Cresta Marakanelo Limited 2015 annual report

annual report

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1Cresta Marakanelo Limited - 2015 Annual Report

MarakaneloLimited


Experience the true warmth of African hospitality at Cresta Hotels, where we’ll do whatever it takes to make your trip a success.

2 3Cresta Marakanelo Limited - 2015 Annual Report Cresta Marakanelo Limited - 2015 Annual Report2 Cresta Marakanelo Limited - 2015 Annual Report

MarakaneloLimited

2 3Cresta Marakanelo Limited - 2015 Annual Report Cresta Marakanelo Limited - 2015 Annual Report 3Cresta Marakanelo Limited - 2015 Annual Report

Cresta Marakanelo Limited - 2015 Annual Report

General Information 6

Financial Highlights 8

Board Members 10

Details of Directors 12

Chairperson’s Statement 14

Executive Management 16

Managing Director’s Statement 18

Corporate Governance 21

Sustainability Reporting 27

Corporate Social Responsibility 31

Statement of Directors’ Responsibility 38

Auditor’s Report 39

Financial Statements 40

Top 20 Shareholders 94

Proxy Form 95

Notice of AGM 97

Contents



6 7Cresta Marakanelo Limited - 2015 Annual Report Cresta Marakanelo Limited - 2015 Annual Report

COMPANY REGISTRATION NO1974/556

BUSINESSThe Group operates hotels in Botswana and Zambia and is engaged in other related businesses.

DIRECTORSM Nthebolan (Chairperson) B G Mmualefhe B P Nyajeka (Resigned 30-11-2015) J Y Stevens E M Dewah P Molefe G Sainsbury T MakayaJ Dube (Resigned 30-11-2015) O Majuru

SECRETARYV Mganga

TRANSFER SECRETARIESDPS Consulting Services (Pty) Ltd

REGISTERED OFFICEMarula House, Prime PlazaPlot 745382nd FloorGaborone

INDEPENDENT AUDITORSPricewaterhouseCoopers

BANKERSBarclays Bank of Botswana Limited Barclays Bank Zambia PlcAfrican Banking Corporation of Botswana LimitedAfrican Banking Corporation Zambia Limited First National Bank of Botswana Limited STANLIB Investment Management Services (Pty) Ltd Stanbic Bank Botswana Limited

CURRENCYBotswana Pula

6 Cresta Marakanelo Limited - 2015 Annual Report

Cresta Marakanelo Limited

General information



Financial Highlights


290,53818 months

171,47712 months

242,289

281,124

303,195 319,603

Group Revenues (P’000)

2010 2011 2012 2013 2014 2015

EBITDA (P’000)

36,778

49,20645,043

53,440

58,62963,554

2010 2011 2012 2013 2014 2015

Total assets grew by 7% to P245 million (2014:P229m). Equity grew by 12% to P163 million (2014:P145m).

With the exception of deferred revenue items of P1.6 million (2014:P1.3m) recognised in respect of the Group’s Pride and Select customer loyalty schemes, net operating assets have increased in line with the growth in the number of operating units.


Financial Highlights (continued)

Total comprehensive income (P’000)

18,740

24,773

20,53822,368

24,098

2010 2011 2012 2013 2014 2015

Earnings per Share(thebe)

10.13

13.36

11.3512.36 13.32

2010 2011 2012 2013 2014 2015

28,960

16.01



1 53 42



Board of DirectorsNthebolan, Maria Mmasolo (6)Non-Executive Chairperson

Sainsbury, Gavin (5)Non-Executive Director

Makaya, Tawanda (7)Executive Director

Majuru, Osbourne (2)Non-Executive Director

Dewah, Elias (3)Non-Executive Director

Molefe, Pius Komane (1)Non-Executive Director

Stevens, John Yendell (4)Non-Executive Director

Mmualefhe, Batlang (NIP)Non-Executive Director

Dube, Jennifer (resigned, NIP)Non-Executive Director

Nyajeka, Bothwell Patrick (resigned, NIP)Non-Executive Director


6 7




Nthebolan, Maria MmasoloNon-Executive Chairman

Maria holds a Master of Arts in Finance and Economics from the University of Botswana and was the Managing Director - Botswana Development Corporation (BDC) until early 2013. She joined BDC in 1995 as the Senior Operations Officer in the Industry Divisions and rose through the ranks to her current position.

Prior to joining BDC she was with the Ministry of Finance & Development Planning as an Economist. She holds various directorships with both public and private sector corporates.

Makaya, TawandaExecutive Director

Tawanda is a Chartered Accountant by profession and holds an MBL from the University of South Africa. He completed his articles of clerkship with Deloitte & Touche Zimbabwe and qualified in 1991. He was a recipient of a bursary from Astra Holdings while at the University of Zimbabwe for being the best accounting student. Tawanda joined Astra Holdings in 192 as Group Internal Auditor in June 1992 after which he joined TA Holdings in 1994 as the Group Finance Executive.

In 1996 he was transferred to Cresta as the Group Financial Controller and rose through the ranks to become the Chief Financial Officer(CFO) and eventually Managing Director in 2007. He is an Associate member of the Botswana Institute of Chartered Accountants.

Dewah, EliasNon-Executive Director

Elias holds a Master of Business Administration from the Research Institute for Management Science at the University of Netherlands. Currently he is a Private Consultant in the field of Management of Business Organization, Public- Private Dialogue, Democracy and Governance. Prior to that Elias has served in the Government of Botswana for 24 years in various capacities in the Ministry of Agriculture and the Ministry of Trade, Commerce and Industry.

For 17 years he served as an Executive Director of Botswana Confederation of Commerce, Industry and Manpower (BOCCIM) and prior to that he was the operations Manager of Shell Oil (Botswana).

Sainsbury, GavinNon-Executive Director

Gavin is the Chief Executive Officer of TA Holdings, a company listed on the Zimbabwe Stock Exchange. Before joining TA Holdings, he worked for Deloitte & Touche from 1981 to 1998. He was appointed a Partner at Deloitte & Touche in 1989.

When he left Deloitte & Touche, he joined Colcom Holdings as a Finance Director and was appointed the Managing Director in 2000. He is a qualified Chartered Accountant and obtained his qualification in 1981 in Zimbabwe.

Dube, JenniferNon-Executive Director

A lawyer by profession, admitted in the High Court of Botswana, Ms Jennifer Dube is currently Head, Legal and Company Secretary at Botswana Development Corporation. She was Manager Legal at Botswana Development Corporation from August 2010 to October 2014 prior to the reorganisation of the Corporation. Previously she was Company Secretary at Botswana Telecommunications Corporation, and before that Head of Legal and Regulatory at Orange Botswana (Pty) Ltd.

Ms Dube’s professional experience spans to over 17 years of legal experience, five of which were as a practicing attorney, Conveyancer and Notary Public, over 13 years as an in-house commercial lawyer. Ms Dube has a strong telecommunications and banking or financial institution background, specialising in the areas of corporate and commercial law, regulatory and compliance, legal risk, company secretarial and corporate governance.

Ms Dube holds a Bachelor of Laws (LLB - UB) degree from the University of Botswana, and has various & extensive management and legal short courses that include a Certificate in Senior Management Development Programme from the University of Stellenbosch Business School, contract management, finance for non-financial managers, debt collection, detecting fraud in the workplace, etc.

Ms Dube serves on the boards of Cresta Marakanelo Limited, Botswana National Productivity Centre, and Kwena Rocla (Pty) Ltd. Resigned on the 30th November 2015.

Board Memebers’ Credentials


Mmualefhe, BatlangNon-Executive Director

Batlang is currently the Manager for Risk Management at BDC and has held this position since 2004. He has also held the positions of Manager for Corporate Communications and Senior Research Officer in the same Institution.

Mr Mmualefe previously worked for Bank of Botswana and Ministry of Finance and Development Planning in varying positions. He holds Master of Arts Degree in Economics from Williams College in USA and a Bachelor of Arts Degree in Economics and Statistics from the University of Botswana. He holds various certificates for attending professional programs on a wide scope of business areas including risk management, project management, and international financial management, corporate communication, management development programs, among others. Mr Mmualefe is a member of GARP (Global Association for Risk Professionals).

MajuruOsbourne Non-Executive Director

Osbourne is a non executive director of Cresta Marakanelo Ltd. He also holds a directorship at Cresta Holdings Pty Ltd. He currently holds a position of Chief Financial and Transformation Officer at Masawara Ltd.

Hehas held a position of Chief Executive Officer of Cresta Holdings Pty Ltd for a number of years, among other positions he has held in his entire career. His experience cuts across industries such as mining, Hospitality and petroleum among others. He is a Chartered Accountant by profession holding a CA qualification obtained in Zimbabwe.

Stevens, John Yendell Non-Executive Director

John qualified as a Chartered Accountant in 1980. He joined Deloitte & Touche in Durban in 1974 and was with the Company for 27 years, serving as a partner resident in Botswana of Deloitte & Touche for 8 years and being elected to the Board of Deloitte & Touche Southern Africa in 2004. John also headed up Deloitte & Touche insolvency and reorganisation division in Botswana and has completed 50 insolvent estates in the past years.

John retired from Deloitte & Touche in 2007 and has taken up the challenge of private consultancy. Over the past 27 years John has gained extensive experience in many spheres of business in Botswana and the many clients that John has served.

Molefe, Pius KomaneNon-Executive Director

Molefe is a Chief Executive Officer of Botswana Building Society. He holds a Post Graduate Diploma in Economics from the University of Sussex in the United Kingdom. Mr Molefe previously worked for Barclays Bank of Botswana and Ministry of Finance among others. At the Ministry of Finance, he was involved in the handling of all development projects.

He was further involved in the development of policies regulating the financial services sector. He was involved in the establishment of the Botswana Stock Exchange and also served as a member in the exchange.

Nyajeka, Bothwell PatrickNon-Executive Director

Bothwell is an executive director of TA Holdings in charge of finance. He is a Chartered Accountant and holds a Bachelor of Accountancy (Honours) degree from the University of Zimbabwe and a Masters degree in Business Leadership from the University of South Africa.

He has extensive financial management and company secretarial experience in the private sector. Before joining TA Holdings, Bothwell worked for the Anglo American Corporation Group in Zimbabwe. Served for 11 months and resigned in the current year.


On behalf of the Board of Directors of Cresta Marakanelo Ltd, I am delighted to present to you the Annual Report and Financial Statements of the Group for the year ended 31st December 2015. During the year 2015, the Group faced challenging times on the business front due to a combination of factors, such as, the consequences of increased competition and the cut on spending by our traditional markets.

However, I am pleased to report that, notwithstanding the challenges, the Group managed to meet its financial commitments, maintain market share, maintain the assets in good condition so as to avoid compromising standards of product and service and has implemented efficiency measures to reduce general operating costs without sacrificing operating standards.

FINANCIAL PERFORMANCEThe Group achieved revenue of P320 million, which was a 5% growth from P303 million achieved in the previous year.

The EBITDA achieved for the period under review was P63.6 million which was an 8% increase from P58.6 million achieved last year. EBITDA was impacted by the 5% increase in revenues and also a 4% reduction in operating costs. Finance costs for the period under review increased by 114.5% from P3.2 million to P6.8 million as a result of the unrealized exchange losses emanating from the depreciation of the Kwacha during the period under review. Profit from operations was P41.1 million from a prior year profit of P34.9 million. This represented an 18% increase over prior year.

Owing to strict cost controls and improved marginal contributions at key units, profit before tax increased by 12% from P32.3 million to P36.2 million.

Botswana OperationsThe Botswana market continues to challenge, with increased competition especially in urban areas such as Gaborone, Francistown and Palapye. Consumers are becoming more price sensitive and are increasingly demanding more value for their spend. The company has had to be creative in its marketing activities to lure business into the hotels.The company’s operating profit of P40.9 million reflects an operating margin of 13.8% (2014: 13.0%). This reflects strong cost control, the improved contribution to operating margins from most hotels during the second half of the year and also a 62% (P2.4 million) reduction in lease straight-lining charges under IAS17.The company continues to innovate in order to attract and retain customers, with the Cresta loyalty card membership continuing to grow. The company is seeing an increasing trend in spend and redemptions by these loyalty members and will continue to evaluate the range of benefits and conditions attaching to these schemes in order to enhance guest experience and loyalty.

Zambian OperationTrading conditions in Zambia continue to be challenging, however, the company continues to innovate. The company came up with a strategy at the beginning of 2015, to win over lost business. The strategy bore fruit as the company recorded growth in revenues in Kwacha terms at Cresta

Golfview Hotel.

Revenues grew by 19% compared to same period last year in Kwacha. However, on the back of continued strengthening of the Pula against the Kwacha, the company recorded a P5.97 million foreign exchange loss on the Pula denominated loan used to finance the acquisition of the Zambian assets. This resulted in the hotel recording a loss of P6.4 million for the year compared to a loss of P4.5 million in the corresponding period in 2014.

STATEMENT OF FINANCIAL POSITIONTotal assets grew by 7% to P245 million (2014:P229m). Equity grew by 12% to P163 million (2014:P145m).With the exception of deferred revenue items of P1.6 million (2014:P1.3m) recognised in respect of the Group’s Pride and Select customer loyalty schemes, net operating assets have increased in line with the growth in the number of operating units.

During the period, shareholders agreed to dissolve the company’s Employee Share Trust (EST) and replace it with a new Phantom Share Scheme which was approved at the Annual General Meeting held on the 26th June 2015. The old scheme was not effective as the dividends that were meant to service the loan that the company had extended to the Trust were not sufficient to cover the interest of the loan. The old scheme was thus dissolved on the 26th of June 2015 and gave way to a new Phantom Share Scheme.

CASH FLOWThe Group’s net cash generated from

Chairperson’s Statement



operations was P55.3 million compared to P61.2 million in the corresponding period, reflecting a decrease in cash as a result of insurance prepayments made at the end of the year.

Cash balances available at year-end stood at P61.8 million (2014: P45.8m). Part of the funds will be used to finance the new hotel project in Maun and also pay a proposed dividend.

DIVIDENDA dividend of 7 thebe per share has been declared for the year ended 31 December 2015. The dividend will be paid on or about 23 May 2016 to shareholders registered at the close of business on 6 May 2016.

In terms of the Income Tax Act (Cap 52.01) as amended, withholding tax at the rate of 7.5% will be deducted by the Company from gross dividends.

OTHER DEVELOPMENTSThe Board wishes to inform shareholders that the Company concluded negotiations for a hotel operation in Ghanzi with Babereki Investments Pty Ltd. Construction of the hotel is likely to start during the course of 2016.

FUTURE PROSPECTSThe Group continues to explore new markets in an endeavor to increase returns.

Maria Nthebolan - Chairperson

Chairperson’s Statement (continued)




Patrick Chivese (1) Group Sales and Marketing Manager

Tawanda Makaya (2) Managing Director

Jonathan Cox (3) Group Operations Manager

Duncan Mfolwe (4)Group Projects Manager

Segomotso Banda (5)Group HR Manager

Valentine Mganga (6) Chief Financial Officer


1 2Executive Management



53 4 6



It is my pleasure to update you on our company’s satisfactory performance. I am, however, even more excited to highlight our company’s long term strategies for the years to come. I am extremely confident that we are positioned for continued successes on account of our strong brand, domestic and regional growth opportunities and expansion of our Cresta loyalty programme. We have an enviable business model and financial strength, which has over time enabled us deliver unmatched shareholder value in the hotel industry.

The last 12 months were challenging for the industry and economy at large with reduced government and personal spending. Consequently, this has resulted in our occupancies only growing by 2% over 2014 levels. This also resulted in our average room rate decline by 5.9% over 2014. For the year, the company’s Revpar declined by 6.9%.

Fortunately, our resilient business model enabled us to offset a confluence of negative factors, as the company demonstrated strong cost containment measures throughout the company. Overall revenues were 5.4% up on prior year. Industry wide revpar was anticipated to decline across most hotels. Our business model and the brand positioned the company to perform favourably relative to direct competitors. The value-orientation of our brand tends to help our properties capture

business from travelers trading down amid the economic slow down. While we are well positioned in this environment, negative economic factors are expected to cause a softening of the company’s future results.

To continue to grow our business and market share in this challenging environment, our strategic focus for the future will be to increase room supply in our company, capturing market share and improving central reservations delivery, continuing to invest in longer term growth opportunities, maintaining our operating margins and allocating capital to sustain our business

Managing Director’s Statement



and increase shareholders’ returns. Our execution in these areas and continued focus on profitability will fuel continued system growth and enable us to maintain our track record of generating strong financial results and shareholder returns.

Strategically grow our established brand

We will continue to focus on growing our already established brand. We will continue to put in place competitive positioning strategies that capitalize on the brand’s unique value propositions for guests while leveraging and protecting the strength of the overall portfolio.

Our brand is well known locally and we are doing everything possible to take it out to the region.

Investment in future growth opportunities

Our profitable core business enables us to continue to invest in growth opportunities in new areas and markets.

We remain confident in the long term growth prospects for our brand. We finished 2015 with 11 operating hotels and our ongoing efforts in increasing rooms have resulted in the company entering into a lease agreements with various developers for new hotels.

I am happy to announce that we have one hotel under construction in Maun, the gateway to the Delta which is expected to be completed towards the end of 2016. I am further pleased to inform all stakeholders that the company has entered into an agreement with a developer for another hotel in the Ghanzi district. The construction of this hotel is expected to start during 2016.

The company continues to evaluate acquisition opportunities in areas where it does not have a presence both locally and

regionally. The company views regional expansion as a strong driver of our future growth. We anticipate developing a long term strategy focused on achieving economies of scale in key regional markets where there is tremendous need for mid-market hotel facilities such as those provided by our brand.

Drive reservations delivery

In an economically challenging environment, the company seeks to benefit from access to a robust distribution platform. The company will continue to improve its value proposition for its existing platform.

The company continues to invest aggressively in marketing, ecommerce and reservations efforts that will encourage occupancy in our hotels. Once the guests elect to stay at our hotels, it is imperative we increase the likelihood they will return. The company’s loyalty programme will be a key driver in this effort and our goal is to increase membership by at least 5% in 2016.

We continue to drive more reservations through our central reservations platform, which deliver a significant number of reservations compared to direct hotel reservations. The company will continue to drive more guests to www.crestamarakanelo.com by accelerating investment in internet search efforts.

Achieve operational efficiency

The economic slowdown will require the company to ensure it is achieving operating efficiencies and leveraging the scale advantages inherent in the business. To that end, we have identified ways to limit growth in expenses. Some of the ways are, assess infrastructure needs to achieve desired operating efficiencies, address information technology requirements and continue to build talented, engaged and diverse workforce. The company is also

committed to elevating its profile in the overall industry and in the communities in which it operates.

Maximise financial and shareholder returns

We remain committed over the long term to utilizing strong, predictable cashflows that our business generates to return excess capital to our shareholders, primarily through dividends.

For 2015 financial year, the Board of Directors declared a dividend of 7 thebe per share. This was a 16.6% growth over prior year declaration.

Conclusion

2016 will be equally challenging for our industry and the economy. We are working very hard to allocate and manage all available resources to maximize guest delivery and each property success and profitability. We are committed to achieving our vision of providing owners with the highest return on investment.

We also remain extremely cautious about how we are managing our resources given the current environment. While we are steadfastly committed to our strategic agenda, given the economic uncertainty, we are committed to carefully managing our expenditures.

Even as the current environment remains challenging, the company’s business model is ideally positioned for success in this climate.

Managing Director’s Statement (continued)




Corporate Governance


BOARDThe Board is committed to ensuring that good practice in corporate governance is observed throughout the Group, and remains the responsibility of the whole Board.The Board is committed to maintaining high standards of business integrity and professionalism in all its activities, and continues to support the highest standards in corporate governance.

Overall control of the Group is exercised by the Board, which has responsibility, among other things, for setting strategy and ensuring adequate resources are available and leadership is provided to achieve the Group’s strategy. The Board meets up four times a year and has a schedule of matters reserved for its attention. All Directors receive board papers prior to the meetings.

Executive management is responsible to the Board for the Group’s operational performance including: implementing Group strategy as determined by the Board; maintaining adequate internal control systems and risk management processes; monitoring operational performance against plans and targets and reporting to the Board any significant variances, maintaining an effective management team and succession planning.

The Board currently comprises the Chairperson, three independent non-executive Directors, four non- executive Directors, all of whom are appointees of major shareholders and finally an executive Director, who is the Managing Director of the Group. Each Director is expected to fulfill their duties for the benefit of all shareholders and it is believed that the independent non executive Directors provide strong independent judgement to the deliberations of the Board.

The Board has established agreed procedures for managing potential conflicts of interest. All Directors are required to disclose at each meeting their shareholding, additional directorships and any potential conflicts of interest to the Chairperson and the Company Secretary. These procedures are reviewed by the Board at least annually. The Board is satisfied that the procedures for managing potential conflicts remain effective.

BOARD COMMITTEESIn relation to certain matters, committees have been established with specific delegated authority. The standing committees of the Board are Audit and Human Resources Committees. Both of these committees have terms of references agreed by the Board.

Audit CommitteeChair – John Y Stevens

The Audit Committee consists of two independent non-executive Directors and one non-executive Director. Two of the Directors are believed to have the relevant financial experience as required.Mandate of the Committee;• Assist the Board with the evaluation

of adequacy and effectiveness of the internal control systems, accounting practices, information systems and auditing processes applied in business.

• Ongoing reviews of the Group’s riskmanagement processes.

• Introduce such measures that wouldserve to enhance the credibility and objectivity of the financial statements.

• Monitoring and reviewing theeffectiveness of the internal audit function.

• Agreement of detailed scope of theexternal audit prior to commencement of their audit; reviewing the scope and results of the audit and its cost effectiveness; and recommendation of the audit fee to the Board.

The Audit Committee is responsible for reviewing the independence and objectivity of the external auditor and has reported to the Board that it considers that the auditor’s independence and objectivity has been maintained. Audit independence and objectivity are safeguarded by the Audit Committee monitoring and approving, when appropriate, the nature of any non-audit work and levels of fees paid.

Corporate Governance



Corporate Governance (continued)

Human Resources CommitteeChair – Elias Dewah

The Human Resources Committee consists of one independent non executive Director, one non executive Director and one executive Director. It is responsible for considering and making recommendations to the Board, within agreed terms of reference, on the Group’s remuneration policies, determining the remuneration packages of executive management and the operation of the Group’s phantom share scheme. The Committee takes independent advice as deemed necessary.

Other functions of the Committee include a review of the performance conditions used for long term incentive plan, review of short term bonus arrangements and targets.

Board and Committee MeetingsFigures in the brackets represent the maximum number of Board or Committee meetings held whilst the individual concerned is a Board member or member of the relevant Committee.

The Board is committed to maintaining high

standards of business integrity and professionalism

in all its activities, and continues to support

the highest standards in corporate governance.





Board Audit Committee Human ResourcesDirectors Meetings Meetings Committee Meetings

Maria Nthebolan 4 (4) - -

John Stevens 3 (4) 2 (3) -

Elias Dewah 4 (4) - -

Gavin Sainsbury 1 (4) - -

Bothwell Nyajeka (resigned) 3 (4) 3 (3) -

Pius Molefe 4 (4) 2 (3) -

Batlang Mmualefhe 3 (4) - -

Jeniffer Dube (resigned) 1 (4) - -

Tawanda Makaya 4 (4) - -

The Board is responsible for the Group’s system of internal control, including the Group’s financial reporting process and the Group’s process for preparation of consolidated accounts, and for monitoring its effectiveness. In establishing this system, the Directors have considered the nature of the Group’s business, with regard to the risks to which the business is exposed to, the likelihood of such risks occurring, their potential impact and the costs of protecting against them. However, such a system is designed to manage rather than eliminate the risk of failure

to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. This process is reviewed by the Audit Committee on behalf of the Board and has been in place for the year under review, and up to the date of the approval of the annual report.

Primary responsibility for the operation of the system of internal controls is

delegated to executive management. The effectiveness of the operation of internal control system is reviewed by the internal audit function and, where appropriate, by the Group’s external auditor, who report to management and to the Audit Committee. In addition, responsibility delegated to executive management to monitor the effectiveness of the systems of control in managing identified risks as established by the Board. The internal audit function reviews the effectiveness of key internal controls as part of its standard work programme, and individual

Board and Committee MeetingsFigures in the brackets represent the maximum number of Board or Committee meetings heldwhilst the individual concerned is a Board member or member of the relevant Committee.


Closed PeriodThe closed period for the trading in the Group’s shares by Directors and employees is from the beginning of the months of both the interim and the year end, up to the date of publication of the interim and final results in the print media.

Directors and employees are prohibited from dealing in the Group’s shares during such periods in which they are privy to unpublished price sensitive information.

M M Nthebolan T MakayaChairperson Managing Director

reports are issued to appropriate senior management. These reports are summarized and distributed to the Audit Committee, The Managing Director, senior management of the group. They are subsequently reviewed by the Audit Committee, which ensures that, where necessary, recommendations on appropriate corrective action are drawn to the attention of the full Board.Communication with Stakeholders

The Group holds Annual General Meetings. At these meetings, there is an opportunity for all shareholders to

question the Chairperson and other Directors (including Chairman of the Audit Committee, Human Resources Committee). The Group prepares separate resolutions on each substantially separate issue put to shareholders and does not combine resolutions together inappropriately. A schedule of proxy votes cast is made available for inspection at the conclusion of the proceedings and the annual report is laid before the shareholders at the Annual General Meeting. Notice of the annual general meeting and related papers are sent to shareholders at least 21 working days

prior to the date of the meeting, and the Group encourages all shareholders to make positive use of the annual general meeting for communication with the Board.

Further, the group has made available an investor relations page on the Group’s website; www.crestamarakanelo.com. All information about the group and activities can be found on this page. Comments and questions can be channeled to management through this page.





Sustainability Reporting


People

Our people play a critical role in the success of the business and the following are relevant in this regard;

• Development of Human Capital

Human capital is a key component of Cresta Marakanelo Ltd. The Group values its employees and endeavous to recruit and retain the best skills in the market. The focus for developing human capital is based on training, continuous reviews for compensation and benefits.

• Staff Welfare and Development

In the quest of the Group’s drive to improve productivity for the employees; sports was identied as one of the the elements that play an important part. Participating across the hotels, the Group has various sporting codes being played, soccer,

volleyball, netball,etc. The Group also promotes country sporting competitions between the Cresta in Botswana and Cresta in Zimbabwe. The interaction between these groups is believed to impact positively on employee motivation.

• Remuneration

Management in conjuction with the Human Resources Committee, continuously reviews incentive schemes for the employees. The Group has got a Performance Appraisal System that is 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 themselves with a recognised hospitality Union which will negotiate for better living conditions on their behalf. In the Committee of the Union, there are staff representatives sitting in the meetings to participate in the negotiations for the rest of the staff members.

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 sector in the country. Attention has been paid to the following;



Our approach to sustainability reporting is one that is in line with the Cresta Marakanelo Ltd values: respect, dignity, intergrity, honesty and passion. The board is accountable for the sustainability of the business and believe that the existence of the business and its continued success is dependent on relationships that prevail with its stakeholders.

The Group recognises the importance of balancing its long term business sustainability requirements with short term focus and goals. Strategies and policies that contribute to the sustainable development of the Group to ensure that both the financial and non financial aspects of the business are appropriately evaluated and managed, have been adopted. Our stakeholders are represented by our people and customers, suppliers and communities we serve in.


• 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 dierent 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 lies with the General Managers of each hotel. There is an escalation that could be done in the event the customer is not satised 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 headquarters 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 is 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 importance on 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.


Sustainability Reporting (continued)




Corporate Social Responsibility



Our corporate environmental consideration

The Cresta Group believes that corporate social responsibility (CSR) should not just be about philanthropy and compliance but that it should also offer a more holistic corporate approach towards economic, social, and environmental impacts as a whole.

The group also places strong emphasis on measuring its success, not only in terms of financial gain, but also in terms of the degree to which it has contributed towards local economic development, environmental conservation and social justice.

Sustaining the environment

The Group seeks to minimize its impact on the environment. Our responsible hospitality policies aim to ensure operational compliance with all relevant environmental legislation in all the areas we operate in.

We are continually assessing our environmental impact and actively seeking ways to reduce it through improvements in our hotels’ operating infrastructure and modifying working practices aimed at reducing energy consumption, reducing water consumption and reducing the amount of waste produced from our hotels. Management also works with suppliers to minimize the environmental impact of their activities. Environmental performance is also being integrated into the operational objectives of general managers and other managerial staff.

Supporting the national economy

The Cresta Group is a significant contributor towards governmental revenue in all the areas in which it operates through payment of taxes.

Promoting good governance

The Cresta Group recognises the need to conduct its business in accordance with generally accepted best corporate practices and in line

with the global principles of corporate governance and business ethics.

Working with the local community

Cresta hotels are located in various places in the country. These areas are shared with an extraordinarily diverse range of local cultures and ethnic groups, all of which cherish their own particular cultural traditions and heritage. The Cresta Group is committed both to protecting and sustaining the lifestyle of such groups and showcasing and promoting their individual cultural heritage. Such promotion includes the inclusion of local designs, fabrics, handicrafts, sculptures and artworks within the design concept of the hotel or lodge, promoting local handicrafts in the hotel gift shops, and in showcasing local cultural traditions by means of dance, song, musical and theatrical displays for the hotel guests.

Corporate Social ResponsibilityWe continue to be sensitive towards monitoring the interests of the local population; particularly with regard to safeguarding of their traditions, culture and future development.

We will practise a responsible attitude towards energy conservation in terms of the reduction and recycling of waste; the control of sewage disposal, air-emissions and pollutants; the reduction in use of such unfriendly products as CFCs, pesticides and other toxic substances; and the reduction of noise and visual pollution.

We will be sensitive to the conservation of environmentally protected or threatened areas, species and scenic aesthetics. We shall also aim to achieve the enhancement of the landscape, wherever possible, by means of indigenous plant material reinforcement.

We must conserve rather than exploit nature.


Corporate Social Responsibility (continued)


Handing over of a house in Sese




House built in Sese

House built in TsetsebjweOne of the beneficiaries’ old dweling




Supporting the local economy

Wherever possible, the Group purchases its raw materials from the local community. This may take the form of fruit and vegetables, meat, dairy products and a wide range of other food stuffs. The Group also works with local suppliers and out-growing schemes so as to enable local growers to meet the exacting quality standards required by the group, as well as to practise economies of scale in supply.

Supporting the local society

The Group is committed to the concept of the creation of optimum economic opportunities for the local communities in which it operates. These can take many forms, such as; employment, supply of raw materials, supply of handicrafts or supply of local dance troupes.

Charitable donations in cash and in-kind

Cresta and its staff support a broad range of charitable causes and community initiatives. These take many forms; building houses, cash, supply of foodstuffs or clothing, supply of bed linen,etc.

The Group encourages its hotels to reach out to local communities and become involved in community projects. Our staff members devote their time and energy to projects and our hotels donate items and resources in accordance with our corporate social responsibility policy. During the year, staff members in various areas have been involved in a wide range of events and activities linked to projects to benefit children and the needy.

House built in Tsetsebjwe Cresta MD Tawanda Makaya Former Vice President Dr Ponatshego Kedikilwe


Group annual Financial statementsfor the year ended 31 December 2015

Index pageStatement of directors’ responsibility 38

Independent auditors’ report 39

Statements of comprehensive income 40

Statements of financial position 41

Statements of changes in equity 42

Statements of cash flows 43

Summary of significant accounting policies 44

Financial risk management 58

Critical accounting estimates and assumptions 67

Notes to the annual financial statements 69



The directors have reviewed the Group and Company budget and cash flow forecasts for the year to 31 December 2016. On the basis of this review, and in the light of the current financial position and existing borrowing facilities of the Group, the directors are satisfied that Cresta Marakanelo Limited is a going concern and have continued to adopt the going concern basis in preparing the financial statements. The Group’s external auditors, PricewaterhouseCoopers, have audited the financial statements and their unqualified audit report appears on page 39 of the financial statements.

The Board recognises and acknowledges its responsibility for the Group’s systems of internal financial control. Cresta Marakanelo Limited has adopted policies on business conduct, which cover ethical behaviour, compliance with legislation and sound accounting practice and which underpin the Group’s internal financial control process. The control systems include written accounting and control policies and procedures, clearly defined lines of accountability and delegation of authority, and

comprehensive financial reporting and analysis against approved budgets. The responsibility for operating these systems is delegated to the executive director and management, who have confirmed that they have reviewed the effectiveness thereof.

The directors consider that the systems are appropriately designed to provide reasonable assurance, as to the reliability of financial statements and that assets are safeguarded against material loss or unauthorised use and that transactions are properly authorised and recorded.

The effectiveness of the internal financial control systems is monitored through management reviews, comprehensive reviews and testing by internal auditors and the external auditors’ review and testing of appropriate aspects of the internal financial control systems during the course of their statutory examinations of the Company and Group.

The Group and Company’s directors have considered the results of these reviews, none of which indicate that the systems of internal control

were inappropriate or operated unsatisfactorily. Additionally, no breakdowns involving material loss have been reported to the directors in respect of the year under review.

The annual financial statements for the year ended 31 December 2015 and which appear on pages 40 to 92 were authorised for issue by the Board of Directors on 22 March 2016 and are signed on its behalf by:

Director

Director

Statement of directors’ responsibility


The Group’s directors are required by the Botswana Companies Act, 2003 to maintain adequate accounting records and to prepare financial statements for each financial year which show a true and fair view of the state of affairs of the Company and Group at the end of the financial year and of the results and cash flows for the period. In preparing the accompanying Company and Group financial statements, International Financial Reporting Standards have been followed, suitable accounting policies have been used and applied consistently, and reasonable and prudent judgements and estimates have been made. Any changes to accounting policies are approved by the Group’s Board of Directors and the effects thereof are fully explained in the financial statements. The financial statements incorporate full and responsible disclosure in line with the significant accounting policies of the Group noted on pages 44 - 57.


INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CRESTA MARAKANELO LIMITEDWe have audited the group annual financial statements of Cresta Marakanelo Limited, which comprise the consolidated and separate statements of financial position as at 31 December 2015, and the consolidated and separate statements of comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 40 to 92.

Directors’ Responsibility for the Financial Statements

The directors are responsible for the preparation of consolidated and separate financial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of Cresta Marakanelo Limited as at 31 December 2015, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards.

Individual practicing member: Rudi Binedell GaboroneMembership number: 20040091 6 April 2016


Statement of Comprehensive IncomeFor the year ended 31 December 2015


GROUP COMPANY 2015 2014 2015 2014 Notss P’000 P’000 P’000 P’000 Revenue 1 319,603 303,195 296,279 279,465 Cost of sales 2 (190,482) (177,519) (178,475) (165,635) Gross profit 129,121 125,676 117,804 113,830 Other income 1,065 1,514 - 427 Other gains 39 27 39 27 Sales and distribution expenses 2 (7,689) (9,239) (7,159) (8,571) Administration and operating expenses 2 (81,448) (83,119) (69,830) (69,259) Operating profit 41,088 34,859 40,854 36,454 Finance income 4 1,933 614 2,899 2,424 Finance expense 4 (6,798) (3,170) (1,152) (1,774) Profit before income tax 36,223 32,303 42,601 37,104 Income tax expense 5 (9,462) (8,245) (9,462) (8,245) Profit for the year 26,761 24,058 33,139 28,859 Other comprehensive income: Currency translation differences (subject to subsequent recycling through profit or loss) 2,199 40 - - Other comprehensive income/(expense) for the year 2,199 40 - - Total comprehensive income for the year 28,960 24,098 33,139 28,859 Basic and diluted earnings per share (thebe) 6 16.01 13.32 18.32 15.63


Statements of Financial PositionFor the year ended 31 December 2015

GROUP COMPANY 2015 2014 2015 2014 Notes P’000 P’000 P’000 P’000 ASSETS Non-current assets Property, plant and equipment 10 142,576 143,581 139,204 138,969 Intangible assets 11 Lease rights/Trademarks/Software 781 748 781 748 Goodwill 11,335 13,878 5,274 5,274 Investment in subsidiary 7 - - 7 7 Loan to subsidiary 8 - - 13,300 14,948 Loan receivable - Cresta Employee Staff Plan 9 - - - 1,373 Deferred income tax assets 17 4,284 4,216 4,284 4,216

Total non-current assets 158,976 162,423 162,850 165,535 Currents assets Inventories 13 2,852 2,919 2,540 2,411 Loan to subsidiary 8 - - 2,258 1,938 Trade and other receivables 14 20,959 18,015 20,216 17,529 Current income tax assets 479 11 470 - Cash and cash equivalents 15 61,835 45,801 61,064 43,091

Total current assets 86,125 66,746 86,548 64,969 Total assets 245,101 229,169 249,398 230,504 EQUITY Capital and reserves Stated capital 16 18,500 18,500 18,500 18,500 Treasury shares 12 (5,915) (5,915) (2,105) (550)Foreign currency translation reserve 2,231 32 - - Retained earnings 148,191 132,508 155,621 133,560

Total equity 163,007 145,125 172,016 151,510 LIABILITIES Non-current liabilities Deferred lease obligation 20 30,589 28,972 29,209 27,621 Borrowings 18 12,856 17,227 12,856 17,227

Total non-current liabilities 43,445 46,199 42,065 44,848 Current liabilities Trade and other payables 19 31,276 29,699 28,134 26,423 Current income tax liabilities - 1,298 - 1,297 Borrowings 18 4,277 3,663 4,277 3,663 Deferred revenue 21 1,615 1,326 1,615 1,326Deferred lease obligation 20 1,481 1,859 1,291 1,437

Total current liabilities 38,649 37,845 35,317 34,146 Total liabilities 82,094 84,044 77,382 78,994 Total equity and liabilities 245,101 229,169 249,398 230,504



Statement of Changes in EquityFor the year ended 31 December 2015


Foreign Currency Ordinary Treasury translation Retained Total shares shares reserve earnings equity P’000 P’000 P’000 P’000 P’000

GROUP Year ended 31 December 2014 Balance at 1 January 2014 18,500 (5,915) (8) 117,510 130,087 Profit for the year - - - 24,058 24,058 Other comprehensive income for the year - - 40 - 40

Total comprehensive income for the year - - 40 24,058 24,098

Transaction with owners of the company Gross dividends paid - - - (9,060) (9,060)

- - - (9,060) (9,060)

Balance at 31 December 2014 18,500 (5,915) 32 132,508 145,125 Year ended 31 December 2015 Balance at 1 January 2015 18,500 (5,915) 32 132,508 145,125 Profit for the year - - - 26,761 26,761 Other comprehensive income for the year - - 2,199 - 2,199

Total comprehensive income for the year - - 2,199 26,761 28,960 Transaction with owners of the company Gross dividends paid - - - (11,078) (11,078)

- - - (11,078) (11,078)

Balance at 31 December 2015 18,500 (5,915) 2,231 148,191 163,007 COMPANY Year ended 31 December 2014 Balance at 1 January 2014 18,500 (550) - 113,933 131,883 Profit for the year - - - 28,859 28,859 Other comprehensive income for the year - - - - - Total comprehensive income for the year - - - 28,859 28,859 Transaction with owners of the company Gross dividends paid - - - (9,232) (9,232)

- - - (9,232) (9,232)

Balance at 31 December 2014 18,500 (550) - 133,560 151,510 Year ended 31 December 2015 Balance at 1 January 2015 18,500 (550) - 133,560 151,510 Profit for the year - - - 33,139 33,139 Other comprehensive income for the year - - - - - Total comprehensive income for the year - - - 33,139 33,139 Transaction with owners of the company Gross dividends paid - - - (11,078) (11,078)Acquisition of treasury shares - (1,555) - - (1,555)

- (1,555) - (11,078) (12,633)

Balance at 31 December 2015 18,500 (2,105) - 155,621 172,016


GROUP COMPANY 2015 2014 2015 2014 Notes P’000 P’000 P’000 P’000

Cash flows from operating activities

Cash generated from operations 24 67,730 71,570 65,508 69,874

Interest paid 4 (1,152) (1,774) (1,152) (1,774)

Tax paid (11,299) (8,580) (11,299) (8,580)

Net cash generated from operating activities 55,279 61,216 53,057 59,520

Cash flows from investing activities

Purchase of property, plant and equipment 10 (25,910) (19,233) (23,958) (18,383)

Purchase of computer software 11 (406) (788) (406) (788)

Proceeds on disposal of plant and equipment 70 137 70 137

Loan repayments received from Employee Share Trust - - 102 85

Loan repayments received from/(Loan provided to)

subsidiary - - 1,328 (132)

Interest received (excluding capitalised portion

of Employee Share Trust) 1,934 590 2,615 1,822

Net cash utilised in investing activities (24,312) (19,294) (20,249) (17,259)

Cash flows from financing activities

Repayment of borrowings (3,857) (7,166) (3,857) (7,166)

Dividends paid to company’s shareholders 22 (11,078) (9,060) (11,078) (9,232)

Net cash utilised in financing activities (14,935) (16,226) (14,935) (16,398)

Net increase in cash and cash equivalents 16,032 25,696 17,873 25,863

Cash and cash equivalents at beginning of year 45,801 20,312 43,091 17,228

Exchange loss on cash and cash equivalents (98) (207) - -

Cash and cash equivalents at end of year 15 61,735 45,801 60,964 43,091

Statements of Cash FlowsFor the year ended 31 December 2015

Foreign Currency Ordinary Treasury translation Retained Total shares shares reserve earnings equity P’000 P’000 P’000 P’000 P’000

GROUP Year ended 31 December 2014 Balance at 1 January 2014 18,500 (5,915) (8) 117,510 130,087 Profit for the year - - - 24,058 24,058 Other comprehensive income for the year - - 40 - 40

Total comprehensive income for the year - - 40 24,058 24,098

Transaction with owners of the company Gross dividends paid - - - (9,060) (9,060)

- - - (9,060) (9,060)

Balance at 31 December 2014 18,500 (5,915) 32 132,508 145,125 Year ended 31 December 2015 Balance at 1 January 2015 18,500 (5,915) 32 132,508 145,125 Profit for the year - - - 26,761 26,761 Other comprehensive income for the year - - 2,199 - 2,199

Total comprehensive income for the year - - 2,199 26,761 28,960 Transaction with owners of the company Gross dividends paid - - - (11,078) (11,078)

- - - (11,078) (11,078)

Balance at 31 December 2015 18,500 (5,915) 2,231 148,191 163,007 COMPANY Year ended 31 December 2014 Balance at 1 January 2014 18,500 (550) - 113,933 131,883 Profit for the year - - - 28,859 28,859 Other comprehensive income for the year - - - - - Total comprehensive income for the year - - - 28,859 28,859 Transaction with owners of the company Gross dividends paid - - - (9,232) (9,232)

- - - (9,232) (9,232)

Balance at 31 December 2014 18,500 (550) - 133,560 151,510 Year ended 31 December 2015 Balance at 1 January 2015 18,500 (550) - 133,560 151,510 Profit for the year - - - 33,139 33,139 Other comprehensive income for the year - - - - - Total comprehensive income for the year - - - 33,139 33,139 Transaction with owners of the company Gross dividends paid - - - (11,078) (11,078)Acquisition of treasury shares - (1,555) - - (1,555)

- (1,555) - (11,078) (12,633)

Balance at 31 December 2015 18,500 (2,105) - 155,621 172,016



General information

Cresta Marakanelo Limited is a public limited Company listed on the Botswana Stock Exchange and primarily operates hotels and related services in Botswana and Zambia.

The consolidated Group financial statements and separate Company financial statements for the year ended 31 December 2015 have been approved for issue by the Board of Directors on 22 March 2016. Neither the entity’s Board of Directors nor others have the power to amend financial statements after issue.

Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Group and Company financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

1.1 Basis of preparation

The Group and Company 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 certain financial assets and liabilities at fair value.

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 effective for 31 December 2015 year end but not applicable to the Group and Company:

Amendment to IAS 19, ‘Employee benefits’, regarding defined benefit plans (effective 1/7/2014): These narrow scope amendments apply to contributions from employees or third parties to defined benefit plans. The objective of the amendments is to simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary.

b) Standards, amendments and interpretations to existing standards but not effective for 31 December 2015 year-end and have not been early adopted by the Group and Company:A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing this financial statement. None of these is expected to have a significant effect on the financial statements of the Group and Company, except the following set out below:

Amendments to IFRS 10, ‘Consolidated financial statements’ and IAS 28,’Investments in associates and joint ventures’ on sale or contribution of assets (effective date 1 January 2016). The IASB has issued this amendment to eliminate the inconsistency between IFRS 10 and IAS 28. If the non-monetary assets sold or contributed to an associate or joint venture constitute a ‘business’, then the full gain or loss will be recognised by the investor. A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments clarify the application of the consolidation exception for investment entities and their subsidiaries.

Summary of Significant Accounting PoliciesFor the year ended 31 December 2015



1.1 Basis of preparation (continued)

b) Standards, amendments and interpretations to existing standards but not effective for 31 December 2015 year-end and have not been early adopted by the Group and Company: (continued)

Amendment to IFRS 11, ‘Joint arrangements’ on acquisition of an interest in a joint operation (effective 1/1/2016). This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions.

IFRS 14 – Regulatory deferral accounts (effective 1/1/2016): The IASB has issued IFRS 14, ‘Regulatory deferral accounts’ specific to first time adopters (‘IFRS 14’), an interim standard on the accounting for certain balances that arise from rate-regulated activities (‘regulatory deferral accounts’). Rate regulation is a framework where the price that an entity charges to its customers for goods and services is subject to oversight and/or approval by an authorised body.

Amendments to IAS 1,’Presentation of financial statements’ disclosure initiative (effective 1/1/2016): In December 2014 the IASB issued amendments to clarify guidance in IAS 1 on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies.

Amendment to IAS 16,’Property, plant and equipment’ and IAS 38,’Intangible assets on depreciation and amortisation (effective 1/1/2016). In this amendment the IASB has clarified that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset.

Amendments to IAS 27, ‘Separate financial statements’ on equity Accounting (effective 1/1/2016): In this amendment the IASB has restored the option to use the equity method to account for investments in subsidiaries, joint ventures and associates in an entity’s separate financial statements.

IFRS 15 – Revenue from contracts with customers (effective 1/1/2018). The FASB and IASB issued their long awaited converged standard on revenue recognition on 29 May 2014. It is a single, comprehensive revenue recognition model for all contracts with customers to achieve greater consistency in the recognition and presentation of revenue. Revenue is recognised based on the satisfaction of performance obligations, which occurs when control of good or service transfers to a customer.

IFRS 9 – Financial Instruments (2009 & 2010), (effective 1/1/2018)• Financialliabilities• De-recognitionoffinancialinstruments• FinancialassetsGeneralhedgeaccounting

This IFRS 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.

The IASB has updated IFRS 9, ‘Financial instruments’ to include guidance on financial liabilities and de-recognition 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.

There are no other IFRS or IFRIC interpretation that are not yet effective that would be expected to have a material impact on the Group.

Summary of Significant Accounting Policies (continued)For the year ended 31 December 2015



1.2 Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. 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 equity 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 acquire 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 carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in statement of comprehensive income.

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 statement of comprehensive income or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-Group transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the Group’s accounting policies.

(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 equity 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 equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(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 statement of comprehensive income. 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 statement of comprehensive income.




1.3 Business Combinations

The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequent changes to the assets, liabilities or equity which are arise as a result of the contingent consideration are not effected against goodwill, unless they are valid measurement period adjustments.

The acquiree’s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3 business combinations are recognised at their values at acquisition date, except for non-current assets (or disposal group) that are classified as held for sale in accordance with IFRS 5 Non-current held for sale and discontinued operations, which are recognised at fair value less costs to sell.

Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there is a present obligation at acquisition date.

On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for Group purposes. This excludes lease agreements and insurance contracts, whose classification remains as per their inception date.

In case where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured at fair value as at acquisition date. The measurement to fair value is included in statement of comprehensive income for the year. Where the existing shareholding was classified as an available for sale financial asset, the cumulative fair value adjustments recognised previously in other comprehensive income and accumulated in equity are recognised in statement of comprehensive income as a reclassification adjustment.

Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree.

Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed.

Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases the goodwill is translated to the functional currency of the Group at the end of each reporting period with the adjustment recognised in equity through other comprehensive income.

1.4 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.




1.4 Foreign Currency Translation (continued) (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 statement of comprehensive income.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within ‘finance income or cost’.

(c) Group companies

The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;(ii) income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and(iii) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income.

1.5 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 - accommodation revenue

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) Sale of goods - Foods, beverages and curios

Sales of foods, beverages, curios 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).




1.5 Revenue recognition (continued)

(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.

(e) Customer loyalty programmes

The Group operates a loyalty programme where customers accumulate points for every paid (night) spent in the Cresta hotel. The reward points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the consideration received between the award points and the other components of the sale such that the reward points are initially recognised as deferred income at their fair value. Revenue from the reward points is recognised when the points are redeemed.

1.6 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 statement of comprehensive income 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.

1.7 Dividend distribution

Dividend distribution to the Group’s shareholders is recognised as a liability in the group’s financial statements in the year in which the dividends are approved by the Group’s shareholders.

Withholding tax of 7.5% is payable on the gross value of dividends. The withholding tax is treated as once off tax on the hands of the shareholder.

1.8 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 probable 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 statement of comprehensive income during the financial year 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: shorter of their useful life or the lease term. 50 years – Improvements to leasehold premises: lower of lease period and useful lives of 5 - 10 years – Plant and equipment 6 – 7 years – Furniture, fixtures and fittings 4 – 7 years – Motor vehicles 5 – 7 years – Computers 3 years




1.8 Property, plant and equipment (continued)

Operating equipment (which includes uniforms, 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 the proceeds with the carrying amount and are recognised within other (losses)/gains – net, in the statement of comprehensive income.

Impairment

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 use.

1.9 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business/subsidiary/associate at the date of acquisition. Goodwill on acquisition of business/subsidiaries is included in ‘intangible assets’. Goodwill on acquisitions of associates is included in ‘investments in associates’. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or Groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(b) Trademarks and licenses

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.

(c) 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 Intangible assets (continued)

(d) Computer software

Acquired computer/other software is capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (four years).

Costs associated with maintaining computer software programmers are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the Company, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.

1.10 Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets not ready to use 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 of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash generating units). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

1.11 Financial assets

The Group classifies its financial assets in the following categories: at fair value through statement of comprehensive income, 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.

(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 year 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 year. 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.




1.11 Financial assets (continued)

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 is initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. 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 statement of comprehensive income 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 statement of comprehensive income 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.

When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are included in the statement of comprehensive income as ‘gains and losses from investment securities’. Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of comprehensive income as part of other income. Dividends on available-for-sale other comprehensive income instruments are recognised in the statement of comprehensive income as part of other income when the Group’s right to receive payments is established.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

Impairment of financial assets

(a) Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.




1.11 Financial assets (continued)

Impairment of financial assets (continued)

(a) Assets carried at amortised cost (continued)

For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses 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 statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income.

1.12 Financial liabilities

The Groups financial liabilities at statement of financial position date include ‘Borrowings’ and ‘Accounts payable and accruals’ (excluding VAT and employee related payables). Financial liabilities, are initially measured at fair value, net of transaction cost. These financial liabilities are subsequently measured at amortised cost using the effective interest method. Financial liabilities are included in current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

1.13 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the average cost method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to complete the sale. Provision is made for slow moving and obsolete inventories.

1.14 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.

1.15 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 consolidated statement of financial position.






1.16 Stated capital

Ordinary shares are classified as equity 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 equity as a deduction, net of tax, from the proceeds.

Where any Group holds equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Group’s 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, and is included in equity attributable to the Group’s equity holders.

1.17 Related parties

Related parties consist of entities under common ownership and control. Related parties comprise the holding Group, subsidiary companies, directors of the Group and key management. Transactions with related parties are in the normal course of business.

1.18 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 statement of comprehensive income 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.

1.19 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.

1.20 Cost of sales

Cost of sales comprise direct cost incurred in the provision of goods and services and are recognised as incurred.

1.21 Income tax

a) Income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, 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


1.21 Income tax (continued)

b) 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 reporting 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.

1.22 Employee benefits

(a) Pension obligations

The Group operates a defined contribution pension scheme. A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. 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.

b) Termination benefits

Termination 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 Group recognises termination benefits when it is demonstrably committed to either: terminating the employment 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 reporting date are discounted to present value. Contract staffs are paid terminal gratuities in accordance with their respective employment contract.

c) Other benefits

(i) Severance payments and gratuities

The Group does not provide pension benefits for all its employees, but operates a gratuity scheme for expatriates in terms of employment contracts, and a severance benefit scheme for citizens in terms of section 28 of the Botswana Employment Act. Severance pay is not considered to be a retirement benefit plan as the benefits are payable on completion of each 60 month period of continuous employment, at the option of the employee. The expected gratuity and severance benefit liability is provided in full by way of a provision.






1.22 Employee benefits (continued)

c) Other benefits (continued)

(ii) Leave pay

The costs of paid leave is recognised as an expense as the employee render services that increases the entitlement or, in the case of non-accumulating absence, when absence occurs.

(iii) Profit sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit sharing due to management and employees where contractually obliged or where there is past practice that has created a constructive obligation.

Employees of the Group receive remuneration in the form of a share of dividends paid by the Group. This scheme is managed through an employee trust scheme whereby employees render services as consideration for distribution from the employee trust scheme which owns the underlying shares in the Group’s shares. The objective of the scheme is to retain staff. Only employees who meet the required criteria of two years in continuous employment are eligible to share in the trust distribution.

(iv) Medical aid

In terms of the employment contracts and the rules of relevant medical aid scheme, medical benefits are provided to employees. The Group subsidies a portion of medical aid contribution for certain employees. Contributions in relation to Group’s obligations in respect of these benefits are charged against statement of comprehensive income in the period of payment.

1.23 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; andiii) 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.

1.24 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.


1.25 Segmental report

Business segments are distinguishable components of the Group that provide services that are subject to risks and rewards. The costs 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 standalone 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.

1.26 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.

1.27 Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.




2. 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 arise 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.

In the period under review, the Group did not have any outstanding balances denominated in foreign currencies.

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 statement of comprehensive income of a defined interest rate shift.

Interest rate sensitivity analysis

The Group is exposed to interest rate cash flow risks only. The sensitivity analysis has been determined on the exposure of financial instruments to interest rates at the reporting date. For floating rate liabilities denominated in the reporting currency, the analysis is prepared assuming the amount of liability outstanding at the reporting date was outstanding for the whole year. A 50 basis point increase

Financial Risk ManagementFor the year ended 31 December 2015



Financial Risk Management (continued)For the year ended 31 December 2015


2.1 Market risk (continued)

ii) Cash flow and fair value interest rate risk (continued)

Interest rate sensitivity analysis (continued)

or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If the rates had been 50 basis points higher/lower and all other variables were held constant, The Group’s profits for the year ended 31 December 2015 would increase / decrease by P34K (2014: increase / decrease by P16K).

If the rates had been 50 basis points higher/lower and all other variables were held constant, The Company’s profits for the year ended 31 December 2015 would increase / decrease by P6K (2014: increase / decrease by P9K).

The Group places its funds in fixed interest earning deposits (fixed deposits) and fluctuating interest earning deposits which are adjusted on short term basis based on changes in the prevailing market related interest rates.

The cash resources are managed to ensure that surplus funds are invested in a manner to achieve maximum returns while minimising risks.

However, considering the short-term maturity for these deposits, these risks are minimised.

2015 GROUP COMPANY

Financial Instrument Name of the financial institution

Current Interest Rate

Due in less than one year

Due in less than one year

P'000 P'000

Fixed deposits African Banking Corporation Limited 5.50% 4,603 4,581

Fixed deposits Bank Gaborone Limited 5.50% 5,433 5,433

Stanlib money market fund Stanlib Investment Management Services Pty Ltd Money market 12,364 12,364

African Alliance Liquidity fund African Alliance Limited Liquidity fund

10,230 10,230

Bifm Pula money market fund Bifm Botswana Limited Money market 10,130 10,130

2014

Fixed deposits African Banking Corporation Limited 6.00% 15,348 15,329

Stanlib money market fund Stanlib Investment Management Services Pty Ltd Money market 2,114 2,114


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 incorporate the information into credit risk controls.

If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, credit control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. The utilisation of credit limits is regularly monitored. In accordance with standard practice within the industry, the Group may require prepayment of standard 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 in accordance with limits set by the board. Management evaluates the credit risk relating to customers on an on-going basis especially on majority customers by obtaining their latest financial statements, budgets, etc. and where appropriate, makes adequate provisions for bad and doubtful debts. Financial assets exposed to credit risk at year end were as follows;





2.2 Credit risk (continued)

Credit trading relationship (continued)

GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Trade and other receivables 16,632 17,083 15,078 15,103

Loan to related party - - 15,558 16,886

Loan receivable - Cresta Employee Staff Plan - - - 1,373

Amount due from related parties - - 1,231 1,855

Barclays Bank (Botswana & Zambia) 15,039 16,988 14,294 14,297

BancABC (Botswana & Zambia) 4,603 15,348 4,581 15,329

First National Bank of Botswana Limited 1,336 8,191 1,336 8,191

Stanlib Investment Management ServicesProprietary Limited 12,364 2,114 12,364 2,114

Stanbic Bank Botswana Limited 2,419 3,087 2,419 3,087

Bank Gaborone Limited 5,433 - 5,433 -

Bifm Botswana Limited 10,130 - 10,130 -

African Alliance Limited 10,230 - 10,230 -

No credit limits were exceeded during the reporting period and management does not expect any losses from non-performance by these counterparties. No trade receivable balances have been re-negotiated. Cash and cash equivalents and deposits are placed only with reputable institutions. At 31 December 2015 the Group had cash and cash equivalents placed with Barclays Bank of Botswana Limited, First National Bank of Botswana Limited, Stanbic Bank of Botswana Limited, African Banking Corporation Limited, Bank Gaborone Limited and fund managers namely African Alliance Limited, Bifm Botswana Limited and Stanlib Investment Management Services (Proprietary) Limited.

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.

Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flows. Surplus cash held over and above balance required for working capital management are transferred to interest bearing assets. These are invested in interest bearing current accounts and time deposits, and money market deposits, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.





2.3 Liquidity risk (continued)

At the reporting date, the Group had the following assets that are expected to readily generate cash inflows for managing liquidity risk.

Group 2015 2014 P’000 P’000

Cash at bank and short-term bank deposits Barclays Bank Limited (Botswana & Zambia) 15,039 16,988African Banking Corporation Limited (Botswana & Zambia) 4,603 15,348First National Bank of Botswana Limited 1,336 8,191Stanlib Investment Management Services Proprietary Limited 12,364 2,114Stanbic Bank Botswana Limited 2,419 3,087Bank Gaborone Limited 5,433 -Bifm Botswana limited 10,130 - African Alliance Limited 10,230 -

61,554 45,728

Company 2015 2014 P’000 P’000

Cash at bank and short-term bank deposits Barclays Bank of Botswana Limited 14,294 14,297African Banking Corporation Limited 4,581 15,329First National Bank of Botswana Limited 1,336 8,191Stanlib Botswana Limited 12,364 2,114Stanbic Bank Botswana Limited 2,419 3,087Bank Gaborone Limited 5,433 -Bifm Botswana Limited 10,130 -African Alliance Limited 10,230 -

60,787 43,018



The table below analyses the Group’s and Company’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

GROUP As at 31 December 2015 Trade and other payables 29,675 - - -Borrowings 5,009 5,009 9,148 - 34,684 5,009 9,148 -As at 31 December 2015 Trade and other payables 27,176 - - -Borrowings 5,009 5,009 14,157 -

32,185 5,009 14,157 -

COMPANY As at 31 December 2015 Trade and other payables 23,832 - - -Borrowings 5,009 5,009 9,148 -

28,841 5,009 9,148 -

As at 31 December 2014 Trade and other payables 22,078 - - -Borrowings 5,009 5,009 14,157 -

27,087 5,009 14,157 -

2.4 Analysis of financial instruments a) Financial instruments by category Financial liabilities at amortised cost P’000GROUP As at 31 December 2015 Trade and other payables** 25,013 Borrowings 17,133 Related party 4,663

46,809 As at 31 December 2014 Trade and other payables** 23,159 Borrowings 20,890 Related party 4,017

48,066 ** Statutory liabilities and VAT are excluded from trade and other payables.





Analysis of financial instruments (continued) Financial liabilities at amortised costCOMPANY P’000As at 31 December 2015 Trade and other payables** 19,241 Borrowings 17,133 Related party 4,591

40,965 As at 31 December 2014 Trade and other payables** 18,080 Borrowings 20,890 Related party 3,998

42,968

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. Financial assets at amortised cost GROUP P’000As at 31 December 2015 Loans and receivables Cash and cash equivalents 61,554Trade and other receivables* 16,632

78,186As at 31 December 2014 Loans and receivables Cash and cash equivalents 45,728Trade and other receivables* 17,083

62,811COMPANY As at 31 December 2015 Loans and receivables Cash and cash equivalents 60,787Trade and other receivables* 15,078Loan to related party 15,558Loan receivable- Cresta Employee Staff Plan -Amounts due from related parties 1,231

92,654As at 31 December 2014 Loans and receivables Cash and cash equivalents 43,018Trade and other receivables* 15,103Loan to related party 16,886Loan receivable- Cresta Employee Staff Plan 1,373Amounts due from related parties 1,855

78,235



2.4 Analysis of financial instruments (continued)

a) Financial instruments by category (continued)

* Prepayments are excluded from accounts receivable.

There were no assets at fair value through profit or loss, or derivatives used for hedging or available for sale financial instruments as at the year end. All the financial instruments are at amortised cost. There were no liabilities at fair value through profit or loss or derivatives used for hedging as at year end. 2.4.1 Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about counterparty default rates.

There are no credit ratings available in Botswana. The below financial institutions have reported sound financial results and continued compliance with minimum capital adequacy requirements set by the regulator. None of the financial assets that are fully performing has been negotiated during the year.

GROUP COMPANY 2015 2014 2015 2014 Ratings P’000 P’000 P’000 P’000

Trade receivables and other receivables Not rated 16,632 17,083 16,309 16,958 Loan to related party Not rated - - 15,558 16,886Loan receivable - Cresta Employee Staff Plan Not rated - - - 1,373Cash at bank and short-term deposits: 61,554 45,728 60,787 43,018

Barclays Bank Limited (Botswana and Zambia) Not rated 15,039 16,98 14,294 14,297African Banking Corporation Limited (Botswana and Zambia) Not rated 4,603 15,348 4,581 15,329First National Bank of Botswana Limited Not rated 1,336 8,191 1,336 8,191Stanlib Investment Management Services Proprietary Limited Not rated 12,364 2,114 12,364 2,114Stanbic Bank of Botswana Limited Not rated 2,419 3,087 2,419 3,087Bank Gaborone Limited Not rated 5,433 - 5,433 - Bifm Botswana Limited Not rated 10,130 - 10,130 - African Alliance Limited Not rated 10,230 - 10,230 -

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. The capital structure of the Group





2.5 Capital risk management (continued)

consists of long term borrowings, bank overdrafts and equity attributable to equity holders of the parent. 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.

The gearing ratios at 31 December 2015 and 2014 were as follows:

GROUP 2015 2014 P’000 P’000

Total borrowings (note 18) 17,133 20,890Less: cash and cash equivalents (note 15) (61,835 ) (45,801 )

Net debt (44,702 ) (24,911 )Total equity 163,007 145,125

Total capital 118,305 120,214

Gearing ratio - -

COMPANY 2015 2014 P’000 P’000

Total borrowings (note 18) 17,133 20,890Less: cash and cash equivalents (note 15) (61,064 ) (43,091 ) Net debt (43,931 ) (22,201 )Total equity 172,016 151,510

Total capital 128,085 129,309Gearing ratio - -


Critical Accounting Estimates And Assumptions For the year ended 31 December 2015

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 Estimated impairment of goodwill

The Group tests annually whether the goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1.9. The recoverable amounts of cash generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. 3.2 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.

The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted.

3.3 Useful life and residual values of property, plant and equipment

Property, plant and equipment are depreciated over its useful life taking into account residual values where appropriate. The actual useful lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In re–assessing asset useful lives, factors such as technological innovation, product life cycles and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values.



3.4 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 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 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.

3.5 Deferred Revenue The Group operates a loyalty programme where customers accumulate points for purchases made which entitles them to a free meal and or free night of accommodation after reaching 500 points and 1000 points respectively. A customer needs to spend P1,000 to earn 100 points.

The reward points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the consideration received between the award points and other components of the sale such that the reward points are initially recognised as deferred income at the fair value. Revenue from the reward points is recognised when the points are redeemed and revenue deferred on this basis is reassessed and measured regularly based on the estimated likelihood of redemption. The likelihood of redemption is estimated based on key assumptions, including the period for which points have been held without redemption (the longer such period, the lower the likelihood of redemption) and the number of points held (the less points, the less likely the points will be redeemed).

At 31 December 2015, the deferred revenue was estimated based on an expected redemption rate of 25% (2014:45.9%) of total accumulated points. Had the estimated redemption rate been 10% higher/ (lower), the deferred revenue recognised at the balance sheet date would have been P292,438 (2014:P289,213) higher/ (lower).

Critical Accounting Estimates And Assumptions (continued) For the year ended 31 December 2015



Notes to the Annual Financial StatementsFor the year ended 31 December 2015

1 Revenue GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Accommodation revenue 182,937 172,156 173,559 162,727 Food revenue 95,908 94,359 85,497 83,197 Bar revenue 21,609 19,920 19,744 17,998Other 19,149 16,760 17,479 15,543

319,603 303,195 296,279 279,465 2 Expenses by nature Inventory consumed 41,223 39,091 36,330 34,950 Employee benefit expense 73,531 71,702 67,617 64,114 Transport expenses 1,812 1,663 1,493 1,290 Operating lease payments 37,946 35,270 34,194 31,581 Lease straightlining 1,817 4,243 1,442 3,835 Auditors’ remuneration - Audit fee 1,120 1,012 875 784 - Internal audit 324 386 297 363 Depreciation 22,093 23,538 20,483 21,326 Armotisation 373 232 373 232 Provision for impairment of trade debtors (71) 1,473 (136) 216 Bad debts written off 1,388 556 - 556 Directors’ fee 133 136 133 136 Management fees 9,463 9,094 8,766 8,382Profit bonus payable to management company ( note 25) 8,821 8,601 8,628 8,697 Water and electricity 13,763 12,154 13,157 11,274 Marketing and promotion 6,841 8,320 6,311 7,652 Repairs and maintenance 11,873 10,912 10,548 9,823 Other expenses 38,151 33,506 36,667 30,451 Insurance 2,949 2,885 2,888 2,840 Legal 179 83 107 5 Telephone 4,059 4,142 3,808 3,872 Travel expenses 1,831 878 1,483 661 Impairment of investment in Employee Share Trust Loan - - - 425 Total cost of sales, sales and distributionexpenses, administration and operating expenses 279,619 269,877 255,464 243,465

Cresta Marakanelo LimitedCresta Marakanelo Limited


Notes to the Annual Financial Statements (continued)For the year ended 31 December 2015


3 Staff costs GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

- pension contributions 2,782 2,574 2,476 2,268 - gross salaries and wages 70,749 69,128 65,141 61,846

73,531 71,702 67,617 64,114 Number of employees 975 975 921 892 4 Finance income and costs Interest income (1,933) (614) (2,899) (2,424) Interest expense 1,152 1,774 1,152 1,774 Net foreign exchange losses on intercompany loan 5,646 1,396 - -

6,798 3,170 1,152 1,774

5 Income tax expense Company tax 9,530 8,821 9,530 8,821 Deferred tax (credit) (68) (576) (68) (576)

Tax charge 9,462 8,245 9,462 8,245

The tax on the profit before tax differs from the theoretical amount that would arise using the weighted average taxrate applicable to profits of the company as follows:

Profit before tax 36,223 32,303 42,601 37,104 Tax calculated at current tax rates - 22% 7,969 7,107 9,372 8,163 Tax effect of income not subject to tax (Golfview is exempt from taxation) 1,403 1,056 - - Expenses not deductible for taxation 90 93 90 93 Prior year deferred tax under provision - (11) - (11)

Tax charge 9,462 8,245 9,462 8,245



6 Earnings 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):

GROUP COMPANY 2015 2014 2015 2014 Total comprehensive income attributable to shareholders P’000 28,960 24,098 33,139 28,859 Weighted average number of ordinary shares in issue 180,934 180,934 180,934 184,634

- Total number of shares issued 185,000 185,000 185,000 185,000 - Less: Treasury shares (4,066) (4,066) (4,066) (366)

Basic and diluted earnings per share (thebe) 16.01 13.32 18.32 15.63

7 Investment in subsidiary 2015 2014 2015 2014 % % P’000 P’000 Holding Holding Company Held directly; Cresta Golfview Hotel Ltd, Zambia* 100% 100% 7 7 The principal activities of the subsidiary is to operatehotel in Zambia.

8 Loan to subsidiary Cresta Marakanelo Ltd (the holding company) acquired a loan from Barclays Bank of Botswana Limited to acquire the business of Golfview Hotel Ltd. A new company, Cresta Golfview Hotel Ltd (subsidiary) was formed as a vehicle that will purchase the business of Golfview hotel in Zambia. The holding company loaned Cresta Golfview Hotel Ltd the amount received from Barclays Bank of Botswana Limited as a loan. The loan to the subsidiary was at the same terms as the loan from Barclays Bank to the holding company. The loan of P20m was acquired at prime less 2 percentage points. The loan is to be repaid over a period of 10 years.





8 Loan to subsidiary (continued) GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000 Current portion - - 2,258 1,938 Non - current portion - - 13,300 14,948

- - 15,558 16,886 At 1 January 16,886 16,754 Loan reclassified from Intercompany - - - 1,367 Loan repayments received - - (1,328) (1,235) Interest charged - - 967 1,232 Interest received - - (967) (1,232)

At 31 December - - 15,558 16,886 9 Loan receivable-Cresta Employee Staff Plan The Company’s 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 employees who have contributed to the growth of the company’s profitability. The Trust was funded by Cresta with 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 Cresta. These shares are held by the Trust on behalf of its qualifying Cresta employees and the loan is to be recovered through dividend received from Cresta, representing half of the residue after accounting for interest and Trust 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 in terms of IAS 19.

During the year, shareholders agreed to dissolve the company’s Employee Share Trust (EST) and replace it with a new Phantom Share Scheme which was approved at the Annual General Meeting held on the 26th June 2015. The old scheme was not effective as the dividends that were meant to service the loan that the company had extended to the EST were not sufficient to cover the interest of the loan. The old scheme was thus dissolved on the 26th of June 2015 with the shares held in the company by the EST reverting to the company in full and final settlement of the outstanding loan balance and gave way to a new Phantom Share Scheme. 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 2015 2014 2015 2014 P’000 P’000 P’000 P’000 The fair value of the receivable at year end is as follows: Loan advanced to the Trust - - 5,365 5,365 - Less: Impairment loss - - (5,731) (5,732) - Interest capitalised - - 2,253 1,969 - Repayment - - (332) (229)- Acquisition of treasury shares (1,555) -

Net carrying amount - - - 1,373



10 PROPERTY, PLANT AND EQUIPMENT

Leasehold Furniture, Capital land and fixtures and Motor Operating work in buildings fittings vehicles Computers equipment progress Total

P’000 P’000 P’000 P’000 P’000 P’000 P’000

GROUP

Year ended 31 December 2014

Opening net book amount 73,770 49,753 2,495 3,296 10,840 9,950 150,104

Exchange differences - (332) (19) (31) (68) (1) (451)

Additions 6,879 8,875 15 1,054 2,410 - 19,233

Disposals (253) (1,440) (67) (89) (1,532) - (3,381)

Depreciation on disposals 180 1,326 67 87 - - 1,660

Transfers 5,543 4,088 - 267 - (9,898) -

Written off from WIP - - - - - (46) (46)

Depreciation (3,039) (17,882) (658) (1,959) - - (23,538)

Closing net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581

At 31 December 2014

Cost 104,370 127,243 3,949 13,465 11,650 5 260,682

Accumulated depreciation (21,290) (82,855) (2,116) (10,840) - - (117,101)

Net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581


Opening net book amount 83,080 44,388 1,833 2,625 11,650 5 143,581

Exchange differences (23) (925) (31) (93) (313) - (1,385)

Additions 8,023 8,004 557 2,141 4,595 2,590 25,910

Disposals (254) (1,838) (48) (735) (3,408) - (6,283)


Transfers - 5 - - - (5) -

Depreciation (3,904) (15,542) (682) (1,965) - - (22,093)

Closing net book amount 87,176 35,913 1,677 2,696 12,524 2,590 142,576

At 31 December 2015

Cost 112,116 132,489 4,427 14,778 12,524 2,590 278,924


Net book amount 87,176 35,913 1,677 2,696 12,524 2,590 142,576





10 PROPERTY, PLANT AND EQUIPMENT

Leasehold Furniture, Capital land and fixtures and Motor Operating work in buildings fittings vehicles Computers equipment progress Total

P’000 P’000 P’000 P’000 P’000 P’000 P’000

COMPANY


Opening net book amount 73,750 44,962 2,234 2,871 9,932 9,930 143,679

Additions 6,838 8,502 15 741 2,287 - 18,383

Disposals (253) (1,440) (67) (89) (1,532) - (3,381)


Transfers 5,524 4,088 - 267 - (9,879) -

Written off from WIP - - - - - (46) (46)

Depreciation (3,038) (16,201) (521) (1,566) - - (21,326)

Closing net book amount 83,001 41,237 1,728 2,311 10,687 5 138,969

At 31 December 2014

Cost 104,290 119,302 3,369 11,630 10,687 5 249,283


Net book amount 83,001 41,237 1,728 2,311 10,687 5 138,969


Opening net book amount 83,001 41,237 1,728 2,311 10,687 5 138,969

Additions 7,978 7,429 358 2,059 4,363 1,771 23,958

Disposals (254) (1,838) (48) (735) (3,212) - (6,087)


Transfers - 5 - - - (5) -

Depreciation (3,903) (14,187) (590) (1,803) - - (20,483)

Closing net book amount 87,076 34,468 1,496 2,555 11,838 1,771 139,204

At 31 December 2015

Cost 112,014 124,898 3,679 12,954 11,838 1,771 267,154


Net book amount 87,076 34,468 1,496 2,555 11,838 1,771 139,204



11 Intangible assets GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000 Goodwill Opening net book amount 13,878 14,994 - - Exchange differences (2,543) (678) - - Impairment for the year - (438) - - Arising out of acquisition of business from United Promotional Enterprises (Pty) Ltd T/A Cezar Hotel - - 5,274 5,274

Closing net book amount 11,335 13,878 5,274 5,274 Impairment test of goodwill For the purpose of impairment testing, goodwill is attached to the following cash generating units (CGU): Cresta Golfview Hotel Ltd 6,061 8,604 - - Cresta Jwaneng Hotel 5,274 5,274 5,274 5,274

11,335 13,878 5,274 5,274

Growth rate beyond the budget period of 2016 to 2020 years 5.00% 3.00% - - Discount rate 15.60% 15.20% - - Recoverable amount of the goodwill (P 000’s) 6,101 8,604 - - Headroom % 1% - - -


The Group did not identify any impairment for the Cresta Jwaneng CGU and the Cresta Golfview CGU during the current year (2014: P438,000 impairment with respect to the Cresta Golfview Hotel CGU). The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. Key assumptions used in the calculation of recoverable amounts, discount rates and growth rates, are as follows for Cresta Golfview:




Trademarks Opening net book amount - 20 - 20 Amortisation charge - (20) - (20)

- - - - Cost 597 597 597 597 Accumulated amortisation (597) (597) (597) (597)

Net book amount - - - -

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 173 209 173 209 Amortisation charge (36) (36) (36) (36)

Closing net book amount 137 173 137 173 Cost 365 365 365 365 Accumulated amortisation (228) (192) (228) (192)

Net book amount 137 173 137 173

11 Intangible assets (continued) GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Growth rate beyond the budget period of 2016 to 2020 years 5.00% 5.00% 5.00% 5.00% Discount rate 14.90% 15.70% 14.90% 15.70% Recoverable amount of the goodwill (P 000’s) 34,447 19,936 34,447 19,936 Headroom % 653% 378% 653% 378%

Impairment test of goodwill

Should the discount rate be increased by 1% an impairment of P 132K would be required. Should the post-budget growth rate be decreased by 1%, an impairment of P 51k would be required.

Key assumptions used in the calculation of recoverable amounts, discount rates and growth rates, are as follows for Cresta Jwaneng:

No reasonable movement in any of the underlying assumptions would indicate impairment of the goodwill for this business unit.

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 being the lease period.



11 Intangible assets (continued) GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Software Opening net book amount 575 - 575 - Additions 406 788 406 788 Amortisation charge (337) (213) (337) (213)

Closing net book amount 644 575 644 575 Cost 1,194 788 1,194 788 Accumulated amortisation (550) (213) (550) (213)

Net book amount 644 575 644 575

Net book amount of intangible assets (excluding

goodwill) 781 748 781 748

Opening balance 5,915 5,915 550 550 Add: Acquisition of treasury shares through dissolution of EST (note 9) - - 1,555 -

5,915 5,915 2,105 550 In addition, shares issued to the Cresta Employee share Trust Scheme have been disclosed as treasury shares on consolidation of the trust. 13 Inventories Foods, beverages and tobacco 2,793 2,889 2,481 2,381 Curio shop 59 30 59 30

2,852 2,919 2,540 2,411 The cost of inventories recognised as expense and included in ‘cost of sales’ amounted to 41,223 39,091 36,330 34,950


12 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.




14 Trade and other receivables GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Trade receivables 15,125 17,609 14,073 14,555 less: Provision for impairment (367) (1,826) (302) (438)

Trade receivables - net 14,758 15,783 13,771 14,117 Prepayments 4,334 932 3,913 571 Amount due from related parties - - 1,231 1,855 Other receivables 1,867 1,300 1,301 986

20,959 18,015 20,216 17,529

Trade receivables which are fully performing 14,758 14,606 13,771 13,289

Trade receivables past due but not impaired Trade receivables past due are not considered to be impaired. Past due is when an invoice remains outstanding beyond 90 days. The ageing of amounts past due but not impaired is as follows: over 3 months - 1,177 - 828 Trade receivables impaired As of 31 Decembert the below trade receivable were impaired and fully provided for. The ageing of these trade receivables is as follows:

over 3 months 367 1,826 302 438 The movement in the provision for impairment of trade receivables is as follows: Movement of impairment Opening balance 1,826 909 438 778 Charge for the year (71) 1,473 (136) 216 Bad debts written off (1,388) (556) - (556)

Closing balance 367 1,826 302 438

The carrying amount of trade and other receivables are denominated in Botswana Pula and approximates the fair value due to their short-term nature. Trade debtors are unsecured and do not attract interest.

The creation and release of provision for impaired receivables have been included in operating expenses in the statement of comprehensive income.

Amounts charged to the allowance account are generally written-off when there is no expectation of recovering additional cash.



17 Deferred income tax

Deferred tax assets

Beginning of the year 4,216 3,640 4,216 3,640

Net income statement (credit) 68 576 68 576

End of the year 4,284 4,216 4,284 4,216

The deferred tax arise from:

- accelerated tax depreciation on property, plant and

equipment and software, Lease rights (2,426) (2,176) (2,426) (2,176)

- operating lease expenditure 6,710 6,392 6,710 6,392

End of the year 4,284 4,216 4,284 4,216

15 Cash and cash equivalents GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Cash at bank and in hand 19,095 28,359 18,324 25,649 Short-term bank deposits 42,740 17,442 42,740 17,442

61,835 45,801 61,064 43,091 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 61,835 45,801 61,064 43,091

Bank overdrafts (note 18) (100) - (100) -

61,735 45,801 60,964 43,09116 Stated Capital

185, 000, 000 ordinary shares of no par value

Issued and fully paid:

At end of year 18,500 18,500 18,500 18,500





17 Deferred income tax (continued) GROUP COMPANY

2015 2014 2015 2014 P’000 P’000 P’000 P’000

The analysis of deferred tax assets and deferred tax

liabilities is as follows:

Deferred tax liabilities

- Deferred tax liabilities to be recovered more than

12 months (2,330) (2,088) (2,330) (2,088)

- Deferred tax liabilities to be recovered within

12 months (96) (88) (96) (88)

(2,426) (2,176) (2,426) (2,176)

Deferred tax assets

- Deferred tax assets to be recovered after 12 months 6,426 5,548 6,426 6,076

- Deferred tax liability to be recovered within 12 months 284 844 284 316

6,710 6,392 6,710 6,392

Net 4,284 4,216 4,284 4,216

18 Borrowings

Non-current

Barclays Bank of Botswana Limited loan 12,856 17,227 12,856 17,227

Current Barclays Bank of Botswana Limited loan 4,177 3,663 4,177 3,663 Bank overdrafts 100 - 100 -

4,277 3,663 4,277 3,663 Bank borrowings which mature until 2022 attract an average coupon rate of prime minus 2% annually (2013: prime less 2% annually). The two loans from Barclays Bank of Botswana Limited are repayable in monthly instalments of P253,351 and P164,132 respectively at variable rate of prime less two (currently 7.5%).

- 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.



The carrying amounts and fair value of non- current borrowings are as follows: Bank borrowings 12,856 17,227 12,856 17,227 19 Trade and other payables Trade payables 8,366 8,652 7,680 6,999 Related party balances 4,662 4,016 4,591 3,999 Other accrued expense 8,200 7,049 7,008 7,109 VAT payable 1,433 1,062 1,041 1,062 Payroll provision (note 19.1) 3,739 3,365 3,033 3,277 Other payables 4,876 5,555 4,781 3,977 31,276 29,699 28,134 26,423

19.1 Payroll provision

Balance at beginning of the year 3,365 3,797 3,277 2,989 Provision for the year 7,748 7,021 5,432 5,509 Payments/reversals made during the year (7,374) (7,453) (5,676) (5,221)

Balance at end of the year 3,739 3,365 3,033 3,277

18 Borrowings (continued) GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000 The banking facilities available to the company as at year end:

Bank overdraft 10,000 10,000 10,000 10,000

The bank overdraft bears interest at prime plus 0.5% (2014: prime plus 0.5%). The facilities are secured by: - First mortgage bond over Mowana Safari Lodge, being Lot 872 Kasane for P15,000,000. - The bank has issued guarantees in favour of Botswana Power Corporation in the amount of P153,000 as security for the supply of power on credit to the company.





20 Deferred lease obligation GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000 This balance represents the difference in the straight-lined recognition of operating lease charges under IAS -17 leases, and actual lease payments made in accordance with underlying lease agreements. Balance beginning of year 30,831 26,588 29,058 25,223 Exchange difference (578) - - - Movement during the year 1,817 4,243 1,442 3,835

Balance at end of year 32,070 30,831 30,500 29,058

21 Deferred revenue Balance beginning of year 1,326 1,170 1,326 1,170 Movement during the year 289 156 289 156

Balance at end of year 1,615 1,326 1,615 1,326

22 Dividends Gross dividend 11,078 9,060 11,078 9,232 Withholding tax at 7.5% (831) (680) (831) (692)

Net dividends 10,247 8,380 10,247 8,540 23 Operating lease commitment The company/group leases hotel properties under non cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. The future aggregate minimum lease payments under non-cancellable operating leases are as follows: No later than 1 year 41,902 37,459 36,831 34,103 Later than 1 year and no later than 5 years 181,715 182,152 156,358 166,964 Later than 5 years 4,801 39,382 4,378 30,602

228,418 258,993 197,567 231,669



23 Operating lease commitment (continued) The company/group holds the following leases: Cresta Lodge Lot 50719 - Gaborone - 10 year lease with Letlole La Rona Limited (formerly 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%. 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.





23 Operating lease commitment (continued) 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.

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 Golfview Hotel, Zambia Lot 10247 - Lusaka, Zambia - 10 year lease with Golfview Hotel Ltd commenced 1 February 2012. Annual lease rentals amount to US$360,000 (equivalent to P2,823,529 for the first year with annual escalations of 5%. Cresta Mahalapye Hotel Mahalapye - 10 year lease Knights Bridge (Pty) Ltd commenced 1 October 2012. Annual lease rentals amount to P1,620,000 for the first year with annual escalations of 8%. Cresta Jwaneng Hotel Lot 5483 - Jwaneng - 10 year lease with United Promotional Enterprise (Pty) Ltd commenced 1 June 2013. Annual lease rentals amount to P2,340,000 for the first year with annual escalations of 8%. Cresta Head office Plot 74538, Marula House, 2nd floor, New CBD,Gaborone - 5 year lease with Primetime Property Holdings Ltd commenced 1 April 2014. Annual lease rentals amount to P1 176 953 for the first year with annual escalations of 8%.



24 Cash generated from operations GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

Operating profit 41,088 34,859 40,854 36,454 Adjustments: - Impairment of Employee share trust loan - - - 425 - Impairment of Goodwill - 438 - - - Depreciation 22,093 23,538 20,483 21,326 - Operating equipment write off 3,408 1,532 3,212 1,533 - Amortisation of trademarks and lease rights 373 232 373 232 - Deferred lease expenses 1,818 4,243 1,442 3,835 -Deferred revenue 289 156 289 156 - Loss/(gain) on disposal of plant and equipment (39) (27) (39) (27)

69,029 64,971 66,614 63,933

Changes in working capital: - Inventories 68 (266) (130) (340) - Trade and other receivables (2,944) 3,957 (2,687) 3,175 - Trade and other payables 1,577 2,908 1,711 3,105

Cash generated from operations 67,730 71,570 65,508 69,874

25 Related party transactions Related companies are companies under common control, directors or ownership. The following are related parties: Botswana Development Corporation Limited- Shareholder with 26% interest. TA Botswana- 40% shareholder interest. Botswana Hotel Development Company- 100% subsidiary of Botswana Development Company and landlord to Cresta Marakanelo Ltd. Letlole La Rona- subsidiary of Botswana Development Corporation and landlord to Cresta Marakanelo Ltd. Cresta Holdings Botswana Ltd- Management company owned by TA Botswana Ltd. Cresta Golfview Hotel Ltd, Zambia is a wholly owned subsidiary of Cresta Marakanelo Ltd. Cresta Holdings (Pty) Ltd has a management contract with Cresta Marakanelo Ltd.





25 Related party transactions (continued) GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

i) Purchase of services

Management services - fees - Management fees - Cresta Holdings (Pty) Ltd 9,463 9,094 8,766 8,382 - Profit bonus - Cresta Holdings (Pty) Ltd 8,821 8,601 8,628 8,697

The Group Managing Director and Group Chief Financial Officer are employees of Cresta Holding (Pty) Ltd who are seconded to the Group in accordance with a management contract

Rent paid - Letlole La Rona Ltd 22,251 20,123 22,251 20,123- Botswana Hotel Development Company (Pty) Ltd 2,433 2,201 2,433 2,201 ii) Year-end balances arising from sales/purchases of services:

Receivables from related parties: -Cresta Golfview Zambia (note 14) - - 1,231 1,855

Payables to related parties

-Cresta Holdings (Pty) Ltd (note 19) 4,662 4,016 4,591 3,999 iii) Loans to related parties Cresta Golfview Zambia (note 8) - - 15,558 16,886 iv) Key management compensation Key management includes the Group Chief Operating officer, Group sales and marketing manager, Group Project Manager and Group Human Resource manager. The compensation paid or payable to key management for employee services is shown below: Salaries and other short-term employee benefits 5,819 5,027 3,685 2,921

Termination benefits 873 790 630 525



26 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. In 2011, the High Court of the Republic of Botswana found in favour of company by way of settlement of P323,770 to BURS which the company paid to BURS during 2015. However, Attorney General’s Chambers acting on behalf of BURS has lodged an appeal against the High Court decision. 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.

27 Commitments GROUP COMPANY 2015 2014 2015 2014 P’000 P’000 P’000 P’000

a) Capital commitments Not yet contracted for are as follows:

Furniture and Fittings 24,557 16,120 21,434 13,975 b) Operating lease commitments- Group/Company as lessee Refer (Note 23)




Group Annual Financial Statements

28 Segmental information While strategic decision making rights vests with the Board of Cresta Marakanelo Limited, operational and managerial responsibility vests with Executive Management, which includes the Chief Executive Officer, Chief Financial Officer, Group Operations Manager, Group Sales and Marketing Manager, Group Project Manager and Group Human Resources Manager. For the purpose of presenting segmental information, Executive 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 Zambia primarily targeting 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, Cresta Marang Gardens and Cresta Golfview, Zambia. - 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, Cresta Jwaneng Hotel,Cresta Mahalpye 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.



28 Segmental information (continued) Cresta Cresta Cresta Cresta Urban Urban African African Control Oasis Heartbeat Roots Fingerprint Unit Combined

P’000 P’000 P’000 P’000 P’000 P’000

GROUP

YEAR ENDED 31 December 2015

Revenue 100,506 70,314 94,428 53,208 1,147 319,603

Accom revenue 56,870 44,551 55,902 25,614 - 182,937

Food revenue 34,157 18,945 28,686 14,120 - 95,908

Bar revenue 6,381 4,477 7,355 3,396 - 21,609

Other 3,098 2,341 2,485 10,078 1,147 19,149

Cost of Sales (55,579) (40,022) (55,947) (26,114) (12,820) (190,482)

Gross profit 44,927 30,292 38,481 27,094 (11,673) 129,121

Other income 1,065 - - - - 1,065

Sales and distribution costs (1,141) (644) (1,100) (1,307) (3,497) (7,689)

Administration and operating expenses (34,115) (16,846) (30,216) (15,622) 15,351 (81,448)

Other gains - - - - 39 39

Operating profit 10,736 12,802 7,165 10,165 220 41,088

Finance income - - - - 1,933 1,933

Finance expense (5,646) - (291) - (861) (6,798)

Reportable segment income before tax 5,090 12,802 6,874 10,165 1,292 36,223

Income tax expense (9,462)

Other-currency translation difference 2,199

Net profit after income tax 28,960

Total assets 47,109 13,475 44,947 66,656 72,914 245,101

Total liabilities 8,910 2,943 7,406 6,843 55,992 82,094

Capital expenditure 5,638 4,002 8,013 6,051 2,206 25,910

Depreciation 5,464 1,573 10,104 4,483 469 22,093

Amortisation 72 75 178 48 - 373




Group Annual Financial Statements


P’000 P’000 P’000 P’000 P’000 P’000

COMPANY


Revenue 78,852 70,314 94,428 51,538 1,147 296,279

Accom revenue 47,492 44,551 55,902 25,614 - 173,559

Food revenue 23,746 18,945 28,686 14,120 - 85,497

Bar revenue 4,516 4,477 7,355 3,396 - 19,744

Other 3,098 2,341 2,485 8,408 1,147 17,479

Cost of Sales (43,572) (40,022) (55,947) (26,114) (12,820) (178,475)

Gross profit 35,280 30,292 38,481 25,424 (11,673) 117,804

Sales and distribution costs (611) (644) (1,100) (1,307) (3,497) (7,159)


Other gains - - - - 39 39

Operating profit 12,172 12,802 7,165 8,495 220 40,854

Finance income - - - - 2,899 2,899

Finance expense - - (291) - (861) (1,152)

Reportable segment income before tax 12,172 12,802 6,874 8,495 2,258 42,601

Dividend income



Total assets 40,678 13,475 44,947 66,656 83,642 249,398



Depreciation 3,854 1,573 10,104 4,483 469 20,483

Amortisation 72 75 178 48 - 373




P’000 P’000 P’000 P’000 P’000 P’000

GROUP


Revenue 96,299 68,294 85,385 52,011 1,206 303,195

Accom revenue 52,783 41,726 50,757 26,890 - 172,156

Food revenue 33,072 19,121 26,351 15,815 - 94,359

Bar revenue 6,236 4,568 6,223 2,893 - 19,920

Other 4,208 2,879 2,054 6,413 1,206 16,760

Cost of sales (52,045) (37,542) (50,850) (25,465) (11,617) (177,519)

Gross profit 44,254 30,752 34,535 26,546 (10,411) 125,676

Other income 1,514 - - - - 1,514



Other gains 27 - - - - 27

Operating profit 8,148 14,420 6,153 10,207 (4,069) 36,454

Finance income - - - - 614 614

Finance expense (1,538 - (449) - (1,183) (3,170)

Reportable segment income before tax 6,610 14,420 5,704 10,207 (4,638) 32,303


Other-currency translation difference 40


Total assets 82,021 10,878 50,650 64,569 21,051 229,169



Depreciation 8,024 1,518 9,273 4,316 407 23,538

Amortisation 61 53 109 9 - 232





P’000 P’000 P’000 P’000 P’000 P’000

COMPANY


Revenue 72,569 68,294 85,385 52,011 1,206 279,465

Accom revenue 43,354 41,726 50,757 26,890 - 162,727

Food revenue 21,910 19,121 26,351 15,815 - 83,197

Bar revenue 4,314 4,568 6,223 2,893 - 17,998

Other 2,991 2,879 2,054 6,413 1,206 15,543

Cost of sales (40,161) (37,542) (50,850) (25,465) (11,617) (165,635)

Gross profit 32,408 30,752 34,535 26,546 (10,411) 113,830

Other income 427 - - - - 427



Other gains 27 - - - - 27

Operating profit 9,743 14,420 6,153 10,207 (4,069) 36,454

Finance income - - - - 2,424 2,424

Finance expense (141) - (449) - (1,184) (1,774)

Reportable segment income before tax 9,602 14,420 5,704 10,207 (2,829) 37,104

Dividend income -



Total assets 63,234 10,878 50,650 64,569 41,173 230,504



Depreciation 5,812 1,518 9,273 4,316 407 21,326

Amortisation 61 53 109 9 - 232

Where one smile starts another



SHARES HELD % HOLDING

1 BOTSWANA DEVELOPMENT CORPORATION LIMITED 50,283,958 27.18%

2 CRESTA HOLDINGS (PTY)LTD 46,020,600 24.88%

3 BOTSWANA INSURANCE COMPANY LIMITED 21,999,400 11.89%

4 MOTOR VEHICLE ACCIDENT FUND 9,250,010 5.00%

5 FNB NOMINEES (PTY)LTD RE:AGRAY BPOPF 10001010 7,021,951 3.80%

6 BOTSWANA INSURANCE FUND MANAGEMENT 6,841,407 3.70%

7 FNB BOTSWANA NOMINEES (PTY) LTD RE: BIFM BPOPF-EQU 6,575,829 3.55%

8 LION ASSURANCE COMPANY LIMITED 5,980,000 3.23%

9 CRESTA TREASURY SHARES 4,065,056 2.22%

10 FNB BOTSWANA NOMINEES (PTY) LTD RE: ACB BPOPF WPPP 1,994,551 1.08%

11 DEBSWANA PENSION FUND - BIFM 1,626,207 0.88%

12 DEBSWANA PENSION FUND - ALLAN GRAY 1,554,653 0.84%

13 SCBN (PTY) LTD RE: AG 214/001 1,019,878 0.55%

14 LHG MALTA HOLDING LTD 809,957 0.44%

15 BURS EMPLOYEE PENSION FUND 515,802 0.28%

16 SCBN (PTY) LTD RE: AG 214/002 417,758 0.23%

17 SCBN (PTY) LTD RE: AG 216/001 410,994 0.22%

18 AGRAY-FNBSPF 351,897 0.19%

19 KNIGHTS BRIDGE PTY LTD 350,000 0.19%

20 BOTSWANA EXAMINATIONS COUNCIL PENSION FUND 344,437 0.19%

167,434,345 90.5%

OTHER SHAREHOLDERS 17,565,655 9.5%

TOTAL SHARES 185,000,000 100.00%

Top 20 Shareholders


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/her

2. 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 each adjournment thereof, and to vote for or against resolutions and/or abstain from voting in respect of the ordinary shares 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







Signed: ____________________________ on this _______ day of _________________ 2016

Please read the notes on the reverse side hereof.


Proxy Form

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 74538 Marula House, Prime Plaza, New CBD, 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.


Notice of Annual General Meeting

Notice is hereby given that the 2015 Annual General Meeting of members

will be held on Thursday 30 June 2016 at 0900hrs 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 2015 together with the directors’ and auditors’ reports thereon.

2. To approve the dividends declared by the Directors.- Final dividend of 7 thebe per share paid to the shareholders on or about 23 May 2016.

3. To re-elect the following directors who retire in terms of the Constitution of the Company, section 20.10.1 who are eligible and offer themselves for re-election;

Mr Elias Dewah Mr John Stevens

4. To approve the Directors’ remuneration for the past financial year.

5. To approve the appointments of Bafana Molomo and Mbako Mbo as Directors on the company Board.

6. To re-appoint PricewaterhouseCoopers as external auditors for the ensuing year and to approve the remuneration for the year ended 31 December 2015.

7. 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 atleast 48 hours before the time fixed for holding the meeting.

By Order of the BoardV Mganga

CFO / Company Secretary16 May 2016


NOTES


NOTES

100 PBCresta Marakanelo Limited - 2015 Annual Report Cresta Marakanelo Limited - 2015 Annual Report

NOTES

Investor Relations

Cresta Marakanelo Limited 2015 annual report