Mincon Group Plc Annual Report 2016

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FY2016 Annual Report · Mincon Group Plc

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The Driller’s Choice Worldwide

MINCON
ANNUAL REPORT
& CONSOLIDATED
FINANCIAL
STATEMENTS

YEAR ENDED 31 DECEMBER 2016

MINCON MOVING IN THE RIGHT DIRECTION

MINCON
The DRILLER’S
CHOICE
SINCE 1977

MINCON IS PEOPLE, PERFORMANCE, ENGINEERING

TABLE OF CONTENTS

Section

Corporate Profile

Chairman’s Statement

Chief Executive Officer’s Review

Operating and Financial Review

Strategy of the Group

Directors and management

Directors’ Report

Directors’ Statement on Corporate Governance

Principal Risks and Uncertainties

Group Financial Statements

Statement of Directors’ Responsibilities

Independent Auditor’s Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements

Separate Financial Statements of the Company

Company Statement of Financial Position

Company Statement of Cash Flow

Company Statement of Changes in Equity

Notes to the Company Financial Statements

Page

CORPORATE PROFILE

Mincon Group Plc (“the Company” or “the Group”) is an Irish engineering group with its shares trading on the AIM market of
the London Stock Exchange and the ESM market of the Irish Stock Exchange. The Company specialises in the design,
manufacture, sale and servicing of rock drilling tools and associated products. The Company’s strategy is to increase its share
of the global rock-drilling consumables market through organic growth and acquisitions. Its manufacturing facilities are located
in Ireland, the UK, the USA, South Africa, Canada and Australia. The Company also maintains a network of sales and
distribution companies in a number of international markets to provide after sales support and service to customers.

Directors:

Padraig McManus - Non Executive Chairman (Irish)
Hugh McCullough – Senior Independent Non-Executive Director (Irish)
Kevin Barry – Non Executive Director (Irish)
John Doris – Non Executive Director (Irish)
Joseph Purcell – Chief Executive Officer (Irish)
Thomas Purcell – Sales Director (USA)
Patrick Purcell – Non Executive Director (Irish)

Company Secretary:

Mark McNamara (Irish)

Registered Office:

Smithstown Industrial Estate
Shannon
Co. Clare
Ireland

Nominated Adviser, ESM Adviser
and Broker:

Legal advisers to the Company:

Auditor:

Registrar:

Davy
49 Dawson Street
Dublin 2
Ireland

William Fry
2 Grand Canal Square
Dublin 2
Ireland

KPMG
1 Stokes Place
St Stephen’s Green
Dublin 2
Ireland

Computershare Investor Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Ireland

Principal Bank:

Allied Irish Banks plc
Shannon
Co. Clare
Ireland

Company Website:

www.mincon.com

Ticker Symbols:

ESM: MIO.IR
AIM: MCON.L

CHAIRMAN’S STATEMENT

The success of Mincon is predicated on three core principles:

- A continuous programme of product and process development ensuring quality products, profits and

positive cash flows,

- Dedicated after sales customer service and support, and
- A recognition of the importance of the role of all our people in the success of our business.

Performance in 2016
2016 was the year we began to see commodity prices recover after several years in the doldrums, through which
Mincon has fought hard to maintain growth and profitability. In the past year we have achieved:

- An 8% increase in revenue to €76 million
- Operating profit at 13% of sales revenue
- Profit before tax up 18% to €11.3 million
- Earnings per share up 16%

When deciding to embark on life as a public company in 2013, the objectives were clear – to increase Mincon’s
share of the rock-drilling consumables market through:

Research and development – we are pleased to report on the development of the Group into large hammers and
bits with the design, manufacture and commercialisation of the new twelve inch and eighteen inch hammer. Both
sizes are in the market, drilling successfully and attracting interest from a new customer base.

The engineering team has been built up and centrally managed to maintain the development of the current ranges,
and on some exciting developments for the coming years. The factories continue to build their modernity and
specification to deliver next generation products and reflect new thinking in design.

Organic growth – with the recent additions of two very senior staff to the Executive team, Bob Fassl and Jussi
Rautiainen, details of whom are available in the Executive section, the Group has taken a significant step in
developing the organic growth ambition. Both have tremendous industry experience and will provide sales and
marketing leadership that underlines our commitment to growth.

In conjunction with this, the Executive team are completing the restructuring of the Group into sales regions and
have determined this as an important step, with systems investment and development, to improving the efficiency
of the inventory delivery and management. The Board supports this commitment.

Acquisition growth – the Group is again actively engaged with several acquisitions with an expectation of
completion over the next year. Mincon has been selective in the valuation approach to targets, and while we have
continued to build out the organically developed range of products, we have also been careful to husband the
investment cash from the IPO and consequently the Group remains in a very healthy condition.

On behalf of the Board I would like to thank all Group management and employees for their contribution to
Mincon’s successful performance in 2016.

Padraig McManus
Chairman

CHIEF EXECUTIVE OFFICER’S REVIEW

The Mincon Group took stock in 2016 and decided to focus on assimilating what we had acquired, to begin
standardising our management systems, and to develop a commonality in our marketing, brand and sales
approach as we move towards building a 2020 strategic plan, and setting aggressive objectives for growth in sales
and profits. I have expanded on this comment below after reviewing the performance of the year.

• Revenue up 8% to €76.2 million from €70.3 million
• Mincon manufactured product sales up 7% to €56.4 million
• Third party product sales up 13% to €19.8 million
• Gross profit up 8%, maintained at 40% to €30.6 million from €28.3 million
• Operating profit up 2% to €10.2 million, 13% of sales revenue
• Profit before tax up 18% to €11.3 million from €9.6 million
• Earnings per share up 16%

Overall 74% of the revenue was derived from Mincon Group manufactured product and this overall sales mix
helped maintain the gross margin of the business at 40%, and the operating profit margin at 13%. That summary
does not explain the progress being made at the Group, though it is a sign of momentum while we set ourselves
for the future.

Engineering at the heart of the Group

There has been a tone change in the market in 2016, the prices of commodities are on the rise, the companies in
our sector speak with a new confidence and enthusiasm, and we see early evidence of renewed interest in
reopening and developing business in some of the markets and sectors in which we operate. We also see
substantial investment in sectors in which we are only peripherally involved to date, and in which we believe we
should deliver an effective set of new products.

We engaged on some acquisitions and decided they did not offer sufficient value to our Group at this time, while
observing some sectors were closed to us without certain key products and people.

Consequently we also began to step change our investment in engineering, our manufacturing processes, in
extending our ranges and creating new engineering solutions in efficiency and value for the customer base. The
Group invested €5 million in machinery in 2016, and is likely to maintain this investment path in 2017. This is at
least twice the depreciation level at this point in the cycle.

Our range of DTH hammers and bits was extended and we now have the capability to drill hole sizes up to 760mm.
This broadens reach in our traditional markets and leads us into new sectors such as construction and piling.
Since these products were designed, manufactured, tested and commercialised in the same year as they were
developed, we expensed the costs in 2016.

We have other products in development and are looking to considerably step up that investment for the current
year. Essentially we are building out a new category and are planning a soft release toward the end of the coming
year. We have been investing and expensing the R&D spend for some years now and are in the short term
development spend prior to launch. Much of our current engineering resource is dedicated to this, to beta testing
in the field and to building a sustainable service platform.

We are determined to produce industry leading designs aimed at longevity and economy, which reflect new
thinking, and to produce and protect a margin that rewards the skill and investment in the new products.

We have allied this engineering investment with competence in the marketing, sales and finance leadership.
Talented people with substantial industry experience have joined us to create our best market opportunities, and
to balance the engineering investment with a pragmatic demand for timely, marketable and commercial product.

We also see competition, price pressure, and value for money remaining key drivers in the coming year, as a
result our share of business and profit will have to continue to be fought for.

The year has been one of investment for the future, in people, manufacturing capability, engineering design and
future products. Mincon is becoming better positioned in the market, and better positioned with innovative products
that should see organic growth emerge at a higher level in the coming years. Allied to this we are very active now
in filling out our ancillary products by acquisition, in tidying up our channels, and better positioning ourselves for
that growth.

CHIEF EXECUTIVE OFFICER’S REVIEW

We place a premium on people, in our group planning we are collegiate in nature, and we welcome the addition
to the team of more senior people to help build our future. We have an experienced management group, adequate
funding, excellent products and an exciting product stream and I look forward to reporting on further progress in
2017 and beyond.

Joseph Purcell
Chief Executive Officer

OPERATING AND FINANCIAL REVIEW

Industry overview

Mincon manufactures and distributes rock drilling consumables. These comprise down the hole (DTH), reverse
circulation (RC), horizontal directional drilling(HDD) hammers, bits, and other consumables used in a variety of
sectors and sub sectors broadly including mining production, exploration, quarrying, geothermal and seismic
drilling. Mincon also produce the tungsten carbide buttons for bits used by the Group and for others in these and
like activities.

The sector is recovering after a number of years of a cyclical low following perhaps ten years of tremendous
growth. While the recovery is fitful, still commodity prices relevant to the customers of the Group are, in many
commodities, indicating strong upticks in pricing.

Income statement

Revenue
Gross profit
Operating profit
Profit before tax
Profit after tax

* Before exceptional items

2016
Audited
€’000

2015
Audited
€’000

2014
Audited
€’000

2013*
Audited
€’000

2012
Audited
€’000

2011
Audited
€’000

76,181
30,561
10,178
11,333
9,253

70,266
28,277
9,990
9,623
8,028

54,544
23,552
10,350
11,249
9,264

52,343
25,722
15,012
13,732
11,159

63,143
26,891
12,724
13,228
10,323

41,145
21,212
12,555
11,266
9,005

€76.1m

€19.8m

€56.3m

€70.3m

€17.5m

€52.8m

€54.5m

€12.7m

€41.8m

€10.2m

€10.0m

€10.4m

3rd Party Products

Mincon Products

Operating Profit

€41.1m

€7.1m

€34.0m

€12.6m

€52.3m

€11.6m

€40.7m

€15.0m

€63.1m

€20.5m

€42.6m

€12.7m

2016

2015

2014

2013*

2012

2011

Revenue and operating margins
Growth in Mincon manufactured product was 7%, not dissimilar from the previous year, in the absence of any
significant acquisitions in the period while we concentrated on developing and extending the product ranges
organically. Third party sales increased by 13% to just short of €20 million. The margin on this traded product is
lower than that of the manufactured product so a mix change in favour of third party reduces our gross margin.
However Mincon product has remained steady at 74% of total sales which has supported the gross margin at
40% and so on to the blended operating margin at 13%.

While the Group has weathered the cyclical downturn reasonably well, showing the defensive characteristics of
the market position and products, still we will expect to see price pressure, increasing competition, and a demand
for rapid delivery of consumables as customers destock to suppliers.

OPERATING AND FINANCIAL REVIEW

Currency movements
The Group operates across the world in a number of currencies and is consequently exposed to movements in
those currencies. There were two major movements in the year.

• A weakening in the GBP average rate against the Euro of 12% compared to 31 December 2015, which
resulted in a decrease in reported revenue for the year of approximately €0.3 million. This was offset by
the FX impact on the retranslation of underlying GBP costs, as a result, the weakening GBP did not
significantly impact reported profit for 2016.

• Due to a significant devaluation in the Rand against the Euro in late 2015 the average FX rate for 2016
decreased by 15% compared to 2015 resulting in a decrease of reported revenue by €1.2 million. This
was offset by the FX impact on the retranslation of underlying Rand costs.

The Group introduced new procedures in 2016 to offset the currency exposure caused by the South African Rand
in previous years. The closing South African rand rate strengthened by 15% compared with the opening rate and
this contributed an FX gain in the Group income statement.

The closing USD rate had strengthened against the Euro by 4% compared with the opening rate in 2016, this
contributed an FX gain in the Group income statement of €0.8 million. The Group will undergo further progress in
2017 to offset any FX exposures caused by the movement in the USD.

Our primary manufacturing facilities are denominated in Euro, GBP, USD and CAD, and much of our sales are
not denominated in those currencies so we will continue to have currency exposures. We will continue to act to
mitigate those currency fluctuations but will have difficulty eliminating or significantly reducing some of the
exposures.

Operating costs
Operating costs have increased by €2.1 million (11%) to €20.4 million due to increased selling and marketing
expenses as the Group increases its footprint in the Americas and Australasia. Sales in those regions increased
by €2.6 million (13%) in the Americas and €3.9 million (25%) in Australasia. Operating costs as a percentage of
Revenue was27% in 2016 (2015: 26%).

Operating profit and profit attributable to shareholders
Operating profit increased by €0.2 million (2%) in 2016 which reflected the increase in gross profit less the step
up in operating expenses.

Profit attributable to shareholders increased by €1.3 million (16%) as a result of;

- an increase of €0.2 million in operating profit
- a reduction in finance income due to very low euro deposit rates
- a foreign exchange gain of €1.1 million
- a minimal movement on contingent consideration

The effective rate of tax was 18% in 2016, up from 17% in 2015 reflective of the rates in the jurisdictions where
the Group earned its profit mix in the year.

OPERATING AND FINANCIAL REVIEW

The Mincon balance sheet
The balance sheet continues to build as accretive profits are earned on the assets in use. The net assets now
stand at €106 million with net cash of c. €35 million available for investment.

Balance Sheet

Assets employed
Property, plant & equipment
Net working capital
Net taxation asset/(liability)

2016
Audited
€’000

2015

2014
Audited Audited
€’000

€’000

2013
Audited
€’000

2012
Audited
€’000

20,052
43,359
50

17,277
36,926
359

16,399
34,179
(488)

13,540
23,415
(1,259)

14,701
24,810
(1,537)

Investments and other liabilities
Intangible assets & other assets
Deferred contingent consideration and other liabilities

13,358
(6,264)

11,801
(7,069)

10,443
(6,857)

2,041
-

2,478
-

Financing assets/(liabilities)
Net cash/(debt)

34,960

38,610

41,754

48,600

6,451

Total equity

105,515

97,904

95,430

86,337

46,903

Use of the IPO cash and Group cash flows
We have spent €15.4 million on nine acquisitions in the last three years from the net IPO proceeds of €47 million.
During that same period we have distributed over €4 million a year in dividends, but still added €20 million to the
balance sheet net value, and added to our net cash outside the IPO proceeds. Our net acquisition cash remains
intact and the Group is largely free of debt.

To be quite clear, we do not lack ambition to invest and acquire, but we are keenly interested in buying what adds
value to our manufacturing base, to our distribution footprint, to our access to markets and sectors and in bringing
people who have a contribution to make, onto our management team.

The Group would still view the IPO cash as being available for acquisitions without reference to debt at this time,
but the Group would use debt where the investment was justified by the addition to the Group. Other than that the
Group has internally generated its cash for investment in the businesses and to pay dividends.

Capitalisation of development expenditure
We have capitalised €499,000 in development expenditure in 2016, which we expect to begin to release as a
particular set of products become commercialised in the next year or so. While this is not hugely material as it
stands and we have historically written off R&D as we spend it, we are going to have to step up the expenditure
around this project in order to bring it to a commercial proposition with an accelerated timetable. This capitalisation
has been in compliance with applicable international accounting standards.

We have addressed the matter in 2016 as otherwise the expenditure in 2017 would potentially cause some
distortion of short term earnings. The initial product has been on live testing in a customer location, and with the
emphasis that has been placed on the engineering in the last two years, has become viable in design much earlier
than anticipated. It is still too early to comment on the revenue or profit value of the additional range being created,
but it is expected that we will return to that at the half year in 2017.

Net working capital
Inventory excluding drill rigs
Our inventory rose by €2.7 million in the year, split between Mincon and third party goods, and slightly more than
the sales increase in each case. With investment required in our overall internal inventory control systems and
with salespeople led demand, we have, to a degree, filled our warehouses with our own product and tied up our
cash with the ramp up in our own goods held at cost.

OPERATING AND FINANCIAL REVIEW

We have perhaps made that investment to suit our customers expected orders, and with an appetite to deliver off
the shelf, since initially the systems, procedures and information flows take longer to develop than to make and
stock the products. Part of the increase in inventory has occurred as our own carbide replaced that of third party
consignment inventory as we adopted our own manufactured buttons.

Over the next year we intend to make the investment in the supply chain, in our systems, and in the transparency
required to balance the efficient delivery of our products, with the appropriate investment in the inventory.

Since we manufacture much of what is being held in inventory this may mean amending manufacturing in the
Group in a manner that maintains efficient production but brings the overstocking back to the manufacturing hubs
for redeployment or rework. The Executive team have set this systems investment path and inventory right-sizing
as an objective in 2017.

Inventory – drill rigs
The movement in the capital equipment inventory was a currency movement. The expected sales of these has
not materialised in 2016. The market was still very unresponsive in the year and the continuing availability of
surplus capital equipment and the poor financial results of many customers meant that potential buyers had
considerable choice and little funding in an unpredictable market.

While we see signs of life in the capital market generally still customers and corporate commentators are very
wary of making investments or forecasts at this time. We continue to hold these assets until the market provides
the options required to move them on. Recent valuations support the carrying cost and a maintenance programme
is in place to protect that value.

Receivables
Trade and other receivables amounted to €16.4 million at 31 December 2016, an increase of €3.4 million from 31
December 2015. While part of this is outside standard terms and not of particular concern, there are two debtors
on a work out with Group in respect of some €2.5 million including VAT. Of this over €500,000 has been received
since the year end.

Long term investments
We have continued to improve our invested plant to maintain the efficiency and quality of our manufactured
products, and to extend our ranges. Of course it is not just a simple matter of acquiring equipment, but to
commission it, and to develop the tools required to build new ranges is an iterative and time consuming process.
This is normal in engineering. We have also begun the investment in our carbide plant, with new multi process
machinery for powder production, robotised button pressing, and new machinery to insource components for the
rest of the Group.

Other capital equipment allowed us to increase the size of the hammers and bits we make to provide the ranges
appropriate for entering other sectors such as construction and piling with more complete ranges with products
that maintain the standard of our current ranges. To add products to our ranges we either have to acquire
businesses that have those products, or develop them ourselves, sometimes it will be the latter, and sometimes
the former, it will depend on the balance of value.

Capital Expenditure

Capital expenditure (Net)

Depreciation

2014
€’000

2015
€’000

2016
€’000

5,019
(2,160)

3,163
(2,285)

5,038
(2,263)

Value embraces not just price, but a number of headings including the quality of the team and the product range,
the distribution footprint, any unique characteristics, and need. The nature of the capital investment last year
differed from previous years in that it was practically all invested in plant and machinery rather than the fixed asset
pool received when businesses were acquired (see note 13).

STRATEGY OF THE GROUP

The Mincon objective is, as stated at the time of the IPO, to grow the business organically and by acquisition to
initially double the size of the Group. Being an engineering Group meant that when we had expanded the
geographic footprint, which we also continue to do organically, we took a view on companies available to us for
acquisition and last year elected to expand our own ranges.

Research and development
The Group has continued to invest in the engineering team in the last eighteen months at a higher level to develop
our own ranges for hammers, bits and other consumables, and to engineer the machinery and processes that
improve the efficiency of our business. We have extended and commercialised the large hammer range to 18
inch, and improved our bits ranges in the last year. We have additions to those ranges, and a new range in
development that should deliver good opportunities to the customers in the second half of the coming year. The
engineering team is fully engaged on these activities.

Organic growth
The sales offices are now being gathered under regional management as customer centres responding to the
CEO and sales leadership of the Group. The factories are being brought under the operating management of the
Group with the CEO. During the coming year we will review where products are best made and from where
customers are best serviced to the economic advantage of the Group depending on the skill sets in those
businesses.

With a concomitant investment in systems the business will be making longer term decisions about service and
manufacturing locations as products and relationships are built. It is important to the Group that the same quality
and service is delivered across the product ranges, and this requires standardisation in processes, engineering
and systems. We will also wish to apply the same customer metrics and service levels and will build systems that
allow us to manage in this format for the future.

These objectives and methodologies are designed to help the Group protect and develop the business margins
while reducing our costs and improving the product and customer relationships.

Acquisitions
Mincon continues to be in discussion with companies that have people, products, customers, markets and
opportunities that we believe would add value to our Group. In the last year we have elected to provide engineering
solutions to our product requirements through our own development capacity, and we continue to do this for the
future.

However our engineering team is fully engaged for the foreseeable future, and we are engaged in discussions
that we believe will result in further additions to the Group. It is likely that the emphasis in the current year will be
to return to making acquisitions with a clear remit to infill the product catalogues where we have gaps, but this is
less likely to result in any further geographic distribution points.

Mincon would be able to invest the current net cash of €35 million without recourse to debt, but would be willing
to engage debt if the right opportunity can be found. As we noted elsewhere, we do not lack the ambition to invest,
just the value proposition.

DIRECTORS AND MANAGEMENT

At 31 December 2016, the Board of Mincon comprised of four non-executive directors and two executive directors.
John Doris was appointed to the board in February 2017. Details of the directors are set out below:

NON-EXECUTIVE DIRECTORS

Padraig McManus (Age 66) (Non-Executive Chairman)
Padraig currently serves as Chairman of Eir, Ireland’s largest telecommunications company, and was previously
chief executive of Ireland's leading energy company, ESB, from 2002 to 2011.

While chief executive of ESB, he oversaw some of the most significant transactions in the group’s history including
(i) the 2010 acquisition of NIE Networks for Stg£1.2 billion, personally overseeing the financial, political and
general stakeholder issues in integrating the business into the ESB Group; (ii) the 2008 sale of a tranche of ESB’s
Power Generation Portfolio to Endesa of Spain in a ground-breaking deal with trade unions and the Irish energy
regulator to reduce dominance and allow competitors into the market; (iii) ESB’s first private placement fundraising
package in the US of €0.9 billion in 2003; and (iv) the sale of ESB’s electrical appliance retail business and outlets
to Bank of Scotland Ireland in 2005. He previously worked as a HR manager in ESB and was part of every major
restructuring programme in ESB that reduced core staff levels below 6,000. He led projects for ESB in Ghana,
Sierra Leone, Gambia, Cambodia, the Philippines and Vietnam.

Padraig is chairman of the Council of the Economic and Social Research Institute of Ireland (ESRI) and the
Curragh Racecourse. He has also served on a number of other boards including The Conference Board of the
US.

Hugh McCullough (Age 66) (Senior Independent Non-Executive Director)
Hugh has over 40 years’ experience in gold and base metal exploration, principally in Ireland, Ghana and Mali.
Having previously worked as a project geologist, in 1982 he became chief executive of Glencar Mining plc. Hugh
was responsible for the management, financing and strategy of Glencar for over 27 years until it was acquired by
Gold Fields Limited in September 2009. Hugh currently serves as a director on the board of Papua Mining plc, an
exploration company with projects in Papua New Guinea and which trades on the AIM market of the London Stock
Exchange.

Hugh is a professional geologist and holds an honours degree in geology from University College Dublin and the
degree of Barrister-at-Law from the King’s Inns, Dublin. In 1994, he was appointed by the then Irish Minister for
Energy to the National Minerals Policy Review Group to review Irish Minerals Policy and to make
recommendations to the Minister for the reform of the fiscal and regulatory policy for the mining industry in Ireland.

Patrick Purcell (Age 79) (Non-Executive Director)
Patrick served an apprenticeship in the Irish Air Corps in the 1950s and later qualified as an accountant in Australia
in 1961. When he returned to Ireland in 1967 he joined Shannon Diamond & Carbide Ltd, (later Boart Longyear)
and worked in various capacities with their European Group Companies for the next 10 years. His roles with
Shannon Diamond & Carbide included that of cost accountant, sales and marketing director and a period as a
general manager of their manufacturing plant in Norway before becoming their director for European sales
companies and product development.

Patrick set up Mincon in 1977 and developed the group, firstly in Ireland and then into overseas areas including
USA, Canada, Australia, South Africa and Sweden. Patrick remained as executive chairman until 2012 but
continued to work with the company as an adviser on new projects.

Kevin Barry (Age 61) (Non-Executive Director)
Kevin commenced his career as a trainee accountant in practice in 1973. He joined Kraus & Naimer Ireland
Limited as an accountant in 1977. He qualified as a Certified Public Accountant (“CPA”) and began working with
Mincon International Limited in 1984 as Financial Controller. He was appointed chief executive officer of the
Mincon Group of companies in 1991 and was responsible for expanding the Group’s activities by extending the
product range through organic growth and by setting up the Group’s international subsidiaries. Kevin resigned as
chief executive officer of Mincon Group plc in May 2015 but remains on the board as a non-executive director.

DIRECTORS AND MANAGEMENT

John Doris (Age 70) (Non-Executive Director)
John Doris joined the board in February 2017. He has broad experience across a number of sectors including
manufacturing, lending and corporate finance. He has been an independent consultant and a non-executive
director for the past eighteen years. Prior to becoming an independent consultant, he was a director of ABN Amro
Corporate Finance (Ireland) Limited where he managed the successful Riada Business Expansion Funds.

John graduated from University College Dublin with a B.Sc. in physics in 1969 and returned to University College
Dublin to complete his M.B.A. in 1977. He qualified as an ACCA in 1974 and is a former president of ACCA
Ireland.

EXECUTIVE DIRECTORS

Joseph Purcell (Age 50) (Chief Executive Officer)
Joseph qualified as a mechanical engineer in 1988 at University College Galway, in Ireland and since then has
worked with Mincon in various capacities. DTH hammer design has been his main area of specialisation although
he has extensive experience in manufacturing methods, heat treatment and process development. His hammer
design work has included seven years in Perth, Australia where he developed a successful range of reverse
circulation and conventional DTH hammers for local and export markets. Joseph was appointed as chief technical
officer for the Mincon Group on his return from Australia in 1998. In May 2015, Joseph succeeded Kevin Barry as
the chief executive officer of Mincon Group plc.

Thomas Purcell (Age 45) (Sales Director)
Thomas Purcell has a background in accounting prior to emigrating to the USA to work with Mincon on a new joint
venture opportunity in the country. He worked for the Mincon Group in the dimensional stone quarrying industry
during which time he was key in setting up operations in Virginia and North Carolina. In 1996, Mincon sold its
investment in the quarrying entities to Marlin Group of South Africa. He worked in various positions with their USA
subsidiary from Purchasing and Safety Manager of four quarrying companies, to CFO and Operations Manager
for their Atlanta based operation, Stone Connection. He re-joined the Mincon Group in 1999 as President of
Mincon, Inc. and has served as President of Mincon Inc. since 1999.

COMPANY SECRETARY
John Doris acted as company secretary until his resignation on 14 March 2017. He was succeeded by Mincon’s
group financial controller, Mark McNamara.

DIRECTORS AND MANAGEMENT

EXECUTIVE MANAGEMENT

Mincon has a highly experienced team of senior managers that has helped to drive the development of the Group
across its global locations. Brief profiles of the Mincon senior management team are set out below:

Robert Fassl (Age 54) (Vice President of Sales and Managing Director of Rotacan)
Robert joined Mincon in August 2014 after the acquisition of Rotacan - where he was assisting in an advisory role.
He has over 30 years’ experience of the mining and construction industries. Prior to joining Rotacan, he served
as senior executive vice president and president of Mining and Rock Excavation Technique Business at Atlas
Copco AB from 1 July, 2011 to 31 July 2013. Mr. Fassl joined the Atlas Copco Group in 1982. From 1982 to 1998
he held several management positions in Atlas Copco Construction and Mining Technique business area in
finance, service, logistics, purchasing and manufacturing. Between 1998 and 1999, he was general manager in
Atlas Copco Kango, Great Britain, a product company in the Atlas Copco Group. From 1999 to 2004, he was
general manager for Atlas Copco Exploration Products and from 2004 to 2011 he served as Divisional President
for Atlas Copco Drilling Solutions. He managed the acquisition process of Ingersoll-rand Drilling Solutions and
was responsible for its integration into the Atlas Copco Group. Mr. Fassl has a degree in business administration
from Ekliden College, Nacka, Sweden.

Peter E. Lynch (Age 59) (Chief Operating Officer)
Peter qualified as a chartered accountant with KPMG in 1985. He previously worked as Managing Director of ABN
AMRO Stockbrokers Ireland Limited, as Finance Director of Eircom Group plc where he led and executed circa
€10 billion of transactions and as Chairman of Prime Active Capital plc. With colleagues he built up Adare Printing
Group plc from €1 million to €200 million turnover through sixteen transactions before its sale to a management
team. Peter graduated in economics from Trinity College Dublin in 1981 and is a member of the Chartered Institute
for Securities & Investment.

Jussi Rautliainen (Age 52) (SVP – Business Development)
Jussi joined Mincon Group in January 2017. He was chief executive officer of Robit Rocktools Ltd. from 2005 to
January, 2016. Prior to that, he held international management positions at Huhtamäki Oyj and UPM Kymmene
Corporation. Jussi holds a Bachelor of Economics degree and has also an Executive Master of Business
Administration degree.

DIRECTORS REPORT

The Directors present the directors’ report and the consolidated financial statements of Mincon Group plc
(“Mincon”) for the year ended 31 December 2016.

Principal activities of the Group
Mincon is an Irish engineering group, specialising in the design, manufacture, sales and servicing of rock drilling
tools and associated products. The Group’s manufacturing facilities are located in Shannon, Ireland, in Sheffield,
in the UK, in Benton, Illinois in the USA, in North Bay, Ontario in Canada, Johannesburg, South Africa and in
Perth, Australia. Mincon also maintains a network of sales and distribution companies in a number of international
markets to provide after sales support and service to customers. Products, comprising both Mincon manufactured
products and third party products which are complementary to Mincon’s own products, are sold directly to the end
user or through distributors.

Mincon manufactured product can be broken down into five distinct product lines:

1. Conventional down the hole (DTH) product

2. Reverse circulation (RC) DTH product

3. Horizontal directional drilling (HDD) product

4. Rotary drilling product

5. Tungsten carbide product

Mincon manufactured hammers and bits (including rotary bits) are used for a variety of drilling industries including
production and exploration mining, water well, geothermal, construction, oil and gas and seismic drilling. Mincon
also provides a hard-rock HDD system to provide access for fibre optic cable laying and similar activities. In
addition, Mincon, through its subsidiary Marshalls Carbide Limited, manufactures tungsten carbide inserts, its core
markets being mining, construction and the oil & gas industry.

DTH, RC & HDD products have distinct sales lines for associated parts, namely hammers, spares and bits. Bits
can be sold separate from the hammer. Mincon manufactures a range of bits to an industry standard size which
can be used in conjunction with hammers manufactured by competitors. Rotary bits are made to industry standard
size and are used in the same applications and industries as Mincon’s DTH hammers and bits. Tungsten carbide
high quality impact buttons are used on the face of DTH, drifter & tricone drill bits.

The Mincon hammers and bits are considered consumable items in the drilling industry in contrast with capital
items such as truck/track-mounted drilling rigs and large air compressors. As products of a consumable nature,
Mincon products have a shorter life cycle than capital goods (such as rigs and compressors).

Business review
Commentaries on performance in the year ended 31 December 2016, including information on recent events and
likely future developments, are contained in the Chairman’s Statement, Chief Executive Officer’s Review and
Operating and Financial Review. The performance of the business and its financial position together with the
principal risks faced by the Group are reflected in the Operating and Financial Review as well as the risk review
section. The following table sets forth for the periods indicated certain financial data and the percentage change
in these items compared to the prior period, being the key performance indicators used by management. The
trends illustrated in the following table may not be indicative of future results.

Product revenue:
Sale of Mincon product ........................................................................................
Sale of third party product ....................................................................................

Total revenue .......................................................................................................

2016

€’000
56,360
19,821

76,181

€’000
52,786
17,480

70,266

Operating profit ....................................................................................................

10,178

9,990

Net profit attributable to shareholders of the parent company ...............................

9,234

7,980

Percentage
change in
period

2015

7%
13%

16%

DIRECTORS REPORT

Dividend
In September 2016, Mincon Group plc paid an interim dividend in the amount of €0.01 (1 cent) per ordinary share
(€2.1 million total payment), which was paid to shareholders on the register at the close of business on 26
September 2016. The Directors recommend the payment of a final dividend of 1 cent per share for the year ended
31 December 2016.

Directors and secretary
The current serving directors and secretary of the Company are set out on page 1. The dates of appointments
and resignations of the Company’s directors and secretary are set out in the table below:

Director
Padraig McManus
Kevin Barry
John Doris
Rose Hynes
Hugh McCullough
Patrick Purcell
Joseph Purcell
Thomas Purcell
Company Secretary
John Doris
Mark McNamara

Date of appointment
23 September 2013
16 August 2013
16 February 2017
22 December 2014
13 December 2016
16 August 2013
23 September 2013
23 September 2013

23 September 2013
14 March 2017

Date of resignation
-
-
-
30 November 2016

-
-
-

14 March 2017

Substantial shareholders
As at close of business on 20 March 2017, in so far as is known to the Company, the following persons are,
directly or indirectly, interested in 3% or more of the issued share capital of the Company:

Shareholder

Kingbell Company
Setanta Asset Management
Investmentaktiengesellschaft fur langfrist TGV
Ballybell Limited
FMR LLC

Ordinary
Shares as at
the date of this
Document

Percentage of
Enlarged Issued
Ordinary Share
Capital

119,671,200
28,466,213
17,683,140
14,917,800
6,526,958

56.84%
13.52%
8.40%
7.09%
3.10%

None of the Group’s major shareholders, as listed above, have different voting rights attaching to ordinary shares
held by them in the Group. Both the Purcell and Barry family vehicles (Kingbell Company and Ballybell Limited)
have certain board nomination rights for so long as their respective shareholdings remain above certain
thresholds.

Financial risk management
The Group’s operations expose it to financial risks including credit risk, interest rate risk and foreign currency risk.
The Group manages risk in order to reduce the impact of these risks on the performance of the Group and it is
the Group’s policy to manage these risks on a non-speculative manner. The Group does not utilise derivative
financial instruments to hedge economic exposures. Details of the Group’s financial risk management objectives
and policies are set out in note 20 to the financial statements.

Compliance Statement
The directors acknowledge that they are responsible for securing compliance by Mincon Group plc (the
‘Company’) with its relevant obligations as are defined in the Companies Act, 2014 (the ‘Relevant Obligations’).
The directors confirm that they have drawn up and adopted a compliance policy statement setting out the
Company’s policies that, in the directors’ opinion, are appropriate to the Company with respect to compliance by
the Company with its relevant obligations.

The directors further confirm the Company has put in place appropriate arrangements or structures that are, in
the directors’ opinion, designed to secure material compliance with its relevant obligations including reliance on
the advice of persons employed by the company and external legal and tax advisers as considered appropriate
from time to time and that they have reviewed the effectiveness of these arrangements or structures during the
financial year to which this report relates.

DIRECTORS REPORT

Political donations
The Group and Company did not make any donations during the year disclosable in accordance with the Electoral
Act 1997.

Research and development
The Group’s strategy around research and development is to set out in the Strategy section of this Annual Report.
The Group invested greater than €0.9 million on research and development in 2016, €0.5 million of which has
been capitalised.

Corporate governance
The board of Mincon is committed to achieving high standards of corporate governance, integrity and business
ethics for all activities as set out in the Directors’ Statement on Corporate Governance of this Annual Report.

Accounting records
The directors believe that they have complied with the requirement of Section 281 to 285 of the Companies Act
2014 with regard to keeping adequate accounting records by employing accounting personnel with appropriate
expertise and by providing adequate resources to the financial function. The accounting records of the company
are maintained at the company’s offices at Smithstown Industrial Estate, Shannon, Co Clare.

Significant events since year-end
Details of significant events since year-end are set out in note 26 to the financial statements.

Going concern
The directors, having made enquiries, have a reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue
to adopt the going concern basis in preparing the financial statements.

Disclosure of information to the auditor

Each of the Directors individually confirm that:
• In so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware;
and
• That they have taken all the steps that they ought to have taken as a Director in order to make themselves aware
of any relevant audit information and to establish that the Company’s auditor is aware of such information.

Auditor
KPMG, Chartered Accountants continue in office in accordance with Section 383(2) of the Companies Act 2014.

On behalf of the Board

Padraig McManus
Chairman

Joseph Purcell
Chief Executive Officer

20 March 2017

DIRECTORS’ STATEMENT ON CORPORATE GOVERNANCE

The board of Mincon is committed to maintaining high standards of corporate governance and has regard to the
Quoted Companies Alliance set of governance guidelines for smaller quoted companies (the “QCA Guidelines”),
which includes a code of best practice for AIM companies, comprising principles intended as a minimum standard,
and recommendations for reporting corporate governance matters. The directors recognise the importance of
sound corporate governance and has taken account of the main principles of the QCA Guidelines, wherever
possible and as appropriate to the size, nature and resources of the Group. It is also our intention to be as open
and transparent about our governance arrangements as possible and use the annual report to give details of
changes and improvements we have made during the year.

The key aspects of the Company’s corporate governance are set out below.

Managing and communicating risk and implementing internal control
The board is responsible for putting in place and communicating a sound system to manage risk and implementing
internal control. The directors have outlined in the Principal Risks and Uncertainties section the key risks facing
the Group and strategies to manage these risks.

Corporate communication and investor relations
The Group recognises the importance of shareholder communications. There is regular dialogue between the
executive directors and institutional shareholders as well as presentations at the time of release of annual and
half year results. The board is subsequently briefed on the views and concerns of institutional shareholders. The
Group issues its results promptly to shareholders and they are also published on the Group’s website,
www.mincon.com. The Company’s Annual General Meeting will afford each shareholder the opportunity to meet
and engage directly with the chairman of the board and all other board members. The annual report, including the
notice of the Annual General Meeting, will be sent to all shareholders at least 21 days prior to the meeting.

The Board
The Company is controlled through its board of directors. The board comprises five non-executive directors and
two executive directors. Biographical details on the board members are set out in the section entitled “Board of
Directors”. The board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and
corporate actions. The directors hold board meetings at least quarterly and at other times as and when required.
The board has delegated responsibility for the day to day management of the Group to the Group’s executive
management. There are clear divisions of responsibilities between the roles of the chairman and chief executive
officer.

Directors’ independence
The board currently comprises five non-executive directors and two executive directors. The board has
determined that Padraig McManus, Hugh McCullough and John Doris are independent within the meaning of the
QCA Guidelines. Patrick Purcell and Kevin Barry are not considered independent within the requirements of the
QCA Guidelines by virtue of their shareholding in the Company. The two executives on the Board are Joseph
Purcell and Thomas Purcell.

Board Committees
The board has established an audit committee, a remuneration committee and a nomination committee with
formally delegated duties and responsibilities. The board deals with matters relating to health and safety and risk
through the board (as opposed to through a separate sub-committee).

Audit committee
The audit committee is chaired by non-executive director Kevin Barry and it consists of two other non-executive
directors; Patrick Purcell and Hugh McCullough. On 13 December 2016, Hugh McCullough replaced Rose Hynes
who had resigned from the board and Patrick Purcell replaced Padraig McManus on the committee. Kevin Barry
replaced Rose Hynes as chairperson of the committee on 13 December 2016. The chairman, chief executive
officer and representatives of the finance function may be invited to attend all or part of any meeting of the
committee, as appropriate.

The audit committee is required to meet at least three times a year and is responsible for ensuring that the financial
performance of the Group is properly monitored and reported , As part of this, it is responsible for meeting with
the external auditors and reviewing findings of the audit with them. It meets with the auditors at least once a year
without any members of the management being present and is also responsible for considering and making
recommendations regarding the identity and remuneration of such auditors. It is authorised to seek any information
that it properly requires from any employee and may ask questions of any employee. The terms of reference of
the committee are available on our website.

During 2016, the committee met on three occasions and all members were present at these meetings.

DIRECTORS’ STATEMENT ON CORPORATE GOVERNANCE

Remuneration Committee
The remuneration committee consists of three non-executive directors; Padraig McManus (chairman), Kevin Barry
and Patrick Purcell (appointed 11 December 2016). Patrick Purcell replaced Rose Hynes who resigned from the
board on 30 November 2016.
It meets at least once per year, it considers and recommends to the board the framework for the remuneration of
the chief executive officer, chairman, company secretary, chief financial officer, executive directors and such other
officers as it is designated to consider and, within the terms of the agreed policy, considers and recommends to
the board the total individual remuneration package of each executive director including bonuses, incentive
payments and share awards. The committee reviews the design of all incentive plans for approval by the board
and shareholders and, for each such plan, recommends whether awards are made and, if so, the overall amount
of such awards, the individual awards to executive directors and the performance targets to be used. No director
is involved in decisions concerning his/her own remuneration. The terms of reference of the committee are
available on our website. The committee met three times during 2016 and all members were present at these
meetings.

Nomination Committee
The nomination committee consists of three non-executive Directors; Padraig McManus, Patrick Purcell and Kevin
Barry. Padraig McManus is chairman of the committee and Kevin Barry joined the committee on 11 December
2016. It met twice during 2016. It identifies and nominates candidates for all board vacancies and reviews regularly
the structure, size and composition (including the skills, knowledge and experience) of the board and makes
recommendations to the board with regard to any changes. The terms of reference of the committee are available
on our website. The committee met twice during 2016 and all members attended these meetings.

Share Ownership and Dealing
Mincon has adopted a share dealing policy that complies with Rule 21 of the AIM Rules and Rule 21 of the ESM
Rules relating to directors’ dealings as applicable to AIM and ESM companies respectively. Mincon takes all
reasonable steps to ensure compliance by applicable employees.

Directors’ Remuneration
Details of individual remuneration of directors are set out in the table below:

Name

Title

Padraig McManus Non-Executive Chairman

Patrick Purcell

Non-Executive Director

Rose Hynes

Non-Executive Director

Kevin Barry*

Non-Executive Director

Hugh McCullough Non-Executive Director

Joseph Purcell

Chief Executive Officer

Thomas Purcell
Sales Director
Total executive and non-executive
remuneration

31 December 2016
Pension
€’000

Fees
€’000

Salary
€’000

Total
€’000

Salary
€’000

31 December 2015
Pension
€’000

Fees
€’000

Total
€’000

-
-

193

207

400

45
-

-
-

45
-

216

209

-
-

193

206

45
10

510

491

-
-

45
10

103

216

211

625

* This includes remuneration as an executive director until 28 May 2015

Patrick Purcell and Kevin Barry waived FY2016 board fees available to them in the amount of €40,000 each. All
directors are paid directly by the company with the exception of Thomas Purcell who is paid by Mincon Inc.

The executive directors employment contracts include the ability to earn performance bonuses dependent on the
performance of the group and payable at the discretion of the remuneration committee. Each executive directors’
service contracts allows the company to terminate their employment by making a lump sum payment of one year’s
base salary.

The executive directors received no bonuses for the year-ended 31 December 2016 (2015: €Nil).

DIRECTORS’ STATEMENT ON CORPORATE GOVERNANCE

DIRECTORS’ AND COMPANY SECRETARY’S SHARE INTERESTS

The beneficial interests of the Directors and Company Secretary (including those of their spouses and children)
who held office at 31 December 2016 in the share capital of the Company was as follows:

Name

Patrick Purcell
Kevin Barry
Joseph Purcell
Thomas Purcell

Ordinary Shares
held

Percentage of
Issued Ordinary
Share Capital

119,671,2001
14,917,8002
119,671,2001
119,671,2001

56.84%
7.09%
56.84%
56.84%

No Director or member of a Director’s family has a related financial product referenced to the Company’s share
capital. There are no outstanding loans as at 31 December 2016 (2015: €Nil) granted or guarantees provided by
any company in the Group to or for the benefit of any of the Directors other than amounts disclosed in note 25 to
the financial statements. There have been no changes in the interests of the Directors and the Company Secretary
in the period to 20 March 2017.

Other transactions with the directors are set out in note 25 to the consolidated financial statements.

1 Kingbell Company, a company controlled by Patrick Purcell and members of the Purcell family (including Joseph Purcell and Thomas
Purcell) holds 119,671,200 Ordinary Shares of €0.01 in the capital of the Company
2 Ballybell Limited, a company controlled by Kevin Barry holds 14,917,800 Ordinary Shares of €0.01 in the capital of the Company.

PRINCIPAL RISKS AND UNCERTAINTIES

The Group’s principal risks and uncertainties are outlined in this section. Mincon has adopted appropriate controls
and recruited management with the necessary skills and experience to manage and mitigate these risks where
possible and thus enable execution of the Group’s business strategy as outlined in the Strategy section.

PRINCIPAL RISKS RELATING TO THE COMPANY’S INDUSTRY

The Group’s products are used in industries which are either cyclical or affected by general economic
condition
The demand for the Group’s products and services is affected by changes in customers’ investment plans and
activity levels. Customers’ investment plans could change depending on global, regional and national economic
conditions or in the case of a widespread financial crisis or economic downturn. The demand for the Group’s
products is affected by the level of construction and mining activities as well as mineral prices. Financial crises
may also have an impact on customers’ ability to finance their investments. In addition, changes in the political
situation in a region or country or political decisions affecting an industry or country could also materially impact
on investments in consumable equipment. Although the Company believes that its sales are well diversified with
customers located in disparate geographic markets, it is likely that the Group would be affected by an economic
downturn in the markets in which it operates.

The Group is exposed to risks associated with operations in emerging markets
The Group’s international operations may be susceptible to political, social and economic instability and civil
disturbances. Risks of the Group operating in such areas may include:

• disruption to operations, including strikes, civil actions, international conflict or political interference;
• changes to the fiscal regime including changes in the rates of income and corporation taxes;
•

reversal of current policies encouraging foreign investment or foreign trade by the governments of
certain countries in which the Group operates;
limited access to markets for periods of time;
increased inflation; and

•
•
• expropriation or forced divestment of assets.

Any of the above factors could result in disruptions to the Group’s business, increased costs or reduced future
growth opportunities. Potential losses caused by these disruptions may not be covered by insurance.

The Group operates in countries with less developed legal systems
The countries in which the Group operates may have less developed legal systems than countries with more
established economies, which may result in risks such as:

• effective legal redress in the courts of such jurisdictions, whether in respect of a breach of law or

regulation or in an ownership dispute, being more difficult to obtain;
• a higher degree of discretion on the part of governmental authorities;
• a lack of judicial or administrative guidance on interpreting applicable rules and regulations;
• an inability on the part of the Group to adequately protect its assets in these jurisdictions;
•

inconsistencies or conflicts between and within various laws, regulations, decrees, orders and
resolutions; or
relative inexperience of the judiciary and courts in such matters.

•

In certain jurisdictions, the commitment of local business people, government officials and agencies and the
judicial system to abide by legal requirements and negotiated agreements may be more uncertain, creating
particular concerns with respect to licences and agreements for business. These may be susceptible to revision
or cancellation and legal redress may be uncertain or delayed. There can be no assurance that joint ventures,
licences or other legal arrangements will not be adversely affected by the actions of government authorities or
others and the effectiveness of and enforcement of such arrangements in these jurisdictions cannot be assured.

PRINCIPAL RISKS AND UNCERTAINTIES

RISKS RELATING TO THE COMPANY’S BUSINESS

If the Group fails to develop, launch and market new products, respond to technological development or
compete effectively, its business and revenues may suffer
The Group’s long-term growth and profitability is dependent on our ability to develop and successfully launch and
market new products. The Group’s revenues and market share may suffer if it is unable to successfully introduce
new products in a timely fashion or if any new or enhanced products or services are introduced by our competitors
that customers find more advanced and/or better suited to their needs. While the Group continuously invests in
research and development to develop products in line with customer demand and expectations, if it is not able to
keep pace with product development and technological advances, including also shifts in technology in the
markets in which it operates, or to meet customer demands, this could have a material adverse effect on the
Group’s business, results of operations and financial condition.

The Group is dependent on the efficiency of our distribution network
The Group distributes products primarily through distributors and also directly to end customers. Should the
distribution network be subject to disruptions, it could have a material adverse effect on the Group’s revenues and
results of operations.

If the Group’s manufacturing and production facilities are damaged, destroyed or closed for any reason,
our ability to distribute products will be significantly affected
The Group has five manufacturing facilities located in Ireland, the UK, Australia, Canada, South Africa and the
United States and an assembly facility in the United States. Should any of these facilities be destroyed or closed
for any reason, or the equipment in the facilities be significantly damaged, the Group is likely to face setbacks in
our ability to manufacture and distribute products to customers. Such circumstances, to the extent that it is not
possible to find an alternative manufacturing and production facility, or transfer manufacturing to other Group
facilities or repair the damaged facilities or damaged equipment in a timely and cost-efficient manner, could have
a material adverse effect on the Group’s business, results of operations and financial condition. In addition, the
availability of manufacturing components is dependent on suppliers to the Group and, if they suffer interruptions
or if they do not have sufficient capacity, this could have an adverse effect on the Group’s business and results of
operations.

Financial Condition Risks

Future Revenues
The Group relies on the ability to secure orders with new customers as well as maintain relationships with existing
customers to generate most of our revenue. Investors should not rely on period to period comparisons of revenue
as an indicator of future performance.

Competition
The markets for the Group’s products are highly competitive in terms of pricing, product design, service and
quality, the timing and development and introduction of new products, customer services and terms of financing.
The Group faces intense competition from significant competitors and to a lesser extent small regional companies.
If we do not compete successfully in all of our business areas and do not anticipate and respond to changes in
evolving market demands, including new products, we will not be able to compete successfully in our markets,
which could have a material adverse effect on the Group’s business, results of operations and financial condition.

The Group is subject to competition in the markets in which it operates and some of its competitors are significantly
larger and have significantly greater resources than the Group. The Group’s principle competitors are Atlas Copco
which is headquartered in Stockholm, Sweden with a global reach spanning more than 170 countries and Sandvik
which is also headquartered in Stockholm, Sweden with business activities in more than 130 countries. There can
be no guarantee that the Group’s competitors or new market entrants will not introduce superior products or a
superior service offering. Such competitors may have greater development, marketing, personnel and financial
resources than the Group. Should these or other competitors decide to compete aggressively with the Group on
price in the markets and industries in which it operates while offering comparable or superior quality products this
could have a material adverse effect on the Group’s financial position, trading performance and prospects.

PRINCIPAL RISKS AND UNCERTAINTIES

RISKS RELATING TO THE COMPANY’S BUSINESS (continued)
Financial Condition Risks (continued)

The Group is exposed to the risk of currency fluctuation
The Group’s financial condition and results of operations are reported in euro but a large proportion of its revenues
are denominated in currencies other than euro, including the US dollar, the Australian dollar and the South African
rand. Adverse currency exchange rate movements may hinder the Group’s ability to procure important materials
and services from vendors and suppliers, may affect the value of its level of indebtedness, and may have a
significant adverse effect on its revenues and overall financial results. In the past, the Group has experienced
gains and losses from exchange rate fluctuations, including foreign exchange gains and losses from transactions
risks associated with assets and liabilities denominated in foreign currencies, including inter-company financings.
The Group has introduced measures to improve its ability to respond to currency exchange rate risks. However,
these measures may prove ineffective, and exchange rate volatility, particularly between currency pairs that have
traditionally been rather stable, may develop. As a result, the Group may continue to suffer exchange rate losses,
which could cause operating results to fluctuate significantly and could have a material adverse effect on the
Group’s business and financial condition.

Contractual Arrangements
The Group derives some of its revenue from large transactions (which may be non-recurring in nature).
Prospective sales are subject to delays or cancellation over which the Group has little or no control and these
delays could adversely affect results. Also to address the non-recurring nature of some of these transactions, the
Group needs to focus on securing new lines of business on a regular basis.

Customer Concentration
Over the past three years, the Group’s top ten customers have accounted for approximately 27% of its revenues.
If, in the future, these customers fail to meet their contractual obligations, decide not to purchase the Group’s
products or decide to purchase few products, this could disrupt the Group’s business and require it to expend time
and effort to develop relationships with new customers, which could have a material adverse effect on the Group’s
business, results of operations and financial condition. There can be no assurance that, even if the Group could
find alternate customers, the Group could receive the same price for its products.

The Group is exposed to fluctuations in the price of raw materials
The Group’s operations give rise to risks due to changes in the price of market-quoted raw materials, mainly steel
and tungsten. The prices can vary significantly during a year. If the market does not permit a transfer of the effects
of changing raw material prices into the end-price of the products, this may have a material adverse effect on the
Group’s business, results of operations and financial condition.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The directors are responsible for preparing the Annual report and the Group and Company financial statements, in
accordance with applicable law and regulations.

Company law requires the directors to prepare Group and Company financial statements for each financial year.
Under that law and in accordance with AIM/ESM Rules, the Directors are required to prepare the Group financial
statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the
Company financial statements in accordance with IFRS as adopted by the EU and as applied in accordance with
the Companies Act 2014.

Under company law the directors must not approve the Group and Company financial statements unless they are
satisfied that they give a true and fair view of the assets, liabilities and financial position of the Group and Company
and of the Group’s profit or loss for that year.

In preparing each of the Group and Company financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

•
• make judgements and estimates that are reasonable and prudent;
•
•

state whether they have been prepared in accordance with IFRS as adopted by the EU; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and Company will continue in business.

The directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy
at any time the assets, liabilities, financial position and profit or loss of the Company and which enable them to
ensure that the financial statements of the Group are prepared in accordance with applicable IFRS, as adopted by
the EU and comply with the provisions of the Companies Act 2014. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud
and other irregularities. Under applicable law, the directors are also responsible for preparing a Directors’ Report
that complies with the Companies Act 2014.

The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company's website. Legislation in the Republic of Ireland governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.

On behalf of the Board

Padraig McManus
Chairman

Joseph Purcell
Chief Executive Officer

20 March 2017

INDEPENDENT AUDITOR’S REPORT

We have audited the Group and Company financial statements (“financial statements”) of Mincon Group plc for the
year ended 31 December 2016 which comprise the Consolidated Income Statement, the Consolidated Statement
of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and
Company Statements of Cash Flows, the Consolidated and Company Statements of changes in Shareholders’
Equity and the related notes. The financial reporting framework that has been applied in their preparation is Irish
law and International Financial Reporting Standards (IFRS) as adopted by the European Union and as regards the
Company financial statements, as applied in accordance with the provisions of the Companies Act 2014. Our audit
was conducted in accordance with International Standards on Auditing (ISAs) (UK & Ireland).

Opinions and conclusions arising from our audit

1 Our opinion on the financial statements is unmodified

In our opinion:

•

the Group financial statements give a true and fair view of the assets, liabilities and financial position of the
Group as at 31 December 2016 and of its profit for the year then ended;

the Company statement of financial position gives a true and fair view of the assets, liabilities and financial
position of the Company as at 31 December 2016;

the Group financial statements have been properly prepared in accordance with IFRS as adopted by the
European Union;

the Company financial statements have been properly prepared in accordance with IFRS as adopted by
the European Union as applied in accordance with the provisions of the Companies Act 2014; and

the Group financial statements and Company financial statements have been properly prepared in
accordance with the requirements of the Companies Act 2014.

2 Our conclusions on other matters on which we are required to report by the Companies Act 2014 are set
out below

We have obtained all the information and explanations which we consider necessary for the purposes of our audit.

In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily
and properly audited and the financial statements are in agreement with the accounting records.

In our opinion the information given in the Directors’ Report is consistent with the financial Statements.

3 We have nothing to report in respect of matters on which we are required to report by exception

ISAs (UK & Ireland) require that we report to you if, based on the knowledge we acquired during our audit, we have
identified information in the annual report that contains a material inconsistency with either that knowledge or the
financial statements, a material misstatement of fact, or that is otherwise misleading.

In addition, the Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors’
remuneration and transactions required by Sections 305 to 312 of the Act are not made.

INDEPENDENT AUDITOR’S REPORT

Basis of our report, responsibilities and restrictions on use

As explained more fully in the Statement of Directors’ Responsibilities set out on page 22 the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view and otherwise comply with the Companies Act 2014. Our responsibility is to audit and express an opinion
on the financial statements in accordance with Irish law and International Standards on Auditing (UK & Ireland).
Those standards require us to comply with the Financial Reporting Council’s Ethical Standards for Auditors.

An audit undertaken in accordance with ISAs (UK & Ireland) involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the Group and Company’ s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.

Whilst an audit conducted in accordance with ISAs (UK & Ireland) is designed to provide reasonable assurance
of identifying material misstatements or omissions it is not guaranteed to do so. Rather the auditor plans the
audit to determine the extent of testing needed to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements does not exceed materiality for the financial statements
as a whole. This testing requires us to conduct significant audit work on a broad range of assets, liabilities,
income and expense as well as devoting significant time of the most experienced members of the audit team, in
particular the engagement partner responsible for the audit, to subjective areas of the accounting and reporting.

Our report is made solely to the Company’s members, as a body, in accordance with Section 391 of the
Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’ s members as a body, for our audit work, for this report, or for the opinions we have formed.

Ruaidhri Gibbons
For and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place
St. Stephen’s Green
Dublin 2, Ireland

20 March 2017

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2016

Notes

2016
€’000

2015
€’000

76,181
(45,620)

30,561
(20,383)

10,178
(140)
170
1,129
(4)

11,333
(2,080)

9,253

9,234
19

4.39c
4.38c

70,266
(41,989)

28,277
(18,287)
9,990
(183)
297
(1,203)
722

9,623
(1,595)

8,028

7,980
48

3.79c
3.79c

6
9

Continuing operations
Revenue ........................................................................................................
Cost of sales .................................................................................................

4
6

Gross profit .................................................................................................
General, selling and distribution expenses ....................................................

Operating profit ............................................................................................
Finance cost ...................................................................................................
Finance income .............................................................................................
Foreign exchange gain/(loss) ........................................................................
Movement on contingent consideration ......................................................... 20(e)

Profit before tax ..........................................................................................
Income tax expense .......................................................................................

Profit for the year ........................................................................................

Profit attributable to:
- owners of the Parent ..................................................................................
- non-controlling interests ..............................................................................
Earnings per Ordinary Share
Basic earnings per share, € ..........................................................................
Diluted earnings per share, € .........................................................................

18
18

The accompanying notes are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended 31 December 2016

Profit for the year ...........................................................................................................
Other comprehensive income/(loss):
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation – foreign operations ............................................................

Other comprehensive income/(loss) for the year ............................................................

Total comprehensive income for the year ...................................................................
Total comprehensive income attributable to:
- owners of the Parent .....................................................................................................
- non-controlling interests .................................................................................................

The accompanying notes are an integral part of these financial statements.

2016
€’000

9,253

2,495

11,748

11,729
19

2015
€’000

8,028

(1,344)

6,684

6,636
48

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

Non-Current Assets
Intangible assets ........................................................................................
Property, plant and equipment ..................................................................
Deferred tax asset .....................................................................................
Other non-current assets ..........................................................................
Total Non-Current Assets .......................................................................
Current Assets
Inventory ...................................................................................................
Trade and other receivables .....................................................................
Other current assets ..................................................................................
Current tax asset .......................................................................................
Short term deposits ...................................................................................
Cash and cash equivalents .......................................................................
Total Current Assets ...............................................................................
Total Assets .............................................................................................

Equity
Ordinary share capital ...............................................................................
Share premium ..........................................................................................
Undenominated capital ..............................................................................
Merger reserve ...........................................................................................
Share based payment reserve ..................................................................
Foreign currency translation reserve .........................................................
Retained earnings .....................................................................................
Equity attributable to owners of Mincon Group plc .............................
Non-controlling interests ............................................................................
Total Equity .............................................................................................

Non-Current Liabilities
Loans and borrowings ...............................................................................
Deferred tax liability ...................................................................................
Deferred contingent consideration .............................................................
Other liabilities ..........................................................................................
Total Non-Current Liabilities ..................................................................
Current Liabilities
Loans and borrowings ...............................................................................
Trade and other payables .........................................................................
Accrued and other liabilities ......................................................................
Current tax liability ....................................................................................
Total Current Liabilities ..........................................................................
Total Liabilities ........................................................................................
Total Equity and Liabilities ......................................................................

Notes

11
13
10
12

14
15

20
20

17
17

16
10
20

The accompanying notes are an integral part of these financial statements.

On behalf of the Board:

Padraig McManus
Chairman

Joseph Purcell
Chief Executive Officer

2016
€’000

13,120
20,052
529
238

33,939

35,310
16,437
996
954
-
36,836

90,533

2015
€’000

11,459
17,277
480
342

29,558

32,045
13,021
649
733
30,781
10,644

87,873

124,472

117,431

2,105
67,647
39
(17,393)
89
1,035
51,509

105,031
484

105,515

1,142
714
5,669
595

8,120

734
6,561
2,823
719

2,105
67,647
39
(17,393)
16
(1,460)
46,485

97,439
465

97,904

2,141
556
6,347
722

9,766

674
6,780
2,009
298

10,837
18,957

124,472

9,761
19,527

117,431

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended 31 December 2016

Operating activities:
Profit for the period .............................................................................................................
Adjustments to reconcile profit to net cash provided by operating activities:
Depreciation ........................................................................................................................
Fair value movement on deferred contingent consideration ................................................
Finance cost .......................................................................................................................
Finance income ..................................................................................................................
Income tax expense ............................................................................................................
Other non-cash movements ................................................................................................

Changes in trade and other receivables ............................................................................
Changes in prepayments and other assets ........................................................................
Changes in inventory .........................................................................................................
Changes in capital equipment inventory .............................................................................
Changes in trade and other payables .................................................................................
Cash provided by operations .............................................................................................
Interest received ................................................................................................................
Interest paid .......................................................................................................................
Income taxes paid ..............................................................................................................
Net cash provided by operating activities .....................................................................

Investing activities
Purchase of property, plant and equipment .......................................................................
Disposal of property, plant and equipment .........................................................................
Acquisitions, net of cash acquired .......................................................................................
Payment of deferred contingent consideration ....................................................................
Former short term deposit ..................................................................................................
Proceeds from former joint venture investments .................................................................
Net cash used in investing activities ..............................................................................

Financing activities
Dividends paid ....................................................................................................................
Repayment of loans and finance leases .............................................................................
Drawdown of loans ............................................................................................................
Net cash provided by/(used in) financing activities ......................................................

Effect of foreign exchange rate changes on cash ..............................................................
Net increase/(decrease) in cash and cash equivalents ................................................

Cash and cash equivalents at the beginning of the year ....................................................
Cash and cash equivalents at the end of the year ........................................................

The accompanying notes are an integral part of these financial statements

2016
€’000

9,253

2,332
4
140
(170)
2,080
(3,356)
10,283
(1,708)
669
281
-
(394)
9,131
170
(140)
(1,943)
7,218

(5,246)
-
(979)
(682)
30,781
116
23,990

(4,210)
(1,052)
-
(5,262)

246
26,192

10,644
36,836

2015
€’000

8,028

2,346
(722)
183
(297)
1,595
1,075
12,208
(1,572)
(438)
(2,753)
(338)
2,264
9,371
297
(183)
(2,084)
7,401

(1,768)
-
(4,149)
(421)
(151)
266
(6,223)

(4,210)
(1,352)
1,100
(4,462)

(154)
(3,438)

14,082
10,644

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Notes to the Consolidated Financial Statements

1. Description of business

The consolidated financial statements of Mincon Group Plc (also referred to as “Mincon” or “the Company”)
comprises the Company and its subsidiaries (together referred to as “the Group”).

The Group is an Irish engineering group, specialising in the design, manufacturing, sale and servicing of rock
drilling tools and associated products. Mincon Group Plc is domiciled in Shannon, Ireland.

On 26 November 2013, Mincon Group plc was admitted to trading on the Enterprise Securities Market (ESM) of
the Irish Stock Exchange and the Alternative Investment Market (AIM) of the London Stock Exchange.

2. Basis of Preparation

These consolidated financial statements has 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).

The individual financial statements of the Company have been prepared in accordance with IFRSs as adopted
by the EU and as applied in accordance with the Companies Act 2014 which permit a company that publishes
its Group and Company financial statements together to take advantage of the exemption in Section 304 of the
Companies Act 2014 from presenting to its members its Company income statement, statement of
comprehensive income and related notes that form part of the approved Company financial statements.

The accounting policies set out in note 3 have been applied consistently in preparing the Group and Company
financial statements for the years ended 31 December 2016 and 31 December 2015.

The Group and Company financial statements are presented in euro, which is the functional currency of the
Company and also the presentation currency for the Group’s financial reporting. Unless otherwise indicated, the
amounts are presented in thousands of euro. These financial statements are prepared on the historical cost
basis.

The preparation of the consolidated financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets
and liabilities, income and expenses. The judgements, estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstances.
Actual results could differ materially from these estimates. The areas involving a high degree of judgement and
the areas where estimates and assumptions are critical to the consolidated financial statements are discussed
in note 3.

The directors believe that the Group has adequate resources to continue in operational existence for the
foreseeable future and that it is appropriate to continue to prepare our consolidated financial statements on a
going concern basis.

3. Significant accounting principles, accounting estimates and judgements

The accounting principles as set out in the following paragraphs have, unless otherwise stated, been consistently
applied to all periods presented in the consolidated financial statements and for all entities included in the
consolidated financial statements.

The following are amendments to existing standards and interpretations that are affective for the Group’s
financial year from 1 January 2016:

Annual Improvements to IFRSs 2012-2014 cycle
IFRS 11: Accounting for acquisitions of interests in Joint Operations
IFRS 14: Regulatory Deferral Accounts
IAS 16 & IAS 38: Acceptable methods of depreciation/ amortisation
IAS 16: Property, Plant and Equipment
IAS 41: Bearer Plants
IAS 27: Equity method in Separate Financial Statements
IAS 1: Disclosure initiative
IFRS 10, IFRS 12 and IAS 28: Investment entities: Applying the consolidation exception.

Notes to the Consolidated Financial Statements (continued)

3. Significant accounting principles, accounting estimates and judgements (continued)

The adoption of the above and interpretations and amendments did not have a significant impact on the Group’s
Consolidated Financial Statements.

New IFRSs and amendments

Annual Improvements to IFRSs 2014-2016 cycle*
IFRS 15, ‘Revenue from Contracts with Customers’ (effective for the Group’s 2018 Consolidated Financial
Statements)
IFRS 9, ‘Financial Instruments’ (effective for the Group’s 2018 Consolidated Financial Statements)
IFRS 16 ‘Leases’ (effective for the Group’s 2019 Consolidated Financial Statements)*
IFRS 2: Classification and measurement of share based payments*
IAS 7: Disclosure initiative*
IAS 12: Recognition of deferred tax assets for unrealised losses.*
* Not yet EU Endorsed

The Directors do not believe that any of the above standards have a significant impact on Group reporting.

Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, net of sales taxes, goods
returned, and discounts and other similar deductions. Revenue from sale of goods is recognised when the
significant risks and rewards of ownership have been transferred to the buyer, which in most cases occurs on
delivery. Revenue is recognised when recovery of the consideration is considered probable and the revenue and
associated costs can be measured reliably. No revenue is recognised if there are significant uncertainties regarding
the possible return of goods.

Segment reporting
An operating segment is a component of the Group that engages in business activities from which it may earn
revenue and incur expenses, and for which discrete financial information is available. The operating results of all
operating segments are reviewed regularly by the Board of Directors, the chief operating decision maker, to make
decisions about allocation of resources to the segments and also to assess their performance. See Note 5 for
additional information.

Earnings per share
Basic earnings per share is calculated based on the profit for the year attributable to owners of the Company and
the basic weighted average number of shares outstanding. Diluted earnings per share is calculated based on the
profit for the year attributable to owners of the Company and the diluted weighted average number of shares
outstanding.

Income taxes
Income taxes include both current and deferred taxes in the consolidated financial statements. Income taxes are
reported in profit or loss unless the underlying transaction is reported in other comprehensive income or in equity.
In those cases, the related income tax is also reported in other comprehensive income or in equity. A current tax
liability or asset is recognised for the estimated taxes payable or refundable for the current or prior years.

Deferred tax is recognised using the statement of financial position liability method. The calculation of deferred
taxes is based on either the differences between the values reported in the statement of financial position and their
respective values for taxation, which are referred to as temporary differences, or the carry forward of unused tax
losses and tax credits. Temporary differences related to the following are not provided for: the initial recognition of
goodwill, the initial recognition (other than in business combinations) of assets or liabilities that affect neither
accounting nor taxable profit, and differences related to investments in subsidiary companies to the extent that
they will not reverse in the foreseeable future.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group
expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. A
deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realised. In the calculation of deferred taxes, enacted or substantively enacted
tax rates are used for the individual tax jurisdictions. Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on
a net basis.

Notes to the Consolidated Financial Statements (continued)

3. Significant accounting principles, accounting estimates and judgements (continued)

Inventories
Inventories 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

Goodwill
The Group accounts for acquisitions using the purchase accounting method as outlined in IFRS 3 Business
Combinations. Group management has determined that the Group has multiple cash generating units, which are
aggregated into one operating segment and therefore all goodwill is tested for impairment at Group level and this
is tested for impairment annually.

Intangible assets
Expenditure on research activities is recognised in profit or loss as incurred.

Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process
is technically and commercially feasible, future economic benefits are probable and the Group intends to and has
sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in the profit
or loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less
accumulated amortisation and any accumulated impairment losses.

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands,
is recognised in profit or loss as incurred.

Foreign currency

Foreign currency transactions
Transactions in foreign currencies (those which are denominated in a currency other than the functional currency)
are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the foreign exchange rate at the statement of financial
position date. Exchange gains and losses related to trade receivables and payables, other financial assets and
payables, and other operating receivables and payables are separately presented on the face of the income
statement.

Exchange rate differences on translation to functional currency are reported in profit or loss, except when reported
in other comprehensive income for the translation of intra-group receivables from, or liabilities to, a foreign operation
that in substance is part of the net investment in the foreign operation.

Exchange rates for major currencies used in the various reporting periods are shown in Note 20.

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.

Notes to the Consolidated Financial Statements (continued)

3. Significant accounting principles, accounting estimates and judgements (continued)

Business combinations and consolidation
The consolidated financial statements include the financial statements of the Group and all companies in which
Mincon Group plc, directly or indirectly, has control. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements
from the date on which control commences until the date on which control ceases.

The consolidated financial statements have been prepared in accordance with the acquisition method. According
to this method, business combinations are seen as if the Group directly acquires the assets and assumes the
liabilities of the entity acquired. At the acquisition date, i.e. the date on which control is obtained, each identifiable
asset acquired and liability assumed is recognised at its acquisition-date fair value.

Consideration transferred is measured at its fair value. It includes the sum of the acquisition date fair values of the
assets transferred, liabilities incurred to the previous owners of the acquiree, and equity interests issued by the
Group. Deferred contingent consideration is initially measured at its acquisition-date fair value. Any subsequent
change in such fair value is recognised in profit or loss, unless the deferred contingent consideration is classified
as equity. In that case, there is no remeasurement and the subsequent settlement is accounted for within equity.

Transaction costs that the Group incurs in connection with a business combination, such as legal fees, due
diligence fees, and other professional and consulting fees are expensed as incurred.

Goodwill is measured as the excess of the fair value of the consideration transferred, the amount of any non-
controlling interest in the acquiree, and the fair value of the Group’s previously held equity interest in the acquiree
(if any) over the net of acquisition-date fair values of the identifiable assets acquired and liabilities assumed.
Goodwill is not amortised but tested for impairment at least annually.

Non-controlling interest is initially measured either at fair value or at the non-controlling interest’s proportionate
share of the fair value of the acquiree’s identifiable net assets. This means that goodwill is either recorded in “full”
(on the total acquired net assets) or in “part” (only on the Group’s share of net assets). The choice of measurement
basis is made on an acquisition-by-acquisition basis.

Earnings from the acquirees are reported in the consolidated income statement from the date of control.

Intra-group balances and transactions such as income, expenses and dividends are eliminated in preparing the
consolidated financial statements. Profits and losses resulting from intra-group transactions that are recognised in
assets, such as inventory, are eliminated in full, but losses are only eliminated to the extent that there is no evidence
of impairment.

Property, plant and equipment
Items of property, plant and equipment are carried at cost less accumulated depreciation and impairment losses.
Cost of an item of property, plant and equipment comprises the purchase price, import duties, and any cost directly
attributable to bringing the asset to its location and condition for use. The Group capitalises costs on initial
recognition and on replacement of significant parts of property, plant and equipment, if it is probable that the future
economic benefits embodied will flow to the Group and the cost can be measured reliably. All other costs are
recognised as an expense in profit or loss when incurred.

Depreciation
Depreciation is calculated based on cost using the straight-line method over the estimated useful life of the asset.

The following useful lives are used for depreciation:

Buildings
Leasehold improvements
Machinery and equipment
Vehicles
Computer hardware and other

Years
20–30
3–10
3–10
3–5
3–5

The depreciation methods, useful lives and residual values are reassessed annually. Land is not depreciated.

Notes to the Consolidated Financial Statements (continued)

3. Significant accounting principles, accounting estimates and judgements (continued)

Leased assets
In the consolidated financial statements, leases are classified as either finance leases or operating leases. A
finance lease entails the transfer to the lessee of substantially all of the economic risks and benefits associated
with ownership. If this is not the case, the lease is accounted for as an operating lease.

For the lessee, a finance lease requires that the asset leased is recognised as an asset in the statement of
financial position. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair
value and the present value of the future minimum lease payments. Initially, a corresponding liability is recorded.
Assets under finance leases are depreciated over their estimated useful lives, while the lease payments are
reported as interest and amortisation of the lease liability. For operating leases, the lessee does not account for
the leased asset in its statement of financial position. In profit or loss, the costs of operating leases are recorded
on a straight-line basis over the term of the lease.

Financial assets and liabilities
Recognition and derecognition
Financial assets and liabilities are recognised at fair value when the Group becomes a party to the contractual
provisions of the instrument. Purchases and sales of financial assets are accounted for at trade date, which is the
day when the Group contractually commits to acquire or dispose of the assets. Trade receivables are recognised
on delivery of product. Liabilities are recognised when the other party has performed and there is a contractual
obligation to pay. Derecognition (fully or partially) of a financial asset occurs when the rights to receive cash flows
from the financial instruments expire or are transferred and substantially all of the risks and rewards of 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.
Impairment of financial assets
Financial assets are assessed at each reporting date to determine whether there is any objective evidence that
they are impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that asset.
Equity
Shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share
options are recognised as a deduction from equity, net of any tax effect.
Contingent liabilities
A contingent liability is a possible obligation or a present obligation that arises from past events that is not reported
as a liability or provision, as it is not probable that an outflow of resources will be required to settle the obligation
or that a sufficiently reliable calculation of the amount cannot be made.
Financial instruments carried at fair value: Non-derivative financial liabilities
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the
market rate of interest at the reporting date.
Financial 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.

Notes to the Consolidated Financial Statements (continued)

3. Significant accounting principles, accounting estimates and judgements (continued)

Provisions
A provision is recognised in the statement of financial position when the Group has a legal or constructive
obligation as a result of a past event, it is 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 pension plan is a post-employment benefit plan under which the Group pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.
Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense
in profit or loss when employees provide services entitling them to the contributions.

Share-based payment transactions
The Group operates a long term incentive plan which allows the Company to grant Restricted Share Awards
(“RSAs”) to executive directors and senior management. All schemes are equity settled arrangements under
IFRS 2 Share-based Payment.

The grant-date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees become unconditionally
entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that meet the related service and non-
market performance conditions at the vesting date.

Critical accounting estimates and judgements
The preparation of financial statements requires management’s judgement and the use of estimates and
assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
These estimates and associated assumptions are based on 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 contingent consideration
The deferred contingent consideration payable represents management’s best estimate of the fair value of the
amounts that will be payable, discounted as appropriate using a market interest rate. The fair value was estimated
by assigning probabilities, based on management’s current expectations, to the potential pay-out scenarios. The
fair value of deferred contingent consideration is primarily dependent on the future performance of the acquired
businesses against predetermined targets and on management’s current expectations thereof.

Trade and other receivables
The Group estimates the risk that receivables will not be paid and provides for doubtful accounts based on specific
provisions for known cases and collective provisions for losses based on historical profit levels.

Total trade and other receivables as of 31 December 2016 amounted to €18.1million (2015: €13.7 million) with a
corresponding total allowance for estimated losses of €1.6 million (2015: €0.6 million).

Notes to the Consolidated Financial Statements (continued)

4. Revenue

Product revenue:
Sale of Mincon product ................................................................................................
Sale of third party product .............................................................................................
Total revenue ...............................................................................................................

2016

€’000

56,360
19,821
76,181

2015

€’000

52,786
17,480
70,266

5. Operating Segment

Results are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker (CODM). Our CODM has been identified as the Board of Directors.

The Group has determined that it has one reportable segment. The Group is managed as a single business unit
that sells drilling equipment, primarily manufactured by Mincon manufacturing sites.

The CODM assesses operating segment performance based on a measure of operating profit.
Segment revenue for the year ended 31 December 2016 of €76.2 million (2015: €70.3 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,
South Africa, UK, Western Australia, the United States and Canada and sales offices in ten other locations
including Eastern & Western Australia, South Africa, Senegal, Spain, Namibia, Tanzania, Sweden, Chile and
Peru. Sales offices in Ghana and Poland have been closed down in 2016 and a distribution model has been
adopted for sales in these jurisdictions. 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):

Region:
Ireland ..........................................................................................................................
Americas .......................................................................................................................
Australasia .....................................................................................................................
Europe, Middle East, Africa ..........................................................................................
Total revenue from continuing operations ..............................................................

Non-current assets by region (location of assets):

Region:
Ireland ..........................................................................................................................
Americas .......................................................................................................................
Australasia .....................................................................................................................
Europe, Middle East, Africa ..........................................................................................
Total non-current assets(1) .........................................................................................

(1) Non-current assets exclude deferred tax assets.

2016

€’000

669
23,389
19,101
33,022
76,181

2016

€’000

6,752
14,423
7,237
4,998
33,410

2015

€’000

651
20,771
15,230
33,614
70,266

2015

€’000

5,681
12,303
6,846
4,248
29,078

Notes to the Consolidated Financial Statements (continued)

6. Cost of Sales and operating expenses

Included within cost of sales, selling and distribution expenses and general and administrative expenses were the
following major components:

Cost of sales

Raw materials ................................................................................................................
Third party product purchases ......................................................................................
Employee costs .............................................................................................................
Depreciation ..................................................................................................................
Other .............................................................................................................................
Total cost of sales ......................................................................................................

General, selling and distribution expenses

Employee costs (including director emoluments) .........................................................
Depreciation ..................................................................................................................
Acquisition costs............................................................................................................
Other .............................................................................................................................
Total other operating costs ........................................................................................

2016

€’000
16,473
15,562
7,162
1,752
4,671
45,620

2016

€’000
12,026
580
-
7,777
20,383

2015

€’000
15,166
13,772
6,714
1,720
4,617
41,989

2015

€’000
10,787
626
175
6,699
18,287

The Group invested approximately €0.9 million on research and development projects in 2016, of this €0.4 million
has been expensed in the period with the balance of €0.5 capitalised (note 11).

7. Employee information

Wages and salaries – excluding directors ....................................................................
Wages, salaries, fees and pensions – directors ...........................................................
Termination payments ...................................................................................................
Social security costs .....................................................................................................
Pension costs of defined contribution plans .................................................................
Share based payment expense (note 19) ....................................................................
Total employee costs ..................................................................................................

2016

€’000
16,207
510
349
1,317
732
73
19,188

2015

€’000
15,012
625
166
1,132
566
-
17,501

The Group capitalised payroll costs of €0.2 million in 2016 in relation to research and development.

The average number of employees was as follows:

Sales and distribution ....................................................................................................
General and administration ...........................................................................................
Manufacturing, service and development .....................................................................
Average number of persons employed ...................................................................

Pension and Other Employee Benefit Plans

2016

Number

2015
Number

76
58
164
298

74
55
141
270

The Group operates various defined contribution pension plans. During the year ended 31 December 2016, the
Group recorded €0.8million (2015: €0.6 million) of expense in connection with these plans.

Notes to the Consolidated Financial Statements (continued)

8. Acquisitions

A. Consideration transferred

The following table summarises the acquisition date fair value of each major class of consideration transferred.

Cash ......................................................................................................................................................
Deferred contingent consideration ........................................................................................................
Total consideration transferred .........................................................................................................

Total

€’000

979
-
979

In September 2016, Mincon acquired the net assets of Premier Drilling Equipment, a drill pipe manufacturer
located in Johannesburg South Africa. Mincon also acquired the assets of Rockdrill Engineering Ltd., a reseller
of Mincon product, located in Hebden Bridge, UK in November 2016.

In the final quarter of 2016, Premier Drilling Equipment and Rockdrill Engineering Ltd contributed additional
revenue of €477,000 to the Group and €9,000 in net profit to the Group results. If these companies were purchased
on 01 January 2016 they would have contributed sales of €2.9 million to the Group and €54,000 in net profit to
the Group results.

Ozmine
The previous owners of Ozmine received final payment of €672,000 during 2016, based on certain profits that
had to be achieved during the years ending 31 December 2015, 2016 & 2017. The payment had been fully
provided for as part of the opening deferred consideration balance at 1 January 2016.

Deferred contingent consideration

B. Identifiable assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets and liabilities assumed at the date of
acquisition.

Property, plant and equipment ..............................................................................................................
Inventories .............................................................................................................................................
Trade receivables ..................................................................................................................................
Cash and cash equivalents ...................................................................................................................
Other assets ..........................................................................................................................................
Trade and other payables .....................................................................................................................
Fair value of identifiable net assets acquired ..................................................................................

Total

€’000

68
199
476
2
9
(54)
700

Measurement of fair values
The valuation techniques used for measuring the fair value of material assets acquired were as follows.

Assets acquired

Property, plant and
equipment

Inventories

Valuation Technique
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.
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.

If the information obtained within one year of the date of acquisition about facts and circumstances that existed at
the date of acquisition identifies adjustments to the above amounts, or any additional provisions that existed at
the date of acquisitions, then the accounting for the acquisition will be revised.

Notes to the Consolidated Financial Statements (continued)

Goodwill

Goodwill arising from the acquisition has been recognised as follows.

Consideration transferred ......................................................................................................................
Fair value of identifiable net assets .......................................................................................................
Goodwill ...............................................................................................................................................

Total
979
(700)
279

The goodwill created in the acquisition in the period is primarily related to the synergies expected to be achieved
from integrating these companies into the Group’s existing structure. Manufactured coring product will be sold
through the Group’s existing sales offices.

9. Statutory and other required disclosures

Operating profit is stated after charging the following amounts:

Directors’ remuneration
Fees ..............................................................................................................................
Wages and salaries .......................................................................................................
Other emoluments .........................................................................................................
Pension contributions ....................................................................................................
Total directors’ remuneration ....................................................................................

Auditor’s remuneration:

Auditor’s remuneration – Fees payable to lead audit firm
Audit of the Group financial statements ........................................................................
Audit of the Company financial statements ...................................................................
Other assurance services .............................................................................................
Tax advisory services (a) .............................................................................................
Other non-audit services ...............................................................................................

Auditor’s remuneration – Fees payable to other firms in lead audit firm’s network
Audit services ................................................................................................................
Other assurance services .............................................................................................
Tax advisory services ....................................................................................................
Total auditor’s remuneration .....................................................................................

(a) Includes tax compliance work on behalf of Group companies.

2016

€’000

85
400
-
25
510

2016

€’000

127
12
10
46
2
197

47
10
8
262

2015

€’000

95
491
-
39
625

2015

€’000

122
10
10
73
3
218

50
-
-
268

Notes to the Consolidated Financial Statements (continued)

10. Income tax

Tax recognised in income statement:

Current tax expense
Current year ..................................................................................................................
Adjustment for prior years .............................................................................................
Total current tax expense ..............................................................................................
Deferred tax expense
Origination and reversal of temporary differences ........................................................
Total deferred tax (credit)/expense ...............................................................................

2016

€’000

1,971
-
1,971

109
109

2015
€’000

1,998
-
1,998

(403)
(403)

Total income tax expense ..........................................................................................

2,080

1,595

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:

Profit before tax from continuing operations .................................................................
Irish standard tax rate (12.5%) ......................................................................................
Taxes at the Irish standard rate ..................................................................................
Foreign income at rates other than the Irish standard rate .........................................
Losses creating no income tax benefit .........................................................................
Other ...........................................................................................................................
Total income tax expense ..........................................................................................

The Group’s net deferred taxation liability was as follows:

Deferred taxation assets:
Reserves, provisions and tax credits ............................................................................
Tax losses and unrealised FX gains .............................................................................
Total deferred taxation asset .........................................................................................
Deferred taxation liabilities:
Property, plant and equipment .....................................................................................
Accrued income ............................................................................................................
Profit not yet taxable .....................................................................................................
Total deferred taxation liabilities ....................................................................................

2016

€’000
11,333
12.5%
1,417
436
274
(47)
2,080

2016

€’000

377
152
529

(523)
-
(191)
(714)

2015
€’000
9,623
12.5%
1,203
95
287
10
1,595

2015

€’000

98
382
480

(459)
-
(97)
(556)

Net deferred taxation liability .........................................................................................

(185)

(76)

Notes to the Consolidated Financial Statements (continued)

10. Income tax (continued)

The movement in temporary differences during the year were as follows:

1 January 2015 – 31 December 2015

Balance Recognised in
1 January Profit or Loss
€’000

€’000

Balance

31 December

€’000

Deferred taxation assets:
Reserves, provisions and tax credits ............................................................
Tax losses ....................................................................................................
Total deferred taxation asset ........................................................................
Deferred taxation liabilities:
Property, plant and equipment .....................................................................
Accrued income and other ............................................................................
Profit not yet taxable .....................................................................................
Total deferred taxation liabilities ...................................................................

95
183
278

(570)
(108)
(79)
(757)

Net deferred taxation liability .........................................................................

(479)

3
199
202

111
108
(18)
201

403

98
382
480

(459)
-
(97)
(556)

(76)

1 January 2016 – 31 December 2016

Balance Recognised in
1 January Profit or Loss
€’000

€’000

Balance

31 December

€’000

Deferred taxation assets:
Reserves, provisions and tax credits ............................................................
Tax losses ....................................................................................................
Total deferred taxation asset ........................................................................
Deferred taxation liabilities:
Property, plant and equipment .....................................................................
Accrued income ............................................................................................
Profit not yet taxable .....................................................................................
Total deferred taxation liabilities ...................................................................

98
382
480

(459)
-
(97)
(556)

279
(230)
49

(64)
-
(94)
(158)

377
152
529

(523)
-
(191)
(714)

Net deferred taxation liability .........................................................................

(76)

(109)

(185)

Deferred taxation assets have not been recognised in respect of the following items:

Tax losses ....................................................................................................................
Total .............................................................................................................................

2016

€’000

2,631
2,631

2015

€’000

2,472
2,472

Notes to the Consolidated Financial Statements (continued)

11. Intangible Assets

Product
development

Balance at 1 January 2015 ..........................................................................
Acquisitions ....................................................................................................
Translation differences ...................................................................................
Balance at 31 December 2015 .....................................................................
Investments
Acquisitions ....................................................................................................
Translation differences ...................................................................................
Balance at 31 December 2016 .....................................................................

€’000
-
-
-
-
499
-
-
499

Goodwill

€’000
9,870
2,426
(837)
11,459
-
279
883
12,621

Total

€’000
9,870
2,426
(837)
11,459
499
279
883
13,120

Goodwill relates to the acquisition of the remaining 60% of DDS-SA Pty Limited in November 2009, the 60%
acquisition of Omina Supplies in August 2014 and the 65% acquisition of Rotacan and ABC products in August
2014, the acquisition of Ozmine in January 2015, the acquisition of Mincon Chile and Mincon Tanzania in March
2015 and the acquisition of Premier and Rockdrill Engineering in November 2016 being the dates that the Group
obtained control of these businesses. 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 analyses) is performed at each period end. Group management has determined that the
Group has multiple cash generating units, which are aggregated into one operating segment and therefore all
goodwill is tested for impairment at Group level.

The recoverable amount of goodwill has been assessed based on estimates of value in use. Calculations of value
in use are based on the estimated future cash flows using forecasts covering a five-year period and terminal value
(based on three year plans prepared annually). The most significant assumptions are revenues, operating profits,
working capital and capital expenditure. A growth rate of 3% was applied for all periods after the three years
budgeted. The discount rate in 2016 was assumed to amount to 13% (2015: 11%) after tax (approximately 16%
before tax) and has been used in discounting the cash flows to determine the recoverable amounts. Goodwill
impairment testing did not indicate any impairment during any of the periods being reported. Sensitivity in all
calculations implies that the goodwill would not be impaired even if the discount rate increased substantially or
the long-term growth was lowered to zero.

12. Other non-current assets

Other non-current assets:
Loan to former joint venture partner (1) ..........................................................................
Total other non-current assets .................................................................................

2016
€’000

238
238

2015
€’000

342
342

(1) In September 2008, the Group invested in TJM, a drilling equipment and supplies company based in
Pennsylvania. The Group disposed of its investment in March 2012. The consideration for sale of the Group’s
shareholding was a US$700,000 interest bearing loan note repayable over 6 years. As at 31 December 2016,
an amount of US$251,000 was outstanding on this loan.

Notes to the Consolidated Financial Statements (continued)

13. Property, Plant and Equipment

Cost:
At 1 January 2015 ..................................................................................
Acquisitions
Additions ................................................................................................
Disposals ...............................................................................................
Foreign exchange differences ................................................................
At 31 December 2015 ............................................................................

Acquisitions ...........................................................................................
Additions ................................................................................................
Disposals ...............................................................................................
Foreign exchange differences ...............................................................
At 31 December 2016 ...........................................................................

Land &
Buildings
€’000

Plant &
Equipment
€’000

8,280
725
180
-
(28)
9,157

-
316
(288)
81
9,266

20,192
943
1,588
(370)
125
22,478

68
4,930
(683)
614
27,407

Total

€’000

28,472
1,668
1,768
(370)
97
31,635

68
5,246
(971)
695
36,673

Accumulated depreciation:
At 1 January 2015 ..................................................................................

(1,727)

(10,346)

(12,073)

Charged in year .....................................................................................
Disposals ...............................................................................................
Foreign exchange differences ................................................................
At 31 December 2015 ............................................................................

Charged in year .....................................................................................
Disposals ...............................................................................................
Foreign exchange differences ...............................................................
At 31 December 2016 ...........................................................................

Carrying amount: 31 December 2016 .................................................
Carrying amount: 31 December 2015 ....................................................

Carrying amount: 1 January 2015 ..........................................................

(244)
-
(23)
(1,994)

(247)
31
(28)
(2,238)

7,028
7,163

6,553

(2,102)
235
(151)
(12,364)

(2,085)
453
(387)
(14,383)

13,024
10,114

9,846

(2,346)
235
(174)
(14,358)

(2,332)
484
(415)
(16,621)

20,052
17,277

16,399

The depreciation charge for property, plant and equipment is recognised in the following line items in the income
statement:

Cost of sales ....................................................................................................................
General, selling and distribution expenses ....................................................................
Total depreciation charge for property, plant and equipment .........................................

2016

€’000

1,752
580
2,332

2015

€’000

1,720
626
2,346

Notes to the Consolidated Financial Statements (continued)

14. Inventory

Finished goods and work-in-progress ...........................................................................
Capital equipment ........................................................................................................
Raw materials ...............................................................................................................
Total inventory ...............................................................................................................

2016

€’000

25,603
4,473
5,234
35,310

2015

€’000

23,408
3,805
4,832
32,045

The company recorded write-downs of €0.17 million against inventory to net realisable value during the year
ended 31 December 2016 (2015: €0.45 million). Write-downs are included in cost of sales. Included in capital
equipment inventory are third party rigs held for resale in Southern Africa.

15. Trade and other receivables

Gross receivable ...........................................................................................................
Provision for impairment ...............................................................................................
Net trade and other receivables ...................................................................................

Less than 60 days .........................................................................................................
61 to 90 days ................................................................................................................
Greater than 90 days ...................................................................................................
Net trade and other receivables ....................................................................................

2016

€’000

18,068
(1,631)
16,437

2016

€’000
11,148
1,844
3,445
16,437

2015

€’000

13,669
(648)
13,021

2015

€’000
9,607
1,931
1,483
13,021

At 31 December 2016, €3.4 million (21%) of trade receivables balance was past due but not impaired (2015: €1.5
million (11%)).

16. Loans and borrowings

Bank loans .............................................................................................. 2017-2021
Finance leases ....................................................................................... 2017-2020
Total Loans and borrowings………………………………………….…
Current………………………………………………………………….……
Non-current…………………………………………………………..……..

Maturity

2016

€’000

1,183
693
1,876
734
1,142

2015

€’000

1,684
1,131
2,815
674
2,141

The Group has a number of bank loans and finance leases in the United States and Australia with a mixture of
variable and fixed interest rates. The Group has not been in default on any of these debt agreements during any
of the periods presented. None of the debt agreements carry restrictive financial covenants.

In January 2014, Mincon Rockdrills Pty Limited drew down AUS$2.4 million (circa €1.6 million) on a 15 year
variable interest loan which is secured on land & buildings of that company with a net book value of approximately
AUS$3,500,000 (circa €2.3 million). This loan was fully repaid in August 2016.

In April 2015, Mincon Rockdrills USA Inc. drew down US$1,200,000 (circa €1.2 million) on a 5 year fixed finance
lease which is secured on plant and equipment of that company with a net book value of approximately
USD$727,000 (circa €0.6 million).

Notes to the Consolidated Financial Statements (continued)

17. Share capital and reserves

At 31 December 2015 and 2016

Authorised Share Capital
Number
Ordinary Shares of €0.01 each ..................................................................................... 500,000,000

Allotted, called-up and fully paid up shares
Number
Ordinary Shares of €0.01 each ..................................................................................... 210,541,102

€000
5,000

€000
2,105

Share Issuances
On 26 November 2013, Mincon Group plc was admitted to trading on the Enterprise Securities Market (ESM) of
the Irish Stock Exchange 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
On 26 September 2015, Mincon Group plc paid an interim dividend for 2015 of €0.01 (1 cent) per ordinary share.
On 23 June 2016, Mincon Group plc paid a final dividend for 2015 of €0.01 (1 cent) per ordinary share. On 25
September 2016, Mincon Group plc paid an interim dividend for 2016 of €0.01 (1 cent) per ordinary share. The
directors are recommending a final dividend of €0.01 (1 cent) per ordinary share for 2016 which will be subject to
approval at the company’s AGM on 28 April 2017.

Share premium and other reserve
As part of a Group reorganisation 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.

Notes to the Consolidated Financial Statements (continued)

18. 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:

2016

€’000

2015

€’000

Numerator (amounts in €’000):
Profit attributable to owners of the Parent ....................................................................
Earnings per Ordinary Share
Basic earnings per share, € ..........................................................................................
Diluted earnings per share, € ………………………………………………………………
Denominator (Number):
Basic shares outstanding ................................................................................................................................................
Diluted weighted average shares outstanding…………………………………………….

210,541,102
210,541,102

210,541,102
211,041,102

3.79c
3.79c

4.39c
4.38c

7,980

9,234

There were a number of outstanding restricted share awards (RSAs) in issue at 31 December 2015 and 2016
(Note 19).

19. Share based payment

During the year ended 31 December 2016, the Remuneration Committee made a grant of approximately 500,000
Restricted Share Awards (RSAs) to members of the senior management team. The vesting conditions include
both service and performance targets. The performance target condition is an average growth of 5% of EPS over
three years. The fair value of the RSA’s granted is equal to the company’s share price on grant date which was
€0.70c.

Notes to the Consolidated Financial Statements (continued)

20. 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.

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 2016 were as follows:

Cash and cash equivalents ..........................................................................................
Short term deposits ......................................................................................................
Loans and borrowings ..................................................................................................
Shareholders’ equity ....................................................................................................

2016

€’000

36,836
-
1,876
105,031

2015

€’000

10,644
30,781
2,815
97,439

During 2016, funds held on long term deposits matured. 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.

At year-end, the Group’s total cash and cash equivalents were held in the following jurisdictions:

Ireland ...........................................................................................................................
Americas .......................................................................................................................
Australasia .....................................................................................................................
Europe, Middle East, Africa ...........................................................................................
Total cash, cash equivalents and short term deposits ..................................................

31 December
2016
€’000
29,373
1,543
1,740
4,180
36,836

31 December

2015

€’000
34,134
2,371
1,198
3,722
41,425

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.

Notes to the Consolidated Financial Statements (continued)

20. Financial Risk Management (continued)

a) Liquidity and Capital (continued)
In the normal course of business, the Group may investigate, evaluate, discuss and engage in future company or
product acquisitions, capital expenditures, investments and other business opportunities. In the event of any future
acquisitions, capital expenditures, investments or other business opportunities, the Group may consider using
available cash or raising additional capital, including the issuance of additional debt. The maturity of the
contractual undiscounted cash flows (including estimated future interest payments on debt) of the Group’s
financial liabilities were as follows:

Total

Total
Carrying Contractual
Value Cash Flows
€’000

€’000

Less than

More than

1 Year

1-3 Years

3-5 Years

5 Years

€’000

At 31 December 2015:
Deferred contingent consideration ..............
Loans and borrowings .................................
Finance leases ...........................................
Trade and other payables ...........................
Accrued and other financial liabilities ...........
Total at 31 December 2015 .........................
At 31 December 2016:
Deferred contingent consideration ..............
Loans and borrowings .................................
Finance leases ...........................................
Trade and other payables ...........................
Accrued and other financial liabilities ...........
Total at 31 December 2016 .........................

6,347
1,684
1,131
6,780
2,009
17,951

5,669
1,183
693
6,561
2,823
16,929

6,990
1,892
1,255
6,780
2,009
18,926

5,870
1,226
726
6,561
2,823
17,206

344
270
420
6,780
2,009
9,823

-
345
418
6,561
2,823
10,147

1,371
811
835
-
-
3,017

5,870
682
308
-
-
6,860

5,275
541
-
-
-
5,816

-
173
-
-
-
173

-
270
-
-
-
270

-
26
-
-
-
26

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 euros. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the
transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at
exchange rates prevailing at the reporting date and the resulting gains and losses are recognised in the income
statement. The Group manages some of its transaction exposure by matching cash inflows and outflows of the
same currencies. The Group does not engage in hedging transactions and therefore any movements in the
primary transactional currencies will impact profitability. The Group continues to monitor appropriateness of this
policy.

The Group’s global operations create a translation exposure on the Group’s net assets since the financial
statements of entities with non-euro functional currencies are translated to euro when preparing the consolidated
financial statements. The Group does not use derivative instruments to hedge these net investments.

The principal foreign currency risks to which the Group is exposed relate to movements in the exchange rate of
the euro against US dollar, South African rand, Australian dollar and Swedish krona.

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.

Notes to the Consolidated Financial Statements (continued)

20. Financial Risk Management (continued)

b) Foreign currency risk (continued)
The Group’s worldwide presence creates currency volatility when compared year on year. In 2016, there were
two major movements in Mincon’s operational currencies:

In 2016 46% (2015: 45%) of Mincon’s revenue, €35 million (2015: approx.€31.6 million) was generated in ZAR,
AUD and SEK, compared to 15% (2015:10%) of the Group’s cost of sales. The majority of the group’s
manufacturing base has a euro or US dollar 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.

Euro exchange rates
US Dollar ........................................................................
Australian Dollar ............................................................
Great British Pound ........................................................
South African Rand .......................................................
Swedish Krona ..............................................................

Closing
1.05
1.46
0.85
14.41
9.54

Average
1.11
1.49
0.82
16.27
9.46

Closing
1.09
1.49
0.74
16.93
9.18

Average
1.11
1.48
0.73
14.16
9.35

2016

2015

The table below shows the Group’s net monetary asset/(liability) exposure. Such exposure comprises the
monetary assets and monetary liabilities that are not denominated in the functional currency of the operating unit
involved. These exposures were as follows:

Net Foreign Currency

Monetary Assets/(Liabilities)

Euro ...............................................................................................................................
US Dollar .......................................................................................................................
Australian Dollar ...........................................................................................................
South African Rand ......................................................................................................
Other ............................................................................................................................
Total .............................................................................................................................

2016
€’000

(1,001)
12,016
1,865
11,979
368
25,226

2015

€’000

258
10,385
6,925
10,406
229
28,203

A 10% strengthening of the Euro against the Group’s primary operating currencies at 31 December 2016 would
have increased/(decreased) shareholders’ equity and net profit by approximately the amounts shown below. This
analysis assumes that all other variables, remain constant.

US dollar ........................................................................
Australian dollar .............................................................
South African Rand .......................................................
* Includes net investment exposure

2016

2015

OCI*

€’000

(983)
(1,302)
(1,323)

Net Profit

€’000

(1,202)
(186)
(1,197)

OCI*

€’000

(1,007)
(1,219)
(632)

Net Profit

€’000

(410)
(90)
(635)

A 10% weakening of the Euro against the above currencies would have had the equal but opposite effect on the
above currencies to the amounts shown above, on the basis that all other variables remain constant.

Notes to the Consolidated Financial Statements (continued)

20. Financial Risk Management (continued)

c) Credit Risk

The majority of the Group’s customers are third party distributors of drilling tools and equipment. The maximum
exposure to credit risk for trade and other receivables at 31 December by geographic region was as follows:

Ireland ...........................................................................................................................
Americas .......................................................................................................................
Australasia .....................................................................................................................
Europe, Middle East, Africa ..........................................................................................
Total amounts owed ...................................................................................................

2016

€’000

27
5,340
3,559
7,511
16,437

2015

€’000

51
3,693
2,746
6,531
13,021

The Group is also exposed to credit risk on its liquid resources (cash), of which €27.1 million (2015: €30.8 million)
was held with Irish financial institutions in Ireland. The Directors actively monitor the credit risk associated with this
exposure.

d) Interest Rate Risk

Interest Rate Risk on financial liabilities
The Group is primarily equity and cash funded and has drawn down small amounts of debt for natural hedging
purposes. Movements in interest rates had no significant impact on our financial liabilities or finance cost
recognised in either 2015 or 2016.

Interest Rate Risk on cash and cash equivalents
Our exposure to interest rate risk on cash and cash equivalents is actively monitored and managed with an average
duration of less than three months. Interest rate risk on cash and cash equivalents is not considered material to
the Group.

e) Fair values

Fair value is the amount at which a financial instrument could be exchanged in an arms-length transaction
between informed and willing parties, other than in a forced or liquidation sale. The contractual amounts payable
less impairment provision of trade receivables, trade payables and other accrued liabilities approximate to their
fair values. Under IFRS 7, the disclosure of fair values is not required when the carrying amount is the reasonable
approximation of fair value.

There are no material differences between the carrying amounts and fair value of our financial liabilities as at 31
December 2015 or 2016.

Notes to the Consolidated Financial Statements (continued)

20. Financial Risk Management (continued)

e) Fair values (continued)

Financial instruments carried at fair value
The deferred contingent consideration payable represents management’s best estimate of the fair value of the
amounts that will be payable, discounted as appropriate using a market interest rate. The fair value was estimated
by assigning probabilities, based on management’s current expectations, to the potential pay-out scenarios. The
fair value of deferred contingent consideration is primarily dependent on the future performance of the acquired
businesses against predetermined targets and on management’s current expectations thereof. An increase or
decrease of 10% in management’s expectation as to the amounts that will be paid out would increase or decrease
the value of contingent deferred contingent consideration at 31 December 2016 by €0.6 million.

The significant unobservable inputs are the performance of the acquired businesses and the timing of the pay-
out.

Movements in the year in respect of Level 3 financial instruments carried at fair value
The movements in respect of the financial assets and liabilities carried at fair value in the year to 31 December
2016 are as follows:

Balance at 1 January 2016 ...................................................................................................................
Arising on acquisition ............................................................................................................................
Cash payment .......................................................................................................................................
Fair value movement .............................................................................................................................
Foreign currency translation adjustment ..............................................................................................
Balance at 31 December 2016 ............................................................................................................

Deferred
contingent
consideration

€’000
6,347
-
(682)
(431)
435
5,669

Notes to the Consolidated Financial Statements (continued)

21. Subsidiary Undertakings

At 31 December 2016, the Group had the following subsidiary undertakings:

Company

Nature of Business

Group
Share %

Registered Office &
Country of Incorporation

Mincon International Limited

Manufacturer of rock drilling equipment

100%

Smithstown, Shannon, Co. Clare, Ireland

Mincon Rockdrills USA Inc.

Manufacturer of rock drilling equipment 100%*

Mincon Rockdrills PTY Ltd

Manufacturer of rock drilling equipment

100%

107 Industrial Park, Benton, IL 62812,
USA
8 Fargo Way, Welshpool, WA 6106,
Australia

1676427 Ontario Inc. (Operating as
Rotacan)

Manufacturer of rock drilling equipment

65%*(1) 400B Kirkpatrick Steet, North Bay,

Ontario, P1B 8G5, Canada

Marshalls Carbide Ltd

Manufacturer of tungsten carbide

100% Windsor St, Sheffield S4 7WB, United

Mincon Inc.

Sales company

100%

Premier Drilling Equipment Ltd

Manufacturer of rock drilling equipment

100%

Mincon Sweden AB

Sales company

DDS-SA (Proprietary) Ltd

Sales company

ABC Products (Rocky) Pty Ltd

Sales company

Mincon West Africa SARL

Sales company

Mincon West Africa SL

Sales Company

Mincon Poland

Sales company

Mincon Rockdrills Ghana Limited

Sales company

Mincon S.A.C.

Sales company

Ozmine International Pty Limited

Sales company

Mincon Chile

Mincon Tanzania

Sales company

Kingdom
603 Centre Avenue, N.W. Roanoke, VA
24016, USA
P.O. Box 30094, Kyalami, 1684, Gauteng,
South Africa
Industrivagen 2-4, 61202 Finspang,
Sweden
1 Northlake, Jetpark 1469, Gauteng,
South Africa
2/57
Rockhampton,
Australia
Villa TF 4635 GRD, Almadies, Dakar B.P.
45534, Senegal
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

Street,
Queensland,

North
4701

Alexandra

ul.Mickiewicza 32, 32-050 Skawina,
Poland
P.O. Box CT5105, Accra,
Ghana
Calle La Arboleda 151, Dpto 201, La
Planicie, La Molina, Peru
Gidgegannup, WA 6083, Australia

Av. La Dehesa #1201, Torre Norte, Lo
Barnechea, Santiago, Chile

100%

95%

80%

100%

80%

100%

70%(1) Plot 1/3 Nyakato Road,

Mwanza, Tanzania

Mincon Namibia Pty Ltd

Sales company

60%(1) Ausspannplatz, Windhoek, Namibia

Mincon International UK Ltd

Sales Company

Mincon Mining Equipment Inc.

Sales company

Mincon Exports USA Inc.

Group finance company

100% Windsor St, Sheffield S4 7WB, United

100%*

100%

Kingdom
19789-92a Avenue, Langley, British
Columbia V1M3B3, Canada
603 Centre Ave, Roanoke VA 24016, USA

Mincon International Shannon

Dormant company

100%*

Smithstown, Shannon, Co. Clare, Ireland

Smithstown Holdings

Holding company

100%

Smithstown, Shannon, Co. Clare, Ireland

Mincon Canada Drilling Products Inc.

Holding company

Lotusglade Limited

Holding company

100%

100%*

1800-355

Suite
Vancouver, BC V6C 268, Canada
Smithstown, Shannon, Co. Clare, Ireland

Burrard

Street,

Floralglade Company

Holding company

100%

Smithstown, Shannon, Co. Clare, Ireland

Mincon Microcare Limited

Holding company

100%*

Smithstown, Shannon, Co. Clare, Ireland

Castle Heat Treatment Limited

Holding company

100%*

Smithstown, Shannon, Co. Clare, Ireland

* Indirectly held shareholding

(1) Non-controlling shareholder has a put option and consequently recorded as a liability rather than non-

controlling interest.

Notes to the Consolidated Financial Statements (continued)

22. Leases

Operating Leases
The Group leases certain of its facilities and equipment under non-cancellable operating lease agreements.
However, annual obligations under these operating leases has not exceeded €100,000 in any of the periods
presented, and is not expected to do so in the foreseeable future.

Finance Leases
At 31 December 2016, the net book value of assets acquired under finance leases was €2.3 million (2015: €2.6
million), which included €2 million (2015: €1.8 million) of accumulated depreciation. The depreciation expense
related to assets under finance leases for 2016 was €0.3 million (2015: €0.1 million).

23. Commitments

The following capital commitments for the purchase of property, plant and equipment had been authorised by the
directors at 31 December:

Contracted for ...............................................................................................................
Not-contracted for .........................................................................................................
Total .............................................................................................................................

For information on lease commitments, refer to Note 22.

24. Litigation

31 December

2016

€’000
3,889
-
3,889

2015

€’000
2,110
-
2,110

The Group is not involved in legal proceedings that could have a material adverse effect on its results or financial
position.

25. Related Parties

As at 31 December 2016, the share capital of Mincon Group plc was 56.84% (2015: 56.84%) 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. Ballybell Limited, a company controlled by Kevin Barry, holds 7.09% (2015:
14.21%) of the equity of the Company.

In September 2016, the Group paid an interim dividend for 2016 of €0.01 to all shareholders. The total dividend
paid to Kingbell Company and Ballybell Limited was €1,196,712 (September 2015: €1,196,712) and €149,178
(September 2015: €299,178) respectively.

In June 2016, the Group paid a final dividend for 2015 of €0.01 to all shareholders. The total dividend paid to
Kingbell Company and Ballybell Limited was €1,196,712 (September 2015: €1,196,712 and €299,178 (September
2015: €299,178) respectively.

The Group has a related party relationship with its subsidiary and its joint venture undertakings (see Note 21 for
a list of these undertakings), directors and officers. All transactions with subsidiaries eliminate on consolidation
and are not disclosed.

Notes to the Consolidated Financial Statements (continued)

25. Related Parties (continued)

Transactions with Directors
The Group is owed €Nil from directors and shareholders at 31 December 2016 and 2015. The Group has amounts
owing to directors of €Nil as at 31 December 2016 and 2015.

Key management compensation
The profit before tax from continuing operations has been arrived at after charging the following key management
compensation:

Short term employee benefits ......................................................................................
Bonus and other emoluments .......................................................................................
Post-employment contributions ...................................................................................
Total ..............................................................................................................................

2016

€’000

1,346
100
31
1,477

2015

€’000

1,284
-
53
1,337

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 (eight in total at year end). Amounts included above are time
weighted for the period of the individuals employment.

26. Events after the reporting date

The Board of Mincon Group plc is recommending the payment of a final dividend for the year ended 31 December
2016 in the amount of €0.01 (1 cent) per ordinary share, which will be subject to approval at the Annual General
Meeting of the Company in April 2017. This final dividend, when added to the interim dividend of 1 cent paid on
26 September 2016, makes a total distribution for the year of 2 cent per share. Subject to Shareholder approval
at the Company’s annual general meeting, the final dividend will be paid on 23 June 2017 to Shareholders on the
register at the close of business on 26 May 2017.

27. Approval of financial statements

The Board of Directors approved the consolidated financial statements on 20 March 2017.

MINCON
SEPARATE
FINANCIAL
STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

Company Statement of Financial Position
As at 31 December 2016

Notes

2016
€’000

2015
€’000

Non-Current Assets
Investments in subsidiary undertakings ........................................................
Total Non-Current Assets ...........................................................................
Current Assets
Loan amounts owing from subsidiary companies ..........................................
Other assets ...................................................................................................
Short term deposits .......................................................................................
Cash and cash equivalents ...........................................................................
Total Current Assets ...................................................................................
Total Assets .................................................................................................
Equity
Ordinary share capital ...................................................................................
Share premium ...............................................................................................
Undenominated capital ..................................................................................
Share based payment reserve .......................................................................
Retained earnings .........................................................................................
Total Equity ..................................................................................................
Current Liabilities
Accrued and other liabilities ..........................................................................
Amounts owed to subsidiary companies .......................................................
Total Current Liabilities ..............................................................................
Total Liabilities ............................................................................................
Total Equity and Liabilities ..........................................................................

The accompanying notes are an integral part of these financial statements.

1
1

On behalf of the Board:

Padraig McManus
Chairman

Joseph Purcell
Chief Executive Officer

38,065
38,065

7,814
62
-
27,712
35,588
73,653

2,105
67,647
39
89
3,535
73,415

80
158
238
238
73,653

36,595
36,595

8,542
24
29,964
1,013
39,543
76,138

2,105
67,647
39
16
6,139
75,946

34
158
192
192
76,138

Company Statement of Cash Flows
For the year ended 31 December 2016

Operating activities:
Profit for the period ........................................................................................................
Share based payments ..................................................................................................
Loans to subsidiaries .....................................................................................................
Movement in other current assets .................................................................................
Movement in accruals and intercompany creditors .......................................................
Net cash provided/(used in) by operating activities ...............................................

Investing activities
Redemption of/(investment in) short term deposits ......................................................
Investment in subsidiary undertakings .........................................................................
Net cash provided by/(used in) investing activities ................................................

Financing activities
Dividends .......................................................................................................................
Receipt of capital contribution .......................................................................................
Net cash provided by/(used in) financing activities ...............................................

Effect of foreign exchange rate changes on cash ........................................................
Net increase/(decrease) in cash and cash equivalents ...........................................
Cash and cash equivalents at the beginning of the period ..........................................
Cash and cash equivalents at the end of the period ...............................................

The accompanying notes are an integral part of these financial statements.

2016
€’000

1,606
73
728
(38)
46
2,415

29,964
(1,470)
28,494

(4,210)
-
(4,210)

-
26,699
1,013
27,712

2015
€’000

8,809
-
1,599
-
(271)
10,137

(224)
(5,227)
(5,451)

(4,210)
-
(4,210)

-
476
537
1,013

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Notes to the Company Financial Statements

1. Share Capital

See note 17 of the Mincon Group plc consolidated financial statements for details of the authorised and issued
share capital of the company.

2. Investments in subsidiary undertakings

During the year ended 31 December 2016, Mincon Group plc subscribed for further equity in its existing
subsidiaries as follows:
-
-
-

€0.7 million investment in Ozmine
€0.6 million investment in Peru
€0.1 million investment in Mincon Inc.

During 2016, the Group took steps to relocate its West Africa sales office from Dakar, Senegal to Las Palmas,
Spain, and invested a further €80,000 equity into the Las Palmas subsidiary.

3. Transactions with subsidiary companies

At 31 December 2016, the Company had advanced €7.8 million (2015: €6.7 million) to subsidiary companies
by way of loans. These loans are interest free and repayable on demand, however these are unlikely to be
recalled in the foreseeable future.

At 31 December 2016, the Company owed €158,000 (2015: €158,000) to subsidiary companies in relation to
costs incurred on its behalf.

4. Short term deposits

During 2016, funds held on long term deposits matured (2015: €29.9 million) and at 31 December 2016, the
Company had €27.7 million cash readily available.

5. Approval of financial statements

The Board of Directors approved the financial statements on 20 March 2017.

Mincon.com

AFRICA
MINCON SOUTHERN AFRICA
Johannesburg, South Africa
Tel: +27 (11) 397-3630

PREMIER DRILLING EQUIPMENT LTD.
Johannesburg, South Africa
Tel: +27 (11) 466-6822

MINCON WEST AFRICA SL
Las Palmas, Spain
Tel: +34 928 23-8026

MINCON TANZANIA
Mwanza, Tanznaia
Tel: +255 282 571-186

MINCON NAMIBIA PTY LTD
Windhoek, Namibia
Tel: +264 61 230-320

AUSTRALASIA
MINCON ROCKDRILLS PTY LTD.
Perth, Western Australia
Tel: +61 (0) 8 9471-2700

OZMINE INTERNATIONAL PTY LTD.
Perth, Western Australia
Tel: +61 (0) 1 3 0037-4552

ABC PRODUCTS (ROCKY) PTY LTD.
Rockhampton, Eastern Australia
Tel: +61 (0) 7 4927-7276

MINCON GROUP PLC
Shannon, Ireland
Tel: +353 (61) 361-099

USA, CENTRAL &
SOUTH AMERICA
MINCON INC.
Virginia, USA
Tel: +1 (540) 344-9939

MINCON ROCKDRILLS USA INC.
ILLINOIS, USA
Tel: +1 (618) 435-3404

ROTACAN
North Bay, Canada
Tel: +1 (705) 474-5858

MINCON CHILE S.A.
Santiago, Chile
Tel: +56 (2) 3223-9351

MINCON S.A.C.
Lima, Peru
Tel: +51 949 753-224

EUROPE & THE MIDDLE EAST
MINCON INTERNATIONAL LTD.
Shannon, Ireland
Tel: +353 (61) 361-099

MINCON INTERNATIONAL UK LTD.
Sheffield, UK
Tel: +44 142 288-1381

MARSHALLS CARBIDE LTD
Sheffield, UK
Tel: +44 (0) 114 275-2282

MINCON AB
Finspang, Sweden
Tel: +46 1221-5480