Cresta predicts decline in profits for 2018
Business
Botswana’s flagship hotel Group Cresta Marakanelo Limited continues to register declining sets of results in cash flows and revenue base. Following subdued performance on overall in 2017 trading year, the Group started the year 2018 on another slow note, unaudited financial results for the first six month of the year mirrored contracted set of figures with total assets and equity gown down the cliff by 3 percent.
According to the financial results for the six month ended June 2018 Cresta ended the half year on cash resources of P45.3 million compared to P51.0 million gathered in the corresponding 2017 period. Due to this 3 percent contraction in total assets and equity the Botswana Stock Exchange (BSE) listed hospitality outfit declared a dividend payments amounting to P25.9 million at 14 thebe per share during the period from July 2017 to June 2018.
Cresta Marakanelo Limited which operates in excess of 10 hotel and lodges registered another depressed performance in Cash flows, during the period under review, operating activities collected P20.2 million, a significant decline when compared to P25.7 million realised at the end of first half year 2017. Cresta noted that still under this subdued cash flow output; a large portion of the figures further went towards tax payments.
“Net cash utilized 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,” reveals the statement from the BSEL listed group. Explaining the set of results Cresta says for under Botswana division, the new Maun hotel, which started operating in June 2017, accounted for a significant part of the revenue growth achieved by the Group in Botswana market when not counted in.
“Excluding the new operation, existing hotels’ revenue increased by 4 percent. The new 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 to a prior year loss of P2 million inclusive of pre-opening expenses,” explains Cresta.
According to further commentary on the half year results Cresta reflects incurred stretched sets of costs from property rental expense, which is increasing ahead of inflation. On the Zambian operations a major cholera outbreak in Lusaka during the first five months of 2018 adversely affected the hotel operations. The Zambian Ministry of Health banned large gatherings of more than five people in order to stop the transmission of the disease.
However, the Moses Lekaukau led board reports that the performance started to improve during the latter part of the second quarter, with profits achieved higher than the prior 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,” underscores the statement from Cresta.
On Prospects Cresta Marakanelo says despite an expected improvement in performance during the second half of 2018, 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.” In a bid to keep up with the market and stay relevant as the country’s traditional major hotels services provider Cresta says it will implement various strategies to diversify their products in order to compete with new active and vibrant market entrants.
“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,” reveals the statement from Cresta. Cresta has been adversely affected by sluggish economy since 2016 which resulted in reduced government spending, increased completion from new entrants as well other unfavorable trading circumstances, in 2017 Cresta registered profit decline of 29 percent compared to 2016 trading year.
“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,” laments statement from the Group. Cresta Marakanelo underscores that it continues to explore local and regional growth opportunities in order to diversify its portfolio and increase shareholder value.
Business
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The Botswana and Johannesburg Stock Exchange listed distributor of fast-moving consumer goods
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Business
Grit divests from Letlole La Rona
Grit Services Limited, a member of the pan African real estate group, London Stock Exchange listed Grit Real Estate Income Group is divesting from Letlole La Rona Limited (LLR), a local real estate company established by government investment arm Botswana Development Corporation over a decade ago.
The Board of Directors of Letlole La Rona Limited this week announced in a statement to Unitholders that Grit Services Limited (‘Grit’) has informed them of its intention to exit its investment in the company.
Grit has been a material shareholder in LLR since 2019. On 07 March 2023, Grit sold 6 421 000 linked units, representing 2.29% of the Company’s total securities in issue, at a market value of BWP 22 537 710.
This trade follows previous sales of 6.79% in December 2022, as communicated to Unitholders on 10 January 2023, as well as a further sale of 4.78% (representing 13 347 068 linked units) on 24 February 2023 to various shareholders.
In aggregate, Grit has sold 13.9% shareholding in the Letlole La Rona between December 2022 and March 2023, resulting in current shareholding of 11.25% in the Company.
Letlole La Rona said in the statement that the exit process will take place in an orderly manner so as to maintain stability of the Company’s share price.
The statement explained that Grit’s sale of its entire shareholding in LLR is in line with its decision to exit investments where it does not have majority control, or where it has significant exposure to currencies other than US dollar, Euro or hard-currency-pegged revenue streams.
“Grit has announced similar decisions pertaining to certain of its hospitality assets in Mauritius recently. The Company would like to advise Unitholders that it remains focused on long-term value delivery to all stakeholders” LLR said
In July last year as part of their Go-to-Africa strategy Letlole La Rona acquired an initial 30% equity stake in Orbit Africa Logistics, with an option to increase this investment to 50%. OAL is a special purpose vehicle incorporated in Mauritius, owning an industrial asset in a prime industrial node in Nairobi, Kenya.
The co-investment was done alongside a wholly owned subsidiary of London listed Grit. The Orbit facility is situated on a prime industrial site on Mombasa Road, the principal route south of Nairobi center, serving the main industrial node, the port of Mombasa and the industrial town of Athi River and is strategically located 11 kilometers south of the international airport and 9.6 kilometers from the Inland Container Depot.
Grit shareholding in Letlole La Rona was seen as strategic for LLR, for the company to leverage on Grit’s already existing continental presence and expand its wings beyond Botswana borders as already delivered by Kenya transaction.
Media reports have however suggested that LLR and Grit have since late last year had fundamental disagreements on how to go about the Go-to-Africa strategy amongst other things, fuelled by alleged Botswana government interference on the affairs of LLR.
Government through LLR founding shareholder – Botswana Development Corporation has a controlling stake of around 40 percent in the company. Government is the sole shareholder of Botswana Development Corporation.
Letlole La Rona recently released their financial results for the six months ended December 2022, revenue increased by 4% to P50.2 million from P48.4 million in the prior comparative six months, whilst operating profit was up 8% to P36.5 million. Profit before tax of P49.7 million was reported, an increase of 8% on the prior comparative six months.
“We are encouraged by the strong results, notwithstanding a challenging economic environment. Our performance was mainly underpinned by annual lease escalations, our quality tenant base and below average market vacancy levels, especially in our warehouse portfolio,” Kamogelo Mowaneng, Letlole La Rona Chief Executive Officer commented.
LLR reported a weighted average lease expiry period of 3.3 years and escalation rates averaging 6.8% per annum for the period ended 31 December 2022.Its investment portfolio value increased by 14% year-on-year to close the period at P1.4 billion, mainly driven by the acquisition of a 30% stake in OAL in July 2022.
The Company also recorded a significant increase in other income, predominantly due to foreign exchange gains on the OAL shareholder loan. “We continue to explore pipeline opportunities locally, and regionally in line with our Go-to-Africa strategy and our interest remains on value-accretive investments,” Mowaneng said.
An interim distribution of 9.11 thebe per linked unit was declared on the 6th of February 2023 for the half-year period to 31 December 2022, comprising of a dividend of 0.05 thebe and debenture interest of 9.06 thebe per linked unit which will be paid to linked unit holders registered in the books of the Company at the close of business on 24 February 2023.
Business
Stargems Group establishes Training Center in BW
Internationally-acclaimed diamond manufacturing company StarGems Group has established the Stargems Diamond Training Center which will be providing specialized training in diamond manufacturing and evaluation.
The Stargems Diamond Training Institute is located at the Stargems Group Botswana Unit in Gaborone.
“In accordance with the National Human Resource Development Strategy (NHRDS) which holds the principle that through education and skills development as well as the strategic alignment between national ambitions and individual capabilities, Botswana will become a prosperous, productive and innovative nation due to the quality and efficacy of its citizenry. The Training Centre will provide a range of modules in theory and in practice; from rough diamond evaluation to diamond grading and polishing for Batswana, at no cost for eight weeks. The internationally- recognized certificate offered in partnership with Harry Oppenheimer Diamond Training School presents invaluable opportunities for Batswana to access in the diamond industry locally and internationally. The initiative is an extension of our Corporate Social Investment to the community in which we operate,” said Vishal Shah, Stargems Group Managing Director, during the launch of the Stargems Diamond Training Center.
In order to participate in this rare opportunity, interested candidates are invited to submit a police clearance certificate and a BGCSE certificate only to the Stargems offices. Students who excel in these programs will have the chance to be onboarded by the Stargems Group. This serves as motivation for them to go through this training with a high level of seriousness.
“Community empowerment is one of our CSR principles. We believe that businesses can only thrive when their communities are well taken of. We are hoping that our presence will be impactful to various communities and economies. In the six countries that we are operating in, we have contributed through dedicating 10% of our revenues during COVID-19 to facilitate education, donating to hospitals and also to NGOs committed to supporting women and children living with HIV. One key issue that we are targeting in Botswana is the rate of unemployment amongst the youth. We are looking forward to working closely with the government and other relevant authorities to curb unemployment,” said Shah.
Currently, Stargems Group has employed 117 Batswana and they are looking forward to growing the numbers to 500 as the company grows. Majority of the employees will be graduates from the Stargems Diamond Training Center. This initiation has been received with open arms by the general public and stakeholders. During the launch, the Minister of Minerals and Energy, Honorable Lefoko Moagi, stated that the ministry fully endorses Stargems Diamond Training and will work closely with the Group to support and grow the initiative.
“As a ministry, we see this as an game changer that is aligned with one of the United Nations’ Six Priority Sustainable Development Goals, which is to Advance Opportunity and Impact for Diversity, Equity, and Inclusion (DEI). What Stargems Group is launching today will have a huge impact on the creation of employment in Botswana. An economy’s productivity rises as the number of educated workers increases as its skilled workmanship increases. It is not a secret that low skills perpetuate poverty and widen the inequality gap, therefore the development of skills has the potential to contribute significantly to structural transformation and economic growth by enhancing employability and helping the country become more competitive. We are grateful to see the emergence of industry players such as Stargems Group who have strived to create such opportunities that mitigate the negative effects of COVID-19 on the economy,” said the Minister of Minerals and Energy.