The objective of this report is to comprehensively investigate Millennium & Copthorne Hotels New Zealand Ltd (MCHNZ Ltd) and Restaurant Brands Ltd’s (RB Ltd) financial and non-financial information to help provide insight regarding future job prospects for graduates from Waikato University. These companies should first and foremost provide stability, but also have strong growth potential, as well as allowing graduates the opportunity to prosper within the industry and gain additional knowledge. This report will contain, financial ratios, cash flow analysis and non-financial information which should provide a broad but accurate state of affairs of each company and show which company has greater job prospects for graduates.
Millennium and Copthorne Hotels Ltd was founded in 1989 by Kwek Leng Beng. They are a global hospitality and real estate group, “with 120 hotels in 79 different locations across Asia, Australasia, Europe, the Middle East and North America”3. They currently trade on the NZX and employee approximately 10,996 people worldwide.
Restaurant Brands Ltd (Restaurantbrands.co.nz, 2019)1 “is a corporate franchise and specialises in managing multi-site branded food retail chains.” The head office is located in Penrose, Auckland, New Zealand. Collectively they supply 283 fast food restaurants across New Zealand, Australia and Hawaii. They are listed on the NZX and ASX and employ a total of 9,000 staff.
Restaurant Brands Ltd Ratios:
Millennium and Copthorne Hotels New Zealand Ltd Ratios:
https://companyresearch-nzx-com.ezproxy.waikato.ac.nz/deep_ar/newpage.php?pageid=finpro&default=MCK link for ratios for hotel
(RESTAURANT BRANDS NEW ZEALAND LIMITED - RBD (RESTAURANT BRANDS NZ LIMITED ORDINARY SHARES, 2019)
Measures the liquidity of the organisation in terms of whether the organization is able to meet all in any term obligations. It measures this by comparing the organizations current assets against their current liabilities. (Stewart, Howard & Mary, 2015)4
The current ratios from 2016 - 2019 for RB Ltd are as follows, 0.28, 1.44, 0.46 and 0.51. Based on the four years the current ratio is increasing, which is favourable. This means Restaurant Brands Ltd will be able to cover their short-term obligations if the trend continues to increase, but currently, have half as many current assets compared to current liabilities.
The current ratios for MCHNZ Ltd from 2016 - 2018 are as follows. 4.29, 6.24 and 5.89. Based on these three years the trend in current ratio is increasing, which is once again favourable. In this case, this company is able to cover their short term debts as each year as the ratio is greater than 1:1.
Measures the liquidity of an organisation through comparing cash, cash equivalents, accounts receivable. However, excludes inventory and prepayments as they are unlikely to be converted into cash quickly. These are then compared against the total current liabilities to gage whether or not immediate debts can be covered. This is also known as the acid-test. (Stewart, Howard & Mary, 2015)
The quick ratios from 2016 - 2019 for RB Ltd are as follows. 0.06, 1.25, 0.2 and 0.31. Overall the trend shows an increase in liquidity. This is favourable but is not at the acceptable benchmark of 1:1.
The quick ratios from 2016 - 2018 for MCHNZ Ltd are as follows. 3.29, 4.98 and 4.19. Overall the trend appears to be increasing, which is favourable. Also is well above the acceptable benchmark of 1:1 meaning ease of covering immediate debts eg. creditors.
The Cash ratios for RB Ltd from 2016 - 2019 are as follows: 0.02, 1.21, 0.14 and 0.19. This shows a gradual increase annually, which is a favourable trend. However, this also shows that RB Ltd have very low levels of cash on hand compared to other assets.
The Cash ratios for MCHNZ Ltd from 2016 - 2019 are as follows: 2.77, 4.35, 3.56 and 3.59. The cash ratio for MCHNZ Ltd has slightly increased overall, peaking in 2017. This is favourable as it shows a high level of liquidity to cover debts.
Evaluates the degree of success that the organisation has had in creating wealth for the owners of the organization. (Stewart, Howard & Mary, 2015)
Return on Equity (ROE) %:
Measures a firm’s profitability in terms of the return being generated for owners/shareholders. Or how effectively equity investment has been used to generate profits. (Stewart, Howard & Mary, 2015)
The ROE percentages for RB Ltd from 2016 - 2019 are as follows: 32.79%, 19.39%, 18.02% and 16.77%. The clear trend for the ROE % is a decrease and is unfavourable. As the ROE percentage decreases, so does the returns for the owners/shareholders of RB Ltd, hence why it is unfavourable.
The ROE percentages for MCHNZ Ltd from 2016 - 2018 are as follows: 10.11%, 9.06% and 8.93%. Similarly to RB Ltd a decrease has occurred which is unfavourable but at a much steadier rate. The owners/shareholders are therefore, receiving marginal losses on their investment.
Return on Assets (ROA) %:
Measures how effectively assets have been used to generate profits. The ratio directly shows the return generated from assets, therefore the higher the better. (Stewart, Howard & Mary, 2015)
The ROA percentages for RB Ltd from 2016 - 2019 are as follows: 15.17%, 12.56%, 10.35% and 8.93%. This trend in the ROA is decreasing slightly each year which is unfavourable. Therefore, RB Ltd appears to not be using assets effectively and efficiently to generate profits and should be investigated.
The ROA percentages for MCHNZ Ltd from 2016 - 2018 are as follows: 6.05%, 5.90% and 6.02%. The trend in ROA for MCHNZ is decreasing but remaining fairly constant over the 3 years. Once again this is unfavourable, but not as significant as RB Ltd. Industry benchmarks would help identify whether ROA should be increased.
Net Profit (NP) %:
Simply measures the net profit generated from sales revenue. An organisation can choose to calculate profit before tax (NPBIT) or after tax (NPAT) for further analysis of Net Profit. (Stewart, Howard & Mary, 2015)
The NP Percentages for RB Ltd from 2016 - 2019 are as follows: 8.54%, 8.59%, 8.16% and 7.91%. The trend in the NP percentage for RB Ltd is decreasing annually but in small increments which is unfavourable. The Sales revenue is gradually increased from 2016 each year, however this has been combated with gradually increasing expenses
The NP Percentages for MCHNZ Ltd from 2016 - 2018 are as follows: 36.68%, 38.86% and 37.96%. The trend in the NP percentage for MCHNZ Ltd is decreasing marginally overall and is therefore unfavourable. It is noticeable that sales revenue is increasing almost identically with net income in terms of percentage change from the previous year. Therefore, small fluctuations are occurring in the net profit percentage.
Asset management ratios:
Inventory Turnover: The inventory turnover ratio is defined by (Stewart, Howard & Mary, 2015) as the ratio that it is used to ensure that the organizations have adequate inventory turnover ratio and that they don’t tie funds up and manage their assets effectively.
Total Asset Turnover (TAT): measures how efficiently the assets of an organisation are being utilised to generate sales revenue. Generally the ‘more times’ the better as this shows more revenue is being generated and assets are being utilised effectively. (Stewart, Howard & Mary, 2015)
The TAT for RB Ltd from 2016 - 2019 are as follows: 2.84 times, 2.34 times, 2.03 times and 1.81 times. The trend in TAT for RB Ltd is a decrease and is classed as unfavourable. This is due to less revenue being per $1 of assets over the course of four years.
The TAT for MCHNZ Ltd from 2016 - 2018 are as follows: 0.26 times, 0.24 times and 0.25 times. The trend in TAT for MCHNZ Ltd is decreasing. This is unfavourable as assets are being used inefficiently. Also unfavourable in the first place as every $1 of assets is generating less than $1 of revenue.
Financial structure ratios:
Financial Leverage Multiplier (FLM): The Financial leverage multiplier ratio shows what the equity ratio represents but rather than expressing it as a percentage it shows as a number. (Stewart, Howard & Mary, 2015).
The FLM for RB Ltd from 2016 - 2019 are as follows: 1.85, 1.57, 2.24 and 2.05. The trend in the FLM is increasing for RB Ltd which is unfavourable. This is due to $1.24 in 2018 and $1.05 in 2019 being financed through debt (risky) and the rest from equity. Compared to 85 cents in 2016 and 57 cents in 2017 being financed through debt means.
The FLM for MCHNZ Ltd from 2016 - 2019 are as follows: 1.29, 1.25, 1.24 and 1.27. The trend in the FLM is overall decreasing which is a favourable outcome for MCHNZ Ltd. This is due to a lower portion of total assets being funded by means of debt (less risky).
Times Interest Earned (TIE): The Times Interest Earned ratio indicates the proportion of earnings before interest and tax (EBIT) there is to cover interest expense (5 or above is considered to be comfortable). It is a very important ratio for lenders to consider how much to lend to an organisation and whether or not the interest payments can be covered. (Stewart, Howard & Mary, 2015)
The TIE for RB Ltd from 2016 - 2019 are as follows: -34.8, 17.9, 10.31 and 8.27. The trend in the TIE is decreasing which is unfavourable. Although interest can still easily be covered the higher it is the better for RB Ltd.
The TIE for MCHNZ Ltd from 2016 - 2019 are as follows: 34.15, 43.7, 50.05 and 30.73. The overall trend in the TIE is an increase, which is favourable. Due to a TIE of 5 considered to be a benchmark /target, MCHNZ Ltd is well above this and should aim to maintain this high level of TIE.
Copthorne and Millennium Hotels New Zealand Ltd:
The Millennium Hotels and Resorts is an organisation focused on giving back and helping out their communities in which their hotels are operating in and around. An example of this is in the UAE in which Millennium and copthorne hotels have set up an initiative named Taddamon which is their Corporate social responsibility program. According to Dubai Hotel Guide, Copthorne and Millennium Hotels presented a cheque donation of $50,633 AED roughly $21890 NZD to Al Jalila Foundation to help fund its research which was raised through the program started in february 2018. This program allowed guess staying their to donate $5 AED ($2) each time they stayed at their hotels in which it could then be gifted.
Copthorne and Millennium hotels also pride themselves on their efforts in the ruduction of human trafficking within their hotels. On their website they openly display how they “strive to maintain the highest standards of ethical behaviour and governance compliance.” and “recognise our responsibility to manage our business and supply chains to identify and alleviate any potential or actual human rights violations, including modern slavery”. However According to the financial times Copthorne and Millennium Hotels are among the companies that have failed to meet all the requirements and have been “Lackluster when trying to eradicate crime from their supply chain”. However in their defense of their poor efforts, the article does go on to state how they have been one of the early players in trying to eradicate this horrible and disturbing crime.
Restaurant Brands Ltd:
Corporate Social Responsibility: at Restaurants brands they strive to uphold food and environmental standards. They openly display on their websites their goals in improving their environmental impact, quality of food and staff management. In terms of improving their environmental impact they state “they are committed to improving animal welfare and working toward the elimination of deforestation”, which in countries such as south america deforestation to create crops in order to supply these massive multinational fast food brands is becoming an issue.
Restaurant brands LTD main push to attract good PR and improve their impact for CSR is through giving back to the communities in which their restaurant brands are situated in. Under their many brands including popeyes, burger king etc, they have set up Foundations in which money raised goes organisations such as No Kid Hungry. Other money raised also goes towards organisations that are set up with the goal of offering scholarships, as well as improving literacy and creating sustainable learning environments for kids that are not fortunate enough to receive these.
Recently however restaurant brands LTD have come under fire in NEw Zealand with accusations with trying to cheat staff out of annual leave. Scoop independent claims that “ Restaurant Brands Ltd (RBL), is asking staff to authorise the deduction of so-called overpayments from the annual leave money they owe their current and former staff”. Unite Union also are claiming that this isn't a "mistake". And that Companies like Restaurant Brands LTD are choosing to “deliberately cheat staff, with the hope they don't get caught.”
- Restaurantbrands.co.nz. (2019). About Us. [online] Available at: http://www.restaurantbrands.co.nz/about-us/ [Accessed 29 Aug. 2019]. - Company introduction
- https://investors.millenniumhotels.com/~/media/Files/M/MillenniumHotels-IR/documents/annual-reports/2016-annual-report.pdf -Approximation for employee numbers
- https://en.wikipedia.org/wiki/Millennium_%26_Copthorne_Hotels - Company introduction
- (Stewart, Howard & Mary 2015)-Definitions of ratios
- https://www.dubaihotelsguide.com/millennium-hotels-and-resorts-mea-donates-proceeds-from-taddamon-initiative-to-al-jalila-foundation/ (donations for CSR)
- https://www.ft.com/content/d8147d76-e22d-11e5-9217-6ae3733a2cd1 (article on how hotel is lackluster)
- https://www.rbi.com/Cache/1500094810.PDF?O=PDF&T=&Y=&D=&FID=1500094810&iid=4591210 (sustainability for CSR)
- http://www.unite.org.nz/restaurant_brands_to_pay_back_annual_leave_underpayments_from_may_2012 (brand accusation)
- http://www.scoop.co.nz/stories/PO1906/S00319/union-accuses-restaurant-brands-of-trying-to-cheat-staff.htm (brand accusation)
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