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Name | Symbol | Market | Type |
---|---|---|---|
GSK plc | NYSE:GSK | NYSE | Depository Receipt |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.37 | -0.92% | 39.64 | 40.005 | 39.49 | 39.97 | 4,916,964 | 01:00:00 |
Issued:
Wednesday, 24 July 2019, London U.K.
|
GSK delivers sales and earnings growth in Q2 2019
Total EPS 19.5p, +>100% AER, +>100% CER; Adjusted EPS 30.5p
+9% AER, +4% CER
|
Q2 2019 results
|
|||||||||||
|
Q2 2019
|
|
Growth
|
|
H1 2019
|
|
Growth
|
||||
|
£m
|
|
£%
|
|
CER%
|
|
£m
|
|
£%
|
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
7,809
|
|
7
|
|
5
|
|
15,470
|
|
6
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
1,484
|
|
90
|
|
80
|
|
2,912
|
|
44
|
|
37
|
Total
earnings per share
|
19.5p
|
|
>100
|
|
>100
|
|
36.3p
|
|
80
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,171
|
|
3
|
|
(1)
|
|
4,334
|
|
8
|
|
4
|
Adjusted
earnings per share
|
30.5p
|
|
9
|
|
4
|
|
60.6p
|
|
15
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from operating activities
|
1,389
|
|
2
|
|
|
|
2,052
|
|
(8)
|
|
|
Free
cash flow
|
370
|
|
(25)
|
|
|
|
535
|
|
(35)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Total results are presented under 'Financial performance' on pages
11 and 24 and Adjusted results reconciliations are presented on
pages 20, 21, 33 and 34. Adjusted results are a non-IFRS
measure that may be considered in addition to, but not as a
substitute for, or superior to, information presented in accordance
with IFRS. Adjusted results are defined on page 9 and £%
or AER% growth, CER% growth, free cash flow and other non-IFRS
measures are defined on page 61. GSK provides guidance on an
Adjusted results basis only for the reasons set out on page
10. All expectations, guidance and targets regarding future
performance and dividend payments should be read together with
"Outlook, assumptions and cautionary statements" on pages 61 and
62.
|
|
|
|
Emma Walmsley, Chief Executive Officer, GSK said:
"GSK
delivered continued good operating performance in Q2 despite the
loss of exclusivity of
Advair
. We are increasing our
expectations for the year and have updated our guidance for
2019.
"We
remain focused on strengthening our R&D pipeline and the
execution of new product launches. Positive clinical data
received so far this year offer significant new opportunities for
products in Oncology, HIV and Respiratory and we expect more
important readouts in the second half of the year. We also
expect to complete our joint venture with Pfizer shortly, laying
the foundation for the creation of two great companies: one in
Pharmaceuticals/Vaccines; one in Consumer Healthcare."
|
2019 guidance
|
GSK now
expects 2019 Adjusted EPS to decline in the range of -3% to -5% at
CER. This new guidance represents an improvement to that
previously given in February 2019 of an expected decline in
Adjusted EPS in the range of -5% to -9% at CER. The new
guidance reflects improved operating performance, lower interest
expense and a one-off benefit to the share of after tax profits of
associates in Q1 2019.
GSK
expects to maintain the dividend for 2019 at the current level of
80p per share.
All
expectations, guidance and targets regarding future performance and
dividend payments should be read together with "Outlook,
assumptions and cautionary statements" on page 61.
If
exchange rates were to hold at the closing rates on 30 June 2019
($1.27/£1, €1.12/£1 and Yen 137/£1) for the
rest of 2019, the estimated positive impact on 2019 Sterling
turnover growth would be around 2% and if exchange gains or losses
were recognised at the same level as in 2018, the estimated
positive impact on 2019 Sterling Adjusted EPS growth would be
around 4%.
|
Results presentation
|
A
webcast of the quarterly results presentation hosted by Emma
Walmsley, GSK CEO, will be held at 2pm BST on 24 July 2019.
Presentation materials will be published on
www.gsk.com
prior to the webcast
and a transcript of the webcast will be published
subsequently.
Information
available on GSK's website does not form part of, and is not
incorporated by reference into, this Results
Announcement.
|
Operating performance - Q2 2019
|
Turnover
|
Q2 2019
|
||||
|
|
|
|
||
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Pharmaceuticals
|
4,307
|
|
2
|
|
(1)
|
Vaccines
|
1,585
|
|
26
|
|
23
|
Consumer
Healthcare
|
1,917
|
|
5
|
|
4
|
|
|
|
|
|
|
Group
turnover
|
7,809
|
|
7
|
|
5
|
|
|
|
|
|
|
Group
turnover increased 7% AER, 5% CER to £7,809 million, with CER
growth delivered by Vaccines and Consumer Healthcare partially
offset by a decline in Pharmaceuticals.
Pharmaceuticals
sales were up 2% AER but down 1% CER with HIV sales up 2% AER but
down 2% CER to £1,209 million, with growth
in
Juluca
and
Dovato
offset
by declines in
Tivicay
and
Triumeq
and a decline in the
remaining portfolio. Respiratory sales were up 16% AER, 12%
CER to £752 million, on growth of
Trelegy
Ellipta
and
Nucala
. Sales of Established
Pharmaceuticals declined 6% AER, 7% CER to £2,138 million
including the impact of loss of exclusivity of
Advair
.
Vaccines
turnover grew 26% AER, 23% CER to £1,585 million, primarily
driven by growth in sales of
Shingrix
, Meningitis vaccines and
Established Vaccines also contributed to growth.
Consumer
Healthcare sales grew 5% AER, 4% CER in the quarter to £1,917
million, primarily driven by the performance of power
brands.
|
Operating profit
Total
operating profit was £1,484 million compared with £779
million in Q2 2018. Adjusted operating profit was £2,171
million, 3% higher than Q2 2018 at AER but 1% lower at CER on a
turnover increase of 5% CER. The Adjusted operating margin of
27.8% was 1.0 percentage points lower at AER, 1.4 percentage points
lower on a CER basis than in Q2 2018.
Reduced
re-measurement charges on the contingent consideration liabilities
and an increase in the value of the shares in Hindustan Unilever
Limited to be received on the disposal of Horlicks and other
Consumer Healthcare brands were partly offset by increased charges
for major restructuring, primarily arising from write-downs in a
number of manufacturing sites.
Operating
profit was impacted by continuing price pressure, including the
first full quarter's impact of the launch of a generic version
of
Advair
in the
US in February 2019, investment in R&D, including a significant
increase in Oncology investment, partly on Tesaro assets, and
investments in promotional product support, particularly for new
launches. These were partly offset by the benefit from sales
growth, particularly in Vaccines, a more favourable mix in Vaccines
and Consumer Healthcare and continued tight control of ongoing
costs across all three businesses.
Earnings per share
Total
earnings per share was 19.5p, compared with 9.0p in Q2 2018.
Adjusted EPS of 30.5p compared with 28.1p in Q2 2018, up 9% AER, 4%
CER, on a 1% CER decrease in Adjusted operating profit. The
improvement primarily resulted from a reduced tax rate and the
reduced non-controlling interest allocation of Consumer Healthcare
profits following the buyout in Q2 2018, partly offset by increased
net finance costs.
Cash flow
Net
cash inflow from operating activities was £1,389 million (Q2
2018: £1,362 million) and free cash flow was £370 million
(Q2 2018: £492 million). The reduction in free cash flow
primarily reflected increased capital expenditure, including the
acquisition of intangible assets from Merck KgaA, Darmstadt,
Germany, the adverse timing of payments for returns and rebates,
and the initial step-down impact from US
Advair
generic competition.
This was partly offset by improved operating profits, lower trade
receivables and a lower seasonal increase in inventory, as well as
reduced dividend payments to non-controlling
interests.
|
Operating performance - H1 2019
|
Turnover
|
H1 2019
|
||||
|
|
|
|
||
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Pharmaceuticals
|
8,465
|
|
3
|
|
1
|
Vaccines
|
3,107
|
|
25
|
|
22
|
Consumer
Healthcare
|
3,898
|
|
2
|
|
2
|
|
|
|
|
|
|
Group
turnover
|
15,470
|
|
6
|
|
5
|
|
|
|
|
|
|
Group
turnover increased 6% AER, 5% CER to £15,470 million, with
growth delivered by all three businesses.
Pharmaceuticals
turnover in the six months was £8,465 million, up 3% AER, 1%
CER. HIV sales were up 4% AER, 1% CER, to £2,330
million, with growth in
Juluca
and
Dovato
partly offset by a decline
in
Triumeq
.
Respiratory sales were up 21% AER, 17% CER, to £1,383 million,
on growth of
Trelegy
Ellipta
and
Nucala
. However, this was
slightly offset by Established Pharmaceuticals sales, which
declined 6% AER, 7% CER to £4,380 million, including the
impact of loss of exclusivity of
Advair
in the US.
Vaccines turnover grew 25% AER, 22% CER to £3,107 million,
primarily driven by growth in sales of
Shingrix
. Meningitis vaccines and Established
Vaccines also contributed to growth.
Consumer
Healthcare sales grew 2% AER, 2% CER to £3,898 million in the
first six months. Growth reflected improved results in all
three regions in the second quarter.
|
Operating profit
Total operating profit was £2,912 million compared with
£2,019 million in H1 2018. Adjusted operating profit was
£4,334 million, 8% higher than H1 2018 at AER and 4% higher at
CER on a turnover increase of 5% CER. The Adjusted operating
margin of 28.0% was 0.3 percentage points higher at AER, but 0.2
percentage points lower on a CER basis than in H1
2018.
Reduced re-measurement charges on the contingent consideration
liabilities were partly offset by increased charges for major
restructuring, primarily arising from write-downs in manufacturing
sites, and a decrease in value of the shares in Hindustan Unilever
Limited to be received on the disposal of Horlicks and other
brands.
Operating profit benefited from sales growth in all three
businesses, particularly Vaccines, a more favourable mix in
Vaccines and Consumer Healthcare, a benefit from favourable
inventory adjustments in Vaccines and continued tight control of
ongoing costs across all three businesses. This was partly
offset by continuing price pressure, particularly in Respiratory,
including the impact of the launch of a generic version
of
Advair
in the US in February 2019, investment in
R&D including a significant increase in Oncology investment,
partly on Tesaro assets, and investments in promotional product
support, particularly for new launches.
Earnings per share
Total
earnings per share was 36.3p, compared with 20.2p in H1 2018.
Adjusted EPS of 60.6p compared with 52.7p in H1 2018, up 15% AER,
11% CER, on a 4% CER increase in Adjusted operating profit.
The improvement primarily resulted from improved trading, the
reduced non-controlling interest allocation of Consumer Healthcare
profits following the buyout in Q2 2018, a reduced tax rate and an
increased share of after tax profits of the associate, Innoviva,
partly offset by increased net finance costs.
Cash flow
Net cash inflow from operating activities was £2,052 million
(H1 2018: £2,225 million) and free cash flow was £535
million (H1 2018: £821 million). The reduction primarily
reflected the adverse timing of payments for returns and rebates,
as well as the initial step-down impact from
US
Advair
generic competition and increased capital
expenditure, including the acquisition of intangible assets.
This was partly offset by improved operating profits, a lower
seasonal increase in trade receivables and inventory and reduced
dividend payments to non-controlling interests.
|
R&D pipeline
|
44 new medicines in development, 13 Vaccines
|
Pipeline news flow highlights since Q1 2019:
|
Oncology
|
Zejula
(niraparib)
|
|
●
|
Positive
headline results from the phase III PRIMA study
of
Zejula
for
patients with ovarian cancer in the first line maintenance setting.
The study met its primary endpoint of a statistically
significant improvement in progression free survival for women
regardless of biomarker status.
|
●
|
The US
FDA accepted the supplemental new drug application
for
Zejula
in
late-stage ovarian cancer based on the results of the QUADRA study
with priority review and a target action date of 24 October
2019.
|
●
|
At
ASCO, data was presented on the combination of niraparib and
bevacizumab versus niraparib alone for treatment of recurrent
platinum-sensitive ovarian cancer. The phase II, investigator
sponsored, AVANOVA study demonstrated that the chemotherapy-free
regimen of niraparib and bevacizumab significantly improved
progression free survival compared with niraparib
alone.
|
Bintrafusp alfa (M7824)
|
|
●
|
The
first patient was dosed in a pivotal study of bintrafusp alfa in
biliary tract cancer.
|
HIV/Infectious diseases
|
Dovato
(dolutegravir
+ lamivudine)
|
|
●
|
The
European Commission granted Marketing Authorisation
for
Dovato,
a new
once-daily, single-pill, two-drug regimen for the treatment of
HIV-1 infection.
|
●
|
96-week
data for the two-drug regimen of dolutegravir plus lamivudine in
treatment naïve patients from the GEMINI 1 & 2 phase III
studies will be presented at the 10th International AIDS Society
Conference on HIV Science.
|
●
|
The
headline data from the 48-week phase III TANGO study were announced
demonstrating the ability to control HIV-1 with a two-drug regimen
of dolutegravir plus lamivudine in virally supressed patients
switching from a TAF-containing, three-drug regimen. This
data will be presented at the 10th International AIDS Society
Conference on HIV Science.
|
Cabotegravir + rilpivirine
|
|
●
|
The US
FDA granted New Drug Approval priority review for the first
once-monthly, injectable, two-drug regimen of cabotegravir plus
rilpivirine and set a target approval date of 29 December
2019.
|
●
|
A study
to identify and evaluate approaches to implementing once-monthly
injectable HIV treatment, cabotegravir plus rilpivirine, in
clinical practice was started.
|
Fostemsavir
|
|
●
|
Positive
96-week data from the phase III study of investigational
fostemsavir in heavily treatment-experienced patients with HIV were
presented at the 10th International AIDS Society Conference on HIV
Science.
|
Combinectin
(GSK3732394)
|
|
●
|
The
first patient was dosed in a phase I study of combinectin to
establish the effect in patients with HIV-1 infection.
|
GSK3389404/3228836
(HBV ASO)
|
|
●
|
Proof
of concept for GSK'404/836 was achieved and the data is currently
being reviewed to inform next steps.
|
Immuno-inflammation
|
Otilimab
(GSK3196165)
|
|
●
|
The
phase III clinical development programme with otilimab, an
investigational anti-granulocyte macrophage colony-stimulating
factor (anti-GM-CSF) monoclonal antibody, for patients with
rheumatoid arthritis, started.
|
Benlysta
(belimumab)
|
|
●
|
The
intravenous formulation of
Benlysta
was approved in China for
the treatment of adult patients with systemic lupus
erythematosus.
|
GSK2983559 (RIP2k
inhibitor)
|
|
●
|
GSK'559
for inflammatory bowel disease was terminated due to pre-clinical
toxicity findings.
|
Respiratory
|
Nucala
(mepolizumab)
|
|
●
|
Nucala
gained FDA approval for two new
self-administration options.
|
●
|
Nucala
received a positive CHMP opinion for new
self-administration options for patients with severe eosinophilic
asthma.
|
Trelegy
Ellipta
(FF/UMEC/VI)
|
|
●
|
The
phase III CAPTAIN study of
Trelegy Ellipta
in patients with
asthma met its primary endpoint.
|
●
|
A sNDA
was submitted to the FDA supporting a revised labelling
for
Trelegy Ellipta
,
on the reduction in the risk of all-cause mortality (ACM) compared
with UMEC/VI in patients with COPD.
|
GSK3772847 (IL33
receptor antagonist)
|
|
●
|
Proof
of concept for GSK'847 was achieved and the data is currently being
reviewed to inform next steps.
|
GSK3511294 (IL5
long acting antagonist)
|
|
●
|
Proof
of concept for GSK'294 was achieved and the data is currently being
reviewed to inform next steps.
|
GSK2586881 (rhACE2
inhibitor)
|
|
●
|
GSK'881
for acute lung injury and pulmonary arterial hypertension was
terminated due to an interim data readout which did not support
progressing the programme.
|
GSK2862277 (TNFR1
antagonist)
|
|
●
|
GSK'277
for acute lung injury was terminated due to an interim data readout
which did not support progressing the programme.
|
Other pharmaceuticals
|
GSK3186899 (CRK-12
inhibitor)
|
|
●
|
The
first patient was dosed in a phase I study to establish the effect
of GSK'899 in patients with visceral leishmaniasis.
|
Vaccines
|
Therapeutic HBV
vaccine
|
|
●
|
First
time in human trials were started for a candidate therapeutic
vaccine using the AS01 adjuvant for patients suffering from chronic
hepatitis B infection with limited level of fibrosis or
cirrhosis.
|
Hepatitis C
vaccine
|
|
●
|
A
candidate prophylactic hepatitis C virus (HCV) vaccine was
terminated following the results of a phase I/IIb study that
indicated low efficacy.
|
Shingrix
|
|
●
|
Shingrix
was approved in China for the prevention of
shingles in adults aged 50 years and over.
|
Contents
|
Page
|
|
|
Total
and Adjusted results
|
9
|
Financial
performance - Q2 2019
|
11
|
Financial
performance - H1 2019
|
24
|
Cash
generation
|
37
|
Returns
to shareholders
|
38
|
|
|
Income
statements
|
40
|
Statement
of comprehensive income - three months ended 30 June
2019
|
41
|
Statement
of comprehensive income - six months ended 30 June
2019
|
42
|
Pharmaceuticals
turnover - three months ended 30 June 2019
|
43
|
Pharmaceuticals
turnover - six months ended 30 June 2019
|
44
|
Vaccines
turnover - three months ended 30 June 2019
|
45
|
Vaccines
turnover - six months ended 30 June 2019
|
46
|
Balance
sheet
|
47
|
Statement
of changes in equity
|
48
|
Cash
flow statement - six months ended 30 June 2019
|
49
|
Segment
information
|
50
|
Legal
matters
|
52
|
Additional
information
|
52
|
Reconciliation
of cash flow to movements in net debt
|
59
|
Net
debt analysis
|
59
|
Free
cash flow reconciliation
|
59
|
Principal
risks and uncertainties
|
60
|
Reporting
definitions
|
61
|
Outlook,
assumptions and cautionary statements
|
61
|
Directors'
responsibility statement
|
63
|
Independent
review report
|
64
|
Contacts
|
GSK
- one
of the world's leading research-based pharmaceutical and healthcare
companies - is committed to improving the quality of human life by
enabling people to do more, feel better and live longer. For
further information please visit
www.gsk.com
.
|
GSK enquiries:
|
|
|
|
UK
Media enquiries:
|
Simon
Steel
|
+44 (0)
20 8047 5502
|
(London)
|
|
Tim
Foley
|
+44 (0)
20 8047 5502
|
(London)
|
|
Mary
Hinks-Edwards
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
|
|
US
Media enquiries:
|
Kristen
Neese
|
+1 215
751 3335
|
(Philadelphia)
|
|
|
|
|
Analyst/Investor
enquiries:
|
Sarah
Elton-Farr
|
+44 (0)
20 8047 5194
|
(London)
|
|
James
Dodwell
|
+44 (0)
20 8047 2406
|
(London)
|
|
Danielle
Smith
|
+44 (0)
20 8047 7562
|
(London)
|
|
Jeff
McLaughlin
|
+1 215
751 7002
|
(Philadelphia)
|
Registered in England & Wales:
No. 3888792
|
|
Registered Office:
980 Great West Road
Brentford, Middlesex
TW8 9GS
|
Total and Adjusted results
|
Total
reported results represent the Group's overall
performance.
GSK
also uses a number of adjusted, non-IFRS, measures to report the
performance of its business. Adjusted results and other
non-IFRS measures may be considered in addition to, but not as a
substitute for or superior to, information presented in accordance
with IFRS. Adjusted results are defined below and other
non-IFRS measures are defined on page 61.
GSK
believes that Adjusted results, when considered together with Total
results, provide investors, analysts and other stakeholders with
helpful complementary information to understand better the
financial performance and position of the Group from period to
period, and allow the Group's performance to be more easily
compared against the majority of its peer companies. These
measures are also used by management for planning and reporting
purposes. They may not be directly comparable with similarly
described measures used by other companies.
GSK
encourages investors and analysts not to rely on any single
financial measure but to review GSK's quarterly results
announcements, including the financial statements and notes, in
their entirety.
GSK is
committed to continuously improving its financial reporting, in
line with evolving regulatory requirements and best practice and
has made a number of changes in recent years. In line with
this practice, GSK expects to continue to review its reporting
framework.
Adjusted
results exclude the following items from Total results, together
with the tax effects of all of these items:
|
●
|
amortisation
of intangible assets (excluding computer software)
|
●
|
impairment
of intangible assets (excluding computer software) and
goodwill
|
●
|
major
restructuring costs, which include impairments of tangible assets
and computer software, (under specific Board approved programmes
that are structural, of a significant scale and where the costs of
individual or related projects exceed £25 million), including
integration costs following material acquisitions
|
●
|
transaction-related
accounting or other adjustments related to significant
acquisitions
|
●
|
proceeds
and costs of disposal of associates, products and businesses;
significant legal charges (net of insurance recoveries) and
expenses on the settlement of litigation and government
investigations; other operating income other than royalty
income, and other items
|
Costs
for all other ordinary course smaller scale restructuring and legal
charges and expenses are retained within both Total and Adjusted
results.
As
Adjusted results include the benefits of Major restructuring
programmes but exclude significant costs (such as significant
legal, major restructuring and transaction items) they should not
be regarded as a complete picture of the Group's financial
performance, which is presented in Total results. The
exclusion of other Adjusting items may result in Adjusted earnings
being materially higher or lower than Total earnings. In
particular, when significant impairments, restructuring charges and
legal costs are excluded, Adjusted earnings will be higher than
Total earnings.
GSK has
undertaken a number of Major restructuring programmes in recent
years in response to significant changes in the Group's trading
environment or overall strategy, or following material
acquisitions. Costs, both cash and non-cash, of these
programmes are provided for as individual elements are approved and
meet the accounting recognition criteria. As a result,
charges may be incurred over a number of years following the
initiation of a Major restructuring programme.
Significant
legal charges and expenses are those arising from the settlement of
litigation or government investigations that are not in the normal
course and materially larger than more regularly occurring
individual matters. They also include certain major legacy
matters.
Reconciliations
between Total and Adjusted results, providing further informat
Pharmaceutical turnover
ion on the key Adjusting items, are
set out on pages 20, 21, 33 and 34.
GSK
provides earnings guidance to the investor community on the basis
of Adjusted results. This is in line with peer companies and
expectations of the investor community, supporting easier
comparison of the Group's performance with its peers. GSK is
not able to give guidance for Total results as it cannot reliably
forecast certain material elements of the Total results,
particularly the future fair value movements on contingent
consideration and put options that can and have given rise to
significant adjustments driven by external factors such as currency
and other movements in capital markets.
|
ViiV Healthcare
ViiV
Healthcare is a subsidiary of the Group and 100% of its operating
results (turnover, operating profit, profit after tax) are included
within the Group income statement.
Earnings
are allocated to the three shareholders of ViiV Healthcare on the
basis of their respective equity shareholdings (GSK 78.3%, Pfizer
11.7% and Shionogi 10%) and their entitlement to preferential
dividends, which are determined by the performance of certain
products that each shareholder contributed. As the relative
performance of these products changes over time, the proportion of
the overall earnings allocated to each shareholder also changes.
In particular, the increasing sales of
dolutegravir-containing products have a favourable impact on the
proportion of the preferential dividends that is allocated to
GSK. Adjusting items are allocated to shareholders based on
their equity interests. GSK was entitled to approximately 85%
of the Total earnings and 82% of the Adjusted earnings of ViiV
Healthcare for 2018.
As
consideration for the acquisition of Shionogi's interest in the
former Shionogi-ViiV Healthcare joint venture in 2012, Shionogi
received the 10% equity stake in ViiV Healthcare and ViiV
Healthcare also agreed to pay additional future cash consideration
to Shionogi, contingent on the future sales performance of the
products being developed by that joint venture, principally
dolutegravir. Under IFRS 3 'Business combinations', GSK was
required to provide for the estimated fair value of this contingent
consideration at the time of acquisition and is required to update
the liability to the latest estimate of fair value at each
subsequent period end. The liability for the contingent
consideration recognised in the balance sheet at the date of
acquisition was £659 million. Subsequent re-measurements
are reflected within other operating income/expense and within
Adjusting items in the income statement in each period. At 30
June 2019, the liability, which is discounted at 8.5%, stood at
£5,664 million, on a post-tax basis.
Cash
payments to settle the contingent consideration are made to
Shionogi by ViiV Healthcare each quarter, based on the actual sales
performance of the relevant products in the previous quarter.
These payments reduce the balance sheet liability and hence
are not recorded in the income statement. The cash payments
made to Shionogi by ViiV Healthcare in H1 2019 were £439
million.
Because
the liability is required to be recorded at the fair value of
estimated future payments, there is a significant timing difference
between the charges that are recorded in the Total income statement
to reflect movements in the fair value of the liability and the
actual cash payments made to settle the liability.
Further
explanation of the acquisition-related arrangements with ViiV
Healthcare are set out on pages 41 and 42 of the Annual Report
2018.
|
Financial performance - Q2 2019
|
Total results
|
The
Total results for the Group are set out below.
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Turnover
|
7,809
|
|
7,310
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,637)
|
|
(2,310)
|
|
14
|
|
14
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,172
|
|
5,000
|
|
3
|
|
-
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,590)
|
|
(2,457)
|
|
5
|
|
3
|
Research
and development
|
(1,113)
|
|
(925)
|
|
20
|
|
17
|
Royalty income
|
78
|
|
73
|
|
7
|
|
4
|
Other
operating expense
|
(63)
|
|
(912)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
1,484
|
|
779
|
|
90
|
|
80
|
|
|
|
|
|
|
|
|
Finance
income
|
21
|
|
27
|
|
|
|
|
Finance
expense
|
(237)
|
|
(194)
|
|
|
|
|
Share
of after tax (losses)/profits of
associates and
joint ventures
|
(4)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
1,264
|
|
614
|
|
>100
|
|
94
|
|
|
|
|
|
|
|
|
Taxation
|
(214)
|
|
(139)
|
|
|
|
|
Tax rate %
|
16.9%
|
|
22.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
1,050
|
|
475
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling
interests
|
86
|
|
34
|
|
|
|
|
Profit
attributable to shareholders
|
964
|
|
441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050
|
|
475
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Earnings per share
|
19.5p
|
|
9.0p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Adjusted results
The
Adjusted results for the Group are set out below.
Reconciliations between Total results and Adjusted results
for Q2 2019 and Q2 2018 are set out on pages 20 and
21.
|
|
Q2 2019
|
||||||
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Turnover
|
7,809
|
|
100
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,243)
|
|
(28.7)
|
|
8
|
|
7
|
Selling,
general and administration
|
(2,433)
|
|
(31.2)
|
|
4
|
|
2
|
Research
and development
|
(1,040)
|
|
(13.3)
|
|
20
|
|
16
|
Royalty
income
|
78
|
|
1.0
|
|
7
|
|
4
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,171
|
|
27.8
|
|
3
|
|
(1)
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
1,947
|
|
|
|
-
|
|
(4)
|
Adjusted
profit after tax
|
1,647
|
|
|
|
6
|
|
2
|
Adjusted
profit attributable to shareholders
|
1,509
|
|
|
|
9
|
|
5
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
30.5p
|
|
|
|
9
|
|
4
|
|
|
|
|
|
|
|
|
Operating profit by business
|
Q2 2019
|
||||||
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,075
|
|
48.2
|
|
(2)
|
|
(5)
|
Pharmaceuticals
R&D*
|
(819)
|
|
|
|
32
|
|
28
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
1,256
|
|
29.2
|
|
(16)
|
|
(19)
|
Vaccines
|
612
|
|
38.6
|
|
71
|
|
64
|
Consumer
Healthcare
|
391
|
|
20.4
|
|
11
|
|
8
|
|
|
|
|
|
|
|
|
|
2,259
|
|
28.9
|
|
3
|
|
(1)
|
Corporate
& other unallocated costs
|
(88)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,171
|
|
27.8
|
|
3
|
|
(1)
|
|
|
|
|
|
|
|
|
*
|
Operating
profit of Pharmaceuticals R&D segment, which is the
responsibility of the President, Pharmaceuticals R&D. It
excludes ViiV Healthcare R&D expenditure, which is reported
within the Pharmaceuticals segment.
|
Turnover
|
Pharmaceuticals turnover
|
|
Q2 2019
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Respiratory
|
752
|
|
16
|
|
12
|
HIV
|
1,209
|
|
2
|
|
(2)
|
Immuno-inflammation
|
151
|
|
32
|
|
26
|
Oncology
|
57
|
|
-
|
|
-
|
Established
Pharmaceuticals
|
2,138
|
|
(6)
|
|
(7)
|
|
|
|
|
|
|
|
4,307
|
|
2
|
|
(1)
|
|
|
|
|
|
|
US
|
1,783
|
|
(5)
|
|
(10)
|
Europe
The
reconciliations between Total results and Adjusted
results
|
1,034
|
|
5
|
|
4
|
International
|
1,490
|
|
9
|
|
8
|
|
|
|
|
|
|
|
4,307
|
|
2
|
|
(1)
|
|
|
|
|
|
|
Pharmaceuticals turnover in the quarter was £4,307 million, up
2% AER but down 1% CER. Respiratory sales were up 16% AER,
12% CER to £752 million, on growth of
Trelegy
and
Nucala
. HIV sales were up 2% AER but down 2% CER
to £1,209 million, with growth in
Juluca
and
Dovato
offset by declines
in
Tivicay
and
Triumeq
and a decline in the remaining
portfolio. Sales of Established Pharmaceuticals declined 6%
AER, 7% CER to £2,138 million including the impact of loss of
exclusivity of
Advair
.
In the US, sales declined 5% AER, 10% CER, with continued growth
of
Nucala
,
Trelegy
and
Benlysta
offset by the decline in Established
Products including the loss of exclusivity
of
Advair
and in
Relvar/Breo
Ellipta
, impacted by
genericisation of the ICS/LABA market. In Europe, sales grew
5% AER, 4% CER, with strong growth in Respiratory partly offset by
declines in Established Pharmaceuticals. International grew
9% AER, 8% CER, with growth in all therapy
areas
.
Respiratory
Total
Respiratory sales were up 16% AER, 12% CER, with strong growth in
Europe and International regions. Europe and International
saw growth in
Ellipta
products
including
Relvar/Breo
and
Trelegy
, and
Nucala
, which was up 44% AER, 42% CER
in Europe and 53% AER, 53% CER in International. In the US,
strong growth in
Trelegy
Ellipta
and
Nucala
was offset by a decline
in
Relvar/Breo
Ellipta
, as a result of post-generic ICS/LABA price
pressure.
Sales
of
Nucala
were
£195 million in the quarter and grew 38% AER, 33% CER,
continuing to benefit from the global rollout of the product.
US sales of
Nucala
grew 33% AER, 26% CER to
£117 million.
Sales
of
Ellipta
products were up 9% AER,
6% CER to £557 million driven by growth in Europe and
International regions. In the US, sales declined 5% AER, 10%
CER, reflecting continued competitive pricing pressures for
ICS/LABA products following the start of generic competition
to
Advair
. In
Europe, sales grew 29% AER, 29% CER. Sales
of
Trelegy
Ellipta
, our new once daily closed
triple product, contributed £120 million globally in the
quarter, continuing to benefit from the expanded US
label.
Relvar/Breo Ellipta
sales were down 15% AER, 16%
CER. In the US,
Relvar/Breo Ellipta
declined 40%
AER, 43% CER impacted by US competitive pricing pressures and the
impact of generic
Advair
on the US ICS/LABA
market. In Europe and International,
Relvar/Breo Ellipta
continued to
grow, up 15% AER, 15% CER and 21% AER, 21% CER
respectively.
HIV
HIV
sales grew 2% AER but declined 2% CER to £1,209 million in the
quarter. The dolutegravir franchise grew 3% AER, but was flat
at CER, delivering sales of £1,147 million in the
quarter. The remaining portfolio, with sales of £62
million, 5% of total HIV sales, declined 18% AER, 21% CER and
reduced the overall growth of total HIV by 1% AER, 2% CER in the
quarter.
Sales
of dolutegravir products were £1,147 million in the quarter,
with
Triumeq
and
Tivicay
delivering sales of
£646 million and £412 million, respectively. The
two-drug regimens
Juluca
and
Dovato
delivered combined sales of
£89 million in the quarter. The combined growth of these
two-drug regimens offset the decline in the three-drug
regimen,
Triumeq
, as
the business transitions to the new portfolio.
In the
US, the second two-drug regimen,
Dovato
, was launched in April 2019,
which, combined with
Juluca
, delivered sales of £75
million in the quarter. Total dolutegravir sales declined 1%
AER, 6% CER reflecting the share decline in
Tivicay
and
Triumeq
, partly offset by the share
gain on two-drug regimens as the business transitions to the new
portfolio. In Europe, overall dolutegravir sales growth was
3% at AER, 2% at CER driven by
Tivicay
and
Juluca
. International continued
to grow strongly with overall dolutegravir sales growth of 27% AER,
29% CER, driven by
Tivicay
and
Triumeq
.
Oncology
Sales
of
Zejula,
the
newly acquired PARP inhibitor asset were £57 million in the
quarter, comprising £33 million in the US and £24 million
in Europe.
Immuno-inflammation
Sales
of
Benlysta
in
the quarter were up 32% AER, 25% CER to £150 million,
including sales of the sub-cutaneous formulation. In the
US,
Benlysta
grew
29% AER, 24% CER to £132 million.
Established Pharmaceuticals
Sales
of Established Pharmaceuticals in the quarter were £2,138
million, down 6% AER, 7% CER. Established Respiratory
products declined 13% AER, 14% CER to £913 million, with the
decline in
Seretide/Advair
partly offset by
higher sales of
Ventolin
, up 39% AER, 35% CER,
benefiting from the strong uptake of an authorised generic version
launched in the US prior to the entry into the market of other
generic competitors. In the US,
Advair
experienced its first full
quarter of generic competition, resulting in a 60% AER, 61% CER
decline in the quarter. In Europe,
Seretide
sales were down 15% AER,
15% CER to £129 million, reflecting continued competition from
generic products and the transition of the Respiratory portfolio to
newer products. In International, sales of
Seretide
declined 1% at both AER
and CER.
The
remainder of the Established Pharmaceuticals portfolio was flat at
AER, but declined 1% CER with underlying mid single-digit decline
offset by certain post divestment inventory sales and the third of
four quarterly instalments of a one-year
Relenza
supply contract in
Europe.
|
Vaccines turnover
|
|
Q2 2019
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Meningitis
|
235
|
|
28
|
|
26
|
Influenza
|
17
|
|
-
|
|
6
|
Shingles
|
386
|
|
>100
|
|
>100
|
Established
Vaccines
|
947
|
|
7
|
|
5
|
|
|
|
|
|
|
|
1,585
|
|
26
|
|
23
|
|
|
|
|
|
|
US
|
778
|
|
60
|
|
52
|
Europe
|
403
|
|
3
|
|
2
|
International
|
404
|
|
8
|
|
8
|
|
|
|
|
|
|
|
1,585
|
|
26
|
|
23
|
|
|
|
|
|
|
Vaccines turnover grew 26% AER, 23% CER to £1,585 million,
primarily driven by growth in sales of
Shingrix
. Meningitis vaccines also contributed to
growth mainly due to
Bexsero
demand across all regions
and
share
gains
in the US.
Established Vaccines grew 7% AER, 5% CER to £947
million, primarily reflecting
Infanrix
,
Pediarix
driven by US CDC stockpile replenishment and
stronger demand in International and the
US,
Boostrix
driven by favourable phasing and strong demand in
International and share gains in the US, partly offset by supply
constraints in MMRV vaccines.
Meningitis
Meningitis sales grew 28% AER, 26% CER to £235 million.
Bexsero
sales grew 26% AER, 24% CER to £156
million, driven by strong demand across all regions and share gains
in the US.
Menveo
grew 27% AER, 22% CER, primarily reflecting
favourable phasing and improved supply in
International.
Influenza
Fluarix/FluLaval
sales
were flat at AER, up 6% CER to £17
million.
Shingles
Shingrix
recorded sales of
£386 million in the quarter, driven by continued strong uptake
in the US. Strong demand and supply phasing in Germany
together with Canada also contributed to this
growth.
Established
Vaccines
Sales of DTPa-containing vaccines (
Infanrix
,
Pediarix
and
Boostrix
) grew 26% AER, 22% CER.
Infanrix
,
Pediarix
sales were up 31% AER, 28% CER to £195
million, reflecting US CDC stockpile replenishment and stronger
demand in International and the US, partly offset by increased
competitive pressures in Europe.
Boostrix
sales grew 19%
AER, 15% CER to £144 million, mainly due to favourable phasing
and strong demand in International together with share gains and
higher demand in the US.
Hepatitis
vaccines grew 7%
AER, 3% CER to £224 million primarily reflecting improved
supply in Europe and stronger demand as a result of a competitor
supply shortage in the US, partly offset by unfavourable phasing
and supply constraints in International.
Rotarix
sales were up 10%
AER, 9% CER to £116 million, reflecting stronger demand in the
US.
Synflorix
sales grew 7%
AER, 6% CER to £107 million due to favourable phasing in
International.
MMRV vaccines sales declined 39% AER, 39% CER to £50 million,
mainly driven by supply constraints in Europe and
International.
Cervarix s
ales were up 75% AER,
75% CER to £28 million, primarily reflecting the favourable
impact of supply timing, despite ongoing competitive pressures in
China.
|
Consumer Healthcare turnover
|
|
Q2 2019
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Wellness
|
949
|
|
5
|
|
3
|
Oral
health
|
651
|
|
7
|
|
5
|
Nutrition
|
164
|
|
6
|
|
5
|
Skin
health
|
153
|
|
(6)
|
|
(5)
|
|
|
|
|
|
|
|
1,917
|
|
5
|
|
4
|
|
|
|
|
|
|
US
|
475
|
|
11
|
|
5
|
Europe
|
578
|
|
1
|
|
-
|
International
|
864
|
|
4
|
|
5
|
|
|
|
|
|
|
|
1,917
|
|
5
|
|
4
|
|
|
|
|
|
|
Consumer
Healthcare sales grew 5% AER, 4% CER in the quarter
to
£1,917 million, primarily
driven by the performance of Power brands. The US performed
well, driven by the Wellness portfolio, while the International
region benefited from strong results in India and South-East
Asia. In Europe, sales grew 1% AER, but were flat at CER, the
stabilisation reflecting improved performance in Oral
health.
Divestments and the phasing out of low margin contract
manufacturing had a negative impact of approximately one percentage
point on growth in the quarter.
Wellness
Wellness
sales grew 5% AER, 3% CER to
£949 million
, driven
primarily by Pain relief, which saw a return to
growth for
Panadol
, partly benefiting
from 2018
regulatory and distribution changes.
Voltaren
grew in mid single-digits. Respiratory
was flat for the quarter and overall growth was impacted by a
decline in other Wellness brands.
Oral health
Oral
health sales grew 7% AER, 5% CER to
£651 million.
Sensodyne
delivered high
single-digit, broad based growth helped by the launch
of
Pronamel Enamel
Repair
in the US and
Sensodyne Herbals
in India.
Double-digit growth in Gum health reflected strong sales in
Europe, while Denture care grew in mid single-digits. Oral
health growth was also impacted by a decline in non-strategic
brands.
Nutrition
Nutrition
sales grew 6% AER, 5% CER to
£164 million, with mid single-digit growth
for
Horlicks
in
India.
Skin health
Skin
health sales declined 6% AER, 5% CER to
£153 million
, largely due to
divestments of small tail brands in the US, which had a negative
impact on growth in the category of four percentage
points.
|
Operating performance
|
Cost of sales
Total
cost of sales as a percentage of turnover was 33.8%, 2.2 percentage
points higher at AER and 2.8 percentage points higher in CER terms
compared with Q2 2018. This reflected an increase in the
costs of manufacturing restructuring programmes, primarily as a
result of write downs in a number of manufacturing sites, and
increased amortisation of intangible assets.
Excluding
these and other Adjusting items, Adjusted cost of sales as a
percentage of turnover was 28.7%, 0.3 percentage points higher at
AER, and 0.8 percentage points higher at CER compared with Q2
2018. The increase reflected continued adverse pricing
pressure in Pharmaceuticals, particularly in Respiratory and an
unfavourable product mix in Pharmaceuticals. This was partly
offset by a more favourable product mix in Vaccines, primarily due
to growth of
Shingrix
in the US, and Consumer
Healthcare, and a further contribution from integration and
restructuring savings in Pharmaceuticals and Consumer
Healthcare.
Selling, general and administration
Total
SG&A costs as a percentage of turnover were 33.2%, 0.4
percentage points lower compared with Q2 2018 at AER and 0.3
percentage points lower on a CER basis. This included
increased significant legal costs, acquisition costs related to the
announced agreement with Pfizer to combine our consumer healthcare
businesses, as well as a reversal of an indemnity receivable from
Novartis following a tax settlement with an equivalent release of a
tax provision.
Excluding
these and other Adjusting items, Adjusted SG&A costs as a
percentage of turnover were 31.2%, 0.8 percentage points lower at
AER than in Q2 2018 and 0.7 percentage points lower on a CER basis.
The growth in Adjusted SG&A costs of 4% AER, 2% CER
reflected increased investment resulting from the acquisition of
Tesaro and in promotional product support, particularly for new
launches in Respiratory, HIV and Vaccines, and targeted priority
markets. This was partly offset by the tight control of
ongoing costs, particularly in non-promotional spending across all
three businesses, as well as income from favourable settlements in
Vaccines.
Research and development
Total
R&D expenditure was £1,113 million (14.3% of turnover), up
20% AER, 17% CER. Adjusted R&D expenditure was
£1,040 million (13.3% of turnover), 20% higher at AER, 16%
higher at CER than in Q2 2018. Pharmaceuticals R&D
expenditure was £803 million, up 25% AER, 21% CER (10%
excluding Tesaro), reflecting a significant increase in Oncology
investment including on assets from the Tesaro acquisition
(primarily
Zejula
and dostarlimab (TSR-042))
and a number of other mid and late-stage programmes including
belantamab mafodotin (BCMA) and NY-ESO. This was partly
offset by reductions in other R&D costs, where increased
spending on the progression of key assets, including otilimab
(aGM-CSF) for rheumatoid arthritis was more than offset by the
phasing of spend on assets reaching the end of clinical development
including
Trelegy
Ellipta
for asthma and the on-going benefits of the
R&D portfolio re-prioritisation decisions, at both Research and
Development stages, including nemiralisib and danarixin.
R&D expenditure in Vaccines and Consumer Healthcare was
£179 million and £58 million, respectively.
|
Royalty income
Royalty
income was £78 million (Q2 2018: £73 million), up 7% AER,
4% CER, primarily reflecting increased royalties on sales of
Gardasil.
Other operating expense
Net
other operating expense of £63 million (Q2 2018: £912
million) primarily reflected accounting charges of £188
million (Q2 2018: £953 million charge) arising from the
re-measurement of the contingent consideration liabilities related
to the acquisitions of the former Shionogi-ViiV Healthcare joint
venture and the former Novartis Vaccines business and the
liabilities for the Pfizer put option and Pfizer and Shionogi
preferential dividends in ViiV Healthcare. This included a
re-measurement charge of £226 million (Q2 2018: £744
million) for the contingent consideration liability due to
Shionogi, primarily arising from changes in exchange rate
assumptions and the unwind of the discount. Q2 2018 also
included a charge of £163 million in relation to the Consumer
Healthcare put option. These accounting charges were partly
offset by an increase in value of the shares in Hindustan Unilever
Limited to be received on the disposal of
Horlicks
and other Consumer
Healthcare brands of £158 million in the quarter. The
cumulative increase in value since the signing of the proposed
transaction was £52 million.
|
Operating profit
Total
operating profit was £1,484 million in Q2 2019 compared with
£779 million in Q2 2018. Reduced re-measurement charges
on the contingent consideration liabilities and an increase in the
value of the shares in Hindustan Unilever Limited to be received on
the disposal of
Horlicks
and other Consumer
Healthcare brands were partly offset by increased charges for major
restructuring, primarily arising from write downs in a number of
manufacturing sites.
Excluding
these and other Adjusting items, Adjusted operating profit was
£2,171 million, 3% higher than Q2 2018 at AER but 1% lower at
CER on a turnover increase of 5% CER. The Adjusted operating
margin of 27.8% was 1.0 percentage points lower at AER, 1.4
percentage points lower on a CER basis than in Q2 2018. The
reduction in Adjusted operating profit primarily reflected
continuing price pressure, particularly in Respiratory, including
the first full quarter's impact of the launch of a generic version
of
Advair
in the
US in February 2019, investment in R&D including a significant
increase in Oncology investment, partly on the assets from the
Tesaro acquisition, and investments in promotional product support,
particularly for new launches in Vaccines, HIV and
Respiratory. This was partly offset by the benefit from sales
growth, particularly in Vaccines, a more favourable mix in Vaccines
and Consumer Healthcare and continued tight control of ongoing
costs across all three businesses.
Contingent
consideration cash payments which are made to Shionogi and other
companies reduce the balance sheet liability and hence are not
recorded in the income statement. Total contingent
consideration cash payments in the quarter amounted to £226
million (Q2 2018: £185 million). This included cash
payments made to Shionogi of £220 million (Q2 2018: £179
million).
Operating profit by business
Pharmaceuticals
operating profit was £1,256 million, down 16% AER, 19% CER on
a turnover decrease of 1% CER. The operating margin of 29.2%
was 6.1 percentage points lower at AER than in Q2 2018 and 6.5
percentage points lower on a CER basis. This primarily
reflected the increase in cost of sales percentage due to the
continued impact of lower prices, particularly in Respiratory,
including the first full quarter impact of the launch of a generic
version of
Advair
in the US in February 2019,
an unfavourable product mix, primarily as a result of the growth in
some lower margin established products, together with a significant
increase in Oncology R&D investment and investment in new
product support and targeted priority markets. This was
partly offset by continued tight control of ongoing costs and the
benefits of re-prioritisation of the R&D
portfolio.
Vaccines
operating profit was £612 million, 71% higher than Q2 2018 at
AER and 64% higher at CER on a turnover increase of 23% CER.
The operating margin of 38.6% was 10.1 percentage points
higher than in Q2 2018 at AER and 9.6 percentage points higher on a
CER basis. This was primarily driven by enhanced operating
leverage from strong sales growth, particularly
Shingrix
in the US, improved
product mix and higher royalty income, partly offset by adverse
inventory adjustments. Increased SG&A investment to
support business growth was offset by income from one-off
settlements.
Consumer
Healthcare operating profit was £391 million, up 11% AER, 8%
CER on a turnover increase of 4% CER. The operating margin of
20.4% was 1.1 percentage points higher than in Q2 2018 and 0.8
percentage points higher on a CER basis. This primarily
reflected continued manufacturing restructuring savings and
improved growth from higher margin power brands. Increased
investment in these brands was offset by tight control of
promotional and other expenses.
Net finance costs
Total
net finance costs were £216 million compared with £167
million in Q2 2018. Adjusted net finance costs were £220
million compared with £165 million in Q2 2018. The
increase primarily reflected higher debt levels following the
acquisition from Novartis of its stake in the Consumer Healthcare
Joint Venture in June 2018 and the acquisition of Tesaro in January
2019. This was partly offset by the benefit from older bonds
being refinanced at lower interest rates. Following the
introduction of IFRS 16, 'Leases', finance costs included an unwind
of the discount on the lease liability of £9 million in the
quarter.
Share of after tax (losses)/profits of associates and joint
ventures
The
share of after tax losses of associates was £4 million (Q2
2018: £2 million profits).
Taxation
The
charge of £214 million represented an effective tax rate on
Total results of 16.9% (Q2 2018: 22.6%) and reflected the different
tax effects of the various Adjusting items, including the
non-taxable gain arising from the increase in value of the shares
in Hindustan Unilever Limited to be received on the disposal of
Horlicks and other Consumer Healthcare brands, as well as
recognition of a deferred tax liability as a result of disposal of
a manufacturing site. Tax on Adjusted profit amounted to
£300 million and represented an effective Adjusted tax rate of
15.4% (Q2 2018: 20.0%), reflecting the impact of the settlement of
a number of open issues with tax authorities.
Issues
related to taxation are described in Note 14, 'Taxation' in the
Annual Report 2018. The Group continues to believe it has
made adequate provision for the liabilities likely to arise from
periods which are open and not yet agreed by tax authorities.
The ultimate liability for such matters may vary from the amounts
provided and is dependent upon the outcome of agreements with
relevant tax authorities.
Non-controlling interests
The
allocation of Total earnings to non-controlling interests amounted
to £86 million (Q2 2018: £34 million). The increase
was primarily due to an increased allocation of ViiV Healthcare
profits to £75 million (Q2 2018: £13 million losses
including charges for movements in contingent consideration
liabilities) partly offset by the ending of the allocation of
Consumer Healthcare profits (Q2 2018: £28 million) following
the buyout of Novartis' interest, and lower net profits in some of
the Group's other entities with non-controlling
interests.
The
allocation of Adjusted earnings to non-controlling interests
amounted to £138 million (Q2 2018: £170 million).
The reduction in allocation was primarily due to the ending of the
allocation of Consumer Healthcare profits (Q2 2018: £16
million), a reduced allocation of ViiV Healthcare profits of
£127 million (Q2 2018: £135 million) and lower net
profits in some of the Group's other entities with non-controlling
interests.
Earnings per share
Total
earnings per share was 19.5p, compared with 9.0p in Q2 2018.
The increase in earnings per share primarily reflected the reduced
impact of charges arising from increases in the valuation of the
liabilities for contingent consideration, put options and
preferential dividends, an increase in the value of the shares in
Hindustan Unilever Limited to be received on the disposal of
Horlicks and other Consumer Healthcare brands and a reduced tax
rate.
Adjusted
EPS of 30.5p compared with 28.1p in Q2 2018, up 9% AER, 4% CER, on
a 1% CER decrease in Adjusted operating profit. The
improvement primarily resulted from a reduced tax rate and the
reduced non-controlling interest allocation of Consumer Healthcare
profits following the buyout in Q2 2018, partly offset by increased
net finance costs.
Currency impact on Q2 2019 results
The Q2
2019 results are based on average exchange rates, principally
£1/$1.28, £1/€1.14 and £1/Yen 140.
Comparative exchange rates are given on page 53. The
period-end exchange rates were £1/$1.27, £1/€1.12
and £1/Yen 137.
In the
quarter, turnover increased 7% AER, 5% CER. Total EPS was
19.5p compared with 9.0p in Q2 2018. Adjusted EPS was 30.5p
compared with 28.1p in Q2 2018, up 9% AER, 4% CER. The
positive currency impact primarily reflected the weakness of
Sterling, particularly against the US$ and Yen, partly offset by
weakness in emerging market currencies, relative to Q2 2018.
Exchange gains or losses on the settlement of intercompany
transactions had a negligible impact on the positive currency
impact of five percentage points on Adjusted EPS.
|
Adjusting items
The
reconciliations between Total results and Adjusted results for Q2
2019 and Q2 2018 are set out below.
|
Three months ended 30 June 2019
|
|
Total
results
£m
|
Intangible
amort-
isation
£m
|
Intangible
impair-
ment
£m
|
Major
restruct-
uring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
£m
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Turnover
|
7,809
|
|
|
|
|
|
7,809
|
Cost of sales
|
(2,637)
|
188
|
4
|
198
|
4
|
|
(2,243)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Gross profit
|
5,172
|
188
|
4
|
198
|
4
|
|
5,566
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,590)
|
|
2
|
67
|
41
|
47
|
(2,433)
|
Research and development
|
(1,113)
|
17
|
11
|
44
|
|
1
|
(1,040)
|
Royalty income
|
78
|
|
|
|
|
|
78
|
Other operating (expense)/income
|
(63)
|
|
|
|
202
|
(139)
|
-
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Operating profit
|
1,484
|
205
|
17
|
309
|
247
|
(91)
|
2,171
|
|
|
|
|
|
|
|
|
Net finance costs
|
(216)
|
|
|
|
|
(4)
|
(220)
|
Share of after tax losses of
associates and joint ventures
|
(4)
|
|
|
|
|
|
(4)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit before taxation
|
1,264
|
205
|
17
|
309
|
247
|
(95)
|
1,947
|
|
|
|
|
|
|
|
|
Taxation
|
(214)
|
(39)
|
(2)
|
(59)
|
(61)
|
75
|
(300)
|
Tax rate %
|
16.9%
|
|
|
|
|
|
15.4%
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit after taxation
|
1,050
|
166
|
15
|
250
|
186
|
(20)
|
1,647
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit
attributable to
non-controlling interests
|
86
|
|
|
|
52
|
|
138
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
964
|
166
|
15
|
250
|
134
|
(20)
|
1,509
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
Earnings per share
|
19.5p
|
3.3p
|
0.3p
|
5.1p
|
2.7p
|
(0.4)p
|
30.5p
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,947
|
|
|
|
|
|
4,947
|
|
------------
|
|
|
|
|
|
------------
|
Three months ended 30 June 2018
|
|
Total
results
£m
|
Intangible
amort-
isation
£m
|
Intangible
impair-
ment
£m
|
Major
restruct-
uring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
£m
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Turnover
|
7,310
|
|
|
|
|
|
7,310
|
Cost of sales
|
(2,310)
|
128
|
1
|
99
|
3
|
|
(2,079)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Gross profit
|
5,000
|
128
|
1
|
99
|
3
|
|
5,231
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,457)
|
|
2
|
39
|
70
|
12
|
(2,334)
|
Research and development
|
(925)
|
10
|
25
|
20
|
|
2
|
(868)
|
Royalty income
|
73
|
|
|
|
|
|
73
|
Other operating (expense)/income
|
(912)
|
|
|
|
949
|
(37)
|
-
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Operating profit
|
779
|
138
|
28
|
158
|
1,022
|
(23)
|
2,102
|
|
|
|
|
|
|
|
|
Net finance costs
|
(167)
|
|
|
1
|
|
1
|
(165)
|
Share of after tax profits of
associates and joint ventures
|
2
|
|
|
|
|
|
2
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit before taxation
|
614
|
138
|
28
|
159
|
1,022
|
(22)
|
1,939
|
|
|
|
|
|
|
|
|
Taxation
|
(139)
|
(24)
|
(5)
|
(38)
|
(197)
|
15
|
(388)
|
Tax rate %
|
22.6%
|
|
|
|
|
|
20.0%
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit after taxation
|
475
|
114
|
23
|
121
|
825
|
(7)
|
1,551
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit
attributable to
non-controlling interests
|
34
|
|
|
|
136
|
|
170
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
441
|
114
|
23
|
121
|
689
|
(7)
|
1,381
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
Earnings per share
|
9.0p
|
2.3p
|
0.4p
|
2.5p
|
14.0p
|
(0.1)p
|
28.1p
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,914
|
|
|
|
|
|
4,914
|
|
------------
|
|
|
|
|
|
------------
|
Major restructuring and integration
Within the Pharmaceuticals sector, the highly regulated
manufacturing operations and supply chains and long lifecycle of
the business mean that restructuring programmes, particularly those
that involve the rationalisation or closure of manufacturing or
R&D sites are likely to take several years to
complete.
Major restructuring costs are those related to
specific Board approved Major
restructuring programmes and are excluded from Adjusted
Results. Major restructuring programmes, including
integration costs following material acquisitions, are those that
are structural and are of a significant scale where the costs of
individual or related projects exceed £25 million. Other
ordinary course smaller scale restructuring costs are retained
within Total and Adjusted results.
|
Total
Major restructuring charges incurred in the quarter were £309
million (Q2 2018: £158 million), analysed as
follows:
|
|
Q2 2019
|
|
Q2
2018
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
restructuring and
integration programme
|
-
|
|
9
|
|
9
|
|
94
|
|
64
|
|
158
|
2018
major restructuring
programme (incl. Tesaro)
|
87
|
|
192
|
|
279
|
|
-
|
|
-
|
|
-
|
Consumer
Healthcare Joint
Venture
integration
programme
|
21
|
|
-
|
|
21
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
|
|
201
|
|
309
|
|
94
|
|
64
|
|
158
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges arising under the 2018 major restructuring programme
primarily related to the write-down of assets as part of the plans
to reduce the manufacturing network. Cash charges arose from
restructuring of the manufacturing organisation, R&D and some
administrative functions, as well as the integration of
Tesaro. Non-cash charges under the Combined restructuring and
integration programme primarily related to announced plans to
restructure the manufacturing network.
Total
cash payments made in the quarter were £111 million, £63
million for the existing Combined restructuring and integration
programme (Q2 2018: £109 million) and £28 million under
the 2018 major restructuring programme including the settlement of
certain charges accrued in previous quarters and a further £20
million relating to the Consumer Healthcare Joint Venture
integration programme.
The
analysis of Major restructuring charges by business was as
follows:
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
|
|
|
Pharmaceuticals
|
232
|
|
81
|
Vaccines
|
17
|
|
22
|
Consumer
Healthcare
|
41
|
|
49
|
|
|
|
|
|
290
|
|
152
|
Corporate
& central functions
|
19
|
|
6
|
|
|
|
|
Total
Major restructuring costs
|
309
|
|
158
|
|
|
|
|
The
analysis of Major restructuring charges by Income statement line
was as follows:
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
|
|
|
Cost of
sales
|
198
|
|
99
|
Selling,
general and administration
|
67
|
|
39
|
Research
and development
|
44
|
|
20
|
|
|
|
|
Total
Major restructuring costs
|
309
|
|
158
|
|
|
|
|
The
Combined restructuring and integration programme delivered
incremental annual cost savings in the quarter of £0.1
billion. The 2018 major restructuring programme delivered
incremental cost savings in the quarter of £0.1
billion.
|
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £247 million (Q2 2018:
£1,022 million). This primarily reflected £188
million of accounting charges for the re-measurement of the
contingent consideration liabilities related to the acquisitions of
the former Shionogi-ViiV Healthcare joint venture and the former
Novartis Vaccines business and the liabilities for the Pfizer put
option and Pfizer and Shionogi preferential dividends in ViiV
Healthcare.
|
Charge/(credit)
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
-
|
|
163
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture
(including Shionogi preferential dividends)
|
226
|
|
744
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(47)
|
|
63
|
Contingent
consideration on former Novartis Vaccines business
|
9
|
|
(17)
|
Other
adjustments
|
59
|
|
69
|
|
|
|
|
Total
transaction-related charges
|
247
|
|
1,022
|
|
|
|
|
The
£226 million charge relating to the contingent consideration
for the former Shionogi-ViiV Healthcare Joint Venture represented
an increase in the valuation of the contingent consideration due to
Shionogi, primarily as a result of updated exchange rate
assumptions and a £106 million unwind of the discount, partly
offset by adjustments to sales forecasts.
Other
adjustments included transaction costs relating to the agreement
with Pfizer to combine our consumer healthcare businesses, as well
as a reversal of an indemnity receivable from Novartis following a
tax settlement with an equivalent reduction in tax
charges.
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 10.
Divestments, significant legal charges and other items
Divestments
and other items included a gain in the quarter of £158 million
arising from the increase in value of the shares in Hindustan
Unilever Limited to be received on the disposal
of
Horlicks
and
other Consumer Healthcare brands and a profit on a number of asset
disposals. This was partly offset by certain other Adjusting
items. A charge of £47 million (Q2 2018: £12
million) for significant legal matters included the benefit of the
settlement of existing matters as well as provisions for ongoing
litigation. Significant legal cash payments were £4
million (Q2 2018: £7 million).
|
Financial performance - H1 2019
|
Total results
|
The
Total results for the Group are set out below.
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Turnover
|
15,470
|
|
14,532
|
|
6
|
|
5
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(5,370)
|
|
(4,701)
|
|
14
|
|
14
|
|
|
|
|
|
|
|
|
Gross
profit
|
10,100
|
|
9,831
|
|
3
|
|
-
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(5,067)
|
|
(4,768)
|
|
6
|
|
5
|
Research
and development
|
(2,119)
|
|
(1,829)
|
|
16
|
|
12
|
Royalty income
|
151
|
|
126
|
|
20
|
|
20
|
Other
operating expense
|
(153)
|
|
(1,341)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
2,912
|
|
2,019
|
|
44
|
|
37
|
|
|
|
|
|
|
|
|
Finance
income
|
55
|
|
47
|
|
|
|
|
Finance
expense
|
(461)
|
|
(356)
|
|
|
|
|
Share
of after tax profits of associates
and
joint ventures
|
53
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
2,559
|
|
1,721
|
|
49
|
|
41
|
|
|
|
|
|
|
|
|
Taxation
|
(524)
|
|
(487)
|
|
|
|
|
Tax rate %
|
20.5%
|
|
28.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
2,035
|
|
1,234
|
|
65
|
|
56
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling
interests
|
241
|
|
244
|
|
|
|
|
Profit
attributable to shareholders
|
1,794
|
|
990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,035
|
|
1,234
|
|
65
|
|
56
|
|
|
|
|
|
|
|
|
Earnings per share
|
36.3p
|
|
20.2p
|
|
80
|
|
70
|
|
|
|
|
|
|
|
|
Adjusted results
The
Adjusted results for the Group are set out below.
Reconciliations between Total results and Adjusted results
for H1 2019 and H1 2018 are set out on pages 33 and
34.
|
|
H1 2019
|
||||||
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Turnover
|
15,470
|
|
100
|
|
6
|
|
5
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(4,446)
|
|
(28.7)
|
|
4
|
|
5
|
Selling,
general and administration
|
(4,830)
|
|
(31.2)
|
|
5
|
|
3
|
Research
and development
|
(2,011)
|
|
(13.0)
|
|
15
|
|
11
|
Royalty
income
|
151
|
|
0.9
|
|
20
|
|
20
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,334
|
|
28.0
|
|
8
|
|
4
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
3,980
|
|
|
|
7
|
|
3
|
Adjusted
profit after tax
|
3,280
|
|
|
|
10
|
|
6
|
Adjusted
profit attributable to shareholders
|
2,993
|
|
|
|
16
|
|
12
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
60.6p
|
|
|
|
15
|
|
11
|
|
|
|
|
|
|
|
|
Operating profit by business
|
H1 2019
|
||||||
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,043
|
|
47.8
|
|
-
|
|
(3)
|
Pharmaceuticals
R&D*
|
(1,549)
|
|
|
|
26
|
|
21
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
2,494
|
|
29.5
|
|
(12)
|
|
(14)
|
Vaccines
|
1,226
|
|
39.5
|
|
76
|
|
67
|
Consumer
Healthcare
|
821
|
|
21.1
|
|
12
|
|
10
|
|
|
|
|
|
|
|
|
|
4,541
|
|
29.4
|
|
7
|
|
3
|
Corporate
& other unallocated costs
|
(207)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,334
|
|
28.0
|
|
8
|
|
4
|
|
|
|
|
|
|
|
|
*
|
Operating
profit of Pharmaceuticals R&D segment, which is the
responsibility of the President, Pharmaceuticals R&D. It
excludes ViiV Healthcare R&D expenditure, which is reported
within the Pharmaceuticals segment.
|
Turnover
|
Pharmaceuticals turnover
|
|
H1 2019
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Respiratory
|
1,383
|
|
21
|
|
17
|
HIV
|
2,330
|
|
4
|
|
1
|
Immuno-inflammation
|
272
|
|
27
|
|
21
|
Oncology
|
100
|
|
-
|
|
-
|
Established
Pharmaceuticals
|
4,380
|
|
(6)
|
|
(7)
|
|
|
|
|
|
|
|
8,465
|
|
3
|
|
1
|
|
|
|
|
|
|
US
|
3,472
|
|
1
|
|
(5)
|
Europe
|
2,037
|
|
1
|
|
1
|
International
|
2,956
|
|
6
|
|
6
|
|
|
|
|
|
|
|
8,465
|
|
3
|
|
1
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the six months was £8,465 million, up 3% AER, 1%
CER. Respiratory sales were up 21% AER, 17% CER, to
£1,383 million, on growth of
Trelegy
Ellipta
and
Nucala
. HIV sales were up 4% AER,
1% CER, to £2,330 million, with growth in
Juluca
and
Dovato
partly offset by a decline
in
Triumeq
.
Sales of Established Pharmaceuticals declined 6% AER, 7% CER to
£4,380 million including the impact of loss of exclusivity
of
Advair
.
In the
US, sales grew 1% AER but declined 5% CER. Continued growth
of
Nucala
,
Trelegy
Ellipta
and
Benlysta
was offset by the decline
in Established Products including the loss of exclusivity
of
Advair
and
in
Relvar/Breo
Ellipta
, impacted by genericisation of the ICS/LABA
market. In Europe, sales grew 1% AER, 1% CER, with strong
growth in Respiratory partly offset by a decline in Established
Pharmaceuticals. International grew 6% AER, 6% CER, with
growth in all therapy areas.
Respiratory
Total
Respiratory sales were up 21% AER, 17% CER, with strong growth in
all regions.
Ellipta
product sales grew 16%
AER, 12% CER, with Europe up 28% AER, 29% CER and International up
32% AER, 31% CER on
Trelegy
Ellipta
and
Relvar/Breo
Ellipta
growth.
Nucala
was up 45% AER, 45% CER in
Europe and 55% AER, 52% CER in International. In the
US,
Trelegy
Ellipta
and
Nucala
growth offset the decline
in
Relvar/Breo
Ellipta
on post-generic ICS/LABA price
pressure.
Sales
of
Nucala
were
£347 million in the six months and grew 42% AER, 37% CER,
continuing to benefit from the global rollout of the product.
US sales of
Nucala
grew 37% AER, 30% CER to
£202 million.
Sales
of
Ellipta
products were up 16% AER,
12% CER to £1,036 million driven by growth in Europe and
International. In the US, sales grew 6% AER but were flat at
CER, reflecting continued competitive pricing pressures for
ICS/LABA products post generic
Advair
. In Europe, sales grew 28%
AER, 29% CER, and in International by 32% AER, 31% CER. Sales
of
Trelegy Ellipta
,
our new once daily closed triple product, contributed £207
million globally in the six months, continuing to benefit from the
expanded US label.
Relvar/Breo Ellipta
sales were down 9% AER, 11%
CER. This was driven by the US decline of 33% AER, 37% CER,
impacted by US competitive pricing pressures and the impact of
generic
Advair
on
the US ICS/LABA market. In Europe and
International,
Relvar/Breo
Ellipta
continued to grow, up 11% AER, 12% CER, and 22%
CER, 20% AER, respectively.
HIV
HIV
sales grew 4% AER, 1% CER to £2,330 million in the six months
to June. The dolutegravir franchise grew 7% AER, 3% CER,
delivering sales of £2,214 million in the six months.
The remaining portfolio with sales of £116 million, 5% of
total HIV sales, declined 28% AER, 28% CER and reduced the overall
growth of total HIV by 3% AER, 2% CER in the six months to
June.
Sales
of dolutegravir products were £2,214 million in the six
months, with
Triumeq
and
Tivicay
delivering sales of
£1,260 million and £795 million, respectively. The
two-drug regimens
Juluca
and
Dovato
delivered sales of
£159 million in the six months to June. The combined
growth of the two-drug regimens offset the decline in the
three-drug regimen,
Triumeq
, as the business transitions to
the new portfolio.
In the
US, the second two-drug regimen,
Dovato
, was launched in April 2019,
which, combined with
Juluca
, delivered sales of £136
million. Total dolutegravir sales grew 4% AER but declined 1%
CER reflecting the share decline in
Tivicay
and
Triumeq
, partly offset by the share
gain on two-drug regimens as the business transitions to the new
portfolio. In Europe, overall dolutegravir sales growth was
flat at both AER and CER with growth in dolutegravir share offset
by price erosion, and the timing of clawback payments.
International grew strongly with overall dolutegravir sales
growth of 37% AER, 38% CER, driven by
Tivicay
and
Triumeq
.
Oncology
Sales
of
Zejula
, were
£99 million in the period from the date of acquisition,
comprising £59 million in the US and £40 million in
Europe.
Immuno-inflammation
Sales
of
Benlysta
in
the six months were up 27% AER, 21% CER to £271 million,
including sales of the sub-cutaneous formulation. In the
US,
Benlysta
grew
24% AER, 18% CER to £237 million.
Established Pharmaceuticals
Sales
of Established Pharmaceuticals in the six months were £4,380
million, down 6% AER, 7% CER.
Established
Respiratory products declined 6% AER, 8% CER to £1,996
million, with the decline in
Seretide/Advair
partially offset
by higher sales of
Ventolin
and allergy
products. In the US, a generic version of
Advair
was launched in February,
resulting in a 43% AER, 45% CER decline in the six months. In
Europe,
Seretide
sales were down 17% AER,
17% CER to £262 million, reflecting continued competition from
generic products and the transition of the Respiratory portfolio to
newer products. In International, sales of
Seretide
grew 1% AER, 2% CER.
Globally,
Ventolin
grew by 37% AER, 34% CER
driven by the strong uptake of an authorised generic version in the
US.
The
remainder of the Established Pharmaceuticals portfolio declined 5%
AER, 5% CER broadly in line with the underlying mid single-digit
decline expected of this portfolio.
|
Vaccines turnover
|
|
H1 2019
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Meningitis
|
444
|
|
22
|
|
22
|
Influenza
|
32
|
|
23
|
|
27
|
Shingles
|
743
|
|
>100
|
|
>100
|
Established
Vaccines
|
1,888
|
|
4
|
|
2
|
|
|
|
|
|
|
|
3,107
|
|
25
|
|
22
|
|
|
|
|
|
|
US
|
1,555
|
|
59
|
|
51
|
Europe
|
742
|
|
(5)
|
|
(5)
|
International
|
810
|
|
10
|
|
12
|
|
|
|
|
|
|
|
3,107
|
|
25
|
|
22
|
|
|
|
|
|
|
Vaccines turnover grew 25% AER, 22% CER to £3,107 million,
primarily driven by growth in sales of
Shingrix
. Meningitis vaccines also contributed to
growth mainly due to
Bexsero
demand and share gains in US together with
stronger demand in International. Established Vaccines grew
4% AER, 2% CER to £1,888 million, reflecting favourable CDC
stockpile movements and stronger demand for Hepatitis vaccines in
the US and favourable phasing and strong demand
for
Boostrix
and
Synflorix
in International, partly offset by supply
constraints in MMRV vaccines.
Meningitis
Meningitis sales grew 22% AER, 22% CER to £444 million.
Bexsero
sales grew 19% AER, 19% CER to £312
million, driven by demand in the US, together with stronger demand
in International, partly offset by the completion of the
vaccination of catch-up cohorts in certain markets in Europe.
Menveo
grew 10% AER, 8% CER, primarily reflecting
improved supply in International.
Influenza
Fluarix/FluLaval
sales
were up 23% AER, 27% CER to £32 million, primarily due to
share gains in International.
Shingles
Shingrix
recorded sales of
£743 million, primarily driven by continued strong uptake and
the favourable benefit of prior period rebate adjustments in the
US. Canada, as well as strong demand and supply phasing in
Germany, also contributed to this growth.
Established Vaccines
Sales of DTPa-containing vaccines (
Infanrix
,
Pediarix
and
Boostrix
) grew 12% AER, 9% CER.
Boostrix
sales were up 21% AER, 18% CER to £267
million, primarily due to favourable phasing and strong demand in
International together with share gains and higher demand in the
US.
Infanrix
,
Pediarix
sales grew 6% AER, 4% CER to £378
million, reflecting US CDC stockpile replenishment and stronger
demand in International, partly offset by increased competitive
pressures in Europe.
Hepatitis
vaccines grew
14% AER, 10% CER to £463 million, mainly due to favourable CDC
stockpile movements and stronger demand benefiting from a
competitor supply shortage in the US.
Rotarix
sales were up 6%
AER, 5% CER to £250 million, reflecting favourable supply
phasing and stronger demand in International.
Synflorix
sales grew 15%
AER, 15% CER to £228 million, primarily due to stronger demand
and favourable phasing in International as well as higher demand in
Europe.
MMRV vaccines sales declined 34% AER, 34% CER to £105 million,
mainly driven by supply constraints in Europe and
International.
Cervarix s
ales were down 29%
AER, 29% CER to £48 million, reflecting lower demand in
International and competitive pressures in
China.
|
Consumer Healthcare turnover
|
|
H1 2019
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Wellness
|
1,955
|
|
2
|
|
1
|
Oral
health
|
1,313
|
|
5
|
|
5
|
Nutrition
|
331
|
|
3
|
|
3
|
Skin
health
|
299
|
|
(5)
|
|
(4)
|
|
|
|
|
|
|
|
3,898
|
|
2
|
|
2
|
|
|
|
|
|
|
US
|
964
|
|
9
|
|
3
|
Europe
|
1,177
|
|
(2)
|
|
(1)
|
International
|
1,757
|
|
2
|
|
4
|
|
|
|
|
|
|
|
3,898
|
|
2
|
|
2
|
|
|
|
|
|
|
Consumer
Healthcare sales grew 2% AER, 2% CER to
£3,898 million in the six months.
Growth reflected improved results in all three regions in the
second quarter.
Divestments and the phasing out of low margin contract
manufacturing had a negative impact of approximately one percentage
point on growth.
Wellness
Wellness
sales grew 2% AER, 1% CER to
£1,955 million
. Pain relief grew
in mid single-digits led by broad-based growth
for
Panadol
, partly
benefiting from 2018 regulatory and distribution
changes.
Voltaren
sales grew in low
single-digits, consistent with consumption growth for the period.
Respiratory sales declined, as
Flonase
growth was offset by a
decline in
Theraflu
following a strong cold
and flu season comparator in H1 2018.
Oral health
Oral
health grew 5% AER, 5% CER to
£1,313
million
with
Sensodyne
reporting broad-based,
high single-digit growth, benefiting from major innovation launches
in developed and emerging markets. Gum health sales saw
double digit-growth, reflecting strong performances across Europe
and the US, where parodontax continued to perform well.
Denture care grew in mid single-digits.
Nutrition
Nutrition
sales grew 3% AER, 3% CER to
£331 million,
with India growing
in high single-digits. Growth was adversely impacted by
the
Horlicks
and
Maxinutrition divestments in the UK, which impacted Nutrition
growth by two percentage points.
Skin health
Skin
health sales declined 5% AER, 4% CER to
£299 million
, largely due to
divestments of small tail brands in the US, which had a negative
impact on
growth of the category
of three
percentage points.
|
Operating performance
|
Cost of sales
Total
cost of sales as a percentage of turnover was 34.7%, 2.4 percentage
points higher at AER and 3.0 percentage points higher in CER terms
compared with H1 2018. This reflected an increase in the
costs of manufacturing restructuring programmes, primarily as a
result of write downs in a number of manufacturing sites, and
increased amortisation of intangible assets.
Excluding
these and other Adjusting items, Adjusted cost of sales as a
percentage of turnover was 28.7%, down 0.6 percentage points at
AER, and flat at CER compared with H1 2018. This reflected a
more favourable product mix in Vaccines, primarily due to growth
of
Shingrix
in
the US, and Consumer Healthcare, a favourable impact of inventory
adjustments in Vaccines and a further contribution from integration
and restructuring savings in Pharmaceuticals and Consumer
Healthcare. This was offset by continued adverse pricing
pressure in Pharmaceuticals, particularly in Respiratory, and an
unfavourable product mix in Pharmaceuticals.
Selling, general and administration
Total
SG&A costs as a percentage of turnover were 32.8%, 0.1
percentage points lower at AER and 0.1 percentage points higher on
a CER basis. This included increased significant legal costs,
acquisition costs related to the announced agreement with Pfizer to
combine our consumer healthcare businesses, as well as a reversal
of an indemnity receivable from Novartis following a tax
settlement, with an equivalent release of a tax provision which was
reflected in the tax charge.
Excluding
these and other Adjusting items, Adjusted SG&A costs as a
percentage of turnover were 31.2%, 0.6 percentage points lower at
AER than in H1 2018 and 0.4 percentage points lower on a CER basis.
The growth in Adjusted SG&A costs of 5% AER, 3% CER
reflected increased investment resulting from the acquisition of
Tesaro and in promotional product support, particularly for new
launches in Vaccines, Respiratory and HIV and targeted priority
markets. This was partly offset by the tight control of
ongoing costs, particularly in non-promotional spending across all
three businesses.
Research and development
Total
R&D expenditure was £2,119 million (13.7% of turnover), up
16% AER, 12% CER. Adjusted R&D expenditure was
£2,011 million (13.0% of turnover), 15% higher at AER, 11%
higher at CER than H1 2018. Pharmaceuticals R&D
expenditure was £1,550 million, up 19% AER, 14% CER (5% CER
excluding Tesaro), reflecting a significant increase in Oncology
investment including on assets from the Tesaro acquisition
(primarily
Zejula
and dostarlimab (TSR-042))
and a number of other mid and late-stage programmes including
belantamab mafodotin (BCMA) and NY-ESO. This was partly
offset by reductions in other R&D costs, where increased
spending on the progression of key assets including otilimab
(aGM-CSF) for rheumatoid arthritis, was more than offset by the
phasing of spend on assets reaching the end of clinical
development, including
Trelegy Ellipta
for asthma, and
the on-going benefits of the R&D portfolio re-prioritisation,
at both Research and Development stages, such as nemiralisib and
danarixin. R&D expenditure in Vaccines and Consumer
Healthcare was £341 million and £120 million,
respectively.
|
Royalty income
Royalty
income was £151 million (H1 2018: £126 million), up 20%
AER, 20% CER, primarily reflecting increased royalties on sales of
Gardasil.
Other operating expense
Net
other operating expense of £153 million (H1 2018: £1,341
million) primarily reflected accounting charges of £103
million (H1 2018: £1,369 million charge) arising from the
re-measurement of the contingent consideration liabilities related
to the acquisitions of the former Shionogi-ViiV Healthcare joint
venture and the former Novartis Vaccines business and the
liabilities for the Pfizer put option and Pfizer and Shionogi
preferential dividends in ViiV Healthcare. This included a
re-measurement charge of £166 million (H1 2018: £713
million) for the contingent consideration liability due to
Shionogi, primarily arising from changes in exchange rate
assumptions and the unwind of the discount. H1 2018 also
included a charge of £658 million in relation to the Consumer
Healthcare put option. In addition there was a decrease in
value of the shares in Hindustan Unilever Limited to be received on
the disposal of
Horlicks
and other Consumer
Healthcare brands of £48 million in the six months. The
cumulative increase in value since the signing of the proposed
transaction was £52 million. This was partly offset by
the profit on a number of asset disposals.
|
Operating profit
Total
operating profit was £2,912 million in H1 2019 compared with
£2,019 million in H1 2018. Reduced re-measurement
charges on the contingent consideration liabilities were partly
offset by increased charges for major restructuring, primarily
arising from write downs in a number of manufacturing sites, and a
decrease in value of the shares in Hindustan Unilever Limited to be
received on the disposal of
Horlicks
and other Consumer
Healthcare brands.
Excluding
these and other Adjusting items, Adjusted operating profit was
£4,334 million, 8% higher than H1 2018 at AER and 4% higher at
CER on a turnover increase of 5% CER. The Adjusted operating
margin of 28.0% was 0.3 percentage points higher at AER, but 0.2
percentage points lower on a CER basis than in H1 2018. The
increase in Adjusted operating profit primarily reflected the
benefit from sales growth in all three businesses, particularly
Vaccines, a more favourable mix in Vaccines and Consumer
Healthcare, a benefit from favourable inventory adjustments in
Vaccines and continued tight control of ongoing costs across all
three businesses. This was partly offset by continuing price
pressure, particularly in Respiratory, including the impact of the
launch of a generic version of
Advair
in the US in February 2019,
investment in R&D including a significant increase in Oncology
investment, partly on the assets from the Tesaro acquisition, and
investments in promotional product support, particularly for new
launches in Vaccines, HIV and Respiratory.
Contingent
consideration cash payments which are made to Shionogi and other
companies reduce the balance sheet liability and hence are not
recorded in the income statement. Total contingent
consideration cash payments in the six months amounted to £443
million (H1 2018: £702 million). This included cash
payments made to Shionogi of £439 million (H1 2018: £376
million).
Operating profit by business
Pharmaceuticals
operating profit was £2,494 million, down 12% AER, 14% CER on
a turnover increase of 1% CER. The operating margin of 29.5%
was 4.8 percentage points lower at AER than in H1 2018 and 5.0
percentage points lower on a CER basis. This primarily
reflected the increase in cost of sales percentage due to the
continued impact of lower prices, particularly in Respiratory,
including the impact of the launch of a generic version
of
Advair
in the
US in February 2019, an unfavourable product mix, primarily as a
result of the growth in some lower margin established products,
together with a significant increase in Oncology R&D investment
and investment in new product support and targeted priority
markets. This was partly offset by continued tight control of
ongoing costs and the benefits of re-prioritisation of the R&D
portfolio.
Vaccines
operating profit was £1,226 million, 76% AER, 67% CER higher
than in H1 2018 on a turnover increase of 22% CER. The
operating margin of 39.5% was 11.5 percentage points higher at AER
than in H1 2018 and 10.3 percentage points higher on a CER basis.
This was primarily driven by enhanced operating leverage from
strong sales growth, particularly
Shingrix
in the US, improved
product mix and higher royalty income. Increased SG&A
investment to support business growth was partly offset by income
from one-off settlements.
Consumer
Healthcare operating profit was £821 million, up 12% AER, 10%
CER on a turnover increase of 2% CER. The operating margin of
21.1% was 1.7 percentage points higher than in H1 2018 and 1.5
percentage points higher on a CER basis. This primarily
reflected continued manufacturing restructuring savings, improved
growth from higher margin power brands and the divestment of lower
margin tail products. Increased investment in power brands
was offset by tight control of promotional and other
expenses.
Net finance costs
Total
net finance costs were £406 million compared with £309
million in H1 2018. Adjusted net finance costs were £407
million compared with £304 million in H1 2018. The
increase primarily reflected higher debt levels following the
acquisition from Novartis of its stake in the Consumer Healthcare
Joint Venture in June 2018 and the acquisition of Tesaro in January
2019, as well as an adverse comparison with a one-off accounting
adjustment of £20 million to amortisation of interest charges
in H1 2018. This was partly offset by the benefit from older
bonds being refinanced at lower interest rates. Following the
introduction of IFRS 16, 'Leases', finance costs included an unwind
of the discount on the lease liability of £20 million in the
six months.
Share of after tax profits of associates and joint
ventures
The
share of after tax profits of associates was £53 million (H1
2018: £11 million). This included a one-off adjustment
of £51 million to reflect GSK's share of increased after tax
profits of Innoviva primarily as a result of a non-recurring income
tax benefit.
Taxation
The
charge of £524 million represented an effective tax rate on
Total results of 20.5% (H1 2018: 28.3%) and reflected the different
tax effects of the various Adjusting items, including the
non-taxable loss arising from the decrease in value of the shares
in Hindustan Unilever Limited to be received on the disposal
of
Horlicks
and
other Consumer Healthcare brands as well as recognition of a
deferred tax liability as a result of disposal of a manufacturing
site. Tax on Adjusted profit amounted to £700
million and represented an effective Adjusted tax rate of 17.6% (H1
2018: 20.1%), reflecting the impact of the settlement of a number
of open issues with tax authorities.
Issues
related to taxation are described in Note 14, 'Taxation' in the
Annual Report 2018. The Group continues to believe it has
made adequate provision for the liabilities likely to arise from
periods which are open and not yet agreed by tax authorities.
The ultimate liability for such matters may vary from the
amounts provided and is dependent upon the outcome of agreements
with relevant tax authorities.
Non-controlling interests
The
allocation of Total earnings to non-controlling interests amounted
to £241 million (H1 2018: £244 million). The
reduction was primarily due to the ending of the allocation of
Consumer Healthcare profits (H1 2018: £117 million) following
the buyout of Novartis' interest. This was partly offset by
an increased allocation of ViiV Healthcare profits to £204
million (H1 2018: £97 million) and higher net profits in some
of the Group's other entities with non-controlling
interests.
The
allocation of Adjusted earnings to non-controlling interests
amounted to £287 million (H1 2018: £394
million). The reduction in allocation was again
primarily due to the ending of the allocation of Consumer
Healthcare profits (H1 2018: £118 million), partly offset by
an increased allocation of ViiV Healthcare profits of £250
million (H1 2018: £246 million) and higher net profits in some
of the Group's other entities with non-controlling
interests.
Earnings per share
Total
earnings per share was 36.3p, compared with 20.2p in H1 2018.
The increase in earnings per share primarily reflected
reduced re-measurement charges on the contingent consideration
liabilities and put options, an improved trading performance, a
reduced effective tax rate and the increased share of after tax
profit of the associate Innoviva.
Adjusted
EPS of 60.6p compared with 52.7p in H1 2018, up 15% AER, 11% CER,
on a 4% CER increase in Adjusted operating profit. The
improvement primarily resulted from the reduced non-controlling
interest allocation of Consumer Healthcare profits following the
buyout in Q2 2018, a reduced effective tax rate and an increased
share of after tax profits of associates as a result of a
non-recurring income tax benefit in Innoviva, partly offset by
increased net finance costs.
Currency impact on H1 2019 results
The H1
2019 results are based on average exchange rates, principally
£1/$1.29, £1/€1.14 and £1/Yen 142.
Comparative exchange rates are given on page 53. The
period-end exchange rates were £1/$1.27, £1/€1.12
and £1/Yen 137.
In the
six months, turnover increased 6% AER, 5% CER. Total EPS was
36.3p compared with 20.2p in H1 2018. Adjusted EPS was 60.6p
compared with 52.7p in H1 2018, up 15% AER, 11% CER. The
positive currency impact primarily reflected the weakness of
Sterling, particularly against the US$ and Yen, partly offset by
weakness in emerging market currencies, relative to H1 2018.
Exchange gains or losses on the settlement of intercompany
transactions had a negligible impact on the positive currency
impact of four percentage points on Adjusted EPS.
|
Adjusting items
The
reconciliations between Total results and Adjusted results for H1
2019 and H1 2018 are set out below.
|
Six months ended 30 June 2019
|
|
Total
results
£m
|
Intangible
amort-
isation
£m
|
Intangible
impair-
ment
£m
|
Major
restruct-
uring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
£m
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Turnover
|
15,470
|
|
|
|
|
|
15,470
|
Cost of sales
|
(5,370)
|
359
|
17
|
539
|
9
|
|
(4,446)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Gross profit
|
10,100
|
359
|
17
|
539
|
9
|
|
11,024
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(5,067)
|
|
6
|
92
|
70
|
69
|
(4,830)
|
Research and development
|
(2,119)
|
34
|
13
|
59
|
|
2
|
(2,011)
|
Royalty income
|
151
|
|
|
|
|
|
151
|
Other operating (expense)/income
|
(153)
|
|
|
(1)
|
115
|
39
|
-
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Operating profit
|
2,912
|
393
|
36
|
689
|
194
|
110
|
4,334
|
|
|
|
|
|
|
|
|
Net finance costs
|
(406)
|
|
|
1
|
|
(2)
|
(407)
|
Share of after tax profits of
associates and joint ventures
|
53
|
|
|
|
|
|
53
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit before taxation
|
2,559
|
393
|
36
|
690
|
194
|
108
|
3,980
|
|
|
|
|
|
|
|
|
Taxation
|
(524)
|
(76)
|
(5)
|
(117)
|
(53)
|
75
|
(700)
|
Tax rate %
|
20.5%
|
|
|
|
|
|
17.6%
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit after taxation
|
2,035
|
317
|
31
|
573
|
141
|
183
|
3,280
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit
attributable to
non-controlling interests
|
241
|
|
|
|
46
|
|
287
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
1,794
|
317
|
31
|
573
|
95
|
183
|
2,993
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
Earnings per share
|
36.3p
|
6.4p
|
0.7p
|
11.6p
|
1.9p
|
3.7p
|
60.6p
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,942
|
|
|
|
|
|
4,942
|
|
------------
|
|
|
|
|
|
------------
|
Six months ended 30 June 2018
|
|
Total
results
£m
|
Intangible
amort-
isation
£m
|
Intangible
impair-
ment
£m
|
Major
restruct-
uring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
£m
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Turnover
|
14,532
|
|
|
|
|
|
14,532
|
Cost of sales
|
(4,701)
|
267
|
28
|
142
|
6
|
|
(4,258)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Gross profit
|
9,831
|
267
|
28
|
142
|
6
|
|
10,274
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(4,768)
|
|
2
|
58
|
70
|
18
|
(4,620)
|
Research and development
|
(1,829)
|
20
|
25
|
23
|
|
6
|
(1,755)
|
Royalty income
|
126
|
|
|
|
|
|
126
|
Other operating (expense)/income
|
(1,341)
|
|
|
|
1,383
|
(42)
|
-
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Operating profit
|
2,019
|
287
|
55
|
223
|
1,459
|
(18)
|
4,025
|
|
|
|
|
|
|
|
|
Net finance costs
|
(309)
|
|
|
2
|
|
3
|
(304)
|
Share of after tax profits of
associates and joint ventures
|
11
|
|
|
|
|
|
11
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit before taxation
|
1,721
|
287
|
55
|
225
|
1,459
|
(15)
|
3,732
|
|
|
|
|
|
|
|
|
Taxation
|
(487)
|
(56)
|
(9)
|
(55)
|
(177)
|
34
|
(750)
|
Tax rate %
|
28.3%
|
|
|
|
|
|
20.1%
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit after taxation
|
1,234
|
231
|
46
|
170
|
1,282
|
19
|
2,982
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Profit
attributable to
non-controlling interests
|
244
|
|
|
|
150
|
|
394
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
990
|
231
|
46
|
170
|
1,132
|
19
|
2,588
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
Earnings per share
|
20.2p
|
4.7p
|
0.9p
|
3.5p
|
23.0p
|
0.4p
|
52.7p
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,909
|
|
|
|
|
|
4,909
|
|
------------
|
|
|
|
|
|
------------
|
Major restructuring and integration
Within the Pharmaceuticals sector, the highly regulated
manufacturing operations and supply chains and long lifecycle of
the business mean that restructuring programmes, particularly those
that involve the rationalisation or closure of manufacturing or
R&D sites are likely to take several years to
complete.
Major restructuring costs are those related to
specific Board approved Major
restructuring programmes and are excluded from Adjusted
Results. Major restructuring programmes, including
integration costs following material acquisitions, are those that
are structural and are of a significant scale where the costs of
individual or related projects exceed £25 million. Other
ordinary course smaller scale restructuring costs are retained
within Total and Adjusted results.
The
Board approved a new Major restructuring programme in July 2018,
which is designed to significantly improve the competitiveness and
efficiency of the Group's cost base with savings delivered
primarily through supply chain optimisation
and reductions in administrative
costs.
The
Group acquired Tesaro in January 2019, and is expected to incur
around £50 million of integration and restructuring cash
costs, leading to annual cost-saving benefits of around £50
million. This is being added to and reported as part of the
2018 Major restructuring programme.
The
Group also announced in December that it had reached agreement with
Pfizer Inc to combine our consumer healthcare businesses. The
proposed transaction is expected to realise substantial cost
synergies, with the new Joint Venture expected to generate total
annual cost savings of £0.5 billion by 2022 for expected total
major restructuring cash costs of £0.9 billion and non-cash
charges of £0.3 billion. Up to 25% of the cost savings are
intended to be reinvested in the business to support innovation and
other growth opportunities.
|
Total
Major restructuring charges incurred in the six months were
£689 million (H1 2018: £223 million), analysed as
follows:
|
|
H1 2019
|
|
H1
2018
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
restructuring and
integration programme
|
22
|
|
21
|
|
43
|
|
142
|
|
81
|
|
223
|
2018
major restructuring
programme (incl. Tesaro)
|
111
|
|
504
|
|
615
|
|
-
|
|
-
|
|
-
|
Consumer
Healthcare Joint
Venture integration
programme
|
31
|
|
-
|
|
31
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164
|
|
525
|
|
689
|
|
142
|
|
81
|
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges arising under the 2018 major restructuring programme
primarily related to the write-down of assets as part of the plans
to reduce the manufacturing network. Cash charges arose from
restructuring of the manufacturing organisation, R&D and some
administrative functions as well as the integration of
Tesaro. Non-cash charges under the Combined restructuring and
integration programme primarily related to announced plans to
restructure the manufacturing network, and cash charges arose from
restructuring in some manufacturing sites, R&D and some
administrative functions.
Total
cash payments made in the six months were £285 million,
£219 million for the existing Combined restructuring and
integration programme (H1 2018: £213 million) and £46
million under the 2018 major restructuring programme including the
settlement of certain charges accrued in previous quarters and a
further £20 million relating to the Consumer Healthcare Joint
Venture integration programme.
The
analysis of Major restructuring charges by business was as
follows:
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
Pharmaceuticals
|
568
|
|
104
|
Vaccines
|
17
|
|
47
|
Consumer
Healthcare
|
62
|
|
64
|
|
|
|
|
|
647
|
|
215
|
Corporate
& central functions
|
42
|
|
8
|
|
|
|
|
Total
Major restructuring costs
|
689
|
|
223
|
|
|
|
|
The
analysis of Major restructuring charges by Income statement line
was as follows:
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
Cost of
sales
|
539
|
|
142
|
Selling,
general and administration
|
92
|
|
58
|
Research
and development
|
59
|
|
23
|
Other
operating income
|
(1)
|
|
-
|
|
|
|
|
Total
Major restructuring costs
|
689
|
|
223
|
|
|
|
|
The
Combined restructuring and integration programme delivered
incremental annual cost savings in the six months of £0.2
billion. The 2018 major restructuring programme delivered
incremental cost savings in H1 2019 of £0.1
billion.
Total cash charges for the Combined restructuring and integration
programme are now expected to be approximately £4.1 billion
with non-cash charges up to £1.6 billion. The programme
has now delivered approximately £4.1 billion of annual
savings, including an estimated currency benefit of £0.3
billion. The programme is now expected to deliver by 2020
total annual savings of £4.4 billion on a constant currency
basis, including an estimated benefit of £0.4 billion from
currency on the basis of H1 2019 average exchange
rates.
The
2018 major restructuring programme, now including Tesaro, is
expected to cost £1.75 billion over the period to 2021, with
cash costs of £0.85 billion and non-cash costs of £0.9
billion, and is expected to deliver annual savings of around
£450 million by 2021 (at H1 2019 rates). These savings
will be fully re-invested to help fund targeted increases in
R&D and commercial support of new products.
|
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £194 million (H1 2018:
£1,459 million charge). This primarily reflected
£103 million of accounting charges for the re-measurement of
the contingent consideration liabilities related to the
acquisitions of the former Shionogi-ViiV Healthcare joint venture
and the former Novartis Vaccines business and the liabilities for
the Pfizer put option and Pfizer and Shionogi preferential
dividends in ViiV Healthcare.
|
Charge/(credit)
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
-
|
|
658
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture
(including Shionogi preferential dividends)
|
166
|
|
713
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(71)
|
|
2
|
Contingent
consideration on former Novartis Vaccines business
|
8
|
|
(4)
|
Other
adjustments
|
91
|
|
90
|
|
|
|
|
Total
transaction-related charges
|
194
|
|
1,459
|
|
|
|
|
The
£166 million charge relating to the contingent consideration
for the former Shionogi-ViiV Healthcare Joint Venture represented
an increase in the valuation of the contingent consideration due to
Shionogi, primarily as a result of a £214 million unwind of
the discount and updated exchange rate assumptions, partly offset
by adjustments to sales forecasts.
Other
adjustments included transaction costs relating to the agreement
with Pfizer to combine our consumer healthcare businesses, as well
as a reversal of an indemnity receivable from Novartis following a
tax settlement with an equivalent release of a tax
provision.
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 10.
Divestments, significant legal charges and other items
Divestments
and other items included a loss in the six months of £48
million arising from the decrease in value of the shares in
Hindustan Unilever Limited to be received on the disposal
of
Horlicks
and
other Consumer Healthcare brands, as well as equity investment
impairments and certain other Adjusting items. This was
partly offset by the profit on a number of asset disposals. A
charge of £69 million (H1 2018: £17 million) for
significant legal matters included the benefit of the settlement of
existing matters as well as provisions for ongoing
litigation. Significant legal cash payments were £8
million (H1 2018: £12 million).
|
Cash generation
|
Cash flow
|
|
Q2 2019
|
|
H1
2019
|
|
H1
2018
|
|
|
|
|
|
|
Net
cash inflow from operating activities (£m)
|
1,389
|
|
2,052
|
|
2,225
|
Free
cash flow* (£m)
|
370
|
|
535
|
|
821
|
Free
cash flow growth (%)
|
(25)%
|
|
(35)%
|
|
>100%
|
Free
cash flow conversion* (%)
|
38%
|
|
30%
|
|
83%
|
Net
debt** (£m)
|
28,721
|
|
28,721
|
|
23,935
|
*
|
Free
cash flow and free cash flow conversion are defined on page
61.
|
**
|
Net
debt is analysed on page 59.
|
Q2 2019
The net
cash inflow from operating activities for the quarter was
£1,389 million (Q2 2018: £1,362 million). The
increase primarily reflected improved operating profits, lower
trade receivables and a lower seasonal increase in inventory and
lower operating lease payments following the transition to IFRS 16,
partly offset by the adverse timing of payments for returns and
rebates, as well as the initial step-down impact from
US
Advair
generic
competition.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the quarter were £220
million (Q2 2018: £179 million), of which £195 million
was recognised in cash flows from operating activities and £25
million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax
purposes.
Free
cash flow was £370 million for the quarter (Q2 2018: £492
million). The reduction primarily reflected increased capital
expenditure including the acquisition of intangible assets from
Merck KgaA, Darmstadt, Germany, increased interest payments, the
adverse timing of payments for returns and rebates, and the initial
step-down impact from US
Advair
generic competition.
This was partly offset by improved operating profits, lower trade
receivables and a lower seasonal increase in inventory, as well as
reduced dividend payments to non-controlling
interests.
|
H1 2019
The net
cash inflow from operating activities for the six months was
£2,052 million (H1 2018: £2,225 million). The
reduction primarily reflected the adverse timing of payments for
returns and rebates, as well as the initial step-down impact from
US
Advair
generic, partly offset by
improved operating profits, a lower seasonal increase in trade
receivables and inventory, lower contingent consideration payments
compared with H1 2018 which included a milestone payment to
Novartis and lower operating lease payments following the
transition to IFRS 16.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the six months were £439
million (H1 2018: £376 million), of which £390 million
was recognised in cash flows from operating activities and £49
million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax
purposes.
Free
cash flow was £535 million in the six months (H1 2018:
£821 million). The reduction primarily reflected the
adverse timing of payments for returns and rebates, as well as the
initial step-down impact from US
Advair
generic competition, increased
capital expenditure including acquisition of intangible assets and
increased interest payments. This was partly offset by
improved operating profits, a lower seasonal increase in trade
receivables and inventory and reduced dividend payments to
non-controlling interests.
|
Net debt
At 30
June 2019, net debt was £28.7 billion, compared with
£21.6 billion at 31 December 2018, comprising gross debt of
£33.4 billion and cash and liquid investments of £4.7
billion, including £0.5 billion reported within Assets held
for sale. Net debt increased due to the £3.9 billion
acquisition of Tesaro Inc as well as £0.2 billion of Tesaro
net debt, together with the £1.3 billion impact from the
implementation of IFRS 16, the dividend paid to shareholders of
£2.1 billion and £0.1 billion of unfavourable exchange
impacts from the translation of non-Sterling denominated debt,
partly offset by £0.5 billion free cash flow.
At 30
June 2019, GSK had short-term borrowings (including overdrafts and
lease liabilities) repayable within 12 months of £10.1 billion
with loans of £2.6 billion repayable in the subsequent
year.
|
Returns to shareholders
|
Quarterly dividends
The
Board has declared a second interim dividend for 2019 of 19 pence
per share (Q2 2018: 19 pence per share).
GSK
recognises the importance of dividends to shareholders and aims to
distribute regular dividend payments that will be determined
primarily with reference to the free cash flow generated by the
business after funding the investment necessary to support the
Group's future growth.
The
Board intends to maintain the dividend for 2019 at the current
level of 80p per share, subject to any material change in the
external environment or performance expectations. Over time,
as free cash flow strengthens, it intends to build free cash flow
cover of the annual dividend to a target range of 1.25-1.50x,
before returning the dividend to growth.
Payment of dividends
The
equivalent interim dividend receivable by ADR holders will be
calculated based on the exchange rate on 8 October 2019. An
annual fee of $0.03 per ADS (or $0.0075 per ADS per quarter) (2018:
$0.02 per ADS; $0.005 per ADS per quarter) is charged by the
Depositary.
The
ex-dividend date will be 8 August 2019, with a record date of 9
August 2019 and a payment date of 10 October 2019.
|
|
Paid/
payable
|
|
Pence
per
share
|
|
£m
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
First
interim
|
11 July
2019
|
|
19
|
|
940
|
Second
interim
|
10
October 2019
|
|
19
|
|
940
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
First
interim
|
12 July
2018
|
|
19
|
|
934
|
Second
interim
|
11
October 2018
|
|
19
|
|
934
|
Third
interim
|
10
January 2019
|
|
19
|
|
935
|
Fourth
interim
|
11
April 2019
|
|
23
|
|
1,137
|
|
|
|
|
|
|
|
|
|
80
|
|
3,940
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
Q2 2019
millions
|
|
Q2
2018
millions
|
|
|
|
|
|
|
Weighted
average number of shares - basic
|
|
|
4,947
|
|
4,914
|
Dilutive
effect of share options and share awards
|
|
|
44
|
|
47
|
|
|
|
|
|
|
Weighted
average number of shares - diluted
|
|
|
4,991
|
|
4,961
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
H1 2019
millions
|
|
H1
2018
millions
|
|
|
|
|
|
|
Weighted
average number of shares - basic
|
|
|
4,942
|
|
4,909
|
Dilutive
effect of share options and share awards
|
|
|
43
|
|
46
|
|
|
|
|
|
|
Weighted
average number of shares - diluted
|
|
|
4,985
|
|
4,955
|
|
|
|
|
|
|
At 30
June 2019, 4,948 million shares (30 June 2018: 4,915 million) were
in free issue (excluding Treasury shares and shares held by the
ESOP Trusts). GSK made no share repurchases during the
period. The company issued 0.5 million shares under employee
share schemes for proceeds of £6 million (Q2 2018: £12
million).
|
At 30 June 2019, the ESOP Trust held 40 million GSK shares against
the future exercise of share options and share awards. The
carrying value of £242 million has been deducted from other
reserves. The market value of these shares was £642
million.
At 30 June 2019, the company held 393.5 million Treasury shares at
a cost of £5,505 million, which has been deducted from
retained earnings.
|
Financial information
|
Income statements
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
|
|
|
|
TURNOVER
|
7,809
|
|
7,310
|
|
15,470
|
|
14,532
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,637)
|
|
(2,310)
|
|
(5,370)
|
|
(4,701)
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,172
|
|
5,000
|
|
10,100
|
|
9,831
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,590)
|
|
(2,457)
|
|
(5,067)
|
|
(4,768)
|
Research
and development
|
(1,113)
|
|
(925)
|
|
(2,119)
|
|
(1,829)
|
Royalty income
|
78
|
|
73
|
|
151
|
|
126
|
Other
operating expense
|
(63)
|
|
(912)
|
|
(153)
|
|
(1,341)
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
1,484
|
|
779
|
|
2,912
|
|
2,019
|
|
|
|
|
|
|
|
|
Finance
income
|
21
|
|
27
|
|
55
|
|
47
|
Finance
expense
|
(237)
|
|
(194)
|
|
(461)
|
|
(356)
|
Share
of after tax (losses)/profits of
associates and joint ventures
|
(4)
|
|
2
|
|
53
|
|
11
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAXATION
|
1,264
|
|
614
|
|
2,559
|
|
1,721
|
|
|
|
|
|
|
|
|
Taxation
|
(214)
|
|
(139)
|
|
(524)
|
|
(487)
|
Tax rate %
|
16.9%
|
|
22.6%
|
|
20.5%
|
|
28.3%
|
|
|
|
|
|
|
|
|
PROFIT AFTER TAXATION
|
1,050
|
|
475
|
|
2,035
|
|
1,234
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling
interests
|
86
|
|
34
|
|
241
|
|
244
|
Profit
attributable to shareholders
|
964
|
|
441
|
|
1,794
|
|
990
|
|
|
|
|
|
|
|
|
|
1,050
|
|
475
|
|
2,035
|
|
1,234
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
|
19.5p
|
|
9.0p
|
|
36.3p
|
|
20.2p
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
19.3p
|
|
8.9p
|
|
36.0p
|
|
20.0p
|
|
|
|
|
|
|
|
|
Statement of comprehensive income
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
|
|
|
Profit
for the period
|
1,050
|
|
475
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
(120)
|
|
(438)
|
Fair
value movements on cash flow hedges
|
(73)
|
|
157
|
Reclassification
of cash flow hedges to income statement
|
-
|
|
(134)
|
Deferred
tax on fair value movements on cash flow hedges
|
1
|
|
(24)
|
Deferred
tax reversed on reclassification of cash flow hedges
|
-
|
|
20
|
|
|
|
|
|
(192)
|
|
(419)
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
8
|
|
20
|
Fair
value movements on equity investments
|
6
|
|
56
|
Deferred
tax on fair value movements on equity investments
|
(20)
|
|
(4)
|
Re-measurement
(losses)/gains on defined benefit plans
|
(131)
|
|
728
|
Tax on
re-measurement (losses)/gains on defined benefit plans
|
27
|
|
(132)
|
|
|
|
|
|
(110)
|
|
668
|
|
|
|
|
Other
comprehensive (expense)/income for the period
|
(302)
|
|
249
|
|
|
|
|
Total
comprehensive income for the period
|
748
|
|
724
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
Shareholders
|
654
|
|
670
|
Non-controlling interests
|
94
|
|
54
|
|
|
|
|
|
748
|
|
724
|
|
|
|
|
Statement of comprehensive income
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
Profit
for the period
|
2,035
|
|
1,234
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
(45)
|
|
(372)
|
Fair
value movements on cash flow hedges
|
(73)
|
|
179
|
Reclassification
of cash flow hedges to income statement
|
1
|
|
(165)
|
Deferred
tax on fair value movements on cash flow hedges
|
-
|
|
(24)
|
Deferred
tax reversed on reclassification of cash flow hedges
|
-
|
|
20
|
|
|
|
|
|
(117)
|
|
(362)
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
(10)
|
|
(8)
|
Fair
value movements on equity investments
|
44
|
|
153
|
Deferred
tax on fair value movements on equity investments
|
(30)
|
|
(13)
|
Re-measurement
(losses)/gains on defined benefit plans
|
(573)
|
|
914
|
Tax on
re-measurement (losses)/gains on defined benefit plans
|
102
|
|
(170)
|
|
|
|
|
|
(467)
|
|
876
|
|
|
|
|
Other
comprehensive (expense)/income for the period
|
(584)
|
|
514
|
|
|
|
|
Total
comprehensive income for the period
|
1,451
|
|
1,748
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
Shareholders
|
1,220
|
|
1,512
|
Non-controlling interests
|
231
|
|
236
|
|
|
|
|
|
1,451
|
|
1,748
|
|
|
|
|
Pharmaceuticals turnover - three months ended 30 June
2019
|
|
Total
|
|
US
|
|
Europe
|
|
International
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
752
|
16
|
12
|
419
|
3
|
(2)
|
193
|
33
|
32
|
140
|
40
|
38
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Ellipta
products
|
557
|
9
|
6
|
302
|
(5)
|
(10)
|
141
|
29
|
29
|
114
|
37
|
35
|
Anoro
Ellipta
|
128
|
7
|
3
|
81
|
(2)
|
(8)
|
30
|
25
|
25
|
17
|
31
|
31
|
Arnuity
Ellipta
|
14
|
40
|
30
|
12
|
33
|
22
|
-
|
-
|
-
|
2
|
>100
|
>100
|
Incruse
Ellipta
|
57
|
(23)
|
(26)
|
31
|
(35)
|
(40)
|
19
|
(5)
|
(5)
|
7
|
17
|
17
|
Relvar/Breo Ellipta
|
238
|
(15)
|
(16)
|
93
|
(40)
|
(43)
|
70
|
15
|
15
|
75
|
21
|
21
|
Trelegy
Ellipta
|
120
|
>100
|
>100
|
85
|
>100
|
>100
|
22
|
>100
|
>100
|
13
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala
|
195
|
38
|
33
|
117
|
33
|
26
|
52
|
44
|
42
|
26
|
53
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
1,209
|
2
|
(2)
|
736
|
(1)
|
(6)
|
289
|
-
|
(1)
|
184
|
17
|
19
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Dolutegravir
products
|
1,147
|
3
|
-
|
720
|
(1)
|
(6)
|
271
|
3
|
2
|
156
|
27
|
29
|
Tivicay
|
412
|
1
|
(2)
|
242
|
(5)
|
(11)
|
99
|
8
|
7
|
71
|
20
|
24
|
Triumeq
|
646
|
(5)
|
(9)
|
403
|
(10)
|
(15)
|
159
|
(6)
|
(8)
|
84
|
31
|
33
|
Juluca
|
84
|
>100
|
>100
|
70
|
>100
|
>100
|
13
|
>100
|
>100
|
1
|
>100
|
>100
|
Dovato
|
5
|
-
|
-
|
5
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epzicom/Kivexa
|
22
|
(15)
|
(15)
|
1
|
>100
|
>100
|
6
|
(40)
|
(40)
|
15
|
(12)
|
(12)
|
Selzentry
|
26
|
(10)
|
(7)
|
13
|
-
|
-
|
8
|
(11)
|
(11)
|
5
|
(29)
|
(14)
|
Other
|
14
|
(33)
|
(48)
|
2
|
(60)
|
(80)
|
4
|
(33)
|
(50)
|
8
|
(20)
|
(30)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-
inflammation
|
151
|
32
|
26
|
132
|
29
|
23
|
11
|
22
|
22
|
8
|
>100
|
>100
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Benlysta
|
150
|
32
|
25
|
132
|
29
|
24
|
11
|
37
|
37
|
7
|
75
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology
|
57
|
-
|
-
|
33
|
-
|
-
|
24
|
-
|
-
|
-
|
-
|
-
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Zejula
|
57
|
-
|
-
|
33
|
-
|
-
|
24
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
2,138
|
(6)
|
(7)
|
463
|
(25)
|
(29)
|
517
|
(5)
|
(6)
|
1,158
|
4
|
4
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Established
Respiratory
|
913
|
(13)
|
(14)
|
310
|
(28)
|
(32)
|
208
|
(11)
|
(12)
|
395
|
4
|
4
|
Seretide/Advair
|
412
|
(30)
|
(31)
|
105
|
(60)
|
(61)
|
129
|
(15)
|
(15)
|
178
|
(1)
|
(1)
|
Flixotide/Flovent
|
126
|
(18)
|
(19)
|
65
|
(31)
|
(34)
|
22
|
5
|
-
|
39
|
-
|
5
|
Ventolin
|
236
|
39
|
35
|
141
|
81
|
71
|
29
|
(6)
|
(6)
|
66
|
8
|
11
|
Avamys/Veramyst
|
71
|
3
|
1
|
-
|
-
|
-
|
20
|
(9)
|
(9)
|
51
|
9
|
6
|
Other
Respiratory
|
68
|
8
|
2
|
(1)
|
>(100)
|
>(100)
|
8
|
(11)
|
(11)
|
61
|
13
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dermatology
|
107
|
3
|
3
|
1
|
>100
|
>100
|
41
|
5
|
3
|
65
|
-
|
2
|
Augmentin
|
133
|
5
|
6
|
-
|
-
|
-
|
38
|
3
|
-
|
95
|
6
|
8
|
Avodart
|
141
|
2
|
1
|
1
|
(67)
|
(67)
|
53
|
(7)
|
(7)
|
87
|
12
|
9
|
Imigran/Imitrex
|
36
|
-
|
-
|
17
|
21
|
14
|
13
|
(13)
|
(13)
|
6
|
(14)
|
-
|
Lamictal
|
142
|
(13)
|
(16)
|
72
|
(12)
|
(16)
|
28
|
4
|
4
|
42
|
(24)
|
(25)
|
Seroxat/Paxil
|
40
|
(5)
|
(5)
|
-
|
-
|
-
|
9
|
(10)
|
(10)
|
31
|
(3)
|
(3)
|
Valtrex
|
25
|
(17)
|
(20)
|
1
|
(80)
|
(60)
|
7
|
(12)
|
(12)
|
17
|
-
|
(12)
|
Other
|
601
|
2
|
1
|
61
|
(28)
|
(33)
|
120
|
4
|
3
|
420
|
8
|
8
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Pharmaceuticals
|
4,307
|
2
|
(1)
|
1,783
|
(5)
|
(10)
|
1,034
|
5
|
4
|
1,490
|
9
|
8
|
|
--------
|
--------
|
--------
|
--------
|
----------
|
--------
|
--------
|
---------
|
--------
|
--------
|
---------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals turnover - six months ended 30 June
2019
|
|
Total
|
|
US
|
|
Europe
|
|
International
|
|
-
|
|
|
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
-
|
|
_
|
|
|
|
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
1,383
|
21
|
17
|
756
|
13
|
6
|
369
|
32
|
33
|
258
|
36
|
34
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Ellipta
products
|
1,036
|
16
|
12
|
554
|
6
|
-
|
272
|
28
|
29
|
210
|
32
|
31
|
Anoro Ellipta
|
230
|
6
|
2
|
139
|
(3)
|
(8)
|
57
|
19
|
19
|
34
|
31
|
31
|
Arnuity Ellipta
|
21
|
-
|
(5)
|
18
|
(5)
|
(11)
|
-
|
-
|
-
|
3
|
50
|
50
|
Incruse Ellipta
|
125
|
2
|
(1)
|
75
|
-
|
(7)
|
37
|
3
|
3
|
13
|
18
|
27
|
Relvar/Breo Ellipta
|
453
|
(9)
|
(11)
|
171
|
(33)
|
(37)
|
137
|
11
|
12
|
145
|
22
|
20
|
Trelegy Ellipta
|
207
|
>100
|
>100
|
151
|
>100
|
>100
|
41
|
>100
|
>100
|
15
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala
|
347
|
42
|
37
|
202
|
37
|
30
|
97
|
45
|
45
|
48
|
55
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
2,330
|
4
|
1
|
1,425
|
4
|
(2)
|
567
|
(3)
|
(3)
|
338
|
22
|
23
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Dolutegravir
products
|
2,214
|
7
|
3
|
1,390
|
4
|
(1)
|
533
|
-
|
-
|
291
|
37
|
38
|
Tivicay
|
795
|
5
|
2
|
465
|
(4)
|
(9)
|
193
|
7
|
7
|
137
|
51
|
53
|
Triumeq
|
1,260
|
(2)
|
(6)
|
789
|
(3)
|
(8)
|
319
|
(9)
|
(9)
|
152
|
25
|
25
|
Juluca
|
154
|
>100
|
>100
|
131
|
>100
|
>100
|
21
|
>100
|
>100
|
2
|
>100
|
>100
|
Dovato
|
5
|
-
|
-
|
5
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epzicom/Kivexa
|
41
|
(35)
|
(33)
|
2
|
-
|
-
|
12
|
(50)
|
(50)
|
27
|
(27)
|
(24)
|
Selzentry
|
49
|
(16)
|
(16)
|
26
|
(7)
|
(11)
|
15
|
(17)
|
(17)
|
8
|
(33)
|
(25)
|
Other
|
26
|
(33)
|
(38)
|
7
|
(42)
|
(50)
|
7
|
(42)
|
(42)
|
12
|
(20)
|
(27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-
inflammation
|
272
|
27
|
21
|
237
|
24
|
17
|
22
|
29
|
29
|
13
|
>100
|
>100
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Benlysta
|
271
|
27
|
21
|
237
|
24
|
18
|
22
|
29
|
29
|
12
|
>100
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology
|
100
|
-
|
-
|
59
|
-
|
-
|
41
|
-
|
-
|
-
|
-
|
-
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Zejula
|
99
|
-
|
-
|
59
|
-
|
-
|
40
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
4,380
|
(6)
|
(7)
|
995
|
(17)
|
(22)
|
1,038
|
(8)
|
(8)
|
2,347
|
1
|
2
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Established
Respiratory
|
1,996
|
(6)
|
(8)
|
710
|
(14)
|
(19)
|
426
|
(13)
|
(12)
|
860
|
6
|
5
|
Seretide/Advair
|
898
|
(22)
|
(23)
|
281
|
(43)
|
(45)
|
262
|
(17)
|
(17)
|
355
|
1
|
2
|
Flixotide/Flovent
|
272
|
(13)
|
(15)
|
143
|
(21)
|
(25)
|
48
|
-
|
-
|
81
|
(4)
|
(1)
|
Ventolin
|
481
|
37
|
34
|
287
|
81
|
70
|
62
|
(5)
|
(5)
|
132
|
5
|
8
|
Avamys/Veramyst
|
186
|
11
|
10
|
-
|
-
|
-
|
39
|
(7)
|
(7)
|
147
|
18
|
15
|
Other Respiratory
|
159
|
9
|
4
|
(1)
|
>(100)
|
>(100)
|
15
|
(6)
|
(6)
|
145
|
12
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dermatology
|
215
|
2
|
3
|
3
|
>100
|
>100
|
79
|
1
|
1
|
133
|
1
|
2
|
Augmentin
|
293
|
1
|
2
|
-
|
-
|
-
|
87
|
(5)
|
(5)
|
206
|
4
|
6
|
Avodart
|
284
|
2
|
1
|
2
|
(67)
|
(67)
|
109
|
(10)
|
(10)
|
173
|
14
|
12
|
Imigran/Imitrex
|
67
|
(1)
|
(3)
|
29
|
12
|
8
|
26
|
(13)
|
(13)
|
12
|
-
|
-
|
Lamictal
|
274
|
(12)
|
(14)
|
137
|
(10)
|
(15)
|
53
|
-
|
-
|
84
|
(19)
|
(20)
|
Seroxat/Paxil
|
80
|
(2)
|
(2)
|
-
|
-
|
-
|
18
|
(10)
|
(10)
|
62
|
-
|
-
|
Valtrex
|
52
|
(10)
|
(12)
|
6
|
(25)
|
(25)
|
14
|
(7)
|
(7)
|
32
|
(9)
|
(11)
|
Other
|
1,119
|
(8)
|
(8)
|
108
|
(41)
|
(45)
|
226
|
(2)
|
(2)
|
785
|
(2)
|
(1)
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Pharmaceuticals
|
8,465
|
3
|
1
|
3,472
|
1
|
(5)
|
2,037
|
1
|
1
|
2,956
|
6
|
6
|
|
--------
|
--------
|
--------
|
--------
|
----------
|
--------
|
--------
|
---------
|
--------
|
--------
|
---------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover - three months ended 30 June 2019
|
|
Total
|
|
US
|
|
Europe
|
|
International
|
|
|
|
|
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meningitis
|
235
|
28
|
26
|
100
|
30
|
25
|
87
|
14
|
12
|
48
|
55
|
61
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Bexsero
|
156
|
26
|
24
|
55
|
49
|
43
|
82
|
17
|
14
|
19
|
12
|
24
|
Menveo
|
62
|
27
|
22
|
45
|
12
|
7
|
4
|
-
|
-
|
13
|
>100
|
>100
|
Other
|
17
|
55
|
55
|
-
|
-
|
-
|
1
|
(50)
|
(50)
|
16
|
78
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
17
|
-
|
6
|
2
|
>100
|
>100
|
(1)
|
>(100)
|
>(100)
|
16
|
(6)
|
-
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Fluarix, FluLaval
|
17
|
-
|
6
|
2
|
>100
|
>100
|
(1)
|
>(100)
|
>(100)
|
16
|
(6)
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
386
|
>100
|
>100
|
351
|
>100
|
>100
|
14
|
>100
|
>100
|
21
|
23
|
23
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Shingrix
|
386
|
>100
|
>100
|
351
|
>100
|
>100
|
14
|
>100
|
>100
|
21
|
23
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Vaccines
|
947
|
7
|
5
|
325
|
25
|
18
|
303
|
(4)
|
(4)
|
319
|
3
|
3
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Infanrix, Pediarix
|
195
|
31
|
28
|
83
|
69
|
59
|
67
|
(7)
|
(8)
|
45
|
61
|
64
|
Boostrix
|
144
|
19
|
15
|
71
|
16
|
10
|
43
|
(4)
|
(4)
|
30
|
>100
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
224
|
7
|
3
|
130
|
9
|
4
|
71
|
18
|
18
|
23
|
(26)
|
(32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
116
|
10
|
9
|
25
|
47
|
35
|
27
|
8
|
8
|
64
|
2
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
107
|
7
|
6
|
-
|
-
|
-
|
15
|
25
|
17
|
92
|
5
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra,
Varilrix
|
50
|
(39)
|
(39)
|
-
|
-
|
-
|
24
|
(46)
|
(46)
|
26
|
(31)
|
(31)
|
Cervarix
|
28
|
75
|
75
|
-
|
-
|
-
|
6
|
(14)
|
(14)
|
22
|
>100
|
>100
|
Other
|
83
|
(18)
|
(18)
|
16
|
14
|
7
|
50
|
(1)
|
1
|
17
|
(54)
|
(54)
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Vaccines
|
1,585
|
26
|
23
|
778
|
60
|
52
|
403
|
3
|
2
|
404
|
8
|
8
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover - six months ended 30 June 2019
|
|
Total
|
|
US
|
|
Europe
|
|
International
|
|
|
|
|
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meningitis
|
444
|
22
|
22
|
171
|
30
|
23
|
170
|
(3)
|
(3)
|
103
|
81
|
95
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Bexsero
|
312
|
19
|
19
|
103
|
51
|
44
|
159
|
(2)
|
(2)
|
50
|
52
|
70
|
Menveo
|
95
|
10
|
8
|
68
|
6
|
-
|
8
|
(11)
|
(11)
|
19
|
46
|
62
|
Other
|
37
|
>100
|
>100
|
-
|
-
|
-
|
3
|
(25)
|
(25)
|
34
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
32
|
23
|
27
|
2
|
>100
|
>100
|
-
|
-
|
-
|
30
|
15
|
19
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Fluarix, FluLaval
|
32
|
23
|
27
|
2
|
>100
|
>100
|
-
|
-
|
-
|
30
|
15
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
743
|
>100
|
>100
|
679
|
>100
|
>100
|
19
|
>100
|
>100
|
45
|
80
|
80
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Shingrix
|
743
|
>100
|
>100
|
679
|
>100
|
>100
|
19
|
>100
|
>100
|
45
|
80
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Vaccines
|
1,888
|
4
|
2
|
703
|
19
|
12
|
553
|
(9)
|
(8)
|
632
|
1
|
1
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Infanrix, Pediarix
|
378
|
6
|
4
|
186
|
20
|
13
|
114
|
(21)
|
(21)
|
78
|
42
|
44
|
Boostrix
|
267
|
21
|
18
|
132
|
23
|
16
|
80
|
(2)
|
(2)
|
55
|
72
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
463
|
14
|
10
|
287
|
24
|
17
|
121
|
2
|
2
|
55
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
250
|
6
|
5
|
70
|
9
|
3
|
56
|
4
|
6
|
124
|
6
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
228
|
15
|
15
|
-
|
-
|
-
|
33
|
32
|
32
|
195
|
12
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra,
Varilrix
|
105
|
(34)
|
(34)
|
-
|
-
|
-
|
51
|
(40)
|
(40)
|
54
|
(28)
|
(27)
|
Cervarix
|
48
|
(29)
|
(29)
|
-
|
-
|
-
|
11
|
(8)
|
(8)
|
37
|
(34)
|
(34)
|
Other
|
149
|
(18)
|
(18)
|
28
|
(22)
|
(25)
|
87
|
4
|
6
|
34
|
(45)
|
(47)
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
Vaccines
|
3,107
|
25
|
22
|
1,555
|
59
|
51
|
742
|
(5)
|
(5)
|
810
|
10
|
12
|
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
|
|
30 June 2019
£m
|
|
30 June
2018
£m
|
|
31
December 2018
£m
|
ASSETS
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Property,
plant and equipment
|
10,385
|
|
10,823
|
|
11,058
|
Right
of use assets
|
1,023
|
|
-
|
|
-
|
Goodwill
|
7,026
|
|
5,778
|
|
5,789
|
Other
intangible assets
|
20,134
|
|
17,294
|
|
17,202
|
Investments
in associates and joint ventures
|
309
|
|
202
|
|
236
|
Other
investments
|
1,380
|
|
1,067
|
|
1,322
|
Deferred
tax assets
|
3,668
|
|
3,472
|
|
3,887
|
Derivative
financial instruments
|
86
|
|
36
|
|
69
|
Other
non-current assets
|
1,393
|
|
1,919
|
|
1,576
|
|
|
|
|
|
|
Total non-current assets
|
45,404
|
|
40,591
|
|
41,139
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Inventories
|
5,959
|
|
5,943
|
|
5,476
|
Current
tax recoverable
|
186
|
|
252
|
|
229
|
Trade
and other receivables
|
6,875
|
|
6,559
|
|
6,423
|
Derivative
financial instruments
|
211
|
|
85
|
|
188
|
Liquid
investments
|
84
|
|
81
|
|
84
|
Cash
and cash equivalents
|
4,123
|
|
4,046
|
|
3,874
|
Assets
held for sale
|
790
|
|
78
|
|
653
|
|
|
|
|
|
|
Total current assets
|
18,228
|
|
17,044
|
|
16,927
|
|
|
|
|
|
|
TOTAL ASSETS
|
63,632
|
|
57,635
|
|
58,066
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Short-term
borrowings
|
(10,147)
|
|
(3,470)
|
|
(5,793)
|
Contingent
consideration liabilities
|
(816)
|
|
(806)
|
|
(837)
|
Trade
and other payables
|
(13,385)
|
|
(12,545)
|
|
(14,037)
|
Derivative
financial instruments
|
(255)
|
|
(84)
|
|
(127)
|
Current
tax payable
|
(502)
|
|
(771)
|
|
(965)
|
Short-term
provisions
|
(674)
|
|
(522)
|
|
(732)
|
|
|
|
|
|
|
Total current liabilities
|
(25,779)
|
|
(18,198)
|
|
(22,491)
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
Long-term
borrowings
|
(23,313)
|
|
(24,592)
|
|
(20,271)
|
Corporation
tax payable
|
(273)
|
|
(394)
|
|
(272)
|
Deferred
tax liabilities
|
(1,233)
|
|
(1,214)
|
|
(1,156)
|
Pensions
and other post-employment benefits
|
(3,352)
|
|
(3,210)
|
|
(3,125)
|
Other
provisions
|
(625)
|
|
(658)
|
|
(691)
|
Derivative
financial instruments
|
-
|
|
-
|
|
(1)
|
Contingent
consideration liabilities
|
(5,212)
|
|
(5,364)
|
|
(5,449)
|
Other
non-current liabilities
|
(878)
|
|
(982)
|
|
(938)
|
|
|
|
|
|
|
Total non-current liabilities
|
(34,886)
|
|
(36,414)
|
|
(31,903)
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
(60,665)
|
|
(54,612)
|
|
(54,394)
|
|
|
|
|
|
|
NET ASSETS
|
2,967
|
|
3,023
|
|
3,672
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
1,345
|
|
1,343
|
|
1,345
|
Share
premium account
|
3,157
|
|
3,042
|
|
3,091
|
Retained
earnings
|
(2,804)
|
|
(2,680)
|
|
(2,137)
|
Other
reserves
|
1,916
|
|
1,974
|
|
2,061
|
|
|
|
|
|
|
Shareholders' equity
|
3,614
|
|
3,679
|
|
4,360
|
|
|
|
|
|
|
Non-controlling
interests
|
(647)
|
|
(656)
|
|
(688)
|
|
|
|
|
|
|
TOTAL EQUITY
|
2,967
|
|
3,023
|
|
3,672
|
|
|
|
|
|
|
Statement of changes in equity
|
|
Share
capital
£m
|
Share
premium
£m
|
Retained
earnings
£m
|
Other
reserves
£m
|
Share-
holder's
equity
£m
|
Non-
controlling
interests
£m
|
Total
equity
£m
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
As
previously reported
|
1,345
|
3,091
|
(2,137)
|
2,061
|
4,360
|
(688)
|
3,672
|
Implementation
of IFRS 16
|
-
|
-
|
(93)
|
-
|
(93)
|
-
|
(93)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
At 1
January 2019, as adjusted
|
1,345
|
3,091
|
(2,230)
|
2,061
|
4,267
|
(688)
|
3,579
|
Profit
for the period
|
|
|
1,794
|
|
1,794
|
241
|
2,035
|
Other comprehensive expense for the
period
|
|
|
(519)
|
(55)
|
(574)
|
(10)
|
(584)
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
Total
comprehensive income/(expense)
for the period
|
|
|
1,275
|
(55)
|
1,220
|
231
|
1,451
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(196)
|
(196)
|
Changes
to non-controlling interests
|
|
|
|
|
|
6
|
6
|
Dividends
to shareholders
|
|
|
(2,072)
|
|
(2,072)
|
|
(2,072)
|
Shares
issued
|
-
|
33
|
|
|
33
|
|
33
|
Realised
after tax profits on disposal of
equity
investments
|
-
|
|
6
|
(6)
|
-
|
|
-
|
Shares
acquired by ESOP Trusts
|
|
33
|
295
|
(328)
|
-
|
|
-
|
Write-down
on shares held by ESOP Trusts
|
|
|
(244)
|
244
|
-
|
|
-
|
Share-based
incentive plans
|
|
|
166
|
-
|
166
|
|
166
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
At 30 June 2019
|
1,345
|
3,157
|
(2,804)
|
1,916
|
3,614
|
(647)
|
2,967
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
1,343
|
3,019
|
(6,477)
|
2,047
|
(68)
|
3,557
|
3,489
|
Implementation
of IFRS 15
|
|
|
(4)
|
|
(4)
|
|
(4)
|
Implementation
of IFRS 9
|
|
|
277
|
(288)
|
(11)
|
|
(11)
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
At 1
January 2018, as adjusted
|
1,343
|
3,019
|
(6,204)
|
1,759
|
(83)
|
3,557
|
3,474
|
Profit for the period
|
|
|
990
|
|
990
|
244
|
1,234
|
Other comprehensive income/(expense)
for the period
|
|
|
377
|
145
|
522
|
(8)
|
514
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
Total
comprehensive income for the period
|
|
|
1,367
|
145
|
1,512
|
236
|
1,748
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(350)
|
(350)
|
Changes
in non-controlling interests
|
|
|
|
|
|
(2)
|
(2)
|
Contributions
from non-controlling interests
|
|
|
|
|
|
21
|
21
|
Derecognition
of non-controlling interests
in Consumer Healthcare Joint Venture
|
|
|
4,118
|
|
4,118
|
(4,118)
|
-
|
Dividends
to shareholders
|
|
|
(2,059)
|
|
(2,059)
|
|
(2,059)
|
Shares
issued
|
-
|
23
|
|
|
23
|
|
23
|
Realised
profits on disposal of equity
investments
|
|
|
65
|
(65)
|
-
|
|
-
|
Write-down
on shares held by ESOP Trusts
|
|
|
(135)
|
135
|
-
|
|
-
|
Share-based
incentive plans
|
|
|
168
|
|
168
|
|
168
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
At 30
June 2018
|
1,343
|
3,042
|
(2,680)
|
1,974
|
3,679
|
(656)
|
3,023
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
Cash flow statement - six months ended 30 June 2019
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
|
|
Profit after tax
|
2,035
|
|
1,234
|
|
Tax on
profits
|
524
|
|
487
|
|
Share
of after tax profits of associates and joint ventures
|
(53)
|
|
(11)
|
|
Net
finance expense
|
406
|
|
309
|
|
Depreciation,
amortisation and other adjusting items
|
1,959
|
|
673
|
|
Increase
in working capital
|
(990)
|
|
(1,123)
|
|
Contingent
consideration paid
|
(392)
|
|
(605)
|
|
(Decrease)/increase
in other net liabilities (excluding contingent
consideration paid)
|
(603)
|
|
2,063
|
|
|
|
|
|
|
Cash generated from operations
|
2,886
|
|
3,027
|
|
Taxation
paid
|
(834)
|
|
(802)
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
2,052
|
|
2,225
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
Purchase
of property, plant and equipment
|
(501)
|
|
(541)
|
|
Proceeds
from sale of property, plant and equipment
|
70
|
|
22
|
|
Purchase
of intangible assets
|
(438)
|
|
(189)
|
|
Proceeds
from sale of intangible assets
|
12
|
|
23
|
|
Purchase
of equity investments
|
(49)
|
|
(37)
|
|
Proceeds
from sale of equity investments
|
39
|
|
78
|
|
Purchase
of businesses, net of cash acquired
|
(3,641)
|
|
-
|
|
Contingent
consideration paid
|
(51)
|
|
(97)
|
|
Disposal
of businesses
|
12
|
|
29
|
|
Investment
in associates and joint ventures
|
(5)
|
|
(4)
|
|
Interest
received
|
36
|
|
44
|
|
Dividends
from associates and joint ventures
|
-
|
|
39
|
|
|
|
|
|
|
Net cash outflow from investing activities
|
(4,516)
|
|
(633)
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
Issue
of share capital
|
33
|
|
23
|
|
Increase
in short-term loans
|
7,255
|
|
448
|
|
Increase
in long-term loans
|
2,603
|
|
10,048
|
|
Repayment
of short-term loans
|
(4,246)
|
|
-
|
|
Net
repayment of obligations under lease liabilities
|
(104)
|
|
(12)
|
|
Purchase
of non-controlling interests
|
-
|
|
(9,301)
|
|
Interest
paid
|
(449)
|
|
(376)
|
|
Dividends
paid to shareholders
|
(2,072)
|
|
(2,059)
|
|
Distributions
to non-controlling interests
|
(196)
|
|
(350)
|
|
Contributions
from non-controlling interests
|
-
|
|
21
|
|
Other
financing items
|
(55)
|
|
85
|
|
|
|
|
|
|
Net cash inflow/(outflow) from financing activities
|
2,769
|
|
(1,473)
|
|
|
|
|
|
|
Increase in cash and bank overdrafts in the period
|
305
|
|
119
|
|
|
|
|
|
|
Cash
and bank overdrafts at beginning of the period
|
4,087
|
|
3,600
|
|
Exchange
adjustments
|
14
|
|
(34)
|
|
Increase
in cash and bank overdrafts
|
305
|
|
119
|
|
|
|
|
|
|
Cash and bank overdrafts at end of the period
|
4,406
|
|
3,685
|
|
|
|
|
|
|
Cash
and bank overdrafts at end of the period comprise:
|
|
|
|
|
|
Cash
and cash equivalents
|
4,123
|
|
4,046
|
|
Cash
and cash equivalents reported in assets held for sale
|
532
|
|
-
|
|
|
|
|
|
|
|
4,655
|
|
4,046
|
|
Overdrafts
|
(249)
|
|
(361)
|
|
|
|
|
|
|
4,406
|
|
3,685
|
|
|
|
|
|
Segment information
|
|
Operating
segments are reported based on the financial information provided
to the Chief Executive Officer and the responsibilities of the
Corporate Executive Team (CET). GSK reports results under
four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines
and Consumer Healthcare, and individual members of the CET are
responsible for each segment.
The
Pharmaceuticals R&D segment is the responsibility of the
President, Pharmaceuticals R&D and is reported as a separate
segment. The operating profit of this segment excludes the
ViiV Healthcare operating profit (including R&D expenditure)
that is reported within the Pharmaceuticals segment.
The
Group's management reporting process allocates intra-Group profit
on a product sale to the market in which that sale is recorded, and
the profit analyses below have been presented on that
basis.
|
Turnover by segment
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,307
|
|
4,229
|
|
2
|
|
(1)
|
Vaccines
|
1,585
|
|
1,253
|
|
26
|
|
23
|
Consumer
Healthcare
|
1,917
|
|
1,828
|
|
5
|
|
4
|
|
|
|
|
|
|
|
|
Total
turnover
|
7,809
|
|
7,310
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|
Q2 2019
£m
|
|
Q2
2018
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,075
|
|
2,111
|
|
(2)
|
|
(5)
|
Pharmaceuticals
R&D
|
(819)
|
|
(619)
|
|
32
|
|
28
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
1,256
|
|
1,492
|
|
(16)
|
|
(19)
|
Vaccines
|
612
|
|
357
|
|
71
|
|
64
|
Consumer
Healthcare
|
391
|
|
352
|
|
11
|
|
8
|
|
|
|
|
|
|
|
|
Segment
profit
|
2,259
|
|
2,201
|
|
3
|
|
(1)
|
Corporate
and other unallocated costs
|
(88)
|
|
(99)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,171
|
|
2,102
|
|
3
|
|
(1)
|
Adjusting
items
|
(687)
|
|
(1,323)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
1,484
|
|
779
|
|
90
|
|
80
|
|
|
|
|
|
|
|
|
Finance
income
|
21
|
|
27
|
|
|
|
|
Finance
costs
|
(237)
|
|
(194)
|
|
|
|
|
Share
of after tax (losses)/profits of
associates and joint ventures
|
(4)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
1,264
|
|
614
|
|
>100
|
|
94
|
|
|
|
|
|
|
|
|
Turnover by segment
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,465
|
|
8,238
|
|
3
|
|
1
|
Vaccines
|
3,107
|
|
2,491
|
|
25
|
|
22
|
Consumer
Healthcare
|
3,898
|
|
3,803
|
|
2
|
|
2
|
|
|
|
|
|
|
|
|
Total
turnover
|
15,470
|
|
14,532
|
|
6
|
|
5
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,043
|
|
4,052
|
|
-
|
|
(3)
|
Pharmaceuticals
R&D
|
(1,549)
|
|
(1,231)
|
|
26
|
|
21
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
2,494
|
|
2,821
|
|
(12)
|
|
(14)
|
Vaccines
|
1,226
|
|
696
|
|
76
|
|
67
|
Consumer
Healthcare
|
821
|
|
736
|
|
12
|
|
10
|
|
|
|
|
|
|
|
|
Segment
profit
|
4,541
|
|
4,253
|
|
7
|
|
3
|
Corporate
and other unallocated costs
|
(207)
|
|
(228)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,334
|
|
4,025
|
|
8
|
|
4
|
Adjusting
items
|
(1,422)
|
|
(2,006)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
2,912
|
|
2,019
|
|
44
|
|
37
|
|
|
|
|
|
|
|
|
Finance
income
|
55
|
|
47
|
|
|
|
|
Finance
costs
|
(461)
|
|
(356)
|
|
|
|
|
Share
of after tax profits of associates
and joint ventures
|
53
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
2,559
|
|
1,721
|
|
49
|
|
41
|
|
|
|
|
|
|
|
|
Legal matters
The Group is involved in significant legal and administrative
proceedings, principally product liability, intellectual property,
tax, anti-trust and governmental investigations as well as related
private litigation, which are more fully described in the 'Legal
Proceedings' note in the Annual Report 2018.
At 30 June 2019, the Group's aggregate provision for legal and
other disputes (not including tax matters described on page 32) was
£0.3 billion (31 December 2018: £0.2 billion). The
Group may become involved in significant legal proceedings in
respect of which it is not possible to make a reliable estimate of
the expected financial effect, if any, that could result from
ultimate resolution of the proceedings. In these cases, the
Group would provide appropriate disclosures about such cases, but
no provision would be made.
The ultimate liability for legal claims may vary from the amounts
provided and is dependent upon the outcome of litigation
proceedings, investigations and possible settlement
negotiations. The Group's position could change over time,
and, therefore, there can be no assurance that any losses that
result from the outcome of any legal proceedings will not exceed by
a material amount the amount of the provisions reported in the
Group's financial accounts.
There have been no significant legal developments since the date of
the Annual Report 2018.
|
Additional information
|
Accounting policies and basis of preparation
|
This
unaudited Results Announcement contains condensed financial
information for the three and six months
ended 30 June 2019, is prepared in accordance with
the Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority and IAS 34 'Interim financial reporting' and
should be read in conjunction with the Annual Report
2018,
which was prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. This Results Announcement has been prepared
applying consistent accounting policies to those applied by the
Group in the Annual Report 2018, except for the implementation of
IFRS 16 'Leases' from 1 January 2019.
IFRS 16
'Leases' was implemented by the Group from 1 January 2019.
The new standard replaces IAS 17 'Leases' and requires lease
liabilities and right of use assets to be recognised on the balance
sheet for almost all leases. GSK has applied the modified
transition approach on adoption with no restatement of comparative
information. The adjustment made on the transition date of 1
January 2019 to each balance sheet line item is as
follows:
|
|
31
December 2018
as
previously
reported
£m
|
|
IFRS
16
adjustments
£m
|
|
1
January 2019
as
adjusted
£m
|
|
|
|
|
|
|
Property,
plant and equipment
|
11,058
|
|
(98)
|
|
10,960
|
Right
of use assets
|
-
|
|
1,071
|
|
1,071
|
Other
non-current assets
|
1,576
|
|
(11)
|
|
1,565
|
Trade
and other receivables
|
6,423
|
|
3
|
|
6,426
|
Deferred
tax assets
|
3,887
|
|
39
|
|
3,926
|
Short-term
borrowings
|
(5,793)
|
|
(229)
|
|
(6,022)
|
Long-term
borrowings
|
(20,271)
|
|
(1,074)
|
|
(21,345)
|
Trade
and other payables
|
(14,037)
|
|
10
|
|
(14,027)
|
Current
and non-current provisions
|
(1,423)
|
|
35
|
|
(1,388)
|
Other
non-current liabilities
|
(938)
|
|
160
|
|
(778)
|
Deferred
tax liabilities
|
(1,156)
|
|
1
|
|
(1,155)
|
|
|
|
|
|
|
Total
effect on net assets
|
3,672
|
|
(93)
|
|
3,579
|
|
|
|
|
|
|
Retained
earnings
|
(2,137)
|
|
(93)
|
|
(2,230)
|
|
|
|
|
|
|
Total
effect on equity
|
3,672
|
|
(93)
|
|
3,579
|
|
|
|
|
|
|
The new
Standard has not had a material impact on the Group's Income
statement or Cash flow statement.
|
The
Group assesses whether a contract is or contains a lease at
inception of the contract. The Group recognises a right
of
use asset and a
corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for
short
-
term leases
(defined as leases with a lease term of 12 months or less) and
leases of low value assets. For these leases, the Group recognises
the lease payments as an operating expense on a
straight
-
line
basis over the term of the lease. The lease liability is initially
measured at the present value of the lease payments that are not
paid at the commencement date. The discount rate applied is the
rate implicit in the lease. If this rate cannot be readily
determined, the Group uses its incremental borrowing
rate.
The
lease liability is subsequently measured by increasing the carrying
amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to
reflect the lease payments made.
The
right
of
use assets primarily
comprise property and reflect the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
|
This
Results Announcement does not constitute statutory accounts of the
Group within the meaning of sections 434(3) and 435(3) of the
Companies Act 2006. The full Group accounts for 2018 were
published in the Annual Report 2018, which has been delivered to
the Registrar of Companies and on which the report of the
independent auditors was unqualified and did not contain a
statement under section 498 of the Companies Act 2006.
|
Exchange rates
|
GSK
operates in many countries, and earns revenues and incurs costs in
many currencies. The results of the Group, as reported in
Sterling, are affected by movements in exchange rates between
Sterling and other currencies. Average exchange rates, as
modified by specific transaction rates for large transactions,
prevailing during the period, are used to translate the results and
cash flows of overseas subsidiaries, associates and joint ventures
into Sterling. Period-end rates are used to translate the net
assets of those entities. The currencies which most
influenced these translations and the relevant exchange rates
were:
|
|
Q2 2019
|
|
Q2
2018
|
|
H1 2019
|
|
H1
2018
|
|
2018
|
||
|
|
|
|
|
|
|
|
|
|
||
Average
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
US$/£
|
1.28
|
|
1.35
|
|
1.29
|
|
1.37
|
|
1.33
|
|
|
Euro/£
|
1.14
|
|
1.15
|
|
1.14
|
|
1.14
|
|
1.13
|
|
|
Yen/£
|
140
|
|
147
|
|
142
|
|
149
|
|
147
|
|
|
|
|
|
|
|
|
|
|
||
Period-end
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
US$/£
|
1.27
|
|
1.32
|
|
1.27
|
|
1.32
|
|
1.27
|
|
|
Euro/£
|
1.12
|
|
1.13
|
|
1.12
|
|
1.13
|
|
1.11
|
|
|
Yen/£
|
137
|
|
146
|
|
137
|
|
146
|
|
140
|
During Q2 2019 average Sterling exchange rates were weaker against
the US Dollar, the Euro and Yen compared with the same period in
2018. During the six months ended 30 June 2019, average
Sterling exchange rates were weaker against the US Dollar and the
Yen and flat against the Euro. Period-end Sterling exchange
rates were weaker against the US Dollar, the Euro and Yen compared
with the 2018 period-end rates.
|
Net assets
|
The
book value of net assets decreased by £705 million from
£3,672 million at 31 December 2018 to £2,967 million at
30 June 2019. This primarily reflected the re-measurement
losses on defined benefit plans during the period.
The
carrying value of investments in associates and joint ventures at
30 June 2019 was £309 million (31 December 2018: £236
million), with a market value of £447 million (31 December
2018: £487 million).
At 30
June 2019, the net deficit on the Group's pension plans was
£1,450 million compared with £995 million at 31 December
2018. The increase in the net deficit primarily arose from
decreases in the rates used to discount UK pension liabilities from
2.9% to 2.3%, and US pension liabilities from 4.2% to 3.4%, partly
offset by higher UK assets.
The
estimated present value of the potential redemption amount of the
Pfizer put option related to ViiV Healthcare, recorded in Other
payables in Current liabilities, was £1,168 million (31
December 2018: £1,240 million).
Contingent
consideration amounted to £6,028 million at 30 June 2019 (31
December 2018: £6,286 million), of which £5,664 million
(31 December 2018: £5,937 million) represented the estimated
present value of amounts payable to Shionogi relating to ViiV
Healthcare and £300 million (31 December 2018: £296
million) represented the estimated present value of contingent
consideration payable to Novartis related to the Vaccines
acquisition.
Of the
contingent consideration payable (on a post-tax basis) to Shionogi
at 30 June 2019, £784 million (31 December 2018: £815
million) is expected to be paid within one year.
|
Movements
in contingent consideration are as follows:
|
H1
2019
|
ViiV Healthcare
£m
|
|
Group
£m
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,937
|
|
6,286
|
Re-measurement
through income statement
|
166
|
|
185
|
Cash
payments: operating cash flows
|
(390)
|
|
(392)
|
Cash
payments: investing activities
|
(49)
|
|
(51)
|
|
|
|
|
Contingent
consideration at end of the period
|
5,664
|
|
6,028
|
|
|
|
|
H1 2018
|
ViiV
Healthcare
£m
|
|
Group
£m
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,542
|
|
6,172
|
Re-measurement
through income statement
|
713
|
|
700
|
Cash
payments: operating cash flows
|
(332)
|
|
(605)
|
Cash
payments: investing activities
|
(44)
|
|
(97)
|
|
|
|
|
Contingent
consideration at end of the period
|
5,879
|
|
6,170
|
|
|
|
|
Contingent liabilities
|
There
were contingent liabilities at 30 June 2019 in respect of
guarantees and indemnities entered into as part of the ordinary
course of the Group's business. No material losses are
expected to arise from such contingent liabilities. Provision
is made for the outcome of legal and tax disputes where it is both
probable that the Group will suffer an outflow of funds and it is
possible to make a reliable estimate of that outflow.
Descriptions of the significant legal disputes to which the Group
is a party are set out on page 52.
|
Business acquisition
|
On 22
January 2019, GSK acquired 100% of Tesaro, an oncology focused
biopharmaceutical company, for cash consideration of $5.0 billion
(£3.9 billion) in order to strengthen the Group's
pharmaceutical pipeline.
The
fair value of intangible assets acquired was approximately
£3.1 billion, including
Zejula
at £2.2 billion.
Net debt of £0.2 billion was assumed. Goodwill of
£1.2 billion, none of which is expected to be tax-deductible,
and a deferred tax liability of £0.3 billion were also
recognised. Other assets and liabilities acquired amounted to
a net asset of £0.1 billion. These valuations are
provisional and may be subject to change. Since 22 January 2019,
sales of £0.1 billion arising from the Tesaro business have
been included in Group turnover, and losses of approximately
£0.2 billion have been included in Group profit.
|
Financial instruments fair value disclosures
|
Certain
of the Group's financial instruments are measured at fair
value. The following tables categorise these financial
assets and liabilities by the valuation methodology applied in
determining their fair value. Where possible, quoted prices
in active markets are used (Level 1). Where such prices are
not available, the asset or liability is classified as Level 2,
provided all significant inputs to the valuation model used are
based on observable market data. If one or more of the
significant inputs to the valuation model is not based on
observable market data, the instrument is classified as Level
3.
|
At 30 June 2019
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
|
|
|
|
|
|
Financial
assets at fair value through other
comprehensive
income (FVTOCI):
|
762
|
|
-
|
|
556
|
|
1,318
|
Other investments designated at FVTOCI
|
-
|
|
1,568
|
|
-
|
|
1,568
|
Trade and other receivables
|
|
|
|
|
|
|
|
Financial
assets mandatorily at fair value through
profit
or loss (FVTPL):
|
|
|
|
|
|
|
|
Other investments
|
-
|
|
-
|
|
62
|
|
62
|
Other non-current assets
|
-
|
|
742
|
|
40
|
|
782
|
Trade and other receivables
|
-
|
|
63
|
|
4
|
|
67
|
Derivatives designated and effective as hedging
instruments
|
-
|
|
84
|
|
-
|
|
84
|
Held for trading derivatives that are not in a
designated and effective hedging
relationship
|
-
|
|
208
|
|
5
|
|
213
|
Cash and cash equivalents
|
2,476
|
|
-
|
|
-
|
|
2,476
|
|
|
|
|
|
|
|
|
|
3,238
|
|
2,665
|
|
667
|
|
6,570
|
|
|
|
|
|
|
|
|
At 31 December 2018
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
|
|
|
|
|
|
Financial assets at fair value through other
comprehensive income (FVTOCI):
|
|
|
|
|
|
|
|
Other investments designated at FVTOCI
|
656
|
|
-
|
|
594
|
|
1,250
|
Trade and other receivables
|
-
|
|
1,687
|
|
-
|
|
1,687
|
Financial assets mandatorily measured at fair value
through profit or loss (FVTPL):
|
|
|
|
|
|
|
|
Other investments
|
-
|
|
-
|
|
72
|
|
72
|
Other non-current assets
|
-
|
|
675
|
|
41
|
|
716
|
Trade and other receivables
|
-
|
|
79
|
|
41
|
|
120
|
Derivatives designated and effective as
hedging instruments
|
-
|
|
69
|
|
-
|
|
69
|
Held for trading derivatives that are not in a
designated and effective hedging
relationship
|
-
|
|
182
|
|
6
|
|
188
|
Cash and cash equivalents
|
2,021
|
|
-
|
|
-
|
|
2,021
|
|
|
|
|
|
|
|
|
|
2,677
|
|
2,692
|
|
754
|
|
6,123
|
|
|
|
|
|
|
|
|
At 31 December 2018
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
|
|
|
|
|
|
|
|
Financial
liabilities mandatorily at fair value through
profit
or loss (FVTPL):
|
|
|
|
|
|
|
|
Contingent consideration liabilities
|
-
|
|
-
|
|
(6,286)
|
|
(6,286)
|
Derivatives designated and effective as hedging
instruments
|
-
|
|
(105)
|
|
-
|
|
(105)
|
Held for trading derivatives that are not in a
designated and effective hedging
relationship
|
-
|
|
(23)
|
|
-
|
|
(23)
|
|
|
|
|
|
|
|
|
|
-
|
|
(128)
|
|
(6,286)
|
|
(6,414)
|
|
|
|
|
|
|
|
|
Movements in the six months to 30 June 2019 and the six months to
30 June 2018 for financial instruments measured using Level 3
valuation methods are presented below:
|
|
Financial
assets
£m
|
|
Financial
liabilities
£m
|
|
|
|
|
At 1 January 2019
|
754
|
|
(6,286)
|
Gains/(losses) recognised in the income statement
|
(13)
|
|
(185)
|
Gains recognised in other comprehensive income
|
(40)
|
|
-
|
Additions
|
53
|
|
-
|
Disposals
|
(15)
|
|
-
|
Payments in the period
|
(42)
|
|
443
|
Transfers from Level 3
|
(37)
|
|
-
|
Exchange
|
7
|
|
-
|
|
|
|
|
At 30 June 2019
|
667
|
|
(6,028)
|
|
|
|
|
At 1 January 2018
|
516
|
|
(6,173)
|
Losses recognised in the income statement
|
8
|
|
(700)
|
Gains recognised in other comprehensive income
|
3
|
|
-
|
Additions
|
99
|
|
-
|
Disposals
|
(8)
|
|
-
|
Payments in the period
|
(43)
|
|
702
|
Transfers from Level 3
|
(28)
|
|
-
|
Exchange
|
10
|
|
-
|
|
|
|
|
At 30 June 2018
|
557
|
|
(6,171)
|
|
|
|
|
Net losses of £198 million (H1 2018: net losses of £692
million) were reported in other operating income and net losses of
£43 million (H1 2018: net losses of £1 million) were
reported in other comprehensive income attributable to Level 3
financial instruments held at the end of the period.
At 30 June 2019, financial liabilities measured using Level 3
valuation methods included £5,664 million of contingent
consideration for the acquisition in 2012 of the former
Shionogi-ViiV Healthcare joint venture.
Financial
liabilities
also included
£300 million of contingent consideration for the acquisition
of the Novartis Vaccines business in 2015. Contingent
consideration is expected to be paid over a number of years and
will vary in line with the future performance of specified
products, the achievement of certain milestone targets and
movements in certain foreign currencies. The financial
liabilities are measured at the present value of expected future
cash flows, the most significant inputs to the valuation models
being future sales forecasts, the discount rate, the Sterling/US
Dollar exchange rate and the probability of success in achieving
milestone targets.
|
The table below shows, on an indicative basis, the income statement
and balance sheet sensitivity to reasonably possible changes in key
inputs to the valuation of the largest contingent consideration
liabilities.
|
|
Shionogi-
ViiV Healthcare
|
|
Novartis
Vaccines
|
Increase/(decrease) in financial liability
|
£m
|
|
£m
|
|
|
|
|
10% increase in sales forecasts
|
567
|
|
64
|
10% decrease in sales forecasts
|
(567)
|
|
(64)
|
1% (100 basis points) increase in discount rate
|
(223)
|
|
(21)
|
1% (100 basis points) decrease in discount rate
|
240
|
|
25
|
5% increase in probability of milestone success
|
|
|
7
|
5% decrease in probability of milestone success
|
|
|
(7)
|
5 cent appreciation of US Dollar
|
172
|
|
(7)
|
5 cent depreciation of US Dollar
|
(159)
|
|
6
|
10 cent appreciation of US Dollar
|
360
|
|
(14)
|
10 cent depreciation of US Dollar
|
(306)
|
|
12
|
5 cent appreciation of Euro
|
57
|
|
14
|
5 cent depreciation of Euro
|
(52)
|
|
(13)
|
10 cent appreciation of Euro
|
118
|
|
30
|
10 cent depreciation of Euro
|
(97)
|
|
(25)
|
|
|
|
|
The Group transfers financial instruments between different levels
in the fair value hierarchy when, as a result of an event or change
in circumstances, the valuation methodology applied in determining
their fair values alters in such a way that it meets the definition
of a different level. There were no transfers between the
Level 1 and Level 2 fair value measurement categories in the
period. Transfers from Level 3 relate to equity investments
in companies which were listed on stock exchanges during the
period.
|
●
|
Cash and cash
equivalents carried at fair value - based on net asset value of the
funds
|
|
|
●
|
Other investments -
equity investments traded in an active market determined by
reference to the relevant stock exchange quoted bid price; other
equity investments determined by reference to the current market
value of similar instruments or by reference to the discounted cash
flows of the underlying net assets
|
|
|
●
|
Contingent
consideration for business acquisitions and divestments - based on
present values of expected future cash
flows
|
|
|
●
|
Interest rate
swaps, foreign exchange forward contracts, swaps and options -
based on the present value of contractual cash flows or option
valuation models using market-sourced data (exchange rates or
interest rates) at the balance sheet
date
|
|
|
●
|
Company-owned life
insurance policies - based on cash surrender
value
|
|
|
●
|
Trade receivables
carried at fair value - based on invoiced
amount.
|
There are no material differences between the carrying value of the
Group's other financial assets and liabilities and their estimated
fair values, with the exception of bonds, for which the carrying
values and fair values are set out in the table below:
|
|
30 June 2019
|
|
31 December 2018
|
||||
|
|
|
|
|
|
|
|
|
Carrying
value
£m
|
|
Fair
value
£m
|
|
Carrying
value
£m
|
|
Fair
value
£m
|
|
|
|
|
|
|
|
|
Bonds in a designated hedging relationship
|
(8,849)
|
|
(9,318)
|
|
(8,213)
|
|
(8,279)
|
Other bonds
|
(15,383)
|
|
(18,501)
|
|
(13,307)
|
|
(15,475)
|
|
|
|
|
|
|
|
|
|
(24,232)
|
|
(27,819)
|
|
(21,520)
|
|
(23,754)
|
|
|
|
|
|
|
|
|
The following methods and assumptions are used to estimate the fair
values of financial assets and liabilities which are not measured
at fair value on the balance sheet:
|
●
|
Liquid
investments - approximates to the carrying amount
|
|
|
●
|
Cash
and cash equivalents carried at amortised cost - approximates to
the carrying amount
|
|
|
●
|
Short-term
loans, overdrafts and commercial paper - approximates to the
carrying amount because of the short maturity of these
instruments
|
|
|
●
|
Long-term
loans - based on quoted market prices in the case of European and
US Medium term notes and other fixed rate borrowings (a Level 1
fair value measurement); approximates to the carrying amount in the
case of
floating rate bank
loans and other loans
|
|
|
●
|
Receivables
and payables, including put options, carried at amortised cost -
approximates to the carrying amount
|
|
|
●
|
Lease
obligations - approximates to the carrying amount.
|
Put option
Other
payables in Current liabilities includes the present value of the
expected redemption amount of the Pfizer put option over its
non-controlling interest in ViiV Healthcare of £1,168
million. Forecast exchange rates are consistent with market
rates at 30 June 2019. This includes a number of assumptions
around future sales and profit forecasts, multiples and forecast
exchange rates. The forecast exchange rates used are
consistent with market rates at 30 June 2019.
The table below shows on an indicative basis the income statement
and balance sheet sensitivity to reasonably possible changes in the
key inputs to the measurement of these liabilities.
|
Increase/(decrease) in financial liability
|
|
|
ViiV
Healthcare
put
option
£m
|
|
|
|
|
10%
increase in sales forecasts
|
|
|
148
|
10%
decrease in sales forecasts
|
|
|
(148)
|
1% (100
basis points) increase in discount rate
|
|
|
(54)
|
1% (100
basis points) decrease in discount rate
|
|
|
58
|
|
|
|
|
Reconciliation of cash flow to movements in net debt
|
|
H1 2019
£m
|
|
H1
2018
£m
|
|
|
|
|
Net
debt, as previously reported
|
(21,621)
|
|
(13,178)
|
Implementation
of IFRS 16
|
(1,303)
|
|
-
|
|
|
|
|
Net
debt at beginning of the period, as adjusted
|
(22,924)
|
|
(13,178)
|
|
|
|
|
Increase
in cash and bank overdrafts
|
305
|
|
119
|
Net
increase in short-term loans
|
(3,009)
|
|
(448)
|
Increase
in long-term loans
|
(2,603)
|
|
(10,048)
|
Net
repayment of obligations under lease liabilities
|
104
|
|
12
|
Debt of
subsidiary undertakings acquired
|
(482)
|
|
-
|
Exchange
adjustments
|
(86)
|
|
(398)
|
Other
non-cash movements
|
(26)
|
|
6
|
|
|
|
|
Increase
in net debt
|
(5,797)
|
|
(10,757)
|
|
|
|
|
Net
debt at end of the period
|
(28,721)
|
|
(23,935)
|
|
|
|
|
Net debt analysis
|
|
30 June 2019
£m
|
|
30 June
2018
£m
|
|
31
December
2018
£m
|
|
|
|
|
|
|
Liquid
investments
|
84
|
|
81
|
|
84
|
Cash
and cash equivalents
|
4,123
|
|
4,046
|
|
3,874
|
Cash
and cash equivalents reported in assets
held for sale
|
532
|
|
-
|
|
485
|
Short-term
borrowings
|
(10,147)
|
|
(3,470)
|
|
(5,793)
|
Long-term
borrowings
|
(23,313)
|
|
(24,592)
|
|
(20,271)
|
|
|
|
|
|
|
Net
debt at end of the period
|
(28,721)
|
|
(23,935)
|
|
(21,621)
|
|
|
|
|
|
|
Free cash flow reconciliation
|
|
Q2 2019
£m
|
|
H1
2019
£m
|
|
H1
2018
£m
|
|
|
|
|
|
|
Net
cash inflow from operating activities
|
1,389
|
|
2,052
|
|
2,225
|
Purchase
of property, plant and equipment
|
(279)
|
|
(501)
|
|
(541)
|
Proceeds
from sale of property, plant and equipment
|
63
|
|
70
|
|
22
|
Purchase
of intangible assets
|
(356)
|
|
(438)
|
|
(189)
|
Proceeds
from disposals of intangible assets
|
4
|
|
12
|
|
23
|
Net
finance costs
|
(319)
|
|
(413)
|
|
(332)
|
Dividends
from joint ventures and associates
|
-
|
|
-
|
|
39
|
Contingent
consideration paid (reported in investing
activities)
|
(28)
|
|
(51)
|
|
(97)
|
Distributions
to non-controlling interests
|
(104)
|
|
(196)
|
|
(350)
|
Contributions
from non-controlling interests
|
-
|
|
-
|
|
21
|
|
|
|
|
|
|
Free
cash flow
|
370
|
|
535
|
|
821
|
|
|
|
|
|
|
Principal risks and uncertainties
The
principal risks and uncertainties affecting the Group are those
described under the headings below. These are detailed in the
'Principal risks and uncertainties' section of the Annual Report
2018.
|
Patient
safety
|
Failure
to appropriately collect, review, follow up, or report human safety
information, including adverse events from all potential sources,
and to act on any relevant findings in a timely
manner.
|
|
|
Product
quality
|
Failure
to comply with current Good Manufacturing Practices or inadequate
controls and governance of quality in the supply chain covering
supplier standards, manufacturing and distribution of
products.
|
|
|
Financial
controls and reporting
|
Failure
to comply with current tax laws or incurring significant losses due
to treasury activities; failure to report accurate financial
information in compliance with accounting standards and applicable
legislation.
|
|
|
Anti-Bribery
and Corruption (ABAC)
|
Failure
of GSK employees, consultants and third parties to comply with our
ABAC principles and standards, as well as with all applicable
legislation.
|
|
|
Commercial
practices
|
Failure
to engage in commercial activities that are consistent with the
letter and spirit of the law, industry or the Group's requirements
relating to marketing and communications about our medicines and
associated therapeutic areas; appropriate interactions with
healthcare professionals and patients, and legitimate and
transparent transfer of value.
|
|
|
Privacy
|
The
failure to collect, secure, use and destroy personal information in
accordance with applicable data privacy laws.
|
|
|
Research
practices
|
Failure
to adequately conduct ethical and sound pre-clinical and clinical
research. In addition, failure to engage in scientific
activities that are consistent with the letter and spirit of the
law, industry, or the Group's requirements and failure to secure
adequate patent protection for the Group's products.
|
|
|
Third
party oversight risk
|
Failure
to maintain adequate governance and oversight over third party
relationships and failure of third parties to meet their
contractual, regulatory, confidentiality or other
obligations.
|
|
|
Environment,
health & safety and sustainability (EHSS)
|
Failure
to manage EHSS risks in line with the Group's objectives, policies
and relevant laws and regulations.
|
|
|
Information
protection
|
The
risk to the Group's business activities if information becomes
disclosed to those not authorised to see it, or if information or
systems fail to be available or are corrupted, typically because of
cybersecurity threats, although accident or malicious
insider-action may be contributory causes.
|
|
|
Supply
continuity
|
Failure
to deliver a continuous supply of compliant finished product;
inability to respond effectively to a crisis incident in a timely
manner to recover and sustain critical operations, including key
supply chains.
|
Reporting definitions
|
Total and Adjusted results
Total
reported results represent the Group's overall
performance.
GSK
also uses a number of adjusted, non-IFRS, measures to report the
performance of its business. Adjusted results and other
non-IFRS measures may be considered in addition to, but not as a
substitute for or superior to, information presented in accordance
with IFRS. Adjusted results are defined on page 9 and other
non-IFRS measures are defined below.
Free cash flow
Free
cash flow is defined as the net cash inflow from operating
activities less capital expenditure on property, plant and
equipment and intangible assets, contingent consideration payments,
net interest, and dividends paid to non-controlling interests plus
proceeds from the sale of property, plant and equipment and
intangible assets, and dividends received from joint ventures and
associates. It is used by management for planning and
reporting purposes and in discussions with and presentations to
investment analysts and rating agencies. Free cash flow
growth is calculated on a reported basis. A reconciliation of
net cash inflow from operations to free cash flow is set out on
page 59.
Free cash flow conversion
Free
cash flow conversion is free cash flow as a percentage of
earnings.
Working capital
Working
capital represents inventory and trade receivables less trade
payables.
CER and AER growth
In
order to illustrate underlying performance, it is the Group's
practice to discuss its results in terms of constant exchange rate
(CER) growth. This represents growth calculated as if the
exchange rates used to determine the results of overseas companies
in Sterling had remained unchanged from those used in the
comparative period. CER% represents growth at constant
exchange rates. £% or AER% represents growth at actual
exchange rates.
|
Brand names and partner acknowledgements
Brand
names appearing in italics throughout this document are trademarks
of GSK or associated companies or used under licence by the Group.
Gardasil is a trademark of Merck Sharp & Dohme
Corp.
|
Outlook, assumptions and cautionary statements
|
2016-2020 outlook
In May
2015, GSK announced that it expected Group sales to grow at CER at
a low-to-mid single digits percentage CAGR and Adjusted EPS to grow
at CER at a mid-to-high single digit percentage CAGR for the period
2016-2020. On 3 December 2018, GSK announced that it
continued to expect to deliver on its previously published Group
outlooks to 2020, but, following the acquisition of Tesaro,
expected Adjusted EPS growth at CER for the period 2016-2020 to be
at the bottom end of the mid-to-high single digit percentage CAGR
range. These outlooks are based on 2015 exchange
rates.
Assumptions related to 2019 guidance and 2016-2020
outlook
In
outlining the expectations for 2019 and the five-year period
2016-2020, the Group has made certain assumptions about the
healthcare sector, the different markets in which the Group
operates and the delivery of revenues and financial benefits from
its current portfolio, pipeline and restructuring
programmes.
For the
Group specifically, over the period to 2020, GSK expects further
declines in sales of
Seretide/Advair
. The introduction
of a generic alternative to
Advair
in the US has been factored
into the Group's assessment of its future performance. The
Group assumes no premature loss of exclusivity for other key
products over the period.
The
assumptions for the Group's revenue, earnings and dividend
expectations assume no material interruptions to supply of the
Group's products, no material mergers, acquisitions or disposals,
except for the acquisition of Tesaro, the proposed divestment of
Horlicks and other Consumer Healthcare products to Unilever and the
proposed formation of a new Consumer Healthcare Joint Venture with
Pfizer, all announced in December 2018, no material litigation or
investigation costs for the Company (save for those that are
already recognised or for which provisions have been made), no
share repurchases by the Company, and no change in the Group's
shareholdings in ViiV Healthcare. The assumptions also assume
no material changes in the macro-economic and healthcare
environment. The 2019 guidance and 2016-2020 outlook have
factored in all divestments and product exits since 2015, including
the divestment and exit of more than 130 non-core tail brands
(£0.5 billion in annual sales) as announced on 26 July
2017 and the product divestments planned in connection with the
proposed Consumer Healthcare transaction with Pfizer.
The
Group's expectations assume successful delivery of the Group's
integration and restructuring plans over the period 2016-2020,
including the extension and enhancement to the combined programme
announced on 26 July 2017 as well as the new major restructuring
plan announced on 25 July 2018. They also assume that the
proposed Consumer Healthcare nutrition disposal closes by the end
of 2019 and the proposed Consumer Healthcare Joint Venture with
Pfizer closes during H2 2019 and that the integration and
investment programmes following the Tesaro acquisition and the
proposed Consumer Healthcare Joint Venture with Pfizer over this
period are delivered successfully. Material costs for
investment in new product launches and R&D have been factored
into the expectations given. Given the potential development
options in the Group's pipeline, the outlook may be affected by
additional data-driven R&D investment decisions. The
expectations are given on a constant currency basis (2016-2020
outlook at 2015 CER).
Subject
to material changes in the product mix, the Group's medium-term
effective tax rate is expected to be around 19% of Adjusted
profits. This incorporates management's best estimates of the
impact of US tax reform on the Group based on the information
currently available.
Assumptions and cautionary statement regarding forward-looking
statements
The
Group's management believes that the assumptions outlined above are
reasonable, and that the aspirational targets described in this
report are achievable based on those assumptions. However,
given the longer term nature of these expectations and targets,
they are subject to greater uncertainty, including potential
material impacts if the above assumptions are not realised,
and other material impacts related to foreign exchange
fluctuations, macro-economic activity, changes in regulation,
government actions or intellectual property protection, actions by
our competitors, and other risks inherent to the industries in
which we operate.
This
document contains statements that are, or may be deemed to be,
"forward-looking statements". Forward-looking statements give
the Group's current expectations or forecasts of future
events. An investor can identify these statements by the fact
that they do not relate strictly to historical or current
facts. They use words such as 'anticipate', 'estimate',
'expect', 'intend', 'will', 'project', 'plan', 'believe', 'target'
and other words and terms of similar meaning in connection with any
discussion of future operating or financial performance. In
particular, these include statements relating to future actions,
prospective products or product approvals, future performance or
results of current and anticipated products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings,
dividend payments and financial results. Other than in
accordance with its legal or regulatory obligations (including
under the Market Abuse Regulation, the UK Listing Rules and the
Disclosure and Transparency Rules of the Financial Conduct
Authority), the Group undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise. The reader should, however,
consult any additional disclosures that the Group may make in any
documents which it publishes and/or files with the SEC. All
readers, wherever located, should take note of these
disclosures. Accordingly, no assurance can be given that any
particular expectation will be met and investors are cautioned not
to place undue reliance on the forward-looking
statements.
Forward-looking
statements are subject to assumptions, inherent risks and
uncertainties, many of which relate to factors that are beyond the
Group's control or precise estimate. The Group cautions
investors that a number of important factors, including those in
this document, could cause actual results to differ materially from
those expressed or implied in any forward-looking statement.
Such factors include, but are not limited to, those discussed under
Item 3.D 'Risk Factors' in the Group's Annual Report on Form 20-F
for 2018. Any forward looking statements made by or on behalf
of the Group speak only as of the date they are made and are based
upon the knowledge and information available to the Directors on
the date of this report.
|
|
|
|
|
|
|
|
|
By order of the Board
|
|
Emma Walmsley
Chief Executive Officer
24 July 2019
|
Iain Mackay
Chief Financial Officer
|
Independent review report to GlaxoSmithKline plc
|
We have
been engaged by GlaxoSmithKline plc ("the company") to review the
condensed financial information (the "interim financial
statements") in the Results Announcement of the company for the
three and six months ended 30 June 2019.
|
What we have reviewed
|
|
The
interim financial statements comprises:
|
|
●
|
the
income statement and statement of comprehensive income for the
three and six month periods ended 30 June 2019 on pages 40 to
42;
|
●
|
the
balance sheet as at 30 June 2019 on page 47;
|
●
|
the
statement of changes in equity for the six month period then ended
on page 48;
|
●
|
the
cash flow statement for the six month period then ended on page 49
and;
|
●
|
the
accounting policies and basis of preparation and the explanatory
notes to the interim financial statements on pages 43 to 46
and 50 to 58.
|
|
|
We have
read the other information contained in the Results Announcement,
including the non-IFRS measures contained on pages 43 to 46 and 50
to 59,and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
This
report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland)
2410 "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we
might state to the company those matters we are required to state
to it in an independent review report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company,
for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The
Results Announcement of the company, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Results Announcement of the company in accordance
with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As
disclosed in Note 1, the annual financial statements of the company
are prepared in accordance with IFRSs as adopted by the European
Union. The interim financial statements included in this
Results Announcement have been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting"
as adopted by the European Union.
Our responsibility
Our
responsibility is to express to the company a conclusion on the
interim financial statements in the Results Announcement based on
our review.
Scope of review
We
conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based
on our review, nothing has come to our attention that causes us to
believe that the interim financial statements in the Results
Announcement for the three and six months ended 30 June 2019 are
not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory
Auditor
London,
United Kingdom
24 July
2019
|
|
GlaxoSmithKline plc
|
|
(Registrant)
|
|
|
Date: July
24, 2019
|
|
|
|
|
By:/s/ VICTORIA
WHYTE
--------------------------
|
|
|
|
Victoria Whyte
|
|
Authorised
Signatory for and on
|
|
behalf
of GlaxoSmithKline plc
|
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