Mincon

01 February 2024
By Maynard Paton

H1 2023 results summary for Mincon (MCON):

• An underwhelming H1 performance caused by reduced mining-customer activity, with revenue down 5%, profit down 12% and an unchanged dividend paid more than two months later than normal.

• This H1 was overshadowed by October’s Q3 update, which warned of weaker sales, lower margins, exceptional costs and H2 Ebitda dropping 45%.

• The Q3 update — and possibility of a difficult FY 2024 — heightened concerns about the group’s debt covenants, capital-intensive growth strategy, dividend payments and boardroom personnel.

• Hopes of improved financials seem to rest upon a mining-customer revival, further geothermal installations plus R&D projects such as Greenhammer and subsea micropiling becoming commercial successes.

• The shares currently trade below their 2013 flotation price and leave minority investors trusting the 56% family owners take the necessary action to safeguard the business. I continue to hold.

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24 June 2023
By Maynard Paton

FY 2022 results summary for Mincon (MCON):

• A positive performance buoyed by healthy post-pandemic orders, showing revenue up 18% (to €170m) and profit up 9% (to €20m) to set new FY records.

• Bumper construction income, greater direct sales and increased US revenue counterbalanced weaker mining activity in Europe and Australia.

• Rig problems have beset early revenue from the “transformational” Greenhammer system, which management now believes has a 15-year useful life.

• A €14m working-capital investment pushed stock levels to a huge €77m, squeezed free cash flow to only €2m and raised questions about the debt-funded dividend.

• MCON’s “superior technical and innovative technology” is still to translate into superior financials, with obvious evidence of smart capital-allocation decisions remaining elusive. I continue to hold.

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21 February 2023
By Maynard Paton

Results summary for Mincon (MCON):

• A very satisfactory performance buoyed by healthy post-pandemic orders, showing revenue up 27% and profit up 18% to set new H1 records.

• Positive progress was reported throughout the group, with construction-related sales up 55% helped by greater demand for specialist drilling.

• The long-awaited Greenhammer system has won its first commercial contract and now offers “transformational potential” to MCON and the mining industry. 

• Greenhammer and other new developments may hopefully improve MCON’s financials, given the group’s modest margin, significant stock level, net debt and poor cash conversion.

• The shares do not appear outrageously expensive on a possible 16x P/E, although the group’s expansion led by the dominant family owners has yet to deliver superior returns to outsiders. I continue to hold.

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02 June 2022
By Maynard Paton

Results summary for Mincon (MCON):

• A better-than-expected performance, bolstered by a record H2 and perhaps a cracking Q4 following less pandemic disruption.

• Positive progress was recorded at all three product divisions, with higher commodity prices pushing H2 mining sales up 30%.

• Encouraging development news included the long-awaited Greenhammer system delivering “outstanding” test results and potentially becoming available to purchase this year. 

• Despite the long-term commitment to first-class product manufacturing, MCON’s financials sadly still lack signs of an obvious ‘moat’.

• The shares do not appear outrageously expensive, assuming H2 extrapolations and upbeat FY 2022 trading do indeed support a 15x P/E. I continue to hold.

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22 September 2021
By Maynard Paton

Results summary for Mincon (MCON):

• A very mixed H1 performance, as record €67m six-month revenue contrasted with profit down as much as 13% due to general pandemic disruption.

• European construction revenue encouragingly climbed 50% supported by numerous smaller projects and innovative sector products.

• Customer testing of the “disruptive” Greenhammer system remains on hold, although other developments are now “poised to deliver“.

• The move to selling a wider range of equipment direct to customers continues to limit margins/returns on equity/cash flow and raise doubts about an indisputable competitive ‘moat’.

• While a P/E of 20 is not a clear bargain, the long-time family management expects a stronger H2 and claims to have established a “platform for future growth“. I continue to hold.

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30 March 2021
By Maynard Paton

Results summary for Mincon (MCON):

• Acceptable pandemic progress, with underlying revenue up 6% and profit up 28% due almost entirely to margin improvements.

• Strategic efforts to sell drills direct and supply the construction market seem to have borne fruit and underpinned the higher earnings.

• A margin comparison with larger rivals raises questions as to whether MCON’s products enjoy an indisputable competitive ‘moat’.  

• Rising costs and enormous stock levels raise further questions about the group’s underlying economics. 

• New products expected to “transform” drilling plus a desire to “innovate and disrupt the market” might justify the 19x-plus P/E. I continue to hold.

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21 August 2020
By Maynard Paton

Results summary for Mincon (MCON):

• A generally satisfactory update given the pandemic, with underlying revenue up almost 5% and profit before adjustments perhaps up as much as 28%.

• The postponement of the interim dividend due to Covid-19 was disappointing after earlier statements barely mentioned the virus.

• An emphasis on “geotechnical” drills and services has reduced the dependence on mining customers to 52% of revenue. 

• Modest cash generation, average margins and enormous stock levels offer significant scope for accounting improvements during the current ‘moat-rebuilding’ phase.  

• Various (perhaps optimistic) assumptions alongside opportunities from new products lead to a reasonable 14.3x P/E. I continue to hold.

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08 April 2020
By Maynard Paton

Results summary for Mincon (MCON):

• A rather muddled and subdued update, the highlight of which during the present Covid-19 uncertainty was a maintained dividend.

• Impairments, exceptionals, accounting quirks and profit diving 28% may all be forgiven if, as seems to be the case, operations have not been too affected by the pandemic.

• An emphasis on “geotechnical” drills and lack of “challenger model” references imply new priorities as the business remains in a ‘moat-digging’ phase.

• Appealing management remarks about product quality, patents and future innovation have yet to make any impact on the somewhat messy financials.

• A post-results acquisition leaves the business with net debt while the underlying P/E of 16 is not an obvious bargain. I continue to hold.

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27 August 2019
By Maynard Paton

Results summary for Mincon (MCON):

• Mixed progress, with little underlying revenue growth and profit down 14% due to a “softening market”.

• Earnings were bolstered by the remarkable €8m disposal of a subsidiary purchased 15 months earlier for effectively €1m.

• New ‘challenger’ plan of selling direct to customers appears to have started well with two new contracts won.

• Financials could be improved after accounts show modest margins, notable write-offs and significant working-capital investment.

• The underlying P/E of 20 is not a bargain. I continue to hold.

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20 March 2019
By Maynard Paton

Results verdict on Mincon (MCON):

• Acceptable double-digit growth supported by encouraging organic sales and the purchase of Driconeq.

• New ‘Greenhammer’ product appears to offer attractive possibilities through “disruptive technology”.

• Year ahead to focus on consolidating operations after bumper orders created production constraints during 2017 and 2018. Recent trading not buoyant.

• Accounts offer scope for improvement as hefty stock build-up unwinds, capital expenditure falls and cost savings are found.

• The underlying P/E of 19 is not an obvious bargain. I continue to hold.

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