SmithKline Beecham,Related Entities Rtgs Raised by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/11/97--Standard & Poor's today has raised its ratings on SmithKline Beecham PLC and related entities (see list below). The outlook is positive. About US$1.7 billion of rated debt is affected. The upgrades reflect significant improvements over the past three years in SmithKline Beecham's business profile, in conjunction with a less aggressive than expected acquisition policy. The business profile has benefited in recent years from successful introduction and growth of a number of new drugs. Compared to its 1994 position, the group: -- Has a better balanced portfolio of drugs (following the mid-1994 U.S. patent expiry of its previously biggest drug Tagamet); -- Enjoys one of the best pipelines in the industry; -- Achieved about twice the industry's average growth rate in pharmaceuticals (13% in 1995, 14% in 1996, and 12% in the first quarter of 1997 compared with the same periods one year earlier); -- Has overproportional exposure to the lucrative U.S. market (49% of total sales in 1996); and -- No significant exposure to U.S. patent expiries in the next four years. The upgrades also acknowledge that, despite a more aggressive management style and the group's goal to become the world's leading health care company, SmithKline Beecham has made no major acquisitions in the past two and half years. While the event risk of a major acquisition cannot be excluded for any major participant in pharmaceuticals, given the ongoing consolidation process in a still fragmented industry, SmithKline Beecham currently has no operational necessity to merge with another company. With its attractive range of new drugs, it has no obvious need for making a major acquisition or considering a merger. Its new products account for over a third of sales, and were up 37% in 1996 compared with 1995, and up 40% in the first quarter of 1997. They include Seroxat/Paxil (antidepressant antidepressant, any of a wide range of drugs used to treat psychic depression. They are given to elevate mood, counter suicidal thoughts, and increase the effectiveness of psychotherapy. ), Famvir (antiviral antiviral /an·ti·vi·ral/ (-vi´ral) destroying viruses or suppressing their replication, or an agent that so acts. an·ti·vi·ral adj. ), Kytril (anti-emetic), Havrix (hepatitis A vaccine Hepatitis A Vaccine, Avaxim, is a vaccine against the Hepatitis A virus. The vaccine protects against the virus in more than 95% of cases and provides protection from the virus for ten years. ), ReQuip (Parkinson's disease Parkinson's disease or Parkinsonism, degenerative brain disorder first described by the English surgeon James Parkinson in 1817. When there is no known cause, the disease usually appears after age 40 and is referred to as Parkinson's disease. ), Hycamtin (ovarian cancer ovarian cancer Malignant tumour of the ovaries. Risk factors include early age of first menstruation (before age 12), late onset of menopause (after age 52), absence of pregnancy, presence of specific genetic mutations, use of fertility drugs, and personal history of breast ), Infanrix (paediatric Adj. 1. paediatric - of or relating to the medical care of children; "pediatric dentist" pediatric vaccine), and until 1996 Relafen (arthritis medicine). Unlike its business profile, SmithKline Beecham's financial profile has remained unchanged. At June 1996 the company's net debt (including preference shares of US$750 million) remained at #2.3 billion (about US$3.7 billion), which is the same level as for the year-end 1994 net debt when SmithKline Beecham acquired Diversified Pharmaceutical Services and Sterling Winthrop. This was mainly because of exceptional cash outflows such as restructuring charges and simplification of SmithKline Beecham share structure. Since then there have been further exceptional cash outflows relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the group's No. 250 million provision set up in 1995 and relating to litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. and administrative proceedings concerning clinical laboratories and pharmaceutical pricing but also a US$750 million preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. issue in July 1996 to repay existing debt. At March 31, 1997 net debt was No. 1.6 billion. Going forward, however, the group's businesses should return to a stronger free cash flow generation -- as evidenced by the generation of No. 362 million of average, annual free cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses between 1993 and 1995. In 1996, funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. (before changes in working capital) to net interest and preference share dividends was above 15 times (x) (up from 13x in 1995) and funds from operations to net debt was 118% (up from 89% in 1995). In the first quarter of 1997 trading profit Trading profit The profit earned on short-term trades of securities held for less than one year, subject to tax at normal income tax rates. trading profit covered net interest and preference share dividends 13x. OUTLOOK: Positive. Ratings anticipate that SmithKline Beecham will reduce its net debt meaningfully via free cash generation as well as a continuation of the good operating performance and disciplined acquisition strategy. Further strong improvements in SmithKline Beecham's financial profile could lead to a rating upgrade over the medium term, Standard & Poor's said. --- CreditWire
RATINGS RAISED
To From
SmithKline Beecham PLC
SmithKline Beecham Corp.
Corporate credit rating AA- A+
Commercial paper A-1+ A-1
SmithKline Beecham Finance PLC
*Commercial paper A-1+ A-1
SmithKline Beecham Capital Inc.
SmithKline Beecham Capital PLC
*Senior unsecured debt AA- A+
SmithKline Beecham Holdings Corp.
Corporate credit rating AA- A+
Preferred stock A+ A
*Guaranteed by SmithKline Beecham PLC.
CONTACT: David Lugg, 212/208-1348 or Christian Wenk, 44 171/826-3511 or Evelyn Heinbach, 44 171/826-3614 |
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