| Wed 26 Sep 2007, 8:00 | | DON - The Don Group Limited - Reviewed financial r |
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DON
DON
DON - The Don Group Limited - Reviewed financial results for the year ended 30
June 2007
The Don Group Limited
Incorporated in the Republic of South Africa
(Registration No. 1946/023123/06)
Share Code: DON ISIN: ZAE000008462
("Don" or "the Group")
Reviewed Financial Results for the year ended 30 June 2007
SUMMARISED CONSOLIDATED INCOME STATEMENT
Year ended Year ended
June 2007 June 2006
Reviewed Audited
R`000 R`000
Revenue 62 578 49 252
Operating profit 15 329 8 785
Net finance (expense) (5 959) (6 127)
Depreciation (4 470) (4 476)
Profit/(Loss) before exceptional items 4 900 (1 818)
Impairment of hotel equipment - (611)
Profit/(Loss) after exceptional items 4 900 (2 429)
Taxation 211 (2 920)
Taxation - SA normal tax (221) (2 339)
Taxation - deferred 432 (581)
Profit/(Loss) attributable to ordinary
shareholders 5 111 (5 349)
Headline profit/(loss) 5 111 (4 738)
Number of ordinary shares in issue
(000`s) 294 485 294 485
Weighted average number of ordinary
shares in issue (000`s) 294 485 294 485
Profit/(Loss) per share (cents) 1,74 (1,82)
Headline profit/(loss) per share
(cents) 1,74 (1,61)
Reconciliation of headline
profit/(loss)
Profit/(Loss) attributable to ordinary
shareholders 5 111 (5 349)
Impairment of hotel equipment - 611
Headline profit/(loss) 5 111 (4 738)
CONSOLIDATED BALANCE SHEET
at 30 June 2007
June 2007 June 2006
Reviewed Audited
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 147 375 148 685
Unlisted investments 1 437 1 437
Current assets 8 553 9 594
- Inventory and accounts receivable 5 184 8 056
- Cash and cash equivalents 3 369 1 538
Total assets 157 365 159 716
Equity and liabilities
Capital and reserves 74 778 69 667
Non-current liabilities 48 269 50 945
- Interest free 2 390 2 390
- Interest bearing 45 879 48 555
Deferred tax 20 772 21 205
143 819 141 817
Current liabilities 13 546 17 899
- creditors and provisions 9 247 12 107
- short-term portion of non-current
liabilities 3 536 3 998
- taxation 763 1 794
Total equity and liabilities 157 365 159 716
SUMMARISED STATEMENT OF CHANGES IN EQUITY
June 2007 June 2006
Reviewed Audited
R`000 R`000
Balance at the beginning of the year 69 667 75 016
Profit/(Loss) for the year 5 111 (5 349)
Balance at the end of the year 74 778 69 667
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
June 2007 June 2006
Reviewed Audited
R`000 R`000
Cash generated by operations 8 126 7 170
Investing activities (3 157) (1 203)
Financing activities (3 138) (3 444)
- Repayments to IDC (3 138) (3 444)
Cash and cash equivalents - beginning
of year 1 538 (985)
Cash and cash equivalents - end of
year 3 369 1 538
Net asset value per share (cents) 25,4 23,7
Capital expenditure during the year
(R000`s) 3 157 1 578
- Other fixed assets acquired during
the year 3 157 1 578
Directors` valuation of unlisted
investments 1 437 1 437
Rental commitments (R000`s)
Payable in the next year 975 512
Payable thereafter 2 736 1 506
COMMENTARY
FINANCIAL RESULTS
The most pleasing feature that closed the financial year ended 30 June 2007 has
been the significant improvement in operating profit: up 74 percent to R15,3
million from R8,8 million in the previous year. The growth path in operating
profit is reflected by the results for the last three financial years - 2005:
R3,9 million; 2006: R8,8 million and 2007: R15,3 million.
It is pleasing therefore to report that the operating profit platform enabled
Don to post a profit of R5,1 million from a R5,3 million prior year loss.
This performance is testimony to the inherent strength of the Don Group as the
premier JSE-listed all-suite hotel group. The Group has now dealt with a once-
off legacy impediment of a tax liability of R2 million in respect of a matter
going back many years. This was a prime contributor to the R5,3 million loss
reported in the prior year. This translates into a headline profit of 1,74 cents
compared with a prior year loss of 1,61 cents.
Again, it is instructive to see how shaking off historic problems affected
financial performance by rating bottom line results over the last three years -
2005: R300 000 profit; 2006: R5,3 million loss; 2007: R5,1 million profit.
Net asset value improved to 0,254 from 0,237 cents per share.
The current result squares neatly with the comment made a year ago in which we
said the removal of historic impediments would leave the road open to the
Group`s management turning its energy to improving financial performance and
continued profit growth.
The basis for this achievement rests on the 27 percent rise in revenue to R62,6
million from R49,3 million. The main contributors were modest increases in suite
rates, as well as good rate yield management.
OPERATIONS
The foundation of Don`s objective of incremental profit growth is its product:
well-designed, superbly furnished studio, one-, two- and three-bedroomed suites
complete with well-equipped self-catering kitchens, supported by dining and
beverage services. There are few competitors in the hospitality market able to
offer self-catering and conventional hotel facility options at rates based not
on per person but on "key to the door" rates.
Accordingly, great attention has been given to improving the quality of the
product. Capital expenditure of R3,2 million focused on upgrading property has
been incurred, particularly on the Don Beach Road Hotel in Cape Town. These new-
look premises to be re-launched in October will set a new standard for a Don
Suite Hotel. The other eight suite hotels in Johannesburg, Sandton and Pretoria
are all receiving upgrading and improvement attention. A significant incentive
is the fact (as reported in the last interim commentary) that the Don Group has
been granted FIFA accreditation for the 2010 World Cup.
Overall, costs have been in line with budget. Nevertheless, in preparing to meet
the challenges associated with the 2010 World Cup, the Group is budgeting for
additional costs, in particular for hotel and Head Office staffing.
Other refinements to operations include upgrading or replacement of telephony
services at hotels and Head Office, computer servers, suite television sets and
air conditioning installation.
In response to guest exit questionnaires, services are continually improving in
line with ever changing customer expectations and further resources have been
allocated to strengthening Don`s advance into different market segments. A
watchful eye is being kept on inflationary pressures, especially in respect of
food prices and there is a constant review of menus to ensure cost saving
without compromising quality of service delivery.
The Don Group is partnered with the popular Multichoice "Big Brother" reality
television series.
The drive to reinforce ground gained in the various market segments is being
intensified, as is the Group`s participation in tourism growth nationally and
internationally.
Social responsibility
The Group embraces a philosophical policy entitled `Lifestyle` with which all
employees are expected to identify. Training and procedural practice inculcates
a level of enthusiastic and friendly efficiency that has become a Don Group
hallmark, earning strong approval ratings in guest exit questionnaires. Don also
makes ample resources available for its long-standing and ongoing commitments to
HIV/AIDS prevention and support, to women and child abuse, and to orphanages.
BOARD MEMBERSHIP
Danisa Baloyi resigned as non-executive chairperson on 29 March 2007. Her
contribution to Don`s development and achievements thus far is acknowledged. In
her place Ms Salukazi Dakile-Hlongwane has been appointed non-executive
chairperson.
Ms Salukazi Dakile-Hlongwane and Wayne Roderick Wright were appointed on 29 June
2007 as non-executive directors.
The composition of the board is: Thabiso Tlelai (Chief Executive Efficer), Max
Maisela*, Professor Francois Viruly*, Ms Salukazi Dakile-Hlongwane
(Chairperson)* and Wayne Wright* (* non-executive directors).
ACCOUNTING POLICIES
Basis of preparation: The consolidated financial statements have been presented
in accordance with the Group`s policies which have been consistently applied
other than as stated below and are in compliance with International Financial
Reporting Standards and the Companies Act of South Africa.
Change in presentation: The offset of certain current assets and liabilities in
the prior year has been adjusted in both the prior and current year and they
have now been presented separately. The directors have determined that the
adjustment of the offset results in more transparent financial reporting. This
has affected cash and cash equivalents and short-term payables. The effects of
the accounting policy changes are shown below:
Balance Sheet effects
Adjusted Adjustments Previously
June 2006 Reported
June 2006
R`000 R`000 R`000
Cash and cash equivalents 1 538 1 538 -
Creditors and provisions 12 107 2 529 9 578
Bank overdraft - (991) 991
Cash Flow Statement effects
Adjusted Adjustments Previously
June 2006 Reported
June 2006
R`000 R`000 R`000
Cash generated by operations 7 170 2 529 4 641
Owner-occupied property: Owner-occupied property is recognised initially at
cost. Thereafter, the property is carried at a re-valued amount, as determined
by professional valuers to reflect the values of the properties had they been
converted into residential units. Depreciation is provided at 2 percent per
annum. The revaluation and related deferred tax have been recognised in equity.
Deferred taxation: Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which deductible
temporary differences can be utilised.
Financial liabilities: Financial liabilities initially are measured at cost,
which is the fair value of the consideration received, less transaction costs.
Thereafter, these are measured on the amortised cost basis. Interest expense is
charged to the income statement.
Investment in associate company: The Group continued to hold this investment as
no application for formal de-registration has been made. Accordingly, there has
been no change in the accounting for this asset and financial liability since
June 2006. The Group is seeking to minimise any obligations should de-
registration take place and these are not expected to exceed R0,28 million.
Review report: The consolidated year-end results to 30 June 2007 have been
reviewed by PKF (Jhb) Inc. and their unqualified review report is available for
inspection at the company`s registered office.
Dividend: No dividend has been declared or paid.
PROSPECTS
Based on a core asset base of nine suite hotels in Cape Town, Johannesburg,
Sandton and Pretoria, management is intent on maximising income and profit
growth. The promise held out to the hospitality industry by stabilised economic
growth, the 2010 World Cup and burgeoning tourism point to opportunities in
which Don fully intends to share. The positive results for the year ended 30
June 2007 have given management and staff a solid platform from which to achieve
that objective. The most worrying aspect is the possibility of worsening
inflation. Nevertheless, through tried and tested management and operational
tools, including an effective cost master programme, and a dedicated staff, Don
has every confidence of improving on the achievements of 2006-2007.
By order of the board
26 September 2007
Thabiso Tlelai Ms Salukazi Dakile-Hlongwane
Chief Executive Officer Non-executive Chairperson
Directors:
Ms Salukazi Dakile-Hlongwane* (Chairperson), Thabiso Tlelai (Chief Executive
Officer), Professor Francois Viruly*#, Max Maisela*, Wayne Wright* * Non-
executive directors # Dutch
Company Secretary:
Whitney Green
Registered Office:
65 Kyalami Boulevard, Kyalami Business Park, Kyalami, 1684
Transfer Secretaries:
Link Market Services (SA) (Proprietary) Limited
Date: 26/09/2007 08:00:04 Produced by the JSE SENS Department.
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