Mincon eyes acquisitions as first-half profits rise 11%

Irish engineering group Mincon has said it is continuing to eye up possible acquisitions as it reported an 11 per cent rise in first-half revenue and profits.

The Clare-based firm, which specialises in the design, manufacture, sale and servicing of rock-drilling tools and associated products, reported a pretax profit of €5 million for the first six months of 2016.

This compares with a €4.5 million profit a year earlier with earnings per share rising 12 per cent to 0.19 cents.

Revenue was 11 per cent ahead of last year at €36.3 million, compared with €32.7 million for the same period in 2015.

Down-the-hole products

More than 50 per cent of the Dublin-listed group’s revenue is derived from sales of “down-the-hole” products and 77 per cent of turnover comes from products manufactured in Mincon factories.

During the first half, sales of Mincon products rose 9 per cent to €27.8 million from €25.4 million a year earlier. Sales of third-party products increased 16 per cent to €8.4 million from €7.2 million.

The gross profit margin of 41 per cent in the first half was unchanged from last year, with the operating profit margin declining slightly to 13.5 per cent from 13.8 per cent. The profit attributable to shareholders improved to 11.2 per cent of sales compared with 10.7 per cent for the first half of 2015.

Mincon chief executive Joe Purcell said the results were "relatively satisfactory numbers" against the backdrop of the cyclically depressed volumes and margins in some of the sectors the group services.

Acquisition targets

He said the company had been active in approaching potential acquisition targets but did not see value for the group in terms that were being sought by many vendors.

“Through the cycle we have seen private-equity-owned companies being withdrawn from sale and refinanced, and other companies seeking unrealistic prices even while their sales and profits fall. However, we are still committed to growing both organically and by acquisition. We prefer to control our own products and our own channels to market,” said Mr Purcell.

“We have elected to invest primarily in organic growth rather than exhaust our resources by buying that which we could competitively make ourselves. We also continue to invest in new products as they move into beta testing from the research stage; and, in keeping with our R&D policy, we expense those costs as they are incurred,” he added.

Mincon had net cash of €33.8 million at the end of June as against €38.6 million, with capital expenditure of €3 million replacing acquisition investment in the first half compared with last year.

Interim dividend

The board recommended the payment of an interim dividend in the amount of 1 cent per ordinary share, which will be paid in late September to shareholders.

Mr Purcell said the company was seeing growth in sales, which was largely due to increased market share rather than a general improvement its target markets.

“There are improvements in some commodity prices and certain end markets appear to be beginning to return to growth. This should lead on to a recovery in the exploration businesses in due course and then across the mining sector. We believe that the underlying tone is improving, even if this is anecdotal rather than observable,” he said.