| Fri 3 Sep 2004, 18:15 | | results for the year ended 30 June 2004 |
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Don - Audited results for the year ended 30 June 2004
DON GROUP LIMITED
(`DON or the company`)
(Registration No. 1946/023123/06
Share code: DON ISIN: ZAE000008462
Audited results for the year ended 30 June 2004
SUMMARISED CONSOLIDATED INCOME STATEMENT
Year ended Year ended
30 Jun 2004 30 Jun 2003
R000s R000s
Revenue 41 249 40 875
Operating (loss)/profit (1 217) 2 832
Net finance income 218 535
Depreciation (2 356) (2 252)
(Loss)/profit before
exceptional items (3 355) 1 115
Exceptional items (758) (175)
(Loss)/profit after
exceptional items (4 113) 940
Taxation overprovision
prior years - 14
(Loss)/profit
attributable to
ordinary shareholders (4 113) 954
Headline (loss)/profit (3 355) 1 129
Number of ordinary
shares in issue (000s) 294 485 294 485
Weighted average number of
ordinary shares
in issue (000s) 294 485 94 485
(Loss)/profit per
share (cents) (1,39) 0,32
Headline (loss)/profit
per share (cents) (1,14) 0,38
Reconciliation of
headline (loss)/profit
(Loss)/profit attributable to
ordinary shareholders (4 113) 954
Impairment of hotel
equipment 758 -
Provision against employee
share incentive
scheme - 175
Headline (loss)/profit (3 355) 1 129
CONDENSED CONSOLIDATED CASH FLOW
Year ended Year ended
30 Jun 2004 30 Jun 2003
R000s R000s
Cash generated by operations 2 139 848
Investing activities (659) (1 112)
Net cash generated 1 480 (264)
Cash and cash equivalents
- beginning of year 3 230 3 494
- end of year 4 710 3 230
CONSOLIDATED BALANCE SHEETS
Year ended Year ended
30 Jun 2004 30 Jun 2003
R000s R000s
Assets
Non-current assets 19 324 21 765
Property, plant and equipment 17 887 20 328
Unlisted investment 1 437 1 437
Current assets 9 507 11 827
Inventory and accounts
receivable 4 797 7 687
Cash and cash equivalents 4 710 4 140
Total assets 28 831 33 592
Equity and liabilities
Capital and reserves 21 714 25 827
Non-current liabilities 2 990 2 990
Interest-free 2 390 2 390
Interest bearing 600 600
Current liabilities 4 127 4 775
Creditors and provisions 4 127 3 865
Short term borrowings
Bank overdrafts - 910
28 831 33 592
Net asset value per
share (cents) 7.3 8.8
Capital expenditure during
the year (000s) 779 1 188
Directors valuation of
unlisted investments 1 437 1 437
Rental commitments (000s) 3 025 9 032
Payable in the next year 2 246 7 613
Payable thereafter 779 1 419
Contingent
liabilities (000s) - -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Year ended Year ended
30 Jun 2004 30 Jun 2003
R000s R000s
Balance at the beginning of
the year 25 827 24 873
(Loss)/profit for the year (4 113) 954
Balance at the end of the year 21 714 25 827
COMMENTS
Post balance sheet event
Elsewhere, we publish an announcement that the Don Group has
exercised its option to buy back from Ellwain Investments (Pty)
Ltd the eight properties from which the hotels in Cape Town,
Johannesburg, Sandton, and Pretoria operate. The Group already
owns the Don Johannesburg International Airport property. The
significance of this to the Group should not be underestimated,
Finance of R57,5-million has been acquired from the Industrial
Development Corporation to facilitate the purchase of the
properties in terms of a price structure determined at the time
Ellwain bought the property holdings of the Group in 2001, which
at the time comprised 13 hotels and other assets. The estimated
value of the properties comfortably exceeds the value of the IDC
financial package. Ownership of the hotel properties removes
uncertainty of tenure; improves cash flow since the monthly lease
costs exceeding R600 000 are replaced by less expensive interest
charges; and will significantly enhance the value of the Group.
Financial results: Shareholders were advised on August 30, 2004,
by way of a trading and cautionary announcement published on
SENS, the JSE Securities Exchange South Africa`s stock exchange
newsletter, that the Don Group would be reporting a loss and a
headline loss for the financial year ended 30 June 2004 compared
with positive earnings and headline earnings for the comparative
reporting period a year previously.
Let me say at the outset that the board of directors and staff
are neither comfortable with, nor complacent in any way about,
the downturn in the financial results. These are poor reward for
the extremely hard work applied to infrastructual improvements
throughout the year to attain the goal of making the Don Group a
winning entity.
These efforts came at a cost borne out of revenue which was not
matched by turnover growth above a plateau of R41-million
generated at June 30 year-ends in 2003 and 2004. In consequence,
operating profit slumped from R2,8-million to a loss of R1,2-
million. The Group thus ended with a loss after exceptional items
of R4.1- million compared with a profit of R954 000, and a
headline loss of R3.3-million compared with a headline profit of
R1.1-million a year previously. The headline loss per share was
1,14 cents against a positive 0,38 cents a share.
My commentary on the interim results of a R505 000 loss gave full
details of overhead expenses, some non-recurring, some
unavoidable, and others of an urgent nature. I indicated then
that some of these expenses, borne entirely from revenue and cash
resources, would spill into the second half of the financial year
and such has been the case. I also cautioned that the going would
not be easy.
Apart from the expenses detailed in my interim report, including
improvements to the hotel properties, investments were extended
in areas such as security, computerisation and back office
operations, restaurant improvements, product development, and
sales and marketing. In the latter area, the sales team has had
to be revamped and given fresh direction to increase room revenue
and occupancy levels; the benefits for the first quarter into the
new financial year are encouraging.
World-wide there are strong adherents of the suite hotel concept
in the travelling market. We are fortunate in South Africa that
there is a hard core of support for the Don`s `freedom to stay
your way` lifestyle. Nevertheless, while we strive to build on
this strength, the commercial realism is that while many guests
appreciate the quality of Don`s self-service suite accommodation
and service, they do prefer a restaurant option, and investment
in and promotion of these facilities are considered a `must` if
the Don Group is to win market share. To this end, the Group is
seeing a steady improvement in the profitability of its food and
beverage sector.
Expansion: It is pleasing to note that the Don`s venture into
Durban by offering its clients suite accommodation in the Oceanic
apartment block close to the North Beach is making a useful
contribution to revenue. Details of this arrangement were
provided in my interim report. Its moderate success underlines
the need for the Group to expand its hotel base to significantly
grow revenue at a more appropriate time.
Training: The Group is accredited to THETA, the Education and
Training Development SETA. There has been considerable investment
spread over the year in the Don Academy`s computer training
facility for the training and upgrading of staff skills and
qualifications in terms of the National Qualification Framework.
The objective is for all staff to attain a minimum of NQ Level 2.
The Group complies with the Employment Equity Act and its three-
year EE plan has been submitted to the Department of Labour. A
Training and Employment Equity Committee is in place, with all
levels of staff and management represented. The objective is to
achieve the appropriate balance in the composition of the staff
complement, including opportunities for disabled people and
promoting women into senior positions. The Group has registered
12 unemployed learners in the Learnership programmme.
Accounting policies: The consolidated year-end financial
statements are prepared in accordance with the accounting
policies adopted in the preparation of the Group`s 30 June 2003
financial statements and comply in all material aspects with the
South African Statements of Generally Accepted Accounting
Practice. No provision has been made for taxation as the Group
has large accumulated tax losses available for offset against
future 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.
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 to the accounting for
this asset and financial liability since June 2003. The Group is
seeking to minimise any obligations arising from the de-
registration and these are not expected to exceed R288 000.
Restatement of comparative figures: The bank call deposit is
included with cash and cash equivalents.
Audit report: the consolidated year-end to 30 June 2004 results
have been audited by Fisher Hoffman PKF (Jhb) Inc., and their
unqualified audited report is available for inspection at the
company`s registered office.
Dividends: No dividend has been declared or paid.
HIV/Aids responsibilities: Our interim report spelt out the
Group`s activities in respect of HIV/Aids education. The Group
has five trained HIV/AIDS educators engaged in promoting
awareness and prevention of the disease.
BEE status: The black empowerment component of shareholding
remains unchanged and exceeds the minimum requirement of 25
percent.
Corporate governance: I am happy to report that Dr Danisa Baloyi,
who joined the Board in a non-executive capacity on 1 April,
2002, has accepted the appointment of non-executive chairperson
with effect from 1 September 2004. I shall continue as Chief
Executive Officer. The Board will announce the appointment of two
more non-executive directors in due course.
Prospects: Because we have paid so much attention to what is
`under the hood` of the Don vehicle in the financial year that
has closed, there is room for quiet optimism for a change in the
Group`s fortunes. Undoubtedly, this will be assisted by a
strengthened leadership and impending ownership by the Group of
the hotel properties that were under lease.
Thabiso Tlelai, Chairman and
Chief Executive Officer
3 September, 2004
Directors: Thabiso Tlelai (chairman and chief executive) Dr
Danisa Baloyi* Errol Grolman* Max Maisela* Company Secretary:
Whitney Green
Registered Office: 3 Cherry Place, Achter Road, Paulshof, 2157
Transfer secretaries: Ultra Registrars (Pty) Ltd. 11 Diagonal
Street, Johannesburg 2001
*non-executive directors
