(Alliance News) - GlaxoSmithKline PLC on Wednesday said it will cut its dividend over the coming years as it prepares ambitious plans to step-up productivity and growth based on vaccine sales and its late-stage product pipeline.
Shares were trading up 2.9% at 1,435.20 pence each in London on Wednesday, making the stock the top performer in the FTSE 100 in early afternoon trade.
The Brentford, England-based pharmaceutical company said that, between 2021 and 2026, it expects a compound annual growth rate, at constant exchange rates, of 5% for sales and 10% for adjusted operating profit.
The firm said it expects cash generated from operations to exceed GBP10 billion by 2026, with plans to hit over GBP33 billion in sales by 2031.
The FTSE 100-listed company also unveiled dividend plans. In 2022, shareholders will receive 55 per share together from GSK and the separated Consumer Healthcare business due to the expected mid-year timing of the demerger. This proforma dividend would be 31% below the planned 2021 payout of 80p per share.
"New GSK will adopt a progressive dividend policy targeting a dividend pay-out ratio equivalent to 40-60%, starting at 45p per share in 2023, the company's first full year of operation," it said.
GSK said its capital allocation priorities will lie on investing in the company's product pipeline and successful product launches, as well as underpinning its progressive dividend policy.
On the separation of its Consumer Healthcare arm, it plans to do this via a demerger of at least 80% of GSK's 68% holding in the business to GSK shareholders, with the new Consumer Healthcare company shares expected to attain a premium listing on the London Stock Exchange and ADRs to be listed in the US.
"New GSK will retain up to 20% of GSK's holding in the new Consumer Healthcare company as a short-term financial investment, which it intends to monetise in a timely manner to further strengthen New GSK's balance sheet and help fund certain pension benefit obligations," it said.
The firm has identified a further GBP200 million of annual savings from its separation preparation restructuring programme, bringing the target up to GBP1.0 billion, with no additional delivery costs.
On strategy for the remaining GSK business, it expects to prioritise research & development and commercial investment in Vaccines and Specialty Medicines. It anticipates this category will account for around 75% of company sales by 2026.
Chief Executive Emma Walmsley said: "The benefits of the huge transformation we have driven since 2017 are now clear. We have strengthened our R&D and commercial execution, and transformed our group structure and capital allocation, while driving a profound cultural change with new leadership."
"Together, we are now ready to deliver a step-change in growth for New GSK and unlock the value of Consumer Healthcare. With world class capabilities across prevention and treatment of disease, New GSK is exceptionally well positioned to positively impact people's health and to deliver strong performance and value to shareholders through the decade," Walmsley added.
By Scarlett Butler; scarlettbutler@alliancenews.com
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Glaxosmithkline (GSK)