GlaxoSmithKline a global healthcare company that develops, manufactures and markets pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products. I have a holding in my income portfolio (epic code: GSK).
Glaxo announced their 3rd quarter results today and in summary revealed that turnover for the quarter was up 1% to £6,510m, with turnover for the nine months being flat at £19,599m. Sales were up in all geographic areas in the quarter except EMAP, due to a 61% decline in China as a result of the on-going corruption investigations.
Core operating profit was £2,059m, an 11% increase for the quarter and for the nine months flat at £5,927m. Core EPS for the quarter was 28.9p an increase of 16% and for the nine months 82.1p an increase of 5%.
On a clean reported basis, EPS was 19.7p for the quarter down 11.3% and 60.3p for the nine months down 17.2%. A 3rd quarter dividend has been declared of 19p an increase of 5.6%, which makes 55p for the nine months an increase to date of 5.8%.
Free cash flow (FCF) was stronger for the nine months than last year generating £3,557m compared to £2,026m. Net debt has increased from £14,054m at the beginning of the year to £15,088m, due to payments from FCF of £2,816m in dividends, £905m in share repurchases, £588m to increase the shareholding in their Indian Consumer Healthcare subsidiary from 43.2% to 72.5% and the acquisition of Okairos AG for £205m.
It was good to see that Seretide/Advair (23% of pharma sales, 20% of group) is still holding up to generic competition with minor declines of 1% in USA and Europe.
Glaxo have been busy on the new drug approval front with four new approvals so far this year, from 6 identified at the beginning of the year as likely candidates.
It is clear that although sales in China have historically accounted for less than 4% of Glaxo's sales, the corruption probe will create a negative back-drop to the share price, until the quantum of the potential liability is known.
Management have reiterated their guidance for the full year of core EPS growth of 3-4% and sales growth of around 1% using constant exchange rates.
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