Traditional hospitality giant Cresta Marakanelo Group which operates hotels and lodges in Botswana & Zambia continues to be negatively affected by the increasing hospitality industry competition.
As signaled by the Group at half year ended June 2017 results presentation, the chain hotel outfit collectively registered shrunk profits for the complete 2017 trading year ended December last year. According to the annual report released last week the Botswana Stock Exchange (BSE) listed hotels Group performance was subdued, with depressed overall financial performance compared to the prior year.
The prior year also recorded lapses in governance processes within the Group, which resulted in a restructuring of the leadership and a complete review of the internal control system, which was completed in 2017. Cresta Marakanelo Limited Chairman of Board of Directors Moatlhodi Lekaukau explains that the overall decline in profitability was by in large attributed to increased competition in the markets the Group operates in, coupled with significant reduction in Government spending.
Cresta has been predominantly a household name in the hospitality and related industries such as conferencing for several years; however of recent the Botswana market which is Cresta’s main operating space has been receiving new entrants who bring to the game exciting and diversified products, amongst other elite’s hospitality outfits internationally reputable market nectarines.
This has in turn taken the competition to Crestar’s door step. The Group also takes blows from reduced government spending from time to time. Government business especially civil servant’s official trips hospitality contributes significantly to Cresta’s bed occupancy. During the year under review the company recorded an overall profit before tax of P26.2 million mirroring a 29 percent decline from the result recorded for the previous year.
The Group recorded a marginal 1 percent increase in revenue to P 337 million. Total overheads decreased marginally, despite the inclusion of the costs related to the new hotel in Maun for the second half of the year. Lekaukau notes that the reduction was as a result of cost rationalization measures across the Group.
Despite shrunk profits as compared to the previous year, Cresta’s total assets for the year under review climbed by 2 percent, while equity increased by 4 percent compared to the same period last year. According to Lekaukau the Group continued to be cash generative despite downward trajectory on profitability, a total 6% increase in net cash generated from operating activities compared to the year ended December 2016.
Net cash generated from operating activities was P65.3 million compared to P61.8 million in 2016. “The Group has a robust and stable base, with cash resources of P65.3 million more that the P61.8 million in 2016, this is satisfactory going forward, the cash will be utilized to fund the payment of dividends to shareholders, refurbishments and expansion activities,” explained Lekaukau.
The group’s operating profit decline of 26 percent comes about from P33 million raked in during the 2017 trading year compared to P44.9 million in 2016. Earnings per share also registered a decline of 29 percent from 20.32 thebe in 2016 to 14.47 thebe in 2017, while the total dividend of 14 thebe per share for the 2017 financial year represents an 8 percent growth on the prior year.
The dividend yield for 2017 of 13 percent compares favourably to the average dividend yield of approximately 5.5% for counters listed on the Botswana Stock Exchange. At year end, the Group had negligible debt amounting to P8.4 million, a significant reduction from the over 12 million debt registered at the end of 2016.
Cresta Marakanelo Managing Director Mokwena Morulane notes that his company‘s declined performance is attributable to sluggish economy and contracted expansion opportunities due competition brought about by new entrant in the market. He however submits that Cresta Marakanelo Group is able to generate cash flows from operations of approximately P65 million per year.
“The Group is adequately positioned for ongoing operations and macro-economic shocks that may occur, we have debt carrying capacity and we are also able to take advantage of significant expansion opportunities,” he said. Amongst the two operation markets for Cresta, Botswana operations were significantly affected by the increased competition. According to the report Botswana’s overall occupancy declined from 63 percent in 2016 to 57 percent in 2017, also weighed down by the low occupancies of the new Cresta Maun Hotel, which opened in May 2017.
Three of the 11 Cresta hotels in Botswana incurred losses for the year as a result of flat revenue growth in a competitive environment. However on the Zambian Market the group performed satisfactorily with the division raking in operating profit of P987 million for the year, compared to a loss of P57 million in the previous year. “This was achieved in spite of the subdued business environment in Lusaka during the first half of 2017” observes Morulane.
The Cresta MD notes that cost optimization for the Zambian operations beard fruits as division’s revenue increased by 2 percent in Kwacha compared to the prior year, with the overall increase in profitability. To emerge from the declined profitability and remain the leading hotel Group predominantly in Botswana Cresta Marakanelo commenced the implementation of its new strategic plan aimed at repositioning the group and revamping its performance.
The strategic plan will run for the five year period from 2018 to 2022. The five main pillars of the Strategic Plan covers the broad areas of human resources and capacity building; growth; information communication and technology; marketing; and cost optimization. “We are working on initiatives to drive down costs without compromising the quality of product offering at the hotels, while also improving the value proposition,” explained the Group MD.
The Group has embarked on significant refurbishment projects of properties in 2018 with over P40 million earmarked to be spent on three properties this year. “This drive for product refreshing and improvement will continue into 2019, and we expect improved occupancies across all our properties,” observed Group Chairman. Lekaukau also notes that Cresta Marakanelo continues to explore regional growth opportunities in order to diversify its portfolio and further unlock shareholder value.
Managing Director Mokwena Morulane says the growth prospects of the Global Travel and Tourism industry as well as possible policy review by different stakeholders on the part of local industry sparks growth forecasts for the sector and ultimately profitability for the Cresta Grou. “The renewal and turnaround at Cresta Hotels will be premised on a solid platform of enhanced customer experience and strong commercial delivery. We are therefore on track to transform the Group into a stronger commercial and financially sustainable company whose central focus is the guest,” he said.
With just four weeks to go, the Gambling Authority of Botswana has revealed that it is expecting a record attendance at the much anticipated International Association of Gambling Regulators (IAGR) Conference, which will be held in Botswana from 16 – 19 October 2023.
According to a communique from the IAGR, the Gambling Authority will most probably break the record in the number of accredited countries that will attend the conference in Botswana.
“We are on track to match and potentially exceed the incredible delegate turnout we saw in Melbourne last year,” read a statement from IAGR’s.
In its global reach alert, IAGR revealed a glimpse of jurisdictions that will be represented at the conference, among them Australia, Canada, Denmark, Japan, Jersey, Mauritius, United Kingdom, United States and Netherlands. African countries that have so far confirmed attendance include Zimbabwe, South Africa, Nigeria, Tanzania, Kenya and Burundi.
Commenting on the expected bumper attendance, IAGR said the amazing diversity elevates the conference to a whole new level, which will enrich discussions with a tapestry of regulatory perspectives and insights.
Botswana won the bid to host this year’s conference last year in Melbourne, Australia. The IAGR consists of representatives from gaming and gambling regulatory organizations from around the world; with a common mission to advance the effectiveness and efficiency of gaming regulation.
According to Gambling Authority Chief Executive Officer (CEO) Peter Kesitilwe, the Authority is a member of the IAGR by dictates of the Gambling Act; which compels it to align with international organizations whose objectives are to regulate gambling, and build collaboration among regulators.
“The IAGR conference is held annually and hosted by different member jurisdictions. It provides opportunities for gambling and gaming regulators from around the world to engage, learn and network with industry peers through events, workshops, research, information sharing, and the development of best practices,” explained Kesitilwe.
Funding requirements for the conference are shared between IAGR, the host country and conference participants. The government of Botswana has reaffirmed its commitment to supporting the Gambling Authority to host IAGR; as it is in line with its objectives of promoting the country as a Meetings, Incentives, Conferences, and Exhibitions (MICE) tourism destination.
According to Kesitilwe, the conference is coordinated by a Technical Committee of IAGR; together with a Local Organizing Committee (LOC) that comprises of representatives from the Ministries of Trade, Tourism, Foreign Affairs, Botswana Police Service and other stakeholders.
“We promise to deliver this hugely important event and showcase the best that Botswana has to offer. In addition to the exchange of ideas and culture capital, the Organizing Committee will also ensure maximum benefits for the tourism, hotel and hospitality industry, entertainment, transport, telecommunications, vendors, hawkers of cultural artifacts,” said Kesitilwe.
As part of preparations to host IAGR2023, the Gambling Authority recently went on a benchmarking mission to Great Britain.
“What we learnt there can assist the Gambling Authority as we enter a new era of growth and expansion. The meeting also provided a timely opportunity to catch up on preparations for IAGR2023. We are ready to host the conference and we look forward to meeting other regulators from across the world to share best practice, discuss common challenges and tackle illegal gambling,” concluded Kesitilwe.
In recent years, diversity and inclusion have emerged as crucial aspects of the corporate sector. Recognising the importance of inclusivity, the Botswana Development Corporation (BDC) has taken significant steps to signal its commitment to the inclusion of all regardless of age, gender, background. By implementing a comprehensive Diversity and Inclusion policy, BDC aims to create an environment that fosters equality, attracts top talent, and promotes creativity and innovation.
BDC has demonstrated its commitment to inclusion by crafting and implementing a bespoke Diversity and Inclusion policy. This policy recognises and values the differences within its workforce, striving to create a culture of equality. By fostering an environment where all employees feel respected and supported, BDC aims to attract and retain top talent, which in turn contributes to the organisation’s overall success.
The Corporation has implemented policies and strategies that promote diversity and inclusivity in the workplace. The Diversity and Inclusion policy emphasises the value and respect for employees from diverse backgrounds, creating an inclusive environment where everyone can thrive. By having this policy in place, BDC ensures that all employees are treated fairly and have equal opportunities for growth and development within the organisation.
In the realm of inclusivity, leading firms and companies have emerged as trailblazers, championing diversity and equity by implementing progressive policies and initiatives. These organisations have made significant strides in demonstrating their commitment to inclusivity through actions that support individuals with disabilities and foster work-life balance for all employees.
Microsoft actively recruits individuals with disabilities and fosters an inclusive workplace through accommodations and a dedicated resource group. Netflix offers generous paternity leave, Unilever supports surrogate parenthood and gender-neutral caregiver benefits, while IBM provides comprehensive adoption support. Companies like Google, Apple, and Facebook establish employee resource groups to amplify underrepresented voices. Adobe prioritises inclusive workplace design, and Accenture and Deloitte focus on diverse leadership representation. These companies set a powerful example, demonstrating the value of diversity and fostering a more inclusive corporate landscape.
Rising to the challenge, BDC has also taken several measures to respond to the different needs of its work force. These measures include fostering open and respectful communication, encouraging the formation of employee resource groups or affinity networks, and promoting diverse perspectives and contributions. The Corporation has also shown its commitment to inclusivity by recruiting persons with disabilities, providing paternity leave benefits, and recognising and supporting surrogate parenthood, primary caregiver benefits regardless of gender, as well as the adoption of children. These efforts demonstrate BDC’s progressive approach to embracing diversity and supporting employees in all aspects of their lives.
By so doing, The Corporation exemplifies the essence of progressiveness, embracing inclusivity as a core value. By championing diverse talent, providing supportive benefits, and fostering inclusive cultures, BDC is part of a movement that is shaping a future where every individual is valued and empowered.
Inclusion and diversity are not only moral imperatives but also strategic investments for success. BDC’s commitment to fostering diversity and inclusion, sets an example for other organisations in Botswana and beyond. By implementing policies and strategies that create an inclusive environment, celebrating diversity, and supporting employees from all walks of life, BDC paves the way for a more equitable and inclusive corporate sector in Botswana. Embracing diversity is not only the right thing to do; it also drives innovation, boosts employee morale, and contributes to the overall success of organisations.
Choppies Enterprises Limited, a supermarket chain led by Botswana businessman Ramachandran Ottapathu, reported an increase in profit after tax which is up 3.4%, hence improving from P145 million realized in 2022, to P150 million in 2023.
The results demonstrate sustained increases in consumer demand, improved operational flexibility, efficiency, cost-effectiveness and despite stiff competition, the Group managed reduce its debt levels by paying off P263 million debt from the previous fiscal year.
The chain supermarket realized growth in Group retail sales which went up 6.5% to BWP6 433 million compared to P6 042 recorded in 2022. The growth is attributed to a broad presence across Botswana and a growing footprint in three other African countries, being South Africa, Zambia and Zimbabwe, according to a recently financial results statement.
In Pula terms, gross profit grew by 4.0% to BWP 1 359 million (2022: BWP 1 307 million) despite the challenging economic environment. Botswana and Namibia marginally grew gross profit rates while rates in Zambia and Zimbabwe declined.
During the period under review, the group’s Group net cash generated from operating activities rose by 4.5% to P484 million, this is a significant improvement when compared to P463 million recorded in 2022. This segment was boosted by strong showing from Botswana and Namibia, which performed exceptionally despite the challenging trading conditions. Furthermore, it was driven by sixteen new stores coupled with price growth of 6.8%.
As a result of the robust financial performance, the group’s total assets increased from P1 886 million to P2 177 million, while retained losses decreased from P811 million to P664 million.
Meanwhile, the Group faced a demanding economic environment characterised by stubbornly high inflation, higher interest rates and unemployment, all of which continue to constrain consumer spending and the consumer’s ability to digest higher prices. Sales volumes were lower in many categories, exacerbated by competitor discounting, with cost pressures only partly recovered through price increases.
According to the audited results, the gross profit margin accordingly reduced to 21.1% from last year’s 21.6% due to higher supply chain costs, including fuel and managing prices in response to higher cost inflation and competitor discounting.
Furthermore, while expenses increased 5.1% excluding the depreciation restatement, expenses grew 9.8% partly due to new stores and inflation. Foreign exchange losses on lease liabilities of P31 million (against a gain of P28 million last year) were partly offset by foreign exchange gains on Zimbabwean legacy debt receipts of P18 million (2022: BWP15 million).
Operating profit (EBIT) reduced by 1.8% from BWP 279 million to BWP 274 million whilst Adjusted EBIT, which excludes foreign exchange gains and losses on lease liabilities, movements in credit loss allowances, Zimbabwean legacy debt receipts and the reassessment of depreciation, reduced by 7.5% as costs grew faster than gross profit.
According to the Choppies Enterprises financial statement commentary, the Group continues to manage its cash resources and liquidity prudently with a reduction of P132 million in debt with P87 million paid out of internally generated funds and the balance of P45 million paid out of the proceeds of the rights issue.
In addition, capital expenditure increased to P185 million when compared to 2022 fiscal year which had recorded P122 million. This was a result of the Group strategy to invest in new stores and maintaining the distribution fleet.
Choppies Enterprises raised BWP50 million from leases to fund the fleet, an improvement because in 2022 only P36 million was raised.
Despite the growth in sales, inflation and new stores, Choppies Enterprises inventory reduced by P20 million helped by more stable global supply and the benefits of implementing an inventory optimisation system.
Finally, commentary from the Choppies Enterprises Group observes that as the economies in which the Group operates recover and the new stores reach full potential, an improvement in margins is expected. “With a value proposition that resonates with customers and with the cost of everyday items still stubbornly high in too many categories, more customers are choosing Choppies for the value and assortment we are known for. While we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices,” reads a commentary on the Group’s Financial statement.
Choppies Enterprises Limited (“the Company”) is a Botswana-based investment holding company operating in the retail sector in Southern Africa. Dual-listed on the Botswana Stock Exchange (“BSE”) and Johannesburg Stock Exchange (“JSE”), its are food and general merchandise retailing as well as financial service transactions supported by centralised distribution channels through distribution and logistical support centres. Each week, approximately 2.0 million customers visit 177 stores under five formats in four countries. With annual revenue of more than BWP6 billion, Choppies employs 10 000 people and is the largest grocery retailer in Southern Africa, outside of South Africa.
EVENTS AFTER REPORTING DATE
On 19 July 2023, Choppies acquired 76% (seventy-six percent) of the Kamoso Group for BWP2.00 (two Pula) and took cession of shareholders’ loans to the value of BWP22 million. The Botswana Development Corporation (BDC) will retain its 24% stake.
This acquisition will take Choppies to become a P8 billion business in revenue with 11 000 employees and 274 retail stores.
SNEAK VIEW: COUNTRY PERFORMANCES
According to the financial results, Botswana experienced sales growth to BWP4 459 million an improvement from P4 209 million recorded in 2022. This was supported by volume growth from new stores and double-digit price inflation. Sales from Botswana increased by 5.9% and like-for-like sales growth was 2.2%, as the business continued to show strong resilience in an increasingly challenging economic environment. The Botswana economy continues to experience elevated inflation, high unemployment, and low economic growth.
EBITDA grew 5.8% and adjusted EBITDA was flat on last year. The performance for the second half was much stronger than in the first half as our strategies, leadership and inventory optimisation system have started to come to fruition.
As for the Rest of Africa being Namibia, Zambia and Zimbabwe sales increased by 7.7% to P 1 974 million, yet another improvement from 2022, which had realized P1 833 million sales. The increase was driven by the addition of nine new stores, inflationary increases in Zimbabwe and Zambia and volume growth in Namibia and Zambia. “However, this was offset by a very weak Zimbabwean Dollar resulting in Zimbabwe’s Pula sales declining by 48.3%.”
Meanwhile Namibia has successfully turned around with sales growth of 60.0% and like-for-like sales growth of 14.4%. Five new stores were opened during the year. EBITDA grew 140% with EBIT loss reducing from BWP9 million to BWP2 million. Adjusted EBIT, excluding the depreciation reassessment, reduced from BWP9 million to BWP6 million.
Connectedly, Zambia continues to grow with sales up 44.7% and like-for-like sales growth of 33.3%. Three new stores were opened during the year. While EBITDA declined by 26.4% due to the foreign exchange loss on the lease liability, adjusted EBITDA grew 27.1%. Adjusted EBIT declined marginally at 2.6%. Choppies Enterprises Directors are confident that Zambia will generate taxable profits in the foreseeable future.
Lastly in Zimbabwe, the Zimbabwean Dollar (ZWL) has significantly weakened especially in the last two months of the financial year. As a result of the above mentioned factors, Pula sales declined by 48.3%. EBIT and EBITDA declined by 151.6% and 125.5% respectively as cost inflation reduced margins. Adjusted EBIT and adjusted EBITDA declined 133.3% and 108.1% respectively.