Consumer Industries Editor

CAPE TOWN All-suite hotels operator the Don Group expects recent interestrate cuts, prospects for further reductions in the next six months and a promising economic picture to lead to an easing of pressure on business travel and individual disposable income.

"No effort will be spared to capture a share of this prosperity," chairman and CEO Thabiso Tlelai said in the group's latest annual report.

When new management took over, the group inherited a debt burden, but it has managed to deliver consistent operating profits, which have enabled it to service and reduce that

"The outcome has been the group's emergence from the heavy shadow of debt into the bright sunlight of cash-positive profitability and a lean group reduced from 13 to nine suite hotels," he said.

In the past financial year, the Don Group grew headline profit to 0,38c a share from 0,11c the previous year and it retained profits to swell its cash holdings to R4,1m. These funds are being accumulated to pay for future growth.

While the Don Group's five- and 10year reviews of ratios such as average annual return on investment, return on shareholders funds, operating profit and growth in headline earnings were "unlikely to attract excitement", Tlelai said, the group had recorded other outstanding accomplishments in the past year.

Profit improved, the operation had cemented its status as an affirmable business enterprise as recommended by the Black Economic Empowerment Commission, and it had continued to deliver a high quality of service.

But it would take several years for the financial baggage of the past to work its way through to performance statistics.

"The steps taken so far point in that direction. Subject to unforeseen circumstances, future balance sheets and income statements should be free of factors that affected results over the last three years."

Daily running of the hotels and marketing within each hotel's business precinct was being controlled by general management structures, and facilities of each hotel were being upgraded. The group would not add new hotels, and would will rely on suite tariff rather than per person daily rates to maintain profit growth.

Don Group share, which peaked at 14c last April last year, is trading around 8c, compared with 5c a year ago, only a slight discount to the group's net asset value of 8,8c a share.

Jan 07 2004 07:13:18:000AM Charlotte Mathews Business Day 1st Edition