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UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2016
Mazor Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2007/017221/06)
Share code: MZR
ISIN: ZAE000109823
('Mazor' or 'the company' or 'the group')
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2016
Revenue up 24.9%
Operating profit up 29.7%
HEPS up 50.7%
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
6 months as at 6 months as at 12 months as at
31 August 2016 31 August 2015 29 February 2016
R R R
ASSETS
Non-current assets
Property, plant and equipment 81 685 261 86 904 342 84 832 242
Intangible asset 17 500 000 18 500 000 18 000 000
Deferred tax 5 433 607 5 016 401 4 342 457
104 618 868 110 420 743 107 174 699
Current assets
Inventories 89 056 081 88 000 053 101 758 943
Construction contracts
and receivables 9 724 339 8 779 860 19 894 834
Current tax receivable 36 172 1 039 421 439 838
Trade and other receivables 45 813 101 54 049 572 41 359 974
Cash and cash equivalents 100 898 793 77 096 341 73 265 974
245 528 486 228 965 247 236 719 563
Total assets 350 147 354 339 385 990 343 894 262
EQUITY AND LIABILITIES
Equity
Stated capital 63 632 244 68 180 401 63 632 244
Retained income 190 692 562 164 378 171 177 069 358
254 324 806 232 558 572 240 701 602
Liabilities
Non-current liabilities
Other financial liabilities 10 131 248 16 467 544 13 035 156
Deferred tax 1 063 364 517 032 1 190 023
11 194 612 16 984 576 14 225 179
Current liabilities
Other financial liabilities 7 855 372 11 907 319 10 175 724
Current tax payable 2 267 629 3 007 692 400 438
Trade and other payables 59 736 382 72 017 882 58 022 355
Amounts due to customers 12 375 516 - 14 745 970
Bank overdraft 2 393 037 2 909 949 5 622 993
84 627 936 89 842 842 88 967 481
Total liabilities 95 822 548 106 827 418 103 192 660
Total equity and liabilities 350 147 354 339 385 990 343 894 262
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 2016 31 August 2015 29 February 2016
R R R
Revenue 305 774 776 244 722 979 491 710 681
Cost of sales (222 019 368) (172 902 627) (347 414 290)
Gross profit 83 755 408 71 820 352 144 296 391
Other income 1 530 698 368 707 1 321 605
Operating expenses (57 503 049) (50 768 973) (104 673 401)
Operating profit 27 783 057 21 420 086 40 944 595
Investment revenue 2 576 134 1 808 647 3 967 933
Finance costs (1 376 786) (1 401 719) (2 932 442)
Profit before taxation 28 982 405 21 827 014 41 980 086
Taxation (6 092 325) (6 171 463) (13 633 348)
Total comprehensive income
for the period 22 890 080 15 655 551 28 346 738
Number of shares in issue 109 351 442 121 501 553 109 351 442
Number of shares in issue
(after treasury shares) 108 963 942 111 932 883 108 963 942
Weighted average number of
shares 108 963 942 112 906 065 111 454 912
Basic and diluted earnings
per share (cents) 21.0 13.9 25.4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Retained
capital income Total
R R R
Balance at 1 March 2015 71 864 018 148 722 620 220 586 638
Changes in equity
Profit for the period - 28 346 738 28 346 738
Treasury shares acquired (8 231 774) - (8 231 774)
Dividends paid - - -
Balance at 29 February 2016 63 632 244 177 069 358 240 701 602
Changes in equity
Profit for the period - 22 890 080 22 890 080
Dividends paid* - (9 266 876) (9 266 876)
Balance at 31 August 2016 63 632 244 190 692 562 254 324 806
* A gross dividend of 8.5 cents per share was paid on 20 June 2016.
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 2016 31 August 2015 29 February 2016
R R R
Earnings attributable to
ordinary shareholders 22 890 080 15 655 551 28 346 738
Adjusted for:
Impairment of property, plant
and equipment 625 000 - 875 000
Loss on disposal of property,
plant and equipment 227 078 882 223 1 130 184
Tax effect thereof (63 582) (247 022) (316 451)
Headline earnings 23 678 576 16 290 752 30 035 471
Basic and diluted headline
earnings per share (cents) 21.7 14.4 26.9
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 2016 31 August 2015 29 February 2016
R R R
Cash flows from operating
activities
Cash generated from operations 51 497 021 48 997 451 62 976 234
Interest income 2 408 802 1 716 479 3 923 538
Finance costs (1 376 786) (1 401 719) (2 932 442)
Tax paid (5 039 459) (4 267 042) (12 389 663)
Dividends paid (9 266 876) - -
Net cash flow from operating
activities 38 222 702 45 045 169 51 577 667
Cash flows from investing activities
Purchase of property, plant
and equipment (2 816 694) (15 877 180) (19 352 628)
Proceeds from disposal of
plant and equipment 681 027 1 931 451 2 043 130
Net cash flow from investing
activities (2 135 667) (13 945 729) (17 309 498)
Cash flows from financing
activities
Proceeds from other financial
liabilities - - 6 873 285
Repayment of other financial
liabilities (5 224 260) 6 636 648 (5 400 620)
Purchase of treasury shares - (3 683 617) (8 231 774)
Net cash flow from financing
activities (5 224 260) 2 953 031 (6 759 109)
Increase in cash and cash
equivalents for the period 30 862 775 34 052 471 27 509 060
Cash and cash equivalents at
the beginning of the period 67 642 981 40 133 921 40 133 921
Cash and cash equivalents at
the end of the period 98 505 756 74 186 392 67 642 981
CONDENSED SEGMENT REPORT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 August 2016 31 August 2015 29 February 2016
R R R
Segment revenue - external
- Aluminium 156 536 087 133 414 915 280 831 877
- Steel 76 835 507 40 677 851 71 341 218
- Glass 72 403 182 70 630 213 139 537 586
- Corporate - - -
305 774 776 244 722 979 491 710 681
Segment revenue - internal
- Aluminium 401 291 810 261 1 335 491
- Steel 600 000 2 000 000 4 100 000
- Glass 20 243 043 13 958 406 27 514 234
- Corporate 1 786 273 3 007 825 5 724 098
23 030 607 19 776 492 38 673 823
Segment result - operating profit
- Aluminium 12 456 102 17 082 405 37 407 001
- Steel 8 345 705 3 178 961 4 561 812
- Glass 6 266 031 (393 654) (4 625 904)
- Corporate 715 220 1 552 374 3 601 686
27 783 058 21 420 086 40 944 595
Segment assets
- Aluminium 164 632 878 144 370 701 155 338 437
- Steel 59 155 588 60 054 569 59 725 240
- Glass 112 943 174 121 561 940 115 522 936
- Corporate 13 415 714 13 398 780 13 307 649
350 147 354 339 385 990 343 894 262
Segment liabilities
- Aluminium 44 120 351 40 705 079 36 739 159
- Steel 16 701 425 11 926 426 16 076 358
- Glass 28 412 652 45 815 680 42 706 707
- Corporate 6 588 120 8 380 233 7 670 436
95 822 548 106 827 418 103 192 660
COMMENTARY
INTRODUCTION
The unaudited condensed consolidated interim results for the six months ended
31 August 2016 ('the period') reflect a continued growth path with revenue up
across all business segments, driven mainly by increased market activity and
improved operational efficiencies. In particular, activity in Cape Town's
residential market has markedly accelerated to the group's benefit. All
three divisions are now profitable and optimal efficiencies in the Glass
division have ensured a first-time profit for this division.
BASIS OF PREPARATION
The unaudited condensed consolidated interim results have been prepared in
accordance with and containing the information required by International
Accounting Standard 34: Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and the
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the JSE Listings Requirements and the South African
Companies Act (No. 71 of 2008). The accounting policies and methods of
computation applied in the preparation of these unaudited condensed
consolidated interim results are in terms of International Financial
Reporting Standards and are consistent with those applied in the audited
annual financial statements for the year ended 29 February 2016.
These unaudited condensed consolidated interim results were authorised for
issue by the board of directors on 8 November 2016. The unaudited condensed
consolidated financial results for the period ended 31 August 2016 have been
prepared under the supervision of the financial director, Ms L Mazor CA(SA)
and have not been reviewed or audited by the company's auditors, Mazars.
These unaudited condensed consolidated interim financial results should
be read in conjunction with the audited annual financial statements for
the year ended 29 February 2016.
GROUP PROFILE
The Steel division comprises Mazor Steel which designs, supplies and erects
structural steel frames.
The Aluminium division comprises Mazor Aluminium which designs, manufactures
and installs aluminium structures such as doors, windows, shop fronts,
facades and balustrades for major blue-chip construction groups.
HBS Aluminium Systems ('HBS') augments the division's offering with a
wide range of fenestration systems and accessories.
The Glass division comprises Compass Glass and Compass Glass SA, which
manufacture and distribute laminated and toughened safety glass and
double-glazed units.
The group has a strong national presence across Gauteng and KwaZulu-Natal
in addition to its historical base in the Western Cape.
REVIEW OF OPERATIONS AND FINANCIAL RESULTS
We have experienced a busy and largely profitable six months off the
back of awakening market activity, particularly in our home base of
Cape Town. Revenue was up 24.9% to R305.8 million from R244.7 million in
the comparative period. All three business segments recorded revenue growth.
Steel was the stellar performer with revenue up 88.9% to R76.8 million
compared to R40.7 million in the comparative period. Aluminium's top line
increased by 17.3% to R156.5 million compared to R133.4 million and Glass'
by 2.5% to R72.4 million from R70.6 million at this time last year.
Notwithstanding the top-line growth in the Aluminium division, operating
profit was down 27.0% to R12.5 million (August 2015: R17.1 million),
primarily due to the marked slowdown experienced by HBS nationally.
Within aluminium manufacturing, performance was up albeit not to the extent
to offset HBS' weaker results. The trend to lower margins in Aluminium is
expected to continue for the next six months although at a less
pronounced rate. However, we expect ongoing development in HBS to counter
this downward trend and drive an improved performance in the 2017
financial year.
The Steel division experienced a significant increase in activity and,
notwithstanding the unexpectedly substantial increase in steel prices at
the start of 2016, operating profit spiralled up 162.5% to R8.3 million
compared to R3.2 million in the comparative period. Margins are expected
to continue improving further over the next six months subject to no further
unexpected steel price increases.
The Glass operations' exceptional increase in profitability relative
to revenue was driven by operational efficiencies and market focus through
the product range, both of which boosted margins. We continued to cement this
improvement with staff training and new plant and equipment and expect the
solid performance to sustain.
Group operating profit was up 29.7% to R27.8 million compared to
R21.4 million in the comparative period.
Headline earnings rose 45.4% to R23.7 million, translating into a
basic and diluted headline earnings per share of 21.7 cents
(August 2015: 14.4 cents).
RELATED PARTY TRANSACTIONS
The group has paid/approved compensation to key management personnel,
including directors and prescribed officers, to the amount of R6.1 million.
DIVIDEND DECLARATION
In line with group policy, no interim dividend was declared for the period.
PROSPECTS
We maintain a positive economic outlook going forward despite negative
market sentiment and gloomy news headlines. We believe the country is
poised for growth with the economy set to swing upward coming off a lower
base. The still growing middle class continues to stimulate demand.
In addition, recent democratic developments have seen investor sentiment/
perception improve.
The increasing market activity, particularly evident in Cape Town over
the past six months, should continue going forward as a result of increased
migration from within South Africa driving demand for residential
developments. New retail and commercial developments are expected to follow.
We are confident about the future and look forward to the next six months
of continued growth for Mazor.
APPPRECIATION
We are encouraged to report that all business segments are now profitable,
with our focus on and efforts in improving internal efficiencies bearing
fruit. Our upswing performance is undoubtedly credit to the hard work of
our staff and management and we thank them. We also thank our board for
their continued guidance and our business associates, customers and
shareholders for their ongoing support.
FORWARD-LOOKING STATEMENTS
This announcement contains certain forward-looking statements with respect
to the economy, financial condition and results of the operations of Mazor
that, by their nature, involve risk and uncertainty because they relate to
events and depend on circumstances that may or may not occur in the future.
These may relate to future prospects, opportunities and strategies. If one
or more of these risks materialise, or should underlying assumptions prove
incorrect, actual results may differ from those anticipated. By consequence,
none of the forward-looking statements have been reviewed or reported on by
the group's auditors.
On behalf of the board
M Kaplan R Mazor
Chairman CEO
8 November 2016
Cape Town
Directors: M Kaplan (Chairman)*^, R Mazor (CEO), L Mazor
(Financial Director), S Mazor, RS Schur*^, A Groll*^, F Boner*^,
A Varachhia*
*Non-executive director ^Independent
Company Secretary: Ivor Mark Bloom
Registered office: 8 Monza Road, Killarney Gardens, 7441
(PO Box 60635, Table View, 7439)
Sponsor: Bridge Capital Advisors (Pty) Limited, 2nd Floor,
27 Fricker Road, Illovo Boulevard, Illovo, 2196
(PO Box 651010, Benmore, 2010)
Transfer Secretaries: Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg,
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