Cresta Marakanelo Limited

Cresta Marakanelo Limited 2021 Integrated Annual Report

By Published On: June 1st, 2022Categories: Corporate announcement, Earnings

Cresta Marakanelo Limited ( 2021 Annual Report

Overview of Operations

During the 2021 financial year, the Group continued to face challenges related to the impact of the COVID-19 pandemic on the travel and hospitality industry. In December 2020, the Government of Botswana introduced a number of measures to curb the spread of COVID-19. These included restrictions on inter-zonal travel, a ban on alcohol sales and limiting the number of conferencing delegates. These measures negatively impacted the business levels at all of the hotels during the greater part of the 2021 financial year. When the State of Emergency was lifted in October 2021 and a number of the COVID-19 restrictions were removed, the Group immediately had a marked increase in revenue across all the properties, with the fourth quarter revenues exceeding the third quarter by 62%. The revenue growth compared to prior year was also tempered during the first three quarters of the year, with modest growth of 6% being registered. Following the lifting of the COVID-19 restrictions, revenue growth registered during the fourth quarter was 24% compared to the same period in the prior year. This is also an indicator of a general improvement in travel sentiment locally as a result of increasing COVID-19 vaccination rates.

In a drive reduce the operating leverage of the business, several measures were implemented including the below:

  • Suspension of all non-critical capital expenditure projects;
  • Freeze on all discretionary expenditure;
  • Restructuring of the bank loan facility;
  • Negotiations with strategic suppliers of the business to reduce contractual obligations;
  • Where possible temporary closure of blocks or sections of the hotels to reduce related direct costs;
  • Encouraging guests to postpone bookings rather than cancel; and
  • Promotional rates towards cash generation and inducing demand at the hotels.

These costs containment and cash preservation measures will continue to be implemented in the business.

Revenue for the year was P216.4 million, 12% higher than the P193.1 million achieved in the prior year. The Group incurred a loss after tax from continuing operations of P43.2 million (2020: P51.1 million). The prior year results include P14.6 million wage subsidy from the Government, which was not available during the current year. If this is excluded, the overall reduction in the loss compared to prior year is 34%, as a result of the increased revenue and the cost control measures in place.

The Group continued to focus on its enhanced health and safety protocols, catering both for staff and guests. All the hotels adhere to the COVID-19 protocols as stipulated by the Botswana Governments and World Health Organisation.

In addition, the Group has engaged the services of medical practitioners to offer medical advice, treatment, and psychological support to all our employees. Over and above these, the Group has reduced touch points in its booking processes where guests can check in and check out of the hotels contactless via a WhatsApp platform and use of a chatbot.

Significant Event – Closure of the Zambia Hotel Operations

The Directors made the decision not to renew the lease for the Cresta Golfview Hotel in Lusaka Zambia, which was due to expire on 31 January 2022. The Group ceased operations at the hotel on 30 September 2021. The landlord of the property took over the operations of the hotel under a different brand name and hired a majority of the former Cresta staff members.

The Group has accounted for Cresta Golfview Hotel as a discontinued operation and as such, the hotel’s results are excluded from the results of continuing operations and are presented as a single amount, as a profit or loss after tax from discontinued operations in the consolidated statement of comprehensive income.

The profit from discontinued operations of P3.0 million was primarily from the write back of the hotel lease liability, for the lease that was terminated early, on 30 September 2021, instead of on 31 January 2022.

Going Concern and the Impact of COVID-19

For the financial year 2021, the Group incurred a net loss after taxation of P40 million (2020: P63 million) as a result of the continuing business disruptions caused by the COVID-19 pandemic on the travel and hospitality industry. The disruptions are expected to continue in varying degrees for the foreseeable future. It is not clear when the current operating environment and the remaining COVID-19 restrictions, in their relaxed state, will be fully lifted and return to ‘normal’ pre-pandemic levels.

However, the Group has observed improved business levels towards the end of 2021 and into early 2022, particularly in the Northern region of the country. COVID 19 restrictions at the border still impact business levels due to cancellations but overall, improved occupancies and higher business levels are anticipated.

The Group continued to focus on its enhanced health and safety protocols, catering both for staff and guests. All the hotels adhere to the COVID-19 protocols as stipulated by the Botswana Governments and World Health Organisation.

As part of the Directors’ consideration of the appropriateness of adopting the going concern basis in preparing the financial statements, a range of scenarios have been prepared and reviewed. The assumptions modelled in the scenarios are based on the estimated potential impact of COVID-19 restrictions and regulations, along with our proposed responses over the course of the next 15 months. These include a range of estimated impact primarily based on length of time various levels of restrictions are in place and the severity of the consequent impact of those restrictions.

The range of scenarios include a scenario of a 23% reduced revenue compared to 2019 pre-COVID-19 levels as the best case scenario, to a base case scenario which has a further 7% decline in revenue compared to the best case scenario, to an extreme scenario of continued low occupancy throughout the 2022 financial year which results in a further 5% decline in revenue compared to the base case.

In addition, the following assumptions and considerations have been made by the Directors in preparing the cash flow forecasts;

  • Increasing vaccination take up in source markets, regionally and locally;
  • That foreign tourism arrivals will increase in 2022, albeit at levels significantly below the pre-pandemic levels;
  • No further extended country lockdowns;
  • Improved food and bar revenue following the easing of alcohol restrictions which will not be re-introduced and some level of increase in the level of conferencing.

Management performed a solvency and liquidity assessment for the 15-month forecast to 31 March 2023 and noted that the Group will be in a position to generate positive cashflows.

It is worth noting that when assessing solvency and liquidity of the Group from a current scenario and foreseeable future, the following observations were made:

  • The Group and Company remain solvent with its assets exceeding its liabilities;
  • The Company has not defaulted on any of its loan facilities and obligations and the forecasts indicate that the business will be able service its debts in future. Cash flow forecasts for the 15-month period to 31 March 2023 assume debt service will be made in accordance with the terms of the existing borrowings.
  • The banking overdraft facility available to the Group as at 31 December 2021 is P10 million which has not been utilised and there is no reason why it will not remain available for the foreseeable future.
  • Since the 2020 financial year, the Group’s debt covenant requirements have been waived by the lender.

Should the improved trading environment not materialise as anticipated, Management will proactively reduce the operating leverage using cost containment and avoidance plus cash preservation measures, based on the past experiences of 2020 and 2021, as necessary.

Based on the reviews performed as outlined above, the Directors are satisfied that the Group has the ability to meet all obligations as they fall due and to trade as a going concern for a period of at least 12 months from the date of approval of the financial statements and is therefore of the opinion that the going concern assumption is appropriate in the preparation of the consolidated and separate financial statements.

Statement of Financial Position

Total assets decreased by 3% ccompared to those as at 31 December 2020. The decrease in assets was primarily because of the capital expenditure freeze and the depreciation of assets. This decrease was partially offset by the increase in right of use assets, following the 10 year extension of the Cresta Mahalapye Hotel lease, as well as the increase in deferred tax assets recognised. Total liabilities increased following the recognition of P30 million Cresta Mahalapye lease liability as well as a P25 million working capital facility drawdown made during the year. The Group had cash resources of P53.2 million (2021: P56.7 million) at the end of the year.

Cash Flow

During the year, P15.5 million was generated from operating activities, a significant improvement from the prior year when P8.8 million was utilised in operating activities. The improvement was due to the increase in revenues and the improvement in working capital management. Net cash utilised in investing activities amounted to P6.1 million (2020: P17.7 million utilised). The reduction in cash outflow on investing activities was due to the capital expenditure freeze as well as the inclusion in the prior year of P9million related to the acquisition of a hotel property. With regards to financing activities, P13.5 million (2020: P18.2 million) was utilised, split between bank loan repayments of P14.9 million (2020: P10.3 million) and leasing hotel properties P20.5 million (2020: P16.9 million). 2021 financing activities were lower because of a receipt of P25 million (2020: P9.0 million) bank loan proceeds.

Subsequent Events

Other than matters discussed in this publication, the Board and Management are not aware of any material events that have occurred subsequent to the end of the reporting period that requires adjustments and or disclosure in the financial statements.


The Group’s revenue in the 2022 financial year has been increasing steadily on a month-to-month basis and so far, the growth compared to the prior year is over 95%, while only 9% below the pre-COVID revenue levels in the 2019 financial year.

This steady improvement in performance indicates the recovery trajectory of the hospitality and tourism. The Group expects to continue to see improved performance throughout the coming year. Despite these signs of the business rebounding, the Group will continue with its cash preservation measures, while building up cash resources for a phased refurbishment of the properties.

The Group believes in the future of the hospitality and tourism sector in Botswana and to that end has signed a lease for the development of a 62 roomed hotel in Mahalapye, that will complement the existing 64 roomed Cresta Mahalapye Hotel. The Group extended the lease for the existing Cresta Mahalapye Hotel, for an additional 10-year term, on 20 December 2021. Further to this, the Group is pursuing two additional leases, for developments in Botswana, which are expected to be signed during quarter two of 2022.


I would like to commend staff, management and my fellow directors for their continued commitment during this challenging COVID-19 pandemic period. I would also like to thank all our valued guests and various stakeholders that continue to support our business.

M K Lekaukau

31 March 2022

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