GlaxoSmithKline Plc (GSK) is a Brentford, United Kingdom-based science-led global healthcare company which focuses on the development, manufacture and commercialisation of pharmaceuticals, vaccines and consumer healthcare products. The company’s operations are differentiated in three operating segments: Pharmaceuticals, Vaccines and Consumer Healthcare products, with Pharmaceuticals being the largest segment. It also differentiates its operations in three geographical areas: The United States, Europe and Rest of World, with the US being the largest single commercial market, representing 39% of revenue.
Financial Updates (Q1 FY 2019, in £m)
(Source: Company Filings)
In Q1 FY19, GSK’s reported revenue stood at £7,661 million as compared with £7,222 million in Q1 FY18. Revenue in all the three businesses grew by 5% on a constant currency basis (CER) and by 6% on the annual equivalent rate (AER). Total operating profit was £1,428 mn in Q1 FY19 versus £1,240 mn in Q1 FY18, while total operating margin stood at 18.6%. Driven by strong sales growth and phasing of R&D, adjusted operating profit was higher by 12% at AER to £2,163 million, while it was up by 9% at CER. Adjusted operating margin stood at 28.2%, improved by 100 basis points on a CER basis and 160 basis points higher at AER. Reflecting improved trading performance and reduction in non-controlling interest allocation of Consumer Healthcare, earnings per share of the group stood at 16.8p, up by 50% on AER basis and by 42% on a CER basis as well, while adjusted earnings per share were up by 22% on AER basis to 30.1p (18% CER basis). For the first quarter, net cash flow from operations stood at £663m & Free cash flow (FCF) accounted at £165m. For FY 2019, the company expects to maintain the dividend for 2019 at the current level of 80p per share, while adjusted EPS is expected to decline in the range of -5% to -9% at CER.
Share Price Commentary
Daily Chart as at May-14-19, before the market closed (Source: Thomson Reuters)
On 14th May 2019, at the time of writing (before the market closed, GMT 12:40 pm), GSK shares were trading at GBX 1,521.40, up by 0.60 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 1,648.80/GBX 1,408.80. On the fundamental front, the company was trading at a trailing twelve months P/E multiple of 13.0x. The company’s stock beta was 1.01, reflecting the same volatility as compared to the benchmark index. Total outstanding market capitalisation was around £75.64 billion with a dividend yield of 5.29 per cent.
The healthcare industry remains intensely competitive and is highly regulated with public scrutiny of drug companies increasing. There is also a threat of regulation of drug prices. Companies are increasingly looking to strengthen their pipelines and portfolios through acquisitions and collaborations. In future, demand for both therapeutic and preventive will be driven by demographic change. Keeping in mind the bright prospects for the company, investors should keep an eye on the stock going forward.
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