GlaxoSmithKline plc (GSK) is a British multinational pharmaceutical company headquartered in London. In 2013, GSK spent £3.9 billion on research and development, accounting for 13.1% of total turnover. GSK focuses its R&D efforts on pharmaceuticals, vaccines, and consumer healthcare. Despite challenges, GSK's R&D strategy has brought an internal rate of return of 13% in 2013. Financial analysis shows GSK has maintained profitability ratios around 20% in recent years, though liquidity and solvency ratios have declined slightly from 2009 levels. Forecasts estimate GSK's return on equity will remain around 64-66% through 2017.

1. Pharmaceutical industry

2. Do more | Feel Better | Live longer
Group 6 member:
Thien Ai, Nguyen – 15838
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Tran Lam Thao, Tran – 16257
Rhein-waal University of Applied Science
Lecture “Financial Statement Analysis”
WS 2014/15
Prof. Dr. Philipp Schorn

3. GlaxoSmithKline plc (GSK):
- A British multinational Pharmaceutical, Vaccines, Consumer Healthcare and company
- Located in Brentford, London.
- As of March 2014, it was the world's sixth-largest pharmaceutical company after Johnson &
Johnson, Novartis, Hoffmann-La Roche, Pfizer, and Sanofi, measured by 2013 revenue.
- Follow differentation strategy, trying to produce various products.
OVERVIEW

4. - GSK is the company leading in R&D in the world.
- In 2012, £3.9 billion (accounting for 13.1% of total
turnover) was spent for R&D with the staff of over 12,500
people researching in this area.
-There are three primary parts that R&D focuses on
including Pharmaceuticals, Vaccines and Consumer
Healthcare.
- With an effective strategy, R&D brought to the company
13% of internal rate of return in 2013
R&D

5. PERFORMANCE IN 2013

6. Profitability Analysis
2009 2010 2011 2012 2013
Gross profit margin 74.0% 73.3% 73.2% 70.1% 67.6%
EBITDA margin 25.1% 8.1% 25.8% 22.9% 22.5%
NOPAT margin 17.4% 4.4% 16.1% 15.5% 17.8%
Net profit margin 20% 7% 20% 18% 21%

7. Efficiency analysis
GSK AZN JNJ Peers
2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013
PP&E/Sales 31,9% 33,2% 33,5% 19,1% 21,8% 22,6% 22,7% 23,9% 23,4% 27,50%27,51% 28,47%
PP&E
turnover 3,13 3,01 2,99 5,23 4,59 4,42 4,41 4,18 4,27 3,59 3,51 3,32
R&D/Sales 14,64% 15,01% 14,80% 16,44 18,74 18,75 11,61 11,40 11,47 14,19 14,51 14,05
R&D
Turnover 6,83 6,66 6,76 6,08 5,34 5,33 8,61 8,77 8,72 7,05 6,89 7,12
Trade
receivables
turnover 4,82 4,89 5,76 4,05 3,41 3,34 6,30 6,06 6,11 5,19 5,06 5,07
Days’
receivables 74,72 73,67 62,53 90,19 106,89 109,3 57,12 59,43 58,92 71,74 74,03 74,74
Inventories
turnover 1,90 2,01 2,18 3,41 2,76 2,65 3,44 3,10 2,87 2,86 2,62 2,43
Days’
inventories 189,28 178,81 164,99 107,03 132,42 137,72 104,54116,12125,57 138,72 151,01 158,75
Trade
payables
turnover 1,03 1,02 1,05 0,67 0,58 0,53 3,54 3,70 3,64 2,39 2,20 2,25
Days’
payables 349,76 351,45 343,25 534,11 615,76 679,32 101,7297,38 98,81 150,64 163,40 160,25
Cash
Conversion
Cycle -85,76 -98,96 -115,73 -336,89 376,45 -432,31 59,95 78,17 85,68 59,81 61,64 73,23

8. Liquidity analysis
2009 2010 2011 2012 2013
Current ratio
GSK 1.57 1.35 1.16 1.04 1.05
JNJ 1.82 2.05 2.38 1.9 2.2
AZN 1.35 1.5 1.49 1.37 1.27
Industry 1.68 1.67 1.64 1.65 1.71
Quick ratio
GSK 1.20 1.03 0.85 0.73 0.69
JNJ 1.34 1.62 1.88 1.34 1.59
AZN 1.25 1.4 1.37 1.22 1.15
Industry 1.20 1.20 1.22 1.20 1.21
Cash ratio
GSK 0.40 0.40 0.38 0.34 0.34
JNJ 0.73 0.84 1.08 0.61 0.82
AZN 0.56 0.66 0.48 0.55 0.57
Industry 0.41 0.42 0.42 0.44 0.43
Operating cash flow ratio
GSK 0.71 0.55 0.45 0.30 0.53
JNJ 0.76 0.71 0.63 0.63 0.68
AZN 0.67 0.64 0.50 0.50 0.46
Industry 0.63 0.66 0.66 0.60 0.62

9. Solvency analysis
2009 2010 2011 2012 2013
Liabilities-to-equity
GSK 3.52 3.42 3.83 4.84 5.39
AZN 1.66 1.42 1.27 1.26 1.41
JNJ 0.87 0.82 0.99 0.87 0.79
AVERAGE 1.98 1.72 1.65 1.71 1.55
Net debt-to-equity
GSK 2.14 1.93 2.07 2.72 3.07
AZN 0.11 0.41 0.40 0.43 0.45
JNJ 0.29 0.30 0.34 0.25 0.25
AVERAGE 0.96 0.80 0.73 0.75 0.56
Interest coverage ratio
GSK 11.08 4.80 10.63 9.28 10.16
AZN 10.02 11.63 13.62 9.06 7.60
JNJ 35.93 38.25 22.65 26.89 33.10

10. Forecast
2014-12 2015-12 2016-12 2017-12 2018-12
Sales 27.128 28.062 29.114 30.119 31.038
Net profit margin (ROS) 20,24% 19,93% 19,37% 19,48% 19,40%
× Asset turnover 0,63 0,63 0,62 0,61 0,61
= Return on assets (ROA) 12,84% 12,55% 12,02% 11,97% 11,90%
× Financial leverage 5,21 5,16 5,39 5,38 5,31
= Return on equity (ROE) 66,86% 64,80% 64,76% 64,40% 63,21%