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Mazor Group Limited - Summarised Results Of The Audited Consolidated Annual Financial Statements For The Year Ended 28 February 2017

Release Date: 16/05/2017 16:08
Code(s): MZR
 
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Summarised Results of the Audited Consolidated Annual Financial Statements for the year ended 28 February 2017

MAZOR GROUP LIMITED 
('MAZOR' OR 'THE COMPANY' OR 'THE GROUP') 
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
REGISTRATION NUMBER: 2007/017221/06
SHARE CODE: MZR
ISIN: ZAE000109823 

REVENUE UP 18.5%
OPERATING PROFIT UP 35.8%
HEPS UP 62.1% TO 43.6 CENTS PER SHARE

SUMMARISED RESULTS OF THE AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 
FOR THE YEAR ENDED 28 FEBRUARY 2017

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
                                                                         2017           2016
                                                                            R              R
ASSETS               
Non-current assets               
Property, plant and equipment                                      79 856 462     84 832 242
Intangible asset                                                   17 000 000     18 000 000
Deferred tax                                                        3 743 963      4 342 457
                                                                  100 600 425    107 174 699
               
Current assets               
Inventories                                                        77 840 847    101 758 943
Construction contracts and receivables                             23 022 833     19 894 834
Current tax receivable                                                426 553        439 838
Trade and other receivables                                        35 992 984     41 359 974
Cash and cash equivalents                                         106 458 363     73 265 974
                                                                  243 741 580    236 719 563
Total assets                                                      344 342 005    343 894 262
EQUITY AND LIABILITIES               
Equity               
Stated capital                                                     63 473 194     63 632 244
Retained income                                                   214 843 423    177 069 358
                                                                  278 316 617    240 701 602
Liabilities               
Non-current liabilities               
Other financial liabilities                                         3 949 921     13 035 156
Deferred tax                                                        2 612 738      1 190 023
                                                                    6 562 659     14 225 179
Current liabilities               
Other financial liabilities                                        11 230 399     10 175 724
Current tax payable                                                   510 875        400 438
Trade and other payables                                           46 458 636     58 022 355
Amounts due to customers                                            1 262 819     14 745 970
Bank overdraft                                                              -      5 622 993
                                                                   59 462 729     88 967 481
Total liabilities                                                  66 025 388    103 192 660
Total equity and liabilities                                      344 342 005    343 894 262

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND 
OTHER COMPREHENSIVE INCOME
                                                                         2017           2016
                                                                            R              R
Revenue                                                           582 845 340    491 710 681 
Cost of sales                                                    (413 992 751)  (347 414 290)
Gross profit                                                      168 852 589    144 296 391 
Other income                                                        2 429 372      1 321 605 
Operating expenses                                               (115 687 920)  (104 673 401)
Operating profit                                                   55 594 041     40 944 595 
Investment revenue                                                  5 789 611      3 967 933 
Finance costs                                                      (2 327 784)    (2 932 442)
Profit before taxation                                             59 055 868     41 980 086 
Taxation                                                          (12 014 927)   (13 633 348)
Total comprehensive income for the period                          47 040 941     28 346 738 
               
Basic and diluted earnings per share                  (cents)            43.2           25.4

                      
CONSOLIDATED STATEMENT OF CASH FLOWS 
                                                                         2017           2016
                                                                            R              R
Cash flows from operating activities               
Cash generated from operations                                     67 649 116     62 976 234 
Interest income                                                     5 718 058      3 923 538 
Finance costs                                                      (2 327 784)    (2 932 442)
Tax paid                                                           (9 869 995)   (12 389 663)
Dividends paid                                                     (9 266 876)             -
Net cash flow from operating activities                             51 902 517     51 577 667 
               
Cash flows from investing activities                
Purchase of property, plant and equipment                          (6 270 653)   (19 352 628)
Proceeds from disposal of plant and equipment                       1 373 128      2 043 130 
Net cash flow from investing activities                            (4 897 525)   (17 309 498)
               
Cash flows from financing activities               
Proceeds from other financial liabilities                                   -      6 873 285 
Repayment of other financial liabilities                           (8 030 560)    (5 400 620)
Purchase of treasury shares                                          (159 050)    (8 231 774)
Net cash flow from financing activities                            (8 189 610)    (6 759 109)
               
Increase in cash and cash equivalents for the year                 38 815 382     27 509 060 
Cash and cash equivalents at the beginning of the year             67 642 981     40 133 921 
Cash and cash equivalents at the end of the year                  106 458 363     67 642 981

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                            Stated capital    Retained income   Total equity
                                                         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)
Balance at 29 February 2016                     63 632 244        177 069 358    240 701 602
               
Changes in equity               
Profit for the period                                              47 040 941     47 040 941 
Treasury shares acquired                          (159 050)                         (159 050)
Dividends paid                                                     (9 266 876)*   (9 266 876)
Balance at 28 February 2017                     63 473 194        214 843 423    278 316 617
               
* A gross dividend of 8.5 cents per share was paid on 20 June 2016
(no dividend was paid in the prior year)               

NOTES TO THE SUMMARISED RESULTS               
Reconciliation between earnings and headline earnings:               
                                                                         2017           2016
                                                                            R              R

Earnings attributable to ordinary shareholders                     47 040 941     28 346 738 
Adjusted for:               
(Reversal)/Impairment of PPE                                         (875 000)       875 000 
Loss on disposal of property, plant and equipment                   1 897 903      1 130 184 
Tax effect thereof                                                   (531 413)      (316 451)
Headline earnings                                                  47 532 431     30 035 471 
Basic and diluted headline earnings per share      (cents)               43.6           26.9

SUMMARISED SEGMENT REPORT               
                                                                         2017           2016
                                                                            R              R
Segment revenue - external               
- Aluminium                                                       293 373 314    280 831 877 
- Steel                                                           133 800 550     71 341 218 
- Glass                                                           155 671 476    139 537 586 
- Corporate                                                                 -              -
                                                                  582 845 340    491 710 681 
               
Segment revenue - internal               
- Aluminium                                                           787 520      1 335 491 
- Steel                                                             3 918 884      4 100 000 
- Glass                                                            40 776 438     27 514 234 
- Corporate                                                         3 612 546      5 724 098 
                                                                   49 095 388     38 673 823 
               
Segment result - operating profit               
- Aluminium                                                        26 758 533     37 407 001 
- Steel                                                            10 772 254      4 561 812 
- Glass                                                            16 357 354     (4 625 904)
- Corporate                                                         1 705 900      3 601 686 
                                                                   55 594 041     40 944 595 
Segment assets               
- Aluminium                                                       161 529 896    155 338 437 
- Steel                                                            58 533 220     59 725 240 
- Glass                                                           110 515 495    115 522 936 
- Corporate                                                        13 763 394     13 307 649 
                                                                  344 342 005    343 894 262 
               
Segment liabilities               
- Aluminium                                                        20 389 707     36 739 159 
- Steel                                                            15 673 987     16 076 358 
- Glass                                                            24 126 422     42 706 707 
- Corporate                                                         5 835 272      7 670 436 
                                                                   66 025 388    103 192 660

COMMENTARY
INTRODUCTION
The summarised results of the audited consolidated financial statements ('summarised 
results') for the year ended 28 February 2017 ('the year') reflect increased revenue 
across all of the group's divisions - a very pleasing result. In particular, the 
turnaround in the Glass division has repaid the focus and investment dedicated to it. 
Cost containment and a consistently high level of service have helped retain customers 
in a margin-pressured environment. Group revenue and profit have improved alongside 
growth in the construction sector, particularly in the residential and retail sub-sectors 
in Cape Town, which continue to bolster our growth. 

BASIS OF PREPARATION
The summarised results of the audited consolidated annual financial statements contain 
the information required by IAS 34: Interim Financial Reporting, and have been prepared 
in accordance with the framework concepts and the measurement and recognition requirements 
of International Financial Reporting Standards ('IFRS'), the SAICA financial reporting 
guides as issued by the Accounting Practices Committee, the Companies Act, No. 71 of 2008, 
and the JSE Listings Requirements.

The accounting policies and methods of computation applied in the preparation of these 
summarised consolidated annual financial results are in terms of IFRS and consistent 
with those applied in the most recently issued audited annual financial statements.

The summarised results have been prepared under the supervision of the financial director, 
Ms L Mazor CA(SA). This summarised report is extracted from audited information, but is 
not itself audited. The directors take full responsibility for the preparation of the 
summarised results and the financial information has been correctly extracted from the 
underlying annual financial statements.

The consolidated annual financial statements from which the summarised results have been 
derived were audited by the group's external auditors, Mazars, who expressed an unqualified 
audit opinion. This is available for inspection at the company's registered office. That 
report does not necessarily cover all the information contained in this announcement.

Shareholders are therefore advised that, in order to obtain a full understanding of the 
nature of the auditors' work, they should refer to the report together with the consolidated 
annual financial statements contained in the integrated annual report. A copy of the full 
set of consolidated annual financial statements is available for inspection from the company 
secretary at the registered office of the group. In order to request a copy, please contact 
Mr I Bloom on 021 981 4300 or e-mail the request to ivor@altotrust.com.

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') adds to 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, as well as 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
All divisions of the group performed well this year, returning increased revenue, 
which is further reflected in overall group revenue and profit figures. 

The Aluminium division enjoyed a good year with improved revenue from manufacturing 
operations. However, operating profit was down. This was due to lower top-line revenue 
in HBS (aluminium distribution) as a result of increased competition. 

The Steel division saw significantly increased revenue this year. Rising material costs 
remain a persistent challenge.

The Glass division also returned strongly to profitability, the result of a successful 
product-focused strategy and optimised efficiencies. This turnaround was particularly pleasing.

No material reportable events occurred between the reporting date and the date of 
this announcement.

FINANCIAL RESULTS
Revenue was up by 18.5% to R582.8 million from R491.7 million in the prior year. 

The Aluminium division posted revenue growth up 4.5% to R293.4 million, although 
operating profit dropped by 28.5% to a still healthy R26.8 million. The Glass division 
also not only increased its revenue by 11.6% to R155.7 million, but returned to 
a pleasing profit of R16.4 million after a prior-year loss. Revenue in the Steel 
division rose 87.6% year-on-year to R133.8 million, with profit also increasing 
from R4.6 million to R10.8 million compared to the prior year - an increase of 136.1%.

Operating profit for the group overall rose 35.8% to R55.6 million compared to R40.9 million 
in the prior year, while headline earnings increased to R47.5 million from R30 million 
in the prior-year, resulting in an increase in headline earnings per share to 43.6 cents 
compared to 26.9 cents - a 62.1% rise.

The group increased cash and cash equivalents by R33.2 million due to operating activities. 

At 28 February 2017, the group had issued guarantees amounting to R35.7 million 
compared to R66.1 million at 29 February 2016. These guarantees have arisen in the 
ordinary course of business and it is not expected that any loss will arise therefrom.

SHARE TRANSACTIONS
During the year, Mazor repurchased 101 505 of its own shares for a total consideration of 
R159 050. The shares were repurchased by a subsidiary of the company and held as 
treasury shares.

DIRECTORATE
There were no changes to the directorate of the business in the year under review.

CAPITAL REDUCTION DISTRIBUTION
Notice is hereby given that on 15 May 2017, the board declared a capital reduction 
distribution of 14.4 cents per share as a return of contributed tax capital to 
shareholders recorded in the share register of the company at the close of business on 
Friday, 9 June 2017.

The following salient dates apply to the dividends:

Last day to trade cum distribution         6 June 2017
Shares trade ex distribution               7 June 2017
Record date                                9 June 2017
Payment date                              12 June 2017

Shareholders may not dematerialise or rematerialise their shares between Wednesday, 
7 June 2017 and Friday, 9 June 2017, both days inclusive.

Additional information
The directors have determined that this capital reduction distribution will be paid 
out of qualifying contributed tax capital as contemplated in the definition of 'contributed 
tax capital' in section 1 of the Income Tax Act, 1962. As the distribution will be regarded 
as a return of capital and may have potential capital gains tax consequences, Mazor 
shareholders are advised to consult their tax advisors regarding the impact of the 
distribution.

The directors have reasonably concluded that the company will satisfy the solvency 
and liquidity requirements of sections 4 and 46 of the Companies Act, 2008, immediately 
after the capital distribution.

The net amount payable to shareholders is R15 746 608, being 14.4 cents per share, 
based on the current number of 109 351 442 shares in issue.

The income tax reference number of Mazor Group Limited is 9495/976/15/2.

PROSPECTS
Although the year in review has been comparatively stable economically and politically, 
we anticipate some political and economic uncertainty in South Africa in the year ahead, 
particularly in terms of fiscal policy and rising finance costs. 

We believe that the Western Cape will continue to be a desirable residential destination 
and a consequent source of business.

We also note the ongoing focus on logistics and warehousing nationally, which offers 
opportunity for the Steel division.

In both these regards, we continue to be well positioned to take advantage of any 
future growth.

There is no doubt that oversupply and continuing competition in our sector means 
pressure will remain on margins for some time. Rationalisation is not occurring at 
the pace required to ensure sustained price increases, so demand-side inflation 
will remain low.

In addition, skills shortages at all levels of the business are an ongoing challenge. 
Our solution remains to invest in in-house training to create the required skills. 

We will continue to control costs rigorously, invest in in-house training and keep a 
keen eye on input costs in particular. Margins will come from efficiencies and product focus.

The annual general meeting will be held on 31 July 2017 at 10:00 at Mazars House, 
Rialto Road, Grand Moorings Precinct, Century City, Cape Town.

APPRECIATION
We would like to take this opportunity to thank our management and staff who work 
side by side with us, often in challenging conditions. Their support and commitment 
are key contributors to our strong performance this year. We are also grateful to our 
fellow directors 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 
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
Chairperson             CEO

15 May 2017
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, 2196 
(PO Box 651010, Benmore, 2010)

Transfer secretaries: Computershare Investor Services (Pty) Limited, 
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196 (PO Box 61051, 
Marshalltown, 2107)

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