Shangri-La Hotels Financial Performance and Strategic Goals: A Report

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FINANCIAL DECISION MAKING
Written Assignment

EXECUTIVE SUMMARY
This present report is developed in order to evaluate the financial as well as non-financial
perspectives to the Board of Directors of Shangri-La Hotels and resorts. This is done with the
perspective of a potential applicant for the position of the Finance Director of Shangri-La hotels
that are listed within the Singapore Stock Exchange (SGX). This report has presented at the end
the vision and the strategic financial goals of the company by effectively analysing the financial
as well as a non-financial performance of the company by applying vertical analysis, trend
analysis and ratio analysis. This was then followed by conducting an analysis of the corporate
governance framework of Shangri-La Hotels which creates a considerable impact on brand and
reputation. This has also provided a discussion in context to the proposed medium-term
financial strategies that Shangri-La hotels should select for achieving a dominant position in the
hospitality sector.

Table of Contents
EXECUTIVE SUMMARY...................................................................................................................2
TABLE OF FIGURES......................................................................................................................... 5
LIST OF TABLES...............................................................................................................................6
SECTION A...................................................................................................................................... 7
1. INTRODUCTION OF SHANGRI-LA HOTELS AND RESORTS........................................................7
2. HORIZONTAL AND VERTICAL ANALYSIS FOR PRECEDING FIVE YEARS....................................8
3. IDENTIFY PROFITS.................................................................................................................16
4. IDENTIFY DIVIDENDS............................................................................................................ 18
5. IDENTIFY STABILITY AND LIQUIDITY..................................................................................... 20
6. IDENTIFY AND COMMENT ON FOLLOWING.........................................................................24
7. IDENTIFY ASSET VALUE PER SHARE AND CURRENT MARKET PRICE......................................25
8. NON-FINANCIAL RATIOS.......................................................................................................25
SECTION B.................................................................................................................................... 26

PROPOSED MEDIUM-TERM FINANCIAL STRATEGIES FOR SHANGRI-LA HOTELS TO BECOME
DOMINANT IN THE INDUSTRY..................................................................................................... 26
CONCLUSION AND RECOMMENDATIONS....................................................................................27
REFERENCES.................................................................................................................................28
APPENDIX.....................................................................................................................................30

TABLE OF FIGURES
Figure 1: trend analysis of sales over five years...........................................................................11
Figure 2: trend analysis of profits................................................................................................ 12
Figure 3: a trend of assets in the preceding five years.................................................................14
Figure 4: a trend of liabilities....................................................................................................... 15
Figure 5: Singapore overall hotel performance...........................................................................16
Figure 6: profitability ratios......................................................................................................... 17
Figure 7: Dividends ratios............................................................................................................ 19
Figure 8: Efficiency ratio.......................................................................................................... of 21
Figure 9: Liquidity ratios.............................................................................................................. 23

LIST OF TABLES
Table 1: Income statement of preceding five years.......................................................................8
Table 2: vertical analysis for the preceding five years...................................................................9
Table 3: horizontal analysis of balance sheet..............................................................................13
Table 4: financial ratios of the preceding five years.....................................................................17
Table 5: dividend ratios for preceding 5 years.............................................................................18
Table 6: Efficiency ratio............................................................................................................of 20
Table 7: Liquidity ratios................................................................................................................22

SECTION A
1. INTRODUCTION OF SHANGRI-LA HOTELS AND RESORTS
Shangri-La Hotels and Resort is considered to be a deluxe Asian hotel chain which was founded
in the year 1971 in Singapore. It has approx. 95 hotels and resorts that have 38,000 rooms in
Europe, Middle East, Asia, Australia and North America. Shangri-La Hotels is headquartered in
Hong Kong with various market segments of the hospitality industry such as Kerry Hotels, Hotel
Jen, Traders Hotels, and Shangri-La Hotels and so on (Owler, 2019). Shangri La Hotels is
considered to be one amongst the leaders in the hospitality industry which maintains an
effective balance between the interest of the stakeholders and the brand. It has 53 subsidiaries
and nearly 20 associates and glancing at the employee count at the organisation there are
115,000 employees working for it. The annual revenue of organisation accounts to $2.55B and
it has its competitor such as Ritz-Carlton. Net income of Shangri-La Hotel accounts to 701.46m
till April 2019 (Owler, 2019).

2. HORIZONTAL AND VERTICAL ANALYSIS FOR PRECEDING FIVE
YEARS
VERTICAL ANALYSIS FOR PRECEDING FIVE YEARS
A vertical analysis will be performed of an income statement of Shangri-La Hotels and Resorts.
The income statement of the preceding five years is depicted as under:
Table 1: Income statement of the preceding five years
Particulars 2017
RM’000
2016
RM’000
2015
RM’000
2014
RM’000
2013
RM’000
Revenue 550,565 508,559 500,253 513,679 511,225
Operating
profit
114,381 105,713 126,230 120,473 159,460
Interest
income
4,279 4,157 1,659 2,438 1,312
Interest
expense
(3,767) (2,697) (1,667) (2,092) (1,416)
The share of
results of
associated
companies
(5,233) (896) 27,419 (1,322) 8,825
Profit before
tax
109,660 106,277 153,641 119,497 168,181
Tax expenses (27,640) (21,293) (15,375) (33,705) (28,373)
Profit for the
year
82,020 84,984 138,266 85,792 139,808

Profit
attributable
to:
Shareholders
of the
company
72,198 79,243 129,686 79,340 130,367
Non-
controlling
interests
9,822 5,741 8,580 6,452 9,441
Profit for the
year
82,020 84,984 138,266 85,792 139,808
Basic earnings
per ordinary
share
16.41 18.01 29.47 18.03 29.63
Vertical analysis of Income Statement of Shangri-La Hotels for preceding five years is presented
as under:
Table 2: vertical analysis for preceding five years
Particul
ars
201
7
RM’
000
% 2016
RM’0
00
% 2015
RM’000
% 2014
RM’000
% 2013
RM’0
00
%
Revenu
e
550,
565
100
%
508,5
59
100
%
500,253 100
%
513,679 100% 511,2
25
100%
Operati
ng
profit
114,
381
20.7
7%
105,7
13
20.7
8%
126,230 25.2
3%
120,473 23.45% 159,4
60
31.19
%
Interest
income
4,27
9
0.77
%
4,157 0.81
%
1,659 0.33
%
2,438 0.47% 1,312 0.25%

Interest
expens
e
(3,76
7)
0.68
%
(2,69
7)
0.53
%
(1,667) 0.33
%
(2,092) 0.40% (1,41
6)
0.27%
Share
of
results
of
associa
ted
compan
ies
(5,23
3)
0.95
%
(896) 0.17
%
27,419 5.48
%
(1,322) 0.25% 8,825 1.72%
Profit
before
tax
109,
660
19.9
%
106,2
77
20.8
9%
153,641 30.7
1%
119,497 23.26% 168,1
81
32.89
%
Tax
expens
es
(27,6
40)
5.02
%
(21,2
93)
4.18
%
(15,375) 3.07
%
(33,705) 6.56% (28,3
73)
5.55%
Profit
for the
year
82,0
20
14.8
9%
84,98
4
16.7
1%
138,266 27.6
3%
85,792 16.70 139,8
08
27.34
%

Sales
470,000
480,000
490,000
500,000
510,000
520,000
530,000
540,000
550,000
560,000
TREND ANALYSIS OF SALES OVER FIVE YEARS
2017
2016
2015
2014
2013
Figure 1: trend analysis of sales over five years
According to the Hospitality industry in Singapore, there was a contraction in revenue by 3.74%
in 2017 which in case of Shangri-La hotels accounted to an annual growth of 7.2% in 2017
depicting a strong position in the hospitality industry (Financial Times, 2019).

Operating profit profit before tax profit for the year
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
TREND ANALYSIS OF PROFITS
2017
2016
2015
2014
2013
Figure 2: trend analysis of profits
According to industry averages, gross profit has been achieved significantly by the Hotel and
tourism industry in Singapore which records operating margin of 16.05% in the quarter of 2017
which in case of Shangri-La hotels is 20.7% which is above the industry average (Bloomberg,
2019).