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, , , , , ,ANNUAL REPORT (Financial Analysis) : Shangri-LA Hotels & Resorts,HP 5033,Hospitality Management Accounting,Presented by,Chung,Myoung,Chu,Frederica,Monak,Siti,Soffiyah,Yusoff,Nurasykin,Mohd,Salleh,BACKGROUND OF SHANGRI-LA HOTELS AND RESORTS,Shangri-La Hotel & Resorts,The,Kuok,Group of Companies established the hotel management company, Shangri-La Hotels & Resorts in 1949,.,Headquarter in Hong Kong,more than 23,500 staff,over 20,000 rooms,suites at 42 hotels,Shangri-La Hotels & Resorts,Shangri-La Hotel & Resorts,Shangri-La were located in.,Shangri-Las Philosophy, Vision, Mission and Care Values,Philosophy,Shangri-La hospitality from caring people,Vision,The first choice for customers, employees,shareholders and business partners,Mission,Delighting customers each and every time,Core Values,Respect, Sincerity, Helpfulness, Courtesy, Humility,Shangri-Las Operating Strategies,1,Technical and Pre-Opening Services,2,Marketing Support,3,Marketing Initiatives and Activities,4,Frequent Flyer Programs,5,Customer Loyalty Program,6,Global Sales Network,7,Central Reservations and Property Management Systems,The Award-Winning Hotel Group,Time (Asia),: Preferred Hotel Chain,Travel Weekly (UK),: Best Asia Pacific Hotel Group,Business Traveller (Asia-Pacific),: One of the Best Business Hotel Brands in the World,Business Traveller (Asia-Pacific, UK and German Versions),: Best Business Hotel Brands in Asia-Pacific,The Asset (Asia-Pacific),: Best Hotel Chain in Asia,The Guardian and The Observer (UK),: Best Overseas Hotel Group,Selling Long Haul (UK),:Best Hotel Group in the Far East,Global Finance (USA),: Best Hotel Chain in Asia-Pacific,Readers Digest (Asia),: Super brands 2003,Asia money,: Best Hotel Chain for Business and Vacation in Asia,Business Activities of Shangri-LA Hotels and Resorts,BUSINESS ACTIVITIES,Business,Activities,Operating Activities,Financial Activities,Planning Activities,Investing Activities,Planning Activities,Asia and in particular Mainland China has been the primary focus of the Groups business.,The Group has actively pursued and successfully concluded management contract opportunities in Australia, South Asia (Maldives and India) and the Middle East.,The Group also continues to prospect for suitable opportunities in key gateway cities in Europe and North America.,The Group views these opportunities with strategic interest in not only underpinning the brand but also improving return on investments for shareholders.,Planning Activities,Mainland China will continue to be the primary choice,for the Groups investments in hotels,strong fundamentals of high annual GDP growth rates,growing disposable income,high year on year growth in domestic travel (by 10%),and international travel (by 8%),Operating Activities,“Hotel Operation”,Ownership and operation of hotel business (77%),“Hotel Management”,Provision of hotel management and related services (1%),“Property Rentals”,Ownership and leasing of office, commercial and,service apartments (22%),Business Segments,Operating Activities,Hotel Operation,Turnover from hotel operations has been affected in recent years by global and regional economic problems, political problems, the outbreak of SARS in some countries in the Asian region in 2003.,Management took immediate actions to minimize expenditures especially salaries, wages and discretionary costs, conserve cash resources and maintain sufficient banking facilities to fund capital commitments and working capital needs.,With the progressive lifting of travel warnings issued by the WHO in June 2003, air-travel volumes and hotel occupancies have recovered. Overall weighted average yield for the year decreased by 11% compared to 2002.,Operating Activities,Hotel Management,SLIM International Limited and its subsidiaries (the SLIM Group), provides hotel management and/or technical consultation and project management services for hotels under development or renovation and hotel management and marketing services for operating hotels.,As at 31 December 2003,-hotel management contracts in respect of 6 operating hotels,-technical services and hotel management contracts in respect of 12 hotel projects,Operating Activities,Property Rental,Commercial Space,Office Space,Serviced Apartment,Mainland China,Shanghai,Shanghai centre,12%,1%,Shanghai Kerry,21%,6%,Beijing,2%,25%,Dalian,12%,Singapore,Average,5%,Tanglin,Mall,5%,Tanglin,Place,17%,Malaysia,Kuala Lumpur,2%,5%,-,Johor,Bahru,9%,8%,Thailand,Bangkok,8%,Financing Activities,Loan,Remark,Hong Kong,HK$2,600 million,Mainland,China,RMBI 991 million,Project development and working capital requirement,Malaysia,RM 35 million,Renovation project,Loans,Net Proceeds,The Company under an arrangement involving placement of existing shares and subscription top-up for new shares issued 183,832,000 new shared at HK$7.4 per share. (Feb. 2004),App. HK$1,360 million,The Group issued zero coupon guaranteed convertible bonds due March 2009, in the aggregate principal amount of US$200 million with an initial conversion price of HK$9.25 per share of the Company.(Mar.2004),App.,US$196.4 million,Shares,Cash and Bank Balance,2003,US$ 63.8 million,2002,US$ 79.9 million,Investing Activities-Renovations,Major renovations are on-going at,the following hotels and are,expected to be progressively,completed in 2004:,Edsa,Shangri-La, Manila,Shangri-Las Fijian Resort,Yanuca,Shangri-La Hotel, Jakarta,Major renovations at the following,hotels/resorts have been,completed in 2003:,Kowloon,Shangri-La, Hong Kong,China World Hotel, Beijing,Shangri-La Golden Flower Hotel, Xian,Shangri-La Hotel, Singapore (Valley Wing),Shangri-Las,Mactan,Island Resort,Cebu,Shangri-La Hotel, Kuala Lumpur,Shangri-La Hotel,Penang,Shangri-Las Rasa,Sayang,Resort,Penang,Shangri-Las,Tanjung,Aru,Resort, Kota,Kinabalu,Shangri-La Hotel, Bangkok,Investing Activities-Renovations,The other renovations to be completed,in 2004 include:,Shangri-La Hotel, Singapore (renovation of coffee garden and ballroom),Shangri-Las Rasa,Sentosa,Resort, Singapore (installation of spa and renovation of food and beverage facilities),Shangri-La Hotel,Penang,(renovation of coffee garden and other facilities),Shangri-Las Rasa,Ria,Resort,Sabah,(guestrooms renovation),Shangri-La Hotel, Bangkok (installation of spa),Makati,Shangri-La, Manila (renovation of some food and beverage facilities),Estimated expenditure of all subsidiaries amounting to US$71.9 million for renovation and other projects currently on going and to be commissioned in 2004 will be mainly financed from operating cash flows of the individual hotels, supplemented by locally contracted short term bank loans where appropriate.,Investing Activities-New Projects,New Hotels,Shangri-La Hotel,Zhongshan,(Jan.2004),Shangri-La Hotel,Fuzhou,(late 2004),The costs to complete these two,projects are estimated at,US$178 million and will be,mainly financed by project,loans and the operating surplus,of SLPU.,Other,Planned,And/or,developed,New Hotels,Chengdu,Futian,in Shenzhen,Ningbo,Xian,Guangzhou,Jingan,Nanli,The Groups commitments to,complete these projects are,estimated at US$684.6 million.,These will be mainly financed,by the funds recently raised,from issue of new shares of,the Company and convertible,bonds, operation surpluses,the available,undrawn,borrowing facilities and locally,contracted project loans, where,appropriate.,Land for,new hotel,Chiang Mai,Investing Activities-New Projects,By the end of 2007, the Group has an equity interest will increase from 36 as at December 2003 to 46 and the corresponding room inventory will increase from 18,852 to approximately 24,498 rooms.,Investing-Management Contracts,The number of operating hotels under management and owned by third parties will increase from 6 as at 31 December 2003 to 18 by mid 2006 and the corresponding room inventory will increase from 1,940 to approximately 6,565 rooms.,Investing-Technology,State-of art Central Reservation System,Interface with Global Distribution System,Property Management System-Central Reservation System,Group-wide Sales & Catering and Sales Force Automation System,New Materials Management System,-wired and wireless broadband internet Access,Human Resource System,Upgrade Point-of-Sale System,Upgrade the technology infrastructure,-to maximize revenue potential, improve staff productivity,enhance customer relations,MANAGEMENT DISCUSSION & ANALYSIS,Financial Statement,Income Statement or Profit and Loss Account,Balance Sheet,Cash Flow Statement,Turnover, revenue and segment information,Primary reporting format- geographical segments,Hong Kong,Hotel ownership, operation and management,Mainland China,Hotel ownership, operation and management,Ownership and leasing of office, commercial and,serviced apartments,The Philippines,Hotel ownership, operation and management,Singapore,Hotel ownership, operation and management,Ownership and leasing of office, commercial and,serviced apartments,Turnover, revenue and segment information,Primary reporting format- geographical segments,Thailand,Malaysia,Hotel ownership, operation and management,golf club ownership and operation,Other Countries,Hotel ownership, operation and management,Hotel ownership, operation and management,ownership and leasing of office and commercial,Associated companies,Amounts due from associated companies are unsecured, interest-free and with no fixed repayment terms except for the total amount of US$76,274,000 (2002: US$80,510,000) due from two associated companies which is interest bearing at LIBOR plus 2% per annum and US$31,316,00 (2002: US$30,631,000) due from an associated company which is interest bearing at 1.25% per annum.,Other Investments,Equity securities listed in Hong Kong included shares in the company (“such SA shares”) with a carrying value of US$12,349,000 (2002: US$8,628,000) held by Shangri-La Hotel Public Company Limited, Thailand (“SHPCL”). Such SA shares, representing approximately o.6% (2002: 0.6%) of the issued share capital of the Company as at 31 December 2003, were held by SHPCL before the Company acquired the controlling interests in SHPCL in late 1999.,The company has undertaken, subject to market conditions, to use its reasonable endeavors to produce SHCPL to dispose of all such SA shares to parties independent of the,Kuok,Group. In view of the temporary nature of this holding in such SA shares, they have been classified as other investments in these accounts.,Bank Loans and Overdrafts and Other Borrowings,Other borrowings represented S$30,000,000 unsecured Floating Rate Notes (the “Notes”) due in December 2004 issued by Shangri-La Hotel Limited, Singapore (“SHL”) on 13 December 2002. As at 31 December 2003, the interest rate is 1.15% per annum (2002: 1.45%). The interest rate will be re-fixed at every 6 monthly interval, based on an agreed formula set out in the issuing documents. Unless previously redeemed at the face value of S$30,000,000 on the maturity date,Retained Profits,Included in the retained profits of subsidiaries and associated companies are statutory funds of approximately US$225,000 and US$16, 785,000 respectively (2002: US$197,000 and US$15,947,000). These funds are set up by way of appropriation from the profit after taxation of the respective,Companies, established and operating in the PRC, in accordance with the relevant laws and regulations.,Cash and Cash Equivalents,At 31st December 2003, the Groups cash and bank balances of US$63,807,000 (2002: US$79,853,000) were kept in the PRC, Malaysia, Thailand, Malaysia, Thailand, the Myanmar. The remittance of funds out of these countries is subject to rules and regulations of foreign exchange control promulgated by the governments of the respective countries.,Dividends,HK8 cents per ordinary share,A script dividend alternative was also offered.,Not reflected as a dividend payable in these accounts, but will be reflected as an appropriation of retained earnings for the year ending 31 December 2004.,The Board of Directors of the company at the board meeting held on 21 may 2003 resolved to change its recommendation made on 21 March 2002 to distribute a final dividend of HK5 cents per share for the year ended 31 December 2002 with scrip alternatives such that no final dividend was recommended to be declared for the year 2002.,As a result, the amount US$13,972,000 previously disclosed as proposed dividend in the audited consolidated balance sheet as at 31 December 2002 included in the Companys 2002 annual report is classified as part of the retained profits in the restated consolidates balance sheet as at 31 December 2002.,Management Discussion and Analysis,Consolidated revenues of the,two hotels decreased by 23%,in 2003 largely due to a decline,in,revPAR,and food and,beverage revenues,following the outbreak of SARS,in late March 2003.,Mainland China,Combined revenues decreased,by 13% in 2003.,All the hotels recorded a decline,in,revPAR,with the exception of,the Shangri-La Hotels in,Hangzhou,Changchun,and,Harbin which registered an,increase by 1%, 7% and 6%,respectively.,The hotels located in Beijing,Shanghai, and,Shangzen,suffered,most during the outbreak of,SARS.,Hong Kong,Management Discussion and Analysis,Combined revenues of the three hotels,recorded a decline of 15% principally,due to the impact of SARS.,The,revPAR,of the Traders hotel,Singapore and The Shangri-La Hotel,Singapore decreased by 14% and 9%,respectively.,Shangri-Las Rasa,Sentosa,Resorts,Singapore also recorded a decline,in,revPAR,by 15%.,With improvement in arrivals and,indication of recovery in the economy,these hotels are expected to improve,their performances.,The Philippines,Consolidated revenues decreased,marginally by 2%.,A part from the fall out from the,SARS epidemic, the hotels in the Philippines,continue to experience some weakness,in demand due to persistence security,concerns and an uncertain investment climate.,The Groups hotels in Manila continue to,experience rate pressures.,How ever the resorts in,Mactan,which,completed the renovation of its guest rooms,buy end of October 2003, registered,a,revPAR,of 30%.,The performance of these resorts continues,to be strong.,Singapore,Management Discussion and Analysis,The consolidated revenue of all the subsidiaries increase by 8% due,mainly the contribution from Shangri-La Hotel Kuala Lumpur reflecting the,ongoing benefit of its extensive renovation program completed in May 2003.,The hotel increased its,revPAR,by 21% compared to 2002.,The Shangri-La Hotel,Penang,also recorded an increase in,revPAR,by 15%,in difficult market, driven by a steady improvement in demand for its newly,renovated rooms.,However, the performance of Shangri-Las Rasa,Sayang,Resorts,Penang,and,Shangri-Las Golden Sand Resorts,Penang,was adversely affected by,the Iraq war which discouraged long haul travel and the outbreak of SARS.,Malaysia,Management Discussion and Analysis,The Shangri-La hotel Bangkok,Recorded a decline in,revPAR,of,17% for the year.,However, the hotel experienced,a good recovery especially in,the last quarter an thereafter,which was also facilitated by,the completion of renovation,of its main wing guest rooms.,Fiji,Consolidated revenues of the two,hotels increased by 6% in line,with an 8% increase in the,weighted average,revPAR,.,Shangri-Las Fijian Resorts,Yanuca,commenced the renovation of its,lagoon wing guest rooms in,November 2003 which is expected,to be completed in late 2004.,Thailand,Management Discussion and Analysis,The hotel in Jakarta and,Yangon continue to suffer,on account of the political and,economic problems facing,Indonesian and Myanmar.,Indonesian and Myanmar,INFORMATION ACCOMPANYING,FINANCIAL STATEMENTS,INFORMATION ACCOMPANYING,FINANCIAL STATEMENTS,Managements Discussion and Analysis,Companies with publicity traded debt and equity securities acquired by the Securities and Exchange Commission to provide a Managements Discussion and Analysis (MD&A) in their financial reports. The MD&A section review a companys financial conditions and results of operations. Management must highlight any favourable or unfavourable trends and identify significant events and uncertainties affecting the companys liquidity, capital resources, and results of operations. They must also disclose prospective information.,Management Report,A management report sets out the responsibilities of management in,preparing a companys financial statements.,To reinforce senior managements responsibilities for the,companys financial and internal control system.,2. To reinforce the shared roles of management, directors,and auditor in preparing financial statements.,Shangri-Las Report of Management highlights the role of its,Audit Committee of the Board of Directors in providing,assurance on the integrity of its financial statements.,Purposes of Report,Auditor Report,Shangri-Las Report of Independent Accountants,prepares by Price Waterhouse Coopers,Explanatory Notes,Explanatory notes include information on,Accounting principles and methods used.,Detailed disclosure regarding individual financia,l,statement elements.,Commitments and contingencies,Business combinations,Transactions with related parties,Stock option plans,Legal proceedings,Significant customers,Supplementary Information,Supplemental schedules,i,n,clude information onto,Business segment data,Export sales,Marketable securities,Valuation accounts,Short-term borrowings,Quarterly financial data,Several supplemental,schedules appear in,the 2003 annual report of,Shangri-La.,The SEC is responsible for,overseeing financial,reporting to external users,for companies with,publicly traded securities.,Social Responsibility Reports,Page 42 under the Report of the Directors.,This report declares Shangri-Las,committed to the charities donations,and other donations made by the,Group during the year amounted,to US$22,000.00,Proxy Statements,Proxy statements contain a wealth of information regarding a company including; identity of shareholders owning 5 or more percent of outstanding shares, biographical information on the board of directors, compensation arrangements with officers and directors, employee benefit plans, and certain transactions with officers and directors.,FINANCIAL STATEMENT ANALYSIS,PREVIEW OF FINANCIAL STATEMENT ANALYSIS,These six areas of inquiry and investigation are the building blocks of financial statement analysis.,Short-term liquidity. A companys ability to meet short-term obligations.,Funds flow. Future availability and disposition of cash.,Capital structure and long-term solvency. A companys ability to generate future revenues and meet long-term obligations.,Return on investment. A companys ability to provide financial rewards sufficient to attract and retain supplies of financing.,Asset utilization. Asset intensity in generating revenues to reach a sufficient level of profitability.,Operation performance. A companys success at maximizing revenues and minimizing expenses from long-run operating activities.,Comparative Financial Statement Analysis,RATIO ANALYSIS,RATIO ANALYSIS OF FINANCIAL STATEMENTS,Factors affecting ratios,Ratio Interpretation,Illustrations,of,Ratio Analysis,Liquidity,Ratios,Activity,Ratios,Leverage,Ratios,Profitability,Ratios,Shareholders,Return Ratio,Changes in Comparative Financial Statement Analysis,Liquidity Ratios,Types,Formula,Yr,2003,Yr,2002,Interpretation,Current Ratio,Current asset,Current liability,1.11,times,1.28,times,ability to meet its cu
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