Cresta Marakanelo Limited (CRESTA.bw) HY2023 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 2023 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 2022.
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 2022, except for the adoption of new standards effective as of 1 January 2023. 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 2023, but do not have an impact on the interim condensed consolidated financial statements of the Group. These amendments and interpretations, effective as of 1 January 2023, are amendments to IFRS 3, IFRS 4, IFRS 17, IAS 1, IAS 8, IAS 12.
OVERVIEW OF OPERATIONS
The business saw a 10% increase in revenue against the period ended 30 June 2022. The main driver for the good revenue performance was on the back of higher average daily rates (“ADR”), predominantly propelled by hotels in the leisure destinations, given the increase in arrivals of foreign guests when compared to 2022. The Group revenue per available room (“RevPAR”) closed the six months 8% ahead of the same period in 2022.
After returning to profitability in the 2022 financial period, Cresta Marakanelo Limited (“CML”) continues to be profitable in the first half ended, 30 June 2023. This has been in line with the general and positive recovery across the tourism and hospitality industry. The first quarter’s performance was relatively low in line with the seasonality of the business. The second quarter saw an increase in performance when compared to the first quarter, contributing 56% of the revenue generated for the six months ended 30 June 2023.
The stronger revenue performance, coupled with robust cost containment measures in place, culminated in an operating profit, which was 24% stronger than in 2022 and profit before tax, which was 32% ahead of the same period last year. The good performance was notwithstanding that the Company strategically increased its absolute spend in sales and marketing costs as a deliberate investment in sustainable profitability of the business into the future, having significantly reduced this class of spend during the pandemic. The finance cost on the interest-bearing borrowings increased in 2022 by 8% due to the increase in the prime lending rate from 6.26% in 2022 to 6.76% as at 30 June 2023. Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) achieved during the period was P43.32 million, an 8% improvement on the prior year’s P40.1 million.
STATEMENT OF FINANCIAL POSITION
The Group has increased the shareholder’s equity during the period under review by 11% from P132.2 million in 2022 to P147.3 million. The upward trend in the shareholder’s net worth is after offsetting the decrease in total assets by a more than proportionate decrease in liabilities. Total assets declined by 6% compared to the half year ended 30 June 2022, while total liabilities decreased by 12%. This was primarily due to the expected decline in book values in right-of-use assets and matching lease liabilities and the P7.9 million decline in cash and cash equivalents on the back of strategic deployment of cash into needful refurbishments and debt service payments.
During the half year 2023, the Group generated stronger positive cash flows from operating activities of P41.2 million (2022: P20.3 million), with a superior EBITDA cash conversion rate of 95% compared to 51% in 2022. Cash generated from operations grew by 74% from P29.2 million in 2022 to P50.8 million. Net cash utilised in investing activities amounted to P21.8 million (2022: P3.1 million), representing a 598% increase against 2022 due to the ongoing expansionary and refurbishment projects which entrenches the Group’s strategic imperative of fostering sustainable profitability into the future. Cash outflow from finance activities in 2023 increased by 82% mainly due to the increase in the debt service obligations with loan capital repayments totalling P19.6 million (2022: P6.1 million) for the six months.
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.
The top strategic priority for the Company is the continued implementation of expansion projects and refurbishments of the existing asset portfolio. Cash generation as a strategic imperative remains instructive as this will be key in self-funding some of the various projects in the pipeline. The Company will continue to closely monitor and proactively respond to the unique challenges and opportunities presented by the current operating environment, as well as entrench its revenue yielding tactics to ensure it remains competitive, while also leveraging on technology and digitalisation to optimise operations, service provision and cost effectiveness.
We would like to commend management, staff, and our fellow directors for their unwavering commitment to ensuring sustainable profitability. The Group has been able to maintain its leadership positioning in the hospitality industry, and this is, in no small part, on the back of the laudable efforts of all stakeholders associated with the Group.
Signed on behalf of the Board.
M K Lekaukau
29 September 2023
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