Cresta Marakanelo 2011 annual report

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

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Cresta Marakanelo 2011 annual report

  1. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 22. Cresta President Hotel President
  23. 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. 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. 25. Cresta Mowana SafariResort and Spa Mowana-Safari Lodge
  26. 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. 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. 28. Cresta Lodge 20th BirthdayGolf Day at Gaborone Golf Club Lodge - Gaborone
  29. 29. ANNUAL FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2011
  30. 30. ANNUAL FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2011
  31. 31. Statement of Directors’ Responsibility 38 to 54. 32 to 3334 to 82 23rd March 2012
  32. 32. Auditor’s Report34 to 82.
  33. 33. Auditor’s Report
  34. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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

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