- New Maun hotel costly to Cresta
- Cholera outbreak impacts Zambia operations
Cash reserves of Botswana’s leading hotel services provider, Cresta Marakanelo Group declined by almost P6 million for the 2018 half year, after the company paid out a handsome dividend during the reporting period.
In the company’s financial statement for the 2018 half year, the Group wrote that it had cash resources of P45.3 million at the end of the period under review, as compared to the P51 million seen during the 2017 half year period ending June 2017.
Total assets declined by 3 percent, while equity decreased by 3 percent compared to the same period last year.
“This followed dividend payments amounting to P25.9 million at 14 thebe per share during the period from July 2017 to June 2018.”
Cash flows from operating activities amounted to P20.2 million during the 2018 half year, with a large portion of this going towards tax payments. During the 2017 half year period, the company’s cash flow was at P25.7 million.
Net cash utilised in investing activities increased to P20.8 million, from P15.4 million in the prior year, as a result of the ongoing refurbishment underway at the flagship Cresta Mowana Resort & Spa.
The new Maun hotel, which started operating in June 2017, continued to bleed Cresta. Excluding the new operation, existing hotels’ revenue increased by 4 percent. The new Maun operation’s average occupancies are still low and it has therefore been incurring losses. The overall impact of Maun hotel to the Group’s profit before tax for the half year was a loss of P3.9 million, compared a prior year loss of P2 million (inclusive of pre-opening expenses), Cresta reported.
Another significant cost driver is the property rental expense, which is increasing ahead of inflation.
At its Zambian operations, a major cholera outbreak in Lusaka during the first five months of 2018 adversely affected the hotel operations, as the Zambian Ministry of Health banned large gatherings of more than five people in order to stop the transmission of the disease. Cresta said the performance started to improve during the latter part of the second quarter, with profits achieved higher than the previous year, however this did not completely reverse the losses incurred during the first quarter, resulting in the hotel recording an operating loss for the half year of P122,000 compared to a profit of P570,000 in the prior year.
“Despite an expected improvement in performance during the second half of this year, the Group’s net profit for the year is anticipated to be below last year’s performance. The new Maun hotel will continue to have a negative impact on Group’s results in the short term,” the group announced.
However, the board said a number of initiatives are underway to improve the performance of this hotel and also increase the contribution of the leisure market to the Company’s customer base, which is heavily skewed towards business travelers. The board further said, there will be a focus on improving margins, as well as product improvement across all hotels.
“The Cresta Mowana Resort & Spa refurbishment is currently underway. This will be substantially complete in October 2018, with the final bedroom block due to be completed during the first quarter of 2019. The Cresta Jwaneng refurbishment is also underway and will be substantially completed by the end of this year. The next proposed refurbishments are for Cresta Riley’s and Cresta Botsalo hotels during the first half of 2019. The Group continues to explore local and regional growth opportunities in order to diversify its portfolio and increase shareholder value.”