| Wed 29 Mar 2006, 17:18 | | Don - Reviewed interim results for the six months |
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DON
DON
Don - Reviewed interim results for the six months ended 31 December 2005
DON GROUP LIMITED
(Registration No. 1946/023123/06)
("Don" or "the company")
Share code: Don & ISIN: ZAE000008462
Reviewed interim results for the six months ended 31 December 2005
CONSOLIDATED INCOME STATEMENT
Reviewed Reviewed Audited
Six months Six months Year-end
31 Dec 2005 31 Dec 200430 June 2005
R000 R000 R000
Revenue 24 722 22 593 45 232
Operating profit 4 111 1 082 3 989
Net finance (expense)/income (2 921) 52 (1 806)
Depreciation (2 240) (1 018) (2 426)
(Loss)/profit before
exceptional items (1 050) 116 (243)
Exceptional items (1 000) - (226)
(Loss)/profit after exceptional items(2 050) 116 (469)
Taxation - SA Normal Tax -
underprovision prior years (1 000) - (205)
Taxation - deferred (784) - 1 000
(Loss)/profit attributable
to ordinary shareholders (3 834) 116 326
Headline (loss)/profit (3 834) 116 1 373
Number of ordinary shares
in issue (000s) 294 485 294 485 294 485
Weighted average number of ordinary
shares in issue (000s) 294 485 294 485 294 485
(Loss)/profit per share (cents) (1,30) 0,04 0,11
Headline (loss)/profit
per share (cents) (1,30) 0,04 0,47
RECONCILIATION OF HEADLINE (LOSS)/PROFIT
(Loss)/profit attributable
to ordinary shareholders (3 834) 116 326
Impairment of hotel equipment - - 226
Loan payable written back - - (600)
Capital loss on loan written off - - 1 421
Headline (loss)/profit (3 834) 116 1 373
SUMMARISED CONSOLIDATED CASH FLOW R000 R000 R000
Cash generated/(utilised) by operations5 959 (729) 2 657
Investing activities (681) (159) (62 385)
Financing activities (3 604) (1 433) 54 033
- Proceeds from IDC loan - - 57 525
- Repayments to IDC (3 604) - (2 916)
- Other loan finance transactions - (1 433) (576)
Cash & cash equivalents
- beginning of year (985) 4 710 4 710
Cash & cash equivalents
- end of year 689 2 389 (985)
STATEMENTS OF CHANGES IN EQUITY R000 R000 R000
Balance at the beginning of the year 75 016 21 714 21 714
(Loss)/profit for the year (3 834) 116 326
Revaluation Surplus - - 52 976
Balance at the end of the year 71 182 21 830 75 016
CONSOLIDATED BALANCE SHEETS
Reviewed Reviewed Audited
Six months Six months Year-end
31 Dec 2005 31 Dec 200430 June 2005
R000 R000 R000
Assets
Non-current assets 151 836 19 952 154 676
Property, plant and equipment 150 399 17 040 152 239
Unlisted investment 1 437 1 437 1 437
Deposit paid on loan - 1 475 -
Deferred tax asset - - 1 000
Current assets 4 392 8 594 6 253
- Inventory and accounts receivable 3 703 6 205 6 253
- Cash and cash equivalents 689 2 389 -
Total assets 156 228 28 546 160 929
Equity and Liabilities
Capital and reserves 71 182 21 830 75 016
Non-current liabilities 52 819 3 033 53 802
- Interest free 2 390 2 433 2 390
- Interest bearing 50 429 600 51 412
Deferred tax 21 422 - 21 638
145 423 24 863 150 456
Current liabilities 10 805 3 683 10 473
- creditors and provisions 5 052 3 683 5 735
- short term portion of
non current liabilities 3 548 - 3 548
- bank overdraft - - 985
- taxation 2 205 - 205
Total equity and liabilities 156 228 28 546 160 929
Net asset value per share (cents) 0,242 0,074 0,255
Capital expenditure during
the year (R000s) 1 044 181 62 394
- Property acquired - - 62 085
- Other fixed assets acquired 1 044 181 309
Directors" valuation of
unlisted investments 1 437 1 437 1 437
Rental commitments (R000s) 834 2 834 985
Payable in the next year 438 2 266 511
Payable thereafter 396 568 474
Financial results:
The drive to maintain annual incremental growth was maintained during the
reporting period ended December 31, 2005. This is reflected in revenue
increasing over the previous half-year to December 31, 2004 by 9,3 percent from
R22,6-million to R24,7-million, and operating profit jumping 272,7 percent from
R1,1-million to R4,1-million.
As a result of taking ownership of eight hotels in 2005 and the revaluation of
all nine properties in the Group, the income statement now reflects a financing
expense of R2,9-million (2004: R52 000 income) and depreciation of R2,2 million
based on the property revaluation (2004: R1,0-million). These items were
factored into our interim performance expectations.
Although the Group"s balance sheet reflects property-related deferred taxation
of R21,4-million, Don"s present administration also faced an inherited taxation
problem dating back to the 1990s, when the Group was shedding the loss-making
restaurants it acquired on listing on the stock exchange in 1994. There were
conflicting opinions as to whether Don was liable for the tax and, if so, for
what amount. Without prejudice to the outcome of further negotiations, the board
has decided as a once-off cost to deal with a tax item of R1-million together
with interest of R1-million (the latter listed as an exceptional item).
Because of these issues, once again Don regrettably fell into a headline loss,
in the amount of R3,8-million as against a profit of R116 000 in the comparative
reporting period.
The balance sheet now shows total assets of R156,2-million (2004: R28,5
million). The negative position of cash and cash equivalents at year-end June 30
2005 has been reversed and the Group is once again cash positive.
As a result of the property acquisition and revaluation net asset value per
share in cents improved to 0,2425 from 0,074.
Many of the fundamentals intended to drive Don towards profitability are
delivering results according to our business plan. Our occupancy levels are
steadily increasing. These are enhanced by periodic special marketing campaigns
that reflect satisfactory public support. It is also encouraging to report that
Don has won back clients lost to competitors. Hits on the website, www.don.co.za
are also delivering valuable reservations.
A further positive development in the review period was the recognition by the
Financial Mail and Empowerdex of the Don Group as the second most empowered
company out of 200 companies (it was ranked third in 2005). This is literally
the fruits of hard work: empowerment in accordance with the hospitality
industry"s score card, and more is always observed and is strictly adhered to in
practice.
Operations: The operation of the hotels is progressively improving, the robust
cost control mechanism contains costs without compromising on service delivery
and offers centralised procurement to take advantage of bulk discounts.
Don sees growth in conference business and has completed a 25-seater venue at
the Sandton 3 hotel. It already has well-used conference facilities at Don
Isando near the Johannesburg International Airport.
The high-speed Gautrain project has a route that traverses Sandton and may have
an impact on certain hotels located in that precinct. The Group has appointed
legal counsel to protect its interests.
FINANCIAL STATEMENTS
Basis of preparation
The interim consolidated financial statements of the Group have been prepared in
accordance with the group"s accounting policies, which comply with International
Financial Reporting Standards (IFRS) and were adopted with effect from 1 July
2005. These are the group"s first interim results prepared in terms of IFRS. As
the properties were only acquired and revalued in the year ended 30 June 2005 no
comparative figures require restatement to reflect the first time adoption of
IFRS statements applicable at 31 December 2005.
ACCOUNTING POLICIES
Owner-occupied property:
Owner-occupied property is recognised initially at cost. Thereafter, the
property is carried at a revalued 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% per annum. The revaluation is recognised
in equity.
Deferred tax:
Impairments in the carrying amount of deferred tax assets are recognised in the
income statement. A deferred tax liability is recognised on revaluation
surpluses on property.
Financial liabilities:
Financial liabilities are initially measured at their 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
deregistration has been made. Accordingly, there has been no change in the
accounting for this asset and financial liability since June 2005. The Group is
seeking to minimise any obligations arising from this de-registration and these
are not expected to exceed R0,28 million.
Review report:
The consolidated interim results to 31 December 2005 have been reviewed by the
Group"s auditors PKF (Jhb) Inc. and their unqualified review report is available
for inspection at the company"s registered office.
Dividends:
No dividend has been declared or paid.
Corporate governance and board membership:
At the January 27 2006 annual general meeting, the board received with regret
the resignation of Errol Grolman, who has had a long history with Don and who
has helped guide the Group through turbulent times. Tribute was paid to his
thoughtful insight and commitment to Don"s future. At the same time Professor
Francois Viruly of the School of Construction Economics and Management at the
University of the Witwatersrand and a well-known property consultant, was
appointed a member. The board now comprises as non-executive chairman Dr Danisa
Baloyi, chief executive officer Thabiso Tlelai and as non-executive members Max
Maisela and Francois Viruly.
Prospects:
The increasing level of sales and occupancies and the positive feedback from
guests" questionnaires about the spacious quality of Don Hotel suites, the
option to self-cater or dine in the restaurants, and the competitive cost of
`key to the door" costs as opposed to `per person" rates are all resources
created within the Group that will be brought to bear to offset the
disappointing results of this first half. To capitalise on these advantages,
there will have to be re-doubled effort by all to ensure a return to
profitability in the shortest possible time.
Dr Danisa Baloyi Thabiso Tlelai
Chairperson Chief Executive Officer
Johannesburg
28 March 2006
Directors: Dr Danisa Baloyi* (chairperson) Thabiso Tlelai (chief executive
officer) Max Maisela* Prof Francois Viruly* 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
Date: 29/03/2006 05:18:08 PM Produced by the JSE SENS Department
