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Issued:
Wednesday, 31 October 2018, London U.K.
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GSK delivers Q3 sales of £8.1 billion, +3% AER, +6%
CER
Total EPS 28.8p, +16% AER, +23% CER; Adjusted EPS 35.5p, +10% AER,
+ 14% CER
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Financial highlights
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●
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Group sales £8.1 billion. Pharmaceuticals £4.2 billion,
+1% AER, +3% CER; Vaccines £1.9 billion, +14% AER, +17% CER;
Consumer Healthcare £1.9 billion, -1% AER, +3%
CER
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Adjusted Group operating margin of 31.2%, -0.3 percentage points
AER; +0.2 percentage points CER. Pharmaceuticals 32.2%; Vaccines
43.0%; Consumer Healthcare 22.0%
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Total EPS 28.8p +16% AER, +23% CER
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Adjusted EPS 35.5p +10% AER, +14% CER
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YTD free cash flow £2,375 million (2017: £1,668
million)
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19p dividend declared for the quarter. Continue to expect 80p for
FY 2018
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Now expect 2018 Adjusted EPS growth of 8-10% CER
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Product and pipeline highlights
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Total New Respiratory product sales £645 million, +39% AER,
+40% CER;
Ellipta sales £500
million, +34% AER, +35% CER; Nucala £145 million, +59% AER, +62%
CER
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Tivicay and Triumeq sales £1.1 billion +12% AER, +13% CER.
Juluca
sales £37
million
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Shingrix sales £286
million. Now expect £700-750 million sales for FY
2018
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New two-drug regimen dolutegravir (DTG) and lamivudine (3TC) for
HIV filed in US and Europe
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Positive
phase III study results received for new HIV therapy
cabotegravir+rilpivirine (FLAIR/ATLAS)
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Clinical
study initiated for use of BCMA in second line treatment of
multiple myeloma
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New phase II efficacy and safety data for aGM-CSF in rheumatoid
arthritis presented at ACR and supports further clinical
development
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R&D prioritisation continues with resources reinvested in
priority projects following termination of several pipeline
programmes as data thresholds not met
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Positive phase II data for candidate TB vaccine published in
NEJM
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Q3 2018 results
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Q3 2018
|
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Growth
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9 months 2018
|
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Growth
|
||||
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|
£m
|
|
£%
|
|
CER%
|
|
£m
|
|
£%
|
|
CER%
|
|
|
|
|
|
|
|
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Turnover
|
8,092
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|
3
|
|
6
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|
22,624
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-
|
|
4
|
|
|
|
|
|
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|
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Total
operating profit
|
1,910
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|
2
|
|
7
|
|
3,929
|
|
10
|
|
22
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Total
earnings per share
|
28.8p
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|
16
|
|
23
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|
49.0p
|
|
15
|
|
30
|
|
|
|
|
|
|
|
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|
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Adjusted
operating profit
|
2,524
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|
2
|
|
6
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|
6,549
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|
-
|
|
7
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|
Adjusted
earnings per share
|
35.5p
|
|
10
|
|
14
|
|
88.3p
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|
4
|
|
12
|
|
|
|
|
|
|
|
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|
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|
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Net
cash from operating activities
|
2,077
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|
9
|
|
|
|
4,302
|
|
6
|
|
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|
Free
cash flow
|
1,554
|
|
21
|
|
|
|
2,375
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|
42
|
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Emma Walmsley, Chief Executive Officer, GSK said:
“GSK
has made further good progress this quarter with CER sales growth
in all three businesses, improvements in the Group operating margin
at CER and Adjusted earnings per share growth of 14% (CER). Strong
commercial execution for key products and new launches,
notably Shingrix, together with an effective focus on cost control
is driving this improved performance and we now expect 2018
Adjusted EPS growth of 8-10% at CER. Looking further ahead, we
remain confident in our ability to deliver the Group outlooks for
sales and EPS growth we previously set for the period
2016-2020.”
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The
Total results are presented under ‘Income Statements’
on page 40 and Adjusted results reconciliations are presented on
pages 16, 24 and 58 to 61. Adjusted results are a non-IFRS measure
that allows key trends and factors in the Group’s performance
to be more easily identified by shareholders. Non-IFRS measures may
be considered in addition to, but not as a substitute for, or
superior to, information presented in accordance with IFRS. The
definitions of £% or AER% growth, CER% growth, Adjusted
results, free cash flow and other non-IFRS measures are set out on
page 37. All expectations and targets regarding future performance
should be read together with “Assumptions related to 2018
guidance and 2016-2020 outlook” and “Assumptions and
cautionary statement regarding forward-looking statements” on
page 38.
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2018 guidance update
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With
continued strong trading in the first nine months of 2018, the
Group is tightening its full year guidance range towards the upper
end of previous expectations. The Group now expects full year 2018
Adjusted EPS growth of 8 to 10% at CER, whether or not a generic
competitor to Advair is launched in the US in 2018.
This
revised guidance primarily reflects an increase in our expectations
for sales of Shingrix,
which we now expect to be £700-750 million in
2018.
We
continue to expect the effective tax rate for 2018 to be
approximately 19-20% of Adjusted profits after the impact of US tax
reform.
If
exchange rates were to hold at the closing rates on 30 September
2018 ($1.30/£1, €1.12/£1 and Yen 148/£1) for
the rest of 2018, the estimated negative impact on full-year 2018
Sterling turnover growth would be around 3% and if exchange gains
or losses were recognised at the same level as in 2017, the
estimated negative impact on 2018 Sterling Adjusted EPS growth
would be around 6%.
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Total and Adjusted results
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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. As a result, GSK also
reports Adjusted results, which is a non-IFRS measure.
GSK believes that Adjusted
results allow the Group’s performance to be more easily and
clearly identified by shareholders. The definition of Adjusted
results, as set out on page 37, also aligns the Group’s
results with the majority of its peer companies and how they report
earnings.
Adjusted
results may exclude significant costs such as those from major
restructuring programmes, significant legal charges or transaction
items. Major restructuring charges have been reported as an
adjusting item since the Group adopted its current reporting
structure in 2012. Estimated charges from the major restructuring
programmes approved by the Board, are set out on page 25. Adjusted
results include the benefits arising from the major restructuring
programmes.
As
Adjusted results may exclude significant costs, such as those from
major restructuring programmes or significant legal charges, they
should not be regarded as a complete picture of the Group’s
financial performance which is presented in its Total results. When
restructuring charges are excluded, Adjusted earnings will be
higher than Total earnings. The exclusion of other Adjusting items
may result in Adjusted earnings being materially higher or lower
than Total earnings.
Reconciliations
between Total and Adjusted results, as set out on pages 16, 24 and
58 to 61, including detailed breakdowns of the key adjusting items,
are provided to shareholders to ensure full visibility and
transparency as they assess the Group’s
performance.
GSK is
not able to give guidance for Total results as it cannot reliably
forecast certain material elements of the Total results,
particularly the future fair value movements on contingent
consideration and put options that can and have given rise to
significant adjustments driven by external factors such as currency
and other movements in capital markets.
In
addition, 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. The cash payments made to
Shionogi by ViiV Healthcare for the nine months to 30 September
2018 were £584 million. An explanation of the
acquisition-related arrangements with ViiV Healthcare, including
details of cash payments to Shionogi, is set out on page
56.
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Page
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Sales
performance
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4
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Financial
performance – Q3 2018
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14
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Financial
performance – nine months ended 30 September
2018
|
21
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Research
and development
|
33
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Reporting
definitions
|
37
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Outlook,
assumptions and cautionary statements
|
38
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Contacts
|
39
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Income
statements
|
40
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Statement
of comprehensive income – three months ended 30 September
2018
|
41
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Statement
of comprehensive income – nine months ended 30 September
2018
|
42
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Pharmaceuticals
turnover – three months ended 30 September 2018
|
43
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|
Pharmaceuticals
turnover – nine months ended 30 September 2018
|
44
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|
Vaccines
turnover – three months ended 30 September 2018
|
45
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|
Vaccines
turnover – nine months ended 30 September 2018
|
45
|
|
Balance
sheet
|
46
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|
Statement
of changes in equity
|
47
|
|
Cash
flow statement – nine months ended 30 September
2018
|
48
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|
Segment
information
|
49
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|
Legal
matters
|
51
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|
Taxation
|
51
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|
Additional
information
|
52
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|
Reconciliation
of cash flow to movements in net debt
|
55
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|
Net
debt analysis
|
55
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|
Free
cash flow reconciliation
|
55
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|
Non-controlling
interests in ViiV Healthcare
|
56
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|
Adjusted
results reconciliations
|
58
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Independent
review report
|
62
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|
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.
Cialis is a trademark of Eli Lilly and Company.
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Sales performance
|
|
Group turnover by business and geographic region
|
|
Group turnover by business
|
Q3 2018
|
||||
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|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,221
|
|
1
|
|
3
|
|
Vaccines
|
1,924
|
|
14
|
|
17
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|
Consumer
Healthcare
|
1,947
|
|
(1)
|
|
3
|
|
|
|
|
|
|
|
|
Group
turnover
|
8,092
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
Group
turnover was up 3% AER, 6% CER to £8,092 million, with CER
growth delivered by all three businesses.
Pharmaceuticals
sales grew 1% AER, 3% CER, driven primarily by the growth in sales
of HIV and the new Respiratory products, Nucala and the Ellipta portfolio. This was partly
offset by lower sales of Seretide/Advair and Established
Pharmaceuticals. Overall Respiratory sales were up 3% AER, 5%
CER.
Vaccines
sales were up 14% AER, 17% CER, driven primarily by sales of
Shingrix in the US and
market growth of Bexsero,
partly offset by declines in some Established
Vaccines.
Consumer
Healthcare sales declined 1% AER but grew 3% CER reflecting growth
in Wellness, Oral health and Nutrition, partly offset by a decline
in Skin health, the divestments of some smaller brands including
Horlicks and MaxiNutrition in the UK as well as the
final quarter’s impact of the implementation of the Goods
& Services Tax (GST) in India.
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|
Group turnover by geographic region
|
Q3 2018
|
||||
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|
|
|
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||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
US
|
3,405
|
|
11
|
|
13
|
|
Europe
|
1,952
|
|
(2)
|
|
(2)
|
|
International
|
2,735
|
|
(2)
|
|
4
|
|
|
|
|
|
|
|
|
Group
turnover
|
8,092
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
US
sales grew 11% AER, 13% CER driven by strong performances from
Shingrix, HIV products and
new Respiratory sales.
Europe
sales declined 2% AER, 2% CER as growth from HIV and the new
Respiratory products was more than offset by continued generic
competition to Epzicom as
well as a decrease in Bexsero sales largely due to the
completion of the vaccination of catch-up cohorts in certain
markets which benefited Q3 2017. Growth in new Respiratory products
more than offset the decline in Seretide.
In
International, sales declined 2% AER but grew 4% CER reflecting
strong growth in the new Respiratory products as well as HIV sales.
Sales in Emerging Markets were flat AER, but grew 8% CER, driven by
strong growth of Cervarix
in China and Horlicks in
India.
|
|
Group turnover by business and geographic region
|
|
Group turnover by business
|
9 months 2018
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
12,459
|
|
(2)
|
|
2
|
|
Vaccines
|
4,415
|
|
12
|
|
15
|
|
Consumer
Healthcare
|
5,750
|
|
(2)
|
|
2
|
|
|
|
|
|
|
|
|
Group
turnover
|
22,624
|
|
-
|
|
4
|
|
|
|
|
|
|
|
|
Group
turnover was flat at AER but increased 4% CER to £22,624
million, with CER growth delivered by all three
businesses.
Pharmaceuticals
sales were down 2% AER but up 2% CER, driven primarily by the
growth in HIV sales and the new Respiratory products, Nucala and the Ellipta portfolio. This was partly
offset by lower sales of Seretide/Advair and Established
Pharmaceuticals. Overall Respiratory sales declined 3% AER but grew
1% CER.
Vaccines
sales were up 12% AER, 15% CER, primarily driven by sales of
Shingrix in the US, a
competitor supply shortage in Hepatitis and market growth for
Bexsero, partly offset by
declines in some Established Vaccines.
Consumer
Healthcare sales declined 2% AER but grew 2% CER with continued
strong broad-based growth in Oral health partly offset by a decline
in Panadol, the divestments
of some smaller brands including Horlicks and MaxiNutrition in the UK as well as the
impact of the implementation of the Goods & Services Tax (GST)
in India.
|
|
Group turnover by geographic region
|
9 months 2018
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
US
|
8,708
|
|
3
|
|
9
|
|
Europe
|
5,943
|
|
-
|
|
(1)
|
|
International
|
7,973
|
|
(3)
|
|
4
|
|
|
|
|
|
|
|
|
Group
turnover
|
22,624
|
|
-
|
|
4
|
|
|
|
|
|
|
|
|
US
sales grew 3% AER, 9% CER driven by the growth of Shingrix and Hepatitis vaccines as well as
strong performances from HIV and the new Respiratory
products.
Europe
sales were flat at AER but down 1% CER, as declines in Established
Pharmaceuticals and Meningitis vaccines more than offset growth
from Tivicay and
Triumeq. Growth in the new
Respiratory products more than offset the decline in Seretide.
In
International, sales declined 3% AER but grew 4% CER, reflecting
strong growth in Tivicay,
Triumeq, the Respiratory
portfolio and Cervarix in
China, following its recent launch. Sales in Emerging Markets
declined 3% AER, but grew 4% CER.
|
|
Turnover – Q3 2018
|
|
Pharmaceuticals
|
|
|
Q3 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Respiratory
|
1,666
|
|
3
|
|
5
|
|
HIV
|
1,209
|
|
11
|
|
12
|
|
Immuno-inflammation
|
122
|
|
28
|
|
29
|
|
Established
Pharmaceuticals
|
1,224
|
|
(12)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
4,221
|
|
1
|
|
3
|
|
|
|
|
|
|
|
|
US
|
1,893
|
|
3
|
|
4
|
|
Europe
|
951
|
|
1
|
|
-
|
|
International
|
1,377
|
|
(3)
|
|
2
|
|
|
|
|
|
|
|
|
|
4,221
|
|
1
|
|
3
|
|
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the quarter was £4,221 million, up 1% AER, 3% CER,
driven primarily by growth in HIV and Respiratory. HIV sales were
up 11% AER, 12% CER, to £1,209 million, reflecting further
strong performances by Triumeq and Tivicay and continued growth from
Juluca. Respiratory sales
were up 3% AER, 5% CER, to £1,666 million, with growth from
the Ellipta portfolio and
Nucala more than offsetting
lower sales of Seretide/Advair. Sales of Established
Pharmaceuticals fell 12% AER, 9% CER, to £1,224
million.
In the
US, sales grew 3% AER, 4% CER, with growth in HIV, Respiratory and
Benlysta more than
offsetting declines in Established Pharmaceuticals. In Europe,
sales grew 1% AER but were flat at CER, with growth in the
Respiratory portfolio offsetting the continued impact of generic
competition to Epzicom and
Avodart. International sales declined 3% AER but grew 2%
CER, with growth driven by HIV and the new Respiratory
portfolio.
Respiratory
Total
Respiratory sales were up 3% AER, 5% CER, with growth in all
regions. The US was up 4% AER, 5% CER, while in Europe sales grew
5% AER, 4% CER. International grew 1% AER, 6% CER, including Japan
up 5% AER, 2% CER. Growth from the Ellipta portfolio and Nucala more than offset lower sales of
Seretide/Advair, which
declined 17% AER, 15% CER globally.
Sales
of Nucala were £145
million in the quarter and grew 59% AER, 62% CER, continuing to
benefit from the global rollout of the product. US sales of
Nucala grew 43% AER, 44%
CER to £87 million.
Sales
of Ellipta products were up
34% AER, 35% CER to £500 million driven by continued growth in
all regions. In the US, sales grew 34% AER, 36% CER, reflecting
further market share gains, partly offset by the impact of
continued competitive and pricing pressures, particularly for
ICS/LABAs. In Europe, sales grew 37% AER, 36% CER. Sales of
Trelegy Ellipta, our new
once daily closed triple product, contributed £42 million in
the quarter, benefiting from an expanded label in the
US.
Relvar/Breo Ellipta sales grew 15% AER, 16% CER, to
£258 million, with Europe up 20% AER, 20% CER to £59
million, and International up 22% AER, 24% CER to £60 million.
In the US sales grew 9% AER, 11% CER to £139 million, with
volume growth of 27% reflecting continued market share growth and
the benefit from lower prior period payer rebate adjustments,
partly offset by increased competitive pricing pressures.
Anoro Ellipta sales grew
34% AER, 34% CER to £115 million, driven by gains in the US.
All Ellipta products,
Breo, Anoro, Incruse, Arnuity and Trelegy, continued to grow market share
in the US during the quarter.
Sales
of New Respiratory products, comprising Ellipta products and Nucala, grew 39% AER, 40% CER to
£645 million.
Seretide/Advair sales declined 17% AER, 15% CER to £619
million. Sales of Advair in
the US declined 20% AER, 19% CER (3% volume decline and 16%
negative impact of price) primarily reflecting increased
competitive pricing pressures. In Europe, Seretide sales were down 20% AER, 20%
CER to £132 million (16% volume decline and a 4% price decline). This reflected continued
competition from generic products and the transition of the
Respiratory portfolio to newer products. In International, sales of
Seretide were down 7% AER,
2% CER, to £178 million (3% volume decline and 1% positive
impact of price), with a decline in markets with generic
competition partly offset by growth from certain other developing
markets.
HIV
HIV
sales increased 11% AER, 12% CER to £1,209 million in the
quarter, with the US up 11% AER, 12% CER, Europe up 2% AER, 1% CER
and International up 27% AER, 34% CER. The growth was driven by
Triumeq and Tivicay which recorded sales of
£669 million and £432 million, respectively, in the
quarter. Juluca sales were
£37 million in the quarter, mainly in the US.
This
growth was partly offset by the impact of generic competition to
Epzicom/Kivexa,
particularly in Europe. Sales declined 51% AER, 47% CER to £24
million.
Immuno-inflammation
Sales
in the quarter were up 28% AER, 29% CER, primarily driven by
Benlysta which grew 29%
AER, 31% CER to £121 million. In the US, Benlysta grew 27% AER, 29% CER to
£108 million.
Established
Pharmaceuticals
Sales
of Established Pharmaceuticals in the quarter were £1,224
million, down 12% AER, 9% CER. The Avodart franchise was flat at AER but
up 1% CER to £144 million, with growth in International
largely offset by the loss of exclusivity in Europe, with the US
generic impact now broadly annualised. Coreg franchise sales declined 76% AER,
78% CER to £9 million following a generic Coreg CR entrant to the US market in Q4
2017. Augmentin sales
declined 10% AER, 5% CER to £133 million.
|
|
Vaccines
|
|
|
Q3 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Meningitis
|
329
|
|
10
|
|
15
|
|
Influenza
|
304
|
|
(11)
|
|
(7)
|
|
Shingles
|
286
|
|
-
|
|
-
|
|
Established
Vaccines
|
1,005
|
|
(4)
|
|
(3)
|
|
|
|
|
|
|
|
|
|
1,924
|
|
14
|
|
17
|
|
|
|
|
|
|
|
|
US
|
1,060
|
|
30
|
|
34
|
|
Europe
|
402
|
|
(7)
|
|
(8)
|
|
International
|
462
|
|
5
|
|
9
|
|
|
|
|
|
|
|
|
|
1,924
|
|
14
|
|
17
|
|
|
|
|
|
|
|
|
Vaccines turnover grew 14% AER, 17% CER to £1,924 million,
primarily driven by market expansion and share growth for
Shingrix, and market growth for Bexsero. Established Vaccines declined 4% AER, 3% CER
reflecting lower sales of DTPa-containing vaccines
(Infanrix,
Pediarix and
Boostrix)
due to increased competitive pressures, particularly in Europe, and
unfavourable CDC stockpile movements in the US.
Meningitis
Meningitis sales grew 10% AER, 15% CER to £329 million.
Bexsero
sales increased 18% AER, 24% CER
largely due to demand and share gains in the US and continued
growth in private market sales in International, partly offset by
the completion of vaccination of catch-up cohorts in certain
markets in Europe which benefited 2017. Menveo sales were up 4% AER, 8% CER,
also driven by demand and share gains in the US, partly offset by
supply constraints in Europe and International.
Influenza
Fluarix/FluLaval sales declined
11% AER, 7% CER to £304 million, driven by increased price
competition in the US, partly offset by stronger sales in
Europe.
Shingles
Shingrix recorded sales of
£286 million in the quarter in the US and Canada, driven by
demand and share gains. US sales of Shingrix benefited from market growth in new patient
populations now covered by immunisation recommendations and
achieved a 99% market share in the quarter. An allocation process
has been implemented in the US to help manage inventory and supply
to ensure patients have the opportunity to complete the two-dose
series.
Established
Vaccines
Sales of the DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) were down 12% AER, 11% CER. This was primarily
driven by Infanrix, Pediarix sales, down 18% AER, 17% CER to £160 million,
reflecting unfavourable CDC stockpile movements in the US and
increased competitive pressures, particularly in Europe, partly
offset by stronger demand in International.
Hepatitis vaccines grew 1% AER, 3% CER to £213 million,
benefiting from a competitor supply shortage and stronger demand in
the US and Europe, partly offset by unfavourable CDC stockpile
movements in the US.
Rotarix sales declined 3% AER,
2% CER to £152 million, mainly driven by an unfavourable
comparison with the reversal of a returns provision in
International in Q3 2017, partly offset by the favourable phasing
of tenders.
Synflorix sales grew 4% AER, 4%
CER to £119 million, mainly due to higher demand in
International and favourable year-on-year phasing, partly offset by
lower pricing in Emerging Markets.
Cervarix sales increased 49%
AER, 51% CER to £55 million, primarily driven by market
expansion in China.
|
|
Consumer Healthcare
|
|
|
Q3 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Wellness
|
1,017
|
|
-
|
|
3
|
|
Oral
health
|
624
|
|
(1)
|
|
2
|
|
Nutrition
|
167
|
|
(2)
|
|
5
|
|
Skin
health
|
139
|
|
(7)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
1,947
|
|
(1)
|
|
3
|
|
|
|
|
|
|
|
|
US
|
452
|
|
5
|
|
6
|
|
Europe
|
599
|
|
(2)
|
|
(2)
|
|
International
|
896
|
|
(3)
|
|
4
|
|
|
|
|
|
|
|
|
|
1,947
|
|
(1)
|
|
3
|
|
|
|
|
|
|
|
|
Consumer
Healthcare sales declined 1% AER but grew 3% CER in the quarter to
£1,947 million as growth in Wellness, Oral health and
Nutrition was partly offset by a decline in Skin health. Strong
performances in the US, Central & Eastern Europe and
International markets were partly offset by a decline in Western
Europe due to challenging trading conditions and increased
competition.
The
divestments of a number of tail brands, including Horlicks and MaxiNutrition in the UK, generic
competition to Transderm
Scop in the US and the final quarter’s impact of the
implementation of the Goods & Service Tax (GST) in India in
aggregate adversely impacted growth by approximately one percentage
point in the quarter.
Wellness
Wellness
sales were flat at AER but grew 3% CER to £1,017 million,
mainly due to Flonase
benefiting from promotional phasing in the US, high-single digit
growth in Voltaren due
to new
launches and
favourable shipment phasing as well as seasonal sell-in of
Otrivin. Panadol sales declined, reflecting the
impact of the continuing change in the route-to-market model in
South-East Asia and the discontinuation of slow-release
Panadol products in the
Nordic countries.
Oral
health
Oral
health sales declined 1% AER but grew 2% CER to £624 million,
primarily reflecting growth of Sensodyne and Denture care. Oral health
was impacted by slower growth in International markets but the US
portfolio grew strongly, supported by Sensodyne Rapid which launched earlier
this year. Denture care delivered mid-single digit growth through
broad-based market performance.
Nutrition
Nutrition
sales declined 2% AER but grew 5% CER to £167 million. The
Nutrition business in India performed strongly across the product
portfolio, benefiting from new innovations including Horlicks Protein+ which was launched
earlier in the year. Divestments and GST impacted Nutrition growth
by eight percentage points.
Skin
health
Skin
health declined 7% AER, 4% CER to £139 million with strong
growth in China more than offset by a weaker performance in Europe
following a strong second quarter.
|
|
Pharmaceuticals
|
|
|
9 months 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Respiratory
|
4,937
|
|
(3)
|
|
1
|
|
HIV
|
3,446
|
|
8
|
|
12
|
|
Immuno-inflammation
|
336
|
|
20
|
|
26
|
|
Established
Pharmaceuticals
|
3,740
|
|
(10)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
12,459
|
|
(2)
|
|
2
|
|
|
|
|
|
|
|
|
US
|
5,334
|
|
(4)
|
|
2
|
|
Europe
|
2,962
|
|
1
|
|
(1)
|
|
International
|
4,163
|
|
(2)
|
|
4
|
|
|
|
|
|
|
|
|
|
12,459
|
|
(2)
|
|
2
|
|
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the nine months was £12,459 million, down 2% AER
but up 2% CER, driven primarily by the growth in HIV sales, which
were up 8% AER, 12% CER to £3,446 million, reflecting further
strong performances by Triumeq and Tivicay and continued growth from
Juluca. Respiratory sales
declined 3% AER but grew 1% CER, to £4,937 million, with
growth from the Ellipta
portfolio and Nucala partly
offset by lower sales of Seretide/Advair. Sales of Established
Pharmaceuticals fell 10% AER, 6% CER.
In the
US, sales declined 4% AER but grew 2% CER, with growth in the HIV
portfolio and Benlysta
offsetting declines in Established Pharmaceuticals and Respiratory.
In Europe, sales grew 1% AER but declined 1% CER, with growth in
the Respiratory portfolio only partly offsetting the continued
impact of generic competition to Epzicom and Avodart.
International sales declined 2% AER but grew 4% CER, driven
by HIV and the new Respiratory portfolio.
Respiratory
Total
Respiratory sales declined 3% AER but grew 1% CER, with the US down
8% AER, 3% CER. In Europe, sales grew 4% AER, 3% CER and
International sales were flat at AER but up 6% CER, driven
primarily by higher sales in Japan. Growth from the Ellipta portfolio and Nucala was offset by lower sales of
Seretide/Advair.
Sales
of Nucala were £390
million in the nine months, up 75% AER, 81% CER, continuing to
benefit from the global rollout of the product. US sales of
Nucala grew 53% AER, 61%
CER to £234 million.
Sales
of Ellipta products were up
26% AER, 31% CER, driven by continued growth in all regions. In the
US, sales grew 20% AER, 27% CER, reflecting further market share
gains, partly offset by the impact of continued competitive and
pricing pressures, particularly for ICS/LABAs. In Europe, sales
grew 38% AER, 37% CER, and International sales grew 34% AER, 42%
CER. Sales of Trelegy
Ellipta, our new once daily closed triple product,
contributed £79 million to total Ellipta sales, benefiting from an
expanded label in the US.
Relvar/Breo Ellipta sales grew 6% AER, 11% CER, to £756
million, primarily driven by growth in Europe, which was up 23%
AER, 22% CER to £182 million, and in International, which was
up 27% AER, 33% CER to £179 million. In the US, Breo Ellipta sales declined 6% AER, 1%
CER, with volume growth of 32%, reflecting continued market share
growth, more than offset by the combined impact of prior period
payer rebate adjustments and increased competitive pricing
pressures. Anoro Ellipta
sales grew 42% AER, 48% CER to £332 million, driven by gains
in the US. All Ellipta
products, Breo,
Anoro, Incruse, Arnuity and Trelegy, continued to grow market share
in the US during the nine months.
Sales
of New Respiratory products, comprising Ellipta products and Nucala, grew 34% AER, 40% CER to
£1,785 million.
Seretide/Advair sales declined 24% AER, 21% CER to
£1,775 million. Sales of Advair in the US declined 34% AER, 30%
CER (6% volume decline and 24% negative impact of price) primarily
reflecting increased competitive pricing pressures. In Europe,
Seretide sales were down
19% AER, 20% CER to £449 million (12% volume decline and an 8%
price decline). This reflected continued competition from generic
products and the transition of the Respiratory portfolio to newer
products. In International, sales of Seretide were down 10% AER, 5% CER, to
£528 million (5% volume decline and no price impact), with a
decline in markets with generic competition partly offset by growth
from certain other developing markets.
HIV
HIV
sales increased 8% AER, 12% CER to £3,446 million in the nine
months, with the US up 7% AER, 13% CER, Europe up 7% AER, 6% CER
and International up 14% AER, 21% CER. The growth was driven by
increased market share for Triumeq and Tivicay with sales of £1,957
million and £1,187 million, respectively, in the nine months.
Juluca was approved in the
US in November 2017 and recorded sales of £71 million in the
nine months.
This
growth was partly offset by the impact of generic competition to
Epzicom/Kivexa,
particularly in Europe. Sales declined 54% AER, 52% CER to £87
million.
Immuno-inflammation
Sales
in the nine months were up 20% AER, 26% CER, primarily driven by
Benlysta, which grew 21%
AER, 27% CER to £335 million. In the US, Benlysta grew 19% AER, 25% CER to
£299 million.
Established
Pharmaceuticals
Sales
of Established Pharmaceuticals were £3,740 million, down 10%
AER, 6% CER, with the decline partly mitigated by favourable prior
period payer rebate adjustments and some post-divestment inventory
sales.
The
Avodart franchise was down
9% AER, 6% CER to £423 million, primarily due to the loss of
exclusivity in Europe, with the US generic impact now broadly
annualised. Coreg
franchise sales
declined 68% AER, 67% CER to £36 million following a generic
Coreg CR entrant to the US
market in Q4 2017. Augmentin sales declined 5% AER but
grew 1% CER to £424 million with improved demand in Emerging
Markets.
|
|
Vaccines
|
|
|
9 months 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Meningitis
|
693
|
|
1
|
|
5
|
|
Influenza
|
330
|
|
(12)
|
|
(8)
|
|
Shingles
|
563
|
|
-
|
|
-
|
|
Established
Vaccines
|
2,829
|
|
(2)
|
|
-
|
|
|
|
|
|
|
|
|
|
4,415
|
|
12
|
|
15
|
|
|
|
|
|
|
|
|
US
|
2,035
|
|
36
|
|
44
|
|
Europe
|
1,184
|
|
(2)
|
|
(4)
|
|
International
|
1,196
|
|
(4)
|
|
-
|
|
|
|
|
|
|
|
|
|
4,415
|
|
12
|
|
15
|
|
|
|
|
|
|
|
|
Vaccines turnover grew 12% AER, 15% CER to £4,415 million,
primarily driven by growth in sales of Shingrix, Hepatitis vaccines, which benefited from a
competitor supply shortage, the launch of Cervarix in China and market growth for Bexsero. This was partly offset by lower
Synflorix
sales, reflecting lower pricing and
demand in Emerging Markets, and lower sales of DTPa-containing
vaccines (Infanrix, Pediarix and
Boostrix) due to
increased competitive pressures, particularly in Europe, and
unfavourable year-on-year CDC stockpile movements in the
US.
Meningitis
Meningitis
sales grew 1% AER, 5% CER to £693 million. Bexsero sales were up 7% AER, 12% CER
driven by demand and share gains in the US, together with continued
growth in private market sales in International, partly offset by
the completion of vaccination of catch-up cohorts in certain
markets in Europe. Menveo
sales fell 10% AER, 5% CER, primarily
reflecting a strong comparator performance and supply constraints
in Europe and International, partly offset by demand and share
gains in the US.
Influenza
Fluarix/FluLaval sales declined
12% AER, 8% CER to £330 million, driven by increased price
competition in the US, partly offset by stronger sales in
Europe.
Shingles
Shingrix recorded sales of
£563 million in the first nine months in the US and Canada,
driven by demand and share gains. US sales benefited from market
growth in new patient populations now covered by immunisation
recommendations.
Established
Vaccines
Sales of DTPa-containing vaccines (Infanrix, Pediarix and
Boostrix) were down 12% AER, 9%
CER. Boostrix sales declined 11% AER, 8% CER to £378
million, primarily driven by lower demand in International and the
return to the market of a competitor in Europe. Infanrix, Pediarix sales were down 12% AER, 9% CER to £515
million, reflecting increased competitive pressures in Europe and
the US as well as unfavourable year-on-year CDC stockpile movements
in the US, partly offset by stronger demand in
International.
Hepatitis vaccines grew 16% AER, 20% CER to £618 million,
benefiting from a competitor supply shortage and stronger demand in
the US and Europe, partly offset by unfavourable CDC stockpile
movements in the US.
Rotarix sales were down 3% AER
and flat at CER to £387 million.
Synflorix sales declined 20%
AER and 20% CER to £318 million, primarily impacted by lower
pricing and demand in Emerging Markets.
Cervarix sales increased 71%
AER, 74% CER to £123 million, primarily driven by its recent
launch in China.
|
|
Consumer Healthcare
|
|
|
9 months 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Wellness
|
2,935
|
|
(2)
|
|
2
|
|
Oral
health
|
1,873
|
|
-
|
|
5
|
|
Nutrition
|
489
|
|
(5)
|
|
2
|
|
Skin
health
|
453
|
|
(3)
|
|
-
|
|
|
|
|
|
|
|
|
|
5,750
|
|
(2)
|
|
2
|
|
|
|
|
|
|
|
|
US
|
1,339
|
|
(3)
|
|
2
|
|
Europe
|
1,797
|
|
-
|
|
-
|
|
International
|
2,614
|
|
(3)
|
|
5
|
|
|
|
|
|
|
|
|
|
5,750
|
|
(2)
|
|
2
|
|
|
|
|
|
|
|
|
Consumer
Healthcare sales in the nine months declined 2% AER but grew 2% CER
to £5,750 million, with continued broad-based growth in Oral
health partly offset by a decline in Panadol and lower sales of tail
brands.
The
aggregate impact from generic competition on Transderm Scop in the US, the
divestment of a number of tail brands, including Horlicks and MaxiNutrition in the UK, and
implementation of the Goods & Service Tax (GST) in India on
overall growth was around one percentage point.
Wellness
Wellness
sales declined 2% AER but grew 2% CER to £2,935 million.
Voltaren grew in mid-single
digits due to new launches while Theraflu growth was supported by a
strong cold and flu season earlier in the year. Panadol delivered a weaker performance
as a result of the change in the route-to-market model in
South-East Asia and the discontinuation of slow-release
Panadol products in the
Nordic countries.
Oral
health
Oral
health sales were flat at AER but grew 5% CER to £1,873
million, as Sensodyne
delivered high single-digit growth in the US and a number of
International markets, driven by Sensodyne Rapid, partly offset by
destocking in China. Denture care grew in high single digits
through a strong Poligrip
performance in the US and the launch of Corega Max in Russia.
Nutrition
Nutrition
sales declined 5% AER but grew 2% CER to £489 million. The
Nutrition business in India performed strongly across the product
portfolio, benefiting from new innovations including Horlicks Protein+ which was launched
earlier in the year. The impact of divestments and India GST
implementation on Nutrition growth was approximately nine
percentage points.
Skin
health
Skin
health sales were down 3% AER but flat at CER at £453 million,
with high single-digit growth in Fenistil offset by a decline in tail
brands.
|
|
Financial performance – Q3 2018
|
|
Total results
|
|
The
Total results for the Group are set out below.
|
|
|
Q3 2018
£m
|
|
Q3
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
8,092
|
|
7,843
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,636)
|
|
(2,652)
|
|
(1)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,456
|
|
5,191
|
|
5
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,527)
|
|
(2,308)
|
|
9
|
|
12
|
|
Research
and development
|
(988)
|
|
(1,047)
|
|
(6)
|
|
(5)
|
|
Royalty income
|
94
|
|
107
|
|
(12)
|
|
(13)
|
|
Other
operating income/(expense)
|
(125)
|
|
(66)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
1,910
|
|
1,877
|
|
2
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
10
|
|
13
|
|
|
|
|
|
Finance
expense
|
(233)
|
|
(194)
|
|
|
|
|
|
Profit
on disposal of associates
|
3
|
|
8
|
|
|
|
|
|
Share
of after tax profits of associates and
joint ventures
|
15
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
1,705
|
|
1,711
|
|
-
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(193)
|
|
(316)
|
|
|
|
|
|
Tax rate %
|
11.3%
|
|
18.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
1,512
|
|
1,395
|
|
8
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
94
|
|
183
|
|
|
|
|
|
Profit
attributable to shareholders
|
1,418
|
|
1,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,512
|
|
1,395
|
|
8
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
28.8p
|
|
24.8p
|
|
16
|
|
23
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
Cost of
sales as a percentage of turnover was 32.6%, down 1.2 percentage
points at AER and 1.7 percentage points in CER terms compared with
Q3 2017. This primarily reflected the phasing of costs of
manufacturing restructuring programmes, as well as the comparison
with a number of non-cash write downs in Q3 2017 as a result of
plant closures, together with a more favourable product mix in all
three businesses, particularly the impact of higher Vaccines and
HIV sales, and a further contribution from integration and
restructuring savings in all three businesses. This was partly
offset by continued adverse pricing pressure in Pharmaceuticals,
particularly in Respiratory and Established Vaccines, inventory
adjustments and increased input costs.
Selling, general and administration
SG&A
costs as a percentage of turnover were 31.2%, 1.8 percentage points
higher than in Q3 2017 at AER and 1.9 percentage points higher on a
CER basis. This reflected a 12% increase, at CER, in SG&A costs
compared with Q3 2017 due to increased restructuring costs mainly
in the Pharmaceuticals business as well as increased investment in
promotional product support, particularly for new launches in
Vaccines, Respiratory and HIV and targeted priority markets, partly
offset by tight control of ongoing costs, particularly in
non-promotional and back office spending across all three
businesses.
Research and development
R&D
expenditure was £988 million (12.2% of turnover), down 6% AER,
5% CER, primarily reflecting lower restructuring costs,
particularly in comparison to the charges in Q3 2017 related to the
termination of rights to sirukumab and the benefits of the
re-prioritisation of the R&D portfolio. This was partly offset
by increased investment in the progression of a number of mid and
late-stage programmes, particularly in Oncology and provision for
the costs payable to a third party relating to the expected use of
a Priority Review Voucher.
Royalty income
Royalty
income was £94 million (Q3 2017: £107 million), down 12%
AER, 13% CER, primarily reflecting the patent expiry of
Cialis.
Other operating income/(expense)
Net
other operating expense of £125 million (Q3 2017: £66
million) reflected £248 million (Q3 2017: £19 million) of
accounting charges arising from the re-measurement of the
contingent consideration liabilities related to the acquisitions of
the former Shionogi-ViiV Healthcare joint venture and the former
Novartis Vaccines business and the liabilities for the Pfizer put
option and Pfizer and Shionogi preferential dividends in ViiV
Healthcare. The largest element was a re-measurement of £214
million for the contingent consideration liability due to Shionogi,
primarily arising from changes in exchange rate assumptions. This
was partly offset by the profit on a number of asset disposals,
including tapinarof.
Operating profit
Total
operating profit was £1,910 million in Q3 2018 compared with
an operating profit of £1,877 million in Q3 2017. The increase
in operating profit primarily reflected the benefit from sales
growth in all three businesses, a more favourable mix and continued
tight control of ongoing costs across all three businesses, as well
as profit on a number of asset disposals, including tapinarof. This
was partly offset by the increased impact of accounting charges
related to re-measurement of the liabilities for contingent
consideration, put options and preferential dividends, as well as
increased restructuring costs, compared with Q3 2017. Operating
profit was also impacted by continuing price pressure, particularly
in Respiratory, supply chain investments, increased R&D
investment including a provision for the costs expected to be
payable to a third party relating to the future use of a Priority
Review Voucher, investments in promotional product support,
particularly for new launches in Vaccines, Respiratory and HIV, and
a reduction in royalty income.
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 £213 million (Q3
2017: £189 million). This included cash payments made to
Shionogi of £208 million (Q3 2017: £186
million).
Net finance costs
Net
finance expense was £223 million compared with £181
million in Q3 2017. The increase primarily reflected higher debt
following the acquisition from Novartis of its stake in the
Consumer Healthcare Joint Venture in June 2018 as well as
additional interest on a historic tax settlement.
Taxation
The
charge of £193 million represented an effective tax rate of
11.3% (Q3 2017: 18.5%) and reflected the differing tax effects of
the various adjusting items, including the reassessment of
estimates of uncertain tax positions following the settlement of a
number of open issues with tax authorities in key
jurisdictions.
Non-controlling interests
The
allocation of earnings to non-controlling interests amounted to
£94 million (Q3 2017: £183 million). The reduction in
allocation was primarily due to the ending of allocations of
Consumer Healthcare profits (Q3 2017: £77 million) following
the buyout of Novartis’ interest in Q2 2018, and a lower
allocation of ViiV Healthcare profits of £78 million (Q3 2017:
£100 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
and higher remeasurement charges. This was partly offset by an
increased allocation due to higher net profits in some of the
Group’s other entities with non-controlling
interests.
Earnings per share
Total
earnings per share was 28.8p, compared with 24.8p in Q3 2017. The
increase in earnings per share primarily reflected increased profit
on disposals as well as an improved trading performance, reduced
non-controlling interest allocation of Consumer Healthcare profits
and a reduced tax rate. This was partly offset by the impact of
charges arising from increases in the valuation of the liabilities
for contingent consideration, put options and preferential
dividends.
|
|
Adjusting items
GSK
presents Total results and Adjusted results in order to assist
shareholders in better understanding the Group’s operational
performance. Adjusted results, which is a non-IFRS measure, may be
considered in addition to, but not as a substitute for, or superior
to, information presented in accordance with IFRS.
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. As a result, GSK also
reports Adjusted results. GSK believes that Adjusted results allow
the key trends and factors driving the Group’s performance to
be more easily and clearly identified by shareholders. This
approach also aligns Group’s results with the majority of its
peer companies and how they report earnings.
Adjusted
results exclude the following items from Total results:
amortisation and impairments of intangible assets and goodwill;
major restructuring costs (under specific Board approved programmes
that are structural, of a significant scale and where the costs of
individual or related projects exceed £25 million), including
those integration 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 and the impact of the enactment of the US Tax Cuts and
Jobs Act in 2017. Costs for all other ordinary course smaller scale
restructuring and legal charges and expenses are retained within
Total and Adjusted results.
The
adjusting items that reconcile Total operating profit, profit after
tax and earnings per share to Adjusted results are as
follows:
|
|
|
Q3 2018
|
|
Q3
2017
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
£m
|
|
Profit
after tax
£m
|
|
Earnings
per
share
p
|
|
Operating
profit
£m
|
|
(Loss)/
profit
after
tax
£m
|
|
Earnings
per
share
p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total results
|
1,910
|
|
1,512
|
|
28.8
|
|
1,877
|
|
1,395
|
|
24.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
asset amortisation
|
143
|
|
114
|
|
2.3
|
|
149
|
|
116
|
|
2.4
|
|
Intangible
asset impairment
|
49
|
|
43
|
|
0.9
|
|
82
|
|
67
|
|
1.4
|
|
Major
restructuring costs
|
283
|
|
216
|
|
4.4
|
|
266
|
|
207
|
|
4.2
|
|
Transaction-related
items
|
247
|
|
223
|
|
3.6
|
|
40
|
|
12
|
|
(0.7)
|
|
Divestments,
significant legal and other
items
|
(108)
|
|
(220)
|
|
(4.5)
|
|
54
|
|
19
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusting
items
|
614
|
|
376
|
|
6.7
|
|
591
|
|
421
|
|
7.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results
|
2,524
|
|
1,888
|
|
35.5
|
|
2,468
|
|
1,816
|
|
32.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
reconciliations between Total results and Adjusted results are set
out on pages 58 to 61 and the definition of Adjusted results is set
out on page 37.
|
|
Intangible asset amortisation and impairment
Intangible
asset amortisation was £143 million, compared with £149
million in Q3 2017. There were also intangible asset impairments of
£49 million (Q3 2017: £82 million) reflecting a number of
impairments to commercial and R&D assets. Both of these charges
were non-cash items.
|
|
Major restructuring and integration
Major restructuring costs related to specific Board approved Major
restructuring programmes that are structural, of a significant
scale and where the costs of individual or related projects exceed
£25 million, including integration costs following material
acquisitions, are excluded from Adjusted results. Other ordinary
course smaller scale restructuring costs are retained within Total
and Adjusted results.
The
Board approved a new major restructuring programme in July 2018,
which is designed to significantly improve the competitiveness and
efficiency of the Group’s cost base with savings delivered
primarily through supply chain optimisation and reductions in administrative
costs.
Total
Major restructuring and integration charges incurred in the quarter
were £283 million (Q3 2017: £266 million). These included
£155 million under the existing combined integration programme
(Q3 2017: £266 million) and £128 million relating to the
2018 major restructuring programme. Total non-cash charges were
£19 million (Q3 2017: £77 million) all arising under the
existing combined integration programme and primarily relating to
the write-down of assets largely as a result of announced plans to
reduce the manufacturing network. Total cash charges were £264
million, including £136 million under the existing combined
programme (Q3 2017: £189 million) relating to restructuring in
the Europe and International Pharmaceuticals commercial operations
as well as some manufacturing sites, and £128 million under
the 2018 major restructuring programme, primarily relating to
restructuring in the US Pharmaceuticals commercial operation. Cash
payments made in the quarter were £140 million (Q3 2017:
£117 million) including the settlement of certain charges
accrued in previous quarters. The existing combined programme
delivered incremental annual cost savings in the quarter of less
than £0.1 billion.
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £247 million (Q3 2017:
£40 million). This primarily reflected £248 million of
accounting charges for the re-measurement of the contingent
consideration liabilities related to the acquisitions of the former
Shionogi-ViiV Healthcare joint venture and the former Novartis
Vaccines business and the liabilities for the Pfizer put option and
Pfizer and Shionogi preferential dividends in ViiV
Healthcare.
|
|
Charge/(credit)
|
Q3 2018
£m
|
|
Q3
2017
£m
|
|
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
-
|
|
(28)
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture
(including
Shionogi preferential dividends)
|
214
|
|
59
|
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(20)
|
|
(38)
|
|
Contingent
consideration on former Novartis Vaccines business
|
54
|
|
26
|
|
Other
adjustments
|
(1)
|
|
21
|
|
|
|
|
|
|
Total
transaction-related charges
|
247
|
|
40
|
|
|
|
|
|
|
The
£214 million charge relating to the contingent consideration
for the former Shionogi-ViiV Healthcare Joint Venture represented
£101 million arising primarily from updated exchange rate
assumptions, together with a £113 million unwind of the
discount. A credit of £21 million relating to a decrease in
the put option liability to Pfizer reflected revised exchange rate
assumptions on forecasts as well as adjustments to pipeline
forecasts.
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 £213 million (Q3
2017: £189 million). This included cash payments made by ViiV
Healthcare to Shionogi in relation to its contingent consideration
liability (including preferential dividends) which amounted to
£208 million (Q3 2017: £186 million).
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 56.
Divestments, significant legal charges and other items
Divestments
and other items included the profit on a number of asset disposals,
including tapinarof, equity investment impairments and certain
other adjusting items. A charge of £12 million (Q3 2017:
£1 million credit) for significant legal matters included the
benefit of the settlement of existing matters as well as provisions
for ongoing litigation. Significant legal cash payments were
£12 million (Q3 2017: £137 million).
|
|
Adjusted results
GSK
uses Adjusted results, which is a non-IFRS measure, to report the
performance of the Group as it believes that it allows the key
trends and factors in the Group’s performance to be more
easily and clearly identified. Non-IFRS measures may be considered
in addition to, but not as a substitute for, or superior to,
information presented in accordance with IFRS.
|
|
|
Q3 2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
8,092
|
|
100
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,388)
|
|
(29.5)
|
|
4
|
|
5
|
|
Selling,
general and administration
|
(2,313)
|
|
(28.6)
|
|
1
|
|
4
|
|
Research
and development
|
(961)
|
|
(11.9)
|
|
7
|
|
8
|
|
Royalty
income
|
94
|
|
1.2
|
|
(12)
|
|
(13)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,524
|
|
31.2
|
|
2
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
2,318
|
|
|
|
1
|
|
5
|
|
Adjusted
profit after tax
|
1,888
|
|
|
|
4
|
|
8
|
|
Adjusted
profit attributable to shareholders
|
1,747
|
|
|
|
10
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
35.5p
|
|
|
|
10
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Operating profit by business
|
Q3 2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,028
|
|
48.0
|
|
(3)
|
|
(1)
|
|
Pharmaceuticals
R&D*
|
(667)
|
|
|
|
2
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
1,361
|
|
32.2
|
|
(5)
|
|
(2)
|
|
Vaccines
|
827
|
|
43.0
|
|
18
|
|
26
|
|
Consumer
Healthcare
|
429
|
|
22.0
|
|
9
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
2,617
|
|
32.3
|
|
4
|
|
8
|
|
Corporate
& other unallocated costs
|
(93)
|
|
|
|
94
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,524
|
|
31.2
|
|
2
|
|
6
|
|
|
|
|
|
|
|
|
|
|
*
|
Operating
profit of Pharmaceuticals R&D segment, which is the
responsibility of the President, Pharmaceuticals R&D. It
excludes ViiV Healthcare operating profit, which is reported within
the Pharmaceuticals segment. A more detailed breakdown of R&D
expenses is set out on page 33.
|
|
Operating profit
Adjusted
operating profit was £2,524 million, 2% higher than Q3 2017 at
AER and 6% higher at CER on a turnover increase of 6% CER. The
Adjusted operating margin of 31.2% was 0.3 percentage points lower
at AER but 0.2 percentage points higher on a CER basis than in Q3
2017. This primarily reflected the benefit from sales growth in all
three businesses, a more favourable mix and continued tight control
of ongoing costs across all three businesses. This was partly
offset by continuing price pressure, particularly in Respiratory,
supply chain investments, increased R&D investment including
the provision for costs expected to be payable to a third party
relating to the future use of a Priority Review Voucher,
investments in promotional product support, particularly for new
launches in Vaccines, Respiratory and HIV, as well as a reduction
in royalty income.
Cost of sales
Cost of
sales as a percentage of turnover was 29.5%, up 0.1 percentage
points at AER, but down 0.3 percentage points at CER compared with
Q3 2017. This primarily reflected a more favourable product mix in
all three businesses, particularly the impact of higher Vaccines
and HIV sales, and a further contribution from integration and
restructuring savings in all three businesses. This was partly
offset by continued adverse pricing pressure in Pharmaceuticals,
particularly in Respiratory and Established Vaccines, inventory
adjustments and increased input costs.
Selling, general and administration
SG&A
costs as a percentage of turnover were 28.6%, 0.5 percentage points
lower at AER than in Q3 2017 and 0.5 percentage points lower on a
CER basis. The 1% AER, 4% CER increase in SG&A costs primarily
reflected increased investment in promotional product support,
particularly for new launches in Vaccines, Respiratory and HIV and
targeted priority markets partly offset by tight control of ongoing
costs, particularly in non-promotional spending across all three
businesses.
Research and development
R&D
expenditure was £961 million (11.9% of turnover), 7% AER, 8%
CER higher than Q3 2017, primarily reflecting increased investment
in the progression of a number of mid and late-stage programmes,
particularly in Oncology as well as the provision for costs
expected to be payable to a third party relating to the future use
of a Priority Review Voucher partly offset by the benefits of the
re-prioritisation of the R&D portfolio.
Royalty income
Royalty
income was £94 million (Q3 2017: £107 million), a
reduction of 12% AER, 13% CER, primarily reflecting the patent
expiry of Cialis.
Operating profit by business
Pharmaceuticals
operating profit was £1,361 million, down 5% AER, 2% CER on a
turnover increase of 3% CER. The operating margin of 32.2% was 1.8
percentage points lower at AER than in Q3 2017 and 1.6 percentage
points lower on a CER basis. This primarily reflected increased
R&D investment including the costs payable to a third party
relating to the future use of a Priority Review Voucher awarded in
Q3 2018, investment in new product support and targeted priority
markets, as well as the continued impact of lower prices,
particularly in Respiratory, and the reduction in royalty income,
partly offset by a more favourable product mix, primarily driven by
the growth in HIV sales.
Vaccines operating profit was £827 million, 18% higher than Q3
2017 at AER and 26% higher at CER on a turnover increase of 17%
CER. The operating margin of 43.0% was 1.7 percentage points higher
than in Q3 2017 at AER and 3.2 percentage points higher on a CER
basis. This was primarily driven by enhanced operating leverage
from strong sales growth, improved product mix and higher royalty
income, partly offset by inventory adjustments and increased
SG&A resources to support new launches and business
growth.
Consumer
Healthcare operating profit was £429 million, up 9% AER, 16%
CER, on a turnover increase of 3% CER. The operating margin of
22.0% was 2.0 percentage points higher than in Q3 2017 at AER, and
2.5 percentage points higher on a CER basis. This primarily
reflected continued manufacturing restructuring and integration
benefits and improved product mix as well as tight control of
promotional and other operating expenses compared with Q3
2017.
Net finance costs
Net finance expense was £221 million compared with £177
million in Q3 2017. The increase primarily reflected higher debt
following the acquisition from Novartis of its stake in the
Consumer Healthcare Joint Venture in June 2018 as well as
additional interest of £23 million on a historic tax
settlement.
Taxation
Tax on Adjusted profit amounted to £430 million and
represented an effective Adjusted tax rate of 18.6% (Q3 2017:
21.0%). See ‘Taxation’ on page 51 for further
details.
Non-controlling interests
The allocation of Adjusted earnings to non-controlling interests
amounted to £141 million (Q3 2017: £228 million). The
reduction in allocation was primarily due to the ending of
non-controlling interest allocations of Consumer Healthcare profits
(Q3 2017: £105 million) following the buyout of
Novartis’ interest in Q2 2018. This was partly offset by
increases in the allocation of ViiV Healthcare profits of £125
million (Q3 2017: £117 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 increases in the allocation to
non-controlling interests due to higher net profits in some of the
Group’s other entities with non-controlling
interests.
Earnings per share
Adjusted
EPS of 35.5p was up 10% AER, 14% CER, compared with a 6% CER
increase in Adjusted operating profit, primarily as a result of the
reduced non-controlling interest allocation of Consumer Healthcare
profits and a reduced Adjusted tax rate.
|
|
Currency impact on Q3 2018 results
The Q3
2018 results are based on average exchange rates, principally
£1/$1.31, £1/€1.11 and £1/Yen 146. Comparative
exchange rates are given on page 52. The period-end exchange rates
were £1/$1.30, £1/€1.12 and £1/Yen
148.
In the
quarter, turnover increased 3% AER, 6% CER. Total EPS was 28.8p
compared with 24.8p in Q3 2017 and Adjusted EPS was 35.5p compared
with 32.5p in Q3 2017, up 10% AER, 14% CER. The negative currency
impact primarily reflected the strength of Sterling, particularly
against the US Dollar and Emerging Market currencies, relative to
Q3 2017. Exchange gains or losses on the settlement of intercompany
transactions had a negligible impact on the negative currency
impact of four percentage points on Adjusted EPS.
|
|
Financial performance – nine months 2018
|
|
Total results
|
|
The
Total results for the Group are set out below.
|
|
|
9 months 2018
£m
|
|
9
months 2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
22,624
|
|
22,547
|
|
-
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(7,337)
|
|
(7,784)
|
|
(6)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
15,287
|
|
14,763
|
|
4
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(7,295)
|
|
(7,139)
|
|
2
|
|
6
|
|
Research
and development
|
(2,817)
|
|
(3,267)
|
|
(14)
|
|
(11)
|
|
Royalty income
|
220
|
|
287
|
|
(23)
|
|
(23)
|
|
Other
operating income/(expense)
|
(1,466)
|
|
(1,069)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
3,929
|
|
3,575
|
|
10
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
57
|
|
49
|
|
|
|
|
|
Finance
expense
|
(589)
|
|
(580)
|
|
|
|
|
|
Profit
on disposal of associates
|
3
|
|
28
|
|
|
|
|
|
Share
of after tax profits of associates and
joint ventures
|
26
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
3,426
|
|
3,083
|
|
11
|
|
25
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(680)
|
|
(551)
|
|
|
|
|
|
Tax rate %
|
19.8%
|
|
17.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
2,746
|
|
2,532
|
|
8
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling
interests
|
338
|
|
454
|
|
|
|
|
|
Profit
attributable to shareholders
|
2,408
|
|
2,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,746
|
|
2,532
|
|
8
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
49.0p
|
|
42.5p
|
|
15
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
Cost of
sales as a percentage of turnover was 32.4%, down 2.1 percentage
points at AER and 2.8 percentage points in CER terms compared with
2017. This primarily reflected a favourable comparison with
£363 million of non-cash write-downs of assets in 2017 related
to the decision to withdraw Tanzeum progressively. The nine months
also benefited from a more favourable product mix in all three
businesses, particularly the impact of higher HIV sales and the
launch of Shingrix,
together with a further contribution from integration and
restructuring savings. This was partly offset by an adverse
comparison with the benefit of a settlement for lost third party
supply volume in 2017 in Vaccines, as well as continued adverse
pricing pressure in Pharmaceuticals, particularly in Respiratory
and Established Vaccines, and increased input costs.
Selling, general and administration
SG&A
costs as a percentage of turnover were 32.2%, 0.5 percentage points
higher than in 2017 at AER and 0.5 percentage points higher on a
CER basis. This reflected a 6% increase, at CER, in SG&A costs
compared with 2017 primarily due to increased restructuring and
integration costs, as well as increased investment in promotional
product support, particularly for new launches in Respiratory, HIV
and Vaccines, partly offset by tight control of ongoing costs,
particularly in non-promotional and back office spending across all
three businesses.
Research and development
R&D
expenditure was £2,817 million (12.5% of turnover), 14% AER,
11% CER lower than in 2017. This reflected a favourable comparison
with the impact of the Priority Review Voucher in 2017, as well as
reduced restructuring costs primarily due to the comparison with
the provision for obligations as a result of the decision to
withdraw Tanzeum
progressively in Q3 2017 and the benefit of the R&D
prioritisation initiatives started in the second half of last year.
This was partly offset by increased investment in the progression
of a number of mid and late-stage programmes, particularly in
Oncology, as well as provisions for the costs payable to a third
party relating to the expected use of a Priority Review Voucher
awarded in 2018.
Royalty income
Royalty
income was £220 million (2017: £287 million), down 23%
AER and CER, the reduction primarily reflecting the patent expiry
of Cialis.
Other operating income/(expense)
Net
other operating expense of £1,466 million (2017: £1,069
million) primarily reflected £1,617 million (2017: £1,299
million) of accounting charges arising from the re-measurement of
the contingent consideration liabilities related to the
acquisitions of the former Shionogi-ViiV Healthcare joint venture
and the former Novartis Vaccines business, the value attributable
to the Consumer Healthcare Joint Venture put option previously held
by Novartis and the liabilities for the Pfizer put option and
Pfizer and Shionogi preferential dividends in ViiV Healthcare. This
was partly offset by the profit on a number of asset disposals,
including tapinarof.
The
accounting charges were driven primarily by a £927 million
re-measurement of the contingent consideration liability due to
Shionogi, primarily related to changes in exchange rate assumptions
and sales forecasts following the GEMINI study completed in Q2
2018. In addition, a net charge of £658 million reflected the
re-measurement of the valuation of the Consumer Healthcare put
option, together with movements in exchange rates largely offset by
gains on hedging contracts.
Operating profit
Total operating profit was £3,929 million in the nine months
compared with £3,575 million in 2017. The increase in
operating profit primarily reflected reduced restructuring costs
and asset impairments in comparison with the non-cash charges in
2017 relating to the progressive withdrawal of Tanzeum. In addition, there was a contribution from sales
growth on a CER basis in all three businesses, a more favourable
mix, benefits from prioritisation of R&D expenditure and
comparison with the impact of the Priority Review Voucher utilised
and expensed in 2017 and continued tight control of ongoing costs.
This was partly offset by continuing price pressure, particularly
in Respiratory, supply chain investments, the comparison with the
benefit in Q2 2017 of a settlement for lost third party supply
volume in Vaccines and investments in new product support,
particularly for launches in Respiratory, HIV and Vaccines, as well
as a reduction in royalty income.
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 nine months amounted to £915 million
(2017: £492 million). This included a cash milestone paid to
Novartis of $450 million (£317 million) as well as cash
payments made to Shionogi of £584 million (2017: £485
million).
Net finance costs
Net finance expense was £532 million compared with £531
million in 2017. This reflected higher debt following the
acquisition from Novartis of its stake in the Consumer Healthcare
Joint Venture in June 2018 as well as additional interest on a
historic tax settlement in Q3 2018, offset by the benefit of a
one-off accounting adjustment to the amortisation of long term bond
interest charges of £20 million in Q1 2018, the maturity of
older bonds refinanced at lower interest rates as well as the
translation impact of exchange rate movements on the reported
Sterling costs of foreign currency denominated interest-bearing
instruments.
Taxation
The charge of £680 million represented an effective tax rate
of 19.8% (2017: 17.9%) and reflected the differing tax effects of
the various adjusting items.
Non-controlling interests
The allocation of earnings to non-controlling interests amounted to
£338 million (2017: £454 million). The reduction
in allocation was primarily due to the ending of further
non-controlling interest allocation of Consumer Healthcare profits
of £117 million (2017: £197 million) after 3 May 2018
when the buyout of Novartis’ interest became unconditional,
as well as a lower allocation of ViiV Healthcare profits of
£175 million (Q3 2017: £226 million), including the
impact of the impact of re-measurement charges and changes in the
proportions of preferential dividends due to each shareholder. This
was partly offset by an increased allocation to non-controlling
interests due to higher net profits in some of the Group’s
other entities with non-controlling interests.
Earnings per share
Total earnings per share was 49.0p, compared with 42.5p in 2017.
The increase in earnings per share primarily reflected an
increase in Adjusted operating profit, reduced restructuring costs and asset impairments
in comparison with the non-cash charges in 2017 relating to the
progressive withdrawal of Tanzeum and a reduced
non-controlling interest allocation of Consumer Healthcare profits.
This was partly offset by the impact of charges arising from
increases in the valuation of the liabilities for contingent
consideration, put options and preferential dividends.
|
|
Adjusting items
GSK
presents Total results and Adjusted results in order to assist
shareholders in better understanding the Group’s operational
performance. Adjusted results, which is a non-IFRS measure, may be
considered in addition to, but not as a substitute for, or superior
to, information presented in accordance with IFRS.
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 Group’s performance. This approach also aligns
the presentation of the Group’s results more closely with the
majority of GSK’s peer group.
Adjusted
results exclude the following items from Total results:
amortisation and impairments of intangible assets and goodwill;
major restructuring costs (under specific Board approved programmes
that are structural, of a significant scale and where the costs of
individual or related projects exceed £25 million), including
integration costs following material acquisitions; 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
and the impact of the implementation of the US Tax Cuts and Jobs
Act in 2017. Costs for all other ordinary course smaller scale
restructuring and legal charges and expenses are retained within
the Adjusted results.
The
adjusting items that reconcile Total operating profit, profit after
tax and earnings per share to Adjusted results are as
follows:
|
|
|
9 months 2018
|
|
9
months 2017
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
£m
|
|
Profit
after tax
£m
|
|
Earnings
per
share
p
|
|
Operating
profit
£m
|
|
Profit
after
tax
£m
|
|
Earnings
per
share
p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total results
|
3,929
|
|
2,746
|
|
49.0
|
|
3,575
|
|
2,532
|
|
42.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
asset amortisation
|
430
|
|
345
|
|
7.0
|
|
444
|
|
344
|
|
7.1
|
|
Intangible
asset impairment
|
104
|
|
89
|
|
1.8
|
|
421
|
|
296
|
|
6.1
|
|
Major
restructuring costs
|
506
|
|
386
|
|
7.9
|
|
872
|
|
626
|
|
12.8
|
|
Transaction-related
items
|
1,706
|
|
1,505
|
|
26.6
|
|
1,358
|
|
1,206
|
|
21.7
|
|
Divestments,
significant legal and other
items
|
(126)
|
|
(201)
|
|
(4.0)
|
|
(140)
|
|
(271)
|
|
(5.6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusting
items
|
2,620
|
|
2,124
|
|
39.3
|
|
2,955
|
|
2,201
|
|
42.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted results
|
6,549
|
|
4,870
|
|
88.3
|
|
6,530
|
|
4,733
|
|
84.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Full
reconciliations between Total results and Adjusted results are set
out on pages 58 to 61 and the definition of Adjusted results is set
out on page 37.
|
|
Intangible asset amortisation and impairment
Intangible
asset amortisation was £430 million, compared with £444
million in 2017. There were also lower intangible asset impairments
of £104 million (2017: £421 million) related to
commercial and Pharmaceuticals R&D development assets,
reflecting a favourable comparison with 2017 which included an
impairment related to the progressive withdrawal of Tanzeum and a number of other
impairments to commercial assets. Both of these charges were
non-cash items.
|
|
Major restructuring and integration
Major restructuring costs related to specific Board approved Major
restructuring programmes that are structural, of a significant
scale and where the costs of individual or related projects exceed
£25 million, including integration costs following material
acquisitions, are excluded from Adjusted results. Other ordinary
course smaller scale restructuring costs are retained within Total
and Adjusted results.
The
Board approved in July 2018 a new major restructuring programme,
which is designed to significantly improve the competitiveness and
efficiency of the Group’s cost base with savings delivered
primarily through supply chain optimisation and reductions in administrative
costs.
Total
Major restructuring and integration charges incurred in the nine
months were £506 million (2017: £872 million). These
included £378 million under the existing combined integration
programme and £128 million relating to the 2018 major
restructuring programme. Total non-cash charges were £100
million (2017: £375 million) all under the existing combined
integration programme primarily relating to write down of assets in
manufacturing sites. Total cash charges were £406 million
(2017: £497 million), including £278 million under the
existing combined programme, primarily relating to restructuring in
Europe and International Pharmaceuticals commercial operations, as
well as some manufacturing sites and £128 million under the
new 2018 programme, primarily relating to restructuring in the US
Pharmaceuticals commercial operation. Cash payments made in the
nine months were £353 million (2017: £449 million)
including the settlement of certain charges accrued in previous
quarters. The programmes delivered incremental annual cost savings
in the nine months of £0.2 billion.
Charges
for the existing combined restructuring and integration programme
to date are £5.1 billion, of which cash charges were £3.7
billion. Cash payments of £3.5 billion have been made to date.
Non-cash charges were £1.4 billion.
Estimated
charges for 2018 under the existing combined restructuring and
integration programme are £0.5 billion, with cash charges of
around £0.3 billion and non-cash charges of around £0.2
billion.
Total
cash charges for the combined restructuring and integration
programme are now expected to be approximately £4.1 billion
with non-cash charges up to £1.6 billion. The programme has
now delivered approximately £3.9 billion of annual savings,
including a currency benefit of £0.4 billion. The programme is
now expected to deliver by 2020 total annual savings of £4.0
billion on a constant currency basis, together with an estimated
benefit of £0.4 billion from currency on the basis of
September 2018 average exchange rates.
The
2018 programme is expected to cost £1.7 billion over the
period to 2021, with cash costs of £0.8 billion and non-cash
costs of £0.9 billion, and is expected to deliver annual
savings of around £400 million by 2021 (at 2018 rates). These
savings will be fully re-invested in the Group to help fund
targeted increases in R&D and commercial support of new
products.
Estimated
charges under the new programme for 2018 are £0.4 billion,
with cash charges of around £0.3 billion and non-cash charges
of around £0.1 billion.
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £1,706 million (2017:
£1,358 million). This primarily reflected £1,617 million
of accounting charges for the re-measurement of the contingent
consideration liabilities related to the acquisitions of the former
Shionogi-ViiV Healthcare joint venture and the former Novartis
Vaccines business, the value attributable to the Consumer
Healthcare Joint Venture put option held by Novartis and the
liabilities for the Pfizer put option and Pfizer and Shionogi
preferential dividends in ViiV Healthcare.
|
|
Charge/(credit)
|
9 months 2018
£m
|
|
9
months 2017
£m
|
|
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
658
|
|
823
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture (including Shionogi
preferential dividends)
|
927
|
|
405
|
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(18)
|
|
(86)
|
|
Contingent
consideration on former Novartis Vaccines business
|
50
|
|
157
|
|
Other
adjustments
|
89
|
|
59
|
|
|
|
|
|
|
Total
transaction-related charges
|
1,706
|
|
1,358
|
|
|
|
|
|
|
A net
charge of £658 million relating to the Consumer Healthcare
Joint Venture represented the re-measurement of the valuation of
the Consumer Healthcare put option to the agreed undiscounted
valuation of $13 billion (£9.2 billion on signing), together
with an increase due to movements in exchange rates, largely offset
by gains on hedging contracts.
The
£927 million charge taken relating to the contingent
consideration for the former Shionogi-ViiV Healthcare Joint Venture
represented a £613 million increase in the valuation of the
contingent consideration due to Shionogi, primarily as a result of
updated exchange rate assumptions and sales forecasts following the
GEMINI study completed in Q2 2018, together with a £314
million unwind of the discount.
Other
adjustments included a £61 million charge reflecting the
release of an indemnity asset relating to the tax treatment of
inventory acquired as part of the Novartis Vaccines acquisition,
with a corresponding offset in tax.
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 nine months amounted to £915 million
(2017: £492 million). This included a cash milestone paid to
Novartis of $450 million (£317 million) as well as cash
payments made by ViiV Healthcare to Shionogi in relation to its
contingent consideration liability (including preferential
dividends) which amounted to £584 million (2017: £485
million).
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 56.
Divestments, significant legal charges and other items
Divestments
and other items included the profit on a number of asset disposals,
including tapinarof, equity investment impairments and certain
other adjusting items. A charge of £29 million (2017: £60
million) for significant legal matters included the benefit of the
settlement of existing matters as well as provisions for ongoing
litigation. Significant legal cash payments were £24 million
(2017: £184 million).
|
|
Adjusted results
GSK
uses Adjusted results, which is a non-IFRS measure, to report the
performance of the Group, as it believes that it allows the key
trends and factors in the Group’s performance to be more
easily and clearly identified. Non-IFRS measures may be considered
in addition to, but not as a substitute for or superior to,
information presented in accordance with IFRS.
|
|
|
9 months 2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
22,624
|
|
100
|
|
-
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(6,646)
|
|
(29.4)
|
|
2
|
|
4
|
|
Selling,
general and administration
|
(6,933)
|
|
(30.6)
|
|
-
|
|
4
|
|
Research
and development
|
(2,716)
|
|
(12.0)
|
|
(5)
|
|
(3)
|
|
Royalty
income
|
220
|
|
0.9
|
|
(23)
|
|
(23)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
6,549
|
|
28.9
|
|
-
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
6,050
|
|
|
|
1
|
|
8
|
|
Adjusted
profit after tax
|
4,870
|
|
|
|
3
|
|
10
|
|
Adjusted
profit attributable to shareholders
|
4,335
|
|
|
|
5
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
88.3p
|
|
|
|
4
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Operating profit by business
|
9 months 2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
6,080
|
|
48.8
|
|
(4)
|
|
-
|
|
Pharmaceuticals
R&D*
|
(1,898)
|
|
|
|
(6)
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
4,182
|
|
33.6
|
|
(3)
|
|
2
|
|
Vaccines
|
1,523
|
|
34.5
|
|
8
|
|
18
|
|
Consumer
Healthcare
|
1,165
|
|
20.3
|
|
9
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
6,870
|
|
30.4
|
|
1
|
|
7
|
|
Corporate
& other unallocated costs
|
(321)
|
|
|
|
13
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
6,549
|
|
28.9
|
|
-
|
|
7
|
|
|
|
|
|
|
|
|
|
|
*
|
Operating
profit of Pharmaceuticals R&D segment, which is the
responsibility of the President, Pharmaceuticals R&D. It
excludes ViiV Healthcare operating profit, which is reported within
the Pharmaceuticals segment. A more detailed breakdown of R&D
expenses is set out on page 33.
|
|
Operating profit
Adjusted
operating profit was £6,549 million, flat at AER compared with
2017 but 7% CER higher on a turnover increase of 4%. The Adjusted
operating margin of 28.9% was 0.1 percentage points lower at AER
than in 2017 but 0.7 percentage points higher on a CER basis. This
reflected the benefit from sales growth in all three businesses, a
more favourable mix, the benefits of prioritisation of R&D
expenditure and the comparison with the impact of the Priority
Review Voucher utilised and expensed in 2017 as well as continued
tight control of ongoing costs across all three businesses. This
was partly offset by continuing price pressure, particularly in
Respiratory, supply chain investments, the comparison with the
benefit in Q2 2017 of a settlement for lost third party supply
volume in Vaccines and investments in promotional product support,
particularly for new launches in Respiratory, HIV and Vaccines, as
well as a reduction in royalty income.
Cost of sales
Cost of
sales as a percentage of turnover was 29.4%, up 0.5 percentage
points at AER, but down 0.1 percentage points in CER terms compared
with 2017. This primarily reflected a more favourable product mix
in all three businesses, particularly the impact of higher HIV
sales and the launch of Shingrix, as well as a further
contribution from integration and restructuring savings in all
three businesses, offset by an adverse comparison with the benefit
of a settlement for lost third party supply volume in 2017 in
Vaccines, as well as continued adverse pricing pressure in
Pharmaceuticals, particularly in Respiratory, and in Established
Vaccines, and increased input costs.
Selling, general and administration
SG&A
costs as a percentage of turnover were 30.6%, 0.1 percentage points
lower at AER than in 2017 and 0.1 percentage points lower on a CER
basis. The 4% CER increase primarily reflected increased investment
in promotional product support, particularly for new launches in
Respiratory, HIV and Vaccines, offset by tight control of ongoing
costs, particularly in non-promotional spending across all three
businesses.
Research and development
R&D
expenditure was £2,716 million (12.0% of turnover), 5% AER, 3%
CER lower than 2017, primarily reflecting the comparison with the
impact of the Priority Review Voucher in H1 2017, as well as the
benefit of the prioritisation initiatives started in the second
half of 2017. This was partly offset by increased investment in the
progression of a number of mid and late-stage programmes,
particularly in Oncology, as well as the provision for costs
expected to be payable to a third party relating to the future use
of a Priority Review Voucher awarded in 2018.
Royalty income
Royalty
income was £220 million (2017: £287 million), primarily
reflecting the patent expiry of Cialis.
Operating profit by business
Pharmaceuticals
operating profit was £4,182 million, down 3% AER but up 2% CER
on a turnover increase of 2% CER. The operating margin of 33.6% was
0.4 percentage points lower at AER than in 2017 but flat on a CER
basis. This primarily reflected the favourable comparison with the
impact of the Priority Review Voucher in 2017, as well as a more
favourable product mix, primarily driven by the growth in HIV
sales, as well as benefits of prioritisation within R&D. This
was offset by increased investment in new product support, the
continued impact of lower prices, particularly in Respiratory, and
the broader transition of the Respiratory portfolio, the cost
payable to a third party relating to the future use of a Priority
Review Voucher awarded in 2018 as well as a reduction in royalty
income.
Vaccines operating profit was £1,523 million, 8% AER, 18% CER
higher than in 2017 on a turnover increase of 15% CER. The
operating margin of 34.5% was 1.3 percentage points lower at AER
than in 2017 but 0.7 percentage points higher on a CER basis. This
was primarily driven by an improved product mix including the
launch of Shingrix, together with further restructuring and
integration benefits. This was partly offset by the comparison with
the benefit of a settlement for lost third party supply volume
recorded in 2017, increased supply chain costs and increased
SG&A resources to support new launches and business
growth.
Consumer
Healthcare operating profit was £1,165 million, up 9% AER, 15%
CER on a turnover increase of 2% CER. The operating margin of 20.3%
was 2.0 percentage points higher than in 2017 and 2.3 percentage
points higher on a CER basis. This primarily reflected continued
manufacturing restructuring and integration benefits, improved
product mix as well as continued tight control of promotional and
other operating expenses.
Net finance costs
Net finance expense was £525 million compared with £522
million in 2017. The increase reflected higher debt following the
acquisition from Novartis of its stake in the Consumer Healthcare
Joint Venture in June 2018 as well as additional interest of
£23 million on a historic tax settlement in Q3 2018, partly
offset by the benefit of a one-off accounting adjustment to the
amortisation of long term bond interest charges of £20 million
in Q1 2018, the maturity of older bonds
refinanced at lower interest rates as well as 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 £1,180 million and
represented an effective Adjusted tax rate of 19.5% (2017: 21.4%).
See ‘Taxation’ on page 51 for further
details.
Non-controlling interests
The allocation of Adjusted earnings to non-controlling interests
amounted to £535 million (2017: £601 million). The
reduction in allocation of £118 million (2017: £259
million) was primarily due to the ending of non-controlling
interest allocation of Consumer Healthcare profits after 3 May 2018
when the buyout of Novartis’ interest became unconditional.
This was partly offset by increases in the allocation of ViiV
Healthcare profits of £371 million (Q3 2017: £311
million), and the changes in the proportions of preferential
dividends due to each shareholder based on the relative performance
of different products, as well as increases in the allocation to
non-controlling interests due to higher net profits in some of the
Group’s other entities with non-controlling
interests.
Earnings per share
Adjusted
EPS of 88.3p was up 4% AER, 12% CER, compared with a 7% CER
increase in Adjusted operating profit, primarily as a result of a
reduced non-controlling interest allocation of Consumer Healthcare
profits and a reduced Adjusted tax rate.
|
|
Currency impact on nine months 2018 results
The
results for the nine months to September 2018 are based on average
exchange rates, principally £1/$1.35, £1/€1.13 and
£1/Yen 148. Comparative exchange rates are given on page 52.
The period-end exchange rates were £1/$1.30,
£1/€1.12 and £1/Yen 148.
In the
nine months to September 2018, turnover was flat in AER terms but
increased 4% CER. Total EPS was 49.0p compared with EPS of 42.5p in
2017 and Adjusted EPS was 88.3p compared with 84.6p in 2017, up 4%
AER, 12% CER. The negative currency impact primarily reflected the
strength of Sterling, particularly against the US Dollar, Yen and
Emerging Market currencies, relative to 2017. Exchange gains or
losses on the settlement of intercompany transactions had a
negligible impact on the negative currency impact of eight
percentage points on Adjusted EPS.
|
|
Cash generation and conversion
|
|
Cash flow and net debt
|
|
|
Q3 2018
|
|
9 months 2018
|
|
9
months 2017
(revised)
|
|
|
|
|
|
|
|
|
Net
cash inflow from operating activities (£m)
|
2,077
|
|
4,302
|
|
4,049
|
|
Free
cash flow* (£m)
|
1,554
|
|
2,375
|
|
1,668
|
|
Free
cash flow growth (%)
|
21%
|
|
42%
|
|
7%
|
|
Free
cash flow conversion* (%)
|
>100%
|
|
99%
|
|
80%
|
|
Net
debt** (£m)
|
23,837
|
|
23,837
|
|
14,209
|
|
*
|
Free
cash flow and free cash flow conversion are defined on page
37.
As
announced at Q2 2018, with the introduction of the new R&D
strategy, GSK has revised its definition of free cash flow to
include proceeds from disposals of intangible assets, as set out on
page 55. Comparative figures have been revised
accordingly.
|
|
|
|
|
**
|
Net
debt is analysed on page 55.
|
|
Q3 2018
The net
cash inflow from operating activities for the quarter was
£2,077 million (Q3 2017: £1,897 million). The increase
primarily reflected improved operating profits, the phasing of tax
payments and reduced legal settlement costs, partly offset by a
negative currency impact on operating profit, and a larger increase
in working capital, primarily seasonal and other receivables,
compared with Q3 2017 particularly related to the growth in
Vaccines sales.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the quarter were £208
million, of which £185 million was recognised in cash flows
from operating activities and £23 million was recognised in
contingent consideration paid within investing cash flows. These
payments are deductible for tax purposes.
Free
cash flow was £1,554 million for the quarter (Q3 2017:
£1,282 million). The increase primarily reflected improved
operating profits, the phasing of tax payments, reduced legal
settlement costs and increased disposals of intangible assets of
£142 million primarily relating to the disposal of tapinarof
(Q3 2017: £6 million). This was partly offset by a negative
currency impact on operating profit and increased working capital
primarily reflecting a larger increase in seasonal and other
receivables compared with Q3 2017, particularly related to the
growth in Vaccines sales.
|
|
9 months 2018
The net
cash inflow from operating activities for the nine months was
£4,302 million (2017: £4,049 million). The increase
primarily reflected improved operating profits, reduced legal
settlement costs and restructuring payments and favourable timing
of payments for returns and rebates, partly offset by a negative
currency impact on operating profit and a larger increase in
working capital, primarily seasonal and other receivables compared
with 2017, particularly related to the growth in Vaccines
sales.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the nine months were
£584 million, of which £517 million was recognised in
cash flows from operating activities and £67 million was
recognised in contingent consideration paid within investing cash
flows. These payments are deductible for tax purposes.
Free
cash flow was £2,375 million for the nine months (2017:
£1,668 million). The increase primarily reflected improved
operating profits, reduced legal settlement costs and restructuring
payments, favourable timing of payments for returns and rebates,
lower capital expenditures including a favourable comparison to the
impact of the Priority Review Voucher in 2017, increased disposals
of intangible assets of £165 million (2017: £24 million),
primarily relating to the disposal of tapinarof, as well as reduced
dividend payments to non-controlling interests. This was partly
offset by a negative currency impact on operating profit, increased
contingent consideration payments including the $450 million
(£317 million) milestone to Novartis paid in Q1 2018 and
increased working capital reflecting a larger increase in seasonal
and other receivables compared with 2017 particularly related to
growth in Vaccines sales.
|
|
Net debt
At 30
September 2018, net debt was £23.8 billion, compared with
£13.2 billion at 31 December 2017, comprising gross debt of
£27.7 billion and cash and liquid investments of £3.9
billion. Net debt increased due to the £9.3 billion
acquisition from Novartis of the remaining stake in the Consumer
Healthcare Joint Venture in June 2018, the £0.2 billion
acquisition of the investment in 23andMe, £0.6 billion of
unfavourable exchange impacts from the translation of non-Sterling
denominated debt, and dividends paid to shareholders of £3.0
billion, partly offset by increased free cash flow of £2.4
billion after the milestone payment to Novartis.
At 30
September 2018, GSK had short-term borrowings (including
overdrafts) repayable within 12 months of £2.9 billion with
loans of £6.6 billion repayable in the subsequent
year.
|
|
Working capital
|
|
|
30
September
2018
|
|
30
June
2018
|
|
31
March
2018
|
|
30
December
2017
|
|
30
September
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital conversion cycle* (days)
|
230
|
|
223
|
|
204
|
|
191
|
|
210
|
|
Working
capital percentage of turnover (%)
|
29
|
|
26
|
|
24
|
|
22
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Working
capital and working capital conversion cycle are defined on page
37.
|
|
The
increase of 7 days in Q3 2018 was predominantly due to an increase
in receivables reflecting increased seasonal and other sales in Q3,
particularly related to the growth in Vaccines sales partly offset
by reduced inventory levels.
The
increase of 20 days compared with September 2017 primarily
reflected the increase in trade receivables as a result of recent
sales growth, particularly new launches, and the full year impact
of inventory for new product launches. It was also affected by
reduced denominator due to lower restructuring and impairment costs
in 2018 and an increase due to exchange rates (compared with a
reduction impacting September 2017).
|
|
Returns to shareholders
|
|
Quarterly dividends
The
Board has declared a third interim dividend for 2018 of 19 pence
per share (Q3 2017: 19 pence per share).
GSK
recognises the importance of dividends to shareholders and aims to
distribute regular dividend payments that will be determined
primarily with reference to the free cash flow generated by the
business after funding the investment necessary to support the
Group’s future growth.
The
Board intends to maintain the dividend for 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 8 January 2019. 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 15 November 2018, with a record date of 16
November 2018 and a payment date of 10 January 2019.
|
|
|
Paid/
payable
|
|
Pence
per
share
|
|
£m
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
|
|
|
First
interim
|
12 July
2018
|
|
19
|
|
934
|
|
Second
interim
|
11 October
2018
|
|
19
|
|
934
|
|
Third
interim
|
10 January
2019
|
|
19
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
First
interim
|
13 July
2017
|
|
19
|
|
928
|
|
Second
interim
|
12
October 2017
|
|
19
|
|
929
|
|
Third
interim
|
11
January 2018
|
|
19
|
|
929
|
|
Fourth
interim
|
12
April 2018
|
|
23
|
|
1,130
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
3,916
|
|
|
|
|
|
|
|
|
GSK
made no share repurchases during the quarter. The company issued
0.6 million shares under employee share schemes for proceeds of
£8 million (Q3 2017: £3 million).
The
weighted average number of shares for Q3 2018 was 4,917 million,
compared with 4,890 million in Q3 2017.
|
|
Research and development
|
|
GSK
remains focused on delivering an improved return on its investment
in R&D. Sales contribution, reduced attrition, cost reduction
and time to market are all important drivers of improving our
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
R&D operations in Pharmaceuticals are broadly split into
Discovery activities and Development work, each supported by
specific and common infrastructure and other shared services where
appropriate. The new R&D strategy has redefined the allocation
of costs between Discovery and Development such that Discovery now
includes all activities up to and including phase I. Development
includes phase II activities onwards (previously phase IIa
activities were included within Discovery). In addition, the
methodology of allocating projects by phase has been revised.
Comparative information has been revised accordingly.
The
impact on Q3 2017 was to increase Discovery costs by £24
million and Technology, facilities and functional support costs by
£13 million and reduce Development costs by £37 million.
The impact on the nine months to September 2017 was to increase
Discovery costs by £31 million and Technology, facilities and
functional support costs by £27 million and reduce Development
costs by £58 million.
|
|
|
Q3 2018
£m
|
|
Q3
2017
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Discovery
|
216
|
|
245
|
|
(11)
|
|
(10)
|
|
Development
|
356
|
|
302
|
|
18
|
|
19
|
|
Technology,
facilities and functional support
|
151
|
|
132
|
|
14
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
723
|
|
679
|
|
6
|
|
8
|
|
Vaccines
|
176
|
|
164
|
|
7
|
|
6
|
|
Consumer
Healthcare
|
62
|
|
55
|
|
13
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Adjusted
R&D
|
961
|
|
898
|
|
7
|
|
8
|
|
Amortisation
and impairment of intangible
assets
|
18
|
|
74
|
|
|
|
|
|
Major
restructuring costs
|
4
|
|
68
|
|
|
|
|
|
Other
items
|
5
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Research and development
|
988
|
|
1,047
|
|
(6)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
9 months 2018
£m
|
|
9
months 2017
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Discovery
|
617
|
|
761
|
|
(19)
|
|
(16)
|
|
Development
|
978
|
|
1,057
|
|
(7)
|
|
(4)
|
|
Technology,
facilities and functional support
|
435
|
|
423
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,030
|
|
2,241
|
|
(9)
|
|
(6)
|
|
Vaccines
|
509
|
|
460
|
|
11
|
|
11
|
|
Consumer
Healthcare
|
177
|
|
169
|
|
5
|
|
8
|
|
|
|
|
|
|
|
|
|
|
Adjusted
R&D
|
2,716
|
|
2,870
|
|
(5)
|
|
(3)
|
|
Amortisation
and impairment of intangible
assets
|
63
|
|
121
|
|
|
|
|
|
Major
restructuring costs
|
27
|
|
253
|
|
|
|
|
|
Other
items
|
11
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Research and development
|
2,817
|
|
3,267
|
|
(14)
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
In Q3
2018, Adjusted R&D expenditure increased 7% AER, 8% CER, with
Pharmaceuticals up 6% AER, 8% CER primarily reflecting an increased
investment in the progression of a number of mid and late stage
programmes, particularly in Oncology, as well as the provision for
costs expected to be payable to a third party relating to the
future use of a Priority Review Voucher. The decline in Discovery
primarily reflected the phasing of expenditure on specific
programmes, including the transfer of certain Oncology assets into
the development phase as well as the benefits of the
re-prioritisation of R&D that started in the second half of
2017. The growth in Technology, facilities and functional support
costs primarily reflected increased investments in data
analytics.
|
|
In the
nine months to 30 September 2018, Adjusted R&D expenditure
declined 5% AER, 3% CER with Pharmaceuticals down 9% AER, 6% CER,
primarily reflecting the comparison with the impact of the
utilisation of the Priority Review Voucher in 2017 and the benefit
of the prioritisation initiatives started in Q3 2017. This was
partly offset by increased investment in the progression of a
number of mid and late stage programmes, particularly in Oncology,
and the provision for costs expected to be payable to a third party
relating to the future use of a Priority Review
Voucher.
|
|
R&D pipeline
|
|
Pipeline news flow since Q2 2018:
|
|
Respiratory
|
|
GSK has
led the way in developing innovative medicines to advance the
management of asthma and COPD for nearly 50 years. Over the last
five years we have launched six innovative medicines responding to
continued unmet patient need, despite existing
therapies.
|
|
Trelegy
Ellipta
|
|
|
●
|
On 21
September, the European Medicines Agency’s Committee for
Medicinal Products for Human Use issued a positive opinion
supporting the use of Trelegy
Ellipta (FF/UMEC/VI) in patients not adequately treated by a
long-acting muscarinic receptor antagonist and long-acting
b2-agonist. It also referenced the effect on exacerbations based on
data from the InforMing the PAthway of COPD Treatment (IMPACT)
study.
|
|
Anoro and
Incruse Ellipta
|
|
|
●
|
In
July, regulatory submissions were made to the US FDA to support
potential updates to the relevant sections of the labelling for
both Anoro Ellipta
(UMEC/VI) and Incruse
Ellipta (UMEC). These were primarily based on data from the
landmark IMPACT trial which showed the contribution of umeclidinium
on reduction in exacerbations (FF/UMEC/VI compared with FF/VI).
Similar submissions to regulators in the EU were made in October
2018.
|
|
Nucala
severe asthma
|
|
|
●
|
On 30
August, the European Commission approved Nucala (mepolizumab) as an add-on
treatment for severe refractory eosinophilic asthma in paediatric
patients aged six up to 17 years. As a result of this licence
extension, Nucala is now
approved for use for severe refractory eosinophilic asthma in both
adult and paediatric patients in the 31 European countries covered
by the EMA.
|
|
●
|
On 10
September, results from an indirect treatment comparison of the
licensed doses of Nucala
(mepolizumab), versus benralizumab and reslizumab in patients with
severe eosinophilic asthma were published in The Journal of Allergy
and Clinical Immunology. The data showed that in patients with
similar blood eosinophil counts, mepolizumab significantly reduced
clinically significant exacerbations and improved asthma control
compared with both benralizumab and reslizumab.
|
|
●
|
In the
third quarter, a regulatory filing was submitted in both EU and US
for a liquid formulation of Nucala (mepolizumab) to be administered
subcutaneously via an autoinjector or a safety syringe device.
Updates regarding regulatory actions in 2019 will be provided in
due course.
|
|
Nucala
COPD
|
|
|
●
|
On 7
September, the US FDA issued a complete response letter (CRL) for
the use of Nucala
(mepolizumab) as an add-on treatment to inhaled
corticosteroid-based maintenance treatment for the reduction of
exacerbations in patients with COPD, guided by blood eosinophil
counts. The CRL stated that more clinical data are required to
support an approval.
|
|
Danirixin (GSK1325756)
|
|
|
●
|
In
October, a planned interim analysis of the phase IIb dose-ranging
study of danirixin in patients with COPD was undertaken. This
interim analysis showed danirixin did not achieve the primary
efficacy endpoint and this has changed the understanding of the
risk/benefit profile of this asset in COPD. Based on these data GSK
has taken the decision to stop development in COPD.
|
|
TRPV4 (GSK2798745)
|
|
|
●
|
In
September, data from a planned interim analysis of the ongoing
clinical phase II study of the TRPV4 blocker GSK’745 in
patients with chronic cough showed it had met the pre-defined
criteria for futility. Based on these data, GSK has taken the
decision to stop ongoing development of GSK’745 for cough due
to lack of efficacy. The phase I programme in acute respiratory
distress syndrome is continuing.
|
|
TLR7 (GSK2245035)
|
|
|
●
|
In
September 2018, data from a phase II study of GSK’035 in mild
asthmatic patients showed it did not meet its pre-determined
success criteria. Based on these data, GSK has taken the decision
to stop ongoing development of GSK’035 in asthma due to lack
of efficacy.
|
|
HIV/Infectious diseases
|
|
GSK has
a long-standing commitment to HIV and infectious diseases –
our scientists discovered amoxicillin, the widely used antibiotic,
over 40 years ago, and developed the first medicines approved to
treat HIV (AZT), HBV (lamivudine), herpes viruses (acyclovir) and
influenza (zanamivir). Today, we are investigating new medicines to
treat, prevent and possibly, ultimately cure HIV and other
infectious diseases. Our scientists are committed to developing
medicines that advance HIV care by exploring new treatment
paradigms (two-drug regimens), new modalities (long-acting
injectables) and new mechanisms of actions (including maturation
inhibitors and broadly neutralising antibodies).
|
|
Cabotegravir + rilpivirine
|
|
|
●
|
On 30
October, positive 48-week results for FLAIR, the second global
phase III study of long-acting, injectable two-drug regimen for the
treatment of HIV were announced.
|
|
●
|
On 29
October, three-year results from LATTE-2, a phase IIb study showing
high rates of virus suppression from first long-acting injectable,
two-drug HIV regimen were presented at HIV Glasgow Drug Therapy
meeting in Scotland.
|
|
●
|
On 15
August, positive headline results from the global, phase III ATLAS
study of a long-acting, injectable two-drug regimen for the
treatment of HIV were announced.
|
|
Dolutegravir + lamivudine
|
|
|
●
|
On 18
October, a regulatory application was submitted to the US FDA for a
single-tablet, two-drug regimen of dolutegravir and lamivudine for
treatment of HIV.
|
|
●
|
On 14
September, a regulatory application was submitted to the European
Medicines Agency for a single-tablet, two-drug regimen of
dolutegravir and lamivudine for treatment of HIV.
|
|
Immuno-inflammation
|
|
Immuno-inflammatory
diseases are relatively common, chronic, debilitating conditions.
While diverse in presentation, they are collectively hallmarked by
impairment of quality of life and can lead to premature mortality.
There is significant unmet need for improved treatment options for
immuno-inflammatory diseases.
|
|
Benlysta
|
|
|
●
|
On 23
October, data on Benlysta
(belimumab) phase II study (PLUTO) in paediatric patients with
childhood-onset systemic lupus erythematosus were presented at
American College of Rheumatology (ACR).
|
|
●
|
In
September, data from the Benlysta (belimumab) phase IV study
(EMBRACE) in adult patients of black race with active,
autoantibody-positive, systemic lupus erythematosus who received
standard therapy were received in-house. Data to be presented at a
future scientific congress.
|
|
Anti-GM-CSF antibody (GSK3196165)
|
|
|
●
|
On 22
October, data from the phase II study (BAROQUE) of anti-GM-CSF
antibody (GSK’165) were presented at ACR supporting its
efficacy and safety in patients with rheumatoid arthritis. The
patient benefit supports further clinical development for
RA.
|
|
●
|
On 22
October, data from the phase IIa study of anti-GM-CSF antibody
(GSK’165) in patients with inflammatory hand osteoarthritis
were presented at ACR. As a result of these data, development of
the asset for potential use in treatment of hand osteoarthritis was
terminated during the second quarter.
|
|
Oncology
|
|
Cancer
is one of the leading causes of death in the developed world. GSK
is focused on delivering transformational therapies for cancer
patients that may help to maximise their survival. GSK’s
pipeline is focused on immuno-oncology, cell therapy, and
epigenetics. Our goal is to achieve a sustainable flow of new
treatments for cancer patients based on a diversified portfolio of
investigational medicines utilising modalities such as small
molecules, antibodies, multi-specific molecules, adjuvants and
cells, either alone or in combination.
|
|
ICOS agonist (GSK3359609)
|
|
|
●
|
On 22
October, phase I safety, pharmacokinetic and pharmacodynamic data
for GSK’609 (monotherapy and combination with pembrolizumab)
were presented at the European Society for Medical Oncology
meeting.
|
|
BCMA antibody-drug conjugate (GSK2857916)
|
|
|
●
|
On 12
October, the phase II study of GSK’916 in combination with
standard of care in 2nd line multiple myeloma was started; primary
results are anticipated in 2020. Interim data from this study will
be used to inform the start of two phase III studies in 2nd line
multiple myeloma in 2019.
|
|
Other pharmaceuticals
|
|
Kozenis
(tafenoquine)
|
|
|
●
|
On 12
September, Kozenis
(tafenoquine) was approved by the Australian Therapeutic Goods
Administration for the radical cure of P. vivax malaria.
|
|
Daprodustat (GSK1278863)
|
|
|
●
|
In
October, positive results from the open-label, phase III study in
28 Japanese patients with anaemia associated with chronic kidney
disease were presented at Kidney Week/the American Society for
Nephrology annual meeting.
|
|
●
|
On 29
October, positive phase III data were announced from the second of
three pivotal studies of daprodustat in 271 Japanese patients on
dialysis with anaemia associated with chronic kidney
disease.
|
|
Miridesap (GSK2315698) and dezamizumab
(GSK2398852)
|
|
|
●
|
On 16
October, further development of miridesap and dezamizumab (SAP
antagonist) for systemic amyloidosis was terminated due to data
that has changed the risk/benefit profile of the dual
therapy.
|
|
Vaccines
|
|
Our
Vaccines business is one of the largest in the world with the
broadest portfolio of any company. The focus of GSK Vaccines
pipeline is to maintain GSK’s meningococcal meningitis market
leadership with both licensed and candidate vaccines. In addition,
we are pursuing a full RSV portfolio for infants, older adults and
maternal immunisation, with different approaches tailored to the
specific segments. This portfolio has the potential to deliver a
series of first and/or best in class vaccines. In addition, we
continue to leverage our unique technology platforms to target new,
emerging or remaining medical needs.
|
|
Tuberculosis vaccine
|
|
|
●
|
On 25
September 2018, GSK and Aeras announced that GSK’s M72/AS01
candidate vaccine significantly reduced the incidence of pulmonary
tuberculosis disease in HIV-negative adults with latent
tuberculosis infection in an ongoing phase IIb clinical trial
testing. These primary results were published in the New England
Journal of Medicine.
|
|
Reporting definitions
|
|
GSK
uses a number of adjusted, non-IFRS, measures to report the
performance of its business. These measures are used by management
for planning and reporting purposes and in discussions with and
presentations to investment analysts and rating agencies and may
not be directly comparable with similarly described measures used
by other companies. Non-IFRS measures may be considered in addition
to, but not as a substitute for or superior to, information
presented in accordance with IFRS.
Total 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, which is a non-IFRS
measure.
Adjusted results
GSK
believes that Adjusted results allow the key trends and factors
driving the Group’s performance to be more easily and clearly
identified by shareholders. The definition of Adjusted results, as
set out below, also aligns the Group’s results with the
majority of its peer companies and how they report
earnings.
Adjusted
results exclude the following items from Total results:
amortisation and impairment of intangible assets (excluding
computer software) and goodwill; major restructuring costs (under
specific Board approved programmes that are structural, of a
significant scale and where the costs of individual or related
projects exceed £25 million), including those integration
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 and the impact of the
enactment of the US Tax Cuts and Jobs Act in 2017. Costs for all
other ordinary course smaller scale restructuring and legal charges
and expenses are retained within Total and Adjusted
results.
As
Adjusted results may exclude significant costs, such as those from
major restructuring programmes or significant legal charges, they
should not be regarded as a complete picture of the Group’s
financial performance which is presented in its Total
results.
Reconciliations
between Total and Adjusted results, as set out on pages 16, 24 and
58 to 61, including detailed breakdowns of the key adjusting items,
are provided to shareholders to ensure full visibility and
transparency as they assess the Group’s
performance.
Free cash flow
With
the introduction of the new R&D strategy in Q2 2018, GSK has
revised its definition of free cash flow, a non-IFRS measure, to
include proceeds from the sale of intangible assets. This balances
with the expenditure on purchases of intangible assets, which is
deducted in calculating free cash flow, and makes the treatment of
intangible assets consistent with property, plant and equipment.
Free cash flow is now defined as the net cash inflow from operating
activities less capital expenditure on property, plant and
equipment and intangible assets, contingent consideration payments,
net interest, and dividends paid to non-controlling interests plus
proceeds from the sale of property, plant and equipment and
intangible assets, and dividends received from joint ventures and
associates. It is used by management for planning and reporting
purposes and in discussions with and presentations to investment
analysts and rating agencies. Free cash flow growth is calculated
on a reported basis. A reconciliation of net cash inflow from
operations to free cash flow is set out on page 55.
Free cash flow conversion
Free
cash flow conversion is free cash flow as a percentage of
earnings.
Working capital
Working
capital represents inventory and trade receivables less trade
payables.
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.
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.
|
|
Outlook, assumptions and cautionary statements
|
|
|
|
In May
2015, GSK announced that it expected Group sales to grow at CER at
a low-to-mid single digits percentage CAGR and Adjusted EPS to grow
at CER at a mid-to-high single digits percentage CAGR for the
period 2016-2020. These outlooks are based on 2015 exchange
rates.
Assumptions related to 2018 guidance and 2016-2020
outlook
In
outlining the expectations for 2018 and the five-year period
2016-2020, the Group has made certain assumptions about the
healthcare sector, the different markets in which the Group
operates and the delivery of revenues and financial benefits from
its current portfolio, pipeline and restructuring
programmes.
For the
Group specifically, over the period to 2020 GSK expects further
declines in sales of Seretide/Advair. The introduction of a
generic alternative to Advair in the US has been factored into
the Group’s assessment of its future performance. The Group
assumes no premature loss of exclusivity for other key products
over the period.
The
assumptions for the Group’s revenue 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. The
assumptions also assume no material changes in the macro-economic
and healthcare environment. The 2018 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 as well as the new major
restructuring plan announced on 25 July 2018. Material costs for
investment in new product launches and R&D have been factored
into the expectations given. Given the potential development
options in the Group’s pipeline, the outlook may be affected
by additional data-driven R&D investment decisions. The
expectations are given on a constant currency basis (2016-2020
outlook at 2015 CER). Subject to material changes in the product
mix, and following the enactment of US tax reform, the
Group’s medium-term effective tax rate is expected to be in
the region of 19-20% of Adjusted profits. This incorporates
management’s best estimates of the impact of US tax reform on
the Group based on the information currently available. As more
information on the detailed application of the US Tax Cuts and Jobs
Act becomes available, the assumptions underlying these estimates
could change with consequent adjustments to the charges taken that
could have a material impact on the results of the
Group.
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 Item
3.D ‘Risk Factors’ in the Group’s Annual Report
on Form 20-F for 2017. 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.
|
|
Results presentation
|
|
A
webcast of the quarterly results presentation hosted by Emma
Walmsley, GSK CEO, will be held at 2.30pm on 31 October 2018.
Presentation materials will be published on www.gsk.com prior to the webcast and a
transcript of the webcast will be published
subsequently.
Information
available on GSK’s website does not form part of, and is not
incorporated by reference into, this Results
Announcement.
|
|
Contacts
|
|
GSK – one of the
world’s leading research-based pharmaceutical and healthcare
companies – is committed to improving the quality of human
life by enabling people to do more, feel better and live longer.
For further information please visit www.gsk.com.
|
|
GSK enquiries:
|
|
|
|
|
UK
Media enquiries:
|
Simon
Steel
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
Tim
Foley
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
|
|
|
|
US
Media enquiries:
|
Sarah
Spencer
|
+1 215
751 3335
|
(Philadelphia)
|
|
|
|
|
|
|
Analyst/Investor
enquiries:
|
Sarah
Elton-Farr
|
+44 (0)
20 8047 5194
|
(London)
|
|
|
James
Dodwell
|
+44 (0)
20 8047 2406
|
(London)
|
|
|
Danielle
Smith
|
+44 (0)
20 8047 7562
|
(London)
|
|
|
Jeff
McLaughlin
|
+1 215
751 7002
|
(Philadelphia)
|
|
Registered in England & Wales:
No. 3888792
|
|
|
|
Registered Office:
980 Great West Road
Brentford, Middlesex
TW8 9GS
|
|
Financial information
|
|
Income statements
|
|
|
Q3 2018
£m
|
|
Q3
2017
£m
|
|
9 months
2018
£m
|
|
9
months
2017
£m
|
|
|
|
|
|
|
|
|
|
|
TURNOVER
|
8,092
|
|
7,843
|
|
22,624
|
|
22,547
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,636)
|
|
(2,652)
|
|
(7,337)
|
|
(7,784)
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,456
|
|
5,191
|
|
15,287
|
|
14,763
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,527)
|
|
(2,308)
|
|
(7,295)
|
|
(7,139)
|
|
Research
and development
|
(988)
|
|
(1,047)
|
|
(2,817)
|
|
(3,267)
|
|
Royalty income
|
94
|
|
107
|
|
220
|
|
287
|
|
Other
operating income/(expense)
|
(125)
|
|
(66)
|
|
(1,466)
|
|
(1,069)
|
|
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
1,910
|
|
1,877
|
|
3,929
|
|
3,575
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
10
|
|
13
|
|
57
|
|
49
|
|
Finance
expense
|
(233)
|
|
(194)
|
|
(589)
|
|
(580)
|
|
Profit
on disposal of associates
|
3
|
|
8
|
|
3
|
|
28
|
|
Share
of after tax profits of associates and
joint ventures
|
15
|
|
7
|
|
26
|
|
11
|
|
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAXATION
|
1,705
|
|
1,711
|
|
3,426
|
|
3,083
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(193)
|
|
(316)
|
|
(680)
|
|
(551)
|
|
Tax rate %
|
11.3%
|
|
18.5%
|
|
19.8%
|
|
17.9%
|
|
|
|
|
|
|
|
|
|
|
PROFIT AFTER TAXATION FOR
THE PERIOD
|
1,512
|
|
1,395
|
|
2,746
|
|
2,532
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
94
|
|
183
|
|
338
|
|
454
|
|
Profit
attributable to shareholders
|
1,418
|
|
1,212
|
|
2,408
|
|
2,078
|
|
|
|
|
|
|
|
|
|
|
|
1,512
|
|
1,395
|
|
2,746
|
|
2,532
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
|
28.8p
|
|
24.8p
|
|
49.0p
|
|
42.5p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
28.5p
|
|
24.6p
|
|
48.5p
|
|
42.1p
|
|
|
|
|
|
|
|
|
|
|
Statement of comprehensive income
|
|
|
Q3 2018
£m
|
|
Q3
2017
£m
|
|
|
|
|
|
|
Profit
for the period
|
1,512
|
|
1,395
|
|
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
4
|
|
(24)
|
|
Fair
value movements on equity investments
|
|
|
(38)
|
|
Reclassification
of fair value movements on equity investments
|
-
|
|
(11)
|
|
Deferred
tax on fair value movements on equity investments
|
|
|
(11)
|
|
Deferred
tax reversed on reclassification of equity investments
|
-
|
|
1
|
|
Fair
value movements on cash flow hedges
|
3
|
|
(3)
|
|
Reclassification
of cash flow hedges to income statement
|
1
|
|
-
|
|
|
|
|
|
|
|
8
|
|
(86)
|
|
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
(11)
|
|
(146)
|
|
Fair
value movements on equity investments
|
115
|
|
|
|
Re-measurement
gains on defined benefit plans
|
189
|
|
255
|
|
Tax on
re-measurement gains on defined benefit plans
|
(35)
|
|
(53)
|
|
|
|
|
|
|
|
258
|
|
56
|
|
|
|
|
|
|
Other
comprehensive income/(expense) for the period
|
266
|
|
(30)
|
|
|
|
|
|
|
Total
comprehensive income for the period
|
1,778
|
|
1,365
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
|
Shareholders
|
1,695
|
|
1,328
|
|
Non-controlling
interests
|
83
|
|
37
|
|
|
|
|
|
|
|
1,778
|
|
1,365
|
|
|
|
|
|
|
Statement of comprehensive income
|
|
|
9 months
2018
£m
|
|
9
months
2017
£m
|
|
|
|
|
|
|
Profit
for the period
|
2,746
|
|
2,532
|
|
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
(368)
|
|
538
|
|
Fair
value movements on equity investments
|
|
|
15
|
|
Reclassification
of fair value movements on equity investments
|
-
|
|
(38)
|
|
Deferred
tax on fair value movements on equity investments
|
|
|
(15)
|
|
Deferred
tax reversed on reclassification of equity investments
|
-
|
|
10
|
|
Fair
value movements on cash flow hedges
|
182
|
|
(5)
|
|
Reclassification
of cash flow hedges to income statement
|
(164)
|
|
2
|
|
Deferred
tax on fair value movements on cash flow hedges
|
(24)
|
|
(1)
|
|
Deferred
tax reversed on reclassification of cash flow hedges
|
20
|
|
-
|
|
|
|
|
|
|
|
(354)
|
|
506
|
|
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
(19)
|
|
(147)
|
|
Fair
value movements on equity investments
|
268
|
|
|
|
Deferred
tax on fair value movements on equity investments
|
(13)
|
|
|
|
Re-measurement
gains on defined benefit plans
|
1,103
|
|
440
|
|
Tax on
re-measurement gains on defined benefit plans
|
(205)
|
|
(102)
|
|
|
|
|
|
|
|
1,134
|
|
191
|
|
|
|
|
|
|
Other
comprehensive income for the period
|
780
|
|
697
|
|
|
|
|
|
|
Total
comprehensive income for the period
|
3,526
|
|
3,229
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
|
Shareholders
|
3,207
|
|
2,922
|
|
Non-controlling
interests
|
319
|
|
307
|
|
|
|
|
|
|
|
3,526
|
|
3,229
|
|
|
|
|
|
|
Pharmaceuticals turnover – three months ended 30 September
2018
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
–––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Respiratory
|
1,666
|
3
|
5
|
846
|
4
|
5
|
351
|
5
|
4
|
469
|
1
|
6
|
|
Seretide/Advair
|
619
|
(17)
|
(15)
|
309
|
(20)
|
(19)
|
132
|
(20)
|
(20)
|
178
|
(7)
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ellipta products
|
500
|
34
|
35
|
308
|
34
|
36
|
110
|
37
|
36
|
82
|
28
|
33
|
|
Anoro Ellipta
|
115
|
34
|
34
|
77
|
33
|
34
|
24
|
33
|
33
|
14
|
40
|
30
|
|
Arnuity Ellipta
|
10
|
43
|
43
|
9
|
50
|
50
|
-
|
-
|
-
|
1
|
-
|
-
|
|
Incruse Ellipta
|
75
|
34
|
38
|
51
|
31
|
33
|
18
|
38
|
38
|
6
|
50
|
75
|
|
Relvar/Breo Ellipta
|
258
|
15
|
16
|
139
|
9
|
11
|
59
|
20
|
20
|
60
|
22
|
24
|
|
Trelegy Ellipta
|
42
|
-
|
-
|
32
|
-
|
-
|
9
|
-
|
-
|
1
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala/Mepolizumab
|
145
|
59
|
62
|
87
|
43
|
44
|
41
|
>100
|
>100
|
17
|
70
|
80
|
|
Avamys/Veramyst
|
60
|
-
|
2
|
-
|
-
|
-
|
15
|
-
|
(7)
|
45
|
5
|
9
|
|
Flixotide/Flovent
|
117
|
(6)
|
(6)
|
59
|
(9)
|
(11)
|
19
|
6
|
6
|
39
|
(7)
|
(2)
|
|
Ventolin
|
172
|
8
|
12
|
83
|
26
|
29
|
29
|
(6)
|
(3)
|
60
|
(3)
|
2
|
|
Other
|
53
|
(10)
|
(10)
|
-
|
-
|
-
|
5
|
(17)
|
(33)
|
48
|
(8)
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
1,209
|
11
|
12
|
754
|
11
|
12
|
290
|
2
|
1
|
165
|
27
|
34
|
|
Epzicom/Kivexa
|
24
|
(51)
|
(47)
|
1
|
(50)
|
-
|
9
|
(65)
|
(65)
|
14
|
(33)
|
(29)
|
|
Juluca
|
37
|
-
|
-
|
35
|
-
|
-
|
2
|
-
|
-
|
-
|
-
|
-
|
|
Selzentry
|
26
|
(16)
|
(13)
|
14
|
(18)
|
(18)
|
8
|
(27)
|
(27)
|
4
|
33
|
67
|
|
Tivicay
|
432
|
19
|
21
|
271
|
11
|
12
|
93
|
16
|
15
|
68
|
70
|
85
|
|
Triumeq
|
669
|
8
|
9
|
427
|
5
|
6
|
172
|
9
|
8
|
70
|
23
|
26
|
|
Other
|
21
|
(30)
|
(37)
|
6
|
(54)
|
(54)
|
6
|
(25)
|
(37)
|
9
|
-
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
122
|
28
|
29
|
108
|
27
|
28
|
9
|
29
|
29
|
5
|
67
|
67
|
|
Benlysta
|
121
|
29
|
31
|
108
|
27
|
29
|
10
|
43
|
29
|
3
|
50
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
1,224
|
(12)
|
(9)
|
185
|
(27)
|
(26)
|
301
|
(7)
|
(7)
|
738
|
(10)
|
(5)
|
|
Dermatology
|
109
|
(5)
|
-
|
1
|
(50)
|
(50)
|
40
|
-
|
-
|
68
|
(7)
|
1
|
|
Augmentin
|
133
|
(10)
|
(5)
|
-
|
-
|
-
|
40
|
(2)
|
(2)
|
93
|
(13)
|
(7)
|
|
Avodart
|
144
|
-
|
1
|
3
|
-
|
33
|
59
|
(11)
|
(12)
|
82
|
9
|
12
|
|
Coreg
|
9
|
(76)
|
(78)
|
9
|
(76)
|
(78)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Eperzan/Tanzeum
|
3
|
(85)
|
(86)
|
3
|
(83)
|
(85)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Imigran/Imitrex
|
33
|
(13)
|
(13)
|
13
|
(19)
|
(19)
|
13
|
(19)
|
(19)
|
7
|
17
|
17
|
|
Lamictal
|
148
|
(11)
|
(10)
|
74
|
(14)
|
(13)
|
30
|
11
|
11
|
44
|
(19)
|
(17)
|
|
Requip
|
19
|
(27)
|
(23)
|
-
|
-
|
-
|
6
|
-
|
17
|
13
|
(28)
|
(28)
|
|
Serevent
|
19
|
(17)
|
(17)
|
9
|
(31)
|
(31)
|
7
|
(13)
|
(12)
|
3
|
50
|
50
|
|
Seroxat/Paxil
|
42
|
(9)
|
(4)
|
-
|
-
|
-
|
9
|
(10)
|
-
|
33
|
(8)
|
(6)
|
|
Valtrex
|
32
|
(6)
|
(3)
|
6
|
(14)
|
(14)
|
8
|
-
|
-
|
18
|
(5)
|
-
|
|
Zeffix
|
18
|
(14)
|
(14)
|
1
|
-
|
-
|
1
|
-
|
-
|
16
|
(20)
|
(20)
|
|
Other
|
515
|
(10)
|
(7)
|
66
|
(4)
|
(3)
|
88
|
(10)
|
(13)
|
361
|
(11)
|
(6)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Pharmaceuticals
|
4,221
|
1
|
3
|
1,893
|
3
|
4
|
951
|
1
|
-
|
1,377
|
(3)
|
2
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals turnover – nine months ended 30 September
2018
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Respiratory
|
4,937
|
(3)
|
1
|
2,345
|
(8)
|
(3)
|
1,118
|
4
|
3
|
1,474
|
-
|
6
|
|
Seretide/Advair
|
1,775
|
(24)
|
(21)
|
798
|
(34)
|
(30)
|
449
|
(19)
|
(20)
|
528
|
(10)
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ellipta products
|
1,395
|
26
|
31
|
832
|
20
|
27
|
322
|
38
|
37
|
241
|
34
|
42
|
|
Anoro Ellipta
|
332
|
42
|
48
|
220
|
40
|
48
|
72
|
47
|
45
|
40
|
48
|
56
|
|
Arnuity Ellipta
|
31
|
35
|
43
|
28
|
27
|
32
|
-
|
-
|
-
|
3
|
>100
|
>100
|
|
Incruse Ellipta
|
197
|
41
|
46
|
126
|
35
|
43
|
54
|
50
|
50
|
17
|
55
|
64
|
|
Relvar/Breo Ellipta
|
756
|
6
|
11
|
395
|
(6)
|
(1)
|
182
|
23
|
22
|
179
|
27
|
33
|
|
Trelegy Ellipta
|
79
|
-
|
-
|
63
|
-
|
-
|
14
|
-
|
-
|
2
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala/Mepolizumab
|
390
|
75
|
81
|
234
|
53
|
61
|
108
|
>100
|
>100
|
48
|
100
|
>100
|
|
Avamys/Veramyst
|
227
|
5
|
9
|
-
|
-
|
-
|
57
|
(3)
|
(5)
|
170
|
9
|
15
|
|
Flixotide/Flovent
|
429
|
(1)
|
4
|
239
|
3
|
9
|
67
|
(3)
|
(3)
|
123
|
(8)
|
(2)
|
|
Ventolin
|
522
|
(5)
|
-
|
242
|
(10)
|
(5)
|
94
|
(2)
|
(2)
|
186
|
(1)
|
7
|
|
Other
|
199
|
(10)
|
(8)
|
-
|
-
|
-
|
21
|
-
|
(10)
|
178
|
(11)
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
3,446
|
8
|
12
|
2,127
|
7
|
13
|
877
|
7
|
6
|
442
|
14
|
21
|
|
Epzicom/Kivexa
|
87
|
(54)
|
(52)
|
3
|
(87)
|
(83)
|
33
|
(66)
|
(66)
|
51
|
(28)
|
(23)
|
|
Juluca
|
71
|
-
|
-
|
68
|
-
|
-
|
3
|
-
|
-
|
-
|
-
|
-
|
|
Selzentry
|
84
|
(14)
|
(10)
|
42
|
(16)
|
(10)
|
26
|
(19)
|
(19)
|
16
|
-
|
6
|
|
Tivicay
|
1,187
|
18
|
23
|
755
|
13
|
19
|
273
|
20
|
18
|
159
|
43
|
56
|
|
Triumeq
|
1,957
|
8
|
12
|
1,241
|
3
|
9
|
524
|
19
|
18
|
192
|
19
|
24
|
|
Other
|
60
|
(35)
|
(37)
|
18
|
(53)
|
(55)
|
18
|
(28)
|
(32)
|
24
|
(17)
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
336
|
20
|
26
|
299
|
19
|
25
|
26
|
30
|
30
|
11
|
37
|
50
|
|
Benlysta
|
335
|
21
|
27
|
299
|
19
|
25
|
27
|
35
|
30
|
9
|
29
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
3,740
|
(10)
|
(6)
|
563
|
(25)
|
(21)
|
941
|
(9)
|
(10)
|
2,236
|
(6)
|
-
|
|
Dermatology
|
320
|
(6)
|
(1)
|
2
|
-
|
-
|
118
|
(3)
|
(4)
|
200
|
(7)
|
1
|
|
Augmentin
|
424
|
(5)
|
1
|
-
|
-
|
-
|
132
|
(3)
|
(4)
|
292
|
(5)
|
3
|
|
Avodart
|
423
|
(9)
|
(6)
|
9
|
(25)
|
(8)
|
180
|
(23)
|
(24)
|
234
|
7
|
12
|
|
Coreg
|
36
|
(68)
|
(67)
|
36
|
(68)
|
(67)
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Eperzan/Tanzeum
|
27
|
(62)
|
(60)
|
26
|
(63)
|
(60)
|
1
|
(60)
|
(61)
|
-
|
-
|
-
|
|
Imigran/Imitrex
|
101
|
(23)
|
(23)
|
39
|
(37)
|
(35)
|
43
|
(14)
|
(14)
|
19
|
(5)
|
(5)
|
|
Lamictal
|
458
|
(5)
|
(1)
|
227
|
(8)
|
(3)
|
83
|
2
|
1
|
148
|
(4)
|
1
|
|
Requip
|
62
|
(24)
|
(21)
|
4
|
(60)
|
(60)
|
19
|
(5)
|
(5)
|
39
|
(25)
|
(19)
|
|
Serevent
|
60
|
(17)
|
(14)
|
31
|
(21)
|
(15)
|
22
|
(12)
|
(12)
|
7
|
(13)
|
(13)
|
|
Seroxat/Paxil
|
124
|
(9)
|
(6)
|
-
|
-
|
-
|
29
|
-
|
-
|
95
|
(12)
|
(7)
|
|
Valtrex
|
90
|
(7)
|
(3)
|
14
|
(12)
|
(6)
|
23
|
-
|
-
|
53
|
(9)
|
(3)
|
|
Zeffix
|
53
|
(23)
|
(22)
|
1
|
-
|
-
|
4
|
-
|
-
|
48
|
(25)
|
(23)
|
|
Other
|
1,562
|
(6)
|
(2)
|
174
|
(7)
|
(4)
|
287
|
(5)
|
(7)
|
1,101
|
(7)
|
(1)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Pharmaceuticals
|
12,459
|
(2)
|
2
|
5,334
|
(4)
|
2
|
2,962
|
1
|
(1)
|
4,163
|
(2)
|
4
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover – three months ended 30 September
2018
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Meningitis
|
329
|
10
|
15
|
192
|
34
|
39
|
83
|
(19)
|
(20)
|
54
|
4
|
21
|
|
Bexsero
|
207
|
18
|
24
|
109
|
58
|
64
|
77
|
(18)
|
(19)
|
21
|
62
|
>100
|
|
Menveo
|
102
|
4
|
8
|
83
|
12
|
16
|
4
|
(33)
|
(33)
|
15
|
(17)
|
(11)
|
|
Other
|
20
|
(17)
|
(17)
|
-
|
-
|
-
|
2
|
(33)
|
(33)
|
18
|
(14)
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
304
|
(11)
|
(7)
|
252
|
(14)
|
(10)
|
33
|
22
|
19
|
19
|
(17)
|
(4)
|
|
Fluarix, FluLaval
|
304
|
(11)
|
(7)
|
252
|
(14)
|
(10)
|
33
|
22
|
19
|
19
|
(17)
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
286
|
-
|
-
|
276
|
-
|
-
|
1
|
-
|
-
|
9
|
-
|
-
|
|
Shingrix
|
286
|
-
|
-
|
276
|
-
|
-
|
1
|
-
|
-
|
9
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Vaccines
|
1,005
|
(4)
|
(3)
|
340
|
(11)
|
(9)
|
285
|
(5)
|
(6)
|
380
|
4
|
5
|
|
Infanrix, Pediarix
|
160
|
(18)
|
(17)
|
66
|
(30)
|
(30)
|
61
|
(24)
|
(25)
|
33
|
50
|
64
|
|
Boostrix
|
157
|
(5)
|
(3)
|
94
|
(5)
|
(3)
|
43
|
(2)
|
(2)
|
20
|
(9)
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
213
|
1
|
3
|
124
|
(6)
|
(5)
|
66
|
25
|
21
|
23
|
(8)
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
152
|
(3)
|
(2)
|
37
|
9
|
12
|
28
|
12
|
12
|
87
|
(11)
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
119
|
4
|
4
|
-
|
-
|
-
|
12
|
(29)
|
(29)
|
107
|
10
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra, Varilrix
|
81
|
2
|
5
|
-
|
-
|
-
|
42
|
(11)
|
(12)
|
39
|
22
|
30
|
|
Cervarix
|
55
|
49
|
51
|
-
|
-
|
-
|
3
|
(62)
|
(63)
|
52
|
79
|
83
|
|
Other
|
68
|
(24)
|
(28)
|
19
|
(10)
|
-
|
30
|
11
|
17
|
19
|
(54)
|
(70)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Vaccines
|
1,924
|
14
|
17
|
1,060
|
30
|
34
|
402
|
(7)
|
(8)
|
462
|
5
|
9
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover – nine months ended 30 September
2018
|
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Meningitis
|
693
|
1
|
5
|
324
|
19
|
25
|
258
|
(15)
|
(17)
|
111
|
(1)
|
17
|
|
Bexsero
|
470
|
7
|
12
|
177
|
30
|
37
|
239
|
(10)
|
(11)
|
54
|
35
|
77
|
|
Menveo
|
188
|
(10)
|
(5)
|
147
|
8
|
14
|
13
|
(55)
|
(55)
|
28
|
(36)
|
(30)
|
|
Other
|
35
|
(10)
|
(10)
|
-
|
-
|
-
|
6
|
(45)
|
(45)
|
29
|
4
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
330
|
(12)
|
(8)
|
250
|
(14)
|
(9)
|
35
|
9
|
6
|
45
|
(18)
|
(9)
|
|
Fluarix, FluLaval
|
330
|
(12)
|
(8)
|
250
|
(14)
|
(9)
|
35
|
9
|
6
|
45
|
(18)
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
563
|
-
|
-
|
528
|
-
|
-
|
1
|
-
|
-
|
34
|
-
|
-
|
|
Shingrix
|
563
|
-
|
-
|
528
|
-
|
-
|
1
|
-
|
-
|
34
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Vaccines
|
2,829
|
(2)
|
-
|
933
|
-
|
6
|
890
|
1
|
1
|
1,006
|
(7)
|
(4)
|
|
Infanrix, Pediarix
|
515
|
(12)
|
(9)
|
221
|
(20)
|
(16)
|
206
|
(14)
|
(15)
|
88
|
26
|
36
|
|
Boostrix
|
378
|
(11)
|
(8)
|
201
|
(6)
|
-
|
125
|
(7)
|
(7)
|
52
|
(34)
|
(32)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
618
|
16
|
20
|
355
|
18
|
24
|
185
|
22
|
20
|
78
|
-
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
387
|
(3)
|
-
|
101
|
(3)
|
3
|
82
|
17
|
16
|
204
|
(9)
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
318
|
(20)
|
(20)
|
-
|
-
|
-
|
37
|
(12)
|
(12)
|
281
|
(21)
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra, Varilrix
|
241
|
2
|
3
|
-
|
-
|
-
|
127
|
1
|
-
|
114
|
4
|
7
|
|
Cervarix
|
123
|
71
|
74
|
-
|
-
|
-
|
15
|
(35)
|
(35)
|
108
|
>100
|
>100
|
|
Other
|
249
|
4
|
5
|
55
|
45
|
58
|
113
|
25
|
24
|
81
|
(26)
|
(30)
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
Vaccines
|
4,415
|
12
|
15
|
2,035
|
36
|
44
|
1,184
|
(2)
|
(4)
|
1,196
|
(4)
|
-
|
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet
|
|
|
30 September 2018
£m
|
|
30
September 2017
£m
|
|
31
December 2017
£m
|
|
ASSETS
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Property,
plant and equipment
|
10,923
|
|
10,633
|
|
10,860
|
|
Goodwill
|
5,848
|
|
5,764
|
|
5,734
|
|
Other
intangible assets
|
17,263
|
|
17,921
|
|
17,562
|
|
Investments
in associates and joint ventures
|
221
|
|
175
|
|
183
|
|
Other
investments
|
1,393
|
|
941
|
|
918
|
|
Deferred
tax assets
|
3,412
|
|
4,380
|
|
3,796
|
|
Derivative
financial instruments
|
51
|
|
-
|
|
8
|
|
Other
non-current assets
|
2,075
|
|
1,313
|
|
1,413
|
|
|
|
|
|
|
|
|
Total non-current assets
|
41,186
|
|
41,127
|
|
40,474
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Inventories
|
5,788
|
|
5,661
|
|
5,557
|
|
Current
tax recoverable
|
257
|
|
239
|
|
258
|
|
Trade
and other receivables
|
7,292
|
|
6,491
|
|
6,000
|
|
Derivative
financial instruments
|
56
|
|
163
|
|
68
|
|
Liquid
investments
|
80
|
|
82
|
|
78
|
|
Cash
and cash equivalents
|
3,793
|
|
4,743
|
|
3,833
|
|
Assets
held for sale
|
152
|
|
277
|
|
113
|
|
|
|
|
|
|
|
|
Total current assets
|
17,418
|
|
17,656
|
|
15,907
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
58,604
|
|
58,783
|
|
56,381
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term
borrowings
|
(2,902)
|
|
(4,740)
|
|
(2,825)
|
|
Contingent
consideration liabilities
|
(818)
|
|
(917)
|
|
(1,076)
|
|
Trade
and other payables
|
(13,093)
|
|
(19,840)
|
|
(20,970)
|
|
Derivative
financial instruments
|
(63)
|
|
(210)
|
|
(74)
|
|
Current
tax payable
|
(813)
|
|
(1,061)
|
|
(995)
|
|
Short-term
provisions
|
(706)
|
|
(670)
|
|
(629)
|
|
|
|
|
|
|
|
|
Total current liabilities
|
(18,395)
|
|
(27,438)
|
|
(26,569)
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Long-term
borrowings
|
(24,808)
|
|
(14,294)
|
|
(14,264)
|
|
Corporation
tax payable
|
(272)
|
|
-
|
|
(411)
|
|
Deferred
tax liabilities
|
(1,223)
|
|
(1,916)
|
|
(1,396)
|
|
Pensions
and other post-employment benefits
|
(3,079)
|
|
(3,652)
|
|
(3,539)
|
|
Other
provisions
|
(652)
|
|
(671)
|
|
(636)
|
|
Derivative
financial instruments
|
-
|
|
(1)
|
|
-
|
|
Contingent
consideration liabilities
|
(5,414)
|
|
(5,000)
|
|
(5,096)
|
|
Other
non-current liabilities
|
(1,038)
|
|
(982)
|
|
(981)
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
(36,486)
|
|
(26,516)
|
|
(26,323)
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
(54,881)
|
|
(53,954)
|
|
(52,892)
|
|
|
|
|
|
|
|
|
NET ASSETS
|
3,723
|
|
4,829
|
|
3,489
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share
capital
|
1,344
|
|
1,343
|
|
1,343
|
|
Share
premium account
|
3,049
|
|
3,011
|
|
3,019
|
|
Retained
earnings
|
(2,081)
|
|
(5,349)
|
|
(6,477)
|
|
Other
reserves
|
2,164
|
|
2,289
|
|
2,047
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
4,476
|
|
1,294
|
|
(68)
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
(753)
|
|
3,535
|
|
3,557
|
|
|
|
|
|
|
|
|
TOTAL EQUITY
|
3,723
|
|
4,829
|
|
3,489
|
|
|
|
|
|
|
|
|
Statement of changes in equity
|
|
|
Share
capital
£m
|
Share
premium
£m
|
Retained
earnings
£m
|
Other
reserves
£m
|
Share-
holder’s
equity
£m
|
Non-
controlling
interests
£m
|
Total
equity
£m
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
1,343
|
3,019
|
(6,477)
|
2,047
|
(68)
|
3,557
|
3,489
|
|
Implementation
of IFRS 15
|
|
|
(4)
|
|
(4)
|
|
(4)
|
|
Implementation
of IFRS 9
|
|
|
277
|
(288)
|
(11)
|
|
(11)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
At 1
January 2018, as adjusted
|
1,343
|
3,019
|
(6,204)
|
1,759
|
(83)
|
3,557
|
3,474
|
|
Profit
for the period
|
|
|
2,408
|
|
2,408
|
338
|
2,746
|
|
Other
comprehensive income for the period
|
|
|
541
|
258
|
799
|
(19)
|
780
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Total
comprehensive income for the period
|
|
|
2,949
|
258
|
3,207
|
319
|
3,526
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(532)
|
(532)
|
|
Contributions
from non-controlling interests
|
|
|
|
|
|
21
|
21
|
|
Derecognition
of non-controlling interests in Consumer Healthcare
Joint Venture
|
|
|
4,056
|
|
4,056
|
(4,118)
|
(62)
|
|
Dividends
to shareholders
|
|
|
(2,993)
|
|
(2,993)
|
|
(2,993)
|
|
Shares
issued
|
1
|
30
|
|
|
31
|
|
31
|
|
Realised
profits on disposal of equity investments
|
|
|
54
|
(54)
|
|
|
-
|
|
Write-down
on shares held by ESOP Trusts
|
|
|
(201)
|
201
|
|
|
-
|
|
Share-based
incentive plans
|
|
|
258
|
|
258
|
|
258
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
At 30 September 2018
|
1,344
|
3,049
|
(2,081)
|
2,164
|
4,476
|
(753)
|
3,723
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1
January 2017
|
1,342
|
2,954
|
(5,392)
|
2,220
|
1,124
|
3,839
|
4,963
|
|
|
|
|
|
|
|
|
|
|
Profit
for the period
|
|
|
2,078
|
|
2,078
|
454
|
2,532
|
|
Other
comprehensive income for the period
|
|
|
876
|
(32)
|
844
|
(147)
|
697
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Total
comprehensive income for the period
|
|
|
2,954
|
(32)
|
2,922
|
307
|
3,229
|
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(621)
|
(621)
|
|
Contribution
from non-controlling interests
|
|
|
|
|
|
21
|
21
|
|
Dividends
to shareholders
|
|
|
(2,977)
|
|
(2,977)
|
|
(2,977)
|
|
Changes
in non-controlling interests
|
|
|
|
|
|
(11)
|
(11)
|
|
Shares
issued
|
1
|
47
|
|
|
48
|
|
48
|
|
Shares
acquired by ESOP Trusts
|
|
10
|
70
|
(140)
|
(60)
|
|
(60)
|
|
Write-down
on shares held by ESOP Trusts
|
|
|
(241)
|
241
|
|
|
-
|
|
Share-based
incentive plans
|
|
|
237
|
|
237
|
|
237
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
At 30
September 2017
|
1,343
|
3,011
|
(5,349)
|
2,289
|
1,294
|
3,535
|
4,829
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Cash flow statement – nine months ended 30 September
2018
|
|
|
9 months 2018
£m
|
|
9
months 2017
£m
|
|
|
|
|
|
|
|
|
Profit after tax
|
2,746
|
|
2,532
|
|
|
Tax on
profits
|
680
|
|
551
|
|
|
Share
of after tax profits of associates and joint ventures
|
(26)
|
|
(11)
|
|
|
Profit
on disposal of interest in associates
|
(3)
|
|
(28)
|
|
|
Net
finance expense
|
532
|
|
531
|
|
|
Depreciation,
amortisation and other adjusting items
|
1,169
|
|
2,097
|
|
|
Increase
in working capital
|
(1,927)
|
|
(1,553)
|
|
|
Contingent
consideration paid
|
(792)
|
|
(427)
|
|
|
Increase
in other net liabilities (excluding contingent consideration
paid)
|
2,936
|
|
1,250
|
|
|
|
|
|
|
|
|
Cash generated from operations
|
5,315
|
|
4,942
|
|
|
Taxation
paid
|
(1,013)
|
|
(893)
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
4,302
|
|
4,049
|
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
(842)
|
|
(1,011)
|
|
|
Proceeds
from sale of property, plant and equipment
|
70
|
|
142
|
|
|
Purchase
of intangible assets
|
(319)
|
|
(513)
|
|
|
Proceeds
from sale of intangible assets
|
165
|
|
24
|
|
|
Purchase
of equity investments
|
(298)
|
|
(64)
|
|
|
Proceeds
from sale of equity investments
|
87
|
|
55
|
|
|
Contingent
consideration paid
|
(123)
|
|
(65)
|
|
|
Disposal
of businesses
|
28
|
|
223
|
|
|
Proceeds
from disposal of interest in associates
|
3
|
|
54
|
|
|
Investment
in associates and joint ventures
|
(5)
|
|
(8)
|
|
|
Interest
received
|
55
|
|
49
|
|
|
Dividends
from associates and joint ventures
|
39
|
|
6
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities
|
(1,140)
|
|
(1,108)
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
Issue
of share capital
|
31
|
|
48
|
|
|
Shares
acquired by ESOP Trusts
|
-
|
|
(60)
|
|
|
Increase/(decrease)
in short-term loans
|
13
|
|
(1,444)
|
|
|
Increase
in long-term loans
|
10,090
|
|
2,233
|
|
|
Net
repayment of obligations under finance leases
|
(17)
|
|
(18)
|
|
|
Purchase
of non-controlling interests
|
(9,321)
|
|
-
|
|
|
Interest
paid
|
(458)
|
|
(423)
|
|
|
Dividends
paid to shareholders
|
(2,993)
|
|
(2,977)
|
|
|
Distributions
to non-controlling interests
|
(535)
|
|
(611)
|
|
|
Contributions
from non-controlling interests
|
21
|
|
21
|
|
|
Other
financing items
|
26
|
|
108
|
|
|
|
|
|
|
|
|
Net cash outflow from financing activities
|
(3,143)
|
|
(3,123)
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and bank overdrafts in the
period
|
19
|
|
(182)
|
|
|
|
|
|
|
|
|
Cash
and bank overdrafts at beginning of the period
|
3,600
|
|
4,605
|
|
|
Exchange
adjustments
|
(32)
|
|
(77)
|
|
|
Increase/(decrease)
in cash and bank overdrafts
|
19
|
|
(182)
|
|
|
|
|
|
|
|
|
Cash and bank overdrafts at end of the period
|
3,587
|
|
4,346
|
|
|
|
|
|
|
|
|
Cash
and bank overdrafts at end of the period comprise:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
3,793
|
|
4,743
|
|
|
Overdrafts
|
(206)
|
|
(397)
|
|
|
|
|
|
|
|
|
3,587
|
|
4,346
|
|
|
|
|
|
|
|
|
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.
|
|
Turnover by segment
|
|
|
Q3 2018
£m
|
|
Q3
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,221
|
|
4,190
|
|
1
|
|
3
|
|
Vaccines
|
1,924
|
|
1,689
|
|
14
|
|
17
|
|
Consumer
Healthcare
|
1,947
|
|
1,964
|
|
(1)
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
8,092
|
|
7,843
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|||||||
|
|
Q3 2018
£m
|
|
Q3
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,028
|
|
2,083
|
|
(3)
|
|
(1)
|
|
Pharmaceuticals
R&D
|
(667)
|
|
(657)
|
|
2
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
1,361
|
|
1,426
|
|
(5)
|
|
(2)
|
|
Vaccines
|
827
|
|
698
|
|
18
|
|
26
|
|
Consumer
Healthcare
|
429
|
|
392
|
|
9
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
2,617
|
|
2,516
|
|
4
|
|
8
|
|
Corporate
and other unallocated costs
|
(93)
|
|
(48)
|
|
94
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,524
|
|
2,468
|
|
2
|
|
6
|
|
Adjusting
items
|
(614)
|
|
(591)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
1,910
|
|
1,877
|
|
2
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
10
|
|
13
|
|
|
|
|
|
Finance
costs
|
(233)
|
|
(194)
|
|
|
|
|
|
Profit
on disposal of associates
|
3
|
|
8
|
|
|
|
|
|
Share
of after tax profits of associates and joint
ventures
|
15
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
1,705
|
|
1,711
|
|
-
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Turnover by segment
|
|
|
9 months
2018
£m
|
|
9
months
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
12,459
|
|
12,736
|
|
(2)
|
|
2
|
|
Vaccines
|
4,415
|
|
3,952
|
|
12
|
|
15
|
|
Consumer
Healthcare
|
5,750
|
|
5,859
|
|
(2)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
22,624
|
|
22,547
|
|
-
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|||||||
|
|
9 months
2018
£m
|
|
9
months
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
6,080
|
|
6,353
|
|
(4)
|
|
-
|
|
Pharmaceuticals
R&D
|
(1,898)
|
|
(2,023)
|
|
(6)
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
4,182
|
|
4,330
|
|
(3)
|
|
2
|
|
Vaccines
|
1,523
|
|
1,413
|
|
8
|
|
18
|
|
Consumer
Healthcare
|
1,165
|
|
1,071
|
|
9
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
6,870
|
|
6,814
|
|
1
|
|
7
|
|
Corporate
and other unallocated costs
|
(321)
|
|
(284)
|
|
13
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
6,549
|
|
6,530
|
|
-
|
|
7
|
|
Adjusting
items
|
(2,620)
|
|
(2,955)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
3,929
|
|
3,575
|
|
10
|
|
22
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
57
|
|
49
|
|
|
|
|
|
Finance
costs
|
(589)
|
|
(580)
|
|
|
|
|
|
Profit
on disposal of associates
|
3
|
|
28
|
|
|
|
|
|
Share
of after tax profits of associates and joint
ventures
|
26
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
3,426
|
|
3,083
|
|
11
|
|
25
|
|
|
|
|
|
|
|
|
|
|
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
2017.
At 30
September 2018, the Group’s aggregate provision for legal and
other disputes (not including tax matters described under
‘Taxation’ below) was £0.2 billion (31 December 2017: £0.2 billion). The
Group may become involved in significant legal proceedings in
respect of which it is not possible to make a reliable estimate of
the expected financial effect, if any, that could result from
ultimate resolution of the proceedings. In these cases, the Group
would provide appropriate disclosures about such cases, but no
provision would be made.
The
ultimate liability for legal claims may vary from the amounts
provided and is dependent upon the outcome of litigation
proceedings, investigations and possible settlement negotiations.
The Group’s position could change over time, and, therefore,
there can be no assurance that any losses that result from the
outcome of any legal proceedings will not exceed by a material
amount the amount of the provisions reported in the Group’s
financial accounts.
There
have been no significant legal development since the date of the
Annual Report 2017 and the Q2 2018 results.
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 2017. 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 £430 million and
represented an effective Adjusted tax rate of 18.6% (Q3 2017:
21.0%). The tax on Total profits amounted to £193 million and
represented an effective tax rate of 11.3% (Q3 2017:
18.5%).
In the
nine months, tax on Adjusted profits amounted to £1,180
million and represented an effective Adjusted tax rate of 19.5%
(2017: 21.4%). The charge for taxation on Total profits amounted to
£680 million and represented an effective tax rate of 19.8%
(2017: 17.9%).
The
Group’s balance sheet at 30 September 2018 included a current
tax payable liability of £813 million, a non-current tax
payable liability of £272 million and a tax recoverable asset
of £257 million.
|
|
Additional information
|
|
Accounting policies and basis of preparation
|
|
This
unaudited Results Announcement contains condensed financial
information for the three and nine months ended 30 September 2018, and should be read in
conjunction with the Annual Report 2017, 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 2017, except for the
implementation of IFRS 15 ‘Revenue from contracts with
customers’ and IFRS 9 ‘Financial instruments’
from 1 January 2018. These new Standards have not had a material
impact on the reported results of the Group.
GSK has
adopted IFRS 15 applying the modified retrospective approach, with
a cumulative adjustment to decrease equity at 1 January 2018 by
£4 million. In accordance with the requirements of the
standard, where the modified retrospective approach is adopted,
prior year results are not restated. IFRS 15 provides a single,
principles-based approach to the recognition of revenue from all
contracts with customers. It focuses on the identification of
performance obligations in a contract and requires revenue to be
recognised when or as those performance obligations are
satisfied.
GSK has
adopted IFRS 9 retrospectively, but with certain permitted
exceptions. As a result, prior year results are also not restated,
but a cumulative adjustment has been made to decrease equity at 1
January 2018 by £11 million, primarily reflecting an increase
in the expected credit loss provision on trade receivables of
£15 million. A net transfer of £288 million between
retained earnings and other reserves has also been made. This
primarily reflects prior impairments of equity investments that had
previously been charged to the income statement. IFRS 9 replaces
the majority of IAS 39 and covers the classification, measurement
and de-recognition of financial assets and financial liabilities,
introduces a new impairment model for financial assets based on
expected losses rather than incurred losses and provides a new
hedge accounting model.
IFRS 16
‘Leases’ is required to be implemented by the Group
from 1 January 2019. The new standard will replace IAS 17
‘Leases’ and will require lease liabilities and
“right of use” assets to be recognised on the balance
sheet for almost all leases. This is expected to result in a
significant increase in both assets and liabilities recognised on
the balance sheet. The costs of operating leases currently included
within operating costs will be split and the financing element of
the charge will be reported within finance expense. 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 2017 were published
in the Annual Report 2017, 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:
|
|
|
Q3 2018
|
|
Q3
2017
|
|
9 months 2018
|
|
9
months 2017
|
|
2017
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Average
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
|
US$/£
|
1.31
|
|
1.30
|
|
1.35
|
|
1.28
|
|
1.30
|
|
|
|
Euro/£
|
1.11
|
|
1.13
|
|
1.13
|
|
1.15
|
|
1.15
|
|
|
|
Yen/£
|
146
|
|
148
|
|
148
|
|
144
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Period-end
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
|
US$/£
|
1.30
|
|
1.34
|
|
1.30
|
|
1.34
|
|
1.35
|
|
|
|
Euro/£
|
1.12
|
|
1.13
|
|
1.12
|
|
1.13
|
|
1.13
|
|
|
|
Yen/£
|
148
|
|
151
|
|
148
|
|
151
|
|
152
|
|
During Q3 2018, average Sterling exchange rates were stronger
against the US Dollar, but weaker against the Euro and Yen compared
with the same period in 2017. During the nine months ended 30
September 2018, average Sterling exchange rates were stronger
against the US Dollar and the Yen, but weaker against the Euro,
compared with the same period in 2017. Period-end Sterling exchange
rates were weaker against the US Dollar, the Euro and Yen compared
with the 2017 year end rates.
|
|
Weighted average number of shares
|
|
|
|
|
|
Q3 2018
millions
|
|
Q3
2017
millions
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
4,917
|
|
4,890
|
|
Dilutive
effect of share options and share awards
|
55
|
|
45
|
|
|
|
|
|
|
Weighted
average number of shares – diluted
|
4,972
|
|
4,935
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
9 months 2018
millions
|
|
9
months 2017
millions
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
4,911
|
|
4,884
|
|
Dilutive
effect of share options and share awards
|
55
|
|
47
|
|
|
|
|
|
|
Weighted
average number of shares – diluted
|
4,966
|
|
4,931
|
|
|
|
|
|
|
At 30
September 2018, 4,919 million shares were in free issue (excluding
Treasury shares and shares held by the ESOP Trusts). This compares
with 4,890 million shares at 30 September 2017.
|
|
Net assets
|
|
The
book value of net assets increased by £234 million from
£3,489 million at 31 December 2017 to £3,723 million at
30 September 2018. This primarily reflected the Total profit for
the period and re-measurement gains on defined benefit plans
exceeding dividends paid in the period.
The
carrying value of investments in associates and joint ventures at
30 September 2018 was £221 million (31 December 2017:
£183 million), with a market value of £411 million (31
December 2017: £372 million).
At 30
September 2018, the net deficit on the Group’s pension plans
was £488 million compared with £1,505 million at 31
December 2017. The decrease in the net deficit primarily arose from
increases in the rates used to discount UK pension liabilities from
2.5% to 2.9%, and US pension liabilities from 3.6% to
4.2%.
At 30
September 2018, the post-retirement benefits provision was
£1,387 million compared with £1,496 million at 31
December 2017. The decrease in the provision was primarily due to
the increase in the US discount rate from 3.6% to
4.2%.
At 30
September 2018, trade and other payables were £13,093 million
compared with £20,970 million at 31 December 2017. The
decrease primarily reflected the elimination of the Consumer
Healthcare Joint Venture put option following the buyout of
Novartis’ interest in the Consumer Healthcare Joint Venture
on 1 June 2018. The buyout was funded by issuing bonds with
maturity rates of between two and twelve years, in both the US and
Europe, which raised $6 billion and €2.5 billion
respectively. Committed bank facilities financed the remaining
amount of the $13 billion transaction.
The
estimated present value of the potential redemption amount of the
Pfizer put option related to ViiV Healthcare, recorded in Other
payables in Current liabilities, was £1,278 million (31
December 2017: £1,304 million).
Contingent
consideration amounted to £6,232 million at 30 September 2018
(31 December 2017: £6,172 million), of which £5,885
million (31 December 2017: £5,542 million) represented the
estimated present value of amounts payable to Shionogi relating to
ViiV Healthcare and £296 million (31 December 2017: £584
million) represented the estimated present value of contingent
consideration payable to Novartis related to the Vaccines
acquisition following a milestone payment of $450 million made to
Novartis in January 2018.
The
liability due to Shionogi included £242 million in respect of
preferential dividends. The liability for preferential dividends
due to Pfizer at 30 September 2018 was £17 million (31
December 2017: £17 million). An explanation of the accounting
for the non-controlling interests in ViiV Healthcare is set out on
page 56.
Of the
contingent consideration payable (on a post-tax basis) at 30
September 2018, £818 million (31 December 2017: £1,076
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 Pfizer put option and the contingent
consideration at 30 September 2018 have been calculated based on
the closing exchange rates, primarily US$1.30/£1 and Euro
€1.12/£1. The sensitivities for each of the largest
contingent consideration liabilities and the Pfizer put option are
set out below.
|
|
Increase/(decrease) in liability
|
|
|
ViiV
Healthcare
put
option
|
|
Shionogi-
ViiV
Healthcare
contingent
consideration
|
|
Novartis
Vaccines
contingent
consideration
|
|
|
|
|
£m
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
5 cent
appreciation of US Dollar
|
|
|
36
|
|
179
|
|
(6)
|
|
5 cent
depreciation of US Dollar
|
|
|
(33)
|
|
(166)
|
|
7
|
|
10 cent
appreciation of US Dollar
|
|
|
75
|
|
372
|
|
(12)
|
|
10 cent
depreciation of US Dollar
|
|
|
(64)
|
|
(317)
|
|
13
|
|
5 cent
appreciation of Euro
|
|
|
23
|
|
55
|
|
15
|
|
5 cent
depreciation of Euro
|
|
|
(21)
|
|
(51)
|
|
(13)
|
|
10 cent
appreciation of Euro
|
|
|
46
|
|
117
|
|
31
|
|
10 cent
depreciation of Euro
|
|
|
(39)
|
|
(96)
|
|
(24)
|
|
|
|
|
|
|
|
|
|
|
Movements in contingent consideration are as follows:
|
|||
|
|
9 months 2018
£m
|
|
9
months 2017
£m
|
|
|
|
|
|
|
Contingent
consideration at beginning of the period
|
6,172
|
|
5,896
|
|
Re-measurement
through income statement
|
975
|
|
513
|
|
Cash
payments: operating cash flows
|
(792)
|
|
(427)
|
|
Cash
payments: investing activities
|
(123)
|
|
(65)
|
|
|
|
|
|
|
Contingent
consideration at end of the period
|
6,232
|
|
5,917
|
|
|
|
|
|
|
The re-measurements of contingent consideration in the nine months
reflected updated forecasts, exchange rate movements and the unwind
of the discounts on the liabilities. The cash settlement in the
period included £584 million (2017: £485 million) of
payments to Shionogi in relation to ViiV Healthcare and the
£317 million milestone payment to Novartis relating to the
non-US sales of Bexsero. These payments are deductible for tax
purposes.
|
|
At 30 September 2018, the ESOP Trust held 41.9 million GSK shares
against the future exercise of share options and share awards. The
carrying value of £214 million has been deducted from other
reserves. The market value of these shares was £650
million.
At 30 September 2018, the company held 414.6 million Treasury
shares at a cost of £5,800 million, which has been deducted
from retained earnings.
|
|
Contingent liabilities
|
|
There
were contingent liabilities at 30 September 2018 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 51.
|
|
Reconciliation of cash flow to movements in net debt
|
|
|
9 months 2018
£m
|
|
9
months 2017
£m
|
|
|
|
|
|
|
Net
debt at beginning of the period
|
(13,178)
|
|
(13,804)
|
|
|
|
|
|
|
Increase/(decrease)
in cash and bank overdrafts
|
19
|
|
(182)
|
|
Net
(increase in)/repayment of short-term loans
|
(13)
|
|
1,444
|
|
Increase
in long-term loans
|
(10,090)
|
|
(2,233)
|
|
Net
repayment of obligations under finance leases
|
17
|
|
18
|
|
Exchange
adjustments
|
(590)
|
|
571
|
|
Other
non-cash movements
|
(2)
|
|
(23)
|
|
|
|
|
|
|
Increase
in net debt
|
(10,659)
|
|
(405)
|
|
|
|
|
|
|
Net
debt at end of the period
|
(23,837)
|
|
(14,209)
|
|
|
|
|
|
|
Net debt analysis
|
|
|
30 September
2018
£m
|
|
30
September
2017
£m
|
|
31
December
2017
£m
|
|
|
|
|
|
|
|
|
Liquid
investments
|
80
|
|
82
|
|
78
|
|
Cash
and cash equivalents
|
3,793
|
|
4,743
|
|
3,833
|
|
Short-term
borrowings
|
(2,902)
|
|
(4,740)
|
|
(2,825)
|
|
Long-term
borrowings
|
(24,808)
|
|
(14,294)
|
|
(14,264)
|
|
|
|
|
|
|
|
|
Net
debt at end of the period
|
(23,837)
|
|
(14,209)
|
|
(13,178)
|
|
|
|
|
|
|
|
|
Free cash flow reconciliation
|
|
|
Q3 2018
£m
|
|
9
months 2018
£m
|
|
9
months 2017
(revised)
£m
|
|
|
|
|
|
|
|
|
Net
cash inflow from operating activities
|
2,077
|
|
4,302
|
|
4,049
|
|
Purchase
of property, plant and equipment
|
(301)
|
|
(842)
|
|
(1,011)
|
|
Proceeds
from sale of property, plant and equipment
|
48
|
|
70
|
|
142
|
|
Purchase
of intangible assets
|
(130)
|
|
(319)
|
|
(513)
|
|
Proceeds
from disposals of intangible assets
|
142
|
|
165
|
|
24
|
|
Net
finance costs
|
(71)
|
|
(403)
|
|
(374)
|
|
Dividends
from joint ventures and associates
|
-
|
|
39
|
|
6
|
|
Contingent
consideration paid (reported in investing activities)
|
(26)
|
|
(123)
|
|
(65)
|
|
Distributions
to non-controlling interests
|
(185)
|
|
(535)
|
|
(611)
|
|
Contributions
from non-controlling interests
|
-
|
|
21
|
|
21
|
|
|
|
|
|
|
|
|
Free
cash flow
|
1,554
|
|
2,375
|
|
1,668
|
|
|
|
|
|
|
|
|
With
the introduction of the new R&D strategy in Q2 2018, GSK has
revised its definition of free cash flow, a non-IFRS measure, to
include proceeds from the sale of intangible assets.
|
|
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 Adjusted earnings of
ViiV Healthcare for 2017. 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, ViiV
Healthcare 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 other operating income/expense
and 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
as part of the 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:
|
|
|
9 months 2018
£m
|
|
9
months 2017
£m
|
|
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,542
|
|
5,304
|
|
Re-measurement
through income statement
|
927
|
|
405
|
|
Cash
payments: operating cash flows
|
(517)
|
|
(424)
|
|
Cash
payments: investing activities
|
(67)
|
|
(61)
|
|
|
|
|
|
|
Contingent
consideration at end of the period
|
5,885
|
|
5,224
|
|
|
|
|
|
|
Of the
contingent consideration payable (on a post-tax basis) to Shionogi
at 30 September 2018, £794 million (31 December 2017:
£724 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 option 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 September 2018
£m
|
|
31
December 2017
£m
|
|
|
|
|
|
|
Pfizer
put option
|
1,278
|
|
1,304
|
|
Pfizer
preferential dividend
|
17
|
|
17
|
|
|
|
|
|
|
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 Q3
2018 and Q3 2017 and also nine months 2018 and nine months 2017 are
set out below.
|
|
Income statement – Adjusted results
reconciliation
Three months ended 30 September 2018
|
|
|
Total
results
£m
|
Intangible
amort-
isation
£m
|
Intangible
impair-
ment
£m
|
Major
restruct-
uring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
£m
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Turnover
|
8,092
|
|
|
|
|
|
8,092
|
|
Cost of sales
|
(2,636)
|
133
|
41
|
69
|
5
|
|
(2,388)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
5,456
|
133
|
41
|
69
|
5
|
|
5,704
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,527)
|
|
|
209
|
(9)
|
14
|
(2,313)
|
|
Research and development
|
(988)
|
10
|
8
|
4
|
|
5
|
(961)
|
|
Royalty income
|
94
|
|
|
|
|
|
94
|
|
Other operating income/(expense)
|
(125)
|
|
|
1
|
251
|
(127)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating profit
|
1,910
|
143
|
49
|
283
|
247
|
(108)
|
2,524
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(223)
|
|
|
|
|
2
|
(221)
|
|
Profit on disposal of associates
|
3
|
|
|
|
|
(3)
|
-
|
|
Share of after tax profits of associates
and joint ventures
|
15
|
|
|
|
|
|
15
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit before taxation
|
1,705
|
143
|
49
|
283
|
247
|
(109)
|
2,318
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(193)
|
(29)
|
(6)
|
(67)
|
(24)
|
(111)
|
(430)
|
|
Tax rate %
|
11.3%
|
|
|
|
|
|
18.6%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit after taxation
|
1,512
|
114
|
43
|
216
|
223
|
(220)
|
1,888
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to
non-controlling
interests
|
94
|
|
|
|
47
|
|
141
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
1,418
|
114
|
43
|
216
|
176
|
(220)
|
1,747
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
28.8p
|
2.3p
|
0.9p
|
4.4p
|
3.6p
|
(4.5)p
|
35.5p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,917
|
|
|
|
|
|
4,917
|
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
|
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 ‘Reporting definitions’ on page
37.
|
|
Income statement – Adjusted results
reconciliation
Three months ended 30 September 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
|
7,843
|
|
|
|
|
|
7,843
|
|
Cost of sales
|
(2,652)
|
137
|
20
|
167
|
24
|
|
(2,304)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
5,191
|
137
|
20
|
167
|
24
|
|
5,539
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,308)
|
|
|
30
|
|
(2)
|
(2,280)
|
|
Research and development
|
(1,047)
|
12
|
62
|
68
|
|
7
|
(898)
|
|
Royalty income
|
107
|
|
|
|
|
|
107
|
|
Other operating income/(expense)
|
(66)
|
|
|
1
|
16
|
49
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating profit
|
1,877
|
149
|
82
|
266
|
40
|
54
|
2,468
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(181)
|
|
|
1
|
|
3
|
(177)
|
|
Profit on disposal of associates
|
8
|
|
|
|
|
(8)
|
-
|
|
Share of after tax losses of associates
and joint ventures
|
7
|
|
|
|
|
|
7
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit before taxation
|
1,711
|
149
|
82
|
267
|
40
|
49
|
2,298
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(316)
|
(33)
|
(15)
|
(60)
|
(28)
|
(30)
|
(482)
|
|
Tax rate %
|
18.5%
|
|
|
|
|
|
21.0%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit after taxation
|
1,395
|
116
|
67
|
207
|
12
|
19
|
1,816
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to non-controlling
interests
|
183
|
|
|
|
45
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
1,212
|
116
|
67
|
207
|
(33)
|
19
|
1,588
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
24.8p
|
2.4p
|
1.4p
|
4.2p
|
(0.7)p
|
0.4p
|
32.5p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
(millions)
|
4,890
|
|
|
|
|
|
4,890
|
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
|
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 ‘Reporting definitions’ on page
37.
|
|
Income statement – Adjusted results
reconciliation
Nine months ended 30 September 2018
|
|
|
Total
results
£m
|
Intangible
amort-
isation
£m
|
Intangible
impair-
ment
£m
|
Major
restruct-
uring
£m
|
Transaction-
related
£m
|
Divestments,
significant
legal and
other items
£m
|
Adjusted
results
£m
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Turnover
|
22,624
|
|
|
|
|
|
22,624
|
|
Cost of sales
|
(7,337)
|
400
|
69
|
211
|
11
|
|
(6,646)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
15,287
|
400
|
69
|
211
|
11
|
|
15,978
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(7,295)
|
|
2
|
267
|
61
|
32
|
(6,933)
|
|
Research and development
|
(2,817)
|
30
|
33
|
27
|
|
11
|
(2,716)
|
|
Royalty income
|
220
|
|
|
|
|
|
220
|
|
Other operating income/(expense)
|
(1,466)
|
|
|
1
|
1,634
|
(169)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating profit
|
3,929
|
430
|
104
|
506
|
1,706
|
(126)
|
6,549
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(532)
|
|
|
2
|
|
5
|
(525)
|
|
Profit on disposal of associates
|
3
|
|
|
|
|
(3)
|
-
|
|
Share of after tax profits of associates
and joint ventures
|
26
|
|
|
|
|
|
26
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit before taxation
|
3,426
|
430
|
104
|
508
|
1,706
|
(124)
|
6,050
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(680)
|
(85)
|
(15)
|
(122)
|
(201)
|
(77)
|
(1,180)
|
|
Tax rate %
|
19.8%
|
|
|
|
|
|
19.5%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit after taxation
|
2,746
|
345
|
89
|
386
|
1,505
|
(201)
|
4,870
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to non-controlling
interests
|
338
|
|
|
|
197
|
|
535
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
2,408
|
345
|
89
|
386
|
1,308
|
(201)
|
4,335
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
49.0p
|
7.0p
|
1.8p
|
7.9p
|
26.6p
|
(4.0)p
|
88.3p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
(millions)
|
4,911
|
|
|
|
|
|
4,911
|
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
|
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 ‘Reporting definitions’ on page
37.
|
|
Income statement – Adjusted results
reconciliation
Nine months ended 30 September 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
|
22,547
|
|
|
|
|
|
22,547
|
|
Cost of sales
|
(7,784)
|
410
|
334
|
466
|
61
|
|
(6,513)
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Gross profit
|
14,763
|
410
|
334
|
466
|
61
|
|
16,034
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(7,139)
|
|
|
152
|
|
66
|
(6,921)
|
|
Research and development
|
(3,267)
|
34
|
87
|
253
|
|
23
|
(2,870)
|
|
Royalty income
|
287
|
|
|
|
|
|
287
|
|
Other operating income/(expense)
|
(1,069)
|
|
|
1
|
1,297
|
(229)
|
-
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Operating profit
|
3,575
|
444
|
421
|
872
|
1,358
|
(140)
|
6,530
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(531)
|
|
|
3
|
|
6
|
(522)
|
|
Profit on disposal of associates
|
28
|
|
|
|
|
(28)
|
-
|
|
Share of after tax profits of associates
and joint ventures
|
11
|
|
|
|
|
|
11
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit before taxation
|
3,083
|
444
|
421
|
875
|
1,358
|
(162)
|
6,019
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(551)
|
(100)
|
(125)
|
(249)
|
(152)
|
(109)
|
(1,286)
|
|
Tax rate %
|
17.9%
|
|
|
|
|
|
21.4%
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit after taxation
|
2,532
|
344
|
296
|
626
|
1,206
|
(271)
|
4,733
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
Profit
attributable to non-controlling
interests
|
454
|
|
|
|
147
|
|
601
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
2,078
|
344
|
296
|
626
|
1,059
|
(271)
|
4,132
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
42.5p
|
7.1p
|
6.1p
|
12.8p
|
21.7p
|
(5.6)p
|
84.6p
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
(millions)
|
4,884
|
|
|
|
|
|
4,884
|
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
|
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 ‘Reporting definitions’ on page
37.
|
|
Independent review report to GlaxoSmithKline plc
|
|
We have
been engaged by GlaxoSmithKline plc (“the Company”) to
review the condensed financial information in the Results
Announcement for the three and nine months ended 30 September
2018.
|
|
What we have reviewed
|
|
|
The
condensed financial information comprises:
|
|
|
●
|
the
income statement and statement of comprehensive income for the
three and nine month periods ended 30 September 2018 on pages 40
and 41 to 42 respectively;
|
|
●
|
the
balance sheet as at 30 September 2018 on page 46;
|
|
●
|
the
statement of changes in equity for the nine month period then ended
on page 47;
|
|
●
|
the
cash flow statement for the nine month period then ended on page 48
and;
|
|
●
|
the
accounting policies and basis of preparation and the explanatory
notes to the condensed financial information on pages 49 to 57 that
have been prepared applying consistent accounting policies to those
applied by the Group in the Annual Report 2017, which was prepared
in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union, except for
the implementation of IFRS 15 “Revenue from Contracts with
Customers” and IFRS 9 “Financial Instruments”
from 1 January 2018.
|
|
|
|
|
We have
read the other information contained in the Results Announcement,
including the non-IFRS measures contained on pages 49 to 57, and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed
financial statements.
This
report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
“Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Auditing
Practices Board. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have
formed.
Directors’ responsibilities
The
Results Announcement of GlaxoSmithKline plc, including the
condensed financial information, is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the Results Announcement by applying consistent
accounting policies to those applied by the Group in the Annual
Report 2017, which was prepared in accordance with IFRS as adopted
by the European Union, except for the implementation of IFRS 15
“Revenue from Contracts with Customers” and IFRS 9
“Financial Instruments” from 1 January
2018.
Our responsibility
Our
responsibility is to express to the Company a conclusion on the
interim financial information in the Results Announcement based on
our review.
Scope of review
We
conducted our review in accordance with International Standard on
Review Engagements (UK and Ireland) 2410 “Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity” issued by the Auditing Practices Board for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based
on our review, nothing has come to our attention that causes us to
believe that the condensed interim financial information in the
Results Announcement for the three and nine months ended 30
September 2018 are not prepared, in all material respects, in
accordance with the accounting policies set out in the accounting
policies and basis of preparation section on page 52.
Deloitte LLP
Statutory
Auditor
London,
United Kingdom
31
October 2018
|
|
|
|
GlaxoSmithKline plc
|
|
|
(Registrant)
|
|
|
|
|
Date: October
31, 2018
|
|
|
|
|
|
|
By: VICTORIA
WHYTE
--------------------------
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Victoria Whyte
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Authorised
Signatory for and on
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behalf
of GlaxoSmithKline plc
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