Glaxo Pakistan

Table of Contents INTRODUCTION As per Jim Collins, *V*ery few have a expertness of going from Good to Great. M each companies strive to be the best in the market. Most never succeed. Many do so only temporarily and subsequently lose their position through misunderstanding how they got there and what is needed to stay there. http//www. roi-ally. com/BPE_vol1. htm Therefore in nine to maintain the assembly line position and to direct its future needs, peer slight requires an accurate analytic thinking of the reality of the personal credit line situation and de margeine its pecuniary health.This is rather complicated yet necessary for keeping angiotensin-converting enzymes financial affairs clean and sustains the faces growth. Recognizing the moance of the above subject matter, I choose topic 8 for my interrogation hide i. e. An analysis of the financial situation of your choice of musical arrangement. The familiarity selected for this purpose is **GlaxoSmithKline Pakist an Limited**, besides referred to as GSK or The Company. REASON FOR CHOOSING THE TOPICTopic inherent selection is ground on a number of factors which derived me towards selecting this topic for my thesis in comparability to other(a) topics specified in research and analysis project guidelines. sideline ar the few reasons for choosing the said topic Relevance to the Current profession While training in the Financial Advisory Services Department of Deloitte Pakistan, I got various opportunities to explore antithetic sectors and industries. This has equip me with strong interpretational and analytical skills which helped me to work effectively on the said topic. Future AssistanceThe pharmaceutical fabrication provides a lot of financial analysis opportunities because of the complexity of its ope ration. This complicated structure enabled me to make make check understand and practically apply theoretical knowledge and be better equipped to under maneuver off financial an alysis in my future c argonr. Importance in ACCA Financial analysis is one of the hygienic-nigh important topics tested in ACCA examinations. I personally feel that it is an interesting topic which has a practical application. Moreoer, it enabled me to utilize my IT skills and the knowledge that I gained from my studies.COMPANY AND SECTOR Industry Pakistan has a very spirited and forward looking Pharma Industry. It has ab turn up 500 pharmaceutical manufacturing units including those operated by 25 multinationals present in the country. It has shown progressive growth all over the last one decade and now meets around 70% of the countrys demand of Finished Medicine. The industry has invested substantially to upgrade itself in the last few accessible classs and today mass of the industry is honouring Good Manufacturing Practices (GMP), in accordance with the interior(prenominal) as well as international Guidance.The industry has the capacity to manufacture a course of yield ranging from simple pills to sophisticated Biotech, Oncology and Value Added Generic compounds. http//www. ppma. org. pk/ The Company History There are quadruple major companies in the history of GSK Burroughs Wellcome & Company, Glaxo Laboratories, Beecham and SmithKline and French. GlaxoSmithKline Pakistan Limited was created on January beginning(a) 2002 through the merger of the aforementioned companies operating separately in Pakistan. Today GSK is standing as one of the largest pharmaceutical gild of the world.Business As a leading international pharmaceutical familiarity, GSK is dedicated towards global healthcare and believes it to be ethically important and a key to its personal credit line success. GSK Pakistans primary activities are manufacturing, import, export and marketing of research-based pharmaceutical and consumer healthcare products. It operates mainly in two industry segments Pharmaceuticals (prescription drugs and vaccines) and consumer healthcare (over -the-counter- medicines, oral care and nutritional care). Market destinyGSK Pakistan limited holds a major market manage in monetary value of products, asset base, revenue and innovation. It produces 5 brands among the 10 top brands of the pharmaceutical products in the market. It is the maiden company in Pakistans pharmaceutical industry which reached the revenue of Rs 10 Billion and reliablely holds 18. 33% of the total volume of the pharmaceutical product traded in Pakistan. Products GSK has a large products portfolio ranging from tablets, toothpaste, inhalers to complex capsules, in over 28,000 different pack sizes and presentations.Principally GSK produces antibiotics, respiratory, dermatological, gastro-intestinal, metabolic, analgesics, central nervous system (CNS) products and vaccines. AIMS AND OBJECTIVES Objectives and milestones are of crucial importance for any activity and are the core of its success, or failure. Setting an objective before initiating the project p rovides the required directions and assists in anticipating its result. This make-up aims to evaluate and assess the financial & affair position of GlaxoSmithKline Pakistan Limited for financial socio-economic class ended December 30, 2008.This will be achieved by the following three key tools Vertical Analysis It deals with the more or less sophisticated technique for analyzing the financial statements which is ratio analysis, also known as course analysis. This analysis will be conducted to compare GSKs latest year writ of execution with its previous stopovers under four broad categories i. e. Profitability, Short margin Solvency, Liquidity and Efficiency, Long Term Solvency and stability & Market ratios. Within each category different ratios would be calculated depending upon their significance and appropriateness. horizontal AnalysisFor a more meaningful and judicious picture of the entitys position it is compared with its rival within the industry. by this horizontal or competitor analysis, GSKs current year performance is judge against its major competitor Sanofi Aventis. This analysis is conducted by the use of financial ratios in the same four broad categories. Business Analysis Business analysis is a well-established means of thinking critically about an entity, its re ancestors and its environment. This analysis aims to evaluate GSKs performance not only from the financial perspective scarcely its business as a whole.This will be achieved by the use of technique videlicet gussy up (Strength, Weaknesses, and Opportunities & Threat) analysis and by conducting a habitual analysis of business mellowedlighting its major performance area. Future Prospects This report will also highlight the companys future objective and strategies and assess its bond with GSKs vision and purpose of existence. INFORMATION GATHERING Information is a source of learning. exactly unless it is organized, processed, and available to the right people in a format f or decision making, it is a burden, not a benefit. William PollardAny course of reach that generates a successive message can be considered as a source of information. Information can be gathered from virtually anywhere only ideal information is that, which when used, adds value. suitablety this in mind, I exploited the most appropriate and authentic information sources. The major sources used to gather the information are Annual Reports The most reliable source of information is the companys annual report. These not only contain financial statements of an entity but also other information of current and future scenarios which helps in evaluating its performance.Annual Reports of GSK for December 2008 and 2007 and its competitor Sanofi Aventis for the December 2008 were obtained from their websites. Meetings Several idle confrontations were conducted with the management of GSK regarding its business and financial stance. I also managed to have meeting with senior associates at Deloitte who had an experience of conducting audit of Abbott Laboratories (Pakistan) Limited. They provided me guidance to conduct the business analysis and industry knowledge, to facilitate me in achieving my goals effectively. meshworkInternet proved to be one of the strongest sources which enhanced the frequency and quality of information gathered during the project. The official website of GlaxoSmithKline Pakistan Limited (http//www. gsk. com. pk) assisted to assemble constructive information for its better understanding which helped in scrutinizing the companys financial performance. Additionally, different quotes and definitions were gathered from Google Search Engine. Articles The Article published in Student Accountant by ACCA, How to come on Performance Appraisal Questions? by Steve Scott from May 2006 issue, helped in the interpretation of the financial position of GlaxoSmithKline Pakistan Limited. ACCA Study text editions The study texts of ACCA Paper F7 and P2, P3, C AT Paper T6 published by BPP and FTC, were the helpful resources in gathering definitions and interpretations of ratios and conducting business analysis. Financial Analysis Financial analysis is an aspect of the overall business financial position that involves examining historical and competitor info to gain information about the current and future financial health of a company. ttp//www. enotes. com/small-business-encyclopedia/financial-analysis Comparison with the anterior periods (Vertical analysis) and with the competitor (horizontal analysis) in the form of ratios assists an organization in taking appropriate measures for improving its financial credibility. Vertical Analysis Trend or vertical analysis is an aspect of technical analysis that evaluates the current performance of the company employ the past data. It is based on the idea that what has happened in the past bequeaths traders an idea of what will happen in the future. ttp//www. investopedia. com/. This analysis is through with(p) under four broad ratio categories discussed below Profitability Ratios RETURN ON CAPITAL EMPLOYED (ROCE) The primary measure of proceedsability is normally considered to be ROCE. It is the ratio which measures the relationship between the sizes of the moolah figure relevant to size of the business. (Student Accountant May 2006) ROCE of the company has reached at a aim of 36. 84% in 2008, which is a growth of 4% from 2007 32. 89% that had reduced by 2. 29% compare to 2006 (35. 18%).This enlarge in 2008 was mainly payable to the rise in net correctment of 17% in comparison to FY 2007. Whereas, in the year 2007, the ontogeny in noncurrent liabilities by 40. 65% (in comparison to 2006) caused a extraction in its ROCE. d lovesome effectuate GROSS PROFIT MARGIN (GP %) The gross profit margin ratio tells us the profit a business makes on its damage of sales. GP% of GSK was 28. 77% in the year 2008 which demonstrated a downward trend, since the recorded margi n in the year 2007 was 37. 25% and 38. 33% in 2006 respectively. Despite of the rise in the sales revenue by 26% in 2008, GSKs GP% has decreased.This was due to the drastic add-on in its cost of sales by 43. 38% over 2007 (which was particularly due to the rise in raw material & commodities prices), whereas there was no result increase in its sales prices (because of no increase in drug prices sanctioned by the government since 2001). The same reason was observed in the year 2007 which squeezed its GP% by 1. 08% over 2006, regardless of the increase in its net sales by 5. 6%. draw shut in NET POFIT MARGIN (NP %) A change in the net profit margin is a measure of how well a company has controlled its overheads. Student Accountant- May 2006) NP% of GSK has shown a declining trend by an comely of approximately 1% per year during the three years periods. It was 15. 74% in 2007 but decreased to 14. 59% in the year 2008. However, this reduction was not in the same proportion as of gross profit, due to the increase in other operating income by 100. 15% (which is 65. 46% of the net profit) and tighter control of company on its expenses during the year. In the year 2007 the NP% decreased by 0. 76% from 16. 50 in 2006, nonetheless indicating no major variation. draw shape plus TURNOVERThe asset utilization ratio (sales/net assets) shows how efficiently the assets are being used to generate sales. (ACCA P3 BPP Study Text) Asset turnover of GSK was 1. 26 clock in 2008, which was an increase of 22% from 2007. This was due to an increase in sales by 26% from 2007 and the raise in fixed assets by 4. 54% (which was because of the uppercase investment of 646 million made by the company, the major portion of which was spend on facility improvement, rationalization and upgrading its plant) that resulted in the improvement of its assets turnover. However, in the year 2007 it declined by 3% from 1. 7 periods in 2006 to 1. 04 times, which was due to the increase in total asset s by 7. 63%. draw swan RETURN ON fair play (ROE) ROE is the amount of net income returned as a percentage of shareholders equity. It measures an entitys profitability by revealing how much profit a company generates with the notes shareholders have invested. http//www. investopedia. com/ ROE of GSK was 23. 4% in the year 2008 that was 2. 82% higher(prenominal) than 2007, which was because of the boost of 17. 04% in its net profits figure. In the financial year 2007, it slightly dropped by 1. 32% from 22. 9% in 2006 to 20. 58%. The issued third estate stock (Bonus Shares) in FY 2007 resulted in its equity enlargement by 7. 7% over 2006, accordingly decelerating its ROE. drawframe Short Term Solvency, Liquidity and Efficiency CURRENT RATIO Current ratio measures a companys ability to pay its short-term obligations. www. investopedia. com The current ratio of GSK was 4. 221 in 2006 further declining to 4. 271 and 4. 111 in 2007 and 2008 respectively. Although there have been a rai se in current assets by 5. 98% but current liabilities are increased in a greater proportion i. e. y 10% during 2008, thus decelerating GSKs current ratio by 4% from 2007. Whereas, the decrease of 15% from 2006 to 2007 in current ratio was due to 3. 3% rise in the companys current liabilities. Although there have been no drastic changes in current assets figure over the three year period, however, it comprises almost 34% of cash and swan balance, signaling towards ineffective cash management. drawframe QUICK RATIO The quick ratio measures the companys ability to meet its short-term obligations with its most liquid assets. It shows better liquidity position than current ratio. ww. investopedia. com The quick ratio of GSK has decreased from 3. 13 in FY 2006 to 2. 98 in FY 2007 to 2. 31 in FY 2008. In the year 2008 GSKs quick ratio has declined in a greater proportion than its current ratio, indicating cash being stuck in stock in trade which can be seen by an increase of 53% in stock in trade figure over 2007. This implies the company has made high investment in less liquid assets which resulted in the increase of its cash operating cycle. Therefore there is a need to restrain any further increase in its entry level.In the year 2007, inventory only increased by 7%, indicating no substantial change. drawframe ACCOUNTS RECEIVABLE COLLECTION PERIOD (In Days) It is a measure of the average number of years that a company takes to collect revenue from its customers later a sale has been made. www. investopedia. com Account receivable collection period of GSK had radically increased from 4 age in the year 2007 to 27 days in 2008, which was caused by 770% increase in its accounts receivables (mainly because of high receivable on government tenders) over 2007.Although, this resulted in the augmented sales turnover but it also raised doubtful debt provision from 2. 9 million in 2007 to 4. 6 million in 2008. However, no epochal rise was observed in receivable collect ion period days of 3. 06 days in FY06 from FY07. drawframe ACCOUNTS PAYABLE PAYMENT PERIOD (In Days) It is used to calculate the average number of days that a business takes to pay off its creditors. www. investopedia. com Account payable days of GSK have decreased by 22 days from 93 days in FY 2007 to 71 days in FY 2008. This sudden decline was due to the increase of 43. 8% in cost of goods sold, which is fairly less in comparison to the 9. 94% rise in trade and other payables. However, in FY 2007 the 7% increase in COGS was in proportion to the 6. 25% raise in trade and other payables, resulting in no considerable change in the year 2007 in comparison to 94 days of its preceding year 2006. drawframe Long Term Solvency and stability Ratios GEARING (Long Term Debt / Equity) Gearing is a general term describing a financial ratio which compares some form of owners equity (or capital) to borrowed silver.It is a measure of financial leverage, demonstrating the degree to which a firms a ctivities are funded by owners funds versus creditors funds. Financial gearing ratio of GSK is not significantly important as it has remained below 1% in the 3 year period from 2006 to 2008. Gearing ratio for FY 2008 and FY 2007 is 0. 25% and 0. 29%, which are relatively better in comparison to 0. 88% for the financial year 2006. This indicates that the company is highly dependent on its familiar cash flow generation system and holds a stable financial position.Therefore, it currently and subsequently would have no problem to borrow funds but at present, it does not seem to rely on the strategy of generating finance through debt. drawframe INTEREST COVER It is a ratio that indicates how galore(postnominal) times a company can skip its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. www. investopedia. com Interest cover of GSK had declined by 191 times being at 40. 05 times in FY 2008 in comparison to 231. 18 times in FY 2007 which was an increase of 93. 92 times in comparison to 137. 5 times in FY 2006. One of the major reasons for this drastic decline in the interest cover in 2008 is because of the rise in financial charges of GSK, which rose because of the foreign exchange losses occurred during the year by the company. This depicts an inefficient FOREX risk management for importing of raw material and exports of its products. While in the year 2007 exchange losses are apparently low compared to the other two years. drawframe Market Ratio EARNING PER SHARE (EPS) EPS is the portion of a companys profit allocated to each outstanding share of common stock.Earnings per share serve as an indicator of a companys profitability. www. investopedia. com EPS of GSK had increased from 9. 79 per share in 2007 to 11. 46 per share in FY 2008, but it was lower as compared to 12. 19 per share of 2006. The increase in the current year (FY 2008) is due to vigorous 17. 04% increase in net profit in comparison to th e profit of FY 2007 however no further shares issue was made during the year. Whereas, the decline in FY 2007 was due to the issue of common shares (bonus shares) which expanded the companys common stock by 25% but net profit remained almost same as of FY 2006. drawframe PRICE EARNING RATIO (P/E) A valuation ratio of a companys current share price compared to its per-share earnings. It is calculated as Market Value/ share shared by Earning per share. www. investopedia. com P/E ratio of GSK has decreased by 13. 03 to 6. 63 in the FY 2008 compare to the FY 2007, but in 2007 it increased by 19. 66 compared to the 12. 81 of FY 2006. The decrease observed in the year 2008 was because of the undervalued share price and improvement in the EPS during the year. The market price of the share in Dec 2008 was Rs. 75. 9 (Dec07 Rs. 192. 4) and the earning per share was Rs. 1. 46 (Dec07 Rs. 9. 79). The low P/E ratio will result in the high expectations of investors for the potential rise in share prices. The stock prices were loosely low due to economic recession in the country and fragile moves of the investors at the stock exchange. The increase in P/E ratio during 2007 was due to decrease in EPS by 20% over 2006. drawframe DIVIDEND PAYOUT RATIO (DPO) Dividend payout ratio is the percentage of earnings paid to shareholders as dividends. www. investopedia. com Dividend payout ratio of the company is depicting a growing trend. Its DPO in the FY 2008 reached to 82. % from 76. 6% in FY 2007, i. e. approximately an increase of 6%. This was due to a raise in net profit by 17%, consequently meeting its investors expectation. Whilst the payout ratio of GSK indicates that it was able cover 65. 6% of the total profit in FY 2006. However GSK retained 23. 4% and 32. 4% of its net profits in the year 2007 and 2006 respectively, since heavy capital expenditure was incurred within these two years, which was financed by its retained earnings. drawframe Horizontal Analysis Knowing your cu stomer is critical, but knowing your competition can be even more valuable.Better knowledge of rivals proffers a legitimate source of competitive advantage, horizontal analysis commonly known as competitor analysis is used for that purpose. This analysis tends to evaluate the entitys standing in comparison to the other companies within the industry. It is not vital that the companies within the same industry are direct competitors (which can be seen in the case of GSK & Sanofi Aventis hereinafter referred to as SA) even then they would be expected to broadly demonstrate similar performance, in terms of growth. (ACCAP3).The Horizontal analysis of GSK is done within the same categories of trend analysis. Profitability Ratios Profitability ratios of GSK are better than that of SA. The huge conflict in the profit margin of these two corporations is due to the conflict in their size. Gross profit margin of the GSK is 28. 77%, which is 4. 48% better than that of SA. GSKs vast product ra nge allows it to purchase and produce in bulk, hence reducing its overall cost. On the other hand, SA manufactures low volumes of products which increase its ordering cost and consequently raise its cost of production. Net profit margin of GSK is 14. 9% while that of SA is 0. 88% in the FY 2008. This difference of 13. 71% indicates that excessive non production cost of SA is squeezing its net profit. As a consequence low ROCE of SA of 15. 36% is witnessed in comparison to GSKs 36. 84%. SAs asset turnover of 1. 46 times indicates that it has utilized its assets 0. 2 times more efficiently than GSK to generate sales revenue. Short Term Solvency, Liquidity and Efficiency The current ratio of GSK for FY 2008 is 4. 11 and of SA is 0. 98. Since SAs current ratio is less than 1, it is can lead to the difficulty in fulfilling its short term obligations.SAs liquidity problems can be witnessed from its short term borrowings covering 48% of the total Current Liabilities. Conversely, Current ra tio of GSK is high showing signs of over capitalization. Additionally, cash and bank balances of GSK are 34 % of its total current assets which indicates weak working capital management. Quick Ratio of SA and GSK is 0. 2 and 2. 25 respectively. This enormous difference from the current ratios of these companies highlights the possibility of investment in assets which are less liquid.The inventory (stock in trade) of the SA is almost 62% of its total current assets while GSK holds around 44% of its current assets. SA has kept a stringent control over its working capital while GSKs policy seems much more relaxed with its creditors and Debtors. These relaxed terms could be one of the reasons which helped GSK in increasing its Sales revenue by 26% in FY 2008 from FY 2007. SA, in contrast, has less receivable collection days and increased payable payment days. Hence SA is better at controlling its cash conversion. Long Term Solvency and stability RatiosBoth the companies hold stable posi tions in the circumstance of extensive term solvency. Gearing ratios are not significant as these are less than 1% in both the companies. Interest cover of 40. 05 times shows a sound financial position. Finance cost occurred by GSK mainly consist of the foreign exchange losses borne by the company in importing the raw material. While SA has interest cover of 0. 51 times due to the high finance cost on short term borrowing. Market Ratios The huge difference in EPS of GSK and SA is due to their different profitability position.Moreover GSK has a high payout ratio of approximately 83% as compared to 35. 28% of SA. NAV of SA is 2. 5 times higher than GSK particularly due to the high number of equity shares (common stock) issued, which is also reflected in its share price. SA currently has a share price of Rs. 211 and GSKs shares are of Rs. 75. 94/share respectively. SAs P/E ratio of 53. 18 indicates low earnings and high market price of its shares. This is a source of concern indicati ng that its shares are overvalued. Conversely, GSKs P/E ratio of 6. 63, highlights that its shares are currently undervalued. Business AnalysisThe business performance analysis of GSK will be carried out using SWOT analysis and by general discussion of its business practices. SWOT SWOT analysis is fundamentally about discovering what a company does well, how it could improve, whether it is making the most out of the available opportunities and whether there are any changes in the market that call for corresponding changes in the business. http//www. bnet. com/2410-13240_23-66478. html Strengths The largest pharmaceutical company in Pakistan. The initial company in Pakistans pharmaceutical industry that crossed Rs 10 billion sales mark.Produces 269 varieties of products, out of which Augmentin, Amoxil, Panadol, Ventolin and Ampiclox are among the top 10 pharmaceutical Rx products of Pakistan. The sales revenue of Augmentin and Amoxil reached to PKR2bn and PKR1bn in 2008. Betnovate i s its leading brand by volume. Segment leadership in antibiotics, respiratory products, anti-malaria, gastrointestinal (GI), derma and hepatitis products, vaccines and anti helmentic medicaments. Stood at 1st position in poster competition of International Clinical Operations, Community of Practice Meetings.Awarded with corporate philanthropic award certificate in 2008 by Pakistan Centre for Philanthropy. Contributes to social welfare by running various charitable programs with leading NGOs in Pakistan such as Pakistan field of study Forum, National Children Human ontogenesis on womens health, concern for Children trust and the trust for health and medical sciences. Awarded as Best place to work-2008 by a leading HR consultancy in association with Pakistan Society for Human Resource Management. Committed to innovation by developing medicines through its global R effort.Weaknesses referable to high cost of importing raw material for medicines, GSK faces strong competition from low- cost generic equivalents. Ineffective foreign exchange currency contracts resulted in the increase of exchange losses (financial charges) for the current year. Strict labor laws and a corporate income tax rate, makes it difficult for GSK to operate. Weak cash management. Opportunities Potential for growth in the domestic market. Sector modernization initiatives will create expansion opportunities. Cut of import duties were made by the government on Pharmaceutical products.This will increase the import of products and motivate foreign involvement in respect of the investment, raw material purchase and technology transfer. Prospective increase in exports of medicines is possible as currently, Pakistan is graded among the top eight leading exporters of herbal medicine. Threats Significant counterfeit drug industry. Domestic patent law is below international standards. Illegal copying, counterfeiting and law enforcement is go on to present significant problems for the international ph armaceutical companies operating in Pakistan.Rising numbers of generics is a major barrier to multinational investment. Increasing inflationary trends without consequent increases in the prices of drugs. Exposed to foreign exchange currency risk as the company is highly dependent on import of raw materials. Slow enrolment process for approving new formulae for medicine thus hampering its access. More about GSK The Vision The opportunity to make a difference to the lives of billions of people GSK states that they are alive(predicate) of the work they do to improve the quality of peoples lives. It takes pride in this and is committed to produce products that benefit patients.It is committed towards improving and implementing the healthcare programs in Pakistan, particularly the area of preventive healthcare and vaccines remains essential and explicit. GSK is the worlds leading developer and manufacturer of vaccines. In order to evaluate the alignment of companys activities with its vision, I have conducted the business analysis under the following heads Market Eminence GSK has always remained a strong wing of the pharmaceutical industry of Pakistan. It has managed to maintain a consistent growth in demand of different vaccines, antibiotics, dermatology, gastro intestinal & cardio vascular portfolios.GSK has a wide distribution network, it sell its products to wholesale drug distributors, hospitals, government entities and other institutions, hence covering almost the whole pharmaceutical market. It produces 7 out of 20 top brands in the pharmaceutical industry of the country. It was as awarded The most preferred pharmaceutical company of the year. It is the market leader of pharmaceutical industry of Pakistan. Quality Management Quality in the Pharmaceutical industry is of significant importance. Due to the sensitive nature of industry, strict quality parameters are set by the regulatory bodies for pharmaceutical companies.GSK is one of the few companies whic h not only follow the quality standard set locally but also practice international quality standards. It was reward with the prestigious Corporate Excellence Award by Management Association of Pakistan (MAP). This was presented after independent evaluation of quality of management practices followed by GSK including corporate governance practices, marketing planning, production, R, corporate social responsibility and scarce financial performance. GSK has always set high quality standards in the industry.It has recently introduced quality management system and is conducting workshops for its successful implementation. It has also installed one of the fastest subway system filling and cartooning machines for its production efficiency and is continually advancing towards improvement in products quality and productivity. Research & Developments GlaxoSmithKline, Pakistan (GSKP) Limited is the largest research-based pharmaceutical company in the country and the second largest in the worl d. It has recently conducted 19 Phase-II and III studies in therapeutic areas of Oncology, Neurosciences, Psychiatry, Metabolic and Hematology.It got 1st Position in poster competition in International Clinical Operations, Community of Practice Meeting held in Bangkok. Its R departments 10 team members were presented with Gold Awards and Certificate of Recognition by CMD. It spends globally around US $ 14 million on research and development each day. The Company has consistently launched new products. Sensodyne Total Care and Sensodyne cushy Mouthwash launched with unique formulation are its recent addition. Overall, it has supported the Pharma industry of by introducing low cost and quality pharmaceutical products. Employees DevelopmentGSK is well known for being one of the most preferred employers. It has been awarded as Best place to work in 2008 by a leading HR consultancy in association with Pakistan Society for Human Resource Management. International Day of Disability was c elebrated at GSK, showing its strong believes in equal opportunity employment. Its HR team recently launched a new initiative titled Mentoring, which provides guidance and assistance for developing talent. It also conducted a learning fair in 4 major cities of Pakistan, which offers a diverse range of courses for employees development and learning exposure.In order to promote and give a chance to new talent, its HR team visited 14 Universities during its recruitment process. Corporate Social Responsibility (CSR) GSK believes that corporate social responsibility is an integral and embedded part of its business. It is sincerely involved in the community work and in various charitable projects in Pakistan and around the world. It works under the context of various health, women and child development, education, and relief programmers at pasturage root level.In 2008 GSK has been rewarded with a corporate philanthropy award in recognition of its support for the social development causes in Pakistan. It is the major corporate bestower for numerous NGOs and also a member of the National Commission for Human Development (NCHD). As a movement to its corporate social responsibility GSK Pakistan has introduced 1st of its kind, value health card. The card will be issued solely on the prescription of doctors, for those who cannot afford pharmaceutical products at their standard retail prices. Environment, Health and golosh (EHS)Environment, health and safety are major concerns for GSK. It continually works towards improving peoples health and safety and for developing environment friendly products. It has standard Environment Excellence Award (AEEA 2008) and EHS Excellence Awards in recognition to its good environmental practices. It has installed low-cost engineering solution (glove box), which reduced OEL level by 40%. Business Continuity Plan desktop exercise was also conducted at all of its sites. CONCLUSION GSK leads the industry in terms of value, volume and mark et shares.It has managed to improve the quality of human life along with showing consistency and stability in its overall business growth. This reports objective, to assess the financial and business position of GSK, was achieved in four key areas. This report aims to analyze the financial and business position of GSK over the three year period from 2006 to 2008. In the context of aforementioned objectives this report concludes Business GSKs overall business performance is in line with its mission and is contributing towards its strategic objective.Due to its presence in the country since 1955, it has managed to build strong business foundation and is able to maintain consistent growth in the market. It has excelled in the field of Research and Development by introducing new products covering various generics, ensuring employees satisfaction by providing better environment to work, expanding its operation through empowerment of diverse product portfolio, contributing towards corpora te social responsibility by capturing tasks to work for the social health and safety, education and environment friendliness and most importantly being profitable, depicts its strong businesses practices.Financial Trend GSK Pakistan has managed to give better financial results in the current year 2008 as compared to the FY 2007, which identifies its financial stability and further growth prospects. Even though the returns (ROCE & ROE) in the current year have improved but its profit margins (GP% & NP %) have depicted a declining trend, which was a result of raise in its revenue expenditure (COGS, Admin, S and Financial expenses).However it can be witnessed that the company has remained focused on continuous improvement in its business processes and sustained its investment in its product & promotion to offset the negative impact on margins through productivity improvement and sales growth. Although the company was not able to perform well in the year 2007 in comparison to its preced ing year 2006, but it was able still able to deliver a stable financial performance having no major threats. This decrease in its financial position during the year was mainly due to the increase in inflation and depreciation in rupee that affected its operating margin negatively.Moreover the capital expenditure made during the year caused a decline in its profitability ratios, but its benefit will be obtained in the later years. The company has always provided sound investment returns which can be seen by consistent growth in its payout ratio. In the year 2007, GSK anticipate bonus issue of 14 when it declared lower dividends, thus retaining its investors trust and being a reliable company for all of its stakeholders. contenders ComparisonDue to its larger asset base, vast product portfolio, global presence and skilled research & development function GSK has a natural edge over its competitor Sanofi Aventis. Overall GSKs financial performance is better than its competitor in th e FY 2008. Almost all of the ratios calculated under the four broad heads, shows that GSK is giving better returns and incurring less cost. Profitability ratios of the GSK show a better picture than that of Sanofi Aventis, with the exception of Asset efficiency which shows a better utilization of assets by Sanofi to generate revenues.Liquidity position of both the companies is stable apart from the huge investments that were stuck in the stock in trade. Higher EPS and low P/E ratio of GSK shows that there is a potential for rise in its share price of the Company, in comparison to the overvalued shares of SA resulted in high P/E ratio. Future Prospects The company can be seen as being committed to respond to the challenges of the operating environment and continues to seek opportunities to drive growth in its vivacious portfolio. It has a good pipeline of innovative new medicines together with the sustained availability of existing products.However, the pharmaceutical industry, in w hich GSK exists, has ample of barriers such as high inflationary environment without general price relief, which makes it difficult to manage its business operations. The company has a great potential for growth, but its sustained success depends on the industrys regulatory environment, that should be able to balance the interest of the company with the need of affordable healthcare. APPENDIcES APPENDIX 1 BALANCE SHEETS (GSK) drawframe APPENDIX 2 PROFIT & qualifying STATEMENTS (GSK) drawframe APPENDIX 3 BALANCE SHEETS (SA) drawframe APPENDIX 4 PROFIT & LOSS STATEMENTS (SA) drawframe APPENDIX 4 RATIOS FORMULAE drawframe APPENDIX 5 RATIOS CALCULATIONS drawframe Key Skill Statement Skill and knowledge Statement is the testimonial which includes the compilation of key factors learned during the course this project. This part of report includes following What did you learn from the meetings with your project mentor, including the presentation that you gave to your project mentor? How w ell do you think that you have answered your research query(s)?How have you demonstrated your interpersonal and communication skills during the project work? How has undertaking the RAP helped you in your accountancy studies and/or current employment role? Choosing a Mentor In accordance with the guidelines, I was required to hold three meetings with my mentor. Working as a trainee in one of the big four audit firms, made the task of locating a mentor quite easy. Mr. Qayam Karim Maknojia (ACA from Institute of Chartered Accountant of Pakistan), Manager in Financial Advisory Services at Deloitte Touche Tomastu, agreed to occupy the role of my mentor.I choose Mr. Qayam as my mentor because of his vast knowledge and experience in the field of advisory and audit. Meetings Planning all the meetings before hand ensured their smooth running, and enable maximum to be achieved in the shortest time. Meeting 1 Due to time constraint and workload, first meeting took place at 7 pm, Wednesday 16 th September, 2009 at our clients office. In order to get most out of the 1st meeting, I had performed all the background work and shortlisted two topics, topic 8 and Topic 20 for the purpose of this report.I also selected the potential organizations that I was willing to use for each respective topic, but before making the final decision I decided to consult Mr. Qayam. after discussing number of issues the exchangeable learning potential and merits of each topic I decided to underpin my research report on Topic 8, business and financial analysis of an organization over a three year period. We also discussed the potential sources of information which I could use for the purpose of this report. Due to workload, Mr.Qayam told me that we will hold the next meeting after finalizing the client and asked me to mail him the agenda and progress of the report one week before the meeting. Meeting 2 Second meeting took place at the 630 pm, after office hours, at Deloitte Karachi Office on Th ursday 29th October, 2009. As requested by Mr. Qayam, I e-mailed him the agenda, my uncompleted report and excel generated worksheet one week before the meeting. By then my report consisted of interpretation ratios of the Company and business evaluation aspects with initial data in bullet train points that I was going to use.Mr. Qayam assessed the work that I had performed and pointed out weaknesses and lack of reasoning in my interpretation. He also suggested that I should incorporate a competitor analysis so that a complete financial overview is covered in the report. Furthermore, he also pointed the fact that, it was not feasible to use business model as the data required for them are hard to come by. Instead, he recommended me to take some specific aspect of the companys operations and evaluate their alignment with its vision and strategic objectives.We concluded the meeting and my mentor told me to take as much time as I want, because the deadline for the submission of the rep ort is too far. He asked me to mail him final draft report once I have completed it. Meeting 3 The last meeting was held in the conference board of Deloitte Pakistans Karachi office on Wednesday, 25th November, 2009. I had mailed the final draft report to my mentor around 15 days before the meeting. After receiving his acknowledgment, I prepared presentation on Microsoft PowerPoint 2007 slides to give it a more professional look. I consulted my seniors, as how to make and delivery good quality presentation.Keeping the guidance provided by my seniors in mind, I prepared and rehearsed my presentation several times. I was a bit shaky at the start of the meeting, but my confidence level grew as I proceeded. After the presentation question answer session took place, which was most exciting as my colleagues and mentor tried to challenge my research by asking numerous questions. I was glad that I had prepared myself for this, although I was not able to answer 100% of the questions asked, my mentor and colleagues were satisfied with the work I had performed and effort I gave in preparing this report.Assessment of the demonstration The presentation took place in front of my mentor and my office colleagues. It took me nearly two days to structure and prepare the presentation. After that, I rehearsed the number of times alone to build confidence. The day before the meeting, I gave this presentation in front of my friends, who are MBA professionals so that they can point out any weakness in my communication. At the start of the meeting I distributed, handouts consisting of ratios, competitor analysis and summary of the business performance of the Company.The meeting progressed smoothly throughout the presentation. As I have already informed the listeners that a question answer session will take place after the presentation is over, no interruption occurred in between. In the introduction phase, it was quite clear that most of my colleagues didnt possess any prior knowle dge of GSK Pakistan Limited, so they took a keen interest in the topic. During the Q & A session numbers of questions were asked by my colleagues challenging my research. Most of the questions related to the financial aspects of the Company, like why I chose that particular competitor.Most exciting questions were asked by my mentor, which focused on the business performance and which widen my horizon of analyzing the business. Overall the presentation was effective. I was able to deliver the presentation in the allocated time, although question answer session went longer than I had hoped. After the presentation my overall efforts were appreciated by my colleagues and mentor. Presentation Outline drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe drawframe challenge Questioning is a vital element of effective communication based on any medium. It enhances understand ing, searches for clarification and opinions. There are two basic types of questions ease up questions such as what? Who? Where? The responses they require are in broad terms. Open questions can further be classified in to probing questions and leading questions. Closed question defines a parameter which limits the response of the questioned individual to choices like Yes or No.During the three meeting Questioning formed a significant part of the communication. Through this me and my mentor developed ideas and structured my thoughts which helped me in completing my report. During the question answer session both open and close ended question were asked by the audience, which tested my knowledge rigorously and helped me identifying weakness in the communication process. However, Questioning was two way process. Numerous open ended questions were asked by me, in order to gain better understanding of the work I had to perform and whether I was on the right track or not.Listening As co mmunication are a two way process between sender and a receiver. Listening is the act of decoding the information being received and it forms a fundamental part of a communication process. Listening is as important a characteristic as questioning. Every communication process is open to noise and distortion and the meaning of the message being delivered is altered or lost if they are present. The first meeting held was open to frequent physical noises and distractions. One of my weaknesses that came into light during the 1st meeting was that, I found out to be an impatient listener.I interrupted Mr. Qayam at numerous times when I did not agree with his opinions. scholarship from the 1st meeting other meetings were arranged and timed to avoid interruption. I started to become more patient and listened to my mentor with full concentration and noted down questions which I asked after he has concluded. During my 3rd meeting I notice that some of the audience members were not listening effectively as they asked question which have already be answered during the course of my presentation. Self Evaluation drawgOverall communication process consists of a sender, transmitting a message to the receiver through a communication medium. The process of communication is incomplete and/or ineffective until it is confirmed via feedback, that the receiver understood the intended message. The communication between me and my mentor could be seen by the above communication model. During the course of my project, the overall interaction with my mentor was quite effective. We were able to decode each others message easily and were able to communicate our thoughts properly.Perhaps, one of the reasons for effective communication was the informal relation with him, which allowed me to ask questions without being reluctant. I have used number of channels to communicate with my mentor, E-mail being the most effective medium after face to face conversation. The interaction with my colle agues during the presentation was not effective. Reason for which could be that I was not able to generate their interest. Due to this I had to repeat things over and over again. I was also asked questions, answers for which were already given in the presentation further implying that communication flow was hampered.Being an ACCA Affiliate and recruited recently, as a trainee adviser in Deloitte Pakistan, requirement for sound evaluation and interpretational skills are essential. During the course of this project, it had not only strengthened my academic knowledge I acquired before and furnished my interpretational and data mining skills, but also helped me into developing presentational skills which I lacked. Significant portion of the analysis of GSK was performed using ratio/trend analysis over a three year period ended 2008.In order for the assessment to be systematic and logical these ratios were broken into 4 broad categories so that proper attention would be given to each se ction and no major area was overlooked. To give a more meaning evaluation of the Companys financial performance, I also incorporated, as guided by my mentor, a horizontal or competitor analysis of GSK with Sanofi Aventis. Performing business analysis of GSK was a difficult task, as this analysis required qualitative data in addition to the quantitative data about the Company.After carefully evaluating how to assess the business performance of a company I came to the conclusion that it was not feasible to use business evaluation models for the analyses of GSK as significant internal data was required. I discussed different operations for the company, evaluated whether they aligned with its vision and strategic objectives. Furthermore, I also used a corporate appraisal technique called SWOT analysis. In order to make my findings easy to understand for my mentor, I decided to use as minimum figures as I could and instead relied upon using graphs and interpreting data as a percentage.Mi crosoft Office was extensively used for this and by the end of this research project I was able to navigate around and use advance level options of its applications with ease. According to me, this research and analysis report contains a sound financial and business analysis of GSK Pakistan and fulfills the requirement to Topic of 8 of BSc. guidelines with ease. References Printed Material ACCA Study Text (2008/09) Paper F9 Financial Management. Kaplan Publishing Foulks Lynch ACCA Study Text (2008/09) Paper F7 (INT) Financial Reporting.Kaplan Publishing Foulks Lynch ACCA Study Text (2008/09) Paper P2 (INT) Corporate Reporting. BPP Learning Media Ltd ACCA Study Text (2008/09) Paper P3 Business Analysis. BPP Learning Media Ltd Annual Report (2006), Glaxo SmithKline. Annual Report (2007), Glaxo SmithKline. Annual Report (2008), Glaxo SmithKline. Electronic and Other Material Types BNET. SWOT Analysis http//www. bnet. com/2410-13240_23-66478. html (Visited 05th November 2009) Financial Analysis http//www. enotes. com/small-business-encyclopedia/financial-analysis (Visited 05th November 2009)Introduction http//www. roi-ally. com/BPE_vol1. htm (Visited 05th November 2009) Industry http//www. ppma. org. pk/ (Visited 05th November 2009) Investopedia. Vertical Analysis http//www. investopedia. com/terms/v/vertical_analysis. asp (Visited 05th November 2009) Investopedia. Return on Equity http//www. investopedia. com/terms/r/returnonequity. asp (Visited 05th November 2009) Investopedia. Current Ratio http//www. investopedia. com/terms/c/currentratio. asp (Visited 05th November 2009) Investopedia.Quick Ratio http//www. investopedia. com/terms/q/quickratio. asp (Visited 05th November 2009) Investopedia. Accounts Recievable Collection Period http//www. investopedia. com/terms/a/average_collection_period. asp (Visited 05th November 2009) Investopedia. Accounts Payable Payment Period http//www. investopedia. com/terms/a/accountspayableturnoverratio. asp (Visited 05th November 2009) Investopedia. Interest Cover http//www. investopedia. com/terms/i/interestcoverageratio. asp (Visited 05th November 2009) Investopedia.Earning Per Share http//www. investopedia. com/terms/e/eps. asp (Visited 05th November 2009) Investopedia. Dividend Payout Ratio http//www. investopedia. com/terms/d/dividendpayoutratio. asp (Visited 05th November 2009) William Pollard. Quote (Visited 07th November) http//thinkexist. com/quotation/information_is_a_source_of_learning-but_unless_it/226524. html BIBLIOGRAPHY Electronic and Other Material Types Competitor Websites Novartis Pharma http//www. novartis. com (Visited 05th November 2009) Sanofi-Aventis http//www. anofi-aventis. com. pk (Visited 05th November 2009) Regulators/ Governments Websites Karachi Stock mass meeting http//www. kse. com. pk (Visited 15th November 2009) Pakistan Pharmaceutical Manufacturers Association http//www. ppma. org. pk (Visited 12th November 2009) Newspaper Websites Business Recorders website http//www. b recorder. com (Visited umteen times) Dawns website http//www. dawn. com (Visited many times) The Financial Daily website http//www. thefinancialdaily. com (Visited many times)