Cresta Marakanelo planned acquisition of Phakalane Golf Estate and Convention Centre has fallen through, in a new development that will puzzle many who were still confused by the proposed transaction in the first place.
On Thursday, the Botswana Stock Exchange listed hospitality giant announced that the lease and acquisition of certain furniture, fittings and equipment related to Phakalane Golf Estate Hotel and Convention Centre, will no longer proceed, as certain conditions precedent to the lease agreement have not been concluded. The agreements have therefore lapsed, the company said in a terse statement.
The failed acquisition happens shortly after the Competition and Consumer Authority last month approved Cresta’s plan to add the swanky Phakalane Golf Estate to its sprawling empire. Cresta’s plans to expand its leisure and hospitality portfolio at time when the tourism sector has been hit hard by the Covid-19 pandemic puzzled market observers, questioning the timing of deal.
Cresta which operates chain of hotels in Botswana and Zimbabwe has been affected by the effects of covid-19 containment measures, reporting a 50 percent decline in interim revenue last year, falling from June 2019’s P187 million to P93 million in June 2020.
Gross profit fell by 80 percent to P12.6 million, with the reduction largely due payment of salaries and other expenses while operations were closed or curtailed during national lockdown that ran from April to late May last year. Expenses reduced slightly to P43.8 million, thanks to a P3.2 million in wage subsidy provided by the government, helping Cresta to reduce its operating expenses.
Cresta registered a pre-tax loss of P42.5 million for the six months ended June 2020, a stark contrast to the pre-tax profit of P12.1 million in June 2019, which was an increase of 170 percent from 2018’s figures after Cresta implemented cost containment initiatives at the hotels which resulted in improved margins and higher profitability. The momentum built has now been decimated by the Covid-19 outbreak, bringing the hotel operator back to square one.
On Friday, Cresta advised shareholders that the audited consolidated profit before tax for the year ended 31 December 2020, is estimated to be 320 to 340 percent (P98 million to P104 million) lower than the pre-tax profit of P30.6 million reported for the year ended 31 December 2019.
“The decline in profitability is as a result of the impact of the COVID-19 pandemic on the travel and tourism industry as well as the impact of the closure of the hotels for normal operations from 2 April 2020 to 4 June 2020,” the company said in the statement.