Gsk Plc · LSE:GSK
Gsk — GlaxoSmithKline — FY2012 Earnings Presentation
24 slides from Gsk's earnings presentation, Feb 6, 2013
Slide 1: Full Year Results 2012
Full Year Results 2012 6 February 2013 Sir Andrew Witty – Chief Executive Officer Simon Dingemans – Chief Financial Officer
Slide 2: Cautionary statement regarding forward-looking statements
Cautionary statement regarding forward-looking statements Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautions investors that any forward-looking statements or projections made by the company, including those made in this document are subj
Slide 3: Strategy has delivered a fundamentally different GSK
Strategy has delivered a fundamentally different GSK Grow a diversified A balanced and synergistic business global business Focused on increasing efficiency and maximising cash conversion Deliver more products Preparing to launch a pipeline of new of value drugs …to deliver earnings momentum and Sim
Slide 4: Grow
Global, Economic and Portfolio balance to capitalise on growth opportunities whilst managing environmental risk Grow Pro-innovation • 36% of GSK • Reshaped for new operating environment Rx/Vx • Pipeline ready; early track record on launch capability markets • JV to build vaccines presence in Japan H
Slide 5: R&D delivery will strengthen innovative Pharma and Vaccines
R&D delivery will strengthen innovative Pharma and Vaccines Deliver Pipeline delivery • 6 new drugs filed • 14 assets with Phase III data in 2013/14; includes 9 new drugs and vaccines • Multiple 2013 catalysts • Discovery delivering sustainable flow of products to late-stage • On target to deliver 1
Slide 6: A simplified and modernised company with strong focus on cash
A simplified and modernised company with strong focus on cash Simplify Reduced cost & • ~9,000 sales force reduction in mature markets since 2007 infrastructure • Exited 20 manufacturing sites since 2006 • 54% reduction in R&D footprint since 2006 • Support service costs down >20% since 2008 Moderni
Slide 7: Strategy focused on delivery of EPS growth, strong cash generation and returns to shareholders
Strategy focused on delivery of EPS growth, strong cash generation and returns to shareholders Sustainable sales growth Faster EPS growth Strong cash generation Returns to Shareholders Invest to fuel growth
Slide 8: Simon Dingemans
Simon Dingemans Chief Financial Officer
Slide 9: GSK financial architecture driving returns
GSK financial architecture driving returns Sales growth Operating EPS leverage Focus Focus Returns to on on shareholders Financial returns returns Free Cash efficiency Flow Cash flow growth
Slide 10: Headline results
Headline results Growth % £m 2012 CER £ Turnover 26,431 (1) (3) Core operating profit 8,330 (3) (5) Core EPS 112.7p flat (2) Adjusted FCF 4,659 (17) (FCF excl. legal)
Slide 11: Sales growth analysis
Sales growth analysis £bn (CER) Sales growth Sales 2011 27.4 OTC brands/ Avandia/ Cervarix Japan (0.6) Operating Europe Pharma (0.4) leverage US Pharma - ViiV + other (0.2) Financial Growth Businesses 0.8 efficiency Sales 2012 at 2011 FX 27.0 (1%) Currency (0.6) Cash flow growth Sales 2012 26.4 (3%)
Slide 12: Outlook for 2013: around 1% turnover growth (CER)
Outlook for 2013: around 1% turnover growth (CER) - difficult comparators in Q1 Sales 2012 quarterly comparators growth £341m OTC divested brands Cervarix Japan Operating Vesicare leverage Financial efficiency £50m £17m £11m Q1 12 Q2 12 Q3 12 Q4 12 Cash flow growth All forward looking statements are
Slide 13: Margin impacted by declining sales, mix and HGS (30bps)
Margin impacted by declining sales, mix and HGS (30bps) Sales growth Op margin 2012 2011 2011 32.1% Margin Margin COGS 26.8% 26.5% Operating leverage SG&A 29.7% 29.1% R&D 13.1% 13.4% Financial efficiency Op margin 2012 31.5% Op margin Cash flow ex HGS 2012 31.8% growth
Slide 14: SG&A: Balancing investment in growth with cost savings
SG&A: Balancing investment in growth with cost savings Sales growth SG&A 2011 29.1% Operating Lower sales 0.5% leverage Investments 1.0% Financial efficiency Cost management and OE savings (0.9%) Cash flow SG&A 2012 29.7% growth
Slide 15: COGS: Mitigation of pressure from cost management and OE savings
COGS: Mitigation of pressure from cost management and OE savings Sales growth COGS 2011 26.5% Regional/ Product mix 0.9% Operating leverage Volume 0.5% Cost management Financial and OE savings (0.8%) efficiency Currency (0.3%) Cash flow growth COGS 2012 26.8%
Slide 16: New Change Programme: at least £1bn of further annual savings by 2016
New Change Programme: Expected to deliver at least £1bn of further annual savings by 2016 2008 – 2014 OE Programme Savings Sales growth £2.7bn £2.8bn £2.5bn £2.2bn £1.7bn Operating £1.0bn leverage £0.4bn 2008 2009 2010 2011 2012 2013 2014 Financial 2013 – 2016 New Change Programme Savings efficiency
Slide 17: Strong delivery on financial efficiencies
Strong delivery on financial efficiencies Sales 2012 effective interest rate 2013 Net financing expense growth ~6% expected to be broadly Target achieved 1 year early similar to 2012 Operating 2012 Core income tax rate 2013 Core income tax rate leverage ~24% 24.4% expected Target achieved 2 years ea
Slide 18: Accounting for Pensions – IAS 19R
Accounting for Pensions – IAS 19R £m 2012 Reported 2012 Restated for IAS 19R Core operating profit 8,330 8,238 Core operating margin 31.5% 31.2% Core EPS 112.7p 111.4p 2012 restatement includes non-cash, pre tax charge of £92m (1.3p) 2013 charge expected to be ~£160m (~2.5p) See separate press relea
Slide 19: Continued strong cash conversion: £4.7bn FCF (ex legal)
Continued strong cash conversion: £4.7bn FCF (ex legal) Sales 2012 (£m) growth 397 2,610 8,866 Operating 605 leverage 6,048 2,422 4,659 Financial 1,452 efficiency 125 2,049 Cash flow EBITDA Working Legal Other Cash from Tax and Capex Minorities FCF FCF cap Ops interest (Ex-Legal) growth EBITDA as re
Slide 20: Net debt increased to £14bn
Net debt increased to £14bn Net interest charges broadly similar to 2011 Sales 2012 (£m) growth 4,265 18,302 618 Operating 2,478 14,037 leverage 2,493 3,814 9,003 4,659 Financial 2,610 1,084 efficiency Cash flow Net Debt 31/12/2011 FCF ex legal Legal Disposals Dividends* Share buybacks Bolt-ons Othe
Slide 21: Guidance for 2013
Guidance for 2013 Sales growth Guidance for 2013 Operating EPS leverage Focus Focus Returns to Turnover growth: around +1% CER on on shareholders Financial returns returns Free Cash efficiency Flow Core EPS growth: +3% to +4% CER Cash flow growth All forward looking statements are based on 2012 rest
Slide 22: Thank you Q&A
Thank you Q&A
Slide 23: Assumptions for 2013 Core Results
Assumptions for 2013 Core Results Guidance Turnover growth Around +1% CER Core EPS growth +3% to +4% CER (from IAS 19R adjusted 2012 EPS of 111.4p) Assumptions Net finance expense Broadly in line with 2012 (£724m) Tax rate Approximately 24% Share buy-backs £1 billion to £2 billion All forward lookin
Slide 24: Currency
Currency 2012 currency sales exposure Core EPS ready reckoner US $ US $ 32 % 10 cents movement in average exchange rate Euro € 18 % for full year impacts EPS by approx. +/- 3.5% Japanese ¥ 8% Euro € Other* 42 % 10 cents movement in average exchange rate for full year impacts EPS by approx. +/- 2.5%