Pharmaceutical giant GlaxoSmithKline is aiming to save £400 million per year by 2021 through a ‘major restructuring programme’ the firm has revealed.
GSK will be reviewing its supply chain and cutting back on admin costs as it seeks to save big money and run a tighter ship.
The company said savings from the restructuring programme will be redirected into research and development as it seeks to develop new profit-making drugs and treatments.
Pharmaceutical giant GlaxoSmithKline is aiming to save £400 million per year
The pharma giant said it expects to take a £800million cash hit as a result of the programme’s implementation, and a £900million ‘non-cash charge’, over the next three years.
The details on the cost cutting plan came as GSK announced its second quarter results, with it reporting sales were flat at £7.3 billion. When adjusted for currently fluctuations, turnover grew 4 per cent.
This translated into pre-tax profit of £614 million, representing a strong turnaround from a loss of £178 million a year earlier.
There was no mention of a demerger of GSK’s consumer healthcare unit as had been expected by some in the City.
Shares in the FTSE 100 company responded well, climbing 1.2 per cent to 1,575p.
Chief executive Emma Walmsley said GSK had delivered ‘encouraging results across the company’ in the second quarter.
‘With the recent new product launches, development of the new R&D approach and the successful buyout of the consumer business, we have evaluated the group’s cost base and what is required to deliver competitive long-term growth and performance in each of the group’s three businesses.’
Chief executive Emma Walmsley said GSK had delivered encouraging results
‘As a result, we are today announcing a new major restructuring programme, which aims to significantly improve the competitiveness and efficiency of the group’s cost base with savings delivered primarily through supply chain optimisation and reductions in administrative costs,’ Walmsley added.
Ketan Patel, manager of the Amity UK fund at EdenTree Investment Management commented: ‘GSK CEO Emma Walmsley has made her mark in a very short time via strategic decision making and assembling a high-quality management team – especially in the pharmaceutical division. The decision to buy out the Novartis joint venture took the market by surprise but went a long way to provide greater comfort on the dividend, which had been under considerable pressure.’
‘Long-term investors will welcome the revised financial guidance, the new approach to R&D and the restructuring programme – which is forecast to save £400m annually,’ Patel continued.
‘In addition, the company has a fertile drugs portfolio, which is expected to play out over 2018-2020. The fall in sterling versus the US dollar and a lower tax rate in the US, post the recent reforms by the Trump administration, augur well for the company over the rest of the year.’