GSK and Rolls in spotlight as half-year results due
Jul 21 2008 by Peter McCusker, The Journal
THE half-year results season will get under way this week with figures from Rolls-Royce and Glaxo- SmithKline.
GlaxoSmithKline’s boss Andrew Witty will present his first set of results on Wednesday after succeeding Jean-Pierre Garnier as chief executive in May.
Mr Witty, previously president of GSK’s European pharmaceuticals business, has taken on the role at the world’s second biggest drugs company at a time of change for the group. Hit by competition from generic drugs and falling sales for its under-fire diabetes treatment Avandia, GSK is in the throes of a sweeping overhaul to cut costs.
His predecessor had already warned that jobs may go under its “operational excellence” programme, although GSK has yet to outline how many of its 22,000-strong UK workforce will be affected.
However it has so far announced 330 staff cuts at a drugs factory in Ulverston, Cumbria, and earlier this month said nearly 500 jobs are to go in Crawley with the closure of a manufacturing site in the town.
It is thought that Mr Witty will take the opportunity at the interim results to outline his strategy, two months into the job. The second quarter results will also be watched for signs of any turnaround since the 13% first quarter profits drop.
Charles Stanley Stockbrokers is expecting pre-tax profits of £1.9m for the three months to June 30, just above the consensus for £1.84m. But this is roughly in line with the £1.87m seen in the previous three months, down from £2.14bn last year after Avandia sales took a hammering.
Demand for the drug has suffered in the wake of claims – denied by GSK – that the drug increased the risk of heart attack. Charles Stanley said there may also be possible strong growth from other products – such as asthma treatment Advair. “We expect GlaxoSmithKline to report a mixed performance over the quarter from its key volume drivers,” said the broker.
A slowing UK economy is expected to impact the UK results of mobile phone giant Vodafone when it issues a trading update on tomorrow.
The Newbury-based group reveals performance for the first quarter to June 30. The results will be presented by outgoing CEO Arun Sarin who leaves at the end of the month.
Broker Lehman Brothers said it was expecting a slowdown in Vodafone’s UK organic revenue growth, to 3.4% during the first quarter compared to the prior year. This compares with 3.8% growth seen during the previous quarter, and 5.9% before that.
The mobile firm has around 18.5 million customers in the UK – around 8% of its global number – but average monthly revenues have fallen over the past year amid fierce competition.
Lehman said: “We expect Vodafone’s management team to confirm some initial negative impact from slowing economies in the European countries most exposed to the housing market, for example UK and Spain.”
The broker expects territories like Italy and Germany to fare better, with strong growth also predicted for its emerging markets region.
Investors will also be keen to see how the uptake of 3G devices is faring, which the group is pinning much of its future revenue growth hopes on. The group had 27 million 3G devices in operation at the end of March but their uptake rate slowed during the year.
Vodafone’s first quarter revenues are expected to be around £9.8bn, compared to £8.2bn for prior year.
The group’s update comes a week before deputy chief executive Vittorio Colao replaces Sarin, who is stepping down after five years in charge.
Rolls-Royce will reveal how it is faring in challenging aerospace conditions when it issues interim results on Thursday. Chief executive Sir John Rose warned investors that increased fuel costs and the credit crunch were putting pressure on airline operators.
