Mincon : 2022 First Half Results

MINCON HALF YEAR FINANCIAL RESULTS 2022

OPTIMISING PERFORMANCE

CONTENTS

MINCON GROUP PLC 2022 HALF YEAR FINANCIAL RESULTS

Chief Executive Officer Commenting on Results	2
Key Financial Commentary	6
GROUP FINANCIAL STATEMENTS
Condensed Consolidated Income Statement	9
Condensed Consolidated Statement
of Comprehensive Income	10
Consolidated Statement of Financial Position	11
Condensed Consolidated Statement of Cash Flows	12
Condensed Consolidated Statement of Changes in Equity	13
NOTES TO THE FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements	15

Mincon Group plc (Euronext:MIO AIM:MCON), the Irish engineering group specialising in the design, manufacture, sale and servicing of rock drilling tools and associated products, announces its half year results for the six months ended 30 June 2022.

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MINCON GROUP PLC 2022 HALF YEAR FINANCIAL RESULTS

JOE PURCELL, CHIEF EXECUTIVE OFFICER, COMMENTING ON THE RESULTS, SAID:

H1 2022 KEY FINANCIAL HIGHLIGHTS (COMPARISON TO H1 2021):

Revenue	up 27%	to €85.1 million
- Of which Mincon manufactured product	up 24%	to €70.9 million
- Of which non-Mincon manufactured product	up 48%	to €14.2 million
Gross Profit	up 18%	to €27.1 million
EBITDA	up 15%	to €12.7 million
Operating Profit	up 18%	to €8.8 million

"Our manufacturing strength has grown, enabling us to reduce backlogs as we manage our strong order books. Our strong market presence across the globe has ensured that our customers get the service that they should expect."

"We carried forward the momentum from H2 2021 into this period with 27% revenue growth over H1 2021. This was achieved by continuing to catch up on our strong order books for all our markets, with growth achieved across all three Industries of mining, construction, and waterwell/geothermal.

The revenue growth was achieved by increased output from our factories as a result of investment in 2021 in new capacity, as well as the acquisition of Attakroc and Spartan Drilling Tools in North America. A particularly pleasing aspect of the growth was the increase in construction revenue, most notably from the delivery of products to a large contract in the USA.

The strong growth in revenue has been accompanied by some pressure on our margins, consistent with the trends noted

in our final 2021 results and Q1 2022 trading update, due to cost increases across many fronts, but particularly in raw materials and energy, as well as freight, partly arising from the use of air freight to reduce our order backlog.Sea freight conditions remain challenging, with no improvement in sight, so we will continue our current policy of holding high levels of finished goods inventory so that we can give our customers the excellent service that they expect from Mincon.

On a more positive note, there has been a recent reduction in the constraints around raw material availability, which has enabled us to start unwinding raw material inventories, due to better supply conditions. We have implemented price increases, and these are starting to take effect, but constant vigilance is required to keep up with the pace of the cost inflationary pressures that we are seeing.

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JOE PURCELL,

CHIEF EXECUTIVE OFFICER, COMMENTING ON THE RESULTS, SAID: CONTINUED

On the product development front, we have made some good progress on the Greenhammer, and I am very pleased to report that we are in discussions with a major mining contractor in Western Australia on commercialising the system and we hope to have a further update on this shortly. This is the culmination of many years of development work, and we are confident that it can have a significant impact on both Mincon and hard rock surface mining more generally. This Greenhammer development has not gone unnoticed by the mining industry in Western Australia, who are keen to monitor the performance of this new system.

In other product development news, once Malaysia re-opened for travel, we made a trip to see how our large hammer and bit prototype had coped with the drilling conditions. We were pleased to see that they were in excellent condition which augurs well for the future of this product for large diameter drilling.

Our Subsea project progresses well, and we have successfully developed a small-scale prototype water-powered hammer and bit. This is an important early step, as this design will

be the cornerstone of our offering, once we can develop a commercial solution on successful completion of the Disruptive Technologies Innovation Fund (DTIF) project on which we are working with our consortium partners.

On the topic of sustainability, I am very pleased that Pirita Mikkanen joined our board in March this year. Pirita brings a wealth of experience in sustainability and energy efficiency which are important near-term considerations for Mincon, and she has agreed to take the chair of our newly formed Environment and Sustainability board sub-committee.

One of the first tasks of the committee was the oversight and approval of our first sustainability report which will be published later this month.

CONCLUSION

While global conditions remain challenging, we are tackling and overcoming the difficulties presented. We have introduced price increases throughout the period and as these take effect they will ease the pressure on margins in H2 2022.

Our engineering skillsets continue to deliver, and our ambition has been reinforced by the progress on this front. Our manufacturing strength has grown, enabling us to reduce backlogs as we manage our strong order books. Our strong market presence across the globe has ensured that our customers get the service that they should expect. I would like to acknowledge the efforts of all my colleagues in ensuring this strong performance for the first half of 2022 and continuing our growth for the rest of the year."

Joseph Purcell

Chief Executive Officer

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KEY FINANCIAL COMMENTARY

KEY FINANCIAL COMMENTARY CONTINUED

MARKET INDUSTRIES AND PRODUCT MIX

We have achieved strong revenue growth of 27% in this reported period. The vast majority of our growth has been organic with

a contribution from currency tailwinds, supported by a solid performance from our H2 2021 acquisition. We had positive revenue growth across our three industries.

Our revenue from the construction industry grew by 55% in the period, mostly due to large construction projects in North America. Additionally, we experienced encouraging growth in Europe & Middle East region as we rolled out improved product performance for the construction industry. We have expanded our footprint

in the construction industry, and we began invoicing outside of our two main construction industry regions of the Americas and Europe & Middle East. Though the amount invoiced is not yet of a substantial size, it is encouraging for the future, as our products and service offering to this industry becomes more widely known. The strong US dollar performance in this period also added to the growth of our construction revenue.

Mining is our largest industry; it has been the mainstay of our four regions over the past decade. We gained further inroads in market share with substantial organic revenue growth in H1 2022. Overall growth in mining revenue, including acquisitions, was 18% for the Group during the period. As the Covid-19 restrictions eased at the end of Q1 2022, it gave us the opportunity to grow our revenue in the Africa region. We have also had strong organic mining revenue growth in North America, along with a contribution from H2 2021 and H1 2022 acquisitions. Our mining revenue in the Europe & Middle East region increased during the period albeit with the suspension of supply to Russian customers at the end of February this year. Australasia mining revenue contracted during the period as the customer mix changed in the region. Currency tailwinds also played a material part in our mining revenue growth for the Group during this period.

Industry mix (by revenue)

The waterwell/geothermal industry is a significant and important industry for Mincon. It is mostly concentrated in two of our four regions, the Americas, and Europe & Middle East. We experienced positive waterwell/geothermal revenue growth in the Americas as the industry there recovers from the pandemic. Revenue in the Europe & Middle East region was flat for H1 2022. Most of the revenue we earn within the waterwell/geothermal industry in the Europe & Middle East region is through supplying the geothermal industry, and that industry has not extended past H1 2021 levels in this period.

The revenue earned by our H2 2021 acquisition has mostly contributed to the increase in non-Mincon manufactured product revenue. However, this acquisition is transitioning, where possible, to sell more Mincon products while reducing its non-Mincon manufactured inventory. Our increase in revenue to the mining industry is partially made up of non-Mincon product sales, due to the nature of mining in certain regions, and that has also contributed to the change in product mix percentage for the period.

EARNINGS

Inflationary factors have had a large impact on our input costs during the reporting period. We have experienced inflation on all fronts; in manufacturing, procurement of non-Mincon manufactured product, employee costs and operational costs in the regions in which we operate. We have sought to increase prices for our product and traded product to mitigate the pressure on our margins, however in some cases, there is a lag between cost increases and price increases, and therefore we have absorbed some of the increased costs during the period.

The price increases we have introduced have been rolled out gradually across the regions, with the majority of planned increases being fully introduced towards the end of the period which has eased the pressure on our margins. The increased sales volume of Mincon manufactured product has also contributed

to some easing on margin pressure, as our fixed overheads, such as depreciation and fixed rents, are spread across a larger manufactured volume.

The increase in our raw material costs has had the most significant impact on our manufacturing margin for the period. The cost increase is mostly due to our raw material suppliers passing on their increased production energy costs to their customers.

Our own manufacturing energy costs also significantly increased in H1 2022, particularly in our European manufacturing plants, as these costs soared across the region. We are commissioning a more energy efficient heat treatment plant in our Shannon factory in H2 2022, and once commissioned this will play a part in offsetting some of these cost increases incurred in H1 2022.

Due to the increase in demand for our products in the period, our manufacturing lead times increased. To ensure timely delivery to our customers, we continued to transport high volumes of our own product by air. We also outsourced some manufacturing to ease the pressure within the factories. As we roll out further capacity in H2 2022, we should be able to bring further manufacturing back in-house and thus increase our manufacturing margin.

Operating costs, excluding acquisitions, have increased also due to inflationary pressures, particularly employee costs across all regions, as we endeavour to retain key employees. With the easing of Covid-19 travel restrictions during the period, our sales team took the opportunity to visit our overseas customers and to visit new customers to ensure we maintain strong customer relationships. This increased travel activity, together with the increase in post-pandemic travel costs, and an increase the number of in customers, has led to a considerable operational cost increase for the Group in this period.

As a result of these inflationary cost increases during the period, the Group achieved a lower gross margin percentage versus the prior period. However, through the anticipated impact of passing on price increases to customers, raw material supply pressures unwinding and a normalisation of product mix with the sale

of more Mincon-produced product, the Group is confident of improving this margin performance in the second half of the year.

BALANCE SHEET AND CASH

We remain prudent in our approach to borrowing, particularly during inflationary periods. However, we have borrowed further across the Group in the period and have used this additional lending to finance the commissioning of plant and equipment in our factories, and to support our working capital requirements in the regions where we have experienced a surge in demand for our products.

Our concerns in relation to our supply chain are easing as raw material supplies are becoming more available in most areas in which we manufacture. As this trend continues across the Group, we are prepared to reduce the level of raw materials held in terms of the number of weeks being carried.

Sea freight conditions remain challenging and thus we are holding larger amounts of Mincon manufactured inventory, and until these issues within that industry ease we will continue to hold buffer stocks of our own inventory.

During the period we paid €1 million for current year acquisitions and €0.4 million for historical acquisitions. We also paid a final year dividend for 2021 of €2.2 million towards the end of this period.

The Board of Mincon has approved the payment of an interim dividend in the amount of 1.05 cent per ordinary share, which will be paid on 9 September 2022 to shareholders on the register at the close of business on 19 August 2022.

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For further information, please contact:

Mincon Group plc		Tel: [phone]
Joe Purcell	CEO
Mark McNamara CFO
Davy Corporate Finance	Tel: [phone]
(Nominated Adviser,
Euronext Growth
Adviser and Joint Broker)
Anthony Farrell
Daragh O'Reilly

H1 2022	H1 2021
Construction	Construction
37%	30%
Mining	Mining
48%	52%
Waterwell/	Waterwell/
Geothermal	Geothermal
15%	18%

With the sharp increased demand for our product over the reported period, we have experienced a rise in working capital requirements and this has significantly reduced cash generated from our operating activities.

We have been developing new manufacturing techniques with key plant partners, while also developing property to increase our manufacturing footprint. We have used the cash generated from our operations to fund these important projects for the future development of the Group.

Shore Capital	Tel: [phone]
(Joint Broker)

Malachy McEntyre

Mark Percy

Daniel Bush

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