GlaxoSmithKline’s (GSK) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Sir Andrew Witty – CEO

Solid top line growth

“…we delivered a strong second quarter, with group sales up 4% CER to £6.5 billion. Sales growth was generated across all three businesses in the company, and was particularly driven by new pharmaceutical and vaccine products.”

Cost control enabling solid bottom line growth

“..with the continued progress we are making on cost control, and the delivery of integration and restructuring benefits, which are tracking ahead of schedule. Taking together for the quarter, we have delivered core earnings per share of £0.245, up 16% on constant currency basis. For the half year, core EPS growth was 12% CER”

Expected to deliver on EPS projections despite the expected currency headwinds

“…we now expect to deliver core EPS of the upper end of the guidance we gave to investors in the first quarter. With 2016 core EPS percentage growth now expected to be 11% to 12% in constant currency terms. Clearly, currency has had a significant impact on our results for the quarter, both in total and core reporting”

There are several Intermediate term concerns resulting from the Brexit

“ There are clearly lots of downside risks of separating the U.K. out, but there are possible upsides. So I think where U.K. regulatory decisions go, will be a very important issue, number one. Number two, parallel trade, so will there continue to be a free movement of goods, between the U.K. and continental Europe?…There is the potential for increased complexity in the supply chain, if Britain were to separate from the European regulator…You could paint a picture, which says, in the long run, a standalone British regulator doesn’t have as much influence globally, and you do less clinical research in the U.K., and that over time, starts to have an influence on where you might want to do your long term research, which is a very long term question, but is clearly a possibility.”


Simon Dingemans – CFO

Positive but even growth expected in H2

“After the strong start to the year, we now expect growth for the two halves to the year to be more evenly balanced than we previously thought, and with the additional visibility we now have, we have tightened up the range for our guidance to the higher end of the range previously provided.”

The weaker pound adds to their bottom line via higher topline growth and lower operating costs

“A weaker pound benefits our core earnings, not just through a stronger topline, but also in the operating leverage across the businesses. We continue to have a higher proportion of our costs in the U.K. than revenues. And so while this hurts us, while sterling is stronger, it helps us when it decline.”

Emerging market sales are down

“Within international, sales in emerging markets were down 9%, with further declines in our China business, as we continue the reshaping of that business. Outside of China, emerging market sales declined 8%..”