GSK Shares Become Popular After Exit Notice

GSK Shares Become Popular After Exit Notice

Shares of GSK Plc listed on the Nigerian Exchange have continued to become expensive as investors take positions. Seeking to profit from the notice, GSK stocks rallied by 20% last week.  Alpha seekers took positions in the pharmaceutical company’s more than 1.195 billion shares outstanding on the local bourse.

The bargain hunting pushed GSK’s share price up by 20% to N8.90 from N7.40 in the previous week. It jumped to N9.75 on Monday and yesterday, the company’s market value inched close to N10 billion after it gained 9.74% to close at N10.7 per share.

According to the company’s financial statement, 53.6% of its GSK shares are owned by Nigerian shareholders while 46.4% are held by UK companies Setfirst Limited and SmithklineBeecham Limited.

The rally, deliberately targeted by alpha seekers, would push the exit costs of the company higher as the market awaits next-in-line action.

Following a decline in revenue over huge foreign exchange losses, GSK Plc announced a decision to leave the Nigerian market as uncertainties spooked the company’s ability to survive.

Analysts said most companies with high import bills would experience a similar threat. Companies in the fast-moving consumer sector have seen large earnings decline due to FX pressures emanating from the fluctuation of the Nigerian naira.

GSK’s exposure to foreign currency transactions worsened after devaluation, and its FX losses ballooned, causing a drain on already tiny profit. 

According to its unaudited financial statement, its unrealised FX loss grew to N10.932 billion from N16.5 million. The company has already realized a forex loss of N14.217 million in the period.

MarketForces Africa reported that GSK told the Nigerian Exchange that it would cease its Nigerian operation amidst a tough economic environment that plunged the pharmaceutical company into losses.

Its UK Group informed GSK Consumer Nigeria of its intention to cease the commercialization of its prescription medicines and vaccines in Nigeria through the local operating companies and transition to a third-party direct distribution model for its pharmaceutical products.

It said the Haleon Group has also separately informed the Board of its intent to terminate its distribution agreement in the coming months and to appoint a third-party distributor in Nigeria for the supply of its consumer healthcare products.

“For the above reasons, and having, together with GSK UK, evaluated various other options, the Board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations.

“Today we are briefing our employees whom we will treat fairly, respectfully, and with care, meeting all applicable legal and consultation requirements”, the company said in a statement.

The group said, “The Board is conscious that shareholders will have many questions; we have been working assiduously with our professional advisors to agree on next steps and we will be shortly submitting to the Securities and Exchange Commission a draft Scheme of Arrangement”.

It said this may, if approved, see shareholders other than GSK UK, receive an accelerated cash distribution and return of capital. The Board acknowledged the support of the GSK Group in its intentions to make this possible, full details of which we hope to publish shortly.

“In the meantime, however, we cannot give you assurance of the final terms of any scheme, or that any scheme will be approved by the SEC or by shareholders.

In the second quarter of 2023, its result showed that revenue declined to N3.731 billion from N7.451 billion 12 months earlier. In the period, the company’s profit surged to about N185 million, an increase of N30 million when compared with about N155 million recorded in the comparable period in 2022.

The profit was propelled by a strong decline in selling and distribution spending in the period. This came in addition to a significant increase in finance income which settled at N192.3 million. The positive vibe was reduced by a surge in other losses, rising from N7.3 million to more than N28 million.

Comparing its half-year results, GSK sales fell by about 100%, from N14.811 billion in the first half of 2022 to N7.75 billion at the end of the first half in 2023.

Its profit performance also declined to about N340 billion in the same period from N349.3 billion in the comparable period despite deliberate efforts to significantly reduce selling and distribution costs.

GlaxoSmithKline Consumer Nigeria Plc has posted N771.146 million annual profit for the financial year 2022. The amount came as the company’s revenue jumped to N25.382 billion from N22.449 billion in 2021.

In 2021, the company went home with N658.811 million annual profit, representing a 17.05% year-on-year growth to N771.146 million in 2022.  Its costs of sales spiked by 13.4% to N18.452 billion in 2022 amidst an increase in the general price level in its Nigerian market. In 2021, the company reported its costs of sales printed at N16.270 billion.

Though selling and distribution costs declined, its administrative spending surged while operating profit grew, supported by healthy top-line growth in 2022. Due to a high interest rate environment in Nigeria, GSK boosted revenue from short-term investment placement.

Its finance income grew by about 242% to N319.508 million from N93.545 million in 2021. The consumer goods company reported that impairment costs moderated significantly in 2022 to N5.917 million from more than N24 million booked in 2021.

Pretax profit came at N1.242 billion, more than 31% above N945 million declared in the financial year 2021. Meanwhile, higher tax provisions dragged overall annual profit growth. In 2021, GSK Plc’s profit after tax printed at N771.146 million, which was 17.05% above N658.811 million reported a year earlier by the company.

It has become increasingly difficult to sell imported goods or services to Nigeria’s mass market at a higher rate without losing market share due to declining household spending ability. The company had seen its earnings decline amidst uncertainties in the economy. #GSK Shares Become Popular After Exit Notice Naira Steadies as Banks Issue Update on FX Purchase