GlaxoSmithKline reports 136% Net Income growth in 2018 and 2.1% Revenue growth
06 Feb 2019 • About GlaxoSmithKline (
$GSK) • By InTwits
GlaxoSmithKline reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 24.1% in 2018, 20.6% in 2017, 15.9% in 2016, 50.2% in 2015, 22.0% in 2014
- GlaxoSmithKline has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.2%. At the same time it's in pair with industry average of 8.3%
- CAPEX is quite volatile: £18m in 2018, £10m in 2017, £21m in 2016, £5m in 2015, £2m in 2014
- The company has highly profitable business model: ROIC is 23.3%
- It operates with high leverage: Net Debt/EBITDA is 3.0x while industry average is 2.4x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
GlaxoSmithKline's Revenue increased on 2.1%. During the last 5 years Revenue growth topped in 2016 at 16.6% and was decelerating since that time. Having stable revenue the company managed to increase EBITDA margin. EBITDA Margin surged on 25.2 pp from -416% to -390% in FY2018.
Gross Margin increased slightly on 1.0 pp from 65.7% to 66.8% in 2018. SG&A as a % of Revenue showed almost no change in 2018.
Net Income margin increased on 6.7 pp from 5.1% to 11.8% in 2018.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 4.4%. The company showed small CAPEX/Revenue decline of 1.4 pp from 5.8% in 2015 to 4.4% in 2018. Average CAPEX/Revenue for the last three years was 5.0%. During 2014-2018 CAPEX as a % of Revenue topped in 2015 at 5.8% and was declining since that time.
Leverage (Debt)
Debt level is 3.0x Net Debt / EBITDA and 3.5x Debt / EBITDA. Net Debt / EBITDA surged on 0.9x from 2.1x to 3.0x in 2018. Debt surged on 52.5% while cash increased slightly on 1.1%.
GlaxoSmithKline has short term refinancing risk: cash is only 66.9% of short term debt.
Valuation and dividends
GlaxoSmithKline's trades at EV/EBITDA 13.3x and P/E 21.2x.
Management team
GlaxoSmithKline's CEO Emma Walmsley is a founder and has spent 2 years with the company.
Financial and operational results
FY ended 31 Dec 2018
GlaxoSmithKline ($GSK) key annual financial indicators| mln. £ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 23,006 | 23,923 | 27,889 | 30,186 | 30,821 | 2.1% |
| Gross Profit | 15,683 | 15,070 | 18,599 | 19,844 | 20,580 | 3.7% |
| SG&A | 8,264 | 9,185 | 9,313 | 9,672 | 9,915 | 2.5% |
| EBITDA | 5,063 | 11,999 | 4,425 | 6,224 | 7,420 | 19.2% |
| Net Income | 2,756 | 8,422 | 912 | 1,532 | 3,623 | 136.5% |
Balance Sheet
|
|---|
| Cash | 4,338 | 5,830 | 4,897 | 3,833 | 3,874 | 1.1% |
| Short Term Debt | 2,943 | 1,308 | 4,129 | 2,825 | 5,793 | 105.1% |
| Long Term Debt | 15,841 | 15,324 | 14,661 | 14,264 | 20,271 | 42.1% |
Cash flow
|
|---|
| Capex | 1,188 | 1,380 | 1,543 | 1,545 | 1,344 | -13.0% |
Ratios
|
|---|
| Revenue growth | -13.2% | 4.0% | 16.6% | 8.2% | 2.1% | |
| EBITDA growth | -40.3% | 137.0% | -63.1% | 40.7% | 19.2% | |
|
|---|
| Gross Margin | 68.2% | 63.0% | 66.7% | 65.7% | 66.8% | 1.0% |
| EBITDA Margin | 22.0% | 50.2% | 15.9% | 20.6% | 24.1% | 3.5% |
| SG&A, % of revenue | 35.9% | 38.4% | 33.4% | 32.0% | 32.2% | 0.1% |
| Net Income Margin | 12.0% | 35.2% | 3.3% | 5.1% | 11.8% | 6.7% |
| CAPEX, % of revenue | 5.2% | 5.8% | 5.5% | 5.1% | 4.4% | -0.8% |
|
|---|
| ROIC | 15.2% | 42.9% | 10.9% | 20.2% | 23.3% | 3.0% |
| ROE | 49.0% | 179.6% | 29.2% | | | |
| Net Debt/EBITDA | 2.9x | 0.9x | 3.1x | 2.1x | 3.0x | 0.9x |
Peers in Pharmaceuticals & Biotechnology
Below we provide GlaxoSmithKline benchmarking against other companies in Pharmaceuticals & Biotechnology industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Evocutis ($EVO) | 25.2% | 57.3% | 51.2% | 54.5% | |
| Benchmark Hldgs ($BMK) | | 25.0% | 147.5% | 28.2% | 8.1% |
| Quantum Pharma ($QP.) | 10.8% | 15.4% | 13.4% | 26.8% | |
| Ixico ($IXI) | | | 4.9% | 25.8% | 31.2% |
| Ergomed ($ERGO) | 39.7% | 42.7% | 30.0% | 21.4% | |
| |
|---|
| Median (14 companies) | 6.6% | 4.5% | 7.2% | 10.2% | 19.6% |
|---|
| GlaxoSmithKline ($GSK) | | 4.0% | 16.6% | 8.2% | 2.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| C4X Discovery Hldg ($C4XD) | 96.3% | | 95.7% | 97.9% | |
| Indivior ($INDV) | 91.5% | 90.4% | 89.9% | 90.5% | |
| Astrazeneca ($AZN) | 78.0% | 81.2% | 82.1% | 80.8% | |
| Pfizer Inc ($PFZ) | 80.7% | 80.3% | 76.7% | 78.6% | 79.0% |
| Ixico ($IXI) | | | 48.6% | 56.5% | 58.8% |
| |
|---|
| Median (13 companies) | 46.3% | 44.9% | 47.7% | 49.1% | 58.8% |
|---|
| GlaxoSmithKline ($GSK) | 68.2% | 63.0% | 66.7% | 65.7% | 66.8% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Evocutis ($EVO) | 35.0% | 35.4% | 38.6% | 45.2% | |
| Pfizer Inc ($PFZ) | 37.9% | 34.8% | 33.6% | 37.9% | 38.0% |
| Astrazeneca ($AZN) | 20.8% | 28.3% | 32.5% | 29.9% | |
| Beximco Pharmaceuticals ($BXP) | 27.2% | 26.6% | 28.9% | 27.3% | |
| Eastpharma Ltd ($EAST) | 16.1% | 23.3% | 23.9% | 22.9% | |
| |
|---|
| Median (14 companies) | 18.5% | 21.9% | 15.4% | 16.6% | -0.5% |
|---|
| GlaxoSmithKline ($GSK) | 22.0% | 50.2% | 15.9% | 20.6% | 24.1% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| C4X Discovery Hldg ($C4XD) | 1.1% | | 15.1% | 28.0% | 0.6% |
| Benchmark Hldgs ($BMK) | 10.9% | 31.8% | 17.1% | 23.4% | 16.6% |
| Beximco Pharmaceuticals ($BXP) | 24.8% | 19.4% | 13.5% | 19.4% | |
| Eastpharma Ltd ($EAST) | 7.1% | 6.2% | 6.7% | 10.3% | |
| Cathay International Hldgs Ltd ($CTI) | 4.0% | 5.5% | 6.2% | 8.2% | |
| |
|---|
| Median (14 companies) | 3.5% | 5.3% | 4.6% | 4.8% | 2.6% |
|---|
| GlaxoSmithKline ($GSK) | 5.2% | 5.8% | 5.5% | 5.1% | 4.4% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Indivior ($INDV) | | 172.1% | 85.9% | 107.2% | |
| Evocutis ($EVO) | 68.6% | 62.4% | 59.8% | 70.1% | |
| Animalcare Group ($ANCR) | 14.2% | 14.8% | 13.8% | 12.0% | |
| Beximco Pharmaceuticals ($BXP) | 8.7% | 9.6% | 10.9% | 11.2% | |
| Anpario ($ANP) | 13.6% | 13.8% | 9.2% | 11.1% | |
| |
|---|
| Median (14 companies) | 7.3% | 12.8% | 9.2% | 10.3% | -8.4% |
|---|
| GlaxoSmithKline ($GSK) | 15.2% | 42.9% | 10.9% | 20.2% | 23.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Cathay International Hldgs Ltd ($CTI) | 6.3x | 12.7x | 20.5x | 21.7x | |
| Quantum Pharma ($QP.) | 15.5x | 0.8x | 2.8x | 4.2x | |
| Astrazeneca ($AZN) | 0.8x | 1.3x | 1.6x | 2.2x | |
| Pfizer Inc ($PFZ) | 1.8x | 2.1x | 2.2x | 2.1x | 2.0x |
| Eastpharma Ltd ($EAST) | 4.3x | 2.7x | 1.8x | 2.1x | |
| |
|---|
| Median (11 companies) | 0.8x | 0.7x | 0.3x | 1.5x | 2.7x |
|---|
| GlaxoSmithKline ($GSK) | 2.9x | 0.9x | 3.1x | 2.1x | 3.0x |
