|
GSK delivers further progress in Q2 and sets out new priorities for
the Group
|
|
Q2 sales of £7.3 billion, +12% AER, +3% CER
Total loss per share of 3.7p, +59% AER, +29% CER; Adjusted EPS of
27.2p, +12% AER, -2% CER
|
|
Financial highlights
|
||
|
|
||
|
|
●
|
Pharmaceutical sales, £4.4 billion, +12% AER, +3% CER,
Vaccines sales, £1.1 billion, +16% AER, +5% CER, Consumer
Healthcare sales, £1.9 billion,+10% AER, flat at
CER
|
|
|
●
|
Group operating margin 28.5%; Pharmaceuticals 33.6%; Vaccines
33.7%; Consumer 17.7%
|
|
|
●
|
Total Q2 loss per share of 3.7p reflecting charges resulting from
increases in the valuation of Consumer and HIV businesses and new
portfolio choices
|
|
|
●
|
Updated 2017 guidance: Adjusted EPS growth now expected to be 3% to
5% CER reflecting impact of Priority Review Voucher
|
|
|
●
|
H1 Free Cash Flow £0.4 billion (H1 2016: £0.1
billion)
|
|
|
●
|
19p dividend declared for Q2; continue to expect 80p for FY
2017
|
|
|
||
|
Product and pipeline highlights
|
||
|
|
|
|
|
|
●
|
New product sales of £1.7 billion, +62% AER, +47%
CER
|
|
|
●
|
HIV two drug regimen (dolutegravir and rilpivirine) filed for
approval in US and EU
|
|
|
●
|
Shingrix filed for approval in
Japan
|
|
|
●
|
FDA approval received for subcutaneous Benlysta for treatment of SLE
|
|
|
|
|
|
New business priorities to 2020
|
||
|
|
|
|
|
|
●
|
New priorities to strengthen innovation, improve performance and
build trust
|
|
|
●
|
Pharmaceutical R&D pipeline reviewed with target over time to
allocate 80% of capital to priority assets in two current
(Respiratory and HIV/infectious diseases) and two potential
(Oncology and Immuno-inflammation) therapy areas; more than 30
pre-clinical and clinical programmes to be stopped
|
|
|
●
|
Extended cost reduction programme expected to deliver additional
£1 billion annual cost savings by 2020 driven by new business
priorities, improved supply chain efficiency and reduced
administrative costs
|
|
|
●
|
Enhanced focus on improved cash generation and strengthening credit
profile
|
|
|
●
|
Dividend of 80p expected for 2018 in conjunction with new dividend
policy
|
|
|
●
|
Group outlook for 2020: Expected 5 year percentage CAGR to 2020 on
a CER basis for sales of low-to-mid-single digits and Adjusted EPS
of mid-to-high single digits
|
|
|
||
|
Q2 2017 results
|
|||||||||||
|
|
Q2 2017
|
|
Growth
|
|
H1 2017
|
|
Growth
|
||||
|
|
£m
|
|
£%
|
|
CER%
|
|
£m
|
|
£%
|
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
7,320
|
|
12
|
|
3
|
|
14,704
|
|
15
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating (loss)/profit
|
(20)
|
|
87
|
|
(45)
|
|
1,698
|
|
>100
|
|
>100
|
|
Adjusted
operating profit
|
2,083
|
|
14
|
|
-
|
|
4,062
|
|
21
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
(loss)/earnings per share
|
(3.7)p
|
|
59
|
|
29
|
|
17.7p
|
|
>100
|
|
>100
|
|
Adjusted
earnings per share
|
27.2p
|
|
12
|
|
(2)
|
|
52.1p
|
|
20
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from operations
|
1,008
|
|
(18)
|
|
|
|
2,152
|
|
24
|
|
|
|
Free
cash flow
|
(282)
|
|
>(100)
|
|
|
|
368
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emma Walmsley, Chief Executive Officer, GSK said:
“Q2 was another quarter of progress for GSK with Group sales
up 3% to £7.3 billion and Adjusted EPS of 27.2p. Our priority
for the second half of the year is to maintain this momentum and
prepare for the successful execution of several important near-term
launches in Respiratory, Vaccines and HIV.
“Today we are updating our full year earnings guidance to
reflect the investments we have made to accelerate the review of
our new two drug regimen in HIV. We are also providing an update to
investors on the longer-term outlook for the Group and our
priorities to improve innovation, performance and trust in
GSK.”
|
|
The
Total results are presented under ‘Income Statement’ on
page 39 and Adjusted results reconciliations are presented on pages
19, 25 and 62 to 65. The definitions of £% or AER% growth,
CER% growth, Adjusted results, free cash flow, other non-IFRS
measures are set out on page 36.
All expectations and targets regarding future
performance should be read together with “Assumptions related
to 2017 guidance and 2016-2020 outlook” and
“Assumptions and cautionary statement regarding
forward-looking statements” on page
37.
|
|
New business priorities
At a
meeting in London today, GSK set out a series of new priorities and
updated its financial outlook for the Group.
The Group affirmed its commitment to developing innovative
healthcare products for patients and consumers across
Pharmaceuticals, Vaccines and Consumer Healthcare.
These
businesses have leadership positions in some of the world’s
biggest therapeutic areas and categories, a broad international
reach, and together have strategic and operational synergies.
Earnings and cash flows from this combination of businesses offer
balance to the Group and provide a level of sustainability to its
performance, its ability to invest in future growth and in its
returns to shareholders.
The
recent performance of these three businesses has demonstrated the
benefits of the transaction with Novartis in 2015 as well as the
impact of more effective introductions of new products, notably new
Respiratory and HIV medicines and vaccines to prevent meningitis.
Better performance, together with cost savings has also resulted in
improved margins and cash flows for all three businesses over the
last 18 months.
Whilst this recent delivery is
encouraging, the company highlighted that there are several key
issues it needs to address, over the
next three years, to make sure the Group delivers long-term
competitive performance.
All three businesses need to perform but the priority for GSK is to
improve in Pharmaceuticals. Delivering full value from recent and
imminent product launches, together with cost base improvements, is
required to help mitigate the impact of pricing pressures to its
current portfolio. Strengthening the Pharmaceuticals pipeline is a
key objective for the Group.
Beyond Pharmaceuticals, the Group aims to realise further benefits
from its newly scaled Consumer Healthcare and Vaccines businesses.
The Group is also aiming to increase investment flexibility with a
series of measures to improve cash generation and clearer capital
allocation priorities.
Going forward, GSK intends to focus on three long-term priorities:
Innovation, Performance and Trust.
Innovation is important for all three businesses but the
Group’s top priority is to improve in
Pharmaceuticals.
A key
near-term focus is to maximise value from new products and three
other material new launch opportunities: Shingrix, a potential new vaccine for
shingles; Closed Triple, a new 3-in-1 respiratory medicine; and new
two drug regimens in HIV.
In its
Pharmaceuticals pipeline, GSK has developed a priority list of
assets to invest behind. This priority list will evolve as data
reads out. The Group has also set a target to deploy over time 80%
of its Pharmaceuticals R&D capital to priority assets in two
current therapy areas: Respiratory and HIV/infectious diseases; and
two potential areas: Oncology and Immuno-inflammation. Significant
data is expected from these priority assets over the next three
years which will be used to inform R&D investment decisions and
how best to generate value from these assets. GSK also expects to
pursue disciplined business development to augment its early-stage
pipeline in these priority areas.
As part
of its efforts to prioritise and allocate resources in R&D, GSK
is terminating development programmes that are unlikely to generate
sufficient returns. GSK has so far made decisions to terminate,
partner or divest more than 30 pre-clinical and clinical
programmes. The Group has also undertaken a strategic review of its
Rare Diseases unit and is now considering options for future
ownership of these assets.
In
addition, the Group is taking steps to improve the partnership
between R&D and its commercial organisation as well as its
governance around pipeline decision-making with the establishment
of a new Development Advisory Board and a new Board Scientific
Committee.
GSK’s second priority is a new company-wide focus on delivery
of sustainable, ethical and more competitive
performance.
The
Group is making a number of choices to prioritise the strongest
assets and markets in its portfolio and move capital and resources
away from those that offer more limited opportunities. It is
prioritising investment to support commercial execution in the US
market and is implementing a new operating model for Emerging
Markets to increase competitiveness and support long-term
profitable growth in these markets. The Group has also decided to
terminate its collaboration on sirukumab with Janssen Biologics and
progressively withdraw its support for Tanzeum.
The
Group is putting in place plans to improve its cash generation and
is expanding its current cost saving programme. It is targeting
delivery of an additional £1 billion in annual cost savings by
2020 at constant exchange rates. These new cost savings will be
used to fund new product launches, R&D investments and to help
mitigate pricing pressure on margins.
A key
driver of the new savings will be through realising efficiency
improvements in the Group’s supply chain. This will include
changes to GSK’s manufacturing network, divestment and exit
of more than 130 non-core tail brands (£0.5 billion in annual
sales), reductions in overheads, improved procurement savings and
more strategic supplier relationships.
The
Group is also seeking to strengthen its capabilities through
investments in people and appointment of external talent. One of
the key areas for this will be in digital, data and analytics, with
the Group aiming to leverage technology to improve clinical
outcomes, develop real world data and make a step-change in its
customer and consumer engagement.
GSK’s third priority is to build Trust. The Group recognises
that levels of trust in the industry are not sufficient and, if not
addressed, will impact long-term value creation.
GSK
will continue to make very strong commitments to delivering on the
fundamentals of Trust: quality and safety, reliability of supply
and service levels and effective compliance. It is also important
that GSK’s partners and customers trust the company’s
science and its intentions. GSK continues to develop its Healthcare
Practitioner engagement model to make sure it is competitive and
trusted.
The
Group is operating in an environment with sustained pressure to
reduce prices and recognises the issues that are being faced by
payers. GSK has taken a balanced approach to pricing of its
recently launched products and this will continue with the company
looking to support payer needs whilst generating sufficient
returns. GSK will also continue to allocate resources to supporting
major global health needs such as malaria and HIV and will be
increasing its efforts to adopt modern, progressive employer
practices.
In addition to these new priorities, GSK also set out its
intentions for future uses of capital.
Firstly,
free cash flow will be used to invest in the business and support
in particular: the Pharmaceuticals pipeline; realisation of the
Consumer Healthcare put option, if exercised; and expansion of
capacity in the Vaccines business. Secondly, free cash flow will be
used to deliver returns to our shareholders through the payment of
dividends. Thirdly, cash will be used for disciplined business
development.
As well
as establishing these clearer priorities for the allocation of
capital in the future, the Group intends to manage its investments
so that it continues to strengthen its credit profile and protect
its target short-term A1/P1 credit ratings.
GSK reiterated its outlook for sales and earnings performance to
2020 (first set out in 2015).
GSK
expects sales to grow at CER at a low-to-mid single digits
percentage CAGR and Adjusted EPS to grow at a mid-to-high single
digits percentage CAGR for the period 2016-2020. These outlooks are
based on 2015 exchange rates and anticipate that at least one
version of generic Advair
will be launched in the US before 2020. The outlook includes the
divestments announced today and those executed since 2015
(£0.9 billion in annual sales).
Given
the potential development options in GSK’s pipeline, the
outlook may be affected by additional data-driven R&D
investment decisions.
The Group also announced its policy for future distributions from
2018 onwards and its expectations for the 2018
dividend.
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 2018 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.
|
|
Contents
|
Page
|
|
|
|
|
Sales
performance
|
6
|
|
Financial
performance – Q2 2017
|
17
|
|
Financial
performance – H1 2017
|
23
|
|
2017
guidance
|
29
|
|
Research
and development
|
33
|
|
Definitions
|
36
|
|
Outlook
assumptions and cautionary statements
|
37
|
|
Contacts
|
38
|
|
|
|
|
Income
statements
|
39
|
|
Statement
of comprehensive income – three months ended 30 June
2017
|
40
|
|
Statement
of comprehensive income – six months ended 30 June
2017
|
41
|
|
Pharmaceuticals
turnover – three months ended 30 June 2017
|
42
|
|
Pharmaceuticals
turnover – six months ended 30 June 2017
|
43
|
|
Vaccines
turnover – three months ended 30 June 2017
|
44
|
|
Vaccines
turnover – six months ended 30 June 2017
|
44
|
|
Balance
sheet
|
45
|
|
Statement
of changes in equity
|
46
|
|
Cash
flow statement – six months ended 30 June 2017
|
47
|
|
Segment
information
|
48
|
|
Legal
matters
|
50
|
|
Taxation
|
50
|
|
Additional
information
|
51
|
|
Reconciliation
of cash flow to movements in net debt
|
59
|
|
Net
debt analysis
|
59
|
|
Free
cash flow reconciliation
|
59
|
|
Non-controlling
interests in ViiV Healthcare
|
60
|
|
Adjusted
results reconciliations
|
62
|
|
|
|
|
Principal
risks and uncertainties
|
66
|
|
Directors’
responsibility statement
|
67
|
|
Independent
review report
|
68
|
|
Group turnover by business and geographic region – Q2
2017
|
|
Group turnover by business
|
Q2 2017
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,357
|
|
12
|
|
3
|
|
Vaccines
|
1,111
|
|
16
|
|
5
|
|
Consumer
Healthcare
|
1,852
|
|
10
|
|
-
|
|
|
|
|
|
|
|
|
Group
turnover
|
7,320
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
Group
turnover increased 12% AER, 3% CER to £7,320 million driven by
continued momentum and growth in Pharmaceuticals and
Vaccines.
Pharmaceuticals
sales were up 12% AER, 3% CER, reflecting the continued strong
growth of new products, driven particularly by Triumeq, Tivicay and Relvar/Breo Ellipta, partly offset by
the impact of divestments. Nucala also contributed significantly
to total Respiratory growth of 14% AER, 4% CER.
Vaccines
sales were up 16% AER, 5% CER, reflecting a strong performance from
Meningitis vaccines and higher demand for Established Vaccines as
well as favourable year-on-year US CDC stockpile movements, partly
offset by the reversal of the beneficial phasing of shipments in
Emerging Markets in the first quarter.
Consumer
Healthcare sales were up 10% AER, but flat at CER, reflecting
strong performances from power brands, particularly in Pain relief
and Oral health, offset by a weaker US allergy performance, and a
broader slow down in key categories, particularly in International
markets. In addition, reported growth was impacted by the Nigerian
beverages business divestment and retailer de-stocking in India
ahead of the Goods & Service Tax
(GST) implementation on 1 July.
Sales
of New Pharmaceutical and Vaccine products in the quarter were
£1,703 million, up 62% AER, 47% CER.
|
|
Group turnover by geographic region
|
Q2 2017
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
US
|
2,720
|
|
15
|
|
5
|
|
Europe
|
1,966
|
|
11
|
|
2
|
|
International
|
2,634
|
|
10
|
|
1
|
|
|
|
|
|
|
|
|
Group
turnover
|
7,320
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
The US
sales growth of 15% AER, 5% CER was driven by continued strong
performances from Triumeq
and Tivicay, growth in the
Respiratory portfolio and, in the US, a competitor supply shortage
and higher demand for Hepatitis vaccines.
Europe
sales grew 11% AER, 2% CER with growth from Triumeq, Tivicay, Meningitis vaccines and
Voltaren. This growth was
partly offset by the decline in Established Pharmaceuticals,
reflecting in part the disposal of the Romanian distribution
business, and Respiratory sales, as the decline in Seretide more than offset the continued
progress in transitioning to the new Respiratory
products.
In
International, sales growth of 10% AER, 1% CER reflected strong
performances from Boostrix
in Emerging Markets, benefiting from the phasing of tenders, as
well as strong growth in Triumeq, Tivicay and the Respiratory portfolio,
which was partly offset by the impact of divestments on Established
Pharmaceuticals. Growth in Emerging Markets of 11% AER, 2% CER was
also impacted by the divestments.
|
|
Group turnover by business and geographic region – H1
2017
|
|
Group turnover by business
|
H1 2017
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,546
|
|
14
|
|
4
|
|
Vaccines
|
2,263
|
|
23
|
|
10
|
|
Consumer
Healthcare
|
3,895
|
|
13
|
|
1
|
|
|
|
|
|
|
|
|
Group
turnover
|
14,704
|
|
15
|
|
4
|
|
|
|
|
|
|
|
|
Group
turnover increased 15% AER, 4% CER to £14,704 million with
growth in all three businesses.
Pharmaceuticals
sales were up 14% AER, 4% CER, reflecting the continued strong
growth of new products, driven particularly by Triumeq, Tivicay and Relvar/Breo Ellipta, partly offset by
the impact of recent divestments. Nucala also contributed significantly
to total Respiratory growth of 16% AER, 4% CER.
Vaccines
sales were up 23% AER, 10% CER, with a strong performance from
Meningitis vaccines and higher demand for Established Vaccines as
well as the benefit of favourable year-on-year US CDC stockpile
movements.
Consumer
Healthcare sales grew 13% AER, 1% CER reflecting strong
performances from power brands, particularly in Pain relief and
Oral health, largely offset by a weaker US allergy performance, and
a broader slow down in key categories, particularly in
International markets. In addition, reported growth was impacted by
the Nigerian beverages business divestment and retailer de-stocking
in India ahead of the Goods &
Service Tax (GST) implementation on 1 July.
Sales
of New Pharmaceutical and Vaccine products in the six months were
£3,119 million, up 67% AER, 49% CER.
|
|
Group turnover by geographic region
|
H1 2017
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
US
|
5,341
|
|
20
|
|
8
|
|
Europe
|
3,961
|
|
10
|
|
1
|
|
International
|
5,402
|
|
14
|
|
3
|
|
|
|
|
|
|
|
|
Group
turnover
|
14,704
|
|
15
|
|
4
|
|
|
|
|
|
|
|
|
The US
sales growth of 20% AER, 8% CER was driven by continued strong
performances from Triumeq
and Tivicay and growth in
the Respiratory portfolio, together with strong performances in the
US from Pediarix and
Boostrix.
Europe
sales grew 10% AER, 1% CER as growth from Triumeq, Tivicay and Meningitis vaccines was
partly offset by the decline in Established Pharmaceuticals,
reflecting in part the disposal of the Romanian distribution
business. Respiratory sales were up 7% AER but down 2% CER as the
decline in Seretide more
than offset the continued progress in transitioning to the new
Respiratory products.
In
International, sales growth of 14% AER, 3% CER reflected strong
performances from Synflorix
and Boostrix in Emerging
Markets, boosted by the phasing of tenders, as well as strong
growth in Triumeq,
Tivicay and the Respiratory
portfolio, which was partly offset by the impact of divestments on
Established Pharmaceuticals. Growth in Emerging Markets of 15% AER,
4% CER was also impacted by the divestments.
|
|
Turnover – Q2 2017
|
|
Pharmaceuticals
|
|
|
Q2 2017
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Respiratory
|
1,801
|
|
14
|
|
4
|
|
HIV
|
1,116
|
|
29
|
|
17
|
|
Immuno-inflammation
|
93
|
|
19
|
|
9
|
|
Established
Pharmaceuticals
|
1,347
|
|
(1)
|
|
(7)
|
|
|
|
|
|
|
|
|
|
4,357
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
US
|
1,974
|
|
18
|
|
7
|
|
Europe
|
993
|
|
6
|
|
(4)
|
|
International
|
1,390
|
|
10
|
|
3
|
|
|
|
|
|
|
|
|
|
4,357
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the quarter was £4,357 million, up 12% AER, 3%
CER. Respiratory sales grew 14% AER, 4% CER to £1,801 million, driven by the
Ellipta portfolio and
Nucala, while HIV sales
were up 29% AER, 17% CER to £1,116 million, driven by a
continued increase in market share for Triumeq and Tivicay. Sales of Established
Pharmaceuticals were down 1% AER, 7% CER, reflecting the impact of
recent divestments, which reduced overall Pharmaceuticals CER
growth by two percentage points and also impacted the contribution
from Emerging Markets.
In the
US, sales growth of 18% AER, 7% CER was driven by the HIV portfolio
and new Respiratory products. Europe sales grew 6% AER but declined
4% CER reflecting continued generic competition to Seretide and the disposal of the
Romanian distribution business in Q4 2016 which impacted Europe
sales by four percentage points. International sales growth was
impacted by the disposal of the thrombosis and anaesthesia
businesses to Aspen in Q1 2017, which reduced growth in Emerging
Markets by two percentage points to 10% AER, 4% CER, including HIV.
Sales in Japan grew 10% AER, 3% CER.
Respiratory
Total
Respiratory portfolio sales were up 14% AER, 4% CER, with the US up
19% AER, 9% CER, Europe up 4% AER but down 5% CER and International
up 11% AER, 4% CER. Growth of
the new Respiratory products more than offset the decline in
Seretide/Advair.
The new Respiratory products recorded combined sales of
£497 million in the quarter with sales of Ellipta products up 90% AER, 73% CER
driven by continued market share growth in all regions and the
ongoing roll-out across Europe and International. Sales of
Nucala were £73
million in the quarter, a Sterling increase of £53 million
over Q2 2016, including sales of £50 million in the
US.
The
aggregate growth of the Ellipta products was primarily driven
by the contribution of the US, where sales more than doubled at
AER, and grew 90% CER. Relvar/Breo
Ellipta sales grew 92% AER, 75% CER with the US more than
doubling at both AER and CER to £183 million. Sales of
Relvar/Breo Ellipta in
Europe grew 52% AER, 39% CER, and in International 45% AER, 30% CER, helped by ongoing
launches. Anoro Ellipta
sales grew 85% AER, 67% CER to £85 million, reflecting market
share gains in the US. The Ellipta products Breo, Anoro and Incruse all continued to grow market
share in the US during the quarter.
Seretide/Advair sales declined 6% AER, 14% CER to £848
million. Sales of Advair in
the US declined 2% AER, 11% CER (8% volume decline and a 3%
negative impact of price) with payer rebate adjustments favourably
impacting growth in the quarter. In Europe, Seretide sales were down 15% AER, 21%
CER to £182 million (10% volume decline and a 11% negative
impact of price), reflecting continued competition from generics
and the transition of the Respiratory portfolio to newer products.
In International, sales of Seretide were down 5% AER and 11% CER, at £190 million,
reflecting increased generic competition and the transition to the
newer Respiratory products.
Ventolin sales were flat at AER, but declined 8% CER to
£179 million, primarily reflecting unfavourable RAR
adjustments in the US. Flixotide/
Flovent sales were up 7% AER, but decreased 1% CER to
£145 million, with growth in International only partly
offsetting the decline in the US.
The
overall impact on growth of payer rebate adjustments related to
prior periods across the US Respiratory portfolio was broadly
neutral.
HIV
HIV
sales increased 29% AER, 17% CER to £1,116 million in the
quarter, with the US up 36% AER, 24% CER, Europe up 10% AER, but
flat at CER and International up 40% AER, 27% CER. The growth in
all three regions was driven by the continued increase in market
share for Triumeq and
Tivicay, partly offset by
the impact of generic competition to Epzicom/Kivexa particularly affecting
the European market. The ongoing increase in patient numbers for
both Triumeq and
Tivicay resulted in sales
of £648 million and £340 million, respectively, in the
quarter.
Epzicom/Kivexa sales declined 60% AER, 63% CER to £63
million, reflecting the continued increase in generic competition
since Q3 2016.
Immuno-inflammation
Benlysta sales, driven by a strong US performance, grew 19%
AER, 9% CER to £93 million against a strong comparative period
in Q2 2016.
Established
Pharmaceuticals
Sales
of Established Pharmaceuticals in the quarter were £1,347
million, down 1% AER, 7% CER, impacted by the disposals of the
Romanian distribution business in Q4 2016 and the thrombosis and
anaesthesia businesses to Aspen during the first quarter. The
impact of the disposals on the growth of the Established
Pharmaceuticals portfolio was approximately four percentage
points.
The
Avodart franchise was down
10% AER, 19% CER to £160 million primarily due to loss of
exclusivity in the US and the impact of favourable RAR adjustments
in 2016.
Dermatology
sales grew 26% AER, 17% CER to £111 million through improved
supply in Emerging Markets, while Augmentin sales grew 5% AER, but
declined 1% CER to £141 million.
|
|
Vaccines
|
|
|
Q2 2017
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Meningitis
|
200
|
|
32
|
|
20
|
|
Influenza
|
21
|
|
24
|
|
6
|
|
Established
Vaccines
|
890
|
|
12
|
|
2
|
|
|
|
|
|
|
|
|
|
1,111
|
|
16
|
|
5
|
|
|
|
|
|
|
|
|
US
|
316
|
|
22
|
|
12
|
|
Europe
|
394
|
|
21
|
|
10
|
|
International
|
401
|
|
6
|
|
(5)
|
|
|
|
|
|
|
|
|
|
1,111
|
|
16
|
|
5
|
|
|
|
|
|
|
|
|
Vaccines
turnover delivered growth of 16% AER, 5% CER to £1,111 million
with continued momentum from Meningitis vaccines, notably
Bexsero, across all
regions. Growth also benefited from the performance of Established
Vaccines, which were driven by higher demand, particularly for
Boostrix and Hepatitis,
partly offset by the reversal of phasing benefits from Q1, and an
increased returns provision for Rotarix, as well as increasing
competitive pressures on Infanrix,
Pediarix in the US and Europe. Favourable year-on-year CDC
purchases and stockpile movements in the US also contributed to
growth.
Meningitis
Meningitis
sales grew 32% AER, 20% CER to £200 million with Bexsero sales up 43% AER, 31% CER. The
Bexsero growth was
primarily driven by private market sales, regional tenders, and new
national immunisation programmes in Europe. Growth also benefited
from strong demand and continued share gains in the US, together
with private market sales in International. Menveo grew 19% AER, 6% CER due to
strong demand mainly in the US, partly offset by supply constraints
in International.
Influenza
Fluarix/FluLaval sales grew 24% AER, 6% CER to £21
million, mainly driven by rebate adjustments in
Europe.
Established
Vaccines
Sales
of the DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) were
up 30% AER, 19% CER to £306 million. Boostrix was up 56% AER, 42% CER,
benefiting from favourable phasing in International and higher
demand in International and Europe. Infanrix, Pediarix sales grew 11% AER,
3% CER mainly driven by improved supply and favourable year-on-year
US CDC stockpile movements. This growth was partly offset by
increased competitive pressure in the US and Europe as well as
unfavourable tender phasing in Europe.
Hepatitis
vaccines grew 19% AER, 10% CER to £155 million due to a
competitor supply shortage and higher demand in the US, partly
offset by the impact of supply constraints in Europe and
International.
Synflorix sales were up 10% AER, down 1% CER to £151
million, reflecting the reversal of favourable phasing in Q1 and
lower pricing in developing countries, partly offset by stronger
demand in International.
Rotarix sales decreased by 12% AER, 20% CER to £95
million, driven by unfavourable phasing and an increased returns
provision in International, partly offset by stronger demand in
Europe and International.
Priorix/Priorix Tetra/Varilrix sales were flat at AER and
down 8% CER to £79 million, mainly due to lower demand in
Europe.
|
|
Consumer Healthcare
|
|
|
|
|
Q2 2017
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellness
|
|
|
925
|
|
9
|
|
-
|
|
|
Oral
health
|
|
|
605
|
|
12
|
|
3
|
|
|
Nutrition
|
|
|
165
|
|
3
|
|
(8)
|
|
|
Skin
health
|
|
|
157
|
|
8
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,852
|
|
10
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
430
|
|
-
|
|
(8)
|
|
|
Europe
|
|
|
579
|
|
16
|
|
7
|
|
|
International
|
|
|
843
|
|
10
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,852
|
|
10
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Healthcare sales were up 10% AER, and were flat CER in the quarter
at £1,852 million against a
slower market backdrop. A strong performance by the power brands in
Pain relief and therapeutic Oral health was offset by a weaker US
allergy performance and softer consumption in key categories,
particularly in International markets but also in the US. In
addition, growth was impacted by the disposal of the Nigeria
beverages business in 2016 and retailer de-stocking in India ahead
of the Goods & Service Tax (GST) implementation on 1 July.
Together, the divestment and GST reduced overall Consumer
Healthcare CER growth by approximately two percentage
points.
Sales
from new GSK innovations (product introductions within the last
three years on a rolling basis) represented approximately 12% of
sales in the quarter. Notable launches within the quarter included
the next generation Sensodyne
Rapid, Pronamel Strong & Bright and the continued global roll out of
Flonase OTC.
Wellness
Wellness
sales grew 9% AER, and were flat CER at £925 million. This
reflected a challenging quarter for Respiratory sales, which were
up 4% AER but down 4% CER due to heightened competitive pressure
for Flonase OTC from
private label and new market entrants. Otrivin grew in double-digits,
benefiting from new variant launches in Turkey and Belgium, backed
by strong marketing execution.
Pain
relief performed well in the quarter, up 16% AER, 5% CER.
Panadol returned to growth
following the annualisation of the removal of Panadol Osteo from the prescription
reimbursement scheme in Australia. Voltaren grew in double-digits, with
strong growth across Europe and in Germany and Southern Europe in
particular, driven principally by the 12-hour variant, strong in-store
activation, broader digital programmes and expert
detailing.
Oral
health
Oral
health sales grew 12% AER, 3% CER to £605 million.
Sensodyne continued to
drive performance, reporting growth of 13% AER, 5% CER, with strong
delivery in Europe and International following the roll out of next
generation Sensodyne Rapid
and the launch of Pronamel Strong
& Bright, partly offset by retailer de-stocking in the
US in a softer consumer environment. Sales of parodontax grew strongly, particularly
in Europe and International, driven by dentist recommendations and
share gains, as well the Q1 launch of the brand in the US. Denture
care grew in low single digits, with double-digit growth in
emerging markets partly offset by slower consumption growth in the
US and Japan.
Nutrition
Nutrition
sales grew 3% AER but declined 8% CER to £165 million,
adversely impacted by the sale of the Nigerian beverages business
in 2016 and de-stocking in India ahead of the implementation of GST
on 1 July as well as continued competitive pressures for
Horlicks in India.
The divestment and GST reduced
Nutrition CER growth by approximately 11 percentage
points.
Skin
health
Skin
health sales grew 8% AER but declined 1% CER to £157 million
with a good overall performance in Europe offset by a challenging
quarter in the US and International. Fenistil recorded double-digit growth,
with strong seasonal sales in Europe and the Middle East. The US
consumer slowdown led to retailer de-stocking which impacted sales
of Lamisil and Lip care.
Physiogel reported a strong
quarter with distribution gains in Germany and new variant launches
more than offsetting continued competitive pressure in
Korea.
|
|
Turnover – H1 2017
|
|
Pharmaceuticals
|
|
|
H1 2017
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Respiratory
|
3,484
|
|
16
|
|
4
|
|
HIV
|
2,101
|
|
32
|
|
18
|
|
Immuno-inflammation
|
185
|
|
29
|
|
15
|
|
Established
Pharmaceuticals
|
2,776
|
|
2
|
|
(6)
|
|
|
|
|
|
|
|
|
|
8,546
|
|
14
|
|
4
|
|
|
|
|
|
|
|
|
US
|
3,705
|
|
22
|
|
9
|
|
Europe
|
2,001
|
|
7
|
|
(3)
|
|
International
|
2,840
|
|
12
|
|
2
|
|
|
|
|
|
|
|
|
|
8,546
|
|
14
|
|
4
|
|
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the 6 months was £8,546 million, up 14% AER, 4%
CER. Respiratory sales grew 16% AER, 4% CER to £3,484 million, driven by the
Ellipta portfolio and
Nucala, while HIV sales
were up 32% AER, 18% CER to £2,101 million, driven by
increases in market share for Triumeq and Tivicay. Sales of Established
Pharmaceuticals were up 2% AER, but declined 6% CER, reflecting the
impact of recent divestments, which reduced overall Pharmaceuticals
CER growth by one percentage point and also impacted the
contribution from Emerging Markets.
In the
US, sales growth of 22% AER, 9% CER was driven by the HIV portfolio
and new Respiratory products. Europe sales grew 7% AER but declined
3% CER reflecting continued generic competition to Seretide and the disposal of the
Romanian distribution business in Q4 2016. International sales
growth was impacted by the benefit to Q1 2016 of the accelerated
sale of inventory under supply agreements to Novartis as well as
the disposal of the thrombosis and anaesthesia businesses to Aspen
in Q1 2017, which reduced growth in Emerging Markets (including
HIV) by two percentage points to 12% AER, 4% CER. Sales in Japan grew
16% AER, 3% CER.
Respiratory
Total
Respiratory portfolio sales were up 16% AER, 4% CER, with the US up
20% AER, 7% CER, Europe up 7% AER but down 2% CER and International
up 17% AER, 5% CER. Growth of
the new Respiratory products more than offset the decline in
Seretide/Advair.
The new Respiratory products recorded combined sales of
£864 million in the 6 months with sales of Ellipta products up 87% AER, 67% CER
driven by continued market share growth in all regions and the
ongoing roll-out across Europe and International. Sales of
Nucala were £132
million, a Sterling increase of £105 million over H1 2016,
including sales of £92 million in the US.
The
aggregate growth of the Ellipta products was primarily driven
by the contribution of the US, where sales were up 96% AER, 75%
CER. Total Relvar/Breo
Ellipta sales grew 89% AER, 69% CER with the US more than
doubling at AER and up 92% CER to £294 million. Sales of
Relvar/Breo Ellipta in
Europe grew 57% AER, 43% CER, and in International 61% AER, 42% CER, helped by ongoing
launches. Anoro Ellipta
sales grew 86% AER, 67% CER to £147 million, reflecting
particularly market share gains in the US. The Ellipta products Breo, Anoro and Incruse all continued to grow market
share in the US during the 6 months.
Seretide/Advair sales declined 3% AER, 13% CER to
£1,600 million. Sales in the US declined 1% AER, 12% CER (8%
volume decline and a 4% negative impact of price), with payer
rebate adjustments favourably impacting growth in the six months.
In Europe, Seretide sales
were down 12% AER, 19% CER to £388 million (10% volume decline
and a 9% negative impact of price), reflecting continued
competition from generics and the transition of the Respiratory
portfolio to newer products. In International, sales of
Seretide grew 2% AER but declined 8% CER to £397
million, also reflecting increased generic competition and the
transition to the newer Respiratory products.
Ventolin sales grew 10% AER, but declined 1% CER to
£393 million, primarily reflecting unfavourable RAR
adjustments in the US. Flixotide/
Flovent sales were up 7% AER, but decreased 3% CER to
£309 million, with growth in International only partly
offsetting the decline in the US.
The
overall impact on growth of payer rebate adjustments related to
prior periods across the US Respiratory portfolio was broadly
neutral.
HIV
HIV
sales increased 32% AER, 18% CER to £2,101 million in the
period, with the US up 39% AER, 24% CER, Europe up 13% AER, 2% CER
and International up 43% AER, 27% CER. The growth in all three
regions was driven by the continued increase in market share for
Triumeq and Tivicay, offset by the impact of
generic competition to Epzicom/Kivexa, particularly affecting
the European market. The ongoing increase in patient numbers for
both Triumeq and
Tivicay resulted in sales
of £1,187 million and £641 million, respectively, in the
6 months.
Epzicom/Kivexa sales declined 55% AER, 59% CER to £141
million, reflecting the continued increase in generic competition
since Q3 2016.
Immuno-inflammation
Benlysta sales grew 29% AER, 15% CER to £184 million,
driven by a strong US performance.
Established
Pharmaceuticals
Sales
of Established Pharmaceuticals in the 6 months were £2,776
million, up 2% AER, but down 6% CER, impacted by the accelerated
sale of inventory under supply agreements to Novartis in Q1 2016 as
well as the disposal of the thrombosis and anaesthesia businesses
to Aspen in Q1 2017 and the disposal of the Romanian distribution
business in Q4 2016. The impact of these disposals on the growth of
the Established Pharmaceuticals portfolio was approximately four
percentage points.
The
Avodart franchise was up 3%
AER, but declined 8% CER to £320 million primarily due to the
loss of exclusivity in the US and the impact of favourable RAR
adjustments in 2016.
Dermatology
sales grew 22% AER, 11% CER to £224 million, through improved
supply in Emerging Markets, while Augmentin sales grew 8% AER, 1% CER to
£296 million.
|
|
Vaccines
|
|
|
H1 2017
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Meningitis
|
391
|
|
49
|
|
33
|
|
Influenza
|
34
|
|
31
|
|
8
|
|
Established
Vaccines
|
1,838
|
|
18
|
|
6
|
|
|
|
|
|
|
|
|
|
2,263
|
|
23
|
|
10
|
|
|
|
|
|
|
|
|
US
|
679
|
|
31
|
|
17
|
|
Europe
|
783
|
|
18
|
|
7
|
|
International
|
801
|
|
22
|
|
8
|
|
|
|
|
|
|
|
|
|
2,263
|
|
23
|
|
10
|
|
|
|
|
|
|
|
|
Vaccines
turnover delivered strong growth of 23% AER, 10% CER to £2,263
million with continued momentum from Meningitis vaccines across all
regions. Growth also benefited from the performance of Established
Vaccines, driven by higher demand, particularly Boostrix, Synflorix and Hepatitis, partly offset by increasing
competitive pressures on Infanrix,
Pediarix. Favourable year-on-year CDC purchases and
stockpile movements in the US also contributed to
growth.
Meningitis
Meningitis
sales grew 49% AER, 33% CER to £391 million. Bexsero sales growth of 67% AER, 50%
CER was primarily driven by private market sales, regional tenders,
and new national immunisation programmes in Europe as well as
growing demand and share gains in the US, together with continued
progress in private market sales in International. Menveo sales were up 25% AER, 11% CER
driven by tenders awarded in International, partly offset by some
supply constraints.
Influenza
Fluarix/FluLaval
sales grew 31% AER, 8% CER to £34 million, mainly driven by
rebate adjustments in Europe.
Established
Vaccines
Sales
of the DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) were
up 27% AER, 14% CER to £651 million. Boostrix was up 42% AER, 27% CER,
benefiting from higher demand and share gains in the US and phasing
in International. Higher demand in International and Europe also
contributed to the growth. Infanrix, Pediarix sales were up 19%
AER, 7% CER, boosted by favourable year-on-year US CDC stockpile
movements, which were partly offset by increasing competitive
pressures in Europe and the US.
Hepatitis
vaccines grew 21% AER, 9% CER to £322 million due to a
competitor supply shortage and higher demand in the US, partly
offset by the impact of supply constraints in Europe and
International.
Synflorix sales were up 25% AER, 12% CER to £284
million due to stronger demand and favourable phasing in
International.
|
|
Consumer Healthcare
|
|
|
|
|
H1 2017
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
Wellness
|
|
|
1,995
|
|
13
|
|
1
|
|
|
Oral
health
|
|
|
1,233
|
|
16
|
|
5
|
|
|
Nutrition
|
|
|
347
|
|
3
|
|
(9)
|
|
|
Skin
health
|
|
|
320
|
|
12
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,895
|
|
13
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
US
|
|
|
957
|
|
10
|
|
(1)
|
|
|
Europe
|
|
|
1,177
|
|
14
|
|
4
|
|
|
International
|
|
|
1,761
|
|
14
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,895
|
|
13
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Healthcare sales were up 13% AER, 1% CER in the 6 months at
£3,895 million, partly impacted
by more challenging market conditions. A strong performance of the
power brands in Pain relief and therapeutic Oral health and good
Cold & flu seasonal sales were offset by a weaker US allergy
performance and slower consumption in key categories, particularly
in International markets but also in the US. In addition, growth
was impacted by the disposal of the Nigeria beverages business in
2016 and retailer de-stocking in India ahead of the Goods &
Service Tax (GST) implementation on 1 July. The divestment and GST
reduced overall Consumer Healthcare CER growth by
approximately one percentage point.
Sales
from new GSK innovations (product introductions within the last
three years on a rolling basis) represented approximately 14% of
sales in the period. Notable launches this year included
parodontax and Flonase Sensimist in the US, the
continued global roll out of Flonase OTC and next generation
Sensodyne
Rapid.
Wellness
Wellness
sales grew 13% AER, 1% CER to £1,995 million. This reflected a
strong performance from Voltaren and Cold & flu seasonal
products partly offset by a weaker US allergy performance.
Respiratory sales were up 10% AER but down 1% CER as heightened
competitive pressure in the US for Flonase OTC from private label and new
market entrants offset strong growth on Theraflu and Otrivin, particularly in
Europe.
Pain
relief sales were up 15% AER, 3% CER, driven by a strong
performance on Voltaren
which saw growth across the regions, benefitting from momentum in
the 12-hour variant, strong
in-store and marketing activation and expansion of expert
detailing. Panadol returned
to growth in Q2 following the annualisation of the removal of
Panadol Osteo from the
prescription reimbursement scheme in Australia.
Oral
health
Oral
health sales grew 16% AER, 5% CER to £1,233 million with
Sensodyne continuing to
drive performance, reporting growth of 19% AER, 8% CER, with strong
delivery in all regions following the roll out of next generation
Sensodyne Rapid and the
launch of Pronamel Strong &
Bright. Sales of parodontax continued to grow strongly,
reflecting double-digit performances in Europe and International,
driven by dentist recommendations and share gains, as well the US
launch in the first quarter. Denture care grew in low single digits
with double-digit growth in emerging markets partly offset by
slower consumption growth in the US and Japan.
Nutrition
Nutrition
sales grew 3% AER but declined 9% CER to £347 million,
adversely impacted by the sale of the Nigeria beverages business in
2016 and de-stocking in India ahead of the implementation of GST on
1 July, as well as continued competitive pressures for Horlicks in India. The divestment of the Nigeria beverages business
and the de-stocking ahead of GST reduced Nutrition CER growth by
approximately nine percentage points.
Skin
health
Skin
health sales grew 12% AER, 1% CER to £320 million with low
single-digit growth in Europe and International partly offset by
de-stocking in the US. Fenistil sales grew in double digits,
with strong performances in Central & Eastern Europe, Germany
and the Middle East following digital activation and new media
campaigns. The slowdown in US consumption led to retailer
de-stocking which impacted Lip care. Physiogel sales were impacted by
competitive pressure in Korea.
|
|
Sales from new Pharmaceuticals and Vaccine products
|
|
|
Q2 2017
|
|
H1 2017
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
|
|
|
|
|
|
|
|
|
|
|
|
Anoro Ellipta
|
85
|
|
85
|
|
67
|
|
147
|
|
86
|
|
67
|
|
Arnuity Ellipta
|
8
|
|
>100
|
|
>100
|
|
16
|
|
>100
|
|
>100
|
|
Incruse Ellipta
|
50
|
|
80
|
|
65
|
|
84
|
|
68
|
|
52
|
|
Nucala
|
73
|
|
>100
|
|
>100
|
|
132
|
|
>100
|
|
>100
|
|
Relvar/Breo Ellipta
|
281
|
|
92
|
|
75
|
|
485
|
|
89
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CVMU
|
|
|
|
|
|
|
|
|
|
|
|
|
Eperzan/Tanzeum
|
23
|
|
(21)
|
|
(28)
|
|
51
|
|
(6)
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
|
|
|
|
|
|
|
|
|
|
|
|
Tivicay
|
340
|
|
51
|
|
37
|
|
641
|
|
55
|
|
39
|
|
Triumeq
|
648
|
|
58
|
|
44
|
|
1,187
|
|
61
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,508
|
|
67
|
|
51
|
|
2,743
|
|
69
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines
|
|
|
|
|
|
|
|
|
|
|
|
|
Bexsero
|
139
|
|
43
|
|
31
|
|
265
|
|
67
|
|
50
|
|
Menveo
|
56
|
|
19
|
|
6
|
|
111
|
|
25
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195
|
|
35
|
|
23
|
|
376
|
|
52
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
1,703
|
|
62
|
|
47
|
|
3,119
|
|
67
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2015, GSK identified a series of New Pharmaceutical and Vaccine
products that were expected to deliver at least £6 billion of
revenues per annum on a CER basis by 2020. Those products, plus
current pipeline asset, Shingrix, are as set out above. The
Group has decided to withdraw Tanzeum progressively, see page
20.
Sales
of the New Pharmaceutical Vaccine products are now expected to
reach £6 billion of revenues per annum on a CER basis in
2018.
Q2 2017
Sales of New Pharmaceutical and Vaccine products were £1,703 million, grew £653 million in Sterling terms (62% AER, 47% CER) and
represented approximately 31%
of Pharmaceuticals and Vaccines turnover in the
quarter.
H1 2017
Sales of New Pharmaceutical and Vaccine products were £3,119 million, grew £1,248 million in Sterling terms (67% AER, 49% CER) and
represented approximately 29%
of Pharmaceuticals and Vaccines turnover in the
half-year.
|
|
Financial performance – Q2 2017
|
|
Total results
|
|
The
Total results for the Group are set out below.
|
|
|
Q2 2017
£m
|
|
Q2
2016
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
7,320
|
|
6,532
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,619)
|
|
(2,124)
|
|
23
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
4,701
|
|
4,408
|
|
7
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,379)
|
|
(2,174)
|
|
9
|
|
-
|
|
Research
and development
|
(1,260)
|
|
(888)
|
|
42
|
|
34
|
|
Royalty income
|
98
|
|
83
|
|
18
|
|
12
|
|
Other
operating income/(expense)
|
(1,180)
|
|
(1,580)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
(20)
|
|
(151)
|
|
87
|
|
(45)
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
15
|
|
18
|
|
|
|
|
|
Finance
expense
|
(192)
|
|
(183)
|
|
|
|
|
|
Profit
on disposal of associates
|
20
|
|
-
|
|
|
|
|
|
Share
of after tax losses of associates
and
joint ventures
|
(1)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before taxation
|
(178)
|
|
(318)
|
|
44
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
92
|
|
(174)
|
|
|
|
|
|
Tax rate %
|
51.7%
|
|
(54.7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss after taxation
|
(86)
|
|
(492)
|
|
83
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss)
attributable to non-controlling
interests
|
94
|
|
(57)
|
|
|
|
|
|
Loss
attributable to shareholders
|
(180)
|
|
(435)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86)
|
|
(492)
|
|
83
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Loss per share
|
(3.7)p
|
|
(9.0)p
|
|
59
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
Cost of
sales as a percentage of turnover was 35.8%, up 3.3 percentage
points in Sterling terms and up 4.3 percentage points in CER terms
compared with Q2 2016. This primarily reflected the phasing of
costs of manufacturing restructuring programmes and £363
million of non-cash write downs of assets related to the decision
to withdraw Tanzeum
progressively, as well as continued adverse pricing pressure in
Pharmaceuticals, primarily Respiratory, and continued supply chain
investments. This was partly offset by a more favourable product
mix in Pharmaceuticals in the quarter, particularly the impact of
higher HIV sales and the disposal of the distribution business in
Romania. There was also a benefit from a settlement for lost third
party supply volume and a favourable year-on-year comparison to
inventory adjustments in Q2 2016 in Vaccines, together with a
further contribution from integration and restructuring savings in
all three businesses.
Selling, general and administration
SG&A
costs were 32.5% of turnover, 0.8 percentage points lower than in
Q2 2016 in Sterling terms and 0.7 percentage points lower on a CER
basis. This primarily reflected lower restructuring costs as well
as tight control of ongoing costs, particularly in Consumer
Healthcare, continued cost reductions in Pharmaceuticals, including
the benefits of the Pharmaceuticals restructuring programme, and
integration benefits in Vaccines and Consumer Healthcare. The cost
reductions were partly offset by an increased investment in
promotional product support, particularly for new launches in
Respiratory, HIV and Vaccines.
Research and development
R&D
expenditure was £1,260 million (17% of turnover), 42% higher
than in Q2 2016 on a Sterling basis and 34% higher on a CER basis.
This reflected the impact of the previously announced Priority
Review Voucher (£106 million) utilised and expensed on filing
of the dolutegravir and rilpivirine two drug regimen as well as
increased investment in the progression of a number of mid and
late-stage programmes in HIV, respiratory and anaemia. In addition,
there were higher restructuring costs, primarily as a result of the
provision for obligations as a result of the decision to withdraw
Tanzeum
progressively.
Royalty and other operating income/(expense)
Net
other operating expense of £1,082 million (Q2 2016:
£1,497 million expense) primarily reflected the £1,211
million net total of further accounting charges arising from the
re-measurement of the contingent consideration liabilities related
to the former Shionogi-ViiV Healthcare joint venture and the
acquisition of the former Novartis Vaccines business, the value
attributable to the Consumer Healthcare Joint Venture put option
and the liabilities for the Pfizer put option and Pfizer and
Shionogi preferential dividends in ViiV Healthcare. These
re-measurement charges were driven primarily by updated trading
forecasts and changes in exchange rate assumptions and increased
multiples on the Consumer Healthcare Joint Venture put option as
well as the unwinding of the discount applied to these future
liabilities. This compares with £1,778 million of equivalent
transaction-related charges in Q2 2016. Royalty income was £98
million (Q2 2016: £83 million).
Operating loss
Total
operating loss was £20 million in Q2 2017 compared with a
£151 million loss in Q2 2016. The reduction in operating loss
reflected the reduced impact of accounting charges related to
re-measurement of the liabilities for contingent consideration, put
options and preferential dividends, together with an improved
operating margin driven by strong sales growth, particularly in
Vaccines, and a more favourable mix in the Pharmaceutical business,
continued benefits from restructuring and integration and tight
control of ongoing costs across all three businesses. This was
partly offset by continued price pressure, particularly in
Respiratory, supply chain investments and increased restructuring
costs and asset impairments, including a charge of £448
million in aggregate relating to the progressive withdrawal of
Tanzeum.
Net finance costs
Net
finance expense was £177 million compared with £165
million in Q2 2016, the increase reflecting the translation impact
of exchange rate movements on the reported Sterling costs of
foreign currency denominated interest-bearing
instruments.
Taxation
A tax
credit of £92 million on the Total loss represented an
effective tax rate of 51.7% (Q2 2016: (54.7%)) and reflected the
differing tax effects of the various adjusting items.
Non-controlling interests
The
allocation of earnings to non-controlling interests amounted to
£94 million (Q2 2016: £(57) million), including the
non-controlling interest allocations of Consumer Healthcare profits
of £57 million (Q2 2016: £44 million) and the allocation
of ViiV Healthcare profits, which increased to £24 million (Q2
2016: £(77) million) including the impact of changes in the
proportions of preferential dividends due to each shareholder. The
increase in allocation also reflected comparison with the reduction
in the allocation to non-controlling interests due to higher net
losses in some of the Group’s other entities with
non-controlling interests in Q2 2016.
Loss per share
The
Total loss per share was 3.7p, compared with a loss per share of
9.0p in Q2 2016. The reduced loss primarily reflected a reduced
impact of charges arising from increases in the valuations of the
liabilities for contingent consideration and the put options
associated with increases in the Sterling value of the
Group’s HIV and Consumer Healthcare businesses, as well as
improved performance and reduced restructuring costs, partly offset
by the impact of the Priority Review Voucher in the
quarter.
|
|
Adjusting items
GSK
presents Total results and Adjusted results in order to assist
shareholders in better understanding the Group’s operational
performance.
Total
results represent the Group’s overall performance. However,
these results can contain material unusual or non-operational items
that may obscure the key trends and factors determining the
Group’s operational performance. GSK therefore also reports
Adjusted results to help shareholders identify and assess more
clearly the key drivers of the Group’s performance. This
approach aligns the presentation of the Group’s results more
closely with the majority of GSK’s peer group.
From Q1
2017, Adjusted results have been amended to exclude, instead of all
legal charges, only significant legal charges, as set out in
‘Accounting policies and basis of preparation' on page 51.
Comparative information has been revised accordingly.
Adjusted
results exclude the following items from Total results:
amortisation and impairments of intangible assets and goodwill;
major restructuring costs; significant legal charges and expenses;
transaction-related accounting adjustments; disposals and other
operating income other than royalty income, together with the tax
effects of all of these items.
|
|
The
adjusting items that reconcile Total operating profit, profit after
tax and earnings per share to Adjusted results are as
follows:
|
|
|
Q2 2017
|
|
Q2
2016
(revised)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
(loss)/
profit
£m
|
|
(Loss)/
profit
after tax
£m
|
|
(Loss)/
earnings
per
share
p
|
|
Operating
(loss)/
profit
£m
|
|
(Loss)/
profit
after
tax
£m
|
|
(Loss)/
earnings
per
share
p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total results
|
(20)
|
|
(86)
|
|
(3.7)
|
|
(151)
|
|
(492)
|
|
(9.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
asset amortisation
|
153
|
|
117
|
|
2.4
|
|
135
|
|
105
|
|
2.2
|
|
Intangible
asset impairment
|
295
|
|
198
|
|
4.1
|
|
-
|
|
-
|
|
-
|
|
Major
restructuring costs
|
440
|
|
290
|
|
5.9
|
|
234
|
|
179
|
|
3.7
|
|
Transaction-related
items
|
1,226
|
|
1,128
|
|
21.5
|
|
1,798
|
|
1,629
|
|
29.9
|
|
Divestments,
significant legal
and
other items
|
(11)
|
|
(146)
|
|
(3.0)
|
|
(194)
|
|
(117)
|
|
(2.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusting
items
|
2,103
|
|
1,587
|
|
30.9
|
|
1,973
|
|
1,796
|
|
33.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results
|
2,083
|
|
1,501
|
|
27.2
|
|
1,822
|
|
1,304
|
|
24.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
reconciliations between Total results and Adjusted results are set
out on pages 62 to 65 and the definition of Adjusted results is set
out on page 36.
|
|
Intangible asset amortisation and impairment
Intangible
asset amortisation was £153 million, compared with £135
million in Q2 2016. Intangible asset impairments of £295
million (Q2 2016: £nil) included an impairment of £229
million related to the progressive withdrawal of Tanzeum as a result of the new business
priorities for the Group and other impairments to a number of
commercial assets. Both of these charges were non-cash
items.
|
|
Major restructuring and integration
Major
restructuring and integration charges incurred in the quarter were
£440 million (Q2 2016: £234 million), primarily
reflecting £134 million of non-cash charges for the write down
of assets and a £71 million provision for future R&D
obligations as a result of the decision to withdraw Tanzeum. Cash charges were £163
million in the quarter. The Group will cease manufacturing,
complete clinical studies as agreed with regulators and work with
healthcare professionals to transition patients to alternative
treatments. Cash payments made in the quarter were £119
million (Q2 2016: £333 million) including the settlement of
certain charges accrued in previous quarters. The programme
delivered incremental cost savings in the quarter of £0.1
billion.
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £1,226 million (Q2
2016: £1,798 million). This primarily reflected accounting
charges for the re-measurement of the liability and the unwinding
of the discounting effects on the contingent consideration related
to the acquisition of the former Shionogi-ViiV Healthcare joint
venture, the contingent consideration related to the acquisition of
the former Novartis Vaccines business, and the value attributable
to the Consumer Healthcare Joint Venture put option held by
Novartis.
|
|
Charge/(credit)
|
Q2 2017
£m
|
|
Q2
2016
£m
|
|
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
730
|
|
594
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture
(including
Shionogi preferential dividends)
|
298
|
|
850
|
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
66
|
|
316
|
|
Contingent
consideration on former Novartis Vaccines business
|
116
|
|
13
|
|
Other
adjustments
|
16
|
|
25
|
|
|
|
|
|
|
Total
transaction-related charges
|
1,226
|
|
1,798
|
|
|
|
|
|
|
The
aggregate impact of unwinding the discount on these future and
potential liabilities was £242 million (Q2 2016: £212
million), including £128 million on the Consumer Healthcare
Joint Venture put option and £100 million on the contingent
consideration related to the former Shionogi-ViiV Healthcare Joint
Venture. The remaining charge of £984 million was driven by
adjustments to trading forecasts and the impact of updated exchange
rate assumptions on those forecasts for the relevant businesses as
well as changes to the multiples used in the valuation of the
Consumer Healthcare Joint Venture put option.
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 £143 million (Q2
2016: £79 million). This included cash payments made by ViiV
Healthcare to Shionogi in relation to its contingent consideration
liability (including preferential dividends) which amounted to
£140 million (Q2 2016: £70 million).
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 60.
Divestments, significant legal charges and other items
Divestments
and other items included the profit on disposal of a number of
other asset disposals, equity investment impairments and certain
other adjusting items. Significant legal charges of £6 million
(Q2 2016: £13 million) included the benefit of the settlement
of existing matters as well as provisions for ongoing litigation.
Significant legal cash payments were £42 million (Q2 2016:
£6 million).
|
|
Adjusted results
|
|
|
Q2 2017
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
7,320
|
|
100
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(1,988)
|
|
(27.2)
|
|
3
|
|
(2)
|
|
Selling,
general and administration
|
(2,294)
|
|
(31.3)
|
|
11
|
|
2
|
|
Research
and development
|
(1,053)
|
|
(14.4)
|
|
32
|
|
24
|
|
Royalty
income
|
98
|
|
1.4
|
|
18
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,083
|
|
28.5
|
|
14
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
1,906
|
|
|
|
15
|
|
-
|
|
Adjusted
profit after tax
|
1,501
|
|
|
|
15
|
|
-
|
|
Adjusted
profit attributable to shareholders
|
1,327
|
|
|
|
12
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
27.2p
|
|
|
|
12
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit by business
|
Q2 2017
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,152
|
|
49.4
|
|
11
|
|
-
|
|
Pharmaceuticals
R&D
|
(688)
|
|
|
|
18
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
1,464
|
|
33.6
|
|
8
|
|
(5)
|
|
Vaccines
|
374
|
|
33.7
|
|
42
|
|
30
|
|
Consumer
Healthcare
|
328
|
|
17.7
|
|
38
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
2,166
|
|
29.6
|
|
17
|
|
3
|
|
Corporate
& other unallocated costs
|
(83)
|
|
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,083
|
|
28.5
|
|
14
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit
Adjusted
operating profit was £2,083 million, 14% AER higher than in Q2
2016 and flat in CER terms on a turnover increase of 3%. The
Adjusted operating margin of 28.5% was 0.6 percentage points higher
than in Q2 2016 and 0.6 percentage points lower on a CER basis.
This primarily reflected the impact of the Priority Review Voucher
(£106 million) as well as an overall increase in R&D
investment, continuing price pressure, particularly in Respiratory,
and supply chain investments. This was partly offset by improved
operating leverage, driven by sales growth in Pharmaceuticals and
Vaccines and a more favourable mix in all three businesses, the
benefit of a settlement for lost third party supply volume and a
favourable year-on-year comparison with inventory adjustments in Q2
2016 in Vaccines, as well as continued tight control of ongoing
costs across all three businesses and benefits from restructuring
and integration.
Cost of sales
Cost of
sales as a percentage of turnover was 27.2%, down 2.4 percentage
points in Sterling terms and down 1.5 percentage points in CER
terms compared with Q2 2016. This reflected a more favourable
product mix in Pharmaceuticals in the quarter, particularly the
impact of higher HIV sales and the disposal of the distribution
business in Romania, as well as in Vaccines the benefit of a
settlement for lost third party supply volume in Q2 2017 and a
favourable year-on-year comparison with inventory adjustments in Q2
2016. There was also a further contribution from integration and
restructuring savings in all three businesses, offset by continued
adverse pricing pressure in Pharmaceuticals, primarily Respiratory,
and additional supply chain investments.
Selling, general and administration
SG&A
costs were 31.3% of turnover, 0.2 percentage points lower in
Sterling terms than in Q2 2016 and 0.2 percentage points lower on a
CER basis. This primarily reflected tight control of ongoing costs,
particularly in Consumer Healthcare, continued cost reductions in
Pharmaceuticals, including the benefits of the Pharmaceuticals
restructuring programme, and integration benefits in Vaccines and
Consumer Healthcare. This was partly offset by an increased
investment in promotional product support, particularly for new
launches in Respiratory, HIV and Vaccines.
Research and development
R&D
expenditure was £1,053 million (14.4% of turnover), 32% AER
higher than Q2 2016 and 24% higher in CER terms than Q2 2016,
primarily reflecting the impact of the previously announced
Priority Review Voucher as well as increased investment in the
progression of a number of mid and late-stage programmes in HIV,
respiratory and anaemia.
Royalty income
Royalty
income was £98 million (Q2 2016: £83
million).
Operating profit by business
Pharmaceuticals
operating profit was £1,464 million, 8% AER higher than in Q2
2016 but 5% lower in CER terms on a turnover increase of 3% CER.
The operating margin of 33.6% was 1.2 percentage points lower than
in Q2 2016 on a Sterling basis and 2.8 percentage points lower on a
CER basis. This primarily reflected increased R&D investment
including the impact of the Priority Review Voucher. The Adjusted
operating margin also reflected a more favourable product mix,
primarily driven by the growth in HIV sales, as well as the
continued cost reduction benefit of the Group’s
Pharmaceuticals restructuring programme, offset by increased
investment in new product support and the continued impact of lower
prices, particularly in Respiratory, and the broader transition of
the Respiratory portfolio.
Vaccines operating profit was £374 million, 42% AER higher
than in Q2 2016 and 30% higher in CER terms on a turnover increase
of 5% CER. The operating margin of 33.7% was 6.2 percentage points
higher than in Q2 2016 on a Sterling basis and 6.4 percentage
points higher on a CER basis. This was primarily driven by improved
product mix, the benefit of a settlement for lost third party
supply volume and a favourable year-on-year comparison with
inventory adjustments in Q2 2016, together
with continued restructuring and integration benefits in SG&A
and R&D. This was partly offset by increased SG&A
investment to support business growth and increased supply chain
investments.
Consumer
Healthcare core operating profit was £328 million, 38% AER
higher than in Q2 2016 and 16% higher in CER terms on flat
turnover. The operating margin of 17.7% was 3.6 percentage points
higher than in Q2 2016 on a Sterling basis and 2.2 percentage
points higher on a CER basis, reflecting an improvement in gross
margin, including benefits from pricing, integration synergies
(principally in SG&A), earlier phasing of promotional
expenditure to Q1 2017 and later phasing of R&D
expenditure.
Net finance costs
Net
finance expense was £176 million compared with £163
million in Q2 2016, the increase reflecting the translation impact
of exchange rate movements on the reported Sterling costs of
foreign currency denominated interest-bearing
instruments.
Taxation
Tax on
Adjusted profit amounted to £405 million and represented an
effective Adjusted tax rate of 21.2% (Q2 2016: 21.3%). See
‘Taxation’ on page 50 for further details.
Non-controlling interests
The
allocation of Adjusted earnings to non-controlling interests
amounted to £174 million (Q2 2016: £121 million),
including the non-controlling interest allocations of Consumer
Healthcare profits of £80 million (Q2 2016: £67 million)
and the allocation of ViiV Healthcare profits, of £81 million
(Q2 2016: £79 million) including the impact of changes in the
proportions of preferential dividends due to each shareholder based
on the relative performance of different products in the quarter,
as well as the non-controlling interest allocation of the Priority
Review Voucher expensed in Q2 2017. The increase in allocation also
reflected comparison with the reduction in the allocation to
non-controlling interests due to higher net losses in some of the
Group’s other entities with non-controlling interests in Q2
2016.
Earnings per share
Adjusted
EPS of 27.2p was up 12% AER, but down 2% CER, compared with flat
Adjusted operating profit at CER.
|
|
Financial performance – H1 2017
|
|
The
Total results for the Group are set out below.
|
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
14,704
|
|
12,761
|
|
15
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(5,132)
|
|
(4,257)
|
|
21
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
9,572
|
|
8,504
|
|
13
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(4,831)
|
|
(4,363)
|
|
11
|
|
-
|
|
Research
and development
|
(2,220)
|
|
(1,703)
|
|
30
|
|
21
|
|
Royalty income
|
180
|
|
174
|
|
3
|
|
(2)
|
|
Other
operating income/(expense)
|
(1,003)
|
|
(2,040)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
1,698
|
|
572
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
36
|
|
36
|
|
|
|
|
|
Finance
expense
|
(386)
|
|
(364)
|
|
|
|
|
|
Profit
on disposal of associates
|
20
|
|
-
|
|
|
|
|
|
Share
of after tax profits/(losses) of associates
and
joint ventures
|
4
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
1,372
|
|
242
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(235)
|
|
(382)
|
|
|
|
|
|
Tax rate %
|
17.1%
|
|
>100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after taxation
|
1,137
|
|
(140)
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
271
|
|
13
|
|
|
|
|
|
Profit/(loss)
attributable to shareholders
|
866
|
|
(153)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,137
|
|
(140)
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share
|
17.7p
|
|
(3.2)p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
Cost of
sales as a percentage of turnover was 34.9%, up 1.5 percentage
points in Sterling terms and up 2.7 percentage points in CER terms
compared with H1 2016. This primarily reflected the phasing of
costs of manufacturing restructuring programmes and the write down
of assets related to the progressive withdrawal of Tanzeum, as well as continued adverse
pricing pressure in Pharmaceuticals, primarily Respiratory, and
continued supply chain investments. This was partly offset by a
more favourable product mix in Pharmaceuticals, particularly the
impact of higher HIV sales and the disposal of the distribution
business in Romania, as well as in Vaccines the benefit of a
settlement for lost third party supply volume and a favourable
year-on-year comparison to inventory adjustments in H1 2016 and a
continued contribution from integration and restructuring savings
in all three businesses.
Selling, general and administration
SG&A
costs were 32.9% of turnover, 1.3 percentage points lower than in
H1 2016 in Sterling terms and 1.3 percentage points lower on a CER
basis. This primarily reflected lower restructuring costs and tight
control of ongoing costs, particularly in Consumer Healthcare, as
well as continued cost reductions in Pharmaceuticals, including the
benefits of the Pharmaceuticals restructuring programme, and
integration benefits in Vaccines and Consumer Healthcare. This was
partly offset by an increased investment in promotional product
support, particularly for new launches in Respiratory, HIV and
Vaccines.
Research and development
R&D
expenditure was £2,220 million (15% of turnover), 30% higher
than in H1 2016 on a Sterling basis and 21% higher on a CER basis.
This reflected the impact of the Priority Review Voucher as well as
increased investment in the progression of a number of mid and
late-stage programmes in HIV, respiratory and anaemia. In addition,
there were higher restructuring costs, primarily as a result of the
provision for future clinical obligations as a result of the
progressive withdrawal of Tanzeum.
Royalty and other operating income/(expense)
Net
other operating expense of £823 million (H1 2016: £1,866
million expense) primarily reflected the £1,281 million net
total of further accounting charges arising from the re-measurement
of the contingent consideration liabilities related to the former
Shionogi-ViiV Healthcare joint venture and the acquisition of the
former Novartis Vaccines business, the value attributable to the
Consumer Healthcare Joint Venture put option and the liabilities
for the Pfizer put option and Pfizer and Shionogi preferential
dividends in ViiV Healthcare. These re-measurement charges were
driven primarily by updated trading forecasts and changes in
exchange rate assumptions as well as the unwinding of the discount
applied to these future liabilities. This compares with £2,267
million of equivalent transaction-related charges in H1 2016. These
charges were partly offset by the gain of £247 million on
disposal of the anaesthesia business to Aspen and royalty income of
£180 million (H1 2016: £174 million).
Operating profit
Total
operating profit was £1,698 million in H1 2017 compared with
£572 million in H1 2016. Operating profit benefited from
improved operating leverage driven by sales growth across all three
businesses, but particularly Vaccines, and a more favourable mix in
all three businesses. There was also a favourable year-on-year
comparison with inventory adjustments in H1 2016 and the benefit of
a one-off settlement in cost of sales in Vaccines as well as
continued tight control of ongoing costs across all three
businesses and benefits from restructuring and integration. This
was offset by the impact of the Priority Review Voucher, as well as
an overall increase in R&D investment, continuing price
pressure, particularly in Respiratory, and supply chain
investments. In addition, H1 2017 reflected the gain on the
disposal of the anaesthesia business and a reduced impact from
accounting charges related to re-measurement of the liabilities for
contingent consideration, put options and preferential
dividends.
Net finance costs
Net
finance expense was £350 million compared with £328
million in H1 2016, the increase reflecting the translation impact
of exchange rate movements on the reported Sterling costs of
foreign currency denominated interest-bearing
instruments.
Taxation
A tax
charge of £235 million on Total profit represented an
effective tax rate of 17.1% (H1 2016: >100%) and reflected the
differing tax effects of the various adjusting items, including
restructuring charges.
Non-controlling interests
The
allocation of earnings to non-controlling interests amounted to
£271 million (H1 2016: £13 million), including the
non-controlling interest allocations of Consumer Healthcare profits
of £120 million (H1 2016: £55 million) and the allocation
of ViiV Healthcare profits, which increased to £126 million
(H1 2016: £(53) million) including the impact of changes in
the proportions of preferential dividends due to each shareholder.
The increase in allocation also reflected comparison with the
reduction in the allocation to non-controlling interests due to
higher net losses in some of the Group’s other entities with
non-controlling interests in H1 2016.
Earnings per share
The
Total earnings per share was 17.7p, compared with a loss per share
of 3.2p in H1 2016. The increase primarily reflected a reduced
impact of charges arising from increases in the valuations of the
liabilities for contingent consideration and the put options
associated with increases in the Sterling value of the
Group’s HIV and Consumer Healthcare businesses, as well as
improved performance and the benefit of the disposal of the
anaesthesia business to Aspen.
|
|
Adjusting items
|
|
|
H1 2017
|
|
H1
2016
(revised)
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
£m
|
|
Profit
after tax
£m
|
|
EPS
p
|
|
Operating
profit
£m
|
|
Profit
after
tax
£m
|
|
EPS
p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total results
|
1,698
|
|
1,137
|
|
17.7
|
|
572
|
|
(140)
|
|
(3.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
asset amortisation
|
295
|
|
228
|
|
4.7
|
|
279
|
|
220
|
|
4.6
|
|
Intangible
asset impairment
|
339
|
|
229
|
|
4.7
|
|
-
|
|
-
|
|
-
|
|
Major
restructuring costs
|
606
|
|
419
|
|
8.6
|
|
422
|
|
340
|
|
7.0
|
|
Transaction-related
items
|
1,318
|
|
1,194
|
|
22.4
|
|
2,258
|
|
2,042
|
|
36.8
|
|
Divestments,
significant legal
and
other items
|
(194)
|
|
(290)
|
|
(6.0)
|
|
(185)
|
|
(85)
|
|
(1.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusting
items
|
2,364
|
|
1,780
|
|
34.4
|
|
2,774
|
|
2,517
|
|
46.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results
|
4,062
|
|
2,917
|
|
52.1
|
|
3,346
|
|
2,377
|
|
43.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
reconciliations between Total results and Adjusted results are set
out on pages 62 to 65 and the definition of Adjusted results is set
out on page 36.
|
|
Intangible asset and amortisation and impairment
Intangible
asset amortisation was £295 million, compared with £279
million in H1 2016. Intangible asset impairments of £339
million (H1 2016: £nil) included impairments related to the
progressive withdrawal of Tanzeum and a number of commercial
assets. Both of these charges were non-cash items.
|
|
Major restructuring and integration
Major
restructuring and integration charges incurred in the 6 months were
£606 million (H1 2016: £422 million), reflecting
increased non-cash charges for the write down of assets as well as
provisions for R&D obligations as a result of the decision to
withdraw Tanzeum
progressively arising from the establishment of the Group’s
new business priorities. Cash payments made were £332 million
(H1 2016: £600 million) including the settlement of certain
charges accrued in previous quarters.
Charges
for the combined restructuring and integration programme to date
are £4.3 billion, of which cash charges are £3.2 billion,
including £163 million in the quarter. Cash payments of
£2.9 billion have been made to date. Non-cash charges are
£1.1 billion, including £277 million in the
quarter.
An
extension to the existing combined programme has been agreed by the
Board, with total cash charges of the combined programme now
expected to be approximately £4.1 billion and non-cash charges
up to £1.6 billion. The programme has now delivered
approximately £3.4 billion of annual savings on a moving
annual total basis, including a currency benefit of £0.3
billion. The extended programme is now expected to deliver by 2020
total annual savings of £4.0 billion on a constant currency
basis, together with an estimated £0.4 billion of currency
benefits. In 2017, approximately £600 million of cash charges
are expected in addition to the settlement of cash charges accrued
at the end of 2016, along with some non-cash charges.
|
|
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £1,318 million (H1
2016: £2,258 million). This primarily reflected accounting
charges for the re-measurement of the liability and the unwinding
of the discounting effects on the contingent consideration related
to the acquisition of the former Shionogi-ViiV Healthcare joint
venture, the contingent consideration related to the acquisition of
the former Novartis Vaccines business, and the value attributable
to the Consumer Healthcare Joint Venture put option held by
Novartis.
|
|
Charge/(credit)
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
851
|
|
854
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture
(including
Shionogi preferential dividends)
|
346
|
|
1,062
|
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(48)
|
|
320
|
|
Contingent
consideration on former Novartis Vaccines business
|
131
|
|
26
|
|
Other
adjustments
|
38
|
|
(4)
|
|
|
|
|
|
|
Total
transaction-related charges
|
1,318
|
|
2,258
|
|
|
|
|
|
|
The
aggregate impact of unwinding the discount on these future and
potential liabilities was £474 million (H1 2016: £409
million), including £253 million on the Consumer Healthcare
Joint Venture put option and £199 million on the contingent
consideration related to the former Shionogi-ViiV Healthcare Joint
Venture. The remaining charge of £844 million was driven by
adjustments to trading forecasts and the impact of updated exchange
rate assumptions on those forecasts for the relevant businesses as
well as changes to the multiples used in the valuation of the
Consumer Healthcare Joint Venture put option.
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 6 months amounted to £303 million (H1
2016: £168 million). This included cash payments made by ViiV
Healthcare to Shionogi in relation to its contingent consideration
liability (including preferential dividends) which amounted to
£299 million (H1 2016: £159 million).
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 60.
Divestments, significant legal charges and other items
Divestments
and other items included the profit on disposal of the anaesthesia
business to Aspen of £247 million, a number of other asset
disposals, equity investment impairments and certain other
adjusting items. Significant legal charges of £61 million (H1
2016: £4 million) included the benefit of the settlement of
existing matters as well as provisions for ongoing litigation.
Significant legal cash payments were £47 million (H1 2016:
£54 million).
|
|
Adjusted results
|
|
|
H1 2017
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
14,704
|
|
100
|
|
15
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(4,209)
|
|
(28.6)
|
|
9
|
|
1
|
|
Selling,
general and administration
|
(4,641)
|
|
(31.6)
|
|
12
|
|
1
|
|
Research
and development
|
(1,972)
|
|
(13.4)
|
|
25
|
|
16
|
|
Royalty
income
|
180
|
|
1.2
|
|
3
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,062
|
|
27.6
|
|
21
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
3,721
|
|
|
|
23
|
|
5
|
|
Adjusted
profit after tax
|
2,917
|
|
|
|
23
|
|
5
|
|
Adjusted
profit attributable to shareholders
|
2,544
|
|
|
|
21
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
52.1p
|
|
|
|
20
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit by business
|
H1 2017
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,270
|
|
50.0
|
|
18
|
|
4
|
|
Pharmaceuticals
R&D
|
(1,366)
|
|
|
|
21
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
2,904
|
|
34.0
|
|
16
|
|
-
|
|
Vaccines
|
715
|
|
31.6
|
|
40
|
|
26
|
|
Consumer
Healthcare
|
679
|
|
17.4
|
|
26
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
4,298
|
|
29.2
|
|
21
|
|
5
|
|
Corporate
& other unallocated costs
|
(236)
|
|
|
|
19
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,062
|
|
27.6
|
|
21
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit
Adjusted
operating profit was £4,062 million, 21% AER higher than in H1
2016 and 4% higher in CER terms on a turnover increase of 4%. The
Adjusted operating margin of 27.6% was 1.4 percentage points higher
than in H1 2016 and 0.2 percentage points higher on a CER basis.
This reflected improved operating leverage driven by sales growth
across all three businesses, but particularly Vaccines, and a more
favourable mix in all three businesses, together with the benefit
of a settlement for lost third party supply volume and a favourable
year-on-year comparison to inventory adjustments in Q2 2016 in
Vaccines, continued tight control of ongoing costs across all three
businesses and benefits from restructuring and integration. This
was offset by the impact of the Priority Review Voucher as well as
increased R&D investment, continuing price pressure,
particularly in Respiratory, and supply chain
investments.
Cost of sales
Cost of
sales as a percentage of turnover was 28.6%, down 1.7 percentage
points in Sterling terms and down 0.7 percentage points in CER
terms compared with H1 2016. This reflected a more favourable
product mix in Pharmaceuticals, particularly the impact of higher
HIV sales and the disposal of the distribution business in Romania,
as well as the benefit of a settlement for lost third party supply
volume and a favourable year-on-year comparison to inventory
adjustments in H1 2016 in Vaccines. There was also a further
contribution from integration and restructuring savings in all
three businesses, offset by continued adverse pricing pressure in
Pharmaceuticals, primarily Respiratory, and additional supply chain
investments.
Selling, general and administration
SG&A
costs were 31.6% of turnover, 0.9 percentage points lower in
Sterling terms than in H1 2016 and 0.9 percentage points lower on a
CER basis. This primarily reflected tight control of ongoing costs,
particularly in Consumer Healthcare, continued cost reductions in
Pharmaceuticals, including the benefits of the Pharmaceuticals
restructuring programme, and integration benefits in Vaccines and
Consumer Healthcare. This was partly offset by an increased
investment in promotional product support, particularly for new
launches in Respiratory, HIV and Vaccines.
Research and development
R&D
expenditure was £1,972 million (13.4% of turnover), 25% AER
higher than H1 2016 and 16% higher in CER terms, reflecting the
impact of the Priority Review Voucher as well as increased
investment in the progression of a number of mid and late-stage
programmes in HIV, respiratory and anaemia and the costs of the BMS
HIV programmes acquired in February 2016.
Royalty income
Royalty
income was £180 million (H1 2016: £174
million).
Operating profit by business
Pharmaceuticals
operating profit was £2,904 million, 16% AER higher than in H1
2016 and flat in CER terms on a turnover increase of 4% CER. The
operating margin of 34.0% was 0.6 percentage points higher than in
H1 2016 on a Sterling basis but 1.2 percentage points down on a CER
basis. This primarily reflected increased R&D investment
including the impact of the Priority Review Voucher. The operating
margin also reflected a more favourable product mix, primarily
driven by the growth in HIV sales, and the continued cost reduction
benefit of the Group’s Pharmaceuticals restructuring
programme, offset by increased investment in new product support
and R&D, as well as the continued impact of lower prices,
particularly in Respiratory, and the broader transition of the
Respiratory portfolio.
Vaccines operating profit was £715 million, 40% AER higher
than in H1 2016 and 26% higher in CER terms on a turnover increase
of 10% CER. The operating margin of 31.6% was 3.9 percentage points
higher than in H1 2016 on a Sterling basis and 3.9 percentage
points higher on a CER basis. This was primarily driven by enhanced
operating leverage from the strong sales growth, the benefit of a
settlement for lost third party supply volume and a favourable
year-on-year comparison with inventory adjustments in H1
2016, together with continued restructuring and
integration benefits. This was partly offset by increased SG&A
resources to support business growth, increased supply chain costs
and lower royalty income.
Consumer
Healthcare operating profit was £679 million, 26% AER higher
than in H1 2016 and 6% higher in CER terms on a turnover increase
of 1%. The operating margin of 17.4% was 1.7 percentage points
higher than in H1 2016 and 0.7 percentage points higher on a CER
basis, reflecting tight control of costs, integration synergies,
principally in SG&A, and the later phasing of R&D
expenditure, partly offset by increased investment in power
brands.
Net finance costs
Net
finance expense was £345 million compared with £322
million in H1 2016, the increase reflecting the translation impact
of exchange rate movements on the reported Sterling costs of
foreign currency denominated interest-bearing
instruments.
Taxation
Tax on
Adjusted profit amounted to £804 million and represented an
effective Adjusted tax rate of 21.6% (H1 2016: 21.3%). The increase
in the effective rate reflected the Group’s changing earnings
mix. See ‘Taxation’ on page 50 for further
details.
Non-controlling interests
The
allocation of Adjusted earnings to non-controlling interests
amounted to £373 million (H1 2016: £268 million),
including the non-controlling interest allocations of Consumer
Healthcare profits of £154 million (H1 2016: £112
million) and the allocation of ViiV Healthcare profits, which
increased to £194 million (H1 2016: £145 million)
including the impact of changes in the proportions of preferential
dividends due to each shareholder. The increase in allocation also
reflected comparison with the reduction in the allocation to
non-controlling interests due to higher net losses in some of the
Group’s other entities with non-controlling interests in H1
2016.
Earnings per share
Adjusted
EPS of 52.1p was up 20% AER, 3% CER compared with a 4% CER increase
in Adjusted operating profit.
|
|
Currency impact on Q2 2017 and H1 2017 results
The Q2
2017 results are based on average exchange rates, principally
£1/$1.29, £1/€1.15 and £1/Yen 143. Comparative
exchange rates are given on page 52. The period-end exchange rates
were £1/$1.30, £1/€1.14 and £1/Yen
146.
In the
quarter, turnover increased 12% in Sterling terms and 3% CER. Total
loss per share was 3.7p compared with a loss per share of 9.0p in
Q2 2016 and Adjusted EPS was 27.2p compared with 24.3p in Q2 2016,
up 12% AER, but down 2% CER. The positive currency impact reflected
the weakness of Sterling against the majority of the Group’s
trading currencies relative to Q2 2016. Settlement of intercompany
transactions had around one percentage point negative impact on the
positive currency impact of 14 percentage points on adjusted
EPS.
In H1
2017, turnover increased 15% in Sterling terms and 4% CER. Total
EPS was 17.7p compared with a loss per share of 3.2p in H1 2016 and
Adjusted EPS was 52.1p compared with 43.5p in H1 2016, up 20% AER,
3% CER. The positive currency impact reflected the weakness of
Sterling against the majority of the Group’s trading
currencies relative to H1 2016. Settlement of intercompany
transactions had around one percentage point negative impact on the
positive currency impact of 17 percentage points on adjusted
EPS.
|
|
2017 guidance for Adjusted EPS
The utilisation of the Priority Review Voucher, together with other
accelerated launch costs for the HIV two drug regimen, has impacted
GSK’s previous expectations for growth in Adjusted EPS by
around two percentage points. With no Advair generic expected in the US in 2017, GSK now
expects 2017 Adjusted EPS growth to be 3% to 5%
CER.
GSK is
not able to give guidance for Total results as it cannot reliably
forecast certain material elements of our Total results such as the
future fair value movements on contingent consideration and put
options. It should be noted that contingent consideration cash
payments are made each quarter primarily to Shionogi by ViiV
Healthcare which reduce the balance sheet liability and are hence
not recorded in the income statement. An explanation of the
acquisition-related arrangements with ViiV Healthcare, including
details of cash payments to Shionogi, is set out on page
60.
If exchange rates were to hold at the closing rates on 30 June
2017 ($1.30/£1, €1.14/£1 and Yen
146/£1) for the rest of 2017, the
estimated positive impact on full-year 2017 Sterling turnover
growth would be around 5% and if exchange losses were recognised at
the same level as in 2016, the estimated positive impact on 2017
Sterling Adjusted EPS growth would be around
8%.
|
|
Cash generation and conversion
|
|
Cash flow and net debt
|
|
|
Q2 2017
|
|
H1 2017
|
|
H1
2016
|
|
|
|
|
|
|
|
|
Net
cash inflow from operating activities (£m)
|
1,008
|
|
2,152
|
|
1,739
|
|
Free
cash flow* (£m)
|
(282)
|
|
368
|
|
63
|
|
Free
cash flow growth (%)
|
>(100)%
|
|
>100%
|
|
6%
|
|
Free
cash flow conversion* (%)
|
>(100)%
|
|
42%
|
|
>100%
|
|
Net
debt (£m)
|
14,800
|
|
14,800
|
|
14,910
|
|
*
|
Free
cash flow and free cash flow conversion are defined on page
36.
|
|
Q2 2017
The net
cash inflow from operating activities for the quarter was
£1,008 million (Q2 2016: £1,236 million). The reduction
reflected flat operating profit, after the impact of the Priority
Review Voucher, as well as a positive currency benefit, more than
offset by an increase in inventory in support of new product
launches and seasonal sales, as well as the timing of payments for
returns and rebates.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the quarter were £140
million, of which £124 million was recognised in cash flows
from operating activities and £16 million was recognised in
purchases of businesses within investing cash flows. These payments
are deductible for tax purposes.
Free
cash outflow was £282 million for the quarter (Q2 2016:
£303 million inflow). The reduction primarily reflected flat
operating performance, including the impact of the Priority Review
Voucher, increased working capital, reflecting seasonal factors and
building of inventory in advance of new product launches, together
with the timing of payments for returns and rebates and higher
dividends to non-controlling interests, which included a catch up
adjustment.
|
|
H1 2017
The net
cash inflow from operating activities for the six months was
£2,152 million (H1 2016: £1,739 million). The increase
reflected improved operating profit performance, as well as a
positive currency benefit, partly offset by increased working
capital reflecting seasonal factors and building of inventory in
advance of new product launches.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the six months were £299
million, of which £261 million was recognised in cash flows
from operating activities and £38 million was recognised in
purchases of businesses within investing cash flows. These payments
are deductible for tax purposes.
Free
cash flow was £368 million for the six months (H1 2016:
£63 million). The increase primarily reflected improved
operating profit performance, as well as a positive currency
benefit, partly offset by increased working capital reflecting
seasonal factors and building of inventory in advance of new
product launches and increased dividends to non-controlling
interests. H1 2016 free cash flow was also impacted by the costs of
acquiring the HIV Clinical assets from BMS for £221
million.
|
|
Net debt
At 30
June 2017, net debt was £14.8 billion, compared with
£13.8 billion at 31 December 2016, comprising gross debt of
£18.9 billion and cash and liquid investments of £4.1
billion. Net debt increased as the cost of dividends paid to
shareholders of £2,049 million more than offset the improved
free cash flow of £368 million and disposal proceeds of
£322 million, together with favourable translation
movements.
At 30
June 2017, GSK had short-term borrowings (including overdrafts)
repayable within 12 months of £6,612 million with no loans
repayable in the subsequent year.
|
|
Working capital
|
|
|
30
June
2017
|
|
31
March
2017
|
|
31
December
2016
|
|
30
September
2016
|
|
30
June
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital conversion cycle* (days)
|
207
|
|
203
|
|
193
|
|
216
|
|
217
|
|
Working
capital percentage of turnover (%)
|
24
|
|
23
|
|
22
|
|
27
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Working
capital conversion cycle is defined on page 36.
|
|
The
increase of four days in Q2 2017 was predominantly due to an
increase in inventory levels reflecting seasonal factors and
building of inventory in advance of new product
launches.
The
reduction of ten days compared with June 2016 reflected a five day
reduction in the cycle primarily due to reduced inventory days and
improved collections, together with a five day reduction from
exchange rates.
|
|
Returns to shareholders
|
|
Quarterly dividends
The
Board has declared a second interim dividend for 2017 of 19 pence
per share (Q2 2016: 19 pence per share).
GSK
expects to pay an annual ordinary dividend of 80p for
2017.
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 2018 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 10 October 2017. An annual
fee of $0.02 per ADS (or $0.005 per ADS per quarter) is charged by
the Depositary.
The
ex-dividend date will be 10 August 2017 (9 August 2017 for ADR
holders), with a record date of 11 August 2017 and a payment date
of 12 October 2017.
|
|
|
Paid/
payable
|
|
Pence
per
share
|
|
£m
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
First
interim
|
13 July
2017
|
|
19
|
|
928
|
|
Second
interim
|
12
October 2017
|
|
19
|
|
929
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
First
interim
|
14 July
2016
|
|
19
|
|
923
|
|
Second
interim
|
13
October 2016
|
|
19
|
|
925
|
|
Third
interim
|
12
January 2017
|
|
19
|
|
925
|
|
Fourth
interim
|
13
April 2017
|
|
23
|
|
1,124
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
3,897
|
|
|
|
|
|
|
|
|
GSK
made no share repurchases during the quarter. The company issued
1.1 million shares under employee share schemes amounting to
£13 million (Q2 2016: £18 million).
The
weighted average number of shares for Q2 2017 was 4,887 million,
compared with 4,859 million in Q2 2016.
|
|
Research and development
|
|
GSK
remains focused on delivering an improved return on its investment
in R&D. Sales contribution, reduced attrition and cost
reduction are all important drivers of an improving internal rate
of return. R&D expenditure is not determined as a percentage of
sales but instead capital is allocated using strict returns based
criteria depending on the pipeline opportunities
available.
The
operations of Pharmaceuticals R&D are broadly split into
Discovery activities (up to the completion of Phase IIa trials) and
Development work (from Phase IIb onwards) each supported by
specific and common infrastructure and other shared services where
appropriate. With effect from 1 January 2017, depreciation within
Pharmaceuticals R&D is now reported within the central support
functions rather than against individual business units.
Comparative information has been revised accordingly. R&D
expenditure for Q2 2017 and H1 2017 is analysed below.
|
|
|
|
|
Q2 2017
£m
|
|
Q2
2016
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
Discovery
|
|
|
259
|
|
200
|
|
30
|
|
23
|
|
Development
|
|
|
451
|
|
296
|
|
52
|
|
44
|
|
Facilities
and central
support
functions
|
|
|
130
|
|
109
|
|
19
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
R&D
|
|
|
840
|
|
605
|
|
39
|
|
32
|
|
Vaccines
|
|
|
160
|
|
140
|
|
14
|
|
3
|
|
Consumer
Healthcare
|
|
|
53
|
|
55
|
|
(4)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
R&D
|
|
|
1,053
|
|
800
|
|
32
|
|
24
|
|
Amortisation
and impairment
of
intangible assets
|
|
|
27
|
|
10
|
|
|
|
|
|
Major
restructuring costs
|
|
|
170
|
|
73
|
|
|
|
|
|
Other
items
|
|
|
10
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
R&D
|
|
|
1,260
|
|
888
|
|
42
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H1 2017
£m
|
|
H1
2016
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
Discovery
|
|
|
509
|
|
381
|
|
34
|
|
25
|
|
Development
|
|
|
776
|
|
549
|
|
41
|
|
31
|
|
Facilities
and central
support
functions
|
|
|
277
|
|
250
|
|
11
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
R&D
|
|
|
1,562
|
|
1,180
|
|
32
|
|
23
|
|
Vaccines
|
|
|
296
|
|
279
|
|
6
|
|
(5)
|
|
Consumer
Healthcare
|
|
|
114
|
|
116
|
|
(2)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
R&D
|
|
|
1,972
|
|
1,575
|
|
25
|
|
16
|
|
Amortisation
and impairment
of
intangible assets
|
|
|
47
|
|
20
|
|
|
|
|
|
Major
restructuring costs
|
|
|
185
|
|
100
|
|
|
|
|
|
Other
items
|
|
|
16
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
R&D
|
|
|
2,220
|
|
1,703
|
|
30
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
In Q2
2017, Adjusted R&D expenditure increased 32% AER, 24% CER and
in H1 2017 Adjusted R&D expenditure increased 25% AER, 16% CER.
The increase in Discovery expenditure reflected further investment
in the early stage Oncology portfolio. The growth in Development
expenditure reflected the utilisation of the Priority Review
Voucher, the progression of a number of mid and late-stage
programmes in HIV, respiratory and anaemia and the costs of the HIV
programmes acquired from BMS in February 2016.
|
|
R&D pipeline
|
|
|
|
|
|
Pipeline news flow since Q1 2017
|
|
|
●
|
Announced
data from the SALFORD LUNG STUDY showing that Relvar Ellipta significantly improved
asthma control compared with usual care (5 May);
|
|
●
|
Announced
headline data from two Phase III studies of mepolizumab in COPD (10
May);
|
|
●
|
Announced
publication in NEJM of data from Phase III study of mepolizumab in
patients with EGPA (17 May);
|
|
●
|
Presented
data at ATS of effect of Nucala for severe asthma according to
blood eosinophil levels (22 May);
|
|
●
|
Announced
EU and US filings for two drug regimen of dolutegravir and
rilpivirine for HIV maintenance (1 June);
|
|
●
|
Announced
positive headline results for a Phase III study showing that
tafenoquine reduces risk of relapse in Plasmodium Vivax malaria (12
June);
|
|
●
|
Announced
results of 10 year continuation study showing sustained disease
control with Benlysta in
SLE (16 June);
|
|
●
|
Announced
positive results from Phase III re-vaccination study with
Shingrix (21
June);
|
|
●
|
Announced
CHMP positive opinion for 4 dose vial of Synflorix (27 June);
|
|
●
|
Announced
start of Phase III programme for mepolizumab in patients with nasal
polyps (27 June);
|
|
●
|
Announced
US filing for mepolizumab in patients with EGPA (28
June);
|
|
●
|
Positive
data in-house from head-to-head study of Anoro Ellipta vs Stiolto Respimat. To
be reported at future scientific forum (July);
|
|
●
|
Received
FDA approval for a new self-injectable formulation of Benlysta for SLE (21
July);
|
|
●
|
Announced
EU filing for extended use of Relvar Ellipta in patients with
controlled asthma on an ICS/LABA combination (21
July);
|
|
●
|
Announced
data from Phase II study presented at IAS showing comparable HIV
suppression rates at 96 weeks for a two drug regimen of long-acting
cabotegravir and rilpivirine and a three drug regimen (24
July);
|
|
●
|
Announced
US filing of Arnuity
Ellipta for children with asthma (24 July);
|
|
●
|
Announced
positive interim results from a Phase IIIb study showing superior
efficacy of dolutegravir in second-line HIV treatment in
resource-limited settings (25 July);
|
|
●
|
Announced
results from a study showing that switching to a dolutegravir
regimen from a boosted protease inhibitor regimen maintained viral
suppression and improved lipid fractions in patients with HIV and
high cardiovascular risk (25 July).
|
|
Key Pharmaceuticals assets
|
|
At our
Business update to investors on 26 July, we confirmed an increased
focus on delivery of several key assets in our Pharmaceuticals
pipeline:
|
|
Therapy area
|
Asset
|
Indication
|
Phase
|
|
Respiratory
|
Closed
triple (ICS/LABA/LAMA)1
|
COPD
(also in Ph III for asthma)
|
Filed
|
|
danirixin
(CXCR2 antagonist)
|
COPD
|
Ph
II
|
|
|
nemiralisib
(2269557, PI3Kd inhibitor)
|
COPD
(acute and chronic)
|
Ph
II
|
|
|
HIV
|
cabotegravir
(long-acting, parenteral HIV integrase inhibitor)
|
HIV
pre-exposure prophylaxis (monotherapy) and HIV infection (in two
drug regimen with rilpivirine)
|
Ph
III
|
|
dolutegravir
+ rilpivirine1
|
HIV
infections – two drug maintenance regimen
|
Filed
|
|
|
dolutegravir
+ lamivudine
|
HIV
infections
|
Ph
III
|
|
|
Oncology
|
3174998
(OX40 agonist mAb)1
|
Solid
tumours and haematological malignancies
|
Ph
I/II
|
|
3359609
(ICOS agonist mAb)
|
Cancer
|
Ph
I/II
|
|
|
525762
(BET inhibitor)
|
Solid
tumours and haematological malignancies
|
Ph
I/II
|
|
|
2857916
(BCMA-ADC)1
|
Multiple
myeloma
|
Ph
I/II
|
|
|
3377794
(NY-ESO-1 TCR)2
|
Sarcoma,
multiple myeloma, non-small cell lung cancer, melanoma, ovarian
cancer.
|
Ph
II
|
|
|
Immuno-
inflammation
|
tapinarof
(2894512, topical non-steroidal anti-inflammatory)1
|
Atopic
dermatitis and psoriasis
|
Ph
II
|
|
2982772
(RIP-1 kinase inhibitor)
|
Psoriasis,
rheumatoid arthritis and ulcerative colitis
|
Ph
II
|
|
|
3196165
(anti-GM-CSF)1
|
Rheumatoid
arthritis and osteoarthritis
|
Ph
II
|
|
|
Other
|
daprodustat
(oral PHI)
|
Anaemia
associated with chronic renal disease
|
Ph
III
|
|
2398852
+ 2315698 (anti-SAP mAb + SAP depleter)1
|
Amyloidosis
|
Ph
II
|
|
1
|
In-licence or other alliance relationship with third
party
|
|
2
|
Option-based alliance with Adaptimmune Ltd.
|
|
Programmes to be terminated, partnered or divested
|
|
Also at
our Business update on 26 July, we confirmed that around 30
programmes are to be terminated or divested with additional
programmes under review. Clinical programmes include the
following:
|
|
Therapy area
|
Asset
|
Indication
|
Phase
|
|
Infectious
diseases
|
2878175
(NS5B polymerase inhibitor)
|
Hepatitis
C
|
Ph
II
|
|
danirixin
i.v. (CXCR2 antagonist)
|
Influenza
|
Ph
I
|
|
|
Oncology
|
tarextumab
(notch 2/3 mAb)2
|
SCLC
|
Ph
II
|
|
2816126
(EZH2 inhibitor)
|
Solid
tumours and haematological malignancies
|
Ph
I
|
|
|
2879552
(LSD1 inhibitor)*
|
SCLC
|
Ph
I
|
|
|
Immuno-inflammation
|
sirukumab
(IL6 mAb)**1
|
Rheumatoid arthritis
|
Filed
|
|
3050002
(CCL20 mAb)1
|
Psoriatic
arthritis
|
Ph
I
|
|
|
Metabolic
|
retosiban
(oxytocin antagonist)
|
Spontaneous
pre-term labour
|
Ph
III
|
|
2330672
(iBAT inhibitor)
|
Cholestatic
pruritis
|
Ph
II
|
|
|
2798745
(TRPV4 antagonist)
|
Heart
failure
|
Ph
II
|
|
|
daprodustat
(topical PHI)
|
Wound
healing
|
Ph
I
|
|
|
3008356
(DGAT 1 inhibitor)
|
Non-alcoholic
steatohepatitis
|
Ph
I
|
|
|
Dermatology
|
2981278
(topical ROR gamma inverse agonist)
|
Psoriasis
|
Ph
II
|
|
*
|
Studies in AML & MDS to continue
|
|
**
|
Rights to other indications also returned to Janssen
|
|
1
|
In-licence or other alliance relationship with third
party
|
|
2
|
Option-based alliance with OncoMed Pharmaceuticals
|
|
In
addition, another ~20 programmes in pre-clinical development have
been identified for termination, partnering or
divestment.
|
|
Definitions
|
|
Adjusted results
Total
reported results represent the Group’s overall performance.
However, these results can contain material unusual or
non-operational items that may obscure the key trends and factors
determining the Group’s operational performance. As a result,
GSK also reports adjusted results.
As
announced on 11 April 2017 in the ‘Change to financial
reporting framework’ press release, from Q1 2017 core results
has been renamed Adjusted results and, instead of all legal charges
and expenses, only significant legal charges and expenses are
excluded in order to present Adjusted results. All other legal
charges and expenses are included in Adjusted results. Significant
legal charges and expenses are those arising from the settlement of
litigation or a government investigation that are not in the normal
course and materially larger than more regularly occurring
individual matters. They also include certain major legacy legal
matters. Any new significant legal matters excluded in order to
present Adjusted results will be disclosed at the
time.
Adjusted
results now exclude the following items from Total results:
amortisation and impairment of intangible assets (excluding
computer software) and goodwill; major restructuring costs,
including those costs following material acquisitions; significant
legal charges (net of insurance recoveries) and expenses on the
settlement of litigation and government investigations,
transaction-related accounting adjustments for significant
acquisitions, and other items, including disposals of associates,
products and businesses and other operating income other than
royalty income, together with the tax effects of all of these
items.
GSK
believes that Adjusted results are more representative of the
performance of the Group’s operations and allow the key
trends and factors driving that performance to be more easily and
clearly identified by shareholders. The definition of Adjusted
results, as set out above, also aligns the Group’s results
with the majority of its peer companies and how they report
earnings.
Reconciliations
between Total and Adjusted results, as set out on pages 19, 25 and
62 to 65, including detailed breakdowns of the key adjusting items,
are provided to shareholders to ensure greater visibility and
transparency as they assess the Group’s
performance.
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.
Free cash flow
From Q1
2017, adjusted free cash flow is no longer being reported and the
free cash flow definition has been amended to include all
contingent consideration payments made during the
period.
Free
cash flow is now defined as the net cash inflow from operating
activities less capital expenditure, contingent consideration
payments, net interest, and dividends paid to non-controlling
interests plus proceeds from the sale of property, plant and
equipment, and dividends received from joint ventures and
associated undertakings. 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.
Free cash flow conversion
Free
cash flow conversion is free cash flow as a percentage of
earnings.
Working capital conversion cycle
The
working capital conversion cycle is calculated as the number of
days sales outstanding plus days inventory outstanding, less days
purchases outstanding.
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.
|
|
Outlook assumptions and cautionary statements
|
|
Assumptions related to 2017 guidance and 2016-2020
outlook
In
outlining the expectations for 2017 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 Group expects at least £6 billion of
revenues per annum on a CER basis in 2018 from products launched
since 2013 including contributions from the current pipeline asset
Shingrix.
The
assumptions for the Group’s revenue and earnings expectations
assume no material interruptions to supply of the Group’s
products and no material mergers, acquisitions, disposals,
litigation costs or share repurchases for the Company; and no
change in the Group’s shareholdings in ViiV Healthcare or
Consumer Healthcare. They also assume no material changes in the
macro-economic and healthcare environment. The 2017 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.
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. 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).
Some moderate upward pressure on the Group’s effective tax
rate is expected over the next few years.
|
|
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,
macroeconomic 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, 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
’Principal risks and uncertainties’ on pages 253-262 of
the GSK 2016 Annual Report. 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.
|
|
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:
|
David
Mawdsley
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
Simon
Steel
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
|
|
|
|
US
Media enquiries:
|
Sarah
Alspach
|
+1 202
715 1048
|
(Washington)
|
|
|
Sarah
Spencer
|
+1 215
751 3335
|
(Philadelphia)
|
|
|
|
|
|
|
Analyst/Investor
enquiries:
|
Sarah
Elton-Farr
|
+44 (0)
20 8047 5194
|
(London)
|
|
|
Gary
Davies
|
+44 (0)
20 8047 5503
|
(London)
|
|
|
James
Dodwell
|
+44 (0)
20 8047 2406
|
(London)
|
|
|
Sarah
Webster
|
+44 (0)
20 8047 0246
|
(London)
|
|
|
Tom
Curry
|
+1 215
751 5419
|
(Philadelphia)
|
|
|
Jeff
McLaughlin
|
+1 215
751 7002
|
(Philadelphia)
|
|
Registered
in England & Wales:
No. 3888792
|
|
|
|
Registered
Office:
980 Great West
Road
Brentford,
Middlesex
TW8 9GS
|
|
Financial information
|
|
Income statements
|
|
|
Q2 2017
£m
|
|
Q2
2016
£m
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
|
|
|
|
TURNOVER
|
7,320
|
|
6,532
|
|
14,704
|
|
12,761
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,619)
|
|
(2,124)
|
|
(5,132)
|
|
(4,257)
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
4,701
|
|
4,408
|
|
9,572
|
|
8,504
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,379)
|
|
(2,174)
|
|
(4,831)
|
|
(4,363)
|
|
Research
and development
|
(1,260)
|
|
(888)
|
|
(2,220)
|
|
(1,703)
|
|
Royalty income
|
98
|
|
83
|
|
180
|
|
174
|
|
Other
operating income/(expense)
|
(1,180)
|
|
(1,580)
|
|
(1,003)
|
|
(2,040)
|
|
|
|
|
|
|
|
|
|
|
OPERATING (LOSS)/PROFIT
|
(20)
|
|
(151)
|
|
1,698
|
|
572
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
15
|
|
18
|
|
36
|
|
36
|
|
Finance
expense
|
(192)
|
|
(183)
|
|
(386)
|
|
(364)
|
|
Profit
on disposal of associates
|
20
|
|
-
|
|
20
|
|
-
|
|
Share
of after tax (losses)/profits of
associates
and joint ventures
|
(1)
|
|
(2)
|
|
4
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
(LOSS)/PROFIT BEFORE TAXATION
|
(178)
|
|
(318)
|
|
1,372
|
|
242
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
92
|
|
(174)
|
|
(235)
|
|
(382)
|
|
Tax rate %
|
51.7%
|
|
(54.7)%
|
|
17.1%
|
|
>100%
|
|
|
|
|
|
|
|
|
|
|
(LOSS)/PROFIT AFTER TAXATION FOR
THE PERIOD
|
(86)
|
|
(492)
|
|
1,137
|
|
(140)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss)
attributable to non-controlling
interests
|
94
|
|
(57)
|
|
271
|
|
13
|
|
(Loss)/profit
attributable to shareholders
|
(180)
|
|
(435)
|
|
866
|
|
(153)
|
|
|
|
|
|
|
|
|
|
|
|
(86)
|
|
(492)
|
|
1,137
|
|
(140)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS)/EARNINGS PER SHARE
|
(3.7)p
|
|
(9.0)p
|
|
17.7p
|
|
(3.2)p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
(loss)/earnings per share
|
(3.7)p
|
|
(9.0)p
|
|
17.6p
|
|
(3.2)p
|
|
|
|
|
|
|
|
|
|
|
Statement of comprehensive income – three months ended 30
June 2017
|
|
|
Q2 2017
£m
|
|
Q2
2016
£m
|
|
|
|
|
|
|
Loss
for the period
|
(86)
|
|
(492)
|
|
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
366
|
|
239
|
|
Fair
value movements on available-for-sale investments
|
-
|
|
230
|
|
Reclassification
of fair value movements on available-for-sale
investments
|
(23)
|
|
(133)
|
|
Deferred
tax on fair value movements on available-for-sale
investments
|
(2)
|
|
(28)
|
|
Deferred
tax reversed on reclassification of available-for-sale
investments
|
10
|
|
42
|
|
Fair
value movements on cash flow hedges
|
-
|
|
9
|
|
Deferred
tax on fair value movements on cash flow hedges
|
-
|
|
(1)
|
|
Reclassification
of cash flow hedges to income statement
|
2
|
|
(4)
|
|
Share
of other comprehensive income of associates and joint
ventures
|
-
|
|
2
|
|
|
|
|
|
|
|
353
|
|
356
|
|
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
(28)
|
|
288
|
|
Re-measurement
losses on defined benefit plans
|
(49)
|
|
(219)
|
|
Deferred
tax on re-measurement losses on defined benefit plans
|
6
|
|
50
|
|
|
|
|
|
|
|
(71)
|
|
119
|
|
|
|
|
|
|
Other
comprehensive income for the period
|
282
|
|
475
|
|
|
|
|
|
|
Total
comprehensive income/(expense) for the period
|
196
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income/(expense) for the period attributable
to:
|
|
|
|
|
Shareholders
|
130
|
|
(248)
|
|
Non-controlling
interests
|
66
|
|
231
|
|
|
|
|
|
|
|
196
|
|
(17)
|
|
|
|
|
|
|
Statement of comprehensive income – six months ended 30 June
2017
|
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
Profit/(loss)
for the period
|
1,137
|
|
(140)
|
|
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
562
|
|
922
|
|
Fair
value movements on available-for-sale investments
|
53
|
|
159
|
|
Reclassification
of fair value movements on available-for-sale
investments
|
(27)
|
|
(135)
|
|
Deferred
tax on fair value movements on available-for-sale
investments
|
(4)
|
|
15
|
|
Deferred
tax reversed on reclassification of available-for-sale
investments
|
9
|
|
44
|
|
Fair
value movements on cash flow hedges
|
(2)
|
|
9
|
|
Deferred
tax on fair value movements on cash flow hedges
|
(1)
|
|
(2)
|
|
Reclassification
of cash flow hedges to income statement
|
2
|
|
(6)
|
|
Share
of other comprehensive income of associates and joint
ventures
|
-
|
|
2
|
|
|
|
|
|
|
|
592
|
|
1,008
|
|
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
(1)
|
|
431
|
|
Re-measurement
gains/(losses) on defined benefit plans
|
185
|
|
(756)
|
|
Deferred
tax on re-measurement gains/(losses) on defined benefit
plans
|
(49)
|
|
184
|
|
|
|
|
|
|
|
135
|
|
(141)
|
|
|
|
|
|
|
Other
comprehensive income for the period
|
727
|
|
867
|
|
|
|
|
|
|
Total
comprehensive income for the period
|
1,864
|
|
727
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
|
Shareholders
|
1,594
|
|
283
|
|
Non-controlling
interests
|
270
|
|
444
|
|
|
|
|
|
|
|
1,864
|
|
727
|
|
|
|
|
|
|
Pharmaceuticals turnover – three months ended 30 June
2017
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
—————————————————————————————————————————————————————————————————————
|
——————————————————————————————————————————————————————————————————————
|
———————————————————————————————————————————————————————————————————————
|
——————————————————————————————————————————————————————————————————————
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
————————————————————————————————————
|
|
———————————————————————————————————
|
|
———————————————————————————————————
|
|
———————————————————————————————————
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Respiratory
|
1,801
|
14
|
4
|
970
|
19
|
9
|
360
|
4
|
(5)
|
471
|
11
|
4
|
|
Anoro Ellipta
|
85
|
85
|
67
|
59
|
90
|
71
|
17
|
89
|
78
|
9
|
50
|
33
|
|
Arnuity Ellipta
|
8
|
>100
|
>100
|
8
|
>100
|
>100
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Avamys/Veramyst
|
65
|
-
|
(8)
|
(1)
|
>(100)
|
>(100)
|
23
|
5
|
(5)
|
43
|
16
|
8
|
|
Flixotide/Flovent
|
145
|
7
|
(1)
|
78
|
4
|
(5)
|
23
|
5
|
(5)
|
44
|
13
|
8
|
|
Incruse Ellipta
|
50
|
80
|
65
|
34
|
61
|
46
|
13
|
>100
|
>100
|
3
|
>100
|
>100
|
|
Nucala
|
73
|
>100
|
>100
|
50
|
>100
|
>100
|
15
|
>100
|
>100
|
8
|
>100
|
>100
|
|
Relvar/Breo Ellipta
|
281
|
92
|
75
|
183
|
>100
|
>100
|
50
|
52
|
39
|
48
|
45
|
30
|
|
Seretide/Advair
|
848
|
(6)
|
(14)
|
476
|
(2)
|
(11)
|
182
|
(15)
|
(21)
|
190
|
(5)
|
(11)
|
|
Ventolin
|
179
|
-
|
(8)
|
86
|
(9)
|
(17)
|
30
|
-
|
(3)
|
63
|
17
|
6
|
|
Other
|
67
|
7
|
4
|
(3)
|
>(100)
|
(25)
|
7
|
(9)
|
(48)
|
63
|
18
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
1,116
|
29
|
17
|
694
|
36
|
24
|
280
|
10
|
-
|
142
|
40
|
27
|
|
Epzicom/Kivexa
|
63
|
(60)
|
(63)
|
7
|
(88)
|
(88)
|
32
|
(54)
|
(59)
|
24
|
(23)
|
(28)
|
|
Selzentry
|
29
|
(3)
|
(13)
|
13
|
(15)
|
(21)
|
11
|
(6)
|
(14)
|
5
|
52
|
21
|
|
Tivicay
|
340
|
51
|
37
|
223
|
49
|
36
|
78
|
41
|
28
|
39
|
96
|
75
|
|
Triumeq
|
648
|
58
|
44
|
440
|
62
|
47
|
148
|
39
|
26
|
60
|
>100
|
80
|
|
Other
|
36
|
(20)
|
(25)
|
11
|
(30)
|
(36)
|
11
|
(3)
|
(12)
|
14
|
(22)
|
(23)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
93
|
19
|
9
|
83
|
17
|
8
|
7
|
40
|
20
|
3
|
50
|
-
|
|
Benlysta
|
93
|
19
|
9
|
83
|
17
|
8
|
7
|
40
|
20
|
3
|
50
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
1,347
|
(1)
|
(7)
|
227
|
(20)
|
(27)
|
346
|
3
|
(5)
|
774
|
5
|
-
|
|
Dermatology
|
111
|
26
|
17
|
-
|
-
|
-
|
41
|
24
|
15
|
70
|
25
|
16
|
|
Augmentin
|
141
|
5
|
(1)
|
-
|
-
|
-
|
42
|
11
|
-
|
99
|
3
|
(1)
|
|
Avodart
|
160
|
(10)
|
(19)
|
4
|
(91)
|
(91)
|
84
|
9
|
(3)
|
72
|
31
|
20
|
|
Coreg
|
39
|
30
|
17
|
39
|
30
|
17
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Eperzan/Tanzeum
|
23
|
(21)
|
(28)
|
22
|
(21)
|
(29)
|
1
|
-
|
-
|
-
|
-
|
-
|
|
Imigran/Imitrex
|
41
|
14
|
8
|
16
|
(6)
|
(6)
|
18
|
29
|
14
|
7
|
40
|
40
|
|
Lamictal
|
149
|
(1)
|
(9)
|
72
|
(8)
|
(15)
|
28
|
12
|
4
|
49
|
2
|
(4)
|
|
Requip
|
29
|
(3)
|
(10)
|
4
|
(20)
|
(60)
|
8
|
-
|
(13)
|
17
|
-
|
6
|
|
Serevent
|
23
|
5
|
(5)
|
11
|
10
|
-
|
8
|
(11)
|
(11)
|
4
|
33
|
-
|
|
Seroxat/Paxil
|
46
|
(2)
|
(9)
|
-
|
-
|
-
|
10
|
(9)
|
(18)
|
36
|
-
|
(6)
|
|
Valtrex
|
32
|
7
|
(3)
|
5
|
25
|
-
|
8
|
33
|
17
|
19
|
(5)
|
(10)
|
|
Zeffix
|
22
|
(21)
|
(25)
|
1
|
>(100)
|
>(100)
|
2
|
100
|
100
|
19
|
(30)
|
(33)
|
|
Other
|
531
|
(4)
|
(8)
|
53
|
(18)
|
(25)
|
96
|
(14)
|
(20)
|
382
|
2
|
(2)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––––––––
|
––––––––
|
––––––––
|
–––––––––(3)–––––––
|
––––––––
|
––––––––
|
––––––––––––––––
|
––––––––
|
|
Pharmaceuticals
|
4,357
|
12
|
3
|
1,974
|
18
|
7
|
993
|
6
|
(4)
|
1,390
|
10
|
3
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals turnover – six months ended 30 June
2017
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
——————————————————————————————————————————————————————————————————————
|
——————————————————————————————————————————————————————————————————————
|
——————————————————————————————————————————————————————————————————————
|
——————————————————————————————————————————————————————————————————————
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
———————————————————————————————————
|
|
———————————————————————————————————
|
|
———————————————————————————————————
|
|
———————————————————————————————————
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Respiratory
|
3,484
|
16
|
4
|
1,737
|
20
|
7
|
742
|
7
|
(2)
|
1,005
|
17
|
5
|
|
Anoro Ellipta
|
147
|
86
|
67
|
99
|
83
|
63
|
31
|
94
|
81
|
17
|
89
|
67
|
|
Arnuity Ellipta
|
16
|
>100
|
>100
|
16
|
>100
|
>100
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Avamys/Veramyst
|
156
|
9
|
(3)
|
(1)
|
>(100)
|
>(100)
|
44
|
10
|
-
|
113
|
24
|
9
|
|
Flixotide/Flovent
|
309
|
7
|
(3)
|
167
|
2
|
(9)
|
51
|
9
|
(2)
|
91
|
17
|
8
|
|
Incruse Ellipta
|
84
|
68
|
52
|
54
|
36
|
23
|
23
|
>100
|
>100
|
7
|
>100
|
>100
|
|
Nucala
|
132
|
>100
|
>100
|
92
|
>100
|
>100
|
26
|
>100
|
>100
|
14
|
>100
|
>100
|
|
Relvar/Breo Ellipta
|
485
|
89
|
69
|
294
|
>100
|
92
|
99
|
57
|
43
|
92
|
61
|
42
|
|
Seretide/Advair
|
1,600
|
(3)
|
(13)
|
815
|
(1)
|
(12)
|
388
|
(12)
|
(19)
|
397
|
2
|
(8)
|
|
Ventolin
|
393
|
10
|
(1)
|
203
|
9
|
(3)
|
65
|
7
|
-
|
125
|
14
|
4
|
|
Other
|
162
|
15
|
4
|
(2)
|
>(100)
|
>(100)
|
15
|
9
|
(13)
|
149
|
18
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
2,101
|
32
|
18
|
1,302
|
39
|
24
|
539
|
13
|
2
|
260
|
43
|
27
|
|
Epzicom/Kivexa
|
141
|
(55)
|
(59)
|
21
|
(82)
|
(84)
|
71
|
(49)
|
(54)
|
49
|
(16)
|
(25)
|
|
Selzentry
|
67
|
12
|
-
|
33
|
7
|
(4)
|
21
|
(9)
|
(16)
|
13
|
97
|
71
|
|
Tivicay
|
641
|
55
|
39
|
423
|
54
|
38
|
148
|
42
|
29
|
70
|
>100
|
83
|
|
Triumeq
|
1,187
|
61
|
44
|
800
|
64
|
46
|
282
|
46
|
32
|
105
|
91
|
68
|
|
Other
|
65
|
(11)
|
(20)
|
25
|
(13)
|
(22)
|
17
|
4
|
(5)
|
23
|
(19)
|
(29)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
185
|
29
|
15
|
167
|
28
|
15
|
13
|
30
|
20
|
5
|
67
|
-
|
|
Benlysta
|
184
|
29
|
15
|
166
|
28
|
15
|
13
|
30
|
20
|
5
|
67
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
2,776
|
2
|
(6)
|
499
|
(7)
|
(16)
|
707
|
2
|
(7)
|
1,570
|
5
|
(3)
|
|
Dermatology
|
224
|
22
|
11
|
-
|
-
|
-
|
82
|
15
|
7
|
142
|
34
|
21
|
|
Augmentin
|
296
|
8
|
1
|
-
|
-
|
-
|
95
|
9
|
(1)
|
201
|
8
|
3
|
|
Avodart
|
320
|
3
|
(8)
|
9
|
(83)
|
(85)
|
167
|
8
|
(3)
|
144
|
40
|
23
|
|
Coreg
|
74
|
19
|
6
|
74
|
19
|
6
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Eperzan/Tanzeum
|
51
|
(6)
|
(15)
|
50
|
(6)
|
(17)
|
2
|
>100
|
>100
|
(1)
|
-
|
-
|
|
Imigran/Imitrex
|
94
|
22
|
14
|
46
|
31
|
26
|
34
|
13
|
3
|
14
|
17
|
8
|
|
Lamictal
|
315
|
9
|
(2)
|
161
|
9
|
(3)
|
54
|
8
|
-
|
100
|
9
|
(2)
|
|
Requip
|
56
|
2
|
(7)
|
8
|
-
|
(25)
|
14
|
(7)
|
(13)
|
34
|
6
|
-
|
|
Serevent
|
49
|
11
|
-
|
26
|
30
|
15
|
17
|
(6)
|
(11)
|
6
|
-
|
(17)
|
|
Seroxat/Paxil
|
91
|
(5)
|
(14)
|
-
|
-
|
-
|
19
|
(5)
|
(15)
|
72
|
4
|
(4)
|
|
Valtrex
|
63
|
11
|
(2)
|
9
|
-
|
(11)
|
15
|
25
|
17
|
39
|
8
|
(6)
|
|
Zeffix
|
48
|
(19)
|
(24)
|
1
|
-
|
-
|
3
|
-
|
-
|
44
|
(20)
|
(25)
|
|
Other
|
1,095
|
(6)
|
(12)
|
115
|
(14)
|
(21)
|
205
|
(13)
|
(20)
|
775
|
(3)
|
(9)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––––––––
|
––––––––
|
––––––––
|
–––––––––(3)–––––––
|
––––––––
|
––––––––
|
––––––––––––––––
|
––––––––
|
|
Pharmaceuticals
|
8,546
|
14
|
4
|
3,705
|
22
|
9
|
2,001
|
7
|
(3)
|
2,840
|
12
|
2
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover – three months ended 30 June
2017
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
——————————————————————————————————————————————————————————————————————————
|
——————————————————————————————————————————————————————————————————————————
|
—————————————————————————————————————————————————————————————————————————
|
————————————————————————————————————————————————————————————————————————
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
——————————————————————————————————————————
|
|
——————————————————————————————————————————
|
|
——————————————————————————————————————————
|
|
—————————————————————————————————————————
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Meningitis
|
200
|
32
|
20
|
83
|
28
|
17
|
98
|
44
|
32
|
19
|
6
|
(17)
|
|
Bexsero
|
139
|
43
|
31
|
40
|
29
|
16
|
88
|
47
|
33
|
11
|
83
|
83
|
|
Menveo
|
56
|
19
|
6
|
43
|
26
|
18
|
7
|
40
|
40
|
6
|
(25)
|
(62)
|
|
Other
|
5
|
(29)
|
(43)
|
-
|
-
|
-
|
3
|
-
|
-
|
2
|
(50)
|
(75)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
21
|
24
|
6
|
-
|
-
|
-
|
4
|
>100
|
>100
|
17
|
(6)
|
(22)
|
|
Fluarix, FluLaval
|
21
|
24
|
6
|
-
|
-
|
-
|
4
|
>100
|
>100
|
17
|
(6)
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Vaccines
|
890
|
12
|
2
|
233
|
20
|
10
|
292
|
14
|
3
|
365
|
7
|
(3)
|
|
Infanrix, Pediarix
|
156
|
11
|
3
|
57
|
8
|
2
|
77
|
20
|
8
|
22
|
(4)
|
(9)
|
|
Boostrix
|
150
|
56
|
42
|
60
|
9
|
-
|
51
|
82
|
64
|
39
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
155
|
19
|
10
|
85
|
52
|
37
|
48
|
(2)
|
(10)
|
22
|
(12)
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
95
|
(12)
|
(20)
|
16
|
(11)
|
(11)
|
23
|
35
|
29
|
56
|
(23)
|
(34)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
151
|
10
|
(1)
|
-
|
-
|
-
|
11
|
-
|
(9)
|
140
|
11
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra, Varilrix
|
79
|
-
|
(8)
|
-
|
-
|
-
|
41
|
(2)
|
(12)
|
38
|
2
|
(3)
|
|
Cervarix
|
18
|
6
|
(6)
|
-
|
-
|
-
|
8
|
-
|
(12)
|
10
|
25
|
12
|
|
Other
|
86
|
1
|
(12)
|
15
|
36
|
9
|
33
|
(14)
|
(23)
|
38
|
6
|
(6)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Vaccines
|
1,111
|
16
|
5
|
316
|
22
|
12
|
394
|
21
|
10
|
401
|
6
|
(5)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover – six months ended 30 June
2017
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
———————————————————————————————————————————————————————————————————————
|
———————————————————————————————————————————————————————————————————————
|
————————————————————————————————————————————————————————————————————————
|
————————————————————————————————————————————————————————————————————————
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
———————————————————————————————————————————
|
|
——————————————————————————————————————————
|
|
—————————————————————————————————————————
|
|
—————————————————————————————————————————
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Meningitis
|
391
|
49
|
33
|
129
|
25
|
13
|
202
|
59
|
44
|
60
|
82
|
55
|
|
Bexsero
|
265
|
67
|
50
|
67
|
43
|
28
|
171
|
69
|
53
|
27
|
>100
|
>100
|
|
Menveo
|
111
|
25
|
11
|
62
|
11
|
-
|
23
|
28
|
17
|
26
|
73
|
47
|
|
Other
|
15
|
-
|
(13)
|
-
|
-
|
-
|
8
|
-
|
(12)
|
7
|
-
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
34
|
31
|
8
|
(3)
|
>100
|
>100
|
5
|
>100
|
>100
|
32
|
23
|
-
|
|
Fluarix, FluLaval
|
34
|
31
|
8
|
(3)
|
>100
|
>100
|
5
|
>100
|
>100
|
32
|
23
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Vaccines
|
1,838
|
18
|
6
|
553
|
33
|
18
|
576
|
7
|
(2)
|
709
|
18
|
6
|
|
Infanrix, Pediarix
|
390
|
19
|
7
|
182
|
39
|
24
|
160
|
3
|
(6)
|
48
|
14
|
-
|
|
Boostrix
|
261
|
42
|
27
|
114
|
25
|
12
|
90
|
34
|
21
|
57
|
>100
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
322
|
21
|
9
|
170
|
44
|
28
|
99
|
1
|
(7)
|
53
|
6
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
241
|
11
|
(1)
|
70
|
17
|
5
|
45
|
29
|
20
|
126
|
3
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
284
|
25
|
12
|
-
|
-
|
-
|
25
|
14
|
-
|
259
|
26
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra, Varilrix
|
156
|
10
|
(1)
|
-
|
-
|
-
|
78
|
-
|
(10)
|
78
|
23
|
11
|
|
Cervarix
|
35
|
3
|
(9)
|
-
|
-
|
-
|
15
|
-
|
(13)
|
20
|
11
|
-
|
|
Other
|
149
|
(4)
|
(12)
|
17
|
6
|
(6)
|
64
|
(4)
|
(11)
|
68
|
(5)
|
(15)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Vaccines
|
2,263
|
23
|
10
|
679
|
31
|
17
|
783
|
18
|
7
|
801
|
22
|
8
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
|
|
|
30 June 2017
£m
|
|
30 June
2016
£m
|
|
31
December 2016
£m
|
|
ASSETS
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Property,
plant and equipment
|
10,662
|
|
10,539
|
|
10,808
|
|
Goodwill
|
5,864
|
|
5,747
|
|
5,965
|
|
Other
intangible assets
|
18,465
|
|
18,317
|
|
18,776
|
|
Investments
in associates and joint ventures
|
250
|
|
232
|
|
263
|
|
Other
investments
|
1,013
|
|
1,358
|
|
985
|
|
Deferred
tax assets
|
4,348
|
|
3,545
|
|
4,374
|
|
Other
non-current assets
|
1,205
|
|
1,009
|
|
1,199
|
|
|
|
|
|
|
|
|
Total non-current assets
|
41,807
|
|
40,747
|
|
42,370
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Inventories
|
5,743
|
|
5,494
|
|
5,102
|
|
Current
tax recoverable
|
196
|
|
156
|
|
226
|
|
Trade
and other receivables
|
6,196
|
|
5,843
|
|
6,026
|
|
Derivative
financial instruments
|
65
|
|
598
|
|
156
|
|
Liquid
investments
|
85
|
|
83
|
|
89
|
|
Cash
and cash equivalents
|
3,986
|
|
4,590
|
|
4,897
|
|
Assets
held for sale
|
155
|
|
116
|
|
215
|
|
|
|
|
|
|
|
|
Total current assets
|
16,426
|
|
16,880
|
|
16,711
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
58,233
|
|
57,627
|
|
59,081
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term
borrowings
|
(6,612)
|
|
(4,485)
|
|
(4,129)
|
|
Contingent
consideration liabilities
|
(855)
|
|
(458)
|
|
(561)
|
|
Trade
and other payables
|
(19,580)
|
|
(10,422)
|
|
(11,964)
|
|
Derivative
financial instruments
|
(96)
|
|
(620)
|
|
(194)
|
|
Current
tax payable
|
(929)
|
|
(1,139)
|
|
(1,305)
|
|
Short-term
provisions
|
(716)
|
|
(983)
|
|
(848)
|
|
|
|
|
|
|
|
|
Total current liabilities
|
(28,788)
|
|
(18,107)
|
|
(19,001)
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Long-term
borrowings
|
(12,259)
|
|
(15,098)
|
|
(14,661)
|
|
Deferred
tax liabilities
|
(1,971)
|
|
(1,710)
|
|
(1,934)
|
|
Pensions
and other post-employment benefits
|
(3,886)
|
|
(4,196)
|
|
(4,090)
|
|
Other
provisions
|
(713)
|
|
(550)
|
|
(652)
|
|
Derivative
financial instruments
|
(1)
|
|
-
|
|
-
|
|
Contingent
consideration liabilities
|
(5,188)
|
|
(4,516)
|
|
(5,335)
|
|
Other
non-current liabilities
|
(1,003)
|
|
(9,224)
|
|
(8,445)
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
(25,021)
|
|
(35,294)
|
|
(35,117)
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
(53,809)
|
|
(53,401)
|
|
(54,118)
|
|
|
|
|
|
|
|
|
NET ASSETS
|
4,424
|
|
4,226
|
|
4,963
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share
capital
|
1,343
|
|
1,341
|
|
1,342
|
|
Share
premium account
|
3,008
|
|
2,857
|
|
2,954
|
|
Retained
earnings
|
(5,854)
|
|
(6,081)
|
|
(5,392)
|
|
Other
reserves
|
2,314
|
|
2,457
|
|
2,220
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
811
|
|
574
|
|
1,124
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
3,613
|
|
3,652
|
|
3,839
|
|
|
|
|
|
|
|
|
TOTAL EQUITY
|
4,424
|
|
4,226
|
|
4,963
|
|
|
|
|
|
|
|
|
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
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
At 1
January 2017
|
1,342
|
2,954
|
(5,392)
|
2,220
|
1,124
|
3,839
|
4,963
|
|
|
|
|
|
|
|
|
|
|
Profit
for the period
|
|
|
866
|
|
866
|
271
|
1,137
|
|
Other
comprehensive income/(expense)
for
the period
|
|
|
698
|
30
|
728
|
(1)
|
727
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Total
comprehensive income for the period
|
|
|
1,564
|
30
|
1,594
|
270
|
1,864
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(494)
|
(494)
|
|
Dividends
to shareholders
|
|
|
(2,049)
|
|
(2,049)
|
|
(2,049)
|
|
Changes
in non-controlling interests
|
|
|
|
|
|
(2)
|
(2)
|
|
Shares
issued
|
1
|
44
|
|
|
45
|
|
45
|
|
Shares
acquired by ESOP Trusts
|
|
10
|
70
|
(141)
|
(61)
|
|
(61)
|
|
Write-down
on shares held by ESOP Trusts
|
|
|
(205)
|
205
|
-
|
|
-
|
|
Share-based
incentive plans
|
|
|
158
|
|
158
|
|
158
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
At 30 June 2017
|
1,343
|
3,008
|
(5,854)
|
2,314
|
811
|
3,613
|
4,424
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
At 1
January 2016
|
1,340
|
2,831
|
(1,397)
|
2,340
|
5,114
|
3,764
|
8,878
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit
for the period
|
|
|
(153)
|
|
(153)
|
13
|
(140)
|
|
Other
comprehensive income for the
period
|
|
|
351
|
85
|
436
|
431
|
867
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Total
comprehensive income for the
period
|
|
|
198
|
85
|
283
|
444
|
727
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(278)
|
(278)
|
|
Dividends
to shareholders
|
|
|
(3,002)
|
|
(3,002)
|
|
(3,002)
|
|
Recognition
of liabilities with non-controlling
interests
|
|
|
(2,013)
|
|
(2,013)
|
(159)
|
(2,172)
|
|
Changes
in non-controlling interests
|
|
|
54
|
|
54
|
(119)
|
(65)
|
|
Shares
issued
|
1
|
26
|
|
|
27
|
|
27
|
|
Shares
acquired by ESOP Trusts
|
|
|
|
(58)
|
(58)
|
|
(58)
|
|
Write-down
on shares held by ESOP Trusts
|
|
|
(90)
|
90
|
-
|
|
-
|
|
Share-based
incentive plans
|
|
|
169
|
|
169
|
|
169
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
At 30
June 2016
|
1,341
|
2,857
|
(6,081)
|
2,457
|
574
|
3,652
|
4,226
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Cash flow statement – six months ended 30 June
2017
|
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
|
|
Profit/(loss) after tax
|
1,137
|
|
(140)
|
|
|
Tax on
profits
|
235
|
|
382
|
|
|
Share
of after tax profits of associates and joint ventures
|
(4)
|
|
2
|
|
|
Profit
on disposal of interest in associates
|
(20)
|
|
-
|
|
|
Net
finance expense
|
350
|
|
328
|
|
|
Depreciation
and other adjusting items
|
1,413
|
|
959
|
|
|
Increase
in working capital
|
(976)
|
|
(643)
|
|
|
Contingent
consideration paid
|
(263)
|
|
(138)
|
|
|
Increase
in other net liabilities (excluding contingent consideration
paid)
|
837
|
|
1,816
|
|
|
|
|
|
|
|
|
Cash generated from operations
|
2,709
|
|
2,566
|
|
|
Taxation
paid
|
(557)
|
|
(827)
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
2,152
|
|
1,739
|
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
(639)
|
|
(612)
|
|
|
Proceeds
from sale of property, plant and equipment
|
125
|
|
11
|
|
|
Purchase
of intangible assets
|
(389)
|
|
(484)
|
|
|
Proceeds
from sale of intangible assets
|
18
|
|
62
|
|
|
Purchase
of equity investments
|
(56)
|
|
(58)
|
|
|
Proceeds
from sale of equity investments
|
44
|
|
147
|
|
|
Contingent
consideration paid
|
(40)
|
|
(30)
|
|
|
Purchase
of businesses, net of cash acquired
|
-
|
|
(24)
|
|
|
Disposal
of businesses
|
223
|
|
-
|
|
|
Proceeds
from disposal of interest in associates
|
37
|
|
-
|
|
|
Investment
in associates and joint ventures
|
(6)
|
|
(7)
|
|
|
Interest
received
|
35
|
|
34
|
|
|
Dividends
from associates and joint ventures
|
2
|
|
40
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities
|
(646)
|
|
(921)
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
Issue
of share capital
|
45
|
|
27
|
|
|
Shares
acquired by ESOP Trusts
|
(61)
|
|
(58)
|
|
|
Increase
in short-term loans
|
1,930
|
|
2,079
|
|
|
Repayment
of short-term loans
|
(1,544)
|
|
(880)
|
|
|
Net
repayment of obligations under finance leases
|
(13)
|
|
(10)
|
|
|
Interest
paid
|
(384)
|
|
(357)
|
|
|
Dividends
paid to shareholders
|
(2,049)
|
|
(3,002)
|
|
|
Distributions
to non-controlling interests
|
(494)
|
|
(278)
|
|
|
Other
financing items
|
96
|
|
(5)
|
|
|
|
|
|
|
|
|
Net cash outflow from financing activities
|
(2,474)
|
|
(2,484)
|
|
|
|
|
|
|
|
|
Decrease in cash and bank overdrafts in the period
|
(968)
|
|
(1,666)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and bank overdrafts at beginning of the period
|
4,605
|
|
5,486
|
|
|
Exchange
adjustments
|
(46)
|
|
144
|
|
|
Decrease
in cash and bank overdrafts
|
(968)
|
|
(1,666)
|
|
|
|
|
|
|
|
|
Cash and bank overdrafts at end of the period
|
3,591
|
|
3,964
|
|
|
|
|
|
|
|
|
Cash
and bank overdrafts at end of the period comprise:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
3,986
|
|
4,590
|
|
|
Overdrafts
|
(395)
|
|
(626)
|
|
|
|
|
|
|
|
|
3,591
|
|
3,964
|
|
|
|
|
|
|
|
|
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
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.
From Q1
2017, Adjusted results have been amended to exclude, instead of all
legal charges, only significant legal charges, as set out in
‘Accounting policies and basis of preparation’ on page
51. Comparative information has been revised
accordingly.
|
|
Turnover by segment
|
|||||||
|
|
Q2 2017
£m
|
|
Q2
2016
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,357
|
|
3,882
|
|
12
|
|
3
|
|
Vaccines
|
1,111
|
|
960
|
|
16
|
|
5
|
|
Consumer
Healthcare
|
1,852
|
|
1,690
|
|
10
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
7,320
|
|
6,532
|
|
12
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|||||||
|
|
Q2 2017
£m
|
|
Q2
2016
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,152
|
|
1,934
|
|
11
|
|
-
|
|
Pharmaceuticals
R&D
|
(688)
|
|
(583)
|
|
18
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
1,464
|
|
1,351
|
|
8
|
|
(5)
|
|
Vaccines
|
374
|
|
264
|
|
42
|
|
30
|
|
Consumer
Healthcare
|
328
|
|
238
|
|
38
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
2,166
|
|
1,853
|
|
17
|
|
3
|
|
Corporate
and other unallocated costs
|
(83)
|
|
(31)
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,083
|
|
1,822
|
|
14
|
|
-
|
|
Adjustments
|
(2,103)
|
|
(1,973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating loss
|
(20)
|
|
(151)
|
|
87
|
|
(45)
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
15
|
|
18
|
|
|
|
|
|
Finance
costs
|
(192)
|
|
(183)
|
|
|
|
|
|
Profit
on disposal of associates
|
20
|
|
-
|
|
|
|
|
|
Share
of after tax losses of associates
and
joint ventures
|
(1)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
before taxation
|
(178)
|
|
(318)
|
|
44
|
|
(18)
|
|
|
|
|
|
|
|
|
|
|
Turnover by segment
|
|||||||
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,546
|
|
7,468
|
|
14
|
|
4
|
|
Vaccines
|
2,263
|
|
1,842
|
|
23
|
|
10
|
|
Consumer
Healthcare
|
3,895
|
|
3,451
|
|
13
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
14,704
|
|
12,761
|
|
15
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|||||||
|
|
H1 2017
£m
|
|
H1
2016
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,270
|
|
3,624
|
|
18
|
|
4
|
|
Pharmaceuticals
R&D
|
(1,366)
|
|
(1,130)
|
|
21
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
2,904
|
|
2,494
|
|
16
|
|
-
|
|
Vaccines
|
715
|
|
510
|
|
40
|
|
26
|
|
Consumer
Healthcare
|
679
|
|
541
|
|
26
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
4,298
|
|
3,545
|
|
21
|
|
5
|
|
Corporate
and other unallocated costs
|
(236)
|
|
(199)
|
|
19
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,062
|
|
3,346
|
|
21
|
|
4
|
|
Adjustments
|
(2,364)
|
|
(2,774)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
1,698
|
|
572
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
36
|
|
36
|
|
|
|
|
|
Finance
costs
|
(386)
|
|
(364)
|
|
|
|
|
|
Profit
on disposal of associates
|
20
|
|
-
|
|
|
|
|
|
Share
of after tax profits/(losses) of associates
and
joint ventures
|
4
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
1,372
|
|
242
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
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
2016.
At 30
June 2017, the Group’s aggregate provision for legal and
other disputes (not including tax matters described under
‘Taxation’ below) was £0.3 billion (31 December 2016: £0.3 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.
Significant
developments since the Annual Report 2016 and the Q1 2017 Results
Announcement are as follows:
In
February 2017, Teva Pharmaceuticals (Teva) sent the Group a
notification under the US Hatch-Waxman Act challenging three Group
patents covering Flovent
HFA. On 31 March 2017, the Group filed suit against Teva on the two
challenged patents covering dose-counter devices that expire in
2023 and 2026. The Group did not sue Teva under the third patent
(the ‘413 patent) and has requested that the FDA delist the
‘413 patent from the Orange Book. On 20 June 2017, the Group
voluntarily dismissed the entire case against Teva.
Developments
with respect to tax matters are described in ‘Taxation’
below.
|
|
Taxation
Issues
related to taxation are described in the ‘Taxation’
note in the Annual Report 2016.
The
Group’s tax rate on Total profits of 17.1% has been
influenced by transaction-related charges arising on the
Group’s put option liabilities, costs associated with the
withdrawal of Tanzeum and
the reassessment of estimates of uncertain tax positions following
the settlement of a number of open issues with tax authorities in
various jurisdictions.
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.
In the
quarter, tax on Adjusted profits amounted to £405 million and
represented an effective Adjusted tax rate of 21.2% (Q2 2016:
21.3%). The credit for taxation on Total losses amounted to
£92 million and represented an effective tax rate of 51.7% (Q2
2016: (54.7)%).
In H1
2017, tax on Adjusted profits amounted to £804 million and
represented an Adjusted tax rate of 21.6% (H1 2016: 21.3%). The
charge for taxation on Total profits amounted to £235 million
and represented an effective tax rate of 17.1% (H1 2016:
>100%).
The
Adjusted tax rate for the full year is expected to be in the range
of 21-22%. The Group’s balance sheet at 30 June 2017 included
a tax payable liability of £929 million and a tax recoverable
asset of £196 million.
|
|
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 2017, 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 2016, 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 2016.
As
detailed in the definition of Adjusted results on page 36, from Q1
2017 core results has been renamed Adjusted results and only
significant legal charges and expenses are excluded, together with
the other Adjusting items, in order to present Adjusted results. A
reconciliation of Total to the revised Adjusted results for Q2 2016
and H1 2016 are presented on pages 63 and 65. The revision had the
effect of decreasing Adjusted H1 2016 operating profit by £44
million due to the inclusion of non-significant legal charges and
expenses in the Pharmaceuticals segment (£20 million) and in
Corporate & other unallocated costs (£24
million).
From Q1
2017, adjusted free cash flow is no longer being reported and the
free cash flow definition has been amended to include all
contingent consideration payments made during the period. The
impact of the change on the free cash flow for H1 2016 was to
increase the free cash outflow by £30 million.
The
Group is required to implement a new accounting standard, IFRS 15
‘Revenue from contracts with customers’, from 1 January
2018. Although GSK continues to assess the impact of IFRS 15 on the
results of the Group, in particular in relation to certain
licensing and government stockpile transactions, it does not expect
that the new standard will have a material impact on product
sales.
The
Group is also required to implement IFRS 9 ‘Financial
instruments’ from 1 January 2018. The new standard requires
all fair value movements on equity investments to be recognised
either in the income statement or in other comprehensive income, on
a case-by-case basis, and also introduces a new impairment model
for financial assets based on expected losses rather than incurred
losses. Although GSK continues to assess the impact of IFRS 9, it
does not expect that the new impairment approach will have a
material impact on the results of the Group.
IFRS 16
‘Leases’ is required to be implemented by the Group
from 1 January 2019. The Group is assessing the potential impact of
the new standard.
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 2016 were published
in the Annual Report 2016, 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 2017
|
|
Q2
2016
|
|
H1 2017
|
|
H1
2016
|
|
2016
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Average
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
|
US$/£
|
1.29
|
|
1.41
|
|
1.27
|
|
1.42
|
|
1.36
|
|
|
|
Euro/£
|
1.15
|
|
1.28
|
|
1.16
|
|
1.29
|
|
1.23
|
|
|
|
Yen/£
|
143
|
|
153
|
|
142
|
|
160
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Period-end
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
|
US$/£
|
1.30
|
|
1.33
|
|
1.30
|
|
1.33
|
|
1.24
|
|
|
|
Euro/£
|
1.14
|
|
1.20
|
|
1.14
|
|
1.20
|
|
1.17
|
|
|
|
Yen/£
|
146
|
|
137
|
|
146
|
|
137
|
|
144
|
|
During Q2 2017, average Sterling exchange rates were weaker against
the US Dollar, the Euro and the Yen, compared with the same period
in 2016. Similarly, during the six months ended 30 June 2017
average Sterling exchange rates were weaker against the US Dollar,
the Euro and the Yen compared with the same period in 2016.
Period-end Sterling exchange rates were weaker against the US
Dollar and the Euro, but stronger against the Yen.
|
|
Weighted average number of shares
|
|
|
|
|
|
Q2 2017
millions
|
|
Q2
2016
millions
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
4,887
|
|
4,859
|
|
Dilutive
effect of share options and share awards
|
-
|
|
-
|
|
|
|
|
|
|
Weighted
average number of shares – diluted
|
4,887
|
|
4,859
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
H1 2017
millions
|
|
H1
2016
millions
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
4,882
|
|
4,853
|
|
Dilutive
effect of share options and share awards
|
42
|
|
-
|
|
|
|
|
|
|
Weighted
average number of shares – diluted
|
4,924
|
|
4,853
|
|
|
|
|
|
|
Because
the Group reported losses attributable to shareholders in Q2 2017
there is no dilutive effect of share options and share
awards.
At 30
June 2017, 4,888 million shares were in free issue (excluding
Treasury shares and shares held by the ESOP Trusts). This compares
with 4,861 million shares at 30 June 2016.
|
|
Net assets
|
|
The
book value of net assets decreased by £539 million from
£4,963 million at 31 December 2016 to £4,424 million at
30 June 2017. This primarily reflects the impact of the dividends
paid in the period exceeding the operating profits and favourable
exchange movements.
The
carrying value of investments in associates and joint ventures at
30 June 2017 was £250 million, with a market value of
£526 million.
At 30
June 2017, the net deficit on the Group’s pension plans was
£1,951 million compared with £2,084 million at 31
December 2016. The decrease in the net deficit primarily arose from
UK asset gains partly offset by a decrease in the rate used to
discount UK pension liabilities from 2.7% to 2.6%.
At 30
June 2017, the post-retirement benefits provision was £1,637
million compared with £1,693 million at 31 December
2016.
At 30
June 2017, the estimated present value of the potential redemption
amount of the Consumer Healthcare Joint Venture put option
recognised in Other payables in Current liabilities was £8,271
million (31 December 2016: £7,420 million reported within
Other non-current liabilities). The estimated present value of the
potential redemption amount of the Pfizer put option related to
ViiV Healthcare was £1,259 million (31 December 2016:
£1,319 million), which is also recorded in Other payables in
Current liabilities.
Contingent
consideration amounted to £6,043 million at 30 June 2017 (31
December 2016: £5,896 million), of which £5,351 million
(31 December 2016: £5,304 million) represented the estimated
present value of amounts payable to Shionogi relating to ViiV
Healthcare and £646 million (31 December 2016: £545
million) represented the estimated present value of contingent
consideration payable to Novartis related to the Vaccines
acquisition. The liability due to Shionogi included £214
million in respect of preferential dividends. The liability for
preferential dividends due to Pfizer at 30 June 2017 was £27
million (31 December 2016: £23 million). An explanation of the
accounting for the non-controlling interests in ViiV Healthcare is
set out on page 60.
Of the
contingent consideration payable (on a post-tax basis) at 30 June
2017, £855 million (31 December 2016: £561 million) is
expected to be paid within one year. The consideration payable for
the acquisition of the Shionogi-ViiV Healthcare joint venture and
the Novartis Vaccines business is expected to be paid over a number
of years. As a result, the total estimated liabilities are
discounted to their present values, on a post-tax basis using
post-tax discount rates. The Shionogi-ViiV Healthcare contingent
consideration liability is discounted at 8.5% and the Novartis
Vaccines contingent consideration liability is discounted partly at
8% and partly at 9%.
The
liabilities for the put options and the contingent consideration at
30 June 2017 have been calculated based on the closing exchange
rates, primarily US$1.30/£1 and Euro €1.14/£1. The
sensitivities for each of the largest contingent consideration
liabilities and both the ViiV Healthcare and Consumer Healthcare
put options are set out on pages 57 and 58.
Movements
in these exchange rates would have the following approximate
effects on the put option liabilities:
|
|
Increase/(decrease) in liability
|
|
|
Consumer
Healthcare
Joint
Venture
put
option
|
|
ViiV
Healthcare
put
option
|
|
|
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
5 cent
appreciation of US Dollar
|
|
|
33
|
|
36
|
|
5 cent
depreciation of US Dollar
|
|
|
(31)
|
|
(33)
|
|
10 cent
appreciation of US Dollar
|
|
|
69
|
|
74
|
|
10 cent
depreciation of US Dollar
|
|
|
(59)
|
|
(64)
|
|
5 cent
appreciation of Euro
|
|
|
137
|
|
20
|
|
5 cent
depreciation of Euro
|
|
|
(125)
|
|
(19)
|
|
10 cent
appreciation of Euro
|
|
|
287
|
|
43
|
|
10 cent
depreciation of Euro
|
|
|
(241)
|
|
(36)
|
|
|
|
|
|
|
|
|
Movements in contingent consideration are as follows:
|
|||
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,896
|
|
3,855
|
|
Additions
|
-
|
|
194
|
|
Amount
reversed
|
-
|
|
(41)
|
|
Re-measurement
through income statement
|
450
|
|
1,136
|
|
Cash
payments: operating cash flows
|
(263)
|
|
(136)
|
|
Cash
payments: investing activities
|
(40)
|
|
(30)
|
|
Other
movements
|
-
|
|
(4)
|
|
|
|
|
|
|
Contingent
consideration at end of the period
|
6,043
|
|
4,974
|
|
|
|
|
|
|
The additions in H1 2016 reflected the recognition of the
preferential dividend payable to Shionogi in relation to ViiV
Healthcare and contingent consideration on the acquisition of the
BMS HIV programmes. The amount reversed in H1 2016 relates to a
provision that had been made in respect of a small acquisition in
2012 but that was no longer required.
The re-measurement increases in contingent consideration in the
period primarily reflected the unwind of the discount on the
liabilities and updated forecasts. The cash settlement in the
period included £299 million (H1 2016: £159 million) of
payments to Shionogi in relation to ViiV Healthcare. These payments
are deductible for tax purposes.
|
|
At 30
June 2017, the ESOP Trusts held 31.8 million GSK shares against the
future exercise of share options and share awards. The carrying
value of £221 million has been deducted from other reserves.
The market value of these shares was £512
million.
At 30
June 2017, the company held 453.2 million Treasury shares at a cost
of £6,381 million, which has been deducted from retained
earnings.
|
|
Contingent liabilities
|
|
There
were contingent liabilities at 30 June 2017 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 and tax disputes to which the Group is a
party are set out on page 50.
|
|
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 2017
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Liquid investments
|
81
|
|
4
|
|
-
|
|
85
|
|
Other investments
|
608
|
|
-
|
|
405
|
|
1,013
|
|
Other non-current assets
|
-
|
|
-
|
|
9
|
|
9
|
|
Financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
|
Other non-current assets
|
-
|
|
368
|
|
-
|
|
368
|
|
Derivatives designated as at fair value through
profit or loss
|
-
|
|
13
|
|
-
|
|
13
|
|
Derivatives classified as held for trading
under
IAS 39
|
-
|
|
52
|
|
-
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
689
|
|
437
|
|
414
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss:
|
|
|
|
|
|
|
|
|
Contingent consideration liabilities
|
-
|
|
-
|
|
(6,043)
|
|
(6,043)
|
|
Derivatives designated as at fair value
through
profit or loss
|
-
|
|
(13)
|
|
-
|
|
(13)
|
|
Derivatives classified as held for trading
under
IAS 39
|
-
|
|
(82)
|
|
(1)
|
|
(83)
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
(95)
|
|
(6,044)
|
|
(6,139)
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2016
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets:
|
|
|
|
|
|
|
|
|
Liquid investments
|
84
|
|
5
|
|
-
|
|
89
|
|
Other investments
|
580
|
|
-
|
|
405
|
|
985
|
|
Other non-current assets
|
-
|
|
-
|
|
6
|
|
6
|
|
Financial assets at fair value through profit or loss:
|
|
|
|
|
|
|
|
|
Other non-current assets
|
-
|
|
355
|
|
-
|
|
355
|
|
Derivatives designated as at fair value
through
profit or loss
|
-
|
|
23
|
|
-
|
|
23
|
|
Derivatives classified as held for trading
under
IAS 39
|
-
|
|
133
|
|
-
|
|
133
|
|
|
|
|
|
|
|
|
|
|
|
664
|
|
516
|
|
411
|
|
1,591
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or
loss:
|
|
|
|
|
|
|
|
|
Contingent consideration liabilities
|
-
|
|
-
|
|
(5,896)
|
|
(5,896)
|
|
Derivatives designated as at fair value
through
profit or loss
|
-
|
|
(92)
|
|
-
|
|
(92)
|
|
Derivatives classified as held for trading
under
IAS 39
|
-
|
|
(101)
|
|
(1)
|
|
(102)
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
(193)
|
|
(5,897)
|
|
(6,090)
|
|
|
|
|
|
|
|
|
|
|
Movements in the six months to 30 June 2017 for financial
instruments measured using Level 3 valuation methods are presented
below:
|
|
|
Financial
assets
£m
|
|
Financial
liabilities
£m
|
|
|
|
|
|
|
At 1 January 2017
|
411
|
|
(5,897)
|
|
Losses recognised in the income statement
|
(1)
|
|
(450)
|
|
Gains recognised in other comprehensive income
|
11
|
|
-
|
|
Additions
|
57
|
|
-
|
|
Equity investment disposals
|
(37)
|
|
-
|
|
Payments in the period
|
-
|
|
303
|
|
Transfers from Level 3
|
(11)
|
|
-
|
|
Exchange
|
(16)
|
|
-
|
|
|
|
|
|
|
At 30 June 2017
|
414
|
|
(6,044)
|
|
|
|
|
|
|
At 1 January 2016
|
274
|
|
(3,856)
|
|
Losses recognised in the income statement
|
-
|
|
(1,095)
|
|
Gains recognised in other comprehensive income
|
25
|
|
-
|
|
Additions
|
41
|
|
(194)
|
|
Equity investment disposals
|
(9)
|
|
-
|
|
Payments in the period
|
-
|
|
168
|
|
Other
|
-
|
|
2
|
|
Exchange
|
31
|
|
(1)
|
|
|
|
|
|
|
At 30 June 2016
|
362
|
|
(4,976)
|
|
|
|
|
|
|
Net losses of £451 million (H1 2016: net losses of £1,135
million) and net losses of £4 million (H1 2016: net gains of
£25 million) attributable to Level 3 financial instruments
held at the end of the period were reported in other operating
income and other comprehensive income respectively.
At 30 June 2017, financial liabilities measured using Level 3
valuation methods included £5,351 million of contingent
consideration for the acquisition in 2012 of the former
Shionogi-ViiV Healthcare joint venture. This consideration is
expected to be paid over a number of years and will vary in line
with the future performance of specified products and movements in
certain foreign currencies. Financial liabilities also included
£646 million of contingent consideration for the acquisition
of the Novartis Vaccines business in 2015. This 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
|
537
|
|
55
|
|
10% decrease in sales forecasts
|
(537)
|
|
(55)
|
|
1% (100 basis points) increase in discount rate
|
(232)
|
|
(38)
|
|
1% (100 basis points) decrease in discount rate
|
253
|
|
45
|
|
10% increase in probability of milestone success
|
|
|
55
|
|
10% decrease in probability of milestone success
|
|
|
(55)
|
|
5 cent appreciation of US Dollar
|
168
|
|
14
|
|
5 cent depreciation of US Dollar
|
(155)
|
|
(13)
|
|
10 cent appreciation of US Dollar
|
351
|
|
29
|
|
10 cent depreciation of US Dollar
|
(300)
|
|
(25)
|
|
5 cent appreciation of Euro
|
41
|
|
10
|
|
5 cent depreciation of Euro
|
(38)
|
|
(9)
|
|
10 cent appreciation of Euro
|
87
|
|
20
|
|
10 cent depreciation of Euro
|
(72)
|
|
(17)
|
|
|
|
|
|
|
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.
|
|
The following methods and assumptions were used to measure the fair
value of the significant financial instruments carried at fair
value on the balance sheet:
|
|
|
|
|
|
●
|
Liquid
investments – based on quoted market prices or calculated
based on observable inputs in the case of marketable securities;
based on principal amounts in the case of non-marketable securities
because of their short repricing periods
|
|
|
|
|
●
|
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 – 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
|
|
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 2017
|
|
31 December 2016
|
||||
|
|
|
|
|
|
|
|
|
|
|
Carrying
value
£m
|
|
Fair
value
£m
|
|
Carrying
value
£m
|
|
Fair
value
£m
|
|
|
|
|
|
|
|
|
|
|
Bonds in a designated hedging relationship
|
(3,275)
|
|
(3,364)
|
|
(3,189)
|
|
(3,335)
|
|
Other bonds
|
(12,159)
|
|
(15,281)
|
|
(14,111)
|
|
(16,996)
|
|
|
|
|
|
|
|
|
|
|
|
(15,434)
|
|
(18,645)
|
|
(17,300)
|
|
(20,331)
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
●
|
Cash
and cash equivalents – 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 – approximates to the
carrying amount
|
|
|
|
|
●
|
Lease
obligations – approximates to the carrying
amount
|
|
|
|
|
Put options
Other
payables in Current liabilities includes the present value of the
expected redemption amount of put options over the non-controlling
interests in ViiV Healthcare of £1,259 million. Forecast
exchange rates are consistent with market rates at 30 June 2017.
Other payables in current liabilities also include the present
value of the expected redemption amount of a put option over the
non-controlling interest in the Consumer Healthcare Joint Venture
of £8,271 million. 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 2017.
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
|
|
Consumer
Healthcare
Joint
Venture
put
option
£m
|
|
|
|
|
|
|
10%
increase in sales forecasts
|
143
|
|
820
|
|
10%
decrease in sales forecasts
|
(143)
|
|
(820)
|
|
1% (100
basis points) increase in discount rate
|
(46)
|
|
(77)
|
|
1% (100
basis points) decrease in discount rate
|
50
|
|
78
|
|
|
|
|
|
|
Reconciliation of cash flow to movements in net debt
|
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
Net
debt at beginning of the period
|
(13,804)
|
|
(10,727)
|
|
|
|
|
|
|
Decrease
in cash and bank overdrafts
|
(968)
|
|
(1,666)
|
|
Net
repayment of short-term loans
|
(386)
|
|
(1,199)
|
|
Net
repayment of obligations under finance leases
|
13
|
|
10
|
|
Exchange
adjustments
|
350
|
|
(1,332)
|
|
Other
non-cash movements
|
(5)
|
|
4
|
|
|
|
|
|
|
Increase
in net debt
|
(996)
|
|
(4,183)
|
|
|
|
|
|
|
Net
debt at end of the period
|
(14,800)
|
|
(14,910)
|
|
|
|
|
|
|
Net debt analysis
|
|
|
30 June
2017
£m
|
|
30
June
2016
£m
|
|
31
December
2016
£m
|
|
|
|
|
|
|
|
|
Liquid
investments
|
85
|
|
83
|
|
89
|
|
Cash
and cash equivalents
|
3,986
|
|
4,590
|
|
4,897
|
|
Short-term
borrowings
|
(6,612)
|
|
(4,485)
|
|
(4,129)
|
|
Long-term
borrowings
|
(12,259)
|
|
(15,098)
|
|
(14,661)
|
|
|
|
|
|
|
|
|
Net
debt at end of the period
|
(14,800)
|
|
(14,910)
|
|
(13,804)
|
|
|
|
|
|
|
|
|
Free cash flow reconciliation
|
|
|
Q2 2017
£m
|
|
H1 2017
£m
|
|
H1
2016
(revised)
£m
|
|
|
|
|
|
|
|
|
Net
cash inflow from operating activities
|
1,008
|
|
2,152
|
|
1,739
|
|
Purchase
of property, plant and equipment
|
(379)
|
|
(639)
|
|
(612)
|
|
Proceeds
from sale of property, plant and equipment
|
112
|
|
125
|
|
11
|
|
Purchase
of intangible assets
|
(233)
|
|
(389)
|
|
(484)
|
|
Net
finance costs
|
(280)
|
|
(349)
|
|
(323)
|
|
Dividends
from joint ventures and associates
|
2
|
|
2
|
|
40
|
|
Contingent
consideration paid (reported in investing activities)
|
(18)
|
|
(40)
|
|
(30)
|
|
Distributions
to non-controlling interests
|
(494)
|
|
(494)
|
|
(278)
|
|
|
|
|
|
|
|
|
Free
cash (outflow)/inflow
|
(282)
|
|
368
|
|
63
|
|
|
|
|
|
|
|
|
Non-controlling interests in ViiV Healthcare
|
|
Trading profit allocations
Because
ViiV Healthcare is a subsidiary of the Group, 100% of its operating
results (turnover, operating profit, profit after tax) are included
within the Group income statement and then a portion of the
earnings is allocated to the non-controlling interests owned by the
other shareholders, in line with their respective equity
shareholdings (Pfizer 11.7% and Shionogi 10%). Each of the
shareholders, including GSK, is also entitled to preferential
dividends 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
of ViiV Healthcare allocated to each shareholder will change. In
particular, the increasing sales of Tivicay and Triumeq have a favourable impact on the
proportion of the preferential dividends that is allocated to GSK.
GSK was entitled to approximately 80% of the core earnings of ViiV
Healthcare for 2016. Re-measurements of the liabilities for the
preferential dividends allocated to Pfizer and Shionogi are
included within other operating income.
Acquisition-related arrangements
As part
of the agreement reached to acquire Shionogi’s interest in
the former Shionogi-ViiV Healthcare joint venture in 2012, the
Group agreed to pay additional consideration to Shionogi contingent
on the performance of the products being developed by that joint
venture, principally dolutegravir. The liability for this
contingent consideration was estimated and recognised in the
balance sheet at the date of acquisition. Subsequent
re-measurements are reflected within Adjusting items in the income
statement.
Cash
payments are made to Shionogi by ViiV Healthcare each quarter which
reduce the balance sheet liability and are hence not recorded in
the income statement. The payments are calculated based on the
sales performance of the relevant products in the previous quarter
and are reflected in the cash flow statement partly in operating
cash flows and partly within investing activities. The tax relief
on these payments is reflected in the Group’s Adjusting items
and total tax charge. The part of each payment relating to the
original estimate of the fair value of the contingent consideration
on the acquisition of the Shionogi-ViiV Healthcare joint venture in
2012 of £659 million is reported within investing activities
in the cash flow statement and the part of each payment relating to
the increase in the liability since the acquisition is reported
within operating cash flows.
|
|
Movements
in contingent consideration payable to Shionogi are as
follows:
|
|
|||
|
|
H1 2017
£m
|
|
H1
2016
£m
|
|
|
|
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,304
|
|
3,409
|
|
|
Additions
|
-
|
|
154
|
|
|
Re-measurement
through income statement
|
346
|
|
1,062
|
|
|
Cash
payments: operating cash flows
|
(261)
|
|
(129)
|
|
|
Cash
payments: investing activities
|
(38)
|
|
(30)
|
|
|
Other
|
-
|
|
(4)
|
|
|
|
|
|
|
|
|
Contingent
consideration at end of the period
|
5,351
|
|
4,462
|
|
|
|
|
|
|
|
|
The
additions in H1 2016 represented the recognition of the
preferential dividends payable to Shionogi.
Of the
contingent consideration payable (on a post-tax basis) to Shionogi
at 30 June 2017, £605 million (31 December 2016: £545
million) is expected to be paid within one year.
|
|
Exit rights
Pfizer
may request an IPO of ViiV Healthcare at any time and if either GSK
does not consent to such IPO or an offering is not completed within
nine months, Pfizer could require GSK to acquire its shareholding.
Under the original agreements, GSK had the unconditional right, so
long as it made no subsequent distribution to its shareholders, to
withhold its consent to the exercise of the Pfizer put options and,
as a result, in accordance with IFRS, GSK did not recognise a
liability for the put option on its balance sheet. However, during
Q1 2016, GSK notified Pfizer that it had irrevocably given up this
right and accordingly recognised the liability for the put option
on the Group’s balance sheet during Q1 2016 at an initial
value of £1,070 million. Consistent with this revised
treatment, at the end of Q1 2016 GSK also recognised liabilities
for the future preferential dividends anticipated to become payable
to Pfizer and Shionogi on the Group’s balance
sheet.
|
|
The
closing balances of the liabilities related to Pfizer’s
shareholding are as follows:
|
|
|
30 June
2017
£m
|
|
31
December
2016
£m
|
|
|
|
|
|
|
Pfizer
put option
|
1,259
|
|
1,319
|
|
Pfizer
preferential dividend
|
27
|
|
23
|
|
|
|
|
|
|
Under
the original agreements, Shionogi could also have requested GSK to
acquire its shareholding in ViiV Healthcare in six month windows
commencing in 2017, 2020 and 2022. GSK had the unconditional right,
so long as it made no subsequent distribution to its shareholders,
to withhold its consent to the exercise of the Shionogi put option
and, as a result, GSK did not recognise a liability for the put
option on its balance sheet. However, during Q1 2016, GSK notified
Shionogi that it had irrevocably given up this right and
accordingly recognised the liability for the put option on the
Group’s balance sheet during Q1 2016 at an initial value of
£926 million. In Q4 2016, Shionogi irrevocably agreed to waive
its put option and as a result GSK de-recognised the liability for
this put option on the Group’s balance sheet directly to
equity. The value of the liability was £1,244 million when it
was de-recognised.
GSK
also has a call option over Shionogi’s shareholding in ViiV
Healthcare, which under the original agreements was exercisable in
six month windows commencing in 2027, 2030 and 2032. GSK has now
irrevocably agreed to waive the first two exercise windows, but the
last six month window in 2032 remains. As this call option is at
fair value, it has no value for accounting purposes.
|
|
Adjusted results reconciliations
|
|
The
reconciliations between total results and adjusted results for Q2
2017 and Q2 2016 and also H1 2017 and H1 2016 are set out
below.
|
|
Income statement – Adjusted results
reconciliation
Three months ended 30 June 2017
|
|
|
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
|
7,320
|
|
|
|
|
|
7,320
|
|
Cost of sales
|
(2,619)
|
142
|
279
|
195
|
15
|
|
(1,988)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
4,701
|
142
|
279
|
195
|
15
|
|
5,332
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,379)
|
|
|
75
|
|
10
|
(2,294)
|
|
Research and development
|
(1,260)
|
11
|
16
|
170
|
|
10
|
(1,053)
|
|
Royalty income
|
98
|
|
|
|
|
|
98
|
|
Other operating income/(expense)
|
(1,180)
|
|
|
|
1,211
|
(31)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating (loss)/profit
|
(20)
|
153
|
295
|
440
|
1,226
|
(11)
|
2,083
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(177)
|
|
|
1
|
|
|
(176)
|
|
Profit on disposal of associates
|
20
|
|
|
|
|
(20)
|
-
|
|
Share of after tax losses of
associates and joint ventures
|
(1)
|
|
|
|
|
|
(1)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
(Loss)/profit before taxation
|
(178)
|
153
|
295
|
441
|
1,226
|
(31)
|
1,906
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
92
|
(36)
|
(97)
|
(151)
|
(98)
|
(115)
|
(405)
|
|
Tax rate %
|
51.7%
|
|
|
|
|
|
21.2%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
(Loss)/profit after taxation
|
(86)
|
117
|
198
|
290
|
1,128
|
(146)
|
1,501
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to
non-controlling
interests
|
94
|
|
|
|
80
|
|
174
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit attributable to
shareholders
|
(180)
|
117
|
198
|
290
|
1,048
|
(146)
|
1,327
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings per share
|
(3.7)p
|
2.4p
|
4.1p
|
5.9p
|
21.5p
|
(3.0)p
|
27.2p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,887
|
|
|
|
|
|
4,887
|
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
|
Adjusted results exclude the above items from Total results as GSK
believes that Adjusted results are more representative of the
performance of the Group’s operations and allow the key
trends and factors driving performance to be more easily and
clearly identified by shareholders. For a fuller explanation of
Adjusted results, see ‘Definitions’ on page
36.
|
|
Income statement – Adjusted results
reconciliation
Three months ended 30 June 2016
|
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
(revised)
£m
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Turnover
|
6,532
|
|
|
|
|
6,532
|
|
Cost of sales
|
(2,124)
|
125
|
48
|
20
|
|
(1,931)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
4,408
|
125
|
48
|
20
|
|
4,601
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,174)
|
|
113
|
|
(1)
|
(2,062)
|
|
Research and development
|
(888)
|
10
|
73
|
|
5
|
(800)
|
|
Royalty income
|
83
|
|
|
|
|
83
|
|
Other operating income/(expense)
|
(1,580)
|
|
|
1,778
|
(198)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating (loss)/profit
|
(151)
|
135
|
234
|
1,798
|
(194)
|
1,822
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(165)
|
|
1
|
|
1
|
(163)
|
|
Share of after tax profits of
associates and joint ventures
|
(2)
|
|
|
|
|
(2)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
(Loss)/profit before taxation
|
(318)
|
135
|
235
|
1,798
|
(193)
|
1,657
|
|
|
|
|
|
|
|
|
|
Taxation
|
(174)
|
(30)
|
(56)
|
(169)
|
76
|
(353)
|
|
Tax rate %
|
(54.7)%
|
|
|
|
|
21.3%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
(Loss)/profit after taxation
|
(492)
|
105
|
179
|
1,629
|
(117)
|
1,304
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
(Loss)/profit
attributable to
non-controlling
interests
|
(57)
|
|
|
178
|
|
121
|
|
|
|
|
|
|
|
|
|
(Loss)/profit attributable to
shareholders
|
(435)
|
105
|
179
|
1,451
|
(117)
|
1,183
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings per share
|
(9.0)p
|
2.2p
|
3.7p
|
29.9p
|
(2.5)p
|
24.3p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,859
|
|
|
|
|
4,859
|
|
|
––––––––––––
|
|
|
|
|
––––––––––––
|
|
Adjusted results exclude the above items from Total results as GSK
believes that Adjusted results are more representative of the
performance of the Group’s operations and allow the key
trends and factors driving performance to be more easily and
clearly identified by shareholders. For a fuller explanation of
Adjusted results, see ‘Definitions’ on page
36.
|
|
Income statement – Adjusted results
reconciliation
Six months ended 30 June 2017
|
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Intangible
impairment
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
(revised)
£m
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Turnover
|
14,704
|
|
|
|
|
|
14,704
|
|
Cost of sales
|
(5,132)
|
273
|
314
|
299
|
37
|
|
(4,209)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
9,572
|
273
|
314
|
299
|
37
|
|
10,495
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(4,831)
|
|
|
122
|
|
68
|
(4,641)
|
|
Research and development
|
(2,220)
|
22
|
25
|
185
|
|
16
|
(1,972)
|
|
Royalty income
|
180
|
|
|
|
|
|
180
|
|
Other operating income/(expense)
|
(1,003)
|
|
|
|
1,281
|
(278)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating profit
|
1,698
|
295
|
339
|
606
|
1,318
|
(194)
|
4,062
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(350)
|
|
|
2
|
|
3
|
(345)
|
|
Profit on disposal of associates
|
20
|
|
|
|
|
(20)
|
-
|
|
Share of after tax profits of
associates and joint ventures
|
4
|
|
|
|
|
|
4
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit before taxation
|
1,372
|
295
|
339
|
608
|
1,318
|
(211)
|
3,721
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(235)
|
(67)
|
(110)
|
(189)
|
(124)
|
(79)
|
(804)
|
|
Tax rate %
|
17.1%
|
|
|
|
|
|
21.6%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit after taxation
|
1,137
|
228
|
229
|
419
|
1,194
|
(290)
|
2,917
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to
non-controlling
interests
|
271
|
|
|
|
102
|
|
373
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
866
|
228
|
229
|
419
|
1,092
|
(290)
|
2,544
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
17.7p
|
4.7p
|
4.7p
|
8.6p
|
22.4p
|
(6.0)p
|
52.1p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,882
|
|
|
|
|
|
4,882
|
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
|
Adjusted results exclude the above items from Total results as GSK
believes that Adjusted results are more representative of the
performance of the Group’s operations and allow the key
trends and factors driving performance to be more easily and
clearly identified by shareholders. For a fuller explanation of
Adjusted results, see ‘Definitions’ on page
36.
|
|
Income statement – Adjusted results
reconciliation
Six months ended 30 June 2016
|
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
(revised)
£m
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Turnover
|
12,761
|
|
|
|
|
12,761
|
|
Cost of sales
|
(4,257)
|
259
|
96
|
35
|
-
|
(3,867)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
8,504
|
259
|
96
|
35
|
-
|
8,894
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(4,363)
|
|
226
|
|
(10)
|
(4,147)
|
|
Research and development
|
(1,703)
|
20
|
100
|
|
8
|
(1,575)
|
|
Royalty income
|
174
|
|
|
|
|
174
|
|
Other operating income/(expense)
|
(2,040)
|
|
|
2,223
|
(183)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating profit
|
572
|
279
|
422
|
2,258
|
(185)
|
3,346
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(328)
|
|
2
|
|
4
|
(322)
|
|
Share of after tax losses of
associates and joint ventures
|
(2)
|
|
|
|
|
(2)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit before taxation
|
242
|
279
|
424
|
2,258
|
(181)
|
3,022
|
|
|
|
|
|
|
|
|
|
Taxation
|
(382)
|
(59)
|
(84)
|
(216)
|
96
|
(645)
|
|
Tax rate %
|
>100%
|
|
|
|
|
21.3%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
(Loss)/profit after taxation
|
(140)
|
220
|
340
|
2,042
|
(85)
|
2,377
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to
non-controlling
interests
|
13
|
|
|
255
|
|
268
|
|
|
|
|
|
|
|
|
|
(Loss)/profit attributable to
shareholders
|
(153)
|
220
|
340
|
1,787
|
(85)
|
2,109
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings per share
|
(3.2)p
|
4.6p
|
7.0p
|
36.8p
|
(1.7)p
|
43.5p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,853
|
|
|
|
|
4,853
|
|
|
––––––––––––
|
|
|
|
|
––––––––––––
|
|
Adjusted results exclude the above items from Total results as GSK
believes that Adjusted results are more representative of the
performance of the Group’s operations and allow the key
trends and factors driving performance to be more easily and
clearly identified by shareholders. For a fuller explanation of
Adjusted results, see ‘Definitions’ on page
36.
|
|
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 2016.
|
|
Patient
safety
|
Failure
to appropriately collect, review, follow up, or report adverse
events from all potential sources, and to act on any relevant
findings in a timely manner.
|
|
|
|
|
Intellectual
property
|
Failure
to appropriately secure, maintain and enforce intellectual property
rights.
|
|
|
|
|
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
reporting and disclosure
|
Failure
to comply with current tax law or incurring significant losses due
to treasury activities; failure to report accurate financial
information in compliance with accounting standards and applicable
legislation; failure to maintain adequate governance and oversight
over third-party relationships.
|
|
|
|
|
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.
|
|
|
|
|
Commercialisation
|
Failure
to execute business strategies, or effectively manage competitive
opportunities and threats in accordance with the letter and spirit
of legal, industry, or the Group’s requirements.
|
|
|
|
|
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.
|
|
|
|
|
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.
|
|
|
|
|
Supply
continuity and crisis management
|
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.
|
|
Impact of Brexit
The
result of the 2016 referendum for the UK to leave the EU has
resulted in some uncertainty, including currency volatility and a
significant weakening of Sterling against the Group’s
principal trading currencies. The weakening of Sterling has had a
beneficial translation impact on the Group’s sterling
results, but has also resulted in re-measurement increases in the
value of the Group’s liabilities associated with the Consumer
Healthcare Joint Venture and ViiV Healthcare businesses (put
options, preferential dividends, contingent consideration)
attributable to the minority interests in these businesses arising
from increases in the estimated Sterling forecasts for sales and
cash flows. There has also been an increase in the Sterling value
of foreign currency assets and liabilities, including gross and net
debt.
The
Group continues to monitor the impact of Brexit on its principal
risks and remains of the view that it will add complexity to some
business activities, with some short-term disruption likely. GSK
has plans in place to mitigate these effects and does not currently
believe that there will be a material adverse impact on the
Group’s results or financial position.
|
|
Directors’ responsibility statement
The Board of Directors approved this Half-yearly Financial Report
on 26 July 2017.
The Directors confirm that to the best of their knowledge the
unaudited condensed financial information has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8.
After making enquiries, the Directors considered it appropriate to
adopt the going concern basis in preparing this Half-yearly
Financial Report.
The Directors of GlaxoSmithKline plc are as follows:
|
|
|
|
|
|
Sir Philip Hampton
|
Chairman (Independent Non-Executive Director, Nominations Committee
Chairman)
|
|
Emma Walmsley
|
Chief Executive Officer (Executive Director)
|
|
Simon Dingemans
|
Chief Financial Officer (Executive Director)
|
|
Dr Patrick Vallance
|
President, R&D (Executive Director)
|
|
Professor Sir Roy Anderson
|
Independent Non-Executive Director
|
|
Vindi Banga
|
Senior Independent Non-Executive Director
|
|
Dr Vivienne Cox, CBE
|
Independent Non-Executive Director
|
|
Lynn Elsenhans
|
Independent Non-Executive Director, Corporate Responsibility
Committee Chairman
|
|
Dr Jesse Goodman
|
Independent Non-Executive Director, Science Committee
Chairman
|
|
Judy Lewent
|
Independent Non-Executive Director, Audit & Risk Committee
Chairman
|
|
Urs Rohner
|
Independent Non-Executive Director, Remuneration Committee
Chairman
|
|
|
|
|
|
|
|
By order of the Board
|
|
|
Emma Walmsley
Chief Executive Officer
26 July 2017
|
Simon Dingemans
Chief Financial Officer
|
|
Independent review report to GlaxoSmithKline plc
|
|
Report on the condensed financial information
Our conclusion
We have reviewed the condensed financial information (the "interim
financial statements") in the Results Announcement of
GlaxoSmithKline plc for the three and six month periods ended 30
June 2017. Based on our review, nothing has come to our attention
that causes us to believe that the interim financial statements are
not prepared, in all material respects, in accordance with
International Accounting Standard 34, ‘Interim Financial
Reporting’, as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
|
|
|
|
|
|
What we have reviewed
The
interim financial information statements comprises:
|
|
|
|
|
|
●
|
the
balance sheet as at 30 June 2017;
|
|
●
|
the
income statement and statement of comprehensive income for the
three and six month periods then ended;
|
|
●
|
the
cash flows for the six month period then ended;
|
|
●
|
the
statement of changes in equity for the six month period then ended;
and
|
|
●
|
the
accounting policies and basis of preparation and explanatory notes
to the interim financial statements on pages 48 to 61.
|
|
|
|
|
The
interim financial statements included in the Results Announcement
of GlaxoSmithKline plc have been prepared in accordance with
International Accounting Standard 34, ‘Interim Financial
Reporting’, as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom’s Financial Conduct Authority.
As
disclosed on page 51 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The
Results Announcement of GlaxoSmithKline plc, 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 GlaxoSmithKline plc in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom’s Financial Conduct
Authority.
Our
responsibility is to express a conclusion on the interim financial
statements in the Results Announcement of GlaxoSmithKline plc based
on our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom’s Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in
writing.
What a review of interim financial statements involves
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 Auditing Practices Board for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, 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.
We have
read the other information contained in the Results Announcement of
GlaxoSmithKline plc and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
|
|
|
PricewaterhouseCoopers
LLP
Chartered
Accountants
26 July
2017, London
|
|
|
|
|
|
Notes:
|
|
|
|
|
|
(a)
|
The
maintenance and integrity of the GlaxoSmithKline plc website is the
responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since it
was initially presented on the website.
|
|
|
|
|
(b)
|
Legislation
in the United Kingdom governing the preparation and dissemination
of interim financial statements may differ from legislation in
other jurisdictions.
|
|
|
GlaxoSmithKline plc
|
|
|
(Registrant)
|
|
|
|
|
Date: July
26, 2017
|
|
|
|
|
|
|
By: VICTORIA
WHYTE
--------------------------
|
|
|
|
|
|
Victoria Whyte
|
|
|
Authorised
Signatory for and on
|
|
|
behalf
of GlaxoSmithKline plc
|