Wednesday 28 April 2021 1:50 pm

GSK profit drops sharply due to pandemic but beats forecasts

Pharma giant GSK saw its profit and turnover slip in the first quarter due to the impact of the coronavirus pandemic, but came in ahead of analyst expectations.

The FTSE 100 firm said that adjusted operating profit fell 30 per cent in the period, down to £1.9bn. Turnover slid 18 per cent to £7.4bn, it added.

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Revenue from the blue-chip’s vaccines division was hit especially hard, which GSK said was because governments were prioritising the roll-out of its Covid-19 vaccine rather than its commercial products.

Shingrix, its bestselling shingles jab, saw revenue fall 47 per cent, for example.

Shares in the firm were up just 0.1 per cent after the announcement.

GSK also said that plans for its spin off of its consumer healthcare division were “well underway”, with details to be announced in June.

Chief executive Emma Walmsley said: “Our first quarter results are in line with our expectations and reflect the anticipated impacts of Covid-19.  

“We continue to expect a significant improvement in performance over the remainder of the year and reconfirm our guidance for 2021 and 2022 outlook.  

“Separation plans are also well underway and we look forward to sharing our strategy and growth outlook for ‘New GSK’ with investors in June.”

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Steve Clayton, manager of the Hargreaves Lansdown Select UK Income Shares fund, said: “The challenges facing GSK this quarter had been well flagged.

“A year ago, wholesalers were pulling orders forward to stock up ahead of looming lockdowns. Social distancing has kept colds and flu at bay whilst GPs have concentrated on Covid vaccinations, rather than other treatments.

“The reduction in profits has led to a weak quarter for cash generation at GSK, and the company needs to show that they can improve this going forward.

“Strip out some of the one-off changes to customer behaviour due to Covid-19 and the company has some encouraging underlying progress to talk about. New treatments in respiratory and cancer are growing well and as GPs return to normal operations GSK’s Shingrix vaccine for shingles should return to strong growth.”

However, Clayton added that the most significant shake-up of GSK could come in the form of new investor Elliot Management, which is rumoured to have made a multi-billion pound investment earlier this month.

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“Elliot have a reputation for shaking up underperforming businesses and driving strategic change”, Clayton said.

“What they will push for at GSK is yet to be seen, but it’s a safe bet that they see more value taking a course different from that which GSK is currently following.”