Hotel operator The Don Group intends to grow from the asset base it established with the recent buy-back of hotel properties and is not contemplating a tie-up with a larger hotel group, CEO Thabiso Tlelai said on Tuesday.

The group manages nine suite hotels, to which it has recently added restaurants, located mainly in Gauteng.

There has been much speculation that the group might link with a larger partner to create the critical mass to market its services more widely, but Tlelai said the company was not talking to any other hotel group at present.

In the six months to December, group revenue rose 5,6% to R22,6m compared with the same period last year, mainly as a result of an increase in the tariff rate, although there was also a small increase in occupancies, Tlelai said.

However, operating profit more than doubled to R1,1m as a result of tighter control of expenses, improved service delivery, training and technology and an expansion of guest facilities.

Tlelai said guest questionnaires were giving management the reassurance that its efforts to improve service were being well received.

In the previous comparable period the group was hit by a number of once-off overhead costs.

The company?s headline earnings improved to 0,04c a share, against a previous interim headline loss of 0,17c a share, and no interim dividend was declared.

After a reduction in cash holdings to R2,4m from R6,6m, net asset value slipped to 0,074c (0,086c) a share. Tlelai said cash holdings fell because R2,2m was required as property guarantees. The balance sheet shows a deposit of R1,5m, which is part of the deposit, and an additional R700,000 was required for other guarantees.

Last year The Don Group arranged a R57,5m loan from the Industrial Development Corporation to buy back eight hotels, which it is currently leasing to provide security of tenure and because the loan repayments will cost less than the escalating rentals.

Tlelai said the full effects of the property deal would be evident only at the end of the current financial year because a number of transactions had occurred after the end of December last year.

Business Day