On behalf of the Board of Directors of Cresta Marakanelo Limited, I am pleased to present to you the Integrated Annual Report for the Group for the year ended 31 December 2019.

OVERVIEW OF OPERATIONS
The Group received shareholder approval in February 2019 to acquire five of the hotels it was leasing, wholly funded from debt. The purchase and transfer of four of the properties was concluded in June 2019 and consideration of P251 million was paid to the sellers. The last property transfer was concluded in February 2020.

The Group achieved revenue growth of 7% and a 45% growth in operating profit compared to the same period last year. This was despite a significant reduction in occupancies in all the Botswana hotels during the month of October, when the general elections took place.

Centralised procurement and cost containment initiatives in the hotels resulted in improved margins. The decline in PBT is primarily as a result of additional finance costs incurred on borrowings for the acquisition of four hotel properties as well as the depreciation related to the newly acquired properties.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Total assets increased by 133% compared to the financial year ended 31 December 2018.

The increase in assets was primarily as a result of the hotel properties acquired, as well as the recognition of Right-of-Use assets for the first time in the current financial period. The acquisition of the properties was wholly funded from borrowings, hence the increase in equity was only 19%.

The Group had cash resources of P103 million at the end of the period under review (2018: P61.6 million).

CONSOLIDATED STATEMENT OF CASH FLOWS
Cash generated from operations amounted to P109.5 million, an increase of 63% compared to the prior year (2018: P67.0 million). This was driven by the higher occupancies achieved and the savings realized on rentals for the properties acquired in June 2019. Net cash utilised in investing activities increased to P273.2 million, from P48.9 million in the prior year, as a result of the acquisition of the hotel properties, as well as refurbishment projects undertaken in the Group.

With regards to financing activities, P251 million obtained from the Barclays Bank loan facility was utilised during the period, to fund the hotel property acquisitions.

SUBSEQUENT EVENTS
The rapidly unfolding COVID-19 pandemic has caused significant disruptions in the global hospitality and tourism industries. Even though there are currently no reported COVID-19 cases in Botswana, the Group has started to receive cancellations from regional and international tour operators and travel agents. In addition, the Government of Botswana has introduced restrictions on public gatherings and conferences in order to contain the possible spread of the disease. All these factors will negatively impact
the Group’s performance during the 2020 financial year.

In line with the World Health Organisation (WHO) and the Ministry of Health and Wellness guidelines, the Group has introduced measures to increase the availability of hand sanitisers in all public spaces in the properties, increased frequency of cleaning of public area touch points and increased staff training on the WHO hygiene measures to combat the spread of COVID-19.

As the duration of the pandemic is unknown, the Group has taken a cautious approach and suspended all major capital expenditure projects for the 2020 financial year in order to conserve cash resources.

GOING CONCERN
In assessing the ability of the Group to continue as a going concern, management carried out a sensitivity analysis on the 12 month forecast cash flow assumptions to reflect a range of reasonably possible outcomes related to the COVID-19 pandemic and concluded that Cresta Marakanelo Limited will be able to continue as a going concern. The Directors reviewed the cash flow forecasts prepared by management when assessing the ability of the Group to continue operating as a going concern. The significant assumption made was that the downturn in business would not be for a period exceeding 12 months.

Based on the review of the Group’s cash flow forecasts, the Directors believe that the Group will have sufficient resources to continue to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements