Financial Position & Performance: Hospitality Industry Report

This report provides a financial analysis of leading hospitality companies including PPHE Hotel Group, Whitebread Plc, and Millennium and Copthorne Hotels Plc, comparing their financial performance and position based on key financial ratios. The analysis covers gross profit margin, net profit margin, return on capital employed, return on equity, current ratio, quick ratio, day debtors, interest coverage ratio, assets turnover, interest-bearing debt-to-equity, earnings per share, and price-earning ratio. The findings indicate varying strengths among the companies, with PPHE showing strong profit performance, MP demonstrating impressive liquidity, and Whitebread Plc exhibiting better gearing. Recommendations include minimizing operational costs and maximizing current assets. The report also emphasizes the importance of qualitative assessments alongside quantitative analysis to account for external market volatility, particularly in multinational operations. The references provided offer additional resources for further research.

FINANCIAL PERFORMANCE AND
POSITION OF A COMPANY

PPHE Hotel Group
• PPHE Hotel Group is the biggest company which is engaged in hospitality
industry. It is headquartered in Netherlands and also it is listed on London
Stock Exchange.
• It has broad brand portfolio and having partnership with another leading
hospitality brand Radisson Hotel Group.
• It has earned 325 billion of revenue in euros at the end of 2017 financial
year.
• It has exclusive rights in nearly 56 countries. It has highly exotic hotels in
many countries including Germany, Europe and other nations.

Whitebread Plc
• Whitebread Plc is another biggest hospitality company listed on London
Stock Exchange (LSE).
• It is headquartered in UK. It is one of the oldest hospitality organization
operating in UK and is primarily engaged in coffee shop, restaurant and
hotel business.
• Organization has earned 2.921 billion at the end of 2016 financial year.

Millennium and Copthorne Hotels Plc
• MP Plc is the largest hospitality industry headquartered in UK. It is real
estate hospitality industry managing, franchising and leasing hotels in
various countries.
• It also offers hotel management consultancy to hotel owners.
• Its vision statement is to become the leading hospitality real estate
company by offering effective and unique assets management services to
people.

Academic and sector literature related to appropriate theory
• The objective behind this research is to provide clarity about importance of
financial ratios' analysis which is required in the company so that financial
condition may be easily ascertained.
• In this context, author has said that computation of financial ratios is quite
important for the company to assess position with reference to its
competitors.
• Income statement and balance sheet provides way to carry out financial
ratios which are helpful for company and various stakeholders.

Cont.
• In contrary to this, author argued that financial ratios does not provide
qualitative information regarding performance of the company as it is
purely based on quantitative information.
• This is the greatest disadvantage of calculating financial ratios.
• This is required as there are various qualitative aspects which are
essentially required for assessing performance of the company.

Cont.
• In relation to this, author says that financial performance help to assess
effectiveness of firm and as such, structured decisions can be made so that
organisation may be able to enhance customer satisfaction in a better way
and help to generate desired revenue with much ease.
• Financial statements such as balance sheet, income statement assists in
carrying out financial ratios so that performance of company may be easily
ascertained.

Gross profit margin
• Above graph clearly highlights that in all the years, Millennium and
Copthorne Hotels Plc’s GM of 57.05%, 59.69%, 58.68% and 57.34% is
significantly greater than Whitebread and PPHE.
• Although MP indicates high profit yielding firm still, since 2014, it shows
downward trend as fallen to 58.68% and 57.34% because of economic and
political uncertainty and changing global landscape.

Net profit margin
• Looking to the trend, it is noticed that MP’s net profit shows a significant
decline from an attractive return of 24.9% to 18.28%, 11.45% and 10.58%.
• Likewise, other companies experienced profit volatility still, in 2016,
PPHE shows highest return of 14%

Return on capital employed
• Whitebread shows highest return on its capital employed of 14.36% higher
than that of earlier year 14.22%.
• However, MP shows regular decrease in ROCE from 9.03% to 5.85%,
3.56% and 3.03% whilst PPE shows fluctuating trend as in 2014, gone up
to 5.98%, then fallen to 5.28% and gone up to 5.49%.
• As per the annual report, company had successfully achieved its target
ROCE of 13%-18% with actual ROCE of 14.22% .

Return on equity
• ROE results show that Whitebread is in strong position that is generating
impressive profit of 16.68% on the total equity investment greater than that
of MP with 2.92% and PPHE with 11.72%.
• Internationalization strategy of Whitebread Plc by 3816 new Premier Inn
rooms, 1585 Costa Express Machines and 110 new stores maximized
revenue from £2921.8m to £3106m.

Current ratio
• This ratio represents the relationship between current assets and current
liabilities of the entities for the reporting year.
• From 2013 to 2016, MP’s CR came down from 2.18:1 to 1.55:1 whereas
PPHE ratio increased from 0.99 to 1.13 and Whitebread Plc’s ratio came
down from 0.42:1 to 0.40.