Despite anticipated business boom in the hospital industry, Cresta Marakanelo has registered reduced occupancies, affecting performance of the group in the first half of the year, reveals the group’s unaudited condensed financial results for the six months ended 30 June 2024. The reduced accommodation bookings, coupled with the high operating leverage nature of the industry, saw the company’s profitability decline.
Following the positive outlook that had punctuated the company’s narrative after travelling restriction were lifted, Cresta Marakanelo is now facing headwinds again. “The hotels sector has also not been spared the brunt of the slow down on the diamond market, with Cresta Jwaneng facing direct and first-hand knock-on effect. The board and management have since deployed measures to pivot the cost structure in line with the prevailing revenue generation capacity whilst working on market diversification strategies,” said Cresta Board Chairperson, Moatlhodi Lekaukau.
Though the Group is reeling in low occupancy challenges, the company registered a three percent increase in revenue for the first half from P180.9 million in 2023 to P187.1 million, driven by Cresta Mowana which enjoys international business. As part of measures to cushion the company from ongoing challenges, management has ramped up its digital marketing efforts which saw the sales and distribution expenses for the period, increasing by 11 percent against 2023. “This was in a bid to get replacement business from corporate and international travelers, a strategy which had positive impact on increasing foreign business,” said Lekaukau.
Analysts have indicated that Cresta’s operations have been heavily dented by the government’s reduced spending on accommodation for its employees on work related trips, as individuals now resort to finding alternative accommodation than booking in hotels and lodges. On the other end, the results indicate that the gross profit margin reduced from 40 percent to 37 percent in the first half of 2024 mainly due to the mismatch in increased staff costs at the turn of the year and the revenue which then struggled under the unforeseen said headwinds. In addition, despite the inflationary pressure, the food and beverage gross profit margins remained at the same level with prior year on the back of procurement economies of scale and robust operational cost containment measures in place.
Meanwhile the administrative and operating expenses increased from P46.9 million to P47.5 million mainly due to the additional lease related costs from the 60 new rooms added at Cresta Mahalapye. “The new wing at Cresta Mahalapye, launched to the market in December 2023, increased the hotel’s room inventory by 94 percent. The cost austerity measures implemented in response to the depressed top line performance saw the business limiting the impact of the fixed costs on profitability,” said Lekaukau.
Cresta says its finance income reduced by 87 percent, during the period under review as the company divested the short-term investments to fund working capital. “Finance costs have continued to decline owing to reduction in the prime lending rate and continuing capital repayments on borrowings. The company has been on a strong expansionary strategy with heightened capital expenditure which coupled with the subdued profitability has resulted in a tax credit for the period,” said Lekaukau.
Following the positive outlook that had punctuated the company’s narrative after travelling restriction were lifted, Cresta Marakanelo is now facing headwinds again. “The hotels sector has also not been spared the brunt of the slow down on the diamond market, with Cresta Jwaneng facing direct and first-hand knock-on effect. The board and management have since deployed measures to pivot the cost structure in line with the prevailing revenue generation capacity whilst working on market diversification strategies,” said Cresta Board Chairperson, Moatlhodi Lekaukau.
Though the Group is reeling in low occupancy challenges, the company registered a three percent increase in revenue for the first half from P180.9 million in 2023 to P187.1 million, driven by Cresta Mowana which enjoys international business. As part of measures to cushion the company from ongoing challenges, management has ramped up its digital marketing efforts which saw the sales and distribution expenses for the period, increasing by 11 percent against 2023. “This was in a bid to get replacement business from corporate and international travelers, a strategy which had positive impact on increasing foreign business,” said Lekaukau.
Analysts have indicated that Cresta’s operations have been heavily dented by the government’s reduced spending on accommodation for its employees on work related trips, as individuals now resort to finding alternative accommodation than booking in hotels and lodges. On the other end, the results indicate that the gross profit margin reduced from 40 percent to 37 percent in the first half of 2024 mainly due to the mismatch in increased staff costs at the turn of the year and the revenue which then struggled under the unforeseen said headwinds. In addition, despite the inflationary pressure, the food and beverage gross profit margins remained at the same level with prior year on the back of procurement economies of scale and robust operational cost containment measures in place.
Meanwhile the administrative and operating expenses increased from P46.9 million to P47.5 million mainly due to the additional lease related costs from the 60 new rooms added at Cresta Mahalapye. “The new wing at Cresta Mahalapye, launched to the market in December 2023, increased the hotel’s room inventory by 94 percent. The cost austerity measures implemented in response to the depressed top line performance saw the business limiting the impact of the fixed costs on profitability,” said Lekaukau.
Cresta says its finance income reduced by 87 percent, during the period under review as the company divested the short-term investments to fund working capital. “Finance costs have continued to decline owing to reduction in the prime lending rate and continuing capital repayments on borrowings. The company has been on a strong expansionary strategy with heightened capital expenditure which coupled with the subdued profitability has resulted in a tax credit for the period,” said Lekaukau.
