Financial Analysis of GSK Consumer Healthcare

A REPORT ON RATIO ANALYSIS OF GLAXOSMITHKLINE

[GSK PHARMACEUTICALS]Financial Management

COURSE: INTRODUCTION TO BUSINESS FINANCE

TEACHER: SIR MIRZA SIKANDER TAJ

PREPARED BY: SYED ADNAN SHAH SALEEM

REG # 53128

2012 [GSK CONSUMER HEALTHCARE]

Amrita School of Business 2


FINANCIAL RATIOS

LIQUIDITY RATIO:

Liquidity ratios are calculated to measure the short term financial soundness of

the business. The ratios assess the capacity of the company to repay its short

term liability. Banks and other money lenders for short period are interested in

the current assets of the company i.e. short term financial position of the

business. The important liquidity ratios are: current ratio, acid-test ratio and

cash ratio.

1. CURRENT RATIO:

This is a popular ratio which expresses the relationship between current assets

and current liabilities. The current ratio is a popular ratio, and it can be

expressed as

Current assets include cash, current investments, debtors, inventories, loans

and advances and prepaid expenses. Current Liabilities represent liabilities that

are expected to mature in the next twelve months. These comprise (1) loans,

secured or unsecured, that are due in the next twelve months and (2) current

liabilities and provisions.


Current Ratio = Current Assets / Current Liabilities


2011

(In Cr.)

2010

(In Cr.)

2009

(In Cr.)

2008

(In Cr.)

2007

(In Cr.)

Total Current Assets (A) 932.92 771.90 808.84 864.78 755.42

Total Current Liabilities (B) 810.46 682.68 589.91 610.84 569.97

Current Ratio (A/B) 1.15 1.13 1.37 1.42 1.33

Analysis:

The current ratio of the company is currently at 1.15 which is a good sign; it

implies that for every one rupee of liabilities the firm has Rs. 1.15 assets. But

the share of inventories is 18.8 % of the total current assets in 2010, lower

than the previous year which was at 16.2 % and the cause for current ratio to

drop from 1.37 (2009) to 1.13 (2010) is the increase in current liabilities.

2. QUICK RATIO:

Quick ratio is also known as “Acid Test Ratio” Historically this ratio is regarded

as a good indicator of liquidity. Quick Ratio refers to those current assets which

can be converted into cash quickly. They include all Current assets except

inventories or stock which are not sufficiently liquid.


Quick ratio = Quick Assets/ Current Liabilities

Or

Quick ratio = Current assets – (Inventory) / Current Liabilities


2011 2010 2009 2008 2007

Total Current Assets 932.92 771.90 808.84 864.78 755.42

Inventories 194.82 145.57 131.04 85.17 92.33

CA – Inventories (A) 738.10 626.33 677.80 779.61 663.09

Total Current Liabilities (B) 810.46 682.68 589.91 610.84 569.97

Quick Ratio (A/B) 0.91 0.92 1.15 1.28 1.16

Analysis:

The acid test ratio is ideally 1:1 or better i.e. the ratio should be greater than or

equal to one. But since the current ratio industrial average is less than 1,

therefore the industrial quick ratio average is estimated to be below 1. Hence a

quick ratio of the company is quite good indicating a healthy liquidity position

of the company.

TURNOVER RATIOS:

Turnover ratios are referred to as activity ratios or asset management ratios,

measures how efficiently the assets are employed by a firm. These ratios are

based on the relationship between the level of activity, represented by sales or

cost of goods sold, and various levels of assets. The important turnover ratios

are: inventory turnover, average collection period, receivables turnover, fixed

assets turnover, and total assets turnover.



1. INVENTORY TURNOVER RATIO:

The inventory turnover, or stock turnover, measures how fast the inventory is

moving through the firm and generating sales. It is defined as:

The inventory turnover reflects the efficiency of inventory management. The

higher the ratio, the more efficient the management of inventories and vice

versa. However, this may not always be true. A high inventory turnover may be

caused by a low level of inventory which may result in frequent stock outs and

loss of sales and customer goodwill.

2011 2010 2009 2008 2011

Net Sales 1273 1109 965 861 780

Gross Profit 520 473 388 350 311

COGS (A) 753 636 577 512 485

Inventory 194.8 145.6 131.04 85.17 92.33

Average Inventory (B) 170.2 138.32 108.1 88.8 89.1

Inventory Turnover Ratio

(A/B)

4.42 4.59 5.33 5.76 5.45


Inventory Turnover Ratio = COGS / Average Inventory


Analysis:

The Inventory Turnover Ratio has not improved from the previous year

indicating that the company has increased its blocked inventory. The average

inventories in 2011 have increased by 23.15% from 2010 and by 27.9% from

the previous year but the Cost of Goods Sold has grown at 18.3% this year. This

ratio has been steadily coming down over the past 5 years indicating a stable

efficient management. A low ratio implies either low sales or an increase in

inventory. For the company this ratio has decreased due to increase in

inventory.

2. FIXED ASSET TURNOVER RATIO:

Fixed Assets are used in the business for producing goods to be sold. The

effective utilization of Fixed Assets will result in increased production and

reduced cost. It also ensures whether the investment in the assets have been

judicious or not. Higher ratio indicates better performance. The ratio is very

significant for manufacturing enterprises, where fixed assets employed are

more than working capital.


Fixed Assets Turnover Ratio = Net Sales/ Fixed Assets


2011 2010 2009 2008 2011

Net Sales (A) 1273 1109 965 861 780

Net Block (Fixed Assets) (B) 226 251 272.9 300.1 323.5

Fixed Assets Turnover

Ratio (A/B)

5.63 4.41 3.53 2.86 2.41

Analysis:

An ideal Fixed Asset Turnover Ratio for any company is 5:1. GSK-CH has

maintained this ratio well above the ideal value indicating that it generates

Rs. 5.63 from every 1 Re of its fixed assets. It could be due to the depreciation

charged on the gross block, due to which the net block is a lower value which

in turn increases this ratio. This ratio shows an upward moving trend on

analysis.

3. DEBTORS TURNOVER RATIO:

Debtor turnover ratio indicates the number of times the debtors are turned

during the year. This ratio is calculated with the Net sales over the Average

debtor. Debtor turnover ratio indicates the number of times the debts are

collected in a year.


Debtor turnover Ratio = Net sales / Average Debtors


2011 2010 2009 2008 2011

Net Sales (A) 1273 1109 965 861 780

Sundry Debtors 27.3 28.1 24.1 25.2 18.3

Average Sundry Debtors (B) 27.7 26.1 24.6 21.75 31.3

Debtors Turnover Ratio

(A/B)

45.9 42.5 39.2 39.5 24.9

Analysis:

The DTR ratio for GSK has increased from the previous years indicating that its

ability to turn debtors to cash has increased and has maintained similar rates

over the years. This ratio is very close to the industrial average.

4. AVERAGE COLLECTION PERIOD (ACP):

The average collection period represents the number of day’s worth of credit

sales that is locked in sundry debtors. Shorter the average collection period the

better is the ratio and higher is the liquidity.


Average Collection Period = 365/Debtors Turnover

Or

Average Collection Period= Average Sundry Debtors / Average daily credit sales


2011 2010 2009 2008 2011

Average Collection Period 8 9 9 9 15

Analysis:

Since GSK has a high DTR its Average Collection Period is lower i.e. it has

reduced the time for which credit sales is outstanding. This ratio gives a

positive indication about the company revenue collections. ACP decreased

from 15days in 2011 to 9 days in 2008 and had been the same for some years

and decreased further to 8.The Company is quite healthy.

5. TOTAL ASSETS TURNOVER RATIO (TATR):

The ratio establishes the relationship between net sales and total assets of the

firm. It shows in what proportion the total assets of the firm have contributed

to the sales.

2011 2010 2009 2008 2011

Net Sales (A) 1273 1109 965 861 780

Total Assets 646.3 542.7 475.1 529.3 492.1

Average Total Assets (B) 594.5 508.9 502.2 510.7 487.6


Total Assets Turnover Ratio = Net Sales / Average Total Assets


T.A.T.R (A/B) 2.14 2.17 1.92 1.68 1.59

Analysis:

A TATR of 2.14 indicates that the company can generate net sales 2.14 times

its total asset value, i.e. for every one rupee of total assets the company

generates Rs.2.14. The company had shown a steady increase in the ratio for

the last five years.

PROFITABILITY RATIO:

Profitability reflects the final results of business operations. Profitability ratios

are the ratios which measure the profitability of a concern. In other words,

they are the ratios which reveal the total effect of the business transactions on

the profit position of an enterprise and indicate how far the enterprise has

been successful in its aim and how far it has achieved its objectives. There are

two types of profitability ratios: profit margin ratios and rate of return ratios.

Profit margin ratios show the relationship between profit and sales. The most

popular profit margin ratios are: Gross Profit Margin, Operating Profit Margin

and Net Profit margin. Rate of return ratios reflect the relationships between

profit and investment. The most popular rate of return measures are: Return

on Assets, Earning Power, Return on Capital Employed and Return on Equity.

1. GROSS PROFIT MARGIN (GPM):



It shows the relationship between the gross profit and sales. This ratio shows

the margin of profits on sales. This ratio measures the efficiency of production

and pricing. This ratio indicates the margin left after meeting manufacturing

costs.

2011 2010 2009 2008 2011

Gross Profit (A) 520 473 388 350 311

Net Sales (B) 1273 1109 965 862 796

G.P.M (A/B)40.84% 42.65% 40.20% 40.6% 39.07%

Analysis:

A GPM of 40.84% indicates that the company has 40.84% of sales remaining

after meeting its operating costs. This ratio is showed a decline in the present

year 07 from 42% in the previous year. The decline of GPM in FY07 can be

attributed to the increase in cost of raw materials without an equally

significant increase in net sales. However the company has worked hard to

maintain its margin at around 40% for the last few years which is really good

sign.

2. NET PROFIT MARGIN (NPM):

The ratio establishes relationship between net profit and net sales. Net profit

or the Net income is the gross profit less selling, distribution and financial


Gross Profit Margin = (Gross Profit / Net sales) * 100


expenses. This ratio indicates earnings left for preference and equity

shareholders as a percentage of net sales. It measures the overall efficiency of

production, administration, financing, pricing and tax management.

2011 2010 2009 2008 2011

Reported Net Profit (PAT) (A) 163 127 107 73 76

Net Sales (B) 1273 1109 965 862 796

N.P.M (A/B) 12.80% 11.45% 11.08% 8.47% 9.55%

Analysis:

The NPM has increased from FY03 to FY07 except for the FY04. A NPM of

12.8% indicates that the company has 12.8% of its net sales revenue remaining

for its owners. Higher the ratio indicates greater utilization of its resources and

better returns to its owners.

3. RETURN ON CAPITAL EMPLOYED (ROCE):

This is one of the most important ratios for the measure of overall profitability.

It indicates the relationship of net profit with capital employed in the business.

Here for calculating return on investment will mean the net profit before

interest, tax and dividend.Net profit means net profit of the year excluding

undivided profit and reserves. ROCE is post-tax version of earning power. It


Net Profit Margin = (Net Profit / Net Sales) * 100


considers the effect of taxation, but not the capital structure. It is internally

consistent. Its merit is that it is defined in such a way that it can be compared

directly with the post-tax weighted average cost of capital of the firm.

2011 2010 2009 2008 2011

Tax 84 62 55 39 31

PBT (1) 245 191 162 116 100

Interest (2) 5 4 4 5 5

PBIT (1+2) 250 195 166 121 105

PBIT(1-T) (A) 165 129 110 80 69

Average Total Assets (B) 595 509 502 511 488

ROCE (A/B) 27.73% 25.34% 21.91% 15.66% 14.13%

Analysis:

The ROCE of the company increased to 27.73% from the previous year’s value

of 25.34%. This ratio indicates that the company made a return of 27.73% with

the capital it has employed. A higher value is a good indication for the

company.

4. RETURN ON EQUITY (ROE):


ROCE = (PBIT (1-T) / Average Total Assets) * 100


This ratio measures the profitability of the capital invested in the business by

equity shareholders. As the business is conducted with a view to earn profit,

return on equity capital measures the business success and managerial

efficiency. This ratio is also called the return on net worth .It measures the

productivity of risk capital.

2011 2010 2009 2008 2011

Equity Earnings (PAT) (A) 162.68 126.93 107.15 73.16 76.35

Total Shareholders Funds (B) 646.35 542.72 475.11 529.35 492.11

Return on Equity (A/B) 27.3% 23.38% 22.55% 13.82% 15.51%

Analysis:

This ratio indicates the company has made a profit of 25.16% from the equity

earnings invested in the firm. The ROE fell by about 10.8% in FY04 due

reduction in net profits and an increase in shareholders’ funds. The decrease

during FY04 was followed by increase in ROE in the next three years. The

increase in ROE was due to increased gross profits. Since the equity returns

have increased it is good from the shareholders point of view.

5. Return on Investment (ROI):


Return on Equity = Equity Earnings / Average Net Worth


This ratio show the return on the investment made in the company. Every

Investor would like to have a higher return on the investment made in the

company. It is also called as earning power. Earning power is a measure of

business performance which is not affected by interest charges and tax

burden. It abstracts away the effect of capital structure and tax factor and

focuses on operating performance. It is eminently suited for inter-firm

comparison. It is internally consistent.

2011 2010 2009 2008 2011

PBT (1) 245 191 162 116 100

Interest (2) 5 4 4 5 5

PBIT (1+2) (A) 250 195 166 121 105


ROI (A/B) 42% 38.3% 33.1% 23.7% 21.5%

Analysis:

This ratio indicates that the company has made a profit of 42% on the total

investments. This ratio has not been stable over the past five years. This

fluctuation was due the disparity in the changes of raw materials, sales and

acquisition of assets. However the matter of paramount importance is that

there is increase in ROI steadily.


ROI = (PBIT / Average Total Assets) *100


6. Return on Assets (ROA):

This ratio measures the efficiency of capital employed. Both the numerator and

denominator are internally inconsistent.

2011 2010 2009 2008 2011

PAT (A) 162.68 126.93 107.15 73.16 76.35


Return on Assets (A/B) 27.3% 24.9% 21.3% 14.3% 15.6%

Analysis:

This ratio indicates the company has made a net profit of 27.3% from the total

assets it has employed. The higher the value of ROA the better, because the

company is earning more money on its assets. The company is showing an

increasing trend in ROA which is clearly evident from the table provided above.

These are promising signs for the future.

LEVERAGE RATIOS:

Financial leverage refers to the use of debt finance. Leverage ratios help in

assessing the risk arising from the use of debt capital. Two types of ratios are


Return on Assets=Net Profit after Tax/Average Total Assets


commonly used to analyze financial leverage: structural ratios and coverage

ratios. Structural ratios are based on the proportions of debt and equity in

the financial structure of the firm. The important structural ratios are: debt-

equity ratio and debt-assets ratio. Coverage ratios show the relationship

between debt servicing commitments and the sources for meeting these

burdens. The most important coverage ratios are: interest coverage ratio

fixed charges coverage ratio and debt service coverage ratio.

1. DEBT EQUITY RATIO:

This expresses the relationship between debt and equity of the firm. It shows

the relative contribution of creditors and owners. The lower the Debt Equity

Ratio greater the protection for creditors. This ratio does not reflect the

market value of equity or the current value of asset.

2011 2010 2009 2008 2011

Total Debt (A) 0 0 0 0 0

Share Capital (a) 42 42 42 45.4 45.4

Reserves Total (b) 604 501 433 483 447

Total Shareholders’ funds

( a + b ) (B) 646 543 475 528.4 492.4

D/E (A/B) 0 0 0 0 0


Debt Equity Ratio= Debt/ Equity


Analysis:

This ratio indicates that the total debt raised by the company is 0. The lower

this ratio indicates higher degree of protection by the creditors. This value has

remained the same for the previous years indicating a higher level of security

for the outsiders of the company. The lower the ratio the better it is for the

shareholders of the company, this is because a) A higher value would mean

higher debt which implies increased interest payments resulting in lower

returns and b) The investor would be the last person to receive any

money in case the company is liquidated and the higher the debt the

lower this amount would be.

2. INTEREST COVERAGE RATIO:

It is also called the times interest earned, the ratio is expressed as

A high interest coverage ratio means that the firm can easily meet its burden

even if profit before interest and tax suffer a considerable decline. A low

interest coverage ratio may result in financial embarrassment when

earnings before and taxes decline. This ratio is widely used by lenders to

assess a firm’s debt capacity. It is a major determinant of bond rating. This

ratio measures the margin of safety with reference to interest payment.

2011 2010 2009 2008 2011


Interest Coverage Ratio=PBIT/Interest


Profit before Tax (1) 245 191 162 116 100

Interest (2) 5 4 4 5 5

PBIT (1+2) (B) 250 195 166 121 105

Interest (A) 5 4 4 5 5

ICR (B/A) 50 48.75 41.75 24.2 21

Analysis:

The higher the Interest Coverage Ratio the better for the company since it

measure the interest paying capacity of the company on its debt. This

ratio has gone up for the company during the last five years due to lower or

zero total debts (both secured and unsecured loans) and hence no interest

payable.

3. Debt Asset Ratio:

The ratio measures the extent to which borrowed funds support the firm’s

assets. Lower this ratio lesser is the leverage and lesser is the risk.

2011 2010 2009 2008 2011

Total Debts (A) 0 0 0 0 0

Total Assets (B) 1159 1023 1082 1165 1079Amrita School of Business 20

Debt Ratio= Debt/Assets


Debt/asset ratio (A/B) 0 0 0 0 0

Analysis:

This ratio shows the relation between total debt and total assets. This ratio

also shows the same trend. This is mainly due to no debt raised by the firm.

VALUATION RATIOS:

Valuation ratios indicate how the equity stock of the company is assessed in

the capital market. Since the market value of equity reflects the combined

influence of risk and return, valuation ratios are the most comprehensive

measures of a firm’s performance. The important valuation ratios are: price-

earnings ratio, EV-EBITDA ratio, and market value to book ratio.

1. Earnings per Share:

It helps to determine the market price of the company. A higher EPS indicates

that the Market Value of Equity Shares will be higher.

2011 2010 2009 2008 2011


E P S = (Net Profit- Preference Dividend)/ Equity Share holders


Reported Net Profit- PAT (A) 162.68 126.93 107.15 73.16 76.35

No of equity shareholders (B) 4.2 4.2 4.2 4.54 4.54

EPS (A/B) 38.73 30.22 25.51 16.11 16.82

Analysis:

The EPS of GSK has gone up due to higher net profits .Net Profits improved by

28.16% in 2011, resulting in a 28.16% increase in EPS. The higher the EPS the

better is the company’s performance. It is to be noted that the increase in PAT

and EPS in percentage terms is the same due to zero debt and zero preference

dividend.

2. Price-earnings Ratio (P/E ratio):

The price-earnings ratio is a summary measure which primarily reflects the

following factors: growth prospects, risk characteristics, shareholder

orientation, corporate image and the degree of liquidity. It reflects price per

rupee of earning. Higher the ratio higher are the expectation of growth rate,

dividend payout etc.

2011 2010 2009 2008 2011

MPS (52 week Average) 651.7 547 445 325.6 292.83


P/E Ratio =Market price per share/Earnings per share


EPS (B) 38.73 30.22 25.51 16.11 16.82

P/E Ratio (A/B) 16.83 18.1 17.44 20.21 17.4

Analysis:

The P/E ratio indicates how many years it will take to get back the value

invested in one share if the same EPS and MPS are maintained. The P/E ratio of

GSK indicates that it will take 16.83 years to get back the money invested. The

P/E ratio showed a decline from 2010 to 2011. The P/E has shown a mixed

trend from 2011 to 2011 i.e. an intermittent increase and decrease. The P/E

ratio is as indication of market expectations of the returns. A very high value

would imply that the share value is overvalued and possess increased

speculation.

3. Market Value to Book Value Ratio:

This ratio reflects the contribution of a firm to the wealth of society.

2011 2010 2009 2008 2011

MPS (52 week Average) 651.7 547 445 325.6 292.83

Book Value (B) 153.67 129.03 112.96 116.65 108.44

Market to book value (A/B) 4.24 4.23 3.94 2.79 2.7

Analysis: Amrita School of Business 23

Market to Book Value Ratio=Market Value per Share/Book Value per Share


A Market Value to Book Value Ratio of greater than one indicates that

the firm has contributed to the wealth of the society. A ratio of less than 1

indicates that the firm has detracted wealth from the society. GSK has

contributed wealth to the society in the past four years. For FY07 this ratio is

4.24 which means that for every Rs. 1 invested by the society the firm has

returned Rs 4.24. The MPS is the major influencing factor in determination

of this ratio, i.e. the expectations of the market. This ratio indicates by what

factor the market expectations exceed the book value of the company. A value

of above 1 indicates higher market expectations.

4. Dividend per Share:

This ratio is a better indicator of company' s performance when compared

to EPS as it shows what exactly owners are entitled to receive on a per share

basis.

2011 2010 2009 2008 2011

Dividend (A) 50.47 42.06 33.64 31.77 31.77

No of equity shareholders (B) 4.2 4.2 4.2 4.54 4.54

DPS (A/B) 12.02 10.01 8.01 6.99 6.99

Analysis:

The dividend per share for FY07 is 12.02, which is higher than the previous

year’s value, it indicates that the company has given increased returns to its Amrita School of Business 24

Dividend per Share = Equity Dividend/ Total Equity Shares


shareholders, higher the DPS value the better it is for the shareholders. The

DPS remained the same in 2011-04 periods and then increased 14.5% to 8.01.

Then it increased by 20.07% in the current year.

5. Dividend Yield:

A financial ratio that shows how much a company pays out in dividends each

year relative to its share price. In the absence of any capital gains, the dividend

yield is the return on investment for a stock. Dividend yield is a way to

measure how much cash flow you are getting for each rupee invested in

equity.

2011 2010 2009 2008 2011

DPS 12.02 10.01 8.01 6.99 6.99

MPS (52 week average) 651.7 547 445 325.6 292.83

Dividend yield 1.84% 1.83% 1.8% 2.1% 2.4%

Analysis:

The Dividend Yield remained the same for the last 3 years at 1.8%. However it

fell from 2.1% to 1.8% in 2009. This is due to an increase in the 52 week

average market price of the company and buyback of shares by the firm. The

company has a significant improvement in the payment of dividends. The


Dividend Yield = (DPS/ Price) * 100


investor should look into the dividend yield also for making the investment

decisions, since it implies the annual returns from the company.

KEY RATIOS

2011

Liquidity RatiosCR 1.15

Quick Ratio 0.91

Leverage RatiosDebt Equity 0Debt Asset 0

Interest coverage 50

Profitability RatiosGross Profit 40.84Net profit 12.8

Return on Assets 27.3Return on Capital Employed 27.73

Return on Equity 27.3Return on Investment 42

Turnover Ratios



Inventory Turnover 4.42Fixed Asset Turnover 5.63Total Asset Turnover 2.14

Debtors Turnover 45.9Average Collection Period 8

MPS (52 week Avg) 651.7

Valuation RatiosP/E Ratio (A/B) 16.83

Market To Book Value (A/B) 4.24DPS 12.02

Dividend Yield 1.84EPS 38.73

INDUSTRIAL AVERAGE



DU PONT ANALYSIS

*

* Amrita School of Business 28

Return on Equity27.3

ROTA 27.3

Total assets/ Equity 1

Net Profit Margin 12.8

Total assets Turnover 2.14

Net Profit 163

Net Sales 1273

Net Sales 1273

Total Assets 594.5

Net Sales 1273

Total Costs 1110

Fixed Assets 226

Current Assets 368.5


/ /

- +

BALANCE SHEET

Year Dec 07 Dec 06 Dec 05 Dec 04 Dec 03 SOURCES OF FUNDS : Share Capital + 42.06 42.06 42.06 45.38 45.38 Reserves Total + 604.29 500.66 433.05 483.97 446.73 Total Shareholders Funds 646.35 542.72 475.11 529.35 492.11 Secured Loans + 0 0 0 0 0 Unsecured Loans + 0 0 0 0 0 Total Debt 0 0 0 0 0 Total Liabilities 646.35 542.72 475.11 529.35 492.11 APPLICATION OF FUNDS : Gross Block + 523.67 521.69 506.91 497.33 485.86 Less : Accumulated Depreciation + 297.65 270.32 233.95 197.24 162.31 Net Block + 226.02 251.37 272.96 300.09 323.55



Lease Adjustment 0 0 0 0 0 Capital Work in Progress+ 17.31 6.52 10.83 7.3 6.36 Investments + 297.84 219.68 0 0 0 Current Assets, Loans & Advances Inventories + 194.82 145.57 131.04 85.17 92.33 Sundry Debtors + 27.36 28.09 24.11 25.22 18.38 Cash and Bank+ 93.67 47.92 185.8 264.47 203.8 Loans and Advances + 617.07 550.32 467.89 489.92 440.91 Total Current Assets 932.92 771.9 808.84 864.78 755.42 Less : Current Liabilities and Provisions Current Liabilities + 220.31 188.23 176.58 169.69 169.11 Provisions + 590.15 494.45 413.33 441.15 400.86 Total Current Liabilities 810.46 682.68 589.91 610.84 569.97 Net Current Assets 122.46 89.22 218.93 253.94 185.45 Miscellaneous Expenses not written off + 0 0 0 0 4.91 Deferred Tax Assets 6.07 4.58 5.29 6.57 6.66 Deferred Tax Liability 23.35 28.65 32.9 38.55 34.82 Net Deferred Tax -17.28 -24.07 -27.61 -31.98 -28.16 Total Assets 646.35 542.72 475.11 529.35 492.11 Contingent Liabilities+ 0 0 27.51 22.27 20.57

PROFIT AND LOSS ACCOUNT

YearDec 07(12)

Dec 06(12)

Dec 05(12)

Dec 04(12)

Dec 03(12)

INCOME : Sales Turnover + 1,395.51 1,210.19 1,089.02 981.72 908.95 Excise Duty 122.09 101.34 124.43 120.19 113.07 Net Sales 1,273.42 1,108.85 964.59 861.53 795.88 Other Income + 68.86 58.16 49.12 48.48 51.53 Stock Adjustments + 27.34 1.44 38.1 -5.81 4.77

Total Income 1,369.62 1,168.451,051.8

1 904.2 852.18 EXPENDITURE : Raw Materials + 347.66 275.05 251.86 224.26 205.27 Power & Fuel Cost+ 30.44 29.93 27.35 24.85 23.52 Employee Cost + 149.99 130.35 115.24 103.64 97.16 Other Manufacturing Expenses + 189.7 172.7 157.01 129.18 125.91



Selling and Administration Expenses + 322.78 296.42 265.52 229.63 217.34 Miscellaneous Expenses + 35.83 27.19 26.34 30.25 32.83 Less: Pre-operative Expenses Capitalised+ 0 0 0 0 0 Total Expenditure 1,076.40 931.64 843.32 741.81 702.03 Operating Profit 293.22 236.81 208.49 162.39 150.15 Interest + 4.61 3.53 4.22 5.25 4.99 Gross Profit 288.61 233.28 204.27 157.14 145.16 Depreciation+ 43.49 42.71 41.85 41.46 45.58 Profit Before Tax 245.12 190.57 162.42 115.68 99.58 Tax+ 84.48 62.13 55.49 38.7 30.7 Deferred Tax+ -6.79 -3.53 -4.38 3.82 -7.47 Reported Net Profit 162.68 126.93 107.15 73.16 76.35 Extraordinary Items + 0.12 -0.24 -0.28 -0.01 -0.06 Adjusted Net Profit 162.56 127.17 107.43 73.17 76.41 Adjst. below Net Profit + 0 0 0 0 0 P & L Balance brought forward 0 0 0 0 0 Statutory Appropriations + 0 0 0 0 0 Appropriations + 162.68 126.93 107.15 73.16 76.35 P & L Balance carried down 0 0 0 0 0 Dividend 50.47 42.06 33.64 31.77 31.77 Preference Dividend 0 0 0 0 0 Equity Dividend % 120 100 80 70 70 Earnings Per Share-Unit Curr 36.64 28.78 24.35 15.21 15.93 Book Value-Unit Curr 153.67 129.03 112.96 116.65 108.44

Common Base Year Financial Statements

Balance Sheet

Year 2011 2010 2009 2002 SOURCES OF FUNDS : Share Capital + 92.68 92.68 92.68 100 Reserves Total + 138.02 114.34 98.91 100 Total Shareholders Funds 133.76 112.31 98.32 100 Secured Loans + 100 100 100 100 Unsecured Loans + 100 100 100 100 Total Debt 100 100 100 100 Total Liabilities 133.76 112.31 100 100 APPLICATION OF FUNDS : Gross Block + 112.12 101.73 98.86 100



Less : Accumulated Depreciation + 242.58 220.31 190.67 100 Net Block + 57.93 64.43 69.97 100 Lease Adjustment 100 100 100 100 Capital Work in Progress+ 627.17 236.23 392.39 100 Investments + 297.84 219.68 100 100 Current Assets, Loans & Advances Inventories + 226.32 169.11 152.23 100 Sundry Debtors + 61.73 63.38 54.39 100 Cash and Bank+ 93.87 48.02 186.19 100 Loans and Advances + 975.75 870.21 739.86 100 Total Current Assets 317.94 263.06 275.65 100 Less : Current Liabilities and Provisions 100 Current Liabilities + 129.66 110.78 103.92 100 Provisions + 8018.34 6718.07 5615.89 100 Total Current Liabilities 457.16 385.08 332.76 100 Net Current Assets 105.43 76.81 188.49 100 Miscellaneous Expenses not written off + 0 0 0 100 Deferred Tax Assets 121.4 91.6 105.8 100 Deferred Tax Liability 57.47 70.51 80.97 100 Net Deferred Tax 48.49 67.56 77.49 100 Total Assets 133.75 112.31 98.32 100 Contingent Liabilities+ 0 0 5502 100

Profit and Loss Account

particulars / year 2011 2010 2009 2002 INCOME : Sales Turnover + 60.21 38.93 25.02 100 Excise Duty 3.4 -14.17 5.39 100 Net Sales 69.12 47.26 28.1 100 Other Income + 36.41 15.21 -2.69 100 Stock Adjustments + 403.5 -73.48 601.66 100 Total Income 69.32 44.45 30.03 100 EXPENDITURE : Raw Materials + 88.98 49.52 36.91 100 Power & Fuel Cost+ 53.58 51.01 37.99 100 Employee Cost + 52.22 34.02 18.49 100



Other Manufacturing Expenses + 74.69 59.04 44.59 100 Selling and Administration Expenses + 63.19 49.86 34.24 100 Miscellaneous Expenses + 12.92 -14.31 -16.99 100 Less: Pre-operative Expenses Capitalised+ 0 0 0 Total Expenditure 68.41 45.76 31.94 100 Operating Profit 72.75 39.51 22.83 100 Interest + -62.69 -52.93 -77.73 100 Gross Profit 77.9 43.79 25.91 100 Depreciation+ 22.44 20.24 17.82 100 Profit Before Tax 93.43 50.39 28.17 100 Tax+ 146.73 81.45 62.06 100 Deferred Tax+ -210.01 -59.95 -158.63 100 Reported Net Profit 91.35 49.31 26.04 100 Extraordinary Items + 300 -500 -566.67 100 Adjusted Net Profit 91.36 49.71 26.46 100

Common Size Financial Statements

Balance Sheet

Year 2011 2010 2009 2008 2011 SOURCES OF FUNDS : Share Capital + 6.51 7.75 8.85 8.57 9.22 Reserves Total + 93.49 92,25 91.15 91.43 90.78 Total Shareholders Funds 100 100 100 100 100 Secured Loans + 0 0 0 0 0 Unsecured Loans + 0 0 0 0 0 Total Debt 0 0 0 0 0



Total Liabilities 100 100 100 100 100 APPLICATION OF FUNDS : Gross Block + 81.02 96.13 106.69 93.95 98.73 Less : Accumulated Depreciation + 46.05 49.81 49.24 37.26 32.98 Net Block + 34.97 46.32 57.45 56.69 65.75 Lease Adjustment 0 0 0 0 0 Capital Work in Progress+ 2.68 1.2 2.28 1.38 1.29 Investments + 46.08 40.48 0 0 0 Current Assets, Loans & Advances Inventories + 30.14 26.82 27.58 16.09 18.76 Sundry Debtors + 4.23 5.18 5.07 4.76 3.73 Cash and Bank+ 14.49 8.83 39.11 49.96 41.41 Loans and Advances + 95.47 101.4 98.48 92.55 89.6 Total Current Assets 144.34 142.23 170.24 163.37 153.51 Less : Current Liabilities and Provisions Current Liabilities + 34.09 34.68 37.17 32.06 34.36 Provisions + 91.31 91.11 87 83.34 81.46 Total Current Liabilities 125.39 125.79 124.16 115.39 115.82 Net Current Assets 18.95 16.44 46.08 47.97 37.68 Miscellaneous Expenses not written off + 0 0 0 0 1 Deferred Tax Assets 0.94 0.84 1.11 1.24 1.35 Deferred Tax Liability 3.61 5.28 6.92 7.28 7.08 Net Deferred Tax -2.67 -4.44 -5.81 -6.04 -5.72 Total Assets 100 100 100 100 100 Contingent Liabilities+ 0 0 5.79 4.21 4.18

Profit and Loss Account

YearDec 07(12)

Dec 06(12)

Dec 05(12)

INCOME : Sales Turnover + 106.70 109.14 112.90



Excise Duty 6.79.13919

812.8997

8 Net Sales 100.00 100.00 100

Other Income + 5.45.24507

45.09231

9

Stock Adjustments + -2.1-

0.129863.94986

5 Total Income 103.30 105.37 109.04 EXPENDITURE :

Raw Materials +27.3012

824.8049

826.1105

8

Power & Fuel Cost+2.39041

32.69919

32.83540

2

Employee Cost +11.7785

211.7554

211.9470

4

Other Manufacturing Expenses +14.8968

915.5746

916.2773

8 Selling and Administration Expenses +

25.34749 26.7322

27.52672

Miscellaneous Expenses +2.81368

3 2.452092.73069

4 Less: Pre-operative Expenses Capitalised+ 0 0 0

Total Expenditure 84.5384.0185

887.4278

2

Operating Profit23.0261

821.3563

621.6143

6

Interest +0.36201

70.31834

80.43749

2

Gross Profit22.6641

621.0380

121.1768

7

Depreciation+3.41521

33.85173

84.33863

1

Profit Before Tax19.2489

517.1862

716.8382

4

Tax+6.63410

35.60310

25.75270

3

Deferred Tax+-

0.53321-

0.31835-

0.45408

Reported Net Profit12.7750

511.4469

911.1083

5

Extraordinary Items +0.00942

3-

0.02164-

0.02903

Adjusted Net Profit12.7656

211.4686

411.1373

7



Recommendation

The current market scenario is a one with high market instability which is due

to high volatility and global slowdown. The effect of slowdown on the

consumer goods sector has been quite less compared to the other sectors. This

is a positive sign for the companies in this sector. Based on current market

performance of the company and the better performance expectation we

recommend the current share holders to HOLD the shares and the prospective

buyers to BUY the share. These recommendations are on the basis of following

factors.

1. Global slowdown: The effect of global slowdown has been quite less in the

consumer and healthcare sector as compared to other sectors. As a result the

demand for the products of the company has been steady even now. Also

Indian economy has been projected to be effected by a minimal scale. These

reasons indicate a higher growth prospectus for the company.

2. Ratio Analysis: The key ratios of the company are the leading indicators

about the company’s overall performance. Ratio analysis of the company have

indicated factors like healthy liquidity of the company , higher profitability,

healthier leverage margins and higher payout ratios which are good signs for

the company.

3. EPS and P/E Ratios: These ratios indicate the earnings for the share holders

and the market expectation about the company. The company has provided Amrita School of Business 36


good returns to its investors and the P/E ratio is also attractive one for a retail

investor.

BIBLIOGRAPHY

www.gsk-ch.in

www.moneycontrol.com

www.myiris.com

www.marketingpractice.blogspot.com

www.economictimes.indiatimes.com

www.bseindia.com

www.capitaline.com


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Financial Analysis of GSK Consumer Healthcare

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