Pharmaceutical company GlaxoSmithKline Pakistan five year report analysis. Data were taken from 5-year annual reports of gsk

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COURSE
FINANCIAL MANAGEMENT
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TOPIC COMPANY REPORT
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DATE OF SUBMISSION 04-12-2018
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GROUP MEMBERS
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SUBMITTED TO
SIR SALEEM
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INTRODUCTION:
GlaxoSmithKline Pakistan Limited was created January 1st, mithKline and French of Pakistan
Limited, Beecham Pakistan (Private) Limited and Glaxo Welcome (Pakistan) Limited, and stands
today as the largest pharmaceutical company in Pakistan.

2. GSK is a long established investor in Pakistan. Our legacy company Glaxo Laboratories Pakistan
Ltd. was the first pharmaceutical company to be listed on the Karachi Stock Exchange in 1951.
GSK Pakistan operates mainly in two industry segments: Pharmaceuticals (prescription drugs
and vaccines) and consumer healthcare (over-the-counter-medicines, oral care and nutritional
care). In Pakistan, the Company deals in Anti-infective, Respiratory, Vaccines, Dermatological,
Gastrointestinal, Analgesics, Urology, Central Nervous System, Allergy, Cardiovascular and
Vitamins therapy areas.
Today GSK Pakistan is a highly successful business with almost 10.3% of the value and over 17%
of the volume share of Pakistan’s pharma market. Major competitors are multinational
pharmaceutical companies such as Abbott, Novartis, Pfizer, Sanofi Aventis, and local companies
like Getz and Sami. GSK Pakistan has built a competent commercial capability with a track
record of successfully integrating the BMS, UCB, Novartis Vaccines, and Stiefel businesses, and
Building a diverse and profitable business of over 150 brands.
GSK Pakistan presently employs about 2,300 persons across its Sales, Global Manufacturing
Services (GMS), Pharma division and Consumer Health Care functions.
MISSION:
“Do more, feel better, live longer”
VISION:
“The opportunity to make a difference to millions of lives everyday”
Company Status
MIED - Manufacturer, Importer, Exporter, Distributor
Co Registration No. and National Tax No.
REGISTRATION NO: 02-11-1702-001-28

3. NATIONAL TAX NO: 0710501-7
Associated Company
GSK OTC (Private) Limited
GSK Consumer Healthcare Pakistan Limited
S.R. One International B.V.
PRODUCTS OF GSK:
They make a wide range of prescription medicines, vaccines and consumer healthcare products.
1- Prescription medicines
Their pharmaceuticals business discovers, develops and makes medicines to treat a broad range
of the world's most common acute and chronic diseases.
2- Vaccines
Their vaccines business develops, produces and distributes over 1.9 million vaccines every day
to people across over 150 countries.
3- Consumer healthcare products
When you experience discomforts like sensitive teeth, colds and flu or joint pain, gsk’s everyday
healthcare products are here to help you enjoy life to the full again.
4- Stiefel dermatology
Stiefel has a long history of excellence in dermatology and R&D focused in acne, psoriasis,
eczema, atopic dermatitis and superficial skin infections.
5- ViiV Healthcare

4. ViiV Healthcare is an independent, global specialist HIV company dedicated to delivering
innovative new options for the care and treatment of people living with HIV/AIDS.
COMMITTEEMEMBERS:
1- Andrew Aristidou (Non-Executive Director)
2- M. Azizul Huq (VP & General Manager)
3- Abdul Samad (Director Finance)
4-Mehmood Mandviwalla (Non-Executive Director)
5- Sohail Ahmed Matin (Non Executive Director)
6- Mark Dawson (Non-Executive Director)
Net Profit Margin
It measures the percentage of net income of an entity to its net sales. It can also be used to
determine the profitability potential of different industries. While companies in some industries
are able to generate high net profit margin, other industries offer very narrow margins.
GSKCompany data shows that it has 9.2% in 2017.
Return on Assets
It’s a profitability ratio that measures the net income produced by total assets during a period.
In other words, the return on assets ratio or ROA measures how efficiently a company can
manage its assets to produce profits. It only makes sense that a higher ratio is more favorable
to investors because it shows that the company is more effectively managing its assets to
produce greater amounts of net income. A positive ROA ratio usually indicates an upward profit
trend as well. In addition, after analyzing Engro’s financial statement it can be seen that ROA is
also same as ROE. In 2017 GSK had 13.9% return on assest.
DIRECTOR’S PROFILE:

5. M. Azizul Huq is the VP and General Manager of GSK Pakistan. He began his career with
RhonePoulenc (now Sanofi) in Bangladesh and during his 9 years with the company, moved
through different progressive roles in product and marketing management. He then joined the
legacy company Glaxo Wellcome in Bangladesh as Marketing Manager in 1998, and also held
the positions of Sales & Marketing Manager before being appointed Marketing Director during
the merger through which GSK was created. Aziz was appointed General Manager & Managing
Director of GSK Bangladesh in 2003, and was appointed VP & GM of GSK Pakistan in November
2015.
Aziz holds a postgraduate degree in Pharmacy from the University of Dhaka, as well as an MBA
degree from the Institute of Business Administration at the same university.
Performance
highlights
2017
2016

6. 2013
RATIO ANALYSIS
A ratio analysis is a quantitative analysis of information contained in a company’s financial
statements. Ratio analysis is used to evaluate various aspects of a company’s operating and
financial performance such as its efficiency, liquidity, profitability and solvency.

7. Ratio analysis is a cornerstone of fundamental analysis.
LIQUIDITY RATIOS:
A company's liquidity is its ability to meet its short-term financial obligations. Liquidity ratios
attempt to measure a company's ability to pay off its short-term debt obligations. This is done by
comparing a company's most liquid assets, those that can be easily converted to cash, with its
short-term liabilities.
EFFICEINCY/TURNOVER RATIOS:
The turnover ratio is the percentage of a mutual fund or other investment's holdings that have
been replaced in a given year, which varies by the type of mutual fund, its investment objective
and/or the portfolio manager's investing style.
LEVERAGE RATIOS:
A leverage ratio is any one of several financial measurements that look at how much capital
comes in the form of debt (loans), or assesses the ability of a company to meet its financial
obligations.
PROFITABILITY RATIOS:
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings compared to its expenses and other relevant costs incurred during a specific
period of time.
LIQUIDITY RATIOS
● CURRENT RATIO

8. 2015 2014
1.8 times 1.8 times
Interpretation:
Current ratio is the ratio that measures the liquidity of the company if the current assets kept on
increasing so it is beneficial for the company but here the current ratio in 2014 are 1.8 and in
2015 it remains the same which indicates that the company has not increased its liquidity.
● QUICK RATIO
2015 2014
0.9 times 0.8 times
Interpretation:
Quick ratio also termed as Acid test ratio .it shows the comparison of cash, short term
investments, and receivables over the current liability. Quick ratio in 2014 is 0.8 and it kept on
increasing and in 2015 as it is 0.9 during the preceding year which means company can pay the
liability soon so it is beneficial for the company.
● WORKING CAPITAL
2015 2014
2431199 2325998

9. Interpretation:
As in 2014 the W/C is 2325998 and in 2015 it increased by 105201 which means the liability has
increased.
EFFICIENCY TURNOVER
● INVENTORY TURNOVER
2015 2014
3.4 Days 3.2 Days
Interpretation:
Inventory turnover measures how fast a company is selling inventory and is generally compared
against industry averages.so if the inventory is increasing that means it is string sales but if the
turnover is decreasing that means it is having a weak sales. As a turnover is increasing an the
turnover in days tells us that how much time they require to turn their raw material in to sales or
get the return on sales.
● CASH CONVERSION CYCLE
2015 2014
42 51
Interpretation:
Cash is considered as a oxygen for the company without cash company face many problems. As
in 2014 it is 51 and in 2015 it is 42 so it is the negative cash cycle except in 2014 in which the

10. cycle is positive as a negative cash flow, a negative cash cycle is a good thing and a company
can achieve one if its accounts payable and accounts receivable practices encourage it.
LEVERAGE RATIOS
● DEBT RATIO
2015 2014
0.3 0.35
Interpretation:
Debt ratio is very important to calculate as to know the company leverage as in 2014 it is 0.35
but in 2015 it is 0.3 so company’s debt ratio has decreased that is not beneficial for the company
as the higher this ratio, the more leveraged the company is, implying greater financial risk.
● INTEREST COVERAGE RATIO
2015 2014
139.9 11.4
Interpretation:
The interest coverage ratio is used to identify that how easily company can pay interest expenses.
The lower the ratio, the more the company is burdened by debt expense but we have seen here
that is is increasing as well as it is decreasing on the same time.
● DEBT TO EQUITY RATIO
2015 2014
1.0 times 0.1 times

11. Interpretation:
The DOE ratio indicates how much debt a company is using to finance its assets if the
company’s debt to equity ratio is increasing it means they are earning more as compare without
outside financing. As in 2014 it is 0.1 and then it is decreasing as in 2015 it is 0.0.
PROFITABILITY RATIOS
● RETURN ON EQUITY
2015 2014
14.1 9.4
Interpretation:
Return on equity is the ratio that measure the company’s ability to generate profit from
shareholders investments. high return on equity ratio because this indicates that the company is
using its investors' funds effectively. Higher ratios are almost always better than lower ratios, so
in 2014 it is 9.4 and then in 2015 it is 14.1 so it is increasing.
● RETURN ON ASSET
2015 2014
13.5 8.7

12. Interpretation:
As ROA kept on increasing as in 2014 it is 8.7 and in 2015 it increased up to 13.5.
● PROFIT MARGIN
2015 2014
6.3 4.0
Interpretation:
As gross profit is also increasing in two years like in 2014 it is 4.0 and in 2015 it is 6.3,so it is
increasing throughout the year that is beneficial of the company to increase their profitability
ratios.
INVENTORY MANAGEMENT:
Warehousing and distribution (W&D) is an integral part of GSK Pakistan’s supply chain. The
W&D department has aligned all its activities and Ways of Working with the GSK values and
expectations. It continues to optimize its logistics and warehousing operations to reach GSK’s
customers more efficiently and effectively.
Dividends
The Company maintained its history of providing reasonable returns to its shareholders. The
Board of Directors of the Company, in their meeting held on March 08, 2018 Basic Earnings per
Share after taxation from continuing operations were Rs. 9.5 (2016: Rs. 8.3) moving forward in
march 2017 company have proposed a cash dividend of Rs. 6.0 (2015: Rs. 4.0) per share. The
Board of Directors of the Company, in their meeting held on March 30, 2016, have proposed a
cash dividend of Rs. 4.0 (2014: Rs. 5.0) per share.The Board of Directors of the Company, in
their meeting held on February 25, 2015, have proposed a cash dividend of Rs. 5.0 (2013: Rs.
3.5) per share. Overall dividend payout for 2014 at Rs 1.6 billion will be 57.1% higher than 2013,
reflecting the higher equity base.
CAPITAL EXPENDITURE:

13. Cash flow for capital expenditures refers to the funds spent for a company to acquire or
upgrade physical assets such as property, industrial buildings or equipment.
GlaxoSmithKline PLC's cash flow for capital expenditures for the three months ended in Sep.
2018 was $-563 Mil. Its cash flow for capital expenditures for the trailing twelve months
(TTM)ended in Sep. 2018 was $-2,467 Mil.
Capital Expenditure for the trailing twelve months (TTM) ended in Sep. 2018 was -
908.847184987 (Dec. 2017 ) + -495.810055866 (Mar. 2018 ) + -498.670212766 (Jun. 2018 ) + -
563.39869281 (Sep. 2018 ) = $-2,467 Mil.
RISK MANAGEMENT:
Gsk is committed to having effective risk management systems (including frameworks and
processes) to ensure the significant risks they face have been appropriately identified, assessed,
treated, monitored, and reported. This is an integral part of good management practice and will

14. help them to: protect patient safety, employees, the environment, company assets and
reputation; and achieve our business objectives, safeguard shareholder investment and ensure
they comply with legal requirements. This policy helps ensure risk management is an integral.
The company must maintain the Risk Oversight and Compliance Council (ROCC) to oversee the
risk management and internal control systems for our significant risks. This includes ensuring a
robust process exists for the business to identify the risks that are significant to the company,
assign risk owners, and monitor the effectiveness of internal controls implemented to manage.
HUMAN RESOURCES:
Human resources (HR) is about equipping gsk business with the right people and the right skills
to help their customers and patients do more, feel better and live longer.
EPS overview
Current Ratio

15. The current ratiois a liquiditythatmeasuresafirm’sabilitytopayoff itsshort-termliabilitieswithits
currentassets.The current ratiois an importantmeasure of liquiditybecause short-termliabilitiesare
due withinthe nextyear.
Formula:CurrentRatio= CurrentAsset/CurrentLiabilities
Interpretation
The current ratioof GSK is1.5 in 2017 whichwashavingtremendouslyresultsin2012 as itreached2.3
due to amazingperformance of the companyinthe industry.In2017 itwas droppedto1.5 that shows
that 2017 has beenthe worstperformance yearamongthe mentionedyears.
Quick Ratio
The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay
its current liabilities when they come due with only quick assets. Quick assets are current assets
that can be converted to cash within 90 days or in the short-term. Cash, cash equivalents, short-

16. term investments or marketable securities, and current accounts receivable are considered
quick assets.
Quick Ratio = Total Current Asset – Inventory – Prepaid Expenses / Current Liabilities
Interpretation
The quick ratio of GSK was 1.0 in 2012 which decreased to 0.7 in 2017 due to not performaning
well in the industry. In 2017, it dropped to 0.7 that shows that in 2017 the poor performance of
the company as compare to the other years.
Returnon Equity Ratio
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to
generate profits from its shareholders investments in the company. In other words, the return
on equity ratio shows how much profit each dollar of common stockholders’ equity generates.
This is an important measurement for potential investors because they want to see how
efficiently a company will use their money to generate net income.

17. Formula:Return on Equity Ratio = Net Income / Shareholder’s Equity
Interpretation
The ROE of GSK was 11.6 in 2012 which increased 22.7 in 2017 due to excellent performance of
the company in the industry. In 2013, it dropped to 9.4. If we analyze the overall performance
of these 5 years; so, in 2017 the company’s ability to generate profits from shareholders’ invest
was the highest and lowest in 2013.
Inventory turnover ratio
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. This measures
how many times average inventory is turned or sold during a period.
Formula:Inventory Turnover Ratio = Cost Of Goods Sold / Average Inventory
Interpretation
The turnover ratio of GSK was 3 in 2012 which increased to 4.0 in 2017 due to excellent
performance of the company.If we analyze the overall performance of these 5 years; so, in
2017 the company’s efficiency was highest while it was lowest in 2012.

18. Programme overview
Gsk HR team ensures that we recognise creativity, collaboration and responsibility. This enables
us to offer our people rewarding careers in terms of development and excellent benefits.
What do gsk look for in a candidate?
-A passion for people and their development
-High learning agility
-A digital and analytical mindset
-A self-motivated and proactive approach
-Ability to adapt to change
-The ability to build strong relationships with key stakeholders and influence others
-Be a real team player who actively collaborates with others and is self-aware
-Clear and effective communication -Ambition to develop a career in HR.
SWOT Analysis
STRENGTHS
• GSK isgloballyone of the 5 largestpharmaceutical companies.
• GSK isone of the world’slargestinvestorsinR&Dand the UK’s biggest
private sectorfunderof R&D.
• Winnerof chemical industry’sManufacturingandResource Efficiencyaward.
• StrongR&D focus andexploringnewmarkets.
• GSK’sglobal presence isinover100 countries.
WEAKNESSES

19. • Controversiesregardingissue of safetyof drugsaffectscompany’simage.
• Patentexpiryforanumberof block-busterproducts.
OPPORTUNITIES
• Strategicagreementswithotherpharmaceuticalcompaniesand
organizationstoboostresearch.
• Increasingawarenessregardinghealthcare needs.
• Global penetrationthroughmergersandacquisitions.
• Increasingdemandforqualityhealthcare solutions.
THREATS
• Riskof unsuccessful newProducts.
• EconomicslowdowninEuropeanmarkets.

20. Income Statements 2017 and2016

21. Income Statement 2015and2014

22. Ratio Analysis of Six years.

23. BALANCESHEETOF 2017 AND 2016:

25. BALANCESHEETOF 2015 AND 2014:

26. CASH FLOWSTATEMENTOF 2017 AND 2016:

27. CASH FLOWSTATEMENTOF 2015 AND 2014:

28. STATEMENTOF EQUITY 2017:

30. STATEMENTOF EQUITY 2016:

31. STATEMENTOF EQUITY 2015:

34. Risk Management, Governance and Compliance
Effective risk management is key to sustainable business sccess. Our established risk
management framework, coupled with our internal controls, helps us maintain our focus on
managing the principal risks affecting our business.Our Risk Management and Compliance
Board (RMCB) is responsible for identifying, assessing, treating, monitoring and reporting on
significant risks associated with the business. Our risk exposure is continually reviewed by the
RMCB and is therefore subject to change as a result of internal and external factors. The RMCB
also ensures that appropriate strategies and policies are in place so that key risks which may
threaten the achievement of strategic objectives are identified, recorded and minimized. The
RMCB held four (04) meetings during the year. The Internal Control Framework established by
the Company ensures appropriate risk mitigation plans, designated accountability, and
mechanisms for upward communication of any significant issues and incidents that arise. The
Risk Management team, along with Corporate Ethics & Compliance uses its systemof controls
to protect the Company’s assets, safeguard shareholder investment and ensure compliance
with applicable legal requirements. In this respect the RMCB has formed a structure whereby
designated Risk Owners are accountable for identifying and treating significant risks, while the
Compliance Officer facilitates in instilling a risk-based approach in establishing internal control
systems within GSK, so that risk management becomes an integral part of decision making and
is embedded in normal business operations.
Risks can be largely classified as follows:Strategic Risks– are those which pose a significant
threat to meeting the business objectives and are outside of entity’s control. The most
important strategic risk being faced by the Company remains the overly restrictive and lack of
market oriented regulatory pricing policies. While the Government in March 2015 notified a
Drug Pricing Policy through which the prices of products going forward would be allowed a
partial inflationary adjustment, the long standing matter of products whose prices had been
frozen for many years was not addressed. As a result while the new policy is a step in the right
direction, it still falls significantly short of addressing outstanding issues which we hope will be
pragmatically addressed by the regulators. The Company is working on mitigating this risk
through active discussion with the DRAP on new pricing policy implementation issues, internal
cost saving initiatives, various cost rationalization measures and optimum product sales mix.
Operational Risks – are those which hinder the entity from running its operations smoothly.
Our main operational risks are the supply issues, inflation and the potential for fraud and
employee turnover. These risks are being managed through development of alternate sourcing

35. of materials, facility upgradations, Robust forecasting process in commercial and
manufacturing, simplification of operating model, spend management, adequate segregation of
duties, Refresher trainings of Code of Conduct, job rotations and employee empowerment.
Commercial Risks – are those which stem from the commercial nature of the industry and
direct a threat to the profitability of the entity. In GSK’s case, the main threat stems from the
acceleration of low cost generics in the market, which we counter through capacity
enhancement / plant upgrading, new product launches, R&D and to provide affordable
healthcare solutions to maintain the Company’s market share.
Financial Risks – are those that may cause financial loss to the entity are described in more
detail in note 38 of the financial statements.

36. RECOMMENDATION/OPINION:
GSK should not use harmful chemicals.They should work more on their green strategy to be
safer for work surroundings and to have safe behavior.

37. CONCLUSION:
After applying all the ratios I got tha Idea that GSK is the profitable firm,Because throught out
the analysis of 5 years,I found that the company is getting Profitable return on short term and
long term investment.There profit margin has been increased as well as they are in a position to
pay their debts with in their resourses.