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MAZOR GROUP LIMITED - Summarised results of the Audited Consolidated Annual Financial Statements

Release Date: 14/05/2019 14:15
Code(s): MZR     PDF:  
 
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Summarised results of the Audited Consolidated Annual Financial Statements

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


SUMMARISED RESULTS OF THE AUDITED CONSOLIDATED
ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 2019


SALIENT FEATURES

- Challenging market conditions continued

- Continued focus on costs and margins

- Solid debtors book


"The year was marked by tough macroeconomic conditions.
Notwithstanding the losses sustained in this period we continued to
focus on cost control and efficiencies, to better position the group to
adapt to challenging market conditions."

Ronnie Mazor, CEO


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 28 FEBRUARY 2019

                                                                    2019           2018
                                                                       R              R
Assets
Non-current assets
Property, plant and equipment                                 78 580 853     85 498 308
Intangible assets                                             15 000 000     16 000 000
Deferred tax                                                   9 381 120      4 105 236
                                                             102 961 973    105 603 544
Current assets
Inventories                                                  117 603 084    108 262 086
Contract assets                                               27 503 590     19 413 913
Other financial assets                                           277 340        274 653
Current tax receivable                                           536 074        525 229
Trade and other receivables                                   33 403 052     34 427 062
Cash and cash equivalents                                     25 552 739     56 350 699
                                                             204 875 879    219 253 642
Total assets                                                 307 837 852    324 857 186

Equity and liabilities
Equity
Stated capital                                                41 060 154     44 365 231
Retained income                                              197 623 065    213 920 556
Equity attributable to shareholders of Mazor Group Limited   238 683 219    258 285 787
Non-controlling interests                                        (46 364)        (3 494)
                                                             238 636 855    258 282 293
Liabilities
Non-current liabilities
Other financial liabilities                                   10 710 952     12 695 652
Deferred tax                                                   1 069 425      2 215 337
                                                              11 780 377     14 910 989
Current liabilities
Other financial liabilities                                    5 491 206      6 736 907
Current tax payable                                              288 376        269 481
Trade and other payables                                      43 837 578     37 106 518
Contract liabilities                                           4 955 145      6 692 428
Bank overdraft                                                 2 848 315        858 570
                                                              57 420 620     51 663 904
Total liabilities                                             69 200 997     66 574 893
Total equity and liabilities                                 307 837 852    324 857 186


CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 28 FEBRUARY 2019

                                                                   2019            2018
                                                                      R               R
Revenue from contracts with customers                       399 037 473     426 481 905
Cost of sales                                              (310 689 217)   (312 510 420)
Gross profit                                                 88 348 256     113 971 485
Other income                                                  2 079 084       1 015 715
Operating expenses                                         (111 269 914)   (116 942 305)
Operating loss                                              (20 842 574)     (1 955 105)
Investment revenue                                            2 744 144       5 263 106
Finance costs                                                (2 491 518)     (1 794 413)
(Loss)/Profit before taxation                               (20 589 948)      1 513 588
Taxation                                                      4 249 587      (2 439 949)
Total comprehensive loss for the period                     (16 340 362)       (926 361)
Total comprehensive loss for the period attributable to:
Shareholders of Mazor Group Limited                         (16 297 491)       (922 867)
Non-controlling interests                                       (42 870)         (3 494)
                                                            (16 340 361)       (926 361)
Basic and diluted earnings per share (cents)                      (15.5)           (0.9)


NOTES TO THE CONDENSED RESULTS

FOR THE YEAR ENDED 28 FEBRUARY 2019

Reconciliation between earnings and headline earnings:
                                                                  2019            2018
                                                                     R               R
Loss attributable to ordinary shareholders                 (16 297 491)       (922 867)
Adjusted for:
Loss on disposal of property, plant and equipment              309 410         144 277
Tax effect thereof                                             (86 635)        (32 318)
Headline earnings                                          (16 074 716)       (810 908)
Basic and diluted headline earnings per share (cents)            (15.3)           (0.8)


CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 28 FEBRUARY 2019

                                                                2019           2018
                                                                   R              R
Cash flows from operating activities
Cash utilised for operations                             (21 632 272)   (20 459 433)
Interest income                                            2 741 457      5 181 320
Finance costs                                             (2 491 518)    (1 794 413)
Tax paid                                                  (2 164 159)    (3 538 692)
Net cash flow from operating activities                  (23 546 492)   (20 611 218)
Cash flows from investing activities
Purchase of property, plant and equipment                 (1 914 853)    (6 987 028)
Proceeds from disposal of plant and equipment                507 469        840 023
Loan advanced                                                      -       (274 653)
Net cash flow from investing activities                   (1 407 384)    (6 421 658)
Cash flows from financing activities
Repayment of other financial liabilities                  (4 528 752)    (4 825 395)
Purchase of treasury shares                               (3 305 077)    (3 431 771)
Capital reduction distribution                                     -    (15 676 192)
Net cash flow from financing activities                   (7 833 829)   (23 933 358)
Decrease in cash and cash equivalents for the period     (32 787 705)   (50 966 234)
Cash and cash equivalents at the beginning of the year    55 492 129    106 458 363
Cash and cash equivalents at the end of the year          22 704 424     55 492 129


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 28 FEBRUARY 2019

                                                                                                          Non-
                                                     Stated         Retained                       controlling            Total
                                                    capital           income            Total        interests           equity
                                                          R                R                R                R                R
Balance at 1 March 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
Changes in equity
Loss for the period                                       -      (16 297 491)     (16 297 491)         (42 870)     (16 340 361)
Treasury shares acquired                         (3 305 077)               -       (3 305 077)               -       (3 305 077)
Balance at 28 February 2019                      41 060 154      197 623 065      238 683 219          (46 364)     238 636 855

* No dividend was paid in the current period. (A capital reduction distribution of 14.4 cents per share was paid on 9 June 2017.)


CONDENSED SEGMENT REPORT

FOR THE YEAR ENDED 28 FEBRUARY 2019

                                                  2019           2018
                                                     R              R
Segment revenue - contract revenue
- Aluminium                                 50 237 169     62 295 317
- Steel                                     64 341 248     69 524 355
- Glass                                              -              -
- Corporate                                          -              -
                                           114 578 417    131 819 672
Segment revenue - sale of goods
- Aluminium                                146 967 098    153 744 231
- Steel                                              -              -
- Glass                                    137 491 958    140 918 002
- Corporate                                          -              -
                                           284 459 056    294 662 233
Segment revenue - internal
- Aluminium                                  1 321 851        312 432
- Steel                                              -              -
- Glass                                     19 238 775     26 135 736
- Corporate                                  5 265 299      3 742 546
                                            25 825 925     30 190 714
Segment result - operating profit/(loss)
- Aluminium                                 (8 468 967)     1 366 431
- Steel                                    (11 030 266)    (1 770 216)
- Glass                                     (3 791 513)    (2 899 137)
- Corporate                                  2 448 172      1 347 817
                                           (20 842 574)    (1 955 105)
Segment assets
- Aluminium                                127 180 609    158 271 643
- Steel                                     36 547 590     30 954 440
- Glass                                    113 623 336    105 809 193
- Corporate                                 30 486 317     29 821 910
                                           307 837 852    324 857 186
Segment liabilities
- Aluminium                                 23 909 682     23 047 071
- Steel                                      5 693 290      9 389 487
- Glass                                     32 134 365     22 311 770
- Corporate                                  7 463 660     11 826 565
                                            69 200 997     66 574 893


COMMENTARY 

INTRODUCTION

The economic landscape has been much the same as the first half of the year and we believe this will continue
for another 12 months. Our industry was negatively impacted by challenging macro conditions, which negatively
impacted results. With the construction industry under immense strain a number of businesses, both large and
small, have been liquidated and we have also seen large-scale retrenchments in the sector due to the lack of
demand and volumes.

Prudence remains key to sustainability in this environment with every decision requiring focused attention on a
multitude of risks. We have remained rigorous in our application of risk assessments.


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 Financial Pronouncements as issued by the
Financial Reporting Standards Council, the Companies Act, No. 71 of 2008, and the JSE Listings Requirements.

The accounting policies and methods of computation applied in the preparation of these summarised
consolidated annual financial results are in terms of IFRS and consistent with those applied in the most recently
issued audited annual financial statements except for the adoption of IFRS 9 and IFRS 15 as discussed below:


STANDARDS AND INTERPRETATIONS EFFECTIVE AND ADOPTED IN THE
CURRENT YEAR

The group adopted IFRS 9 and IFRS 15 in the current financial period for the first time on the mandatory
adoption date. No standard, amendment or interpretation has been adopted early by the group. The comparative
information has not been restated, and complies with the requirements of IAS 39 and IAS 18. Other than the
changes set out below, the accounting policies are consistent with those applied in the prior financial period and
did not result in any prior-year restatements.


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.


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.
The adoption of IFRS 9 in the current year, and on the opening balances as at 1 March 2018, has not had a
significant impact on the group's results. It has not resulted in the recognition of significant allowances for
credit losses.

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 itself not 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 in accordance with International Standards on Auditing by the group's external auditors, Mazars, who
expressed an unqualified audit opinion. This is available for inspection at the company's registered office. That
report does not necessarily cover all the information contained in this announcement.

Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditors'
work, they should refer to the report together with the 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 email 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 Aluminium
Systems' 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 R399 million (February 2018: R426.5 million). The group recorded an operating loss
of R20.8 million (February 2018: operating loss R1.9 million). A headline loss of R16.1 million resulted in a
headline loss per share of 15.3 cents compared to a headline loss of R0.8 million and HEPS loss of 0.8 cents
at February 2018.

Revenue declined in all three business segments, resulting in operating losses across all business segments.
The largest impact was within the Aluminium and Steel divisions as a result of the downturn in the construction
sector.

Our emphasis on rigorous risk assessment has ensured that we have avoided bad debts from contract revenue
in our Aluminium and Steel divisions to date. There have been a reduced number of new building starts across
all regions of the country over the past year. We believe it will take time until demand outstrips supply and hence
 the current situation of the construction industry is expected to prevail for the medium term. We continue to
focus on costs on a monthly basis and identifying further efficiencies in the business. In addition, we continue
to tender as much as possible within the constraints that exist in the current market.

Our Glass division continues to provide a differentiated value offering and notwithstanding a loss for the year is
expected to help sustain margins and efficiencies in the current year.

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.

Contract assets increased to R27.5 million from R19.4 million in the prior year due to an increase in project
starts prior to February 2019.

Trade and other payables increased from R37.1 million in the prior year to R43.8 million in the current year as
a result of increased purchasing to improve inventory levels.

At 28 February 2019, the group had issued guarantees amounting to R27.5 million compared to R24 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.


RELATED PARTY TRANSACTIONS

Directors' remuneration for the year amounted to R9.2 million (2018: R11.3 million).


SHARE TRANSACTIONS

During the year Mazor repurchased 2 189 996 (2018: 2 153 213) of its issued ordinary shares for a total
consideration of R3 305 077. The shares were repurchased by a subsidiary of the company at an average price
of R1.51 per share (2018: R1.59) and are held as treasury shares.


DIRECTORATE

During the year Mr Ray Schur resigned effective 1 December 2018 and Mr Allan Groll, a current independent
non-executive director of the Mazor board, replaced him on the audit and risk committee, the remuneration and
nomination committee and as chairperson of the social and ethics committee, with effect from 18 February
2019.


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 we have not changed our outlook as stated at interim results in August last year and continue to
remain cautious. We remain hopeful of an improved macroeconomic environment, which would aid recovery
in our sector.

We will continue to focus on margins, costs and efficiencies in pursuit of our long-term objective of sustainable
profitability, irrespective of the immediate to mid-term economic landscape.


APPRECIATION

We thank our employees for their continued dedication and hard work under challenging trading conditions.
Our appreciation also to our board for their continued guidance and wise counsel. We thank our customers,
suppliers, advisers and shareholders for their continued loyal 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

Cape Town
14 May 2019


Directors: M Kaplan (Chairperson)*^, R Mazor (CEO), L Mazor (Financial director), S Mazor, A Groll*^, F Boner*^,
A Varachhia*

*Non-executive director ^Independent

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

Registered office: 8 Monza Road, Killarney Gardens, 7441
(PO Box 60635, Table View, 7439)

Company secretary: Ivor Mark Bloom

Sponsor: Bridge Capital Advisors (Pty) Limited, 50 Smits Street, 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)

www.mazor.co.za
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