MAZOR GROUP LIMITED - Summarised Results of the Audited Consolidated Annual Financial Statements for the year ended 28 February 2018

Release Date: 15/05/2018 17:30
Code(s): MZR
 
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Summarised Results of the Audited Consolidated Annual Financial Statements for the year ended 28 February 2018

Mazor Group Limited
("Mazor" or "the company" or "the group")
(Incorporated in the Republic of South Africa)
(Registration number: 2007/017221/06)
JSE share code: MZR
ISIN: ZAE000109823

SUMMARISED RESULTS OF THE AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2018

GROUP PERFORMANCE IN LINE WITH NATIONAL ECONOMY
ALUMINIUM BUSINESS HBS CONTINUED REVENUE GAINS IN TOUGH MARKET
EMBATTLED CONSTRUCTION INDUSTRY FACING ONGOING MARGIN PRESSURE
WATER CRISIS IN WESTERN CAPE IMPACTING RESIDENTIAL SECTOR
MAZOR MAINTAINING COST CONTROL AND MANAGING STOCK LEVELS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                                     2018                   2017
                                                                                        R                      R
Assets
Non-current assets
Property, plant and equipment                                                  85 498 308             79 856 462
Intangible asset                                                               16 000 000             17 000 000
Deferred tax                                                                    4 105 236              3 743 963
                                                                              105 603 544            100 600 425
Current assets
Inventories                                                                   108 262 086             77 840 847
Construction contracts and receivables                                         19 413 913             23 022 833
Other financial assets                                                            274 653                      -
Current tax receivable                                                            525 229                426 553
Trade and other receivables                                                    34 427 062             35 992 984
Cash and cash equivalents                                                      56 350 699            106 458 363
                                                                              219 253 642            243 741 580
Total assets                                                                  324 857 186            344 342 005

Equity and liabilities
Equity
Stated capital                                                                 44 365 231             63 473 194
Retained income                                                               213 920 556            214 843 423
Equity attributable to shareholders of Mazor Group Limited                    258 285 787            278 316 617
Non-controlling interests                                                          (3 494)                     -
                                                                              258 282 293            278 316 617
Liabilities
Non-current liabilities
Other financial liabilities                                                    12 695 652              3 949 921
Deferred tax                                                                    2 215 337              2 612 738
                                                                               14 910 989              6 562 659
Current liabilities
Other financial liabilities                                                     6 736 907             11 230 399
Current tax payable                                                               269 481                510 875
Trade and other payables                                                       37 106 518             46 458 636
Amounts due to customers                                                        6 692 428              1 262 819
Bank overdraft                                                                    858 570                      -
                                                                               51 663 904             59 462 729
Total liabilities                                                              66 574 893             66 025 388
Total equity and liabilities                                                  324 857 186            344 342 005

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
                                                                                     2018                   2017
                                                                                        R                      R
Revenue                                                                       426 481 905            582 845 340
Cost of sales                                                                (312 510 420)          (413 992 751)
Gross profit                                                                  113 971 485            168 852 589
Other income                                                                    1 015 715              2 429 372
Operating expenses                                                           (116 942 305)          (115 687 920)
Operating (loss)/profit                                                        (1 955 105)            55 594 041
Investment revenue                                                              5 263 106              5 789 611
Finance costs                                                                  (1 794 413)            (2 327 784)
Profit before taxation                                                          1 513 588             59 055 868
Taxation                                                                       (2 439 949)           (12 014 927)
Total comprehensive (loss)/income for the period                                 (926 361)            47 040 941
Total comprehensive (loss)/income for the period attributable to:
Shareholders of Mazor Group Limited                                              (922 867)            47 040 941
Non-controlling interests                                                          (3 494)                     -
                                                                                 (926 361)            47 040 941
Basic and diluted earnings per share (cents)                                         (0.9)                  43.2

NOTES TO THE SUMMARISED RESULTS
Reconciliation between earnings and headline earnings:
                                                                                      2018                  2017
                                                                                         R                     R
(Loss)/Earnings attributable to ordinary shareholders                             (922 867)           47 040 941
Adjusted for:
Reversal of impairment of property, plant and equipment                                  -              (875 000)
Loss on disposal of property, plant and equipment                                  144 277             1 897 903
Tax effect thereof                                                                 (32 318)             (531 413)
Headline earnings                                                                 (810 908)           47 532 431
Basic and diluted headline earnings per share (cents)                                 (0.8)                 43.6

CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                      2018                  2017
                                                                                         R                     R
Cash flows from operating activities
Cash (utilised in)/generated from operations                                   (20 459 433)           67 649 116                                                                                                     
Interest income                                                                  5 181 320             5 718 058                                                                                                     
Finance costs                                                                   (1 794 413)           (2 327 784)                                                                                                     
Tax paid                                                                        (3 538 692)           (9 869 995)                                                                                                    
Dividends paid                                                                           -            (9 266 876)
Net cash flow from operating activities                                        (20 611 218)           51 902 517
Cash flows from investing activities
Purchase of property, plant and equipment                                       (6 987 028)           (6 270 653)
Proceeds from disposal of plant and equipment                                      840 023             1 373 128
Loan advanced                                                                     (274 653)                    -
Net cash flow from investing activities                                         (6 421 658)           (4 897 525)
Cash flows from financing activities
Repayment of other financial liabilities                                        (4 825 395)           (8 030 560)
Purchase of treasury shares                                                     (3 431 771)             (159 050)
Capital reduction distribution                                                 (15 676 192)                    -
Net cash flow from financing activities                                        (23 933 358)           (8 189 610)
(Decrease)/Increase in cash and cash equivalents for the period                (50 966 234)           38 815 382
Cash and cash equivalents at the beginning of the year                         106 458 363            67 642 981
Cash and cash equivalents at the end of the period                              55 492 129           106 458 363

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                           Non-
                                       Stated          Retained                     controlling
                                      capital            income            Total      interests     Total equity
                                            R                 R                R              R                R
Balance at 1 March 2016            63 632 244       177 069 358      240 701 602              -      240 701 602
Changes in equity
Profit for the period                       -        47 040 941       47 040 941              -       47 040 941
Treasury shares acquired             (159 050)                -         (159 050)             -         (159 050)
Dividends paid                              -        (9 266 876)*     (9 266 876)             -       (9 266 876)
Balance at 28 February 2017        63 473 194       214 843 423      278 316 617              -      278 316 617 
Changes in equity
Loss for the period                         -          (922 867)        (922 867)        (3 494)        (926 361)
Treasury shares acquired           (3 431 771)                -       (3 431 771)             -       (3 431 771)
Capital reduction distribution    (15 676 192)*               -      (15 676 192)             -      (15 676 192)
Balance at 28 February 2018        44 365 231       213 920 556      258 285 787         (3 494)     258 282 293

* A capital reduction distribution of 14.4 cents per share was paid on 9 June 2017 (2017: A gross dividend of 8.5 cents
  per share was paid on 20 June 2016).

CONDENSED SEGMENT REPORT
                                                                                      2018                  2017
                                                                                         R                     R
Segment revenue - external
   - Aluminium                                                                 216 039 548           293 373 314
   - Steel                                                                      69 524 355           133 800 550
   - Glass                                                                     140 918 002           155 671 476
   - Corporate                                                                           -                     -
                                                                               426 481 905           582 845 340
Segment revenue - internal
   - Aluminium                                                                     312 432               787 520
   - Steel                                                                               -             3 918 884
   - Glass                                                                      26 135 736            40 776 438
   - Corporate                                                                   3 742 546             3 612 546
                                                                                30 190 714            49 095 388
Segment result - operating profit
   - Aluminium                                                                   1 366 431            26 758 533
   - Steel                                                                      (1 770 216)           10 772 254
   - Glass                                                                      (2 899 137)           16 357 354
   - Corporate                                                                   1 347 817             1 705 900
                                                                                (1 955 105)           55 594 041
Segment assets
   - Aluminium                                                                 158 271 643           161 529 896
   - Steel                                                                      30 954 440            58 533 220
   - Glass                                                                     105 809 193           110 515 495
   - Corporate                                                                  29 821 910            13 763 394
                                                                               324 857 186           344 342 005
Segment liabilities
   - Aluminium                                                                  23 047 071            20 389 707
   - Steel                                                                       9 389 487            15 673 987
   - Glass                                                                      22 311 770            24 126 422
   - Corporate                                                                  11 826 565             5 835 272
                                                                                66 574 893            66 025 388

COMMENTARY
INTRODUCTION

The group's performance for the year is in line with the national economy trend of negative growth in successive quarters.
Mazor's hard-won turnover and operating profit gains at the previous year-end have been eradicated by reduced business
activity due to waning business confidence and the lack of clear policy from government. All three business segments were
severely impacted in the year by the oppressive trading conditions industry-wide.

Only HBS Aluminium Systems (Pty) Ltd ("HBS"), in our Aluminium segment, continued to buck the trend and achieved
top-line growth.

While we did enjoy improved activity in the Western Cape residential sector, the temporary reprieve has since been cut
short by the ongoing water crisis in the region. The construction industry has become a very tough industry in which to do
business and we have seen an alarming increase in the number of business closures and liquidations as a result.

In order to sustain operations in this environment, Mazor has continued to streamline company costs and capacity in line
with foreseeable reduced activity over the next 24 months. All costs associated with the retrenchment exercise have been
included in the results for the year. All levels of employment were impacted, from ground staff to mid-management, in an
effort to successfully counter the macro environment and trade through to an industry uptick in the mid- to long-term.

BASIS OF PREPARATION

The summarised results of the audited consolidated annual financial statements for the group for the year ("the summarised
results") 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 are 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 that 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 auditor's work, they
should refer to the report together with the annual consolidated financial statements contained in the integrated annual
report. A copy of the full 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 and includes HBS' range of fenestration systems and accessories.
The Glass division comprises the Compass Glass businesses, 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.

FINANCIAL RESULTS AND REVIEW OF OPERATIONS

Revenue declined 26.8% to R426.5 million (February 2017: R582.9 million). The group recorded an operating loss of
R1.9 million (February 2017: operating profit R55.6 million). A headline loss of R0.8 million resulted in a headline loss per
share of 0.8 cents compared to headline earnings of R47.5 million and HEPS of 43.6 cents at February 2017.

Segmentally, revenue declined in all three business segments, with HBS the only individual business to report year-on-year
revenue growth. The Aluminium division remained profitable, albeit 94.7% down on the previous year. Glass was unable
to hold onto its prior-year resumption of profitability and posted an operating loss and Steel reported a small operating
loss for the year.

Amounts due to customers represent income received in advance for work to be performed under construction contracts.
During the year the group, via a subsidiary, purchased two properties which it intends to develop and sell. These properties
have been classified as inventory at the reporting date. Development will commence in the 2019 financial year.

The group entered into additional instalment sale agreements mainly to finance the purchase of a new vehicle fleet and for
the financing of some plant and equipment.

At 28 February 2018, the group had issued guarantees amounting to R24.0 million compared to R35.7 million at the
previous year-end. 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 2 153 213 of its issued ordinary shares for a total consideration of R3 431 771. The
shares were repurchased by a subsidiary of the company and are held as treasury shares.

DIRECTORATE

There were no changes to the directorate of the group during the year in review.

DIVIDEND DECLARATION

No dividend was declared for the year in light of the losses incurred by the group.

EVENTS AFTER THE REPORTING PERIOD

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

PROSPECTS

Looking ahead to the next two years we remain cautious. The economy is not expected to experience any significant
relief as a clear direction for government policy has not yet materialised, even post the ANC leadership change. The
stronger Rand is further putting pressure on the economy and challenging government's ability to execute a more balanced
economic approach. The prevailing uncertainty is alienating investors and constraining business activity in the industry.

As a result, margins will remain strained until real business confidence, not newspaper headlines, reignites. In the interim
we are taking care of our house against a chaotic backdrop by reacting timeously and adapting. We are controlling costs,
proactively maintaining critical stock levels in an industry-wide stock crisis and will continue to invest in R&D both for
improved efficiencies and new product development. The success of the latter has been reflected in the popular new
products which continue to be launched in HBS.

We will continue to pursue our long-term objective of sustainable profitability irrespective of the immediate- to mid-term
economic landscape. We will ensure that we manage risk in the challenging period ahead and will continue expending all
efforts to maintain a strong operating position.

APPRECIATION

We thank our teams for their tenacity and balanced morale at a very tough time. We also thank our fellow directors for
their valuable advice in the downcycle 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. 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                                     Chief executive officer

14 May 2018
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, 50 Smits Road, Dunkeld, 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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