Department of Public Enterprises Portfolio Committee on Aventura Presenter: Nonkululeko Msomi Venue: Cape Town Date :18 September2002 Time : 09h00 Maximising Shareholder Value

Department of Public Enterprises Contents Brief Background on the status quo; Operational performance; Sustainability of Aventura for the balance of the financial year; Update on the disposal of Roodeplaat; Response to portfolio committee questions; Maximising Shareholder Value

Brief Background on the status quo The nature of the business of Aventura is seasonal and the last four months the Resorts has not been performing well due winter. The operational income has therefore been impacted, hence Aventura reported losses over this period. Unforeseen delays in the disposal of the three resort resulted in the late payment by the bidders. In the meantime, Aventura was in arrears with payment of its creditors due to the seasonal business. The impact of the delays resulted in a high utilization of overdraft facilities with higher interests and therefore the proceeds from the three only settled the ABSA to some extent.

Con’t Club Prive obligations has also negatively impacted on the operational performance of Aventura. There has been a need to undertake necessary operational maintenance to keep the resorts running. This has made a dent on the potential operational profit. Future bookings are declining due to uncertain nature of the Aventura’s future.

Sustainability of Aventura The balance of the year should see the business improving due to the fact that it is now summer season. The pending disposal of the four resorts should settle creditors and therefore the interest payable as a cost to business will be eliminated. Having eliminated the loss-making resorts operational performance should improve within this disposal period. The cost of the management fee will be reducing as and when disposal of the individual resorts are finalized.

Challenges due to the Restructuring of Aventura The valuations of the individual resorts, as undertaken by the independent evaluator, are different or higher than the bank’s evaluation/s. Consequently, the preferred bidders find it difficult to raise funding at market value for these resorts. This is resulting in serious delays to some of these transactions i.e. Aventura Roodeplaat. The current financial situation of Aventura has put a lot of strain on the disposal process. The negative publicity on the Aventura financials.

Response to the Portfolio Committee Questions The portfolio Committee raised the following issues: Security The security of the Resorts are currently undertaken by Recom Security. The Managing Director, Don Hamilton, use to be involved in the Boulevard Hotel Group, which is a franchise group. Hamilton was never employed by Protea. Mercedes An exclusivity agreement was reached between Aventura and Dairy Maid. Dairy Maid paid R 310 000 for the exclusive right to sell their products at the Resorts. An ML Mercedes was purchased by Aventura to market the products of Dairy Maid on the Resorts.

Cont. The purchase was not sanctioned by the Board. The responsible Manager was disciplined at a disciplinary hearing and given a final warning. The ML Mercedes was sold to the Mercedes Dealership in Cape Town . The shortfall was paid out of pocket by the responsible Manager. Computers Aventura computer network functioned on a CLS system. After Protea was appointed, a new system, Landmark program was installed. The Landmark Program was installed to be compatible with the existing Protea Program, specifically for central reservation. Part of the expenditure was to prepare the computer network for Y2K.

Conclusion Department of Public Enterprises is closely monitoring the performance of Aventura and manage the relations with all stakeholders; Cabinet has also requested a report on the Club Prive obligations,the Department is finalizing the report and will advise accordingly;