Significant cut in loses for Cresta as it battles its way back to profitability.

  1. Cresta Marakanelo Holidays Limited, Botswana ‘s leading hotels group is still battling the catastrophic effects of the Covid-19 pandemic and its far reaching implications.

The tourism and travel business was by far the most hit economic sector , key to covid containment was significant curtailment in movement of the people to reduce the spread of the virus, on the flip side this delivered massive blow to the tourism and hospitality business which relies by in large on accomoding travelers.

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Last week Cresta released their unaudited condensed consolidated financial results for the half year period ended June 2021.

The Group which operates 11 hotels in Botswana reported a significant reduction in losses owing to stringent cost containment measures deployed by management to ensure the business doesn’t plunge deeper into negative figures zone.

The Group’s registered a six months Loss Before Taxation of P34.1 million,which was P8.4 million lower than same period last year which reported a loss of P42.5 million

Cresta says the COVID-19 headwinds continue to significantly affect the tourism and hospitality industry and Cresta Marakanelo Limited was not an exception.

During the six months to June 2021, the Government of Botswana continued to implement a raft of measures imposed in December 2020 to try and curb the spread of COVID-19.

These measures, which include restrictions on inter-zonal travel, ban on alcohol sales and limited number of conferencing guests, have had a direct effect of reducing the level of activity in hotels.

The resort town hotels, which ordinarily generate at least 50% of their business
from incoming foreign travellers, were significantly affected by the lockdowns in the source countries and low travel sentiment even after the hard lockdown measures were lifted.

The first quarter performance was low in line with the seasonality of the business, but the performance was further slowed down by the pandemic induced low travel sentiment and pandemic mitigation controls in place.

The second quarter saw a rise in the performance of the business when compared to the first quarter, contributing 60% of the revenue generated for the six months ended 30 June 2021.

The business enjoyed a steady month-on-month increase in revenues from January to June 2021.

Under the adverse operating conditions for the industry, Cresta Directors boast of the P8.4 million losses cut.

This according to a commentary alongside financials was mainly driven by the cost reduction measures implemented, some of which will be continued in the long term, even after the pandemic has been contained.

Revenue for the period under review was P96.5 million, 4% (P3.3 million) higher than same period last year.

Earnings before interest, tax, and depreciation and amortization (EBITDA) achieved during the period was P2.2 million, an improvement on the prior year’s loss incurred of P2.5 million.

The reduced market base has seen a surge in price wars in the industry, a variable which further puts pressure on the revenues of the business.

Cresta management noted that the Group will continue to focus on cost containment to ensure survival of the business through this difficult pandemic season.

In a drive to reduce the operating leverage of the business to ensure the Company continues to be a going concern, several measures were implemented including the suspension of all non-critical capital expenditure projects and freeze on all discretionary expenditure.

In addition Cresta negotiationd with staff, landlords and other strategic suppliers of the business to reduce contractual obligations.

Following these measures the Cresta was able to minimise the reduction in cash balances during the period.

From 31 December 2020, cash balances declined by P29.1 million for the six
months to 30 June 2021, compared to a decline of P42.1 million during the same period in 2020 on largely the same level of revenue mirroring a successful cash preservation.

In assessing the ability of the Group to continue as a going concern, management performed a sensitivity analysis on a 12-month cash flow forecast which was reviewed by the Board of Directors to their satisfaction.

A range of reasonably possible outcomes related to the COVID-19 pandemic were considered and it was concluded that Cresta Marakanelo Limited will be able to continue as a going concern.

The single most significant assumption made was that the business should turnaround for the better within 12 months period on the back of vaccination programmes both in the source market countries and locally.

Vaccination enhances travel sentiment for the market, and it is on its strength that most of the paid guests are opting to postpone their bookings rather than cancel completely.

The Company has also secured an additional working capital facility of P25 million. This will provide additional headroom while the business levels are low.

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 and accordingly, the interim financial statements have been prepared on the going concern basis.

Last month Cresta announced that they have made the decision not to renew the lease for the Cresta Golfview Hotel in
Lusaka Zambia, which comes to an end on 31 January 2022.

The landlord of the property will
continue to run the hotel, under a different brand and preparations are currently underway for a smooth handover of the property, with the least possible impact to staff, suppliers and guests.

 

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