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)
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