COMPARISON OF FINANCIAL STATEMENTS OF TWO COMPANIES

In this contemporary business world, there is significant growth in commercial activities of pharmaceutical industry and this has resulted in an increase in existence of performance evaluation systems in all companies operating in pharmaceutical industry. This requirement is so evident with the issue that if a pharmaceutical company has lack of evaluation system then that company is termed as unhealthy (Ormiston and Fraser, 2013). With the help of financial evaluations, organizations become capable of attaining a higher performance level through depiction of current financial position of organization as compared to other different companies. Financial performance analysis helps in creation of competitive environment by an organization. The financial performance analysis also helps in making reforms and improvement of weaknesses. This is done through identification of strengths and activities that are performed by company (Healy and Palepu, 2012).

The present research has been conducted for comparing the financial statements of two different companies from pharmaceutical industry. The comparison has been done through vertical, horizontal and ratio analysis. This has provided an insight to investors about their performance for taking a decision related to investment in the best company. Organizations of pharmacy work along with NHS for ensuring that health requirements are fulfilled. This also ensures that local NHS companies can fulfil the perspectives and these working projects can be completed successfully. In this case, there is win situation for industry, NHS and patients. Two companies selected in current study for comparing their performances are Oxford BioMedica and Skyepharma.

Oxford BioMedica is one of the leading organizations with more of the expertise in cell and gene therapy. This implies that ability and knowledge is owned by companies for harnessing technologies to get treatments for patients. Oxford BioMedica is a biopharmaceutical organization which has specialization in commercialisation and development of gene-based medicines.

Skyepharma is the main drug delivery organization with inhalation, oral capabilities and technologies of inhalation product. The development and formulation capabilities of the Group and technologies are the oral and inhaled controlled drug delivery. This is available for other organizations of pharmacy on licensing basis and partnered development.

1.1.Aims and Objectives

The aim of this research is to compare the financial statements of two different companies from pharmaceutical industry in order to analyse their financial performance.

This study is conducted for fulfilling following research objectives;

  • To identify the importance of financial statements for a company.
  • To examine the use of financial statements for identification of performance of an organization.
  • To study the impact of financial statements of a company on investment decision of investors.
  • To examine the use of financial statements by management and owners of company to take important decisions.
  • To compare the financial statements of Oxford Biomedica and Skyepharma.

1.2.Significance of Study

This research might be advantageous for companies that belong to pharmaceutical industry in a way that they will be able to get an idea about importance of different elements of financial statements through which they can enhance their performance. In addition to this, the constituents who can get benefit from this study are investors and advisors who actually give services to investors regarding investment. The investors can get an idea about different important factors that must be considered while taking investment decision.

 

CHAPTER 2: LITERATURE REVIEW

Financial statements are used in companies for evaluating the financial performance of the company. With the help of proper analysis of financial statements, the management can get financial information that can be used for the purpose of decision making. The analysis of financial statements tells about the present and the past situations of a company. The management of companies makes a prediction about the future through analysing financial statements (Biddle, 2015). Healy and Palepu (2012) did a research on financial statements and found that the analysis of financial statement tells about fundamental performance of the company that has an aim of providing necessary information related to financial position in the form of financial statements. Internal and external users involving managers, owners, investors, shareholders and lenders have significant requirements based on the kinds of decisions which should be made. They target on three features of organization: liquidity, profitability, and solvency. For example, a creditor for short time like bank is mainly interested in borrower ability for paying obligation when it comes due (Healy and Palepu, 2012). That is why; creditors pay more attention to borrower liquidity before offering money. The basic features of information are reliable and relevance. Comparability deals with the ability for making comparison in between two or more than two organizations in the business at a point at right time. Consistency deals with the ability for making to make relevant comparisons in the similar organization over some a period of time period (DeFusco et al, 2015).

It is indicated by the research done by Brigham and Ehrhardt (2013) that before making investments, investors focus on evaluation of financial performance of some specific company in which they want to make investment. This helps in determining the degree to which a company is acceptable or not with respect to its financial performance, management of capital, use of financial and human resources and quality control of capital. Before 18th century, there was low volume and diversification of investment, due to which there was not high need of performance evaluation and comparing performance of companies. However, due to increase in investments’ diversification and volumes of investment, particularly due to the introduction of new and innovative approaches for partnerships among corporates like joint stock firms, the complexity among quality of capital turnover has been increased. Due to this reason, the need to develop new approaches for evaluation of performance of companies and consideration on their ranking is increased. In order to measure financial performance of a company, analysis of financial statements is considered to be one of the most important approaches (DeFusco et al, 2015). Moreover, another study was conducted by Lawrence (2013) in which they used financial statements for analyzing the performance of companies. It has been found in the research that with the help of financial statements’ analysis, valuable information can be gained related to processes, correlations, dividends, assets, liabilities, strengths and weaknesses of a company. There are different techniques of analysing financial statements of a company and that are horizontal, vertical and ratio analysis. Investors can get an idea about performance of different companies through analysis of their financial statements and this helps them in taking decision about investment.  This kind of analysis is helpful in identifying the past and current conditions of company and provides insight about future strategies of company. The evaluation of performance must be done in such a way that it can help in recognizing useful information and give some guideline about future operations of company (Lawrence, 2013).

Financial performance of an organization tells about competitiveness, economic interests and potentials of business. So, there is a significant contribution of analysis of financial performance, weaknesses and strengths’ identification to management, investors, shareholders, regulators and as a whole on economy of country (Blankespoor et al, 2013).  The aim of financial statements is to give information related to financial position, variation and financial position of a company. This information is useful for investors in taking decisions related to investment. In addition to this, this information can be used by owners and managers for making important decisions related to business due to which operations of business are affected. Financial statements are required to be analysed in such a way that effective decisions can be taken by management as well as investors. In addition to this, the reason behind financial statements’ analysis is diagnosing the information shown by financial statements for judging the future earning, capability of paying interests, profitability and sound policy of dividend (Bohušová and Svoboda, 2014).

According to Weygandt et al (2015) financial performance of an organization is generally relevant to ways according to which it uses its assets, equity, revenues, liability and expenses. In order to get an idea about financial performance of an organization, the financial statements of that company have to be analysed. Financial ratio analysis is considered to be one of the best tools to evaluate performance of a company. For determining the financial position of pharmaceutical companies and for making a judgement about their performance, the analysis of financial statements is very important.

According to Brochet et al (2013), financial statements are actually the formal record of financial activities of a company or any entity. They conducted a research through the use of financial statements and found that financial statements give an overview of condition of a business in both short as well as long term. They provide an exact picture about condition of company and operating outcomes in a mixed form. Financial statements are utilized by executives as a tool of management for assessment of position and operating outcomes of company. With the help of analysing and interpreting financial statements, the liquidity position, solvency, profitability and financial viability of company can be determined (Brochet et al, 2013).

According to Brigham and Ehrhardt (2013), financial statements are termed as records that are used being a source for the analysis of financial statements. Primary financial statements are three in number: statement of cash flows, income statement, and the balance sheet. The Balance sheet is description of financial situation of organizations on a particular date. It depicts that what is owned by a company along with it what the companies owe for internal owners and external users. There are three parts of the statement: equity of ownership, liabilities, and assets. In accordance with financial equation, assets should be equal to liabilities and equity of stockholder. The target of Income statement is to depict that how much profit the organization has got over particular time period. It reports a description of how the organization incurs expenses and revenues with the help of both non-operating and operating exercises. An outcome of this is given being as total loss or profit. Income statement is the significant report that analysts, creditors and investors are interested in cash flows which provide knowledge related to the cash inflows and outflows of organization during the time period of accounting. It involves three areas: cash flow through activities of financing, cash flows acquired through financing, and cash flow from financing. Financial statement involves financial information related to the organization. It the last item of accounting work which is done during the time period of accounting – annually/half-yearly/ quarterly (Grant, 2016). The preparations of financial statements are done in terms of monetary values. Some deal with them being ‘Annual Accounts’, when they get prepared on annual basis. However, interim financial descriptions are prepared for even less time, generally a quarter year and therefore they are known as ‘Quarterly Financial Statements’ (Cheng et al, 2013). Board of directors prepare financial statements in order to report the shareholders in discharging the stewardship activity and therefore law of corporate give them the task of finalizing them before the shareholders’ meetings for providing ‘a fair and true view’ of the organizations’ affairs. The loss and profit account needs to be annexed in order to do the balance of report of auditor (involving the separate of auditor, particular, or necessary report, if any) (Florou and Pope, 2012).

In order to analyze performance of companies, different strategies are used. Among those strategies, one of the significant strategies is SWOT analysis. SWOT analysis is used for addressing four aspects of company; strengths, weaknesses, opportunities and threats of company. These aspects have a significant impact on competitive advantage of company. SWOT analysis was introduced by Ken Andrews in 1970s. In order to do audit of internal setup of organization, its strengths and weaknesses are assessed. The internal factors of a company are easily to be controlled as compared to external factors. In contrast to this, examination of opportunities and threats is included in environmental analysis (Grant, 2016). For determining opportunities and threats a company has to analyze external environment of the company. In SWOT analysis, strengths are capabilities and resources of a company through which it gets ability to get involved in activities for generating economic value and competitive advantage. The strengths of a company can be its capability of creating unique and distinct products, providing customer service of high level or having presence in different retail markets. In contrast to this, weaknesses of a company are lack of resources through which a company feels hindrances from generation of economic value or achieving competitive advantage (Jami and Bahar, 2016). Opportunities give the company a chance of improving its performance and competitive advantage. There are some anticipated opportunities and some are faced by companies unexpectedly. In addition to this, threats are present outside the organization that has aim of reducing the performance of company. While working in an organization, every company has to face various kinds of threats because every other company has a desire of taking success.

A strong strategy of a company must address four elements of SWOT analysis in order to improve performance and gaining competitive advantage. It must assist organization in determining ways of using its strengths for taking benefit of opportunities and neutralizing threats (Davies et al, 2014).

Ledgerwood (2014) conducted a research on the use of SWOT analysis in companies for the purpose of analyzing performance of companies. They found that SWOT analysis helps in depicting that whether there is some improvement or deterioration in company from last some years. In addition to this, comparison can also be done among different companies’ strengths and weaknesses on the basis of their SWOT analysis. It helps the investors in taking decision about their investment by analysing the level of opportunities and threats that can be faced by company in future (Ledgerwood, 2014).

Helms and Nixon (2010) conducted a research on importance of SWOT analysis and it has been found that every organization even the largest ones who dominate the markets have more of the manpower, capital and capacity of production. Evaluation of the strength of organization assist it in determining that how to do the allocation of resources in a way that can cause highest potential for profitability and revenue growth. The management team observes that where should the organization compete in the most effective way. The organization even identifies that it has competitive strengths that are not fully used in the past.

According to Kajanus et al (2012) when the management team looks over the weakness of the organization, it should blame the previous shortfalls. On contrary to this, it should look over the critical areas where more of the improvement is required for making business to be effective in the competition. Assessment of weakness helps in prevention of blunders such as getting into the market with items that are inferior to what other competitors are providing. Constant improvement in all of the sectors of organization is the most significant approach of staying superior than competitors. Recent weaknesses should be transformed into future strengths. Development in business needs to seek out opportunities, involving geographic expansion, producing new characterization of services and products, wider distribution of product and potential consumer groups. In SWOT analysis, the emerging opportunities are identified by the management team for taking benefit of right now and attempts are made for forecasting long term choices, therefore advance planning can be done for entering into the market when there is right time.

 

A threat in SWOT analysis is just like risk – any existence outside the control of organization that can have negative influence over performance of organization. Organization can even suffer from different threats caused by competitors. Performance can be adversely affect by the alterations in environment. Tastes of customers can change like when recession let the customers to cut back on purchasing services and goods. For an organization, risks seem to be less threatening. At the time of development of contingency plan the threat transforms into reality. SWOT analysis assists the organization to be prepared for whatever happens in the external environment (Gao and Peng, 2011).

Görener et al (2012) stated that many organizations do a type of SWOT analysis on their competitors. Linked with the information from the SWOT analysis of the organization, the management team starts to get an image of how the positioning of the organization should be done in opposed to the competitors. The organizations look forward to attack the weaknesses of competitor through its strengths. It is just like planning of game in football match – trying to identify that where the opposite team is vulnerable. SWOT analysis let the organization to acknowledge that most powerful competitors also own some weaknesses that can be exploited.

Lawrence (2013) did a research on analysis of Financial Ratio for the evaluation of Performance. The analysis of financial statements assists in the evaluation of organization’s performance, so that investors can make decision regarding the investment in an organization. Various ratio categories have been observed in different articles for analyzing the performances like evaluations ratios, performance ratios, debt ratios, liquidity ratios, and profitability ratios. Vogel (2014) stated that Profitability Ratio Analysis and Income Statement are used in order to measure the profitability of the organization. The Balance Sheet and Income Statement are two significant reports that depict the net worth and profit of the organization. The analysis has shown that how well organizations are doing for generating revenue. The Income Statement has been defined as a statement that shows the total profit of organization through subtraction of gross profit (sales – cost of goods sold). In addition to this, the balance sheet also lists down the asset value, in terms of liabilities. Simply, the major function performed by balance sheet is to depict the net worth of organization through subtraction of liabilities from assets. Balance sheet does not show any of information related to profits, but there is a link between profits and assets. A large number of investments are generally done by the business owner in the asset of organization. Bentley et a (2013) has discussed about the Returns and Profitability Ratios Measure Margins like ROCE ratio, ROE ratio, ROA ratio, Net Profits and Pretax, Operating and gross. However, he also stated that Gross profit is the total income which is developed through sales. He stated that Gross Profit margin is equal to the net revenues or sales or total gross profit. Along with it, through deduction of depreciation, administration and marketing, operating profits are acquired. He also defined the margin of operating profit. Operating Profit/Net Revenue or Sales is equal to the operating profit margin. Through deduction of non-operating expenses from the profits pretax profits can be calculated and through addition of non-operating revenues to it, it can also be computed. Pretax profit/ net revenue or sales is equals to Pretax Profit Margin. He also did the analysis of total profit margin. Net profit margin is equal to the net sales or revenue or net profit. He also describes that resources return utilize dividend into three forms like ROCE, ROE and ROA. Firstly, Assets Return is equal to total profit (Brochet et al, 2013).

An analysis has been done by Warren et al (2013) of financial statement which is used for the measurement of performance of organization. This article has also analyzed the balance sheet and income statement. Lending institutions and investors have used ration analysis of statements for determining the liquidity and profitability of organization. If ratios identify poor performance, then the investors can even feel reluctant for making investments. That is why; the capital ratio or current ratio does the measurement of current assets in opposed to the present liabilities. The present ratio does the measurement of ability of organization for paying back the short term debt obligations with present assets. A higher ratio represent that organization is more equipped for paying off short-term debt with present assets. The quick ratio or acid test ratio, does the measurement of quick assets in opposed to the present liabilities. Considered assets are quick assets whose conversion can be done quickly into cash. Basically there are present assets and fewer inventories.

 

Bierman Jr and Smidt (2012) deals with the accounts receivable. These are significant analytical tool for the measurement of efficiency of functions is the accounts. Many organizations sell services or good on some basis. This implies that customer purchases services or good through organization but does not make any pay for them at purchase time. Payment is done within a shorter time period, which range from just few days to one year. These transactions are then made on the balance sheet being accounts which are received.

Coates IV (2014) interpreted the use of different techniques and ratios can assist in acquiring a full picture of the financial outlook of the organization. According to him, the most significant factor is variable cost and fixed cost. Fixed costs are the ones that are always there, no matter how little or how much is sold. Some instances of fixed costs involve salaries, insurance, and rent. Variable costs are termed as the costs that decrease or increase in proportion of ratios to sales.

2.1. Pharmaceutical Industry

Pharmaceutical organizations are contributing in the economy of UK. This contribution is greater than other industries. The significance of pharmaceutical sector becomes even higher when productivity is considered; its measurement is done as Gross Value Added (GVA). The contribution of pharmaceutical sector for balancing the trade was the greatest industrial sectors, up from third in 1904 and fifth in 1975. Over the past decade, the pharmaceutical sector has developed more surplus (like more of the exports and causing more money as compared to imports which implies money away from the country), approaching 2.8 billion in 2013.

Increasingly, organizations of pharmacy work along with NHS for ensuring that health requirements are fulfilled. This also ensures that local NHS companies can fulfil the perspectives and these working projects can be completed successfully. In this case, there is win situation for industry, NHS and patients. The capital and people employed in the industry of pharmacy get more money for UK than if they were present in any other economic sectors (Gibson, 2016).

2.2. Oxford BioMedica

Oxford BioMedica was developed through Oxford University. Oxford BioMedica is one of the leading organizations with more of the expertise in cell and gene therapy. Being a pioneer in the global field, the first Organization was Oxford BioMedia that was involved in delivering a gene therapy into the brain and human eye. This implies that ability and knowledge is owned by companies for harnessing technologies to get treatments for patients.

Oxford BioMedica (LSE: OXB) is a biopharmaceutical organization which has specialization in commercialisation and development of gene-based medicines. It was developed in 1995 being a spin from Oxford University. The main product is TroVax, which is vaccine for solid cancers, which is in progress having collaboration with Sanofi-Avents. TroVax was unsuccessful in test of kidney cancer in the year 2008 which was responsible for major drop in Oxford BioMedica's share price. The recent advancements in the pipeline of the organization involve cancer treatment, retinopathy and Parkinson’s disease. The early stage of the advancement of pipeline involves AIDS, spinal muscular atrophy, motor neuron disease, and Stargardt disease (DiMasi et al, 2016).

Oxford BioMedia is a cell and gene therapy organization which focuses on the development of life altering treatments for some particular diseases. A platform has been developed with cutting-edge capabilities and technologies, dependent on proprietary and sector leading institutions involved in gene therapy (LentiVector®). This resulted in production and development of new design and then medicines of gene and cell were produced for partners (Oxford Biomedica, 2016).

2.3. Skyepharma

In 1996 Skyepharma was produced, through acquisition of Jago Pharma AG, since 1983 it is the specialist of drug delivery. Now-a-days Skyepharma is the main drug delivery organization with inhalation, oral capabilities and technologies of inhalation product.

In Muttenz which is present near Basel in Switzerland, there are many laboratories of research and development. In these laboratories, scientists belonging to experienced teams develop and formulate oral modified and innovative inhalation to release products related to pharmacy. The capabilities for solving complex problems of formulation, linked with regulatory, clinical and pre-clinical expertise and proprietary technologies have caused 14 recently admitted products that are then sold in more than 80 countries. The marketing of products is done in the world with the help of pharmaceutical organizations and specialty organizations of pharmacy.

Skyepharma increases the product pipeline through innovative products which arise from the research along with the work which is done along with partners. The development and formulation capabilities of the Group and technologies are the oral and inhaled controlled drug delivery. This is available for other organizations of pharmacy on licensing basis and partnered development. Headquarters of Skyepharma are present in London, and trading of its shares is done under the symbol SKP on London Stock Exchange (Roschangar et al, 2015). The generation of revenues is done through contract development work, product supply, milestones and licensing (Skyepharma, 2016).

2.4. Theoretical Underpinning

2.4.1. Stakeholder Theory

According to stakeholder theory, it is the responsibility of companies to give value to all stakeholders of a company. In a company the stakeholders are employees, customers, investors, suppliers, government, groups of political parties, trade unions and so on. Stakeholders are all those parties that are directly or indirectly linked with the firm. In accordance with stakeholder theory, companies have to report their financial performance through financial statements. This shows that how much a company gives value to its stakeholders. With the help of financial statements, companies give benefits to all stakeholders that they can use those statements for taking necessary decisions. This theory shows the importance of financial statements that these statements help companies in showing value to its stakeholders and as a result of this reputation and image of companies are positively affected (Freeman et al, 2010).

2.4.2. Accountability Model

The accountability model is a framework that shows that in contemporary business world, leadership and management of companies should show acceptance towards accountability. The firms have to report their financial information for the purpose of disclosure. This shows that companies do not hide any kind of financial information from stakeholders and consider them as an important part of the organization (Cavoukian, 2010).

 

CHAPTER 3: STUDY

3.1. Oxford Biomedica

3.1.1. SWOT Analysis of Oxford Biomedica

SWOT analysis is a significant strategy used for realizing strengths, weaknesses, opportunities and threats of either a company or a person. In the context of business, this strategy makes a business capable of discovering strong as well as weak aspects, thus enable it for surviving both internal as well as external forces.

 

3.1.2. Analysis of Income Statement

Interpretation of Trend and Horizontal Analysis:

It can be seen from the Appendix A that we have taken 2014 as base year and trend of items of income statement has been seen from 2014 to 2015 year.

Sales

The sales of company have been increased from 2014 to 2015 (as shown in Appendix A). The reasons behind an increase in sales of company might be due to the increased purchasing power of customers, increase in accounts receivables, improved channels of distribution, higher prices of competitors and improved quality of products.

Cost of Goods Sold

The cost of goods sold of Oxford BioMedica has decreased in 2015 as compared to 2014 (as shown in Appendix A). The factors that might result in increased cost of goods sold are decrease in production volume and cost, reduction in international prices of medicines, decrease in cost of raw materials and fewer fluctuations in currency.

Gross Profit

The gross profit is increased (as shown in Appendix A & B). The possible reasons of this increase are effective use of labour, appropriate pricing strategy, lower bargaining power of suppliers of raw material, decreased direct material and direct labour cost and definitely, increase sales of Oxford BioMedica.

Research and Development Cost

The research and development cost has been reduced in year 2015 as compared to 2014 (as shown in Appendix A). This shows that in year 2015 the company reduced its focus of spending cost on research and development. The reason might be due to the increase in other different costs like administrative expenses.

Administrative Expenses

The administrative expenses have been increased by 70.356% (as shown in Appendix B). The reason might be due to high focus on management and administration within the firm rather than focusing on research and development.

Other Operating Income

The other operating income of Oxford BioMedica is increased by 153.72% in 2015 (as shown in Appendix B). The other operating income of Oxford BioMedica involves income from financial assets, income from non-financial assets, and compensation from GOP, scarp sales and WPPF.

Net Profit before Taxation

The net profit before taxation was increased by 57% from 2014 to 2015 (as shown in Appendix B). The net profit is made of sales, cost of goods sold, distribution cost and finance costs so changes in these factors resulted changes in net profit before taxation. The net profit of the firm might be increased due to the decreased cost of goods sold, increased sales and decreased research and development cost.

Provision for taxation

This consists of the amount that a company reserves in one year for paying taxes of that year. In this amount, amount of both current and deferred taxation is included. The amount for provision in taxation is increased due to high amount of deferred taxation.

Loss per Share

In Oxford BioMedica the loss per share was 0.43 in 2014 and 0.51 in 2015 (as shown in Appendix A). This means that company experienced increased loss per share in 2015. The reason is due to the increased operating loss faced by company in the year 2015. The other reason might be an increase in provision for taxation in the year 2015.

3.1.2.3. Vertical Analysis

In 2015, 63% of sales was gross profit and 28% was cost of goods sold. Moreover, 107% was research and development cost, 42% were administrative expenses and 18% was finance cost (as shown in Appendix C). This depicts that company had more gross profit due to less cost of goods sold. In contrast to this, the company spent high percentage on research and development cost.

In 2014, cost of goods sold was 43% of sales and gross profit was 68% of sales. This means there was high gross profit earned by the firm due to lesser costs spent. In addition to this, 29% were administrative expenses, 149% was research and development cost that was huge in 2014. Similarly, 78% was operating loss (as shown in Appendix D).

3.1.3. Analysis of Balance Sheet

Equity

The value of equity is decreased by 52.7% (as shown in Appendix E). The reason might be due to the increase in accumulated losses in the year 2015 and reduction in treasury reserves. As there is no change in ordinary shares and share premium account, so equity of the company has not been increased.

Non-current liabilities

In 2015, the non-current liabilities of Oxford BioMedica have been increased 2725% (as shown in Appendix E) that is a huge change. This shows that company relied heavily on external funding for running its operations. This is due to the reason that equity of company is reduced in year 2015 due to which the company had to take loans from external parties for running the business. Due to the increase in amount of non-current liabilities, the amount for provisions that include deferred taxation has also been increased. The company had to pay high taxes to government.

Current Liabilities

Overall, the current liabilities are increased by 42.661% in year 2015 (as shown in Appendix E). This depicts that in addition to non-current liabilities, company is also relying on short term borrowings. Due to increase in short term borrowings, provisions for taxation have also been increased in year 2015. The reason behind this is reduction in equity of the firm due to which company had to take both short term and long term loans.

Non-current Assets

More property, plant or equipment is added in 2015. Most probably, company purchased new equipment for its production. In contrast to this, there is a decrease in intangible assets from 2014 to year 2015. This means the company focused on purchasing more tangible assets as compared to intangible assets.

Current Assets

Overall, current assets were increased by 112.9% in 2015 (as shown in Appendix F). This increase is due to the increase in inventories, trade and other receivables, current tax assets. In contrast to this, only decrease in cash and cash equivalents was experienced by the company. Due to this reason, liabilities of company were increased as company did not get an increase in cash and cash equivalents.

3.1.3.3. Vertical Analysis

The vertical analysis of balance sheet shows that in 2015 in case of total equity and liabilities, the percentage of total equity was 21% and total liabilities was 79% (as shown in Appendix G). This clearly depicts that company relied heavily on loans and funding rather than equity. The proportion of liability is high as compared to the proportion of equity.

In addition to this, in case of assets, contribution of current asset was 50% and non-current assets were also 50%. This means there was equal distribution of current and non-current assets in Oxford BioMedica in 2015.

In 2014, contribution of equity was 68% and contribution of liabilities was 32%. This means in 2014, there was more contribution of equity rather than liabilities in business of Oxford BioMedica. In addition to this, among total assets there were 33% non-current assets and 67% current asset(as shown in Appendix G). This means there were more short term assets and less long term assets.

 

3.1.4. Ratio Analysis

3.1.4.1. Liquidity Ratios

One of the significant liquidity ratios is current ratio that indicates the capability of an organisation for repaying current liabilities out of current assets. The current ratio of Oxford BioMedica for the year 2014 is 2.45:1 (as shown in Appendix I). This means in 2014, current assets were 2.46 times of current liabilities. It means for paying the liability of £1, the company had £2.46 in 2014. In contrast to this, the value of current ratio was reduced to 1.95 (as shown in Appendix I) but still it was a good ratio, as in 2015 the ratio of current assets was greater than current liabilities.

The value of normal ratio is 1:1 in this case. In 2014, the quick ratio was 2.312:1 and in 2015 it was reduced to 1.7 (as shown in Appendix I). This means the capability of Oxford BioMedica for paying current liabilities has been reduced in 2015.

The value of working capital ratio was 0.400: 1 in 2014 and it was reduced to 0.24 in 2015 (as shown in Appendix I). It means the performance of company was decreased in 2015 as compared to 2014 on the basis of its liquidity ratios.

3.1.4.2. Activity Ratio

As, there were neither debtors of Oxford BioMedica in 2015 nor in 2014, so debtors turnover has not been calculated.

Inventory turnover tells about the capability of an organisation for selling its inventory. This means how much the company is capable of converting its inventory into sales. The value of inventory turnover for the period 2014 and 2015 is 3.12 (as shown in Appendix J). It means the company has the capability of converting 3 times its inventory in to sales.

3.1.4.3. Solvency Ratios

This ratio tells how much financing of assets of company is done by owners. Thus, this ratio indicates the strength of a company. The ratio of equity was 0.68 (as shown in Appendix K) that means 68% financing was done through owner’s equity. This ratio was reduced to 0.21 in 2015 (as shown in Appendix K) that means in 2015 21% financing was done through owner’s equity.

The debt ratio tells that how much financing of assets is done through debts. Thus, this ratio tells about the weakness of company. The debt ratio for year 2014 was 0.318 (as shown in Appendix K) that means 31.8% financing was done through debts and it was increased to 1 in 2015 (as shown in Appendix K). It means in 2015, the company heavily depend on debts for the purpose of financing. This shows a weak point of company that company relied on debts rather than equity. This imposes heavy cost on the company in the form on interest and taxes and also results in bad impression of company.

Another important debt ratio is solvency ratio. This is opposite to debt ratio that shows that how much liabilities are paid through assets of company. It depicts the capability of company for repaying its debt. The solvency ratio was 3.13:1 in 2014 and 1.26:1 in 2015 (as shown in Appendix K). This means the capability of company for repaying its liabilities through assets has been reduced in 2015 to a great extent. This is a bad sign for the company.

Debt to equity ratio tells about the comparison of financing done through owner’s equity and debts from external parties. Debt to equity ratio for 2014 is 0.46 and for 2015 it is 3.75 (as shown in Appendix K). It showed that in 2014 for every liability of £0.46 of outside creditors Oxford BioMedica internal owners had £1. Similarly, in 2015 for every liability of £3.75 of outside creditors Oxford BioMedica internal owners had £1.

3.1.4.4. Profitability Ratio

 

 

2014

2015

Gross profit margin

68%

63%

Net profit margin

79%

107%

 

3.2. Skyepharma

3.2.1. SWOT Analysis

Image Can't Display

3.2.2. Analysis of Income Statement

Interpretation

Revenue

The sales/revenues of company were increased in 2015 in comparison to 2014 (as shown in Appendix L) because of increasing in royalty and supply of revenues and royalties from GSK Ellipta products, Lodotra®/RAYOS® and Solaraze® in the U.S and increased revenue from the Group’s share of growing EXPAREL® net sales.

In 2015, total £0.1 million cash was received. This increase is because of sales milestone of first flutiform of €10 million. This was recorded due the release of deferred income.

Cost of goods sold

It can be seen from the analysis that cost of goods sold was increased to £43.1 million (2014: £32.9 million) (as shown in Appendix L) because of experiencing an increase in supplies of flutiform and other related products.

Operating profit before tax

The operating profit before tax was increased in 2015 as compared to 2014. In 2014, £1.1 million operating cost was recognized in relative to restructuring of Lyon Facility (as shown in Appendix M).  This was increased because in 2014, the company experienced a loss that also included an exceptional financing cost of £25.5 million but in contrast to this there was no exceptional cost in 2015.

Taxation

In 2015 the amount of income tax as increased from 2014. In this tax, the amount of current income tax and deferred tax charge was included that resulted in effective rate of taxation of 13.8%. Due to the increase in current income tax, higher pre-tax profits are reflected. In 2015, the deferred tax charge was because of the use of losses of overseas tax losses and deferred tax movements that are explained in Note 12 to the consolidated financial statements.

Earnings per share

In 2015, the basic earnings per share were 25.1 pence per share whereas diluted earnings per share were 24.6 pence per share. In 2015, the difference between basic and diluted earnings per share was because of dilutive effect of employee share awards on IAS 33. In contrast to this, in 2014 there was no difference between basic and diluted loss per share and due to this the company experienced a loss and all additional shares were anti-dilutive.

Research and development cost

The research and development cost was increased in 2015 as compared to 2014 (as shown in Appendix M). The reason behind this was increase in self-funded projects within the limits set by the board. By increasing research and development cost, company tried to bring innovation and in the end increase in profitability.

3.2.2.3. Vertical Analysis

 

The vertical analysis shows that in 2014, gross profit was 68% of sales and in 2015 it was decreased to 63%. In addition to this, in 2014 cost of goods sold was 43% in 2014 and it was reduced to 28%. Moreover, research and development cost has also been decreased from 149% to 107%. In contrast to this, administrative expenses were 29% of sales in 2014 and they were increased in 2015. The proportion of net profit has also been increased from 2014 to 2015 (as shown in Appendix N). Due to increase in provision for taxation, the company had to face more loss and comprehensive expense as compared to 2014.

3.2.3. Analysis of Balance Sheet

Equity

The value of equity is increased by 111.44% (as shown in Appendix P). The reason might be due to the decresase in accumulated losses in the year 2015 and addition in treasury reserves.

Non-current liabilities

In 2015, the non-current liabilities of Skyepharma have been decreased by 48.6% (as shown in Appendix P). This shows that company did not rely on external funding for running its operations. This is due to the reason that equity of company is increased in year 2015 due to which the company had not to take loans from external parties for running the business.

Current Liabilities

Overall, the current liabilities are decreased by 48.6% in year 2015 (as shown in Appendix P). This depicts that just like current liabilities; company is not relying on non-current liabilities. Due to the reduction in short term borrowings, provisions for taxation have also been decreased in year 2015. The reason behind this is increase in equity of the firm due to which company did not rely on taking both short term and long term loans.

Non-current Assets

More property, plant or equipment is added in 2015. Most probably, company purchased new equipment for its production. In contrast to this, there is a decrease in intangible assets from 2014 to year 2015 (as shown in Appendix O). This means the company focused on purchasing more tangible assets as compared to intangible assets.

Current Assets

Overall, current assets were increased by 13.9% in 2015 (as shown in Appendix P). This increase is due to the increase in cash and cash equivalents. In contrast to this, only inventories of company were decreased by10%. This means in 2015 the company focused on increasing cash and its equivalent rather than inventory.

3.2.2.2. Vertical Analysis

Among total equity and liabilities, in 2014 total liabilities were 75% and total equity was 25%. This means there were more liabilities as compared to equity. In 2014, the company relied on external debts and financing rather than owner’s equity. In contrast to this, in 2015 total equity was 48% and total liabilities were 52%. This means in 2015 the distribution of percentage was almost equal to each other.

In addition to equity and liabilities, among total assets there were 34% no-current assets and 66% current assets in 2014. It means there were more current assets so they can be converted in to cash easily. Similarly, in 2015 there were 67% current assets and 33% non-current assets (as shown in Appendix Q).

3.2.4. Ratio Analysis

3.2.4.1. Liquidity Ratios

Current ratio for Skyepharma for the year 2014 is 1.9: 1 and it has been increased to 4.27: 1 (as shown in Appendix R). It means in 2014, to pay £1 liabilities of company, the firm had 1.9 assets in 2014. This is a good ratio for the firm but in 2015 this ratio has increased to a great extent. In 2015, for £1 liability the firm had 4.27 assets. This means the liquidity of firm has been increased in 2015.

Quick ratio was also increased from 2014 to 2015. It was 1.57 in 2014 and 3.67 in 2015 (as shown in Appendix R). It means in 2015 Skyepharma got more current assets with capability of getting quickly converted into cash.

In order to test liquidity of company, working capital ratio is also used. The working capital ratio was decreased with a small percentage from 2015 to 2014. This is not a big change but still the company lost some assets that can easily be converted in to cash.

3.1.4.2. Activity Ratio

Inventory turnover tells that for how many times inventory of company can be used for earning revenues and sales. The value of inventory turnover for the year 2014 and 2015 is 8.9 (as shown in Appendix R) that mean the inventory of Skyepharma can be used 8 times for earning sales.

3.1.4.3. Solvency Ratios

The ratio of equity was 0.255 that means 25.5% financing was done through owner’s equity. This ratio was increased to 0.483 in 2015 (as shown in Appendix S) that means in 2015 48.3% financing was done through owner’s equity.

The debt ratio for year 2014 was 0.74 that means 74.3% financing was done through debts and it was decreased to 0.51 in 2015 (as shown in Appendix S). It means in 2015, the company relied more on owner’s equity rather than debts. This shows strength of company that company relied on equity rather than debts.

The solvency ratio was 1.34:1 in 2014 and 1.93:1 in 2015 (as shown in Appendix S). This means the capability of company for repaying its liabilities through assets has been increased in 2015 to a great extent. This is a good sign for the company.

3.1.4.4. Profitability Ratio

Gross margin from flutiform product supply was 24 percent (2014: 10 percent), benefiting from improved mix, a value-related price break with Sanofi and lower depreciation following a review of asset lives, partly offset by the effect of the weaker Euro against the Pounds Sterling reporting currency. Notwithstanding higher orders for flutiform, initiatives to improve working capital management including faster manufacturing cycle time, year-end inventories decreased to £9.3 million (2014: £10.4 million). During 2015 the flutiform supply chain recorded a gross profit of £11.5 million (2014: £3.0 million) (as shown in Appendix T).

 

CHAPTER 4: DISCUSSION

In this research the performance of Oxford Biomedica and Skyepharma is compared using different techniques. In order to analyse performance of both companies belonging to Pharmaceutical Industry, their financial statements are analysed with the help of trend, horizontal, vertical and ratio analysis. In addition to this, SWOT analysis has also been done that helped in identifying key strengths, weaknesses, opportunities and threats of both companies. As both companies are pharmaceutical companies, so there is some similarity among opportunities and threats of both companies. In contrast to this, both companies are different from each other on the basis of their strengths and weaknesses. It has been found from SWOT analysis of Oxford Biomedica that one of the major strengths of company is in-house expertise in techniques of genetic engineering. The company is capable of using advanced techniques of genetic engineering for the purpose of cancer immunology. In contrast to this, Skyepharma has astrength of developing novel drug delivery products. This depicts that both companies are involved in different medical techniques for the purpose of gaining competitive edge. In addition to this, both companies are relying on local market due to lack of expansion capabilities. The companies are not successful in achieving higher profitability due to heavy reliance on local markets. Due to this reason, both companies have an opportunity of expanding in different countries around the globe in order to increase market share and profitability.

In addition to SWOT analysis, the financial statements of both companies for the year 2014 and 2015 are analysed in order to examine their performance. On the basis of this analysis, it has been found that among both companies Oxford Biomedica has performed better than Skyepharma. It has been seen from the financial statements’ analysis that profitability of Oxford Biomedica was increased from 2014 to 2015 due to reduction in cost of goods sold, distribution cost and finance costs. This depicts that company has put a lot of efforts for reducing different types of costs in order to enhance profitability. Moreover, the company’s profitability has also been increased due to increase in sales of company from 2014 to 2015. In Skyepharma although net profit before taxation of company was increased from 2014 to 2015 but in contrary to Oxford Biomedica the cost of goods sold as well as taxation was increased in 2015. All these factors were identified using analysis of income statement. On the basis of income statement, it can be said that Oxford Biomedica performed well in 2015 as compared to Skyepharma, but it is also important to analyse balance sheet of both companies. From the analysis of balance sheet it has been found that equity of Oxford Biomedica that is an important factor affecting performance of companies was decreased in 2015 as compared to 2014. This depicts that company’s owners did not add much investment in the firm for improving business operation. In order to fill this gap, company had to take loans from various sources. Due to high reliability on loans, the company’s both current and non-current liabilities were increased in 2015. As a result of increase in liabilities firm had to pay high amount of interest. In contrast to this, for improving performance and profitability of the firm, owners of Skyepharma put high level of investment in 2015 as compared to 2014. This resulted in increasing equity of company and due to this reason company also reduced its both current and non-current liabilities. This is considered to be a positive point for company to have high equity ratio and low debt ratio. So, with the help of this it can be said that Skyepharma performed better than Oxford Biomedica with respect to equity and liabilities distribution. In addition to equity and liabilities analysis of both companies, their performance is also compared on the basis of assets distribution. Assets play a vital role in success of any business. In case of having more assets, the company becomes capable of paying off its liabilities. In order to analyse this aspect of companies, liquidity ratio is measured that how much the company had assets for paying its liabilities.

From the analysis of data, it has been shown in current study that Skyepharma performed better in 2015 as compared to 2014 with respect to its assets’ allocation for paying liabilities. With increase in current ratio, the company’s capability of paying liabilities through assets is also increased. It has been shown from ratio analysis that current ratio of Skyepharma was increased in 2015 to a great extent that means company’s capability of paying debts was increased. This shows that company’s performance was improved. In contrast to this, Oxford Biomedica relied heavily on external liabilities and their current ratio was also decreased in 2015 as compared to 2014. This reduction in current ratio shows that company’s capability of paying debts through assets was reduced. This is considered to be a negative sign for the performance of company. This overall analysis shows that from various aspects examined through financial statement and SWOT analysis, it can be concluded that Skyepharma’s performance is better than Oxford Biomedica. In order to improve performance of Oxford Biomedica, owners should focus on investing high on operations of business and in addition to this the firm should reduce its reliance on liabilities. Rather than focusing on taking loans from external sources, the company should invest on its assets in order to enhance its current ratio and as result profitability. Moreover, for ensuring further increase in profitability of Skyepharma, the company should reduce costs of goods sold and other related costs. This would help the company to get higher profitability in 2016. In addition to this, both companies should spend more on research and development activities in order to bring innovations. Both companies are required to expand their business in different countries other than UK. This would help in enhancing market share and profitability of business.

 

 

CHAPTER 5: CONCLUSION

5.1. Brief Summary

This research has been conducted for analysing performance of two companies. In order to analyse the performance, two pharmaceutical companies were selected. These two companies were Oxford Biomedica and Skyepharma and their performance was compared with each other on the basis of SWOT, trend, horizontal, vertical and ratio analysis. The financial statements for the year 2014 and 2015 were taken for analysing the performance. The study has found that the financial performance of Skyepharma Company is better than Oxford Biomedica on the basis of financial statements analysis. In contrast to this, SWOT analysis of both companies has shown that Oxford Biomedica has more and effective strengths as compared to Skyepharma. The financial performance of Skyepharma is better than Oxford Biomedica on the basis of share of equity and liabilities. The owners of Skyepharma focused on bringing more equity within the firm rather than liabilities. Skyepharma has to pay fewer amounts of interests and its image is also better in the pharmaceutical industry due to less reliance on external liabilities. In case of financial performance’ comparison of both pharmaceutical companies, income statements for year 2014 and 2015 were also analysed and compared with each other. From the analysis of income statements, it has been found that the profitability of Oxford Biomedica was increased from 2014 to 2015, whereas in contrast to this the profitability of Skyepharam was reduced in 2015 as compared to the year 2014.

5.2. Limitations

Although current research has provided many benefits, but there are also some limitations of this study. First of all, the researcher had to face financial and time constraint. The researcher did not have enough time for conducting the research in depth. Moreover, due to lack of time and budget, only two companies were chosen by the researcher as case study for comparing the performances. In addition to this, only two years were selected from which 2014 was taken as base year and performance of 2015 was compared with the performance of 2014. In future studies, financial statements of more years can be studied for analysing the performance of companies. This would help in increasing validity and reliability of findings drawn from the research. With the help of analysis of financial statements of more companies, the generalizability of research can be increased. Moreover, in future researches industry wise comparison can also be done in which performance of companies belonging to two different industries can also be done.

5.3. Recommendations

For having reliability and relevance, accounting information should be time and verifiable too. Along with being reliable and relevant, accounting information should be consistent and comparable. Information that does not hold any of these features is not sufficient for the process of decision making. This report of comparison between performances of both pharmaceutical companies can be used by four groups for taking important decisions.

5.3.1. Investors

On the basis of findings of this report, it is recommended to investors that they should invest in Skyepharma Company as it has less reliance on liabilities and more dependability on equity. With more investment in equity, it is shown that owners are more risk taker. As high risk means high rate of returns, so investors should invest in Skyepharma Company. In contrast to this, with the aspect of profitability and getting high share from the profitability, investors can select Oxford Biomedica for making investment. The investors must think on long term basis and on the basis of this, they should go for Skyepharma for making investments.

5.3.2. Lenders & Other Creditors

The findings of this report have depicted that creditors should not give further loans to Oxford Biomedica Company, as it already has taken a lot of liabilities, so there are chances that liabilities will not be paid back by the firm. Due to high dependability on external liabilities, there are chances of getting bankrupt. In case if creditors have to give loans to company then they must be given on high interest rates, so that creditors can get benefit through this. On the basis of profitability, creditors can get high interest from Oxford Biomedica by lending money to that company.

5.3.3. Debtors

In current we are taking both companies as debtors who take debt from some external sources in order to run operations of business. In current study, it is strongly recommended to Oxford Biomedica that owners of this company should not take further loans as it will increase their liabilities and this will further affect profitability of business.

 

References

Bentley, K.A., Omer, T.C. and Sharp, N.Y., 2013. Business strategy, financial reporting irregularities, and audit effort. Contemporary Accounting Research, 30(2), pp.780-817.

Biddle, G.C., 2015. The Role of Financial Statements in Reporting Financial Performance. In Accounting & Finance/IASB Research Forum.

Bierman Jr, H. and Smidt, S., 2012. The capital budgeting decision: economic analysis of investment projects. Routledge.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Brochet, F., Jagolinzer, A.D. and Riedl, E.J., 2013. Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research,30(4), pp.1373-1400.

Blankespoor, E., Linsmeier, T.J., Petroni, K.R. and Shakespeare, C., 2013. Fair value accounting for financial instruments: Does it improve the association between bank leverage and credit risk?. The Accounting Review,88(4), pp.1143-1177.

Bohušová, H. and Svoboda, P., 2014. Comparability of financial statements prepared according to IFRS and IFRS for SMEs in the field of intangible assets. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis58(6), pp.67-78.

Brigham, E. and Ehrhardt, M., 2013. Financial management: Theory & practice. Cengage Learning.

Brochet, F., Jagolinzer, A.D. and Riedl, E.J., 2013. Mandatory IFRS adoption and financial statement comparability. Contemporary Accounting Research,30(4), pp.1373-1400.

Cheng, M., Dhaliwal, D. and Zhang, Y., 2013. Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?. Journal of Accounting and Economics56(1), pp.1-18.

Coates IV, J.C., 2014. Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications. Yale LJ, 124, p.882.

Davies, A., John, E. and Thomas, A., 2014. Corporate strategy development via numerical situation analysis. Benchmarking: An International Journal,21(4), pp.619-633.

DeFusco, R.A., McLeavey, D.W., Pinto, J.E., Anson, M.J. and Runkle, D.E., 2015. Quantitative investment analysis. John Wiley & Sons.

DiMasi, J.A., Grabowski, H.G. and Hansen, R.W., 2016. Innovation in the pharmaceutical industry: new estimates of R&D costs. Journal of health economics47, pp.20-33.

DeFusco, R.A., McLeavey, D.W., Pinto, J., Runkle, D.E. and Anson, M.J., 2015. Quantitative investment analysis. John Wiley & Sons.

Florou, A. and Pope, P.F., 2012. Mandatory IFRS adoption and institutional investment decisions. The Accounting Review, 87(6), pp.1993-2025.

Gibson, M. ed., 2016. Pharmaceutical preformulation and formulation: a practical guide from candidate drug selection to commercial dosage form. CRC Press.

Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Healy, P.M. and Palepu, K.G., 2012. Business Analysis Valuation: Using Financial Statements. Cengage Learning.

Jami, M. and Bahar, M.N., 2016. Analysis of Profitability Ratios to Evaluation of Performance of Indian Automobile Industry. Journal of Current Research in Science, (1), p.747.

Lawrence, A., 2013. Individual investors and financial disclosure. Journal of Accounting and Economics, 56(1), pp.130-147.

Ledgerwood, J., 2014. Microfinance handbook: an institutional and financial perspective. World Bank Publications.

Oxford Biomedica, 2016. About. [Online] Available at: http://www.oxfordbiomedica.co.uk/about-us/ [Accessed 18 July 2016].

Roschangar, F., Sheldon, R.A. and Senanayake, C.H., 2015. Overcoming barriers to green chemistry in the pharmaceutical industry–the Green Aspiration Level™ concept. Green Chemistry17(2), pp.752-768.

Skyepharma, 2016. About. [Online] Available at: http://www.skyepharma.com/ [Accessed 18 July 2016].

 Ormiston, A. and Fraser, L.M., 2013. Understanding financial statements. Pearson Education.

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & Managerial Accounting. John Wiley & Sons.

Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.

Warren, C.S., Reeve, J.M. and Duchac, J., 2013. Financial & managerial accounting. Cengage Learning.

 

Appendices

Appendix A:  Trend Analysis of Income statement

 

2014

2015

2014

2015

Sales

13,618

15,909

100%

116.82

Cost of sales

5,839

4,416

100%

75.629

Gross Profit

9,202

10,070

100%

109.43

Research development and bioprocessing cost

20,274

16,986

100%

83.782

Administrative expenses

3,957

6,741

100%

170.36

Other operating income

1,128

2,862

100%

253.72

Operating loss

10,613

14,083

100%

132.7

Finance income

53

26

100%

49.057

Finance cost

238

2,925

100%

1229

Net profit before taxation

10,798

16,982

100%

157.27

Provision for taxation

2,137

3,963

100%

185.45

Loss and total comprehensive expense for the year

8,661

13,019

100%

 

150.32

Loss per share - basic and diluted (Rupees)

0.43

0.51

100%

118.6

     

 

 

Appendix B: Horizontal Analysis

 

 

2014

2015

Sales

100%

16.823

Cost of sales

100%

-24.371

Gross Profit

100%

9.4327

Research development and bioprocessing cost

100%

-16.218

Administrative expenses

100%

70.356

Other operating income

100%

153.72

Operating loss

100%

32.696

Finance income

100%

-50.943

Finance cost

100%

1129

Net profit before taxation

100%

57.27

Provision for taxation

100%

85.447

Loss and total comprehensive expense for the year

100%

50.318

Loss per share - basic and diluted (Rupees)

100%

18.605

 

 

Appendix C: Vertical Analysis of income statement for year 2015

 

2015

Sales

100%

Cost of sales

28%

Gross Profit

63%

Research development and bioprocessing cost

107%

Administrative expenses

42%

Other operating income

18%

Operating loss

89%

Finance income

0%

Finance cost

18%

Net profit before taxation

107%

Provision for taxation

25%

Loss and total comprehensive expense for the year

82%

Loss per share - basic and diluted (Rupees)

0%

   
 

 

 

Appendix D: Vertical Analysis of income statement for year 2014

 

2014

2014

Sales

13,618

100%

Cost of sales

5,839

43%

Gross Profit

9,202

68%

Research development and bioprocessing cost

20,274

149%

Administrative expenses

3,957

29%

Other operating income

1,128

8%

Operating loss

10,613

78%

Finance income

53

0%

Finance cost

238

2%

Net profit before taxation

10,798

79%

Provision for taxation

2,137

16%

Loss and total comprehensive expense for the year

8,661

64%

Loss per share - basic and diluted (Rupees)

0.43

0%

     
 

 

Appendix E: Trend Analysis of Balance Sheet

 

2014

2015

 

Equity and Liabilities

   

 

Ordinary shares

25659

25741

0.3196

Share premium account

141,615

141,677

0.0438

Merger reserve

2,291

2,291

0

Treasury reserve

-226

-102

-54.867

Other reserve

-682

 

 

Accumulate losses

145,618

158,713

8.9927

Total Equity

23,039

10,894

-52.715

     

 

Non-Current Liabilities

   

 

Loans

1,000

27,255

262.5

Provisions

535

533

-0.37

Total Non-Current Liabilities

1,535

27,788

1710.3

     

 

Current Liabilities

   

 

Trade and other payables

6,304

9,268

47.018

Deferred income

2,927

3,045

4.03

Provisions

 

838

 

Total Current Liabilities

9,231

13,169

42.661

     

 

Assets

   

 

Non-Current Assets

   

 

Property, plant and equipment

8,944

24,396

172.76

Intangible assets

2106

1743

-17.236

Investment in subsidiaries

   

 

Total non-current assets

11,050

26,139

136.55

     

 

Current Assets

   

 

Inventories

1,407

2,706

92.324

Trade and other receivables

5,153

10,930

112.11

Current tax assets

2,000

2,721

36.05

Cash and cash equivalents

14,195

9,355

-34.097

Total Current Assets

22,755

25,712

12.995

Net assets

23,039

10,894

-52.715

Appendix F: Horizontal Analysis of Balance Sheet

 

 

2014

2015

2014

2015

Equity and Liabilities

       

Ordinary shares

25659

25741

100%

100.32

Share premium account

141,615

141,677

100%

100.044

Merger reserve

2,291

2,291

100%

100

Treasury reserve

-226

-102

100%

45.1327

Other reserve

-682

 

100%

0

Accumulate losses

145,618

158,713

100%

108.993

Total Equity

23,039

10,894

100%

47.285

         

Non-Current Liabilities

       

Loans

1,000

27,255

100%

2725.5

Provisions

535

533

100%

99.6262

Total Non-Current Liabilities

1,535

27,788

100%

1810.29

         

Current Liabilities

       

Trade and other payables

6,304

9,268

100%

147.018

Deferred income

2,927

3,045

100%

104.031

Provisions

 

838

100%

 

Total Current Liabilities

9,231

13,169

100%

142.661

         

Assets

       

Non-Current Assets

       

Property, plant and equipment

8,944

24,396

100%

272.764

Intangible assets

2106

1743

100%

82.7635

Investment in subsidiaries

       

Total non-current assets

11,050

26,139

100%

236.552

         

Current Assets

       

Inventories

1,407

2,706

 

192.324

Trade and other receivables

5,153

10,930

100%

212.109

Current tax assets

2,000

2,721

100%

136.05

Cash and cash equivalents

14,195

9,355

100%

65.9035

Total Current Assets

22,755

25,712

100%

112.995

Net assets

23,039

10,894

100%

47.285

 

Appendix G: Vertical Analysis of balance sheet for year 2014

For year 2014

2014

 

Equity and Liabilities

   

Ordinary shares

25659

76%

Share premium account

141,615

419%

Merger reserve

2,291

7%

Treasury reserve

-226

-1%

Other reserve

-682

-2%

Accumulate losses

145,618

431%

Total Equity

23,039

68%

   

0%

Non-Current Liabilities

 

0%

Loans

1,000

3%

Provisions

535

2%

Total Non-Current Liabilities

1,535

5%

   

0%

Current Liabilities

 

0%

Trade and other payables

6,304

19%

Deferred income

2,927

9%

Provisions

 

0%

Total Current Liabilities

9,231

27%

Total Equity and Liabilities

33,805

 

 

Assets

   

Non-Current Assets

   

Property, plant and equipment

8,944

26%

Intangible assets

2106

6%

Investment in subsidiaries

 

0%

Total non-current assets

11,050

33%

     

Current Assets

   

Inventories

1,407

4%

Trade and other receivables

5,153

15%

Current tax assets

2,000

6%

Cash and cash equivalents

14,195

42%

Total Current Assets

22,755

67%

Net assets

23,039

68%

     

Total Assets

33,805

100%

Appendix H: Vertical Analysis of balance sheet for year 2015

For year 2015

 

 

 

2015

 

Equity and Liabilities

   

Ordinary shares

25741

50%

Share premium account

141,677

273%

Merger reserve

2,291

4%

Treasury reserve

-102

0%

Other reserve

 

0%

Accumulate losses

158,713

306%

Total Equity

10,894

21%

   

0%

Non-Current Liabilities

 

0%

Loans

27,255

53%

Provisions

533

1%

Total Non-Current Liabilities

27,788

54%

   

0%

Current Liabilities

 

0%

Trade and other payables

9,268

18%

Deferred income

3,045

6%

Provisions

838

2%

Total Current Liabilities

13,151

25%

Total Equity and Liabilities

51,833

100%

 

Assets

   

Non-Current Assets

   

Property, plant and equipment

24,396

47%

Intangible assets

1743

3%

Investment in subsidiaries

 

0%

Total non-current assets

26,139

50%

   

0%

Current Assets

 

0%

Inventories

2,706

5%

Trade and other receivables

10,930

21%

Current tax assets

2,721

5%

Cash and cash equivalents

9,355

18%

Total Current Assets

25,712

50%

Net assets

10,894

21%

     

Total Assets

51,851

100%

 

Appendix I: Liquidity Ratios

 

2014

2015

Current Assets

22,755

25712

Current Liabilities

9231

13169

Current Ratio

2.465063

1.9524641

Quick Assets

21,348

23,006

Quick Ratio

2.312642

1.7469815

Working Capital

13,524

12543

Working Capital Ratio

0.400059

0.2419047

 

Appendix J: Activity Ratios

 

2014

2015

Debtors collection period

-

-

Debtors turover

-

-

Inventory on hand

-

29.2538

Inventory turnover

-

3.12922

Creditors payment period

-

-

Creditors turnover

-

-

 

Appendix K: Solvency Ratios

 

2014

2015

Equity ratio

0.6815264

0.2101

Debt ratio

0.3184736

1

Solvency ratio

3.1399777

1.26654

Debt -equity ratio

0.4672946

3.75794

 

 

 

Appendix L: Trend Analysis

 

2014

2015

 

Sales

74

96

129.946

Cost of sales

-33

-43

131.003

Gross Profit

41

53

129.095

Research development and bioprocessing cost

-12

-15

123.14

Administrative expenses

-2

6,741

-449400

Other operating income

1,128

2,862

253.723

Operating loss

10,613

14,083

132.696

Finance income

53

26

49.0566

Finance cost

-26

2,925

-11471

Net profit before taxation

10,798

16,982

157.27

Provision for taxation

2,137

3,963

185.447

Loss and total comprehensive expense for the year

8,661

13,019

150.318

Loss per share - basic and diluted (Rupees)

0.43

0.51

118.605

       

Appendix M: Horizontal Analysis

 

2014

2015

 

Sales

74

96

29.9458

Cost of sales

-33

-43

31.003

Gross Profit

41

53

29.0954

Research development and bioprocessing cost

-12

-15

23.1405

Administrative expenses

-2

6,741

-449500

Other operating income

1,128

2,862

153.723

Operating loss

10,613

14,083

32.6958

Finance income

53

26

-50.943

Finance cost

-26

2,925

-11571

Net profit before taxation

10,798

16,982

57.2699

Provision for taxation

2,137

3,963

85.4469

Loss and total comprehensive expense for the year

8,661

13,019

50.3175

Loss per share - basic and diluted (Rupees)

0.43

0.51

18.6047

       

 

Appendix N: Vertical Analysis

 

2014

2015

Sales

100%

100%

Cost of sales

43%

28%

Gross Profit

68%

63%

Research development and bioprocessing cost

149%

107%

Administrative expenses

29%

42%

Other operating income

8%

18%

Operating loss

78%

89%

Finance income

0%

0%

Finance cost

2%

18%

Net profit before taxation

79%

107%

Provision for taxation

16%

25%

Loss and total comprehensive expense for the year

64%

82%

Loss per share - basic and diluted (Rupees)

0%

0%

     

 

Appendix O: Trend Analysis of balance sheet

 

2014 (m)

2015 (m)

2014

2015

Equity and Liabilities

       

Share capital

179.4

179.4

100%

100

Share premium account

407

407

100%

100.04914

Translation reserve

-28

-28

100%

100

Own-share reserve

0

0

100%

0

Other reserve

9

0

100%

0

Accumulate losses

-544

-510

100%

93.729312

Total Equity

24

50

100%

211.44068

         

Non-Current Liabilities

       

Deferred income

6.9

0.1

100%

1.4492754

Retirement obligation

-5.9

-6.4

100%

108.47458

Loans

-12

-5

100%

40.677966

Provisions

0

0

100%

0

Deferred taxation

-5

-4

100%

76

Total Non-Current Liabilities

-30

-15

100%

51.342282

         

Current Liabilities

       

borrowings

-5.6

-1.6

100%

28.57

Trade and other payables

-29

-30

100%

105.26316

Corporate taxation payable

-1

-4

   

Deferred income

-3

-1

100%

26.666667

Provisions

-1

-1

100%

127.27273

Total Current Liabilities

-30

-15

100%

51.342282

total liabilities

-69

-53

100%

77.583697

Total equity and liabilities

93

103

100%

111.12

Assets

       

Non-Current Assets

       

Property, plant and equipment

22

25

100%

113.18182

Intangible assets

6.1

6.5

100%

106.55738

deferred taxation

3.3

1.9

100%

57.575758

Total non-current assets

31

34

100%

109.67742

         

Current Assets

       

Inventories

10

9

100%

89.423077

Trade and other receivables

15

15

100%

102.05479

other financial assets

0

0

100%

0

Cash and cash equivalents

32

41

100%

126.85185

Total Current Assets

57

65

100%

113.93728

Total Assets

92

103

100%

111.80932

 

Appendix P: Horizontal Analysis

 

2014

2015

2015

Equity and Liabilities

     

Share capital

179.4

179.4

0

Share premium account

407

407

0.04914

Translation reserve

-28

-28

0

Own-share reserve

0

0

 

Other reserve

9

0

-100

Accumulate losses

-544

-510

-6.2707

Total Equity

24

50

111.441

       

Non-Current Liabilities

     

Deferred income

6.9

0.1

-98.551

Retirement obligation

-5.9

-6.4

8.47458

Loans

-12

-5

-59.322

Provisions

0

0

 

Deferred taxation

-5

-4

-24

Total Non-Current Liabilities

-30

-15

-48.658

       

Current Liabilities

     

borrowings

-5.6

-1.6

-71.429

Trade and other payables

-29

-30

5.26316

Corporate taxation payable

-1

-4

500

Deferred income

-3

-1

-73.333

Provisions

-1

-1

27.2727

Total Current Liabilities

-30

-15

-48.658

total liabilities

-69

-53

-22.416

Total equity and liabilities

93

103

11.1231

Assets

     

Non-Current Assets

     

Property, plant and equipment

22

25

13.1818

Intangible assets

6.1

6.5

6.55738

deferred taxation

3.3

1.9

-42.424

Total non-current assets

31

34

9.67742

       

Current Assets

     

Inventories

10

9

-10.577

Trade and other receivables

15

15

2.05479

other financial assets

0

0

 

Cash and cash equivalents

32

41

26.8519

Total Current Assets

57

65

13.9373

Total Assets

92

103

11.8093

 

Appendix Q: Vertical Analysis of Balance Sheet

 

2014

2015

Equity and Liabilities

   

Share capital

194%

174%

Share premium account

440%

396%

Translation reserve

-30%

-27%

Own-share reserve

0%

0%

Other reserve

10%

0%

Accumulate losses

-587%

-495%

Total Equity

25%

48%

 

0%

0%

Non-Current Liabilities

0%

0%

Deferred income

7%

0%

Retirement obligation

-6%

-6%

Loans

-13%

-5%

Provisions

0%

0%

Deferred taxation

-5%

-4%

Total Non-Current Liabilities

-32%

-15%

 

0%

0%

Current Liabilities

0%

0%

borrowings

-6%

-2%

Trade and other payables

-31%

-29%

Corporate taxation payable

-1%

-4%

Deferred income

-3%

-1%

Provisions

-1%

-1%

Total Current Liabilities

-32%

-15%

total liabilities

-74%

-52%

Total equity and liabilities

100%

100%

Assets

   

Non-Current Assets

   

Property, plant and equipment

24%

24%

Intangible assets

7%

6%

deferred taxation

4%

2%

Total non-current assets

34%

33%

 

0%

0%

Current Assets

0%

0%

Inventories

11%

9%

Trade and other receivables

16%

14%

other financial assets

0%

0%

Cash and cash equivalents

35%

40%

Total Current Assets

66%

63%

Total Assets

100%

100%

 

Appendix R: Liquidity Ratio

 

2014

2015

Current Assets

57

65

Current Liabilities

30

15

Current Ratio

1.926174497

4.27451

Quick Assets

47

56

Quick Ratio

1.577181208

3.666667

Working Capital

87

80.7

Working Capital Ratio

0.944745395

0.781977

 

Appendix R: Activity Ratio

Debtors collection period

-

Debtors turnover

-

Inventory on hand

20.04041249

Inventory turnover

8.95191155

Creditors payment period

-

Creditors turnover

-

 

Appendix S: Solvency Ratio

 

2014

2015

Equity ratio

0.255688

0.48353

Debt ratio

0.744312

0.5165

Solvency ratio

1.343523

1.9362

Debt -equity ratio

2.911017

1.0681

 

Appendix T: Profitability Ratio

 

 

2014

2015

Gross profit margin

55%

55%

Net profit margin

14631%

17708%

Return on capital employed

 

27337%

 


Get in Touch With us

Get in touch with our dedicated team to discuss about your requirements in detail. We are here to help you our best in any way. If you are unsure about what you exactly need, please complete the short enquiry form below and we will get back to you with quote as soon as possible.