GlaxoSmithKline PLC

GlaxoSmithKline Plc (LON: GSK) is a healthcare company, which focuses on the manufacturing, commercialisation, and development of pharmaceuticals vaccines and consumer healthcare products. The company offers over the counter (OTC) products for pain, relief, nutrition, skin health, oral health, and gastrointestinal disorders.

On 5^th February 2020, the company will announce the Q4 2019 results.

Recent News
On 21^st December 2019, ViiV Healthcare, is the international specialist HIV business majority-owned by the company (GSK), with Shionogi Limited and Pfizer Inc. as investors, received a CRL (complete response letter) from the US FDA (Food and Drug Administration).

Financial Highlights (Q3 and 9M ended 30 September 2019)
In the nine months of the financial year 2019, the company’s total revenue stood at £24,855 million and increased by 10 per cent (AER), while increased by 7 per cent on CER basis.The company’s pharmaceuticals sales increased by 4 per cent (AER) to £12,996 million, while on a CER basis, sales increased by 1 per cent.  In Vaccines, sales surged by 23 per cent (AER) to £5,415 million, while on a CER basis, sales increased by 19 per cent. In the Consumer Healthcare segment, sales stood at £6,424 million.

The company’s operating profit went up by 29 per cent (AER) to £5,059 million for 9M FY2019versus £3,929 million for 9M FY2018. The PBT (Profit before tax) surged by 22 per cent (CER) from £3,426 million for 9M FY2018 to £4,510 million for 9M FY2019. The company’s PAT (Profit after tax) increased by 37 per cent (AER) to £3,751 million for 9M FY2019 from £2,746 million for 9M FY2018. The company’s earnings per share surged by 38 per cent (AER) to 67.7 pence for 9M FY2019 from 49 pence for 9M FY2018. For the nine months ended 30 September 2019, the adjusted EPS increased by 12% (AER) or 7% (CER) to 99.2 pence as compared with the corresponding period of the last year.

In the third quarter of 2019, the net cash inflow from operating activities stood at £2,515 million (Q3 2018: £2,077 million) and free cash flow was reported at £1,939 million (Q3 2018: £1,554 million).The surged in free cash flow mainly reflected enhanced operating profits, reduced dividend payments to non-controlling interests, and a lower seasonal increase in inventory and trade receivables. While net cash inflow from operating activities was £4,567 million and free cash flow was £2,474 million in 9M FY2019.

Share Price Performance

Daily Chart as at January-07-20, before the market closed (Source: Thomson Reuters)

On 7th January 2020, GlaxoSmithKline PLC shares were trading at GBX 1,765.80 at the time of writing before the market close (at 8:15 AM GMT), down by 0.26% against the previous day closing price. Stock's 52 weeks High and Low are GBX 1,850.40/GBX 1,429.80. The company's stock beta stood at 0.86, reflecting the lower volatility as compared to the benchmark index.

The shares of the company have delivered a positive return of around 2.37 per cent in the last month. In the last six months, the company’s stock has given investors approximately 7.94 per cent of a positive return.

Conclusion
The company’s business segments have performed well during the third quarter of FY2019. On a CER basis, the company’s adjusted EPS will be approximately flat in 2019. In the financial year 2019, the company anticipate a reduction in adjusted EPS in the range of 3-5 per cent at CER basis. The company’s new guidance reflects operating performance in the nine months of the financial year 2019, a lower anticipated effective tax rate of approximately 17% for the year, and increased investment in R&D and priority assets. For 2019, the company expects to maintain the dividend per share at the existing level of 80 pence.
In the third quarter of 2019, the company had made further good progress, with sales growth across all three segments.The company had also upgraded the full-year 2019 EPS guidance. In the current period, the company has maintained to reinforce the pipeline and have advanced assets in Respiratory, HIV and, Oncology. The company has raised its earnings, with strength in its consumer health and vaccines business offsetting weakness in its pharmaceutical’s unit caused by the launch of a generic rival to its asthma treatment Advair. With the completion of the new Consumer Healthcare Joint Venture with Pfizer, GlaxoSmithKline has attained a substantial milestone and also to build a new world prominent consumer healthcare business.

Based on the decent prospects, we have given a "Hold" recommendation, at the current price of GBX 1,765.80 (as on 7^th January 2020, before the market close).

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