MCON

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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23 August 2018
By Maynard Paton

Update on Mincon (MCON).

Event: Interim results for the six months ending 30 June 2018 published 13 August 2018.

Summary: MCON extended its bumper 2017 progress with some very satisfactory first-half figures. The specialist drill manufacturer claimed greater orders from the mining sector had supported 12% organic sales growth, while my sums suggested a robust 19% operating margin was reached during the second quarter. In addition, current trading appears healthy and a recent acquisition may have performed much better than expected. However, a P/E in excess of 20 probably reflects all of the positives, especially given cash conversion remains below par. I continue to hold.

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21 March 2018
By Maynard Paton

Update on Mincon (MCON).

Event: Final results for the twelve months ending 31 December 2017 published 20 March 2018

Summary: MCON’s subdued years of 2014, 2015 and 2016 now seem long forgotten after the mining-drill manufacturer confirmed a bumper set of 2017 numbers. Greater client activity has now fuelled director talk of “significant opportunities” and “the first year of the current upturn”, and the share price has naturally climbed to a premium level. Meanwhile, the accounts remain cash-rich, several factors may be suppressing certain ratios, and even the standstill dividend has been lifted. I continue to hold.

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06 September 2017
By Maynard Paton

Quick update on Mincon (MCON).

Event: Interim results for the six months ending 30 June 2017 published 17 August 2017

Summary: A very welcome set of results, which I calculate included the drill specialist’s best-ever quarter as a quoted company. Revenue and profit enjoyed significant advances, and it appears the group’s mining customers are now happy to place greater orders following the sector downturn of the last few years. Also pleasing was the improvement to cash flow and the possibility of certain new projects providing further “meaningful” growth. I continue to hold.

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22 March 2017
By Maynard Paton

Quick update on Mincon (MCON).

Event: Final results for the year ending 31 December 2016 published 21 March 2017

Summary: These were quite reasonable results, given MCON is still plugging away serving the subdued mining sector with its heavy-duty drills and bits. The introduction of a new accounting policy was disappointing, although the chief exec’s bullish commentary was encouraging and suggested the group’s expansion could accelerate in the years to come. Such growth ought to improve MCON’s rather average margin and return on equity numbers — at present those ratios may not be doing justice to the group’s competitive position. I continue to hold.     

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