Cresta profits halve as occupancies drop

Cresta says the hospitality sector is under pressure in towns and cities
Cresta says the hospitality sector is under pressure in towns and cities

Hospitality group, Cresta Marakanelo Limited profits halved in the six months to June 2017 as its operations in both Botswana and Zambia were weighed down by low occupancy levels.

During the six months ended June 30, 2017, the group, which provides hotel and related services in Botswana and Zambia recorded an overall profit before tax of P9.1 million for the period, reflecting a 50% drop from the result recorded for the same period last year.

On the other hand, revenue  printed at P153 million representing a four percent decline from P160 million that was recorded for the same period in the prior year.

Cresta chairperson, Maria Nthebolan said this performance was largely attributed to pressures facing the industry at large, exacerbated by muted government spending, occupancies and revenue per available room (RevPAR) that experienced a slight year-on-year decline.

The group recorded an overall profit before tax of P9.1 million for the period, reflecting a 50% drop from the result recorded for the same period last year.

Out of the 12 hotels within the group, three hotels incurred losses for the half-year as a result of industry pressures.

However, Nthebolan said various initiatives to increase occupancies as well as contain costs are underway and yielding positive results.

She stated that total overheads decreased by three percent as a result of cost containment measures across the group. However, she said  cost rationalisation efforts have not impacted on the brand appeal and the group’s value proposition to customers.

“Management fully believes these initiatives are sustainable,” Nthebolan said.

In line with the group’s strategy to increase its footprint locally and regionally, she said a new hotel was opened in Maun during May 2017, and that the associated pre-opening expenses are included in these results. She further stated that Botswana operations were significantly affected by industry pressures, with performance largely remaining subdued compared to the prior period.

“Customer retention remains a key focus for the group and additional investments were made into this area,” she said.

In this regard, Nthebolan indicated that a timely investment was made into the information technology infrastructure supporting the Cresta Loyalty Card, which she said will improve communication with the customers and the ability to add more benefits to further enhance the value proposition. In addition, the group’s business environment in Zambia was subdued during the first half of the year, recording three percent lower occupancy levels and only marginal growth average room rates, as well as flat revenues compared to the same period last year.

According to Nthebolan, operational efficiencies resulted in a significant improvement in operating profit, with the Zambia hotel recording an operating profit of P570,000 for the half year, compared to a loss of P183,000 in the previous year.

She said total assets grew by two percent, while equity increased by five percent compared to the same period last year, despite the challenges faced by the group during the first half of the year.

This followed a payment of dividends amounting to P24.05 million (13 thebe per share) during the period from July 2016 to June 2017.

“Improved results are expected for the second half of 2017,” she said. “However, the net profit for the year is anticipated to be below last year’s performance.”  She, however, expressed optimism, noting that recovery is expected from 2018 onwards from significant capital expenditure on the refurbishments of hotels, contribution from the new Maun hotel and investment in Gantsi.

She said all these will put the company on a strong footing for future sustainable growth, adding that the group continues to explore regional growth opportunities in order to diversify its portfolio and continue to increase shareholder value.

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