financial statement analysis of pakistan hotels developers limited and pakistan services limited

Financial Statement Analysis Financial Statement Analysis of Pakistan Hotels Developers of Pakistan Hotels Developers Limited and Pakistan Services Limited and Pakistan Services

LimitedLimited

Introduction of the ProjectIntroduction of the Project

The presentation is based on the financial data The presentation is based on the financial data analysis of two Pakistani listed companies analysis of two Pakistani listed companies engaged in the business of hotel industry, engaged in the business of hotel industry, Pakistan Hotels Developers Limited (hereinafter Pakistan Hotels Developers Limited (hereinafter referred to as PHDL) and Pakistan Services referred to as PHDL) and Pakistan Services Limited (hereinafter referred to as PSL).Limited (hereinafter referred to as PSL).

Three years data has been analyzed in order to Three years data has been analyzed in order to reach at a comprehensive conclusion to avoid reach at a comprehensive conclusion to avoid any unusual fluctuation confront the company.any unusual fluctuation confront the company.

Objectives and SignificanceObjectives and Significance

ObjectivesObjectivesWe will discuss balance sheet, P & L We will discuss balance sheet, P & L accounts, Cash flow statement and each and accounts, Cash flow statement and each and every important aspect of both the every important aspect of both the companies. So that we can be in a better companies. So that we can be in a better position to comments on hotel industry of our position to comments on hotel industry of our countrycountry

SignificanceSignificanceHotel industry is the back bone of tourism, Hotel industry is the back bone of tourism, and it is an industry of huge dimensions in its and it is an industry of huge dimensions in its own place. It consumes large amounts of own place. It consumes large amounts of inputs and services, thus, creating strong inputs and services, thus, creating strong economic stimuli for the economy of the economic stimuli for the economy of the country.country.

Data CollectionData Collection

a)a) Data Collection SourcesData Collection Sources:- :-

Primary Sources:Primary Sources:Following are the two main primary sources used:Following are the two main primary sources used:

1)1) Annual ReportsAnnual Reports2)2) InterviewsInterviews

Secondary Sources:Secondary Sources: Secondary sources used are:Secondary sources used are:

1) Study text1) Study text2) Articles2) Articles3) Internet 3) Internet

b)b) Data Collection ToolsData Collection Tools:-:-Interviews, books, and websites are main tools which Interviews, books, and websites are main tools which have been described above under the heading of data have been described above under the heading of data collection sources.collection sources.

Data ProcessingData Processing Data ProcessingData Processing:-:-

The evaluation process will primarily involve the use of ratio The evaluation process will primarily involve the use of ratio analysis which will further be broken down in to:analysis which will further be broken down in to:

1)1) Graphical Analysis:- Graphical Analysis:- Use of graphs to show comparison of Use of graphs to show comparison of past with current data, with competitors, using financial past with current data, with competitors, using financial statement absolute figures. statement absolute figures.

2) 2) Vertical Analysis:- Vertical Analysis:- Each expense is analyzed on the basis Each expense is analyzed on the basis of turnover in respect of income statement whereas balance of turnover in respect of income statement whereas balance sheet items are analyzed over total of assets and equities in sheet items are analyzed over total of assets and equities in respect of any individual asset or equity.respect of any individual asset or equity.

3) 3) Horizontal Analysis:- Horizontal Analysis:- To analyze trend of components of To analyze trend of components of financial statements using 2006 as base year.financial statements using 2006 as base year.

4)4) Future Planning:- Future Planning:- It will broadly include the company’s It will broadly include the company’s future plans in terms of increasing financial performance future plans in terms of increasing financial performance and achieving financial goals.and achieving financial goals.

Data AnalysisData Analysis

Financial analysis views the financial or commercial worth Financial analysis views the financial or commercial worth of the entity from the perspective of all stakeholders. It of the entity from the perspective of all stakeholders. It helps to measure the progress made by an enterprise helps to measure the progress made by an enterprise through analyzing the needs of each individual who has a through analyzing the needs of each individual who has a financial interest in the company.financial interest in the company.

Trends and performance can be represented pictorially in Trends and performance can be represented pictorially in the form of absolute figures which provides us with the the form of absolute figures which provides us with the opportunity to evaluate the growth and decline in opportunity to evaluate the growth and decline in businesses activities: businesses activities:

Equities side of Balance Sheet of PHDLEquities side of Balance Sheet of PHDL

Assets side of Balance Sheet of PHDLAssets side of Balance Sheet of PHDL

P & L of PHDLP & L of PHDL

Cash Flow Statement of PHDLCash Flow Statement of PHDL

Ratio Analysis of PHDLRatio Analysis of PHDL

Note: (Rupees '000)Note: (Rupees '000)

Common Size Analysis PHDLCommon Size Analysis PHDL

Horizontal AnalysisHorizontal Analysis - Equities side of Balance Sheet- Equities side of Balance Sheet


Horizontal AnalysisHorizontal Analysis - Assets side of Balance Sheet- Assets side of Balance Sheet


Horizontal AnalysisHorizontal Analysis -- P & L AccountP & L Account

Vertical Analysis Analysis PHDLVertical Analysis Analysis PHDL

Equities side of Balance SheetEquities side of Balance Sheet

Vertical Analysis Analysis PHDLVertical Analysis Analysis PHDL

Assets side of Balance SheetAssets side of Balance Sheet

Graphical AnalysisGraphical Analysis

Sales & Services - PHDLSales & Services - PHDL

Cost of Sales & Services - PHDLCost of Sales & Services - PHDL

PHDL

160,000

165,000

170,000

175,000

180,000

185,000

2008 2007 2006

Year

Rs. i

n Th

ousa

nds

Cost of sales and services

PHDL

-100,000200,000300,000400,000500,000600,000

2008 2007 2006

Year

Rs.

in T

hous

ands

Sales and services


Gross Profit - PHDLGross Profit - PHDL

Net Profit Margin- PHDLNet Profit Margin- PHDL

Equities side of Balance Sheet of PSLEquities side of Balance Sheet of PSL

Assets side of Balance Sheet of PSLAssets side of Balance Sheet of PSL

P & L of PSLP & L of PSL

Cash Flow Statement of PSLCash Flow Statement of PSL

Ratio Analysis of PSLRatio Analysis of PSL

Note: (Rupees '000)Note: (Rupees '000)

Common Size Analysis PSLCommon Size Analysis PSL

Horizontal AnalysisHorizontal Analysis - Equities side of Balance Sheet- Equities side of Balance Sheet


Horizontal AnalysisHorizontal Analysis - Assets side of Balance Sheet- Assets side of Balance Sheet


Horizontal AnalysisHorizontal Analysis - P & L- P & L

Vertical Analysis Analysis PSLVertical Analysis Analysis PSL

Equities side of Balance SheetEquities side of Balance Sheet


Assets side of Balance SheetAssets side of Balance Sheet


P & L AccountP & L Account


Sales & Services - PSLSales & Services - PSL

Cost of Sales & Services - PSLCost of Sales & Services - PSL


Gross Profit - PSLGross Profit - PSL

Net Profit Margin- PSLNet Profit Margin- PSL

Conclusion/FindingsConclusion/Findings

The objective of this report was to analyze the current financial The objective of this report was to analyze the current financial position of PHDL & PSL in the light of financial data of preceding position of PHDL & PSL in the light of financial data of preceding three years of its performance.three years of its performance.

The analysis concluded:The analysis concluded:

Graphical analysis of sales revenue, cost of sales and gross profit Graphical analysis of sales revenue, cost of sales and gross profit reflected sound financial position of PSL as compare to PHDL. reflected sound financial position of PSL as compare to PHDL. But if we see these analysis with due consideration then PHDL But if we see these analysis with due consideration then PHDL is in much better position because its current gross profit is is in much better position because its current gross profit is about 54% of sales while this ratio of PSL is only about 34%.about 54% of sales while this ratio of PSL is only about 34%.

The liquidity situation of the PHDL has been tremendously improved The liquidity situation of the PHDL has been tremendously improved over its prior years, although it is a good sign but it might also over its prior years, although it is a good sign but it might also indicate that PHDL is not using its current resources adequately indicate that PHDL is not using its current resources adequately to generate profits as compared to PSL. to generate profits as compared to PSL.

PHDL has sound financial position indicating that it has a good credit PHDL has sound financial position indicating that it has a good credit rating, would have no problems if it plans to obtain further loan rating, would have no problems if it plans to obtain further loan for expansion but even for this lender would first need to for expansion but even for this lender would first need to assess the norms of industry & risks associated with project assess the norms of industry & risks associated with project

before providing them further loanbefore providing them further loan..

Conclusion/FindingsConclusion/Findings

The competitor was a market leader so its performance was obviously The competitor was a market leader so its performance was obviously better than PHDL in almost all ways, but PHDL is making efforts better than PHDL in almost all ways, but PHDL is making efforts to improve its existing performance; it have not yet been able to to improve its existing performance; it have not yet been able to come to the standard of PSL but with the continuous efforts from come to the standard of PSL but with the continuous efforts from management it will soon be able to raise its standards.management it will soon be able to raise its standards.

By interviewing few personnel in management, I came to know PHDL By interviewing few personnel in management, I came to know PHDL is making future plans for expansion by setting up a new hotel is making future plans for expansion by setting up a new hotel project in Lahore city which will contribute greatly to the project in Lahore city which will contribute greatly to the financial growth of the company; however this plan has been financial growth of the company; however this plan has been deferred for some period.deferred for some period.

Pakistan is a beautiful country with holiday resorts and hotels like Pakistan is a beautiful country with holiday resorts and hotels like regent plaza. Through better and improved facilities for regent plaza. Through better and improved facilities for marketing, the world has come to know of this fact. As a result, marketing, the world has come to know of this fact. As a result, foreign tourism has been on a rise causing the increase in the foreign tourism has been on a rise causing the increase in the demand and consequently, the appreciation of Pakistani demand and consequently, the appreciation of Pakistani currency. It is possible that the appreciation of currency would currency. It is possible that the appreciation of currency would make hotelling expensive and might lead to a reduction in the make hotelling expensive and might lead to a reduction in the overall foreign demand of the hotel industry in the future.overall foreign demand of the hotel industry in the future.

RecommendationsRecommendations

PHDL is working very efficiently in terms of inventory control, but PHDL is working very efficiently in terms of inventory control, but it needs to give attention to improving its credit control system or it needs to give attention to improving its credit control system or revise the payment terms of the debtors; whereas the working revise the payment terms of the debtors; whereas the working capital period also need to be improved. capital period also need to be improved.

Although being listed in two stock exchanges PHDL’s investment Although being listed in two stock exchanges PHDL’s investment ratio does not promotes the investors to invest, if it wants to ratio does not promotes the investors to invest, if it wants to expand it should provide opportunities for general public to expand it should provide opportunities for general public to invest. Hence, PHDL will be able to obtain further finances for invest. Hence, PHDL will be able to obtain further finances for

expansion from the shareholders instead of the lending institutes.expansion from the shareholders instead of the lending institutes.

Thank YouThank You

financial statement analysis of pakistan hotels developers limited and pakistan services limited

Documents

financial data analysis

financial performance

financial statements

financial goals

vertical analysis

graphical analysis

horizontal analysis

current data