What were the highlights of these results for you? Can you talk me
through the details?
I think the picture we’ve presented today is very consistent to the one that
we’ve presented for some time now. And for me the three simple statistics are
11% growth on the top line, 3.8 percentage points of margin improvement and a
34% increase in earnings per share.
That is precisely the kind of operating leverage that we’ve been seeking to
achieve and have been achieving for some time now.
Your margins are now into the low 30s and for some time this has been
your stated target. So how much more is there to go for?
Over the last three years we’ve added 10 percentage points of margin
improvement, so I think our record of driving productivity improvements is very
This year we aim to improve margins again and the target we’ve set ourselves
is that, if everything goes well, we should be able to increase margins by up to
1.5 percentage points. And that’s after being somewhat flattened by the
reductions in other income. So our desire to increase productivity still
remains. I would love to say we can put another 10% on the margin, but clearly
that’s not possible.
You have announced 3,000 job cuts. Where are these coming from and
what’s the timetable?
The timetable, rightly, is governed by communication to the parts of the
business that are affected. So we’ve announced the plan in its broadest terms.
But to give more detail on that is utterly inappropriate and against our
values to communicate in advance of telling the people that are affected.
So that process will evolve over the coming months. As we get more specifics
on it and as people are being properly informed, then we will roll out more of
But it is a plan that is going to affect the next three years, so the impact
of it isn’t going to be immediate or short-term.
What costs are you putting to the actions that are underway?
The total cost is about $500m (£255.1m) over three years; $300m of which is
cash cost. The rest is an asset write-off. We’re not clear yet what the
accounting phasing of that is, because it will depend on how the programme rolls
out. But it’s got a very sound business case and, as I say, it will be part of
maintaining AstraZeneca’s gross margins at the industry leadership level, which
is the aspiration we always set for ourselves.
Some shareholders have been critical about how AstraZeneca has been
using its cash pile. What’s the plan going forward?
I think we’re absolutely clear about what we want to use our cashflow for.
Number one: to support the long-term growth of the business, and we’ve been very
clear that the first priority will be to invest in the pipeline.
Thereafter, all free cash generation is available for shareholder
distribution. If you look at our record on that – 83% increase in dividends over
the last three years, over $7bn returned by share repurchases (10% of the market
cap of the company) – we’ve been at the 90% plus level of distribution and have
sustained an investment campaign.
Shareholders will fully understand that the return has to be on the basis
that we sustain the future needs of the business as well. And I think those two
criteria can live in harmony.
So what forecasts are you making in terms of share buybacks for this
The board has announced an increase in the share buy-back programme for this
year to around $4bn. So they are getting a 32% increase in the final dividend, a
$1bn increase in the share buyback programme and a continuing commitment to
I believe that we continue to satisfy shareholders’ demands for return of
capital and for increasing the prospects of the business in the future through
investing in the pipeline. I think we meet those both head-on.
You’ve made a particular point in mentioning AstraZeneca’s geographic
marketing reach. So to what extent do you think emerging markets will play in
the future of the company?
Let me come at that with a general point first. There is one thing that has
really struck us this year, particularly as we have spent a lot of time out and
about talking to companies about the potential of AstraZeneca as a partner. It
has come back time and time again that the quality and the breadth of our
geographic footprint is a real competitive advantage, particularly when you look
at AstraZeneca in primary care markets across the world.
We are looking at our geographical spread perhaps a little differently than
we were 12 months ago. And so we have communicated the performance of our
emerging markets business. Emerging markets in our view is Asia, it’s China,
it’s Latin-America and it includes Eastern Europe as well. We have got a
business now that is over $2.8bn in sales. It is growing at 22% and it has got
pretty decent profitability.
I think that is one of the differentiating features of AstraZeneca’s
geographic footprint. Our partners recognise it and so it seems perfectly
sensible to present it to our shareholders, so that they can recognise it too.
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