Cresta Marakanelo Limited

Cresta Marakanelo Limited – Summarised Financial Results FYE 31 December 2023

By Published On: March 28th, 2024Categories: Corporate announcement, Earnings
Cresta Marakanelo Limited 2023 Abridged Results

Cresta Marakanelo Limited (CRESTA.bw) 2023 Abridged Report

The Directors are pleased to present the summarised financial results of Cresta Marakanelo Limited for the year ended 31 December 2023.

INDEPENDENT AUDITOR’S REPORT

Deloitte & Touche, the Company’s independent auditors, have audited the financial statements of the Company from which these summarised financial results have been derived and have expressed an unmodified audit opinion on the financial statements. The full set of the financial statements, including the audit report are available for inspection at the Company’s registered office. However, this summarised financial information and any reference to future financial performance has not been audited by the auditors.

BASIS OF PREPARATION AND CHANGES TO THE COMPANY’S ACCOUNTING POLICIES

The summarised financial results for the year ended 31 December 2023 have been prepared applying the recognition and measurement criteria in accordance with International Financial Reporting Standards (“IFRS”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) and any Pronouncements if applicable.

The Company’s underlying financial statements have been prepared in accordance with IFRS. In the preparation of the summarised financial results, the Company has applied key assumptions concerning any inherent uncertainties in recording various assets and liabilities. These assumptions were applied consistently to the summarised financial results for the prior year ended 31 December 2022. The assumptions and estimates are subject to ongoing review. The estimates and areas of judgments are on the following elements of the financial statements:

  • Impairment of cash generating units;
  • Impairment of assets and goodwill;
  • Income taxes;
  • Useful lives and residual values of property, plant, and equipment;
  • Leases and
  • Contract liabilities.

Based on the 2023 financial year performance and the forecast for the next 12 months, the Directors are satisfied that the Company 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. The Directors have noted the net current liability position of the Company as at 31 December 2023. They have reviewed the expected timing of the settlement of the liabilities and are satisfied that the forecasted cash flows would be sufficient for the liabilities to be settled when due, while the P10 million unutilised overdraft facility would also be available for working capital requirements.

The Directors are therefore of the opinion that the going concern assumption is appropriate in the preparation of the financial statements.

New standards, interpretations and amendments adopted by the Company

In preparing the underlying financial statements from which these summarised results were extracted, all relevant and applicable IFRS and IFRIC interpretations issued and effective for annual periods ended 31 December 2023 have been applied. The Company has not adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Several amendments and interpretations apply for the first time in 2023, but do not have a significant impact on the summarised financial statements of the Company. These amendments and interpretations are Amendments to IAS 1, IAS 8, IAS 12, IFRS Practice Statement 2, IFRS 4 and IFRS 17.

OVERVIEW OF OPERATIONS

The revenue for the year under review at P400 million was P44 million higher than what was achieved in 2022, a 13% year on year growth. This was predominantly on the back of increased standard tour operator business, meetings and events in the leisure destination hotels, especially Cresta Mowana Safari & Spa, enhanced conferencing, food and beverage offering in the city hotels in addition to improved revenue management following hotel refurbishments which were undertaken during the year. The business continues with the refurbishment programme in 2024, to deliver an improved product offering to guests.

Entrenching the ethos of service excellence has been a key focus during 2023, which culminated in the launch of the service code in quarter 3 called “Marakanelong”. Marakanelong is encapsulated in four (4) pillars of: Botho – Humility, Botswerere – Excellence, Bonatla – Passion, Bofefo – Efficiency. This has seen an improvement in guest experience and sentiment, resulting in repeat business across Company hotels.

The stronger revenue performance, coupled with robust cost containment measures in place, culminated in operating profit of P58 million which was 28% ahead of 2022 and profit before tax which was 57% above the same period last year. The business has seen an increase in its profitability margins with operating profit margin closing the year at 15% (2022: 13%) and profit before tax margin at 8% (2022: 6%). Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) achieved during the period was P104 million, a 15% improvement on the prior year’s P90 million. The Company contributed P4.7 million in corporate income tax to the government, after registering its first year of taxable income since the COVID-19 pandemic.

To ensure sustainable profitability into the future, the Company strategically increased its absolute spend on repairs and maintenance of properties and sales and marketing costs as a deliberate investment. This was complemented by increases in the remuneration and welfare of staff and companywide training programmes.

The finance cost on interest-bearing borrowings increased by 2% due to the increase in the prime lending rate from 6.26% in 2022 to 6.76% for most of the year with it being reduced to 6.51% in December 2023.

The Company continues to battle headwinds due to the proliferation of Airbnb and increases in rooms across the country, and more so in Gaborone. The inflationary pressures, coupled with continued industry price wars, continue to be a key risk to the business. The Board constantly monitors and guides management accordingly on navigating the diverse risks facing the business.

STATEMENT OF FINANCIAL POSITION

The Company has increased shareholder’s equity during the period under review by 19% from P142 million in 2022 to P169 million in 2023. Total assets saw an increase of 14% year on year which was characterised by an increase in capital expenditure (“CAPEX”) spend on property, plant, and equipment (“PP&E”) and a significant increase in right-of-use-asset (“RoUA”) from the additional lease at Cresta Mahalapye which added 60 rooms to the Company room inventory. The increase in RoUA was offset by an increase in lease liabilities.

The Return on Equity (“ROE”) stood at 16% (2022: 14%) while Return on Invested Capital (“ROIC”) closed the year at 10% (2022: 9%). These investment ratios are in context of finance cost on interest-bearing borrowings of 7.76%.

CASH FLOW

The business generated cash of P115 million (2022:P86 million) from operations which represented a cash conversion on EBITDA of 111% (2022: 95%). After spending 12% of the cash generated from operations (“CGFO”) in finance cost on interest-bearing borrowings, 8% in finance cost on leases and 3% in prepayment of self-assessment corporate income tax, the Company closed the year on cash flow from operating activities of P89 million (2022: P88 million), a performance higher than 2022 by 54%.

The operational structure of the business saw 20% [P23 million] of the cash generated from operations being appropriated towards lease payments on the 5 leased properties while the capital structure of the business consumed 31% [P36 million] of cash generated from operations in borrowings capital repayment.

Cash and cash equivalents closed the year at P30 million (2022: P56 million) a decrease of 46% [P26 million] on the back of the strategic reinvestment into CAPEX and short term cash investment into a money market fund of P6 milion. The Company reinvested P61 million (2022: P15 million) in CAPEX which is expected to primarily defend the Company’s market share, retain its market leadership pole position, and foster sustainable profitability of the business into the foreseeable future. This was especially critical given the limited CAPEX spend in the three years of COVID-19 constrained periods of 2020 through to 2022.

SUBSEQUENT EVENTS

The Company acquired a P40 million facility from ABSA Bank Botswana, for capital expenditure funding. Apart from this facility, the Board and Management are not aware of any material events that have occurred subsequent to the end of the reporting period that require adjustment and or disclosure in the financial statements.

OUTLOOK

As is explained by the refurbishment and growth drive, the Company intends to remain a key architect of the tourism and hospitality industry in the country. Going into 2024, the top strategic priority for the Company is the continued implementation of expansion projects and advancing refurbishments of the existing asset portfolio. The completion of a 50-roomed 4-star Cresta Jwaneng Hotel in Jwaneng with our development partner – Debswana Pension Fund – whose construction commenced in 2023 remains top priority. It is expected that the hotel will be launched to the market sometime in quarter 2 of 2024.

Digitalisation and entrenching the gains of service excellence already witnessed will continue to be on the strategic dashboard for the Company. The Board and Management will remain vigilant to closely monitor and proactively respond to the unique challenges and opportunities presented by the strategy in play.

APPRECIATION

It is our distinguished privilege and honour to proffer our utmost gratitude to Management, Staff and our fellow Directors for their dedicated commitment to ensuring sustainable profitability of the business and maintaining the Company’s market leadership position. We present our heartfelt appreciation to our customers and all other stakeholders who are in partnership with the business for their continuous invaluable support and engagement.

Signed on behalf of the Board.

M K Lekaukau
Chairman

M Morulane
Managing Director

28 March 2024

The contents of the post above were obtained from third parties, which We, AfricanFinancials, believe to be reliable. However, We do not guarantee their accuracy and the above information may be in condensed form. The reader is encouraged to refer to the original source of the information, which, in most cases, is in PDF format and on the originating company's letterhead. While We endeavour to replicate the original content accurately, We cannot guarantee the absence of errors in the above article and We disclaim any liability regarding reliance on information provided in this article.

Cresta Marakanelo Limited (CRESTA.bw)

Share price: 107.00 Thebe (0.00 | 0.00% – 24/05/24)

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