| Fri 28 Mar 2003, 16:28 | | Don Group Limited - Interim Results |
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Don Group Limited - Interim results
DON GROUP LIMITED
(Registration No. 1946/023123/06
Share code: Don ISIN: ZAE000008462
("Don")
Unaudited Proforma1* Audited
Six months Six months Year-end
31 Dec 2002 31 Dec 2001 30 June 2002
Note R000 R000 R000
Revenue 20 956 22 729 41959
Operating profit 4 028 2 358 3 128
Depreciation (1 120) (1 554) (2 758)
Net finance and
investment
income/(costs) 51 (161) (34)
Profit before
exceptional items 2 959 643 336
*Exceptional items - 2 117 874
Profit attributable to
ordinary
Shareholders 2 2 959 2 760 1 210
Headline profit 2 959 643 336
Number of ordinary
shares in issue (000"s) 294 485 294 485 294 485
Weighted average number
of ordinary shares
in issue (000"s) 294 485 294 485 294 485
Profit per
share (cents) 1,00 0,94 0,41
Headline profit per
share (cents) 1,00 0,22 0,11
Reconciliation of
headline profit
Profit attributable
to ordinary
shareholders 2 959 2 760 1 210
*Exceptional items - (2 117) (874)
Provision against
loan to employee share
incentive scheme - - 210
Income arising from
group restructuring - (2 117) (1 048)
Profit arising
on sale of assets - - (36)
Headline profit 2 959 643 336
Note 1*: The proforma results presented here are for the six months ended 31
December 2001. These reflect the unaudited consolidated position assuming that
the sale of properties, re-financing and rental agreements with Ellwain
Investments (Pty) Ltd ("Ellwain") had taken place in the six months then ended.
The profit before exceptional items was the same for the actual and pro-forma
figures and was determined using the same accounting policies.
Note 2: No taxation has been provided as the group has large accumulated tax
losses available for offset against taxable income.
CONDENSED CONSOLIDATED
CASH FLOW STATEMENTS
Unaudited Proforma1* Audited
Six months Six months Year-end
31 Dec 2002 31 Dec 2001 30 June 2002
R000 R000 R000
Cash generated/(utilised)
by operations 1 801 (974) 1 153
Investing activities (931) (360) 1 534
Acquisition of equipment (931) (360) (1 223)
Proceeds on disposal
of equipment - - 2 757
Financing activities - 28 658 28 692
Increase in Notice Deposits (3 098) - (2 171)
(2 228) 27 324 29 208
Opening cash &
cash equivalents 1 323 (27 885) (27 885)
Closing cash & cash
equivalents (905) (561) 1 323
CONSOLIDATED BALANCE SHEETS
Unaudited Proforma1* Audited
Six months Six months Year-end
31 Dec 2002 31 Dec 2001 30 June 2002
R000 R000 R000
Assets
Non-current assets 22 900 24 492 23 089
Property, plant and equipment 21 288 22 733 21 477
Investment in associate 1 437 1 374 1 437
Long term receivables 175 385 175
Current assets 12 640 8 656 9 391
Inventories and
accounts receivable 7 315 6 543 5 897
Notice deposits 5 269 2 050 2 171
Cash and cash equivalents 56 63 1 323
Total assets 35 540 33 148 32 480
Equity and Liabilities
Capital and reserves 27 832 26 423 24 873
Non-current liabilities 2 990 2 390 2 990
Interest free 2 390 2 390 2 390
Interest bearing 600 - 600
Current liabilities 4 718 4 335 4 617
Accounts payable
and provisions 3 757 3 711 4 617
Bank overdrafts 961 624 -
Total equity and liabilities 35 540 33 148 32 480
Net asset value
per share (cents) 9,5 9,0 8,4
Capital expenditure
during the period (R000"s) 931 360 1 223
Directors" valuation
of unlisted investments 1 437 1 374 1 437
Rental commitments (R000"s) 15 310 19 500 16 734
Payable in the next year 7 235 7 153 7 060
Payable thereafter 8 075 12 347 9 674
Contingent
liabilities (R000"s) 149 - -
STATEMENTS OF CHANGES IN EQUITIES
Unaudited Proforma1* Audited
Six months Six months Year-end
31 Dec 2002 31 Dec 2001 30 June 2002
R000 R000 R000
Opening balance 24 873 23 663 23 663
Profit attributable
to ordinary
shareholders 2 959 2 760 1 210
Closing balance 27 832 26 423 24 873
OVERVIEW
Introduction
South Africa"s hospitality sector is experiencing real growth as the huge
international tourism market identifies the country as a safe and desirable
holiday destination. This generates foreign exchange and job creation
opportunities for the South African economy. At the same time the domestic
economy is also encouraging more business travel, which forms the backbone of
the Don Group"s guest base.
The effects of the above and more particularly the increase in the latter sector
is reflected in the interim results for the half-year to December 31, 2002, and
fully justifies the decision taken in the previous financial year to reduce the
chain to a core of ten well-located viable suite hotels in Cape Town,
Johannesburg, Sandton, Pretoria, and close to the Johannesburg International
Airport.
The Tourism Grading Council has pronounced the Don suite hotels to be the
equivalent of four star standard.
The opportunities presented by these encouraging trends and developments have
highlighted a shortcoming in the group"s geographic spread, preventing it from
capitalising on its strengths in the suite hotel business, and widening its
clientele base. At the same time, the brand image and reputation of the Group
led to approaches from within several African countries to manage suite hotels,
some of which are already operational or are under construction.
We are in the process of identifying and examining ways of redressing our
absence in other main metropolitan centres, as well as exploring cross-border
suite hotel management opportunities.
Don"s role as a leading empowerment company in the hotel industry is steadily
being recognised. As the only Black-owned and managed listed hotel group, it
received the PMR Award as the Empowerment Company of the Year. Don was also
recognised by Empowerdex as the second most empowered company listed on the JSE
Securities Exchange South Africa, based on ownership, control, equity,
affirmative procurement, enterprise development and social responsibility, and
named 2002 runner-up by BBQ-Nafcoc in recognition of a successful business
turnaround with minimum job losses.
Accounting policies
1. These summarised interim financial statements are prepared in accordance
with the Group"s accounting policies adopted in the preparation of its 30 June
2002 financial statements and comply in all material respects with South African
Statements of Generally Accepted Accounting Practice.
2. Due to the re-structure of the Group"s funding and operations in the year
ended 30 June 2002, the comparative figures presented here are the pro-forma
results for the six months ended 31 December 2001.
Shareholders were informed of this re-structuring, which was approved in
the 31 December 2001 period and, hence, the effects thereof are fully shown in
the 30 June 2002 audited financial statements and in the numbers shown above.
The continuing effects of the restructuring are reflected in the results for the
six months ended 31 December 2002.
3. No provision has been made for taxation as the group has large accumulated
tax losses available for offset against taxable income. No deferred tax asset
has been raised in terms of AC102 due to uncertainty as to when these losses are
expected to be utilised.
Financial Results
The year-on-year results are not strictly comparable, as explained above.
Nevertheless, the advances made in all key performance measures indicate a
healthy improve-ment in the group"s financial position.
The group generated revenue of R20,9-million compared with R22,7-million earned
by a greater number of hotels in the prior period.
Operating profit was 71 percent higher, increasing from R2,4-million to R4-
million. From this base, the group posted a headline profit of R2,96-million
which translated into headline profit per share of 1 cent compared with 0,22
cents per share.
Net asset value per share rose from 8,4 cents at year-end 30 June 2002 to 9,5
cents at 31 December 2002.
No interim dividend was declared or paid.
Operations
Apart from continuing marketing programmes to strengthen relations with the
travel and corporate travel sectors, the focus in the interim review period has
been on implementing improved business operations, introducing a new property
management system and rolling out a comprehensive training scheme. The formation
of an internal I T department has already led to savings in hardware and
software expenditure.
The upgrading of the properties is under continuous review and enhancement.
The introduction of restaurants offering breakfasts and limited dinner menus is
adding value to guest welfare and to revenue.
The overall objective is to provide service of an outstanding quality that will
increase room occupancies, warrant competitive rack suite rates, and enhance
Don"s main strength of offering suite accommodation tariffs as against a `per
person" rate that is usual in conventional hotels.
In terms of occupancies and in the average rate per room, the levels are nudging
ever upwards.
It gives me pleasure to recognise Mam Dora Jantjie as the Group"s W0W Winner of
the Year, an annual award conferred for the most consistent delivery of service
beyond the call of duty.
Prospects
Don has set challenging budgets for the second half-year aimed at continuing on
the path of financial growth and reinforcing its status as the largest dedicated
and empowered suite hotel chain in South Africa.
Acknowledgments
None of the achievements thus far could have been possible without the
enthusiastic support and commitment to service of Don"s dedicated staff. I also
appreciate the patience and support of my fellow directors during the evolution
of Don into a real force in the South African hospitality sector. They all have
my sincere thanks.
Thabiso Tlelai
Chairman and Chief Executive Officer
Johannesburg
28 March 2003
Directors: Thabiso Tlelai (Chairman), Errol Grolman, Sidney Ellerine, Marc
Wainer Company Secretary: Whitney Green
Registered Office: 3 Cherry Place, Achter Road, Paulshof, 2056 Transfer
Secretaries: Ultra Registrars (Pty) Ltd, 11 Diagonal Street, Johannesburg 2001
