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Mazor Group Limited - Unaudited Condensed Consolidated Interim Results

Release Date: 08/11/2017 17:36
Code(s): MZR
 
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Unaudited Condensed Consolidated Interim Results

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 2017

HIGHLIGHTS
Revenue Down 24.8%
HEPS down 91.2%

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                        Unaudited         Unaudited           Audited
                                   6 months as at    6 months as at   12 months as at
                                   31 August 2017    31 August 2016  28 February 2017
                                                R                 R                 R
Assets
Non-current assets
Property, plant and equipment          83 763 213        81 685 261        79 856 462
Intangible asset                       16 500 000        17 500 000        17 000 000
Deferred tax                            4 905 071         5 433 607         3 743 963
                                      105 168 284       104 618 868       100 600 425
                                      326 765 325       350 147 354       344 342 005
Current assets
Inventories                            84 169 135        89 056 081        77 840 847
Construction contracts
and receivables                        10 594 804         9 724 339        23 022 833
Current tax receivable                          -            36 172           426 553
Trade and other receivables            45 118 700        45 813 101        35 992 984
Cash and cash equivalents              81 714 402       100 898 793       106 458 363
                                      221 597 041       245 528 486       243 741 580
Total assets                          326 765 325       350 147 354       344 342 005
Equity and liabilities
Equity
Stated capital                         62 912 698        63 632 244        63 473 194
Retained income                       201 178 729       190 692 562       214 843 423
                                      264 091 427       254 324 806       278 316 617
Liabilities
Non-current liabilities
Other financial liabilities            11 321 169        10 131 248         3 949 921
Deferred tax                            1 380 098         1 063 364         2 612 738
                                       12 701 267        11 194 612         6 562 659
Current liabilities
Other financial liabilities             7 024 779         7 855 372        11 230 399
Current tax payable                     2 872 342         2 267 629           510 875
Trade and other payables               40 075 510        59 736 382        46 458 636
Amounts due to customers                        -        12 375 516         1 262 819
Bank overdraft                                  -         2 393 037                 -
                                       49 972 631        84 627 936        59 462 729

Total liabilities                      62 673 898        95 822 548        66 025 388
Total equity and liabilities          326 765 325       350 147 354       344 342 005

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

                                        Unaudited         Unaudited           Audited

                                   6 months as at    6 months as at   12 months as at
                                   31 August 2017    31 August 2016  28 February 2017
                                                R                 R                 R
Revenue                               229 934 534       305 774 776       582 845 340
Cost of sales                        (171 610 368)     (222 019 368)     (413 992 751)
Gross profit                           58 324 166        83 755 408       168 852 589
Other income                              711 952         1 530 698         2 429 372
Operating expenses                    (57 617 775)      (57 503 049)     (115 687 920)
Operating profit                        1 418 343        27 783 057        55 594 041
Investment revenue                      3 074 494         2 576 134         5 789 611
Finance costs                            (754 407)       (1 376 786)       (2 327 784)
Profit before taxation                  3 738 430        28 982 405        59 055 868
Taxation                               (1 712 316)       (6 092 325)      (12 014 927)
Total comprehensive income
for the period                          2 026 114        22 890 080        47 040 941
Basic and diluted earnings
per share (cents)                             1.9              21.0              43.2

CONSOLIDATED STATEMENT OF CASH FLOWS

                                        Unaudited         Unaudited           Audited

                                   6 months as at    6 months as at   12 months as at
                                   31 August 2017    31 August 2016  28 February 2017
                                                R                 R                 R
Cash flows from operating activities
Cash (utilised in)/generated 
from operations                        (3 966 353)       51 497 021        67 649 115
Interest income                         3 001 666         2 408 802         5 718 058
Finance costs                            (754 407)       (1 376 786)       (2 327 784)
Tax paid                               (1 318 041)       (5 039 459)       (9 869 996)
Dividends paid                        (15 690 808)       (9 266 876)       (9 266 876)
Net cash flow from
operating activities                  (18 727 943)       38 222 702        51 902 517

Cash flows from investing activities
Purchase of property,
plant and equipment                    (3 757 627)       (2 816 694)       (6 270 653)
Proceeds from disposal
of plant and equipment                    666 851           681 027         1 373 128
Net cash flow from
investing activities                   (3 090 776)       (2 135 667)       (4 897 525)

Cash flows from financing activities
Repayment of other
financial liabilities                  (2 364 746)       (5 224 260)       (8 030 560)
Purchase of treasury shares              (560 496)                -          (159 050)
Net cash flow from
financing activities                   (2 925 242)       (5 224 260)       (8 189 610)
(Decrease)/Increase in cash and
cash equivalents for the period       (24 743 961)       30 862 775        38 815 382
Cash and cash equivalents 
at the beginning of the period        106 458 363        67 642 981        67 642 981
Cash and cash equivalents
at the end of the period               81 714 402        98 505 756       106 458 363

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                   Stated capital   Retained income      Total equity
                                                R                 R                 R
Balance at 1 March 2016                63 632 244       177 069 358       240 701 602
Changes in equity
Profit for the period                           -        22 890 080        22 890 080
Treasury shares acquired                        -                 -                 -
Dividends paid                                  -        (9 266 876)*      (9 266 876)
Balance at 31 August 2016              63 632 244       190 692 562       254 324 806

Changes in equity
Profit for the period                           -        24 150 861        24 150 861
Treasury shares acquired                 (159 050)                -          (159 050)
Dividends paid                                  -                 -                 -
Balance at 28 February 2017            63 473 194       214 843 423       278 316 617

Changes in equity
Profit for the period                           -         2 026 114         2 026 114
Treasury shares acquired                 (560 496)                -          (560 496)
Dividends paid                                  -       (15 690 808)*     (15 690 808)
Balance at 31 August 2017              62 912 698       201 178 729       264 091 427

* A final gross dividend of 14.4 cents per share was paid on 12 June 2017 (8.5 cents
per share paid on 20 June 2016).

NOTES TO THE CONDENSED RESULTS

RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS

                                        Unaudited         Unaudited           Audited
                                   6 months as at    6 months as at   12 months as at
                                   31 August 2017    31 August 2016  28 February 2017
                                                R                 R                 R
Earnings attributable to 
ordinary shareholders                   2 026 114        22 890 080        47 040 941
Adjusted for:
Impairment of property, 
plant and equipment                             -           625 000          (875 000)
Loss on disposal of property,
plant and equipment                       119 850           227 078         1 897 903
Tax effect thereof                        (33 558)          (63 582)         (531 413)
Headline earnings                       2 112 406        23 678 576        47 532 431
Basic and diluted headline
earnings per share (cents)                    1.9              21.7              43.6
Number of shares in issue             109 351 442       109 351 442       109 351 442
Number of shares in issue
(after treasury shares)               108 514 327       108 963 942       108 862 437
Weighted average number
of shares                             108 856 715       108 963 942       108 916 756

CONDENSED SEGMENT REPORT
                                        Unaudited         Unaudited           Audited

                                   6 months as at    6 months as at   12 months as at
                                   31 August 2017    31 August 2016  28 February 2017
                                                R                 R                 R
Segment revenue - external
- Aluminium                           106 373 354       156 536 087       293 373 314
- Steel                                45 561 996        76 835 507       133 800 550
- Glass                                77 999 184        72 403 182       155 671 476
- Corporate                                     -                 -                 -
                                      229 934 534       305 774 776       582 845 340
Segment revenue - internal
- Aluminium                               149 094           401 291           787 520
- Steel                                         -           600 000         3 918 884
- Glass                                12 952 483        20 243 043        40 776 438
- Corporate                             1 871 273         1 786 273         3 612 546
                                       14 972 850        23 030 607        49 095 388
Segment result - operating profit
- Aluminium                            (1 966 530)       12 456 102        26 758 533
- Steel                                 2 562 350         8 345 705        10 772 254
- Glass                                    40 896         6 266 031        16 357 354
- Corporate                               781 623           715 220         1 705 900
                                        1 418 337        27 783 058        55 594 041
Segment assets
- Aluminium                           157 030 811       164 632 878       161 529 896
- Steel                                42 490 054        59 155 588        58 533 220
- Glass                               113 504 560       112 943 174       110 515 495
- Corporate                            13 739 910        13 415 714        13 763 394
                                      326 765 335       350 147 354       344 342 005
Segment liabilities
- Aluminium                            16 035 137        44 120 351        20 389 707
- Steel                                10 669 856        16 701 425        15 673 987
- Glass                                30 667 739        28 412 652        24 126 422
- Corporate                             5 301 166         6 588 120         5 835 272
                                       62 673 898        95 822 548        66 025 388

COMMENTARY

INTRODUCTION
The unaudited condensed consolidated interim results for the six months ended 
31 August 2017 ("the period") reflect tough trading conditions. All three business
segments were impacted by challenging macroeconomic conditions, which are not unique
to Mazor. As a result, the group embarked on a cost-cutting exercise to ensure the
business remains profitable during difficult times.

The six months have seen continued hesitancy to deploy money and pricing remained
challenging in an increasingly competitive environment due to lack of demand.

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, the JSE Listings Requirements and the South African
Companies Act (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 28 February 2017.

These unaudited condensed consolidated interim results were authorised for issue
by the board of directors on 7 November 2017. The unaudited condensed consolidated
financial results for the period ended 31 August 2017 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.

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
Revenue declined 24.8% to R229.9 million (2016: R305.8 million). Operating profit was
down 94.9% to R1.4 million (2016: R27.8 million). Headline earnings declined to 
R2.1 million translating into headline earnings per share of 1.9 cents per share
compared to 21.7 cents per share in the comparative period.

Steel was severely impacted with a general paralysis in the marketplace as clients
were hesitant to commit on a long-term basis. The pressure on shopping centres and
downturn in the mining sector due to regulatory uncertainty have led to lack of
activity in Steel. This resulted in revenue declining 40.7% to R45.6 million 
(2016: R76.8 million) and operating profit of R2.6 million compared to R8.3 million 
in the comparative period.

In Aluminium, HBS performed relatively well given market conditions. The division
continued to innovate to meet challenging market conditions where lower occupancy in
retail and commercial space is resulting in less demand.  The staff complement was
substantially reduced to position appropriately for the slowdown in market activity.
Aluminium revenue fell 32.1% to R106.4 million (2016: R156.5 million), resulting in a 
loss of R1.9 million compared to operating profit of R12.5 million in the comparative
period.

In Glass we saw growth in the George area due to the fires, as well as in
Johannesburg. We embarked on a rationalisation process 18 months ago, which is
bearing fruit and ensuring we are better positioned to compete. We foresee continued
growth in these regions. In Cape Town we adapted the market strategy to focus on
increasing the number of customers as we anticipated that activity in large projects
would deteriorate. External revenue in the Glass division increased by 7.7% to
R78.0 million (2016: R72.4 million), however, operating profit dropped to R40 894
(2016: R6.3 million) as a result of margin squeeze due to the increased competition.

During the period a new vehicle fleet was purchased for R5.5 million. The transaction
was financed via a finance lease liability. The finance leases are repayable 
in monthly instalments for a period of five years. The finance leases bear interest at
rates linked to the prime bank overdraft lending rate.

At 31 August 2017, the group had issued guarantees amounting to R26.1 million. These
guarantees have arisen in the ordinary course of business and it is not expected that
any loss will arise therefrom.

RELATED PARTY TRANSACTIONS
The group has paid/approved compensation to key management personnel including
directors and prescribed officers to the amount of R6.7 million.

DIVIDEND DECLARATION
In line with group policy, no interim dividend was declared for the period.

SHARE TRANSACTIONS
During the period, Mazor repurchased 348 110 of its own shares for a total
consideration of R560 496. The shares were repurchased by a subsidiary of the company
and are held as treasury shares. The number of treasury shares held by subsidiaries
and special purposes entities at 1 March 2017 was 489 005. As at 31 August 2017, the
total number of treasury shares held by subsidiaries and special purposes entities
was 873 115.

EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any material event which occurred after the interim
reporting date and up to the date of the release of the unaudited condensed
consolidated interim results for the six months ended 31 August 2017.

PROSPECTS
Despite an improved interest rate, we don"t anticipate there will be a meaningful
improvement in South Africa"s growth prospects until after the general election.
We anticipate that uncertainty will persist, stalling major private projects and
the inability to cap budget deficit will result in slower activity on the government
side. The stagnant economy will deter investors from investing in long-term assets.
With our continued cost-cutting drive, focus on efficiencies and rationalisation.
programmes throughout the group we are well-positioned to face the challenging 
market environment.

APPRECIATION
We extend our appreciation to our staff and management for their hard work and
continued commitment in a challenging market. We also thank our fellow directors for
their guidance and our business partners, suppliers, advisors, valued clients and
shareholders for their continued 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.

On behalf of the board
M Kaplan           R Mazor
Chairperson        Chief Executive Officer

7 November 2017
Cape Town

Directors: M Kaplan (Chairperson)*^, 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, Rosebank Towers,
15 Biermann Avenue, Rosebank (PO Box 61051, Marshalltown, 2107)


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