Financial Insights and Business Intelligence Assignment Sample
Introduction
Insight means to understand the future impacts of decisions taken presently. A financial business partner might answer those questions or might ask them and allow the huge business in answering them. The financial manager makes the decisions on the basis of the recent performances of the business and accordingly plans their capital investment (Palepuet.al. 2020). The current report will require taking the public listed company and in this context organization GlaxoSmithKline (GSK) is undertaken. It is British multinational pharmaceutical organization head quartered in London and it stands on 6th largest pharmaceutical organization. The report will include the proposal of new project that would further support in managing the financial performance. The financial plan will be assessed and merits of the project will be described. Finally, overall financial analysis of the firm and project will be examined.
Task
Project idea that helps further improve the financial performance of a public company
According to the analysis of the annual report of the GSK, it is considered that organization has wider scope to invest in the project to increase their financial performance (GSK annual report, 2019). The idea of the project is to invest on high quality vaccines and specialty medicines portfolio as number of diseases is increasing after the situation of Covid-19. GSK has performed the major corporate transformation to identify long time issues for improving performance, strengthening capabilities and creating GSK for new future. The project has majorly strengthened its performance and productivity within R&D (Schuhmacheret.al. 2016). The commercial implementation will be raised more with new and specialty products and estimate 10 billion pound sales annually.
The investment will be done on the new vaccines by changing the group portfolio and networking within Pharma and Vaccines that will result into cost savings of 0.5 billion pound and proceeds through divestment of brands that are not core that will amount to 1.4 billion pound. For delivering more financial growth to the business by high quality vaccines project it will able to create the new world leading consumer healthcare business by radically transforming portfolio and resulting into sector leading profitability (Healthcare, 2020). The financial performance is just not improving through bringing the change in financial aspects but also needs to bring the significant leadership and cultural change for managing accountability and increasing ambition of team included in project.
The leaders might be given new role with new incentives and governance in managing all the major areas of the capital investment project. This change would give the platform to GSK to act as the global company that will bring major positive impacts on health of human and can provide compelling performance and influencing returns and shareholders’ value (Anderssonet.al. 2010). In the concerned project of high quality medicines, General medicines product group will include all of new GSK’s primary care brands that include older developed products along with inhaled respiratory portfolio. The reason to bring some changes is to have the broad stability of the sales over the time period of 2021-2026. The activity will be conducted for optimizing the general medicines for generating profits and cash in order to have support in capital investment in high quality vaccines and speciality medicines.
As the part of this proposed project, additionally streamlining of portfolio is expected by divestment or non-priority brands partnering. The project managers will work strongly with the R&D and commercial department for investment in the vaccines and speciality medicine that are estimated to have growth of around three quarters of the sales of the company by 2026. The project of quality medicines will relate to immunology/ respiratory, infectious diseases, oncology and HIV (Bhuiyan, 2011). The financial performance can be improved more as the project gives the opportunity rooted in immune and genetic science validation. Currently, GSK has 20 vaccines and 42 medicines in the pipeline that are categorised as best in the class and has potential to bring new quality medicines by undertaking the project that will raise the financial performance to the next level (GSK Investment plan, 2021).
Create a financial plan that critically evaluates a company performance and assesses the merits of the proposed project performance
Project financial planning is the procedure of identifying the cost of the project and making estimations on profits. The better financial plan includes benefits with profit estimations, lowering financial risks and plan for unexpected costs. There are mainly five components of financial plan that is evaluated below:
Defining financial goals: The financial goal of the organization is to increase the sales and profitability along with raising the dividends in the hand of shareholders. It is estimated that growth of sales by 5% and operating profit to be raised by 10% till the year 2021 (GSK Investment plan, 2021). The next is till 2031 the sales can be more than 33billion.
Cash flow estimations: The cash flow is seen to be important for carrying out the project in the manner it wants. The project estimated till 2026 the cash flow from operations shall be at least 10 billion that represent the success of the project. Out of the cash flow generated the dividend is to be paid to the shareholders from 2023 under progressive dividend policy.
Assessing risks: It is planned that there is less risk associated with the project in terms of finances as the annual report reflects that the organization has surplus investment to carry out such capital investment in the project (GSK annual report, 2019). Apart from financial risk, there can be other risks such as lack of team interest to work in collaboration, lack of time management and project time is big that can create the issues of conflicts among team members (Antony and Gupta, 2019). Therefore, timely training is essential to keep the interest of the team and project manager.
Defining investment strategy: It is being identified that the investment is conducted in order to have supportive growth and productivity. The financial manager strategy is to optimize the general medicine so that optimum sales and profits can be generated continuously and the same can be invested in the project of new vaccines and medicines. The manager has also planned to demerge with the organization in order to generate revenue and saving costs that can also be invested on the new project (Van der Zwan, 2014). In this manner, both the investment strategy would enable necessary funds arrangement and GSK has some surplus funds as well.
Review and refining plan regularly: It is important that to carry out the financial plan in the right manner it is essential to review and refine the plan continuously. It will continue support in making any changes and knowing such changes would require any additional cost or results in savings. The monitoring can be carried out through taking the feedbacks from the project team members and the improvements can be considered accordingly.
Benefits of the proposed project performance
- As the organization deals in helping people do more, feel better and live longer that directly links with the proposed project for GSK. By use of high quality vaccines and speciality medicines would support in bringing more life to the people by use of particular medicine that acts as the major benefit of the project (Zwikael al. 2018).
- The next is managing the sector lead ESG performance will be major part of new project strategy and key objective of the new organization (GSK Investment plan, 2021).
- The project will support in delivering of sustainable performance and long-time growth along with building trust with stakeholders, reducing operational risks and allows delivery of positive social influence.
- A critical success measure of new project in GSK is to impact health positively at scale as it is the core of organization objective and it is estimated that the speciality medicine will put positive influence on health of 2.5 billion individuals across world over the coming 10 years (GSK Investment plan, 2021).
- The project benefits by having sustainable sales and profitability, higher generation of cash and delivering influencing returns to shareholders (Zwikael al. 2019). The purpose of the project is to strengthen business balance sheet and raise value of shareholders in GSK business.
Financial analysis provided of the firm and project
It is analysed that the new project of quality vaccine and speciality medicine is expected to have the leverage ratio of maximum 2 times not more than this. It will ensure in giving higher cash flow generation and will give flexibility to support for future investment for growth in GSK. In the coming 5 years, it is expected that the GSK by this project will have cash flow generation of around 10 billion pound or more. Through the financial plan of the project, it is analysed that allocation of capital is the priority as it supports in strengthening pipeline that will be conducted through licensing of business development and investing in the successful launch of the medicines and vaccines. It is examined that it will raise the financial and operational sustainability and helps out in ensuring better dividend policy for its shareholders (Van der Zwan, 2014).
After implementation of project it is analysed that dividend pay-out ratio will be equal to 40-60%. It is also examined that the project will face some challenges in the healthcare industry as it considers consistent uncertainty in relation to Covid-19 impact. The project expects in delivering the sales growth and adjusted operational profit growth of more than 5%and 10% accordingly (GSK Investment plan, 2021). The growth of profit is estimated to underpin by integrating strong growth of revenue through new vaccines that manages operational performances and advantages from transformation of business from general to speciality medicine. However, this financial aspect has excluded the contribution from Covid19 revenue.
From the project, the organization is expecting to raise its operating margin from the year 2021 to 2026 by 30% (GSK Investment plan, 2021). The improvement in sales growth, sales mix advantages and results in cost saving that ultimately contributes in margin improvements. GSK has determined an additional annual savings of £200million from the demerger with other company and restructuring will be performed till 2022. With the project consistency, it is estimated that specific assets in later stage development has the capability in total to deliver the highest sales. The project of speciality medicines analyses that the sales growth till the year 2031. Overall, it can be predicted and analysed that the organization profits and sales will be increased with undertaking new proposed project that include demerger and restructuring of financial statements to bring the capital investment in the quality vaccines. The project financial aspects show the better rate of returns in hand of shareholders (Palepuet.al. 2020).
Conclusion
From the study, it can be concluded that the project proposed had been related to the pharmaceutical organization GSK. On the basis of financial statements and cash flow, the organization had better financial position that would supports in successful lead of proposed project. The project is connected with bringing quality vaccines and speciality medicines and its financial plan had shown the cash flow, risk and strategies adopted to generate the sales forecasted. The overall financial analysis had been demonstrated over the period of 10 years of the project including demerger and restructuring to carry out the project effectively.
References
Andersson, T., Gleadle, P., Haslam, C. and Tsitsianis, N., (2010). Bio-pharma: A financialized business model. Critical Perspectives on Accounting, 21(7), pp.631-641.
Antony, J. and Gupta, S., (2019). Top ten reasons for process improvement project failures. International Journal of Lean Six Sigma.
Bhuiyan, N., (2011). A framework for successful new product development. Journal of Industrial Engineering and Management (JIEM), 4(4), pp.746-770.
Healthcare, U.C., (2020). Where we operate You are currently visiting our global website.
Palepu, K.G., Healy, P.M., Wright, S., Bradbury, M. and Coulton, J., (2020). Business analysis and valuation: Using financial statements. Cengage AU.
Schuhmacher, A., Gassmann, O. and Hinder, M., (2016). Changing R&D models in research-based pharmaceutical companies. Journal of translational medicine, 14(1), pp.1-11.
Van der Zwan, N., (2014). Making sense of financialization. Socio-economic review, 12(1), pp.99-129.
Zwikael, O., Chih, Y.Y. and Meredith, J.R., (2018). Project benefit management: Setting effective target benefits. International Journal of Project Management, 36(4), pp.650-658.
Zwikael, O., Meredith, J.R. and Smyrk, J., (2019). The responsibilities of the project owner in benefits realization. International Journal of Operations & Production Management.
Online
GSK annual report,(2019). [Online]. [Accessed through] https://www.gsk.com/media/5892/strategic-report-2019.pdf [Accessed on 23 October, 2021]
GSK Investment plan,(2021). [Online]. [Accessed through] https://www.gsk.com/en-gb/media/press-releases/new-gsk-to-deliver-step-change-in-growth-and-performance-over-next-ten-years/ [Accessed on 23 October, 2021]
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