COMSATS University

Islamabad Lahore campus

[DEPARTMENT OF MANAGEMENT SCIENCES]

Group Project
Financial Management
Topic: GSK’s Company Overview, Competitive Advantage and Financial
Analysis

Submitted to:
Sir Ammar Abid

Submitted by:
Aniqa Safdar (SP17-BBA-020)

Shumaila Ashraf (SP17-BBA-035)

Aneela Ashraf (SP17-BBA-036)

Saba Mehmood (SP17-BBA-080)

M. Asim Faheem (FA16-BBA-155)

Section:
B
 Company Overview
GlaxoSmithKline is a British global pharmaceutical organization with base camp in Bretford,
Middlesex, United Kingdom. The organization additionally has a noteworthy nearness in the US,
with workplaces in Philadelphia, Pennsylvania, and Durham, North Carolina. GlaxoSmithKline
is a worldwide organization with business activities in excess of 150 nations. It has a wide
system of 84 manufacturing destinations in 36 nations and huge innovative work focuses in the
United Kingdom, the United States, Spain, Belgium, and China. The underneath diagram
demonstrates the offer value execution of GlaxoSmithKline against its companions. On an
annualized premise, the organization conveyed returns of 3.5% from June 2010 to June 2015. In
the equivalent time allotment, peers like Merck, Novartis, Pfizer and Johnson and Johnson.

Group turnover was up 2% AER, 5% CER to £30,821 million.

Pharmaceuticals sales were flat at AER but up 2% CER, driven primarily by the growth in HIV
sales and the new Respiratory products, Nucala and the Ellipta portfolio. This was partly offset
by lower sales of Seretide/Advair and Established Pharmaceuticals. Overall Respiratory sales
declined 1% AER but grew 1% CER.

Vaccines sales were up 14% AER, 16% CER, primarily driven by sales of Shingrix in the US
and growth in influenza and Hepatitis vaccines, which also benefited from a competitor supply
shortage, partly offset by declines in some Established Vaccines.
Consumer Healthcare sales declined 1% AER but grew 2% CER with broad-based growth in
Oral health and Wellness partly offset by increased competitive pressures in Europe, the
divestments of some smaller brands, including Horlicks and MaxiNutrition in the UK, as well as
the impact of the implementation of the Goods & Services Tax (GST) in India.

History

In 2000, GlaxoWellcome PLC and SmithKline Beecham PLC converged to shape

GlaxoSmithKline. GlaxoSmithKline began tasks on January 1, 2001, after this merger. Be that as
it may, the foundations of the organization's presence return a few centuries. In 1715, the Plough
Court Pharmacy was built up in London. This was precursor of Allen and Hanburys (or A&H),
which was procured by Glaxo in 1958. GlaxoWellcome PLC was shaped through a merger of
Glaxo and the Wellcome Foundation in 1995. The Wellcome establishment was built up in
London in 1880 as Burroughs Wellcome, and the exchange name was changed in 1974 in the
UK. Glaxo was enrolled in 1906. Throughout the years, Glaxo procured Allen and Hanburys and
Duncan Flock hart.

Business Segments

GlaxoSmithKline, the British pharmaceutical company with a significant worldwide presence,

deals in the following industry sections:

 Pharmaceuticals
 Vaccines
 Consumer Healthcare

The key business segment of the organization's tasks is Pharmaceuticals, trailed by Consumer
Healthcare and Vaccines. The whole business is divided among these three sections.

1. Pharmaceuticals

GlaxoSmithKline's Pharmaceuticals fragment manages creating, assembling, and advertising

prescriptions, both licensed just as nonexclusive, to treat a wide scope of intense and unending
sicknesses. The portfolio is comprised of creative (or patent-ensured) just as built up (or
nonexclusive) drugs. The organization leads in medications for respiratory ailments and HIV.
During 2014, the incomes from the Pharmaceuticals portion were 15.5 billion pounds (or $25.6
billion), which is 67.3% of the organization's all out incomes.

2. Vaccines

GlaxoSmithKline’s vaccines segment is one of the biggest on the planet, with an expansive
arrangement of more than 30 immunizations utilized for pediatric, immature, grown-up, and
travel. The organization circulated more than 800 million portions in 170 nations amid 2014. The
Vaccines section accomplished a turnover of 3.2 billion pounds (or $5.3 billion), which is 13.9%
of the gathering turnover in 2014.

3. Consumer Healthcare
The Consumer Healthcare business is one of the biggest on the planet, with its item portfolio
spread more than four classifications:

 Wellness
 Oral health
 Nutrition
 Skin health

The company supplies these products to over 100 countries worldwide. During 2014, the
Consumer Healthcare segment achieved a turnover of 4.3 billion pounds (or $7.1 billion), which
is 18.8% of group turnover.

Competitive Advantage

As one of the biggest pharmaceutical organizations, GlaxoSmithKline has utilized its immense
assets to make the up and coming age of drugs. The organization's imaginative new item lineup
and extensive rundown of patent-ensured drugs make a wide financial canal - which means it has
a protected upper hand over its companions. The size of the organization's compass is proving by
an item portfolio that traverses most real restorative classes, just as antibodies and shopper
merchandise. The differing stage protects the organization from issues with any single item.
They will convey the development and edge improvement. Taking development first. They have
an objective of structure development into a genuine upper hand for GSK Consumer Healthcare.
Winning in advancement implies having a solid and separated pipeline and executing their
dispatches splendidly. Competition is a significant perspective in the business world. Each
association needs to dominate the worldwide market and become a market chief and innovator
by beating its rivals through the generation of higher quality, just as prevalent, items. Giving
quality items at reasonable costs ought to be considered so as to accomplish advantage in the
worldwide market. This report depends on the SWOT and PORTER examination of
GlaxoSmithKline; considering its qualities and shortcomings that guide or thwart it from
contending inside its industry adequately.
Strengths of GlaxoSmithKline

The huge assets and assets accessible to the organization empower it to utilize a solid deals and
showcasing group. The solid deals and promoting foundation of GlaxoSmithKline positions it to
be the showcasing decision for clients. This is on the back of incredible showcasing and
advertising efforts attempted by the organization through print and tele-visual media. Aside from
being one of the world's main 5 pharmaceutical organizations, it is additionally UK's greatest
funder and speculator in innovative work. It has ruled the science business through effective
asset usage and assembling. It has more than 97000 representatives who adequately center
around and investigate new markets. Therefore, this has kept on playing as a noteworthy quality
for the organization, particularly after the criminal accusations looked in the USA, through
which it has left on deals, advertising and advertising efforts.

Weaknesses of GlaxoSmithKline

Increased efficiency leads to various cases of expired bulk-buster products. Issues of wellbeing
of medications utilized by clients raise discussions for the organization's picture. Innovative
work methodologies may likewise neglect to convey the required desire. These are the same
issues that the organization has needed to fight as the years progressed. Attributable to the large
scale manufacturing it takes part in, the organization has, consistently needed to get back to a
portion of the items because of value, amount or even expiry date issues. This has served a
noteworthy hit to the organization's endeavors by scratching its record and open image.

Opportunities for GlaxoSmithKline

It has the chance to move into oncology advertise, biologics, portions and explicit antibodies
specialization. The chance to encourage potential mergers and acquisitions through its solid
income position is very favorable. Furthermore, there has additionally been expanded
mindfulness and interest for human services arrangements all inclusive. The organization was set
up through a merger of different littler organizations. Therefore, it has kept on creating first class
research facilities while at the same time storing up immense measures of assets, assets and
riches. This fills in as an epic open door for it to adventure to venture into new markets and items
and furthermore power through mergers, acquisitions, too amalgamations for it to grow its
activities and customers' base.

Threats for GlaxoSmithKline

There is high danger of unsuccessful new items because of lacking consciousness of shoppers.
Ecological guidelines have turned out to be increasingly severe, exact and demanding these days.
The possibility of economic slowdown in markets in European nations presents noteworthy
dangers. The organization has likewise been always confronting the risk of new ordinary types of
medication, home grown drug, which has been demonstrated to be increasingly viable and has
lesser reactions. The way that the organization has begun showing smugness in its activities
because of the synonymous market initiative it holds likewise fills in as a main danger as
elucidated in the USA where new medications were presented without following every one of the
principles.

GlaxoSmithKline’s PORTER Analysis

Threats of New Entrants for GlaxoSmithKline

The cost required to enter the pharmaceutical market is very high because of broad innovative
work required in the business. Therefore, GlaxoSmithKline has constrained stress because of
dangers of new participants. The administration impacts exacting guidelines to organizations
wishing to enter the medications business. High odds of items expiry go about as hindrances to
new participants. GlaxoSmithKline has likewise settled a solid brand name with clients
consequently taking out a few contenders. In any case, the gainfulness of this market has in the
ongoing past pulled in heaps of littler firms into the business. This has been essentially through
the arrangement of greater partnerships through mergers, acquisitions and amalgamations of
littler firms.

Threat of Substitutes for GlaxoSmithKline

Generic brand medication is the main substitution for pharmaceutical companies like
GlaxoSmithKline. Complementary Alternative Medicine (CAM) is one of the products substitute
to GlaxoSmithKline (Reuters, 2010). These substitutes convey same items to clients with the
exception of that they utilize diverse brand names and costs. These new types of contemporary
drug are a noteworthy risk for this organization since they have been observed to be a lot more
secure and less expensive in contrast with customary medication. For this reason,
GlaxoSmithKline faces a major threat with the increased proliferation of this form of medicine.

Bargaining Power of Buyers in GlaxoSmithKline

GlaxoSmithKline spends most of its research and development techniques to create high quality
and transparent items. Accordingly, there is a little noteworthy danger of purchasers to
GlaxoSmithKline. Significant shoppers of their items incorporate patients, specialists, medical
clinics, drug specialists and other social insurance offices. The intensity of purchasers is little
thinking about their numbers in the market. The way that GlaxoSmithKline is additionally
among the top pharmaceutical organizations all inclusive has established this reality by
benefiting reserves, most recent types of innovation and labor to the organization. Purchasers,
along these lines, don't represent any danger to the organization for they have constrained
bartering power. Being an oligopolistic type of market, dealers, for example, GlaxoSmithKline,
control the costs in the business.

Bargaining Power of Suppliers in GlaxoSmithKline

The fundamental providers incorporate crude materials and work suppliers, contemplate staff,
clinical officers, and agents of generation, appropriation and showcasing. They can easily impose
much of a stretch force immense danger to GlaxoSmithKline by retention or diminishing the
nature of provisions. GlaxoSmithKline has a perfect history of treating their providers well by
gathering their requests. The organization likewise offers incredible compensation to it
representatives. The organization keeps up a spotless record in gathering every single
authoritative prerequisite and terms with its providers. This has rendered it in shaft position in
managing terms with its providers. Thereupon, providers employ negligible bargaining power,
subduing the risk of inside and out.

GlaxoSmithKline’s Rivalry with Competitors

Government strategies and guidelines in pharmaceutical enterprises are exacting in this manner
restricting number of contenders. The enormous business measure empowers GlaxoSmithKline
to succeed without essentially taking the market from different contenders. Pharmaceutical
enterprises become quickly accordingly producing speedier income and over the long haul
lessening rivalry. Because of this, GlaxoSmithKline utilizes arranging and foreknowledge to
position itself for long haul achievement in the realm of rivalry. Moreover, pharmaceutical
industry requires expensive broad innovative work strategies which limit number of competitors.

Conclusion and Recommendations

Gaining advantages in the world requires excellent item conveyance utilizing fitting systems.
GlaxoSmithKline, for instance, should center to dispense with its shortcomings and dangers in
order to accomplish upper hands. They ought to do this by improving their qualities and taking
extraordinary focal points in their chances. They ought to sort out a few battles that address
issues of security and wellbeing of medication use through media and online worlds. Creation of
satisfactory (however not overabundance) items lessens high odds of items expiries. Very
qualified faculty in the field of innovative work will guarantee required desire in looks into. To
battle the issue of Europe's monetary stoppage, they should concentrate on worldwide creation
by expanding their market everywhere throughout the world. The cost used to improve these
proposals can without much of a stretch be recuperated from high benefits accomplished from
offers of new improved items. To outline, GlaxoSmithKline should add these proposals to their
systems subsequently empower them contend adequately in the pharmaceutical market.
 Financial Analysis
Ratio analysis
Liquidity ratio
Current ratio:

year 2014 2015 2016 2017 2018

Current ratios 1.84 times 1.85 times 1.70 times 1.56 times 2.1 times

Interpretation: It defines the liquidity strength of the firm that's how much the firm is strong in
the liquidity ratio. As the current ratio should always be greater than one in order to get more
liquids from the business. From 2011-2018, company have more than 1 assets to pay its 1Rs.
Total current liability. This defines that GSK’s financial structure is good enough for doing
business.

Quick ratio:

Year 2014 2015 2016 2017 2018

Quick ratio 0.82 times 0.9 times 0.80 times 0.76 times 1.06 times

Interpretation: The quick ratio measures the liquidity of a company by showing its ability to pay
off its current liability with current assets as you see the quick ratio of the company is more than
one in year 2015 and 2018 which show that the company has ability to pay off its obligations
without selling its long term or current assets but the quick ratio is less than 1 so it is not good in
2014, 2016 and 2017 by which company has to sell its long term or current assets to pay of its
obligation. It is also shown that they are not maintaining a low level of inventory. In short, firm
has a sufficient current asset to pay of its current liabilities.

Liquidity Rtaio
2.5

1.5
current ratio
1
quick ratio
0.5

0
2014 2015 2016 2017 2018
Profitability ratio
Gross Profit Margin:

Year 2014 2015 2016 2017 2018

Gross Profit 26.30 % 27.4 % 28.0 % 26.5 % 24.74 %
Margin

Interpretation: A ratio that measures Company’s manufacturing and distribution efficiency

during production process. In the case of GSK, ratio is ranging from 24%-27% prove that
company has enough money to cover his operating cost. However it is noticed that profit
increases in 2015 and 2016 but it declines in 2017 and 2018 which shows that efficiency of using
raw material, labor and manufacturing related fixed assets declining.

Operating Profit/EBIT Margin:

Year 2014 2015 2016 2017 2018

Operating 11.21% 14.98% 13.44% 13.48% 11.07%
Profit Margin

Interpretation: It is a gainfulness proportion that measures what rate of aggregate incomes is

made up by working salary. As it were, the working edge proportion exhibits how much incomes
are left over after all the variable or working expenses have been paid. At year 2018, company’s
profit decline which shows GSK is unable to control their operating expenses and need some
actions to controlling the cost related to business.

Net Profit Margin:

Year 2014 2015 2016 2017 2018

Net Profit 6.1% 8.9% 9.60% 9.24% 9.50%
Margin

Interpretation: It is an indicator of how efficient a company is and how well it manages its cost.
The higher the margin is the more effective the company is in converting revenue into actual
profit. GSK’s margin ratio increases from 2014-2015 and decreases in 2016 and 2017 but then
slightly improves in last period. It represents that there is a good signal of recovering in its
business activities.
Return on Asset:

Year 2014 2015 2016 2017 2018

Return on 8.05% 12.48% 12.50% 13.84% 14.57%
Asset

Interpretation: The return on assets ratio, often called the return on total assets, is a gainfulness
proportion that measures the net pay delivered by aggregate resources amid a period by
contrasting net wage with the normal aggregate resources. At the end of the day, the arrival on
resources proportion or ROA measures how proficiently an organization can deal with its
advantages for deliver benefits amid a period. ROA of GSK increases over the period due to high
sales and productivity.

Return on Equity:
Year 2014 2015 2016 2017 2018
Return on 14.1% 20.21% 19.83% 22.7% 21%
Equity

Interpretation: The return on equity ratio or ROE is a profitability ratio that measures the
capacity of a firm to produce benefits from its shareholder’s interests in the organization. At the
end of the day, the arrival on value proportion indicates how much benefit every dollar of normal
stockholders' value produces. Similarly, due to higher sales and productivity ROE of company
increases over time and going in positive figures.

Profitibily Ratio
30.00%
25.00%
Gross Profir
20.00%
EBIT
15.00%
Net Profit
10.00%
ROA
5.00%
ROE
0.00%
2014 2015 2016 2017 2018
Solvency/Debt ratio
Debt-to-total asset ratio:

Year 2014 2015 2016 2017 2018

Debt/Asset 37.52% 35.04% 36.01% 38.46% 30.47%

Interpretation: From 2014-2018, all the assets of GSK are financed by 30%-37% of debt. GSK
debt-to-asset ratio is less than 50% which is appropriate according to company’s standard.

Debt-to-equity ratio:
Year 2014 2015 2016 2017 2018
Debt/Equity 59.91% 53.94% 56.28% 62.49% 43.82%

Interpretation: From year 2014-2017, company’s equity ratio is greater than 50% which is not
good sign for GSK but it reduces in last year.

Interest coverage ratio:

Year 2014 2015 2016 2017 2018

Interest 139.9 times 70.8 times 228.7 times 55.8 times 31.8 times
Coverage

Interpretation: From year 2014-2018, the EBIT of GSK is several times greater than interest
expense or pay interest over a particular time period. In 2018 company’s interest coverage ratio
is 31.8 times which shows that company can pay interest over 31 years and company’s higher
income and lower interest shows that GSK’s borrowing interest is low.

Long Term Debt to Equity Ratio:

Year 2014 2015 2016 2017 2018

L.Term Debt 8.17% 4.95% 5.34% 6.17% 6.40%
to Equity

Long Term Debt to Assets Ratio:

Year 2014 2015 2016 2017 2018

L.Term Debt 5.11% 3.21% 3.42% 3.80% 4.45%
to Asset
 Solvency Ratio
70.00%

60.00%

50.00%
Debt/Asset
40.00%
Debt/Equity
30.00%
L.Term Debt/Equity
20.00% L.Term Debt/Asset
10.00%

0.00%
2014 2015 2016 2017 2018

Activity Ratio
Total Asset Turnover:

Year 2014 2015 2016 2017 2018

Total Asset 1.19 times 1.18 times 1.30 times 1.49 times 1.53 times
Turnover

Interpretation: As total asset turnover is acceptable because assets are productive from year
2014-2018 with values more than 1 which shows that every 1 asset generates 1 rupee for
company so it is beneficial.

Fixed Asset Turnover:

Year 2014 2015 2016 2017 2018

Fixed Asset 4.2 times 4.1 times 3.3 times 3.7 times 3.8 times
Turnover

Interpretation: Firm’s fixed asset turnover has value 4.2 times in 2014 and 3.8 times in 2018,
means GSK is more efficient at converting fixed assets to sales and they are productive.

Payable Turnover:

Year 2014 2015 2016 2017 2018

Payable 10.6 times 10.6 times 8.6 times 12.0 times 13.0 times
Turnover
Average Payment Period:
 Year 2014 2015 2016 2017 2018
APP 34 days 35 days 43 days 31 days 29 days

Interpretation: In 2014, GSK have 10.6 times its A/P turnover and company is paying account
payable within 34 days. Similarly, from year 2015-2018 company pays its credits within
particular days.

Receivable Turnover:

Year 2014 2015 2016 2017 2018

Receivable 63 times 56.1 times 52.5 times 22.7 times 17.2 times
Turnover
Average Collection Period:

Year 2014 2015 2016 2017 2018

ACP 6 days 7 days 7 days 17 days 22 days

Interpretation: In 2014, GSK have 63 times its A/R turnover and is converting account
receivables into cash within 6 days. Similarly, for upcoming years company converts its
receivables into cash within a particular day.

Inventory Turnover:

Year 2014 2015 2016 2017 2018

Inventory 3.2 times 3.4 times 3.4 times 4 times 4 times
Turnover
Days in Inventory:

Year 2014 2015 2016 2017 2018

Days in 115 days 107 days 108 days 92 days 91 days
Inventory

Interpretation: In year 2014-2018, GSK have its inventory turnover (times) and is converting raw
material into finish goods within a specific days. Company has increased its turnover ratio from
3.2 to 4 over 5-year time, it is good enough.

Cash Conversion/Operating Cycle:

Year 2014 2015 2016 2017 2018

Operating 86 days 79 days 73 days 77 days 84 days
Cycle
 Activity Ratio
70
60
50 Total Asset Turnover

40 Fixed Asset Turnover

30 Payable Turnover
20 Receivables Turnover
10 Inventoty Turnover
0
2014 2015 2016 2017 2018

Market Ratio
Earnings per Share (EPS):

Year 2014 201 2016 2017 2018

EPS 5.3 Rs. 8.3 Rs. 8.3 Rs. 9.5 Rs. 10.2 Rs.

Interpretation: Earning per share or EPS expresses the earned profit against per share. In the year
2014, the EPS was very low but up to 2018 it increased a lot which indicates that earnings
against each share were high on those years.

Price Earnings Ratio:

Year 2014 2015 2016 2017 2018

Price 41.4 times 26.5 times 28.1 times 17.7 times 11.1 times
Earnings
Ratio

Interpretation: Through this ratio, the recent trading price of the firm is compared with its EPS.
The P/E ratio actually represents the expectation of investors about the firm. In 2014, the P/E
ratio of GSK was quite high which means that investors have great interest on GSK, this is
because GSK is a well reputed multinational firm and has a unique brand image. From 2014 to
2018, there was a fall in P/E which indicates that people have neutral opinion about the stocks of
GSK.

Price to Book Ratio:

Year 2014 2015 2016 2017 2018

Price/Book 1.2% 1.2% 1.2% 0.8% 0.5%
Ratio
Dividend Yield Ratio:

Year 2014 2015 2016 2017 2018

Dividend 2.3% 1.8% 2.6% 4.2% 6.2%
Yield Ratio

Markey Ratio
7.00%
6.00%
5.00%
4.00%
Price/Book
3.00%
Dividend Yield
2.00%
1.00%
0.00%
2014 2015 2016 2017 2018

Income Statement
Year 2018 2017 2016 2015 2014
Sales 34,006,840 32,773,770 27,563,533 23,821,926 22,843,250
Cost Of Sales 25,593,240 24,095,384 20,099,062 17,397,755 16,996,459
Gross Profit 8,413,600 8,678,386 7,464,471 6,424,171 5,846,791
Operating 3,765,457 4,416,808 3,704,107 3,568,467 2,560,386
Profit
Other Income 1,471,634 1,036,344 1,040,556 1,159,017 488,010
Finance Cost 147,392 88,282 19,032 54,361 20,363
Profit Before 4,692,117 4,925,414 4,352,881 3,514,106 2,540,023
Tax
Taxation 1,460,195 1,898,180 1,707,969 1,003,380 1,005,105
Profit After 3,231,922 3,027,234 2,644,912 2,510,726 1,534,918
Tax

The net sale of GSK which is 3.8 in 2014 but increase in 2015 that is good sign for company. In
2016, net sale is 15.7 which is comparatively higher than sales in 2017 and 2018. A decrease in
sales is showing a poor performance in these years so company should improve its condition.
The cost of goods sold is expense for company so that it should be less in every year. In 2014,
CGS is 6.2 which is good for company but it increases from year 2016-17 an then decreases up
to 8.1 2018 which shows that company should carry on their operation by adopting current
policies. Selling and distribution expenses during the year increased by 8.9% which is mainly
attributable to Handling & Freight cost and Increase and Increase in other income versus last
year by 42% is mainly on account of promotional allowance received for sustainable investment.
Taxation expense declined by 23% mainly on account of reduction in corporate tax rate from
31% to 30%. Hence, the overall performance of GSK in 2018 is good from previous years.

Balance Sheet
Year 2018 2017 2016 2015 2014
Cash 3,185,011 1,818,900 3,515,638 2,946,612 2,060,444
Inventory 5,944,050 6,082,218 5,548,083 4,707,918 6,308,061
Current Asset 12,074,025 11,855,900 11,736,277 11,855,497 11,378,061
Investments 0 0 793,873 695,586 591,667
Fixed Asset 10,102,322 10,018,032 9,428,830 8,264,685 7,695,670
Total Assets 22,176,347 21,873,932 21,165,107 20,120,182 19,073,731
Current 5,770,211 7,581,158 6,899,137 6,403,429 6,180,168
Liability
Fixed 986,686 830,917 723,185 646,542 975,607
Liability
Total 6,756,897 8,412,075 7,622,322 7,049,971 7,155,775
Liabilities
Paid Up 3,184,672 3,184,672 3,184,672 3,184,672 3,184,672
Capital
Total Equity 15,419,450 13,461,857 13,542,785 13,070,211 11,945,103
Total Equity 22,176,347 21,873,932 21,165,107 20,120,182 19,073,731
and Liabilities

The asset side and the equity, liability side both are equal; this means that assets, or the means
used to operate the company, are balanced by a company’s financial obligations, along with the
equity investment brought into the company and its retained earnings. Increase in current assets
mainly driven by increase in the balance of Cash & Cash equivalent due to better collection in
current period and careful cash flow management.
 .

Equity Profile
Year Market Cap(000’s) Shares Free Float Free Float

2018 33,537,789.05 318,467,278 51,666,368 16.22%

Distribution
Year 2018 2017 2016 2015 2014
Dividend 70.00 % 70.00 % 60.00 % 40.00 % 50.00 %
Bonus 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %
Right 0.00 % 0.00 % 0.00 % 0.00 % 0.00 %

Dividends
Year 2018 2017 2016 2015 2014
Dividend 7.00 7.00 6.00 4.00 5.00
Dividend Cover 1.45 1.36 1.38 1.97 0.96
Dividend Growth 0.00 16.67 50.00 -20.00 42.86
Dividend Yield 4.23 3.46 2.77 1.91 2.78
Average
Dividend Yield High 6.25 4.54 3.04 2.39 3.54
Dividend Yield Low 3.23 2.58 2.44 1.70 2.07
Payout Ratio 68.98 73.64 72.24 50.74 103.74

Sales
Year 2018 2017 2016 2015 2014
 COGS 6.22 19.88 15.53 2.36 -10.58
Price To Sales Ratio 1.55 1.96 2.50 2.79 2.51
Average
Price To Sales Ratio 2.03 2.63 2.84 3.15 3.37
High
Price To Sales Ratio 1.05 1.50 2.28 2.23 1.97
Low
Sales Growth 3.76 18.90 15.71 4.28 -9.46
Sales Margin 75.26 73.52 72.92 73.03 74.40
Sales Per Share 106.78 102.91 86.55 74.80 71.73

Cash
Year 2018 2017 2016 2015 2014
Cash Flow Per Share 10.78 6.81 13.53 11.44 8.33
Cash Per Share 10.00 5.71 11.04 9.25 6.47

Horizontal analysis
Balance Sheet Analysis

% 2014 2015 2016 2017 2018

Share Capital and reserves 2.5 9.4 2.0 (0.1) 15.9

Non-current liabilities 13.0 (34.4) 13.0 14.9 18.7
Current liabilities 7.9 3.6 6.7 11.0 (23.9)
Total equity and liabilities 6.5 5.3 3.8 4.0 2.1
Non-current assets 9.7 7.9 13.5 6.2 0.8
Current assets 4.2 3.8 (3.0) 2.2 3.2
Total assets 6.5 5.3 3.8 4.0 2.1

Income Statement Analysis

% 2014 2015 2016 2017 2018

Net sales 10.5 6.1 15.7 18.9 3.8

Cost of goods sold 8.1 4.6 15.5 19.9 6.2
Gross profit 17.9 10.2 16.2 16.3 (3.1)
Selling, marketing and 1.9 8.2 1.0 16.4 8.9
distribution expenses
Administrative expenses 9.0 4.7 (2.8) 4.1 9.5
Other operating expenses 65.4 12.0 45.8 17.9 (9.5)
Other operating income 8.0 135.9 (10.2) (0.4) 42.0
Operating profit 45.7 36.0 22.5 14.7 3.5
Financial charges (87.2) 167.0 (65.0) 363.9 67.0
Profit before taxation 57.4 35.0 23.9 13.2 (4.7)
Taxation 55.4 3.6 70.2 11.1 (23.1)
Profit after taxation 58.8 56.7 5.3 14.5 6.8

Vertical Analysis
Balance Sheet Analysis

% 2014 2015 2016 2017 2018

Share Capital and reserves 62.5 65.0 63.8 61.3 69.5

Non-current liabilities 5.1 3.2 3.5 3.8 4.4
Current liabilities 32.4 31.8 32.7 34.9 26.0
Total equity and liabilities 100 100 100 100 100
Non-current assets 40.3 41.3 45.2 46.1 45.6
Current assets 59.6 58.7 54.8 53.9 54.4
Total assets 99.9 100 100 100 100

Income Statement Analysis

% 2014 2015 2016 2017 2018

Net sales 100 100 100 100 100

Cost of goods sold 73.7 72.6 72.9 73.5 75.3
Gross profit 26.3 27.4 27.1 26.5 24.7
Selling, marketing and 13.3 13.5 10.2 10.0 10.5
distribution expenses
Administrative expenses 3.7 3.6 3.4 3.0 3.2
Other operating expenses 0.9 1.0 1.4 1.3 1.2
Other operating income 1.8 3.9 3.8 3.2 4.3
Operating profit 10.3 13.2 15.9 15.3 14.2
Financial charges 0.1 0.2 0.1 0.3 0.4
Profit before taxation 10.2 13.0 15.8 15.0 13.8
taxation 4.2 4.1 6.2 5.8 4.3
Profit after taxation 6.1 8.9 9.6 9.2 9.5
 Cross-sectional Analysis
Industry Dynamics

In 2017, Pakistani Pharmaceuticals Industry (PPI) registered sales of US$ 3.1b translating to a
global market share of 0.5%, growing at the rate of 12%. The industry is dominated by local /
national companies which account for 2/3rd of market share whereas multinationals enjoy the
remaining 1/3rd. Top ten companies constitute approximately 46% of the market whereas top 50
share approximately 90% of the market.

Currently, a total of 759 companies operate in the country of which 27 are MNCs. The industry
is dominated by large players with top 100 firms accounting for ~97% of market share. As a
result, ~600 firms compete for a market of just ~Rs. 10b. A total of 12 companies are listed on
Pakistan Stock Exchange and they have a market share of ~30%.

Symbol Company Name Market Share Growth In

Sales

GSK GlaxoSmithKline Pakistan 7.45% 3.10%

ABBOTT Abbott Laboratories Pakistan Limited 6.29% 8.98%
GETZ Getz Pharma (Private) Limited 6.22% 13.15%
SAMI Sami Pharmaceutical (Private) Limited 5.25% 10.12%
MARTIN Martin Dow 4.12% 11.83%
SEARLE The Searle Company 3.71% 11.44%
SANOFI Sanofi-Aventis Pakistan 3.10% -2.91%
GSKCH GlaxoSmithKline Consumer Healthcare 3.00% 17.42%
Pakistan
OBS OBS Pakistan 2.98% 0.45%
HILTON Hilton Pharma 2.95% 8.17%
Source: IMS (information medical statistic)
 Name Market Share

GSK 7.5%
Abbott 6.3%
Searle 3.7%
Sanofi 3.1%
GSKCH 3.0%
Highnoon 1.6%
AGP Limited (AGP) 1.4%
ICI/Wyeth 1.3%
Feroz sons 1.1%
Macter 1.1%
Otsuka 0.2%
IBLHL n/a
Source: IMS (information medical statistic)

Benchmarking- Profitability (Rs. m)

% Abbott GSK Sanofi ICI Feroz sons

FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17
Gross 32.9% 38.7% 24.7 % 26.5% 30.5% 35.6% 17.31% 18.77% 35.2% 41.2%
Margin
Net Margin 9.1% 16.3% 9.5% 9.2% 4.7% 8.1% 6.23% 7.97% 2.1% 9.1%
ROA 13.3% 21.9% 14.5% 13.8% 7.9% 15.2% 7.09% 9.12% 1.60% 6.9%
ROE 20.4% 29.3% 21.0% 22.7% 14.3% 24.3% 16.92% 19.47% 2.0% 8.1%
EBIT 14.7% 22.4% 11.0% 13.4% 7.3% 12.7% 7.43% 10.62% - -
Margin

Benchmarking-Liquidity (Rs. m)

Times Abbott GSK Sanofi ICI Feroz sons

FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17
Current 1.96 2.98 2.1 1.56 1.7 2.0 1.17 1.01 3.1 3.8
ratio
Quick ratio 1.27 2.19 1.06 0.76 0.9 1.0 0.52 0.50 1.8 1.8
 Benchmarking-Activity Ratio (Rs. m)

Days/Times Abbott GSK Sanofi ICI Feroz sons

FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17
No. of days 72.28 80.40 91 92 109 117 73.29 69.52 44 31
in inventory
ACP 12.64 12.56 22 17 18 20 19.15 18.48 100 90

APP 76.68 61.14 29 31 87 72 36.32 53.03 160 226

Inventory 5.05 4.54 4.0 4.0 3.3 3.1 4.22 5.02 8.30 11.8
turnover
Receivable 28.88 29.06 17.2 22.7 20.5 17.9 19.15 18.48 3.65 4.05
turnover
Payable 4.76 5.97 13.0 12.0 4.2 5.1 36.32 53.03 2.28 1.61
turnover
Total asset 1.47 1.36 1.5 1.5 1.7 1.9 1.14 1.14 - -
turnover
Operating 8.24 31.82 84 77 8.3 7.9 56.12 34.96 -16 -105
cycle

Benchmarking-Market Ratio (Rs. m)

Times/% Abbott GSK Sanofi ICI Feroz sons

FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17
Earnings Per Rs. Rs. Rs. 10.2 Rs.9.5 Rs. 96 Rs. Rs. Rs. Rs. 3.2 Rs. 13
Share 27.52 42.95 160.3 33.13 30.67
Price 22.93 16.24 11.1 17.7 11.8 11.9 24.19 30.67 61.6 29.6
Earnings
Ratio
Market/Book - - 0.5% 0.8% 1.7% 2.9% - - - -
Ratio
Dividend 3.2% 5.7% 6.2% 4.2% 4.0% 3.6% 1.93% 2.0% 1.50% -
Yield