| Wed 31 Mar 2010, 11:33 | | DON - Don Group Limited - Unaudited interim results for the six months ended |
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DON
DON
DON - Don Group Limited - Unaudited interim results for the six months ended
31 December 2009
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")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2009
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
for the period ended 31 December 2009
Unaudited Reviewed Audited
six months six months year
ended ended ended
Dec-09 Dec-08 Jun-09
R`000 R`000 R`000
Revenue 46 467 35 448 64 991
(Loss)/profit before interest and tax (8 813) 3 332 (4 498)
Interest received 146 254 460
Interest paid (3 999) (3 318) (7 183)
Impairment losses - - (91)
(Loss)/profit before tax (12 666) 268 (11 312)
Taxation 1 183 186 1 588
Taxation - Current - - (187)
Taxation - Deferred 1 183 186 1 775
Comprehensive (loss)/income for the (11 483) 454 (9 724)
period
Attributable to:
- Equity holders of parent (10 444) 454 (8 947)
- Non-controlling interests (1 039) - (777)
(11 483) 454 (9 724)
Other comprehensive income for the - - 46 236
period
- Gross revaluation surplus - - 74 396
- Deferred taxation - - (28 160)
Total comprehensive (loss)/income for (11 483) 454 36 512
the period
Attributable to:
- Equity holders of parent (10 444) 454 37 289
- Non-controlling interests (1 039) - (777)
(11 483) 454 36 512
Number of ordinary shares in issue 294 485 294 485 294 485
(000s)
Weighted average number of
ordinary shares in issue (000s) 294 485 294 485 294 485
(Loss)/profit per share (cents) (3.55) 0.15 (3.04)
Headline (loss)/profit per share (cents) (3.55) 0.15 (3.12)
Reconciliation of headline (loss)/profit
Comprehensive (loss)/income for the
period
attributable to ordinary shareholders (10 444) 454 (8 947)
Impairment of assets - - 91
Profit on disposal of assets (11) - (395)
Tax effect of above 3 - 111
Minority effect of above - - (38)
Headline (loss)/profit for the period (10 452) 454 (9 178)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION at 31 December 2009
Unaudited Reviewed Audited
Dec-09 Dec-08 Jun-09
R`000 R`000 R`000
ASSETS
Non-current assets 350 367 245 901 349 678
- Property, plant and equipment 338 235 244 501 341 392
- Goodwill 2 338 - 2 338
- Other intangible assets 176 - 176
- Deferred tax asset 9 618 1 400 5 772
Current assets 22 159 6 430 14 286
- Other financial assets 1 035 - 860
- Inventories 575 462 430
- Trade and other receivables 13 656 4 340 6 976
- Cash and cash equivalents 6 893 1 628 6 020
Total assets 372 526 252 331 363 964
EQUITY AND LIABILITIES
EQUITY
Share capital and reserves 183 327 156 936 193 771
Non-controlling interests 2 922 - 3 961
186 249 156 936 197 732
LIABILITIES
Non-current liabilities 126 317 79 538 118 026
- Loans from shareholders 6 208 - -
- Interest bearing liabilities 51 468 42 206 52 047
- Deferred tax liability 68 641 37 332 65 979
Current liabilities 59 960 15 857 48 206
- Trade and other payables 35 301 12 039 17 041
- Short-term portion of interest bearing 11 172 3 001 20 661
liabilities
- Short-term portion of non interest - - 1 611
bearing liabilities
- Current tax payable 1 008 817 1 008
- Bank overdraft 12 479 - 7 885
Total equity and liabilities 372 526 252 331 363 964
Net asset value per share (cents) 63.2 53.3 67.1
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY for the period ended
31 December 2009
Unaudited Reviewed Audited
Dec-09 Dec-08 Jun-09
R`000 R`000 R`000
Attributable to equity holders of
parent:
- Balance at beginning of period 193 771 156 482 156 482
- Total comprehensive (loss)/income for (10 444) 454 37 289
the period
- Balance at end of period 183 327 156 936 193 771
Non-controlling interests
- Balance at beginning of period 3 961 - -
- Acquisition of subsidiary - - 4 738
- Total comprehensive (loss)/income for (1 039) - (777)
the period
- Balance at end of period 2 922 - 3 961
Total equity 186 249 156 936 197 732
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the period ended 31
December 2009
Unaudited Reviewed Audited
Dec-09 Dec-08 Jun-09
R`000 R`000 R`000
Operating activities 2 747 4 030 (3 255)
Investing activities (760) (4 519) (4 621)
Financing activities (5 708) (1 403) 2 492
Net cash outflow (3 721) (1 892) (5 385)
Cash and cash equivalents at beginning (1 865) 3 520 3 520
of period
Cash and cash equivalents at end of (5 586) 1 628 (1 865)
period
CONDENSED SEGMENTAL ANALYSIS
for the period ended 31 December 2009
Unaudited Reviewed Audited
Dec-09 Dec-08 Jun-09
R`000 R`000 R`000
Segmental revenue
Hotels 26 929 35 448 61 736
Travel and Tourism 19 538 - 3 255
Net revenue 46 467 35 448 64 991
Segmental (loss)/profit before interest
and tax
Hotels (6 377) 3 332 (2 761)
Travel and Tourism (2 436) - (1 737)
(Loss)/profit before interest and tax (8 813) 3 332 (4 498)
OVERVIEW AND FINANCIAL RESULTS
The Board has the task of informing shareholders that the Group incurred a
headline loss of R10.5 million in the half-year to 31 December 2009, compared
with a profit of R454 000 in the previous comparative period. This follows a
headline loss of R9.17 million incurred at financial year ended 30 June 2009.
This swing in fortunes underlined the considerable fears consistently voiced
by the Board in previous reporting periods of the poor economy impacting
negatively on the Group`s performance.
That view notwithstanding, the Board had held out high hopes for the
business, as published in the commentary for the financial year ended 30 June
2009 and in the annual report. These expectations were founded on the
expansion of the Group beyond its core base of nine suite hotels through the
acquisition of a 51 percent stake in iKapa Tours and Travel (Proprietary)
Limited ("iKapa") as well as control, through the new subsidiary Bay Drive
Trading 84 (Proprietary) Limited, of the 45-room Don Savoy and Conference
Centre in Kimberley and the 36-suite Don Hyde in Sea Point, Cape Town.
Unfortunately, these expectations were not met.
Growth prospects and profitability throughout 2009 were limited by a hotel
base of only nine hotels and 424 suites competing in a declining hospitality
market; heavy competitive discounting of tariffs and increased competition
from new hotels on its own turf; and increased municipal charges, with
electricity bills rising by 20 percent.
The Board considers it unfortunate that the recession caught the Group well
into its extensive refurbishment programme of all its suite hotels (cost at
31 December 2009: R1.23 million), the suspension of which was deemed non-
negotiable in terms of the Don`s Fifa World Cup commitments. Likewise, the
Don`s long-planned expansion programme to widen its business model had just
begun to gain traction. The additional Kimberley and Cape Town hotels
contributed revenue for four and three months, respectively.
The phased withdrawal of suites during upgrading and the industry-wide
decline of the corporate market, in particular, resulted in a 25 percent
decline across the board in average suite rate occupancies and a sharp
reduction in revenue. Income from hotels dropped 24 percent to R26.9 million
from R35.4 million posted a year ago. This was offset by iKapa`s contribution
to revenue of R19.5 million, which boosted half-year revenue to R46.47
million, a 31 percent improvement on the R35.45 million recorded at 31
December 2008. However, iKapa, with its focus on the tourism industry, did
not escape recession ravages, and incurred a R2.1 million loss to 31 December
2009.
The Group`s non-current asset base is relatively unchanged at R350.43
million.
Net asset value per share in cents: 63.2 (31 December 2008: 53.3).
OPERATIONS
The applications for the re-zoning of the Group`s Sandton properties are
nearing resolution. Once this is achieved, new opportunities will open to
transform the Group`s scope for growth.
The hotel upgrading project is conducted in-house using a special team to
reduce labour costs. Initially, the programme was financed from internal
resources. The decline in revenue as occupancies fell, led the Don to enter
into a R15 million sale and leaseback agreement with Rentworks Africa
(Proprietary) Limited ("Rentworks") to ensure completion of refurbishment.
With the deterioration in market conditions showing no sign of abating, the
Group sought alternative relief through a R36 million arrangement with the
Industrial Development Corporation. This funding is to be used to settle and
cancel the Rentworks deal, with the balance being allocated to completion of
hotel refurbishment. All hotels will be fully refurbished in time for the
Fifa World Cup.
The Board believes the enhanced quality of the hotels will add considerable
value to the asset base and will strengthen the appeal of the suite hotel
product in post World Cup marketing.
Strong marketing during the downturn broadened relations in the travel trade
and elicited strategic alliances with key new business facilitators. Clearly,
this was not sufficient to increase occupancies and thus mitigate losses.
Looking to the immediate future, these initiatives and greater Don brand
awareness will be important in winning back corporate guests and attracting
new customers as and when the economy recovers.
The financial year to 30 June 2010 will incorporate nine months of income
streams from Don Savoy in Kimberley. The 36-room Don Heritage Square in
Krugersdorp came under Group control in March. The objective of seeking
similar lease/management opportunities to expand its hotel division will
continue without exposing its asset base to risk.
To spur growth, the Don has appointed sales agents with clear annual sales
target objectives. The Group`s continental exposure has been steadily
intensified through its association with the MultiChoice DSTV`s `Big Brother`
series focused on African participants.
iKapa`s business was fully described in the annual report executive review.
The complementing synergies of the Don and iKapa are yielding new
opportunities for mutual benefit. iKapa is expanding its well-established
sales representation in key overseas markets and now incorporates the Don
accommodation in its iKapa three-star tour packages. The Don now has the
capacity to offer hotel guests improved airport shuttle services and day
tours.
The Group has also identified new opportunities to partially unlock capital
in the Don properties by deriving benefit from its suite accommodation
through time share. It has entered an agreement with a time share company to
exchange Don Hotel suites at Don Isando with similar accommodation in a
Durban timeshare establishment and it sees further potential growth by
widening timeshare to hotels in other centres.
BOARD MEMBERSHIP
The Board said farewell to independent non-executive member Mr Kelly Clinton
on 21 September 2009. Mr Carel van Zyl was appointed on 26 November 2009 in
his place.
BASIS OF PREPARATION
The interim results have been prepared in accordance with International
Financial Reporting Standards, the requirements of IAS 34 (Interim Financial
Reporting) and in compliance with the JSE Listings Requirements and the
Companies Act, 1973 (Act 61 of 1973), as amended.
The accounting policies applied in preparing these interim results are
consistent with those presented in the annual financial statements for the
year ended 30 June 2009 except for the application of IAS 1 and IFRS 8 which
is applicable from years commencing 1 January 2009 and require additional
disclosure.
These interim results have not been audited or reviewed by the Group`s
auditors.
DIVIDENDS
No dividend has been declared or paid.
SUBSEQUENT EVENTS
The management contract in respect of The Hyde in Cape Town was terminated at
31 March 2010, by mutual agreement as a result of differences in operational
direction between both parties.
PROSPECTS
The potential for an economic recovery, no matter how sluggish, is
encouraging. Suite hotel occupancies for the last quarter of the 2010
financial year show an improvement and are expected to gather momentum with
the approach of the Fifa World Cup.
The Group is set to benefit considerably from healthy contracts for the Fifa
World Cup signed by iKapa and the hotel division. This stimulus should be
positively reflected in the financial results at year-end 30 June 2010 and in
the first half of the financial year 30 June 2011.
The investment in hotel upgrading and expansion via the iKapa acquisition has
transformed the Group`s business model and provided it with it a superb
marketing tool. From managing and selling hotel suites from wholly-owned
properties, the business now encompasses a much more diverse tourist offering
of suites, conventional hotel rooms, conferencing facilities, comprehensive
inbound tourist services, fleet management, and the new timeshare concept.
That said, the Board and management acknowledge that they confront a
significant task in recovering from recent losses. Efforts will be doubled to
contain operational costs in the face of expected large increases in
electricity, other municipal charges and fuel. This will include a
significant reduction in costs.
The Board and management are looking beyond the Fifa World Cup and its
inevitable aftermath of intensified competition to retain any hospitality
market benefits. There is every intention of using the expanded resources
within the Group to recoup lost ground and to drive new business in the
domestic and international tourism sector. The Board`s faith in the
reconstructed Group`s product remains.
By order of the Board.
Ms Salukazi Dakile-Hlongwane Thabiso Tlelai
Chairperson Chief Executive Officer
31 March 2010
Directors: Salukazi Dakile-Hlongwane* (Chairperson), Thabiso Tlelai (Chief
Executive Officer), Uviwe Mzilikazi (Financial Director), Professor Francois
Viruly*>, Max Maisela*, Carel van Zyl* * 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 Capital
Date: 31/03/2010 11:33:01 Produced by the JSE SENS Department.
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