MANAGEMENT OF MONETARY

RESOURCE OF GSK

Course:
Financial management
Faculty:
Mirza Shakeel Baig
Group Name:
The Gainers
SALOGAN
 EXCELLENCE AWARDS 2008
GSK named as “the best place to work-2008”

Most preferred pharmaceutical company

25th corporate excellence award

Tax-payers excellence award 2008

Consumer choice award

GlaxoSmithKline, Pakistan (GSKP) Limited is the largest research-
based pharmaceutical company in the country and the second largest in
the world. GSK is in Pakistan since 1955.

GlaxoSmithKline has 99 manufacturing sites in 39 countries that

supply products to 191 global markets. GlaxoSmithKline has over
100,000 highly skilled and dedicated employees worldwide.

Leading products Our vaccines include:

♦ Engerix       ♦ Typherix
♦ Augmentin   ♦ Amoxil
♦ Infanrix       ♦ Mencevax
♦ Panadol       ♦ Ventolin
♦ Fluarix        ♦ Havrix
♦ Ampiclox     ♦ Betnovate
♦ Varilrix       ♦ Hiberix
♦ Calpol          ♦ Zantac
♦ Tritanrix     ♦ Priorix
7000

6000

5000

4000

non-current liabilities
non-current assets
3000
net current assets
property,plant and equipment

2000

1000

0
2008
2007
2006
2005
2004
 Rev
enue
disp a
osal nd its

2008
2007
2006
 Di
s
sha tribu
res tio
n of

2008
2007
2006
Ratios 2003 2004 2005 2006 2007 2008
             

Price earning ratio (times) 31.9 20.9 17.5 16.5 19.6 6.6

Earning per share- Rs 6 8.6 10.6 9.8 9.8 11.5

Bonus share % 20 20 25 25 25 ------

Cash dividend per share- Rs 7 7 8 8 7.5 9.5

Market capitalization (Rs in millions) 13,916 15,817 20,350 21,559 32,837 12,961

Dividend payout % 61.5 51.5 60.2 82 97 83

Dividend yeild % 4.7 5 5.6 6.6 5.2 12.5

Return on equity % 22.4 26.5 26.9 22.1 20.6 23.4

Total assets turnover(times) 1.4 1.3 1.1 1.1 1 1.3

Dedtors turnover % 3.7 2.2 1.9 2.7 3.5 15.4

Inevtory turnover (days) 51 50 54 63 69 56

Current ratio 4.2 4.6 5.1 4.4 4.3 4.1

gross profit margin % 12.7 16.6 19.3 16.5 15.7 14.6

WORKING CAPITAL

Current Current Working

year Assets Liabilities Capital
2008 7,970,061 1,937,662 6,032,399
2007 7,520,402 1,761,218 5,759,184
2006 7,530,354 1,703,806 5,826,548
2005 6,519,159 1,266,695 5,252,464
Capital budgeting decision
methods
Pay back Period:
YEAR Net cash flow Cumulative net cash
flow
0 4,050,000 (4,050,000)
1(2005) 1,720,593 (2,329,407)
2(2006) 1,765,874 (563,533)
3(2007) 1,496,890 933,357
4 (2008) 401,842 1,335,199

= 2 + 563,533 = 2.376 years

1,496,890
Discounted payback period:
Year Net cash flow Discounted net cash Cumulative discounted net
flow (at 10%) cash flow

0 4,050,000 4,050,000 (4,050,000)

1(2005) 1,720,593 1,564,175 (2,845,825)

2(2006) 1,765,874 1,459,400 (1,026,425)

3(2007) 1,496,890 1,124,635.6 98,210.6

4(2008) 401,842 274,463.5 372,674.1

= 2 + 1,026,425 = 2.91
1,124,635.6
Net present value:
Year Net cash flow

0 (4,050,000)

1(2005) 1,720,593 1,564,175

2(2006) 1,765,874 1,459,400

3(2007) 1,496,890 1,124,635.6
4(2008) 401,842 274,463.5
Total In-flows 6,892,846.2

Inflow – outflow = 6,892,846.2 – 4,050,000

= 2,842,846.2
Internal rate of return:
Year Net cash 10% 15% 14% 14.7% 14.8% 14.9%
flow

0 (4,050,000)

1(2005) 1,720,593 1,564,175 1,496,167.826 1,509,292.105 1,500,081.081 1,498,774.39 1,497,469.97

2(2006) 1,765,874 1,459,400 1,335,254.442 1,358,782.702 1,342,248.343 1,339,910.95 1,337,579.65

3(2007) 1,496,890 1,124,635.6 984,229.47 1,010,358.113 991,972.50 989,382.5 986,801.50

4(2008) 401,842 274,463.5 229,754.47 237,922.7228 232,167.62 231,359.733 230,555.35

Total In-flows 6,892,846.2 4,045,405.38 4,116,355.643 4,066,469.55 4,059,427 4,052,406

NPV 2,842,846.2 (4594.62) 66355.64 16469.55 9427 2406

IRR
Year Net cash 14.94%
flow
0 (4,050,000)
1(2005) 1,720,593 1,496,948.843
2(2006) 1,765,874 1,336,744.843
3(2007) 1,496,890 985,871.62
4(2008) 401,842 230,434.58
Total In-flows 4049999.886
NPV (0.11)
Modified Internal Rate of return:
Year Net cash flow 10%

0 (4,050,000)
1(2005) 1,720,593 2,290,109.283
2(2006) 1,765,874 2,136,707.54
3(2007) 1,496,890 1,646,579
4(2008) 401,842 401,842
Terminal value 6475237.823

4,050,000 = 6,475,237.823
(1+ MIRR) 
(1+ MIRR) = 6,475,237.823
4,050,000
(1+ MIRR) =( 1.599)⅟₄
MIRR = 1.125 – 1 = 0.125
MIRR= 12.5%
EVALUATION SUMMARY

Methods Result Comparison Decision

PBP 2.376 3.5  Accept
D. PBP 2.91 3.5  Accept
NPV 2,842,846.2 0  Accept
IRR 14.94% 10%  Accept
MIRR 12.5% 10%  Accept
New project analysis for GSK
NET COST OF MACHINE:

 Net cost of new machine:

Basic price 2,272,134
add: Modifications 356,241
increase in w. capital 273,215
net cost of machine---2,901,590
OPERATING CASH FLOWS
 After tax cost saving = 2,019,515 (1 - 0.40)
= 1,211,709
 Depreciation tax saving
*Amount = 2,272,134 + 356,241 =2628375
Year Amount % amount Tax X % amount
1 2628375 867363.75 346945.5
2 2628375 1182768.75 473107.5
3 2628375 394256.25 157702.5
4 2628375 183986.25 73594.5

Year After tax cost Depreciation tax Operating Cash

saving saving flows
1 1,211,709 346945.5 1,558,654.5
2 1,211,709 473107.5 1,684,816.5
3 1,211,709 157,702.5 1,369,411.5
4 1,211,709 73,594.5 1,138,114.5
NON OPERATING CASH FLOWS
 Tax saving on salvage value:
*taxable income= 2,019,515 + 1,255,422 = 3,274,937(0.40)
= 1309974.8

Salvage value 2,019,515

Less: tax saving 1309974.8

Add: increase in w. capital 273,215

Non-operating cash flows 436325.2

NET PRESENT VALUE

Operating Cash 10%

flows
4,050,000
1,558,654.5 1416958.18
1,684,816.5 1392410.33
1,369,411.5 1028859.13
1,138,114.5 777347.52
Net in-flows 4,615,575.16

Inflow – outflow =4,615,575.16 – 4,050,000

= 565,575.16
Thank you