Cresta Marakanelo Limited, the hotel group operating in Botswana and the region has announced plans to dissolve the Cresta Marakanelo Limited Employees Share Trust through a buyback of its 3 700 000 shares.
The employee Share Trust was formed in 2010 for the purpose of incentivizing and encouraging employees of Cresta to contribute to and share in the growth and profitability of the company.
The acquisition was facilitated through a P5, 365 000 loan advanced by Cresta to the Employee Share Trust. At the time, the 3 700 000 shares acquired by the Cresta Employee Share Trust were purchased at a price of P1.45 per share. On Thursday, the multinational hotelier confirmed that it was agreed that the loan would be repaid from 50 percent of the dividends that accrued to the Cresta Employee Share Trust, with interest set at the prevailing prime lending rate.
“The balance of the dividends would be paid to the employees of Cresta as calculated in a manner recommended by the Board and approved by the Trustees,” noted a circular sent to Cresta shareholders this week.
However the company come out this week saying the cash flows generated by the Trust remain inadequate to adequately service the loan and interest repayments. Furthermore, the structure appears to be tax inefficient to Cresta as impairment losses on the loan and bonus distributions to employees are not tax deductible, whilst the interest earned on the loan is taxed. Sunday Standard is informed that at a meeting held between the board of Cresta and the Cresta Employees Share Trust in March this year, the two parties agreed that the employees’ scheme should be terminated subject to approval by shareholders. The two parties further resolved to start a new scheme, Cresta Phantom.
According to documents sent to shareholders recently, the proposed Phantom Share Scheme is also meant to motivate employees to build long term careers with the company and align the interest of the employees in a bid to drive profitability, growth and shareholder value. The Botswana Stock Exchange (BSE) listed hotelier’s full year results for the period ended 31 December 2014 showed it grew revenues by 7.9 percent from P281 million on the prior year to P303.2 million. Founded in 1974, Cresta, initially BDC Hotel Management, boats of big names under its belt, among them Cresta Lodge, President Hotel, Botsalo Hotel, Bosele Hotel, Marang Gardens and Hotel, President Hotel, Riley’s Hotel and Cresta Mowana Safari Lodge.
The hotelier has continued to explore new opportunities in a bid to unlock shareholder value and increase returns. Recently, Cresta entered into a 10 year lease agreement with a landlord, Rainet Safaris (Pty) Ltd to lease their new 83 roomed hotel and conference centre to be built in Maun, Botswana’s tourism hotspot.