Gsk Share Discussion Threads

[tradermichael] 04/3/2021 10:41

Any investment made from profits would reduce corporation tax. The point is, the budget introduces a new tax benefit for business investment, reducing taxable profits by 130%

[staggie65] 04/3/2021 10:38

I’m guessing if you re invest in business you avoid the new corporate tax, but I’m guessing that’s good for the pipeline in RD but less so for dividends

[montyhedge] 04/3/2021 09:52

I always said GSK ord shares trades like a corporate bond, shareprice below what it was 20 years ago, shareholders put up with it because of the nice dividend. Now that's going to be cut drastically, Walmsley taking a massive gamble on finding new drugs. GSK shareprice I see going lower and I'm a holder, lolIs Walsmley up to the job, time and our pockets will tell.

[tradermichael] 04/3/2021 09:49

Monty - Don't worry about the future increase in corporation tax. She wants to cut the dividend to invest in the new pharma business. There is a new 'super deduction' tax relief for businesses in a bid to spur investment. Companies that invest in their businesses over the next two years will be able to reduce their tax bills by 130 per cent of the cost. She needs to get her accountants onto this straight away.

[tradermichael] 04/3/2021 09:45

Lets just say they are included in the main three .... ;0)

[imastu pidgitaswell] 04/3/2021 09:32

And setting - and delivering - a strategy.

[spud] 04/3/2021 09:29

Amazing how EW is still getting support despite her pi55 poor performance and wanton capital destruction.And don't get me going on her share performance awards...spud

[montyhedge] 04/3/2021 09:26

Of course with 25% corporation tax, less to give out in dividends, double whammy.

[montyhedge] 04/3/2021 09:23

Frank is a legend at my beloved Chelsea, Walmsley a legend in her own mind. Dividend cut, ok growth will be good, but still a gamble still got to find the right drugs for the future.

[tradermichael] 04/3/2021 09:22

Of the three primary responsibilities, how well is she doing (50 words, with examples)?

[tradermichael] 04/3/2021 09:20

Erm..... A chief executive officer is the highest-ranking executive in a company, whose primary responsibilities include making major corporate decisions, managing the overall operations and resources of a company, acting as the main point of communication between the board of directors (the board) and corporate operations and being the public face of the company.

[tradermichael] 04/3/2021 09:19

At least Frank knows how to play football (from experience).

[montyhedge] 04/3/2021 09:18

I think it's like Frank Lampard at Chelsea, the job was to big for him. Same with Walmsley.

[toffeeman] 04/3/2021 09:05

The CEO manages people not projects

[meijiman] 04/3/2021 09:04

Difficult to believe. Why would a global pharma company appoint someone with a career in lipstick sales to be ceo? It's like a death wish....

[montyhedge] 04/3/2021 08:58

Interesting guy from Liontrust global dividend fund, on CNBC recommended GSK cut dividend and reinvest into r and d, my own guess I think cut to 50p from 80p, rather go for growth.Shareprice below what it was 20 years ago, something has to be done surely.

[beckers2008] 03/3/2021 22:32

Montie,

"Vir Biotechnology down 27.5%. What is GSK stake?"

Didn't you do your research? Why doesn't that surprise me!

Posting multiple times on AZN BB, mocking some you think are underwater! Evidently you know nothing, Lol, just Lol!

[eurofox] 03/3/2021 21:44

noise level for gsk

[montyhedge] 03/3/2021 21:41

Vir Biotechnology down 27.5%. What is GSK stake?https://www.fool.com/investing/2021/03/03/why-vir-biotechnology-stock-is-dropping-today/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article

[ianood] 03/3/2021 16:56

daneswood - my sentiments entirely, a World class consumer healthcare company plus I have considerable faith in the R&D operation too, led by Hal Barron.

[daneswooddynamo] 03/3/2021 16:49

Sit back and wait for the split next year, I reckon gsk will be well north of here

[unastubbs] 03/3/2021 16:44

i sympathise with net curtains, it might have been tempting for me to sell this one on the back of major wins elsewhere today. as it is, i'm happy to hold, it may take a month or two, maybe more but this will be back. corporate action, good news from the labs, even an offer for all or part of the company...something will happen here. my break even is 12.81 (or 12.58 less the dividend), i'm relaxed on this one.

[montyhedge] 03/3/2021 16:22

Lol like the last comment, itching to get rid of them.

[spud] 03/3/2021 16:21

Brilliant!!:

'.....holding Glaxo’s shares feeling a bit like having herpes – easier to acquire than to be rid of, even though Glaxo does have a vaccine.'

spud

[spud] 03/3/2021 16:19

Glaxo’s vanishing trick



When it splits into two, Glaxo will be takeover fodder.

Management has come clean that the dividend must be cut.

Holding shares in GlaxoSmithKline (GSK) must be the investment equivalent of waiting for a distant relative to die. You know there is a legacy in the offing, but you seriously wonder whether it will be worth the wait. Any legacy Glaxo offers will be turned into cash after it finally splits itself into two, sometime next year. After that, it is just a matter of time before a once-great company dies as one or both of its component parts are gobbled up by rivals or by private equity.

When it comes, it will be a sad end to one of the greatest growth companies that British industry has seen in the past 50 years. For a short while in the 1980s Glaxo turned itself into the UK’s most valuable company and the world’s most valuable pharmaceuticals stock. Its success was almost exclusively based on Zantac, an ulcer treatment that was rejected by Glaxo’s rivals but became the world’s top-selling prescription drug.

After Zantac lost its patent, Glaxo lost its edge. Nothing that Glaxo’s laboratories or its bosses did could make good Zantac’s declining revenues. Not that they were short of effort. During the 1990s, its bosses focused on growth by acquisition. In the process, the group turned itself into Glaxo Wellcome, then – in 2001 – came the deal that created the current corporate body. Along with SmithKline (which, ironically, had rejected Zantac) came the chief executive of the enlarged group, Jean-Pierre Garnier. He spent the next seven years presiding over much corporate activity and a share price response that said pretty clearly what investors thought about it (see Table 1).



Table 1: How Glaxo's bosses have performed
Jean-Pierre Garnier Andrew Witty Emma Walmsley
Date appointed Jan-01 May-08 Apr-17
Share price (p) 1,905 1,121 1,660
FTSE All-Share 2,868 3,100 3,990
Date departed Apr-08 Mar-17 na
Share price (p) 1,066 1,660 1,267
FTSE All-Share 2,927 3,953 3,726
Relative change (%) -45 16 -18
Absolute change (%) -44 48 -24
Source: FactSet


Where corporate tinkering failed, Garnier’s successor, Sir Andrew Witty, turned to financial engineering to give the impression of growth. During his tenure, Glaxo’s net debt more than doubled from £6bn to over £13bn. Every bit of that £7bn-plus and another £2bn besides was spent buying in shares. The result was that operating profits shrank; earnings per share also shrank (although they would have shrunk even more without the buy-ins) and dividends rose a bit.

Still, compared with the share price performance during Garnier’s tenure, Witty’s time in charge could be judged a success. The same might be said of his time versus that of his successor, Emma Walmsley. Where Witty employed financial engineering, the current boss is turning to another old faithful in the handbook of corporate legerdemain – splitting the business into two. This relies on the idiosyncratic logic of corporate finance that, when a company is valued, one often equals less than one, but two halves, when added together, must always equal more than one.

Thus Glaxo’s consumer healthcare side – 22 per cent of underlying group operating profits in 2020 – is being split from the conventional pharmaceuticals side. This will be the culmination of Walmsley’s efforts, which have focused on the consumer operation (star products, Sensodyne toothpaste, Eno liver salts, Voltaren pain killer). First, healthcare was augmented via a deal with Novartis (SWX:NOV). Then the minority stake in the division held by US rival Pfizer (US:PFE) was bought out. Now, as a wholly-owned and pumped-up division, it is ready for independence.

However, when Glaxo’s two sides eventually split and each gets its own London-market listing, the move will chiefly highlight what Table 2 makes clear anyway – that, in the global scheme of things, Glaxo is already an also-ran. The table ranks nine pharma groups by their stock market valuation. Glaxo comes in ninth.



Table 2: How Glaxo compares
Company Share price* Mkt Cap (£bn) Sales (£m) Op profit (£m) Profit margin (%) Return on assets (%) Net debt/Ebitda R&D/Sales (%) Price/sales PE ratio†
Johnson & Johnson 164.92 315.4 64,400 15,529 24.1 9.0 na 12.7 5.2 17.6
Roche Holding 308.30 216.5 48,456 13,728 30.4 16.9 0.1 18.2 4.4 14.9
Novartis 81.72 162.6 37,945 8,437 22.2 6.5 1.4 18.1 4.2 14.8
Pfizer 34.82 141.4 32,681 6,831 20.9 4.0 na 19.5 4.3 12.6
Merck & Co 75.04 139.7 37,426 9,702 25.9 8.1 na 19.5 4.4 13.0
Bristol-Myers Squibb 60.23 100.3 33,156 3,490 10.5 -7.1 na 13.8 3.6 8.3
AstraZeneca 72.89 95.5 19,114 2,200 11.5 4.1 2.1 21.1 4.9 23.7
Sanofi 80.77 88.3 32,039 7,777 24.3 10.8 na 15.2 2.7 12.5
GlaxoSmithKline 12.70 63.7 34,099 7,373 21.6 7.2 2.6 11.8 2.0 11.7
Source: FactSet; * local currency; † Next 12 mnths earnings


As such, it is already easy for a pharma giant, in combination with its Wall Street piranhas, to rip it apart. By splitting the group, which will divide its market value roughly into three-quarters for pharmaceuticals, one-quarter for healthcare, Glaxo is turning itself into bite-sized morsels. For example, roughly speaking, to buy the healthcare side would cost Johnson & Johnson (US:JNJ) 5 per cent of its current market value.

This much is pretty obvious, but the question is whether Glaxo’s shareholders should stick around for any payday or, indeed, whether the stock should be bought as takeover fodder. This is especially pertinent for income investors because Glaxo’s bosses have finally come clean that the dividend – 80p a year for seven years now – will have to be cut and Glaxo’s shares without the dividend yield won’t be the same, to put it mildly.

Shareholders have every reason to be miffed. After all, one justification for splitting the group was that the dividend would be saved. Maintaining the payout was a factor behind the share price recovery that started in early 2018 and it was almost promised in the gushing PR blurb that accompanied the tie-up with Pfizer. Now, there is guff about “optimised capital structure” and “delivering sustainable long-term shareholder value” – that’s good coming from Glaxo – but the long and the short of it is that the dividend will be cut.

At least its bosses promise another 80p for 2021. The intuitive response might be to tell Glaxo to stick it, but that would be silly. After all, with the share price down to £12.70, the dividend yields 6.3 per cent. Which leaves holding Glaxo’s shares feeling a bit like having herpes – easier to acquire than to be rid of, even though Glaxo does have a vaccine – but I am itching to be rid of them.

spud