MAZOR GROUP LIMITED - Unaudited Condensed Consolidated Interim Financial Results for the six months ended 31 August 2018

Release Date: 07/11/2018 17:15
Code(s): MZR
 
Wrap Text
Unaudited Condensed Consolidated Interim Financial Results for the six months ended 31 August 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


Unaudited CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2018
("THE PERIOD")


SALIENT FEATURES

Tough economy continued
Revenue down 13.5%
Well-positioned to sustain and grow in the long term


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                         Unaudited             Unaudited                Audited
                                                                  six months as at      six months as at        12 months as at
                                                                    31 August 2018        31 August 2017       28 February 2018
                                                                                 R                     R                      R
Assets
Non-current assets
Property, plant and equipment                                           82 765 033            83 763 213             85 498 308
Intangible asset                                                        15 500 000            16 500 000             16 000 000
Deferred tax                                                             6 475 407             4 905 071              4 105 236
                                                                       104 740 440           105 168 284            105 603 544
Current assets
Inventories                                                            103 803 713            84 169 135            108 262 086
Construction contracts and receivables                                  13 550 429            10 594 804             19 413 913
Other financial assets                                                     276 404                     -                274 653
Current tax receivable                                                     533 032                     -                525 229
Trade and other receivables                                             39 531 423            45 118 700             34 427 062
Cash and cash equivalents                                               56 265 376            81 714 402             56 350 699
                                                                       213 960 377           221 597 041            219 253 642
Total assets                                                           318 700 817           326 765 325            324 857 186
Equity and liabilities
Equity
Stated capital                                                          41 060 154            47 236 506             44 365 231
Retained income                                                        199 817 376           216 869 537            213 920 556
Equity attributable to shareholders of Mazor Group Limited             240 877 530           264 091 427            258 285 787
Non-controlling interests                                                  (25 469)                    -                 (3 494)
                                                                       240 852 061           264 091 427            258 282 293
Liabilities
Non-current liabilities
Other financial liabilities                                             13 706 502            11 321 169             12 695 652
Deferred tax                                                               881 647             1 380 098              2 215 337
                                                                        14 588 149            12 701 267             14 910 989
Current liabilities
Other financial liabilities                                              5 997 261             7 024 779              6 736 907
Current tax payable                                                        369 809             2 872 342                269 481
Trade and other payables                                                53 367 283            40 075 510             37 106 518
Amounts due to customers                                                 1 901 933                     -              6 692 428
Bank overdraft                                                           1 624 321                     -                858 570
                                                                        63 260 607            49 972 631             51 663 904
Total liabilities                                                       77 848 756            62 673 898             66 574 893
Total equity and liabilities                                           318 700 817           326 765 325            324 857 186


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                                           Non-
                                               Stated           Retained                            controlling             Total
                                              capital             income              Total           interests            equity
                                                    R                  R                  R                   R                 R
Balance at 28 February 2017                63 473 194        214 843 423        278 316 617                   -       278 316 617
Changes in equity
Profit for the period                               -          2 026 114          2 026 114                   -         2 026 114
Treasury shares acquired                     (560 496)                 -           (560 496)                  -          (560 496)
Capital reduction distribution            (15 676 192)                 -        (15 676 192)                  -       (15 676 192)
Balance at 31 August 2017                  47 236 506        216 869 537        264 106 043                   -       264 106 043
Changes in equity
Loss for the period                                 -         (2 948 981)        (2 948 981)             (3 494)       (2 952 475)
Treasury shares acquired                   (2 871 275)                 -         (2 871 275)                  -        (2 871 275)
Balance at 28 February 2018                44 365 231        213 920 556        258 285 787               3 494)      258 282 293
Changes in equity
Loss for the period                                 -        (14 103 180)       (14 103 180)            (21 975)      (14 125 155)
Treasury shares acquired                   (3 305 077)                 -         (3 305 077)                  -        (3 305 077)
Balance at 31 August 2018                  41 060 154        199 817 376        240 877 530             (25 469)      240 852 061



CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

                                                                         Unaudited              Unaudited               Audited
                                                                  six months as at       six months as at       12 months as at
                                                                    31 August 2018         31 August 2017      28 February 2018
                                                                                 R                      R                     R
Revenue                                                                198 914 601            229 934 534           426 481 905
Cost of sales                                                         (157 538 615)          (171 610 368)         (312 510 420)
Gross profit                                                            41 375 986             58 324 166           113 971 485
Other income                                                             1 291 807                711 952             1 015 715
Operating expenses                                                     (59 800 928)           (57 617 775)         (116 942 305)
Operating (loss)/profit                                                (17 133 135)             1 418 343            (1 955 105)
Investment revenue                                                       1 579 365              3 074 494             5 263 106
Finance costs                                                           (1 387 293)              (754 407)           (1 794 413)
(Loss)/Profit before taxation                                          (16 941 063)             3 738 430             1 513 588
Taxation                                                                 2 815 908             (1 712 316)           (2 439 949)
Total comprehensive (loss)/income for the period                       (14 125 155)             2 026 114              (926 361)
Total comprehensive (loss)/income for the period
attributable to:
Shareholders of Mazor Group Limited                                    (14 103 180)             2 026 114              (922 867)
Non-controlling interests                                                  (21 975)                     -                (3 494)
                                                                       (14 125 155)             2 026 114              (926 361)
Basic and diluted earnings per share (cents)                                 (13.3)                   1.9                  (0.9)


NOTES TO THE CONDENSED RESULTS

Reconciliation between earnings and headline earnings:
                                                                         Unaudited              Unaudited                Audited
                                                                  six months as at       six months as at        12 months as at
                                                                    31 August 2018         31 August 2017       28 February 2018
                                                                                 R                      R                      R
(Loss)/Earnings attributable to ordinary shareholders                  (14 103 180)             2 026 114               (922 867)
Adjusted for:
Loss on disposal of property, plant and equipment                          398 829                119 850                144 277
Tax effect thereof                                                        (111 672)               (33 558)               (32 318)
Headline earnings                                                      (13 816 023)             2 112 406               (810 908)
Basic and diluted headline earnings per share (cents)                        (13.0)                   1.9                   (0.8)


Correction of error

In the prior interim period the group reflected the capital distribution as a deduction from retained earnings in error. Comparatives
have been restated to reflect the distribution as a deduction from stated capital to more accurately represent its nature as a capital
distribution. The restatement has increased retained earnings by the amount of the distribution and decreased stated capital by
the same amount, with no net effect on equity. The above error effected the amounts previously disclosed in the statement of financial 
position, statement of changes in equity and the cash flow statement.


CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                          Unaudited             Unaudited                Audited
                                                                   six months as at      six months as at        12 months as at
                                                                     31 August 2018        31 August 2017       28 February 2018
                                                                                  R                     R                      R
Cash flows from operating activities
Cash generated from/(utilised in) operations                              5 211 643            (3 966 353)           (20 459 433)
Interest income                                                           1 542 194             3 001 666              5 181 320
Finance costs                                                            (1 387 293)             (754 407)            (1 794 413)
Tax paid                                                                   (795 427)           (1 318 041)            (3 538 692)
Net cash flow from operating activities                                   4 571 117            (3 037 135)           (20 611 218)
Cash flows from investing activities
Purchase of property, plant and equipment                                (1 374 044)           (3 757 627)            (6 987 028)
Proceeds from disposal of plant and equipment                               286 079               666 851                840 023
Loan advanced                                                                     -                     -               (274 653)
Net cash flow from investing activities                                  (1 087 965)           (3 090 776)            (6 421 658)
Cash flows from financing activities
Repayment of other financial liabilities                                 (1 029 149)           (2 364 746)            (4 825 395)
Purchase of treasury shares                                              (3 305 077)             (560 496)            (3 431 771)
Capital reduction distribution                                                    -           (15 690 808)           (15 676 192)
Net cash flow from financing activities                                  (4 334 226)          (18 616 050)           (23 933 358)
Decrease in cash and cash equivalents for the period                       (851 074)          (24 743 961)           (50 966 234)
Cash and cash equivalents at the beginning of the period                 55 492 129           106 458 363            106 458 363
Cash and cash equivalents at the end of the period                       54 641 055            81 714 402             55 492 129



CONDENSED SEGMENT REPORT
                                                                         Unaudited             Unaudited                Audited
                                                                  six months as at      six months as at        12 months as at
                                                                    31 August 2018        31 August 2017       28 February 2018
                                                                                 R                     R                      R
Segment revenue - contract revenue
- Aluminium                                                             26 889 623            31 318 260             62 295 317
- Steel                                                                 27 382 312            45 561 996             69 524 355
- Glass                                                                          -                     -                      -
- Corporate                                                                      -                     -                      -
                                                                        54 271 935            76 880 256            131 819 672
Segment revenue - sale of goods
- Aluminium                                                             77 604 554            75 055 094            153 744 231
- Steel                                                                          -                     -                      -
- Glass                                                                 67 038 112            77 999 184            140 918 002
- Corporate                                                                      -                     -                      -
                                                                       144 642 666           153 054 278            294 662 233
Segment Revenue - internal
- Aluminium                                                                116 153               149 094                312 432
- Steel                                                                          -                     -                      -
- Glass                                                                  9 164 456            12 952 483             26 135 736
- Corporate                                                              2 563 857             1 871 273              3 742 546
                                                                        11 844 466            14 972 850             30 190 715
Segment Result - operating profit/(loss)
- Aluminium                                                             (4 522 015)           (1 966 530)             1 366 431
- Steel                                                                 (7 664 676)            2 562 350             (1 770 216)
- Glass                                                                 (5 781 066)               40 894             (2 899 137)
- Corporate                                                                834 622               781 623              1 347 817
                                                                       (17 133 135)            1 418 337             (1 955 105)
Segment Assets
- Aluminium                                                            147 409 509           157 030 811            158 271 643
- Steel                                                                 28 722 161            42 490 054             30 954 440
- Glass                                                                111 864 390           113 504 561            105 809 195
- Corporate                                                             30 704 757            13 739 911             29 821 910
                                                                       318 700 817           326 765 336            324 857 187
Segment Liabilities
- Aluminium                                                             19 781 869            16 035 137             23 047 071
- Steel                                                                 12 142 735            10 669 856              9 389 487
- Glass                                                                 33 896 528            30 667 739             22 311 770
- Corporate                                                             12 027 624             5 301 166             11 826 565
                                                                        77 848 756            62 673 898             66 574 893


"The macro conditions in the period continued to deteriorate, as anticipated. Our resilience in adapting quickly to market conditions saw us limit the potential downside in direct contrast to most
of our peers. We are optimistic looking ahead as we have done all we need to do to ensure Mazor's sustainability, and more than that, have positioned the group to take advantage of certain market
opportunities. We anticipate better market prospects over the medium to long term."
                                                           Ronnie Mazor, Chief Executive Officer


COMMENTARY

INTRODUCTION

As Mazor continued taking care of our house during the period against the backdrop of a recessionary economy and
political uncertainty. We continued to control costs and seek improved efficiencies to position the group strongly for a
market upturn.

Market conditions showed no let-up and remained very challenging for all business segments. The devaluation in the rand
compounded the situation by adding to already high levels of uncertainty in the market. However, we believe that the political
leadership is taking the first steps in the right direction for the South African economy, provided that the rand devaluation
does not lead to uncontrolled inflation. From a growth perspective, the rand devaluation will accelerate rationalisation in the
market (on the supply side) as well as demand opportunity in the sectors that have lagged, such as mining.

BASIS OF PREPARATION

The Unaudited condensed consolidated interim financial results for the group for the period have been prepared in
accordance with and contain the information required by IAS 34 Interim Financial Reporting, 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 Unaudited condensed consolidated
interim financial results are in terms of International Financial Reporting Standards. The impact of the new standards that
became effective during the current reporting period is set out below:

IFRS 15 Revenue from Contracts with Customers

Contract revenue

The group's contracts contain single distinct performance obligations, and are not exposed to material amounts of variable
consideration. The group continues to apply the percentage of completion method (using surveys of work performed as the
measure of performance completed to date) to recognise revenue over time from its contracts with customers.

Sale of goods

The group recognises revenue on the sale of goods on delivery, which is when control of the goods passes to the customer.

Time value of money

The group does not expect to have any contracts where the period between the transfer of the promised goods or services
to the customer and payment by the customer exceeds one year. As a consequence, the group does not adjust any of the
transaction prices for the time value of money.

Impact

The adoption of IFRS 15 has not had a material impact on the group's financial performance or results. Additional
disclosures have been provided in these financial results in the condensed segment report.

IFRS 9 Financial Instruments

Classification of financial assets

The group's significant financial assets consist of contract and trade receivables and cash and cash equivalents. Its business
model for its financial assets is to "hold and collect", and the group collects capital and interest only. Accordingly, these
instruments are measured at amortised cost under IFRS 9, which is similar to their previous measurement under IAS 39.

Impairment

The group was required to revise its impairment methodology under IFRS 9 for its financial assets. In terms of its revised
methodology the group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected
loss allowance for all trade receivables and construction contract receivables.

While the loss allowance has increased on this basis as a result of the general earlier recognition of credit losses, the impact
has not been material - attributable, in part, to the credit guarantee insurance held by the group against its trade receivables,
which reduces the group's exposure to credit losses and the low default rates on construction contract receivables.

IFRS 16 Leases

IFRS 16 introduces a new single accounting model for all leases, and is effective for years beginning on or after
1 January 2019. The group will adopt the new standard on its mandatory effective date in its 2020 financial year.

There are no other standards and interpretations, which have been published and are mandatory for the group's current
financial reporting period, that have had a material impact on the group's financial position or results.

The Unaudited condensed consolidated interim financial results have been prepared under the supervision of the financial
director, Ms L Mazor CA(SA), and the directors take full responsibility for the preparation of the Unaudited condensed
consolidated interim financial results.

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's 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 to R198.9 million (August 2017: R229.9 million). The group recorded an operating loss of R17.1 million
(August 2017: operating profit R1.4 million). A headline loss of R14.1 million resulted in a headline loss per share of
13.0 cents compared to headline earnings of R2.0 million and headline earnings per share of 1.9 cents at August 2017.

All segments experienced a slowdown. Given that we had anticipated this, we continued to put in place the necessary
measures to ensure our sustainability through the downcycle.

In both the Aluminium (in HBS) and Glass (in Compass Glass) divisions we continued to invest in equipment and technology
and to develop new products which we believe differentiate Mazor from our peers. This effectively enabled the group to
sustain our margins. The challenge remains at the top line and volume levels, both of which were lower in the period.

Aluminium successfully completed its first project in Johannesburg, a milestone first, and is now seeking to branch out
in the Gauteng market. In Steel we believe there is a potential upside over the long term given that many of our peers in
this segment have closed down nationally, and that the government's more friendly view on foreign direct investment and
devaluation of currency could propel investment into the local mining sector, to our benefit.

The increase in the deferred tax asset is as a result of losses incurred in the Aluminium and Steel divisions. A deferred tax
asset was raised in respect of these losses as they are considered recoverable.

DIRECTORATE

There were no changes to the directorate of the group in the period.

DIVIDEND DECLARATION

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

SHARE TRANSACTIONS

During the period Mazor repurchased 2 189 996 of its own shares for a total consideration of R3 305 077. 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-purpose entities at 1 March 2018 was 2 254 718. At 31 August 2018, the total number of treasury
shares held by subsidiaries and special-purpose entities was 4 444 714.

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 2018.

PROSPECTS

Looking ahead we have not changed our outlook stated in May this year and remain cautious. We still foresee a difficult year
ahead and expect a possible uptick in business activity only after the national elections. Even then, improved political and
policy certainty may take time to translate into business and market gains.

We will continue to focus on doing all we must to protect margins in pursuit of our long-term objective of sustainable
profitability, irrespective of the immediate to mid-term economic landscape.

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

Cape Town
7 November 2018


Directors: M Kaplan (Chairperson)*^, R Mazor (Chief Executive Officer), 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 (PO Box 61051, Marshalltown, 2107)
Date: 07/11/2018 05:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story