Trading still challenging for GlaxoSmithKline

21st Oct 2010 14:14

GlaxoSmithKline reported better than expected earnings per share before restructuring costs but it says that the operating environment is challenging. Revenues were similar to expectations at £6.81bn in the three months to September 2010, against £6.76bn in the same period last year. Revenues were 2% lower than they would have been due to US healthcare reform and European government austerity measures. Underlying sales growth, when adjusting for unusually high sales of some products and sales declines of Avandia and Valtrex, is estimated at 6%. GSK says this represents the successful refocusing of investment on key areas. New product sales grew 44% to £448m in the quarter. Pre-restructuring earnings were 28.2p a share, slightly down on the 28.5p a share reported last year. Including restructuring costs of £171m, the earnings figure is 25.3p a share. Strong cash flow enables GSK to increase its third quarter dividend by 7% to 16p a share. The ex-dividend date is 27 October. Net debt fell by £652m to £8.8bn at the end of September 2010. Chief executive Andrew Witty says he does not expect to make any significant disposals in the rest of the year. This has led to a reduction in other operating income guidance for the full year to £500m. A 29% tax charge is expected for the full year. Witty is keen to do bolt-on acquisitions but not mega deals. Comparative figures will become less testing over the coming months making it easier to grow revenues.