Drug Industry Tops UK Profit Ratios

Pharmaceutical companies have the highest profit margins of all industrial groups in the UK, according to a report entitled The CCN Corporate Health Check - An Economic Analysis of UK plc, published by CCN.

The pharmaceutical industry stands out as having maintained a generally rising trend in profitability over most of the past decade, says the report. Although the return on capital employed has declined since 1991, it stood at 30% in 1994 - well above the national average of 9.7%, and nearly double that of the next best industrial sector, namely miscellaneous services, which generated a return of 17% in 1994.

The pretax margin on turnover has been exceptionally high, generally at around 20% since the mid-1980s. The margin of over 22% in 1994 is the best level achieved in the last decade and is three times the national average, notes the report. The traditionally high levels of profitability have helped to maintain high returns on shareholders' funds, and in 1994 produced a figure of 40%, well over twice the national average of 16%.