Hospitality giant, Cresta Marakanelo, reported a marginal increase in revenue driven by its flagship hotel in Kasane.
According to the first half financial results for 2024, the Botswana Stock Exchange-listed hospitality company recorded a 3 percent increase in revenue to P187.1 million recorded this year, from P180.9 million in the previous corresponding period of 2023.
Cresta attributed Mowana’s stellar performance to an increase in international visitors in the tourism hotspot of Kasane largely to see the country’s wildlife in northern Botswana.
Cresta also recorded an 8 percent growth in profit after tax to P5.7 million in June 2024, compared to P5.3 million recorded in the previous interim period.
However, the company’s business hotels, including Cresta Jwaneng, faced a tough time due to reduced occupancy rates amid a slowdown in the diamond market. This added strain to an already challenging operational landscape, as highlighted by Managing Director, Mokwena Morulane.
The company’s gross profit margin declined from 40 percent to 37 percent in the first half of 2024. This drop was mainly due to increased staff costs at the beginning of the year, which were not offset by the anticipated revenue growth. However, Morulane noted that Cresta successfully managed to control costs, maintaining stable food and beverage profit margins despite inflationary pressures.
Cresta says procurement economies of scale and robust cost control measures helped it navigate these challenges as food and beverage gross profit margins were maintained at prior-year levels.
The company says increased digital marketing efforts boosted sales and distribution expenses by 11 percent against 2023, as the company focused on attracting corporate clients and international travellers. According to Cresta, this strategic move paid off, as the foreign business grew, thanks to their targeted marketing efforts.
Administrative and operating expenses also saw a slight rise, increasing from P46.9 million to P47.5 million, largely attributed to the costs associated with the newly added 60 rooms at Cresta Mahalapye. The new wing, launched in December 2023, increased the hotel’s room inventory by 94 percent and added to the overall operational costs.
According to the company’s statement of financial position, the company’s total assets grew by 15 percent to P565.7 million by June 2024 from P493.1 million in June 2023. The company says this was driven by the expansionary strategy over the period. Cresta says it remains focused on enhancing the guest experience, investing in upgrades to its existing portfolio.
Trade receivables increased by 64 percent from P25.1 million to P41.2 million, with delayed customer payments contributing to the rise. The company says it used a bank overdraft of P7.2 million to bridge the working capital gap, to cushion the temporary pressure during the slow season of their full year business cycle.
Cresta’s cash flow position remains a focal point, with the company generating P35.6 million in cash from operations, a notable decrease from P50.8 million in 2023. The company says, the primary reasons for this decline include a 50 percent increase in debt service payments, rising to P43.8 million, compared to P29.2 million in the prior year. Capital expenditure also surged from P22.6 million to P30.0 million, which reflects Cresta’s ongoing commitment to expanding its hotel portfolio.
Finance income experienced a sharp decline of 87 percent, as the company divested its short-term investments to meet working capital requirements. However, Cresta successfully reduced its finance costs due to a decrease in the prime lending rate and ongoing capital repayments.
The company reported a tax credit for the period, which Cresta attributes to combination of subdued profitability and the costs associated with its expansion efforts.
Cresta’s Managing Director reiterated the company’s commitment to growth and market diversification. Cresta Grande Jwaneng, a new 4-star hotel in the diamond mining town of Jwaneng, had a soft opening in July 2024. The company’s focus on leveraging technology and digitalisation to enhance operational efficiency and guest service continues to be a key part of its strategy going forward.
Looking ahead, Cresta Marakanelo remains optimistic about the future, with plans to further diversify its market base, strengthen its digital marketing efforts, and optimise operations through technology. The company prioritises cash generation, aiming to self-fund its ongoing projects. Morulane emphasised the need for agility in the current economic climate, noting that Cresta is prepared to proactively address both challenges and opportunities as they emerge.
