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Cresta Marakanelo 2011 annual report

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Cresta Marakanelo Limited's annual report for the period ended 31 December 2011

Cresta Marakanelo Limited's annual report for the period ended 31 December 2011


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  • 1. Table of Contents INDEX PAGE ...................................................................................................................................................................... Table of Contents 001 Mission and Vission 002 Financial Highlights 003 Board of Directors 004 - 007 Chairperson’s Statement 009 - 010 Executive Management 011 Managing Director’s Statement 013 - 017 Corporate Governance 018 - 021 Sustainability Reporting 023 - 024 Corporate Social Responsibility 026 - 027 Financial Statements 029 - 082 Top 20 Shareholders 084 Notice of Annual General Meeting 086 Proxy Form 087 - 088 001
  • 2. Our Mission and Vision Vision Statement The Group’s Overall Strategy To create memorable hospitality experiences. To ensure optimum execution of the group strategy, Cresta Marakanelo Ltd is structured and managed in Mission Statement an environment with the necessary financial and To offer excellent service,filled with African heart administrative capacity, driven by a fully motivated and soul workforce that fits an adaptive culture. The Group maintains a governance structure with specific targets, Group Values regularly motivating progress towards achieving these We value: targets. • Our people and believe in their right to respect, dignity and empowerment. Cresta Marakanelo Ltd stands for: • Our integrity and will always conduct our • Great value for money business honestly. • Opportunity to expand the business • Our passion and will consistently create an • Opportunity for employees to participate in the enjoyable environment for all our stakeholders. business • Diverse service offering in the leisure/tourism Overall Strategic Intent industry With the intention to improve our product offering, • Experienced management team there is also emphasis to optimise and deliver on • Return to shareholders employment equity, skills development, in line with • Strategically placed to take advantage of the good corporate governance practices which all growing tourism industry forms part of the Cresta Marakanelo Ltd strategy.002
  • 3. Financial HighlightsGroup Revenues (P’000) Segmental Revenue by gateway (P’000) 290,538 (18 months) 100000 90000 171,477 (12 months) 80000 70000 60000 50000 2010 2011 40000 30000 EBITDA (P’000) 20000 60,776 10000 34,697 0 African African African Control Oasis Heartbeat Roots Unit 2010 2011 2011 2010 003
  • 4. (1). Gavin Sainsbury (5). Batlang Mmualefhe(2). Osbourne Majuru (6). Bothwell P. Nyajeka 3 5 7 8 1 2 4 6(3). Elias Dewah (7). John Y. Stevens(4). Maria M. Nthebolan (8). Pius Molefe
  • 5. Board of DirectorsNthebolan, Maria Mmasolo Majuru, OsbourneNon-Executive Chairman Non-Executive DirectorMaria holds a Master of Arts in Finance and Osbourne is the Chief Executive Officer of CrestaEconomics from the University of Botswana and is Holdings (Pty) Ltd, prior to that he was thethe Managing Director – Botswana Development Executive Director of Operations after being theCorporation (BDC) Special Assistant to the Executive Chairman of TA Holdings Ltd.She joined BDC in 1995 as the SeniorOperations Officer in the Industry Divisions and He was with Ashanti Goldfields from 1998 untilrose through the ranks to her current position. Prior 2002. He held the position of Finance Director andto joining BDC she was with the Ministry of Finance has been involved in the Geita Project in Tanzania,& Development Planning as an Economist. She Zimbabwe and the International Treasury Office onholds various directorships with both public and the Isle of Man. In 2002 Osbourne was elected asprivate sector corporates. the deputy Chief Executive Officer for Beitbridge Bulawayo Railway.Sainsbury, GavinNon-Executive Director Dewah, Elias Non-Executive DirectorGavin is the Chief Executive Officer of TA Hold-ings, a company listed on the Zimbabwe Stock Elias holds a Master of Business AdministrationExchange. Before joining TA Holdings, he worked from the Research Institute for Managementfor Deloitte & Touche from 1981 to 1998. He was Science at the University of Netherlands.appointed a Partner at Deloitte & Touche in 1989. Currently he is a Private Consultant in the field ofWhen he left Deloitte & Touche, he joined Colcom Management of Business Organization, Public-Holdings as a Finance Director and was appointed Private Dialogue, Democracy and Governance.the Managing Director in 2000. Prior to that Elias has served in the Government of Botswana for 24 years in various capacities in theHe is a qualified Chartered Accountant and Ministry of Agriculture and the Ministry of Trade ,obtained his qualification in 1981 in Zimbabwe. Commerce and Industry. 005
  • 6. Board of Directors For 17 years he served as an Executive Director of He holds various certificates for attending Botswana Confederation of Commerce, Industry professional programs on a wide scope of business and Manpower (BOCCIM) and prior to that he was areas including risk management, project the operations Manager of Shell Oil (Botswana). management, and international financial management, corporate communication, manage- Mmualefhe, Batlang ment development programs, among others. Non-Executive Director Mr Mmualefe is a member of GARP (Global Association for Risk Professionals). Batlang is currently the Manager for Risk Management at BDC and has held this position Nyajeka, Bothwell Patrick since 2004. He has also held the positions of Non-Executive Director Manager for Corporate Communications and Senior Research Officer in the same Institution. Bothwell is an executive director of TA Holdings in charge of finance. He is a Chartered Accountant Mr Mmualefe previously worked for Bank of and holds a Bachelor of Accountancy (Honours) Botswana and Ministry of Finance and Develop- degree from the University of Zimbabwe and a ment Planning in varying positions. Masters degree in Business Leadership from the University of South Africa. He holds Master of Arts Degree in Economics from Williams College in USA and a Bachelor of Arts He has extensive financial management and com- Degree in Economics and Statistics from the pany secretarial experience in the private sector. University of Botswana. Before joining TA Holdings, Bothwell worked for the Anglo American Corporation Group in Zimbabwe.006
  • 7. Board of DirectorsStevens, John Yendell Molefe, Pius KomaneNon-Executive Director Non-Executive DirectorJohn qualified as a Chartered Accountant in 1980. Molefe is a Chief Executive Officer of BotswanaHe joined Deloitte & Touche in Durban in 1974 and Building Society. He holds a Post Graduate Diplomawas with the Company for 27 years ,serving as a in Economics from the University of Sussex in thepartner resident in Botswana of Deloitte & Touche United Kingdom.for 8 years and being elected to the Board ofDeloitte & Touche Southern Africa in 2004. Mr Molefe previously worked for Barclays Bank of Botswana and Ministry of Finance among others.John also headed up Deloitte & Toucheinsolvency and reorganisation division in Botswana At the Ministry of Finance, he was involved in theand has completed 50 insolvent estates in the past handling of all development projects. He was furtheryears. John retired from Deloitte & Touche in 2007 involved in the development of policies regulatingand has taken up the challenge of private the financial services sector.consultancy. He was involved in the establishment of theOver the past 27 years John has gained extensive Botswana Stock Exchange and also served as aexperience in many spheres of business in member in the exchange.Botswana and the many clients that John hasserved.“ Our mission is to offer excellent service, filled with African heart and soul ” 007
  • 8. “Our people, distinctive brand, larger national footprint and solid balance sheet position us well as we begin the new chapter in our Group’s history, to grow regionally”Maria M. NthebolanChairperson
  • 9. Chairperson’s StatementIt is my pleasure to present to you the Group’s financial report for the year 2010/2011.Firstly, I would like to point out that the Group changed its financial reporting period from 30June to 31 December, thereby resulting in the announcement of 18 months results to 31December 2011. It is also my pleasure to inform all stakeholders that the Group has been listedfor the past 18 months as at the reporting date.Cresta Marakanelo Ltd’s focus area is to create long term value for its Shareholders. Anotherfocus area is to tailor the Group for the opportunities and challenges ahead in the very competitivehospitality industry.We have broadened our offerings to address additional segments of the hospitality market. Most impor-tantly, your Board of Directors recognises that exceptional service delivery cannot be achieved withoutinvesting in human resource capital.The Group continues to resource its various operations with skilled professional personnel offering uniqueCresta hospitality with a smile.Our people, distinctive brand, larger national footprint and solid balance sheet position us well as we begin thenew chapter in our Group’s history, to grow regionally.RESULTS2011 was an eventful period for Cresta Marakanelo Ltd, within which we strengthened our foundation for the future.Our listing came at a time when economic conditions around the world began to shift to somewhat more stableconditions.Your Directors are pleased to report the second results of Cresta Marakanelo Ltd after their listing on the BotswanaStock Exchange in 2010.The Group performed according to expectations despite the challenges of the year.Occupancies achieved were 61.5% compared to 61.6% in the prior year. The hotels depended largely ongovernment and corporates to achieve these occupancies.During the period, the Group continued with its refurbishment programme where the following hotels wereaffected; Cresta Lodge, Cresta Botsalo Hotel, Cresta Bosele Hotel and Cresta Mowana Safari Resort and Spa.These works caused an increase in depreciation charges which ultimately had an impact on the final profit ofthe Group.The profit before tax for the period was P24.6 million for the eighteen months. However, the out turn was Netprofit after tax of P20.9 million. 009
  • 10. Chairperson’s Statement The Group reported the earnings per share of 11.54 thebe. The Group generated P65 miilion of cash from operations during the period. A consistent working capital management has been key to achieving this. The Group utilised its cash resoures to finance the refurbish- ment programme already alluded to above. The Group total assets rose to P165 million from a base of P133 million in the previous reporting period. This was a growth of 24% on total assets. REGIONAL GROWTH I am pleased to announce that the Group, with effect from 1 February 2012, acquired the business operations of Golfview Hotel in Lusaka, Zambia. The hotel will become a foreign subsidiary of Cresta Marakanelo Ltd. This acquisition, is part of of the Group’s expansion strategy into the region and living true to the aspirations of Cresta Marakanelo Ltd to be a regional market player. The Group will continue to look for growth opportunities in the region and locally if there is commercial sense to the acquisitions. DIVIDEND The Directors are pleased to declare a gross dividend of 4 thebe thebe per share, payable to all shareholders registered at the close of business on 11 May 2012 for payment on 22 May 2012. OUTLOOK We expect the following year to be as challenging as the previous one due to the slow recovery from the economic crisis and also the expectation of the impending double dip recession. However, we believe that innovative marketing initiatives will add to room occupancies in the following year. We are compelled as a Group to deliver real growth in the coming year and this can only be achieved by getting clients into our hotels and also further contain costs. The Board is however, aware that with tough economic conditions and competition, costs may increase and strategies are in place to manage the Group’s cashflow. CONCLUSION I wish to thank the Board, Management and Staff of Cresta Marakanelo Ltd for their commitment and resilience in continuing to drive the Group in the right direction and achieving success. ________________________ Maria Nthebolan Chairperson010
  • 11. Executive ManagementTawanda Makaya Valentine Mganga Patrick Chivese Managing Director Chief Financial Officer Group Sales & Marketing Manager Jonathan Cox Segomotso Banda Duncan Mfolwe Group Operations Manager Group HR Manager Group Projects Manager
  • 12. “In appreciating our people, the Group established an Employee Share Trust Scheme which will benefit them for working for the Group through receipt of dividends whenever the Group declares a dividend”Tawanda MakayaManaging Director ANNUAL REPORT 2011 11
  • 13. Managing Director’s StatementFor Cresta Marakanelo Ltd, the reporting period has been an eventful period during which we strengthenedour foundation for the future. Our initial public offering in June 2010 came at a time when economic conditionsaround the world began to shift from very challenged to somewhat more stable. The welcome we receivedfrom the public markets reinforced the confidence we have in our people, our premier brand and our corporatestrategy.FINANCIAL RESULTSThe Group achieved a profit after tax of Pula 24.8 million. This result was achieved after taking into accountan additional lease charges (over and above actual rentals paid during the period under review) of Pula13,7million arising from complying with International Standard Number 17 (IAS 17), Leases. In accordance withIAS 17, rentals on leased properties have to be amortized (after taking into account escalations during thelease period) in equal installments over the lease period. Since the accounting standard does not allowdiscounting for the time value of money over the lease period, a portion of future lease increments wasaccounted for during the period under review, even though it was not due and payable. The additional chargeof Pula 13.7 million is non cash. These charges will reverse and will have a nil impact at the end of the leaseperiods.IAS 17-Lease Straight-lining Impact HOTELSYear Marang Rileys Bosele Thapama Lodge President Botsalo HO Totals 1 484,549 753,742 699,904 1,776,679 2,638,099 1,776,679 504,738.28 29,920 8,664,310 2 398,149 619,342 575,104 1,459,879 2,167,699 1,459,879 582,984.37 105,871 7,368,906 3 304,837 474,190 440,320 1,117,735 1,659,667 1,117,735 455,784.37 49,524 5,619,792 4 204,060 317,426 294,753 748,219 1,110,992 748,219 318,408.37 (11,330) 3,730,748 5 95,221 148,121 137,541 349,142 518,424 349,142 170,042.29 (173,986) 1,593,648 6 (22,326) (34,729) (32,248) (81,860) (121,550) (81,860) 9,806.92 - (364,767) 7 (149,276) (232,206) (215,620) (547,344) (812,722) (547,344) (163,247.27) - (2,667,759) 8 (286,381) (445,482) (413,662) (1,050,065) (1,559,188) (1,050,065) (350,145.80) - (5,154,990) 9 (434,456) (675,820) (627,547) (1,593,005) (2,365,371) (1,593,005) (551,996.22) - (7,841,200) 10 (594,376) (924,585) (858,543) (2,179,380) (3,236,048) (2,179,380) (976,375.31) - (10,948,688) - - - - - - - - - 013
  • 14. Managing Director’s Statement Group revenues achieved were P290.5 million for • Increase in depreciation as a result of the 18 months under review. This revenue was capitalising the refurbishment works mainly at achieved on the back of average room rates of Pula Cresta Lodge, Cresta Botsalo Hotel and Cresta 708.82 and average occupancies of 61.5%. The Bosele Hotel. Group managed to achieve this level of revenue despite: • Increase in payroll costs following wage negotiations which resulted in an award of • The industrial action by the employees over 10.5% salaries and wages increase. wage negotiations which lasted over a month. • Costs associated with the listing of the Group on • The group being impacted by the civil service the Botswana Stock Exchange. industrial action which lasted a few months. Over these periods, the group experienced low Shareholders’ funds increased from Pula 91 million occupancies and reduced covers for the food at 30 June 2010 to Pula 104 million at 31 December and beverage business, 2011. The increase was largely due to profit achieved during the period under review. However, • The strengthening of the rand against the pula the increase was reduced by Pula 5,9 million being during the reporting period, the value of treasury shares (for the Employee Share Trust and those acquired through the share • Cancellation of tours by Japanese clients buy back scheme) . following the earthquake in Japan . This mainly affected occupancies at Cresta Mowana Safari The Group generated cash of Pula 65 million from Resort and Spa. operations. Pula 52 million of the cash was used for capital expenditure; mainly refurbishments of • Low occupancies during the 2010 World Cup Cresta Lodge, Cresta Botsalo Hotel, Cresta Bosele tournament in South Africa during the month of Hotel and Cresta Mowana Safari Resort and Spa. July 2010. The Group raised Pula 20 million, long term finance After taking into account cost of sales and adminis- during the period under review. The cash will be tration and operating costs, the Group achieved an used to fund the acquisition of Cresta Golfview operating profit of Pula 26.8 million , resulting in an Hotel in Lusaka, Zambia. operating margin of 9% for the period under review versus 15% for the twelve months ended 30 June Due to the fact that the borrowed funds had not 2010. The decrease in operating margin was mainly been used as at 31 December 2011, the Group due to : ended the year with net cash of Pula 20.1 million. • Additional rental charges arising from the In addition to the acquisition of Cresta Golfview for application of IAS 17 (as explained above). This Pula 20 million during 2012,the group will spend had a profound impact during the period under an additional P10 million for the furnishing of the review as all the new lease contracts came into new hotel in Mahalapye, Cresta Mahalapye Hotel. effect from 1 July 2010. The new leases are for a period of 10 years and have fixed rental increases.014
  • 15. Managing Director’s StatementNew Cresta Mahalapye Hotel New Wellness Centre at MowanaBrief Description Brief DescriptionNew 64-room hotel along the A1 highway in New Wellness Centre at Mowana Safari Resort &Mahalapye, featuring: Spa, featuring:• 57 standard rooms • Manicure/Pedicure facilities• 1 accessible room • Health & Beauty shop• 4 Junior suites • 4 Massage Rooms with showers• 2 Presidential suites • Steam Room• One 200-seater conference room • Sauna• Two 40-seater meeting rooms • Plunge Pool• One 16-seater “boardroom-style” meeting room • Spa Bath• Restaurant & Kitchen • Swimming Pool• Bar & Poolside Terrace • Relaxation Room• Gym • Gym• Swimming Pool • Health bar• 88 guests’ car parking bays Current state of progressCurrent state of progress • Approximately 85% complete – internal fitout• Approximately 35% complete – roof construction currently underway (as at March 2012) currently underway (as at March 2012) • Facility anticipated to start operating in May 2012• Anticipated project completion – Late 2012 015
  • 16. Managing Director’s Statement PEOPLE We are committed to enhancing the strength of our When you assess Cresta Marakanelo Ltd, you brand over time by delivering the highest levels of have to start with people. The Group’s culture service and achieving the highest level of nurtures and rewards our people through the satisfaction for hotel guests. shared core values. The values support a common Mission of ‘offering excellent service, filled with Over time, we have been realizing improvements in African heart and soul’. These all help with achiev- satisfaction levels through dipstick surveys and ing the overall vision of creating memorable hospi- have also focused on demonstrating our loyalty to tality experiences, defined by making a difference our most loyal guests, through initiatives within our in the lives of the people we touch everyday. guest loyalty programs. Every member of the Group has a valued voice in Our loyalty programs, notably the Pride Card and what we do, and is critical to our success in the Select Card are active in the Botswana market. delivering on the promise we make to our guests. Increasing engagement among our people and DIVIDEND including them in deciding how we deliver great The Board of Directors of Cresta Marakenelo service to our guests is a key element of delivering Limited wishes to announce a declaration of a on our Mission. I am proud to say this level of dividend at 4 thebe per share for all Shareholders personal commitment extends into the area of registered as at the close of business on 11 May social responsibility. 2012 for payment on 22 May 2012. In appreciating our people, the Group established SUBSEQUENT EVENTS an Employee Share Trust Scheme which was On 31 January 2012, the group completed the approved by the Shareholders at the Annual acquisition of the hotel business of Golfview Hotel General Meeting held on 17 December 2010. The in Lusaka, Zambia. Thus, this hotel became a employees will benefit for working for the Group subsidiary on this date. Golfview operates a hotel through receipt of dividends whenever the Group business in Lusaka, Zambia. This acquisition was declares a dividend. part of the group’s expansion strategy into Southern Africa. BRAND The Group has developed a brand that is FUTURE PROSPECTS recognized and respected in the local and regional The group continues to explore new markets in an markets. The Group’s footprint in Botswana endeavor to increase revenues. The group further provides an excellent platform from which we can continues to explore opportunities in and outside grow. High levels of brand recognition among the country for new hotel business with the aim of travellers, combined with our operating expertise increasing the number of rooms. This will be and development capabilities across the country, pursued through the growth strategy that is in place. will help us expand our presence locally and regionally. It is expected that the new Cresta Mahalapye Hotel will come into operation during the third quarter of 2012.016
  • 17. Managing Director’s StatementHealth and WellnessArtists impression of new Spa at Cresta Mowana Safari Resort and SpaSafaris and Boat CruisesSafari Vehicles 20 seater Cruise boat 017
  • 18. Corporate Governance The group endorses the code of corporate practices All directors interact on a regular basis and the and conduct as exemplified in the King Committee board meets quarterly with adhoc special meetings report on Corporate Governance (“King III”) and convened as necessary. embraces the principles of integrity, transparency and accountability. The primary responsibilities of the Board are: The Board regards Corporate Governance as vitally • regular reviews of the strategic direction of important to the success of the Group and are investment decisions and performance against unreservedly committed to applying the principles approved plans, budgets and best practice necessary to ensure good governance is practised standards. in all of its business dealings in respect of its shareholders and relevant stakeholders. • retains full and effective control of the group and makes decisions on material matters. The Board will be ensuring that all the required policies and procedures are adopted by the Board, • monitoring the activities of the executive and that the Audit and Human Resources Commit- management. tees will only comprise of non-executive directors in compliance with the Constitution of the Group. • exercises leadership, enterprise, integrity and judgement and operates on the four pillars of Board of Directors corporate governance namely, fairness, Our board remains the focal point of the Group’s accountability, responsibility and transparency. governance system and is ultimately accountable and responsible for the key governance processes • directors have access to staff, records and the and the performance and affairs of the Group. advice of the Company Secretary. Cresta Marakanelo Ltd has a unitary board • approval of financial statements. structure comprising a mix of executive and non- executive directors. No one director has unfettered • approval of payment of dividends, annual capital powers of decision making. expenditure plan and approval of major capital projects. The non-executive directors are fully independent of management and free to make their own decisions. Conflict of interest They enjoy no benefits from the Group for their Directors are required to disclose at each board services, other than their fees. meeting their shareholding, additional directorships and any potential conflicts of interest to the The members of the Board come from diverse back- Chairman and the Company Secretary. grounds. Their collective experience enables them to provide sound decision-making in the best inter- Board Meetings est of the Group. All Directors are expected to make A minimum of four board meetings are scheduled individual contributions in terms of skill, per financial year to consider, deal with and review experience and management and is expected to inter alia, strategic and key issues, financial issues, have the requisite capabilities to carry out their quarterly opera¬tional performance and any tasks efficiently and to the benefit of the Group. specific proposals for capital expenditure relative to the group.018
  • 19. Corporate GovernanceThe list of directors is provided below. NAME CAPACITY M M Nthebolan Chairperson B P Nyajeka Director O Majuru Director B Mmualefe Director J Y Stevens Director (Independent) E Dewah Director (Independent) P Molefe Director (Independent) G Sainsbury DirectorBoard Meetings Attendance Register Maximum NAME Possible Attended M M Nthebolan 7 7 B P Nyajeka 7 6 O Majuru 7 6 B Mmualefe 7 4 J Y Stevens 7 5 E Dewah 7 7 P Molefe* 5 3 G Sainsbury* 1 1*-Joined during the reporting period. 019
  • 20. Corporate Governance Audit Committee A minimum of four Audit Committee meetings are scheduled per financial year. The mandate of the Audit Committee: • To assist the board in the evaluation of adequacy and effectiveness of the internal control systems, accounting practices, information systems and auditing processes applied in the business. • To introduce such measures that would serve to enhance the credibility and objectivity of the financial statements. • To provide a forum for communication between the Board of Directors, Management and the Auditors (both internal and external). • To oversee the financial reporting of the group. Below are the Directors who form part of the Audit Committee. NAME CAPACITY J Y Stevens Chairperson (Independent non executive) B P Nyajeka Director (non executive) P Molefe Director (Independent non executive) Audit Committee Attendance Register Maximum NAME Possible Attended J Y Stevens (Chairperson) 5 5 B P Nyajeka 5 3 P Molefe 4 2020
  • 21. Corporate GovernanceHuman Resources CommitteeThe Committee is responsible for ensuring that all matters affecting employees are decided under the authorityof the Board and that it keeps abreast of developments in the market place, with regards to remuneration.The mandate of the Human Resource Committee: • Determines remuneration policy for all on management and get it approved by the Board. • Deliberates and decides on policy issues relating to remuneration. • Determines targets and objectives of the performance appraisal system.Below are the Directors who form part of the Human Resource Committee. NAME CAPACITY E Dewah Chairperson (Independent non executive) B Mmualefe Director (non executive)Human Resource Committee Attendance register Maximum NAME Possible Attended E Dewah ( Chairperson ) 7 7 B Mmualefe 7 6Closed PeriodThe closed periods for trading in the Group’s shares by directors and employees is from the beginning of themonths of both the interim and the year end up to the date of publication of the interim and final results in theprint media.Directors and employees are prohibited from dealing in the Group’s shares during such periods in wich they areprivy to unpublished price sensitive information._______________________ ________________________M M Nthebolan T MakayaChairperson Managing Director 021
  • 22. Cresta President Hotel President
  • 23. Sustainability ReportingOur approach to sustainability reporting is one that • Staff Welfare and Developmentis in line with Cresta Marakanelo Ltd values: In the quest of the Group’s drive to improve productivity for the employees; sports was identifiedrespect, dignity, intergrity, honesty and passion as one of the the elements that play an important part. Participating across the hotels, the Group hasThe board is accountable for the sustainability of various sporting codes being played, soccer,the business and believe that the existence of the volleyball, netball,etc.The Group also promotesbusiness and its continued success is dependent conuntry sporting competitions between the Crestaon relationships that prevail with its stakeholders. in Botswana and Cresta in Zimbabwe. The interac- tion between these groups is believed to impactThe Group recognises the importance of balancing positively on employee motivation.its long term business sustainability requirementswith short term focus and goals. Strategies andpolicies that contribute to the sustainable develop-ment of the Group to ensure that both the financialand non financial aspects of the business areappropriately evaluated and managed, have beenadopted. Our stakeholders are represented by ourpeople and customers, suppliers and communitieswe serve in.PeopleOur people play a critical role in the success of thebusiness and the following are relevant in this Basket ball players between Cresta Marakanelo andregard; Cresta Zimbabwe sweating it out. • Development of Human CapitalHuman capital is a key component of Cresta • RemunerationMarakanelo Ltd. The Group values its employees Management in conjuction with the Humanand endeavous to recruit and retain the best skills Resources Committee, continuously reviewsin the market. The focus for developing human incentive schemes for the employees. The Groupcapital is based on training, continuous reviews for has got a Performance Appraisal System that iscompensation and benefits. used to reward employees. The results of the appraisal system are also used as inputs for training the employees on various areas. • Employee engagement General employee engagement at various levels of the organisation has yielded positive results for the Group. This has led to an improved customer focus. Our employees are allowed to associate them- selves with a recognised hospitality Union which will negotiate for better living conditions on their behalf. In the Committee of the Union, there are staff represantatives sitting in the meetings to“The competition was a success and the overall winner participate in the negotiations for the rest of the staffwas Nonofo Isaac from Cresta Lodge. This will now members.become an annual event” 023
  • 24. Sustainability Reporting Customers The Group has continued to benchmark itself against the leading brands and the standards required to be customer focused, quality conscious, innovative and being responsible for its actions. The Group continues to be the market leader in the hospitality segment in the country. Attention has been paid to the following; • Pricing The hotels’ tariffs are regularly published in the hotels for custmers to see. Further there are different discount levels for our customers. Customers get different discount levels after a careful assessment of the customer and the business levels the customer brings to the entity. The Group also has a loyalty programme where cardholders get various discounts depending on the product they want. • Customer Complaints These are normally received at every hotel and the ultimate responsibility to resolve these lie with the General Managers of each hotel. There is an escalation that could be done in the event the customer is not satisfied with the complaint resolution at the hotel. The complaints are further escalated to the Group’s Operations Manager who is based at the Group’s head quarters in Gaborone. • Customer Information Sharing The Group has various means of sharing information with its stakeholders. One of the mediums is through the frequently updated website where new developments or new products will feature. Further, the Group has got an inhouse magazine called Cresta Calling where information will be relayed to the stakeholders. Regulatory Authorities The Group maintains sound working relationships with all the regualtory bodies and ensures compliance with all legislation in order to ensure good governance. This enables the Group to operate in a stable environment, which is conducive for the successful operation of the business. Communities The Group operates in a number of areas and therefore places a lot of imprtance in contributing to the upliftment of the communites it operates in. The Group executes its Corporate Social Responsibility in these areas depending on the need of the community after a need assessment has been carried out. Mowana employees listening and taking The official launch of the Cresta Hospitality notes as Ms Yuki explain the meanings Excellence Awards of Japanese verbs.024
  • 25. Cresta Mowana SafariResort and Spa Mowana-Safari Lodge
  • 26. Corporate Social Responsibility The Group’s Corporate Social Responsibilty program concentrates on assisting the communities in which the Group operates through donations of various items. The Group, in its active involvement, aid social development and the protection of quality of life. The Group believes that goodwill and being good hearted may not be a core function in the business but is central to our social license to do business. That is how the Group would donate various items including cash to charity. Beneficiaries of the donations and sponsorships include among others; • Women Against Rape in Maun • Kazungula Orphanage in Kasane • Chobe District Council in Kasane • Kasane Hospital • Rankoromake Camphill school in Otse • Tsholofelo Foundation in Gaborone • Gemstone Group in Gaborone • My African Dream countrywide • Masiela Trust Fund countrywide The Group has got a standing commitment to donate to the Masiela Trust Fund. The Group donates P1 of every bed night spent in the hotels to Masiela trust Fund. These donations go a long way to assist the orphans identified by Masiela Trust Fund. The Group’s Corporate Social Responsibility Program focuses on the following areas; • Support for disadvantaged and or handicapped. • Skills development • Education • Public health facilities that need assistance. • Non Governmental Organisations- These must be focused on on improving the general welfare of Batswana in some form or the other. • Needy communities whose projects are intended to improve the lives of many Batswana. The conditions for donations and sponsorships and criteria for determining worthiness are reviewed by the Group’s Sales and Marketing Manager with the input of the various hotels’ managers.026
  • 27. Corporate Social ResponsibilityCresta Cares - Masiela Trust Fund Received P200,000 Donation from Cresta for TheNeedy ChildrenCresta Marakanelo Limited’s Group Operations Manager Cresta management Team at Masiela Trust Fund donationMr J.Cox and Managing Director Mr T. Makaya Kasane Hospital Matron Ms. V. McLean receiving the donation from MS Khonuo of Mowana Safari Resort and Spa. 027
  • 28. Cresta Lodge 20th BirthdayGolf Day at Gaborone Golf Club Lodge - Gaborone
  • 29. ANNUAL FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2011
  • 30. ANNUAL FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2011
  • 31. Statement of Directors’ Responsibility 38 to 54. 32 to 3334 to 82 23rd March 2012
  • 32. Auditor’s Report34 to 82.
  • 33. Auditor’s Report
  • 34. Statement of Comprehensive Income FOR THE PERIOD ENDED 31 DECEMBER 2011 GROUP COMPANY 18 months to 18 months to 12 months to Dec-11 Dec-11 Jun-10 Notes P000 P000 P000 Revenue 4 290,538 290,538 171,477 Direct costs (197,165) (197,165) (114,945) Gross profit 93,373 93,373 56,532 Sales and distribution expenses (9,935) (9,935) (5,953) Administration and operating expenses (56,668) (60,268) (24,855) Operating profit 26,770 23,170 25,724 Finance income 7 45 45 222 Finance expense 7 (2,193) (2,193) (2,284) Profit before income tax 24,622 21,022 23,662 Income tax credit /(expense) 8 (3,750) (3,750) (4,922) Profit after income tax 20,872 17,272 18,740 Other comprehensive income - - - Total comprehensive income 20,872 17,272 18,740 Basic and diluted earning per share (thebe) 9 11.54 9.35 10.13034
  • 35. Statement of Financial Position AT 31 DECEMBER 2011 Group Company 31-Dec-2011 31-Dec-2011 30-Jun-2010 Notes P000 P000 P000ASSETSNon-current assetsProperty, plant and equipment 10 128,901 128,901 114,065Loan receivable- Cresta Employee Staff Plan 12 - 1,764 -Other investments 13 89 89 103Intangible assets 14 383 383 498Deferred income tax asset 20 830 830 -Total non-current assets 130,203 131,967 114,666Currents assetsInventories 16 1,123 1,123 1,107Current income tax - - 722Trade and other receivables 17 10,322 10,322 14,767Cash and cash equivalents 18 23,885 23,885 1,482Total current assets 35,330 35,330 18,078Total assets 165,533 167,297 132,744EQUITYCapital and reservesStated capital 19 18,500 18,500 18,500Retained earnings 89,820 86,220 68,948Treasury shares (5,915) (550) -Dividend reserve - - 3,700Total equity 102,405 104,170 91,148LIABILITIESNon-current liabilitiesDeferred income tax liability 20 - - 4,582Deferred lease expense 23 13,744 13,744 945Borrowings 21 27,458 27,458 11,451 41,202 41,202 16,978Current liabilities 21 6,289 6,289 5,466Borrowings 22 14,225 14,225 15,452Trade and other payables 1,412 1,411 3,700Current Income tax 21,926 21,925 24,618Total current liabilities 63,128 63,127 41,596Total liabilities 165,533 167,297 132,744Total equity and liabilities 035
  • 36. Statement of Changes In Equity FOR THE PERIOD ENDED 31 DECEMBER 2011 Ordinary Treasury Dividend Retained Total shares shares reserve earnings equity P000 P000 P000 P000 P000GROUPEighteen months ended 31 December 2011Balance at 1 July 2010 18,500 - 3,700 68,948 91,148Total comprehensive income - - - 20,872 20,872Share buyback - (550) - - (550)Employee share Trust (5,365) (5,365)Gross dividends declared and paid - - (3,700) - (3,700)Balance at 31 December 2 18,500 (5,915) - 89,820 102,405COMPANYYear ended 30 June 2010Balance at 1 July 2009 18,500 - 6,718 57,608 82,826Total comprehensive income - - - 18,740 18,740Gross dividends proposed - - 3,700 (3,700) -Gross dividends declared and paid - - (6,718) (3,700) (10,418)Balance at 30 June 2010 18,500 - 3,700 68,948 91,148Eighteen months ended 31 December 2011Balance at 1 July 2010 18,500 - 3,700 68,948 91,148Total comprehensive income - - - 17,272 17,272Share buyback - (550) - - (550)Gross dividends declared and paid - - (3,700) - (3,700)Balance at 31 December 2 18,500 (550) - 86,220 104,170 036
  • 37. Statement of Cash FlowsFOR THE PERIOD ENDED 31 DECEMBER 2011 GROUP COMPANY 18 months to 18 months to 12 months to Dec-11 Dec-11 Jun-10 Notes P000 P000 P000Operating activitiesCash generated from operations 26 65,275 65,275 35,164Interest paid 7 (2,193) (2,193) (2,284)Tax paid (8,440) (8,440) (5,566)Net cash generated from operating activities 54,642 54,642 27,314Investing activitiesPurchase of property, plant and equipment 10 (52,690) (52,690) (29,249)Proceeds on disposal of plant and equipment 15,466 15,466 2,794Loan given to the Employee Share Trust - (5,365) -Interest received 7 45 45 222Proceeds from investments 14 14 -Purchase of lease rights - - (365)Net cash used in investing activities (37,165) (42,530) (26,598)Financing activitiesPurchase of Treasury Shares/Employee ShareTrust (5,915) (550) -Proceeds from/(repayment) of borrowings 16,482 16,482 (1,881)Dividends paid to companys shareholders 24 (5,989) (5,989) (6,718) 4,578 9,943 (8,599)Changes in cash and cash equivalents 22,055 22,055 (7,883)Movement in cash and cash equivalentsAt beginning of year (1,957) (1,957) 5,926Changes in cash and cash equivalents 22,055 22,055 (7,883)At end of year 20,098 20,098 (1,957)Disclosed as follows;Cash at bank 23,885 23,885 1,482Bank overdraft (3,787) (3,787) (3,439) 20,098 20,098 (1,957) 037
  • 38. Summary of Significant Accounting Policies FOR THE PERIOD ENDED 31 DECEMBER 2011 General information Cresta Marakanelo Limited is a public limited group listed on the Botswana Stock Exchange and primarily oper- ates hotels and related services in Botswana. The financial statements for the period ended 31 December 2011 have been approved for issue by the Board of Directors on 23rd March 2012 Neither the entity’s Board of Directors nor others have the power to amend financial statements after issue. Summary of significant accounting policies The financial statements for the period ended 31 December 2011 are presented for Cresta Marakanelo Limited. The principal accounting policies applied in the preparation of the group financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 1.1 Basis of presentation The group and group financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group’s accounting policies. These areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the group’s financial statements are disclosed in the “Critical estimates and assumptions” section of the financial statements. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. a) New and amended standards adopted by the group There are no IFRSs interpretations that are effective for the first time for the financial year beginning on or after 1 January 2011 that would be expected to have a material impact on the group. The following standards effective for the first time are not relevant for the group:038
  • 39. Summary of Significant Accounting Policiesa) Standards and International Financial Reporting Standards and amendments effective forthe first time for 31 December 2011 year-end. Amendment to IAS 24 - Related party disclosures - This amendment provides partial relief from the requirement for government related entities to disclose details of all transactions with the government and other government-related entities. It also clarifies and simplifies the definition of a related party. Effective for period beginning 1 January 2011. The amendment had no impact on Group accounts. Improvements to IFRSs (Issued May 2010) was issued by the IASB as part the ‘annual improvements process’ resulting in the following amendments to standards issued, effective for the first time for 31 December 2011 year-ends. These amendments are the result of conclusions the IASB reached on proposals made in its annual improvements project. Unless otherwise specified the amendments are effective for annual periods beginning on or after 1 January 2011. IFRS Subject of amendment Accounting policy changes in the year of adoption IFRS 1 First - time Adoption of Revaluation basis as deemed cost International Financial Reporting Standards Use of deemed cost for operations subject to rate regulation - effective 1 January 2011 Measurement of non-controlling interests Un-replaced and voluntarily replaced share-based payment awards Multiple clarifications related to the disclosure of financial IFRS 7 Financial instruments: disclosures instruments - effective 1 January 2011 IAS 1 Presentation of Financial Clarification of statement of changes in equity Statements - effective 1 January 2011 Significant events and transactions -effective 1 January 2011 IAS 34 Interim Financial Reporting Amendments clarifying components of non-controlling IFRS 3 interest to measure on acquisition - effective 1 July 2010 IFRIC 13 Customer Loyalty Programmes Fair value of award credits - effective 1 January 2011 IAS 27 - Consolidated and separate Transitional arrangements for amendments arising as a financial statements result of IAS 27 - Consolidated and separate financial statements - effective 1 July 2010 039
  • 40. Summary of Significant Accounting Policies b) Standards and International Financial Reporting Standards and amendments issued but not effective for 31 December 2011 year-end Amendments to IFRS 1, First time adoption on hyperinflation and fixed dates- The first amendment replaces references to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transac tions that occurred before the date of transition to IFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. Effective for period beginning 1 July 2011 Amendment to IFRS 7 Financial Instruments: Disclosures – Transfer of financial assets. The amendments are intended to address concerns raised during the financial crisis by the G20, among others, that financial statements did not allow users to understand the ongoing risks the entity faced due to derecognised receivables and other financial assets. Effective for period beginning 1 July 2011 Amendments to IAS 19, “Employee benefits”- The IASB has issued an amendment to IAS 19, ‘Employee benefits’, which makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits.- Effective for period beginning 1 January 2013 Amendment to IFRS 7 Financial Instruments: Disclosure- The IASB has published an amendment to IFRS 7, ‘Financial instruments: Disclosures’, reflecting the joint requirements with the FASB to enhance current offsetting disclosures. These new disclosures are intended to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial state ments in accordance with US GAAP. Effective for period beginning 1 January 2013 Amendment to IAS 12,Income taxes on deferred tax -Currently IAS 12, Income taxes, requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. Hence this amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment prop erty measured at fair value. As a result of the amendments, SIC 21, Income taxes- recovery of reval ued non-depreciable assets, would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is accordingly withdrawn- Effective for period beginning 1 January 2012 Amendments to IAS 1, ‘Presentation of Financial Statements’, on presentation of items of OCI- The IASB has issued an amendment to IAS 1, ‘Presentation of financial statements’. The amendment changes the disclosure of items presented in other comprehensive income (OCI) in the statement of comprehensive income. The IASB originally proposed that all entities should present profit or loss and OCI together in a single statement of comprehensive income.040
  • 41. Summary of Significant Accounting Policiesb) Standards and International Financial Reporting Standards and amendments issued but not effective for 31 December 2011 year-end (continued)The proposal has been withdrawn and IAS 1 will still permit profit or loss and OCI to be presented ineither a single statement or in two consecutive statements. The amendment does not address whichitems should be presented in OCI and the option to present items of OCI either before tax or net of taxhas been retained. Effective for period beginning 1 July 2012 IFRS 9 – Financial Instruments - Financial Instruments (2009) is part of the IASB’s project to replace IAS 39. IFRS 9 addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only two classification categories: amortised cost and fair value. - Amendment to Financial Instruments (2010) includes guidance on financial liabilities and derecognition of financial instruments. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39, ‘Financial instruments: Recognition and measurement’, without change, except for financial liabilities that are designated at fair value through profit or loss.- The above are effective for period beginning 1 January 2013 - Amendments to IFRS 9 – Financial Instruments (2011). The original effective date was for annual periods beginning on or after from 1 January 2013. This amendment is a result of the board extending its timeline for completing the remaining phases of its project to replace IAS 39 (for example, impairment and hedge accounting) beyond June 2011, as well as the delay in the insurance project. The amendment confirms the importance of allowing entities to apply the requirements of all the phases of the project to replace IAS 39 at the same time. The requirement to restate comparatives and the disclosures required on transition have also been modified. Effective for period beginning 1 January 2015 IFRS 10 – Consolidated financial statements- This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess. This new standard might impact the entities that a group consolidates as its subsidiaries. Effective for period beginning 1 January 2013 IFRS 11 – Joint arrangements- This standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. Effective for period beginning 1 January 2013 041
  • 42. Summary of Significant Accounting Policies b) Standards and International Financial Reporting Standards and amendments issued but not effective for 31 December 2011 year-end (continued) IFRS 12 – Disclosures of interests in other entities - This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. Effective for period beginning 1 January 2013 IFRS 13 – Fair value measurement- This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP.- Effective for period beginning 1 January 2013 IAS 27 (revised 2011) – Separate financial statements- This standard includes the provisions on sepa rate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10.- Effective for period beginning 1 January 2013 IAS 28 (revised 2011) – Associates and joint ventures- This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. Effective for period beginning 1 January 2013 Amendments to IAS 32 – Financial Instruments: Presentation- The IASB has issued amendments to the application guidance in IAS 32, ‘Financial instruments: Presentation’, that clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. However, the clarified offsetting requirements for amounts presented in the statement of financial position continue to be different from US GAAP. Effective for period beginning 1 January 2014 Interpretations of International Financial Reporting Standards Interpretations of International Financial Reporting Standards issued and effective for the first time for 31 December 2011 year-ends Amendments to IFRIC 14: Pre-payments of a Minimum Funding Requirement. This amendment has no impact as it applies only to companies that are required to make minimum funding contributions to a defined benefit pension plan. It removes an unintended consequence of IFRIC 14 related to voluntary pension prepayments when there is a minimum funding requirement. Effective from 1 January 2011. Interpretations of International Financial Reporting Standards issued and not effective for the period ended the 31 December 2011 year-ends IFRIC 19 –Extinguishing financial liabilities with equity instruments. Effective from 1 January 2013 IFRIC 20 –Stripping costs in the production phase of a mine. Effective from 1 January 2013042
  • 43. Summary of Significant Accounting Policiesb) Standards and International Financial Reporting Standards and amendments issued but not effective for 31 December 2011 year-end (continued) There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.1.2 Consolidation a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercis able or convertible are considered when assessing whether the group controls another entity. The group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the group’s voting rights relative to the size and dispersion of holdings of other shareholders give the group the power to govern the financial and operating policies, etc. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the other comprehensive income interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition- by- acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held other comprehensive income interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as other comprehensive income is not remeasured, and its subsequent settlement is accounted for within other comprehensive income. 043
  • 44. Summary of Significant Accounting Policies b) Standards and International Financial Reporting Standards and amendments issued but not effective for 31 December 2011 year-end (continued) Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. Inter-group transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-group transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (b) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as other comprehensive income transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in other comprehensive income. Gains or losses on disposals to non-controlling interests are also recorded in other comprehensive income. (c) Disposal of subsidiaries When the group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. 1.3 Foreign Currency Translation (a) Functional and presentation currency Items included in the financial statements of the group are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Pula, which is the group’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the profit and loss within ‘finance income or cost’.044
  • 45. Summary of Significant Accounting Policies1.4 Revenue recognition Revenue comprises the fair value for the sale of goods and services, net of value-added tax, rebates and discounts and after eliminated sales within the group. Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group activities. Revenue is recognised to the extent that it is probable that economic benefits will flow to the group and the revenue can be reliably measured. Revenue comprises the sale of bed space, food and beverages. Revenue is recognised as follows: (a) Provision of services Provision of services is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. The Group sells bed nights at its hotels and lodges to guests and also provides guided safaris to guests. Revenue from these services is recognised when the service is provided to the guest, usually over the period of the guests stay at the hotels and lodges. (b) Sales of goods Sales of curios, beverages and ancillary goods are usually in cash or by credit card. Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. The recorded revenue includes applicable credit card fees payable for the transaction. Such fees are included in bank charges. (c) Interest income Interest income is recognised on a time-proportion basis using the effective interest method. (d) Dividend income Dividend income is recognised when the right to receive payment is established.1.5 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit and loss on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payments required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. 045
  • 46. Summary of Significant Accounting Policies 1.6 Dividend distribution Dividend distribution to the group’s shareholders is recognised as a liability in the group’s financial statements in the period in which the dividends are approved by the group’s shareholders. Dividends proposed not yet approved by shareholders are shown as a reserve within other comprehensive income. Withholding tax of 7.5% is payable on the gross value of dividends. 1.7 Property, plant and equipment Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is prob able that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the profit and loss during the financial period in which they are incurred. Land and buildings comprise mainly hotel properties. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: – Buildings: lower of lease period and useful lives 50 years – Improvements to leasehold premises: lower of lease period and useful lives 5 - 10 years – Plant and equipment 6 – 7 years – Furniture, fixtures and fittings 4 – 7 years – Motor vehicles 5 – 7 years – Computers 3 years Operating equipment (which includes uniforms, casino chips, kitchen utensils, crockery, cutlery and linen) is recognised as an expense based on usage. The period of usage depends on the nature of the operating equipment and varies between one to three years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains and losses Gains and losses on disposals are determined by comparing proceeds with carrying amount and are recognised within other (losses)/gains – net, in the profit and loss.046
  • 47. Summary of Significant Accounting PoliciesImpairment Plant and equipment are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, the latter being the higher of fair value less cost to sell of the asset and its value in use1.8 Intangible assets Separately acquired trademarks and licenses are shown at historical cost. Trademarks and licenses acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licenses have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licenses over their estimated useful lives of 15 to 20 years. Lease rights Lease rights represents rights covered by contract or similar arrangement to occupy, lease out or otherwise utilise property. Separately acquired lease rights are shown at historical costs. Lease rights acquired in a business combination are recognised at fair value at the acquisition date. Where land rights are acquired directly through agreement, the group records these at nominal amounts at the inception of the underlying lease/rental agreements or when such agreements are renewed. Lease rights have a finite useful life based on the underlying contractual agreement assigning such rights to the consignee and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of the lease rights over their estimated useful lives based on contractual assignment terms.1.9 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).1.10 Financial assets The group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. 047
  • 48. Summary of Significant Accounting Policies (a) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise, they are classified as non-current. During the period the Group did not have assets under this category. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The group’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the statement of financial position. (c) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of it within 12 months of the end of the reporting period. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the profit and loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for- sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are presented in the profit and loss within ‘other (losses)/gains – net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the profit and loss as part of other income when the group’s right to receive payments is established. Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income.048
  • 49. Summary of Significant Accounting PoliciesWhen securities classified as available for sale are sold or impaired, the accumulated fair valueadjustments recognised in other comprehensive income are included in the profit and loss as ‘gainsand losses from investment securities’. Interest on available-for-sale securities calculated using theeffective interest method is recognised in the profit and loss as part of other income. Dividends onavailable-for-sale other comprehensive income instruments are recognised in the profit and loss aspart of other income when the group’s right to receive payments is established.Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the balance sheet when thereis a legally enforceable right to offset the recognised amounts and there is an intention to settle on anet basis or realise the asset and settle the liability simultaneously.Impairment of financial assets(a) Assets carried at amortised costThe group assesses at the end of each reporting period whether there is objective evidence that afinancial asset or group of financial assets is impaired. A financial asset or a group of financial assetsis impaired and impairment losses are incurred only if there is objective evidence of impairment as aresult of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) andthat loss event (or events) has an impact on the estimated future cash flows of the financial asset orgroup of financial assets that can be reliably estimated.Evidence of impairment may include indications that the debtors or a group of debtors is experiencingsignificant financial difficulty, default or delinquency in interest or principal payments, the probabilitythat they will enter bankruptcy or other financial reorganisation, and where observable data indicatethat there is a measurable decrease in the estimated future cash flows, such as changes in arrears oreconomic conditions that correlate with defaults.For loans and receivables category, the amount of the loss is measured as the difference between theasset’s carrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset’s original effective interest rate.The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated profit and loss. If a loan or held-to-maturity investment has a variable interest rate, the discountrate for measuring any impairment loss is the current effective interest rate determined under thecontract. As a practical expedient, the group may measure impairment on the basis of an instrument’sfair value using an observable market price.If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognised (such as animprovement in the debtor’s credit rating), the reversal of the previously recognised impairment lossis recognised in the consolidated profit and loss. 049
  • 50. Summary of Significant Accounting Policies (b) Assets classified as available for sale The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the group uses the criteria referred to in (a) above. In the case of other comprehensive income investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from other comprehensive income and recognised in profit or loss. Impairment losses recognised in the consolidated profit and loss on other comprehensive income instruments are not reversed through the consolidated profit and loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated profit and loss. 1.11 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first- in, first-out (FIFO) method. Net realisable value is the estimate of the selling price, in the ordinary course of business, less selling expenses. Provision is made for slow moving and obsolete inventories. 1.12 Trade receivables Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. 1.13 Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at cost which approximates fair value. Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, net of bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.050
  • 51. Summary of Significant Accounting Policies1.14 Stated capital Ordinary shares are classified as other comprehensive income and stated at the fair value of the consideration received. Incremental costs directly attributable to the issue of new shares or options are shown in other comprehensive income as a deduction, net of tax, from the proceeds. Where any group company purchases the company’s share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from other equity attributable to the group’s other equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the group’s other equity holders.1.15 Related parties Related parties consist of entities under common ownership and control. Related parties comprise the holding group, subsidiary group and directors of the group. Transactions with related parties are in the normal course of business.1.16 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the profit and loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.1.17 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.1.18 Cost of sales Cost of sales comprise direct cost incurred in the provision of goods and services and are recognised as incurred. 051
  • 52. Summary of Significant Accounting Policies 1.19 Income tax Income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit and loss, except to the extent that it relates to items recognised directly in other comprehensive income. In this case the tax is also recognised in other comprehensive income. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date where the group operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred tax Deferred income tax is recognised for in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. 1.20 Employee benefits a) Pension obligations The group operates a defined contribution pension scheme. The group pays contributions to a privately administered pension insurance plan. The group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.052
  • 53. Summary of Significant Accounting Policiesb) Termination benefitsTermination benefits are payable when employment is terminated before the normal retirement date,or whenever an employee accepts voluntary redundancy in exchange for these benefits. The grouprecognises termination benefits when it is demonstrably committed to either: terminating theemployment of current employees according to a detailed formal plan without possibility of withdrawal;or providing termination benefits as a result of an offer made to encourage voluntary redundancy.Benefits falling due more than 12 months after balance sheet date are discounted to present value.Contract staff are paid terminal gratuities in accordance with their respective employment contract.c) Other benefitsSeverance payments and gratuitiesIn terms of the Labor Law legislation, severance pay is due to employees who are not eligible forgratuities or with respect to whom no contributions are made to the pension scheme and who remainin the group employment for more than five years. Provision for severance and gratuity benefits areraised in the period in which they accrue.Leave payThe costs of paid leave is recognised as an expense as the employee render services thatincreases the entitlement or, in the case of non-accumulating absence, when absence occurs.Profit sharing and bonus plansThe group recognises a liability and an expense for bonuses and profit sharing due to managementand employees where contractually obliged or where there is past practice that has created aconstructive obligation.Employees of the Group receive remuneration in the form of dividend distribution from an employeetrust scheme whereby employees render services as consideration for distribution from dividendsreceived by the employee trust scheme from its shares in the company. The objective of the schemeis to retain staff. Only employees who meet the required criteria of two years in continuousemployment are eligible to share in the trust distribution.Medical aidIn terms of the employment contracts and the rules of relevant medical aid scheme, medicalbenefits are provided to employees. The group subsidises a portion of medical aid contribution forcertain employees. Contributions in relation to group’s obligations in respect of these benefits arecharged against profit or loss in the period of payment.There are no post retirement medical funding requirements. 053
  • 54. Summary of Significant Accounting Policies 1.21 Provisions Provisions are recognised when: i) the group has a present legal or constructive obligation as a result of past events; ii) it is more likely than not that an outflow of resources will be required to settle the obligation; and iii) the amount has been reliably estimated. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 1.22 Earnings per ordinary share Earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the period and are based on the net profit attributable to ordinary shareholders. 1.23 Segmental report Business segments are distinguishable components of the Group that provide services that are subjects to risks and rewards. The cost of shared services are accounted for in a separate (“unallocated”) segment. Transactions between segments are generally accounted for in accordance with Group policies as if the segments were stand alone business with intra segment revenue being eliminated through separate adjustment to revenue. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive management that makes strategic decisions. The Group areas of operations were limited to the Republic of Botswana during the reporting period although subsequent to the year end its operations are expanding to the Republic of Zambia. 1.24 Contingent liabilities Contingent liabilities are reflected when the group has a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group, or it is possible but not probable that an outflow of resources will be required to settle an obligation, or the amount of the obligation cannot be measured with sufficient reliability.054
  • 55. Financial Risk ManagementFOR THE PERIOD ENDED 31 DECEMBER 20112. Financial risk factors The group’s activities expose it to a variety of financial risks: a) market risk (including currency risk, price risk, fair value interest rate risk, and cash flow interest rate risk ), b) credit risk; and c) liquidity risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. Risk management is carried out by senior management under policies approved by the board of directors. Management identifies, evaluates and hedges financial risks in close co-operation with the group’s operating units. The board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity.2.1 Market risk i) Foreign currency risk In the normal course of business, the group may enter into transactions denominated in foreign currencies. In addition, the group may have assets and liabilities in foreign currencies, which exposes it to fluctuations in foreign currency exchange rates. Foreign exchange risks arises when future commercial transactions or recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The group had no assets and liabilities or significant committed future transactions denominated in foreign currencies at year end. ii) Cash flow and fair value interest rate risk The group’s interest rate risk arises from long-term borrowings, short-term bank deposits and bank overdrafts. Bank overdrafts are obtained at, and short-term deposits are placed at, variable rates that expose the group to cash flow interest rate risk. During the financial year, the group’s borrowings and deposits at variable rates were denominated in Botswana Pula. The group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration refinancing, renewal of existing positions, and alternative financing. Based on these scenarios, the group calculates the impact on profit and loss of a defined interest rate shift. 055
  • 56. Financial Risk Management 2.2 Credit risk Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks and financial institutions, only reputable parties are accepted. The group continuously monitors defaults of customers and other counter parties identified either individually or by group, and incorporates the information into credit risk controls. If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, credit control assess the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored. In accordance with standard practice within the industry, the group may require prepayment of stand ard charges prior to booking confirmation thereby eliminating significant portion of credit risk prior to rendering services. The balance of dues from guests is settled through bank transfer, in cash or using credit cards. The most significant dues from guest arise from transactions with agents. The group carefully vets new agents prior to extending credit terms, and deals mostly with agents with whom it has established reliable long term relationships. As a result of this, the group historically has succeeded in minimising negative impacts of adverse credit risks events. Credit trading relationship Individual customer risk limits are set based on internal ratings in accordance with limits set by the board according to the category into which a customer falls. Customers are categorised into: i) Botswana Government; ii) Corporate sector (domestic companies and agents); and iii)Foreign customers (tour agents and individuals).056
  • 57. Financial Risk Management The table below shows an age analysis of trade receivables at their carrying value respectively as at the balance sheet date. Fully Past due Total performing not impaired Impaired P’000 P’000 P’000 P’000 At 30 June 2010 Trade receivables - Botswana Government 1 574 1 538 36 - - Corporate sector 9 196 7 658 989 549 - Foreign customers 84 77 7 - 10 854 9 273 1 032 549 At 31 December 2011 Trade receivables - Botswana Government 970 732 238 - - Corporate sector 6 897 6 468 270 159 - Foreign customers 98 87 11 - 7 965 7 287 519 159 No credit limits were exceeded during the reporting period. Fully performing trade receivables include renegotiated balances. Independent credit ratings are available for the Government of Botswana, which is rated by Standard and Poor’s (S&P) and Moody’s Investor Services, which rates the Government of Botswana as stable, with government issued bonds at A2 ratings. Credit Quality of financial assets • No independent credit ratings are available for domestic banks. The group however only transacts with banks that are affiliated to large well known global or regional banks.2.3 Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. 057
  • 58. Financial Risk Management 2011 2010 P’000 P’000 Cash at bank and short-term bank deposits Barclays Bank of Botswana Limited 17 704 448 Stanbic Bank 4 000 - First National Bank of Botswana Limited 2 094 970 23 798 1 418 The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. Between 1 Between 2 Less than and 2 and 5 Over 1 year years years 5 years P’000 P’000 P’000 P’000 At 31 December 2011 Trade and other payables 14 199 - - - Borrowings 6 289 8 947 9 088 9 423 20 488 8 947 9 088 9 423 At 30 June 2010 Trade and other payables 14 650 Borrowings 21 814 3 725 7 563 - The group’s approach to managing liquidity is to ensure as far as possible that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the group’s reputation.058
  • 59. Financial Risk Management2.4 Analyses of financial instruments Financial instruments by category 2011 2010 P’000 P’000 Loans and receivables Other investments 89 103 Cash and cash equivalents (note 18 ) 23 885 1 482 Trade and o ther receivables 10 322 14 767 34 296 16 352 There were no assets at fair value through the profit and l o ss, or derivatives used for hedging as at year end. Other financial liabilities Trade and other payables 2 596 1 13 049 Due to related parties 1 629 2 403 Borrowings 33 747 16 917 4 7 972 32 369 There were no liabilities at fair value through the profit and loss or derivatives used for hedging as at year end.2.5 Capital risk management The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.2.6 Fair value estimation The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments. 059
  • 60. Notes to the Annual Financial Statements FOR THE PERIOD ENDED 31 DECEMBER 2011 3 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. 3.1 Income taxes Significant judgement is required in determining the group’s provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax provisions in the period in which such determination is made. 3.2 Residual values of property, plant and equipment Residual values of buildings are based on current estimates of the value of these assets at the end of their useful lives. The estimated residual values of buildings have been determined by the directors based on their knowledge of the industry. 3.3 Impairment of assets The group follows the guidance of IAS 39 to determine when a financial asset is impaired. This determination requires significant judgment. In making this judgment, the group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost; and the financial health of and near-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow. Intangible assets is reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, the latter being the higher of fair value less cost to sell and the value in use. Allowance for doubtful debts is created where there is objective evidence, such as probability of insolvency or significant financial difficulties of the debtor, that the group will not be able to collect the amount under original terms of the invoice. An estimate is made with regards to the probability of insolvency and the estimated amount of debtors who will not be able to pay.060
  • 61. Notes to the Annual Financial StatementsFOR THE PERIOD ENDED 31 DECEMBER 2011 GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 4 Revenue Accommodation revenue 170,043 170,043 98,945 Food revenue 85,144 85,144 50,380 Bar revenue 20,388 20,388 12,029 Other 14,962 14,962 10,123 290,538 290,538 171,477 5 Expenses Inventory consumed 36,444 36,444 23,027 Employee benefit expense (note 6) 64,516 64,516 39,936 Transport expenses 3,719 3,719 2,421 Operating lease payments 47,081 47,081 15,013 Auditors remuneration - Audit fee 686 686 478 - Non audit fee 64 64 - Depreciation (note 10) 22,348 22,348 10,995 Bad debts recovered (390) (390) - Bad debts impairment charge 1 - 37 Directors fee 274 274 284 Related party transactions (note 27) - management fees 8,714 8,714 5,158 - profit bonus 8,773 8,773 5,853 Other expenses 16,339 16,339 13,731 Water and electricity 10,697 10,697 3,454 Marketing and promotion 11,268 11,268 7,119 Repairs and maintenance 10,887 10,887 6,879 Direct expenses 12,562 12,562 5,185 Insurance and legal 3,603 3,603 2,277 Telephone 4,264 4,264 2,694 Travel expenses 1,918 1,918 1,212 Impairment of investment in trust (12) - 3,601 - Total direct costs, sales distribution and 263,768 267,368 145,753 administrative operating costs 061
  • 62. Notes to the Annual Financial Statements GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 6 Staff costs - pension contributions 2,784 2,784 1,755 - gross salaries and wages 61,732 61,732 38,181 64,516 64,516 39,936 Number of employees 778 778 745 7 Finance income and costs Interest income -bank (45) (45) (222) Interest expense -bank 2,193 2,193 2,284 8 Income tax expense Company tax at 22%/25% 10,272 10,272 5,289 ACT credit on dividends paid (1,110) (1,110) (1,008) Interest on tax payable - - 35 Deferred tax charge (5,412) (5,412) 606 3,750 3,750 4,922 The tax on the profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the company as follows: Profit before tax 24,622 21,022 23,662 Tax at the statutory rate 5,417 4,625 5,916 Expenses not deductible for taxation 819 819 42 other reconciling items (919) (126) (63) Effect of tax rate change (458) (458) - Interest on tax payable - - 35 Withholding tax on dividends (1,110) (1,110) (1,008) 3,749 3,750 4,922062
  • 63. Notes to the Annual Financial Statements GROUP COMPANY December December June 2011 2011 2010 P000 P000 P0008 Income tax expense (continued) The additional company taxation credit available for off-set against future withholding tax on dividends is as follows: Opening ACT 3,497 3,497 2,249 Arising during the year (2,387) (2,387) 2,967 Utilised during the year (1,110) (1,110) (1,719) Closing balance - - 3,497 In terms of Income Tax Amendments Act which came into effect on 1 July 2011, the two tier tax system has been replaced by a single corporate tax rate of 22%. In addition, ACT arising on payment of withholding tax will no longer be eligible for carry forward and utilisation against future dividends9 Earning per share Basic earnings per share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year (excluding Treasury Shares): Net profit attributable to shareholders P000 20,872 17,272 18,740 Weighted average number of ordinary shares in issue 180,934 184,634 185,000 - Total number of shares issued 185,000 185,000 185,000 - Less: Treasury shares (4,066) (366) - Basic and diluted earning per share (thebe) 11.54 9.35 10.13 063
  • 64. Notes to the Annual Financial Statements10 PROPERTY, PLANT AND EQUIPMENT Leasehold Furniture, Capital land and fixtures and Motor Operating work in buildings fittings vehicles Computers equipment progress Total P000 P000 P000 P000 P000 P000 P000 Year ended 30 June 2010 Opening net book amount 57,864 25,033 184 1,270 5,621 8,723 98,695 Additions 2,426 11,571 - 3,183 3,748 7,133 28,061 Assets acquired - Botsalo - 2,651 - 798 - - 3,449 Accumulated depreciation - Botsalo - (1,803) - (458) - - (2,261) Transfer - 8,150 - - - (8,150) - Disposals (41) (4,185) (271) (974) (2,195) - (7,666) Depreciation on disposals 41 3,593 207 941 - - 4,782 Depreciation (1,821) (7,861) (68) (1,245) - - (10,995) Closing net book amount 58,469 37,149 52 3,515 7,174 7,706 114,065 At 30 June 2010 Cost 71,035 75,596 182 9,345 7,174 7,706 171,038 Accumulated depreciation (12,566) (38,447) (130) (5,830) - - (56,973) Net book amount 58,469 37,149 52 3,515 7,174 7,706 114,065 Period ended 31 December 2011 Opening net book amount 58,469 37,149 52 3,515 7,174 7,706 114,065 Additions 2,841 6,705 3,213 1,241 7,407 23,577 44,984 Disposals (627) (5,491) (13) (1,332) (7,174) - (14,637) Depreciation on disposals 669 4,829 13 1,326 - - 6,837 Transfer - 7,706 - - - (7,706) - Depreciation (2,873) (16,812) (120) (2,543) - - (22,348) Closing net book amount 58,479 34,086 3,145 2,207 7,407 23,577 128,901 At 31 December 2011 Cost 73,249 84,516 3,382 9,254 7,407 23,577 201,385 Accumulated depreciation (14,770) (50,430) (237) (7,047) - - (72,484) Net book amount 58,479 34,086 3,145 2,207 7,407 23,577 128,901 064
  • 65. Notes to the Annual Financial Statements11 Dividends per share The dividends declared to December 2011 and to June 2010 were P3 700 000 and P10 418 112 (2 thebe and 5.63 thebe per share) respectively for shareholders registered at the time.12 Loan receivable- Cresta Employee Staff Plan The Companys share trust scheme, the Cresta Marakanelo Limited Employee Share Trust ("CREST"), was established for the purpose of incentivising and encouraging employees to contribute and share in the growth and profitability of Cresta Marakanelo Limited to recognise and reward qualifying employeeswho have contributed to the growth of the companys profitability. CREST was funded by the company through a loan of P5 365 000 which it used to purchase 3 700 000 shares (representing 2% of the share capital) at 30 November 2011 in the company These shares are by CREST on behalf of qualifying employees and is to be recovered through dividend received on the shares representing half of the residue after accounting for interest and expenses. The remaining 50% is available for distribution in equal proportion to all qualifying employees at the distribution date.The Trust scheme is accounted for as an employee benefit in terms of IAS 19 and SIC 12. Only employees who have been with the Cresta for a period of not less than two years and who are not serving notice are eligible for participation in the trust distribution. GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 The fair value of the receivable at year end is as follows: Loan advanced to the CREST - 5,365 - - Less: Impairment loss - (3,601) - Net carrying amount - 1,764 - Fair value of receivable from CREST - 1,764 - No dividend was received from the company during the year. 065
  • 66. Notes to the Annual Financial Statements GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 13 Investments Other investments-debentures 89 89 103 Debentures provide certain preferential places, at Clifton School for children of the debenture holders or for employees of debenture holders. The rights and privileges are extinguished on redemption of debentures. These debentures do not expose the Group to significant credit risk 14 Intangible assets Trademarks Opening net book amount 160 160 200 Amortisation charge (60) (60) (40) Closing net book amount 100 100 160 Cost 597 597 597 Accumulated amortisation (497) (497) (437) Net book amount 100 100 160 Trademarks were acquired on 1 July 1999 on acquisition of the Marang Hotel and are amortised over 15 years. Lease rights Opening net book amount 338 338 365 Amortisation charge (55) (55) (27) Closing net book amount 283 283 338 Cost 365 365 365 Accumulated amortisation (82) (82) (27) Net book amount 283 283 338 Net Book amount of intangible assets 383 383 498066
  • 67. Notes to the Annual Financial Statements14 Intangible assets (continued) Lease rights relate to leasehold concessions acquired through the leasing of property from Botsalo Hotel (Pty) Ltd on 1 October 2009 and are amortised over 10 years.15 Treasury Shares The company acquired 365 056 of its own shares through an offer to qualifying shareholders between 10 October 2011 and 2 December 2011. Only shareholders holding stocks of between 100 and 2000 were eligible. The total amount paid to acquire the shares was approximately P550 000 and has been deducted from retained earnings within shareholders equity. These shares are held as treasury shares. The company has the right to re-issue these shares at a later date. In addition, shares issued to the Cresta Employee share Trust Scheme have been disclosed as treasury shares on consolidation of the trust GROUP COMPANY December December June 2011 2011 2010 P000 P000 P00016 Inventories Foods, beverages and tobacco 883 883 800 Curio shop 240 240 307 1,123 1,123 1,107 The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to 36,444 36,444 23,02717 Trade and other receivables Trade receivables 7,965 7,965 10,854 less: Provision for impairment (159) (159) (549) 7,806 7,806 10,305 Prepayments 141 141 224 Related party balances (27) 195 195 7 Other receivables 2,180 2,180 4,231 10,322 10,322 14,767 067
  • 68. Notes to the Annual Financial Statements 17 Trade and other receivables (continued) As at 31 December 2011, receivables of P519 171 (2010 June: P482 467) were overdue but not impaired. These relate to a number of customers for which there is no history of default. Trade receivables of P159 000 (2010:P549 000) were overdue and deemed not recoverable and have been provided for and included in provision for impairment. The ageing analysis of these trade receivables is as follows: GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 Up to 3 months 519 519 482 519 519 482 The movement on the impairment of receivables is as follows: Movement of impairment Opening balance 549 549 512 Charge for the year 3 3 37 Bad debts recovered (393) (393) - Closing balance 159 159 549 18 Cash and cash equivalents Cash at bank and in hand 19,885 19,885 1,482 Short-term bank deposits 4,000 4,000 - 23,885 23,885 1,482 Short-term bank deposits have an average maturity of not more than 90 days. Cash and bank overdrafts include the following for the purposes of the cash flow statement. Cash and cash equivalents 23,885 23,885 1,482 Bank overdrafts (note 21) (3,787) (3,787) (3,439) 20,098 20,098 (1,957)068
  • 69. Notes to the Annual Financial Statements GROUP COMPANY December December June 2011 2011 2010 P000 P000 P00019 Stated Capital 185 000 000 ordinary shares of no par value Issued and fully paid: 50 636 391 shares- BDC Limited 5,064 5,064 5,064 74 000 000 shares - TA Botswana Limited 7,400 7,400 7,400 60 363 609 - Others 6,036 6,036 6,036 18,500 18,500 18,50020 Deferred income tax Deferred tax liabilities Beginning of the year 4,582 4,582 3,976 Net income statement (credit)/charge (5,412) (5,412) 606 End of the year (830) (830) 4,582 The deferred tax arise from: - accelerated tax depreciation on property plant and equipment 2,194 2,194 4,818 Lease rights - operating lease expenditure (3,024) (3,024) (236) End of the year (830) (830) 4,582 The analysis of deferred tax assets and deferred tax liabilities is as follows: Deferred tax liabilities - Deferred tax liabilities to be recovered within more 1,539 1,539 3,613 than 12 months - Deferred tax liabilities to be recovered within 12 months 655 655 1,205 2,194 2,194 4,818 Deferred tax assets - Deferred tax assets to be recovered after more (1,304) (1,304) (236) than 12 months - Deferred tax liability to be recovered within 12 months (1,720) (1,720) - (3,024) (3,024) (236) Net (830) (830) 4,582 069
  • 70. Notes to the Annual Financial Statements 21 Borrowings Non-current Barclays Bank of Botswana Limited loan 27,458 27,458 11,451 27,458 27,458 11,451 Current Barclays Bank of Botswana Limited loan 2,502 2,502 2,027 Bank overdrafts (note 18) 3,787 3,787 3,439 6,289 6,289 5,466 Bank borrowings which mature until 2022 attract an average coupon rate of prime minus 2% annually (2010: prime minus 2% annually) The two loans from Barclays Bank of Botswana Limited are repayable in monthly instalments of P310,430 and P253 351 respectively at variable rate of prime less two (currently 9%). - First mortgage bond over Lots. Rem 930, 931 and 21367 in Francistown for P18,390,000. - First mortgage bond over Lot. 872, Kasane for P3,090,000. - Cession of material damage policies covering the properties mentioned above. - Unlimited suretyship by Cresta Marakanelo Ltd directors.070
  • 71. Notes to the Annual Financial Statements21 Borrowings (continued) The banking facilities available to the company as at year end: GROUP COMPANY December December June 2011 2010 P000 P000 P000 Bank overdraft 5,000 5,000 5,000 The bank overdraft bears interest at prime plus 0.5% (2010: prime plus 0.5%). The facilities are secured by: - First mortgage bond over Mowana Safari Lodge, being Lot 872 Kasane for P15 000 000 (2010: P3,000,000). - The bank has issued guarantees in favour of Botswana Power Corporation in the amount of P 130 000 as security for the supply of power on credit to the company. The carrying amounts and fair value of non- current borrowings are as follows: Bank borrowings 27,458 27,458 11,451 Finance lease liabilities - - - 27,458 27,458 11,451 The fair value of current borrowings equal their carrying amount, as the impact of discounting is not significant. The fair values are based on cash flows discounted using a rate based on the borrowing rate of 11% (15%). The carrying amounts of the borrowings are denominated in Botswana Pula. 071
  • 72. Notes to the Annual Financial Statements GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 22 Trade and other payables Trade payables 4,521 4,521 4,413 Related party balances (note 27) 1,628 1,628 2,403 Other accrued expense 4,874 4,874 6,061 Other payables 3,202 3,202 2,575 14,225 14,225 15,452 23 Deferred income Deferred income represented operating lease charges based on the straight line basis. During the period, management has opted not to comply with the requirements of IAS 17-Leases, which require that operating lease obligations are straightlined 24 Dividends Gross dividend 7,400 7,400 14,118 Withholding tax at 15% (1,110) (1,110) (2,118) Net dividends 6,290 6,290 12,000 25 Operating lease commitment The company leases motor vehicles and hotel properties under non cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The leases for motor vehicles are for periods ranging between 3-5 years and the hotel properties are for a period of 10 years signed with Letlole La Rona Limited (formely Botswana Hotel Development Company (Proprietary) Limited (BHDC)) with effect from 1 July 2010. The lease commitments on hotel properties are to related companies. The company holds the following leases: Cresta Lodge Lot 50719- Gaborone- 10 year lease with Letlole La Rona Limited (formely Botswana Hotel development Company (Pty) Ltd (BHDC)) commenced in 1 July 2002. Annual lease rentals amount to P3 600 000 for the first year with annual escalations of 8%. However, a new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P5 880 000 for the first year with annual escalations of 8%.072
  • 73. Notes to the Annual Financial Statements25 Operating lease commitment (continued) Cresta President Hotel Lot 1168/9 - Gaborone - 10 year lease with Letlole La Rona commenced 1 July 2002. Annual lease rentals amount to P540 000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P3 960 000 for the first year with annual escalations of 8%. Cresta Rileys Hotel Tribal Lot TB - Maun - 10 year lease with Botswana Hotels Development Company (Proprietary) Limited commenced 1 July 2002. Annual lease rentals amount to P840 000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P1 680 000 for the first year with annual escalations of 8%. Cresta Bosele Hotel Lot 276 - Selebi Phikwe - 10 year lease with Letlole La Rona Limited commenced 1 July 2002. Annual lease rentals amount to P648 000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P1 560 000 for the first year with annual escalations of 8%. Cresta Thapama Hotel Lot 6348 - Francistown - 10 year lease with Letlole La Rona Limited commenced 1 July 2002. Annual lease rentals amount to P1 320 000 for the first year with annual escalations of 8%. However, new 10 year lease agreement has been entered with effect from 1 July 2010. According to the agreement, annual lease rentals amount to P3 960 000 for the first year with annual escalations of 8%. Mowana Safari Lodge Agreement through a "Deed of Fixed Period State Grant" between the Government of Botswana and Cresta Marakanelo (Pty) Ltd dated 22 January 1998 for lease over Lot 2239 - Kasane, representing 34,1684 hectares in the Chobe Administrative District. The state grant is for a period of 50 years expiring on 22 January 2048 upon which the land together with all improvements thereon shall revert to the State absolutely without compensation payable for improvements or otherwise. Cresta Marang Hotel Agreement through a "Deed of Fixed Period State Grant" between the government of Botswana and Cresta Marakanelo Ltd dated 14 November 1996 for lease over plots 930, 931 and 21367 - Francistown, representing 6,3829 hectares in the North East Administrative District. The state grant is for a period of 50 years expiring on 14 November 2046 upon which the land together with all improvements thereon shall revert to the State absolutely without compensation payable for improvements or otherwise. 073
  • 74. Notes to the Annual Financial Statements 25 Operating lease commitment (continued) In addition, the company has a lease agreement with Knight Bridge (Pty) Ltd in respect of Residential Hotel for plot 6218 portion of lot 931, Francistown. The lease is for 10 years commencing on 1 July 2007 and renewable at the option of Cresta Marakanelo Ltd for a further 10 year period. Annual lease rental amount to P 2 095 153. Cresta Botsalo Hotel Lot 87 - Palapye - 10 year lease with Botsalo Hotel (Pty) Ltd commenced 1 October 2009. Annual lease rentals amount to P1 500 000 for the first year with annual escalations of 8%. Cresta Head office Plot 50676, Phase 2, Block D, unit 2, floor fairground office park - 5 year lease with Khumo Property Assets Management commenced 1 April 2009. Annual lease rentals amount to P650 522 for the first year with annual escalations of 8%. GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 26 Cash generated from operations Operating activities Profit before interest and income tax 26,770 23,170 25,724 Adjustments: - Depreciation (note 10) 22,348 22,348 10,995 - Amortisation of trademarks and lease rights (note 14) 115 115 67 Impairment loss on loan advanced to CREST - Deferred operating expenses 12,799 12,799 945 - Loss on disposal of plant and equipment 40 40 90 62,072 62,072 37,821 Changes in working capital: - Inventories (16) (16) (211) - Receivables and prepayments 4,445 4,445 (4,610) - Trade and other payables (1,226) (1,227) 2,164 Cash generated from operations 65,275 65,275 35,164074
  • 75. Notes to the Annual Financial Statements27 Related party transactions Related companies are companies under common control, directors or ownership. The followning are related parties: Botswana Development Corporation Limited- Shareholder with 27% interest. TA Botswana- 40% shareholder interest. Botswana Hotel Development Company- 100% subsidiary of Botswana Development Company and landlord to Cresta Marakanelo Ltd.Cresta Holdings Botswana Ltd- Management company owned by TA Botswana Ltd. Related companies are companies under common control, directors or ownership. The followning are related parties: Botswana Development Corporation Limited- Shareholder with 27% interest. TA Botswana- 40% shareholder interest Botswana Hotel Development Company- 100% subsidiary of Botswana Development Company and landlord to Cresta Marakanelo Ltd. Cresta Holdings Botswana Ltd- Management company owned by TA Botswana Ltd. GROUP COMPANY December December June i) Purchase of services 2011 2011 2010 Management services - fees P000 P000 P000 - Cresta Holdings (Pty) Ltd 8,714 8,714 5,158 - Profit bonus - Cresta Holdings (Pty) Ltd 8,773 8,773 5,853 Rent paid - Letlole La Rona (formerly BHDC) 28,935 28,935 9,893 - Botsalo (Pty) Ltd 2,422 2,422 1,125 - Lease rights - Botsalo (Pty) Ltd - - 365 48,845 48,845 22,394 Services are provided on the basis of existing agreements with related parties. ii) Sale of services Management services - fees - Botsalo Hotel (Pty) Ltd - - 166 - Profit bonus - Botsalo Hotel (Pty) Ltd - - 80 - - 246 Services and goods are offered/ sold on the basis of the price lists applicable with non- related parties. 075
  • 76. Notes to the Annual Financial Statements GROUP COMPANY December December June 2011 2011 2010 P000 P000 P000 27 Related party transactions (continued) iii) Year-end balances arising from sales/purchases of services: Receivables from related parties (note 17): Cresta Golfview-Zambia 180 180 - Trans Industries (Pty) Ltd 15 15 7 195 195 7 iii) Year-end balances arising from sales/purchases of goods/services: (continued) Payables to related parties (note 22): Cresta Hotels (Pty) Ltd 1,628 1,628 2,395 Limited - - 8 1,628 1,628 2,403 28 Contingent liabilities During 2003, the Botswana Unified Revenue Service (“BURS”) investigated the company with a view to recover withholding tax in respect of management fees paid from 1988 to 2002. The total management fees paid in the period was P32 931 362 and withholding tax due thereon is P4 002 090 plus penalty interest at 2% per month from date of assessment. During the year, the High Court of the Republic of Botswana found in favour of company by way of settlement of P323 770 to BURS. However, Attorney Generals Chambers acting on behalf of BURS has lodged an appeal against the High Court decision. This appeal is expected to be heard in January 2012. The outcome of this matter is not yet reliably known. The directors are satisfied, based on legal opinion obtained, that no provision for the potential liability is required.076
  • 77. Notes to the Annual Financial StatementsFOR THE PERIOD ENDED 31 DECEMBER 201129 Segmental information While strategic decision making rights vests with the Board of Cresta Marakanelo Limited, operational and managerial responsibility vests with Exceutive Management, which includes the Chief Executive Officer, Chief Financial Offiecer, Group Operations Manager, Group Sales and Marketing Manager, Group Project Manager and Group Human Resources Manager. For the purpose of presenting segmental inaformation, Exceutive management has been identified as the Chief Decision Maker as defined in IFRS 8 (Operating segments) The main reporting segments reviewed by the Chief Operating Decision Maker are: - Cresta Urban Oasis The hotels under this Gateway operate in major cities in Botswana and target business travellers. These properties are located close to the city centre and have lush gardens offering a more serene environment. The facilities available include meeting and conference rooms, wireless internet access and high-end restaurants, thereby meeting all business travellers’ needs. The hotels under this Gateway are Cresta Lodge Gaborone, and Cresta Marang Gardens. - Cresta Urban Heartbeat Similar to Cresta Urban Oasis, the hotels in the Cresta Urban Heartbeat brand cater for business travellers as they are located in the city centres of the major cities (Gaborone and Francistown). These hotels offer a cosmopolitan setting with simple rooms and high quality restaurants ideal for business meals. Hotels under this Gateway are Cresta President Hotel and Cresta Thapama Hotel. - Cresta African Roots These hotels offer modern and affordable accommodation, emphasising on value and comfort. They are located in the smaller cities within Botswana and have access to the surrounding areas. Hotels under this Gateway include Cresta Riley’s Hotel, Cresta Bosele Hotel and Cresta Botsalo Hotel. - Cresta African fingerprint Only one hotel, Mowana Safari Lodge, is classified within this brand, and is a signature destination offering a unique travel experience to guests. This Gateway’s hotel has a high rating and offers guests a travel experience, which includes safaris and other activities in addition to top class hotel rooms and restaurants. The Chief Operating Decision Maker reviews performance of each segment based on operating profit achieved, total assets employed and net assets employed. 077
  • 78. Notes to the Annual Financial Statements 29 Segmental information (continued) Cresta Cresta Cresta Cresta Urban Urban African African Control Oasis Heartbeat Roots Fingerprint Unit Combined P000 P000 P000 P000 P000 P000 GROUP Revenue - external 95,933 85,906 60,842 46,469 1,388 290,538 Direct cost (56,708) (51,785) (42,441) (31,857) (14,374) (197,165) Gross profit 39,225 34,121 18,401 14,612 (12,986) 93,373 Sales and distribution costs (1,906) (1,415) (1,292) (2,214) (3,108) (9,935) Administration and operating expenses (27,288) (22,440) (15,123) (9,023) 17,206 (56,668) Operating profit 10,031 10,266 1,986 3,375 1,112 26,770 Finance income 3 3 5 4 30 45 Finance expense (2,070) - (17) - (106) (2,193) Reportable segment income before tax 7,964 10,269 1,974 3,379 (3,335) 24,622 Income tax expense (3,750) Net profit after income tax 20,872 Total assets 54,128 16,368 24,295 75,507 (4,765) 165,533 Total liabilities 12,256 10,731 12,263 5,470 - 50,680 Capital expenditure 5,451 4,300 15,536 27,221 181 52,690 Depreciation (note 10) 9,030 6,090 3,967 2,789 473 22,348 Amortisation (note 14) 60 - 55 - - 115078
  • 79. Notes to the Annual Financial Statements29 Segmental information (continued) Cresta Cresta Cresta Cresta Urban Urban African African Control Oasis Heartbeat Roots Fingerprint Unit Combined P000 P000 P000 P000 P000 P000 COMPANY Revenue - external 95,933 85,906 60,842 46,469 1,388 290,538 Direct cost (56,708) (51,785) (42,441) (31,857) (14,374) (197,165) Gross profit 39,225 34,121 18,401 14,612 (12,985) 93,373 Sales and distribution costs (1,906) (1,415) (1,292) (2,214) (3,108) (9,935) Administration and operating expenses (27,288) (22,440) (15,123) (9,023) 13,606 (60,268) Operating profit 10,031 10,266 1,986 3,375 (2,487) 23,170 Finance income 3 3 5 4 30 45 Finance expense (2,070) - (17) - (106) (2,194) Reportable segment income before tax 7,964 10,269 1,974 3,379 (2,563) 21,022 Income tax expense (3,750) Net profit after income tax 17,272 Total assets 54,128 16,368 24,295 75,507 (3,831) 166,467 Total liabilities 12,256 10,731 12,263 5,470 - 50,680 Capital expenditure 5,451 4,300 15,536 27,221 181 52,690 Depreciation (note 10) 9,030 6,090 3,967 2,789 473 22,348 Amortisation (note 14) 60 - 55 - - 115 079
  • 80. Notes to the Annual Financial Statements 29 Segmental information (continued) Cresta Cresta Cresta Cresta Urban Urban African African Control Oasis Heartbeat Roots Fingerprint Unit Combined P000 P000 P000 P000 P000 P000Year ended 30 June 2010Revenue 53,904 52,244 31,228 32,999 1,102 171,477Finance income 104 3 2 5 108 222Finance expense (1,954) - - - (330) (2,284)Reportable segmentincome before tax 6,471 12,257 2,542 4,978 (2,586) 23,662Income tax expense (4,922)Net profit after income tax 18,740Total assets 54,635 16,900 15,186 45,180 843 132,744Total liabilities 27,618 3,917 4,574 5,487 - 41,596Capital expenditure 18,752 2,728 5,630 2,070 69 29,249Depreciation 3,341 4,061 1,288 1,897 408 10,995Amortisation 40 - 27 - - 67080
  • 81. Notes to the Annual Financial StatementsFOR THE PERIOD ENDED 31 DECEMBER 201130 EVENTS AFTER THE REPORTING PERIODAcquisitionsOn 1 February 2012, the company completed the acquisition of 100% of the ordinaryshares of Golfview Hotels Ltd. Thus, Golfview became a subsidiary on this date. Golfviewoperates a hotel business in Lusaka, Zambia. The purpose of the acquisition was part ofthe Group expansion strategy into Southern Africa.The following table summarises the consideration transferred to acquire Golfview and theamounts of identified assets acquired and liabilities assumed at the acquisition date, aswell as the fair value of the non-controlling interest in Golfview at the acquisition date: P000Fair value of consideration transferred:Cash 19,246Ordinary shares -Contingent consideration -Total 19,246 At Fair Value P000Fair value of the company’s investment in Golfview held before the businesscombination.Fair value of the non-controlling interest in Golfview.Recognised amounts of identifiable assets acquired and liabilities assumed:Cash and cash equivalentsIntangible assets -Inventories 784Property, plant and equipment 13,842Total identifiable net assets 14,626Goodwill 4,620 081
  • 82. Notes to the Annual Financial Statements 30 EVENTS AFTER THE REPORTING PERIOD (continued) The goodwill is attributable to the significant synergies expected to arise after the company’s acquisition of Golfview The goodwill is not expected to be deductible for tax purposes. The company did not acquire any other class of receivable as a result of the acquisition of Golfview. The fair values of the acquired Licence and trademark intangible assets were Pnil and Pnil, respectively. Prior to the acquisition, the company had no pre-existing relationship with Golfview Hotels Ltd 31 PERIOD OF OPERATION During the year, the company changed its statutory financial year from 30 June to 31 December. Consequently, these financial statements cover a period of eighteen months.082
  • 83. Feel the spirit of the African Root
  • 84. Top 20 Shareholders INVESTOR SHARES % 1 T A BOTSWANA LIMITED 74,000,000 40.00% 2 BOTSWANA DEVELOPMENT CORPORATION 48,100,000 26.00% 3 STANBIC NOMINEES RE: BIFM BPOPF 10,188,688 5.51% 4 STANBIC NOMINEES RE: BIFM 7,734,935 4.18% 5 MOTOR VEHICLE ACCIDENT FUND 6,393,610 3.46% 6 MOTOR VEHICLE ACCIDENT FUND 2,856,400 1.54% 7 FNB NOMINEES (PTY)LTD RE:SIMS BPOPF 10001009 2,800,000 1.51% 8 SBB NOMINEES ( PTY) LTD RE A/C B00485 2,183,958 1.18% 9 STANBIC NOMINEES RE: BIFM BPOPLF 1,511,800 0.82% 10 SCBN (PTY) LTD RE: BIFM DPF 1,490,427 0.81% 11 UNIGEM (PTY) LTD 689,700 0.37% 12 BOB STAFF PENSION FUND 510,000 0.28% 13 OVERSEAS DEVELOPMENT ENTERPRISES (BOTSWANA) 500,000 0.27% 14 KNIGHTS BRIDGE PTY LTD 350,000 0.19% 15 SIKALESELE MM 350,000 0.19% 16 ESTATE PROPERTY INVESTMENTS (PTY) LTD 340,000 0.18% 17 JDM INVESTMENTS (PTY) LTD 310,000 0.17% 18 HIRSCHFELD S 300,000 0.16% 19 HEMAMO INVESTMENTS (PTY) LTD 300,000 0.16% 20 MOTSWAISO RM 275,000 0.15% OTHER SHAREHODLERS 23,815,482 12.87% TOTAL 185,000,000 100.00%084
  • 85. Cresta Marang-Gardens Marang-Gardens
  • 86. Notice of Annual General Meeting - Notice is hereby given that the 2011 Annual General Meeting of members will be held on Friday 29 June 2012 at 1200hrs at the Cresta Lodge Conference room, to transact the following business; 1. To receive, consider and adopt the audited annual financial statements for the period ended 31 December 2011 together with the directors’ and auditors’ reports thereon. 2. To approve the dividends declared by the Directors. Final dividend of 4 thebe per share paid to the shareholders on or about 22 May 2012. 3. To re-elect all directors who retire in terms of the Constitution of the Company, section 20.10.1 who are eligible and offer themselves for re-election. 4. To approve the Directors’ remuneration for the past financial year. 5. To re-appoint PricewaterhouseCoopers as external auditors for the ensuing year and to approve the remuneration for the year ended 31 December 2011. 6. To transact any other business that may be transacted at an Annual General Meeting. Any member entitled to attend and vote, if unable to attend for any reason, is entitled to appoint a proxy or proxies to attend, speak, and on a poll, vote in his/her stead, and such proxy need not also be a member of the Company. Proxy forms should be forwarded to reach the Registered Office of the Company at least 48 hours before the time fixed for holding the meeting. By Order of the Board V Mganga Company Secretary 14 May 2012086
  • 87. Proxy Form(Please complete in block letters)I/We*________________________________________________________________________________Of __________________________________________________________________________________Being a member of Cresta Marakanelo Limited, hereby appoint (see note 1):1. __________________________________________________ or failing him/her2. __________________________________________________ or failing him/her3. The Chairman of the meeting,as my/our proxy to act for me/us at the Annual General Meeting which will be held for purpose of considering,and if deemed fit, passing with or without modification, the resolutions to be proposed thereat and at eachadjournment thereof, and to vote for or against resolutions and/or abstain from voting in respect of the ordinaryshares registered in my/our name in accordance with the following instructions (see note 2): Number of Ordinary Shares For Against Abstain Ordinary resolution number 1 Ordinary resolution number 2 Ordinary resolution number 3 Ordinary resolution number 4 Ordinary resolution number 5 Ordinary resolution number 6Signed: ____________________________ on this _______ day of _________________ 2012Please read the notes on the reverse side hereof. 087
  • 88. Notes to Proxy Form Notes 1. A shareholder may insert the names of two alternative proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairman of the Annual General Meeting”. The person whose name appears first on the form of proxy and whose name has not been deleted will be entitled to act as proxy to the exclusion of those whose names follow. 2. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by the shareholder in the appropriate space provided. Failure to comply herewith will be deemed to authorize the proxy to vote at the Annual General Meeting as he/she deems fit in respect of the shareholder’s votes exercisable thereat, but where the proxy is the Chairman, failure to comply will be deemed to authorize the proxy to vote in favour of the resolution. A shareholder or his/her proxy is obliged to use all the votes exercisable by the shareholder or by his/her proxy. 3. Forms of proxy must be lodged at or posted to the Company Secretary at P/Bag 00272, Plot 50676 Fairgrounds Office Park, Phase 2,Block D, Gaborone not later than 48 hours before the time fixed for holding the meeting. 4. The completion and lodging of this form will not preclude the relevant shareholder from attending the Annual General Meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof should such shareholder wish to do so. 5. The Chairman of the Annual General Meeting may reject or accept any form of proxy not completed and/or received other than in accordance with these notes provided that he/she is satisfied as to the manner in which the shareholder concerned wishes to vote. 6. An instrument of proxy shall be valid for the Annual General Meeting as well as for any adjournment thereof, unless the contrary is stated thereon. 7. A vote given in accordance with the terms of a proxy shall be valid, notwithstanding the previous death or insanity of the shareholder, or revocation of the proxy, or of the authority under which the proxy was executed, or the transfer of the ordinary shares in respect of which the proxy is given, provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company not less than one hour before the commencement of the Annual General Meeting or adjourned Annual General Meeting at which the proxy is to be used. 8. The authority of a person signing the form of proxy under a power of attorney or on behalf of a company must be attached to the form of proxy, unless the authority or full power of attorney has already been registered by the Company or the Transfer Secretaries. 9. Where ordinary shares are held jointly, all joint shareholders must sign. 10. A minor must be assisted by his/her guardian, unless the relevant documents establishing his/her legal capacity are produced or have been registered by the Company.088
  • 89. Cresta Bosele Hotel Bosele
  • 90. Cresta Marang-Gardens Marang-Gardens
  • 91. Cresta Mowana SafariResort and Spa Mowana-Safari Lodge
  • 92. Notes092