TIDMMCON
RNS Number : 5703I
Mincon Group Plc
08 August 2023
Mincon Group plc
("Mincon" or the "Group")
2023 Half 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 half
year results for the six months ended 30 June 2023.
H1 2023 Key Financial Highlights:
H1 2023 H1 2022
------------------------------------------------- --------------- ---------------
* Revenue EUR80.6 million EUR85.1 million
* Of which Mincon manufactured product EUR67.2 million EUR70.9 million
* Of which Non-Mincon manufactured product EUR13.4 million EUR14.2 million
* Gross Profit EUR25.6 million EUR27.1 million
* EBITDA EUR11.8 million EUR12.7million
* Operating Profit EUR7.8 million EUR8.8 million
Joe Purcell, Chief Executive Officer, commenting on the results,
said:
"H1 2023 has been a challenging period for Mincon with our
revenue behind the same period in the prior year, primarily due to
a shortfall in our sales to the mining industry and FX headwinds.
This performance in the sector is down to several factors but
mainly due to reduced exploration activity and certain larger
customers taking advantage of improved freight conditions to reduce
inventories. We are, however, working on regaining some of this
revenue with some positive drilling results from customer testing
that we are doing in all our regions, most notably in APAC.
In positive news, it is very pleasing to see that we have
consolidated the gains we made last year in the construction
sector, and more importantly, the revenue mix includes a higher
proportion of smaller projects, which gives a more sustainable
spread to the business. It is notable that there continues to be a
strong pipeline of large projects that we are looking to land in H2
and beyond. Our sales into the water well/geothermal well drilling
market are up, driven by gains in EME and the Americas.
As a result of the lower mining revenues, we have looked closely
at our costs and have taken selective, targeted action to reduce
costs where appropriate. The results of this cost reduction
exercise will be seen in H2, which should help us to recover
margins. In July, we announced the appointment of Tom Purcell to
the role of COO for the Group. Most recently, Tom has been leading
a project to reduce our inventories across the Group and we are
pleased to report that we have started to make good progress in
this area.
I am pleased to report that our sustainability report for 2022
will be published in conjunction with these results. This will show
that we have achieved initial progress on our ambitious goals to
reduce scope 1 and 2 emissions. It also indicates that our biggest
challenge and opportunity to reduce emissions is around the end-use
of our products. This has been well known to us for many years and
is what has driven our ambition and engineering innovations to
focus on the drilling efficiency of our products, whether it be
through increased rate of drilling, longer product life or
reliability.
These attributes are particularly noticeable with some of the
new product develpoment projects that we have been working on, such
as our Greenhammer system. We have engaged with a major rig
manufacturer on a collaboration to prove out the system by
converting one of their rigs and testing it at a location in the
US. This is an attractive location as the largest rig population
suitable for conversion to Greenhammer is in this market. Another
attractive feature of this collaboration is the service footprint
that we both have in this market. We remain heavily focused on
getting the system running in Western Australia and expect the
system to return to operation in the coming month at the gold mine
where we have been carrying out drilling in recent months.
Another project which can deliver positive efficiency gains is
our large hammer and bit project that we have been testing in
Malaysia. We have had excellent performance figures when it has
been run and we have been onsite a number of times to see the
system in action. We see a great opportunity to push this out to
the large diameter drilling market to replace incumbent systems
that have much lower productivity with resulting higher
emissions.
Our Subsea project has been gathering momentum and at our recent
AGM we made a presentation to assembled shareholders and guests in
conjunction with our collaboration partners, Subsea Micropiles. We
had very positive feedback from this event, and we have commenced
the assembly of the subsea rig at our facility in Shannon. We are
working hard to have the subsea testing underway within the next
six months. There remains an enormous opportunity for Mincon with
this exciting project on the successful completion of our
collaboration with Subsea Micropiles and our University
partners.
These transformational product development projects as well as
the continuous improvement initiatives we are engaged in across our
product lines give us confidence about the future of our business.
To ensure we are adequately positioned to capitalise on these
opportunities, we invested a further EUR4.3 million in property,
plant and equipment during the period, which includes a step-change
in efficiency gains with a new heat treatment facility at our
Shannon plant. This will be followed up with the commissioning of a
new manufacturing building at our Shannon site and installing
purpose-built robotic machining cells in the extension to cater for
the growth opportunities we see.
Conclusion
While the first half of 2023 has been challenging, we are
confident that our focus on the efficiency of our production
facilities but, more importantly, the efficient products we have
today as well as those in development, will ensure that we can grow
and thrive in the longer term.
In the short term we expect to deliver revenue growth in H2,
while also realising the benefits of our cost reduction program to
deliver a much improved margin in H2 2023 over H1 2023. We are also
confident that we will continue with the progress we are making on
inventory reduction in H2 2023. I feel privileged to work with the
global Mincon team and look forward to delivering on the platform
that we have created."
Joseph Purcell
Chief Executive Officer
Key financial commentary
Market Industries and Product Mix
Revenue in the first half of 2023 contracted by 5%, due to a
decrease in our mining industry revenue and currency headwinds.
Foreign exchange movements represented 3% of the reduction in
reported revenue, most notably due to the South African Rand
weakening during Q2 2023.
Industry mix (by revenue)
H1 2023 H1 2022
* Mining 43% 48%
* Construction 39% 37%
* Waterwell / Geothermal 18% 15%
Our revenue from the mining industry contracted by 15% during
the period, with revenues down in three out of our four geographic
regions. The largest contraction in our mining revenue was in the
Europe & Middle East region, down 72% versus the same period in
the prior year. We have received fewer orders from one large
customer in this region due to their inventory reduction strategy.
Since the beginning of the war in Ukraine, emerging mining
opportunities for the Group in Eastern Europe and further East into
Asia, have unfortunately been significantly affected, a
disappointing result given we had been making positive traction in
the mining industry in those areas in recent years.
Our mining revenue in Africa contracted by 11%, however this has
mostly been driven by the weakening in the South African Rand
during the period. Excluding FX impacts, our Africa region business
contracted by 1% in the period due mainly to reduced activity in
the exploration sector. Mining in our APAC region also contracted
in the period and is behind H1 2022 revenue by 22%.
Our revenue in the construction industry was flat during the
period, however this has been on the back of significant growth in
this industry, year on year, since 2019. The Americas region, where
we have seen the largest growth in this industry over the last few
years, contracted by 2% in this period, due to the absence of any
new large construction project and FX headwinds. The focus during
H1 2023 has been on winning smaller projects as they provide the
Group with a steadier income stream and reduced complexity in
controlling working capital. Large construction projects will
remain an important part in our construction growth however, and
there continues to be a healthy pipeline of projects which we will
selectively target.
Our Europe & Middle East region had construction revenue
growth of 8% during the period, this has been due to our expanded
footprint in Northern Europe. Our other regions are continuing to
develop the industry for our products.
Our revenue in the waterwell/geothermal industry grew by 10% in
the period. We experienced positive growth in North America and
Northern Europe where we earn the vast majority of our revenue in
this industry.
Earnings
Our earnings have been impacted due to lower revenue earned in
the period, though our gross margin percentage is consistent with
H1 2022. This is due to price increases that were implemented in H2
2022, and measures taken to protect our margins during this
reported period.
In line with our inventory reduction ambitions, we have
decreased our manufacturing output in H1 2023 versus the same
period in the prior year. However, our margins have been
temporarily impacted as a result.
Decreased revenue together with our inventory reduction program
has had an impact on our gross margin versus the first quarter of
the year due to less manufactured product in our factories. As a
result, our manufacturing plants are not fully utilising their
capacity and manufacturing overheads are spread across less factory
output, thus impacting our consolidated gross margin.
To mitigate this impact on our margin we have implemented a cost
reduction program across our factories and our operations, to
maximise efficiency in manufacturing and to rightsize costs in
subsidiaries to match their revenue. That program has continued
into H2 2023, and we will see the full benefits at the end of this
year and into 2024.
Earnings (continued)
We have also reduced our subcontract manufacturing significantly
in the period and this has given some relief to our factories,
enabling us to increase the volume of Mincon-manufactured product
through our manufacturing plants and thus benefiting our gross
margin.
Our operating employee costs are flat on H1 2022, though we have
reduced our headcount in administration and sales. Total costs
associated with employees exiting the business in H1 2023 was
EUR0.7 million and that cost was recorded within our operating
employee costs. As a result of these actions, we expect to see a
considerable saving in employee costs in H2 2023.
Our finance costs have increased in the period reflecting
increased interest costs on our borrowings as a result of the wider
change in the interest rate environment as central banks take
action to address inflation. The Group has a number of bank loans
and lease liabilities with a mixture of variable and fixed interest
rates.
Balance Sheet and Cash
Our cash generated from operations has increased significantly
over the same period from the prior year although the impact from
movements in debtor balances and the timing of orders in the first
half has resulted in a lower closing cash position at the end of
the period. This is due to where we earned our revenues in the
first half of the year and we expect this debtor position to unwind
in the coming months.
As previously noted in our discussion on new business
development initiatives, we have commissioned EUR4.3 million of
property plant and equipment in the period. This is mostly from
large capex projects over the past eighteen months, including the
new heat treatment facilities in Shannon.
We have implemented a Group-wide inventory reduction program,
with the goal of reducing our overall inventory levels in terms of
months. Targets have been set for each subsidiary in the Group with
timelines attached. We expect to make inroads in our goals on this
important project for the Group by the end of this year.
We borrowed further in the first half of 2023. This is mostly in
relation to our capital equipment program. The borrowings over
capital equipment commissioning are in relation to our Subsea
project. We plan to borrow further in H2 2023 to see out our large
capex projects.
During the period we paid EUR0.4 million for historical
acquisitions. We also paid a final year dividend for 2022 of EUR2.2
million in June 2023. The Board of Mincon has approved the payment
of an interim dividend in the amount of EUR0.0105 (1.05 cent) per
ordinary share, which will be paid to shareholders in December
2023.
For further information, please contact:
Mincon Group plc Tel: +353 (61) 361 099
Joe Purcell CEO
Mark McNamara CFO
Davy Corporate Finance (Nominated Adviser, Euronext Growth Tel:
+353 (1) 679 6363
Listing Sponsor and Joint Broker)
Anthony Farrell
Daragh O'Reilly
Shore Capital (Joint Broker) Tel: +44 (0) 20 7408 4090
Malachy McEntyre
Mark Percy
Daniel Bush
Mincon Group plc
2023 Half Year Financial Results
Condensed consolidated income statement
For the 6 months ended 30 June 2023
Unaudited Unaudited
H1 2023 H1 2022
Notes EUR'000 EUR'000
-------------------------------------- ---------------- ------------ --------------
Continuing operations
Revenue 6 80,585 85,168
Cost of sales 8 (54,940) (58,106)
------------ --------------
Gross profit 25,645 27,062
Operating costs 8 (17,863) (18,238)
------------ --------------
Operating profit 7,782 8,824
Finance income 19 11
Finance cost (1,175) (623)
Foreign exchange gain/(loss) (503) 835
Movement on deferred consideration 4 10
------------ --------------
Profit before tax 6,127 9,057
-------------------------------------- ------------ --------------
Income tax expense (1,228) (2,527)
-------------------------------------- ---------------- ------------ --------------
Profit for the period 4,899 6,530
-------------------------------------- ---------------- ------------ --------------
Earnings per Ordinary Share
Basic earnings per share 12 2.31c 3.07c
Diluted earnings per share 12 2.28c 2.99c
-------------------------------------- ---------------- ------------ --------------
Condensed consolidated statement of comprehensive income
For the 6 months ended 30 June 2023
Unaudited Unaudited
2023 2022
H1 H1
EUR'000 EUR'000
--------------------------------------------------------- --------- ------------
Profit for the period 4,899 6,530
Other comprehensive income:
Items that are or may be reclassified subsequently
to profit or loss:
Foreign currency translation - foreign operations (2,840) 3,814
Other comprehensive (loss)/profit for the period (2,840) 3,814
--------------------------------------------------------- --------- ------------
Total comprehensive income for the period 2,059 10,344
--------------------------------------------------------- --------- ------------
The accompanying notes are an integral part of these financial
statements.
Consolidated statement of financial position
As at 30 June 2023
Unaudited
30 June 31 December
2023 2022
Notes EUR'000 EUR'000
--------------------------------------------- ----- ----------- ------------
Non-Current Assets
Intangible assets and goodwill 14 39,503 40,109
Property, plant and equipment 15 52,777 53,004
Deferred tax asset 10 2,446 2,050
Total Non-Current Assets 94,726 95,163
---------------------------------------------- ----- ----------- ------------
Current Assets
Inventory and capital equipment 16 76,064 76,911
Trade and other receivables 17 30,467 23,872
Prepayments and other current assets 12,717 12,727
Current tax asset 10 314 305
Cash and cash equivalents 12,673 15,939
Total Current Assets 132,235 129,754
---------------------------------------------- ----- ----------- ------------
Total Assets 226,961 224,917
---------------------------------------------- ----- ----------- ------------
Equity
Ordinary share capital 11 2,125 2,125
Share premium 67,647 67,647
Undenominated capital 39 39
Merger reserve (17,393) (17,393)
Share based payment reserve 13 2,669 2,505
Foreign currency translation reserve (8,426) (5,586)
Retained earnings 107,117 104,449
---------------------------------------------- ----- ----------- ------------
Total Equity 153,778 153,786
Non-Current Liabilities
Loans and borrowings 18 28,787 26,971
Deferred tax liability 10 2,091 2,046
Deferred consideration 19 1,498 1,705
Other liabilities 849 833
Total Non-Current Liabilities 33,225 31,555
---------------------------------------------- ----- ----------- ------------
Current Liabilities
Loans and borrowings 18 15,280 14,973
Trade and other payables 14,711 14,420
Accrued and other liabilities 8,537 8,699
Current tax liability 10 1,430 1,484
Total Current Liabilities 39,958 39,576
---------------------------------------------- ----- ----------- ------------
Total Liabilities 73,183 71,131
---------------------------------------------- ----- ----------- ------------
Total Equity and Liabilities 226,961 224,917
---------------------------------------------- ----- ----------- ------------
The accompanying notes are an integral part of these financial
statements.
Condensed consolidated statement of cash flows
For the 6 months ended 30 June 2023
-------------------------------------------------------- -----------------------------------
Unaudited Unaudited
H1 H1
2023 2022
EUR'000 EUR'000
-------------------------------------------------------- ---------------------- -----------
Operating activities:
Profit for the period 4,899 6,530
Adjustments to reconcile profit to net cash provided
by operating activities:
Depreciation 3,974 3,890
Amortisation of internally generated intangible asset 242 -
Amortisation of intellectual property 108 92
Movement on deferred consideration (4) (10)
Finance cost 1,175 623
Finance income (19) (11)
Loss on sale of property, plant & equipment 11 154
Income tax expense 1,228 2,527
Other non-cash movements 510 (831)
-------------------------------------------------------- ---------------------- -----------
12,124 12,964
Changes in trade and other receivables (7,272) (3,396)
Changes in prepayments and other assets (119) (3,333)
Changes in inventory (814) (9,362)
Changes in trade and other payables 650 4,599
-------------------------------------------------------- ---------------------- -----------
Cash provided by operations 4,569 1,472
Interest received 19 11
Interest paid (1,175) (623)
Income taxes paid (1,462) (1,793)
-------------------------------------------------------- ---------------------- -----------
Net cash provided by/(used in) operating activities 1,951 (933)
-------------------------------------------------------- ---------------------- -----------
Investing activities
Purchase of property, plant and equipment (4,278) (2,327)
Proceeds from the sale of property, plant and equipment 288 605
Investment in intangible assets - (286)
Acquisitions, net of cash required - (1,014)
Payment of deferred consideration (203) (204)
Investment in acquired intangible assets (158) (147)
Net cash provided used in investing activities (4,351) (3,373)
-------------------------------------------------------- ---------------------- -----------
Financing activities
Dividends paid (2,231) (2,231)
Repayment of borrowings (2,569) (1,162)
Repayment of lease liabilities (2,112) (1,349)
Drawdown of loans 6,472 5,159
Net cash provided (used in)/by financing activities (440) 417
-------------------------------------------------------- ---------------------- -----------
Effect of foreign exchange rate changes on cash (426) 171
-------------------------------------------------------- ---------------------- -----------
Net decrease in cash and cash equivalents (3,266) (3,718)
-------------------------------------------------------- ---------------------- -----------
Cash and cash equivalents at the beginning of the
year 15,939 19,049
-------------------------------------------------------- ---------------------- -----------
Cash and cash equivalents at the end of the period 12,673 15,331
-------------------------------------------------------- ---------------------- -----------
The accompanying notes are an integral part of these financial
statements.
Condensed consolidated statement of changes in equity for the 6
months ended 30 June 2023
Foreign
Share based currency Unaudited
Share Share Merger Un-denominated payment translation Retained Total
capital premium reserve capital reserve reserve earnings equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Balances at 1
July 2022 2,125 67,647 (17,393) 39 2,959 (1,354) 98,506 152,529
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Comprehensive
income:
Profit for the
period - - - - - - 8,174 8,174
Other
comprehensive
income:
Foreign
currency
translation - - - - - (4,232) - (4,232)
Total
comprehensive
income (4,232) 8,174 3,942
------------ --------- ---------
Transactions
with
Shareholders:
Share-based
payments - - - - (454) - - (454)
Dividend
payment - - - - - - (2,231) (2,231)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Total
transactions
with
Shareholders - - - - (454) - (2,231) (2,685)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Balances at 31
December 2022 2,125 67,647 (17,393) 39 2,505 (5,586) 104,449 153,786
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Comprehensive
income:
Profit for the
period - - - - - - 4,899 4,899
Other
comprehensive
income:
Foreign
currency
translation - - - - - (2,840) - (2,840)
------------ --------- ---------
Total
comprehensive
income (2,840) 4,899 2,059
------------ --------- ---------
Transactions
with
Shareholders:
Share-based
payments - - - - 164 - - 164
Dividend
payment - - ,- - - - (2,231) (2,231)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Total
transactions
with
Shareholders - - - - 164 - (2,231) (2,067)
-------- ------------ ------------ -------------- ------------ ------------ --------- ---------
Balances at 30
June 2023 2,125 67,647 (17,393) 39 2,669 (8,426) 107,117 153,778
-------------- -------- ------------ ------------ -------------- ------------ ------------ --------- ---------
The accompanying notes are an integral part of these financial
statement
Notes to the consolidated interim financial statements
1 Description of business
Mincon Group plc ("the Company") is a company incorporated in
the Republic of Ireland. The unaudited consolidated interim
financial statements of the Company for the six months ended 30
June 2023 (the "Interim Financial Statements") include the Company
and its subsidiaries (together referred to as the "Group"). The
Interim Financial Statements were authorised for issue by the
Directors on 8 August 2023.
2. Basis of preparation
The Interim Financial Statements have been prepared in
accordance with IAS 34, 'Interim Financial Reporting', as adopted
by the EU. The Interim Financial Statements do not include all of
the information required for full annual financial statements and
should be read in conjunction with the Group's consolidated
financial statements for the year ended 31 December 2022 as set out
in the 2022 Annual Report (the "2022 Accounts"). The Interim
Financial Statements do, however, include selected explanatory
notes to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the last annual financial statements.
The Interim Financial Statements do not constitute statutory
financial statements. The statutory financial statements for the
year ended 31 December 2022, extracts from which are included in
these Interim Financial Statements, were prepared under IFRS as
adopted by the EU and will be filed with the Registrar of Companies
together with the Company's 2022 annual return. They are available
from the Company website www.mincon.com and, when filed, from the
registrar of companies. The auditor's report on those statutory
financial statements was unqualified.
The Interim Financial Statements are presented in Euro, rounded
to the nearest thousand, which is the functional currency of the
parent company and also the presentation currency for the Group's
financial reporting.
The financial information contained in the Interim Financial
Statements has been prepared in accordance with the accounting
policies applied in the 2022 Accounts.
3. Use of estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income, and expenses. The
judgements, estimates and associated assumptions are based on
historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ materially from these estimates. In
preparing the Interim Financial Statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the 2022 Financial Statements.
4. Changes in significant accounting policies
There have been no changes in significant accounting policies
applied in these interim financial statements, they are the same as
those applied in the last annual audited financial statements.
5. Financial Reporting impact due to the Covid-19 Pandemic:
a. Government Grants
The Group received government grants in certain countries where
the Group operates. These grants differ in structure from country
to country but primarily relate to personnel costs. During the six
months ended 30 June 2023, when the terms attached to the grants
were complied with, the grant was recognised in operating costs in
the consolidated income statement.
b. Expected Credit losses
The Group has not witnessed any trends in its analysis of its
customers that would indicate an adjustment to its trade
receivables as at the 30 June 2023 due to the Covid-19
pandemic.
c. Inventory
The Group has not experienced any material impact on its
valuation of inventory as of 30 June 2023, that can be directly
attributable to the Covid-19 pandemic.
d. Risk Assessment
The Mincon Group's operations are spread globally. This brings
various exposures, such as trading and financial, and strategic
risks. The primary trading risks would encompass operational,
legal, regulatory and compliance. Strategic risks would cover long
term risks effecting the business such as evolving industry trends,
technological advancements, and global economic developments.
Financial risks extend to but are not limited to pricing risks,
currency risks, interest rate volatility and taxation risks. The
risk of managing Covid-19 is encompassed with the abovementioned
risks and therefore the Group considers its management of these
risks as a whole.
6. Revenue
H1 H1
2023 2022
EUR'000 EUR'000
---------------------------- ------- --------
Product revenue:
Sale of Mincon product 67,190 70,906
Sale of third-party product 13,395 14,262
Total revenue 80,585 85,168
---------------------------- ------- --------
7. Operating Segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
(CODM). Our CODM has been identified as the Board of Directors.
Having assessed the aggregation criteria contained in IFRS 8
operating segments and considering how the Group manages its
business and allocates resources, the Group has determined that it
has one reportable segment. In particular the Group is managed as a
single business unit that sells drilling equipment, primarily
manufactured by Mincon manufacturing sites.
Entity-wide disclosures
The business is managed on a worldwide basis but operates
manufacturing facilities and sales offices in Ireland, Sweden,
Finland, South Africa, UK, Australia, the United States and Canada
and sales offices in other locations including Australia, South
Africa, Finland, Spain, Namibia, France, Sweden, Canada, 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.
7. Operating Segments (continued)
Revenue by region (by location of customers):
H1 H1
2023 2022
EUR'000 EUR'000
----------------------------------------- ------- --------
Region:
Europe, Middle East, Africa 38,021 42,805
Americas 34,894 33,649
Australasia 7,670 8,714
Total revenue from continuing operations 80,585 85,168
----------------------------------------- ------- --------
Non-current assets by region (location of assets):
30 June 31 December
2023 2022
EUR'000 EUR'000
Region:
Europe, Middle East, Africa 63,646 63,109
Americas 17,265 17,752
Australasia 11,369 12,252
Total non-current assets(1) 92,280 93,113
---------------------------------------------------- ------- -----------
(1) Non-current assets exclude deferred tax assets.
8. Cost of Sales and operating expenses
Included within cost of sales, operating costs were the
following major components:
Cost of sales
H1 H1
2023 2022
EUR'000 EUR'000
------------------------------------- -------- --------
Raw materials 22,364 22,621
Third-party product purchases 10,073 10,886
Employee costs 11,347 11,599
Depreciation 2,643 2,628
In bound costs on purchases 1,744 2,512
Energy costs 1,449 1,562
Maintenance of machinery 832 1,000
Subcontracting 2,612 3,860
Amortisation of product development 242 -
Other 1,634 1,438
------------------------------------- -------- --------
Total cost of sales 54,940 58,106
------------------------------------- -------- --------
Operating costs
H1 H1
2023 2022
EUR'000 EUR'000
------------------------------- --------
Employee costs 10,857 10,835
Depreciation 1,331 1,262
Amortisation of acquired IP 108 91
Travel 889 918
Other 4,678 5,132
-------------------------------- -------- --------
Total other operating costs 17,863 18,238
-------------------------------- -------- --------
The Group recognised EUR32,000 in Government Grants during H1
2023 (H1 2022: EUR194,000). These grants differ in structure from
country to country, they primarily relate to personnel costs.
Employee information
H1 H1
2023 2022
EUR'000 EUR'000
--------------------------------------------- -------- --------
Wages and salaries 19,450 18,817
Social security costs 1,426 2,278
Pension costs of defined contribution plans 1,164 1,075
Share based payments (note 13) 164 264
--------------------------------------------- -------- --------
Total employee costs 22,204 22,434
--------------------------------------------- -------- --------
The average number of employees was as follows:
H1 H1
2023 2022
Number Number
--------------------------------------------------- ------- --------
Sales and distribution 138 135
General and administration 80 80
Manufacturing, service and development 406 416
--------------------------------------------------- ------- --------
Average number of persons employed 624 631
--------------------------------------------------- ------- --------
9. Acquisitions and disposals
Acquisitions
During 2023, Mincon Group Plc made no new acquisitions.
In January 2022, Mincon acquired 100% shareholding in Spartan
Drilling Tools, a manufacturer of drill pipe and related products
based in the USA for a consideration of EUR1,014,000
A. Consideration transferred for acquisitions
Spartan Total
Drilling
Tools
EUR'000 EUR'000
--------------------------------- ---------- --------
Cash 1,014 1,014
Total consideration transferred 1,014 1,014
--------------------------------- ---------- --------
B. Goodwill
Spartan Total
Drilling
Tools
EUR'000 EUR'000
--------------------------------------- ---------- --------
Consideration transferred 1,014 1,014
Fair value of identifiable net assets (815) (815)
Goodwill 199 199
--------------------------------------- ---------- --------
10. Income Tax
The Group's consolidated effective tax rate in respect of
operations for the six months ended 30 June 2023 was 20% (30 June
2022: 28%). The effective rate of tax is forecast at 20% for 2023.
The tax charge for the six months ended 30 June 2023 of EUR1.2
million (30 June 2022: EUR2.5 million) includes deferred tax
relating to movements in provisions, net operating losses forward
and the temporary differences for property, plant and equipment
recognised in the income statement.
The net current tax liability at period-end was as follows:
30 June 31 December
2023 2022
EUR'000 EUR'000
------------------------ ------- ------------
Current tax prepayments 314 305
Current tax payable (1,430) (1,484)
------------------------ ------- ------------
Net current tax (1,116) (1,179)
------------------------ ------- ------------
The net deferred tax liability at period-end was as follows:
30 June 31 December
2023 2022
EUR'000 EUR'000
----------------------- ------- ------------
Deferred tax asset 2,446 2,050
Deferred tax liability (2,091) (2,046)
----------------------- ------- ------------
Net deferred tax 355 4
----------------------- ------- ------------
11. Share capital
Allotted, called- up and fully paid up shares Number EUR000
---------------------------------------------- ----------- ------
01 January 2023 212,472,413 2,125
30 June 2023 212,472,413 2,125
---------------------------------------------- ----------- ------
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.
12. Earnings per share
Basic earnings per share (EPS) is computed by dividing the
profit for the period available to ordinary shareholders by the
weighted average number of Ordinary Shares outstanding during the
period. Diluted earnings per share is computed by dividing the
profit for the period by the weighted average number of Ordinary
Shares outstanding and, when dilutive, adjusted for the effect of
all potentially dilutive shares. The following table sets forth the
computation for basic and diluted net profit per share for the
years ended 30 June:
H1 2023 H1 2022
Numerator (amounts in EUR'000):
Profit attributable to owners of the Parent 4,899 6,530
Denominator (Number):Basic shares outstanding
Restricted share options
Diluted weighted average shares outstanding 212,472,413 212,472,413
----------------------------------------------
2,780,000 5,820,000
215,252,413 218,292,413
---------------------------------------------- ----------- -----------
Earnings per Ordinary Share
Basic earnings per share, EUR 2.31c 3.07c
Diluted earnings per share, EUR 2.28c 2.99c
----------- -----------
13. Share based payment
The vesting conditions of the scheme state that the minimum
growth in EPS shall be CPI plus 5% per annum, compounded annually,
over the relevant three accounting years up to the share award of
100% of the participants basic salary. Where awards have been
granted to a participant in excess of 100% of their basic salary,
the performance condition for the element that is in excess of 100%
of basic salary is that the minimum growth in EPS shall be CPI plus
10% per annum, compounded annually, over the three accounting
years.
Number of
Options in
Reconciliation of outstanding share options thousands
--------------------------------------------- -----------
Outstanding on 1 January 2023 2,030
Forfeited during the period (120)
Exercised during the period -
Granted during the period 715
Outstanding at 30 June 2023 2,625
--------------------------------------------- -----------
Number of
Options in
Reconciliation of outstanding share awards thousands
-------------------------------------------- -----------
Outstanding on 1 January 2023 -
Forfeited during the period -
Exercised during the period -
Granted during the period 155
Outstanding at 30 June 2023 155
-------------------------------------------- -----------
14. Intangible Assets
Internally Goodwill
generated Acquired
intangible intellectual
assets property Total
EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------------- ------------ --------- --------------- -------
Balance at 1 January 2023 7,150 32,328 631 40,109
----------------------------------------- ------------ --------- --------------- -------
Acquired intellectual property - - 158 158
----------------------------------------- ------------ --------- --------------- -------
Amortisation of intellectual property - - (108) (108)
----------------------------------------- ------------ --------- --------------- -------
Amortisation of product development (242) - - (242)
----------------------------------------- ------------ --------- --------------- -------
Foreign currency translation differences - (399) (15) (414)
----------------------------------------- ------------ --------- --------------- -------
Balance at 30 June 2023 6,908 31,929 666 39,503
----------------------------------------- ------------ --------- --------------- -------
15. Property, Plant and Equipment
Capital expenditure in the first half-year amounted to EUR4.3
million (30 June 2022: EUR2.3 million), of which EUR4.1 million was
invested in plant and equipment (30 June 2022: EUR1.9 million) and
EUR800,000 million in ROU assets (30 June 2022: EUR400,000). The
depreciation charge for property, plant and equipment is recognised
in the following line items in the income statement:
H1 H1
2023 2022
EUR'000 EUR'000
-------------------------------------------------- ------- --------
Cost of sales 2,643 2,628
Operating Costs 1,331 1,262
Total depreciation charge for property, plant and
equipment 3,974 3,890
-------------------------------------------------- ------- --------
16. Inventory
30 June 31 December
2023 2022
EUR'000 EUR'000
----------------- ------- ------------
Finished goods 48,244 47,983
Work-in-progress 12,215 12,943
Raw materials 15,605 15,985
----------------- ------- ------------
Total inventory 76,064 76,911
----------------- ------- ------------
The Group recorded an impairment of EUR58,000 against inventory
to take account of net realisable value during the period ended 30
June 2023 (30 June 2022: EUR87,000).
17. Trade and other receivables
30 June 31 December
2023 2022
EUR'000 EUR'000
--------------------------------------------------- -------- ----------------
Gross receivable 31,750 24,975
Provision for impairment (1,283) (1,103)
Net trade and other receivables 30,467 23,872
--------------------------------------------------- -------- ----------------
Provision
for impairment
EUR'000
------------------------------------------------------------- ------------------
Balance at 1 January 2023 (1,103)
Additions (180)
Balance at 30 June 2023 (1,283)
------------------------------------------------------------- ------------------
The following table provides the information about the exposure
to credit risk and ECL's for trade receivables as at 30 June
2023.
Weighted Gross Loss
average carrying allowance
loss rate amount EUR'000
% EUR'000
Current (not past due) 1.2% 23,318 280
1-30 days past due 6.2% 4,293 266
31-60 days past due 12% 2,289 271
61 to 90 days 14.5% 1,618 235
More than 90 days past due 100% 232 231
-------------------------------- ---------- -----------
Net trade and other receivables 31,750 1,283
-------------------------------- ---------- -----------
The following table provides the information about the exposure
to credit risk and ECL's for trade receivables as at 31 December
2022.
Weighted Gross Loss
average carrying allowance
loss rate amount EUR'000
% EUR'000
Current (not past due) 1% 17,929 179
1-30 days past due 5% 4,245 211
31-60 days past due 13% 1,459 189
61 to 90 days 21% 1,034 216
More than 90 days past due 100% 308 308
-------------------------------- ---------- -----------
Net trade and other receivables 24,975 1,103
-------------------------------- ---------- -----------
18. Loans, borrowings and lease liabilities
30 June 31 December
2023 2022
Maturity EUR'000 EUR'000
--------------------------------------------------------- ------- ------------
Loans and borrowings 2023-2037 34,531 30,848
Lease liabilities 2023-2032 9,536 11,096
Total Loans, borrowings and lease liabilities 44,067 41,944
------- ------------
Current 15,280 14,973
------- ------------
Non-current 28,787 26,971
------- ------------
The Group has a number of bank loans and lease liabilities with
a mixture of variable and fixed interest rates. The Group has not
been in default on any of these debt agreements during any of the
periods presented. The loans are secured against the assets for
which they have been drawn down for.
19. Financial Risk Management
The Group is exposed to various financial risks arising in the
normal course of business. Our financial risk exposures are
predominantly related to changes in foreign currency exchange rates
as well as the creditworthiness of our financial asset
counterparties.
The half-year financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements and should be read in conjunction with the
2022 Annual Report. There have been no changes in our risk
management policies since year-end and no material changes in our
interest rate risk.
a) Liquidity and Capital
The Group defines liquid resources as the total of its cash,
cash equivalents and short term deposits. Capital is defined as the
Group's shareholders' equity and borrowings.
The Group's objectives when managing its liquid resources are:
* To maintain adequate liquid resources to fund its
ongoing operations and safeguard its ability to
continue as a going concern, so that it can continue
to create value for investors;
* To have available the necessary financial resources
to allow it to invest in areas that may create value
for shareholders; and
-- To maintain sufficient financial resources to mitigate against
risks and unforeseen events.
Liquid and capital resources are monitored on the basis of the
total amount of such resources available and the Group's
anticipated requirements for the foreseeable future. The Group's
liquid resources and shareholders' equity at 30 June 2023 and 31
December 2022 were as follows:
30 June 31 December
2023 2022
EUR'000 EUR'000
-------------------------- -------- -----------
Cash and cash equivalents 12,673 15,939
Loans and borrowings 44,067 41,944
Shareholders' equity 153,778 153,786
-------------------------- -------- -----------
19. Financial Risk Management (continued)
b) Foreign currency risk
The Group is a multinational business operating in a number of
countries and the euro is the presentation currency. The Group,
however, does have revenues, costs, assets and liabilities
denominated in currencies other than 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, British Pound 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.
In 2023, 56% (2022: 58%) of Mincon's revenue EUR81 million (30
June 2022: EUR85 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.
Currency also has a significant transactional impact on the
Group as outstanding balances in foreign currencies are
retranslated at closing rates at each period end. The changes in
the South African Rand, Australian Dollar, Swedish Krona and
British Pound have either weakened or strengthened, resulting in a
foreign exchange loss being recognised in other comprehensive
income and a significant movement in foreign currency translation
reserve.
Average and closing exchange rates for the Group's primary
currency exposures were as disclosed in the table below for the
period presented.
30 June 31 December
2023 H1 2023 2022 H1 2022
Euro exchange rates Closing Average Closing Average
-------------------- ------- -------- ------------ --------
US Dollar 1.09 1.08 1.07 1.05
Australian Dollar 1.64 1.60 1.57 1.52
Canadian Dollar 1.44 1.46 1.45 1.37
Great British Pound 0.86 0.88 0.88 0.85
South African Rand 20.50 19.67 18.18 17.19
Swedish Krona 11.79 11.33 11.15 10.63
-------------------- ------- -------- ------------ --------
There has been no material change in the Group's currency
exposure since 31 December 2022. Such exposure comprises the
monetary assets and monetary liabilities that are not denominated
in the functional currency of the operating unit involved.
19. Financial Risk Management (continued)
c) Fair values
Financial instruments carried at fair value
The deferred consideration payable represents management's best
estimate of the fair value of the amounts that will be payable,
discounted as appropriate using a market interest rate. The fair
value was estimated by assigning probabilities, based on
management's current expectations, to the potential pay-out
scenarios. The fair value of deferred consideration is not
dependent on the future performance of the acquired businesses
against predetermined targets and on management's current
expectations thereof.
Movements in the year in respect of Level 3 financial
instruments carried at fair value
The movements in respect of the financial assets and liabilities
carried at fair value in the period ended to 30 June 2023 are as
follows:
Deferred
consideration
EUR'000
-------------------------- --------------
Balance at 1 January 2023 1,705
-------------------------- --------------
Cash payment (203)
-------------------------- --------------
Fair value movement (4)
-------------------------- --------------
Balance at 30 June 2023 1,498
-------------------------- --------------
20. Commitments
The following capital commitments for the purchase of property,
plant and equipment had been authorised by the directors at 30 June
2023:
Total
EUR'000
------------------- --------
Contracted for 2,104
Not contracted for 28
------------------- --------
Total 2,132
------------------- --------
21. Litigation
The Group is not involved in legal proceedings that could have a
material adverse effect on its results or financial position.
22. Related Parties
The Group has relationships with its subsidiaries, directors and
senior key management personnel. All transactions with subsidiaries
eliminate on consolidation and are not disclosed.
As at 30 June 2023, the share capital of Mincon Group plc was
56.32% owned by Kingbell Company (31 December 2022 56.32%), this
company is ultimately controlled by Patrick Purcell and members of
the Purcell family. Patrick Purcell is also a director of the
Company. The Group paid the final dividend for 2022 in June 2023,
Kingbell Company receive EUR1.3 million.
There were no other related party transactions in the half year
ended 30 June 2023 that affected the financial position or the
performance of the Company during that period and there were no
changes in the related party transactions described in the 2022
Annual Report that could have a material effect on the financial
position or performance of the Company in the same period.
23. Events after the reporting date
Dividend
On 3 August 2023, the Board of Mincon Group plc approved the
payment of an interim dividend in the amount of EUR0.0105 (1.05
cent) per ordinary share. This amounts to a dividend payment of
EUR2.2 million which will be paid on 08 December 2023 to
shareholders on the register at the close of business on 17
November 2023.
24. Approval of financial statements
The Board of Directors approved the interim condensed
consolidated financial statements for the six months ended 30 June
2023 on 08 August 2023.
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END
IR FLFFATRIDIIV
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