Mazor

Interim results for the six months ended 31 August 2009
HIGHLIGHTS
* Revenue up 45.8%
* Operating profit up 69.6%
* Core HEPS up 54.4%
* Introduction of strategic equity partner
* Expanded national and cross-border footprint
The directors are pleased to present the unaudited consolidated results for the six months ended 31 August 2009, which continue to reflect robust top and bottom line growth. Being a scalable business with an established and flexible infrastructure, Mazor successfully weathered the challenging economic environment to maintain its record of consistent growth.
During the period the group concluded a R27.3 million share buy-in agreement with boutique investment banking and private equity specialist, Global Capital (Pty) Limited. The investment introduced a strategic shareholder with a proven track record of partnering growth companies, adding impetus to Mazor's diversification and acquisition strategy.
Group profile
Founded in the Western Cape nearly 30 years ago, the group now also operates in Gauteng, KwaZulu-Natal and the Eastern Cape following a successful geographical expansion programme.
Mazor comprises three key divisions:
* Mazor Steel which designs, supplies and erects structural steel frames;
* Mazor Aluminium which designs, manufactures and installs aluminium structures such as doors, windows, shopfronts, facades and balustrades for major blue-chip construction groups. Mazor Aluminium is South Africa's leading specialist in the technique of glass facade cladding, capitalising on vertical integration opportunities within the group; and
* Glass which manufactures and distributes laminated and toughened safety glass and double-glazed units.
Introduction of strategic partner
As previously announced on 6 August 2009 Mazor concluded an agreement with Global Capital to acquire 12 284 722 Mazor shares, at a price of R2.225 per share, amounting to an aggregate consideration of R27 333 506. The Global Capital transaction was approved by shareholders in a general meeting on 18 September 2009. The sale of shares to Global Capital generated net after-tax profit (included in equity) of R6.8 million.
The shares, constituting 10% of the entire issued share capital of Mazor, were previously held as treasury shares in terms of section 89 of the South African Companies Act, 1973.
Global Capital's skill and expertise is expected to support Mazor's strategy of identifying acquisitions that diversify its revenue stream. The group is currently pursuing a number of opportunities in this regard while being cognisant of the relevant risk profile. Global Capital's proven track record highlights its ability to add value through strategic input.
Directorate
Following the Global Capital transaction, Global Capital CEO Frank Boner was appointed as a non-executive director to the board of Mazor. We welcome him to the board and look forward to his contribution.
Review of operations
Mazor Steel and Mazor Aluminium continue to account for the majority of group revenue and profitability and again performed well despite tough market conditions. The divisions expanded further into high-growth regions such as Port Elizabeth and KwaZulu-Natal to counter the impact of a flailing economy in Mazor's traditional base of operation, the Western Cape. Following the downscaling of projects in traditional markets the group is seeking larger-scale, higher margin projects outside of South Africa and is currently making inroads into Namibia and Angola. No major capital expenditure was incurred by either division during the period. Notwithstanding the industry downturn the performance of the Glass Division was encouraging with a steady increase in revenue. The wider product range and geographic expansion are expected to help boost performance going forward. The weak economy has enabled the division to secure a number of strong new personnelto drive future growth. Mazor continued its investment in plant and equipment tofurther bolster the division's capacity, with capital expenditure for the periodtotalling R6 million.
Financial results
Revenue for the period increased by 45.8% on the comparative period to R180.2 million from R123.6 million. Net profit grew 26.9% to R32.2 million from R25.4 million, generating headline earnings per share of 29.19 cents compared to 20.75cents in the comparative period. Operating profit grew 69.6% to R48.3 million from R28.5 million. Earnings per share increased 40.75% to 29.16 cents from 20.72 cents.
Core headline earnings per share increased 54.4% from 20.75 cents per share to 32.03 cents per share. (Core headline earnings is calculated after adjusting forthe share-based payment that arose as a result of the Global Capital transaction- see "Introduction of strategic partner" above.)
The share-based payment charge is purely an accounting entry as required in terms of IFRS 2 and has no effect on the cash flows or net asset value of the group.
Mazor remains cash flush with cash on hand of R115.4 million. The cash inflow from the Global Capital transaction only occurred post the end of the period during September 2009.
At 31 August 2009, the group had issued guarantees amounting to R44.4 million compared with R33.9 million at 31 August 2008. These guarantees have arisen in the ordinary course of business and it is not expected that any loss will arisetherefrom. Net asset value increased 35.6% from 140.9 cents per share (31 August 2008) to 191 cents per share.
Share transactions
During the period 1 938 401 shares were repurchased at an average price of R1.64 per share, bringing the number of Mazor shares held as treasury shares to13 698 627. The group sold 12 284 722 shares (see "Introduction of strategic partner") and cancelled 1 345 669 shares. At 31 August 2009, 68 236 Mazor shareswere held as treasury shares.
Ordinary shares in issue at 31 August 2008 and 28 February 2009 have been restated to take into account treasury shares. This has no effect on published results.
Prospects
Notwithstanding prevailing market conditions the board maintains a positive outlook for the full year to February 2010. Mazor will continue to expand geographically in all three divisions, particularly targeting new opportunitiesin high-growth areas such as Gauteng and Africa. The expanded and upgraded product range in the Glass Division should further contribute to a continually improving performance. Backed by positive cash holdings, Mazor continues to identify acquisition opportunities within the construction industry either for geographic expansion or additional product differentiation. The group will continue to assess diversification into untapped markets such as the industrial and motor sectors.
Dividends
A dividend of 17.5 cents per share in respect of the year ending 28 February 2009, totalling R21.3 million, was paid on 13 July 2009 and is reflected in these results net of treasury share dividends received. In line with company policy no interim dividend has been declared for the period. It isthe intention of the board to declare a dividend for the full year ending.