| Wed 30 Sep 2009, 15:27 | | DON - The Don - Reviewed Financial Results For The Year Ended 30 June 2009 |
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DON
DON
DON - The Don - Reviewed Financial Results For The Year Ended 30 June 2009
The Don Group Limited
Incorporated in the Republic of South Africa
(Registration number: 1946/023123/06)
Share Code: DON & ISIN: ZAE000008462
("The Don" or "the Group")
Reviewed Financial Results for the year ended 30 June 2009
CONDENSED CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2009
Year Year
Ended Ended
Jun 09 Jun 08
Reviewed Audited
R`000 R`000
Revenue 64 991 70 074
Net (loss)/profit before interest and (4 498) 11 468
taxation
Interest received 460 427
Interest paid (7 183) (6 570)
(Loss)/Profit before taxation and (11 221) 5 325
impairment
Impairment losses (91) -
(Loss)/Profit before taxation (11 312) 5 325
Taxation 1 588 1 647
Taxation - SA Normal Tax (187) (54)
Taxation - deferred 1 775 1 701
(Loss)/Profit for the year (9 724) 6 972
Attributable to:
- Equityholders of parent (8 947) 6 972
- Non-controlling interests (777) -
(Loss)/Profit for the year (9 724) 6 972
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
(Loss)/Earnings per share (cents) (3.04) 2.37
Headline (loss)/earnings per share (cents) (3.12) 2.37
Reconciliation of headline (loss)/earnings
(Loss)/Earnings attributable to ordinary (8 946) 6 972
shareholders
Impairment of assets 91 -
Profit on disposal of assets (395) -
Tax effect of above 111 -
Minority effect of above (38) -
Headline (loss)/earnings (9 177) 6 972
CONDENSED CONSOLIDATED BALANCE SHEET
At 30 June 2009
Jun 09 Jun 08
Reviewed Audited
R`000 R`000
ASSETS
Non-current assets 349 679 243 630
Property plant & equipment 341 392 242 230
Goodwill 2 338 -
Intangible assets 176 -
Deferred tax asset 5 773 1 400
Current assets 14 286 12 337
Loans receivable 860 -
Inventories 430 366
Trade and other receivable 6 976 6 863
Cash and cash equivalents 6 020 5 108
Total assets 363 965 255 967
EQUITY AND LIABILITIES
EQUITY
Share capital and reserves 193 771 156 482
Non-controlling interests 3 961 -
197 732 156 482
LIABILITIES
Non-current laibilities 118 027 81 552
Interest bearing liabilities 52 047 44 034
Deferred tax liability 65 980 37 518
Current liabilities 48 206 17 933
Trade and other payables 17 041 12 952
Short term portion of interest bearing 20 661 2 576
liabilities
Non interest bearing liabilities 1 611 -
Current tax payable 1 008 817
Bank overdraft 7 885 1 588
Total equity and liabilities 363 965 255 967
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2009
Share Non-
capital Revalua- control-
and Accumulated tion ling
premium loss surplus interest Total
R`000 R`000 R`000 R`000 R`000
Balance at 30 155 914 (131 107) 98 230 123 037
June 2007
Profit for the 6 972 6 972
year
Revaluation 25 344 25 344
surplus (net of
tax)
Effect of 1 129 1 129
change in tax
rate
Balance at30 155 914 (124 135) 124 703 156 482
June 2008
Revaluation 46 236 46 236
surplus (net of
tax)
Acquired as 4 738 4 738
part of
business
acquisition
Loss for the (8 947) (777) (9 724)
year
Balance at the 155 914 (133 082) 170 939 3 961 197 732
end of the year
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 June 2009
Jun 09 Jun 08
Reviewed Audited
R`000 R`000
Operating activities (3 255) 9 905
Investing activities (4 621) (6 623)
Financing activities 2 491 (3 131)
Net cash (outflow)inflow (5 385) 151
Cash & cash equivalents - beginning of 3 520 3 369
period
Cash & cash equivalents - end of period (1 865) 3 520
Net asset value per share (cents) 67.15 53.14
Tangible net asset value per share (cents) 66.29 53.14
Capital expenditure during the year 8 527 6 688
- Other fixed assets acquired during the 8 527 6 688
year
Rental commitments
Payable in the next year 1 028 1 028
Payable thereafter 956 968
COMMENTARY
OVERVIEW
Despite the inherent positives in The Don suite hotel operations, these
collectively were not strong enough in the financial year ended 30 June 2009 to
help the Group withstand the hospitality industry slump, the marked decline in
its core revenue source of business travel and the opening of new competitor
hotels in Sandton, Johannesburg, Pretoria and Cape Town, putting nearly 1 300
extra competitive hotel rooms into the market place.
The Group has also experienced an increase in operating costs with an
unavoidable increase in staff costs, increased municipal charges and higher
electricity costs which have affected bottom line performance.
The impact of the above mentioned factors coincided with the short-term impact
on suites occupancy levels due to The Don`s hotel refurbishment programme, which
continues to be financed from internal resources. These enhancements contributed
to the value of the asset base and will continue to do so until the last
upgraded hotels come fully on stream.
Although in previous reporting periods the board cautioned that trading
conditions were deteriorating, and took such steps as were possible to meet the
challenge, the extent and depth of recessionary conditions far exceeded the
directors` fears, with anticipated new income generating areas referred to in
the previous reporting period not materialising. The overall consequence was a
decline in revenue and profitability for the financial year ended 30 June 2009.
Nevertheless, The Don`s nine hotels have been able to successfully hold their
own against the larger hotel groups. However, the small size of the Group is a
prevailing weakness, which the current turbulent economy has exposed once again.
To counter this, the Group has brought into play a long-standing development
programme to expand The Don`s activities in the overall hospitality sphere. The
first phase of the development programme was the acquisition of a controlling
interest in iKapa Tours & Travel (Proprietary) Limited ("iKapa"), a leading Cape
Town-based company specialising in inbound foreign tourist business from the
United States, United Kingdom, Europe and Australia.
Through iKapa, The Don is able to provide customers with a complete tourism
service (including accommodation, sightseeing, transportation, car hire, airline
ticket and meals) with a particular focus on inbound foreign visitors. iKapa
operates a 20-fleet luxury coach and mini bus operation covering Southern Africa
and has a formal business partnership with a leading tour organisation, Ambula
Safaris, which operates in Botswana, Zambia and Zimbabwe (Victoria Falls).
As a result of the acquisition of iKapa, the board of directors` believe that
The Don`s suite hotels will enhance its performance through iKapa`s hotel
offerings to inbound tourists.
iKapa`s contribution in revenue to year-end results covered only two months of
the year to 30 June 2009 and amounted to R3.2 million.
The goodwill recognised on the acquisition of iKapa is attributable to its trade
name and customer relationships. iKapa`s revenue for the year reported on
amounts to R42.8 million and a loss of R4.46 million before taxation. The
carrying amounts of assets and liabilities on acquisition date were:
Property, plant and equipment 22 225
Intangible assets 176
Deferred tax asset 2 296
Loans receivable 860
Inventories 59
Trade and other receivables 2 127
Cash and cash equivalents 3 668
Interest bearing liabilities (17 947)
Trade and other payables (3 793)
Full details of the transaction were published on SENS on 15 May 2009.
FINANCIAL RESULTS
For reasons set out above, year on year, turnover fell 7.3 percent from R70.1
million to R65 million. This led to a swing from a headline profit of R6.97
million to a headline loss of R9.18 million.
This translated into a headline loss per share of 3.12 cents from a profit of
2.37 cents.
On a brighter note, a revaluation of the Group`s property portfolio increased
the assets from R243.6 million to R349.7 million.
CASH FLOW
Under subsidiary Bay Drive Trading 84 (Proprietary) Limited, all new leased
hotels, as discussed in the Prospects section below, are extra revenue
generating and will in the new financial year contribute directly to the cash
flow stream of the group.
iKapa has firm contracts in place in respect of the 2010 World Cup event. The
Don, as an approved supplier, has made available 80 percent of its accommodation
for the event.
Furthermore, to meet the cost of refurbishment and the investment in iKapa, The
Don entered a three year sale and leaseback agreement (with an extension option
of two years) with Rentworks Africa (Proprietary) Limited using moveables in
the hotels such as TVs, stoves and refrigerators as security which raised R14
million. Opportunities in the future exist to source alternative sources of
finance.
The conclusion of the refurbishment project before December 2009 will restore
The Don to full capacity to take advantage of any improvement in the economy
before 2010 FIFA World Cup.
OPERATIONS
Capital expenditure for the year amounted to R8.53 million (30 June 2008: R6.69
million).
Refurbishment has been completed on five hotels at a cost of R8.53 million and a
further R8 million shall be sourced for the refurbishment of Arcadia I and II,
Rosebank and Isando (of which 60 suites have already been refurbished).
Although the refurbishment programme was largely responsible for lost revenue,
occupancy rates were also badly affected by a sharp drop in corporate travel
customers and a decline in airline travel.
The opening of new competitor hotels and the resultant increase in the number of
rooms led to price wars in the industry during the financial year. As a result,
The Don has had to review its pricing strategy and, within limits of market
conditions and inflation, has a struck a countervailing balance through
increased suite rates, especially justified in upgraded hotels.
As with earlier DSTV Big Brother reality TV shows, The Don has a working
arrangement with the current programme that garners increasing visibility for
The Don in South Africa and in countries north of its borders. The Don has built
on this platform to date by appointing sales agents in Angola, Malawi, Zimbabwe
and Tanzania. Domestically, the Group is continually strengthening its
association with key travel agencies.
Investment in staff training is delivering rewards in improved exit responses
from guests, which reflect appreciation for high levels of service efficiency,
enthusiasm and friendliness of staff as well as accommodation standards.
Information technology for reservations, guest internet services and the
corporate website have been upgraded. The installation of a web server which
provides a microsite link to booking engines and the improved website
reservation service has delivered a marked improvement in internet sales. The
upgrades include an automated Virtual Card Services ("VCS") payment service
which minimises fraud and allows a link to the website.
All hotels now have wireless internet connectivity, which is backed up by
efficient, secure facilities that ensure data integrity and uninterrupted power
supplies.
BOARD MEMBERSHIP
Ms Uviwe Vuyokazi Mzilikazi was appointed executive Financial Director on 30
June 2009.
The board said farewell to independent non-executive member Mr Wayne Wright,
with tribute paid to his services. He is replaced by Mr Kelly Clinton, who was
appointed on 1 July 2009.
ACCOUNTING POLICIES
Basis of preparation: The accounting policies applied in the preparation of
these condensed consolidated interim results, are in accordance with
International Financial Reporting Standards ("IFRS"), and are consistent with
those applied in the annual financial statements for the year ended 30 June 2008
and, where applicable, are based on management judgments and estimates. These
condensed consolidated interim results as set out in this report have been
prepared in terms of IAS 34 - Interim Financial Reporting, the Companies Act,
1973 (Act 61 of 1973), as amended, and the Listings Requirements of JSE Limited.
Owner-occupied property: Owner-occupied property is recognised initially at
cost. Thereafter, the property is carried at a revalued amount, as determined by
the directors and or professional valuers. Depreciation is provided on buildings
over their remaining useful lives (total estimated useful life is 50 years.)
Residual values of properties are re-assessed annually. Where the residual value
equals or exceeds the carrying amount of an asset no depreciation is recognised.
The revaluation reserve and related deferred tax have been recognised in equity
and liabilities. The requirements of IAS 16, `Property, plant and equipment` on
the valuations and depreciation of the properties have been applied in
accordance with IAS 8 `Accounting policies, changes in accounting estimates and
errors`.
Deferred taxation: Deferred tax liabilities are recognised for all revaluations,
prior period restatements and 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.
Investment in associate company: Steps had been taken by the year-end date to
have this company formally de-registered. Accordingly, the financial liability
has been `de-recognised` and the financial asset impaired. The Group is seeking
to minimise any obligations arising from de-registration and these are not
expected to exceed R280 000.
Review report: These condensed consolidated year end results to 30 June 2009
have been reviewed by PKF (Jhb) Inc. and their unqualified review report is
available for inspection at the Group`s registered office.
Dividends: No dividend were declared for the financial year ended 30 June 2009.
PROSPECTS
In addition to the iKapa acquisition, the Group`s expansion objectives include
advances into other hospitality markets in South Africa and other African
countries. To facilitate expansion, The Don has established a subsidiary, Bay
Drive Trading 84 (Proprietary) Limited, through which it is now actively seeking
lease-management takeover opportunities in other metropolitan growth centres.
The first steps in this direction will start bearing fruit in the first half of
the 2010 financial year.
The Don entered into leasing and rental pool contracts which are effective from:
- 1 September 2009, for the 45-room Savoy Hotel and Conference Centre in
Kimberley which is a conventional hotel business;
- 1 October 2009, for the Hyde, in Sea Point, Cape Town, a four-star 38-suite
hotel; and
- 1 January 2010, for a centrally located three-star 36 rooms establishment in
Krugersdorp.
The above hotels will be known as Don Savoy, Don The Hyde and Don Krugersdorp.
Early next year, The Don plans to enter into a leasing and management contract
for The Don, Sir Lowry Road with 60 suites in the centre of Cape Town. This
could result in The Don`s hospitality `footprint` in Cape Town increasing to 125
suites from the 27 units (including a luxury penthouse) of the existing The Don
Beach Road hotel.
The Don itself is a FIFA-approved accommodation provider for the 2010 FIFA World
Cup.
Another medium-term objective of the Group`s expansion programme is application
for bulk development re-zoning of certain of its existing properties.
By order of the board.
Salukazi Dakile-Hlongwane Thabiso Tlelai
Chairperson Chief Executive Officer
30 September 2009
Directors: Salukazi Dakile-Hlongwane* (Chairperson), Thabiso Tlelai (Chief
Executive Officer), Uviwe Mzilikazi (Financial Director) Professor Francois
Viruly*>, Max Maisela*, Kelly Clinton* * Independent Non-Executive Directors
>Dutch
Company Secretary: Whitney Green
Registered Office: 65 Kyalami Boulevard, Kyalami Business Park, Kyalami, 1684
Transfer Secretaries: Link Market Services South Africa (Proprietary) Limited
Sponsor: Merchantec (Proprietary) Limited
Auditors: PKF (Jhb) Inc.
Date: 30/09/2009 15:27:01 Produced by the JSE SENS Department.
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