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Mincon Forced To Write Off Products As Market Softness Bites

(Alliance News) - Irish engineer Mincon Group PLC on Monday reported interim revenue growth ...

Alliance News 12 August, 2019 | 9:26AM
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(Alliance News) - Irish engineer Mincon Group PLC on Monday reported interim revenue growth though profit slumped in a softening market.

Mincon, which specialises in drilling products, reported revenue of EUR59.9 million for the six months to June, 8% higher year-on-year. Mincon product sales rose 6%, and third-party product sales were up 14%.

Pretax profit was EUR1.1 million from EUR7.8 million the year before, with the underlying figure halving to EUR4.1 million.

Mincon's profit was hit by an inventory impairment, with products becoming obsolete as more advanced versions came onto the market, and re-organisation costs also contributed to the decline in profit.

The firm is paying a 1.05 euro cent dividend, the same as the year before.

"The first half of 2019 marked a period where the production capacity of the group caught up with the order book of last year, but where the market has softened during the period," said Chief Executive Joe Purcell.

"This has led to a build-up in inventory, a capacity coming on-stream in excess of current sales levels and an overhead level that requires growth to support it against the backdrop of a softening market. This has impacted on our gross margin, our operating margin and our momentum."

"Excluding the impairments, the gross margin was reduced by the revenue mix changes as lower margin businesses were owned for the full period, some excess production costs were carried as we maintained employment and the capacity for higher volume through the earlier part of the year and some softness in market pricing due to competitor behaviour," Purcell continued.

"As we recognised the change in market tone we initiated a full-scale review of our business model. This led to setting a EUR3 million targeted reduction in costs above and below the gross margin line, at all levels of employees and cost categories in the company, and a reduction in the complexity of the group."

Looking ahead, Mincon is aiming to improve performance as new contracts begin during the second half of 2019, and said it has the capacity to achieve this.

Shares were untraded on Monday morning in London, last quoted at 95.01 pence each.

By George Collard; georgecollard@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Mincon Group PLC 90.00 GBX 0.00 -
Mincon Group PLC 1.10 EUR 0.92 -

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