Sbpl

The company has decided to pamper its shareholders by rewarding them with a dividend of 50 per cent and a generous 1:1 bonus. The stock market's response was predictable with the stock being marked up Rs 13 to Rs 599 on Wednesday. The current market price discounts SBPL's 1997 earnings per share (EPS) of Rs 22.6 by 26.6 times.

Analysts feel that, apart from its excellent financial performance, the bonus issue is also to retain fancy among investors. This is owing to the active interest shown by the parent company SmithKline Beecham Plc in its one hundred per cent subsidiary -- SmithKline Beecham Asia Private Ltd(SBAP).

 

The investments in and the brand acquisitions routed through SBAP had cast a shadow over the future of SBPL.

This will also improve SBPL's valuations so that it has a better bargaining power in the case of a merger with Glaxo.

Turnover growth has been boosted by the high offtake of Augmentin -- combination of amoxycillin and potassium clavulanate. This broad spectrum anti-ineffective introduced two years back registered a growth of 70 per cent in 1996.

Impressive growth of 'Engerix'- SBPL's hepatitis-B vaccine brand also aided overall sales growth. This brand is cashing in on the increasing threat of hepatitis-B in the country and the absence of major competition in this segment. However, analysts feel that with the entry of other players in this segment, SBPL will have to strive hard to sustain growth in this segment.

The operating profit margin improved significantly, to 20.5 per cent from 17.5 per cent last year. This is partly due to lower wage costs on account of a Rs 7 crore voluntary retirement scheme implemented in 1995. The impact was not felt in the 1996 results due to the three year wage agreement pact.

The other major performance highlight is the low interest outflow of Rs 0.52 crore. SBPL attributed its zero debt status to efficient working capital management.

While SBPL's sales grew by 76 per cent between 1994 and 1997 its inventory and receivables growth was just 15 per cent during this period. SBPL plans to install an enterprise resource planning system (ERP) which will further enable it to integrate operations and have better control over working capital costs. These measures will help its shareholders when the merger with Glaxo comes through.

Other income was partly responsible for the healthy bottom line growth, as it grew 229 per cent to Rs 8.03 crore and accounted for nearly 16 per cent of the profit before tax.

Lower tax rates resulted in a lower tax outflow as the effective tax rate was at 35 per cent in 1997 compared to 41 per cent a year ago.