INVESTING ACTIVITIES

Overview of the investing activities

Graph 1 - Common size analysis on liquidity

100% 80% 60% 40% 20% 0% CA FA

2008 18% 82%

2009 19% 81%

2010 10% 90%

2011 66% 34%

2012 27% 73%

Graph 1 shows the composition of assets over the period considered. Year 2011 is significant as there is a significant increase in the investment in current (liquid) assets compared with fixed assets. This is mainly due to investments in shares as well as holding large value of cash as interest bearing fixed deposit. This is a favorable situation for the company as the company has liquid investments earning an interest by avoiding opportunity cost. Graph 2 clearly shows that in 2011 Citrus has improved its liquidity levels by heavily investing in other investments and also we see significant increase in the cash holdings during 2011, this may be due to the major restructuring the company had planned for during the year 2011, of incorporating 2 subsidiaries and acquiring of two hotels. Major restructuring of the company is evident in the graph 3 where the company has rapidly increased its investments in fixed assets and leased holdings. Graph 2 - Current assets
70% 60% 50% 40% 30% 20% 10% 0% other investments Inventories Cash and cash equivalents

2008 0% 1% 1%

2009 0% 1% 0%

2010 0% 1% 1%

2011 60% 0.07% 4%

2012 19% 0.11% 1%

Graph 3 - Changes in investments of Fixed Assets

2000.00% 1500.00% 1000.00% 500.00% 0.00% -500.00% Lease hold property PPE 2009 -7.69% -2.00% 2010 0.01% -0.65% 2011 1445.95% 252.03% 2012 -1.01% 70.97%

Liquidity Graph 4 - Liquidity

2.50 2.00 1.50 1.00 0.50 0.00 Current ration Quick asset ratio cash ratio Axis Title

2008 1.61 1.56 0.07

2009 1.53 1.48 0.01

2010 1.02 0.94 0.12

2011 2.27 2.27 0.14

2012 1.63 1.63 0.05

As shown in the graph we could see that Citrus is maintaining a low liquidity level. Though the current ratio and Quick Assets ratio reports figures above 1 throughout the period the cash ratio is closer to zero. This signals to investors that the company doesnt have required cash readily available to settle the debt as they fall due. This may be due to the poor management of working capital days by Citrus as shown by the graph below. Graph 5 - Working capital cycle
Axis Title 0.00 -1000.00 -2000.00 WORKING CAPITAL DAYS 2008 2009 -96.66 2010 -207.94 2011 -232.33 2012 -1610.64

Working capital days report negative days because of low receivable and inventory turnover days with high payable turnover days. This could be clearly evident in the following graph. This emphasizes on the fact that the company depends heavily on short term debt financing to carry out the day to day business operations. Graph 6 - Turnover Days
3000.00 2000.00 1000.00 0.00 Inventory turnover Days Recievable Turnover days Payable Turnover Days Days

2008

2009 36.65 377.67 510.98

2010 36.65 230.52 478.64

2011 34.43 182.38 449.13

2012 73.24 802.07 2485.95

FINANCING AVTIVITIES
Use of debt financing Graph 7 - Use of debt financing Operating Financing

50.26%

46.78%

28.28% 93.55% 71.33%

49.74%

53.22%

71.72% 6.45% 28.67% 2012

2008

2009

2010

2011

Above graph explains the usage of debt financing by Citrus. Through which it is evident that the company used majority of the debt obtained to finace its operating expenses. But this trend has started to change since mid 2010. This shift in financing is positive to the company as it signals that the company is investing the finances in capital appriciation expenditure which has income generation potential rather than operating expences which is for consumption purpose. Leases Graph 8 - Growth in Finance Leasing
2000.00% 1500.00% 1000.00% 500.00% 0.00% -500.00% Finance Leasing Axis Title

2008 0.00%

2009 -7.69%

2010 0.01%

2011 1445.95%

2012 -1.01%

Graph 9 - Portion of lease exp from finance cost

20.00% 15.00% 10.00% 5.00% 0.00% portion of lease exp from finance cost

2008 4.62%

2009 12.79%

2010 17.40%

2011 5.85%

2012 1.15%

From the above graphs we could clearly see that Citrus has opted for a major finance lease only in 2011 when there was a stable economic and political condition in the country and with the growth in tourist arrivals. Prior to 2011 the increasing lease expense in the income statement emphasizes that Citrus has opted to finance their capital requirement through operating leases there by avoided showing negative information to the public. Equity Graph 10 - Equity Classes

Stated Capital

Revaluation Reserves

Retained earnings

46% 58% -4%

2,008

47% 59% -6%

2,009

47% 59% -5%

2,010

16% 19%
65%
2,011

23% 0%
77%
2,012

From the above graph we could see that retained earnings have significantly changed over the period under study. This is favorable for the shareholders of the company as this allows the company to use the low cost financing to fund the investing decisions rather than opting to high cost debt or equity financing.

Debt Financing Graph 11 - Financing

50.00% 40.00% Axis Title 30.00% 20.00% 10.00% 0.00% Debt Ratio Debt/Equity 2008 26.20% 35.55% 2009 26.34% 35.76% 2010 17.15% 20.70% 2011 30.16% 43.18% 2012 17.06% 20.51%

From the above graph we could clearly see that Citrus finances majority of the assets are financed through equity which makes the company a low geared company. Company is operating with a negative interest cover ratio implying that the company doesnt not generate sufficient income to settle its interest expenses but this condition could be expected to improve in the future. Graph 12 - Interst cover
0.00 -1.00 -2.00 -3.00 -4.00 Interst cover Axis Title

2008 -0.47

2009 -0.42

2010 -1.60

2011 -3.48

2012 -1.03

OPERATING ACTIVITIES
Graph 13 - Profit margin
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% GP Operating margin Pre tax profit margin NP

2008 70% -9.21% -4.93% -1.50%

2009 65% -10.56% -6.03% -6.91%

2010 72% 1.28% 3.12% 1.68%

2011 76% 17.84% 19.49% 13.81%

2012 80% -0.65% 4.18% 4.05%

From the above graph we could see that the company generates high Gross Profit Margin but this gross profit earned is not sustained because of inefficient management of Citrus overhead cost which results in low operating margin, pre-tax margin and net profit margin. Graph 14 - Revenue and COGS behavior
60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% Revenue cost of sales

Axis Title

2009 7% 25%

2010 16% -6%

2011 48% 25%

2012 -19% -32%

Above graph displays the year on year increase in revenue and cost of goods sold of Citrus. According to the graph we see that from 2010 revenue increase has been higher than the increase in cost of goods sold. The reason for this behavior in revenue and cost of goods sold could be seen in Chairmans report to the 2012 annual report, which disclosed that in the industry though room rate has rapidly increased after 2009 the hotel was unable to provide a service to match,

and as in the industry Citrus also saw a decline in its revenue by 2012. According to the management decisions we see that Citrus has grown to be a group of companies with subsidiaries in food and beverages, ayurweda spa and water related sports also they have included three new hotels increasing the room capacity. Graph 15 - Fixed Asset Turnover
30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Fixed Asset Turnover

2008 19.1%

2009 20.8%

2010 24.3%

2011 9.3%

2012 2.7%

From the above graph we could conclude that Citrus is currently operating below their capacity. Therefore they could increase return generation ability through effective use of their fixed assets. The low fixed asset turn over in 2012 could be assigned due to the refurbishment cost addition of new rooms. Citrus being in the hotel industry where usage of the business environment is a critical factor they have stopped operation for refurbishment in 2012 and this resulted in low turnover from the usual tourist arrival waves and high asset value through refurbishment. Graph 16 - Return ratios
1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00% ROI ROA ROE ROCE -0.32% -0.26%

2008 -0.24%

2009 -1.17% -1.16% -1.58% -1.33%

2010 0.37% 0.35% 0.45% 0.41%

2011 0.43% 0.79% 0.62% 0.61%

2012 0.08% 0.09% 0.10% 0.10%

Above graph shows the return ratio over the period in 2009 return ratios have dipped singnifying the impact of the unstable political status and by 2010 and 2011 it has reached a peak and now declining. The decline in return ratios could be attributed to the major restructuring Citrus was undergoing during the year with addition of subsidiaries and hotels as well as closure of hotel for refurbishment.