The market reacted badly to AstraZeneca's (AZN) full-year results - not because the group missed consensus forecasts, but because it's increasingly likely that only major product acquisitions can reverse the damage caused to the company's earnings prospects from key patent expiries. Chief executive Pascal Soriot now expects a mid-to-high single-digit decline in sales this year, with the fall in core EPS to be "significantly" more than revenue.
AstraZeneca's problems were illustrated by the fact that 13 percentage points - or $4.5bn (£2.8bn) -of the 17 per cent sales decline came from the expiry of a handful of products, with schizophrenia drug Seroquel IR being the most significant in terms of sales. In response, management is restructuring the research and development operation with more than 9,000 redundancies now completed. That should generate annual savings of $1.9bn by end-2014, which, combined with a suspended share buy-back programme and the lowest dividend increase in a decade, will provide additional cash to invest in new products. There was little clarity on strategic priorities, however, although details have been promised at the group's capital markets day on 21 March.
Analyst estimates are under review but, prior to these results, broker Shore Capital expected pre-tax profit for 2014 of £7.77bn, giving EPS of 495¢.
ASTRAZENECA (AZN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,989p | MARKET VALUE: | £37.3bn | |
| TOUCH: | 2,989-2,991p | 12-MONTH HIGH: | 3,171p | LOW: 2,578p |
| DIVIDEND YIELD: | 6% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 1,904¢* | NET DEBT: | 6% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 31.6 | 8.68 | 420 | 133 |
| 2009 | 32.8 | 10.8 | 519 | 141 |
| 2010 | 33.2 | 11.0 | 560 | 162 |
| 2011 | 33.6 | 12.4 | 733 | 176 |
| 2012 | 28.0 | 7.72 | 499 | 179 |
| % change | -17 | -38 | -32 | +2 |
Ex-div: 13 Feb Payment: 18 Mar *Includes intangible assets of $26.3bn, or 2,113¢ a share £1=$1.58 | ||||
