REG - Mincon Group Plc - Final Results
14/03/2022 07:01
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RNS Number : 5546E Mincon Group Plc 14 March 2022
Mincon Group plc
("Mincon" or the "Group")
2021 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 2021.
Percentage
change in
period
2021 2020
Product revenue: €'000 €'000
Sale of Mincon product 118,802 108,556 +9.4%
Sale of third-party product 25,560 21,347 +19.7%
Total revenue 144,362 129,903 +11.1%
Gross profit 48,763 45,717 +6.7%
EBITDA 25,212 24,731 +1.9%
Profit before tax 17,828 17,069 +4.4%
Financial highlights
· Growth in revenues of 11.1% in 2021 over 2020.
o 8% like-for-like revenue growth, including growth across all industries
(mining, construction and waterwell/geothermal)
o Strong H2 performance, with revenue growth of 19% on H2 2020 as the
production challenges imposed by the COVID-19 pandemic eased.
· Gross margin for 2021 of 33.8% (2020: 35.2%) reflected higher
freight costs and input cost inflation in the period, as well as an increase
in the sale of third-party product to compensate for supply chain disruptions.
Price increases were prudently implemented to pass on cost increases, with
further price increases planned for Q1 2022
· EBITDA of €25.2 million, an increase of 1.9% on 2020
· Final dividend of 1.05c per ordinary share recommended, taking
the total dividend for 2021 to 2.10c per ordinary share (2020: 2.10c per
ordinary share)
Operational highlights
· Successfully managed the logistical and material availability
challenges resulting from the pandemic, building inventory levels to maintain
product availability and strong service levels for customers
· Completion of two acquisitions in 2021, adding IP in subsea
drilling and distribution in eastern Canada
· Successful on-site testing of the hydraulic Greenhammer product and
large diameter hammer system on site in Australia and Malaysia respectively.
Greenhammer achieved outstanding results and the Group is determining the most
appropriate commercialisation route for this product
· Disruptive Technology Innovation Fund award to a Mincon-led
consortium involved in developing a certified anchor foundation solution for
the offshore wind industry
Current trading and outlook
· Our order books for 2022 remain healthy as the markets remain
strong. We are passing on inflationary manufacturing cost, such as increases
in energy cost, through price increases to customers. The Group continues with
the momentum from H2 2021 into 2022.
Joe Purcell, Chief Executive Officer, commenting on the results, said:
We are very pleased to report growth in revenue and profitability in 2021,
following what was another year characterised by challenging and uncertain
market conditions due to the COVID-19 pandemic.
The start of the year was particularly challenging due to the impact of the
pandemic, but we worked hard to mitigate the impact by adapting our operations
to suit the variable conditions. While strict COVID-19 health measures
remained in place through the year in some areas, such as Western Australia,
we still delivered a strong performance for the year, particularly in H2 where
gross profits rose 16% on H2 2020.
Revenues
The Group continued its path of revenue growth during the year across all our
industries and finished the year ahead of 2020 revenue by 11%, with 8% of this
organically and 3% through contribution from acquisitions. Our strongest
growth was in the mining industry where our organic revenue grew by 16%. We
had fewer large construction supply contracts in 2021 versus 2020, however we
achieved growth in smaller supply contracts in Europe and the Americas which
drove overall revenue growth in the construction industry of 7%. The
Waterwell/geothermal industry recovered somewhat from the COVID-19 impacts
experienced in 2020 and the Group took the opportunity to recover some lost
ground and grew revenue across our regions by 5% in the industry in 2021.
Profitability
As previously reported, the areas of procurement and logistics presented
challenges during the period in terms of material availability, raw material
price increases, higher freight costs and longer transit times (for example,
we observed trans-ocean freight transit times roughly doubling in 2021). As a
result, we chose to increase inventory levels of both raw materials and
finished goods to ensure we maintain continued strong service to our customers
who use our products for business-critical operations.
Supply chain challenges and increases in raw material prices had an impact on
our margins during the year, along with additional operational costs brought
about by the on-going pandemic. For instance, our overall manufacturing
freight cost increased by 18%. We were also compelled to purchase local
non-Mincon products to fulfil our customer requirements when Mincon
manufactured products were subject to freight interruptions at seaports, and
this also impacted our gross margin in 2021. We have passed on price increases
to customers to offset increases in manufacturing and delivery costs, but only
when it was considered appropriate to do so. Despite these challenges, we were
able to maintain profit growth and finished the year 1.4% ahead of prior year
profit after tax.
Our strong regional management structure and global coverage reduced the
potential impact of COVID-19 on the business and has meant that we can
continue to operate with minimal cross-regional travel. We are keeping this
situation under review, and provided that the global situation continues in
the current positive direction, we intend to ease our restrictions on travel.
It is important to note that we will control travel expenditure carefully and
continue to leverage the strength of our global organisation and regional hub
structure.
Product Development
The pandemic impacted product development throughout 2021. However, we
achieved some important milestones towards the end of the year:
· Greenhammer - Our hydraulic Greenhammer ran successfully on our
own Mincon rig at a major open pit iron ore mine in north-western Australia
during the year. Stringent COVID-19 restrictions in Western Australia
materially curtailed our ability to put the outstanding results, in terms of
penetration rate increases and reliability, to commercial use. As a result,
and subject to pandemic restrictions easing in Western Australia, we are
working on alternative routes to commercialising this transformational
opportunity for the Group and the hard rock surface mining industry. It is
important to note that protecting our hard-earned IP will be at the forefront
of any agreements that we commit to.
· Large diameter hammer system - Another testing success was the
drilling that was carried out in Malaysia with our new large diameter hammer
system to drill 1750mm diameter rock socket friction piles. We believe that
these are the largest holes ever drilled with a single hammer. While we need
to drill more metres using the system, the performance, which is several times
faster than the existing technology, gives us great encouragement. We believe
that there is great potential for this product globally as the preferred
method for drilling large diameter construction piles more efficiently.
Another important milestone during the year was the Disruptive Technology
Innovation Fund award to a Mincon-led consortium involved in developing a
certified anchor foundation solution for the offshore wind industry. We have
made good progress on this project with our consortium partners, Subsea
Micropiles, University of Limerick and University College Dublin. One of the
key aspects of the project is the self-drilling seawater powered micropile
anchor that we have designed in Mincon. A small-scale prototype has been test
drilled onsite at the Shannon plant and we are continuing to refine this. We
are also working with our partners to develop a seabed drill rig as part of an
overall system to drill, load test and certify anchor installations at an
offshore test site. The future global requirement for offshore wind power is
well chronicled and we believe this provides a very attractive future market
for Mincon.
Acquisitions
An important contributor towards our development of the seabed drill rig has
been Hammer Drilling Rigs ("HDR"), a specialist in the supply of hard rock
drilling attachments based in the USA. HDR has a specialism in drill mast
attachments to heavy equipment that is used in a variety of applications,
including the installation of anchor points for solar field projects. In
January 2021, Mincon acquired the intellectual property including the
knowledge and skillsets that the HDR team brings from designing and developing
bespoke rigs for terrestrial applications. This has been, and will continue to
be, very important in our subsea rig development.
There is also a growing interest in and growing order book for the rigs and
masts produced by Hammer Drilling Rigs for terrestrial applications such as
construction and solar field applications, which will complement the
consumable range that we already have within the Group. We are very happy with
the successful integration of the engineering and production teams into our
facility in Benton, and we believe that the product range has a bright future
within the Group.
In July 2021, we acquired Attakroc, a distribution company. Which has
contributed positively to our revenue and profitability since joining the
Group. The strong customer service ethos that the Attakroc team has brought
will serve us well in our efforts to grow our market share in the three
industries that the Group serves today in eastern Canada.
We paid a total of €3 million in 2021 to bring businesses into the Group,
which is inclusive of 2021 acquisitions, non-business combinations and
historical acquisitions.
Post year-end, in January 2022, we completed the acquisition of Spartan Drill
Tools, based in Fruita Colorado, which produces high quality drill pipes and
related products. This strategic acquisition introduces this capability into
the Americas region to further strengthen our full package offering for the
mining, construction, and waterwell/geothermal markets. An important aspect of
this acquisition is that we can integrate certain aspects of drill pipe
manufacturing with available capacity and skillsets that we already have in
Benton to generate efficiencies and hence improve our margins.
Sustainability
Our engineering focus on the efficiency of the products that we manufacture
means that we have always sought to minimise our carbon footprint. This is
more obvious on projects such as Greenhammer and will be further emphasised by
our move into renewables with solar energy and offshore wind installations. We
are also increasing production efficiencies and are investing in new
technologies in this area to further reduce our impact on the environment. We
are in the process of conducting a detailed review of our carbon emissions and
will be reporting on this and associated reduction targets in the first half
of 2022.
As a truly global Group, we are embedded in a wide range of cultures and
communities across our operations and markets. As a significant employer in
these communities, Mincon has a meaningful role to play in these societies and
we are committed to increasing opportunities for our employees as well as the
wider communities.
As with the carbon emissions project, we will be reporting on Corporate Social
Responsibility (CSR) initiatives, on our website, in a more formal manner in
the coming year to reflect our continued commitment to the communities in
which we operate.
Dividend
The Board of Mincon Group plc is recommending the payment of a full year
dividend for the year ended 31 December 2021 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 2022. Subject to Shareholder approval at
the Company's annual general meeting, the final dividend will be paid on 17
June 2022 to Shareholders on the register at the close of business on 27 May
2022.
Concluding Comments
Since our IPO in 2013, we have been on a journey that has filled out our
product offering so that we can now supply a full range of consumables to the
mining, construction, and waterwell/geothermal markets. Our engineering
capacity has been transformed by adding to our team through acquisition and
strategic hiring.
Our desire to focus on efficiency through ambitious product development
projects that have challenged us, but which are now poised to deliver, has
built a knowledge base and honed our abilities. These engineering skillsets
can now be deployed for new product development in existing markets as well as
new areas such as our move into the renewables space.
Our increased manufacturing capacity, combined with the global spread of our
factories and customer service centres, means that we have created a platform
for future growth. Of course, we remain cognisant of the challenges that the
COVID-19 pandemic still presents, and we will endeavour to mitigate the effect
on our people. On that note I wish to thank our Board and investors for their
continued support, and all my colleagues for their work, vigilance and
perseverance through these challenging times and look forward to better days
ahead.
ENDS
14 March 2022
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 Adviser and Joint Tel: +353 (1) 679 6363
Broker)
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 2021
2021 2020
€'000 €'000
Notes
Continuing operations
Revenue 4 144,362 129,903
Cost of sales 6 (95,599) (84,186)
Gross profit 48,763 45,717
Operating costs 6 (30,656) (27,468)
Operating profit 18,107 18,249
Finance costs 7 (927) (857)
Finance income 20 42
Foreign exchange gain/(loss) 630 (376)
Movement on deferred consideration 23 (2) 11
Profit before tax 17,828 17,069
Income tax expense 11 (3,228) (2,683)
Profit for the period 14,600 14,386
Profit attributable to:
- owners of the Parent 14,600 14,221
- non-controlling interests 19 - 165
Earnings per Ordinary Share
Basic earnings per share, 21 6.87 6.72
Diluted earnings per share, 21 6.69 6.57
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Comprehensive Income for the year ended 31 December
2021
2021 2020
€'000 €'000
Profit for the year 14,600 14,386
Other comprehensive loss:
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation - foreign operations 2,865 (4,165)
Other - 156
Other comprehensive income/(loss) for the year 2,865 (4,009)
Total comprehensive income for the year 17,465 10,377
Total comprehensive income attributable to:
- owners of the Parent 17,465 10,212
- non-controlling interests - 165
The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial Position as at 31 December 2021
2021 2020
Notes €'000 €'000
Non-Current Assets
Intangible assets and goodwill 12 40,157 36,987
Property, plant and equipment 13 50,660 45,820
Deferred tax asset 11 1,075 1,093
Total Non-Current Assets 91,892 83,900
Current Assets
Inventory and capital equipment 14 63,050 53,017
Trade and other receivables 15a 25,110 20,640
Prepayments and other current assets 15b 8,822 4,186
Current tax 521 311
asset
Cash and cash equivalents 23 19,049 17,045
Total Current Assets 116,552 95,199
Total Assets 208,444 179,099
Equity
Ordinary share capital 20 2,125 2,117
Share premium 67,647 67,647
Undenominated capital 39 39
Merger reserve (17,393) (17,393)
Share based payment reserve 2,695 2,259
Foreign currency translation reserve (5,168) (8,033)
Retained earnings 94,207 86,300
Total Equity 144,152 132,936
Non-Current Liabilities
Loans and borrowings 18 23,265 14,789
Deferred tax liability 11 1,622 1,832
Deferred consideration 23 4,224 4,723
Other liabilities 852 503
Total Non-Current Liabilities 29,963 21,847
Current Liabilities
Loans and borrowings 18 11,205 6,822
Trade and other payables 16 15,683 10,457
Accrued and other liabilities 16 6,027 5,529
Current tax liability 1,414 1,508
Total Current Liabilities 34,329 24,316
Total Liabilities 64,292 46,163
Total Equity and Liabilities 208,444 179,099
The accompanying notes are an integral part of these financial statements.
On behalf of the Board:
Hugh
McCullough
Joseph Purcell
Chairman
Chief Executive Officer
Consolidated Statement of Cash Flows for the year ended 31 December 2021
2021 2020
Notes €'000 €'000
Operating activities:
Profit for the period 14,600 14,386
Adjustments to reconcile profit to net cash provided by operating activities:
Depreciation 13 7,105 6,482
Amortisation of intangible assets 12 105 -
Fair value movement on deferred consideration 2 (11)
Finance cost 927 857
Finance income (20) (42)
(Gain)/Loss on sale of property, plant and equipment (177) 18
Income tax expense 3,228 2,683
Other non-cash movements (633) 1,092
25,137 25,465
Changes in trade and other receivables (2,695) 919
Changes in prepayments and other assets (4,502) 1,209
Changes in inventory (7,468) (3,228)
Changes in trade and other payables 5,240 (1,812)
Cash provided by operations 15,712 22,553
Interest received 20 42
Interest paid (927) (857)
Income taxes paid (3,627) (2,389)
Net cash provided by operating activities 11,178 19,349
Investing activities
Purchase of property, plant and equipment (7,567) (7,222)
Proceeds from the sale of property, plant and equipment 543 331
Investment in intangible assets (1,139) (1,065)
Proceeds from the issuance of share capital 8 7
Acquisitions of subsidiary, net of cash acquired (681) (7,156)
Investment in acquired intangible assets (275) -
Payment of deferred consideration (2,082) (2,460)
Proceeds from the sale of subsidiaries 111 706
Net cash used in investing activities (11,082) (16,859)
Financing activities
Dividends paid (6,693) (2,222)
Repayment of borrowings 18 (3,262) (1,536)
Repayment of lease liabilities (3,590) (3,455)
Drawdown of loans 18 15,236 6,622
Purchase of NCI - (1,000)
Net cash provided by/(used in) financing activities 1,691 (1,591)
Effect of foreign exchange rate changes on cash 217 (222)
Net increase in cash and cash equivalents 2,004 677
Cash and cash equivalents at the beginning of the year 17,045 16,368
Cash and cash equivalents at the end of the year 19,049 17,045
The accompanying notes are an integral part of these financial statemen
Consolidated Statement of Changes in Equity for the year ended 31 December
2021
Share Share premium Merger reserve Un-denominated Share based payment reserve Foreign Retained earnings Total attributable to owner of the company Non-controlling interests Total
capital capital currency translation reserve equity
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Balances at 1 January 2020 2,110 67,647 (17,393) 39 1,629 (3,868) 74,865 125,029 1,115 126,144
Comprehensive income:
Profit for the year - - - - - - 14,221 14,221 165 14,386
Other comprehensive income/(loss):
Foreign currency translation - - - - - (4,165) - (4,165) - (4,165)
Other - - - - - - 156 156 - 156
Total comprehensive income (4,165) 14,377 10,212 165 10,377
Transactions with Shareholders:
Issuance of share capital 7 - - - - - - 7 - 7
Share based payments - - - - 630 - - 630 - 630
Dividends - - - - - - (2,222) (2,222) - (2,222)
Total transactions with Shareholders 7 - - - 630 - (2,222) (1,585) - (1,585)
Acquisition of non-Controlling Interest without a change in control (note 18) - - - - - - (720) (720) (1,280) (2,000)
Balances at 31 December 2020 2,117 67,647 (17,393) 39 2,259 (8,033) 86,300 132,936 - 132,936
Comprehensive income:
Profit for the year - - - - - - 14,600 14,600 - 14,600
Other comprehensive income/(loss):
Foreign currency translation - - - - - 2,865 - 2,865 - 2,865
Total comprehensive income 2,865 14,600 17,465 - 17,465
Transactions with Shareholders:
Issuance of share capital 8 - - - - - - 8 - 8
Share-based payments - - - - 436 - - 436 - 436
Dividends - - - - - - (6,693) (6,693) - (6,693)
Total transactions with Shareholders 8 - - - 436 - (6,693) (6,249) - (6,249)
Balances at 31 December 2021 2,125 67,647 (17,393) 39 2,695 (5,168) 94,207 144,152 - 144,152
The accompanying notes are an integral part of these financial statements. See
note 20 for explanation of movements in reserve balances.
Notes to the 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 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 2021 and 31 December 2020.
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 Group has initially adopted Interest
rate Benchmark Reform- Phase 2 (Amendments to IFRS 9, IAS 39, IFRS7, IFRS 4
and IFRS 16) and it has not had a significant impact on the Groups financial
statements.
The following new and amended standards are not expected to have a significant
impact on the Group's consolidated financial statements:
Effective 01/04/2021
• COVID-19-Related Rent Concessions beyond 30 June
2021 (Amendment to IFRS 16)
Effective 01/01/2022
• Annual Improvements to IFRS Standards 2018-2020.
• Property, Plant and Equipment: Proceeds before
Intended Use (Amendments to IAS 16).
• Onerous Contracts - Cost of Fulfilling a Contract
(Amendments to IAS 37)
• Reference to Conceptual Framework (Amendments to
IFRS 3).
3. Significant accounting principles, accounting estimates and judgements
(continued)
Effective 01/01/2023
• Classification of Liabilities as Current or
Non-current (Amendments to IAS 1).c
• IFRS 17 Insurance Contracts and amendments to IFRS
17 Insurance Contracts.
• Disclosure of Accounting Policies (Amendments to
IAS 1 and IFRS Practice Statement 2).
• Deferred Tax related to Assets and Liabilities
arising from a Single Transaction (Amendments to IAS 12)
• Definition of Accounting Estimates (Amendments to
IAS 8).
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.
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.
Earnings per share
Basic earnings per share is calculated based on the profit for the year
attributable to owners of the Company and the basic weighted average number of
shares outstanding. Diluted earnings per share is calcu-lated based on the
profit for the year attributable to owners of the Company and the diluted
weighted average number of shares outstanding.
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.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Taxation (continued)
Deferred tax
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is not recognised
for:
• temporary differences on the initial recognition of
assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss;
• temporary differences related to investments in
subsidiaries, associates and joint arrangements to the extent that the Group
is able to control the timing of the reversal of the temporary differences and
it is probable that they will not reverse in the foreseeable future; and
• taxable temporary differences arising on the initial
recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits
and deductible temporary differences to the extent that it is probable that
future taxable profits will be available against which they can be used.
Future taxable profits are determined based on the reversal of relevant
taxable temporary differences. If the amount of taxable temporary differences
is insufficient to recognise a deferred tax asset in full, then future taxable
profits, adjusted for reversals of existing temporary differences, are
considered, based on the business plans for individual subsidiaries in the
Group. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will
be realised; such reductions are reversed when the probability of future
taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and
recognised to the extent that it has become probable that future taxable
profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, using tax rates enacted or
substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that would
follow from the manner in which the Group expects, at the reporting date, to
recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are
met.
Leases
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.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Leases (continued)
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.
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.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Foreign Currency
Foreign currency transactions
Transactions in foreign currencies (those which are denominated in a currency
other than the functional currency) are translated at the foreign exchange
rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the foreign exchange
rate at the statement of financial position date. Exchange gains and losses
related to trade receivables and payables, other financial assets and
payables, and other operating receiv-ables and payables are separately
presented on the face of the income statement.
Exchange rate differences on translation to functional currency are reported
in profit or loss, except when reported in other compre-hensive income for the
translation of intra-group receivables from, or liabilities to, a for-eign
operation that in substance is part of the net investment in the foreign
operation.
Exchange rates for major currencies used in the various reporting periods are
shown in note 23.
Translation of accounts of foreign entities
The assets and liabilities of foreign entities, including goodwill and fair
value adjustments arising on consolidation, are translated to euro at the
exchange rates ruling at the reporting date. Revenues, expenses, gains, and
losses are translated at average exchange rates, when these approximate the
exchange rate for the respective transaction. Foreign exchange differences
arising on translation of foreign entities are recognised in other
comprehensive income and are accumulated in a separate component of equity as
a translation reserve. On divestment of foreign entities, the accumulated
exchange differences, are recycled through profit or loss, increasing or
decreasing the profit or loss on divestments.
Business combinations and consolidation
The consolidated financial statements include the financial statements of the
Group and all companies in which Mincon Group plc, directly or indirectly, has
control. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date on which control commences until the date on which
control ceases.
The consolidated financial statements have been prepared in accordance with
the acquisition method.
According to this method, business combinations are seen as if the Group
directly acquires the assets and assumes the liabilities of the entity
acquired. At the acquisition date, i.e. the date on which control is obtained,
each identifiable asset acquired and liability assumed is recognised at its
acquisition-date fair value.
Consideration transferred is measured at its fair value. It includes the sum
of the acquisition date fair values of the assets transferred, liabilities
incurred to the previous owners of the acquiree, and equity interests issued
by the Group. Deferred 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.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Business combinations and consolidation (continued)
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.
Financial Assets and Liabilities
Recognition and derecognition
Financial assets and liabilities are recognised at fair value when the Group
becomes a party to the contractual provisions of the instrument. Purchases and
sales of financial assets are accounted for at trade date, which is the day
when the Group contractually commits to acquire or dispose of the assets.
Trade receivables are recognised 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. 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. The Group derecognises (fully or
partially) a financial liability when the obligation specified in the contract
is discharged or otherwise expires. A financial asset and a financial
liability are offset and the net amount presented in the statement of
financial position when there is a legally 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.
Effective interest method
The effective interest method is a method of calculating the amortised cost of
a financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant periods. The effective interest
rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument, or when
appropriate a shorter period, to the net carrying amount of the financial
asset or financial liability. The calculation includes all fees and points
paid or received between parties to the contract that are an integral part of
the effective interest rate, transaction costs, and all other premiums or
discounts.
Borrowing costs
All borrowing costs are expensed in accordance with the effective interest
rate method.
Investments in subsidiaries - Company
Investments in subsidiary undertakings are stated at cost less provision for
impairment in the Company's statement of financial position. Loans to
subsidiary undertakings are initially recorded at fair value in the Company
statement of financial position and subsequently at amortised cost using an
effective interest rate methodology.
3. Significant accounting principles, accounting estimates and judgements
(continued)
Financial Assets and Liabilities (continued)
Impairment of financial assets
Financial assets are assessed at each reporting date to determine whether
there is any objective evidence that they are impaired. A financial asset is
considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that
asset.
Equity
Shares are classified as equity. Incremental costs directly attributable to
the issue of ordinary shares and share options are recognised as a deduction
from equity, net of any tax effect.
Contingent liabilities
A contingent liability is a possible obligation or a present obligation that
arises from past events that is not reported as a liability or provision, as
it is not probable that an outflow of resources will be required to settle the
obligation or that a sufficiently reliable calculation of the amount cannot be
made
Financial instruments carried at fair value: 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.
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.
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.
3. Significant accounting principles, accounting estimates and judgements
(continued)
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.
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
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.
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. 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.
2021 2020
€'000 €'000
Product revenue:
Sale of Mincon product 118,802 108,556
Sale of third party product 25,560 21,347
Total revenue 144,362 129,903
5. Operating Segment
An operating segment is a component of the Group that engages in busi-ness
activities from which it may earn revenue and incur expenses, and for which
discrete financial information is available. The operating results of 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. The Group is
managed as a single business unit that sells drilling equipment, primarily
manufactured by Mincon manufacturing sites.
The CODM assesses operating segment performance based on operating profit.
Segment revenue for the year ended 31 December 2021 of €144.4 million (2020:
€129.9 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):
2021 2020
€'000 €'000
Region:
Ireland 1,859 1,487
Americas 45,908 43,640
Australasia 17,327 24,754
Europe, Middle East, Africa 79,268 60,022
Total revenue from continuing operations 144,362 129,903
During 2021, Mincon had sales in the USA of €24.4 million (2020: €24.7
million), Australia of €14.7 million (2020: €14.6 million, these
separately contributed to more than 10% of the entire Group's sales for 2021.
Non-current assets by region (location of assets):
2021 2020
€'000 €'000
Region:
Americas 14,682 11,310
Australasia 11,838 11,338
Europe, Middle East, Africa 64,297 60,159
Total non-current assets((1)) 90,817 82,807
(1) Non-current assets exclude deferred tax assets.
During 2021, Mincon held non-current assets (excluding deferred tax assets) in
Ireland of €18.3 million (2020: €18.3 million), in the USA of €10.7
million (2020: €9.4 million) these separately contributed to more than 10%
of the entire Group's non-current assets (excluding deferred tax assets) for
2021.
6. Cost of Sales and operating expenses
Included within cost of sales and operating costs were the following major
components:
Cost of sales
2021 2020
€'000 €'000
Raw materials 37,081 32,860
Third party product purchases 19,275 16,098
Employee costs 19,764 17,504
Depreciation (note 13) 4,801 4,216
In bound costs on purchases 3,772 3,106
Energy costs 2,188 1,623
Maintenance of machinery 1,711 1,392
Subcontracting 5,463 5,364
Other 1,544 2,023
Total cost of sales 95,599 84,186
The Group invested approximately €3.9 million on research and development
projects in 2021 (2020: €3.7 million). €2.8 million of this has been
expensed in the period (2020: €2.6 million), with the balance of €1.1
million of development costs capitalised (2020: €1.1 million) (note 12).
Operating costs
2021 2020
€'000 €'000
Employee costs (including director emoluments) 18,615 17,438
Depreciation (note 13) 2,304 2,266
Amortisation of acquired IP 105 -
Travel 1,238 964
Professional costs 2,589 2,291
Administration 2,841 2,007
Marketing 694 542
Legal cost 629 878
Other 1,641 1,082
Total other operating costs 30,656 27,468
The Group recognised €450,000 in Government Grants in 2021 (2020: €1.3
million). These grants differ in structure from country to country, they
primarily relate to personnel costs.
Included in professional costs are acquisition costs of €63,000, relating to
acquisition of Attakroc and the acquisition of the IP of Campbell's Welding
and Fabrication. Also included in professional fees is costs relating to the
Non-Business Combination of Hammer Drill Rigs.
7. Finance costs
2021 2020
€'000 €'000
Interest on lease liabilities 684 741
Interest on loans and borrowings 243 116
Finance costs 927 857
8. Employee information
2021 2020
€'000 €'000
Wages and salaries - excluding directors 31,830 28,753
Wages, salaries, fees and retirement benefit - directors (note 10) 797 795
Social security costs 3,357 3,029
Retirement benefit costs of defined contribution plans 1,959 1,735
Share based payment expense (note 22) 436 630
Total employee costs 38,379 34,942
In addition to the above employee costs, the Group capitalised payroll costs
of €700,000 in 2021 (2020: 500,000) in relation to development.
At 31 December 2021, there was €256,000 (2020: €219,000) accrued for and
not in paid pension contributions.
The average number of employees was as follows:
2021 2020
Number Number
Sales and distribution 136 126
General and administration 75 66
Manufacturing, service and development 383 360
Average number of persons employed 594 552
Retirement benefit and Other Employee Benefit Plans
The Group operates various defined contribution retirement benefit plans.
During the year ended 31 December 2021, the Group recorded €2 million (2020:
€1.7 million) of expense in connection with these plans.
9. Acquisitions & Disposals
In June 2021, Mincon acquired the business of Campbell's Welding &
Fabrication, for a consideration of €421,000. This was made up of a cash
consideration of €84,000 and deferred consideration of €337,000. Mincon
acquired Campbell's Welding & Fabrication to bring in-house their knowhow
and processes.
In June 2021, Mincon acquired 100% shareholding in Attakroc, a Canadian-based
mining and construction product distributor, for a consideration of €1.8
million. The Group acquired Attakroc to bring in-house their vast experience
in selling and servicing the mining and construction industries in western
Canada. Attakroc brings their knowledge of the local market conditions and
give Mincon a distinctive advantage in this region. The transaction included a
cash consideration of €600,000 and deferred consideration of €1.2 million.
A. Consideration transferred
The following table summarises the acquisition date fair value of each major
class of consideration transferred.
Campbell Welding & Fabrication Attakroc Total
€'000 €'000 €'000
Cash 84 597 681
Deferred consideration 337 1,227 1,564
Total consideration transferred 421 1,824 2,245
9. Acquisitions & Disposals (continued)
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 equipment 176
Right of use assets 39
Inventories 958
Trade receivables 1,174
Other assets 15
Trade and other payables (699)
Right of use liabilities (39)
Other accruals and liabilities (615)
Fair value of identifiable net assets acquired 1,009
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.
Goodwill
Goodwill arising from the acquisition has been recognised as follows.
Attakroc Total
€'000 2021
€'000
Consideration transferred 1,824 1,824
Fair value of identifiable net assets (1,009) (1,009)
Goodwill 815 815
10. Statutory and other required disclosures
Operating profit is stated after charging the following amounts: 2021 2020
€'000 €'000
Directors' remuneration
Fees 220 165
Wages and salaries 522 574
Retirement benefit contributions 55 56
Total directors' remuneration 797 795
Auditor's remuneration 2021 2020
€'000 €'000
Auditor's remuneration - Fees payable to lead audit firm
Audit of the Group financial statements 205 205
Audit of the Company financial statements 15 15
Other assurance services 20 20
240 240
Auditor's remuneration - Fees payable to other firms in lead audit firm's
network
Audit services 149 112
Other assurance services 3 2
Tax advisory services - 9
Total auditor's remuneration 152 123
11. Income tax
Tax recognised in income statement:
2021 2020
Current tax expense €'000 €'000
Current year 3,427 3,224
Adjustment for prior years (7) (103)
Total current tax expense 3,420 3,121
Deferred tax expense
Origination and reversal of temporary differences (192) (438)
Adjustment for prior years - -
Total deferred tax expense (192) (438)
Total income tax expense 3,228 2,683
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:
2021 2020
€'000 €'000
Profit before tax from continuing operations 17,828 17,069
Irish standard tax rate (12.5%) 12.5% 12.5%
Taxes at the Irish standard rate 2,229 2,134
Foreign income at rates other than the Irish standard rate 691 849
Losses created/(utilised) 277 (843)
Other 31 543
Total income tax expense 3,228 2,683
The Group's net deferred taxation liability was as follows:
2021 2020
€'000 €'000
Deferred taxation assets:
Reserves, provisions and tax credits 741 585
Accrued income - 31
Tax losses and unrealised FX gains 334 477
Total deferred taxation asset 1,075 1,093
Deferred taxation liabilities:
Property, plant and equipment (1,332) (1,780)
Profit not yet taxable (290) (52)
Total deferred taxation liabilities (1,622) (1,832)
Net deferred taxation liability (547) (739)
11. Income tax (continued)
The movement in temporary differences during the year were as follows:
Balance Recognised in Acquired in a Balance
1 January Profit or Loss Business combination 31 December
1 January 2020 - 31 December 2020 €'000 €'000 €'000 €'000
Deferred taxation assets:
Reserves, provisions and tax credits 610 (25) - 585
Accrued income - 31 - 31
Tax losses 6 471 - 477
Total deferred taxation asset 616 477 - 1,093
Deferred taxation liabilities:
Property, plant and equipment (1,742) (38) - (1,780)
Profit not yet taxable (52) - - (52)
Total deferred taxation liabilities (1,794) (38) - (1,832)
Net deferred taxation liability (1,178) 439 - (739)
Balance Recognised in Acquired in a Balance
1 January Profit or Loss Business combination 31 December
1 January 2021 - 31 December 2021 €'000 €'000 €'000 €'000
Deferred taxation assets:
Reserves, provisions and tax credits 585 156 - 741
Accrued income 31 (31) - -
Tax losses 477 (143) - 334
Total deferred taxation asset 1,093 (18) - 1,075
Deferred taxation liabilities:
Property, plant and equipment (1,780) 448 - (1,332)
Profit not yet taxable (52) (238) - (290)
Total deferred taxation liabilities (1,832) 210 - (1,622)
Net deferred taxation liability (739) 192 - (547)
Deferred taxation assets have not been recognised in respect of the following
items:
2021 2020
€'000 €'000
Tax losses 566 843
Total 566 843
12. Intangible assets and goodwill
Product development Goodwill Acquired Total
intellectual
property
€'000 €'000 €'000 €'000
Balance at 1 January 2020 4,782 27,155 - 31,937
Internally developed 1,065 - - 1,065
Acquisitions - 4,533 - 4,533
Translation differences - (548) - (548)
Balance at 31 December 2020 5,847 31,140 - 36,987
Internally developed 1,139 - - 1,139
Acquisitions (note 10) - 815 - 815
Acquired intellectual property - - 696* 696
Amortisation of intellectual property - - (105) (105)
Translation differences - 590 35 625
Balance at 31 December 2021 6,986 32,545 626 40,157
* Included is €275,000 for the Non-Business Combination of Hammer Drilling
Rigs in January 2021. Also included is the acquisition of the IP of Campbell
Welding & Fabrication €421,000.
Goodwill relates to the acquisition of the below companies, being the dates
that the Group obtained control of these business:
· The remaining 60% of DDS-SA Pty Limited in November 2009.
· The 60% acquisition of Omina Supplies in August 2014.
· The 65% acquisition of Rotacan in August 2014.
· The acquisition of ABC products in August 2014.
· The acquisition of Ozmine in January 2015.
· The acquisition of Mincon Chile in March 2015.
· The acquisition of and Mincon Tanzania in March 2015.
· The acquisition of Premier in November 2016.
· The acquisition of Rockdrill Engineering in November 2016.
· The acquisition of PPV in April 2017.
· The acquisition of Viqing July 2017.
· The acquisition of Driconeq in March 2018.
· The acquisition of Pacific Bit of Canada in January 2019
· The acquisition of Lehti Group in January 2020
· The acquisition of Rocdrill in May 2020
· The acquisition of Attakroc in June 2021
The Group accounts for acquisitions using the purchase accounting method as
outlined in IFRS 3 Business Combinations.
The businesses acquired were integrated with other Group operations soon after
acquisition. Impairment testing (including sensitivity analysis) is performed
at each period end. Group management has determined that the Group has one
cash generating unit and one operating segment and therefore all goodwill is
tested for impairment at Group level.
The recoverable amount of goodwill has been assessed based on estimates of
fair value less costs to sell (FVLCS). The FVLCS 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.
12. Intangible assets and goodwill (continued)
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 cost to sell by €42.9 million (2020: €68.4 million), giving
management substantial 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:
( )
2021 2020
WACC 9.60% 10.50%
( )
EBIDTA margin 16.69% 17.84%
Long term growth rate 2.24% 2.25%
( )
Terminal value capital expenditure €9.3 million €7.1 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 8.70% to 10.50%. This results in a midpoint WACC being
used of 9.6%.
The Long term growth rate of 2.24% 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 16.69% for 2024 is
assumed in the Terminal Value calculation used to arrive at the FVLCS.
Terminal value capital expenditure assumes no balance sheet growth is assumed
in the terminal value, capital expenditure is assumed to equal depreciation of
€9.3 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.
( ) 2021 2020
WACC 10.60% 13.28%
Long term growth rate 1.48% 1.50%
Investment expenditure of €1.1 million, which has been capitalised, is in
relation to ongoing product development within the Group. Amortisation will
begin at the stage of commercialisation and charged to the income statement
over a period of three to five years, or the capitalised amount will be
written off if the project is deemed no longer viable by management.
13. Property, plant and equipment
Land & Plant & ROU
Buildings Equipment Assets Total
€'000 €'000 €'000 €'000
Cost: ( )
At 1 January 2020 16,228 45,829 4,832 66,889
Acquisitions through business combinations 95 2,542 3,385 6,022
Additions 387 6,835 102 7,324
Disposals and derecognition of ROU assets - (2,282) (1,199) (3,481)
Foreign exchange differences (419) (1,384) (233) (2,036)
At 31 December 2020 16,291 51,540 6,887 74,718
Acquisitions through business combinations - 176 39 215
Additions 1,524 6,043 3,419 10,986
Disposals and derecognition of ROU assets (264) (570) (1,022) (1,856)
Foreign exchange differences 496 1,586 122 2,204
At 31 December 2021 18,047 58,775 9,445 86,267
Accumulated depreciation: ( )
At 1 January 2020 (3,027) (21,346) (1,344) (25,717)
Charged in year (461) (4,205) (1,816) (6,482)
Disposals - 1,969 432 2,401
Foreign exchange differences 68 750 82 900
At 31 December 2020 (3,420) (22,832) (2,646) (28,898)
Charged in year (524) (4,685) (1,896) (7,105)
Disposals 18 450 866 1,334
Foreign exchange differences (79) (786) (73) (938)
At 31 December 2021 (4,005) (27,853) (3,749) (35,607)
Carrying amount: 31 December 2021 14,042 30,922 5,696 50,660
Carrying amount: 31 December 2020 12,871 28,708 4,241 45,820
Carrying amount: 1 January 2020 13,201 24,483 3,488 41,172
ROU assets includes Property of €5 million (2020: €3.6 million) and Plant
and Equipment of €700,000 (2020: €1.1 million).
The depreciation charge for property, plant and equipment is recognised in the
following line items in the income statement:
2021 2020
€'000 €'000
Cost of sales 4,413 3,744
Cost of sales ROU assets 388 472
Operating expenses 796 922
Operating expenses ROU asset 1,508 1,344
Total depreciation charge for property, plant and equipment 7,105 6,482
14. Inventory and capital equipment
2021 2020
€'000 €'000
Finished goods 42,396 34,120
Work-in-progress 9,596 8,206
Raw materials 11,058 10,187
Capital equipment - 504
Total inventory 63,050 53,017
The Group recorded an impairment of €22,000 against inventory to take
account of net realisable value during the year ended 31 December 2021 (2020:
€80,000). Write-downs are included in cost of sales.
At 31 December 2020, capital equipment are rigs held in South Africa for
resale, during 2021 these rigs were sold.
15. Trade and other receivables and other current assets
a) Trade and other receivables
2020 2020
€'000 €'000
Gross receivable 26,047 21,830
Provision for impairment (937) (1,190)
Net trade and other receivables 25,110 20,640
Provision for impairment
€'000
Balance at 1 January 2021 (1,190)
Reduction in provision arising from prior years receivables impairment 136
Reduction in ECL model 117
Balance at 31 December 2021 (937)
The following table provides the information about the exposure to credit risk
and ECL's for trade receivables as at 31 December 2021.
Weighted average loss rate % Gross carrying amount €'000 Loss allowance
….
€'000
Current (not past due) 1% 19,804 198
1-30 days past due 5% 3,749 187
31-60 days past due 14% 1,649 230
61 to 90 days 17% 628 106
More than 90 days past due 100% 216 216
Net trade and other receivables 26,047 937
The following table provides the information about the exposure to credit risk
and ECL's for trade receivables as at 31 December 2020.
Weighted average loss rate % Gross carrying amount €'000 Loss allowance
….
€'000
Current (not past due) 2% 12,709 254
1-30 days past due 5% 5,169 258
31-60 days past due 14% 1,350 189
61 to 90 days 9% 2,312 199
More than 90 days past due 100% 290 290
Net trade and other receivables 21,830 1,190
15. Trade and other receivables and other current assets (continued)
b) Prepayments and other current assets
( ) 2021 2020
€'000 €'000
Plant and machinery prepaid 5,781 1,597
Prepayments and other current assets 3,041 2,589
Prepayments and other current assets 8,822 4,186
16. Trade creditors, accruals and other liabilities
( ) 2021 2020
€'000 €'000
Trade creditors 15,683 10,457
Total creditors and other payables 15,683 10,457
( ) 2021 2020
€'000 €'000
VAT 31 390
Social security costs 768 1,088
Other accruals and liabilities 5,228 4,051
Total accruals and other liabilities 6,027 5,529
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).
( ) 2021 2020
€'000 €'000
Total liabilities (64,292) (46,163)
Less: cash and cash equivalents 19,049 17,045
Net debt (45,243) (29,118)
Total equity 144,152 132,936
Net debt to equity ratio 0.31 0.22
18. Loans and borrowings
2021 2020
Maturity €'000 €'000
Bank loans 2022-2036 23,391 11,090
Lease Liabilities 2022-2031 11,079 10,521
Total loans and borrowings 34,470 21,611
Current 11,205 6,822
Non-current 23,265 14,789
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 €10.5 million (2020: €4
million) carry restrictive financial covenants including, EBITA 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 4.64%
During 2021, the Group availed of the option to enter into overdraft
facilities and to draw down loans of €15.2 million, €12.4 million in loans
and €2.8 million in overdraft facilities. At 31 December 2021, Mincon Group
has €2.5 million to drawdown on existing loan 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 2021 Arising from acquisition Cash movements Non-cash movements Foreign exchange differences Balance at 31 December 2021
( ) €'000 €'000 €'000 €'000 €'000 €'000
Loans and borrowings 11,090 83 11,974 - 244 23,391
Lease liabilities 10,521 39 (3,590) 3,943 166 11,079
Total 21,611 122 8,384 3,943 410 34,470
Interest rate range Effective interest rate
Bank 1% - 7.8% 3.4%
loans.........................................................................................................................
Lease 2% - 15% 5.4%
Liabilities.................................................................................................................
19. Non-controlling interest
The following table summarises the information relating to the Group's
subsidiary, Mincon West Africa SL, Mincon Group plc acquired the additional
20% interest in the voting shares of Mincon West Africa on 1 October 2020,
increasing its ownership interest to 100%.
( ) 2021 2020
Non-controlling Interest 20% €'000 €'000
Non-current assets - -
Current assets - -
Non-current liabilities - -
Current liabilities - -
Net assets - -
Net assets attributable to NCI - -
Revenue - 6,919
Profit - 826
OCI - -
Total comprehensive income - 826
Profit allocated to NCI - 165
20. Share capital and reserves
At 31 December 2021
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 212,472,414 2,125
( ) 2021 2020
Opening Share Capital 211,675,02 210,973,102
Share Awards vested during year 797,390 701,922
Authorised Share Capital 212,472,414 211,675,024
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 2021, Mincon Group plc paid a final dividend for 2020 of €0.021
(2.10 cent) per ordinary share (€4.5 million).
In September 2021, 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 20 August
2021.
The Directors recommend the payment of a final dividend of €0.0105 (1.05
cent) per share for the year ended 31 December 2021 (31 December 2020: 1.05
cent per share).
20. Share capital and reserves (continued)
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.
21. Earnings per share
Basic earnings per share (EPS) is computed by dividing the profit for the
period available to ordinary shareholders by the weighted average number of
Ordinary Shares outstanding during the period. Diluted earnings per share is
computed by dividing the profit for the period by the weighted average number
of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of
all potentially dilutive shares. The following table sets forth the
computation for basic and diluted net profit per share for the years ended
31 December:
2021 2020
Numerator (amounts in €'000):
Profit attributable to owners of the Parent 14,600 14,221
Denominator (Number):
Basic shares outstanding
Restricted share awards
Diluted weighted average shares outstanding
212,472,414 211,675,024
5,820,000 4,825,517
218,292,414 216,500,544
Earnings per Ordinary Share
Basic earnings per share, € 6,87 6.72
Diluted earnings per share, € 6.69 6.57
Diluted weighted average shares outstanding
212,472,414
211,675,024
5,820,000
4,825,517
218,292,414
216,500,544
Earnings per Ordinary Share
Basic earnings per share, €
Diluted earnings per share, €
6,87
6.69
6.72
6.57
22. 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.
i. Share Awards
In March 2021, 516,128 Restricted Share Awards (RSAs) met the vesting
conditions set down by the board of directors and were allotted to the
recipients of the awards.
In April 2021, a further 281,261 Restricted Share Awards (RSAs) met the
vesting conditions set down by the board of directors and were allotted to the
recipients of the awards.
Reconciliation of outstanding share awards Number of Awards
in thousand
Outstanding on 1 January 2021 844
Forfeited during the year (47)
Exercised during the year (797)
Granted during the year -
Outstanding at 31 December 2021 -
22. Share based payment (continued)
ii. Share Options
During the year ended 31 December 2021, the Remuneration Committee made a
grant of approximately 2,060,000 Restricted Share Options (RSAs) to members of
the senior management team.
Reconciliation of outstanding share options
Number of Options
in thousands
Outstanding on 1 January 2021 3,981
Forfeited during the year (221)
Exercised during the year -
Granted during the year 2,060
Outstanding at 31 December 2021 5,820
LTIP Scheme 2021 2020
Conditional Award at Grant Date Conditional Award at Grant Date
Conditional Award Invitation date April 2021 April 2020
Year of Potential vesting 2024/2028 2023/2027
Share price at grant date €1.35 €0.80
Exercise price per share/share options €1.35 €0.80
Expected Volatility 36.57% 36.81%
Expected life 7 years 7 years
Risk free rate (0.53%) (0.50%)
Expected dividend yield 1.58% 2.53%
Fair value at grant date €0.39 €0.21
Valuation model Black & Scholes Model Black & Scholes Model
( )
23. Financial risk management
The Group is exposed to various financial risks arising in the normal course
of business. Its financial risk exposures are predominantly related to changes
in foreign currency exchange rates and interest rates, as well as the
creditworthiness of our counterparties.
The Company's Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management framework. The
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 2021 and 31 December 2020 were as follows:
2021 2020
€'000 €'000
Cash and cash equivalents 19,049 17,045
Loans and borrowings 34,470 21,611
Shareholders' equity 144,152 132,936
The Group frequently assess its liquidity requirements, together with this
requirement and the rate return of long term euro deposits, the Group has
decided to keep all cash readily available that is accessible within a month
or less. Cash at bank earns interest at floating rates based on daily bank
deposits. The fair value of cash and cash equivalents equals the carrying
amount.
Cash and cash equivalents are held by major Irish, European, United States and
Australian institutions with credit rating of A3 or better. The Company
deposits cash with individual institutions to avoid concentration of risk with
any one counterparty. The Group has also engaged the services of a depository
to ensure the security of the cash assets.
Risk of counterparty default arising on cash and cash equivalents and
derivative financial instruments is controlled by dealing with high-quality
institutions and by policy, limiting the amount of credit exposure to any one
bank or institution.
23. 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
2021 2020
€'000 €'000
Ireland 4,760 1,870
Americas 3,136 2,989
Australasia 1,108 1,723
Europe, Middle East, Africa 10,045 10,463
Total cash, cash equivalents and short term deposits 19,049 17,045
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 2020:
Deferred consideration 4,723 4,803 2,068 2,252 370 113
Loans and borrowings 11,090 11,313 3,666 3,991 1,937 1,719
Lease liabilities 10,521 10,742 3,155 5,534 1,936 117
Trade and other payables 10,457 10,457 10,457 - - -
Accrued and other financial liabilities 5,529 5,529 5,529 - - -
Total at 31 December 2020 42,320 42,844 24,875 11,777 4,243 1,949
At 31 December 2021:
Deferred consideration 4,224 4,281 2,319 1,759 203 -
Loans and borrowings 23,391 23,866 7,565 7,163 4,409 4,729
Lease liabilities 11,079 11,302 3,640 5,249 1,699 714
Trade and other payables 15,683 15,683 15,683 - - -
Accrued and other financial liabilities 6,027 6,027 6,027 - - -
Total at 31 December 2021 60,404 61,159 35,234 14,171 6,311 5,443
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.
23. Financial risk management (continued)
b) Foreign currency risk (continued)
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 when compared year
on year. During 2021, currencies were volatile due to the COVID-19 Global
pandemic, however the euro remained relatively steady against all major
currencies the Group trades in.
· The US dollar increased by 7% against the closing 2020 euro rate
(2020 decrease of 9% against 2019).
· The Australian dollar increased by 2% against the closing 2020
euro rated (2020 remained flat against 2019).
· The South African rand remained flat against the closing 2020
euro rated (2020 decrease of 14% against 2019).
· The Swedish Krona has decreased 2% against the closing 2020 euro
rated (2020 increase of 4% against 2019).
In 2021, 54% (2020: 57%) of Mincon's revenue €144 million (2020: €130
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 €4.8 million was held in US dollar
(USD 5.5 million), €2.5 million was held in Swedish krona (SEK 25.6 million)
and the euro equivalent of €1.1 million was held in Australian dollar (AUD
1.7 million).
2021 2020
Euro exchange rates Closing Average Closing Average
US Dollar 1.13 1.18 1.22 1.14
Australian Dollar 1.56 1.57 1.59 1.66
South African Rand 18.06 17.47 17.91 18.76
Swedish Krona 10.26 10.14 10.06 10.48
23. Financial risk management (continued)
c) Credit risk
Credit risk is the risk that the possibility that the Group's customers may
experience financial difficulty and be unable to meet their obligations. The
Group monitors its collection experience on a monthly basis and ensures that a
stringent policy is adopted to provide for all past due amounts. The majority
of the Group's customers are third party distributors and end users of
drilling tools and equipment.
Expected credit loss assessment
The Group allocates each exposure to a credit risk grade based on data that is
determined to be predictive of the risk of loss and applying experienced
credit judgement. Credit risk grades are defined using quantitative factors
that are indicative of the risk of default and are aligned to past
experiences. Loss rates are based on accrual credit loss experience over the
past five years.
The maximum exposure to credit risk for trade and other receivables at 31
December 2021 and 31 December 2020 by geographic region was as follows:
2021 2020
€'000 €'000
Americas 7,969 7,298
Australasia 3,330 2,540
Europe, Middle East, Africa 13,811 10,802
Total amounts owed 25,110 20,640
d) Interest rate risk
Interest Rate Risk on financial liabilities
There were no significant changes in interest rates during 2021 and therefore
there was no significant impact. Movements in interest rates had no
significant impact on our financial liabilities or finance cost recognised in
either 2020 or 2021.
Interest Rate Risk on cash and cash equivalents
Our exposure to interest rate risk on cash and cash equivalents is actively
monitored and managed, the rate risk on cash and cash equivalents is not
considered material to the Group.
e) Fair values
Fair value is the amount at which a financial instrument could be exchanged in
an arms-length transaction between informed and willing parties, other than in
a forced or liquidation sale. The contractual amounts payable less impairment
provision of trade receivables, trade payables and other accrued liabilities
approximate to their fair values.
f) Deferred consideration
The movements in respect of the deferred consideration value in the year to 31
December 2021 are as follows:
( ) Deferred consideration
€'000
Balance at 1 January 2021 4,723
Arising on acquisition 1,564
Cash payment (2,082)
Foreign currency translation adjustment 17
Unwinding of discount on deferred consideration 2
Balance at 31 December 2021 4,224
24. Subsidiary undertakings
At 31 December 2021, 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 SARL 100% Villa TF 4635 GRD, Almadies, Dakar B.P. 45534, Senegal
Dormant 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
24. 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 Russia 100% 4,4 Lesnoy In,125047 Moscow, Russia
Dormant 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
Lotusglade Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Floralglade Company 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
24. Subsidiary undertakings (continued)
Group Registered Office &
Company Share % Country of Incorporation
Castle Heat Treatment Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
Mincon Microcare Limited 100% Smithstown, Shannon, Co. Clare, Ireland
Holding company
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
25. Leases
A. Leases as Lessees (IFRS 16)
The Group leases property, plant and equipment across its global operations.
During 2020, one of the leased properties in Finland was sublet. The lease and
sublease expire in 2023
During 2019, one of the leased properties in Australia was sublet. The lease
and sublease expire in 2024.
The Group leases IT and other equipment with contract terms of less than 12
months and also for low value items.
The Group has elected not to recognise right-of -use assets and lease
liabilities for these leases in line with availing of the exemptions for such
leases allowable under IFRS16.
Information about leases for which the Group is a lessee is presented below.
i) Right-of-use
assets
31 December 2020
€'000
Balance at 1 January 3,488
Depreciation charge for the year (1,816)
Additions to right of use assets 3,487
Disposal of right of use asset (536)
Derecognition of right of use asset* (231)
Foreign exchange difference (151)
Balance at 31 December 2020 4,241
31 December 2021
€'000
Balance at 1 January 4,241
Depreciation charge for the year (1,896)
Additions to right of use assets 3,458
Disposal of right of use asset (156)
Derecognition of right of use asset* -
Foreign exchange difference 49
Balance at 31 December 2021 5,696
*Derecognition of the right of use asset during 2020 is as a result of
entering into a finance sub-lease.
ii) Amounts recognised in income statement.
2021 2020
€'000 €'000
Interest on lease liabilities 308 332
Expenses related to short term leases 311 314
Expenses related to leases of low value assets 65 95
-Leases under IFRS 16 684 741
iii) Amounts recognised in statement of cash flows
2021 2020
€'000 €'000
Total cash outflow for leases 3,590 3,455
Total cash outflow of leases 3,590 3,455
25. 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.
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 €194,000.
The following table sets out a maturity analysis of lease receivable, showing
the undiscounted lease payments to be received after the reporting date.
31 December 2021 31 December 2020
€'000 €'000
Less than one year 192 188
One to two years 146 185
Two to three years - 140
Balance at 31 December 2021 338 513
Unearned finance income (22) (43)
Total undiscounted lease receivable 316 470
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 2021 was €214,000 (2020:
€213,000).
The following table sets out a maturity analysis of lease receivable, showing
the undiscounted lease payments to be received after the reporting date.
31 December 2021
€'000
Less than one year 65
One to two years 20
Total 85
26. Commitments
The following capital commitments for the purchase of property, plant and
equipment had been authorised by the directors at 31 December 2021:
31 December 31 December
2021 2020
€'000 €'000
Contracted for 2,837 3,044
Not-contracted for 772 521
Total 3,609 3,565
27. Litigation
The Group is not involved in legal proceedings that could have a material
adverse effect on its results or financial position.
28. Related parties
As at 31 December 2021, 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 2021, the Group paid a final dividend for 2020 of €0.210 to all
shareholders. The total dividend paid to Kingbell Company was €2,411,545.
In September 2021, the Group paid an interim dividend for 2021 of €0.0105 to
all shareholders. The total dividend paid to Kingbell Company was €1,261,385
(September 2020: €1,256,551).
The Group has a related party relationship with its subsidiary and its joint
venture undertakings (see note 24) for a list of these undertakings),
directors and officers. All transactions with subsidiaries eliminate on
consolidation and are not disclosed.
Transactions with Directors
The Group is owed €Nil from directors and shareholders at 31 December 2021
and 2020. The Group has amounts owing to directors of €Nil as at 31 December
2021 and 2020.
Key management compensation
The profit before tax from continuing operations has been arrived at after
charging the following key management compensation:
2021 2020
€'000 €'000
Short term employee benefits ( ) 1,514 1,441
Bonus and other emoluments 320 347
Post-employment contributions ( ) 145 126
Social security costs 109 86
Share based payment charged in the year 221 96
Total 2,309 2,096
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 (ten in total at year end).
Amounts included above are time weighted for the period of the individuals
employment.
29. Events after the reporting date
The Board of Mincon Group plc is recommending the payment of a full year
dividend for the year ended 31 December 2021 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 2022. Subject to Shareholder approval at
the Company's annual general meeting, the final dividend will be paid on 17
June 2022 to Shareholders on the register at the close of business on 27 May
2022.
Acquisition of the Spartan Drilling Tools
On 1 January 2022, the Group acquired 100% shareholding in Spartan Drilling
Tools, a manufacturer of drill pipe and related products based in the USA for
a consideration of €925,000. The goodwill arising on acquisition is circa
€200,000, with expected 2022 revenue of €3 million.
30. Approval of financial statements
The Board of Directors approved the consolidated financial statements on 11
March 2022.
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