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Reviewed Condensed Consolidated Results for the year ended 30 June 2012
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 Condensed Consolidated Results for the year ended 30 June
2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2012
Year Year
Ended Ended
30 June 30 June
2012 2011
Reviewed Audited
CONTINUING OPERATIONS R 000 R 000
(Loss) before taxation (3 988) (3 808)
(Loss) for the period from
continuing operations and total
comprehensive loss for the
period (3 988) (3 808)
Attributable to:
- Equity holders of parent (3 988) (3 808)
- Non-controlling interests - -
(3 988) (3 808)
DISCONTINUED OPERATIONS
Revenue 34 154 90 015
Operating loss before
impairment, fair value
adjustments and disposal of
discontinued operation (13 511) (18 630)
(Loss) on disposal of business (2 635) -
Impairment loss (1 116) (2 338)
Fair value adjustment on
investment-property classified
as assets held for sale (10 288) -
Operating loss from
discontinued operations (27 550) (20 968)
Interest received 44 323
Interest paid (8 528) (8 090)
(Loss) before taxation (36 034) (28 735)
Taxation (608) (3 170)
(Loss) for the period from
discontinued operations (36 642) (31 905)
Attributable to:
- Equity holders of parent (34 787) (30 657)
- Non-controlling interests (1 855) (1 248)
(36 642) (31 905)
Other comprehensive loss from
discontinued operations: - (20 869) (17 454)
- Gross revaluation loss - (18 349) (57 540)
- Deferred taxation - (2 520) 40 086
Total comprehensive loss for
the period from discontinued
operations (57 511) (49 359)
Total comprehensive loss from
discontinued operations
attributable to:
- Equity holders of parent (55 656) (48 111)
- Non-controlling interests (1 855) (1 248)
(57 511) (49 359)
Loss for the period from
continued and discontinued
operations attributable to: (40 630) (35 713)
- Equity holders of parent (38 775) (34 465)
- Non-controlling interests (1 855) (1 248)
(40 630) (35 713)
Total comprehensive loss from
continued and discontinued
operations (61 499) (53 167)
Total comprehensive loss from
continued and discontinued
operations attributable to:
- Equity holders of parent (59 644) (51 919)
- Non-controlling interests (1 855) (1 248)
(61 499) (53 167)
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 per share (cents) (13.17) (11.70)
Headline loss per share (cents) (8.52) (10.97)
Loss per share from continuing
operations (cents) (1.35) (1.29)
Loss per share from
discontinued operations (cents) (11.82) (10.41)
Headline loss per share from
continuing operations (cents) (1.35) (1.29)
Headline loss per share from
discontinued operations (cents) (7.17) (9.68)
Reconciliation of headline loss
Loss for the period
attributable to ordinary
shareholders (38 775) (34 465)
Impairment of assets 1 116 2 338
Impairment in investment
properties 10 288 -
Change in CGT inclusion rate –
deferred tax investment
properties 897 -
Loss on disposal of assets in
iKapa (322) -
Profit on disposal of assets 2 957 58
Tax effect of above 53 (103)
Minority effect of above (1 303) (130)
Headline loss (25 089) (32 302)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2012
30 June 30 June
2012 2011
Reviewed Audited
R 000 R 000
ASSETS
Non-current assets 387 274 553
Property, plant and
equipment 387 198 658
Investment properties - 75 736
Intangible assets - 159
Current assets 548 15 309
Other financial assets 165 5 718
Inventories - 289
Trade and other receivables 288 7 910
Cash and cash equivalents 95 1 392
Non-current assets held for
sale 222 017 -
Total assets 222 952 289 862
EQUITY AND LIABILITIES
EQUITY
Share capital and reserves 73 581 133 225
Non-controlling interests - 7 849
73 581 141 074
LIABILITIES
Non-current liabilities 28 353 28 863
Interest bearing liabilities - 3 274
Deferred tax liability 28 353 25 589
Current liabilities 35 657 119 925
Trade and other payables 24 840 28 637
Short – term portion of
interest – bearing
liabilities 1 780 81 878
Non – interest – bearing
liabilities 1 987 2 214
Provisions 3 819 2 239
Current tax payable 1 665 1 795
Bank overdraft 1 566 3 162
Liabilities associated with
non-current assets held for
sale 85 361 -
Total liabilities 149 371 148 788
Total equity and liabilities 222 952 289 862
Net asset value per share
(cents) 24.99 47.91
Net tangible asset value per
share (cents) 24.99 47.85
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2012
Year Year
Ended Ended
30 June 30 June
2012 2011
Reviewed Audited
R 000 R 000
Attributable to equity
holders of parent:
Balance at beginning of
period 133 225 184 570
Further acquisition of
subsidiary shares - 574
Total comprehensive loss for
the period (59 644) (51 919)
Balance at end of period 73 581 133 225
Non-controlling interests
Balance at beginning of
period 7 849 10 693
Further acquisition of
subsidiary shares - (1 153)
Total comprehensive loss for
the period (1 855) (1 248)
Dividends paid to non-
controlling shareholders - (443)
Change in ownership interest (5 994) -
Balance at end of period 0 7 849
Total equity 73 580 141 074
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period ended 30 June 2012
Year Year
Ended Ended
30 June 30 June
2012 2011
Reviewed Audited
R 000 R 000
Cash outflow from operating
activities (8 076) (18 481)
Cash inflow/(outflow) from
investing activities 3 831 (4 661)
Cash inflow from financing
activities 4 544 5 553
Net cash inflow/(outflow) 299 (17 589)
Cash and cash equivalents
at beginning of period (1 770) 15 819
Cash and cash equivalents
at end of period (1 471) (1 770)
CONDENSED SEGMENTAL ANALYSIS
for the year ended 30 June 2012
30 June 30 June
2012 2011
Reviewed Audited
R 000 R 000
Segmental Revenue
Hotels 11 326 50 280
Travel & Tourism 11 782 39 618
Residential letting 11 046 117
Net Revenue 34 154 90 015
Segmental loss/profit
before impairment and
disposal of business,
interest and tax
Hotels (8 148) ( 19 139)
Travel & Tourism (1 397) ( 3 370)
Residential letting (7 954) 71
Operating loss before
impairment, fair value
adjustments and disposal of
discontinued operations (17 499) ( 22 438)
DISPOSAL OF IKAPA BUSINESS
Property, plant and
equipment 15 266
Intangible assets 153
Current assets 8 923
Current liabilities (9 713)
Net assets disposed of 14 629
Non - controlling interest (5 994)
(Loss) on disposal (2 635)
Proceeds 6 000
Net cash disposed of (2 169)
Net cash received 3 831
COMMENTARY
Given the challenges facing the tourism sector, The Don resolved
in 2011 to change direction and exit the saturated hotel industry
into the property management sector, particularly the residential
leasing space, in view of growing opportunities identified in the
broader property industry sector. This entailed ceasing all hotel
operations, resulting in staff retrenchments in its remaining six
properties effective 31 October 2011 and making the properties
available for residential leasing. Three of these properties were
converted into residential letting apartments during April 2011.
As a result of The Don’s new long-term strategy of diversifying
away from the hotel and leisure sector, a decision was made to
dispose of the investment in iKapa Tours & Travel Proprietary
Limited (“iKapa”), effective 1 November 2011, as the purpose for
which iKapa was originally acquired is no longer in line with the
Group’s strategy.
The hotel segment revenue for the period ended 30 June 2012
(“period under review”) amounted to R11,3 million compared to the
period ended 30 June 2011 (“prior period”) of R50,3 million. The
decline is in line with expectations due to the hotels only
operating for four months during the period under review compared
to the prior period. The same is true for the Travel and Tourism
segment which operated for four months of the period under review
prior to disposal. Its revenue declined from R39,6 million in the
prior period to R11,8 million in the period under review.
Residential letting revenue is reported at R11 million for the
period under review with a vacancy percentage of 56%.
As The Don is expecting to dispose of its properties, the Group
has reflected the residential letting segment as a discontinued
operation together with the hotel and travel and tourism segments.
As expected, cost of sales also decreased by 86% while staff costs
remained relatively high as a result of the mass retrenchment to
the tune of R6,3 million that occurred at the end of November
2011. Although the operating loss decreased from R22,4 million to
R17,5 million in the period under review, loss before tax
increased to R48,5 million as a result of the impairment of R10,3
million of the four properties converted to investment property in
the prior period i.e. Arcadia 1, Sandton 4, Sandton 1 and Bruma.
The loss on the disposal of iKapa also contributed R2,6 million
towards the Group loss before tax.
Directors valued all nine properties at R222 million.
REPORTABLE IRREGULARITY
The Group’s auditors,have reported a reportable irregularity to
the Independent Regulatory Board for Auditors. This arose in the
previous financial period and has continued in the current
financial period. This related specifically to the Group being in
arrears with certain provident fund contributions and certain
statutory deductions owing to SARS which constitutes a
contravention of the Pension Funds Act and the Income Tax Act.
Management have subsequently settled all amounts outstanding in
respect of provident fund contributions and SARS have agreed on
payment terms in relation to amounts due to SARS.
BOARD MEMBERSHIP
During the period under review, Mr Hatla Ntene was appointed as an
independent non-executive director on 22 November 2011 and Mr
Carel van Zyl resigned as an independent non-executive director on
25 June 2012.
BASIS OF PREPERATION
The accounting policies applied in the preparation of these
reviewed condensed consolidated financial statements, which are
based on reasonable judgments and estimates, 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 2011. These reviewed condensed
consolidated financial statements as set out in this report have
been prepared in terms of IAS 34 – Interim Financial Reporting,
the AC 500 series as issued by the Accounting Standards Board, the
Companies Act, 2008 (Act 71 of 2008), as amended, and the Listings
Requirements of JSE Limited.
These results have been prepared by U Mzilikazi CA(SA), Financial
Director of Don Group Limited and have been reviewed by the
Group’s auditors.
DIVIDENDS
No dividend has been declared or paid.
SUBSEQUENT EVENTS
On 11 July 2012, it was announced on SENS that The Don, through
its wholly-owned subsidiary, Granport, had entered into agreements
to dispose of three of its nine hotel properties, being the
Sandton 3 and Sandton 1 Properties and the Beach Road Property,
together with all the buildings and improvements thereon,
including fittings and fixtures, for a total purchase
consideration of R77,5 million.
On 8 August 2012, it was announced on SENS that The Don, through
its wholly-owned subsidiary, Granport, had entered into an
agreement to dispose of an additional hotel property, being the
Sandton 4 Property, together with all fittings and fixtures of a
permanent nature, for a purchase consideration of R12,9 million.
The Sandton 3 and Sandton 1 Properties Disposal, the Beach Road
Property Disposal and the Sandton 4 Property Disposal each
constitute a Category 1 transaction in terms of the Listings
Requirements and are subject to approval thereof by shareholders
in general meeting. There are no related parties or connected
parties to any of the purchases of the hotel properties being
disposed of.
PROSPECTS
In light of continuing weak trading conditions, the Board has been
obliged to reconsider The Don’s future in the hotel industry and
accordingly, since ceasing its hotel operations in 2011, has been
leasing all of its properties as furnished residential apartments.
It is the intention of the Board to apply the proceeds from the
disposals of the Sandton 3 and Sandton 1 Properties, the Beach
Road Property Disposal and the Sandton 4 Property Disposal to
substantially settle all liabilities, including the debt to the
IDC, and thereafter to dispose of The Don’s remaining five hotel
properties in the near future.
The Board is of the opinion that, given the challenges facing the
tourism sector, the decision to change direction and exit the
saturated hotel industry, is in the best interests of
shareholders.
The Board will carefully consider all options available to the
Group to unlock value for its shareholders going forward.
EXTRACTS FROM AUDITOR’S REVIEW REPORT
AUDITOR’S REPORT
The Group’s condensed annual financial statements for the year
ended 30 June 2012 have been reviewed by the Group’s auditors, PKF
(Jhb) Inc. The auditors’ modified review report on the Group’s
condensed consolidated results is available for inspection at the
Group’s registered office.
The modification is extracted below:
“EMPHASIS OF MATTER
Without qualifying our conclusion, we draw attention to the
reviewed condensed results which indicates that the Group incurred
a loss of R40,6 million during the year ended 30 June 2012. These
conditions, along with other matters as set forth in the results
commentary, indicate the existence of a material uncertainty that
may cast significant doubt about the Group’s ability to continue
as a going concern.
REPORTABLE IRREGULARITY
In accordance with our responsibilities in terms of sections 44(2)
and 44(3) of the Auditing Profession Act, we reported that in the
previous year, we identified certain unlawful acts or omissions by
persons responsible for the management of Don Group Limited which
constituted a reportable irregularity in terms of the Auditing
Professions Act, and we have reported such matters to the
Independent Regulatory Board for Auditors. The matter pertaining
to the reportable irregularity and the actions taken by management
have been described in the condensed financial information.”
STATEMENT OF GOING CONCERN
The reviewed condensed consolidated results for the year ended 30
June 2012, have been prepared on the going concern basis.
On a review of the Group’s statement of financial position there
are three significant issues that should be brought to the
attention of the users of these results. The Group currently has a
loss of R40,6 million for the year, creating material uncertainty
about the Group’s ability to discharge of its liabilities in the
normal course of business. Given the current circumstances of the
Group, consideration has been made as to the provisions of IAS 12
Income Taxes and deferred taxation assets arising from previous
periods which were reversed in the previous financial period and
no further deferred tax assets have been raised. Secondly, due to
the Group’s request to change their business model and dispose of
the properties, interest-bearing liabilities have become voidable
and are to be settled in full by 30 June 2013. The provisions of
IAS 1 Presentation of Financial Statements and IFRS 7 Financial
Instruments Disclosures have been applied resulting in the full
amount outstanding of R85,3 million being reflected as a current
liability instead of allocated between current and non-current
liabilities in terms of the original contractual undertaking.
Management are currently in the process of negotiating sale
agreements for the disposal of certain properties that will fund
the settlement of the liabilities. Finally, the intention of
management to cease hotel operations and the change in the Group’s
business model needs to be emphasised as well.
By order of the board.
Salukazi Dakile-Hlongwane Thabiso Tlelai
Chairperson Chief Executive Officer
08 October 2012
Directors: Salukazi Dakile-Hlongwane* (Chairperson),
Thabiso Tlelai (Chief Executive Officer),
Uviwe Mzilikazi (Financial Director),Hatle Ntene*
* Independent Non-Executive Directors
Company Secretary: Whitney Green
Registered Office: 6 Electron Avenue, Isando
Transfer Secretaries: Link Market Services South Africa
Proprietary Limited
Sponsor: Merchantec Proprietary Limited
Auditors: PKF (Johannesburg) Inc.
Date: 08/10/2012 05:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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