| Mon 10 Nov 2008, 10:16 | | MZR - Mazor - Unaudited Consolidated Interim Results For The Six Months Ended 31 |
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MZR
MZR
MZR - Mazor - Unaudited Consolidated Interim Results For The Six Months Ended 31
August 2008
Mazor Group Limited
("Mazor" or "the group")
(Incorporated in the Republic of South Africa)
Registration number: 2007/017221/06
Share code: MZR & ISIN: ZAE000109823
HIGHLIGHTS
* Revenue up 39.5%
* NAV per share up to 140.8 cents
* Broadened geographical footprint
Unaudited Consolidated Interim Results for the six months ended 31 August 2008
Commentary
Introduction
Mazor continued to achieve growth for the six months ended 31 August 2008 ("the
period"), setting the group firmly on track to achieve forecast net profit of
R53.9 million and earnings per share of 44 cents for the full year to February
2009 (as set out in the pre-listing prospectus dated 8 November 2007).
In line with strategy to further diversify Mazor`s offering into related high-
growth markets, the group acquired the businesses of Independent Glass CC and
Independent Glass George CC ("Independent Glass") effective 3 March 2008, and
during the period further acquired Compass Glass (Pty) Limited ("Compass
Glass") (see "Acquisitions" below). The results of Compass Glass have been
consolidated into these interim results for two months from the effective date
of the acquisition on 1 July 2008.
As previously announced on 7 July 2008, Mazor has moved from AltX to the JSE
Main Board - "Construction and Materials" sector - with effect from 14 July
2008. This is intended to position Mazor alongside comparable construction
groups and provide the appropriate platform for future growth.
Basis of preparation
The unaudited consolidated interim financial statements have been prepared in
accordance with IAS 34 - Interim Financial Reporting, International Financial
Reporting Standards ("IFRS") and Schedule 4 of the South African Companies Act,
1973. The accounting policies used in the preparation of these unaudited
consolidated interim financial statements are consistent with those used in the
audited annual financial statements for the previous year ended 29 February
2008.
Review of operations
Demand for the group`s products and services remained buoyant during the
period. Both Mazor Steel and Mazor Aluminium continued to trade well
notwithstanding challenging economic and market conditions. Commodities -
particularly steel and aluminium - were in short supply and in addition
experienced extraordinary month-on-month price increases. However, Mazor`s
positive cash flow enabled the group to successfully hedge positions in
respect of orders of materials preventing exposure to exceptional price
movement. The strategy of regional expansion into Durban and Port Elizabeth
benefited Mazor Steel, with operations in these areas delivering solid
performances.
The Glass division began operating strongly in Cape Town during the period and
is reporting month-on-month growth of between 15% and 20%. With the integration
of the Independent Glass and Compass Glass acquisitions (see "Acquisitions"
below), the division has successfully captured increasing market share. Since
completion of the acquisitions the group has extended Independent Glass`
distribution operations from Cape Town and George to Gauteng with the opening
in June 2008 of a plant in Johannesburg.
Inflationary pressure during the period resulted in bulk wage increases above
the negotiated agreement with the relevant trade unions, which drove operating
expenses significantly higher. Mazor believes the successful realignment of
wages with the average cost of living has now been achieved and is critical to
the sustainability of a stable workforce, especially in light of the industry
skills shortage.
Acquisitions
As previously announced Mazor acquired the businesses of Independent Glass for
an aggregate purchase consideration of R1,4 million. The acquisitions became
effective during the period on 3 March 2008. Independent Glass` operations have
been successfully integrated into the group`s operations.
Following stated strategy to consider larger acquisitions in the niche market
of glass, Mazor further acquired Compass Glass for a maximum purchase
consideration of R50 million, as previously announced on 5 June 2008.
The first instalment of the purchase price was discharged during the period
in a combination of cash amounting to R34,1 million and the issue of 347
222 ordinary shares in Mazor at R2,88 per share. The second instalment will
be calculated by multiplying Compass Glass` annualised audited profit after
tax (excluding extraordinary items, such as share-based payment charges)
calculated from 1 July 2008 to 28 February 2009 by 5, less the first
instalment. The second instalment is payable by no later than 30 May 2009.
The earnings-enhancing acquisition has further expanded the Glass division to
capitalise on a segment in the construction industry offering robust growth
opportunities, as well as extended the group`s national presence. The
acquisition is starting to complement the group`s existing operations and
contributed well for the two months of incorporation into these interim
results.
Financial results
Revenue for the period was up 39.5% to R123.6 million from R88.6 million. The
inclusion of Independent Glass and Compass Glass (consolidated from 1 July
2008) for the first time contributed R13.1 million of the increase in revenue.
Operating profit grew by 6.6%. Operating margins reduced to 23.04% (August
2007: 30.13%) as a result of establishing a presence and seizing market share
in the glass industry which has historically been dominated by a few key
players, as well as the costs incurred for geographical expansion therein.
Mazor is confident these expansion initiatives position the group for growth
and margins will improve in the next 12 months as the Glass division`s
operations increase capacity and achieve economies of scale.
The balance sheet remains strong supported by healthy cash flows. Total
financial guarantees issued to third parties amounted to R33.9 million at
31 August 2008 compared with R20.0 million at 31 August 2007. Net asset value
increased to 140.8 cents per share (August 2007:101.2 cents per share).
Prospects
To date business orders remain buoyant and Mazor`s order book in hand to
year-end at 28 February 2009 and beyond is healthy.
While the scarce supply of commodities such as steel and aluminium has been
alleviated post the period, the challenge remains the recent devaluation of the
Rand against major world currencies. To counter this Mazor has successfully
hedged all positions in respect of orders of materials to June 2009.
The group will continue to focus on high-growth regions and pursue further
expansion where appropriate. Mazor is currently considering expansion of the
Glass division into Port Elizabeth and Bloemfontein in the short-term.
The second half of the year is traditionally stronger than the first six months
and accordingly, Mazor anticipates a more significant contribution to top and
bottom line growth in the six months ahead to year-end February 2009.
Dividend
In line with company policy no interim dividend has been declared for the
period. A dividend is planned to be declared for the full year ending
28 February 2009, the group`s first full year trading as a listed entity.
Appreciation
We thank our management and employees for their loyalty and effort without
which the ongoing growth of the group would not be achievable. We also thank our
fellow directors for their counsel and our business partners, advisers and
suppliers for their ongoing support. Finally, thank you to our clients and
shareholders for their loyal faith in the group.
On behalf of the board
M Kaplan R Mazor
Independent Chairman CEO
10 November 2008
Directors: M Kaplan (Chairman)*, R Mazor (CEO), L Mazor (Financial Director),
S Mazor, A Groll *, SM Ozinsky*, A Varachhia* *Non-executive Independent
Registered office: 8 Monza Road, Killarney Gardens, 7441 (PO Box 60635,
Table View, 7439)
Sponsor: Bridge Capital Advisors (Pty) Limited, 2nd Floor, 27 Fricker Road,
Illovo Boulevard, Illovo, 2196
Transfer secretaries: Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Company secretary: Liat Mazor, 8 Monza Road, Killarney Gardens, 7441
(PO Box 60635, Tableview, 7439)
Investor relations: Envisage Investor & Corporate Relations
Consolidated Income Statement
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2008 August 2007 February 2008
R R R
Revenue 123 624 788 88 641 038 177 145 317
Cost of sales (86 151 369) (58 142 856) (106 180 890)
Gross profit 37 473 419 30 498 182 70 964 427
Other income 30 574 5 705 437 739
Operating expenses (9 023 237) (3 798 971) (7 943 845)
Operating profit 28 480 756 26 704 916 63 458 321
Loss on non-current assets
held-for-sale - (244 797) (244 797)
Share-based payment: BEE
credentials - - (13 860 000)
Profit before investment
revenue and finance costs 28 480 756 26 460 119 49 353 524
Investment revenue 7 312 809 1 882 834 6 472 469
Finance costs (241 754) (183 874) (376 062)
Profit before taxation 35 551 811 28 159 079 55 449 931
Taxation (10 153 626) (7 664 319) (25 457 357)
Net profit 25 398 185 20 494 760 29 992 574
Ordinary shares in issue 122 847 222 100 000 000 122 500 000
Weighted average number of
shares 122 575 483 100 000 000 106 164 384
Basic earnings per share
(cents) 20.72 20.49 28.25
Headline earnings per share
(cents) 20.75 20.76 28.46
Adjusted headline earnings
per share(cents) 20.75 20.76 41.52
Reconciliation of headline
earnings:
Earnings attributable to
ordinary shareholders 25 398 185 20 494 760 29 992 574
Adjusted for:
(Profit)/Loss on disposal
of PPE (net of tax) 30 955 14 382 (28 078)
Loss on non-current assets
held-for-sale(net of tax) - 252 801 252 801
Headline earnings 25 429 140 20 761 943 30 217 297
BEE share-based payments
expense 13 860 000
Adjusted headline earnings 25 429 140 20 761 943 44 077 297
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2008 August 2007 February 2008
R R R
Cash flows from operating
activities
Cash generated from
operations 23 495 560 23 669 375 50 350 918
Interest income 7 312 809 1 882 834 6 472 469
Finance costs (241 754) (183 874) (376 062)
Taxation paid (7 065 271) (5 136 659) (25 051 002)
Dividends paid - - (60 000 000)
Net cash flow from
operating activities 23 501 344 20 231 676 (28 603 677)
Cash flows from investing
activities
Purchase of property, plant
and equipment (12 122 225) (3 505 283) (3 896 691)
Acquisition of subsidiary (31 707 370)
Sale of property, plant and
equipment 250 000 42 982 145 486
Sale of financial assets - 865 213 48 812 059
Sale of non-current asset
held-for-sale - 5 155 203 5 155 203
Net cash flow from
investing activities (43 579 595) 2 558 115 50 216 057
Cash flows from financing
activities
Proceeds on share issue - - 81 787 121
Raising/(Repayment) of
other financial liabilities 1 447 049 2 931 509 (2 600 841)
Net cash flow from
financing activities 1 447 049 2 931 509 79 186 280
Increase in cash and cash
equivalents
for the period (18 631 202) 25 721 300 100 798 660
Cash and cash equivalents
at beginning of the period 130 281 677 29 483 017 29 483 017
Cash and cash equivalents
at the end of the period 111 650 475 55 204 317 130 281 677
Consolidated Balance Sheet
Unaudited Unaudited Audited
August 2008 August 2007 February 2008
R R R
Assets
Non-current assets
Property, plant and equipment 45 298 683 10 759 006 10 359 399
Goodwill 22 784 979 - -
Deferred tax 965 486 - -
69 049 148 10 759 006 10 359 399
Current assets
Inventories 17 082 774 2 913 262 5 656 627
Other financial assets - 47 946 846 -
Construction contracts and
receivables 25 974 058 19 685 188 23 547 784
Trade and other receivables 13 946 343 18 213 1 788 666
Cash and cash equivalents 111 650 475 55 204 317 130 281 677
168 653 650 125 767 826 161 274 754
Total assets 237 702 798 136 526 832 171 634 153
Equity and liabilities
Equity
Share capital 1 224 200 1 221
Share premium 82 786 097 - 81 786 100
Retained income 89 771 454 101 015 455 64 373 269
172 558 775 101 015 655 146 160 590
Liabilities
Non-current liabilities
Other financial liabilities 3 288 040 2 082 905 829 199
Deferred tax 509 826 347 240 775 515
3 797 866 2 430 145 1 604 714
Current liabilities
Other financial liabilities 17 234 046 5 774 710 1 496 066
Current tax payable 13 892 040 12 979 958 10 430 377
Trade and other payables 30 220 071 14 326 364 11 942 406
61 346 157 33 081 032 23 868 849
Total liabilities 65 144 023 35 511 177 25 473 563
Total equity and liabilities 237 702 798 136 526 832 171 634 153
Condensed Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2008 August 2007 February 2008
R R R
Total equity at the beginning
of the period 146 160 590 80 520 895 80 520 895
Net profit for the period 25 398 185 20 494 760 29 992 574
Issue of shares/share premium 1 000 000 - 88 450 000
Listing expenses - - (6 662 679)
Return of members`
contributions - - (200)
Share-based payment: BEE
credentials - - 13 860 000
Dividend paid - - (60 000 000)
Total equity at the end of
the period 172 558 775 101 015 655 146 160 590
Condensed Consolidated Segmental Information
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2008 August 2007 February 2008
R R R
Segment revenue (external)
- Aluminium 40 123 616 33 996 712 82 508 289
- Steel 70 349 499 54 644 326 94 637 028
- Glass 13 151 673 - -
- Corporate - - -
123 624 788 88 641 038 177 145 317
Segment result (operating
profit)
- Aluminium 11 231 226 8 871 808 30 619 146
- Steel 18 543 822 17 833 108 33 004 586
- Glass (306 545) - -
- Corporate (987 747) - (165 411)
28 480 756 26 704 916 63 458 321
Date: 10/11/2008 10:16:01 Produced by the JSE SENS Department.
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