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Friday, 19 April 2024

Cresta bounces back with P19 million profit after tax

Business

Cresta Marakanelo, Botswana’s largest hotels chain group has emerged from the repercussions and losses of COVID-19 negative economic impacts, returning to profitability levels with a profit after tax of P19 million, figures last registered in 2019.

In its summarized consolidated financial results for the year ended 31 December 2022, Cresta achieved a net profit after taxation of P19.2 million from a loss of P40 million loss registered in the prior year 2021.

Losses were made in 2021 due to disruptions caused by the COVID-19 pandemic on the travel and hospitality industry. Cresta started observing improved business levels towards the end of 2021 and into early 2022 with improved occupancies and positive returns.

Based on the 2022 financial year performance and the forecast for the next 12 months, Cresta Directors said are satisfied that the Group has the ability to meet all obligations as they fall due and to trade as a going concern for a period of at least 12 months from the date of approval of these financial statements.

The Directors have noted the net current liability position of the Group as at 31 December 2022. Cresta says it has reviewed expected timing of the settlement of the liabilities and are satisfied that the forecasted cash flows would be sufficient for the liabilities to be settled when due, while the P10 million unutilised overdraft facility would also be available for working capital requirements.

The Directors are therefore of the opinion that the going concern assumption is appropriate in the preparation of the consolidated and separate financial statements.

The year 2022 is the first full year period that Cresta made a profit since the start of the COVID-19 pandemic in 2020. There was no significant rise in new COVID-19 cases during the year under review, with vaccinations being availed worldwide.

This resulted in the relaxing of the COVID-19 restrictions which included travel bans, alcohol sale bans and restrictions on gatherings. An improvement in business levels was noted with occupancies increasing across the hotels.

The Group also noted a rise in the inflow of international tour series business at the key tourism properties. With the adverse operating conditions for the industry having improved, the business registered some wins.

The Group’s full year profit before tax of P21.7 million, was P74.5 million higher than same period last year which reported a loss before tax of P52.9 million. Occupancies and average daily rates improved across all the hotels driven by increased conferencing levels as well as regional and international guest arrivals, leading to a 64% increase in revenue.

Direct operating costs increased in line with the revenue growth, with a significant increase in staff numbers after almost a two-year recruitment freeze. Various cost reduction measures continued to be implemented across the business, to ensure improved margins in the future. Cash generation improved significantly, with a continued focus on cash flow management.

No additional borrowings were required during the year to fund the operations. Investments were made into uplifting the properties, with the Cresta Thapama Hotel refurbishment commencing during the year. The first phase of the refurbishment of a room block was completed during Quarter 3, with the rest of the refurbishment expected to be completed by July 2023.

In 2021 Cresta made the decision not to renew the lease for the Cresta Golfview Hotel in Lusaka, Zambia and the operation ceased trading on 30 September 2021. The entity was accounted for as a discontinued operation in the prior year.

Cresta total assets decreased by 4% compared to the year ended 31 December 2021. The decrease in assets was primarily due to depreciation of assets, while capital expenditure during the year was low.

Total liabilities decreased by 11% following repayment of borrowings and lease liabilities during the year. The Group had cash resources of P56.1 million slightly up from the P53.2 million in 2021 at the end of the year.

During the year, P65.1 million was generated from operating activities, a significant improvement from the prior year when P19.0 million was generated.

The improvement was due to the increase in revenues and the improvement in working capital management. Net cash utilised in investing activities amounted to P12.3 million (2021: P6.1 million utilised).

The increase in cash outflow on investing activities was due to a rise in capital expenditure relating to refurbishment of hotels; which had been put on hold in 2021.

With regards to financing activities, P50.2 million (2021: P14.1 million) was utilised, split between bank loan repayments of P29.4 million (2021: P14.9 million) and leasing hotel properties of P20.8 million (2021: P21.2 million). 2021 net financing activities were lower because of a receipt of P25 million bank loan proceeds.

Going forward Cresta Directors said they firmly believe in the future of the hospitality and tourism sector in Botswana and is prioritising the execution of expansion projects as a critical path to success for the year.

One such project is the 60 room extension of Cresta Mahalapye Hotel which is scheduled to be completed during the third quarter of 2023. Still on the expansion journey, Cresta signed a lease for the development of a 50 roomed boutique hotel in Jwaneng. Construction for Cresta Jwaneng Boutique Hotel commenced in November 2022, with completion scheduled for February 2024.

The Botswana Stock Exchange listed Group says it will continue to search for ways to digitalise operations, service provision and the enabling departments to enhance efficiency and effectiveness.

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Business

LLR transforms from Company to Group reporting

9th April 2024

Botswana Stock Exchange listed diversified real estate company, Letlole La Rona Limited (“LLR” or “the Company” or “the Group”), posted its first set of group financial statements which comprise the Company and Group consolidated accounts, which show strong financial performance for the six months ended 31 December 2023, with improvements across all key metrics.

The Company commenced the financial year with the appointment of a Deputy Chairperson, Mr Mooketsi Maphane, in order to bolster its governance and enhance leadership continuity through the development of a Board and Executive Management Succession Plan.

At operational level, LLR increased its shareholding in Railpark Mall from 32.79% to 57.79% and proudly took over the management of this prime asset.

The CEO of LLR, Ms Kamogelo Mowaneng commented “During the period under review, our portfolio continued to perform strongly, with improvements across all key metrics as a result of our ongoing focus on portfolio growth and optimisation.

“We are pleased to report a successful first half of the 2024 financial year, where we managed to not only grow the portfolio through strategic acquisitions and value accretive refurbishments but also recycled capital through the disposal of Moedi House as well as the ongoing sale of section titles at Red Square Apartments. The acquisition of an additional 25% stake in JTTM Properties significantly uplifted the value of our investment portfolio to P2.0 billion at a Group level. Our investment portfolio was further differentiated by the quality of our tenant base, as demonstrated by above market occupancy levels of 99.15% and strong collections of above 100% for the period”.

The growth in contractual revenue of 9% from the prior year’s P48.0 million to the current year P52.2 million, increased income from Railpark Mall, coupled with high collection rates, has enabled the company to declare a distribution of 9.11 thebe per linked unit, which is in line with the prior year.

 

In line with its strategic pillars of ‘Streamlined and Expanded Botswana Portfolio’ as well as ‘Quality African Assets’, the Group continuously monitors the performance of its investments to ensure that they meet the targeted returns.

“The Group continues to explore yield accretive opportunities for balance sheet growth and funding options that can be deployed to finance that growth” further commented the CEO of LLR Ms Kamogelo Mowaneng.

Ms Mowaneng further thanked the Group’s stakeholders for their continued support and stated that they look forward to unlocking further value in the Group.

 

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Business

Botswana’s Electricity Generation Dips 26.4%

9th April 2024

The Botswana Power Corporation (BPC) has reported a significant decrease in electricity generation for the fourth quarter of 2023, with output plummeting by 26.4%. This decline is primarily attributed to operational difficulties at the Morupule B power plant, as per the latest Botswana Index of Electricity Generation (IEG) released recently.

Local electricity production saw a drastic reduction, falling from 889,535 MWH in the third quarter of 2023 to 654,312 MWH in the period under review. This substantial decrease is largely due to the operational challenges at the Morupule B power plant. Consequently, the need for imported electricity surged by 35.6% (136,243 MWH) from 382,426 MWH in the third quarter to 518,669 MWH in the fourth quarter. This increase was necessitated by the need to compensate for the shortfall in locally generated electricity.

Zambia Electricity Supply Corporation Limited (ZESCO) was the principal supplier of imported electricity, accounting for 43.1% of total electricity imports during the fourth quarter of 2023. Eskom followed with 21.8%, while the remaining 12.1, 10.3, 8.6, and 4.2% were sourced from Electricidade de Mozambique (EDM), Southern African Power Pool (SAPP), Nampower, and Cross-border electricity markets, respectively. Cross-border electricity markets involve the supply of electricity to towns and villages along the border from neighboring countries such as Namibia and Zambia.

Distributed electricity exhibited a decrease of 7.8% (98,980 MWH), dropping from 1,271,961 MWH in the third quarter of 2023 to 1,172,981 MWH in the review quarter.

Electricity generated locally contributed 55.8% to the electricity distributed during the fourth quarter of 2023, a decrease from the 74.5% contribution in the same quarter of the previous year. This signifies a decrease of 18.7 percentage points. The quarter-on-quarter comparison shows that the contribution of locally generated electricity to the distributed electricity fell by 14.2 percentage points, from 69.9% in the third quarter of 2023 to 55.8% in the fourth quarter. The Morupule A and B power stations accounted for 90.4% of the electricity generated during the fourth quarter of 2023, while Matshelagabedi and Orapa emergency power plants contributed the remaining 5.9 and 3.7% respectively.

The year-on-year analysis reveals some improvement in local electricity generation. The year-on-year perspective shows that the amount of distributed electricity increased by 8.2% (88,781 MWH), from 1,084,200 MWH in the fourth quarter of 2022 to 1,172,981 MWH in the current quarter. The trend of the Index of Electricity Generation from the first quarter of 2013 to the fourth quarter of 2023 indicates an improvement in local electricity generation, despite fluctuations.

The year-on-year analysis also reveals a downward trend in the physical volume of imported electricity. The trend in the physical volume of imported electricity from the first quarter of 2013 to the fourth quarter of 2023 shows a downward trend, indicating the country’s continued effort to generate adequate electricity to meet domestic demand, has led to the decreased reliance on electricity imports.

In response to the need to increase local generation and reduce power imports, the government has initiated a new National Energy Policy. This policy is aimed at guiding the management and development of Botswana’s energy sector and encouraging investment in new and renewable energy. In the policy document, Minister of Mineral Resources, Green Technology and Energy Security Lefoko Moagi stated that the policy aims to transform Botswana from being a net energy importer to a self-sufficient nation with surplus energy for export into the region. Moagi expressed confidence that Botswana has the potential to achieve self-sufficiency in electric power supply, given the country’s readily available energy resources such as coal and renewable sources.

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Business

MMG acquires Khoemacau in a transaction valued at P23Bn

9th April 2024

MMG Limited, the Hong Kong-based mining company specializing in base metals, has successfully concluded the acquisition of Khoemacau Copper Mine, a state-of-the-art, world-class copper asset nestled in the northwest of Botswana.

On Monday, MMG announced that the acquisition of Khoemacau Mine in Botswana was finalized on 22nd March 2024. “This acquisition enriches the company’s portfolio with a top-tier, transformative growth project and signifies a monumental milestone in the Company’s journey,” MMG communicated in an official statement published on the Hong Kong Stock Exchange.

Upon completion of the acquisition, MMG remitted to the Sellers an Aggregate Consideration of approximately US$1,734,657,000 (over P23 billion), a sum subject to potential adjustments post-Completion.

In addition to the Aggregate Consideration, MMG, in accordance with the Agreement, advanced an aggregate amount of approximately US$348,580,000 (over P4.5 billion) as the Aggregate Debt Settlement Amount, to settle certain debt balances of the Target Group (Cuprous Capital/Khoemacau).

On November 21, 2023, Khoemacau announced that the shareholders of its parent company [Cuprous Capital] had agreed to sell 100% of their interests to MMG Limited.

MMG is a global resources company that mines, explores, and develops copper and other base metals projects on four continents. The company is headquartered in Melbourne, Australia, and has a significant shareholder, China Minmetals Corporation, which is China’s largest metals and minerals group owned by the Government of the People’s Republic of China.

On December 22, 2023, Khoemacau Copper Mining (Pty) Ltd received the approval from the Minister of Minerals and Energy of Botswana regarding the transfer of a controlling interest in the Project Licenses and Prospecting Licenses associated with the Khoemacau Copper Mine, a result of the Acquisition.

 

The Botswana Competition & Consumer Authority (CCA) on January 29, 2024, notified the market that it had given its approval for the takeover of Khoemacau Copper Mining by MMG Limited.

On January 29, 2024, the CCA issued a merger decision to the market, stating that after conducting all necessary assessments, it was ready to proceed.

The Competition Authority affirmed that the structure of the relevant market would not significantly change upon implementation of the proposed merger as the proposed transaction is not likely to result in a substantial lessening of competition, nor endanger the continuity of service in the market of mining of copper and silver ores and the production, and sale or supply of copper concentrate in Botswana.

Furthermore, the CCA stated that the proposed merger would not have any negative impact on public interest matters in Botswana as per the provisions of section 52(2) of the Competition Act 2018.

Earlier this month, Minister of Minerals & Energy, Lefoko Maxwell Moagi, informed parliament that his Ministry was endorsing the Khoemacau acquisition by MMG Limited. He noted that not only was the company acquiring the existing operation but also committing to an expansion program that would cost over $700 million to double production, create more jobs for Batswana, and increase taxes and royalties paid to the Government.

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