Case Study Profitability Analysis
OVERVIEW OF INCOME STATEMENTS YoY% % to Total Revenue Particulars FY 18 FY 17 FY 16 FY 15 FY 18 FY 17 FY 16 FY 18 FY 17 FY 16 FY 15 Revenue From Operations 4,71,83,737 4,07,22,448 4,24,41,493 2,81,59,022 15.9% -4.1% 50.7% 100.0% 100.0% 100.0% 100.0% Expenses Purchases/Consumption 1,04,61,915 73,53,767 72,41,471 29,14,578 42.3% 1.6% 148.5% 22.2% 18.1% 17.1% 10.4% Employee Benefit Expenses 1,40,06,449 1,08,17,280 98,33,891 71,91,651 29.5% 10.0% 36.7% 29.7% 26.6% 23.2% 25.5% Other Expenses 1,29,66,519 1,23,62,840 1,14,16,713 98,35,409 4.9% 8.3% 16.1% 27.5% 30.4% 26.9% 34.9% Total Expenses 3,74,34,884 3,05,33,887 2,84,92,075 1,99,41,639 22.6% 7.2% 42.9% 79.3% 75.0% 67.1% 70.8% EBITDA from Operations 97,48,853 1,01,88,560 1,39,49,418 82,17,384 -4.3% -27.0% 69.8% 20.7% 25.0% 32.9% 29.2% We were not provided financial statements for FY18 and FY17. We have attempted to work out the financials as above based on Tally data. EBITDA from operations has declined by 4.3% in FY18 over FY17 while it had decreased by 27% in FY17 over FY16 and increased by 69% in FY16 over FY15. The main reason for the decline in EBITDA has been the rise in expenses by 22.6% in FY18. This has lead to decrease in EBITDA. Purchases/Consumption should ideally move in relation to the movement in sales, as this being a direct cost. However, in FY18 it has increased more than the increase in sales. Employee Benefit expenses were not verified by the management. The employee cost for FY17 has been estimated based on the previous years numbers. It is assumed to have increased by 10% in comparison to FY16. Other Expenses have increased by 4.9% in FY18 over FY17 but the percentage to revenue of other expenses has declined in FY18. Operational EBITDA has declined by 4.3% in FY18 over FY17, comprising 20.7% of the Total Revenue in FY18 as compared to 25% in FY17, 32.9% in FY16 and 29.2% in FY15. It is also pertinent to note that the industry standard for EBITDA is 35% for four star hotel in Goa. In our case its working out to 20.7% which is quite low. We need to mention that the preparedness of the accounts team was found lacking. Ideally the financials of FY18 and FY17 together with all the supporting should have been easily available.
INCOME Segment Wise Revenue % of Total Revenue YoY% Particulars FY 18 FY17 FY16 FY15 FY18 FY17 FY16 FY15 FY18 FY17 FY16 Room Sales 34,962,915 32,793,494 33,615,804 19,343,055 74% 81% 79% 69% 7% -2% 74% Food and Beverage 11,500,144 7,303,432 7,790,741 8,099,061 24% 18% 18% 29% 57% -6% -4% Laundry Income 121,911 137,308 110,794 76,419 0% 0% 0% 0% -11% 24% 45% Other Operating Income 598,768 488,214 924,153 640,488 1% 1% 2% 2% 23% -47% 44% Total 47,183,737 40,722,448 42,441,493 28,159,022 100% 100% 100% 100% 16% -4% 51% Room revenue comprised of major portion of total revenue at 74% in FY18. Revenue from rooms have increased by 7% in FY18 inline with 10% increase in the room nights sold in FY18. Comparatively, room sales reduced by 2% in. The F&B revenue has increased by 57% in FY18 as compared to a decrease of 6% in FY17 comprising of 18% to the total revenue in FY17 as compared to 24% in FY18. This is due to the new restaurant which has been introduced in the recent FY. However, ideally F&B revenue to total sales should be a minimum of 30%. Laundry income has decreased by 11% in FY18 as compared to 24% increase in FY17 over FY16 and 45% increase in FY 16 over FY15. As per the management the laundry service is outsourced and commission is charged for the services provided. Other Operating Income includes any extra charges paid by the customers, car hire charges and other operating miscellaneous income. It has increased by 23% in FY 18 comprising of 1% of total revenue.
EXPENSES -1/6 Purchases/Consumption % of Total Revenue YoY% Particulars FY 18 FY17 FY16 FY15 FY18 FY17 FY16 FY15 FY18 FY17 FY16 Purchase for Restaurant 86,78,782 58,81,337 56,23,273 2,25,238 18% 14% 13% 1% 48% 5% 2397% Purchase for House Keeping 13,21,446 6,88,549 12,65,764 7,98,710 3% 2% 3% 3% 92% -46% 58% Purchase for Maintenance 2,86,731 2,95,257 2,01,046 - 1% 1% 0% 0% -3% 47% 0% Purchase Account- Others - - - 15,98,540 0% 0% 0% 6% 0% 0% -100% Purchase for Mini Bar 1,34,955 2,29,150 1,36,319 2,92,090 0% 1% 0% 1% -41% 68% -53% Purchase for Utensils (Kitchen) 40,001 2,59,474 15,069 - 0% 1% 0% 0% -85% 1622% 0% Total 1,04,61,915 73,53,767 72,41,471 29,14,578 22% 18% 17% 10% 42% 2% 148% Purchases have increased by 42% in FY18, but the increase is not in alignment with the increase in revenue (16% overall increase in Revenue). Purchases for Restaurant has increased by 48% the reason could be introduction of new restaurant in FY18. However, as a percentage to sales of Restaurant this is very high. Ideally this ratio is expected to be approx. 40%. However, we found this to be 75% and needs to be looked at. Purchases for Housekeeping has gone up by 92% in the FY18, as per management remarks linen, bedsheets, pillow covers were purchased in FY18 and no such purchases were made in FY17.
EXPENSES – 2/6 Other Expenses % of Total Revenue YoY % Particulars FY 18 FY 17 FY 16 FY 15 FY 18 FY 17 FY 16 FY 15 FY 18 FY 17 FY 16 Housekeeping 6,94,440 8,24,477 5,66,900 5,02,578 1% 2% 1% 2% -16% 45% 13% Marketing 30,82,130 26,02,491 21,71,487 7,72,560 7% 6% 5% 3% 18% 20% 181% Administrative and Other Expenses 91,89,949 89,35,872 86,78,326 85,60,271 19% 22% 20% 30% 3% 3% 1% 1,29,66,519 1,23,62,840 1,14,16,713 98,35,409 27.48% 30.36% 26.90% 34.93% 4.88% 8.29% 16.08% Housekeeping % of Total Revenue YoY% Particulars FY 18 FY17 FY16 FY15 FY18 FY17 FY16 FY15 FY18 FY17 FY16 Housekeeping & Maintenance 42,417 140 78,154 13,650 0.09% 0.00% 0.18% 0.05% 30197.86% -99.82% 472.56% 8,24,337 4,88,746 4,88,928 1.38% 2.02% 1.15% 1.74% -20.90% 68.66% -0.04% Laundry Expense 6,52,023 Total 6,94,440 8,24,477 5,66,900 5,02,578 1.47% 2.02% 1.34% 1.78% -15.77% 45.44% 12.80% The other expenses broadly comprise of housekeeping expenses, marketing expenses and administrative & other expenses. Laundry Expense comprise of hotel laundry and the guest laundry expenses. Laundry expenses have decreased by 21% in FY18 as compared to increase by 69% in FY17. It is noted that the laundry service provider is changed frequently due to service issues faced by the management. Although, the same is not inline with growth in room sales. Accordingly, it is advisable to review the terms of laundry service provider. Overall the housekeeping expenses have decreased by 16% in FY18 mainly on account of laundry expenses in FY18 comprising major portion of Housekeeping expenses. On comparison with industry norms, Housekeeping expense is generally 3%-4% of Total Revenue.
EXPENSES – 3/6 Marketing % of Total Revenue YoY% Particulars FY 18 FY17 FY16 FY15 FY18 FY17 FY16 FY15 FY18 FY17 FY16 Entertainment & Sight seeing 7,16,600 1,55,900 92,000 1,84,780 1.5% 0.4% 0.2% 0.7% 359.7% 69.5% -50.2% Travelling and conveyence Travelling and conveyence- General 4,10,648 9,16,036 46,222 38,710 0.9% 2.2% 0.1% 0.1% -55.2% 1881.8% 19.4% Transportation of Guest (Car on Hire) 1,60,038 15,350 1,21,960 - 0.3% 0.0% 0.3% 0.0% 942.6% -87.4% 0.0% Transportation 54,568 1,77,946 1,75,585 32,800 0.1% 0.4% 0.4% 0.1% -69.3% 1.3% 435.3% Total 13,41,854 12,65,232 4,35,767 2,56,290 2.8% 3.1% 1.0% 0.9% 6.1% 190.3% 70.0% Advertisement & Sales Promotion Sales Promotion Expenses - - 2,01,591 2,00,000 0.0% 0.0% 0.5% 0.7% 0.0% -100.0% 0.8% Advertisement & Publicity - Marketing 3,36,784 5,92,699 1,66,766 - 0.7% 1.5% 0.4% 0.0% -43.2% 255.4% 0.0% Advertisement & Publicity - Others 1,22,578 65,123 1,81,227 2,11,584 0.3% 0.2% 0.4% 0.8% 88.2% -64.1% -14.3% Total 4,59,362 6,57,822 5,49,584 4,11,584 1.0% 1.6% 1.3% 1.5% -30.2% 19.7% 33.5% Commission to Travel Agent & Others Commission to Travel Agent & Others 12,80,914 6,79,437 11,86,136 15,900 3% 2% 3% 0% 89% -43% 7360% Commission on Credit Cards - - - 88,786 0% 0% 0% 0% 0% 0% -100% Total 12,80,914 6,79,437 11,86,136 1,04,686 2.71% 1.67% 2.79% 0.37% 88.53% -42.72% 1033.04% Total 30,82,130 26,02,491 21,71,487 7,72,560 6.5% 6.4% 5.1% 2.7% 18.4% 19.8% 181.1%
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