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 €'000	Total 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 €'000	2020 €'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 intellectual property	Total
	€'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 loans.........................................................................................................................	1% - 7.8%	3.4%
Lease Liabilities.................................................................................................................	2% - 15%	5.4%

 

 

 

 

 

 

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, € 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                                   Conditional Award at Grant Date	2020                                   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:

 

Company	Group Share %	Registered Office & 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)

 

Company	Group Share %	Registered Office & 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)

 

Company	Group Share %	Registered Office & 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   Sales company	100%	Rue Charles Rolland, 29650 Guerlesquin, France
Attakroc Inc   Sales company	100%	601, rue Adanac, Quebec, G1C 7G6, Canada
Mincon Quebec   Holding company	100%	601, rue Adanac, Quebec, G1C 7G6, Canada

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.