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MAZOR GROUP LIMITED - UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2016

Release Date: 09/11/2016 15:09
Code(s): MZR     PDF:  
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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, 
Date: 09/11/2016 03:09:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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