Abstracts and thoughts based on previous four annual reports and some news articles:
Revenue Growth between 2006 – 2010 at 12-14% rate
2010 Turnover up 13% PAT up 45%, PE Ratio 10 -12
2011 Turnover up 28% PAT up 16% PE Ratio 10
15 new products were launched in 2011 ! This is a great innovation metric used by 3M and Google. It quantifies an otherwise black art of innovation estimation.
3M mandates that 35% of the revenues should come from products launched in the past four years. The company stands out distinctly with its assorted collection of knick knacks.
GSK stood out in the past decade on this score. Some organisations call it “vitality index” or “innovation index”, measured as new product revenues divided
by total revenues. New product in Silicon Valley may be 9 months, 3 years in most industries or 10 years in Airline industry. There are books on the subject, we will leave
management consulting to the experts and leave ourselves with business analysis and its side effects of getting rich.
The company was confident of double digit growths around this time. Company had planned more launches in 2012 based on science and deep consumer insight.
Company also enjoyed an astounding 5 billion Naira CFO in 2011 vs 3.2 Billion Naira in 2010
Page #51 of AR 2011 is a delightful sight, dividends have increased with clockwork precision at 30% CAGR from 12 kobo in year 2000, to 120 kobo in year 2010. (1 Nigerian Naira = 100 kobo just as 1 $ = 100 cents)
In 2012 The turnover was up 18%, PAT of 23%
Government reduced subsidy on fuel, resulting in 12% inflation.
Real growth rates in Nigeria, however, continued to be as good as 9% between 2009-2012
In 2012 GSK introduced Lucozade Boost Can.
Company writes “Introduction of new products has contributed considerably”, innovation index brownie points!
In 2012 B/S of 21 Billion Nigerian Naira with 10 Billion Retained Earnings, 8.2 Billion Trade Payables, no long term debt, some taxes payable looks like is an adorable garden nestled in a fortress.
Depreciation growth is moderate (cool), 810 Million this year (vs 738 million previous year)
2013 Turnover is up 13% PAT up 3% PE Ratio of 20
GSK Nigeria now 4th best place to work out of 38. Introduced a whole raft of goodies. Ribena Can, Ribena Pineapple, Ribena Cherry. Lucozade extends flavours to cola, cherry, tropical, raspberry, orange. Sensodyne Rapid Action is introduced, McCleans Sachet ! wow taking a cue from Hindustan Unilever in India for shampoos, should do well.
CFO 4.9 Billion up from 3.7 billion. Out of 29 Billion Naira revenues 20 derived from Consumer, other 9 billion from Pharma.
Between 2000 – 2013, i.e. 14 year period revenues rise from 2.9 Billion to 29 Billion. PBT from 97 million to 4.3 billion. Fixed asset formation from 400 million to 12 billion .
26 billion B/S still looks like an invincible iron man. Current PE of 18 is still marked down. Unbelievably at 20% growth it was available at 10 PE.
Personal Opinion: GSK is not very competitive against Pharma companies of developing world, nor is Reckitt Benckiser in consumer space. Products are not made with price attractive for developing world. Most products introduced in the recent five years are in consumer space.
A tragedy for GSK Nigeria is that whilst Lucozade and Ribena was not important for GSK Parent, they are significant for Nigerian entity, where the company derived 54% of consumer revenues in 2013 in Nigeria. These brands are famous in over 100 countries and are found in tiniest of countries (Nigeria is a warm country). In 2013 Japan’s Suntory bought the rights for these two brands globally from GSK for 2.1 Billion USD. While Suntory has not started manufacturing these two products yet in Nigeria, the entity in Nigeria will have to commence royalties, hence profit numbers will suffer permanently. On top GSK has vowed to not build more than seven top brands in consumer space like Horlicks, McCleans, Sensodyne, Panadol (something I dislike). Need management interaction and more research before pulling trigger.
You can download ARs of GSK Nigeria from http://www.africanfinancials.com/Company_list.aspx?countryUID=11 or http://www.gsk.com.ng/
Nice to be in a position to say pass to a company considered par excellence with an infallible balance sheet. We do not own this yet but very well can any day, hence you should assume we have a bias to buy.
Disclosure: Vested interest in positions discussed. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.
SOURCE: Long Term Equities – Read entire story here.