Financial Analysis and Management of Serendib Hotels Plc

Running Head: Financial Analysis and management
1
Project Report: Financial Analysis and management

Financial Analysis and management 2
Contents
Introduction.......................................................................................................................3
Critical analysis of key ratios...........................................................................................3
Profitability ratios.........................................................................................................3
Efficiency ratios............................................................................................................4
Liquidity ratios..............................................................................................................5
Capital structure ratios..................................................................................................6
Stock market performance............................................................................................7
Practical application and deployment...............................................................................8
Why trends....................................................................................................................8
Recommendation..........................................................................................................9
Conclusion......................................................................................................................11
References.......................................................................................................................12
Appendix.........................................................................................................................14

Financial Analysis and management 3
Introduction:
Serendib hotels plc is operating its business in the hospitality industry in Sri Lanka.
The business operates various hotels, spa and resorts in the Sri Lanka. Almost all the
properties are owned by the company itself. The company has been formed in the year of
1966 in the Colombo, Sri Lanka. The main property of the company includes AVANI
Bentota Resort & Spa located in Bentota; Club Hotel Dolphin in Waikkal, Hotel Sigiriya in
Sigiriya and Avani Kalutara Resort in Kalutara (Bloomberg, 2018). The financial and non
financial information of the business explains that numerous changes have occurred in the
business in last 5 years.
The cash flow level of the business has been reduced in recent years along with the
reduction in the financial performance and financial position because of few changes in the
industry and the competition in the market. The main competitor of the business is Tal Lanka
hotel plc which is holding 1.87 billion market capitals whereas the market cap of Serendib
hotels plc is 1.91 billion (FT, 2018). In this report, the financial analysis study has been done
on Serendib hotels plc to measure the performance and changes in the financial performance
and position of the company in last 5 years.
Critical analysis of key ratios:
Ratio analysis is one of the most used and crucial financial analysis technique which
makes it easier for the internal and external stakeholders of the business to identify the
performance and the changes in the financial performance form the last year. It evaluates the
financial statement of the business on the basis of the liquidity level, profitability level,
capital structure level, and efficiency level and market performance of the business (Higgins,
2012). ratio analysis study of Serendib hotels plc is as follows:
Profitability ratios:
Profitability ratios define the potential of the business to maintain and generate more
revenue on the basis of the total turnover and assets of the business (Krantz, 2016). In case of
Serendib hotels plc, it has been measured that the profitability position of the business has
been reduced from last few years in the year of 2017.
In case of return on capital employed, the ROCE level has been 5.99% in 2017 from
13.34% in 2013 which depicts about great decrement in the profitability level of the company
(Annual report, 2013). Along with that, the return on assets also depict that the net

Financial Analysis and management 4
profitability level of the business has been reduced and is lowest in 2017 from last 5 years.
the current ROA of the business is 3% only. Lastly, the net profit margin level defines that
the net profitability level of the business has been lowest in 2017 because of the lower
demand of the rooms and the occupancy rate of the business was also lower (Annual report,
2017).
It explains that the profitability level of the business has been reduced by a great %
from last few years and it becomes important for the business now to make some strong
strategies in order to assure the performance and improve the profitability level of the
business.
Figure 1: Profitability ratios
(Annual report, 2017)
Efficiency ratios:
Asset efficiency ratios define the potential of the business to maintain and generate
the working capital and efficiency level of the business to improve the turnover and manage
the activities of the business (Lord, 2007). In case of Serendib hotels plc, it has been
measured that the efficiency position of the business has been improved from last few years
in the year of 2017.
In case of creditor’s turnover days, little improvement has been seen in the efficiency
level. The creditor’s turnover days of the business has been improved from last year which
depicts that the business could maintain the activities of the business at reduced working
capital as well (annual report, 2015). Further, the inventory turnover days of the business has