GlaxoSmithKline Consumer Healthcare Pakistan Limited (PSX: GSKCH) has closed the half-year ended June 30, 2017 with net profits of Rs307.5 million. GSKCH is a new kid on the trading block. It got listed on the PSX earlier in March this year, following GSK Pakistan’s decision to unbundle its healthcare business from the rest of its operations, in line with the strategy of its ultimate parent, GlaxoSmithKline PLC UK.
GSKCH markets a number of over-the-counter consumer healthcare products in areas like pain relief, respiratory health, gastrointestinal health, oral health, skin health, and nutrition. Top brands include Panadol, Actifed, Eno, Horlicks, and Sensodyne. Due to the unbundling of consumer healthcare business from prescription medicines and vaccines, GSKCH can better reach its target market through mass advertisements.
During the most recent quarter, GSKCH has shown an all-round better performance. The massive top line boost (up 44% YoY) was accompanied by a number of factors that resulted in a disproportionate bottom-line growth (up 140% YoY). The major reason is that 2QCY17 cost of sales came in visibly lower than the same period last year, consuming 59 percent of net sales, as opposed to a whopping 98 percent in 2QCY16. Resultantly, gross margin stood at 41 percent, compared to a paltry 2 percent in 2QCY16.
Operating expenses – marketing expenses, administrative expenses, and other operating expenses – have registered higher in 2QCY17, exhausting 27 percent of net sales, compared to 24 percent in the year-ago period. However, the lack of control in this department was more than compensated by huge growth in ‘other income’, which equated to 5 percent of net sales in 2QCY17. Consequently, operating margin read 19 percent in the quarter, in contrast with negative 21 percent in 2QCY16.
With a boisterous top line in the bag, operational savings in tow and only negligible financial charges to pay, GSKCH not only closed 2QCY17 on a profitable note but also did so with phenomenal growth over the same period last year. There is no standalone historical data over multiple years to analyse here, but it is apparent that the GSK’s hitherto consumer-healthcare-division is continuing its growth journey.
Meanwhile, over at the stock market, folks didn’t seem too enthused about GSKCH yesterday after the firm announced its half-yearly results. The stock closed 5 percent lower at Rs250.59. Otherwise; the scrip has done rather well since it started trading on the bourse on March 22. The share value has nearly quadrupled in the 98 trading days since. And the stock has comprehensively beaten the KSE100 index, averaging a daily trading volume of roughly one lac shares.
Going forward, GSKCH is expected to benefit from growing consumerism in Pakistan. The de-merger should allow the firm to better focus on its target market through quick-response marketing initiatives. In addition, GSK’s existing pharmaceutical footprint will remain an advantage for GSKCH. However, distribution network will need to be strengthened in the competition-heavy general-trade business. GSKCH can gain some shelf power by launching some of its internationally-popular consumer healthcare brands in Pakistan.
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