Final Results

Mincon Group plc

("Mincon" or the "Group")

2017 Full Year Financial Results

Mincon Group plc (ESM:MIO AIM:MCON), the Irish engineering group specialising in the design, manufacture, sale and servicing of rock drilling tools and associated products, announces its results for the year ended 31 December 2017.

Joe Purcell, Chief Executive Officer, commenting on the results, said:

A strong year of organic growth

The year was stronger for the company than the results suggest.

Out of the €97 million of revenue, the €75 million revenue for Mincon manufactured product was nearly the same as the Group total sales in the prior year. While the mix changed as we added more products, still the gross margin was maintained at 39%, just shy of the 40% the previous year. Our sales growth was 28% for the year, 33% for our own manufactured product even with the significant capacity constraints, and 13% for third party manufactured product.

The protection of the gross margin is important to us, and we see pressure there as it begins to reflect the increasing cost of supplies to the Group. Raw materials for manufactured product in the year rose to 25% from 22% of revenue. Some of this is mix change, but some of it is raw material costs being absorbed by the Group. The market is not yet taking sustainable price increases, and while we make good products, some great products, still we do not seek to be a price leader, nor do we need to be. Having said that, we expect to see upward price movement for the product ranges through 2018.

Acquisitions in the year

We acquired PPV, a company in Finland that can bring us into the construction industry and which has given us a new suite of products. We have commenced the process of building this out during the year. This follows on from the extensive training process already undertaken across our owned distribution centres.

We bought in the balance of Rotacan, making a contingent gain in the process, and applied that gain to the write downs on rigs, debtors and inventory. Rotacan has the opportunity to recover with the uptick in the sector, as it suffered very considerably with the set back in the coal industry, and the loss of a very substantial customer in Chile. However the business has weathered this, the recovery of value in Chile was more than expected last year, and all the business is growing again.

We have added the Driconeq Group in March 2018, which will give the Group a run rate of €120 million in revenue in 2018.

We acquired Viqing, a start-up drill pipe manufacturer in Sunne, Sweden, and while the turnover in that business has doubled since the acquisition, we still had maybe another €4 million of group sales to move from competing manufacturers into our own business. With the acquisition of Driconeq we believe that between these two businesses and management teams we have an excellent business with tremendous opportunities for development of customers, margins and profitability. We expect them to be combined seamlessly through H1, 2018.

Product development

We are renewing our product ranges to deliver scheduled improvements to sustain our competitive advantage. This is where the engineering knowledge we have built up continues to protect the market position of the Group. We have built out our distribution model to give us direct access to end customers to ensure that we have good market knowledge, and competent margin management.

In H1, 2018 the Greenhammer in which we have been investing will move into stage 2 of beta testing, going live on a customer rig. The outcomes of the phase 1 testing on our own rig have been positive, within the development process we have been going through, constant iteration and adjustment, finding problems and solutions, and both the customer and we believe that the product is ready to approach commercialisation.

When we can establish just how sustainable the productivity gains are, we can build the commercial model around this. This is an exciting prospect for 2018 and beyond, even if we cannot predict exactly when in the year we expect to derive revenue.

Making profits from investment

In 2018 on current volumes we will have a run rate revenue exceeding €120 million as we have acquired the Driconeq Group with the release of these results. We will have Driconeq for about nine months of the current year. Our organic growth may be constrained to single digits in the first half of 2018 , as we have been running hard in 2017, and the new turnover base is so much higher, but if the demand continues to build, the capacity coming on stream should begin to reduce any order book back log.

If we can build sustainable organic growth on top of the acquisition growth, we will deliver another very strong year. We have tightened up on our working capital, actually reducing it before the exceptional write-offs, even while sales rose 28%.

The Group is growing strongly, we have continued to build and invest, and we have made great strides in improving our culture and control. Confidence is high in the Group, in our products, our management and our people, and we have tremendous opportunities in front of us that we have yet to realise in our revenues and returns. We are not under pressure to grow revenue, that is coming naturally from good products and good management teams, our focus will be on bedding down what we have and planning the profitability and cash flow from our existing sales.

We believe the investments we have made through the downturn in footprint, products and people can now be deployed and while we have not made any more profit than we did when we came to market in 2013, that was in retrospect the final year of the last cycle, and this looks very much like the first one of the current upturn. The Group has great funding, good leadership, significant opportunities for organic and acquisition growth, exciting products and a strong, we believe, improving market position."

ENDS

20 MARCH 2018

For further information, please contact:

Mincon Group plc Tel: + 353 (61) 361 099

Joe Purcell, Chief Executive Officer

Peter Lynch, Chief Operating Officer

Davy Corporate Finance (Nominated Adviser and ESM Adviser) Tel: +353 (1) 679 6363

Anthony Farrell

Daragh O'Reilly

Any forward-looking statements made in this press release have been made in good faith based on the information available as of the date of this press release and are not guarantees of future performance. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future and reflect the Group's current expectations and assumptions as to such future events and circumstances that may not prove accurate. Actual results or developments may differ materially from the expectations expressed or implied in these statements, and the Group expressly disclaims any obligation to update any such statements whether as a result of new information, future events, or otherwise. You should not place undue reliance on any forward-looking statements. These forward-looking statements are made as of the date of this announcement.

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2017

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2017

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2017

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

On behalf of the Board:

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2017

The accompanying notes are an integral part of these financial statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2017

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

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 companies registered address is Smithstown Industrial Estate, Smithstown, Shannon, Co. Clare, Ireland.

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

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

2.  Basis of preparation

This consolidated preliminary financial information has been prepared in accordance with the International Financial report standards and interpretations approved by the International Accounting Standards Board (IASB).

The accounting policies set out in note 3 have been applied consistently in preparing the preliminary financial information for the years ended 31 December 2017 and 31 December 2016.

The Group preliminary financial information 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. This preliminary financial information are prepared on the historical cost basis.

The preparation of the consolidated preliminary financial information 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 preliminary financial information 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 preliminary financial information on a going concern basis.

3. Significant accounting principles, accounting estimates and judgements

• Disclosure initiative (Amendments to IAS 7)

• Recognition of deferred tax assets for unrealised losses (Amendments to IAS 12)

• Annual improvements to IFRSs 2014 - 2016 Cycle - various standards (Amendments to IFRS 12)

The aforementioned did not have a material impact on the Group.

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

A number of new Standards, Amendments to Standards and Interpretations are effective for annual periods beginning after 1 January 2018, and have not been applied in preparing these consolidated financial statements. These are set out as follows:

• IFRS 15: Revenue from contracts with customers*

• IFRS 9: Financial Instruments*

• Amendments to IFRS 2: Classification and measurement of share-based payment transactions*

• Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts*

• Amendments to IAS 40: Transfers of Investment Property*

• Annual Improvements to IFRS 2014-2016 Cycle - various standards (Amendments to IFRS 1 and IAS 28)*

• IFRIC 22: Foreign Currency Transactions and Advance Consideration*

• IFRS 16: Leases**

• IFRIC 23: Uncertainty over Income Tax Treatments**

• IFRS 17: Insurance Contracts***

The aforementioned did not have a material impact on the Group.

IFRSs not yet effective

The following new or amended standards and interpretations that are mandatory for 2018 annual periods (and future years) will be applicable to the Group:

The Group has not adopted any standard, interpretation or amendment that has been issued but is not yet effective. The impact of these new or amended standards and interpretations has been considered as follows:

Estimated impact of the adoption of IFRS 9, IFRS 15 and IFRS 16

The Group is required to adopt IFRS 9 Financial Instruments from 1 January 2018. The Group has assessed the estimated impact that initial application of IFRS 9 will have on the consolation financial statements. IFRS 9 Financial Instruments sets out the requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The standard replaces IAS 39 Financial Instruments: Recognition and Measurement.

Classification of financial assets and financial liabilities

Based on its assessment, the Group concludes that the classification requirements will not have a material impact on any of its accounting balances.

Impairment - Financial assets

IFRS 9 requires the Group to record expected credit losses on all of its trade receivables, either on a 12 month or lifetime basis. The Group will apply the simplified approach and record lifetime expected losses on all trade receivables. The Group has determined that due to the nature of its receivables, the impact of IFRS 9 will not significantly impact the provision for bad debts.

Estimated impact of the adoption of IFRS 15

IFRS 15 establishes a comprehensive framework for determining whether, how much, and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 revenue, IAS 11 Construction contracts and IFRIC 13 Customer Loyalty Programmes.

The Group is involved in the sale and servicing of rock drilling tools and associated products. Revenue from the sale of these goods and services to customers is measured at the fair value of the consideration received or receivable (excluding sales taxes).

The Group has reviewed the requirements of the new standard, considered those requirements in the context of the Group's revenue generating activities and identified the key areas for further detailed assessment. Based on the Group's initial review, the Group concludes that the new standard will not have a material impact on the net profit of the Group.

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

IFRS 16 Leases

IFRS 16 replaced existing leases guidance including IAS 17 leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating leases - Incentives and SIC-27 Evaluation the substance of transactions Involving the legal form of a lease.

The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply IFRS 15 at or before the date of initial application of IFRS 16.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognised a right of use assets representing its right to use the underlying asset and lease liability representing its obligation to make lease payments. There are recognition exemptions for short term leases and leases of low value items. Lessor accounting remains similar to the current standard (i.e. lessors continue to classify leases as finance or operating leases).

The Group has commenced an initial assessment of the potential impact on its consolidated financial statements but has not yet completed its detailed assessment. It is expected that the Group will recognise right of use assets and related lease liabilities for its operating leases.

* Amendments are effective for annual period commencing after 1 January 2018.

** Amendments are effective for annual period commencing after 1 January 2019.

*** Amendments are effective for annual period commencing after 1 January 2021.

Revenue recognition

Segment reporting

Earnings per share

Income taxes

Inventories

Foreign Currency

Foreign currency transactions

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

Translation of accounts of foreign entities

The assets and liabilities of foreign entities, including goodwill and fair value adjustments arising on consolidation, are translated to Euro at the exchange rates ruling at the reporting date. Revenues, expenses, gains, and losses are translated at average exchange rates, when these approximate the exchange rate for the respective transaction. Foreign exchange differences arising on translation of foreign entities are recognised in other comprehensive income and are accumulated in a separate component of equity as a translation reserve. On divestment of foreign entities, the accumulated exchange differences, are recycled through profit or loss, increasing or decreasing the profit or loss on divestments.

Business combinations and consolidation

Property, plant and equipment

Depreciation

The following useful lives are used for depreciation:

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

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

Leased assets

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 own-ership 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 enforce-able 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, transac-tion costs, and all other premiums or discounts.

Borrowing costs

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

Equity

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

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

Provisions

Exceptional Items

The Group has adopted an Income Statement format which seeks to highlight significant items within the Group results for the year. Such items may include restructuring, profit or loss on disposal or termination of operations, litigation costs and settlements, profit or loss on disposal of investments, profit or loss on disposal of property, plant and equipment, acquisition costs, adjustment to contingent consideration (arising on business combinations from 1 April 2010) and impairment of assets. Judgement is used by the Group in assessing particular items, which by virtue of their scale and nature, should be presented in the Income Statements and disclosed in the related notes as exceptional items.

Defined contribution plans

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

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.

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

Trade and other receivables

4. Revenue

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 2017 of €97.4 million (2016: €76.2 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, Sweden, South Africa, UK, Western Australia, the United States and Canada and sales offices in eleven other locations including Eastern & Western Australia, South Africa, UK, Finland, Spain, Namibia, Tanzania, Sweden, Chile and Peru. In presenting information on geography, revenue is based on the geographical location of customers and non-current assets based on the location of these assets.

Revenue by region (by location of customers):

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: 

The Group invested approximately €1.7 million on research and development projects in 2017 (2016: €0.9 million)., of this €0.6 million has been expensed in the period with the balance of €1.1 million capitalised (note 12).

General, selling and distribution expenses

Pension and Other Employee Benefit Plans

The Group operates various defined contribution pension plans. During the year ended 31 December 2017, the Group recorded €1.1 million (2016: €0.8 million) of expense in connection with these plans.

8. Exceptional Items

The write down in the year ended 31 December 2017 on the Group's capital equipment inventory is €1.7 million (2016: €nil).

The level of finished goods inventory write down recognised as an exceptional item within the cost of sales amounted to €0.5 million (2016: €nil). This write down in inventory in the year ended 31 December 2017 arose on various non-Mincon manufactured product that became obsolete due to the availability of more advanced products that have now become available on the market.

The Group provides for all receivables where there is objective evidence, including historical loss experience, that amounts are irrecoverable. The Group now considers that a receivable of €0.6 million from a South American distributor is no longer recoverable.

The Group considers acquisition and related costs as significant items. During the course of acquiring PPV and Viqing the Group incurred costs of €0.3 million.

In August 2014 the Group acquired a 65% majority shareholding in Rotacan. In June 2017 the Group acquired the 35% minority interest in this business for cash consideration of €2 million which was settled in July 2017. The acquisition of the minority shareholding in Rotacan resulted in a credit to the income statement as the amount paid to settle the contingent consideration was less than the director's estimate of its fair value at 31 December 2016.

9. Acquisitions

In 2017, the Group increased its product portfolio and further extended its distribution network through the acquisition of PPV (Pirkanmaan Poraveikot OY) and Viqing Drilling Equipment AB.

In April, 2017, Mincon acquired 100% shareholding in Pirkanmaan Poraveikot OY, PPV, this is a Finnish based business that specialises in the design and sale of specialised consumable equipment for drilling where ground disruption must be minimised.

In July 2017, Mincon acquired 100% shareholding in Viqing Drilling Equipment AB. This company specialises in the manufacture and distribution of drill pipe, adapters/subs and other drilling accessories for drilling in mining, geothermal, water well and construction industries.

A. Consideration transferred

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

B. Identifiable assets acquired and liabilities assumed

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

The carrying amount of trade receivables equates to the fair value and the gross contractual amounts. The best estimate of the amount not to be collected is €nil.

Measurement of fair values

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

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.

Goodwill

Goodwill arising from the acquisition has been recognised as follows.

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. PPV product will be sold through the Group's current sales offices and Viqing product will continue to sell through existing channels and also through Mincon's sales offices.

10. Statutory and other required disclosures

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

11.  Income tax

Tax recognised in income statement:

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:

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

11.  Income tax (continued)

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

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

12. Intangible assets

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, the acquisition of Premier and Rockdrill Engineering in November 2016 and the acquisition of PPV and Viqing in 2017 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 2017 was assumed to amount to 13% (2016: 13%) after tax (approximately 13% 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.

13. Other non-current assets

(1) In September 2008, the Group invested in TJM, a drilling equipment and supplies company based in Pennsylvania, USA. 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 2017, an amount of US$120,000 (2016: US$251,000) was outstanding on this loan.

14. Property, plant and equipment

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

15. Inventory

The company recorded write-downs of €2.3 million against inventory to net realisable value (see note 8) during the year ended 31 December 2017 (2016: €0.2 million). Write-downs are included in cost of sales, please refer to note 8 for further details. Included in capital equipment inventory are third party rigs held for resale in Southern Africa.

16. Trade and other receivables and the current assets

At 31 December 2017, €3.9 million (22%) of trade receivables balance was past due but not impaired (2016: €3.4 million (21%)).

b) Other current assets

17. Loans and borrowings

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 July 2017, Mincon Nordic OY a subsidiary of Group plc acquired 100% of Viqing Drilling Equipment AB. This acquisition included variable rate loans on the books of Viqing and its subsidiaries of €1.2 million. The loans are secured against land & buildings and plant & machinery.

18. Share capital and reserves

Share issuances

Voting rights

Dividends

In September 2017, Mincon Group plc paid an interim dividend for 2017 of €0.01 (1 cent) per ordinary share. In June 2017, Mincon Group plc paid a final dividend for 2016 of €0.01 (1 cent) per ordinary share. In 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 €0.0105 (1.05 cent) per ordinary share for 2017 which will be subject to approval at the company's AGM in April 2018.

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.

19. 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:

There were a number of outstanding restricted share awards (RSAs) in issue at 31 December 2016 and 2017.

20. Share based payment

During the year ended 31 December 2017, the Remuneration Committee made a grant of approximately 1,153,845 Restricted Share Awards (RSAs) to members of the senior management team. The vesting conditions of the scheme state that the minimum growth in EPS shall be CPI plus 5% per annum, compounded annually, over the relevant three accounting years up to the share award of 100% of the participants basic salary. Where awards have been granted to a participant in excess of 100% of their basic salary, the performance condition for the element that is in excess of 100% of basic salary is that the minimum growth in EPS shall be CPI plus 10% per annum, compounded annually, over the three accounting years.

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.

21. Financial risk management

The Group is exposed to various financial risks arising in the normal course of business. Its financial risk exposures are predominantly related to changes in foreign currency exchange rates and interest rates, as well as the creditworthiness of our counterparties.

The 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.

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 2017 were as follows:

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:

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.

21. 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:

b) Foreign currency risk

The Group is a multinational business operating in a number of countries and the euro is the presentation currency. The Group, however, does have revenues, costs, assets and liabilities denominated in currencies other than euro. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the reporting date and the resulting gains and losses are recognised in the income statement. The Group manages some of its transaction exposure by matching cash inflows and outflows of the same currencies. The Group does not engage in hedging transactions and therefore any movements in the primary transactional currencies will impact profitability. The Group continues to monitor 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.

21. Financial risk management (continued)

b) Foreign currency risk (continued)

The Group's worldwide presence creates currency volatility when compared year on year. In 2017, there were two major movements in Mincon's operational currencies:

· The weakening closing USD rate against the Euro at the end of 2017 (-14% compared with 2016 closing rate) contributed significantly to the FX loss in the Group's Income Statement. This is due to the high monetary net asset exposure the Group has to the USD.

· A strengthening in the Rand average rate against the Euro of 8% compared to 2016 average rate, which resulted in an increase in reported revenue for the year of approximately €1 million. This was offset by the FX impact on the retranslation of underlying Rand costs, as a result, the strengthening Rand average rate against the Euro did not significantly impact reported profit for 2017.

In 2017 44% (2016: 46%) of Mincon's revenue €97 million (2016: €35 million) was generated in ZAR, AUD and SEK, compared to 9% (2016: 15%) 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.

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:

21. Financial risk management (continued)

c) Credit risk

The majority of the Group's customers are third party distributors and end users 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: