TIDMMCON
RNS Number : 0994H
Mincon Group Plc
23 March 2020
Mincon Group plc
("Mincon" or the "Group")
2019 Full Year Financial Results
Mincon Group plc (Euronext: MIO AIM:MCON), the Irish engineering
group specialising in the design, manufacture, sale and servicing
of rock drilling tools and associated products, announces its
results for the year ended 31 December 2019.
Joe Purcell, Chief Executive Officer, commenting on the results,
said:
2019: A year of consolidation and diversification
I am pleased to report that Mincon's 2019 financial results
represented a significant step forward in Group's long-term
strategy to diversify our customer base. At a glance, these
financials paint a picture of flattening growth, but when viewed in
the context of our overall consolidation, we believe the results
reflect a more stable, focused future for the Group.
The table below shows the results excluding exceptional items
and excluding non-exceptional write-downs in 2019 in inventory of
EUR1.7 million and trade receivables of EUR0.8 million. When these
are included, the profit numbers for 2019 are as follows:
-- Gross profit EUR40.5 million
-- Operating profit EUR11.8 million
-- Profit for the year EUR9.5 million
Income Statement - Excluding Exceptional Items and
Impairments:
Continuing operations 2019 2018 Variance
EUR'000 EUR'000 %
---------------------------------------- --------- --------- ---------
Revenue from Mincon product 100,786 100,319 0.5%
Revenue from third party product 19,885 17,369 14.5%
---------------------------------------- --------- --------- ---------
Total Revenue 120,671 117,688 2.5%
Gross profit excluding impairments 42,205 44,626 (5.4%)
As a % of Revenue 35.0% 37.9%
Operating profit excluding impairments 14,301 16,352 (12.5%)
As a % of Revenue 11.9% 13.9%
Profit for the year excluding
impairments 12,040 13,266 (9.2%)
---------------------------------------- --------- --------- ---------
During 2019 Mincon grew its turnover by 2.5%, from continuing
operations, to EUR120.7 million from EUR117.7 million in 2018.
However the mix of products sold resulted in lower gross profit and
lower operating profit for the Group. Notwithstanding the headline
figures, there were a number of very significant positive
developments during the year including:
-- Cash generated from operations increased from EUR3.1 million
in 2018 to EUR12.5 million in 2019, due to profitable trading and
stronger working capital management systems;
-- Products supplied to the large scale construction and
geotechnical industry more than doubled in 2019 and the recent
acquisition of Lehti Group will enable the Group to capture a
greater portion of the margin generated from such sales;
-- The business was streamlined under four regional managers,
with refocused factory and sales operations leading to annualised
reduction in operating costs;
-- Growth in revenues in the America's market was 57% reflecting
the award of a number of significant construction and mining
contracts across that region and;
-- Progress was made in flagship Greenhammer project with the
12" system poised to commence commercial drilling operations and a
new 10" system to start drilling in Q2 2020 using a Mincon owned
drill rig.
At the beginning of the year, the Group made the strategic
decision to concentrate its efforts on growing the business through
products that it considers relevant to its challenger model. As a
result, the Group disposed of its heat-treatment business in
Sweden, and a business in South Africa that manufactures coring
products which it sold through Mincon distribution channels in
Southern Africa. The revenue streams from these companies accounted
for 5% of total revenue in 2018 and zero in the continuing
operational results for 2019.
Although these annual results overall show only minor revenue
growth at a headline level, this was not the case in all markets
and industry segments in which we operate. Last year marked a
concerted push into the construction industry for the Group, and a
strong performance in the Americas grew our market share in that
region. Our work on filling out our product range and expanding our
geographic support also saw Mincon win several large, direct-supply
mining contracts. These contracts are for comprehensive drilling
consumables supply, and the ability to supply the full range,
together with the required service support levels to maintain them,
enables us to undertake a programme of continuous improvement to
increase our value-add to Mincon and to the end user. The Group's
manufactured conventional DTH product, that provides the Group its
highest profit margin endured a decline of 16% in revenue during
2019 compared with 2018. This decline was experienced in Australia,
Africa and the European regions (excluding Scandinavia) during
2019. This revenue decline was partly due to delays in
commissioning heat treatment facilities in the USA and Australia as
planned. Both facilities have now been commissioned, and as result
we have seen improved DTH revenue during the first quarter of
2020.
We also greatly increased the sales revenue on our geotechnical
and foundation drilling product range, thereby successfully
diversifying our revenue stream away from on our traditional mining
market, in line with our long-term strategy. In 2019 revenue
generated in this market accounted for 12% of the Group's revenue
within continuing operations, while in 2018 the corresponding
figure was 6%. This increase in geotechnical revenue was achieved
due to customers responding favourably to the unique and
predominantly patented features of the Mincon product range, which
ensures minimal ground disturbance. The revenue growth was further
supported by the productivity and efficiency of our large hammer
range, which we have now complemented with the acquisition of the
Lehti Group in January 2020. The acquisition of the Lehti Group
enables us to capture the substantial manufacturing margin which
exists for many of our products in this sector. Our geotechnical
offering also fits our desire and strategy to reduce our
environmental impact of our products in this important and growing
market for us.
Actions undertaken following operational reviews
At the start of 2019, in response to profits trending lower than
our expectations, management undertook a review of the Group's
operations. As a result, several actions were undertaken during the
year.
We decided to move to a regional management structure and
created four regions, namely, the Americas; Europe and Middle East;
Africa; and Asia-Pacific. Each region, and all the activities in
that region, is the responsibility of the Regional VP reporting to
Group. Each Regional VP is a proven leader at Mincon. They each
have a history of working effectively and collaboratively within
the Group, sharing our vision, culture, and ambition.
One of the first tasks within the regions was to look at
personnel numbers, which were reduced in line with each region's
strategy. These reductions were at all levels and areas of
operations. At Mincon, people remain one of the cornerstones and
key stakeholders of the business, but these measures were necessary
to ensure that our business was in the right shape for long-term
development.
We also undertook a major review of our factory operations in
2019, resulting in a change in the mix of products manufactured at
some plants. In part this was done to achieve greater economies of
scale. In other cases, production was moved closer to the end
market, to shorten lead times; to yield net savings in logistics
costs; and to reduce the amount of working capital invested in
finished goods. This restructuring of operations at our factories
is ongoing and expected to be completed by the end of the first
half of 2020. Once complete, our factories will be more efficient
and should earn a healthier margin, and the Group will be in a
better position to respond to spikes in demand and changing
customer requirements.
We also divested two businesses with operations that were not
core to the rest of the Group's focus, which contributed an
exceptional profit, HardTekno in Sweden and Premier Drilling in
South Africa. Additionally, two distribution centres in Russia and
Tanzania were closed. We still have access to those markets through
third party distributors and nearby Mincon service centres.
Finally, excellent progress was made on our IT and reporting
systems during 2019. This brought increased transparency to our
inventory, effectively furthering our goal of improving working
capital efficiency. This vital work will continue into 2020 and
beyond.
Innovative engineering is the key to our future
We have a strong history, with more than 40 years of expertise
in design, manufacture, delivery, and service of high-quality
surface drilling consumables. Over the last six years we have
strategically grown our product offering to now include a
comprehensive range of products for the whole drill string and for
multiple applications. Innovative and superior engineering has
always been at the core of what we do and just as this engineering
is the reason for our past success, innovation will be the key to
the next 40 years of success and growth for the company.
Our clients are embracing continuous improvement to remain
competitive, improve safety, and reduce the effect of their
operations on the environment, which includes using less energy. We
share these objectives, with a strategy, an ambition and an ability
to deliver on them. Indeed, the next generation of drilling tools
that we are developing is aimed at energy-efficient drilling, with
a reduced impact on the environment and, in some cases, a
transformational effect on Mincon and our customers.
This primary engineering objective continues to be driven by our
engineering leadership in the Technology Steering Group. It
continues to be my pleasure to lead this group, comprising senior
engineers who each have many decades of experience in the
rock-drilling industry. The experience in the group is broad and
includes expertise in mechanical design and simulation; metallurgy
and heat treatment, market and application knowledge; and hands-on
drilling. The function of the group is to develop the next
generation of engineering leaders and to liaise with all levels of
the Mincon Group, including the customer service centres, so that
it can analyse customer feedback, and prioritise areas for
technology development.
Product development
Our engineering effort can be broken down to the following
headings:
1. Product maintenance - ongoing product development and
continuous improvement to existing product line-ups to ensure that
remain at industry highest standard, as well as identifying areas
for optimisation within customer operations. Most of this
development is a result of direct customer feedback.
2. New product design and development - new designs and
generations of existing technologies. Over the coming years, this
development will include work on:
-- New DTH hammer and bit developments with a focus on speed and efficiency;
-- Continuous improvement for our range of open, and
sealed-bearing, rotary drill bits, to deliver market-leading
performance in terms of life and penetration rates;
-- Optimising drill-rod performance and durability;
-- Further development to the performance and range of cushion subs; and,
-- Carbide grade developments.
3. New technology development - spearheaded by Mincon's
Technology Steering Group, which is exploring several new
technologies and concepts for development, including:
-- Greenhammer (working name) - Mincon's flagship technology for
single-pass, hard-rock blasthole drilling, using a high-performance
DTH hydraulic percussion system;
-- Drilled foundation product developments particularly for sensitive ground conditions; and,
-- Plans for advancing hammer technology to encompass larger
hole size capabilities than ever, while maintaining the focus on
efficiency and productivity.
Along with the Technology Steering Group, a dedicated Research
and Development prototype manufacturing facility was commissioned
during 2019. Based near the Group headquarters in Shannon, Ireland,
but in a separate building from the main factory, we have allocated
the necessary manufacturing capabilities and capacity to ensure our
engineer's designs are machined into reality in a timely fashion.
Results from field testing are then incorporated into improved
design so that new revisions can be rapidly manufactured and sent
back for field testing, without interrupting day-to-day
production.
The Hydraulic systems
During 2019 we made excellent progress in moving towards
commercial release of our 12" Greenhammer hydraulic system. Since
the beginning of 2020 we have been working on a schedule of
commercialising the system on the customer owned rig by the end of
Q1 2020. This has been delayed due to a serious mechanical issue
arising on the customer owned rig, prior to its handover to us,
which has necessitated an extensive rig overhaul, making the rig
unavailable to us until Q2 2020.
On a positive note, we are due to commence running our new
Greenhammer 10" system on a commercial basis in Q2 2020 using a
Mincon-owned rig at the same mine. A 10" system was requested by
the mine in response to drilling results achieved using the larger
system. This is a standard drilling size for us, and the system
will be compatible with the same drill bits already supplied to the
mine in large quantities. These bits are used in our market leading
DTH hammers on six other mine-owned rigs. The benefit of this
approach is twofold: Mincon's testing will not be restricted by rig
availability and the mine will have an extra rig drilling
production holes.
We remain excited about the transformational benefits of this
system for Mincon and the hard-rock mining industry and we look
forward to commercial release once we can get back drilling.
New Products to market
In addition to the Greenhammer technology development project,
2020 will see the Group release new products, as it does every
year, as well as other new technologies. Our investment in new
technologies has been significant over the last several years.
Predicting the timing for commercialisation of new technologies is
not an exact science, with the research and development path
naturally having many twists. The Group has taken a prudent stance
by not prematurely releasing new technologies to market until
vigorous and thorough field testing has proven the concept to be
not only a technical success but also ready for commercial rollout
across our markets. This approach should also be viewed in the
context of our ambition, expertise, and capability to deliver on
these exciting opportunities that increasingly present themselves
through our extensive and growing market reach.
Acquisitions
Over the last five years the Group's acquisitions have brought
in good products, people and management. Acquisitions have also
extended our reach into the markets that we strategically
target.
We continue to look for acquisitions that are complementary to
our operations and will help achieve the Group's strategic
objectives. For example, in January 2020 we were delighted to add
the Lehti Group to Mincon, bringing a strategically valuable
production process and the associated margins in-house. This will
support the ambition to grow our footprint in the geotechnical and
foundation drilling market, which remains a large, exciting, and
lucrative opportunity for Mincon.
Concluding comments
While 2019 revenue was flat, it was encouraging that we grew in
some markets and built on new revenue streams - which was in line
with our strategy. When we found ourselves with overheads and
factory capacity beyond our needs a plan was formulated to
reorganise and right-size the business, ensuring that we started
2020 in good shape for future growth.
The build-out in the three core factories in Shannon, Ireland;
Benton, USA; and Perth, Australia was completed in 2019. We can now
deliver efficiently to our Group distribution points and to our end
customers, with spare capacity for growth. Equally as important,
these factory investments have also been about improving quality
throughout our production, with critical parts of the manufacturing
process now taking place in-house.
I am delighted with the progress of the Technology Steering
Group in 2019. Through the work of this team and our other
colleagues at Mincon, we have great opportunities to deliver new
products in the coming year. We have the manufacturing capacity,
talent, and technical innovation that will drive growth. I hope to
report continuing growth throughout this year, in both traditional
and new markets. This, along with shrewd management of costs,
should see a stronger result for 2020.
We have seen good growth in the first quarter of 2020 to the
date of this report, with accompanying profit figures as a result
of the Group reorganisation that took place during 2019. During the
first quarter of 2020 we have won additional geotechnical contracts
in the Americas region, and our DTH product line has seen an
improved order intake, with other product lines following suit. The
Mincon Group is monitoring the Covid-19 global pandemic and is
taking the advice of local governments in locations where we have a
physical presence. The Group has implemented an international
travel ban within the Group to all employees for their own safety.
Our sales departments have been in regular contact with our
customers and are working with our factories to give more
flexibility on shipping products. We are conscious of the potential
impact the Covid-19 virus might have on future cashflow
requirements. We will continue to monitor and evaluate its impact
on the business, and where necessary, we will take appropriate
steps to limit any personnel and business risks if that might
arise.
Joseph Purcell
Chief Executive Officer
Consolidated Income Statement for the year ended 31 December
2019
2019 2018
Pre-exceptional Exceptional Pre-exceptional Exceptional
items items items items
EUR'000 (Note Total EUR'000 (Note Total
Notes 8) EUR'000 8) EUR'000
EUR'000 EUR'000
---------------- ------- -------------------- ------------ ---------- ---------------- ------------ ----------
Revenue 4 120,671 3,074 123,745 117,688 - 117,688
Cost of sales
including
impairments 6 (80,158) (2,489) (82,647) (73,062) 747 (72,315)
Gross profit 40,513 585 41,098 44,626 747 45,373
Operating costs
including
impairments 6 (28,703) (5,113) (33,816) (28,274) (166) (28,440)
Operating profit 11,810 (4,528) 7,282 16,352 581 16,933
Finance cost (582) - (582) (122) - (122)
Finance income 107 - 107 91 - 91
Foreign exchange
loss (130) - (130) (634) - (634)
FV movement on
consideration 23 10 - 10 16 - 16
Profit on
disposal of
operations - 7,489 7,489 - - -
Profit before
tax 11,215 2,961 14,176 15,703 581 16,284
----------------
Income tax
expense 11 (1,666) (127) (1,793) (2,437) - (2,437)
---------------- ------- -------------------- ------------ ---------- ---------------- ------------ ----------
Profit for the
year 9,549 2,834 12,383 13,266 581 13,847
================ ======= ==================== ============ ========== ================ ============ ==========
Profit
attributable to:
- owners of the
Parent 12,329 13,573
-
non-controlling
interests 19 54 274
---------- ----------
Earnings per
Ordinary
Share
Basic earnings
per share,
EUR 21 5.84c 6.45c
Diluted earnings
per
share, EUR 21 5.80c 6.37c
---------------- ------- ------------------------------ ---------- ----------
The accompanying notes are an integral part of these financial
statements.
Consolidated Statement of Consolidated Income for the year ended
31 December 2019
2019 2018
EUR'000 EUR'000
--------------------------------------------------- -------- --------
Profit for the year 12,383 13,847
Other comprehensive loss:
Items that are or may be reclassified subsequently
to profit or loss:
Foreign currency translation - foreign operations 2,153 (3,081)
Other comprehensive loss for the year 2,153 (3,081)
--------------------------------------------------- -------- --------
Total comprehensive income for the year 14,536 10,766
--------------------------------------------------- -------- --------
Total comprehensive income attributable to:
- owners of the Parent 14,482 10,492
- non-controlling interests 54 274
--------------------------------------------------- -------- --------
The accompanying notes are an integral part of these financial
statements.
Consolidated Balance Sheet as at 31 December 2019
2019 2018
Notes EUR'000 EUR'000
---------------------------------------- ----- --------- --------
Non-Current Assets
Intangible assets and goodwill 12 31,937 30,753
Property, plant and equipment 13 41,172 34,930
Deferred tax asset 11 616 278
Total Non-Current Assets 73,725 65,961
----------------------------------------- ----- --------- --------
Current Assets
Inventory and capital equipment 14 48,590 49,357
Trade and other receivables 15a 20,346 20,711
Prepayments and other current assets 15b 6,098 6,578
Current tax asset 589 252
Cash and cash equivalents 23 16,368 8,042
Total Current Assets 91,991 84,940
----------------------------------------- ----- --------- --------
Total Assets 165,716 150,901
----------------------------------------- ----- --------- --------
Equity
Ordinary share capital 20 2,110 2,105
Share premium 20 67,647 67,647
Undenominated capital 39 39
Merger reserve 20 (17,393) (17,393)
Restricted equity reserve 20 419 1,511
Share based payment reserve 22 1,629 1,274
Foreign currency translation reserve (3,868) (6,021)
Retained earnings 74,446 66,543
----------------------------------------- ----- --------- --------
Equity attributable to owners of Mincon
Group plc 125,029 115,705
----------------------------------------- ----- --------- --------
Non-controlling interests 1,115 1,061
Total Equity 126,144 116,766
Non-Current Liabilities
Loans and borrowings 18 10,879 4,461
Deferred tax liability 11 1,794 1,222
Deferred contingent consideration 23 4,962 5,470
Other liabilities 153 151
Total Non-Current Liabilities 17,788 11,304
----------------------------------------- ----- --------- --------
Current Liabilities
Loans and borrowings 18 4,043 2,735
Trade and other payables 16 10,853 12,027
Accrued and other liabilities 16 5,827 6,996
Current tax liability 1,061 1,073
Total Current Liabilities 21,784 22,831
----------------------------------------- ----- --------- --------
Total Liabilities 39,572 34,135
----------------------------------------- ----- --------- --------
Total Equity and Liabilities 165,716 150,901
----------------------------------------- ----- --------- --------
The accompanying notes are an integral part of these financial
statements.
On behalf of the Board:
Hugh McCullough Joseph Purcell
Chairman Chief Executive Officer
Consolidated Statement of Cash Flows For the year ended 31
December 2019
2019 2018
Notes EUR'000 EUR'000
---------------------------------------------------- ------ -------- ---------
Operating activities:
Profit for the period 12,383 13,847
Adjustments to reconcile profit to net cash
provided by operating activities:
Depreciation 12 5,242 3,896
Fair value movement on deferred contingent
consideration (10) (16)
Gain on sale of operations, net of tax (7,489) 122
Finance cost 582 -
Finance income (107) (91)
Income tax expense 1,793 2,437
Other non-cash movements 209 (849)
---------------------------------------------------- ------ -------- ---------
12,603 19,346
Changes in trade and other receivables 1,037 (292)
Changes in prepayments and other assets 1,873 (1,456)
Changes in inventory 1,050 (14,551)
Changes in trade and other payables (1,865) 1,429
Cash provided by operations 14,698 4,476
Interest received 107 91
Interest paid (582) (122)
Income taxes paid (1,713) (1,296)
---------------------------------------------------- ------ -------- ---------
Net cash provided by operating activities 12,510 3,149
---------------------------------------------------- ------ -------- ---------
Investing activities
Purchase of property, plant and equipment (7,930) (12,552)
Investment in intangible assets (1,405) (1,715)
Proceeds from the issuance of share capital 5 -
Acquisitions of subsidiary, net of cash acquired (770) (7,923)
Payment of deferred contingent consideration (1,600) (1,445)
Proceeds from the sale of subsidiaries 8,517 -
Proceeds from former joint venture investments - 104
Net cash used in by investing activities (3,183) (23,531)
---------------------------------------------------- ------ -------- ---------
Financing activities
Dividends paid (4,426) (4,421)
Repayment of loans and finance leases 18 (2,778) (1,141)
Drawdown of loans 18 6,182 6,264
Net cash provided by/(used in) financing activities (1,022) 702
---------------------------------------------------- ------ -------- ---------
Effect of foreign exchange rate changes on
cash 21 (493)
---------------------------------------------------- ------ -------- ---------
Net increase(decrease) in cash and cash equivalents 8,326 (20,173)
---------------------------------------------------- ------ -------- ---------
Cash and cash equivalents at the beginning
of the year 8,042 28,215
---------------------------------------------------- ------ -------- ---------
Cash and cash equivalents at the end of the
year 16,368 8,042
---------------------------------------------------- ------ -------- ---------
The accompanying notes are an integral part of these financial
statements
Consolidated Statement of Changes in Equity For the year ended
31 December 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
January
2018 2,105 67,647 (17,393) - 39 512 (2,940) 57,391 107,361 787 108,148
-------- ------- -------- ---------- -------------- ------- ----------- -------- ------- --------------- -------
Comprehensive
income:
Profit for the
year - - - - - - - 13,573 13,573 274 13,847
Other
comprehensive
income/(loss):
Foreign
currency
translation - - - - - - (3,081) - (3,081) - (3,081)
----------- -------- ------- --------------- -------
Total
comprehensive
income (3,081) 13,573 10,492 274 10,766
----------- -------- ------- --------------- -------
Non Taxable
income - - - 1,511 - - 1,511 1,511
Transactions
with
Shareholders:
Share based
payments - - - - - 762 - - 762 - 762
Dividends - - - - - - - (4,421) (4,421) - (4,421)
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
year - - - - - - - 12,329 12,329 54 12,383
Other
comprehensive
income/(loss):
Foreign
currency
translation - - - - - - 2,153 - 2,153 - 2,153
----------- -------- ------- --------------- -------
Total
comprehensive
income 2,153 12,329 14,482 54 14,436
----------- -------- ------- --------------- -------
Non-taxable
income - - - (1,092) - - - - (1,092) - (1,092)
Transactions
with
Shareholders:
Equity-settled
share-based
payments 5 - - - - - - - 5 - 5
Share-based
payments - - - - - 355 - - 355 - 355
Dividends - - - - - - - (4,426) (4,426) - (4,426)
Balances at 31
December
2019 2,110 67,647 (17,393) 419 39 1,629 (3,868) 74,446 125,029 1,115 126,144
--------------- -------- ------- -------- ---------- -------------- ------- ----------- -------- ------- --------------- -------
The accompanying notes are an integral part of these financial
statements. See note 20 for explanation of movements in reserve
balances.
1. Description of business
The consolidated financial statements of Mincon Group Plc (also
referred to as "Mincon" or "the Group") comprises the Company and
its subsidiaries (together referred to as "the Group"). The
companies registered address is Smithstown Industrial Estate,
Smithstown, Shannon, Co. Clare, Ireland.
The Group is an Irish engineering group, specialising in the
design, manufacturing, sale and servicing of rock drilling tools
and associated products. Mincon Group Plc is domiciled in Shannon,
Ireland.
On 26 November 2013, Mincon Group plc was admitted to trading on
the Enterprise Securities Market (ESM) of the Euronext Dublin and
the Alternative Investment Market (AIM) of the London Stock
Exchange.
2. Basis of preparation
These consolidated financial statements have been prepared in
accordance with the International Financial Reporting Standards as
adopted by the European Union (EU IFRS), which comprise standards
and interpretations approved by the International Accounting
Standards Board (IASB), and endorsed by the EU.
The individual financial statements of the Company have been
prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the Companies Act 2014 which permit a
company that publishes its Group and Company financial statements
together to take advantage of the exemption in Section 304 of the
Companies Act 2014 from presenting to its members its Company
income statement, statement of comprehensive income and related
notes that form part of the approved Company financial
statements.
The accounting policies set out in note 3 have been applied
consistently in preparing the Group and Company financial
statements for the years ended 31 December 2019 and 31 December
2018.
The Group and Company financial statements are presented in
euro, which is the functional currency of the Company and also the
presentation currency for the Group's financial reporting. Unless
otherwise indicated, the amounts are presented in thousands of
euro. These financial statements are prepared on the historical
cost basis.
The preparation of the consolidated financial statements in
conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets and liabilities, income and
expenses. The judgements, estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances. Actual results
could differ materially from these estimates. The areas involving a
high degree of judgement and the areas where estimates and
assumptions are critical to the consolidated financial statements
are discussed in note 3.
The directors believe that the Group has adequate resources to
continue in operational existence for the foreseeable future and
that it is appropriate to continue to prepare our consolidated
financial statements on a going concern basis.
3. Significant accounting principles, accounting estimates and
judgements
The accounting principles as set out in the following paragraphs have,
unless otherwise stated, been consistently applied to all periods
presented in the consolidated financial statements and for all entities
included in the consolidated financial statements.
Impact of the adoption of IFRS 16
The following new and amended standard is effective for the
Group for the first time for the financial year beginning 1 January
2019:
-- IFRS 16: Leases
3. Significant accounting principles, accounting estimates and
judgements (continued)
Impact of the adoption of IFRS 16(continued)
The Group initially applied IFRS 16 Leases effective 1 January
2019
The Group opted to adopt the modified retrospective approach and
applied the practical expedients, recording the lease liability
equal to the right of use asset at 1 January 2019, therefore there
is no opening adjustment to retained earnings. Comparative
information presented for 2018 is not restated-i.e. it is presented
as previously reported under IAS 17 and related
interpretations.
Definition of a lease
IFRS 16 defines a lease as a contract, or part of a contract,
that conveys the right to use an asset (the underlying asset) for a
period of time in exchange for consideration. Control over the
leased asset requires accounting for it as an asset and liability
on the balance sheet under IFRS.
As a lessee
The Group recognises assets and liabilities for its operating
leases of land and buildings, plant and machinery and motor
vehicles. The nature of expenses related to those leases has
changed because the Group recognises a depreciation charge for
'ROU' assets and interest expense on lease liabilities.
IFRS 16 introduced a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability showing its obligation to make lease payments. For leases
previously classified as operating leases (under IAS 17) Mincon
chose the option to measure the ROU asset equal to the lease
liability (adjusted for prepaid/accrued lease payments). Where
applying the modified retrospective approach to leases previously
classified as operating leases (under IAS 17) the Group used a
number of the following practical expedients available under the
new standard;
a. Discount rates: A company may apply a single discount rate to
a portfolio of leases with reasonably similar characteristics.
b. Leases with a short remaining term: A company may account for
leases when the lease term ends within 12 months of the date of
initial application as short term leases.
c. Leases of low value assets : Leases of assets such as
Printers, office furniture etc. with a value less than
EUR4,497.
d. Use of hindsight: A company may use hindsight e.g. in
determining the lease term if the contract contains options to
extend or terminate the lease.
As a lessor
The Group leases company owned property to tenants in the USA
under various agreements. The group recognises these leases as
operating leases from a lessor perspective due to the fact they do
not transfer substantially all of the risks and rewards incidental
to the ownership of the assets. The Group entered into the sublease
of a property which has been recognised as a finance lease.
Impact on financial statements
Impact on transition
On transition to IFRS 16, the Group recognised additional right
of use assets and corresponding additional lease liabilities.
The impact on transition is summarised below.
1 January 2019
EUR'000
---------------------------------------- -----------------
Right of use assets-property, plant and
equipment 4,683
Lease Liabilities 4,683
Further disclosures on the financial impact after inception of
this standard can be seen in note 25.
3. Significant accounting principles, accounting estimates and
judgements (continued)
Standards, interpretations and amendments to published standards
but not yet effective
A number of new Standards, Amendments to Standards and
Interpretations are effective for annual periods beginning after 1
January 2020 and earlier application is permitted; however, the
Group has chosen not to introduce early adoption of the new or
amended standards in preparing these consolidated financial
statements.
The following amended standards and interpretations are not
expected to have a significant impact on the Group's consolidated
financial statements
-- Amendments to References to Conceptual Framework in IFRS
Standards
-- Definition of a Business (Amendments to IFRS3)
-- Definition of Material (Amendments to IAS 1 and IAS 8)
-- IFRS17 Insurance Contracts
Revenue Recognition
The Group is involved in the sale and servicing of rock drilling
tools and associated products. Revenue from the sale of these goods
and services to customers is measured at the fair value of the
consideration received or receivable (excluding sales taxes). The
Group recognises revenue when it transfers control of goods to a
customer.
Earnings per share
Basic earnings per share is calculated based on the profit for the
year attributable to owners of the Company and the basic weighted
average number of shares outstanding. Diluted earnings per share
is calcu-lated based on the profit for the year attributable to owners
of the Company and the diluted weighted average number of shares
outstanding.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Taxation
Current tax comprises the expected tax payable or receivable on the
taxable income or loss for the year and any adjustment to the tax
payable or receivable in respect of previous years. The amount of
current tax payable or receivable is the best estimate of the tax
amount expected to be paid or received that reflects uncertainty related
to income taxes, if any. It is measured using tax rates enacted or
substantively enacted at the reporting date. Current tax also includes
any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria
are met.
Deferred tax
Deferred tax is recognised in respect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax
is not recognised for:
* temporary differences on the initial recognition of
assets or liabilities in a transaction that is not a
business combination and that affects neither
accounting nor taxable profit or loss;
* temporary differences related to investments in
subsidiaries, associates and joint arrangements to
the extent that the Group is able to control the
timing of the reversal of the temporary differences
and it is probable that they will not reverse in the
foreseeable future; and
* taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax
credits and deductible temporary differences to the extent that it
is probable that future taxable profits will be available against
which they can be used. Future taxable profits are determined based
on the reversal of relevant taxable temporary differences. If the
amount of taxable temporary differences is insufficient to recognise
a deferred tax asset in full, then future taxable profits, adjusted
for reversals of existing temporary differences, are considered, based
on the business plans for individual subsidiaries in the Group. Deferred
tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit
will be realised; such reductions are reversed when the probability
of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting
date and recognised to the extent that it has become probable that
future taxable profits will be available against which they can be
used.
Deferred tax is measured at the tax rates that are expected to be
applied to temporary differences when they reverse, using tax rates
enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that
would follow from the manner in which the Group expects, at the reporting
date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria
are met.
Inventories and capital equipment
Inventories and capital equipment are valued at the lower of cost
or net realisable value. Net realisable value is the estimated selling
price in the ordinary course of business less the estimated costs
of completion and selling expenses. The cost of inventories is based
on the first-in, first-out principle and includes the costs of acquiring
inventories and bringing them to their existing location and condition.
Inventories manufactured by the Group and work in progress include
an appropriate share of production overheads based on normal operating
capacity. Inventories are reported net of deductions for obsolescence.
Intangible Assets and Goodwill
Goodwill
The Group accounts for acquisitions using the purchase accounting
method as outlined in IFRS 3 Business Combinations. Group management
has determined that the Group has one operating segment and therefore
all goodwill is tested for impairment at Group level and this is tested
for impairment annually.
3. Significant accounting principles, accounting estimates and
judgements (continued)
Intangible assets
Expenditure on research activities is recognised in profit or
loss as incurred.
Development expenditure is capitalised only if the expenditure
can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable and
the Group intends to and has sufficient resources to complete
development and to use or sell the asset. Otherwise, it is
recognised in the profit or loss as incurred. Subsequent to initial
recognition, development expenditure is measured at cost less
accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure is capitalised only when it increases the
future economic benefits embodied in the specific asset to which it
relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as
incurred.
Foreign Currency
Foreign currency transactions
Transactions in foreign currencies (those which are denominated in
a currency other than the functional currency) are translated at the
foreign exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated
using the foreign exchange rate at the statement of financial position
date. Exchange gains and losses related to trade receivables and payables,
other financial assets and payables, and other operating receiv-ables
and payables are separately presented on the face of the income statement.
Exchange rate differences on translation to functional currency are
reported in profit or loss, except when reported in other compre-hensive
income for the translation of intra-group receivables from, or liabilities
to, a for-eign operation that in substance is part of the net investment
in the foreign operation.
Exchange rates for major currencies used in the various reporting
periods are shown in note 23.
Translation of accounts of foreign entities
The assets and liabilities of foreign entities, including
goodwill and fair value adjustments arising on consolidation, are
translated to Euro at the exchange rates ruling at the reporting
date. Revenues, expenses, gains, and losses are translated at
average exchange rates, when these approximate the exchange rate
for the respective transaction. Foreign exchange differences
arising on translation of foreign entities are recognised in other
comprehensive income and are accumulated in a separate component of
equity as a translation reserve. On divestment of foreign entities,
the accumulated exchange differences, are recycled through profit
or loss, increasing or decreasing the profit or loss on
divestments.
Business combinations and consolidation
The consolidated financial statements include the financial statements
of the Group and all companies in which Mincon Group plc, directly
or indirectly, has control. The Group controls an entity when it is
exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date
on which control commences until the date on which control ceases.
The consolidated financial statements have been prepared in accordance
with the acquisition method. According to this method, business combinations
are seen as if the Group directly acquires the assets and assumes
the liabilities of the entity acquired. At the acquisition date, i.e.
the date on which control is obtained, each identifiable asset acquired
and liability assumed is recognised at its acquisition-date fair value.
Consideration transferred is measured at its fair value. It includes
the sum of the acquisition date fair values of the assets transferred,
liabilities incurred to the previous owners of the acquiree, and equity
interests issued by the Group. Deferred contingent consideration is
initially measured at its acquisition-date fair value. Any subsequent
change in such fair value is recognised in profit or loss, unless
the deferred contingent consideration is classified as equity. In
that case, there is no remeasurement and the subsequent settlement
is accounted for within equity. Deferred contingent consideration
arises in the current year where part payment for an acquisition is
deferred to the following year or years.
Transaction costs that the Group incurs in connection with a business
combination, such as legal fees, due diligence fees, and other professional
and consulting fees are expensed as incurred.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Business combinations and consolidation (continued)
Goodwill is measured as the excess of the fair value of the consider-ation
transferred, the amount of any non-controlling interest in the acquiree,
and the fair value of the Group's previously held equity interest
in the acquiree (if any) over the net of acquisition-date fair values
of the identifiable assets acquired and liabilities assumed. Goodwill
is not amortised but tested for impairment at least annually.
Non-controlling interest is initially measured either at fair value
or at the non-controlling interest's proportionate share of the fair
value of the acquiree's identifiable net assets. This means that goodwill
is either recorded in "full" (on the total acquired net assets) or
in "part" (only on the Group's share of net assets). The choice of
mea-surement basis is made on an acquisition-by-acquisition basis.
Earnings from the acquirees are reported in the consolidated income
statement from the date of control.
Intra-group balances and transactions such as income, expenses and
dividends are eliminated in preparing the consolidated financial statements.
Profits and losses resulting from intra-group transactions that are
recognised in assets, such as inventory, are eliminated in full, but
losses are only eliminated to the extent that there is no evidence
of impairment.
Property, plant and equipment
Items of property, plant and equipment are carried at cost less accu-mulated
depreciation and impairment losses. Cost of an item of property, plant
and equipment comprises the purchase price, import duties, and any
cost directly attributable to bringing the asset to its location and
condition for use. The Group capitalises costs on initial recognition
and on replacement of significant parts of property, plant and equip-ment,
if it is probable that the future economic benefits embodied will
flow to the Group and the cost can be measured reliably. All other
costs are recognised as an expense in profit or loss when incurred.
Depreciation
Depreciation is calculated based on cost using the straight-line method
over the estimated useful life of the asset.
The following useful lives are used for depreciation:
Years
Buildings 20-30
Plant and equipment 3-10
The depreciation methods, useful lives and residual values are
reassessed annually. Land is not depreciated.
Right of use assets are depreciated using the straight-line
method over the estimated useful life of the asset being the
remaining duration of the lease from inception date of the asset.
The depreciation methods, useful lives and residual values are
reassessed annually.
3. Significant accounting principles, accounting estimates and
judgements (continued)
Financial Assets and Liabilities
Recognition and derecognition
Financial assets and liabilities are recognised at fair value
when the Group becomes a party to the contractual provisions of the
instrument. Purchases and sales of financial assets are accounted
for at trade date, which is the day when the Group contractually
commits to acquire or dispose of the assets. Trade receivables are
recognised on delivery of product. Liabilities are recognised when
the other party has performed and there is a contractual obligation
to pay. Derecognition (fully or partially) of a financial asset
occurs when the rights to receive cash flows from the financial
instruments expire or are transferred and substantially all of the
risks and rewards of own-ership have been removed from the Group.
The Group derecognises (fully or partially) a financial liability
when the obligation specified in the contract is discharged or
otherwise expires. A financial asset and a financial liability are
offset and the net amount presented in the statement of financial
position when there is a legally enforce-able right to set off the
recognised amounts and there is an intention to either settle on a
net basis or to realise the asset and settle the liability
simultaneously.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset or a financial liability and of
allocating the interest income or interest expense over the
relevant periods. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument, or when
appropriate a shorter period, to the net carrying amount of the
financial asset or financial liability. The calculation includes
all fees and points paid or received between parties to the
contract that are an integral part of the effective interest rate,
transac-tion costs, and all other premiums or discounts.
Borrowing costs
All borrowing costs are expensed in accordance with the effective
interest rate method.
Investments in subsidiaries - Company
Investments in subsidiary undertakings are stated at cost less
provision for impairment in the Company's statement of financial
position. Loans to subsidiary undertakings are initially recorded
at fair value in the Company statement of financial position and
subsequently at amortised cost using an effective interest rate
methodology.
Impairment of financial assets
Financial assets are assessed at each reporting date to determine
whether there is any objective evidence that they are impaired. A
financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset.
Equity
Shares are classified as equity. Incremental costs directly attributable
to the issue of ordinary shares and share options are recognised as
a deduction from equity, net of any tax effect.
Contingent liabilities
A contingent liability is a possible obligation or a present
obligation that arises from past events that is not reported as a
liability or provision, as it is not probable that an outflow of
resources will be required to settle the obligation or that a
sufficiently reliable calculation of the amount cannot be made.
Financial instruments carried at fair value: Non-derivative
financial liabilities
Fair value is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of
interest at the reporting date.
Finance income and expenses
Finance income and expense are included in profit or loss using the
effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits
with maturities of three months or less.
3. Significant accounting principles, accounting estimates and
judgements (continued)
Provisions
A provision is recognised in the statement of financial position
when the Group has a legal or constructive obligation as a result
of a past event, it is proba-ble that an outflow of economic benefits
will be required to settle the obligation, and the outflow can be
estimated reliably. The amount recognised as a provision is the best
estimate of the expenditure required to settle the present obligation
at the reporting date. If the effect of the time value of money is
material, the provision is determined by discounting the expected
future cash flows at a pre-tax rate that reflects the current market
assessments of the time value of money and, where appropriate, the
risks specific to the liability.
A provision for restructuring is recognised when the Group has approved
a detailed and formal restructuring plan and the restructuring has
either commenced or been announced publicly. Future operating losses
are not provided for.
Exceptional Items
The Group has adopted an Income Statement format which seeks to
highlight significant items within the Group results for the year.
Exceptional items may include restructuring, profit or loss on
disposal or termination of operations, litigation costs and
settlements, profit or loss on disposal of investments, profit or
loss on disposal of property, plant and equipment, acquisition
costs, adjustment to contingent consideration and impairment of
assets relating to significant transactions. Judgement is used by
the Group in assessing particular items, which by virtue of their
scale and nature, should be presented in the Income Statements and
disclosed in the related notes as exceptional items.
Defined contribution plans
A defined contribution pension plan is a post-employment benefit
plan under which the Group pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution pension
plans are recognised as an employee benefit expense in profit or
loss when employees provide services entitling them to the contributions.
Share-based payment transactions
The Group operates a long term incentive plan which allows the
Company to grant Restricted Share Awards ("RSAs") to executive
directors and senior management. All schemes are equity settled
arrangements under IFRS 2 Share-based Payment.
The grant-date fair value of share-based payment awards granted
to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the
employees become unconditionally entitled to the awards. The amount
recognised as an expense is adjusted to reflect the number of
awards for which the related service and non-market performance
conditions are expected to be met, such that the amount ultimately
recognised as an expense is based on the number of awards that meet
the related service and non-market performance conditions at the
vesting date.
Critical accounting estimates and judgements
The preparation of financial statements requires management's judgement
and the use of estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. These estimates and associated assumptions are based on his-torical
experience and various other factors that are believed to be rea-sonable
under the prevailing circumstances. Actual results may differ from
those estimates. The estimates and assumptions are reviewed on an
ongoing basis. Revisions to the accounting estimates are recognised
in the period in which they are revised and in any future periods
affected.
Following are the estimates and judgements which, in the opinion
of management, are significant to the underlying amounts included
in the financial reports and for which there is a significant risk
that future events or new information could entail a change in
those estimates or judgements.
Deferred contingent consideration
The deferred contingent consideration payable represents
management's best estimate of the fair value of the amounts that
will be payable, discounted as appropriate using a market interest
rate. The fair value was estimated by assigning probabilities,
based on management's current expectations, to the potential
pay-out scenarios. The fair value of deferred contingent
consideration is primarily dependent on the future performance of
the acquired businesses against predetermined targets and on
management's current expectations thereof.
3. Significant accounting principles, accounting estimates and
judgements (continued)
Trade and other receivables
Trade and other receivables are included in current assets, except
for those with maturities more than 12 months after the reporting
date, which are classified as non-current assets. The Group estimates
the risk that receivables will not be paid and pro-vides for doubtful
debts in line with IFRS 9.
4. Revenue
In the following table, revenue is disaggregated between Mincon
manufactured product and product that is purchased outside the
Group and resold through Mincon distribution channels.
2019 2018
EUR'000 EUR'000
---------------------------- ------- -------
Product revenue:
Sale of Mincon product 103,797 100,319
Sale of third party product 19,948 17,369
Total revenue 123,745 117,688
---------------------------- ------- -------
Revenue is measured based on the consideration specified in a
contract with a customer. The Group recognises revenue when it
transfers control of goods to a customer.
The following provides information about the nature and timing
of the satisfaction of performance obligations in contracts with
customers, including significant payment terms, and the related
revenue recognition policies.
Customers obtain control of products when one of the following
conditions are satisfied:
1. The goods have been picked up by the customer from Mincon's premises.
2. When goods have been shipped by Mincon, the goods are
delivered to the customer and have been accepted at their
premises.
Invoices are generated at that point in time. Invoices are
payable within the timeframe as set in agreement with the customer
at the point of placing the order of the product. Discounts are
provided from time-to-time to customers.
Customers may be permitted to return goods where issues are
identified with regard to quality of the product. Returned goods
are exchanged only for new goods or credit note. No cash refunds
are offered.
Where the customer is permitted to return an item, revenue is
recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue recognised
will not occur. Therefore, the amount of revenue recognised is
adjusted for expected returns, which are estimated based on the
historical data for specific types of product. In these
circumstances, a refund liability and a right to recover returned
goods asset are recognised.
5. Operating Segment
An operating segment is a component of the Group that engages in
busi-ness activities from which it may earn revenue and incur
expenses, and for which discrete financial information is
available. The operating results of all operating segments are
reviewed regularly by the Board of Directors, the chief operating
decision maker, to make deci-sions about allocation of resources to
the segments and also to assess their performance.
Results are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker (CODM).
Our CODM has been identified as the Board of Directors.
The Group has determined that it has one reportable segment. The
Group is managed as a single business unit that sells drilling
equipment, primarily manufactured by Mincon manufacturing
sites.
The CODM assesses operating segment performance based on a
measure of operating profit. Segment revenue for the year ended 31
December 2019 of EUR123.7 million (2018: EUR117.7 million) is
wholly derived from sales to external customers.
Entity-wide disclosures
The business is managed on a worldwide basis but operates
manufacturing facilities and sales offices in Ireland, Sweden,
South Africa, UK, Western Australia, the United States and Canada
and sales offices in nine other locations including Eastern &
Western Australia, South Africa, Finland, Spain, Namibia, Sweden,
Chile and Peru. In presenting information on geography, revenue is
based on the geographical location of customers and non-current
assets based on the location of these assets.
Revenue by region (by location of customers):
2019 2018
EUR'000 EUR'000
----------------------------------------- ------- -------
Region:
Ireland 772 915
Americas 39,410 24,732
Australasia 27,351 28,256
Europe, Middle East, Africa 56,212 63,785
Total revenue from continuing operations 123,745 117,688
----------------------------------------- ------- -------
During 2019 Mincon had sales in the USA of EUR20.8 million
(2018: EUR11.5 million), Australia of EUR18.5 million (2018:
EUR20.8 million) and Sweden of EUR12.8 million (2018: EUR14.5
million), these separately contributed to more than 10% of the
entire Group's sales for 2019.
Non-current assets by region (location of assets):
2019 2018
EUR'000 EUR'000
Region:
Ireland 17,064 15,255
Americas 21,846 17,271
Australasia 11,144 8,795
Europe, Middle East, Africa 23,055 24,362
Total non-current assets(1) 73,109 65,683
---------------------------------------------------- ------- -------
(1) Non-current assets exclude deferred tax assets.
During 2019 Mincon held non-current assets (excluding deferred
tax assets) in Sweden of EUR17 million and in the USA of EUR10.8
million, these separately contributed to more than 10% of the
entire Group's non-current assets (excluding deferred tax assets)
for 2019.
6. Cost of Sales and operating expenses
Included within cost of sales and operating costs were the
following major components:
Cost of sales
2019 2018
EUR'000 EUR'000
------------------------------------------------ ------- -------
Raw materials 39,190 33,221
Third party product purchases 14,204 13,625
Employee costs 14,045 14,728
Depreciation 3,312 3,214
Distribution costs 2,380 2,988
Energy costs 1,450 1,648
Maintenance of machinery 1,363 1,302
Impairment of capital inventory (note 8) - (747)
Impairment of finished goods inventory (note 8) 1,692 -
Cost of sales of disposed operations 2,489 -
Other 2,522 2,336
Total cost of sales 82,647 72,315
------------------------------------------------ ------- -------
Operating costs
2019 2018
EUR'000 EUR'000
-------------------------------------------------------- ------- -------
Employee costs (including director emoluments) 15,899 18,373
Depreciation 1,930 683
Rent 865 1,287
Travel 2,375 2,309
Professional costs 1,938 2,138
Administration 2,247 1,978
Marketing 886 698
Acquisition and related costs (note 8) - 166
Salary and termination payments for redundant employees
(note 8) 2,754 -
Impairment of trade receivable (note 8) 799 -
Operating costs of disposed operations 2,359 -
Other 1,764 808
Total other operating costs 33,816 28,440
-------------------------------------------------------- ------- -------
The Group invested approximately EUR3.2 million on research and
development projects in 2019 (2018: EUR2.7 million). EUR1.8 million
of this has been expensed in the period (2018: EUR1.0 million),
with the balance of EUR1.4 million capitalised (2018: EUR1.7
million) (note 12).
7. Employee information
2019 2018
EUR'000 EUR'000
-------------------------------------------------------- -------- -------
Wages and salaries - excluding directors 25,088 26,997
Wages, salaries, fees and pensions - directors 760 765
Salary and termination payments for redundant employees 2,754 17
Social security costs 2,677 3,070
Retirement benefit costs of defined contribution
plans 1,064 1,551
Share based payment expense (note 22) 355 701
Total employee costs 32,698 33,101
-------------------------------------------------------- -------- -------
The Group capitalised payroll costs of EUR0.5million in 2019 (2018:
EUR0.1 million) in relation to research and development.
The average number of employees was as follows:
2019 2018
Number Number
------------------------------------------------------ -------- ------
Sales and distribution 124 126
General and administration 56 56
Manufacturing, service and development 290 332
------------------------------------------------------ -------- ------
Average number of persons employed 470 514
------------------------------------------------------ -------- ------
Retirement benefit and Other Employee Benefit Plans
The Group operates various defined contribution pension plans.
During the year ended 31 December 2019, the Group recorded EUR1.1
million (2018: EUR1.6 million) of expense in connection with these
plans.
8. Exceptional Items
2019 2018
EUR'000 EUR'000
-------------------------------------------------------- ------- --------
Revenue
Revenue from disposed operations 3,074 -
-------------------------------------------------------- ------- --------
Total Revenue 3,074 -
-------------------------------------------------------- ------- --------
Cost of sales
Impairment of capital equipment inventory - 747
Cost of sales of disposed operations (2,489) -
Total cost of sales (2,489) 747
-------------------------------------------------------- ------- --------
Operating costs
Salary and termination payments for redundant employees (2,754) -
Acquisition related costs - (166)
Operating costs of disposed operations (2,359) -
-------------------------------------------------------- ------- --------
Total operating costs (5,113) (166)
-------------------------------------------------------- ------- --------
Tax on disposals and discontinued operations (127) -
-------------------------------------------------------- ------- --------
Profit on Disposal (note 10) 7,489 -
-------------------------------------------------------- ------- --------
Total exceptional profit after tax 2,834 581
-------------------------------------------------------- ------- --------
8. Exceptional Items (continued)
At 31 December 2018 the Group reversed EUR0.7 million of
previously recognised impairment due to information obtained during
the year on the valuation of capital equipment inventory.
The Group has undertaken a reorganisation of its activities
across all regions during 2019, including relocation of activities;
closing of regional offices; and redundancies where necessary.
The Group has also disposed of operations in two distribution
centres, Mincon Tanzania and Mincon Russia, following a strategic
decision to place greater focus and emphasis on the Group's key
competencies while focusing on the profitability of the core
business activities and growth areas where there are synergies and
tangible growth opportunities.
The Group has chosen to present exceptional items separately
from the reorganisation.
9. Acquisitions & Disposals
In January 2019, Mincon acquired 100% shareholding in Pacific
Bit, a Canadian-based mining and construction product distributor,
for a consideration of EUR1.8 million. Cash transferred at the date
of acquisition was EUR0.8 million with a deferred consideration of
EUR1.0m.
A. Consideration transferred
The following table summarises the acquisition date fair value
of each major class of consideration transferred.
Pacific Total
Bit of
Canada
EUR'000 EUR'000
----------------------------------- -------- --------
Cash 770 770
Deferred contingent consideration 1,032 1,032
Total consideration transferred 1,802 1,802
------------------------------------- -------- --------
B. Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets
and liabilities assumed at the date of acquisition.
Total
EUR'000
----------------------------------------------- -------------
Property, plant and equipment 75
Inventories 1,009
Trade receivables 650
Other assets 123
Trade and other payables (626)
Other accruals and liabilities (315)
Fair value of identifiable net assets acquired 916
----------------------------------------------- -------------
Measurement of fair values
The valuation techniques used for measuring the fair value of
material assets acquired were as follows.
Assets acquired Valuation Technique
Property, plant Market comparison technique and cost technique: The valuation
and equipment model considers quoted market prices for similar items
when they are available, and depreciated replacement cost
when appropriate. Depreciated replacement cost reflects
adjustments for physical deterioration as well as functional
and economic obsolescence.
Inventories Market comparison technique: The fair value is determined
based on the estimated selling price in the ordinary course
of business less the estimated costs of completion and
sale, and a reasonable profit margin based on the effort
required to complete and sell the inventories.
----------- ------------------------------------------------------------
9. Acquisitions & Disposals (continued)
Goodwill
Goodwill arising from the acquisition has been recognised as
follows.
Pacific Total
Bit of
Canada
--------------------------------------- -------- ------
Consideration transferred 1,802 1,802
Fair value of identifiable net assets (916) (916)
--------------------------------------- -------- ------
Goodwill 886 886
--------------------------------------- -------- ------
The goodwill created in the acquisition in the period is
primarily related to the synergies expected to be achieved from
integrating these companies into the Group's existing structure.
Mincon will sell it's product range of hammers, bits and drill pipe
through Pacific Bit of Canada to the end user of our products in
Western Canada.
C. Profit on Disposal
During the year the Group disposed of two subsidiaries in Sweden
(Hardtekno and Cebeko) and a distribution subsidiary in South
Africa (Premier Drilling Solutions).
Total
------------------------------------------------- --------
Consideration received 8,997
Cash and cash equivalents disposed of (480)
Net assets (1,028)
Profit on Disposal 7,489
------------------------------------------------- --------
Total
------------------------------------------------- --------
Profit on disposal of Hardtekno 7,551
Profit on disposal of Cebeko 106
Profit on disposal of Premier Drilling Solutions 98
Cost on disposal (266)
Profit on Disposal 7,489
------------------------------------------------- --------
10. Statutory and other required disclosures
Operating profit is stated after charging the following 2019 2018
amounts:
EUR'000 EUR'000
-------------------------------------------------------- ---------------- -------
Directors' remuneration
Fees 192 161
Wages and salaries 477 546
Other emoluments - -
Retirement benefit contributions 57 58
-------------------------------------------------------- ---------------- -------
Total directors' remuneration 726 765
-------------------------------------------------------- ---------------- -------
10. Statutory and other required disclosures (continued) 2019 2018
Auditor's remuneration:
EUR'000 EUR'000
--------------------------------------------------------- ------- -------
Auditor's remuneration - Fees payable to lead audit
firm
Audit of the Group financial statements 195 186
Audit of the Company financial statements 15 14
Other assurance services 20 10
Tax advisory services (a) - 28
Other non-audit services 2 3
--------------------------------------------------------- ------- -------
232 241
--------------------------------------------------------- ------- -------
Auditor's remuneration - Fees payable to other firms
in lead audit firm's network
Audit services 158 150
Other assurance services 2 3
Tax advisory services 63 3
Total auditor's remuneration 223 156
--------------------------------------------------------- ------- -------
(a) Includes tax compliance work on behalf of Group
companies.
11. Income tax
Tax recognised in income statement:
2019 2018
Current tax expense EUR'000 EUR'000
-------------------------------------------------- ------- --------
Current year 1,648 2,594
Adjustment for prior years (89) (412)
-------------------------------------------------- ------- --------
Total current tax expense 1,559 2,182
-------------------------------------------------- ------- --------
Deferred tax expense
Origination and reversal of temporary differences 231 287
Adjustment for prior years 3 (32)
Total deferred tax (credit)/expense 234 255
-------------------------------------------------- ------- --------
Total income tax expense 1,793 2,437
-------------------------------------------------- ------- --------
A reconciliation of the expected income tax expense for
continuing operations is computed by applying the standard Irish
tax rate to the profit before tax and the reconciliation to the
actual income tax expense is as follows:
2019 2018
EUR'000 EUR'000
------------------------------------------------------ ------- -------
Profit before tax from continuing operations 14,176 16,284
Irish standard tax rate (12.5%) 12.5% 12.5%
Taxes at the Irish standard rate 1,772 2,036
Foreign income at rates other than the Irish standard
rate 957 446
Losses creating no income tax benefit 288 559
Other (1,224) (604)
------------------------------------------------------ ------- -------
Total income tax expense 1,793 2,437
------------------------------------------------------ ------- -------
11. Income tax (continued)
The Group's net deferred taxation liability was as follows:
2019 2018
EUR'000 EUR'000
------------------------------------- ------- --------
Deferred taxation assets:
Reserves, provisions and tax credits 610 278
Tax losses and unrealised FX gains 6 -
Total deferred taxation asset 616 278
------------------------------------- ------- --------
Deferred taxation liabilities:
Property, plant and equipment (1,742) (1,154)
Accrued income - -
Profit not yet taxable (52) (68)
Total deferred taxation liabilities (1,794) (1,222)
------------------------------------- ------- --------
Net deferred taxation liability (1,178) (944)
------------------------------------- ------- --------
The movement in temporary differences during the year were as
follows:
Balance Recognised Acquired in Balance
in a
1 January Profit or Business combination 31 December
Loss
1 January 2018 - 31 December
2018 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation assets:
Reserves, provisions and tax
credits 69 209 - 278
Tax losses 81 (81) - -
------------------------------------ --------- ---------- -------------------- ------------
Total deferred taxation asset 150 128 - 278
------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation liabilities:
Property, plant and equipment (194) (439) (521) (1,154)
Accrued income (30) 30 - -
Profit not yet taxable (94) 26 - (68)
------------------------------------ --------- ---------- -------------------- ------------
Total deferred taxation liabilities (318) (383) (521) (1,222)
------------------------------------ --------- ---------- -------------------- ------------
Net deferred taxation liability (168) (255) (521) (944)
------------------------------------ --------- ---------- -------------------- ------------
11. Income tax (continued)
Balance Recognised Acquired in Balance
in a
1 January Profit or Business combination 31 December
Loss
1 January 2019 - 31 December
2019 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation assets:
Reserves, provisions and tax
credits 278 332 - 610
Tax losses - 6 - 6
------------------------------------ --------- ---------- -------------------- ------------
Total deferred taxation asset 278 338 - 616
------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation liabilities:
Property, plant and equipment (1,154) (588) - (1,742)
Accrued income - - - -
Profit not yet taxable (68) 16 - (52)
------------------------------------ --------- ---------- -------------------- ------------
Total deferred taxation liabilities (1,222) (572) - (1,794)
------------------------------------ --------- ---------- -------------------- ------------
Net deferred taxation liability (944) (234) - (1,178)
------------------------------------ --------- ---------- -------------------- ------------
Deferred taxation assets have not been recognised in respect of
the following items:
2019 2018
EUR'000 EUR'000
----------- ------- --------
Tax losses 4,112 3,824
Total 4,112 3,824
----------- ------- --------
12. Intangible assets and goodwill
Product
development Goodwill Total
EUR'000 EUR'000 EUR'000
---------------------------- ------------ --------- --------
Balance at 1 January 2018 1,662 23,432 25,094
---------------------------- ------------ --------- --------
Internally developed 1,715 - 1,715
---------------------------- ------------ --------- --------
Acquisitions - 4,491 4,491
---------------------------- ------------ --------- --------
Translation differences - (547) (547)
---------------------------- ------------ --------- --------
Balance at 31 December 2018 3,377 27,376 30,753
---------------------------- ------------ --------- --------
Internally developed 1,405 - 1,405
---------------------------- ------------ --------- --------
Acquisitions (note 9) - 886 886
---------------------------- ------------ --------- --------
Disposal (note 9) - (1,529) (1,529)
---------------------------- ------------ --------- --------
Translation differences - 422 422
---------------------------- ------------ --------- --------
Balance at 31 December 2019 4,782 27,155 31,937
---------------------------- ------------ --------- --------
Goodwill relates to the acquisition of the below companies,
being the dates that the Group obtained control of these
business:
--..... The remaining 60% of DDS-SA Pty Limited in November
2009.
--..... The 60% acquisition of Omina Supplies in August
2014.
--..... The 65% acquisition of Rotacan in August 2014.
--..... The acquisition of ABC products in August 2014.
--..... The acquisition of Ozmine in January 2015.
--..... The acquisition of Mincon Chile in March 2015.
--..... The acquisition of and Mincon Tanzania in March
2015.
--..... The acquisition of Premier in November 2016.
--..... The acquisition of Rockdrill Engineering in November
2016.
--..... The acquisition of PPV in April 2017.
--..... The acquisition of Viqing July 2017.
--..... The acquisition of Driconeq in March 2018.
--..... The acquisition of Pacific Bit of Canada in January
2019
The Group accounts for acquisitions using the purchase
accounting method as outlined in IFRS 3 Business Combinations.
The businesses acquired were integrated with other Group
operations soon after acquisition. Impairment testing (including
sensitivity analysis) is performed at each period end. Group
management has determined that the Group has multiple cash
generating units, which are aggregated into one operating segment
and therefore all goodwill is tested for impairment at Group
level.
The recoverable amount of goodwill has been assessed based on
estimates of value in use. Calculations of value in use are based
on the estimated future cash flows using forecasts covering a
three-year period and terminal value (based on three year plans
prepared annually). The most significant assumptions are revenues,
operating profits, working capital and capital expenditure. A
growth rate of 3% was applied for all periods after the three year
budget. The discount rate in 2019 was assumed to amount to 7%
(2018: 13%) after tax and has been used in discounting the cash
flows to determine the recoverable amounts. Goodwill impairment
testing did not indicate any impairment during any of the periods
being reported. Sensitivity in all calculations implies that the
goodwill would not be impaired even if the discount rate increased
or decreased by 5% or the long-term or short-term growth was
substantially increased or decreased.
Investment expenditure of EUR1.4 million, which has been
capitalised, is in relation to ongoing product development within
the Group. Amortisation will begin at the stage of
commercialisation and charged to the income statement over a period
of three to five years, or the capitalised amount will be written
off if the project is deemed no longer viable by management.
13. Property, plant and equipment
Land & Plant & ROU
Buildings Equipment Assets Total
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------------- --------- --------- -------- --------
Cost:
At 1 January 2018 10,846 29,659 - 40,505
------------------------------------------- --------- --------- -------- --------
Acquisitions through business combinations 501 3,511 - 4,012
Additions 4,353 8,199 - 12,552
Disposals - (601) - (601)
Foreign exchange differences (50) (421) - (471)
At 31 December 2018 15,650 40,347 - 55,997
------------------------------------------- --------- --------- -------- --------
Acquisitions through business combinations - 75 - 75
Right of use asset on inception - - 4,683 4,683
Additions 1,223 6,707 490 8,420
Disposals and derecognition of ROU
assets (482) (2,913) (455) (3,850)
Foreign exchange differences (163) 1,613 114 1,564
At 31 December 2019 16,228 45,829 4,832 66,889
------------------------------------------- --------- --------- -------- --------
Accumulated depreciation:
At 1 January 2018 (2,419) (15,510) - (17,929)
------------------------------------------- --------- --------- -------- --------
Charged in year (448) (3,448) - (3,896)
Disposals - 598 - 598
Foreign exchange differences 12 148 - 160
--------- --------- -------- --------
At 31 December 2018 (2,855) (18,212) - (21,067)
------------------------------------------- --------- --------- -------- --------
Charged in year (442) (3,456) (1,344) (5,242)
Disposals 279 1,582 - 1,861
Foreign exchange differences (9) (1,260) - (1,269)
------------------------------------------- --------- --------- -------- --------
At 31 December 2019 (3,027) (21,346) (1,344) (25,717)
------------------------------------------- --------- --------- -------- --------
Carrying amount: 31 December 2019 13,201 24,483 3,488 41,172
------------------------------------------- --------- --------- -------- --------
Carrying amount: 31 December 2018 12,795 22,135 - 34,930
------------------------------------------- --------- --------- -------- --------
Carrying amount: 1 January 2018 8,427 14,149 - 22,576
------------------------------------------- --------- --------- -------- --------
The depreciation charge for property, plant and equipment is
recognised in the following line items in the income statement:
2019 2018
EUR'000 EUR'000
----------------------------------------------------- ------- --------
Cost of sales 3,312 3,214
General, selling and distribution expenses 586 682
General, selling and distribution expenses ROU asset 1,344 -
Total depreciation charge for property, plant and
equipment 5,242 3,896
----------------------------------------------------- ------- --------
14. Inventory and capital equipment
2019 2018
EUR'000 EUR'000
------------------------------------ ------- --------
Finished goods and work-in-progress 38,212 36,158
Capital equipment 962 2,365
Raw materials 9,416 10,834
------------------------------------ ------- --------
Total inventory 48,590 49,357
------------------------------------ ------- --------
The Group recorded an impairment of EUR1.7 million against
inventory to take account of net realisable value during the year
ended 31 December 2019 (2017: EUR0.1 million). Write-downs are
included in cost of sales.
At 31 December 2019 and 31 December 2018, capital equipment are
rigs held in South Africa for resale.
15. Trade and other receivables and other current assets
a) Trade and other receivables
2019 2018
EUR'000 EUR'000
-------------------------------- ------- --------
Gross receivable 21,424 21,519
Provision for impairment (1,078) (808)
Net trade and other receivables 20,346 20,711
-------------------------------- ------- --------
Provision
for impairment
EUR'000
---------------------------- ----------------
Balance at 1 January 2019 (808)
Additions (270)
Balance at 31 December 2019 (1,078)
---------------------------- ----------------
2019 2018
EUR'000 EUR'000
Less than 60 days 17,112 14,451
61 to 90 days 1,659 3,437
Greater than 90 days 1,575 2,823
-------------------------------- ------- --------
Net trade and other receivables 20,346 20,711
-------------------------------- ------- --------
At 31 December 2019, EUR3.2 million of trade receivables
balances (16%) were past due but not impaired (2018: EUR5.6 million
(27%)).
b) Prepayments and other current assets
2019 2018
EUR'000 EUR'000
------------------------------------- ---------- -------
Plant and machinery prepaid 3,302 4,943
Prepayments and other current assets 2,766 1,635
Prepayments and other current assets 6,098 6,578
------------------------------------- ---------- -------
16. Trade creditors, accruals and other liabilities
2019 2018
EUR'000 EUR'000
----------------------------------- -------- -------
Trade creditors 10,853 12,027
Total creditors and other payables 10,853 12,027
----------------------------------- -------- -------
2019 2018
EUR'000 EUR'000
------------------------------------- -------- -------
VAT 207 476
Social security costs 674 3,048
Other accruals and liabilities 4,946 3,472
Total accruals and other liabilities 5,827 6,996
------------------------------------- -------- -------
17. Capital management
The Group's policy is to have a strong capital base in order to
maintain investor, creditor and market confidence and to sustain
future development of the business. Management monitors the return
on capital, as well as the level of dividends to ordinary
shareholders.
The Board of Directors seeks to maintain a balance between the
higher returns that might be possible with higher levels of
borrowing and the advantages and security afforded by a sound
capital position.
The Group monitors capital using a ratio of 'net debt' to
equity. Net debt is calculated as total liabilities less cash and
cash equivalents (as shown in the statement of financial
position).
2019 2018
EUR'000 EUR'000
-------------------------------- --------- --------
Total liabilities (39,784) (34,135)
Less: cash and cash equivalents 16,368 8,042
Net debt (23,416) (26,093)
-------------------------------- --------- --------
Total equity 126,144 116,766
-------------------------------- --------- --------
Net debt to equity ratio 0.18 0.22
-------------------------------- --------- --------
18. Loans and borrowings
2019 2018
Maturity EUR'000 EUR'000
-------------------------------------- ------- --------
Bank loans 2020-2027 4,879 4,576
Finance leases 2020-2023 5,903 2,620
Right of Use leases 2020-2028 4,140 -
--------------------------- ----------
Total loans and borrowings 14,922 7,196
------- --------
Current 4,043 2,735
------- --------
Non-current 10,879 4,461
------- --------
The Group has a number of bank loans and finance leases in
Sweden, the UK, the United States and Australia with a mixture of
variable and fixed interest rates. The Group has not been in
default on any of these debt agreements during any of the periods
presented. None of the debt agreements carry restrictive financial
covenants. Interest rates on current borrowings are at an average
rate of 6.8%
During 2019, the Group availed of the option to enter into
overdraft facilities and to draw down loans of EUR1.7 million with
interest rate between 2% and 13.8%.
18. Loans and borrowings (continued)
Reconciliation of movements of liabilities to cash flows arising
from financing activities
Loans Finance Right Retained
and borrowings leases of Use earnings
leases Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------------------------------- --------------- ------- ------- --------- -------
At 1 January 2019: 4,576 2,620 - - 7,196
Proceeds from loans and borrowings 1,709 - - - 1,709
Inception of finance leases - 4,473 - - 4,473
Inception of right of use liability - - 4,589 - 4,589
Repayment of borrowings (1,290) - - - (1,290)
Repayment of finance lease liabilities - (1,039) - - (1,039)
Repayment of right of use leases - - (449) - (449)
Dividend paid - - - (4,426) (4,426)
Foreign exchange differences (116) (151) - - (267)
Total at 31 December 2019 4,879 5,903 4,140 (4,426) 10,496
--------------------------------------- --------------- ------- ------- --------- -------
19. Non-controlling interest
The following table summarises the information relating to the
Group's subsidiary, Mincon West Africa SL, that has material
non-controlling interests, before any intra-group eliminations. The
non-controlling interest is 20% of this subsidiary.
2019 2018
Non-controlling Interest 20% EUR'000 EUR'000
------------------------------- -------- -------
Non-current assets 97 106
Current assets 4,253 3,762
Non-current liabilities - -
Current liabilities (874) (664)
------------------------------- -------- -------
Net assets 3,476 3,204
------------------------------- -------- -------
Net assets attributable to NCI 695 641
------------------------------- -------- -------
Revenue 6,176 6,978
------------------------------- -------- -------
Profit 273 1,368
------------------------------- -------- -------
OCI - -
------------------------------- -------- -------
Total comprehensive income 272 1,368
------------------------------- -------- -------
Profit allocated to NCI 54 274
------------------------------- -------- -------
20. Share capital and reserves
At 31 December 2019
Authorised Share Capital Number EUR000
-------------------------------- ----------- ------
Ordinary Shares of EUR0.01 each 500,000,000 5,000
Allotted, called-up and fully paid up shares Number EUR000
--------------------------------------------- ----------- ------
Ordinary Shares of EUR0.01 each 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.
20. Share capital and reserves (continued)
Voting rights
The holders of Ordinary Shares have the right to receive notice of
and attend and vote at all general meetings of the Company and they
are entitled, on a poll or a show of hands, to one vote for every
Ordinary Share they hold. Votes at general meetings may be given either
personally or by proxy. Subject to the Companies Act and any special
rights or restrictions as to voting attached to any shares, on a show
of hands every member who (being an individual) is present in person
and every proxy and every member (being a corporation) who is present
by a representative duly authorised, shall have one vote, so, however,
that no individual shall have more than one vote for every share carrying
voting rights and on a poll every member present in person or by proxy
shall have one vote for every share of which he is the holder.
Dividends
In September 2019, Mincon Group plc paid an interim dividend for
2019 of EUR0.0105 (1.05 cent) per ordinary share. In June 2019,
Mincon Group plc paid a final dividend for 2018 of EUR0.0105 (1.05
cent) per ordinary share. In September 2018, Mincon Group plc paid
an interim dividend for 2018 of EUR0.01 (1 cent) per ordinary
share. The directors are recommending a final dividend of EUR0.0105
(1.05 cent) per ordinary share for 2019 which will be subject to
approval at the company's AGM in May 2020.
Share premium and other reserves
As part of a Group reorganisation of the Company, Mincon Group
plc, became the ultimate parent entity of the Group. On 30 August
2013, the Company acquired 100% of the issued share capital in
Smithstown Holdings and acquired (directly or indirectly) the
shareholdings previously held by Smithstown Holdings in each of its
subsidiaries, thereby creating a merger reserve.
Restricted equity reserve
Restricted equity reserve arises on the acquisition of the
Driconeq Group, representing the local requirement to allocate
reserves between the equity and deferred taxes.
21. Earnings per share
Basic earnings per share (EPS) is computed by dividing the
profit for the period available to ordinary shareholders by the
weighted average number of Ordinary Shares outstanding during the
period. Diluted earnings per share is computed by dividing the
profit for the period by the weighted average number of Ordinary
Shares outstanding and, when dilutive, adjusted for the effect of
all potentially dilutive shares. The following table sets forth the
computation for basic and diluted net profit per share for the
years ended 31 December:
2019 2018
Numerator (amounts in EUR'000):
Profit attributable to owners of the Parent 12,329 13,573
Denominator (Number):Basic shares outstanding
Restricted share awards
Diluted weighted average shares outstanding 210,973,102 210,541,102
----------------------------------------------
1,546,189 2,469,176
212,519,291 213,010,278
---------------------------------------------- ----------- -----------
Earnings per Ordinary Share
Basic earnings per share, EUR 5.84 6.45c
Diluted earnings per share, EUR 5.80 6.37c
-----------
22. Share based payment
During the year ended 31 December 2019, the Remuneration
Committee did not grant any Restricted Share Awards (RSAs) to key
management or to members of the senior management team.
The vesting conditions of the scheme state that the minimum
growth in EPS shall be CPI plus 5% per annum, compounded annually,
over the relevant three accounting years up to the share award of
100% of the participants basic salary. Where awards have been
granted to a participant in excess of 100% of their basic salary,
the performance condition for the element that is in excess of 100%
of basic salary is that the minimum growth in EPS shall be CPI plus
10% per annum, compounded annually, over the three accounting
years.
Number of
Options
Reconciliation of outstanding share options in thousands
--------------------------------------------- -------------
Outstanding on 1 January 2019 2,469
Forfeited during the year (491)
Exercised during the year (432)
Granted during the year -
Outstanding at 31 December 2019 1,546
--------------------------------------------- -------------
23. Financial risk management
The Group is exposed to various financial risks arising in the
normal course of business. Its financial risk exposures are
predominantly related to changes in foreign currency exchange rates
and interest rates, as well as the creditworthiness of our
counterparties.
The Company's board of directors has overall responsibility for
the establishment and oversight of the Group's risk management
framework. The board of directors has established the risk
management committee, which is responsible for developing and
monitoring the Group's risk management policies. The committee
reports regularly to the board of directors on its activities.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's activities.
The Group, through its training and management standards and
procedures, aims to maintain a disciplined and constructive control
environment in which all employees understand their roles and
obligations.
The Group audit committee oversees how management monitors
compliance with the Group's risk management policies and
procedures, and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group.
23. Financial risk management (continued)
a) Liquidity and capital
The Group defines liquid resources as the total of its cash,
cash equivalents and short term deposits. Capital is defined as the
Group's shareholders' equity and borrowings.
The Group's objectives when managing its liquid resources are:
* To maintain adequate liquid resources to fund its
ongoing operations and safeguard its ability to
continue as a going concern, so that it can continue
to create value for investors;
* To have available the necessary financial resources
to allow it to invest in areas that may create value
for shareholders; and
-- To maintain sufficient financial resources to mitigate against
risks and unforeseen events.
Liquid and capital resources are monitored on the basis of the
total amount of such resources available and the Group's
anticipated requirements for the foreseeable future. The Group's
liquid resources and shareholders' equity at 31 December 2019 and
31 December 2018 were as follows:
2019 2018
EUR'000 EUR'000
-------------------------- ------- -------
Cash and cash equivalents 16,368 8,042
Loans and borrowings 14,922 7,196
Shareholders' equity 125,029 115,705
-------------------------- ------- -------
The Group frequently assess its liquidity requirements, together
with this requirement and the rate return of long term euro
deposits, the Group has decided to keep all cash readily available
that is accessible within a month or less. Cash at bank earns
interest at floating rates based on daily bank deposits. The fair
value of cash and cash equivalents equals the carrying amount.
Cash and cash equivalents are held by major Irish, European,
United States and Australian institutions with credit rating of A3
or better. The Company deposits cash with individual institutions
to avoid concentration of risk with any one counterparty. The Group
has also engaged the services of a depository to ensure the
security of the cash assets.
Risk of counterparty default arising on cash and cash
equivalents and derivative financial instruments is controlled by
dealing with high-quality institutions and by policy, limiting the
amount of credit exposure to any one bank or institution.
The Group is also exposed to credit risk on its liquid resources (cash),
of which the euro equivalent of EUR3.4 million was held in US Dollar
(USD 3.8 million), EUR2 million was held in Swedish krona (SEK 21 million)
and the euro equivalent of EUR1.7 million was held Australian Dollar
(AUD 2.8 million). The Directors actively monitor the credit risk associated
with this exposure.
At year-end, the Group's total cash and cash equivalents were
held in the following jurisdictions:
31 December 31 December
2019 2018
EUR'000 EUR'000
Ireland 5,759 1,068
Americas 2,339 1,558
Australasia 1,625 266
Europe, Middle East, Africa 6,645 5,150
----------------------------------------------------- ----------- -----------
Total cash, cash equivalents and short term deposits 16,368 8,042
----------------------------------------------------- ----------- -----------
There are currently no restrictions that would have a material
adverse impact on the Group in relation to the intercompany
transfer of cash held by its foreign subsidiaries. The Group
continually evaluates its liquidity requirements, capital needs and
availability of resources in view of, among other things,
alternative uses of capital, the cost of debt and equity capital
and estimated future operating cash flow.
23. Financial risk management (continued)
a) Liquidity and capital (continued)
In the normal course of business, the Group may investigate,
evaluate, discuss and engage in future company or product
acquisitions, capital expenditures, investments and other business
opportunities. In the event of any future acquisitions, capital
expenditures, investments or other business opportunities, the
Group may consider using available cash or raising additional
capital, including the issuance of additional debt. The maturity of
the contractual undiscounted cash flows (including estimated future
interest payments on debt) of the Group's financial liabilities at
31 December were as follows:
Total
Fair Value Less than More than
of
Cash Flows 1 Year 1-3 Years 3-5 Years 5 Years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------------------- ---------- --------- --------- --------- ---------
At 31 December 2018:
Deferred contingent consideration 5,470 1,596 3,874 - -
Loans and borrowings 4,677 2,246 479 416 1,536
Finance leases 2,630 655 1,025 950 -
Trade and other payables 12,027 12,027 - - -
Accrued and other financial
liabilities 6,996 6,996 - - -
---------------------------------- ---------- --------- --------- --------- ---------
Total at 31 December 2018 31,800 23,520 5,378 1,366 1,536
---------------------------------- ---------- --------- --------- --------- ---------
At 31 December 2019:
Deferred contingent consideration 4,962 2,452 2,510 - -
Loans and borrowings 4,879 1,441 847 782 1,809
Finance leases 5,903 1,244 2,895 1,764 -
Right of use leases 4,140 1,360 1,807 735 238
Trade and other payables 10,853 10,853 - - -
Accrued and other financial
liabilities 5,827 5,827 - - -
---------------------------------- ---------- --------- --------- --------- ---------
Total at 31 December 2019 36,564 23,177 8,059 3,281 2,047
---------------------------------- ---------- --------- --------- --------- ---------
b) Foreign currency risk
The Group is a multinational business operating in a number of
countries and the euro is the presentation currency. The Group,
however, does have revenues, costs, assets and liabilities
denominated in currencies other than euro. Transactions in foreign
currencies are recorded at the exchange rate prevailing at the date
of the transaction. The resulting monetary assets and liabilities
are translated into the appropriate functional currency at exchange
rates prevailing at the reporting date and the resulting gains and
losses are recognised in the income statement. The Group manages
some of its transaction exposure by matching cash inflows and
outflows of the same currencies. The Group does not engage in
hedging transactions and therefore any movements in the primary
transactional currencies will impact profitability. The Group
continues to monitor appropriateness of this policy.
The Group's global operations create a translation exposure on
the Group's net assets since the financial statements of entities
with non-euro functional currencies are translated to euro when
preparing the consolidated financial statements. The Group does not
use derivative instruments to hedge these net investments.
The principal foreign currency risks to which the Group is
exposed relate to movements in the exchange rate of the euro
against US dollar, South African rand, Australian dollar, Swedish
krona and Canadian dollar.
The Group has material subsidiaries with a functional currency
other than the euro, such as US dollar, Australian dollar, South
African rand, Canadian dollar, British pound and Swedish krona.
23. Financial risk management (continued)
b) Foreign currency risk (continued)
The Group's worldwide presence creates currency volatility when
compared year on year. During 2019, there were positive movements
in US Dollar, however all the major currencies in which Mincon
operates through, except for Swedish Krona, finished the year
stronger than the previous year. Strong economic growth in the USA,
and a weakening Euro are a key driver for increases in the US
Dollar versus the Euro. The Australian dollar had a weaker
performance during 2019 due to the economic tensions between the
USA and China, however easing tensions towards the end of the year
had a positive effect on the currency. The movements in the South
African Rand were not significant in comparison to previous years.
There were also very slight movements in the valuation of the
Swedish Krona against the Euro due to the Swedish economy's close
links with the economic area of the Euro. In particular we note the
following:
-- The US Dollar increased by 2% against the closing 2018 Euro
rate (2018 decrease of 2% against 2017).
-- The Australian Dollar has increased 2% against the closing
2018 Euro rated (2018 decrease of 6% against 2017).
-- The South African Rand has increased 4% against the closing
2018 Euro rated (2018 decrease of 11% against 2017).
-- The Swedish Krona has decreased 3% against the closing 2018
Euro rated (2018 decrease of 4% against 2017).
In 2019, 60% (2018: 53%) of Mincon's revenue EUR124 million
(2018: EUR118 million) was generated in AUD, SEK and USD. The
majority of the group's manufacturing base has a Euro, US dollar or
Swedish Krona cost base. While Group management makes every effort
to reduce the impact of this currency volatility, it is impossible
to eliminate or significantly reduce given the fact that the
highest grades of our key raw materials are either not available or
not denominated in these markets and currencies. Additionally, the
ability to increase prices for our products in these jurisdictions
is limited by the current market factors.
2019 2018
Euro exchange rates Closing Average Closing Average
US Dollar 1.12 1.11 1.14 1.18
Australian Dollar 1.59 1.61 1.62 1.58
South African Rand 15.72 15.93 16.46 15.60
Swedish Krona 10.51 10.53 10.21 10.25
-------------------- ------- -------- -------- --------
The table below shows the Group's net monetary asset/(liability)
exposure. Such exposure comprises the monetary assets and monetary
liabilities that are not denominated in the functional currency of
the operating unit involved. These exposures were as follows:
23. Financial risk management (continued)
c) Credit risk
Credit risk is the risk that the possibility that the Group's
customers may experience financial difficulty and be unable to meet
their obligations. The Group monitors its collection experience on
a monthly basis and ensures that a stringent policy is adopted to
provide for all past due amounts. The majority of the Group's
customers are third party distributors and end users of drilling
tools and equipment.
Expected credit loss assessment
The Group allocates each exposure to a credit risk grade based
on data that is determined to be predictive of the risk of loss and
applying experienced credit judgement. Credit risk grades are
defined using quantitative factors that are indicative of the risk
of default and are aligned to past experiences. Loss rates are
based on accrual credit loss experience over the past five
years.
The maximum exposure to credit risk for trade and other
receivables at 31 December 2019 and 31 December 2018 by geographic
region was as follows:
2019 2018
EUR'000 EUR'000
---------------------------- ------- -------
Ireland 88 122
Americas 6,141 5,154
Australasia 4,495 4,772
Europe, Middle East, Africa 9,622 10,663
Total amounts owed 20,346 20,711
---------------------------- ------- -------
The Group is also exposed to credit risk on its liquid resources
(cash), of which the euro equivalent of EUR3.4 million was held in
US Dollars ($3.8 million ), the euro equivalent of EUR2 million was
held in Swedish krona (SEK 21 million) and the euro equivalent of
EUR1.7 million was held in Australian Dollars ($2.7 million). The
Directors actively monitor the credit risk associated with this
exposure, cash and cash equivalents are held by major Irish,
European, United States and Australian institutions with credit
rating of A3 or better.
d) Interest rate risk
Interest Rate Risk on financial liabilities
Movements in interest rates had no significant impact on our financial
liabilities or finance cost recognised in either 2018 or 2019.
Interest Rate Risk on cash and cash equivalents
Our exposure to interest rate risk on cash and cash equivalents is
actively monitored and managed, the rate risk on cash and cash equivalents
is not considered material to the Group.
e) Fair values
Fair value is the amount at which a financial instrument could
be exchanged in an arms-length transaction between informed and
willing parties, other than in a forced or liquidation sale. The
contractual amounts payable less impairment provision of trade
receivables, trade payables and other accrued liabilities
approximate to their fair values. Under IFRS 7, the disclosure of
fair values is not required when the carrying amount is the
reasonable approximation of fair value.
There are no material differences between the carrying amounts
and fair value of our financial liabilities as at 31 December 2018
or 2019.
Financial instruments carried at fair value
The deferred contingent consideration payable represents
management's best estimate of the fair value of the amounts that
will be payable, discounted as appropriate using a market interest
rate. The fair value was estimated by assigning probabilities,
based on management's current expectations, to the potential
pay-out scenarios.
23. Financial risk management (continued)
e) Fair values (continued)
Movements in the year in respect of Level 3 financial
instruments carried at fair value
The movements in respect of the financial assets and liabilities
carried at fair value in the year to 31 December 2019 are as
follows:
Deferred
contingent
consideration
EUR'000
--------------------------------------------------------- --------------
Balance at 1 January 2019 5,470
Arising on acquisition 1,032
Cash payment (1,600)
Foreign currency translation adjustment 70
Fair value movement on deferred contingent consideration (10)
Balance at 31 December 2019 4,962
--------------------------------------------------------- --------------
24. Subsidiary undertakings
At 31 December 2019, the Group had the following subsidiary
undertakings:
Group Registered Office &
Company Share % Country of Incorporation
------------------------------------------- -------- ---------------------------------------------------------------
Mincon International Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Manufacturer of rock drilling equipment
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Rockdrills USA Inc. 100%* 107 Industrial Park, Benton, IL 62812, USA
Manufacturer of rock drilling equipment
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Rockdrills PTY Ltd 100% 8 Fargo Way, Welshpool, WA 6106, Australia
Manufacturer of rock drilling equipment
------------------------------------------- -------- ---------------------------------------------------------------
1676427 Ontario Inc. (Operating as Rotacan) 100% 400B Kirkpatrick Street, North Bay,
Ontario, P1B 8G5, Canada
---------------------------------------------------------------
Manufacturer of rock drilling equipment
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Carbide Ltd 100% Windsor St, Sheffield S4 7WB, United Kingdom
Manufacturer of tungsten carbide
------------------------------------------- -------- ---------------------------------------------------------------
Viqing Drilling Equipment AB 100%* Svarvarevagen 1, SE-686 33 Sunne, Sweden
Manufacturer of drill pipe equipment
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Inc. 100% 603 Centre Avenue, N.W. Roanoke, VA 24016, USA
---------------------------------------------------------------
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Sweden AB 100% Industrivagen 2-4, 61202 Finspang, Sweden
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Nordic OY 100% Hulikanmutka 6, 37570 Lempäälä, Finland
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Holdings Southern Africa (Pty) 100% 1 Northlake, Jetpark 1469, Gauteng, South Africa
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
ABC Products (Rocky) Pty Ltd 95% 2/57 Alexandra Street, North Rockhampton, Queensland, 4701
Australia
---------------------------------------------------------------
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
Mincon West Africa SARL 80% Villa TF 4635 GRD, Almadies, Dakar B.P. 45534, Senegal
---------------------------------------------------------------
Dormant company
------------------------------------------- -------- ---------------------------------------------------------------
Mincon West Africa SL 80% Calle Adolfo Alonso Fernández, s/n, Parcela P-16, Planta
2, Oficina 23, Zona Franca de
Gran Canaria, Puerto de la Luz, Código Postal 35008, Las
Palmas de Gran Canari
---------------------------------------------------------------
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
Mincon Poland 100% ul.Mickiewicza 32, 32-050 Skawina, Poland
Dormant company
------------------------------------------- -------- ---------------------------------------------------------------
Pacific Bit of Canada 100% 9485 189 Unit204, Surrey, BC V4N 5L8, Canada
Sales company
------------------------------------------- -------- ---------------------------------------------------------------
24. Subsidiary undertakings (continued)
Group Registered Office &
Company Share % Country of Incorporation
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Rockdrills Ghana Limited 80% P.O. Box CT5105, Accra,
Ghana
---------------------------------------------------------------
Dormant company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon S.A.C. 100% Calle La Arboleda 151, Dpto 201, La Planicie, La Molina, Peru
---------------------------------------------------------------
Sales company
---------------------------------------- -------- ---------------------------------------------------------------
Ozmine International Pty Limited 100% Gidgegannup, WA 6083, Australia
---------------------------------------------------------------
Sales company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Chile 100% Av. La Dehesa #1201, Torre Norte, Lo Barnechea, Santiago, Chile
---------------------------------------------------------------
Sales company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Tanzania 100% Plot 1/3 Nyakato Road,
Mwanza, Tanzania
---------------------------------------------------------------
Dormant company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Namibia Pty Ltd 100% Ausspannplatz, Windhoek, Namibia
Sales company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Russia 100% 4,4 Lesnoy In,125047 Moscow, Russia
Dormant Company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon International UK Ltd 100% Windsor St, Sheffield S4 7WB, United Kingdom
Sales company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Mining Equipment Inc 100%* 19789-92a Avenue, Langley, British Columbia V1M3B3, Canada
---------------------------------------------------------------
Sales company
---------------------------------------- -------- ---------------------------------------------------------------
Pirkanmaan Poraveikot OY PPV 100%* Hulikanmutka 6, 37570 Lempäälä, Finland
Engineering company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Exports USA Inc. 100% 603 Centre Ave, Roanoke VA 24016, USA
---------------------------------------------------------------
Group finance company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon International Shannon 100%* Smithstown, Shannon, Co. Clare, Ireland
Dormant company
---------------------------------------- -------- ---------------------------------------------------------------
Smithstown Holdings 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
---------------------------------------- -------- ---------------------------------------------------------------
Mincon Canada Drilling Products Inc. 100%
---------------------------------------------------------------
Holding company Suite 1800-355 Burrard Street, Vancouver, BC V6C 268, Canada
---------------------------------------- -------- ---------------------------------------------------------------
Lotusglade Limited 100%* Smithstown, Shannon, Co. Clare, Ireland
Holding company
---------------------------------------- -------- ---------------------------------------------------------------
Floralglade Company 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
---------------------------------------- -------- ---------------------------------------------------------------
24. Subsidiary undertakings (continued)
Group Registered Office &
Company Share % Country of Incorporation
----------------------------------- -------- ----------------------------------------------------------------
Castle Heat Treatment Limited 100%* Smithstown, Shannon, Co. Clare, Ireland
Holding company
----------------------------------- -------- ----------------------------------------------------------------
Mincon Microcare Limited 100%* Smithstown, Shannon, Co. Clare, Ireland
----------------------------------- -------- ----------------------------------------------------------------
Holding company
----------------------------------- -------- ----------------------------------------------------------------
Cebeko Elast AB 100%* Svarvarevagen 1, SE-686 33 Sunne, Sweden
Holding company
----------------------------------- -------- ----------------------------------------------------------------
Driconeq AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
Holding company
----------------------------------- -------- ----------------------------------------------------------------
Driconeq Production AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
----------------------------------- -------- ----------------------------------------------------------------
Manufacturing facility
Driconeq Fastighet AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
----------------------------------- -------- ----------------------------------------------------------------
Property holding company
Driconeq Do Brasil 100% Rua Dr. Ramiro De Araujo Filho, 348, Jundai, SP, Brasil
----------------------------------- -------- ----------------------------------------------------------------
Sales company
Driconeq Africa Ltd 100% Cnr of Harriet and James Bright Avenue, Driehoek. Germiston 1400
----------------------------------- -------- ----------------------------------------------------------------
Manufacturing facility
Driconeq Australia Holdings Pty Ltd 100% 47 Greenwich Parade, AU-6031 Neerabup, WA, Australia
----------------------------------- -------- ----------------------------------------------------------------
Holding company
Driconeq Australia Pty Ltd 100% 47 Greenwich Parade, AU-6031 Neerabup, WA, Australia
----------------------------------- -------- ----------------------------------------------------------------
Manufacturing facility
Mincon Drill String AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
Holding company
* Indirectly held shareholding
25. Leases
A. Leases as Lessees (IFRS 16)
The group leases property, plant and equipment across its global
operations. During the year one of the leased properties in
Australia was sublet. The lease and sublease expire in 2024.
The property and equipment leases recognised on inception were
entered into in the previous years and were classified as operating
leases under IAS17.
The Group leases IT and other equipment with contract terms of
less than 12 months and also for low value items.
The Group has elected not to recognise right-of -use assets and
lease liabilities for these leases in line with availing of the
exemptions for such leases allowable under IFRS16.
Information about leases for which the Group is a lessee is
presented below.
i) Right-of-use assets
31 December
2019
EUR'000
Balance at 1January 4,683
Depreciation charge for the year (1,344)
Additions to right of use assets 490
Derecognition of right of use asset* (455)
Foreign exchange difference 114
-------------------------------------- -----------
Balance at 31 December 2019 3,488
-------------------------------------- -----------
*Derecognition of the right of use asset during 2019 is as a
result of entering into a finance sub-lease.
ii) Amounts recognised in income statement.
31 December
2019
EUR'000
2019-Leases under IFRS 16
Interest on lease liabilities 247
Expenses related to short term leases 363
Expenses related to leases of low value assets 28
------------------------------------------------ -----------------
Total 2019-Leases under IFRS 16 638
------------------------------------------------ -----------------
31 December
2018
EUR'000
2018-Operating Leases under IAS 17
Lease expenses 2,155
Total 2018-Operating Leases under IAS 17 2,155
------------------------------------------ ----------------
iii) Amounts recognised in statement of cash flows
31 December
2019
EUR'000
2019-Cash outflow of leases
Total cash outflow for leases 2,121
----------------------------------- -----------
Total 2019-Cash outflow of leases 2,121
----------------------------------- -----------
iv) Extension options
Some property leases contain extension options exercisable by
the group. The group assesses at lease commencement date whether it
is reasonably certain to exercise the extension options. The group
is reasonably certain it will not incur future lease liabilities
beyond what is currently calculated.
25. Leases (continued)
B. Leases as Lessor (IFRS 16)
i) Financing Lease
The group subleased a property that had been recognised as a
right of use asset in Australia. The group recognised income
interest in the year in relation to this totalling EUR21,000.
The following table sets out a maturity analysis of lease
receivable, showing the undiscounted lease payments to be received
after the reporting date.
31 December
2019
EUR'000
Less than one year 138
One to two years 138
Two to three years 135
Three to four years 135
More than five years -
------------------------------------ ---------------
Balance at 31 December 2019 546
------------------------------------- ---------------
Unearned finance income (62)
------------------------------------- ---------------
Total undiscounted lease receivable 484
------------------------------------- ---------------
ii) Operating leases
The group leases company owned property out to tenants in the
USA under various agreements. The group recognises these leases as
operating leases from a lessor perspective due to the fact they do
not transfer substantially all of the risks and rewards incidental
to the ownership of the assets.
Rental income recognised by the Group during 2019 was EUR125,000
(2018: EUR9,000)
The following table sets out a maturity analysis of lease
receivable, showing the undiscounted lease payments to be received
after the reporting date.
31 December
2019
EUR'000
Less than one year 76
One to two years 26
Two to three years -
Three to four years -
More than five years -
--------------------- -----------
Total 102
---------------------- -----------
26. Commitments
The following capital commitments for the purchase of property,
plant and equipment had been authorised by the directors at 31
December 2019:
31 December 31 December
2019 2018
EUR'000 EUR'000
Contracted for 358 3,553
Not-contracted for - 185
------------------- ----------- ------------
Total 358 3,738
------------------- ----------- ------------
27. Litigation
The Group is not involved in legal proceedings that could have a
material adverse effect on its results or financial position.
28. Related parties
As at 31 December 2019, the share capital of Mincon Group plc
was 56.72% owned by Kingbell Company which is ultimately controlled
by Patrick Purcell and members of the Purcell family. Patrick
Purcell is also a director of the Company.
In September 2019, the Group paid an interim dividend for 2019
of EUR0.0105 to all shareholders. The total dividend paid to
Kingbell Company was EUR1,256,551 (September 2018:
EUR1,256,551).
In June 2019, the Group paid a final dividend for 2018 of
EUR0.0105 to all shareholders. The total dividend paid to Kingbell
Company EUR1,256,551.
The Group has a related party relationship with its subsidiary
and its joint venture undertakings (see note 24) for a list of
these undertakings), directors and officers. All transactions with
subsidiaries eliminate on consolidation and are not disclosed.
Transactions with Directors
The Group is owed EURNil from directors and shareholders at 31
December 2019 and 2018. The Group has amounts owing to directors of
EURNil as at 31 December 2019 and 2018.
Key management compensation
The profit before tax from continuing operations has been
arrived at after charging the following key management
compensation:
2019 2018
EUR'000 EUR'000
Short term employee benefits 1,369 1,686
Share based payment charged in the year 67 600
Bonus and other emoluments 10 188
Post-employment contributions 68 109
Social security costs 133 164
---------------------------------------- ------- -------
Total 1,647 2,747
---------------------------------------- ------- -------
The key management compensation amounts disclosed above
represent compensation to those people having the authority and
responsibility for planning, directing and controlling the
activities of the Group, which comprises the Board of Directors and
executive management (nine in total at year end). Amounts included
above are time weighted for the period of the individuals
employment.
29. Events after the reporting date
The Board of Mincon Group plc is recommending the payment of a
final dividend for the year ended 31 December 2019 in the amount of
EUR0.0105 (1.05 cent) per ordinary share, which will be subject to
approval at the Annual General Meeting of the Company in May 2020.
This final dividend, when added to the interim dividend of 1.05
cent paid in September 2019, makes a total distribution for the
year of 2.10 cent per share. Subject to Shareholder approval at the
Company's annual general meeting, the final dividend will be paid
on 19 June 2020 to Shareholders on the register at the close of
business on 29 May 2020.
Acquisition of the Lehti Group Oy
On 15 January 2019, the Group completed the acquisition of the
Lethi Group Oy, a manufacture of drilling consumables for a
consideration of EUR8 million. The goodwill arising on acquisition
is circa EUR4.3 million, with expected 2020 revenue of between
EUR10 million and EUR14 million. (What will Mincon Goup's revenue
increase be as a result of this acquisition? Most of the sales were
to Mincon Nordic.)
30. Approval of financial statements
The Board of Directors approved the consolidated financial
statements on 20 March 2020.
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
FR EAKDEASAEEFA
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