Shares in GlaxoSmithKline (LSE: GSK) fell a little over 1% to 1,642p after the UK’s largest healthcare company posted a 10% sales decline in the first quarter. This was mainly a reflection of sterling’s strength against the US dollar and the Euro, while at constant exchange rates sales grew in all major markets barring the US. Total sales still fell 2% in constant exchange rate terms.
Despite falling sales, core earnings per share increased to 21p while the quarterly dividend rose 6% to 19p. Glaxo is targeting share buybacks of £1-2bn in 2014.
GSK noted that the deal to trade assets with Swiss company Novartis — Glaxo will sell its oncology division, while gaining Novartis’ vaccines business — should enhance the firm’s long term earnings outlook.
At constant exchange rates Glaxo expects sales to grow in 2014 — dependent on a number of factors, including the rollout of new medicines and the level of generic competition to older products.
The chief executive, Sir Andrew Witty, commented:
“We are very focused on executing the roll-out of our new products and are re-allocating investment to do so. In an industry with 20-year product cycles, synchronisation of this new product growth with managing the impact of competition elsewhere in the portfolio is clearly challenging, particularly in the US, and especially when viewed on a quarterly basis.”
“We remain confident that GSK’s overall portfolio is fundamentally changing and improving. The R&D innovations we are now launching are at the forefront of an extensive pipeline and discovery effort supporting our strategic approach to deliver a continued flow of multiple product launches that are competitive and will be valued by both patients and payers.”
After this morning’s price movement, GlaxoSmithKline shares offer a prospective dividend yield of 4.7%. The shares trade on a forward P/E of 15 against the FTSE 100 average of 13.