Innovative branding and market penetration spur GlaxoSmithKline FY13 earnings

Improved product rebranding, introduction of new product packing across a wide spectrum and increased market penetration helped boost GlaxoSmithKline consumer Nigeria Plc’s (GLAXOSMI) 2013FY results.

The pharmaceutical company, a unit of UK’s biggest drug makers for the year ended 31 December 2013 grew year on year (y/y) revenue by 15.31 percent to N29.18 billion from N25.30 billion in 2012.

“We attribute this feat to product development in the consumer healthcare segment and company’s new market penetration into Ghana in a bid to meet growing demand,” said Ronke Akinsola a research analyst with Meristem Securities Limited a Lagos based investment firm.

“Continued sales, marketing and distribution efforts as well as its strong presence across Nigeria further buoyed 2013 FY revenues. The company has been able to sustain steady growth due to the brand equity enjoyed by virtue of its parent company (GLAXOSMITHKLINE Plc) and robust product portfolio,” Akinsola said.

Industry analysts are saying that the ability of the drug maker to expand operations or facilities and introduce new medicines into the market is boosting revenues.

GlaxoSmithKline Pharmaceuticals, (GSK) recently launched a range of generics to provide access to safe and quality medicines across the continent.

These brands cut across various categories: anti-infectives, cardiovascular, metabolic, gastroenterology, central nervous system and oncology.

Based on Business Day’s analysis, the company’s cost of sales margin jumped to 60.1 percent in FY13 from 59.2 percent as at FY12, while gross profit margin remained stable at 40 percent in the review period.

Further analysis showed that Operating expenses (OPEX) for the year ended December 2013 rose by 18.0 percent y/y to N7.53 billion compared with N6.38 billion as at FY12.

“The growth in operating expenses can be attributed to new market discovery for delivery of both Pharmaceutical and consumer healthcare products across West Africa to sustain market share,” said Akinsola.

Profit before tax (PBT) for the year ended December 2013 (FY13) grew slightly by 3.35 percent y/y to N4.31 billion from N4.17 billion in 2012, while profit after tax also followed suit as it climbed by 3.19 percent to N2.91 billion in FY13 from N2.82 billion as at FY12.

Globally there is a decline in pharmaceutical profits due to patent cliff (patent expiration),” said Lekan Asuni, Managing Director of GlaxoSmithKline Pharmaceuticals, Anglophone West Africa, while responding to questions at the just concluded Healthcare Federation of Nigeria (HFN) consultative forum in Lagos.

“Nigeria pharmaceutical companies are affected in this area,” Asuni said.

GSK Nigeria’s Return on equity (ROE), declined to 23 percent in 2013 from 26.2 percent in 2012, while Return on assets (ROA) remained stable at 12 percent in the review period.

Earnings per share EPS grew by 3.37 percent to 305k in FY: 13 as against 295k in FY: 12, while net profit, margin remained stable at 17 percent.

GSK’s total assets were up by 19.7 percent y/y to N26.21 billion in 2013 compared with N21.89 billion in 2012, while total equity increased by 15.76 percent y/y to N12.34 billion in 2013FY from N10.66 billion as at 2012FY.

GlaxoSmithKline is the largest company by market value in the Nigeria healthcare sector.

Its share price has increased by 51.35 percent in the year to March 27 2014 and closed trading at N70 on the floor of the Nigeria Stock Exchange.

The company had a market capital of N66.95 billion on the same day, while Price to book ratio (PBR) and Price to sales ratio (PSR) were 6.28x and 2.29x respectively.

“Based on our forecast assumptions, we expect 15.39 percent revenue growth for the next 5 financial years (2014f: NGN33.561bn),” said Akinsola.