LONDON-- GlaxoSmithKline PLC on Wednesday cut the amount of
money it plans to return to shareholders under an asset swap with
Switzerland's Novartis AG as it reported a rise in first-quarter
net profit, boosted by the deal.
Glaxo also said it would keep its stake in Viiv Healthcare, its
HIV medicine joint venture with Pfizer Inc. and Shionogi & Co.,
after recent drug launches beat expectations. It had previously
considered spinning off the unit.
The U.K.-based company said profit attributable to shareholders
leapt to GBP8.09 billon ($12.28 billion), compared with GBP668
million a year earlier. Revenue edged up to GBP5.62 billion from
GBP5.61 billion in the first quarter of 2014.
Profit was boosted by proceeds from the deal with Novartis,
under which Glaxo sold its oncology unit and bought the Swiss
company's vaccines business. The two companies also merged their
consumer-health businesses.
Core operating profit, GSK's preferred measure of earnings, fell
14% on a constant exchange rate basis to GBP1.31 billion. Analysts
surveyed by The Wall Street Journal had expected revenue of GBP5.65
billion and core profit of GBP1.31 billion.
However, the company cut the amount of money it will return to
shareholders from the proceeds of the Novartis transaction to GBP1
billion from GBP4 billion, saying it wanted to maintain financial
flexibility. The sum to be returned to shareholders will be paid
via a special dividend alongside its fourth-quarter payment.
GSK said it would pay a first-quarter dividend of 19 pence a
share and planned to pay an annual ordinary dividend of 80 pence a
share for each of the next three years, 2015-2017.
The results were complicated by the closing of GSK's $20 billion
asset swap with Novartis in the quarter, meaning they reflected a
mix of the "old" and "new" company.
"With the completion of the Novartis transaction, we have
reviewed future prospects for the newly shaped group, including the
opportunities offered through the integration and our cash
allocation strategy," Chief Executive Andrew Witty said as he set
out the group's medium-term expectations.
While 2015 earnings will be diluted by the Novartis deal, Mr.
Witty said earnings and revenue are expected to grow over the next
five years from 2016 to 2020.
He expects group revenue to grow in the low-mid single digits
over the five year period on a constant currency exchange basis,
but earnings to grow faster than sales at mid-to-high single digits
over the five years 2016-2020.
Write to Denise Roland at Denise.Roland@wsj.com and Ian Walker
at ian.walker@wsj.com
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