Cresta Marakanelo Limited (CRESTA.bw) HY2022 Interim Report
BASIS OF PREPARATION AND CHANGES TO THE GROUP’S ACCOUNTING POLICIES
The interim condensed consolidated financial statements for the six months ended 30 June 2022 do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual consolidated financial statements as at 31 December 2021.
The Group has prepared the financial statements on the basis that it will continue to operate as a going concern. The Directors consider that there are no material uncertainties that may cast significant doubt over this assumption. They have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and not less than 12 months from the end of the reporting period.
New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2021, except for the adoption of new standards effective as of 1 January 2022. The Group 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 2022, but do not have an impact on the interim condensed consolidated financial statements of the Group. These amendments and interpretations are Amendments to IFRS 17, IAS 1, IFRS 3, IAS 16, IAS 37, IFRS 1, IFRS 9, IAS 41, IAS 8.
OVERVIEW OF OPERATIONS
With the waning in strength of the negative effects caused by the COVID-19 pandemic, the Tourism & Hospitality industry experienced a surge in the rebound momentum in 2022, and Cresta Marakanelo Limited (“CML” or “the Company”), was no exception. During the six months to 30 June 2022, as the ban on alcohol sales and various other COVID related restrictions such as the curfew and travel restrictions were removed, CML returned to profitability. International tour operator arrivals continue to rise steadily at our key tourism properties, while local travel has also been steadily rising both for corporates and individuals resulting in a significant increase in occupancies across all the Company’s hotels.
The first quarter’s performance was low in line with the seasonality of the business but was an improvement from the previous year as during the same time last year, the State of Emergency was still in effect with a number of other COVID-19 pandemic mitigation controls. The second quarter saw a rise in the performance of the business when compared to the first quarter, contributing 55% of the revenue generated for the six months ended 30 June 2022. The business enjoyed a steady month-on-month increase in revenues from January to June 2022.
The Group’s six months Profit Before Taxation from continuing operations of P5.9 million, was P40 million higher in comparison to the same period last year which reported a loss of P35.2million. The main driver for the good performance is increased occupancies and the cost reduction measures implemented, some of which will be continued for the long term, even after the pandemic has been contained. Revenue for the period under review was P164.9 million, 77% higher than the same period last year. Earnings before interest, tax, and depreciation (EBITDA) achieved during the period was a profit of P40.2 million, an improvement on the prior year’s EBITDA generated of P0.4 million.
From the beginning of the year, cash balances increased by P1.6 million for the six months to 30 June 2022, compared to a decline of P29.4 million during the same period in 2021.
The Directors made the decision not to renew the lease for the Cresta Golfview Hotel in Lusaka Zambia, and the operation ceased trading on 30 September 2021. The entity has been accounted for as a discontinued operation.
STATEMENT OF FINANCIAL POSITION
Total assets increased by 8% compared to the half year ended 30 June 2021. The increase in assets was primarily due to a P21.3 million increase in right of use assets for a hotel lease extension signed in December 2021 as well as a P26.4 million increase in cash balances. The Group had cash resources of P54.0 million (2021: P27.6 million) at the end of the period under review.
During the half year, P20.3 million was generated in operating activities while in 2021, P11.7 million was utilized in operations. Net cash utilised in investing activities amounted to P3.1 million (2021: P2.5 million). The increase in cash outflow on investing activities was as a result of the additional capital expenditure incurred. With regards to financing activities, P16.4 million (2021: P15.2 million) was utilised with bank loan repayments being P6.1 million (2021: P2.1 million) and the costs of leasing hotel properties being P10.3 million (2021: P11.5 million).
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 require adjustments and or disclosure in the financial statements.
Execution of expansion projects as a critical path to success for the year is a top priority, together with the refurbishment of the existing properties in the portfolio. The focus on cash generation continues as this will be key in funding the various projects in the pipeline. The Group will continue to implement its yielding strategy to ensure it remains competitive, while also leveraging on technology and digitalisation in order to optimise operations, service provision and cost effectiveness.
We would like to commend management, staff, and our fellow directors for their continued commitment during this challenging COVID-19 pandemic period. It is heartening that despite the devastating effects of COVID-19 on the economy in general and more so on the hospitality sector, the Group has been able to build up its cash resources; this is in no small part due to the laudable efforts of all stakeholders associated with the Group.
Signed on behalf of the Board.
M K Lekaukau
22 September 2022
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