Hotelier chain The Don Group said that although revenue for the six months to 31 December 2008 increased from R34.5 million in the previous corresponding period to R35.4 million, an increase of 2.8%, headline earnings declined 86.4% to R454,000 from R3.3 million in the previous corresponding period.

This is reflected as headline earnings per share of 0.15 cents (2007: 1.13 cents).

The group said the results had been offset to an extent by a strong balance sheet built upon the revaluation of The Don's property portfolio.

Total assets are R252.3 million (2007: R219.3 million) and include positive cash and cash equivalents of R1.6 million(2007: R5.7 million).

The reduction is as a result of the Group utilising cash reserves to meet refurbishment costs.

Net asset value per share was at 53.3 cents (2007: 42.9 cents).

The group said the positive growth trend achieved by The Don over past years was considerably dampened for the half-year mainly due to economic and inflationary pressures as a result of the fluctuating oil price and high interest rates.

Further challenges faced by the Group were the rise in supplier costs in every category of goods essential for hotel operation and a decline in the demand for local accommodation.

"Amid these challenges is The Don's continued dedication to the refurbishment of all nine hotels to the highest standards and the Group's commitment to finance this project from The Don's cash reserves.

With three hotels already completed, the Group accelerated the refurbishment project to commence the refurbishment of two hotels simultaneously in the current reporting period," the group said.

"The withdrawal of suites for refurbishment at the Sandton III property during the reporting period had a negative impact on occupancies.

Furthermore, The Don also experienced a decline in spending from its corporate clients.

This was aggravated by room price discounting due to the oversupply of hotels in Rosebank and Sandton fighting to retain market share in the light of dwindling travel numbers," the group added.

Looking ahead, The Don said that with the current refurbishment of two hotels, the phased withdrawal of suites from the market will continue to impact on room availability and occupancies.

"The Don is addressing its marketing and sales resources to exploit wider segmental markets to maintain viable occupancy levels in the remaining months of the current financial year. The Board is aware that this will not be easy.

"Nevertheless, the Board is confident that, with completion of the refurbishment project, The Don will have a chain of suite hotels second to none, which will be capable of competing strongly in order to own market share commensurate with its small chain size."

Source: I-Net Bridge