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Business Overview
GlaxoSmithKline Plc (GSK.L) is a healthcare company, which focuses on the development, manufacture and commercialisation of pharmaceuticals, vaccines and consumer healthcare products. It offers drugs for the treatment of HIV, respiratory, cancer, immuno-inflammation, anti-viral, central nervous system (CNS), metabolic, cardiovascular and urogenital, anti-bacterial, dermatology and rare diseases. The company offers over-the-counter (OTC) products for pain relief, oral health, nutrition, skin health and gastrointestinal disorders.
Recent Developments
- On 6 February 2019, GSK reported its full-year 2018 Final Results.
- On 5 February 2019, GSK and Merck announced their strategic pact to develop and distribute, M7824 immunotherapy.
- On 22 January 2019, GSK notified exchange that the company had completed the acquisition of TESARO, an oncology-focused pharmaceutical company, for a total cash consideration of $5.1 billion approximately.
- On 21 January 2019, GSK announced that Philip Hampton, Non-Executive chairman at GSK had shown its intention to step down from his post.
- On 19 December 2018, GSK announced that GSK and Pfizer Inc are going to combine their consumer health businesses to form a world leading Consumer Healthcare Joint Venture.
- On 3 December 2018, Company informed to sell off its Horlicks brand and other consumer healthcare nutrition products to the Dove soap maker Unilever.
Financial Highlights (GBP Million)
Result Commentary (FY 2018)
- In FY18, GSK reported sales growth in all its three segments, Pharmaceuticals business grew 2 %, Vaccines business grew 16%, and Consumer Healthcare business grew 2% respectively.
- Under the Pharmaceuticals business segment, new respiratory products sales grew by 38%, HIV & Dolutegravir medicine sales increased by 11%, and 16% and Benlysta sales grew by 29% respectively on Y-O-Y basis.
- Under the Vaccines business segment, US vaccines sales grew by 48%, and Meningitis vaccines sales rose by 2% respectively.
- Under the Consumer Healthcare business segment, Wellness sales grew by 1%, Oral health products sales increased by 4 per cent, Nutritional sales grew by 1%, and Skin sales decreased by -1% respectively on a year-on-year basis.
- The company reported a gross profit of GBP 20,580 million, up 4% compared to its FY17 gross profit.
- Operating profit and pre-tax profit of the company grew significantly in FY18 and were up by 31% and 36% respectively as compared to its FY17 numbers.
- Net Profit (Attributed to Shareholders) in FY18 grew by 136 % at GBP 3,623 million.
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Key Ratios
Ratios Commentary
- GSK's gross margin of 68.5% during FY18 is trending towards the industry median of 72.3%, although GP margin in FY18 was a bit lower than the FY17 GP margin.
- EBITDA margin of 32.3% for FY18 stood considerably higher than the industry median of 24.6%.
- Pre-tax and Post-tax margins of 15.6% and 13.5% surged when compared with the industry average of 9.9% and 6.7% in FY18.
- ROE stood at 174.7% which is remarkably higher than the industry median of 13.2%.
- Although at liquidity front, GSK's liquidity position is much lower than the industry median of 1.93 in terms of current ratio.
- The company is highly leveraged as compared to its peers. High debt sucked out liquidity from the company.
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Stock Performance
(Source: London Stock Exchange)
At the closing price, the stock was trading 5% lower than its 52w High and 23% higher than its 52w low, which shows that share has the potential to make a new high. From a technical standpoint, the stock was trading above its 200, 100, 50 and 30 days' simple moving average (SMA). From valuation front, the stock was trading at a Trailing-Twelve-Month (TTM) PE of 13.1x compared to the industry median of -2.0x.
