As investors take positions, shares of GSK Plc traded on the Nigerian Exchange have grown more costly. GSK shares rose 20% last week as investors sought to profit from the announcement. Alpha hunters bought into the pharmaceutical company’s more than 1.195 billion shares on the local stock exchange.
GSK’s share price increased by 20% to N8.90 from N7.40 the previous week due to the bargain hunting. On Monday, it soared to N9.75, and yesterday, the company’s market worth reached N10 billion after it gained 9.74% to settle at N10.7 per share.
According to the company’s financial statements, Nigerian stockholders control 53.6% of the GSK shares, while UK businesses Setfirst Limited and SmithklineBeecham Limited possess 46.4%.
The rise, which was purposely targeted by alpha hunters, would raise the company’s exit costs while the market awaited next-in-line action. Following a drop in sales due to massive foreign exchange losses, GSK Plc announced its decision to exit the Nigerian market, citing uncertainty about the company’s capacity to continue.
According to analysts, most firms with large import expenses would face a similar threat. Companies in the fast-moving consumer sector have faced significant profit declines as a result of foreign exchange pressures caused by the volatility of the Nigerian naira. GSK’s exposure to foreign currency transactions deteriorated as a result of the devaluation, and its FX losses soared, draining an already meager profit.
According to its unaudited financial statement, its unrealised FX loss grew to N10.932 billion from N16.5 million. The company has already realized a forex loss of N14.217 million in the period. GSK informed the Nigerian Exchange that it will shut its Nigerian operations due to a difficult economic climate that had resulted in losses for the pharmaceutical business.
Its UK Group informed GSK Consumer Nigeria of its plan to discontinue the sale of its prescription medicines and vaccines in Nigeria through local operating firms and shift to a third-party direct distribution strategy for its pharmaceutical goods. The Haleon Group has also separately notified the Board of its intention to terminate its distribution arrangement in the coming months and select a third-party distributor in Nigeria to sell its consumer healthcare goods, according to the statement.
“For the above reasons, and having, together with GSK UK, evaluated various other options, the Board of GlaxoSmithKline Consumer Nigeria Plc has concluded that there is no alternative but to cease operations.
“Today we are briefing our employees whom we will treat fairly, respectfully, and with care, meeting all applicable legal and consultation requirements”, the company said in a statement.
The group said, “The Board is conscious that shareholders will have many questions; we have been working assiduously with our professional advisors to agree on next steps and we will be shortly submitting to the Securities and Exchange Commission a draft Scheme of Arrangement”.
It said this may, if approved, see shareholders other than GSK UK, receive an accelerated cash distribution and return of capital. The Board acknowledged the support of the GSK Group in its intentions to make this possible, full details of which we hope to publish shortly.
“In the meantime, however, we cannot give you assurance of the final terms of any scheme, or that any scheme will be approved by the SEC or by shareholders.
In the second quarter of 2023, its result showed that revenue declined to N3.731 billion from N7.451 billion 12 months earlier. In the period, the company’s profit surged to about N185 million, an increase of N30 million when compared with about N155 million recorded in the comparable period in 2022.
The profit was propelled by a strong decline in selling and distribution spending in the period. This came in addition to a significant increase in finance income which settled at N192.3 million. The positive vibe was reduced by a surge in other losses, rising from N7.3 million to more than N28 million. Comparing its half-year results, GSK sales fell by about 100%, from N14.811 billion in the first half of 2022 to N7.75 billion at the end of the first half in 2023.
Its profit performance also declined to about N340 billion in the same period from N349.3 billion in the comparable period despite deliberate efforts to significantly reduce selling and distribution costs. GlaxoSmithKline Consumer Nigeria Plc has posted N771.146 million annual profit for the financial year 2022. The amount came as the company’s revenue jumped to N25.382 billion from N22.449 billion in 2021.
In 2021, the company went home with N658.811 million annual profit, representing a 17.05% year-on-year growth to N771.146 million in 2022. Its costs of sales spiked by 13.4% to N18.452 billion in 2022 amidst an increase in the general price level in its Nigerian market. In 2021, the company reported its costs of sales printed at N16.270 billion.
Though selling and distribution costs declined, its administrative spending surged while operating profit grew, supported by healthy top-line growth in 2022. Due to a high interest rate environment in Nigeria, GSK boosted revenue from short-term investment placement. Its finance income grew by about 242% to N319.508 million from N93.545 million in 2021. The consumer goods company reported that impairment costs moderated significantly in 2022 to N5.917 million from more than N24 million booked in 2021.
