Glaxo insider Walmsley to replace Witty as CEO

Given many in the City can't wait to see the back of GlaxoSmithKline chief executive Andrew Witty, the naming of his successor has failed to trigger much excitement. Still, Emma Walmsley, who earned her stripes in-house, will become the FTSE 100's most powerful female boss early next year, and prospects look good.

Witty will stand down in March after more than 30 years at the drugs giant, eight of them as CEO. It's been an uncomfortable position in recent years as big shareholders like Neil Woodford criticised his strategy, arguing that the business should be broken up.

However, Glaxo has been one of the major beneficiaries of the post-referendum clamour for overseas earning dividend payers. Its share price is up by as much as 20% since the vote to a three-year high, and investors can still lock in a dividend yield of almost 5%.

Walmsley, who joined Glaxo six years ago, has built her reputation running the Consumer Healthcare division where sales grew 7% in the first half of 2016 to £1.7 billion. Sales of Sensodyne toothpaste were a big driver of growth there.

The decision to promote Walmsley, who previously headed up L'Oreal's consumer products business in China, followed a "very thorough and rigorous global selection process," said Glaxo chairman Philip Hampton:

"Emma is an outstanding leader with highly valuable experience of building and running major global businesses and a strong track record of delivering growth and driving performance in healthcare."

And she's clearly got ideas about the way the business should be run. "I'm looking forward to working with Andrew and other leaders over the next few months to ensure a smooth handover and to develop plans for 2017 and beyond," Walmsley said Tuesday.

We won't be told her new salary yet, but there'll be a significant increase in basic pay and incentives on top of the 200,000-plus Glaxo shares she already owns. Those alone are already worth about £3.3 million.

Broker UBS last month upgraded earnings per share (EPS) estimates for 2016 by 10%, implying growth of about 11% this year, in line with company guidance. Look for 7.8% annual growth from 2016 to 2020.

It also thinks the current share price is about right. "We continue to base our price target on the large-cap sector 2017E PE average. Excluding GSK, the large-cap weighted average (excl. Novo Nordisk) is currently 15.1x, leading us to derive a PT of 1,650p: up from 1,420p."

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