FINANCE Financial Analysis of the PPHE Hotel Group and Andrew Brownsword Hotels Limited

Running head: FINANCE
Financial Analysis
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL ANALYSIS
Table of Contents
1.0 Financial Analysis...........................................................................................................3
2.0 Cost of Capital....................................................................................................................14
3.0 Share Price Valuation.........................................................................................................16
4.0 Effect on Financial Statements and Synergy Effect...........................................................17
5.0 Share Price Movements......................................................................................................18
Conclusion................................................................................................................................19
Reference..................................................................................................................................21
Appendix..................................................................................................................................24

2FINANCIAL ANALYSIS
Executive Summary
The aim of the assignment is to conduct a financial analysis on the PPHE Hotel Group and
Andrew Brownsword Hotels Limited. The financial analysis of both the companies was
conducted by incorporating the ratio analysis of both the companies. The profitability
condition, asset management, liquidity and investor relations for the company was evaluated
for both the company. The cost of capital for the company was taken into consideration and
the respective cost of equity for the PPHE Company was determined. The valuation of the
share price of the company was done by including the forecast for the share price of the
company and the growth factor of the company. The share price movement of the PPHE
Company was also evaluated thereby taking the various factors and reasons behind the
movement of the same. The likely impact on the PPHE Company on the purchase of the
Andrew Brownsword Hotel was taken into consideration for the company.

3FINANCIAL ANALYSIS
1.0 Financial Analysis
The assessment considers the business of PPHE hotels ltd and ABHL which are
engaged in the same industry and offer similar services to the customers of the business
(Ey.com. 2019). In order to assess the profitability of the business, this part shows horizontal
and vertical analysis of the financial statement of the business. The assessment also considers
the financial aspects of both the businesses by making comparisons with the help of
horizontal and vertical analysis. The market of hotel industry is highly competitive and due to
the increase in tourism which had to the overall growth and development of a business. The
hotel industry in different areas have grown and the same is represented in the chart which is
shown below:
Figure 1: Chart showing growth of Hotel industry in different regions of the world
Source: (Statista.com. 2019)

4FINANCIAL ANALYSIS
The business of PPHE hotels follows an effective strategy for the purpose of ensuring
that there is constant growth in the revenue which is generated by the company. The
strategies which are followed by the management of PPHE Hotels group is presented in the
form of chart presented below:
Figure 2: Image showing Core strategies of PPHE Hotels group
Source: (Pphe.com. 2019)
Horizontal analysis is a tool which is used by most of the businesses for the purpose
of measuring the changes which takes place in the financial statements which is prepared by
the business. The analysis considers the period of 2017 and 2018 for the purpose of
measuring the changes in financial statements (Pphe.com. 2019). On the other hand, vertical
analysis can be determined as a tool which measures the variation in items on the basis of
particular base which is considered by the business. The analysis is conducted so that the

5FINANCIAL ANALYSIS
management of the company is able to effectively measure the variations in the items, which
are reported in the annual reports of the business. Both horizontal and vertical analysis can be
described as a tool which can measure the trends in the business.
Horizontal Analysis of Income Statement