Introduction
Cinnamon Grand is a five-star hotel experience,
located in the heart of Colombo’s business, shopping and entertainment Centre.
The Cinnamon Grand is a unique hotel that caters to its patrons with 501
opulent rooms and eight restaurants offering a diverse range of excellent
cuisine. For business gatherings and conferences, lodging in opulent rooms and
suites, and multi-course catering—primarily for tourists but also keeping an
eye on the neighborhood market. The Cinnamon Grand offers the ideal combination
of amenities for both business and pleasure, all while keeping connectivity and
comfort in mind.
The premier conglomerate of Sri Lanka, John Keells
Holdings, has named its brand, Cinnamon Hotels & Resorts, after the spice
that is associated with the country. The Cinnamon brand is a collection of
contemporary hotels that are colorful, lavishly hospitable, and dedicated to
going above and beyond to meet the needs of their patrons. Legendary Sri Lankan
hospitality is ensured by Cinnamon Hotels & Resorts through comfort, style,
innovation, and exploration.
In the heart of Colombo, where the bustling rhythm of
business and the enchanting melodies of entertainment converge, stands Cinnamon
Grand Hotels Sri Lanka - a beacon of opulence and impeccable hospitality. This
exquisite five-star haven beckons travelers to experience an unparalleled blend
of luxury, comfort, and connectivity. With 501 lavish rooms and an eclectic
ensemble of eight restaurants serving exquisite cuisines, Cinnamon Grand is a
testament to the art of exceptional hospitality.
For both business and leisure voyagers, Cinnamon Grand
is an oasis of possibilities. Whether customers seek a venue for corporate
meetings, seek refuge in their luxurious rooms and suites, or embark on a
gastronomic journey through their multi-cuisine offerings, this hotel is a
masterpiece in the world of hospitality. At its core, Cinnamon Grand is built
upon a simple yet profound ethos: "Guest is God." This dictum drives
their commitment to creating divine experiences for every visitor.
The flagship property of Cinnamon Hotels &
Resorts, Cinnamon Grand Colombo, opened for business on November 26, 2005.And
now it's a well-known brand name and five-star hotel. It is divided into
several sections, the primary ones being Corporate Travel, Leisure Travel,
Cruise Ship Stopovers, and a range of Holiday Packages for local clients.
Background
Cinnamon Grand Hotels Sri Lanka is a distinguished
member of the illustrious Cinnamon Hotels & Resorts brand, operating under
the esteemed banner of John Keells Holdings, one of Sri Lanka's foremost
conglomerates. The name "Cinnamon" draws inspiration from the iconic
spice that is synonymous with Sri Lanka, symbolizing a commitment to modernity,
vibrancy, and uncompromising hospitality.
The inception of Cinnamon Grand Colombo, the flagship
hotel of Cinnamon Hotels & Resorts, dates back to November 26, 2005. Since
its inception, it has rapidly ascended to become a celebrated five-star
destination, catering to a diverse clientele that includes corporate travelers,
leisure tourists, cruise ship stopovers, and local patrons. It offers an array
of meticulously curated holiday packages that cater to the myriad preferences
of its guests.
Formerly known as Keells Hotels Limited, John Keells
Hotels underwent a transformation, becoming a publicly-traded entity on the
Colombo Stock Exchange in 2004. In 2005, the distinct Cinnamon Hotels &
Resorts brand was introduced in London, under which all properties now operate.
Notably, in 2019, Cinnamon Hotels & Resorts invested in the extensive
renovation of Cinnamon Bentota Beach and expanded its footprint by launching
Cinnamon Velifushi Maldives, exemplifying its commitment to innovation and
expansion.
Cinnamon Grand Hotels Sri Lanka, with 15
establishments and over 1,400 rooms in its portfolio, has firmly established
its reputation, not just as an accommodation provider but as a symbol of
hospitality excellence. Actively engaged in corporate partnerships, event
sponsorships, and inventive customer loyalty programs, it maintains its
position as a prominent figure in Sri Lanka's vibrant hospitality industry.
With a penchant for hosting grand events, both local and international visitors
are irresistibly drawn to the allure of Cinnamon Grand.
Financial
Statement Analysis
Financial statement analysis is a vital tool for
understanding the financial health and performance of a business. It involves
the evaluation of a company's financial statements, such as the income
statement, balance sheet, and cash flow statement, to make informed decisions
about its profitability, stability, and potential for growth.
The income statement is one of the most important
parts of financial statement analysis. This statement gives a quick overview of
the earnings and outlays for a business over a given time frame, usually a
year. Investors and other stakeholders can evaluate the company's cost control,
revenue growth, and profitability by examining the income statement. For
investors to make well-informed investment decisions or for management to
identify areas in which cost-cutting or revenue-boosting initiatives are
required, this information is essential.
Another crucial document for financial statement
analysis is the balance sheet. It displays the equity, liabilities, and assets
of a business at a specific moment in time. A company's overall financial
stability can be ascertained by looking at the balance sheet. For instance, a
business that has a large debt load on its balance sheet might be in danger if
it is unable to pay off its debts. On the other hand, a substantial equity
position denotes sound financial standing and the capacity to withstand
downturns in the economy.
Equally important, the cash flow statement shows how a
business makes and spends money. A business needs positive cash flow in order
to pay dividends, pay down debt, and invest in expansion prospects. A negative
cash flow may be an indicator of troubled finances.
Calculating different financial ratios and metrics,
like the debt-to-equity ratio, current ratio, and return on investment, is
another aspect of financial statement analysis. A deeper comprehension of a
company's financial performance and position is offered by these ratios. For
example, a high return on investment can be a sign of efficiency and
profitability, but a high debt-to-equity ratio may indicate high financial
risk.
1)
Horizontal Analysis of Financial Position
In
order to determine how the financial data has changed over time, the current
year's results are compared to the base year - the base year is supposed
to be 100.
Statement of Financial Position - Cinnamon
Hotels & Resorts
In
Rs. 000’
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
|
Assets |
||||||
|
Non-Current Assets |
||||||
|
Property plant and equipment |
|
|
|
|
|
|
|
Right-of-use assets |
|
|
|
|
|
|
|
Lease rentals paid in advance |
|
|
|
|
|
|
|
Investment property |
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
|
Investments in subsidiaries |
10485279.00 |
10623739.00 |
10665499.00 |
12678838.00 |
12682683.00 |
12688540.00 |
|
Investments in equity accounted
investees |
60020.00 |
63599.00 |
64625.00 |
633997.00 |
766072.00 |
766822.00 |
|
Non-current financial assets |
15.00 |
12.00 |
10.00 |
8.00 |
6.00 |
5.00 |
|
Deferred tax assets |
|
|
|
|
|
10368.00 |
|
Other non-current assets |
|
|
|
|
|
|
|
Total Non-Current Assets |
10552593.00 |
10687350.00 |
10730134.00 |
13312843.00 |
13448761.00 |
13465735.00 |
|
Current Assets |
||||||
|
Inventories |
235826.00 |
258005.00 |
296683.00 |
418753.00 |
258005.00 |
600342.00 |
|
Trade and other receivables |
12245.00 |
13584.00 |
14818.00 |
0.00 |
0.00 |
0.00 |
|
Amounts due from related parties |
1050.00 |
1109.00 |
1901.00 |
10725.00 |
4530.00 |
3525.00 |
|
Other current assets |
5965.00 |
7098.00 |
12554.00 |
799.00 |
|
|
|
Short term investments |
986926.00 |
986926.00 |
986926.00 |
3781.00 |
|
672.00 |
|
Cash in hand and at bank |
43901.00 |
43901.00 |
43901.00 |
4707.00 |
393477.00 |
405044.00 |
|
Total Current Assets |
400566.00 |
383597.00 |
1053558.00 |
500120.00 |
398007.00 |
4092410.00 |
|
Total Assets |
11070947.00 |
11070947.00 |
11783692.00 |
13332855.00 |
13846768.00 |
13874976.00 |
|
Equity and Liabilities |
|
|
|
|
|
|
|
Equity attributable to equity holders
of the parent |
|
|
|
|
|
|
|
Stated Capital |
9500247.00 |
9500247.00 |
9500247.00 |
9500247.00 |
9500247.00 |
9500247.00 |
|
Revenue reserves |
1538924.00 |
1538924.00 |
2202014.00 |
3347642.00 |
3295384.00 |
3245753.00 |
|
Other components of equity |
-1.00 |
-1.00 |
-3.00 |
-5.00 |
-7.00 |
-8.00 |
|
Non-controlling interest |
|
|
|
|
|
|
|
Total Equity |
11039170.00 |
11039170.00 |
11702258.00 |
12847884.00 |
12795624.00 |
12745992.00 |
|
Non-current liabilities |
|
|
|
|
|
|
|
Insurance contract liabilities |
|
|
|
|
|
|
|
Interest-bearing loans and borrowings |
0 |
|
|
|
1020560.00 |
1104926.00 |
|
Lease liabilities |
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
Employee benefit liabilities |
|
|
|
|
|
|
|
Non-current financial liabilities |
|
|
|
|
|
|
|
Other non-current liabilities |
|
|
|
|
|
|
|
Total Non-Current Liabilities |
0 |
|
|
|
1020560.00 |
1104926.00 |
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
14053.00 |
15411.00 |
13584.00 |
14023.00 |
10456.00 |
10993.00 |
|
Amounts due to related parties |
2949.00 |
1929.00 |
2592.00 |
2514.00 |
3121.00 |
1276.00 |
|
Income tax liabilities |
12448.00 |
14399.00 |
37657.00 |
15207.00 |
14413.00 |
10368.00 |
|
Short term borrowings |
|
|
|
|
|
|
|
Interest-bearing loans and borrowings |
0 |
|
|
|
2594.00 |
1421.00 |
|
Lease liabilities |
|
|
|
|
|
|
|
Other current financial liabilities |
|
|
|
|
|
|
|
Other current liabilities |
0 |
38.00 |
27601.00 |
453227.00 |
|
|
|
Bank overdrafts |
26188.00 |
31777.00 |
81434.00 |
484971.00 |
30584.00 |
24058.00 |
|
Total Equity and Liabilities |
10070960.00 |
11070947.00 |
11783692.00 |
13332855.00 |
13846768.00 |
13874976.00 |
2)
Rupee Change
Rupee
Change = Analysis period Amount – Base Period Amount
The
Base Year = 2017
Time
Period = 2018 to 2022
2.1) Percentage Change
Percentage Change = (Rupee
Change/Base period Amount) *100%
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Assets |
|
|
|
|
|
|
Non-Current Assets |
|
|
|
|
|
|
Property plant and
equipment |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Right-of-use assets |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Lease rentals paid
in advance |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Investment property |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Intangible assets |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Investments in
subsidiaries |
0.00% |
0.00% |
17.22% |
17.26% |
17.29% |
|
Rupee Change |
0.00% |
-18.97% |
10.95% |
11.00% |
11.04% |
|
Investments in
equity accounted investees |
0.00% |
0.00% |
90.59% |
117.67% |
118.16% |
|
Rupee Change |
0.00% |
-97.30% |
85.53% |
177.67% |
118.15% |
|
Non-current
financial assets |
0.00% |
0.00% |
-46.67% |
-60.00% |
-66.67% |
|
Rupee Change |
0.00% |
-60.00% |
-73.33% |
-80.00% |
-83.33% |
|
Deferred tax assets |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
100.00% |
|
Other non-current
assets |
|
|
|
|
|
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Total Non-Current
Assets |
-0.13% |
-0.11% |
19.86% |
21.50% |
21.62% |
|
Rupee Change |
-0.13% |
-0.11% |
19.72% |
21.16% |
21.40% |
|
Current Assets |
|
|
|
|
|
|
Inventories |
-90.38% |
-74.52% |
78.05% |
-90.38% |
54.62% |
|
Rupee Change |
-90.38% |
-74.52% |
78.05% |
-90.38% |
54.62% |
|
Trade and other
receivables |
-87.99% |
-79.39% |
-200.00% |
-200.00% |
-200.00% |
|
Rupee Change |
-87.99% |
-79.39% |
-200.00% |
-200.00% |
-200.00% |
|
Amounts due from
related parties |
-94.48% |
-81.24% |
819.71% |
330.95% |
138.64% |
|
Rupee Change |
-94.48% |
-81.24% |
819.71% |
330.95% |
138.64% |
|
Other current assets |
-81.04% |
-88.98% |
-186.30% |
0.00% |
0.00% |
|
Rupee Change |
-81.04% |
-88.98% |
-186.30% |
0.00% |
0.00% |
|
Short term
investments |
-100.00% |
-100.00% |
-99.61% |
-99.93% |
-99.93% |
|
Rupee Change |
-100.00% |
-100.00% |
-99.61% |
-99.93% |
-99.93% |
|
Cash in hand and at
bank |
-100.00% |
-100.00% |
-89.44% |
700.70% |
727.41% |
|
Rupee Change |
-100.00% |
-100.00% |
-89.44% |
700.70% |
727.41% |
|
Total Current Assets |
-24.53% |
152.57% |
-73.67% |
-54.26% |
897.26% |
|
Rupee Change |
-24.53% |
152.57% |
-73.67% |
-54.26% |
897.26% |
|
Total Assets |
-1.02% |
4.38% |
21.39% |
10.62% |
87.39% |
|
Rupee Change |
-1.02% |
4.38% |
21.39% |
10.62% |
87.39% |
|
Equity and
Liabilities |
|||||
|
Equity attributable
to equity holders of the parent |
|
|
|
|
|
|
Stated Capital |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Rupee Change |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Revenue reserves |
0.00% |
41.39% |
117.47% |
170.83% |
167.47% |
|
Rupee Change |
|
|
|
|
|
The Percentage Change table reflects
a spotlight on how each financial category will change from 2018 to 2022.
Significant percentage increases in Investments in Subsidiaries and Investments
in Equity Accounted Investees, which show significant expansion in these
assets, are noteworthy observations. On the other hand, there was a significant
percentage reduction in short-term investments, cash on hand, and bank
deposits, indicating a decline in these liquid assets. With Stated Capital
showing no changes and Revenue Reserves showing constant positive growth, the
equity component is still mostly stable.
3) Trend Analysis of Financial
Position
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Total Non-current
Assets |
20% |
50% |
80% |
120% |
170% |
|
Total Current Assets |
10% |
5% |
2% |
30% |
75% |
|
Total Assets |
15% |
35% |
50% |
80% |
125% |
|
Total Equity |
15% |
30% |
35% |
45% |
45% |
|
Total Non-current
liabilities |
15% |
30% |
50% |
160% |
320% |
|
Total Current
liabilities |
15% |
35% |
120% |
120% |
190% |
|
Total Liabilities |
15% |
30% |
75% |
150% |
255% |
The
changes in important financial measures between 2018 and 2022 are shown in the
Trend Analysis of Financial Position table. Total Non-current Assets have a
strong long-term asset expansion trend, increasing by 20%, 50%, 80%, 120%, and
170% annually. The path of total current assets is irregular with a notable 30%
growth in 2021. While Total Non-current and Current Liabilities show differing
trajectories, with a notable growth of 320% in Total Non-current Liabilities in
2022, Total Equity remains comparatively constant with a modest increase.
4) Trend Analysis of the Income
Statement
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Sale of goods |
15% |
40% |
110% |
120% |
95% |
|
Rendering of
services |
10% |
105% |
-65% |
-70% |
-55% |
|
Revenue |
14% |
130% |
45% |
49% |
37% |
|
Cost of Sales |
17% |
145% |
68% |
75% |
70% |
|
Gross Profit |
11% |
105% |
0% |
-6% |
-33% |
|
Other operating
income |
-20% |
95% |
-10% |
5% |
25% |
|
Selling and
distribution expenses |
10% |
120% |
60% |
50% |
30% |
|
Administrative
expenses |
9% |
110% |
20% |
25% |
25% |
|
Other operating
expenses |
-15% |
85% |
5% |
-15% |
-60% |
|
Results from
operating activities |
14% |
90% |
-35% |
-40% |
-75% |
|
Finance cost |
-60% |
50% |
170% |
210% |
350% |
|
Finance income |
20% |
140% |
55% |
20% |
35% |
|
Change in insurance
contract liabilities |
40% |
70% |
0% |
60% |
100% |
|
Change in contract
liability due to transfer of one off |
0% |
100% |
0% |
0% |
0% |
|
Change in fair value
of investment property |
80% |
330% |
20% |
110% |
-10% |
|
Share of results of
equity accounted investees (net of tax) |
20% |
130% |
75% |
65% |
50% |
|
Profit before tax |
20% |
140% |
0% |
-30% |
-70% |
|
Tax expense |
40% |
130% |
0% |
-20% |
-60% |
|
Profit for the year |
15% |
145% |
5% |
-35% |
-70% |
Over time, there have been notable
variations in the money generated by the sale of goods and provision of
services. From 2017 to 2021, revenue increased significantly, reaching a peak
in 2021. Revenue fell by 37% in 2022, which is a significant drop. This could
be due to a number of things, including shifts in consumer behavior or the
state of the economy.
This is a period of fluctuating gross
profit margin. 2022 saw a 33% decline in gross profit, which may be cause for
concern. This could be the result of higher expenses, diminished pricing power,
or inefficient operations.
Expenses for selling and distribution
as well as administration are growing at a somewhat constant rate, with a
slight increase in 2022. Other operating expenses decrease significantly in
2022, which might indicate cost-cutting efforts but could also impact the
quality of services. Operating activity results drop significantly in 2022,
indicating a 75% loss. This points to a difficult year ahead for Cinnamon Grand
Hotels, perhaps brought on by a number of variables.
When it comes to the Finance Revenue
and Expenses over time, finance costs grew dramatically, a symptom of rising
interest charges. Higher interest rates or more borrowing may be the cause of
this. Even though it is growing, finance income is still far less than
financing costs.
Even though profit dropped in 2022,
tax expenditure went up. The company's tax position may have changed or tax
laws may have changed. The year-over-year profit exhibits significant
variations. In 2022, Cinnamon Grand Hotels recorded a substantial 70% loss, a
sharp contrast to the prior years' profits.
As an overall, Cinnamon Grand Hotels
saw rapid revenue growth through 2021; however, 2022 proved to be a difficult
year, with a notable decline in gross profit, revenue, and loss. The financial
line was further impacted by the rise in financing and tax charges under the
current economic crisis can cause the above matter.
5)
Vertical Analysis of Income Statement
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Revenue |
100% |
100% |
100% |
100% |
100% |
|
Cost of Sales |
70% |
75% |
78% |
80% |
85% |
|
Gross Profit |
30% |
25% |
22% |
20% |
15% |
|
Other operating income |
3% |
2% |
1% |
2% |
3% |
|
Selling and distribution expenses |
4% |
4% |
4% |
4% |
4% |
|
Administrative expenses |
10% |
9% |
9% |
9% |
10% |
|
Other operating expenses |
3% |
3% |
3% |
2% |
2% |
|
Results from operating activities |
16% |
9% |
7% |
5% |
2% |
|
Finance cost |
0% |
0% |
2% |
2% |
4% |
|
Finance income |
8% |
8% |
8% |
7% |
8% |
|
Change in insurance contract liabilities |
4% |
2% |
3% |
4% |
6% |
|
Change in contract liability due to transfer of one off |
0% |
3% |
0% |
0% |
0% |
|
Change in fair value of investment property |
0% |
1% |
0% |
0% |
0% |
|
Share of results of equity accounted investees (net of
tax) |
3% |
3% |
3% |
3% |
3% |
|
Profit before tax |
21% |
23% |
14% |
9% |
4% |
|
Tax expense |
4% |
4% |
2% |
2% |
1% |
|
Profit for the year |
17% |
19% |
12% |
7% |
3% |
Revenue
remained constant at 100% throughout the period, which indicates stable
top-line growth. There is a gradual increase in the cost of sales from 70% in
2018 to 85% in 2022. This suggests a steady increase in the cost of goods sold
relative to revenue, which may indicate challenges in controlling production
costs or sourcing materials. The gross profit percentage declined from 30% in
2018 to 15% in 2022. This decline is due to the rising cost of sales,
indicating reduced profitability.
When
considering, Other Operating Income; other operating income fluctuated but
remained relatively low, indicating that the company did not rely significantly
on other income sources apart from core operations. Operating Expenses
(Selling, Distribution, and Administrative); selling and distribution expenses
remained constant at 4%, while administrative expenses fluctuated but were
relatively stable. This suggests that the company effectively controlled these
expenses over the years.
Considering,
Results from Operating Activities; the percentage declined from 16% in 2018 to
2% in 2022, indicating declining profitability from core operations.
Considering, Finance Costs and Income; Finance costs increased from 0% in 2018
to 4% in 2022, suggesting higher debt or borrowing costs. Finance income
remained stable.
Considering,
Profit Before Tax; there is a significant decline in profit before tax, from
21% in 2018 to 4% in 2022, indicating decreasing profitability. Considering,
Tax Expense; the tax expense remained relatively low and stable, which
indicates that tax efficiency was maintained.
When
considering, Profit for the Year; the profit for the year saw a consistent
decline, from 17% in 2018 to 3% in 2022, reflecting decreasing overall
profitability.
6)
Vertical Analysis of Financial Position
Common
Size Percentage = Analysis Amount/Base Amount * 100%
Considering, Non-Current Assets; Property, plant, and
equipment have increased over time, which could be a sign of fixed asset
investment. Significant growth in right-of-use assets points to a move toward
leased assets. The non-current assets' overall makeup stayed mostly unchanged.
Considering, Current Assets Although there were variations in short-term
investments, 2020 saw a notable decline. This can mean that the company's
investment approach has changed. Both in-hand and bank cash stayed steady. The
mix of all current assets was largely consistent.
Considering, Equity; over time, equity decreased, with
a notable drop occurring between 2019 and 2021. This could mean that during
this time the company distributed profits or experienced losses.
Considering, Non-Current Liabilities; In 2021,
interest-bearing loans and borrowings climbed significantly, which might be a
sign of more borrowing or refinancing. Between 2019 and 2021, the overall amount
of non-current liabilities grew considerably. Considering, Current Liabilities;
In 2021, trade and other payables grew, suggesting that the business would owe
more money to creditors or suppliers. Increased short-term debt is suggested by
an increase in interest-bearing loans and borrowings as well as short-term
borrowings.
Cinnamon Grand Hotels' financial statements show a
change in the structure of assets and liabilities as well as a decline in
profitability, according to the vertical study. The business had trouble
keeping costs under control, and its gross profit margins were dropping, which
had an impact on profitability as a whole.
7) Ratio Analysis
7.1) Liquidity & Efficiency
Working capital -
Working capital is the total amount of money that is available to pay for
regular operating costs. Cinnamon Grand Hotels' working capital increased
dramatically to Rs. 9,721,240 million in 2019 from Rs. 351,820 million in 2018.
But in 2020, it fell sharply to Rs. 15,149 million, and in 2021 and 2022, it
rose sharply to Rs. 367,423 million and a much larger Rs. 4,068,352 million.
Significant variations in working capital could be a sign of erratic investing
behavior or potential financial instability.
Current Ratio -
Cinnamon Grand Hotels' current ratios were above 1.0 in 2018 and 2019,
indicating that they could pay for their immediate obligations. This ratio
assesses how well a business can pay its short-term debts. In general, a ratio
of more than 1.0 is regarded as healthy. The ratio did, however, sharply
decline to 0.103 in 2020, indicating possible liquidity problems. After that,
it bounced back in 2021 and got even better in 2022. The 2022 current ratio of
1.701 shows a significantly better state of liquidity.
Acid Test Ratio - Quick Ratio, also known as the Acid Test
Ratio, is comparable to the current ratio but does not include inventory
because it is frequently regarded as less liquid. In 2018 and 2019, Cinnamon
Grand Hotels' acid test ratio was relatively strong; however, in 2020, it
declined significantly, suggesting that the company might have trouble
fulfilling its short-term obligations without using inventory. Although it was
better in 2021 and 2022, the ratio stayed below 1.0, indicating that they
continue to rely on inventory to pay short-term obligations.
Accounts Receivable Turnover -
A value of 0 for 2020 and 2021 indicates that either no accounts receivable
were generated by the company during those years, or the data was not
accessible. As this indicator demonstrates the speed at which the business
collects its outstanding debts; a high value denotes effective collection,
whereas a low value denotes sluggish collection. It's hard to assess the trend
over time without the 2020 and 2021 data.
Total Asset Turnover -
This indicator assesses how well assets are being used. A score of less than
1.0 usually means that the business is not making the most of its resources to
produce income. From 2018 to 2022, Cinnamon Grand Hotels had a consistently low
asset turnover rate, which may suggest that asset management needs to be
improved.
Days Sales in Inventory -
The number of days needed to sell inventory improved in 2020 and 2021,
suggesting improved inventory management. But in 2022, there was a small
increase. As this indicator determines how long it takes a business to sell its
stock; overall, the trend points to increased inventory management efficiency.
According to the data, Cinnamon Grand Hotels had cash
flow issues in 2020; these issues were only partially resolved in 2021 and
greatly improved in 2022. Additionally, the business displayed indications of
increased inventory management efficiency. The low overall asset turnover,
however, points to potential for additional asset utilization optimization. It
is challenging to evaluate the full scope of the business's financial
performance in 2020 and 2021 due to the absence of accounts receivable data for
those years.
7.2) Solvency
|
Financial
Ratios |
2018 |
2019 |
2020 |
2021 |
2022 |
|
Debt
Equity Ratio |
10.5% |
12.6% |
25.9% |
70.4% |
88.6% |
|
Times
Interest Earned |
11.8 |
12.5 |
5.1 |
3.6 |
2.9 |
a. Debt Equity
Ratio: A smaller ratio is often seen to be desirable since it suggests less
financial risk. The Debt Equity Ratio of Cinnamon Grand Hotels has expanded
dramatically throughout the years, rising from 10.5% in 2018 to 88.6% in 2022.
As this ratio compares the proportion of a company's funding from debt to
equity. This indicates that the firm has relied increasingly on debt to fund
its operations, which might increase financial risk.
b. Times
Interest Earned: This ratio evaluates whether a business can use its profits to
pay its interest costs. Better capacity to satisfy interest commitments is
indicated by a higher value. The Times Interest Earned ratio fell from 11.8 in
2018 to 2.9 in 2022 as a result of the years. This downward trend suggests that
the business might be having trouble using its operating profits to pay its
interest costs.
7.3)
Profitability
|
Financial
Ratios |
2018 |
2019 |
2020 |
2021 |
2022 |
|
Profit
Margin |
11.2% |
9% |
1.2% |
2.1% |
3.8% |
|
Gross
Profit Margin |
22.72% |
20.51% |
4.1% |
5.4% |
8% |
|
Return
On Total Assets |
9.5% |
8.5% |
0.2% |
2.8% |
1.1% |
|
Return
on Equity |
10.4 |
9.1 |
1.5 |
2.5 |
1.3 |
|
Market
Value per Share |
11.9 |
12.5 |
13.8 |
17.6
|
20.5 |
|
Basic
EPS |
4.8 |
4.6 |
2.5 |
3.0 |
6.4 |
a. Profit
Margin: The profit margin of Cinnamon Grand Hotels decreased dramatically in
2020 after remaining relatively steady in 2018 and 2019. It has demonstrated
resiliency in 2021 and 2022. This ratio shows how much profit a business makes
for each dollar of sales. The COVID-19 pandemic's effects on the hotel sector
may be the cause of 2020's low profitability.
b. Gross
Profit Margin: The percentage of income left over after subtracting the cost of
products sold is shown by this ratio. 2020 saw a sharp decline in the gross
profit margin, which has since recovered. This implies that in 2020, the
business encountered difficulties controlling its expenses.
c. Return on
Total Assets (ROA): ROA gauges how well assets are used to produce profits. In
2020, Cinnamon Grand Hotels saw a significant drop in ROA; however, in 2021 and
2022, there was some improvement.
d. Return on
Equity (ROE): ROE demonstrates how well a business uses the equity of its
shareholders to produce profit. In 2020, the ROE similarly decreased, but in
2021 and 2022, it somewhat improved.
e. Market
Value per Share and Basic EPS: From 2018 to 2022, both metrics exhibit an
increasing tendency. This suggests that the company's earnings per share and
stock price have been rising, which is encouraging for investors.
7.4) Market
Ratio
|
Financial
Ratios |
2018 |
2019 |
2020 |
2021 |
2022 |
|
PE
Ratio |
2.5 |
2.7 |
5.5 |
5.9 |
3.2 |
|
Dividend
Yield |
4.75% |
4.28% |
2.8% |
3.98% |
1.21% |
a.
Price-to-Earnings (PE) Ratio: The PE ratio of Cinnamon Grand Hotels has varied
over time. It shows how the market assesses the earnings of the business. In
here, it has consistently stayed at a moderate level, indicating that investors
are prepared to pay a fair price for the company's earnings.
a. Dividend
Yield: With a minor decline in 2022, the Dividend Yield has been comparatively
steady over time. This implies that the business has been paying its investors
a dividend on a regular basis.
Cinnamon Grand
Hotels has encountered difficulties with its liquidity, particularly due to a
notable rise in the Debt Equity Ratio and a decrease in the Times Interest
Earned ratio. Profitability suffered in 2020, but in the years that followed,
it began to improve. Based on the market ratios, the company is reasonably
valued and has a stable dividend yield. It is noteworthy that the difficulties
encountered in 2020 could be ascribed to the COVID-19 pandemic's effects on the
hospitality sector, and the subsequent rebound could indicate a favorable
development for the organization's fiscal well-being.
8) ALTMAN
Z-SCORE ANALYSIS
Altman's
Z-Score methodology uses a numerical measurement to estimate the probability
that a company would fail within the following two years. Based on five
essential financial ratios, this model A corporation can be divided into three
operational zones based on the Z-Score's numerical value.
Z = 1.2T1+
1.4T2 + 3.3T3 + 0.6T4 + 0.99T5
T1, T2, T3….
are specific ratios among financial elements.
Z < 1.81 =
Distress Zone
1.81 < Z
< 2.99 = Grey Zone
Z > 2.99 =
Safe Zone
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|
Working
Capital (Rs.'000) |
2708667 |
2871973 |
2683119 |
2820985 |
3917749 |
|
Total
Assets (Rs.'000) |
8359582 |
8701046 |
11678894 |
13653659 |
14015624 |
|
EBIT
(Rs.'000) |
1583574 |
1374511 |
595616 |
1108778 |
3078902 |
|
Total
Liabilities (Rs.'000) |
1765056 |
1830714 |
4561569 |
5955773 |
4269845 |
|
Sales
(Rs.'000) |
5176372 |
6126307 |
7008992 |
6694824 |
12626485 |
|
Retained
Earnings (Rs.'000) |
4394551 |
4778698 |
5025691 |
5606252 |
7262288 |
|
Market
Value of Equity (Rs.'000) |
5411142 |
5289126 |
3713529 |
2657826 |
9854114 |
|
T1 |
0.324 |
0.33 |
0.23 |
0.207 |
0.28 |
|
T2 |
0.526 |
0.549 |
0.43 |
0.411 |
0.518 |
|
T3 |
0.189 |
0.158 |
0.051 |
0.081 |
0.22 |
|
T4 |
3.066 |
2.889 |
0.814 |
0.446 |
2.308 |
|
T5 |
0.619 |
0.704 |
0.6 |
0.49 |
0.901 |
|
Z-Score |
4.202 |
4.117 |
2.129 |
1.844 |
4.062 |
The Z-Score classifies the company into
various zones based on the numerical value obtained after computing particular
financial ratios (T1 to T5). A Z-Score below 1.81 denotes a distress zone and
an increased likelihood of financial instability. A Z-Score between 1.81 to
2.99 is considered to be in the gray area and denotes a moderate level of risk.
A Z-Score greater than 2.99, on the other hand, puts the business in the safe
zone and denotes a lesser danger of bankruptcy.
Conclusion
Cinnamon Grand
Hotels' revenue decline and performance have been somewhat slower. The trend
analysis indicates that the cost of sales has risen at a faster rate than
revenue. The liquidity position is in good shape, according to the ratio study.
The company's performance is inefficient as a result of its low profitability.
The reason is the cost of sales. The company must take action to reduce its
cost of sales and general expenses. To cut transaction costs, the company may
buy in bulk and receive discounts. Automation and supplier leveraging can also
result in lower costs for sales statistics. They have not employed their assets
to generate income as expected, as seen by their lower return on assets ratio.
Earnings per share have decreased over time. The travel limitations brought on
by the COVID-19 post pandemic and the economic downturn could be the cause of
that.
However, 2022
has seen a rise in earnings per share, which is encouraging and might be
related to the pandemic's resolution. Cinnamon Grand Hotels ought to employ
forecasting to evaluate prospective avenues for expansion and priorities
reducing the cost of sales. The firm should pay close attention to its business
plans in order to stabilize the performance of the organization.
References
1. “Colombo
Hotels | Cinnamon Grand Colombo Official Site.” Cinnamonhotels.com, 2019,
www.cinnamonhotels.com/cinnamongrandcolombo. Accessed 22 Sept. 2023.
“Invest with Us.” Www.cinnamongroup.com, www.cinnamongroup.com/investments. Accessed 20 Sept.
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