REG - Mincon Group Plc - Final Results
11/03/2024 07:00
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RNS Number : 2121G Mincon Group Plc 11 March 2024
Mincon Group plc
("Mincon" or the "Group")
2023 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 2023.
2023 2022 Change in period
€'000 €'000
Total revenue 156,931 170,008 -8%
Gross profit 45,523 54,070 -16%
EBITDA 21,074 27,531 -23%
Operating profit 12,290 19,749 -38%
Profit for the period 7,470 14,704 -49%
Financial Summary
· 2023 Group revenue of €156.9 million, a decrease of 8% versus
2022, with FX headwinds was 5% of the contraction:
o The contraction in revenue was primarily driven by disruption in the
mining industry:
§ Mining revenue decreased by 16%, with contraction across all our mining
regions driven in part by customers resetting stock post covid disruption.
§ Our Waterwell/geothermal revenue grew by 3% in 2023.
§ Construction revenue was up 2% on a constant currency basis although
reported revenues fell by 2%.
· EBITDA of €21.1 million in 2023, slightly ahead of guidance but
reflecting a 23% decrease versus 2022:
§ This was a result of the lower revenues and reduced margins as a
consequence of smaller volumes through the manufacturing facilities.
o We continued with our R&D investment through 2023, with €4.1 million
expensed, broadly flat on 2022. However, we are expecting a decrease in
R&D spend in 2024.
o Measures were taken to protect our margins in the challenging market
environment, through cutting costs, bringing some subcontracting back in-house
and through a redundancy programme, resulting in a net EBITDA saving of €3.1
million for the Group in 2023.
o We have further initiatives ongoing to enhance competitiveness of our cost
base.
· Our net debt position reduced by €6.4 million in 2023.
· The Group commissioned €10.5 million in capital equipment in
2023, to create greater efficiencies in our operations and catering for
further expansion in manufacturing capacity. This reflects a peak of
investment in the near term, with capital equipment expected to be less than
depreciation levels in 2024.
· We continued with the execution of our inventory rationalisation
programme, with a decrease in our inventory holding of 9% in the year. Also, a
more positive trend in the remainder of our working capital.
· Final dividend of 1.05c per ordinary share recommended, taking
the total dividend for 2023 to 2.10c per ordinary share (2021: 2.10c per
ordinary share).
Chief Executive's Review:
2023 has been a challenging year for Mincon in terms of revenue, profitability
and ROCE. Revenue in H2 2023 was lower than expected due to a number of
factors, notably a slower than expected recovery in mining revenues as
customers ran down their inventories and the continuation of more muted
conditions in exploration drilling, while we also experienced delays to
anticipated commencements on some construction projects during the period.
The team at Mincon have worked hard to position the Group against this tough
market backdrop and there are some positives to note in respect of our
year-end cash and net debt position and the continued good results we have
seen from our inventory reduction project. These positive balance sheet
movements will continue to be worked on through 2024, something that is vital
in the current interest rate environment.
With the appointment of Tom Purcell as our COO in 2023, we began the process
of carrying out a root and branch review of all our businesses, and that is
ongoing into H1 2024. The actions we take now will help ensure that we create
a more stable base to better cope with both the challenges and opportunities
ahead.
Geographic Markets
Our business in the Americas was largely flat on the prior year but it was
notable that our construction revenue, although slightly down on the prior
year, did have a lot of smaller project revenue which is more sustainable in
the longer term. We did have a large construction project delayed from H2 2023
until this year, but we are expecting to get positive news on this in the near
term. Elsewhere in the Americas, we have finished a mining supply contract in
Chile and the effect of this will be significantly positive for our balance
sheet as we unwind the working capital position tied up in the contract. We
continue to believe that the Americas represent an area with a lot of
potential growth across all our industries, as it has been in the past and, to
that end, we intend to capture further growth in the mining and construction
industries with further investment in Q1 2024.
Our Europe and Middle East (EME) region, like the Americas, was flat on the
prior year. This was achieved despite our mining revenue being down, with
increases in construction and water well/geothermal markets offsetting this.
As this is our primary region for manufacturing activities within the Group,
the cost inflation in the region, largely due to the war in Ukraine, has been
a significant challenge to deal with in recent periods. As a result, we have
been looking closely at every avenue for sensible cost management initiatives
to offset these increases.
Regarding our business in the Australia Pacific (APAC) region, we experienced
a revenue decline of 15% on the prior year. We are continuing to work hard to
rebuild our revenues in the region and we are confident that we will make
progress through 2024. We see good opportunities to regain lost business here
through our strong presence on the ground to support local requirements and to
provide a better value proposition to our customers by tailoring products
manufactured in - country and supported with our field service technicians.
Our business in Africa is a sharp focus for the year ahead, as it experienced
a revenue decline of 22% on the prior year. We have put plans in place to
regain market share with strategic hires to assist in business development in
the West Africa region as well as continuing our focus on revenue generation
in Southern Africa through building upon our strong local presence.
Business Development
During the year, we continued our collaboration on the Greenhammer project
with a major rig manufacturer and this is ready to start drilling on a copper
mine in Arizona. We are confident that this approach will realise the
potential that this product offers. Following this strategic decision, we
elected to discontinue the previous testing on our own rig in Australia during
the year. The Greenhammer team in that region are now focused on supporting
the opportunity in the US as well as onsite business development work in the
APAC region as part of our drive to rebuild our revenues there.
Our push to provide larger diameter drilling systems for the construction
piling industry was slower to materialise in 2023 than we had originally
anticipated. This is due to a lack of suitable project starts in Malaysia
following a downturn in that region in the second half of 2023. We anticipate
opportunities in H1 2024 and will provide further updates on this product area
during the year. Regarding the construction market in general, we still have a
significant pipeline of potential projects and have made good progress in some
new markets with our spiral flush offering, which augers well for improving
our market spread for the year ahead.
I am pleased to report that the Subsea project with our collaboration
partners, Subsea Micropiles, has progressed well since our last update. The
subsea rig has been completed and we have successfully shown that it can be
road transported as a fully assembled unit. This significant milestone was
achieved in November 2023, when we moved the rig from our plant in Shannon,
Ireland to Jamestown Manufacturing Ltd. in Portarlington, Ireland to carry out
the commissioning of the rig as well as the terrestrial load testing program
essential for certification.
The functional testing of the rig has been successful, we have drilled and
grouted the templates in place for load testing. We also successfully
completed an initial wet test of the drilling system at Killybegs Port. We
will hold the system there for now to use it as a base for marine testing in
Ireland.
The subsea project progress has been closely followed by the offshore industry
and there have been some important strategic agreements made with well-funded
industry players. These agreements are essential pillars in moving the project
closer to commerciality and unlocking the enormous potential that offshore
wind represents for Mincon and our collaboration partners, Subsea Micropiles.
Sustainability
I am pleased to announce that our third Environment & Sustainability
report has been published and outlines the progress that we have made in 2023
toward our goals to reduce emissions as part of our commitment to ensure the
long-term sustainability of the business, and our commitment to people and the
environment. As first reported for FY2022, we have further refined our scope 3
emissions reporting which clearly points to the engineering challenge of
increasing the operational efficiency of our products in order to reduce their
carbon emissions in use. This is becoming increasingly critical to the
industries in which we work as they all have a pivotal role to play in the
global push to reduce emissions. Indeed, in mining alone (currently 4%-7% of
global emissions), the increase in output required is anticipated to reach
levels never before seen and to achieve this it must be done at dramatically
reduced levels of emissions to have any hope of making a positive impact on
the environment.
Conclusion
After a difficult 2023, Mincon is focused on taking the appropriate strategic
decisions in 2024 to meet the current market challenges and to position the
business to best capitalise on the long-term opportunities we see in our
end-markets. The subdued market environment in H2 of 2023 has continued into
H1 2024 although we have begun to see some improvement in our order book. We
are working hard to improve our competitiveness and input costs which together
with potential improvement in the market environment gives us more confidence
around performance in the second half of this year. . We must also continue
our work on delivering on the promise of our development projects. We also
need to complete our root and branch review to put a stable base under the
business to both deal with the challenges and realise the significant
opportunities ahead.
Finally, I would like to acknowledge the global Mincon team for their
diligence and commitment through a difficult year in 2023, as well as the
continuing support of our Board and investors. I remain confident that if we
continue to hold fast and build on the foundation we have created, we will
make a positive contribution in terms of our key business metrics and the
environment in which we live.
11 March 2024
For further information, please contact:
Mincon Group plc Tel: +353 (61) 361 099
Joe Purcell CEO
Mark McNamara CFO
Davy Corporate Finance
(Nominated Adviser, Euronext Growth Listing Sponsor and Joint Broker) Tel:
+353 (1) 679 6363
Anthony Farrell
Daragh O'Reilly
Shore Capital (Joint Broker) Tel: +44 (0) 20 7408 4090
Malachy McEntyre
Mark Percy
Daniel Bush
Consolidated Income Statement
For the year ended 31 December 2023
2023 2022
€'000 €'000
Notes
Continuing operations
Revenue 4 156,931 170,008
Cost of sales 6 (111,408) (115,938)
Gross profit 45,523 54,070
Operating costs 6 (33,233) (34,321)
Operating profit 12,290 19,749
Finance costs 7 (2,472) (1,479)
Finance income 90 26
Foreign exchange (loss)/gain (1,001) 469
Movement on deferred consideration 22 (3) (31)
Profit before tax 8,904 18,734
Income tax expense 11 (1,434) (4,030)
Profit for the period 7,470 14,704
Profit attributable to:
- owners of the Parent 7,470 14,704
Earnings per Ordinary Share
Basic earnings per share, 20 3.52 6.92
Diluted earnings per share, 20 3.50 6.85
The accompanying notes are an integral to these financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
2023 2022
€'000 €'000
Profit for the year 7,470 14,704
Other comprehensive loss:
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation - foreign operations (2,280) (418)
Other comprehensive (loss)/income for the year (2,280) (418)
Total comprehensive income for the year 5,190 14,286
Total comprehensive income attributable to:
- owners of the Parent 5,190 14,286
The accompanying notes are an integral to these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2023
2023 2022
Notes €'000 €'000
Non-Current Assets
Intangible assets and goodwill 12 40,625 40,109
Property, plant and equipment 13 54,763 53,004
Deferred tax asset 11 2,664 2,050
Total Non-Current Assets 98,052 95,163
Current Assets
Inventory and capital equipment 14 69,730 76,911
Trade and other receivables 15a 21,616 23,872
Prepayments and other current assets 15b 8,609 12,727
Current tax 1,007 305
asset
Cash and cash equivalents 22 20,482 15,939
Total Current Assets 121,444 129,754
Total Assets 219,496 224,917
Equity
Ordinary share capital 19 2,125 2,125
Share premium 67,647 67,647
Undenominated capital 39 39
Merger reserve (17,393) (17,393)
Share based payment reserve 2,241 2,505
Foreign currency translation reserve (7,866) (5,586)
Retained earnings 107,458 104,449
Total Equity 154,251 153,786
Non-Current Liabilities
Loans and borrowings 18 26,032 26,971
Deferred tax liability 11 2,099 2,046
Deferred consideration 22 1,998 1,705
Other liabilities 932 833
Total Non-Current Liabilities 31,061 31,555
Current Liabilities
Loans and borrowings 18 14,080 14,973
Trade and other payables 16 10,505 14,420
Accrued and other liabilities 16 8,596 8,699
Current tax liability 1,003 1,484
Total Current Liabilities 34,184 39,576
Total Liabilities 65,245 71,131
Total Equity and Liabilities 219,496 224,917
The accompanying notes are an integral to these financial statements.
On behalf of the Board:
Hugh
McCullough
Joseph Purcell
Chairman
Chief Executive Officer 11 March 2024
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
2023 2022
Notes €'000 €'000
Operating activities:
Profit for the period 7,470 14,704
Adjustments to reconcile profit to net cash provided by operating activities:
Depreciation 13 7,997 7,782
Amortisation of intellectual property 12 216 190
Amortisation of internally generated intangible asset 12 485 121
Movement on deferred consideration 3 31
Finance cost 7 2,472 1,479
Finance income (90) (26)
(Gain)/loss on sale of property, plant and equipment (100) 32
Income tax expense 11 1,434 4,030
Other non-cash movements 1,009 (459)
20,896 27,884
Changes in trade and other receivables 1,694 1,354
Changes in prepayments and other assets 3,993 (3,848)
Changes in inventory 5,596 (13,463)
Changes in trade and other payables (3,613) 1,632
Cash provided by operations 28,566 13,560
Interest received 90 26
Interest paid (2,472) (1,479)
Income taxes paid (3,693) (4,042)
Net cash provided by operating activities 22,491 8,064
Investing activities
Purchase of property, plant and equipment 13 (10,201) (7,309)
Proceeds from the sale of property, plant and equipment 13 471 996
Investment in intangible assets 12 - (285)
Acquisitions of subsidiary, net of cash acquired 9 - (1,014)
Investment in acquired intangible assets 12 (158) (147)
Payment of deferred consideration 22 (1,054) (2,628)
Net cash used in investing activities (10,942) (10,387)
Financing activities
Dividends paid 19 (4,461) (4,462)
Repayment of borrowings 18 (5,350) (4,107)
Repayment of lease liabilities 18 (4,194) (3,993)
Drawdown of loans 18 7,223 11,478
Net cash provided (used in) financing activities (6,782) (1,084)
Effect of foreign exchange rate changes on cash (224) 297
Net increase/(decrease) in cash and cash equivalents 4,543 (3,110)
Cash and cash equivalents at the beginning of the year 15,939 19,049
Cash and cash equivalents at the end of the year 20,482 15,939
The notes are an integral part of these consolidated financial statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
Share Share premium Merger reserve Un-denominated Share based payment reserve Foreign Retained earnings Total
capital capital currency translation reserve equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Balances at 1 January 2022 2,125 67,647 (17,393) 39 2,695 (5,168) 94,207 144,152
Comprehensive income:
Profit for the year - - - - - - 14,704 14,704
Other comprehensive income/(loss):
Foreign currency translation - - - - - (418) - (418)
Total comprehensive income (418) 14,704 14,286
Transactions with Shareholders:
Issuance of share capital - - - - - - - -
Share based payments - - - - (190) - - (190)
Dividends - - - - - - (4,462) (4,462)
Total transactions with Shareholders - - - - (190) - (4,462) (4,652)
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 year - - - - - - 7,470 7,470
Other comprehensive income/(loss):
Foreign currency translation - - - - - (2,280) - (2,280)
Total comprehensive income (2,280) 7,470 5,190
Transactions with Shareholders:
Issuance of share capital - - - - - - - -
Share-based payments - - - - (264) - - (264)
Dividends - - - - - - (4,461) (4,461)
Total transactions with Shareholders - - - - (264) - (4,461) (4,725)
Balances at 31 December 2023 2,125 67,647 (17,393) 39 2,241 (7,866) 107,458 154,251
The notes are an integral part of these consolidated financial statements. See
note 19 for explanation of movements in reserve balances.
Notes to the Consolidated Financial Statements
1. Description of business
The consolidated financial statements of Mincon Group plc (also referred to as
"Mincon" or "the Group") comprises the Company and its subsidiaries (together
referred to as "the Group"). The companies registered address is Smithstown
Industrial Estate, Smithstown, Shannon, Co. Clare, Ireland.
The Group is an Irish engineering Group, specialising in the design,
manufacturing, sale and servicing of rock drilling tools and associated
products. Mincon Group Plc is domiciled in Shannon, Ireland.
On 26 November 2013, Mincon Group plc was admitted to trading on the Euronext
Growth and the Alternative Investment Market (AIM) of the London Stock
Exchange.
2. Basis of preparation
These consolidated financial statements have been prepared in accordance with
the International Financial Reporting Standards as adopted by the European
Union (EU IFRS), which comprise standards and interpretations approved by the
International Accounting Standards Board (IASB), and endorsed by the EU.
The Group's financial statements consolidate those of the parent company and
all of its subsidiaries as of 31 December 2023. All subsidiaries have a
reporting date of 31 December.
The accounting policies set out in note 3 have been applied consistently in
preparing the Group and Company financial statements for the years ended 31
December 2023 and 31 December 2022.
The Group and Company financial statements are presented in euro, which is the
functional currency of the Company and also the presentation currency for the
Group's financial reporting. Unless otherwise indicated, the amounts are
presented in thousands of euro. These financial statements are prepared on the
historical cost basis.
The preparation of the consolidated financial statements in conformity with
IFRS requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The judgements, estimates and associated
assumptions are based on historical experience and various other factors that
are believed to be reasonable under the circumstances. Actual results could
differ materially from these estimates. The areas involving a high degree of
judgement and the areas where estimates and assumptions are critical to the
consolidated financial statements are discussed in note 3.
The directors believe that the Group has adequate resources to continue in
operational existence for the foreseeable future and that it is appropriate to
continue to prepare our consolidated financial statements on a going concern
basis.
3. Significant accounting principles, accounting estimates and judgements
The accounting principles as set out in the following paragraphs have, unless
otherwise stated, been consistently applied to all periods presented in the
consolidated financial statements and for all entities included in the
consolidated financial statements.
The following new and amended standards are not expected to have a significant
impact on the Group's consolidated financial statements:
New Standards adopted as at 1 January 2023
• IFRS 17 Insurance Contracts
• IAS 8 Definition of Accounting Estimates
• IAS 1 Disclosure of Accounting Policies
(Amendments to IAS 1 and IFRS Practice Statement 2)
• IAS 12 Deferred Tax related to Assets and
Liabilities arising from a Single Transaction
(Amendments to IAS 12)
• IAS 12 International Tax Reform - Pillar Two Model
Rules
3. Significant accounting principles, accounting estimates and judgements
(continued)
Standards, amendments and Interpretations to existing Standards that are not
yet effective
• Liability in a Sale and Leaseback (Amendments to
IFRS 16 Leases)
• Classification of Liabilities as Current or
Non-Current (Amendments to IAS 1 Presentation of Financial
Statements)
• Lack of Exchangeability (Amendments to IAS 21 The
Effects of Changes in Foreign Exchange Rates)
• Supplier Finance Arrangements (Amendments to IAS 7
Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures)
Segment Reporting
An operating segment is a component of the Group that engages in busi-ness
activities from which it may earn revenue and incur expenses, and for which
discrete financial information is available. The operating results of the
operating segment is reviewed regularly by the Board of Directors, the chief
operating decision maker, to make deci-sions about allocation of resources and
also to assess performance.
Results are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker (CODM). Our CODM has been
identified as the Board of Directors.
The Group has determined that it has one reportable segment (see Note 5). The
Group is managed as a single business unit that sells drilling equipment,
primarily manufactured by Mincon manufacturing sites.
Revenue Recognition
The Group is involved in the sale and servicing of rock drilling tools and
associated products. Revenue from the sale of these goods and services to
customers is measured at the fair value of the consideration received or
receivable (excluding sales taxes). The Group recognises revenue when it
transfers control of goods to a customer or has completed a service over a set
period (typically one month) for a customer.
The following provides information about the nature and timing of the
satisfaction of performance obligations in contracts with customers, including
significant payment terms, and the related revenue recognition policies.
Customers obtain control of products when one of the following conditions are
satisfied:
1. The goods have been picked up by the customer from Mincon's premises.
2. When goods have been shipped by Mincon, the goods are delivered to the
customer and have been accepted at their premises, or;
3. The customer accepts responsibility of the goods during transit that is
in line with international commercial terms.
Where the Group provides a service to a customer, who also purchases Mincon
manufactured product from the Group, the revenue associated with this service
is separately identified in a set period (typically one month) and is
recognised in the Groups revenue as it occurs.
Invoices are generated when the above conditions are satisfied. Invoices are
payable within the timeframe as set in agreement with the customer at the
point of placing the order of the product or service. Discounts are provided
from time-to-time to customers.
Customers may be permitted to return goods where issues are identified with
regard to quality of the product. Returned goods are exchanged only for new
goods or a credit note. No cash refunds are offered.
Where the customer is permitted to return an item, revenue is recognised to
the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. Therefore, the amount
of revenue recognised is adjusted for expected returns, which are estimated
based on the historical data for specific types of product. In these
circumstances, a refund liability and a right to recover returned goods asset
are recognised.
The Group recognises contract liabilities for consideration received in
respect of unsatisfied performance obligations and reports these amounts as
accruals and other liabilities in its consolidated statement of financial
position. Similarly, if the Group satisfies a performance obligation before it
receives the consideration, the Group recognises either a contract asset or a
receivable in its consolidated statement of financial position, depending on
whether something other than the passage of time is required before the
consideration is due.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Revenue Recognition (continued)
The Group has elected to apply IFRS 15 Practical expedient, the Group need not
adjust the promised amount of consideration for the effects of a significant
financing component if the entity expects, at contract inception, that the
period between when the Group transfers a promised good or service to a
customer and when the customer pays for that good or service will be one year
or less.
Government Grants
Amounts recognised in the profit and loss account are presented under the
heading Operating Costs on a systematic basis in the periods in which the
expenses are recognised, unless the conditions for receiving the grant are met
after the related expenses have been recognised. In this case, the grant is
recognised when it is receivable. Current government grants have no conditions
attached.
Earnings per share
Basic earnings per share is calculated based on the profit for the year
attributable to owners of the Company and the basic weighted average number of
shares outstanding. Diluted earnings per share is calculated based on the
profit for the year attributable to owners of the Company and the diluted
weighted average number of shares outstanding.
Taxation
Current tax comprises the expected tax payable or receivable on the taxable
income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years. The amount of current tax payable or
receivable is the best estimate of the tax amount expected to be paid or
received that reflects uncertainty related to income taxes, if any. It is
measured using tax rates enacted or substantively enacted at the reporting
date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are
met.
Deferred tax
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is not recognised
for:
• not a business combination and that affects neither
accounting nor taxable profit or loss;
• temporary differences related to investments in
subsidiaries, associates and joint arrangements to the extent that the Group
is able to control the timing of the reversal of the temporary differences and
it is probable that they will not reverse in the foreseeable future; and
• taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Future taxable profits are determined based on the reversal of relevant
taxable temporary differences. If the amount of taxable temporary differences
is insufficient to recognise a deferred tax asset in full, then future taxable
profits, adjusted for reversals of existing temporary differences, are
considered, based on the business plans for individual subsidiaries in the
Group. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will
be realised; such reductions are reversed when the probability of future
taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and
recognised to the extent that it has become probable that future taxable
profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Leases (continued)
At inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Group uses the definition of a
lease in IFRS 16.
(i) As a lessee
At commencement or on modification of a contract that contains a lease
component, the Group allocates the consideration in the contract to each lease
component on the basis of its relative stand-alone prices.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate.
The Group determines its incremental borrowing rate by obtaining interest
rates from various external financing sources.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, if there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset, or is recorded in
profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
(ii) As a lessor
At inception or on modification of a contract that contains a lease component,
the Group allocates the consideration in the contract to each lease component
on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each
lease is a finance lease or an operating lease.
When the Group is an intermediate lessor, it accounts for its interests in the
head lease and the sub-lease separately. It assesses the lease classification
of a sub-lease with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset.
Short term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for leases of low-value assets and short-term leases, including IT
equipment. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Inventories and capital equipment
Inventories and capital equipment (rigs) are valued at the lower of cost or
net realisable value. Net realisable value is the estimated selling price in
the ordinary course of business less the estimated costs of completion and
selling expenses. The cost of inventories is based on the first-in, first-out
principle and includes the costs of acquiring inventories and bringing them to
their existing location and condition. Inventories manufactured by the Group
and work in progress include an appropriate share of production overheads
based on normal operating capacity. Inventories are reported net of deductions
for obsolescence.
Intangible Assets and Goodwill
Goodwill
The Group accounts for acquisitions using the purchase accounting method as
outlined in IFRS 3 Business Combinations. Goodwill is not amortised and is
tested annually.
Intangible assets
Expenditure on research activities is recognised in profit or loss as
incurred.
Development expenditure is capitalised only if the Group can demonstrate if
the expenditure can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are probable
and the Group intends to and has sufficient resources to complete development
and to use or sell the asset. Otherwise, it is recognised in the profit or
loss as incurred. Subsequent to initial recognition, development expenditure
is measured at cost less accumulated amortisation and any accumulated
impairment losses.
Acquired IP which has been obtained at a cost that can be measured reliably,
and that meets the definition and recognition criteria of IAS38, will be
accounted for as an intangible asset.
Recognising an internally developed intangible assets post the development
phase once the company has assessed the development phase is complete and the
asset is ready for use. Internally generated assets have an infinite life.
They will be amortised over a fifteen year period on a straight line basis.
Currently there is thirteen years and nine months remaining on the
amortisation.
Foreign Currency
Foreign currency transactions
Transactions in foreign currencies (those which are denominated in a currency
other than the functional currency) are translated at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the foreign exchange
rate at the statement of financial position date. Exchange gains and losses
related to trade receivables and payables, other financial assets and
payables, and other operating receivables and payables are separately
presented on the face of the income statement.
Exchange rate differences on translation to functional currency are reported
in profit or loss, except when reported in other comprehensive income for the
translation of intra-group receivables from, or liabilities to, a foreign
operation that in substance is part of the net investment in the foreign
operation.
Exchange rates for major currencies used in the various reporting periods are
shown in note 22.
Translation of accounts of foreign entities
The assets and liabilities of foreign entities, including goodwill and fair
value adjustments arising on consolidation, are translated to euro at the
exchange rates ruling at the reporting date. Revenues, expenses, gains, and
losses are translated at average exchange rates, when these approximate the
exchange rate for the respective transaction. Foreign exchange differences
arising on translation of foreign entities are recognised in other
comprehensive income and are accumulated in a separate component of equity as
a translation reserve. On divestment of foreign entities, the accumulated
exchange differences, are recycled through profit or loss, increasing or
decreasing the profit or loss on divestments.
Business combinations and consolidation
The consolidated financial statements include the financial statements of the
Group and all companies in which Mincon Group plc, directly or indirectly, has
control. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date on which control commences until the date on which
control ceases.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Business combinations and consolidation (continued)
The consolidated financial statements have been prepared in accordance with
the acquisition method.
According to this method, business combinations are seen as if the Group
directly acquires the assets and assumes the liabilities of the entity
acquired. At the acquisition date, i.e., the date on which control is
obtained, each identifiable asset acquired, and liability assumed is
recognised at its acquisition-date fair value.
Consideration transferred is measured at its fair value. It includes the sum
of the acquisition date fair values of the assets transferred, liabilities
incurred to the previous owners of the acquiree, and equity interests issued
by the Group. Deferred consideration is initially measured at its
acquisition-date fair value. Any subsequent change in such fair value is
recognised in profit or loss, unless the deferred consideration is classified
as equity. In that case, there is no remeasurement and the subsequent
settlement is accounted for within equity. Deferred consideration arises in
the current year where part payment for an acquisition is deferred to the
following year or years.
Transaction costs that the Group incurs in connection with a business
combination, such as legal fees, due diligence fees, and other professional
and consulting fees are expensed as incurred.
Goodwill is measured as the excess of the fair value of the consideration
transferred, the amount of any non-controlling interest in the acquiree, and
the fair value of the Group's previously held equity interest in the acquiree
(if any) over the net of acquisition-date fair values of the identifiable
assets acquired and liabilities assumed. Goodwill is not amortised but tested
for impairment at least annually.
Non-controlling interest is initially measured either at fair value or at the
non-controlling interest's proportionate share of the fair value of the
acquiree's identifiable net assets. This means that goodwill is either
recorded in "full" (on the total acquired net assets) or in "part" (only on
the Group's share of net assets). The choice of measurement basis is made on
an acquisition-by-acquisition basis.
Earnings from the acquirees are reported in the consolidated income statement
from the date of control.
Intra-group balances and transactions such as income, expenses and dividends
are eliminated in preparing the consolidated financial statements. Profits and
losses resulting from intra-group transactions that are recognised in assets,
such as inventory, are eliminated in full, but losses are only eliminated to
the extent that there is no evidence of impairment.
Property, plant and equipment
Items of property, plant and equipment are carried at cost less accumulated
depreciation and impairment losses. Cost of an item of property, plant and
equipment comprises the purchase price, import duties, and any cost directly
attributable to bringing the asset to its location and condition for use. The
Group capitalises costs on initial recognition and on replacement of
significant parts of property, plant and equipment, if it is probable that the
future economic benefits embodied will flow to the Group and the cost can be
measured reliably. All other costs are recognised as an expense in profit or
loss when incurred.
Depreciation
Depreciation is calculated based on cost using the straight-line method over
the estimated useful life of the asset. The following useful lives are used
for depreciation:
Years
Buildings
20-30
Plant and equipment 3-10
The depreciation methods, useful lives and residual values are reassessed
annually. Land is not depreciated.
Right of use assets are depreciated using the straight-line method over the
estimated useful life of the asset being the remaining duration of the lease
from inception date of the asset. The depreciation methods, useful lives and
residual values are reassessed annually.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Financial Assets and Liabilities
Classification and initial measurement of financial assets financial
liabilities.
Financial assets and liabilities are recognised at fair value when the Group
becomes a party to the contractual provisions of the instrument. Purchases and
sales of financial assets are accounted for at trade date, which is the day
when the Group contractually commits to acquire or dispose of the assets.
Trade receivables are recognised once the responsibility associated with
control of the product has transferred to the customer. Liabilities are
recognised when the other party has performed and there is a contractual
obligation to pay. A financial asset and a financial liability are offset and
the net amount presented in the statement of financial position when there is
a legally enforceable right to set off the recognised amounts and there is an
intention to either settle on a net basis or to realise the asset and settle
the liability simultaneously.
The classification is determined by both:
• the entity's business model for managing the financial asset, and
• the contractual cash flow characteristics of the financial asset.
Subsequent measurement of financial assets and financial liabilities
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
· they are held within a business model whose objective is to hold
the financial assets and collect its contractual cash flows, and
· the contractual terms of the financial assets give rise to cash
flows that are solely payments of principal and interest on the principal
amount outstanding.
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial.
Financial liabilities at amortised cost
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method.
Derecognition (fully or partially) of a financial asset occurs when the rights
to receive cash flows from the financial instruments expire or are transferred
and substantially all of the risks and rewards of ownership have been removed
from the Group. Financial assets are assessed at each reporting date. The
Group derecognises (fully or partially) a financial liability when the
obligation specified in the contract is discharged or otherwise expires.
Impairment of financial assets
Financial assets are assessed from initial recognition and at each reporting
date to determine whether there is a requirement for impairment. Financial
assets require there expected lifetime losses to be recognised from initial
recognition.
IFRS 9's impairment requirements use forward-looking information to recognise
expected credit losses - the 'expected credit loss (ECL) model'. Instruments
within the scope of the requirements included loans and other debt-type
financial assets measured at amortised cost, trade and other receivables.
The Group considers a broader range of information when assessing credit risk
and measuring expected credit losses, including past events, current
conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
· financial instruments that have not deteriorated significantly in
credit quality since initial recognition or that have low credit risk ('Stage
1') and
· financial instruments that have deteriorated significantly in
credit quality since initial recognition and whose credit risk is not low
('Stage 2').
'Stage 3' would cover financial assets that have objective evidence of
impairment at the reporting date.
'12-month expected credit losses' are recognised for the first category (ie
Stage 1) while 'lifetime expected credit losses' are recognised for the second
category (ie Stage 2).
Measurement of the expected credit losses is determined by a
probability-weighted estimate of credit losses over the expected life of the
financial instrument.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Financial Assets and Liabilities (continued)
Trade and other receivables
The Group makes use of a simplified approach in accounting for trade and other
receivables and records the loss allowance as lifetime expected credit losses.
These are the expected shortfalls in contractual cash flows, considering the
potential for default at any point during the life of the financial
instrument. In calculating, the Group uses its historical experience, external
indicators and forward-looking information to calculate the expected credit
losses using a provision matrix.
The Group assesses impairment of trade and other receivables on a collective
basis as they possess shared credit risk characteristics they have been
grouped based on the days past due.
Borrowing costs
All borrowing costs are expensed in accordance with the effective interest
rate method.
Equity
Shares are classified as equity. Incremental costs directly attributable to
the issue of ordinary shares and share options are recognised as a deduction
from equity, net of any tax effect.
Financial instruments carried at fair value: Deferred consideration
Fair value is calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at the
reporting date. These are set amounts detailed in each contract.
Finance income and expenses
Finance income and expense are included in profit or loss using the effective
interest method.
Contingent liabilities
A contingent liability is a possible obligation or a present obligation that
arises from past events that is not reported as a liability or provision, as
it is not probable that an outflow of resources will be required to settle the
obligation or that a sufficiently reliable calculation of the amount cannot be
made.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with
maturities of three months or less.
Provisions
A provision is recognised in the statement of financial position when the
Group has a legal or constructive obligation as a result of a past event, it
is probable that an outflow of economic benefits will be required to settle
the obligation, and the outflow can be estimated reliably. The amount
recognised as a provision is the best estimate of the expenditure required to
settle the present obligation at the reporting date. If the effect of the time
value of money is material, the provision is determined by discounting the
expected future cash flows at a pre-tax rate that reflects the current market
assessments of the time value of money and, where appropriate, the risks
specific to the liability.
A provision for restructuring is recognised when the Group has approved a
detailed and formal restructuring plan and the restructuring has either
commenced or been announced publicly. Future operating losses are not provided
for.
Defined contribution plans
A defined contribution retirement benefit plan is a post-employment benefit
plan under which the Group pays fixed contributions into a separate entity and
will have no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution retirement benefit plans
are recognised as an employee benefit expense in profit or loss when employees
provide services entitling them to the contributions.
Share-based payment transactions
The Group operates a long term incentive plan which allows the Company to
grant Restricted Share Awards ("RSAs") to executive directors and senior
management. All schemes are equity settled arrangements under IFRS 2
Share-based Payment.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Financial Assets and Liabilities (continued)
Share-based payment transactions (continued)
The grant-date fair value of share-based payment awards granted to employees
is recognised as an employee expense, with a corresponding increase in equity,
over the period that the employees become unconditionally entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market performance conditions
are expected to be met, such that the amount ultimately recognised as an
expense is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date. It is reversed only
where entitlements do not vest because all
non-market performance conditions have not been met or where an employee in
receipt of share entitlements leaves the Group before the end of the vesting
period and forfeits those options in consequence.
Critical accounting estimates and judgements
The preparation of financial statements requires management's judgement and
the use of estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. These estimates and
associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the prevailing circumstances.
Actual results may differ from those estimates. The estimates and assumptions
are reviewed on an ongoing basis. Revisions to the accounting estimates are
recognised in the period in which they are revised and in any future periods
affected.
Following are the estimates and judgements which, in the opinion of
management, are significant to the underlying amounts included in the
financial reports and for which there is a significant risk that future events
or new information could entail a change in those estimates or judgements.
Deferred consideration
The deferred consideration payable represents management's best estimate of
the fair value of the amounts that will be payable, discounted as appropriate
using a market interest rate. The fair value was estimated by assigning
probabilities, based on management's current expectations, to the potential
pay-out scenarios. The fair value of deferred consideration is primarily
dependent on the future performance of the acquired businesses against
predetermined targets and on management's current expectations thereof.
Climate-related matters
Consistent with the prior year, as at 31 December 2023, the Group has not
identified significant risks induced by climate changes that could negatively
and materially affect the estimates and judgements currently used in the
Group's financial statements. Management continuously assesses the impact of
climate-related matters.
Goodwill
The initial recognition of goodwill represents management' best estimate of
the fair value of the acquired entities value less the identified assets
acquired.
During the annual impairment assessment over goodwill, management calculate
the recoverable value of the group using their best estimate of the discounted
future cash flows of the group. The fair values were estimated using
management's current and future projections of the Mincon Group's performance
as well as appropriate data inputs and assumptions.
Useful life and residual values of Intangible Assets
Distinguishing the research and development phase, determining the useful
life, and deciding whether the recognition requirements for the capitalisation
of development costs of new projects are met all require judgement. These
judgements are based on historical experience and various other factors that
are believed to be reasonable under the prevailing circumstances.
After capitalisation, management monitors whether the recognition requirements
continue to be met and whether there are any indicators that capitalised costs
may be impaired.
Trade and other receivables
Trade and other receivables are included in current assets, except for those
with maturities more than 12 months after the reporting date, which are
classified as non-current assets. The Group estimates the risk that
receivables will not be paid and provides for doubtful debts in line with IFRS
9.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Critical accounting estimates and judgements (continued)
Trade and other receivables (continued)
The Group applies the simplified approach to providing for expected credit
losses (ECL) permitted by IFRS 9 Financial Instruments, which requires
expected lifetime losses to be recognised from initial recognition of the
receivables and considered at each reporting date. Loss rates are calculated
using a "roll rate" method based on the probability of a receivable
progressing through successive chains of non-payment to write-off.
Trade receivables are written off when there is no reasonable expectation of
recovery, such as a debtor failing to engage in a repayment plan with the
company. Where recoveries are made, these are recognised in the Consolidated
Income Statement.
4. Revenue
In the following table, revenue is disaggregated between Mincon manufactured
product and product that is purchased outside the Group and resold through
Mincon distribution channels.
2023 2022
€'000 €'000
Product revenue:
Sale of Mincon product 128,294 141,830
Sale of third party 28,637 28,178
product
Total 156,931 170,008
revenue
The Group's revenue disaggregated by primary geographical markets are
disclosed in Note 5.
The Group recognised contract liability amounting to €1 million as at 31
December 2023 (2022:€NIL) which represent customer payments received in
advance of performance that are expected to be recognised within the next
financial year. Contract liability is recorded under Other accruals and other
liabilities (Note 16).
5. Operating Segment
The CODM assesses operating segment performance based on operating profit.
Segment revenue for the year ended 31 December 2023 of €156.9 million (2022:
€170 million) is wholly derived from sales to external customers.
Entity-wide disclosures
The business is managed on a worldwide basis but operates manufacturing
facilities and sales offices in Ireland, UK, Sweden, Finland, South Africa,
Western Australia, the United States and Canada and sales offices in ten other
locations including Eastern Australia, South Africa, France, Spain, Namibia,
Sweden, Chile and Peru. In presenting information on geography, revenue is
based on the geographical location of customers and non-current assets based
on the location of these assets.
Revenue by region (by location of customers):
2023 2022
€'000 €'000
Region:
Ireland 1,619 2,974
Americas 66,466 69,752
Australasia 14,344 16,882
Europe, Middle East, Africa 74,502 80,400
Total revenue from continuing operations 156,931 170,008
5. Operating Segment (continued)
During 2023, Mincon had sales in the USA of €38.4 million (2022: €42.4
million), this contributed to more than 10% of the entire Group's sales for
2023.
( ) 2023 2022
€'000 €'000
Region:
Americas 16,352 17,752
Australasia 11,060 12,252
Europe, Middle East, Africa 67,976 63,109
Total non-current 95,388 93,113
assets((1))
(1) Non-current assets exclude deferred tax assets.
During 2023, Mincon held non-current assets (excluding deferred tax assets) in
Ireland of €23.5 million (2022: €17.6 million), in the USA of €11.7
million (2022: €12.5 million) these separately contributed to more than 10%
of the entire Group's non-current assets (excluding deferred tax assets) for
2023.
( ) 2023 2022
€'000 €'000
Region:
Americas 5,883 6,839
Australasia 1,988 2,555
Europe, Middle East, Africa 21,091 20,115
Total non-current 28,962 29,509
liabilities((1))
(1) Non-current liabilities exclude deferred tax liabilities.
During 2023, Mincon held non-current liabilities (excluding deferred tax
liabilities) in Ireland of €15.7 million (2022: €13.5 million), this
contributed to more than 10% of the entire Group's non-current liabilities
(excluding deferred tax liabilities) for 2023.
6. Cost of Sales and operating expenses
Included within cost of sales and operating costs were the following major
components:
Cost of sales
2023 2022
€'000 €'000
Raw materials 46,201 45,523
Third party product purchases 22,194 21,838
Employee costs 20,980 23,093
Depreciation (note 13) 5,387 5,194
In bound costs on purchases 3,200 4,759
Energy 2,735 3,116
costs
Maintenance of 1,529 2,120
machinery
Subcontracting 4,884 7,139
Amortisation of product 485 121
development
Other 3,813 3,035
Total cost of sales 111,408 115,938
The Group invested approximately €4.1 million on research and development
projects in 2023 (2022: €4.4 million). €4.1 million of this has been
expensed in the period (2022: €4.1 million), with the balance of €NIL of
development costs capitalised (2022: €285,000) (note 12).
6. Cost of Sales and operating expenses (continued)
Operating costs
2023 2022
€'000 €'000
Employee costs (including director 19,726 20,370
emoluments)
Depreciation (note 2,610 2,588
13)
Amortisation of acquired 215 190
IP
Travel 1,812 1,927
Professional 2,425 2,637
costs
Administration 2,938 2,997
Marketing 791 706
Legal 715 846
cost
Other 2,001 2,060
Total other operating 33,233 34,321
costs
The Group recognised €56,000 in Government Grants in 2023 (2022:
€119,000). These grants differ in structure from country to country, they
primarily relate to personnel costs.
7. Finance costs
2023 2022
€'000 €'000
Interest on lease liabilities 698 609
Interest on loans and borrowings 1,774 870
Finance costs 2,472 1,479
8. Employee information
2023 2022
€'000 €'000
Wages and salaries - excluding directors 34,633 36,085
Wages, salaries, fees and retirement benefit - directors (note 10) 725 868
Social security costs 3,409 4,428
Retirement benefit costs of defined contribution plans 2,203 2,272
Share based payment expense (note 21) (264) (190)
Total employee costs 40,706 43,463
In addition to the above employee costs, the Group capitalised payroll costs
of €NIL in 2023 (2022: €151,000) in relation to development.
At 31 December 2023, there was €445,000 (2022: €234,000) accrued for and
not in paid pension contributions.
The average number of employees was as follows:
2023 2022
Number Number
Sales and distribution 136 133
General and administration 77 75
Manufacturing, service and development 391 417
Average number of persons employed 604 625
Retirement benefit and Other Employee Benefit Plans
The Group operates various defined contribution retirement benefit plans.
During the year ended 31 December 2023, the Group recorded €2.2 million
(2022: €2.3 million) of expense in connection with these plans.
9. Acquisitions & Disposals
2023 Acquisition
Mincon Group had no acquisitions in 2023.
2022 Acquisition
In January 2022, Mincon acquired 100% shareholding in Spartan Drilling Tools,
a manufacturer of drill pipe and related products based in the USA for a
consideration of €1,014,000. Spartan Drilling Tools was acquired to
manufacture drill pipe closer to the end user in the America's region.
A. Consideration transferred
The following table summarises the acquisition date fair value of each major
class of consideration transferred.
Spartan Drilling Tools Total
€'000 €'000
Consideration transferred 1,014 1,014
Total consideration transferred 1,014 1,014
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
€'000
Property, plant and 480
equipment
Right of use 455
assets
Inventories 369
Trade 133
receivables
Other 63
assets
Trade and other (83)
payables
Right of use (455)
liabilities
Other accruals and liabilities (109)
Fair value of identifiable net assets 853
acquired
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 and equipment Market comparison technique and cost technique: The valuation model considers
quoted market prices for similar items when they are available, and
depreciated replacement cost when appropriate. Depreciated replacement cost
reflects adjustments for physical deterioration as well as functional and
economic obsolescence.
Inventories Market comparison technique: The fair value is determined based on the
estimated selling price in the ordinary course of business less the estimated
costs of completion and sale, and a reasonable profit margin based on the
effort required to complete and sell the inventories.
Assets acquired Valuation Technique
Trade receivables All receivable balances were assessed and all are collectable.
Trade and other payables All were accessed and deemed payable to credible suppliers
Other current assets All were accessed for recoverability and all is recoverable
Other accruals and liabilities All were assessed for credibility and deemed payable
9. Acquisitions & Disposals (continued)
The loss from the acquisition of Spartan Drilling Tools has been consolidated
into the Mincon Group 2022 profit for the reporting period.
Goodwill
Goodwill of €161,000 is primarily due to growth expectations, expected
future profitability and expected cost synergies.
Goodwill arising from the acquisition has been recognised as follows.
Spartan Drilling Tools Total
€'000 2022
€'000
Consideration transferred 1,014 1,014
Fair value of identifiable net assets (853) (853)
Goodwill 161 161
10. Statutory and other required disclosures
Operating profit is stated after charging the following amounts: 2023 2022
€'000 €'000
Directors' remuneration
Fees 234 210
Wages and 432 599
salaries
Retirement benefit 59 59
contributions
Total directors' 725 868
remuneration
Auditor's remuneration 2023 2022
€'000 €'000
Auditor's remuneration - Fees payable to lead audit firm
Audit of the Group financial statements 188 180
Audit of the Company financial statements 10 10
Other assurance services 15 13
213 203
Auditor's remuneration - Fees payable to other firms in lead audit firm's
network
Audit 36 35
services
Other assurance - -
services
Tax advisory 2 2
services
Total auditor's 38 37
remuneration
11. Income tax
Tax recognised in income statement:
2023 2022
Current tax expense €'000 €'000
Current 1,995 4,409
year
Adjustment for prior years - 172
Total current tax expense 1,995 4,581
Deferred tax expense
Origination and reversal of temporary differences (561) (551)
Total deferred tax expense (561) (551)
Total income tax expense 1,434 4,030
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:
2023 2022
€'000 €'000
Profit before tax from continuing operations 8,904 18,734
Irish standard tax rate (12.5%) 12.5% 12.5%
Taxes at the Irish standard rate 1,113 2,342
Foreign income at rates other than the Irish standard rate (462) 662
Losses created/utilised (61) 304
Other 844 722
Total income tax 1,434 4,030
expense
The Group's net deferred taxation liability was as follows:
2023 2022
€'000 €'000
Deferred taxation assets:
Reserves, provisions and tax credits 2,012 1,044
Tax losses and unrealised FX gains 652 1,006
Total deferred taxation asset 2,664 2,050
Deferred taxation liabilities:
Property, plant and equipment (2,099) (1,808)
Profit not yet taxable - (238)
Total deferred taxation (2,099) (2,046)
liabilities
Net deferred taxation asset/(liability) 565 4
The movement in temporary differences during the year were as follows:
Balance Recognised in Balance
1 January Profit or Loss 31 December
1 January 2022 - 31 December 2022 €'000 €'000 €'000
Deferred taxation assets:
Reserves, provisions and tax credits 741 303 1,044
Tax losses 334 672 1,006
Total deferred taxation asset 1,075 975 2,050
Deferred taxation liabilities:
Property, plant and equipment (1,332) (476) (1,808)
Profit not yet taxable (290) 52 (238)
Total deferred taxation liabilities (1,622) (424) (2,046)
Net deferred taxation liability (547) 551 4
11. Income tax (continued)
Balance Recognised in Balance
1 January Profit or Loss 31 December
1 January 2023 - 31 December 2023 €'000 €'000 €'000
Deferred taxation assets:
Reserves, provisions and tax credits 1,044 968 2,012
Tax losses 1,006 (354) 652
Total deferred taxation asset 2,050 614 2,664
Deferred taxation liabilities:
Property, plant and equipment (1,808) (291) (2,099)
Profit not yet taxable (238) 238 -
Total deferred taxation liabilities (2,046) (53) (2,099)
Net deferred taxation liability 4 561 565
Deferred taxation assets have not been recognised in respect of the following
items:
2023 2022
€'000 €'000
Tax losses 3,789 3,850
Total 3,789 3,850
12. Intangible assets and goodwill
Product development Internally generated intangible asset Goodwill Acquired Total
intellectual
property
€'000 €'000 €'000 €'000 €'000
Balance at 1 January 2022 6,986 - 32,545 626 40,157
Internally developed 285 - - - 285
Acquisitions (note 9) - - 161 - 161
Transfer to internally generated intangible asset (7,271) 7,271 - - -
Acquired intellectual property - - - 147 147
Amortisation of intellectual property - - - (190) (190)
Amortisation of product development - (121) - - (121)
Translation differences - - (378) 48 (330)
Balance at 31 December 2022 - 7,150 32,328 631 40,109
Acquired intellectual property - - - 1,517 1,517
Amortisation of intellectual property - - - (216) (216)
Amortisation of product development - (485) - - (485)
Translation differences - - (278) (22) (300)
Balance at 31 December 2023 - 6,665 32,050 1,910 40,625
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 Mincon Tanzania in March 2015
·..... The acquisition of Premier in November 2016
·..... The acquisition of Rockdrill Engineering in November 2016
·..... The acquisition of PPV in April 2017
·..... The acquisition of Viqing July 2017
·..... The acquisition of Driconeq in March 2018
·..... The acquisition of Pacific Bit of Canada in January 2019
·..... The acquisition of Lehti Group in January 2020
·..... The acquisition of Rocdrill in May 2020
·..... The acquisition of Attakroc in June 2021
·..... The acquisition of Spartan Drilling Tools in January 2022
The Group accounts for acquisitions using the purchase accounting method as
outlined in IFRS 3 Business Combinations.
12. Intangible assets and goodwill (continued)
The recoverable amount of goodwill has been assessed based on estimates of
fair value less costs of disposal (FVLCD). The FVLCD valuation is calculated
on the basis of a discounted cash flow ("DCF") model. The most significant
assumptions within the DCF are weighted average cost of capital ("WACC"), tax
rates and terminal value assumptions. Goodwill impairment testing did not
indicate any impairment during any of the periods being reported. Four
sensitivities are applied as part of the analysis considering the effects of
changes in:
1) the WACC,
2) the EBITDA margin,
3) the long term growth rate and
4) the level of terminal value capital expenditure.
The sensitivities calculate downside scenarios to assess potential indications
of impairments due to changes in key assumptions. The results from the
sensitivity analysis did not suggest that goodwill would be impaired when
those sensitivities were applied.
The carrying amount of the CGU was determined to be lower than its fair value
less costs of disposal by €5.3 million (2022: €52.4 million), giving
management headroom and comfort in the above stated impairment assessment.
The key assumptions used in the estimation of the fair value less cost
calculation were as follows:
( )
2023 2022
WACC 11.35% 12.60%
EBITDA margin 16.18% 20.23%
Long term growth rate 2.29% 2.20%
Terminal value capital expenditure €9.8 million €10.6 million
The WACC calculation considers market data and data from comparable public
companies. Peer group data was especially considered for the beta factor and
assumed financing structure (gearing level). The analysis resulted in a
discount rate range of 10.15% to 12.55%. This results in a midpoint WACC being
used of 11.35%.
The Long term growth rate of 2.30% applied is based on a weighted average of
the long term inflation rates of the countries in which Mincon generates
revenues and earnings.
The budgeted EBITDA was based on expectations of future outcomes, taking
account for past experience, adjusted for anticipated revenue growth as
detailed in managements approved Budget. No EBITDA margin effect is assumed in
the terminal value i.e. the budgeted EBITDA margin of 16.20% for 2026 is
assumed in the Terminal Value calculation used to arrive at the FVLCD.
Terminal value capital expenditure assumes no balance sheet growth is assumed
in the terminal value, capital expenditure is assumed to equal depreciation of
€9.8 million.
The following table shows the amount by which the two assumptions below would
need to change to individually for the estimated recoverable amount to be
equal to the carrying amount.
( ) 2023 2022
WACC 11.63% 14.80%
Long term growth rate 1.73% 1.35%
Investment expenditure of €NIL (2022: €285,000), which has been
capitalised, is in relation to ongoing product development within the Group.
Amortisation began in October 2022 once the project was commercialised.
Amortisation is charged into the income statement over fifteen years on a
straight line basis.
13. Property, plant and equipment
Land & Plant & ROU
Buildings Equipment Assets Total
€'000 €'000 €'000 €'000
Cost: ( )
At 1 January 2022 18,047 58,775 9,445 86,267
Acquisitions through business combinations 9 471 455 935
Additions 1,146 6,164 2,880 10,190
Disposals and derecognition of ROU assets (1,226) (1,176) (1,191) (3,593)
Foreign exchange differences 181 274 (58) 397
At 31 December 2022 18,157 64,508 11,531 94,196
Additions 3,824 6,378 1,013 11,215
Disposals and derecognition of ROU assets - (1,734) (656) (2,390)
Foreign exchange differences (337) (1,029) (292) (1,658)
At 31 December 2023 21,644 68,123 11,596 101,363
Accumulated depreciation: ( )
At 1 January 2022 (4,005) (27,853) (3,749) (35,607)
Charged in year (577) (5,046) (2,159) (7,782)
Disposals 381 994 1,134 2,509
Foreign exchange differences (41) (282) 11 (312)
At 31 December 2022 (4,242) (32,187) (4,763) (41,192)
Charged in year (648) (5,144) (2,205) (7,997)
Disposals (10) 1,372 567 1,929
Foreign exchange differences 50 501 109 660
At 31 December 2023 (4,850) (35,458) (6,292) (46,600)
Carrying amount: 31 December 2023 16,794 32,665 5,304 54,763
Carrying amount: 31 December 2022 13,915 32,321 6,768 53,004
Carrying amount: 1 January 2022 14,042 30,922 5,696 50,660
ROU assets includes Property of €4.2 million (2022: €6 million) and Plant
and Equipment of €1.1 million (2022: € 800,000).
The depreciation charge for property, plant and equipment is recognised in the
following line items in the income statement:
2023 2022
€'000 €'000
Cost of sales 4,994 4,768
Cost of sales ROU assets 393 426
Operating expenses 830 852
Operating expenses ROU asset 1,780 1,736
Total depreciation charge for property, plant and equipment 7,997 7,782
14. Inventory and capital equipment
2023 2022
€'000 €'000
Finished goods 45,953 47,983
Work-in-progress 9,060 12,943
Raw materials 14,717 15,985
Total inventory 69,730 76,911
The Group recorded an impairment of €87,000 against inventory to take
account of net realisable value during the year ended 31 December 2023 (2022:
128,000). Write-downs are included in cost of sales.
15. Trade and other receivables and other current assets
a) Trade and other receivables
2023 2022
€'000 €'000
Gross receivable 23,129 24,975
Provision for impairment (1,513) (1,103)
Net trade and other receivables 21,616 23,872
Provision for impairment
€'000
Balance at 1 January 2023 (1,103)
Increase in provision arising from prior years receivables impairment 2
Increase in ECL model (412)
Balance at 31 December 2023 (1,513)
The following table provides the information about the exposure to credit risk
and ECL's for trade receivables as at 31 December 2023.
Weighted average loss rate % Gross carrying amount €'000 Loss
allowance
€'000
Current (not past due) 2% 15,924 280
1-30 days past due 9% 3,145 275
31-60 days past due 22% 1,538 345
61 to 90 days 15% 2,250 341
More than 90 days past due 100% 272 272
Net trade and other receivables 23,129 1,513
The following table provides the information about the exposure to credit risk
and ECL's for trade receivables as at 31 December 2022.
Weighted average loss rate % Gross carrying amount €'000
Loss
allowance
€'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
15. Trade and other receivables and other current assets (continued)
b) Prepayments and other current assets
( ) 2023 2022
€'000 €'000
Plant and machinery prepaid and under commission 6,607 9,852
Prepayments and other current assets 2,002 2,875
Prepayments and other current assets 8,609 12,727
16. Trade creditors, accruals and other liabilities
( ) 2023 2022
€'000 €'000
Trade creditors 10,505 14,420
Total creditors and other payables 10,505 14,420
( ) 2023 2022
€'000 €'000
VAT 664 104
Social security costs 1,810 1,929
Other accruals and liabilities 6,122 6,666
Total accruals and other liabilities 8,596 8,699
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).
( ) 2023 2022
€'000 €'000
Total liabilities (65,245) (71,131)
Less: cash and cash equivalents 20,482 15,939
Net debt (44,763) (55,192)
Total equity 154,251 153,786
Net debt to equity ratio 0.29 0.36
18. Loans and borrowings
2023 2022
Maturity €'000 €'000
Bank loans 2024-2036 32,486 30,848
Lease Liabilities 2024-2032 7,626 11,096
Total loans and borrowings 40,112 41,944
Current 14,080 14,973
Non-current 26,032 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.
The Group has been in compliance with all debt agreements during the periods
presented. The loan agreements in Ireland of €11.5 million (2022: €13.5
million) carry restrictive financial covenants including, EBITDA to be no less
than €18 million at end of each reporting period, interest cover to be 3:1
and to maintain a minimum cash balance of €5 million.
Interest rates on current borrowings are at an average rate of 5.12% (2022:
4.89%)
During 2023, the Group availed of the option to enter into overdraft
facilities and to draw down loans of €7.2 million (2022: €11.5 million),
€6.9 million (2022: €8.8 million) in loans and €300,000 (2022: €2.7
million) in overdraft facilities.
Loans are repayable in line with their specific terms, the Group has one
bullet repayment due in 2026 of €5 million.
Reconciliation of movements of liabilities to cash flows arising from
financing activities
( ) Balance at 1 January 2022 Arising from acquisition Cash movements Non-cash movements Foreign exchange differences Balance at 31 December 2022
( ) €'000 €'000 €'000 €'000 €'000 €'000
Loans and borrowings 23,391 109 7,372 - (24) 30,848
Lease liabilities 11,079 455 (3,993) 3,604 (49) 11,096
Total 34,470 564 3,379 3,604 (73) 41,944
( ) Balance at 1 January 2023 Arising from acquisition Cash movements Non-cash movements Foreign exchange differences Balance at 31 December 2023
( ) €'000 €'000 €'000 €'000 €'000 €'000
Loans and borrowings 30,848 - 1,873 - (235) 32,486
Lease liabilities 11,096 - (4,194) 1,018 (294) 7,626
Total 41,944 - (2,321) 1,018 (529) 40,112
Interest rate range Effective interest rate
Bank loans 1% - 16% 5%
Lease Liabilities 3% - 10% 5.41%
19. Share capital and reserves
At 31 December 2023
Authorised Share Capital Number €000
Ordinary Shares of €0.01 each 500,000,000 5,000
Allotted, called-up and fully paid up shares Number €000
Ordinary Shares of €0.01 each 212,472,413 2,125
( ) 2023 2022
Opening Share Capital 212,472,413 212,472,413
Share Awards vested during year - -
Authorised Share Capital 212,472,413 212,472,413
Share issuances
On 26 November 2013, Mincon Group plc was admitted to trading on the Euronext
Growth and the Alternative Investment Market (AIM) of the London Stock
Exchange.
Voting rights
The holders of Ordinary Shares have the right to receive notice of and attend
and vote at all general meetings of the Company and they are entitled, on a
poll or a show of hands, to one vote for every Ordinary Share they hold. Votes
at general meetings may be given either personally or by proxy. Subject to the
Companies Act and any special rights or restrictions as to voting attached to
any shares, on a show of hands every member who (being an individual) is
present in person and every proxy and every member (being a corporation) who
is present by a representative duly authorised, shall have one vote, so,
however, that no individual shall have more than one vote for every share
carrying voting rights and on a poll every member present in person or by
proxy shall have one vote for every share of which he is the holder.
Dividends
In June 2023, Mincon Group plc paid a final dividend for 2022 of €0.0105
(1.05 cent) per ordinary share (€2.2 million).
In December 2023, Mincon Group plc paid an interim dividend in the amount of
€0.0105 (1.05 cent) per ordinary share (€2.2 million total payment), which
was paid to shareholders on the register at the close of business on 17
November 2023.
The Directors recommend the payment of a final dividend of €0.0105 (1.05
cent) per share for the year ended 31 December 2023 (31 December 2022: 1.05
cent per share).
Share premium and other reserves
As part of a Group reorganisation of the Company, Mincon Group plc, became the
ultimate parent entity of the Group. On 30 August 2013, the Company acquired
100% of the issued share capital in Smithstown Holdings and acquired (directly
or indirectly) the shareholdings previously held by Smithstown Holdings in
each of its subsidiaries, thereby creating a merger reserve.
20. Earnings per share
Basic earnings per share (EPS) is computed by dividing the profit for the
period available to ordinary shareholders by the weighted average number of
Ordinary Shares outstanding during the period. Diluted earnings per share is
computed by dividing the profit for the period by the weighted average number
of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of
all potentially dilutive shares. The following table sets forth the
computation for basic and diluted net profit per share for the years ended
31 December:
20. Earnings per share (continued)
2023 2022
Numerator (amounts in €'000):
Profit attributable to owners of the Parent 7,470 14,704
Denominator (Number):
Basic shares outstanding
Restricted share awards
Diluted weighted average shares outstanding
212,472,413 212,472,413
830,000 2,030,000
213,302,413 214,502,413
Earnings per Ordinary Share
Basic earnings per share, € 3.52 6.92
Diluted earnings per share, € 3.50 6.85
Diluted weighted average shares outstanding
212,472,413
212,472,413
830,000
2,030,000
213,302,413
214,502,413
Earnings per Ordinary Share
Basic earnings per share, €
Diluted earnings per share, €
3.52
3.50
6.92
6.85
21. Share based payment
The vesting conditions of the scheme state that the minimum growth in EPS
shall be CPI plus 5% per annum, compounded annually, over the relevant three
accounting years up to the share award of 100% of the participants
basic salary. Where awards have been granted to a participant in excess of
100% of their basic salary, the performance condition for the element that is
in excess of 100% of basic salary is that the minimum growth in EPS shall be
CPI plus 10% per annum, compounded annually, over the three accounting years.
Reconciliation of outstanding share options
Number of Options
in thousands
Outstanding on 1 January 2022 5,820
*Forfeited during the year (3,790)
Exercised during the year -
Granted during the year -
Outstanding at 31 December 2022 2,030
*Based on the conditions set out in the 2023 conditional awards agreement, all
shares were forfeited as conditions were not met.
Reconciliation of outstanding share options
Number of Options
in thousands
Outstanding on 1 January 2023 2,030
*Forfeited during the year (2,070)
Exercised during the year -
Granted during the year 870
Outstanding at 31 December 2023 830
*Based on the conditions set out in the 2024 conditional awards agreement, all
shares were forfeited as conditions were not met.
LTIP Scheme
Conditional Award at Grant Date
Conditional Award Invitation date April 2021
Year of Potential vesting 2024/2028
Share price at grant date €1.35
Exercise price per share/share options €1.35
Expected Volatility 36.57%
Expected life 7 years
Risk free rate (0.53%)
Expected dividend yield 1.58%
Fair value at grant date €0.39
Valuation model Black & Scholes Model
( )
22. Financial risk management
The Group is exposed to various financial risks arising in the normal course
of business. Its financial risk exposures are predominantly related to changes
in foreign currency exchange rates and interest rates, as well as the
creditworthiness of our counterparties.
The Company's Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management framework. The
Group's risk management policies are established to identify and analyse the
risks faced by the Group, to set appropriate risk limits and controls and to
monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management standards and
procedures, aims to maintain a disciplined and constructive control
environment in which all employees understand their roles and obligations.
The Group audit committee oversees how management monitors compliance with the
Group's risk management policies and procedures, and reviews the adequacy of
the risk management framework in relation to the risks faced by the Group.
a) Liquidity and capital
The Group defines liquid resources as the total of its cash, cash equivalents
and short term deposits. Capital is defined as the Group's shareholders'
equity and borrowings.
The Group's objectives when managing its liquid resources are:
• To maintain adequate liquid resources to fund its
ongoing operations and safeguard its ability to continue as a going concern,
so that it can continue to create value for investors;
• To have available the necessary financial resources to
allow it to invest in areas that may create value for shareholders; and
• To maintain sufficient financial resources to mitigate
against risks and unforeseen events.
Liquid and capital resources are monitored on the basis of the total amount of
such resources available and the Group's anticipated requirements for the
foreseeable future. The Group's liquid resources and shareholders' equity at
31 December 2023 and 31 December 2022 were as follows:
2023 2022
€'000 €'000
( )
Cash and cash equivalents 20,482 15,939
Loans and borrowings 40,112 41,944
Shareholders' equity 154,251 153,786
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,
Canadian and Australian institutions with credit rating of A3 or better. The
Company deposits cash with individual institutions to avoid concentration of
risk with any one counterparty. The Group has also engaged the services of a
depository to ensure the security of the cash assets.
Risk of counterparty default arising on cash and cash equivalents and
derivative financial instruments is controlled by dealing with high-quality
institutions and by policy, limiting the amount of credit exposure to any one
bank or institution.
22. Financial risk management (continued)
a) Liquidity and capital (continued)
At year-end, the Group's total cash and cash equivalents were held in the
following jurisdictions:
31 December 31 December
2023 2022
€'000 €'000
Ireland 2,088 3,668
Americas 3,517 3,039
Australasia 657 347
Europe, Middle East, Africa 14,220 8,885
Total cash, cash equivalents and short term deposits 20,482 15,939
There are currently no restrictions that would have a material adverse impact
on the Group in relation to the intercompany transfer of cash held by its
foreign subsidiaries. The Group continually evaluates its liquidity
requirements, capital needs and availability of resources in view of, among
other things, alternative uses of capital, the cost of debt and equity capital
and estimated future operating cash flow.
In the normal course of business, the Group may investigate, evaluate, discuss
and engage in future company or product acquisitions, capital expenditures,
investments and other business opportunities. In the event of any future
acquisitions, capital expenditures, investments or other business
opportunities, the Group may consider using available cash or raising
additional capital, including the issuance of additional debt. The maturity of
the contractual undiscounted cash flows (including estimated future interest
payments on debt) of the Group's financial liabilities at 31 December were as
follows:
( ) Total
( ) Current Value of Total Undiscounted contractual Cash Flows Less than More than
( ) Cash Flows 1 Year 1-3 Years 3-5 Years 5 Years
( ) €'000 €'000 €'000 €'000 €'000 €'000
At 31 December 2022:
Deferred consideration 1,705 1,725 1,054 671 - -
Loans and borrowings 30,848 31,443 11,024 6,805 13,306 308
Lease liabilities 11,096 11,309 3,949 4,695 2,082 584
Trade and other payables 14,420 14,420 14,420 - - -
Accrued and other financial liabilities 8,699 8,699 8,699 - - -
Total at 31 December 2022 66,768 67,596 39,146 12,171 15,388 892
At 31 December 2023:
Deferred consideration 1,998 2,045 442 1,603 - -
Loans and borrowings 32,486 33,124 11,212 6,738 14,520 654
Lease liabilities 7,626 7,769 2,869 3,061 963 876
Trade and other payables 10,505 10,505 10,505 - - -
Accrued and other financial liabilities 8,596 8,596 8,596 - - -
Total at 31 December 2023 61,211 62,039 33,624 11,402 15,483 1,530
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 the appropriateness of this
policy.
22. Financial risk management (continued)
b) Foreign currency risk (continued)
Foreign currency denominated financial assets and liabilities which expose the
Group to currency risk are disclosed below. The amounts shown are those
reported to key management translated into EURO at the closing rate:
( ) Short-term exposure Long-term debt
( ) USD SEK ZAR USD SEK ZAR
( ) €'000 €'000 €'000 €'000 €'000 €'000
At 31 December 2023:
Financial assets 27,756 13,387 9,675 - - -
Financial liabilities (3,666) (2,235) (1,386) (3,010) (892) (764)
Total Exposure 24,090 11,152 8,289 (3,010) (892) (764)
At 31 December 2022:
Financial assets 31,075 12,476 10,790 - - -
Financial liabilities (4,483) (2,613) (1,608) (3,284) (1,136) (1,372)
Total Exposure 26,592 9,863 9,182 (3,284) (1,136) (1,372)
The following table illustrates the sensitivity of profit and equity in
relating to the Group's financial assets and financial liabilities and the
USD/EUR exchange rate, SEK/EUR exchange rate and ZAR/EUR exchange rate 'all
other things being equal'. It assumes a +/- 1% change of the EUR/USD exchange
rate for the year ended at 31 December 2023 (2022: 4%). A +/- 2% change is
considered for the EUR/SEK exchange rate (2022: 4%). It assumes a +/- 8%
change of the EUR/ZAR exchange rate for the year ended at 31 December 2023
(2022: 4%). Both of these percentages have been determined based on the
average market volatility in exchange rates in the previous twelve months.
( ) Profit for the year Equity
( ) USD SEK ZAR USD SEK ZAR
( ) €'000 €'000 €'000 €'000 €'000 €'000
31 December 2023 (10) 34 54 194 499 722
31 December 2022 (3) 35 14 218 244 98
( ) Profit for the year Equity
( ) USD SEK ZAR USD SEK ZAR
( ) €'000 €'000 €'000 €'000 €'000 €'000
31 December 2023 10 (36) (64) (198) (519) (847)
31 December 2022 12 (147) (58) (917) (1,026) (412)
The Group has material subsidiaries with a functional currency other than the
euro, such as US dollar, Australian dollar, South African rand, Canadian
dollar, British pound and Swedish krona. Changes in the exchange rate year on
year between the reporting currencies of these operations and the Euro, have
an impact on the Group's consolidated reported result.
The Group's worldwide presence creates currency volatility, as reported in the
Group's results, when compared year on year. During 2023, the currencies that
the Group trades with were volatile due to local economic performances and
geopolitical issues. As a result, all major currencies that we trade in
weekend against the euro in 2023.
22. Financial risk management (continued)
b) Foreign currency risk
In 2023, 56% (2022: 56%) of Mincon's revenue €158 million (2022: €170
million) was generated in AUD, SEK and USD. The majority of the Group's
manufacturing base has a euro, US dollar or Swedish Krona cost base. While
Group management makes every effort to reduce the impact of this currency
volatility, it is impossible to eliminate or significantly reduce given the
fact that the highest grades of our key raw materials are either not available
or not denominated in these markets and currencies. Additionally, the ability
to increase prices for our products in these jurisdictions is limited by the
current market factors.
The Group is also exposed to foreign currency risk on its liquid resources
(cash), of which the euro equivalent of €3.8 million was held in US dollar
(USD 4.2 million), €3.5 million was held in Swedish krona (SEK 38.8
million), €1.1 million was held in South Africa rand (ZAR 21.5 million), and
the euro equivalent of €973,000 on was held in Canadian dollar (CAD 1.4
million).
2023 2022
Euro exchange rates Closing Average Closing Average
US Dollar 1.10 1.08 1.07 1.05
Australian Dollar 1.62 1.63 1.57 1.52
South African Rand 20.18 19.94 18.18 17.19
Swedish Krona 11.13 11.47 11.15 10.63
c) Credit risk
Credit risk is the risk that the possibility that the Group's customers may
experience financial difficulty and be unable to meet their obligations. The
Group monitors its collection experience on a monthly basis and ensures that a
stringent policy is adopted to provide for all past due amounts. The majority
of the Group's customers are third party distributors and end users of
drilling tools and equipment.
Credit risk management
The credit risk is managed on a group basis based on the Group's credit risk
management policies and procedures.
The credit risk in respect of cash balances held with banks and deposits with
banks are managed via diversification of bank deposits, and are only with
major reputable financial institutions.
The Group continuously monitors the credit quality of customers. Where
available, external credit ratings and/or reports on customers are obtained
and used. The credit terms range between 30 and 90 days. The credit terms for
customers as negotiated with customers are subject to an internal approval.
The ongoing credit risk is managed through regular review of ageing analysis.
Trade receivables consist of a large number of customers in various industries
and geographical areas.
Trade receivables and contract assets
The Group applies the IFRS 9 simplified model of recognising lifetime expected
credit losses for all trade receivables as these items do not have a
significant financing component.
In measuring the expected credit losses, the trade receivables have been
assessed on a collective basis as they possess shared credit risk
characteristics. They have been grouped based on the days past due and also
according to the geographical location of customers.
22. Financial risk management (continued)
c) Credit risk (continued)
Trade receivables are written off (i.e. derecognised) when there is no
reasonable expectation of recovery. Failure to make payments within 180 days
from the invoice date and failure to engage with the Group on alternative
payment arrangement amongst other is considered indicators of no reasonable
expectation of recovery.
The closing balance of the trade receivables loss allowance as at 31 December
2023 reconciles with the trade receivables loss allowance opening balance as
follows:
( ) Trade receivables
( ) €'000
Opening loss allowance as at 1 January 2022 937
Loss allowance recognised during the year 166
Loss allowance as at 31 December 2022 1,103
Loss allowance recognised during the year 410
Loss allowance as at 31 December 2023 1,513
Expected credit loss assessment
The Group allocates each exposure to a credit risk grade based on data that is
determined to be predictive of the risk of loss and applying experienced
credit judgement. Credit risk grades are defined using quantitative factors
that are indicative of the risk of default and are aligned to past
experiences. Loss rates are based on accrual credit loss experience over the
past five years.(Note 15)
The maximum exposure to credit risk for trade and other receivables at 31
December 2023 and 31 December 2022 by geographic region was as follows:
2023 2022
€'000 €'000
Americas 8,704 8,173
Australasia 1,900 3,300
Europe, Middle East, Africa 11,012 12,399
Total amounts owed 21,616 23,872
d) Interest rate risk
Interest Rate Risk on financial liabilities
Interest rates increased rapidly through 2023. As a result, the Group variable
rate lending had a significant impact on our income statement during the year.
This is very noteworthy when it is shown in contrast to our interest payments
during 2022, as the 2023 level of Group lending was relatively flat and
comparable to 2022.
Interest Rate Risk on cash and cash equivalents
Our exposure to interest rate risk on cash and cash equivalents is actively
monitored and managed, the rate risk on cash and cash equivalents is not
considered material to the Group.
22. Financial risk management (continued)
e) Fair values
Fair value is the amount at which a financial instrument could be exchanged in
an arms-length transaction between informed and willing parties, other than in
a forced or liquidation sale. The contractual amounts payable less impairment
provision of trade receivables, trade payables and other accrued liabilities
approximate to their fair values.
Financial assets and financial liabilities measured at fair value in the
consolidated statement of financial position are grouped into three levels of
a fair value hierarchy. The three levels are defined based on the
observability of significant inputs to the measurement, as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities
• Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset
or liability, either directly or indirectly
• Level 3: unobservable inputs for the asset or liability.
Mincon Group plc only apply level 3 for fair value, using the detail displayed
above.
Deferred consideration
The movements in respect of the deferred consideration value in the year to 31
December 2023 are as follows:
( ) Level 3
€'000
Balance at 1 January 2023 1,705
Arising on acquisition 1,359
Cash payment (1,054)
Foreign currency translation adjustment (15)
Unwinding of discount on deferred consideration 3
Balance at 31 December 2023 1,998
Deferred consideration includes multiple deferred payments for prior
acquisitions over a fixed period of time. These carry no significant
observational inputs.
23. Subsidiary undertakings
At 31 December 2023, the Group had the following subsidiary undertakings:
Group Registered Office &
Company Share %* Country of Incorporation
Mincon International Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Manufacturer of rock drilling equipment
Mincon Rockdrills PTY Ltd 100% 8 Fargo Way, Welshpool, WA 6106, Australia
Manufacturer of rock drilling equipment
1676427 Ontario Inc. (Operating as Mincon Canada) 100% 400B Kirkpatrick Street, North Bay,
Ontario, P1B 8G5, Canada
Manufacturer of rock drilling equipment
Mincon Carbide Ltd 100% Windsor St, Sheffield S4 7WB, United Kingdom
Manufacturer of tungsten carbide
Mincon Inc. 100% 603 Centre Avenue, N.W. Roanoke, VA 24016, USA
Sales company
Mincon Sweden AB 100% Industrivagen 2-4, 61202 Finspang, Sweden
Sales company
Mincon Nordic OY 100% Hulikanmutka 6, 37570 Lempäälä, Finland
Sales company
Mincon Holdings Southern Africa (Pty) 100% 1 Northlake, Jetpark 1469, Gauteng, South Africa
Sales company
ABC Products (Rocky) Pty Ltd 100% 2/57 Alexandra Street, North Rockhampton, Queensland, 4701 Australia
Sales company
Mincon West Africa SL 100% Calle Adolfo Alonso Fernández, s/n, Parcela P-16, Planta 2, Oficina 23, Zona
Franca de Gran Canaria, Puerto de la Luz, Código Postal 35008, Las Palmas de
Gran Canari
Sales company
Mincon Poland 100% ul.Mickiewicza 32, 32-050 Skawina, Poland
Dormant company
Mincon Canada - Western Service Centre (previously Pacific Bit of Canada) 100% 3568-191 Street, Unit 101, Surrey BC, V3Z 0P6, Canada
Sales company
23. Subsidiary undertakings (continued)
Group Registered Office &
Company Share %* Country of Incorporation
Mincon Rockdrills Ghana Limited 100% P.O. Box CT5105, Accra,
Ghana
Dormant company
Mincon S.A.C. 100% Calle La Arboleda 151, Dpto 201, La Planicie, La Molina, Peru
Sales company
Ozmine International Pty Limited 100% Gidgegannup, WA 6083, Australia
Dormant company
Mincon Chile 100% Av. La Dehesa #1201, Torre Norte, Lo Barnechea, Santiago, Chile
Sales company
Mincon Tanzania 100% Plot 1/3 Nyakato Road,
Mwanza, Tanzania
Dormant company
Mincon Namibia Pty Ltd 100% Ausspannplatz, Windhoek, Namibia
Sales company
Mincon Mining Equipment Inc 100% 19789-92a Avenue, Langley, British Columbia V1M3B3, Canada
Sales company
Mincon Exports USA Inc. 100% 603 Centre Ave, Roanoke VA 24016, USA
Group finance company
Mincon International Shannon 100% Smithstown, Shannon, Co. Clare, Ireland
Dormant company
Smithstown Holdings 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Mincon Canada Drilling Products Inc. 100% Suite 1800-355 Burrard Street, Vancouver, BC V6C 268, Canada
Holding company
MGP Investments Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding Company
Lotusglade Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Floralglade Company 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Spartan Drilling Tools 100% 1882 US HWY 6 & 50 Fruita, CO 81507, USA
Manufacturing facility
23. Subsidiary undertakings (continued)
Group Registered Office &
Company Share %* Country of Incorporation
Castle Heat Treatment Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Mincon Microcare Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Driconeq AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
Holding company
Driconeq Production AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
Manufacturing facility
Driconeq Fastighet AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
Property holding company
Driconeq Do Brasil 100% Rua Dr. Ramiro De Araujo Filho, 348, Jundai, SP, Brasil
Sales company
Driconeq Africa Ltd 100% Cnr of Harriet and James Bright Avenue, Driehoek. Germiston 1400
Manufacturing facility
Driconeq Australia Holdings Pty Ltd 100% 47 Greenwich Parade, AU-6031 Neerabup, WA, Australia
Holding company
Driconeq Australia Pty Ltd 100% 47 Greenwich Parade, AU-6031 Neerabup, WA, Australia
Manufacturing facility
Mincon Drill String AB 100% Svetsarevägen 4, 686 33, Sunne, Sweden
Holding company
EURL Roc Drill 100% Rue Charles Rolland, 29650 Guerlesquin, France
Sales company
Attakroc Inc 100% 601, rue Adanac, Quebec, G1C 7G6, Canada
Sales company
Mincon Quebec 100% 601, rue Adanac, Quebec, G1C 7G6, Canada
Holding company
*All shares held are ordinary shares.
24. Leases
A. Leases as Lessees (IFRS 16)
The Group leases property, plant and equipment across its global operations.
Mincon Group PLC has elected to apply the practical expedient allowed under
IFRS 16 for short-term leases by class of underlying asset to which the right
of use relates. A class of underlying asset is a grouping of underlying assets
of a similar nature and use in an entity's operations. The class of underlying
assets this applies to short term leases of office equipment.
Information about leases for which the Group is a lessee is presented below.
i) Right-of-use
assets
31 December 2022
€'000
Balance at 1 January 2022 5,696
Depreciation charge for the year (2,159)
Additions to right of use assets 3,334
Disposal of right of use asset (57)
Foreign exchange difference (46)
Balance at 31 December 2022 6,768
31 December 2023
€'000
Balance at 1 January 2023 6,768
Depreciation charge for the year (2,205)
Additions to right of use assets 1,013
Disposal of right of use asset (89)
Foreign exchange difference (183)
Balance at 31 December 2023 5,304
ii) Amounts recognised in income statement.
2023 2022
€'000 €'000
Interest on lease liabilities 698 354
Expenses related to short term leases 5 245
Expenses related to leases of low value assets - 10
Leases under IFRS 16 703 609
iii) Amounts recognised in statement of cash flows
2023 2022
€'000 €'000
Total cash outflow for leases 4,194 3,994
Total cash outflow of leases 4,194 3,994
24. Leases (continued)
iv) Extension options
Some property leases contain extension options exercisable by the Group. The
Group assesses at lease commencement date whether it is reasonably certain to
exercise the extension options. The Group is reasonably certain it will not
incur future lease liabilities beyond what is currently calculated.
The following table sets out a maturity analysis of lease liabilities, showing
the undiscounted lease payments to be paid after the reporting date.
31 December 2023
€'000
Less than one year 2,068
One to two years 2,042
Two to five years 788
More than 5 years 850
Total 5,748
31 December 2022
€'000
Less than one year 2,219
One to two years 3,068
Two to five years 1,525
More than 5 years 568
Total 7,290
B. Leases as Lessor (IFRS 16)
i) Financing Lease
The Group subleased a properties that had been recognised as a right of use
asset in Finland and Australia. The Group recognised income interest in the
year in relation to this totalling €132,000 (2022: €193,000).
The Group manages the risk to retain the right to the assets as they have a
right to inspect the property, the right to enforce the contractual
arrangement with the lessee and the right to perform maintenance.
The following table sets out a maturity analysis of lease receivable, showing
the undiscounted lease payments to be received after the reporting date.
31 December 2023 31 December 2022
€'000 €'000
Less than one year 11 147
One to two years - -
Balance at 31 December 11 147
Unearned finance income - (10)
Total undiscounted lease receivable 11 137
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 2023 was €120,000 (2022:
€180,000).
24. Leases (continued)
B. Leases as Lessor (IFRS 16)
i) Operating leases (continued)
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 2023
€'000
Less than one year 73
One to two years 30
Two to three years 32
Total 135
31 December 2022
€'000
Less than one year 22
Total 22
25. Commitments
The following capital commitments for the purchase of property, plant and
equipment had been authorised by the directors at 31 December 2023:
31 December 31 December
2023 2022
€'000 €'000
Contracted for 1,585 3,360
Not-contracted for - 229
Total 1,585 3,589
26. Litigation
The Group is not involved in legal proceedings that could have a material
adverse effect on its results or financial position.
27. Related parties
As at 31 December 2023, the share capital of Mincon Group plc was 56.32% owned
by Kingbell Company which is ultimately controlled by Patrick Purcell and
members of the Purcell family. Patrick Purcell is also a director of the
Company.
In June 2023, the Group paid a final dividend for 2022 of €0.0105 to all
shareholders. The total dividend paid to Kingbell Company was €1,256,477.
In December 2023, the Group paid an interim dividend for 2023 of €0.0105 to
all shareholders. The total dividend paid to Kingbell Company was €1,256,477
(September 2022: €1,256,477).
The Group has a related party relationship with its subsidiary undertakings
(see note 23) for a list of these undertakings), directors and officers. All
transactions with subsidiaries eliminate on consolidation and are not
disclosed.
27. Related parties (continued)
Transactions with Directors
The Group is owed €Nil from directors and shareholders at 31 December 2023
and 2022. The Group has amounts owing to directors of €Nil as at 31 December
2023 and 2022.
Key management compensation
The profit before tax from continuing operations has been arrived at after
charging the following key management compensation:
2023 2022
€'000 €'000
Short term employee benefits ( ) 1,616 1,561
Bonus and other emoluments 24 348
Post-employment contributions ( ) 156 149
Social security costs 117 110
Share based payment charged in the year (160) (153)
Total 1,753 2,015
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 (twelve in total at year end).
Amounts included above are time weighted for the period of the individuals
employment.
28. Events after the reporting date
The Board of Mincon Group plc is recommending the payment of a final dividend
for the year ended 31 December 2023 in the amount of €0.0105 (1.05 cent) per
ordinary share, which will be subject to approval at the Annual General
Meeting of the Company in May 2024. Subject to Shareholder approval at the
Company's annual general meeting, the final dividend will be paid on 14 June
2024 to Shareholders on the register at the close of business on 24 May 2024.
29. Approval of financial statements
The Board of Directors approved the consolidated financial statements on 11
March 2024.
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