Govt.’s Delay in Salary Payment, Forex Loss Rob GSK of Good Outing Mid-Way

The fortunes of GlaxoSmithKline (GSK) have slipped in the first six months of its financial year ended 30th June, 2015. This retrogressive wind is said to have originated from the evil wind of delay in payment of salaries by governments, particularly state governments and the company’s loss to foreign exchange rate fluctuation.
The unaudited half year 2015 result of GlaxoSmithKline shows that it’s cumulative turnover (T/O) for the first and second quarters decreased marginally by 1.43 per cent to N15.44 billion, compared with N15.67 billion recorded in the corresponding period of 2014.
Analysts at FSDHGroup Research said the happenings may be linked to the weak consumer spending premised on the delay in payment of workers’ salaries in most states across the nation and the security challenges in the North East of the country.
The cost of sales also decreased marginally by 0.30 per cent to N10.29 billion from N10.32 billion recorded in first half of 2014.
This led to a Gross Profit (GP) of N5.16 billion from N5.35 billion in 2014. The cost of sales as a percentage of turnover however increased to 66.60 per cent from 65.85 per cent during the period under review.
The administrative, selling and distribution expenses increased by 1.44 per cent to N4.07 billion. This may be partly linked to the company’s strategic focus on advertisement. These expenses as a percentage of turnover increased to 26.38 per cent in first six months of 2015 from 25.63 per cent during the period under review in 2014.
The other operating income decreased to N14.43 million as at the first half of 2015 from N15.34 million recorded in 2014. The company recorded a decrease of 64.45 per cent in its net finance income to N24.87 million during the period in 2015 from N69.96 million in the six month period in 2014.
The Profit Before Tax (PBT) dropped to N424.82 million, a decrease of 66.06 per cent from N1.25 billion recorded in the corresponding period of 2014. The tax provision dropped by 67.15 per cent to N127.45 million in the first half of 2015 from N387.9 8 million in the first half of 2014, leading to a Profit After Tax (PAT) of N297.37 million during the period in 2015 from N863.56 million in the corresponding period of 2014, representing a decrease of 65.56 per cent. The company’s profit margins fell during the period under review in 2015 compared with the corresponding period of 2014.
“This is a reflection of the challenging operating environment which has increased running cost in the face of weak demand”, said analysts at FSDHGroup Research.
The total assets of the company increased to N29.97 billion in 2015 from N27.99 billion recorded in financial year ended 2014. The working capital declined further to N1.14 billion while the current ratio stood at 1.07x, indicating efficiency in its operating cycle and that the company can cover its current liabilities as at when due.
Analysts believe strongly that the poor outing experienced by the company was most as a result of the fluctuating foreign exchange rate.
According to financial experts, the fluctuation in foreign exchange help to alter the forecast the manufacturers would have made for the year. They explained that, often, the manufacturers who import raw materials for production end up spending more than what they budgeted for, and of course with current happenings, where there is scarcity of foreign exchange, end up buying in the parallel market at a much costlier rate, thus impacting negatively on their bottom line.
Nonetheless, analysts at FSDHGroup believe that there is still light at the end of the tunnel for GSK.
For instance, they are optimistic that turnover will rise to N31.35 billion by the end of its financial year as at December 31st, further rise to N34.54 billion in 2016, N39.97 billion in 2017, N46.24 billion in 2018 and N56.27 billion in 2019.
The company’s gross profits is forecast to be N10.8 billion as at the end of its financial year in 2015, N12.6 billion in 2016, N14.57 billion in 2017, 17.79 billion in 2018 and N20.6 billion in 2019.
It is projected that GSK’s profit before tax will be N2.08 billion in 2015, 3.79 billion in2016, N4.42 billion in 2017, N6.07 billion in 2018 and N7.13 billion in 2019.

Leave a Reply

Your email address will not be published. Required fields are marked *