|
Issued:
Wednesday, 6 February 2019, London U.K.
|
|
GSK delivers sales, earnings and cash flow growth in
2018
Total EPS 73.7p, +>100% AER, +>100% CER; Adjusted EPS 119.4p
+7% AER, +12% CER
|
|
|
|||
|
2018 financial, product and strategy highlights
|
|||
|
|
|||
|
●
|
Group
sales £30.8 billion, +2% AER, +5% CER
|
||
|
●
|
Pharmaceuticals
sales £17.3 billion, flat AER, +2% CER; Vaccines sales
£5.9 billion, +14% AER, +16% CER; Consumer Healthcare sales
£7.7 billion, -1% AER, +2% CER
|
||
|
●
|
Total
new Respiratory product sales £2.6 billion, +35% AER, +38%
CER
|
||
|
●
|
Total HIV sales £4.7 billion, +9% AER, +11% CER.
Dolutegravir-based regimens £4.4 billion, +14% AER, +16%
CER
|
||
|
●
|
Shingrix sales £784 million, +>100% AER,
+>100% CER
|
||
|
●
|
Total
Group operating margin 17.8%, +4.3 percentage points
AER, +5.0 percentage
points CER
|
||
|
●
|
Adjusted
Group operating margin 28.4%, flat AER, +0.5 percentage points CER.
(Pharmaceuticals: 33.3%; Vaccines 33.0%; Consumer Healthcare
19.8%)
|
||
|
●
|
Total
EPS 73.7p, +>100% AER, +>100% CER, reflecting stronger
operating performance, lower restructuring and impairment charges
as well as a favourable comparison with impact of US tax reform in
2017
|
||
|
●
|
Adjusted
EPS 119.4p, +7% AER, +12% CER, driven by improved operating margin
and continued financial efficiencies
|
||
|
●
|
Net
cash flow from operations £8.4 billion. Free cash flow
£5.7 billion, improvement reflecting greater focus on cash
conversion, particularly working capital
|
||
|
●
|
23p
dividend declared for the quarter; 80p for full year
2018
|
||
|
●
|
4 major
transactions, including new Consumer Healthcare JV, announced in
2018 to support strategy and reshape of the Group's
portfolio
|
||
|
|
|||
|
2019 guidance
|
|||
|
|
|||
|
●
|
Expect
Adjusted EPS to decline -5% to -9% CER reflecting recent approval
of a generic competitor to Advair in the US. Guidance
also reflects expected impact of Tesaro acquisition and assumes
Consumer Healthcare nutrition disposal and Consumer JV with Pfizer
close as previously indicated
|
||
|
●
|
Expect
80p dividend for 2019
|
||
|
|
|
||
|
Pipeline update and newsflow
|
|||
|
|
|
|
|
|
●
|
Rebuild
of Pharmaceuticals pipeline continues with 33* of the 46* new
medicines now in development targeting modulation of the immune
system
|
||
|
●
|
Major
progress made in immuno-oncology pipeline with 16* assets now in
clinical development, reflecting organic progression, the Tesaro
acquisition and the alliance with Merck KGaA, Darmstadt,
Germany*
|
||
|
●
|
Major
data readouts and other significant newsflow expected on multiple
new medicines in HIV, Oncology, Immuno-inflammation and Respiratory
in 2019:
|
||
|
|
-
|
FDA approval decision expected for dolutegravir + lamivudine in
H1
|
|
|
|
-
|
FDA filings planned for long-acting injectable cabotegravir +
rilpivirine in H1 and fostemsavir for highly treatment-experienced
patients in H2
|
|
|
|
-
|
Pivotal
stage data readouts expected for BCMA for 4L multiple
myeloma, Zejula for 1L maintenance ovarian
cancer and PD1 dostarlimab for endometrial cancer
|
|
|
|
-
|
Updated
phase I PFS data from DREAMM-1 study for BCMA to be published in
leading journal in H1
|
|
|
|
-
|
Phase
III start planned for anti-GMCSF for treatment of rheumatoid
arthritis in H2
|
|
|
|
-
|
Results
of pivotal CAPTAIN study to support filing of Trelegy for use in asthma expected
in H1
|
|
|
|
|||
|
|
|
|
|
|
2018 results
|
|||||||||||
|
|
2018
|
|
Growth
|
|
Q4 2018
|
|
Growth
|
||||
|
|
£m
|
|
£%
|
|
CER%
|
|
£m
|
|
£%
|
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
30,821
|
|
2
|
|
5
|
|
8,197
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
5,483
|
|
34
|
|
43
|
|
1,554
|
|
>100
|
|
>100
|
|
Total
earnings per share
|
73.7p
|
|
>100
|
|
>100
|
|
24.7p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
8,745
|
|
2
|
|
6
|
|
2,196
|
|
8
|
|
4
|
|
Adjusted
earnings per share
|
119.4p
|
|
7
|
|
12
|
|
31.2p
|
|
14
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from operating activities
|
8,421
|
|
22
|
|
|
|
4,119
|
|
44
|
|
|
|
Free
cash flow
|
5,692
|
|
63
|
|
|
|
3,317
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Total results are presented under 'Financial performance' on pages
6 and 22 and Adjusted results reconciliations are presented on
pages 14, 15, 30 and 31. Adjusted results are a non-IFRS
measure that may be considered in addition to, but not as a
substitute for, or superior to, information presented in accordance
with IFRS. Adjusted results are defined on page 4 and £%
or AER% growth, CER% growth, free cash flow and other non-IFRS
measures are defined on page 44. GSK provides guidance on an
Adjusted results basis only for the reasons set out on page 5.
All expectations, guidance and targets regarding future
performance and dividend payments should be read together with
"Outlook, assumptions and cautionary statements" on page
45.
|
|
|
*
|
Includes
M7824, the subject of the alliance with Merck KGaA, Darmstadt,
Germany, expected to close in Q1 2019.
|
|
Emma Walmsley, Chief Executive Officer, GSK said:
"GSK
delivered improved operating performance in 2018 with Group sales
growth, strong commercial execution of new product launches,
especially Shingrix,
continued cost discipline and better cash generation.
"It was
also a significant year for the Group strategically, with the
launch of a new R&D strategy focused on immunology, genetics
and new technologies, together with a series of transactions that
support our strategy and reshape of the Group's
portfolio.
"We are
making good progress against our priority to rebuild our
Pharmaceuticals pipeline, particularly in oncology. Since
July, we have doubled the number of oncology assets in clinical
development to 16 through the advancement of our internal
programmes and with targeted business development including the
recently completed acquisition of Tesaro and our new alliance with
Merck KGaA that is expected to close in Q1 2019. During 2019,
we expect to receive pivotal data on three new cancer medicines,
all of which have the potential to be launched in the next two
years.
"We are
also focused on completing the transactions to divest our Consumer
Healthcare nutrition business to Unilever; and the formation of our
new joint venture with Pfizer that will create a new, world leading
Consumer Healthcare company and which provides a unique opportunity
to deliver substantial value for shareholders.
"Finally,
I would like to thank all our customers, suppliers and employees
for their support and hard work in 2018 and look forward to working
with them in 2019, which will be an important year of execution for
GSK."
|
|
2019 guidance
|
|
In
2019, we now expect Adjusted EPS to decline in the range
of -5% to -9% at CER. This guidance reflects
the recent approval of a substitutable generic competitor
to Advair in the
US and the expected impact of the Tesaro acquisition and assumes
that the proposed Consumer Healthcare nutrition disposal closes by
the end of 2019 and the proposed Consumer Healthcare Joint Venture
with Pfizer closes during H2 2019.
GSK
expects to maintain the dividend for 2019 at the current level of
80p per share.
All
expectations, guidance and targets regarding future performance and
dividend payments should be read together with "Outlook,
assumptions and cautionary statements" on page 45.
If
exchange rates were to hold at the closing rates on 31 January 2019
($1.31/£1, €1.14/£1 and Yen 143/£1) for the
rest of 2019, the estimated positive impact on 2019 Sterling
turnover growth would be less than 1% and if exchange gains or
losses were recognised at the same level as in 2018, the estimated
positive impact on 2019 Sterling Adjusted EPS growth would be
around 1%.
|
|
Contents
|
Page
|
|
|
|
|
Total
and Adjusted results
|
4
|
|
Financial
performance - year ended 31 December 2018
|
6
|
|
Financial
performance - three months ended 31 December 2018
|
22
|
|
Cash
generation and conversion
|
37
|
|
Returns
to shareholders
|
39
|
|
Research
and development
|
40
|
|
Reporting
definitions
|
44
|
|
Outlook,
assumptions and cautionary statements
|
45
|
|
Contacts
|
46
|
|
|
|
|
Income
statements
|
47
|
|
Statement
of comprehensive income - year ended 31 December 2018
|
48
|
|
Statement
of comprehensive income - three months ended 31 December
2018
|
49
|
|
Pharmaceuticals
turnover - year ended 31 December 2018
|
50
|
|
Pharmaceuticals
turnover - three months ended 31 December 2018
|
51
|
|
Vaccines
turnover - year ended 31 December 2018
|
52
|
|
Vaccines
turnover - three months ended 31 December 2018
|
52
|
|
Balance
sheet
|
53
|
|
Statement
of changes in equity
|
54
|
|
Cash
flow statement - year ended 31 December 2018
|
55
|
|
Segment
information
|
56
|
|
Legal
matters
|
58
|
|
Taxation
|
58
|
|
Additional
information
|
59
|
|
Reconciliation
of cash flow to movements in net debt
|
63
|
|
Net
debt analysis
|
63
|
|
Free
cash flow reconciliation
|
63
|
|
Non-controlling
interests in ViiV Healthcare
|
64
|
|
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 and Gardasil is a
trademark of Merck Sharp & Dohme Corp.
|
|
Total and Adjusted results
|
|
Total
reported results represent the Group's overall
performance.
GSK
also uses a number of adjusted, non-IFRS, measures to report the
performance of its business. Adjusted results and other
non-IFRS measures may be considered in addition to, but not as a
substitute for or superior to, information presented in accordance
with IFRS. Adjusted results are defined below and other
non-IFRS measures are defined on page 44.
GSK
believes that Adjusted results, when considered together with Total
results, provide investors, analysts and other stakeholders with
helpful complementary information to understand better the
financial performance and position of the Group from period to
period, and allow the Group's performance to be more easily
compared against the majority of its peer companies. These
measures are also used by management for planning and reporting
purposes. They may not be directly comparable with similarly
described measures used by other companies.
GSK
encourages investors and analysts not to rely on any single
financial measure but to review GSK's quarterly results
announcements, including the financial statements and notes, in
their entirety.
GSK is
committed to continuously improving its financial reporting, in
line with evolving regulatory requirements and best practice and
has made a number of changes in recent years. In line with
this practice, GSK expects in 2019 to continue to review its
reporting framework (including, where relevant, the use of
alternative performance measures).
Adjusted
results exclude the following items from Total results, together
with the tax effects of all of these items:
|
|
●
|
amortisation
of intangible assets (excluding computer software) and
goodwill
|
|
●
|
impairment
of intangible assets (excluding computer software) and
goodwill
|
|
●
|
major
restructuring costs, which include impairments of tangible assets
and computer software, (under specific Board approved programmes
that are structural, of a significant scale and where the costs of
individual or related projects exceed £25 million), including
integration costs following material acquisitions
|
|
●
|
transaction-related
accounting or other adjustments related to significant
acquisitions
|
|
●
|
proceeds
and costs of disposals of associates, products and businesses;
significant legal charges (net of insurance recoveries) and
expenses on the settlement of litigation and government
investigations; other operating income other than royalty
income, and other items
|
|
●
|
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 both Total and Adjusted
results.
As
Adjusted results include the benefits of Major restructuring
programmes but exclude significant costs (such as significant
legal, major restructuring and transaction items) they should not
be regarded as a complete picture of the Group's financial
performance, which is presented in its Total results. The
exclusion of other Adjusting items may result in Adjusted earnings
being materially higher or lower than Total earnings. In
particular, when significant impairments, restructuring charges and
legal costs are excluded, Adjusted earnings will be higher than
Total earnings.
GSK has
undertaken a number of Major restructuring programmes in recent
years in response to significant changes in the Group's trading
environment or overall strategy, or following material
acquisitions, including the Novartis transaction in 2015.
Costs, both cash and non-cash, of these programmes are provided for
as individual elements are approved and meet the accounting
recognition criteria. As a result, charges may be incurred
over a number of years following the initiation of a Major
restructuring programme.
Significant
legal charges and expenses are those arising from the settlement of
litigation or government investigations that are not in the normal
course and materially larger than more regularly occurring
individual matters. They also include certain major legacy
matters.
Reconciliations
between Total and Adjusted results, providing further information
on the key Adjusting items, are set out on pages 14, 15, 30 and
31.
GSK
provides earnings guidance to the investor community on the basis
of Adjusted results. This is in line with peer companies and
expectations of the investor community, supporting easier
comparison of the Group's performance with its peers. GSK is
not able to give guidance for Total results as it cannot reliably
forecast certain material elements of the Total results,
particularly the future fair value movements on contingent
consideration and put options that can and have given rise to
significant adjustments driven by external factors such as currency
and other movements in capital markets.
|
|
ViiV Healthcare
ViiV
Healthcare is a subsidiary of the Group and 100% of its operating
results (turnover, operating profit, profit after tax) are included
within the Group income statement.
Earnings
are allocated to the three shareholders of ViiV Healthcare on the
basis of their respective equity shareholdings (GSK 78.3%, Pfizer
11.7% and Shionogi 10%) and their entitlement to preferential
dividends, which are determined by the performance of certain
products that each shareholder contributed. As the relative
performance of these products changes over time, the proportion of
the overall earnings allocated to each shareholder also changes.
In particular, the increasing sales of
dolutegravir-containing products have a favourable impact on the
proportion of the preferential dividends that is allocated to
GSK. Adjusting items are allocated to shareholders based on
their equity interests. GSK was entitled to approximately 85%
of the Total earnings and 82% of the Adjusted earnings of ViiV
Healthcare for 2018.
As
consideration for the acquisition of Shionogi's interest in the
former Shionogi-ViiV Healthcare joint venture in 2012, Shionogi
received the 10% equity stake in ViiV Healthcare and ViiV
Healthcare also agreed to pay additional future cash consideration
to Shionogi, contingent on the future sales performance of the
products being developed by that joint venture, principally
dolutegravir. Under IFRS 3 'Business combinations', GSK was
required to provide for the estimated fair value of this contingent
consideration at the time of acquisition and is required to update
the liability to the latest estimate of fair value at each
subsequent period end. The liability for the contingent
consideration recognised in the balance sheet at the date of
acquisition was £659 million. Subsequent re-measurements
are reflected within other operating income/expense and within
Adjusting items in the income statement in each period. At 31
December 2018, the liability, which is discounted at 8.5%, stood at
£5,937 million, on a post-tax basis.
Cash
payments to settle the contingent consideration are made to
Shionogi by ViiV Healthcare each quarter, based on the actual sales
performance of the relevant products in the previous quarter.
These payments reduce the balance sheet liability and hence
are not recorded in the income statement. The cash payments
made to Shionogi by ViiV Healthcare in 2018 were £793
million.
Because
the liability is required to be recorded at the fair value of
estimated future payments, there is a significant timing difference
between the charges that are recorded in the Total income statement
to reflect movements in the fair value of the liability and the
actual cash payments made to settle the
liability.
Further
explanation of the acquisition-related arrangements with ViiV
Healthcare are set out on page 64.
|
|
Financial performance - 2018
|
|
Total results
|
|
|
2018
£m
|
|
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
30,821
|
|
30,186
|
|
2
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(10,241)
|
|
(10,342)
|
|
(1)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
20,580
|
|
19,844
|
|
4
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(9,915)
|
|
(9,672)
|
|
3
|
|
5
|
|
Research
and development
|
(3,893)
|
|
(4,476)
|
|
(13)
|
|
(12)
|
|
Royalty income
|
299
|
|
356
|
|
(16)
|
|
(17)
|
|
Other
operating income/(expense)
|
(1,588)
|
|
(1,965)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
5,483
|
|
4,087
|
|
34
|
|
43
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
81
|
|
65
|
|
|
|
|
|
Finance
expense
|
(798)
|
|
(734)
|
|
|
|
|
|
Profit
on disposal of associates
|
3
|
|
94
|
|
|
|
|
|
Share
of after tax profits of associates
and
joint ventures
|
31
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
4,800
|
|
3,525
|
|
36
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(754)
|
|
(1,356)
|
|
|
|
|
|
Tax rate %
|
15.7%
|
|
38.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
4,046
|
|
2,169
|
|
87
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling
interests
|
423
|
|
637
|
|
|
|
|
|
Profit
attributable to shareholders
|
3,623
|
|
1,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,046
|
|
2,169
|
|
87
|
|
100
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
73.7p
|
|
31.4p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Sales performance - 2018
|
|
Group turnover by business
|
2018
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
17,269
|
|
-
|
|
2
|
|
Vaccines
|
5,894
|
|
14
|
|
16
|
|
Consumer
Healthcare
|
7,658
|
|
(1)
|
|
2
|
|
|
|
|
|
|
|
|
Group
turnover
|
30,821
|
|
2
|
|
5
|
|
|
|
|
|
|
|
|
Group
turnover was up 2% AER, 5% CER to £30,821
million.
Pharmaceuticals
sales were flat at 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 1% AER
but grew 1% CER.
Vaccines
sales were up 14% AER, 16% CER, primarily driven by sales
of Shingrix in
the US and growth in influenza and Hepatitis vaccines, which also
benefited from a competitor supply shortage, partly offset by
declines in some Established Vaccines.
Consumer
Healthcare sales declined 1% AER but grew 2% CER with broad-based
growth in Oral health and Wellness partly offset by increased
competitive pressures in Europe, 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
|
2018
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
US
|
11,982
|
|
6
|
|
9
|
|
Europe
|
7,973
|
|
-
|
|
(1)
|
|
International
|
10,866
|
|
(1)
|
|
4
|
|
|
|
|
|
|
|
|
Group
turnover
|
30,821
|
|
2
|
|
5
|
|
|
|
|
|
|
|
|
US
sales grew 6% AER, 9% CER, driven by the growth
of Shingrix and
Hepatitis vaccines as well as strong performances from HIV
and Benlysta, offset
by declines in Established Pharmaceuticals and
Respiratory.
Europe
sales were flat at AER, but declined 1% CER, as declines in
Established Pharmaceuticals, older HIV products, Meningitis
vaccines and Consumer Healthcare more than offset growth
from Tivicay and Triumeqand the new Respiratory
products.
In
International, sales declined 1% AER, but grew 4% CER, reflecting
strong growth in Tivicay, Triumeq and the Respiratory
portfolio. Sales in Emerging Markets declined 2% AER, but
grew 4% CER.
|
|
Pharmaceuticals
|
|
|
2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Respiratory
|
6,928
|
|
(1)
|
|
1
|
|
HIV
|
4,722
|
|
9
|
|
11
|
|
Immuno-inflammation
|
472
|
|
25
|
|
28
|
|
Established
Pharmaceuticals
|
5,147
|
|
(7)
|
|
(4)
|
|
|
|
|
|
|
|
|
|
17,269
|
|
-
|
|
2
|
|
|
|
|
|
|
|
|
US
|
7,453
|
|
(2)
|
|
1
|
|
Europe
|
4,072
|
|
2
|
|
1
|
|
International
|
5,744
|
|
-
|
|
5
|
|
|
|
|
|
|
|
|
|
17,269
|
|
-
|
|
2
|
|
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the year was £17,269 million, flat at AER, but up
2% CER, driven primarily by the growth in HIV sales, which were up
9% AER, 11% CER, to £4,722 million, reflecting share growth
over the year in the dolutegravir portfolio; Triumeq, Tivicay and Juluca. Respiratory sales
declined 1% AER, but grew 1% CER, to £6,928 million, with
growth from the Ellipta portfolio
and Nucala partly
offset by lower sales of Seretide/Advair. Sales of
Established Pharmaceuticals were down 7% AER, 4% CER.
In the
US, sales declined 2% AER but grew 1% at CER, with growth in the
HIV portfolio and Benlysta offsetting declines in
Established Pharmaceuticals and Respiratory. In Europe, sales
grew 2% AER, 1% CER, with growth in the Respiratory portfolio
offsetting the continued impact of generic competition
to Epzicom and Avodart. International was flat at AER but grew 5%
CER, with growth driven by HIV and the new Respiratory
portfolio.
Respiratory
Total
Respiratory sales declined 1% AER, but grew 1% CER, with the US
down 5% AER, 3% CER. In Europe, sales grew 5% AER, 4% CER and
International grew 3% AER, 7% CER. Growth from
the Ellipta portfolio
and Nucala was
partly offset by lower sales of Seretide/Advair.
Sales
of Nucala were
£563 million in the year, up 64% AER, 66% CER, continuing to
benefit from the global rollout of the product. US sales
of Nucala grew
44% AER, 48% CER to £341 million, despite increased
competition, benefiting from continued market
expansion.
Sales
of Ellipta products were up 29% AER,
32% CER, driven by continued growth in all regions. In the
US, sales grew 24% AER, 27% CER, reflecting further market share
gains, partly offset by the impact of continued competitive pricing
pressures, particularly for ICS/LABAs. In Europe, sales grew
42% AER, 41% CER. Sales of Trelegy Ellipta, our new once-daily
closed triple product, contributed £156 million to
total Ellipta sales, benefiting from an
expanded label in the US.
Relvar/Breo Ellipta sales grew 8% AER, 10% CER, to
£1,089 million, primarily driven by growth in Europe, which
was up 25% AER, 24% CER to £253 million, and in International,
which was up 26% AER, 31% CER to £255 million. In the
US, Breo
Ellipta sales declined 3% AER, 1% CER, with volume
growth of 27%, reflecting continued market share growth, offset by
the combined impact of prior period payer rebate adjustments and
increased competitive pricing pressure. Anoro Ellipta sales grew 39% AER,
42% CER to £476 million, driven primarily by share gains in
the US. All Ellipta products, Breo, Anoro, Incruse, Arnuity and Trelegy,
continued to grow market share in the US during the
year.
Sales
of New Respiratory products, comprising Ellipta products
and Nucala, grew 35%
AER, 38% CER to £2,612 million.
Seretide/Advair sales declined 23% AER, 21% CER to
£2,422 million. Sales of Advair in the US declined 32%
AER, 30% CER (9% volume decline and 21% negative impact of
price) primarily reflecting increased competitive pricing
pressures. In Europe, Seretide sales were down 19% AER,
20% CER to £599 million (13% volume decline and a 7% 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, 4% CER,
to £726 million (5% volume decline and 1% positive impact of
price), with declines in markets with generic competition partly
offset by growth from other developing markets.
HIV
HIV
sales increased 9% AER, 11% CER to £4,722 million in the year,
with the US up 8% AER, 10% CER, Europe up 7% AER, 6% CER and
International up 14% AER, 20% CER.
The
growth was driven by the increase in market share over the year in
the dolutegravir products which grew 14% AER, 16% CER. This
was partly offset by the decline in the established portfolio,
particularly the impact of generic competition to Epzicom/Kivexa in
Europe. Triumeq,
Tivicay and Juluca (which was approved in the
US in November 2017), recorded sales of £2,648 million,
£1,639 million and £133 million, respectively, in the
year. Epzicom/Kivexa sales declined 50%
AER, 48% CER to £117 million.
Immuno-inflammation
Sales
in the year were up 25% AER, 28% CER, primarily driven
by Benlysta, which grew 26% AER, 29%
CER to £473 million. In the US, Benlysta grew 24% AER, 27% CER to
£420 million, benefiting from the launch of the sub-cutaneous
formulation in the third quarter.
Established
Pharmaceuticals
Sales
of Established Pharmaceuticals were £5,147 million, down 7%
AER, 4% CER, reflecting efforts to maximise the value from this
portfolio but also the benefit of certain post-divestment contract
manufacturing sales and the first instalment of a
12-month Relenza supply contract in
Europe.
The Avodart franchise
was down 7% AER, 5% CER to £572 million, primarily due to the
loss of exclusivity in Europe, with the US impact now broadly
annualised. Coreg franchise sales declined 63%
AER, 63% CER following a generic Coreg CR entrant to the US market
in Q4 2017. Lamictal sales declined 5% AER, 3%
CER to £617 million.
|
|
Vaccines
|
|
|
2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Meningitis
|
881
|
|
(1)
|
|
2
|
|
Influenza
|
523
|
|
7
|
|
10
|
|
Shingles
|
784
|
|
>100
|
|
>100
|
|
Established
Vaccines
|
3,706
|
|
(1)
|
|
-
|
|
|
|
|
|
|
|
|
|
5,894
|
|
14
|
|
16
|
|
|
|
|
|
|
|
|
US
|
2,701
|
|
45
|
|
48
|
|
Europe
|
1,561
|
|
(2)
|
|
(4)
|
|
International
|
1,632
|
|
(3)
|
|
-
|
|
|
|
|
|
|
|
|
|
5,894
|
|
14
|
|
16
|
|
|
|
|
|
|
|
|
Vaccines turnover grew 14% AER, 16% CER to £5,894 million,
primarily driven by growth in sales of Shingrix, Hepatitis vaccines, which also benefited from a
competitor supply shortage and higher sales of influenza products.
This was partly offset by 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, together with lower Synflorix sales, reflecting lower pricing and demand
in Emerging Markets.
Meningitis
Meningitis sales were down 1% AER but up 2% CER to £881
million. Bexsero sales grew 5% AER, 9% 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 declined 15% AER, 12% CER, primarily
reflecting supply constraints in Europe and International as well
as a strong comparator in 2017 and unfavourable year-on-year CDC
stockpile movements in the US, partly offset by demand and share
gains in the US.
Influenza
Fluarix/FluLaval sales
grew 7% AER, 10% CER to £523 million, driven by strong sales
execution in the US and improved sales in Europe, partly offset by
increased price competition in the US.
Shingles
Shingrix recorded sales of
£784 million, primarily 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
and Shingrix has now achieved a 98% market share.
Established
Vaccines
Sales of DTPa-containing vaccines (Infanrix,
Pediarix and Boostrix) were down 8% AER, 7%
CER. Infanrix,
Pediarix sales were down
8% AER, 7% CER to £680 million, reflecting increased
competitive pressures in Europe as well as unfavourable
year-on-year CDC stockpile movements in the US, partly offset by
stronger demand in International. Boostrix sales declined 8% AER, 7% CER to £517
million, primarily driven by the return to the market of a
competitor in Europe and lower demand in
International.
Hepatitis vaccines grew 17% AER, 19% CER to £808 million,
benefiting from stronger demand in the US and Europe as well as a
competitor supply shortage in the US.
Rotarix sales were down 1%
AER but up 1% CER to £521 million, reflecting higher demand in
Europe, partly offset by lower demand in
International.
Synflorix sales declined
17% AER, 17% CER to £424 million, primarily impacted by lower
pricing and demand in Emerging Markets.
|
|
Consumer Healthcare
|
|
|
2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Wellness
|
3,940
|
|
(2)
|
|
1
|
|
Oral
health
|
2,496
|
|
1
|
|
4
|
|
Nutrition
|
643
|
|
(5)
|
|
1
|
|
Skin
health
|
579
|
|
(4)
|
|
(1)
|
|
|
|
|
|
|
|
|
|
7,658
|
|
(1)
|
|
2
|
|
|
|
|
|
|
|
|
US
|
1,828
|
|
-
|
|
2
|
|
Europe
|
2,340
|
|
(1)
|
|
(2)
|
|
International
|
3,490
|
|
(2)
|
|
4
|
|
|
|
|
|
|
|
|
|
7,658
|
|
(1)
|
|
2
|
|
|
|
|
|
|
|
|
Consumer
Healthcare sales in the year declined 1% AER but grew 2% CER to
£7,658 million, with broad-based growth in Oral health and
Wellness partly offset by a decline in Panadol and lower sales of smaller
brands. International markets performed strongly,
particularly India and Brazil, whilst Europe was impacted by
intensifying competitive pressure in the second half of
2018.
The
aggregate impact from generic competition on Transderm Scop in the US, the
divestment of Horlicks and MaxiNutrition in the UK and other
small non-strategic brands and implementation of the Goods &
Service Tax (GST) in India was to reduce overall sales growth by
approximately one percentage point.
Wellness
Wellness
sales declined 2% AER but grew 1% CER to £3,940 million.
Respiratory sales grew in low single digits, led
by Theraflu supported by a strong
cold and flu season earlier in the year as well as
the TherafluPowerPods launch in the US
in the second half of the year. Otrivin grew in mid single digits,
benefiting from new variants, and Flonase returned to growth
following a weaker allergy season earlier this year.
Pain
relief sales were flat as low single-digit growth
in Voltaren and
double-digit growth in Fenbid were offset by a decline
in Panadol sales
due to a 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 grew 1% AER, 4% CER to £2,496 million, as
increased competitive pressures in Europe were offset by double
digit growth from Sensodyne in a number of
International markets, including India and Turkey, and strong
single-digit growth in the US driven by Sensodyne Rapid. Denture care
grew in high single digits through the launch of Corega Max in Russia and Brazil
and Gum health delivered double-digit growth with continued
strong Parodontax performance in the
US. Growth was also partly impacted by de-stocking in
International.
Nutrition
Nutrition
sales declined 5% AER but grew 1% CER to £643 million.
The Nutrition business in India performed strongly across the
product portfolio including new innovations such
as Horlicks
Protein+ which was launched earlier in the year.
The impact of divestments and India GST implementation on growth
was approximately eight percentage points.
Skin
health
Skin
health sales were down 4% AER, 1% CER to £579 million,
largely driven by a decline in Physiogel and the divestment of
several small non-strategic brands in the US, which had a negative
impact on growth of one percentage point.
|
|
Total results -
2018
|
|
Cost of sales
Cost of
sales as a percentage of turnover was 33.2%, down 1.0 percentage
points at AER and 1.4 percentage points in CER terms compared with
2017. This primarily reflected a favourable comparison with
£363 million of non-cash restructuring costs from the
write-downs of assets in 2017 related to the decision to
withdraw Tanzeum progressively. The
year also benefited from a more favourable product mix in Vaccines
and Consumer Healthcare, particularly the launch
of Shingrix, together
with a further contribution from integration and restructuring
savings. This was partly offset by continued adverse pricing
pressure in Pharmaceuticals, particularly in Respiratory, and in
Established Vaccines, together with increased input costs and an
adverse comparison with the benefit of a settlement for lost third
party supply volume in 2017 in Vaccines.
Selling, general and administration
SG&A
costs as a percentage of turnover were 32.2%, 0.1 percentage points
higher than in 2017 at both AER and CER, reflecting growth of 3%
AER, 5% CER. The increase in SG&A costs primarily
reflected higher restructuring costs, and 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 £3,893 million (12.6% of turnover), 13% AER,
12% CER lower than in 2017. This reflected reduced
restructuring costs primarily due to the comparison with the
provision for obligations as a result of the decision to
withdraw Tanzeum in 2017 and lower
intangible impairments, a favourable comparison with the impact of
the Priority Review Voucher purchased and utilised in H1 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
use of a Priority Review Voucher awarded in 2018.
Royalty income
Royalty
income was £299 million (2017: £356 million), down 16%
AER and 17% CER, the reduction primarily reflecting the patent
expiry of Cialis, partly offset by an increase in the Gardasil
royalty.
Other operating income/(expense)
Other
operating expense of £1,588 million (2017: £1,965
million) primarily reflected £1,846 million (2017: £1,517
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.
The 2017 charges included the impact of US tax reform, which
increased the fair value of these liabilities by £666 million.
This was partly offset by the profit on a number of asset
disposals, including tapinarof, as well as a gain arising from the
increase in value of the shares in Hindustan Unilever Limited to be
received on the disposal of Horlicks and other Consumer
Healthcare brands, net of disposal costs.
The
accounting charges were driven primarily by a £758 million
re-measurement of the contingent consideration liability due to
Shionogi, largely related to the regular updates of exchange rate
assumptions to period end rates and sales forecasts following a
number of studies including the GEMINI study completed in Q2 2018,
together with a £430 million unwind of the discount. In
addition, a net charge of £658 million reflected the
re-measurement of the valuation of the Consumer Healthcare put
option to reflect the price agreed with Novartis to acquire its
shareholding, together with movements in exchange rates largely
offset by gains on hedging contracts.
Operating profit
Total operating profit was £5,483 million in 2018 compared
with £4,087 million in 2017. The increase in operating
profit primarily reflected a favourable comparison with charges of
£666 million in 2017 arising from the impact of US tax reform
on the valuation of the Consumer Healthcare and HIV businesses
and reduced restructuring costs and asset impairments.
In addition, there was a contribution from sales growth, a more
favourable mix, primarily in Vaccines and Consumer Healthcare,
benefits from the prioritisation of R&D expenditure and
comparison with the impact of the Priority Review Voucher utilised
and expensed in 2017, alongside continued tight control of ongoing
costs. This was partly offset by the increased impact of
accounting charges related to the re-measurement of the liabilities
for contingent consideration, put options and preferential
dividends, continuing pricing pressure, particularly in
Respiratory, increased input costs, the comparison with the benefit
in Q2 2017 of a settlement for lost third party supply volume in
Vaccines, investments in new product support, particularly for
launches in Respiratory, HIV and Vaccines 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 2018 amounted to £1,137 million
(2017: £685 million). This included a cash milestone
paid to Novartis of $450 million (£317 million) as well as
cash payments made to Shionogi of £793 million (2017:
£671 million).
Net finance costs
Net finance costs were £717 million compared with £669
million in 2017. This reflected higher debt levels following
the acquisition from Novartis of its stake in the Consumer
Healthcare Joint Venture in June 2018 as well as additional
interest on tax arising from a historic tax settlement, recorded in
Q3 2018, and an adverse comparison with a provision
release of £24 million in Q4 2017, 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 benefit from
older bonds being refinanced at lower interest rates and the
translation impact of exchange rate movements on the reported
Sterling costs of foreign currency denominated interest-bearing
instruments.
Taxation
The charge of £754 million represented an effective tax rate
on Total results of 15.7% (2017: 38.5%) and reflected the different
tax effects of the various Adjusting items. This includes the
effect of a reduced estimate of the 2017 impact of US tax reform of
£125 million, following additional guidance being released by
the IRS and a re-assessment of estimates of uncertain tax positions
following the settlement of a number of open issues with tax
authorities. The reduction from the prior year effective tax
rate on Total profits was driven primarily by a favourable
comparison with the impact of US tax reform, which resulted in a
number of charges in Q4 2017.
Non-controlling interests
The allocation of earnings to non-controlling interests amounted to
£423 million (2017: £637 million). The
reduction was primarily due to the lower allocation of Consumer
Healthcare profits of £117 million (2017: £415 million)
following the buyout of Novartis' interest. This was partly
offset by an increased allocation of ViiV Healthcare profits and
higher net profits in some of the Group's other entities with
non-controlling interests.
Earnings per share
Total earnings per share was 73.7p, compared with 31.4p in
2017. The increase in earnings per share primarily reflected
a favourable comparison with charges in 2017 arising
from the impact of US tax reform, reduced restructuring costs and asset impairments,
increased operating profits, a lower tax rate and
a reduced non-controlling interest allocation of
Consumer Healthcare profits, partly offset by higher
transaction-related charges arising from increases in the valuation
of the liabilities for contingent consideration, put options and
preferential dividends.
|
|
Currency impact on 2018 results
The
results for 2018 are based on average exchange rates, principally
£1/$1.33, £1/€1.13 and £1/Yen 147.
Comparative exchange rates are given on page 59. The
period-end exchange rates were £1/$1.27, £1/€1.11
and £1/Yen 140.
In
2018, turnover increased 2% in AER terms and 5% CER. Total
EPS was 73.7p compared with 31.4p in 2017. The negative
currency impact primarily reflected the strength of Sterling,
particularly against the US Dollar, Yen and Emerging Market
currencies, relative to 2017.
|
|
Adjusting items
The
reconciliations between Total results and Adjusted results for 2018
and 2017 are set out below.
|
|
Year ended 31 December 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
|
30,821
|
|
|
|
|
|
30,821
|
|
Cost of sales
|
(10,241)
|
536
|
69
|
443
|
15
|
-
|
(9,178)
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Gross profit
|
20,580
|
536
|
69
|
443
|
15
|
-
|
21,643
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(9,915)
|
|
2
|
315
|
98
|
38
|
(9,462)
|
|
Research and development
|
(3,893)
|
44
|
45
|
49
|
|
20
|
(3,735)
|
|
Royalty income
|
299
|
|
|
|
|
|
299
|
|
Other operating income/(expense)
|
(1,588)
|
|
|
2
|
1,864
|
(278)
|
-
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Operating profit
|
5,483
|
580
|
116
|
809
|
1,977
|
(220)
|
8,745
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(717)
|
|
|
4
|
(3)
|
18
|
(698)
|
|
Profit on disposal of associates
|
3
|
|
|
|
|
(3)
|
-
|
|
Share of after tax profits of
associates and joint ventures
|
31
|
|
|
|
|
|
31
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit before taxation
|
4,800
|
580
|
116
|
813
|
1,974
|
(205)
|
8,078
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(754)
|
(109)
|
(19)
|
(170)
|
(239)
|
(244)
|
(1,535)
|
|
Tax rate %
|
15.7%
|
|
|
|
|
|
19.0%
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit after taxation
|
4,046
|
471
|
97
|
643
|
1,735
|
(449)
|
6,543
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit
attributable to
non-controlling interests
|
423
|
|
|
|
251
|
|
674
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
3,623
|
471
|
97
|
643
|
1,484
|
(449)
|
5,869
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
73.7p
|
9.6p
|
2.0p
|
13.1p
|
30.2p
|
(9.2)p
|
119.4p
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,914
|
|
|
|
|
|
4,914
|
|
|
------------
|
|
|
|
|
|
------------
|
|
Year ended 31 December 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
|
US tax
reform
£m
|
Adjusted
results
£m
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Turnover
|
30,186
|
|
|
|
|
|
|
30,186
|
|
Cost of sales
|
(10,342)
|
546
|
400
|
545
|
80
|
-
|
|
(8,771)
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Gross profit
|
19,844
|
546
|
400
|
545
|
80
|
-
|
|
21,415
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administration
|
(9,672)
|
|
|
248
|
|
83
|
|
(9,341)
|
|
Research and
development
|
(4,476)
|
45
|
288
|
263
|
|
18
|
|
(3,862)
|
|
Royalty income
|
356
|
|
|
|
|
|
|
356
|
|
Other operating income/
(expense)
|
(1,965)
|
|
|
|
1,519
|
(220)
|
666
|
-
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Operating profit
|
4,087
|
591
|
688
|
1,056
|
1,599
|
(119)
|
666
|
8,568
|
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(669)
|
|
|
4
|
|
8
|
|
(657)
|
|
Profit on disposal of
associates
|
94
|
|
|
|
|
(94)
|
|
-
|
|
Share of after tax profits
of associates and joint
ventures
|
13
|
|
|
|
|
|
|
13
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit before taxation
|
3,525
|
591
|
688
|
1,060
|
1,599
|
(205)
|
666
|
7,924
|
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(1,356)
|
(134)
|
(176)
|
(209)
|
(619)
|
(251)
|
1,078
|
(1,667)
|
|
Tax rate %
|
38.5%
|
|
|
|
|
|
|
21.0%
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit after taxation
|
2,169
|
457
|
512
|
851
|
980
|
(456)
|
1,744
|
6,257
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit
attributable to
non-controlling interests
|
637
|
|
|
|
42
|
|
114
|
793
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
1,532
|
457
|
512
|
851
|
938
|
(456)
|
1,630
|
5,464
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
31.4p
|
9.4p
|
10.5p
|
17.4p
|
19.2p
|
(9.4)p
|
33.3p
|
111.8p
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares
(millions)
|
4,886
|
|
|
|
|
|
|
4,886
|
|
|
------------
|
|
|
|
|
|
|
------------
|
|
Intangible asset amortisation and impairment
Intangible
asset amortisation was £580 million compared with £591
million in 2017. Intangible asset impairments related to
commercial and Pharmaceuticals R&D development assets were
£116 million (2017: £688 million). The 2017 charge
included impairments related to the withdrawal of Tanzeum and a number of other
commercial and Pharmaceuticals R&D development assets.
These charges were non-cash items.
|
|
Major restructuring and integration
Within the Pharmaceuticals sector, the highly regulated
manufacturing operations and supply chains and long lifecycle of
the business mean that restructuring programmes, particularly those
that involve the rationalisation or closure of manufacturing or
R&D sites, are likely to take several years to
complete.
Major restructuring costs are those related to specific Board approved Major
restructuring programmes. Major restructuring programmes,
including integration costs following material acquisitions, are
those that are structural and are of a significant scale where the
costs of individual or related projects exceed £25
million. Other ordinary course smaller scale restructuring
costs are retained within Total and Adjusted results.
The
Board approved a new Major restructuring programme in July 2018,
which is designed to significantly improve the competitiveness and
efficiency of the Group's cost base with savings delivered
primarily through supply chain optimisation and reductions in administrative
costs.
|
|
Total
Major restructuring charges incurred in 2018 were £809 million
(2017: £1,056 million), analysed as follows:
|
|
|
2018
|
|
2017
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
restructuring and
integration programme
|
330
|
|
110
|
|
440
|
|
531
|
|
525
|
|
1,056
|
|
2018
major restructuring
programme
|
279
|
|
90
|
|
369
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
609
|
|
200
|
|
809
|
|
531
|
|
525
|
|
1,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges arising under the existing Combined restructuring and
integration programme primarily related to the write-down of assets
as part of the announced plans to reduce the manufacturing
network. Cash charges arose from restructuring in the Europe
and International Pharmaceuticals commercial operations and some
manufacturing sites. Non-cash charges under the 2018 major
restructuring programme primarily related to announced plans to
restructure the manufacturing network and cash charges to date
under the 2018 major restructuring programme primarily related to
restructuring in the US Pharmaceuticals commercial operation, as
well as some manufacturing sites and central
functions.
Total
cash payments for the two programmes made in the year were
£537 million (2017: £555 million).
The
analysis of major restructuring charges by business was as
follows:
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Pharmaceuticals
|
563
|
|
682
|
|
Vaccines
|
104
|
|
177
|
|
Consumer
Healthcare
|
72
|
|
137
|
|
|
|
|
|
|
|
739
|
|
996
|
|
Corporate
& central functions
|
70
|
|
60
|
|
|
|
|
|
|
Total
Major restructuring costs
|
809
|
|
1,056
|
|
|
|
|
|
|
The
analysis of Major restructuring charges by Income statement line
was as follows:
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Cost of
sales
|
443
|
|
545
|
|
Selling,
general and administration
|
315
|
|
248
|
|
Research
and development
|
49
|
|
263
|
|
Other
operating income/(expense)
|
2
|
|
-
|
|
|
|
|
|
|
Total
Major restructuring costs
|
809
|
|
1,056
|
|
|
|
|
|
|
The
Combined restructuring and integration programme delivered
incremental annual cost savings in the year of £0.3
billion. Given its relatively recent launch, the benefit
delivery this year from the 2018 major restructuring programme was
not material.
|
|
The
analysis of incremental annual cost savings in the year by Income
statement line was as follows:
|
|
|
2018
£bn
|
|
2017
£bn
|
|
|
|
|
|
|
Cost of
sales
|
0.2
|
|
0.2
|
|
Selling,
general and administration
|
0.1
|
|
0.4
|
|
Research
and development
|
-
|
|
0.1
|
|
|
|
|
|
|
Total
Major restructuring savings
|
0.3
|
|
0.7
|
|
|
|
|
|
|
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 an estimated currency benefit of £0.3
billion. The programme is now expected to deliver by 2020
total annual savings of £4.4 billion on a constant currency
basis, including an estimated benefit of £0.4 billion from
currency on the basis of 2018 average exchange rates.
The 2018 major restructuring 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
to help fund targeted increases in R&D and commercial support
of new products.
|
|
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £1,977 million (2017:
£1,599 million). This primarily reflected £1,846
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)
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
658
|
|
986
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare
Joint Venture (including Shionogi preferential
dividends)
|
1,188
|
|
556
|
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(58)
|
|
(126)
|
|
Contingent
consideration on former Novartis Vaccines business
|
58
|
|
101
|
|
Other
adjustments
|
131
|
|
82
|
|
|
|
|
|
|
Total
transaction-related charges
|
1,977
|
|
1,599
|
|
|
|
|
|
|
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 valuation of $13
billion (£9.2 billion on signing), together with an increase
due to movements in exchange rates, which was largely offset by
gains on hedging contracts.
The
£1,188 million charge relating to the contingent consideration
for the former Shionogi-ViiV Healthcare Joint Venture represented a
£758 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 £430 million
unwind of the discount.
Other
adjustments included a £51 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, as well as acquisition costs
relating to the acquisition of Tesaro completed in January 2019 and
the announced agreement with Pfizer to combine our consumer
healthcare businesses.
Contingent
consideration cash payments which are made to Shionogi and other
companies reduce the balance sheet liability and hence are not
recorded in the income statement. Total contingent
consideration cash payments in the year amounted to £1,137
million (2017: £685 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 £793 million (2017:
£671 million).
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 64.
Divestments, significant legal charges and other items
Divestments
and other items included the profit on a number of asset disposals,
including tapinarof, a gain arising from the increase in value of
the shares in Hindustan Unilever Limited to be received on the
disposal of Horlicks and other Consumer
Healthcare brands, which is expected to complete by the end of
2019, net of disposal costs, as well as equity investment
impairments and certain other adjusting items. A charge of
£33 million (2017: £68 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 £39 million (2017: £192
million).
|
|
Adjusted results
The
reconciliations between Total results and Adjusted results for 2018
and 2017 are set out on pages 14 and 15.
|
|
|
2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
30,821
|
|
100
|
|
2
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(9,178)
|
|
(29.8)
|
|
5
|
|
6
|
|
Selling,
general and administration
|
(9,462)
|
|
(30.7)
|
|
1
|
|
4
|
|
Research
and development
|
(3,735)
|
|
(12.1)
|
|
(3)
|
|
(2)
|
|
Royalty
income
|
299
|
|
1.0
|
|
(16)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
8,745
|
|
28.4
|
|
2
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
8,078
|
|
|
|
2
|
|
6
|
|
Adjusted
profit after tax
|
6,543
|
|
|
|
5
|
|
9
|
|
Adjusted
profit attributable to shareholders
|
5,869
|
|
|
|
7
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
119.4p
|
|
|
|
7
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Operating profit by business
|
2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,420
|
|
48.8
|
|
(3)
|
|
-
|
|
Pharmaceuticals
R&D*
|
(2,676)
|
|
|
|
(2)
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
5,744
|
|
33.3
|
|
(3)
|
|
-
|
|
Vaccines
|
1,943
|
|
33.0
|
|
18
|
|
25
|
|
Consumer
Healthcare
|
1,517
|
|
19.8
|
|
10
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
9,204
|
|
29.9
|
|
3
|
|
7
|
|
Corporate
& other unallocated costs
|
(459)
|
|
|
|
22
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
8,745
|
|
28.4
|
|
2
|
|
6
|
|
|
|
|
|
|
|
|
|
|
*
|
Operating
profit of Pharmaceuticals R&D segment, which is the
responsibility of the President, Pharmaceuticals R&D. It
excludes ViiV Healthcare R&D expenditure, which is reported
within the Pharmaceuticals segment. A more detailed breakdown
of R&D expenses is set out on page 40.
|
|
Operating profit
Adjusted
operating profit was £8,745 million, 2% higher at AER compared
with 2017 and 6% higher at CER on a turnover increase of 5%.
The Adjusted operating margin of 28.4% was flat at AER compared
with 2017 but 0.5 percentage points higher on a CER basis.
This reflected the benefit from sales growth at CER in all three
businesses, a more favourable mix, primarily in Vaccines and
Consumer Healthcare, 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 pricing pressure, particularly
in Respiratory, increased input costs, the comparison with the
benefit in Q2 2017 of a settlement for lost third party supply
volume in Vaccines, investments in promotional product support,
particularly for new launches in Respiratory, HIV and Vaccines and
a reduction in royalty income.
Cost of sales
Cost of
sales as a percentage of turnover was 29.8%, up 0.7 percentage
points at AER, and 0.4 percentage points in CER terms compared with
2017. This primarily reflected continued adverse pricing
pressure in Pharmaceuticals, particularly in Respiratory, and
Established Vaccines, as well as increased input costs and an
adverse comparison with the benefit of a settlement for lost third
party supply volume in 2017 in Vaccines. This was partly
offset by a more favourable product mix in Vaccines and Consumer
Healthcare, particularly with the launch of Shingrix, as well as a further
contribution from integration and restructuring savings in all
three businesses.
Selling, general and administration
SG&A
costs as a percentage of turnover were 30.7%, 0.2 percentage points
lower at AER than in 2017 and 0.3 percentage points lower on a CER
basis. This reflected an increase of 1% AER, 4% CER,
primarily resulting from 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 £3,735 million (12.1% of turnover), 3% AER, 2%
CER lower than 2017, primarily reflecting the favourable comparison
with the impact of the Priority Review Voucher purchased and
utilised in 2017 and 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 the costs payable to a third party relating to the
use of a Priority Review Voucher awarded and utilised in
2018.
Royalty income
Royalty
income was £299 million (2017: £356 million), the
reduction primarily reflecting the patent expiry of Cialis, partly
offset by an increase in the Gardasil royalty.
Operating profit by business
Pharmaceuticals
operating profit was £5,744 million, down 3% AER but flat at
CER on a turnover increase of 2% CER. The operating margin of
33.3% was 1.0 percentage points lower at AER than in 2017 and 0.9
percentage points lower on a CER basis. This primarily
reflected the continued impact of lower prices, particularly in
Respiratory, and the broader transition of the Respiratory
portfolio, increased investment in new product support and a
reduction in royalty income. This was partly offset by the
benefits of prioritisation within R&D and a favourable
comparison with the impact of the Priority Review Voucher purchased
in 2017.
Vaccines
operating profit was £1,943million, 18% AER, 25% CER higher
than in 2017 on a turnover increase of 16% CER. The operating
margin of 33.0% was 1.1 percentage points higher at AER than in
2017 and 2.5 percentage points higher on a CER basis. This
was primarily driven by enhanced operating leverage from strong
sales growth, an improved product mix, including the impact of 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 investments to
support new launches and business growth.
Consumer
Healthcare operating profit was £1,517 million, up 10% AER,
15% CER on a turnover increase of 2% CER. The operating
margin of 19.8% was 2.1 percentage points higher than in 2017 and
2.2 percentage points higher on a CER basis. This primarily
reflected improved product mix and manufacturing restructuring and
integration benefits, as well as continued tight control of
promotional and other operating expenses.
Net finance costs
Net finance costs were £698 million compared with £657
million in 2017. The increase reflected higher debt levels
following the acquisition from Novartis of its stake in the
Consumer Healthcare Joint Venture in June 2018 as well as a
£23 million increase in interest on tax arising from
settlement of a historic tax matter in Q3 2018 and an adverse
comparison with a provision release of £23 million in Q4
2017. This was 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 benefit from older bonds and the
facilities utilised to fund the acquisition of Novartis' stake in
the Consumer Healthcare JV being refinanced at lower interest
rates and fair value
gains on hedging instruments.
Taxation
Tax on
Adjusted profit amounted to £1,535 million and represented an
effective Adjusted tax rate of 19.0% (2017: 21.0%). The
reduction in the effective Adjusted tax rate in 2018 is primarily
driven by the reduction in the US federal tax rate. See
'Taxation' on page 58 for further details.
Non-controlling interests
The
allocation of Adjusted earnings to non-controlling interests
amounted to £674 million (2017: £793 million). The
reduction was primarily due to the lower allocation of Consumer
Healthcare profits of £118 million (2017: £344 million)
following the buyout of Novartis' interest. This was partly
offset by an increased allocation of ViiV Healthcare profits of
£501 million (2017: £414 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 due to higher net profits in some of
the Group's other entities with non-controlling
interests.
Earnings per share
Adjusted
EPS of 119.4p was up 7% AER, 12% CER, compared with a 6% CER
increase in Adjusted operating profit, primarily as a result of a
reduced non-controlling interest allocation of Consumer Healthcare
profits and a lower Adjusted tax rate.
|
|
Currency impact on 2018 results
The
results for 2018 are based on average exchange rates, principally
£1/$1.33, £1/€1.13 and £1/Yen147.
Comparative exchange rates are given on page 59. The
period-end exchange rates were £1/$1.27, £1/€1.11
and £1/Yen140.
In
2018, turnover increased 2% in AER terms and 5% CER. Adjusted
EPS was 119.4p compared with 111.8p in 2017, up 7% 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 five
percentage points on Adjusted EPS.
|
|
Financial performance - Q4 2018
|
|
Total results
|
|
The
Total results for the Group are set out below.
|
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
8,197
|
|
7,639
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,904)
|
|
(2,558)
|
|
14
|
|
13
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,293
|
|
5,081
|
|
4
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,620)
|
|
(2,533)
|
|
3
|
|
1
|
|
Research
and development
|
(1,076)
|
|
(1,209)
|
|
(11)
|
|
(14)
|
|
Royalty income
|
79
|
|
69
|
|
14
|
|
6
|
|
Other
operating income/(expense)
|
(122)
|
|
(896)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
1,554
|
|
512
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
24
|
|
16
|
|
|
|
|
|
Finance
expense
|
(209)
|
|
(154)
|
|
|
|
|
|
Profit
on disposal of associates
|
-
|
|
66
|
|
|
|
|
|
Share
of after tax profits of associates
and
joint ventures
|
5
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
1,374
|
|
442
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(74)
|
|
(805)
|
|
|
|
|
|
Tax rate %
|
5.4%
|
|
>100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) after taxation
|
1,300
|
|
(363)
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling
interests
|
85
|
|
183
|
|
|
|
|
|
Profit/(loss)
attributable to shareholders
|
1,215
|
|
(546)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,300
|
|
(363)
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) per share
|
24.7p
|
|
(11.2)p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Sales performance - Q4 2018
|
|
Group turnover by business
|
Q4 2018
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,810
|
|
6
|
|
4
|
|
Vaccines
|
1,479
|
|
22
|
|
18
|
|
Consumer
Healthcare
|
1,908
|
|
1
|
|
1
|
|
|
|
|
|
|
|
|
Group
turnover
|
8,197
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
Group
turnover was up 7% AER, 5% CER to £8,197 million, with growth
delivered by all three businesses.
Pharmaceuticals
sales grew 6% AER, 4% CER, with growth in all therapy areas.
HIV sales were up 10% AER, 6% CER to £1,276 million,
reflecting strong performances by Tivicay and Juluca. Respiratory sales were up
5% AER, 2% CER to £1,991 million, with growth from
the Ellipta portfolio
and Nucala.
Vaccines
sales were up 22% AER, 18% CER, driven primarily by growth in sales
of Shingrix in
the US and influenza products, partly offset by declines in
Meningitis and Established Vaccines.
Consumer
Healthcare sales grew 1% AER, 1% CER reflecting growth in Oral
health and Wellness, partly offset by increased competitive
pressures in Europe and by a decline in Nutrition and Skin health,
primarily following the divestments of some smaller brands,
including Horlicks and MaxiNutrition in the
UK.
|
|
Group turnover by geographic region
|
Q4 2018
|
||||
|
|
|
|
|
||
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
US
|
3,274
|
|
15
|
|
8
|
|
Europe
|
2,030
|
|
2
|
|
1
|
|
International
|
2,893
|
|
3
|
|
6
|
|
|
|
|
|
|
|
|
Group
turnover
|
8,197
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
US
sales grew 15% AER, 8% CER driven by strong performances
from Shingrix, HIV
products, Benlysta and new Respiratory
products.
Europe
sales grew 2% AER, 1% CER as growth from HIV and the new
Respiratory products was partly offset by a decline in Consumer
Healthcare sales and a decrease in Bexsero sales, largely due to the
completion of the vaccination of catch-up cohorts in certain
markets that benefited Q4 2017.
In
International, sales grew 3% AER, 6% CER reflecting strong growth
in the new Respiratory products as well as HIV and Established
Pharmaceutical sales. Sales in Emerging Markets grew 1% AER,
5% CER, driven by strong growth of Horlicks in
India, Panadol in
Latin America and respiratory products.
|
|
Pharmaceuticals
|
|
|
Q4 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Respiratory
|
1,991
|
|
5
|
|
2
|
|
HIV
|
1,276
|
|
10
|
|
6
|
|
Immuno-inflammation
|
136
|
|
40
|
|
34
|
|
Established
Pharmaceuticals
|
1,407
|
|
1
|
|
1
|
|
|
|
|
|
|
|
|
|
4,810
|
|
6
|
|
4
|
|
|
|
|
|
|
|
|
US
|
2,119
|
|
4
|
|
(1)
|
|
Europe
|
1,110
|
|
7
|
|
6
|
|
International
|
1,581
|
|
7
|
|
9
|
|
|
|
|
|
|
|
|
|
4,810
|
|
6
|
|
4
|
|
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the quarter was £4,810 million, up 6% AER, 4% CER,
with growth in all therapy areas. HIV sales were up 10% AER,
6% CER, to £1,276 million, reflecting continued growth of the
dolutegravir portfolio, particularly Tivicay and Juluca. Respiratory sales were up
5% AER, 2% CER, to £1,991 million, with growth from
the Ellipta portfolio
and Nucala more
than offsetting lower sales of Seretide/Advair. Sales of
Established Pharmaceuticals grew 1% AER, 1% CER to £1,407
million.
In the
US, sales grew 4% AER, but declined 1% CER, with growth in
HIV, Benlysta and
new Respiratory products more than offset by declines
in Advair and
Established Products. In Europe, sales grew 7% AER, 6% CER,
with strong growth in the Respiratory and HIV portfolios, as well
as the benefit of the first instalment of a
12-month Relenza supply
contract. International grew 7%
AER, 9% CER, with growth in HIV, Respiratory and
Established Pharmaceuticals.
Respiratory
Total
Respiratory sales were up 5% AER, 2% CER. Growth from
the Ellipta portfolio
and Nucala more
than offset lower sales of Seretide/Advair which declined 18%
AER, 20% CER globally. The US was up 2% AER but down 3% CER
as the decline in Advair sales exceeded the growth
in the new Respiratory products in the quarter. In Europe,
sales grew 9% AER, 7% CER and International grew 9% AER, 10% CER,
including Japan, up 7% AER, 5% CER.
Sales
of Nucala were
£173 million in the quarter and grew 43% AER, 38% CER,
continuing to benefit from the global rollout of the product.
US sales of Nucala grew 29% AER, 23% CER to
£107 million.
Sales
of Ellipta products were up 36% AER,
33% CER to £654 million driven by continued growth in all
regions. In the US, sales grew 33% AER, 28% CER, reflecting
further market share gains, partly offset by the impact of
continued competitive pricing pressures, particularly for
ICS/LABAs. In Europe, sales grew 52% AER, 51% CER.
Sales of Trelegy
Ellipta, our new once-daily closed triple product, were
£77 million in the quarter, continuing to benefit from an
expanded label in the US.
Relvar/Breo Ellipta sales grew 13% AER, 9% CER, to
£333 million, with growth in Europe, which was up 31% AER, 28%
CER to £71 million and in International, which was up 25% AER,
26% CER to £76 million. In the US, Relvar/Breo was up 3% AER, but
down 2% CER to £186 million, with volume growth of 16%
reflecting continued market share growth, offset by the impact of
competitive pricing pressures in the ICS/LABA
market. Anoro
Ellipta sales grew 32% AER, 28% CER to £144
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 38%
AER, 34% CER to £827 million.
Seretide/Advair sales declined 18% AER, 20% CER to
£647 million. Sales of Advair in the US declined 27%
AER, 31% CER (15% volume decline and 16% negative impact of
price) primarily reflecting increased competitive pricing
pressures. In Europe, Seretide sales were down 18% AER,
20% CER to £150 million (17% volume decline and a
3% 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 up 1% AER, 2% CER,
to £198 million (2% volume decline and 4% positive impact of
price), with decline in markets with generic competition offset by
growth from other developing markets.
HIV
HIV
sales increased 10% AER, 6% CER to £1,276 million in the
quarter, with the US up 10% AER, 3% CER, Europe up 9% AER, 7% CER
and International up 15% AER, 18% CER. US growth in the quarter was
adversely impacted by year end stocking patterns compared to
2017.
The
growth was driven by the dolutegravir portfolio which grew 14% AER,
9% CER. Triumeq
,Tivicay and Juluca sales were £691
million, £452 million and £62 million, respectively, in
the quarter. The growth was partly offset by the decline in
the established portfolio and, in particular, Epzicom/Kivexa, which declined 29% AER,
31% CER to £30 million, reflecting ongoing generic
competition.
Immuno-inflammation
Sales
in the quarter were up 40% AER, 34% CER, primarily driven
by Benlysta which
grew 42% AER, 34% CER to £138 million. In the
US, Benlysta grew
39% AER, 31% CER to £121 million, benefiting from the launch
of the sub-cutaneous formulation in the third quarter of
2017.
Established
Pharmaceuticals
Sales
of Established Pharmaceuticals in the quarter were £1,407
million, up 1% AER, 1% CER, reflecting efforts to maximise the
value from this portfolio but also the benefit of certain
post-divestment contract manufacturing sales and the first
instalment of a 12-month Relenza supply contract in
Europe.
The Avodart franchise
was flat at AER but declined 1% CER to £149 million, primarily
due to the loss of exclusivity in Europe, with the US impact now
broadly annualised. Coreg franchise sales declined 39%
AER, 43% CER following a generic Coreg CR entrant to the US market
in Q4 2017. Lamictal sales declined 5% AER, 8%
CER to £159 million.
|
|
Vaccines
|
|
|
Q4 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Meningitis
|
188
|
|
(6)
|
|
(9)
|
|
Influenza
|
193
|
|
74
|
|
69
|
|
Shingles
|
221
|
|
>100
|
|
>100
|
|
Established
Vaccines
|
877
|
|
-
|
|
(3)
|
|
|
|
|
|
|
|
|
|
1,479
|
|
22
|
|
18
|
|
|
|
|
|
|
|
|
US
|
666
|
|
78
|
|
65
|
|
Europe
|
377
|
|
(2)
|
|
(4)
|
|
International
|
436
|
|
(3)
|
|
(2)
|
|
|
|
|
|
|
|
|
|
1,479
|
|
22
|
|
18
|
|
|
|
|
|
|
|
|
Vaccines turnover grew 22% AER, 18% CER to £1,479 million,
primarily driven by growth in Shingrix, and strong performances by influenza
products. Meningitis vaccines declined 6% AER, 9% CER driven
primarily by an adverse comparison with prior year CDC stockpile
movements on Menveo in the US. Established Vaccines were
flat at AER but declined 3% CER, reflecting increased competition
to Cervarix and supply phasing in China, competitive
pressures particularly in the EU on DTPa-containing vaccines
(Infanrix, Pediarixand Boostrix), partly offset by higher sales of Hepatitis
vaccines.
Meningitis
Meningitis sales declined 6% AER, 9% CER to £188 million.
Bexsero sales declined 1% AER, 3% CER largely due to
the completion of vaccination of catch-up cohorts in certain
markets in Europe which benefited 2017, partly offset by demand and
share gains in the US. Menveo sales were down 32% AER, 37% CER, primarily
reflecting the comparison with strong growth in Q4 2017, which
included favourable CDC stockpile movements in the
US.
Influenza
Fluarix/FluLaval sales
were up 74% AER, 69% CER to £193 million, primarily reflecting
strong sales execution in the US and improved sales in
Europe.
Shingles
Shingrix recorded sales of
£221 million in the quarter, primarily in the US and Canada.
US sales of Shingrixbenefited from market growth in new patient
populations now covered by immunisation
recommendations.
Established
Vaccines
Sales of DTPa-containing vaccines (Infanrix,
Pediarix and Boostrix) were up 4% AER but flat at
CER. Infanrix,
Pediarix sales were up 5%
AER, 1% CER to £165 million, reflecting the benefit of US
channel stocking movements, partly offset by increased competitive
pressures, particularly in Europe. Boostrix sales were up 4% AER but down 1% CER to
£139 million, primarily driven by the return to the market of
a competitor in Europe, partly offset by stronger demand in the
US.
Hepatitis vaccines grew 18% AER, 14% CER to £190 million,
driven by stronger demand and competitor supply shortage in the US
and Europe, favourable year-on-year CDC stockpile movements in the
US, partly offset by supply constraints in
International.
Rotarix sales increased 6%
AER, 4% CER to £134 million, mainly driven by favourable
phasing of tenders in Emerging Markets, partly offset by lower CDC
purchases in the US.
Synflorix sales were down
5% AER, 6% CER to £106 million, mainly due to lower tender
volumes in Europe, and unfavourable year-on-year phasing in
International.
Cervarix sales declined
76% AER, 81% CER to £15 million, primarily reflecting
increased competition and year-on-year supply phasing in
China.
|
|
Consumer Healthcare
|
|
|
Q4 2018
|
||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Wellness
|
1,005
|
|
1
|
|
1
|
|
Oral
health
|
623
|
|
3
|
|
3
|
|
Nutrition
|
154
|
|
(6)
|
|
(2)
|
|
Skin
health
|
126
|
|
(6)
|
|
(5)
|
|
|
|
|
|
|
|
|
|
1,908
|
|
1
|
|
1
|
|
|
|
|
|
|
|
|
US
|
489
|
|
11
|
|
4
|
|
Europe
|
543
|
|
(5)
|
|
(6)
|
|
International
|
876
|
|
-
|
|
3
|
|
|
|
|
|
|
|
|
|
1,908
|
|
1
|
|
1
|
|
|
|
|
|
|
|
|
Consumer
Healthcare sales grew 1% AER, 1% CER in the quarter to £1,908
million as growth in Oral health and Wellness was partly offset by
declines in Nutrition and Skin health, primarily following the
disposal of a number of products. Growth in the US and
International markets was partly offset by a decline in
Europe. The decline in Europe was mainly driven by a slowdown
in consumption and increased competitive pressures.
The
negative impact of the divestments of Horlicks and MaxiNutrition in the UK and other
smaller brands earlier in the year was offset by growth
in Transderm
Scop in the US, which benefited from supply shortages
faced by the generic competition.
Wellness
Wellness
sales grew 1% AER, 1% CER to £1,005 million. Respiratory
sales grew in mid-single digits, mainly driven by Flonase consumption
and Theraflu, which
was supported by the US launch of Theraflu PowerPods. Growth was partly
offset by a decline in Pain relief, mainly the result of lower
volumes shipped for Voltaren to rebalance the
distribution channel, while Excedrin was impacted by a strong
comparative performance in Q4 2017. Panadol grew in double digits in
Latin America but this was offset by 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 grew 3% AER, 3% CER to £623 million, mainly
driven by Denture care and Sensodyne. Denture care grew high
single-digit, mainly in International markets,
while Parodontax delivered broad-based
double digit growth. Strong momentum on Sensodyne in the quarter in the US
and India was largely offset as we made executional adjustments to
our marketing campaigns in Europe in response to intensified
competitor promotional activity in the category and completed the
last of the de-stocking in International markets. Oral Health
growth was also tempered by a decline in non-strategic
brands.
Nutrition
Nutrition
sales declined 6% AER, 2% CER to £154 million.
The Horlicks and MaxiNutrition divestments in the
UK impacted growth by three percentage points. The Nutrition
business in India continued to grow in mid single digits, partly
offset by a weaker performance in the Middle East.
Skin
health
Skin
health declined 6% AER, 5% CER to £126 million due to a
weak quarter for Physiogel and divestments of small
non-strategic brands in the US, which had a negative impact on
growth of three percentage points.
|
|
Total results - Q4 2018
|
|
Cost of sales
Cost of
sales as a percentage of turnover was 35.4%, 1.9 percentage points
higher at AER and 2.6 percentage points higher in CER terms
compared with Q4 2017. This primarily reflected an increase
in the costs of manufacturing restructuring programmes and a higher
proportion of tenders and post-divestment contract manufacturing
business in the quarter, together with continued adverse pricing
pressure in Pharmaceuticals, particularly in Respiratory, and
Established Vaccines and an unfavourable product mix in
Pharmaceuticals, primarily as a result of the growth in some lower
margin Established products and increased input costs. This
was partly offset by a more favourable product mix in Vaccines and
Consumer Healthcare, particularly the impact of higher Vaccines
sales, and a further contribution from integration and
restructuring savings in all three businesses.
Selling, general and administration
SG&A
costs as a percentage of turnover were 32.0%, 1.2 percentage points
lower compared with Q4 2017 at AER and 1.2 percentage points lower
on a CER basis. The growth in SG&A costs of 3% AER, 1%
CER reflected increased investment in promotional product support,
particularly for new launches in Vaccines, Respiratory and HIV and
targeted priority markets, and a charge arising from the
equalisation of UK Guaranteed Minimum Pensions, as well as
acquisition costs for Tesaro and the announced agreement with
Pfizer to combine our consumer healthcare businesses. This
was partly offset by the tight control of ongoing costs,
particularly in non-promotional spending across all three
businesses, and reduced restructuring costs.
Research and development
R&D
expenditure was £1,076 million (13.1% of turnover), down 11%
AER, 14% CER, primarily reflecting lower intangible asset
impairments and the benefits of the re-prioritisation of the
R&D portfolio as well as the phasing of investment in
late-stage programmes, particularly in HIV. This was partly
offset by increased investment in the progression of a number of
mid and late-stage programmes, particularly in
Oncology.
Royalty income
Royalty
income was £79 million (Q4 2017: £69 million), up 14%
AER, 6% CER, primarily reflecting increased royalties on sales of
Gardasil.
Other operating income/(expense)
Net
other operating expense of £122 million (Q4 2017: £896
million) reflected £229 million (Q4 2017: £884 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 £261 million for the
contingent consideration liability due to Shionogi, primarily
arising from changes in exchange rate assumptions and the unwind of
the discount. The 2017 charges included the impact of US tax
reform, which increased the fair value of these liabilities by
£666 million. This was partly offset by the profit on a
number of asset disposals and a gain arising from the increase in
value of the shares in Hindustan Unilever Limited to be received on
the disposal of Horlicks and other Consumer
Healthcare brands, net of disposal costs.
Operating profit
Total
operating profit was £1,554 million in Q4 2018 compared with
an operating profit of £512 million in Q4 2017. The
increase in operating profit reflected lower net other operating
expenses compared with the charges of £666 million in Q4 2017
arising from the impact of US tax reform on the valuation of the
Consumer Healthcare and HIV businesses, as well as the benefit from
sales growth in all three businesses, a more favourable mix in
Vaccines and Consumer Healthcare, continued tight control of
ongoing costs across all three businesses, reduced intangible asset
impairments, profit on a number of asset disposals and a gain
arising from the increase in value of the shares in Hindustan
Unilever Limited to be received on the disposal
of Horlicks and
other Consumer Healthcare brands, net of disposal costs. This
was partly offset by increased restructuring costs compared with Q4
2017, continuing price pressure, particularly in Respiratory,
increased input costs, an unfavourable product mix in
Pharmaceuticals, primarily as a result of a higher proportion of
lower margin tenders and post-divestment contract manufacturing and
investments in promotional product support, particularly for new
launches in Vaccines, Respiratory and HIV.
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 £222
million (Q4 2017: £193 million). This included cash
payments made to Shionogi of £209 million (Q4 2017: £186
million).
Net finance costs
Net
finance costs were £185 million compared with £138
million in Q4 2017. The increase primarily reflected higher
debt levels following the acquisition from Novartis of its stake in
the Consumer Healthcare Joint Venture in June 2018 as well as an
adverse comparison to a provision release for interest on tax of
£24 million in Q4 2017.
Taxation
The
charge of £74 million represented an effective tax rate on
Total results of 5.4% (Q4 2017: >100%) and reflected the
different tax effects of the various Adjusting items. This
includes the effect of a reduced estimate of the 2017 impact of US
tax reform of £101 million, following additional guidance
being released by the IRS and a re-assessment in the quarter of
estimates of uncertain tax positions following the settlement of a
number of open issues with tax authorities. The reduction
from the Q4 2017 effective tax rate (>100%) was driven primarily
by a favourable comparison with the impact of US tax reform, which
resulted in a number of charges in Q4 2017.
Non-controlling interests
The
allocation of earnings to non-controlling interests amounted to
£85 million (Q4 2017: £183 million). The reduction
was primarily due to the ending of the allocation of Consumer
Healthcare profits (Q4 2017: £218 million) following the
buyout of Novartis' interest. This was partly offset by an
increased allocation of ViiV Healthcare profits as well as higher
net profits in some of the Group's other entities with
non-controlling interests.
Earnings per share
Total
earnings per share was 24.7p, compared with a loss per share of
11.2p in Q4 2017. The increase in earnings per share
primarily reflected a favourable comparison with charges in 2017
arising from the impact of US tax reform as well as an improved
trading performance, the reduced non-controlling interest
allocation of Consumer Healthcare profits and a lower tax
rate.
Currency impact on Q4 2018 results
The Q4
2018 results are based on average exchange rates, principally
£1/$1.27, £1/€1.13 and £1/Yen144.
Comparative exchange rates are given on page 59. The
period-end exchange rates were £1/$1.27, £1/€1.11
and £1/Yen140.
In the
quarter, turnover increased 7% AER, 5% CER. Total EPS was
24.7p compared with a loss per share of 11.2p in Q4 2017. The
positive currency impact primarily reflected the weakness of
Sterling, particularly against the US Dollar, partly offset by
weakness in emerging market currencies, relative to Q4 2017.
|
|
Adjusting items
The
reconciliations between Total results and Adjusted results for 2018
and 2017 are set out below.
|
|
Three months ended 31 December 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
|
8,197
|
|
|
|
|
|
8,197
|
|
Cost of sales
|
(2,904)
|
136
|
|
232
|
4
|
|
(2,532)
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Gross profit
|
5,293
|
136
|
|
232
|
4
|
|
5,665
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,620)
|
|
|
48
|
37
|
6
|
(2,529)
|
|
Research and development
|
(1,076)
|
14
|
12
|
22
|
|
9
|
(1,019)
|
|
Royalty income
|
79
|
|
|
|
|
|
79
|
|
Other operating income/(expense)
|
(122)
|
|
|
1
|
230
|
(109)
|
-
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Operating profit
|
1,554
|
150
|
12
|
303
|
271
|
(94)
|
2,196
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(185)
|
|
|
2
|
(3)
|
13
|
(173)
|
|
Profit on disposal of associates
|
-
|
|
|
|
|
|
-
|
|
Share of after tax losses of
associates and joint ventures
|
5
|
|
|
|
|
|
5
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit before taxation
|
1,374
|
150
|
12
|
305
|
268
|
(81)
|
2,028
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(74)
|
(24)
|
(4)
|
(48)
|
(38)
|
(167)
|
(355)
|
|
Tax rate %
|
5.4%
|
|
|
|
|
|
17.5%
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit after taxation
|
1,300
|
126
|
8
|
257
|
230
|
(248)
|
1,673
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit
attributable to
non-controlling interests
|
85
|
|
|
|
54
|
|
139
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to
shareholders
|
1,215
|
126
|
8
|
257
|
176
|
(248)
|
1,534
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
24.7p
|
2.6p
|
0.2p
|
5.2p
|
3.6p
|
(5.1)p
|
31.2p
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares (millions)
|
4,920
|
|
|
|
|
|
4,920
|
|
|
------------
|
|
|
|
|
|
------------
|
|
Three months ended 31 December 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
|
US tax
reform
£m
|
Adjusted
results
£m
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Turnover
|
7,639
|
|
|
|
|
|
|
7,639
|
|
Cost of sales
|
(2,558)
|
136
|
66
|
79
|
19
|
-
|
|
(2,258)
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Gross profit
|
5,081
|
136
|
66
|
79
|
19
|
-
|
|
5,381
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administration
|
(2,533)
|
|
|
96
|
|
17
|
|
(2,420)
|
|
Research and
development
|
(1,209)
|
11
|
201
|
10
|
|
(5)
|
|
(992)
|
|
Royalty income
|
69
|
|
|
|
|
|
|
69
|
|
Other operating income/
(expense)
|
(896)
|
|
|
(1)
|
222
|
9
|
666
|
-
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Operating profit
|
512
|
147
|
267
|
184
|
241
|
21
|
666
|
2,038
|
|
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(138)
|
|
|
1
|
|
2
|
|
(135)
|
|
Profit on disposal of
associates
|
66
|
|
|
|
|
(66)
|
|
-
|
|
Share of after tax profits
of associates and joint
ventures
|
2
|
|
|
|
|
|
|
2
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit before taxation
|
442
|
147
|
267
|
185
|
241
|
(43)
|
666
|
1,905
|
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(805)
|
(34)
|
(51)
|
40
|
(467)
|
(142)
|
1,078
|
(381)
|
|
Tax rate %
|
>100%
|
|
|
|
|
|
|
20.0%
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
(Loss)/profit after
taxation
|
(363)
|
113
|
216
|
225
|
(226)
|
(185)
|
1,744
|
1,524
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Profit
attributable to
non-controlling interests
|
183
|
|
|
|
(105)
|
|
114
|
192
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/profit attributable
to shareholders
|
(546)
|
113
|
216
|
225
|
(121)
|
(185)
|
1,630
|
1,332
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings per
share
|
(11.2)p
|
2.3p
|
4.4p
|
4.6p
|
(2.5)p
|
(3.7)p
|
33.3p
|
27.2p
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares
(millions)
|
4,891
|
|
|
|
|
|
|
4,891
|
|
|
------------
|
|
|
|
|
|
|
------------
|
|
Intangible asset amortisation and impairment
Intangible
asset amortisation was £150 million compared with £147
million in Q4 2017. There were also intangible asset
impairments of £12 million (Q4 2017: £267 million)
relating to R&D assets. Both of these charges were
non-cash items.
|
|
Major restructuring and integration
Within the Pharmaceuticals sector, the highly regulated
manufacturing operations and supply chains and long lifecycle of
the business mean that restructuring programmes, particularly those
that involve the rationalisation or closure of manufacturing or
R&D sites are likely to take several years to
complete.
Major restructuring costs are those related to specific Board approved Major
restructuring programmes and are excluded from Adjusted
Results. Major restructuring programmes, including
integration costs following material acquisitions, are those that
are structural and are of a significant scale where the costs of
individual or related projects exceed £25 million. Other
ordinary course smaller scale restructuring costs are retained
within Total and Adjusted results.
The
Board approved a new Major restructuring programme in July 2018,
which is designed to significantly improve the competitiveness and
efficiency of the Group's cost base with savings delivered
primarily through supply chain optimisation and reductions in administrative
costs.
|
|
Total
Major restructuring charges incurred in the quarter were £303
million (Q4 2017: £184 million), analysed as
follows:
|
|
|
Q4 2018
|
|
Q4
2017
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
p
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
restructuring and
integration programme
|
52
|
|
10
|
|
62
|
|
34
|
|
150
|
|
184
|
|
2018
major restructuring
programme
|
151
|
|
90
|
|
241
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203
|
|
100
|
|
303
|
|
34
|
|
150
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
charges arising under the existing Combined restructuring and
integration programme primarily related to the write-down of assets
as part of the announced plans to reduce the manufacturing
network. Cash charges arose from restructuring of the
manufacturing organisation and some administrative functions.
Non-cash charges under the 2018 major restructuring programme
primarily related to announced plans to restructure the
manufacturing network, and cash charges arose from restructuring in
some manufacturing sites and some administrative
functions.
Total
cash payments for the two programmes made in the quarter were
£184 million, £175 million for the existing Combined
restructuring and integration programme (Q4 2017: £106
million) and £9 million under the 2018 major restructuring
programme including the settlement of certain charges accrued in
previous quarters.
The
analysis of Major restructuring charges by business was as
follows:
|
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
|
|
|
|
|
Pharmaceuticals
|
269
|
|
55
|
|
Vaccines
|
28
|
|
62
|
|
Consumer
Healthcare
|
(28)
|
|
42
|
|
|
|
|
|
|
|
269
|
|
159
|
|
Corporate
& central functions
|
34
|
|
25
|
|
|
|
|
|
|
Total
Major restructuring costs
|
303
|
|
184
|
|
|
|
|
|
|
The
credit of £28 million in Consumer Healthcare includes a profit
on disposal of several manufacturing sites in the
quarter.
|
|
The
analysis of Major restructuring charges by Income statement line
was as follows:
|
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
|
|
|
|
|
Cost of
sales
|
232
|
|
79
|
|
Selling,
general and administration
|
48
|
|
96
|
|
Research
and development
|
22
|
|
10
|
|
Other
operating income/(expense)
|
1
|
|
(1)
|
|
|
|
|
|
|
Total
Major restructuring costs
|
303
|
|
184
|
|
|
|
|
|
|
The
Combined restructuring and integration programme delivered
incremental annual cost savings in the quarter of less than
£0.1 billion. Given its relatively recent launch, the
benefit delivery in the quarter from the 2018 major restructuring
programme was not material.
|
|
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £271 million (Q4 2017:
£241 million). This primarily reflected £229
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)
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
|
|
|
|
|
Consumer
Healthcare Joint Venture put option
|
-
|
|
163
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare Joint
Venture
(including Shionogi preferential dividends)
|
261
|
|
151
|
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
(40)
|
|
(40)
|
|
Contingent
consideration on former Novartis Vaccines business
|
8
|
|
(56)
|
|
Other
adjustments
|
42
|
|
23
|
|
|
|
|
|
|
Total
transaction-related charges
|
271
|
|
241
|
|
|
|
|
|
|
The
£261 million charge relating to the contingent consideration
for the former Shionogi-ViiV Healthcare Joint Venture represented
£145 million arising primarily from updated exchange rate
assumptions, together with a £116 million unwind of the
discount. A credit of £40 million relating to a decrease
in the put option liability to Pfizer primarily reflected
adjustments to the current multiples of market comparables, partly
offset by revised exchange rate assumptions.
Other
adjustments included acquisition costs relating to the acquisition
of Tesaro completed in January 2019 and the announced agreement
with Pfizer to combine our consumer healthcare
businesses.
Contingent
consideration cash payments which are made to Shionogi and other
companies reduce the balance sheet liability and hence are not
recorded in the income statement. Total contingent
consideration cash payments in the quarter amounted to £222
million (Q4 2017: £193 million). This included cash
payments made by ViiV Healthcare to Shionogi in relation to its
contingent consideration liability (including preferential
dividends) which amounted to £209 million (Q4 2017: £186
million).
An
explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 64.
Divestments, significant legal charges and other items
Divestments
and other items included the profit on a number of asset disposals,
and a gain arising from the increase in value of the shares in
Hindustan Unilever Limited to be received on the disposal
of Horlicks and
other Consumer Healthcare brands, which is expected to complete by
the end of 2019, net of disposal costs, as well as equity
investment impairments and certain other Adjusting items. A
charge of £4 million (Q4 2017: £8 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 £15
million (Q4 2017: £8 million).
|
|
Adjusted results
The
reconciliations between Total results and Adjusted results for 2018
and 2017 are set out on pages 30 and 31.
|
|
|
Q4 2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
8,197
|
|
100
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,532)
|
|
(30.9)
|
|
12
|
|
12
|
|
Selling,
general and administration
|
(2,529)
|
|
(30.9)
|
|
5
|
|
3
|
|
Research
and development
|
(1,019)
|
|
(12.4)
|
|
3
|
|
(1)
|
|
Royalty
income
|
79
|
|
1.0
|
|
14
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,196
|
|
26.8
|
|
8
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
2,028
|
|
|
|
6
|
|
2
|
|
Adjusted
profit after tax
|
1,673
|
|
|
|
10
|
|
6
|
|
Adjusted
profit attributable to shareholders
|
1,534
|
|
|
|
15
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
31.2p
|
|
|
|
14
|
|
10
|
|
|
|
|
|
|
|
|
|
|
Operating profit by business
|
Q4 2018
|
||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,340
|
|
48.6
|
|
1
|
|
(3)
|
|
Pharmaceuticals
R&D*
|
(778)
|
|
|
|
9
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
1,562
|
|
32.5
|
|
(2)
|
|
(6)
|
|
Vaccines
|
420
|
|
28.4
|
|
82
|
|
71
|
|
Consumer
Healthcare
|
352
|
|
18.4
|
|
17
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
2,334
|
|
28.5
|
|
10
|
|
5
|
|
Corporate
& other unallocated costs
|
(138)
|
|
|
|
50
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,196
|
|
26.8
|
|
8
|
|
4
|
|
|
|
|
|
|
|
|
|
|
*
|
Operating
profit of Pharmaceuticals R&D segment, which is the
responsibility of the President, Pharmaceuticals R&D. It
excludes ViiV Healthcare R&D expenditure, which is reported
within the Pharmaceuticals segment. A more detailed breakdown
of R&D expenses is set out on page 40.
|
|
Operating profit
Adjusted
operating profit was £2,196 million, 8% higher than Q4 2017 at
AER and 4% higher at CER on a turnover increase of 5% CER.
The Adjusted operating margin of 26.8% was 0.1 percentage points
higher at AER but 0.4 percentage points lower on a CER basis than
in Q4 2017. This primarily reflected an increase in cost of
sales due to continuing pricing pressure, particularly in
Respiratory, increased input costs, an unfavourable product mix in
Pharmaceuticals, primarily as a result of a higher proportion of
tenders and post-divestment contract manufacturing business in the
quarter, together with investments in promotional product support,
particularly for new launches in Vaccines, Respiratory and
HIV. This was partly offset by the benefit from sales growth
in all three businesses, a more favourable mix in Vaccines and
Consumer Healthcare and continued tight control of ongoing costs
across all three businesses.
Cost of sales
Cost of
sales as a percentage of turnover was 30.9%, up 1.3 percentage
points at AER, and 1.9 percentage points higher at CER compared
with Q4 2017. This primarily reflected continued adverse
pricing pressure in Pharmaceuticals, particularly in Respiratory,
and Established Vaccines, an unfavourable product mix in
Pharmaceuticals, primarily as a result of the growth in some lower
margin Established products, and increased input costs. This
was partly offset by a more favourable product mix in Vaccines and
Consumer Healthcare, particularly the impact of higher Vaccines
sales, and a further contribution from integration and
restructuring savings in all three businesses.
Selling, general and administration
SG&A
costs as a percentage of turnover were 30.9%, 0.8 percentage points
lower at AER than in Q4 2017 and 0.8 percentage points lower on a
CER basis. The 5% AER, 3% 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 and a charge arising from the
equalisation of UK Guaranteed Minimum Pensions, partly offset by
tight control of ongoing costs, particularly in non-promotional
spending, across all three businesses.
Research and development
R&D
expenditure was £1,019 million (12.4% of turnover), 3% higher
at AER, but 1% lower at CER than Q4 2017, primarily
reflecting the benefits of the re-prioritisation of the R&D
portfolio as well as the phasing of investment in late-stage
programmes, particularly HIV, partly offset by increased investment
in the progression of a number of early and mid stage programmes,
particularly in Oncology.
Royalty income
Royalty
income was £79 million (Q4 2017: £69 million), an
increase of 14% AER, 6% CER, primarily reflecting increased
royalties on sales of Gardasil.
Operating profit by business
Pharmaceuticals
operating profit was £1,562 million, down 2% AER, 6% CER on a
turnover increase of 4% CER. The operating margin of 32.5%
was 2.7 percentage points lower at AER than in Q4 2017 and 3.3
percentage points lower on a CER basis. This primarily
reflected the growth in cost of sales due to the continued impact
of lower prices, particularly in Respiratory, an unfavourable
product mix primarily as a result of the growth in some lower
margin established products and increased input costs, together
with investment in new product support and targeted priority
markets and lower royalty income, partly offset by continued tight
control of ongoing costs and the benefits of re-prioritisation of
the R&D portfolio.
Vaccines
operating profit was £420 million, 82% higher than Q4 2017 at
AER and 71% higher at CER on a turnover increase of 18% CER.
The operating margin of 28.4% was 9.3 percentage points higher than
in Q4 2017 at AER and 8.5 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, with higher SG&A investment increased broadly
in line with sales to support new launches and business
growth.
Consumer
Healthcare operating profit was £352 million, up 17% AER, 14%
CER, on a turnover increase of 1% CER. The operating margin
of 18.4% was 2.5 percentage points higher than in Q4 2017 at AER,
and 2.0 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
Q4 2017.
Net finance costs
Net finance costs were £173 million compared with £135
million in Q4 2017. The increase primarily reflected higher
debt levels following the acquisition from Novartis of its stake in
the Consumer Healthcare Joint Venture in June 2018, as well as an
adverse comparison to a provision release for interest on tax of
£23 million in Q4 2017.
Taxation
Tax on Adjusted profit amounted to £355 million and
represented an effective Adjusted tax rate of 17.5% (Q4 2017:
20.0%). The reduction in the effective Adjusted
tax rate in Q4 2018 is primarily driven by the reduction in the US
federal tax rate. See 'Taxation'
on page 58 for further details.
Non-controlling interests
The allocation of Adjusted earnings to non-controlling interests
amounted to £139 million (Q4 2017: £192 million).
The reduction was primarily due to the ending of the allocation of
Consumer Healthcare profits (Q4 2017: £85 million) following
the buyout of Novartis' interest. This was partly offset by
an increased allocation of ViiV Healthcare profits of £130
million (Q4 2017: £103 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.
Earnings per share
Adjusted
EPS of 31.2p was up 14% AER, 10% CER, compared with a 4% CER
increase in Adjusted operating profit, primarily as a result of the
reduced non-controlling interest allocation of Consumer Healthcare
profits and a lower Adjusted tax rate.
|
|
Currency impact on Q4 2018 results
The Q4
2018 results are based on average exchange rates, principally
£1/$1.27, £1/€1.13 and £1/Yen144.
Comparative exchange rates are given on page 59. The
period-end exchange rates were £1/$1.27, £1/€1.11
and £1/Yen140.
In the
quarter, turnover increased 7% AER, 5% CER. Adjusted EPS was
31.2p compared with 27.2p in Q4 2017, up 14% AER, 10% CER.
The positive currency impact primarily reflected the weakness of
Sterling, particularly against the US Dollar, partly offset by
weakness in emerging market currencies, relative to Q4 2017.
Exchange gains or losses on the settlement of intercompany
transactions had a negligible impact on the positive currency
impact of four percentage points on Adjusted EPS.
|
|
Cash generation and conversion
|
|
Cash flow and net debt
|
|
|
2018
|
|
2017
(revised)
|
|
Q4
2018
|
|
|
|
|
|
|
|
|
Net
cash inflow from operating activities (£m)
|
8,421
|
|
6,918
|
|
4,119
|
|
Free
cash flow* (£m)
|
5,692
|
|
3,485
|
|
3,317
|
|
Free
cash flow growth (%)
|
63%
|
|
6%
|
|
83%
|
|
Free
cash flow conversion* (%)
|
>100%
|
|
>100%
|
|
>100%
|
|
Net
debt** (£m)
|
21,621
|
|
13,178
|
|
21,621
|
|
*
|
Free
cash flow and free cash flow conversion are defined on page
44.
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 63. Comparative figures have been revised
accordingly.
|
|
|
|
|
**
|
Net
debt is analysed on page 63.
|
|
2018
The net
cash inflow from operating activities for the year was £8,421
million (2017: £6,918 million). The increase primarily
reflected improved operating profits, a smaller increase in working
capital as a result of a reduction of inventory balances and a
strong focus on collections, the favourable timing of payments for
returns and rebates, and reduced legal settlement and restructuring
payments, partly offset by a negative currency impact on operating
profit.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the year were £793
million (2017: £671 million), of which £703 million was
recognised in cash flows from operating activities and £90
million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax
purposes.
Free
cash flow was £5,692 million for the year (2017: £3,485
million). The increase primarily reflected improved operating
profits, a smaller increase in working capital following a
reduction of inventory balances and a strong focus on collections,
the favourable timing of payments for returns and rebates, reduced
legal settlement costs and restructuring payments, lower capital
expenditure, including a favourable comparison with the impact of
the Priority Review Voucher in 2017, increased disposals of
intangible assets of £256 million (2017: £48 million),
primarily relating to the disposal of tapinarof, and reduced
dividend payments to non-controlling interests. This was
partly offset by a negative currency impact on operating profit and
increased contingent consideration payments including the $450
million (£317 million) milestone to Novartis paid in Q1
2018.
|
|
Q4 2018
The net
cash inflow from operating activities for the quarter was
£4,119 million (Q4 2017: £2,869 million). The
increase primarily reflected improved operating profits, including
a positive currency impact, a larger seasonal reduction in working
capital following a strong focus on collections and a reduction of
inventory balances, the favourable timing of payments for returns
and rebates and the phasing of tax payments, partly offset by
increased restructuring payments.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the quarter were £209
million, of which £186 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 £3,317 million for the quarter (Q4 2017:
£1,817 million). The increase primarily reflected
improved operating profits, including a positive currency impact, a
larger seasonal reduction in working capital following a strong
focus on collections and a reduction of inventory balances, the
favourable timing of payments for returns and rebates, the phasing
of tax payments and reduced dividend payments to non-controlling
interests. This was partly offset by increased restructuring
payments.
|
|
Net debt
At 31
December 2018, net debt was £21.6 billion, compared with
£13.2 billion at 31 December 2017, comprising gross debt of
£26.1 billion and cash and liquid investments of £4.5
billion, including £0.5 billion reported within Assets held
for sale. 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, £0.8 billion of
unfavourable exchange impacts from the translation of non-Sterling
denominated debt, and dividends paid to shareholders of £3.9
billion, partly offset by increased free cash flow of £5.7
billion after the milestone payment to Novartis.
At 31
December 2018, GSK had short-term borrowings (including overdrafts)
repayable within 12 months of £5.8 billion with loans of
£1.8 billion repayable in the subsequent year.
|
|
Working capital
|
|
|
31
December
2018
|
|
30
September
2018
|
|
30
June
2018
|
|
31
March
2018
|
|
31 December
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Working
capital conversion cycle* (days)
|
201
|
|
230
|
|
223
|
|
204
|
|
191
|
|
Working
capital percentage of turnover (%)
|
23
|
|
29
|
|
26
|
|
24
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Working
capital and working capital conversion cycle are defined on
page 44.
|
|
The
increase of 10 days in 2018 compared with 2017 was predominately
due to an adverse impact from exchange of approximately five days
as well as a reduced denominator due to lower restructuring and
impairment costs in 2018. Excluding these factors,
significant improvements were made in working capital relative to
the growth in the business, with reduced inventory as a result of
tight control of inventory levels and stronger collections of
receivables.
|
|
Returns to shareholders
|
|
Quarterly dividends
The
Board has declared a fourth interim dividend for 2018 of 23 pence
per share (Q4 2017: 23 pence per share).
GSK
recognises the importance of dividends to shareholders and aims to
distribute regular dividend payments that will be determined
primarily with reference to the free cash flow generated by the
business after funding the investment necessary to support the
Group's future growth.
The
Board intends to maintain the dividend for 2019 at the current
level of 80p per share, subject to any material change in the
external environment or performance expectations. Over time,
as free cash flow strengthens, it intends to build free cash flow
cover of the annual dividend to a target range of 1.25-1.50x,
before returning the dividend to growth.
Payment of dividends
The
equivalent interim dividend receivable by ADR holders will be
calculated based on the exchange rate on 9 April 2019. An
annual fee of $0.03 per ADS (or $0.0075 per ADS per quarter) (2018:
$0.02 per ADS; $0.005 per ADS per quarter) is charged by the
Depositary.
The
ex-dividend date will be 21 February 2019, with a record date of 22
February 2019 and a payment date of 11 April 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
|
|
Fourth
interim
|
11
April 2019
|
|
23
|
|
1,132
|
|
|
|
|
|
|
|
|
|
|
|
80
|
|
3,935
|
|
|
|
|
|
|
|
|
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 year. The company issued
6.5 million shares under employee share schemes for proceeds of
£74 million (2017: £56 million).
The
weighted average number of shares for 2018 was 4,914 million,
compared with 4,886 million in 2017.
The
weighted average number of shares for Q4 2018 was 4,920 million,
compared with 4,891 million in Q4 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 2017 was to reduce Discovery costs by £13 million
and Development costs by £27 million and increase Technology,
facilities and functional support costs by £40 million.
The impact on Q4 2017 was to reduce Discovery costs by £45
million and increase Technology, facilities and functional support
costs by £14 million and Development costs by £31
million.
|
|
|
2018
£m
|
|
2017
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Discovery
|
892
|
|
1,007
|
|
(11)
|
|
(10)
|
|
Development
|
1,332
|
|
1,423
|
|
(6)
|
|
(5)
|
|
Technology,
facilities and functional support
|
600
|
|
576
|
|
4
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,824
|
|
3,006
|
|
(6)
|
|
(5)
|
|
Vaccines
|
673
|
|
621
|
|
8
|
|
8
|
|
Consumer
Healthcare
|
238
|
|
235
|
|
1
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Adjusted
R&D
|
3,735
|
|
3,862
|
|
(3)
|
|
(2)
|
|
Amortisation
and impairment of intangible
assets
|
89
|
|
333
|
|
|
|
|
|
Major
restructuring costs
|
49
|
|
263
|
|
|
|
|
|
Other
items
|
20
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Research and development
|
3,893
|
|
4,476
|
|
(13)
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2018
£m
|
|
Q4
2017
(revised)
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Discovery
|
275
|
|
245
|
|
12
|
|
9
|
|
Development
|
354
|
|
366
|
|
(3)
|
|
(8)
|
|
Technology,
facilities and functional support
|
165
|
|
154
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
794
|
|
765
|
|
4
|
|
-
|
|
Vaccines
|
164
|
|
161
|
|
2
|
|
-
|
|
Consumer
Healthcare
|
61
|
|
66
|
|
(8)
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
R&D
|
1,019
|
|
992
|
|
3
|
|
(1)
|
|
Amortisation
and impairment of intangible
assets
|
26
|
|
212
|
|
|
|
|
|
Major
restructuring costs
|
22
|
|
10
|
|
|
|
|
|
Other
items
|
9
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Research and development
|
1,076
|
|
1,209
|
|
(11)
|
|
(14)
|
|
|
|
|
|
|
|
|
|
|
In
2018, Adjusted R&D expenditure declined 3% AER, 2% CER with
Pharmaceuticals down 6% AER, 5% CER. The decline in Discovery
reflected the transfer of certain Oncology assets to the
Development phase. The decline in Development primarily
reflects the comparison with the impact of the utilisation of the
Priority Review Voucher in 2017 and 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, and the provision for costs payable to a
third party relating to the use of a Priority Review Voucher
awarded in 2018. The growth in Technology, facilities and
functional support costs primarily reflected increased investments
in data analytics.
|
|
In Q4
2018, Adjusted R&D expenditure increased 3% AER, but declined
1% CER, with Pharmaceuticals up 4% AER, but flat at CER reflecting
the benefits of the prioritisation initiatives, offset by the
increased investment in the progression of a number of mid and
late-stage programmes, particularly in Oncology and functional
genomics. The significant growth in Discovery primarily
reflected the investment in Oncology, ViiV and functional genomics
collaborations aligned with our new R&D strategy. The
decline in Development reflected lower expenditure on ViiV
Healthcare assets following launches during the year and the
benefits of the re-prioritisation of R&D that started in the
second half of 2017 partly offset by higher expenditure on Oncology
development assets.
|
|
R&D pipeline
|
|
Pipeline news flow since Q3 2018:
|
|
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, cancer
epigenetics and genetic medicine. 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.
|
|
Tesaro
|
|
|
●
|
On 22
January, the acquisition of Tesaro, an oncology focused biotech
company, was completed. This acquisition adds the PARP
inhibitor Zejula to our
portfolio. Zejula is currently approved as a
treatment for patients with recurrent ovarian cancer regardless of
BRCA mutation or biomarker status and being investigated in
"all-comers" population in monotherapy and combination for first
line maintenance treatment of ovarian cancer. The acquisition
also bring dostarlimab (TSR-042) an anti-PD-1 antibody and several
other oncology assets including antibodies directed against TIM-3
and LAG-3.
|
|
Bi-functional TGF-b and PD-L1 fusion protein
(M7824)
|
|
|
●
|
On 5
February, GSK and Merck KGaA, Darmstadt, Germany announced a global
alliance to jointly develop and commercialise M7824, a novel
immunotherapy with potential in multiple difficult-to-treat
cancers. This transaction is subject to regulatory clearances
in Brazil and Germany (or confirmation that no filing is required)
and is expected to close in Q1 2019.
|
|
BCMA antibody-drug conjugate (GSK2857916)
|
|
|
●
|
Updated
phase I PFS data from DREAMM-1 study for BCMA is expected to be
published in a leading journal in H1.
|
|
●
|
Enrolment
of patients in the 4L monotherapy pivotal study of GSK'916
(DREAMM-2) was achieved ahead of schedule during the quarter.
Results are expected in H2 2019.
|
|
●
|
In Q4,
the POC study of GSK'916 (DREAMM-6) in 2L started. Data are
expected in H1 2019.
|
|
ICOS agonist (GSK3359609)
|
|
|
●
|
In Q4,
encouraging clinical data were received for GSK'609 in combination
with pembrolizumab. Data will be shared at an upcoming
conference.
|
|
●
|
In
December, the first patient was dosed in a phase I/II study of
GSK'609 in combination with CTLA-4 (tremelimumab) in patients with
advanced solid tumours.
|
|
●
|
In
January, the first patient was dosed in a phase II study of GSK'609
in NSCLC post-PD-1 patients.
|
|
RIP-1 kinase inhibitor (GSK3145095)
|
|
|
●
|
In Q4,
first time in human trials started for GSK'095 as monotherapy and
in combination with otheranti-cancer agents including pembrolizumab
in patients with pancreatic ductal adenocarcinoma (PDAC) and other
solid tumours.
|
|
PRMT1 inhibitor (GSK3368715)
|
|
|
●
|
In Q4,
first time in human trials started for GSK'715, a first in class
PRMT1 inhibitor, as monotherapy in patients with solid tumours and
diffuse large B-cell lymphoma (DLBCL).
|
|
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).
|
|
Juluca (dolutegravir
+ rilpivirine)
|
|
|
●
|
On 26
November, the Japan Ministry of Health, Labour and Welfare granted
marketing authorisation for Juluca (dolutegravir/rilpivirine)
for the maintenance treatment of human immunodeficiency virus type
1 (HIV-1) infection.
|
|
Dolutegravir + lamivudine
|
|
|
●
|
On 16
November, the Committee for Medicinal Products for Human Use
adopted a positive opinion for Tivicay (dolutegravir) EU label
update with GEMINI study data for the 2-drug regimen
of Tivicay +
lamivudine.
|
|
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.
|
|
Anti-GM-CSF antibody (GSK3196165)
|
|
|
●
|
In
December, following the results from the phase II programme and
discussions with regulators, a decision was made to progress to
phase III clinical development with GSK'165 in patients with
rheumatoid arthritis. This programme is expected to start in
H2 2019.
|
|
Respiratory
|
|
GSK has
led the way in developing innovative modern inhaled medicines to
advance the management of asthma and COPD for 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 9
November, Trelegy (FF/UMEC/VI) gained an
expanded COPD indication in Europe for patients not adequately
treated with dual bronchodilation, making it the first single
inhaler triple therapy indicated for patients with moderate to
severe COPD.
|
|
Nucala severe
asthma
|
|
|
●
|
On 19
November, a US regulatory submission was made to expand the use
of Nucala (mepolizumab) in children
(aged 6-11 years) with severe eosinophilic asthma.
|
|
Nemiralisib (GSK2269557)
|
|
|
●
|
A
planned interim analysis of the phase IIb study of nemiralisib in
patients with acutely exacerbating COPD showed no discernible
benefit in patients when added to standard of care. Neither
the primary endpoint or secondary endpoints were met. As a
result of these findings a decision has been made to terminate
progression of the acute COPD indication.
|
|
TRPV4 (GSK2798745)
|
|
|
●
|
A
second interim analysis of the phase I experimental medicine study
of GSK'745 in support of an indication in Acute Respiratory
Distress Syndrome (ARDS) has reduced confidence in successfully
meeting the primary endpoint. As a result of these findings a
decision has been made to terminate the ARDS indication and return
the molecule to research.
|
|
aVb6 (GSK3008348)
|
|
|
●
|
Following
an interim analysis of the phase Ib data a decision has been made
to terminate GSK'348 in idiopathic pulmonary fibrosis due to a lack
of confidence in developability and portfolio
considerations.
|
|
Other pharmaceuticals
|
|
Daprodustat (GSK1278863)
|
|
|
●
|
On 22
November, GSK and Kyowa Hakko Kirin signed a strategic
commercialisation deal in Japan for daprodustat, a potential new
oral treatment for anaemia associated with chronic kidney
disease. This followed positive results from two phase III
studies in dialysis dependent Japanese patients. Results from
the final Japanese phase III study in non-dialysis dependent
patients are anticipated in H1 2019, with filing anticipated in H2
2019.
|
|
Krintafel/Kozenis (tafenoquine)
|
|
|
●
|
On 17
January, two positive phase III studies, DETECTIVE and GATHER, of
tafenoquine for the radical cure of Plasmodium vivax malaria were
published in The New England Journal of Medicine.
|
|
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. 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.
|
|
Respiratory Syncytial Virus (RSV) Vaccines
|
|
|
●
|
In
December, the FDA granted Older Adult and Maternal RSV vaccine
candidates Fast Track Designation.
|
|
Reporting definitions
|
|
Total and Adjusted results
Total
reported results represent the Group's overall
performance.
GSK
also uses a number of adjusted, non-IFRS, measures to report the
performance of its business. Adjusted results and other
non-IFRS measures may be considered in addition to, but not as a
substitute for or superior to, information presented in accordance
with IFRS. Adjusted results are defined on page 4 and other
non-IFRS measures are defined below.
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 63.
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
|
|
2019 guidance
In
2019, GSK expects Adjusted EPS to decline in the range of -5% to
-9% at CER. This guidance reflects the recent announcement of
a substitutable generic competitor to Advair and the expected impact of
the Tesaro acquisition and assumes that the proposed Consumer
Healthcare nutrition disposal closes by the end of 2019 and the
proposed Consumer Healthcare Joint Venture with Pfizer closes
during H2 2019.
|
|
2016-2020 outlook
In May
2015, GSK announced that it expected Group sales to grow at CER at
a low-to-mid single digits percentage CAGR and Adjusted EPS to grow
at CER at a mid-to-high single digit percentage CAGR for the period
2016-2020. On 3 December 2018, GSK announced that it
continued to expect to deliver on its previously published Group
outlooks to 2020, but, following the acquisition of Tesaro,
expected Adjusted EPS growth at CER for the period 2016-2020 to be
at the bottom end of the mid-to-high single digit percentage CAGR
range. These outlooks are based on 2015 exchange
rates.
Assumptions related to 2019 guidance and 2016-2020
outlook
In
outlining the expectations for 2019 and the five-year period
2016-2020, the Group has made certain assumptions about the
healthcare sector, the different markets in which the Group
operates and the delivery of revenues and financial benefits from
its current portfolio, pipeline and restructuring
programmes.
For the
Group specifically, over the period to 2020, GSK expects further
declines in sales of Seretide/Advair. The introduction
of a generic alternative to Advair in the US has been factored
into the Group's assessment of its future performance. The
Group assumes no premature loss of exclusivity for other key
products over the period.
The
assumptions for the Group's revenue, earnings and dividend
expectations assume no material interruptions to supply of the
Group's products, no material mergers, acquisitions or disposals,
except for the acquisition of Tesaro, the proposed divestment of
Horlicks and other Consumer Healthcare products to Unilever and the
proposed formation of a new Consumer Healthcare Joint Venture with
Pfizer, all announced in December 2018, no material litigation or
investigation costs for the Company (save for those that are
already recognised or for which provisions have been made), no
share repurchases by the Company, and no change in the Group's
shareholdings in ViiV Healthcare. The assumptions also assume
no material changes in the macro-economic and healthcare
environment. The 2019 guidance and 2016-2020 outlook have
factored in all divestments and product exits since 2015, including
the divestment and exit of more than 130 non-core tail brands
(£0.5 billion in annual sales) as announced on 26 July
2017 and the product divestments planned in connection with the
proposed Consumer Healthcare transaction with Pfizer.
The
Group's expectations assume successful delivery of the Group's
integration and restructuring plans over the period 2016-2020,
including the extension and enhancement to the combined programme
announced on 26 July 2017 as well as the new major restructuring
plan announced on 25 July 2018. They also assume that the
proposed Consumer Healthcare nutrition disposal closes by the end
of 2019 and the proposed Consumer Healthcare Joint Venture with
Pfizer closes during H2 2019 and that the integration and
investment programmes following the Tesaro acquisition and the
proposed Consumer Healthcare Joint Venture with Pfizer over this
period are delivered successfully. Material costs for
investment in new product launches and R&D have been factored
into the expectations given. Given the potential development
options in the Group's pipeline, the outlook may be affected by
additional data-driven R&D investment decisions. The
expectations are given on a constant currency basis (2016-2020
outlook at 2015 CER).
Subject
to material changes in the product mix, the Group's medium-term
effective tax rate is expected to be around 19% of Adjusted
profits. This incorporates management's best estimates of the
impact of US tax reform on the Group based on the information
currently available. 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, macro-economic activity, changes in regulation,
government actions or intellectual property protection, actions by
our competitors, and other risks inherent to the industries in
which we operate.
This
document contains statements that are, or may be deemed to be,
"forward-looking statements". Forward-looking statements give
the Group's current expectations or forecasts of future
events. An investor can identify these statements by the fact
that they do not relate strictly to historical or current
facts. They use words such as 'anticipate', 'estimate',
'expect', 'intend', 'will', 'project', 'plan', 'believe', 'target'
and other words and terms of similar meaning in connection with any
discussion of future operating or financial performance. In
particular, these include statements relating to future actions,
prospective products or product approvals, future performance or
results of current and anticipated products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings,
dividend payments and financial results. Other than in
accordance with its legal or regulatory obligations (including
under the Market Abuse Regulation, the UK Listing Rules and the
Disclosure and Transparency Rules of the Financial Conduct
Authority), the Group undertakes no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise. The reader should, however,
consult any additional disclosures that the Group may make in any
documents which it publishes and/or files with the SEC. All
readers, wherever located, should take note of these
disclosures. Accordingly, no assurance can be given that any
particular expectation will be met and investors are cautioned not
to place undue reliance on the forward-looking
statements.
Forward-looking
statements are subject to assumptions, inherent risks and
uncertainties, many of which relate to factors that are beyond the
Group's control or precise estimate. The Group cautions
investors that a number of important factors, including those in
this document, could cause actual results to differ materially from
those expressed or implied in any forward-looking statement.
Such factors include, but are not limited to, those discussed under
Item 3.D 'Risk Factors' in the Group's Annual Report on Form 20-F
for 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 annual results presentation hosted by Emma Walmsley,
GSK CEO, will be held at 2.00pm GMT on 6 February 2019.
Presentation materials will be published on www.gsk.com prior to the webcast
and a transcript of the webcast will be published
subsequently.
Information
available on GSK's website does not form part of, and is not
incorporated by reference into, this Results
Announcement.
|
|
Contacts
|
|
GSK - one
of the world's leading research-based pharmaceutical and healthcare
companies - is committed to improving the quality of human life by
enabling people to do more, feel better and live longer. For
further information please visit www.gsk.com.
|
|
GSK enquiries:
|
|
|
|
|
UK
Media enquiries:
|
Simon
Steel
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
Tim
Foley
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
Mary
Hinks-Edwards
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
|
|
|
|
US
Media enquiries:
|
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
|
|
|
2018
£m
|
|
2017
£m
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
|
|
|
|
|
|
|
|
|
TURNOVER
|
30,821
|
|
30,186
|
|
8,197
|
|
7,639
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(10,241)
|
|
(10,342)
|
|
(2,904)
|
|
(2,558)
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
20,580
|
|
19,844
|
|
5,293
|
|
5,081
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(9,915)
|
|
(9,672)
|
|
(2,620)
|
|
(2,533)
|
|
Research
and development
|
(3,893)
|
|
(4,476)
|
|
(1,076)
|
|
(1,209)
|
|
Royalty income
|
299
|
|
356
|
|
79
|
|
69
|
|
Other
operating income/(expense)
|
(1,588)
|
|
(1,965)
|
|
(122)
|
|
(896)
|
|
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
5,483
|
|
4,087
|
|
1,554
|
|
512
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
81
|
|
65
|
|
24
|
|
16
|
|
Finance
expense
|
(798)
|
|
(734)
|
|
(209)
|
|
(154)
|
|
Profit
on disposal of associates
|
3
|
|
94
|
|
-
|
|
66
|
|
Share
of after tax profits of associates
and joint ventures
|
31
|
|
13
|
|
5
|
|
2
|
|
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAXATION
|
4,800
|
|
3,525
|
|
1,374
|
|
442
|
|
|
|
|
|
|
|
|
|
|
Taxation
|
(754)
|
|
(1,356)
|
|
(74)
|
|
(805)
|
|
Tax rate %
|
15.7%
|
|
38.5%
|
|
5.4%
|
|
>100%
|
|
|
|
|
|
|
|
|
|
|
PROFIT/(LOSS) AFTER TAXATION
FOR THE PERIOD
|
4,046
|
|
2,169
|
|
1,300
|
|
(363)
|
|
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
423
|
|
637
|
|
85
|
|
183
|
|
Profit/(loss)
attributable to shareholders
|
3,623
|
|
1,532
|
|
1,215
|
|
(546)
|
|
|
|
|
|
|
|
|
|
|
|
4,046
|
|
2,169
|
|
1,300
|
|
(363)
|
|
|
|
|
|
|
|
|
|
|
EARNINGS/(LOSS) PER SHARE
|
73.7p
|
|
31.4p
|
|
24.7p
|
|
(11.2)p
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings/(loss) per share
|
72.9p
|
|
31.0p
|
|
24.4p
|
|
(11.2)p
|
|
|
|
|
|
|
|
|
|
|
Statement of comprehensive income
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Profit
for the year
|
4,046
|
|
2,169
|
|
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
(480)
|
|
462
|
|
Reclassification
of exchange on liquidation or disposal of overseas
subsidiaries
|
-
|
|
109
|
|
Fair
value movements on equity investments
|
|
|
(14)
|
|
Reclassification
of fair value movements on equity investments
|
-
|
|
(42)
|
|
Deferred
tax on fair value movements on equity investments
|
|
|
47
|
|
Deferred
tax reversed on reclassification of equity investments
|
-
|
|
(18)
|
|
Fair
value movements on cash flow hedges
|
140
|
|
(10)
|
|
Reclassification
of cash flow hedges to income statement
|
(175)
|
|
-
|
|
Deferred
tax on fair value movements on cash flow hedges
|
(22)
|
|
-
|
|
Deferred
tax reversed on reclassification of cash flow hedges
|
20
|
|
-
|
|
|
|
|
|
|
|
(517)
|
|
534
|
|
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
(1)
|
|
(149)
|
|
Fair
value movements on equity investments
|
180
|
|
|
|
Deferred
tax on fair value movements on equity investments
|
10
|
|
|
|
Re-measurement
gains on defined benefit plans
|
728
|
|
549
|
|
Tax on
re-measurement gains on defined benefit plans
|
(146)
|
|
(221)
|
|
|
|
|
|
|
|
771
|
|
179
|
|
|
|
|
|
|
Other
comprehensive income for the year
|
254
|
|
713
|
|
|
|
|
|
|
Total
comprehensive income for the year
|
4,300
|
|
2,882
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the year attributable to:
|
|
|
|
|
Shareholders
|
3,878
|
|
2,394
|
|
Non-controlling interests
|
422
|
|
488
|
|
|
|
|
|
|
|
4,300
|
|
2,882
|
|
|
|
|
|
|
Statement of comprehensive income
|
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
|
|
|
|
|
Profit/(loss)
for the period
|
1,300
|
|
(363)
|
|
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
(112)
|
|
(76)
|
|
Reclassification
of exchange on liquidation or disposal of overseas
subsidiaries
|
-
|
|
109
|
|
Fair
value movements on equity investments
|
|
|
(29)
|
|
Reclassification
of fair value movements on equity investments
|
-
|
|
(4)
|
|
Deferred
tax on fair value movements on equity investments
|
|
|
62
|
|
Deferred
tax reversed on reclassification of equity investments
|
-
|
|
(28)
|
|
Fair
value movements on cash flow hedges
|
(42)
|
|
(5)
|
|
Reclassification
of cash flow hedges to income statement
|
(11)
|
|
(2)
|
|
Deferred
tax on fair value movements on cash flow hedges
|
2
|
|
1
|
|
|
|
|
|
|
|
(163)
|
|
28
|
|
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
18
|
|
(2)
|
|
Fair
value movements on equity investments
|
(88)
|
|
|
|
Deferred
tax on fair value movements on equity investments
|
23
|
|
|
|
Re-measurement
gains on defined benefit plans
|
(375)
|
|
109
|
|
Tax on
re-measurement gains on defined benefit plans
|
59
|
|
(119)
|
|
|
|
|
|
|
|
(363)
|
|
(12)
|
|
|
|
|
|
|
Other
comprehensive (expense)/income for the period
|
(526)
|
|
16
|
|
|
|
|
|
|
Total
comprehensive income/(expense) for the period
|
774
|
|
(347)
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income/(expense) for the period attributable
to:
|
|
|
|
|
Shareholders
|
671
|
|
(528)
|
|
Non-controlling interests
|
103
|
|
181
|
|
|
|
|
|
|
|
774
|
|
(347)
|
|
|
|
|
|
|
Pharmaceuticals turnover - year ended 31 December
2018
|
|
|
Total
|
US
|
Europe
|
International
|
|||||||||||
|
|
|
|
|
|
|||||||||||
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
6,928
|
(1)
|
1
|
|
3,368
|
(5)
|
(3)
|
|
1,533
|
5
|
4
|
|
2,027
|
3
|
7
|
|
Seretide/Advair
|
2,422
|
(23)
|
(21)
|
|
1,097
|
(32)
|
(30)
|
|
599
|
(19)
|
(20)
|
|
726
|
(7)
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ellipta products
|
2,049
|
29
|
32
|
|
1,245
|
24
|
27
|
|
457
|
42
|
41
|
|
347
|
33
|
38
|
|
Anoro
Ellipta
|
476
|
39
|
42
|
|
318
|
36
|
39
|
|
101
|
46
|
45
|
|
57
|
46
|
54
|
|
Arnuity
Ellipta
|
44
|
26
|
29
|
|
39
|
22
|
25
|
|
-
|
-
|
-
|
|
5
|
67
|
67
|
|
Incruse
Ellipta
|
284
|
41
|
44
|
|
186
|
39
|
42
|
|
74
|
45
|
45
|
|
24
|
50
|
56
|
|
Relvar/Breo
Ellipta
|
1,089
|
8
|
10
|
|
581
|
(3)
|
(1)
|
|
253
|
25
|
24
|
|
255
|
26
|
31
|
|
Trelegy
Ellipta
|
156
|
>100
|
>100
|
|
121
|
>100
|
>100
|
|
29
|
>100
|
>100
|
|
6
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala/Mepolizumab
|
563
|
64
|
66
|
|
341
|
44
|
48
|
|
152
|
>100
|
>100
|
|
70
|
84
|
89
|
|
Avamys/Veramyst
|
300
|
7
|
10
|
|
-
|
-
|
-
|
|
74
|
(3)
|
(4)
|
|
226
|
11
|
16
|
|
Flixotide/Flovent
|
595
|
-
|
3
|
|
333
|
3
|
6
|
|
93
|
(2)
|
(3)
|
|
169
|
(5)
|
1
|
|
Ventolin
|
737
|
(4)
|
(1)
|
|
352
|
(7)
|
(5)
|
|
130
|
(2)
|
(2)
|
|
255
|
-
|
7
|
|
Other
|
262
|
(9)
|
(7)
|
|
-
|
-
|
-
|
|
28
|
4
|
-
|
|
234
|
(9)
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
4,722
|
9
|
11
|
|
2,913
|
8
|
10
|
|
1,194
|
7
|
6
|
|
615
|
14
|
20
|
|
Dolutegravir products
|
4,420
|
14
|
16
|
|
2,830
|
11
|
13
|
|
1,091
|
18
|
17
|
|
499
|
28
|
35
|
|
Tivicay
|
1,639
|
17
|
19
|
|
1,036
|
12
|
15
|
|
377
|
20
|
18
|
|
226
|
37
|
47
|
|
Triumeq
|
2,648
|
8
|
9
|
|
1,670
|
2
|
5
|
|
706
|
17
|
15
|
|
272
|
21
|
25
|
|
Juluca
|
133
|
>100
|
>100
|
|
124
|
>100
|
>100
|
|
8
|
-
|
-
|
|
1
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epzicom/Kivexa
|
117
|
(50)
|
(48)
|
|
7
|
(74)
|
(74)
|
|
44
|
(61)
|
(61)
|
|
66
|
(28)
|
(24)
|
|
Selzentry
|
115
|
(10)
|
(9)
|
|
58
|
(12)
|
(11)
|
|
35
|
(17)
|
(17)
|
|
22
|
10
|
15
|
|
Other
|
70
|
(41)
|
(40)
|
|
18
|
(59)
|
(59)
|
|
24
|
(35)
|
(38)
|
|
28
|
(26)
|
(21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
472
|
25
|
28
|
|
420
|
24
|
27
|
|
36
|
33
|
33
|
|
16
|
45
|
64
|
|
Benlysta
|
473
|
26
|
29
|
|
420
|
24
|
27
|
|
37
|
37
|
33
|
|
16
|
60
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
5,147
|
(7)
|
(4)
|
|
752
|
(23)
|
(21)
|
|
1,309
|
(5)
|
(7)
|
|
3,086
|
(4)
|
2
|
|
Dermatology
|
435
|
(4)
|
-
|
|
3
|
(57)
|
(57)
|
|
161
|
(1)
|
(2)
|
|
271
|
(5)
|
2
|
|
Augmentin
|
570
|
(3)
|
2
|
|
-
|
-
|
-
|
|
181
|
(1)
|
(2)
|
|
389
|
(4)
|
3
|
|
Avodart
|
572
|
(7)
|
(5)
|
|
12
|
(20)
|
(20)
|
|
240
|
(19)
|
(20)
|
|
320
|
6
|
11
|
|
Coreg
|
50
|
(63)
|
(63)
|
|
50
|
(63)
|
(63)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Eperzan/Tanzeum
|
31
|
(64)
|
(64)
|
|
30
|
(64)
|
(63)
|
|
1
|
(60)
|
(61)
|
|
-
|
-
|
-
|
|
Imigran/Imitrex
|
141
|
(16)
|
(16)
|
|
58
|
(25)
|
(23)
|
|
57
|
(12)
|
(14)
|
|
26
|
-
|
-
|
|
Lamictal
|
617
|
(5)
|
(3)
|
|
310
|
(7)
|
(5)
|
|
113
|
6
|
5
|
|
194
|
(8)
|
(4)
|
|
Requip
|
85
|
(23)
|
(21)
|
|
5
|
(58)
|
(58)
|
|
28
|
(3)
|
(7)
|
|
52
|
(25)
|
(20)
|
|
Serevent
|
82
|
(15)
|
(14)
|
|
43
|
(17)
|
(15)
|
|
30
|
(9)
|
(9)
|
|
9
|
(18)
|
(18)
|
|
Seroxat/Paxil
|
170
|
(8)
|
(5)
|
|
-
|
-
|
-
|
|
39
|
-
|
-
|
|
131
|
(10)
|
(7)
|
|
Valtrex
|
123
|
(4)
|
(1)
|
|
21
|
5
|
5
|
|
30
|
3
|
3
|
|
72
|
(9)
|
(4)
|
|
Zeffix
|
69
|
(22)
|
(22)
|
|
1
|
-
|
-
|
|
5
|
(17)
|
(17)
|
|
63
|
(23)
|
(23)
|
|
Other
|
2,202
|
(2)
|
1
|
|
219
|
(10)
|
(6)
|
|
424
|
(2)
|
(3)
|
|
1,559
|
(1)
|
4
|
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
Pharmaceuticals
|
17,269
|
-
|
2
|
|
7,453
|
(2)
|
1
|
|
4,072
|
2
|
1
|
|
5,744
|
-
|
5
|
|
|
--------
|
--------
|
--------
|
|
--------
|
----------
|
--------
|
|
--------
|
---------
|
--------
|
|
--------
|
---------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals turnover - three months ended 31 December
2018
|
|
|
Total
|
US
|
Europe
|
International
|
|||||||||||
|
|
|
|
|
|
|||||||||||
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
1,991
|
5
|
2
|
|
1,023
|
2
|
(3)
|
|
415
|
9
|
7
|
|
553
|
9
|
10
|
|
Seretide/Advair
|
647
|
(18)
|
(20)
|
|
299
|
(27)
|
(31)
|
|
150
|
(18)
|
(20)
|
|
198
|
1
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ellipta products
|
654
|
36
|
33
|
|
413
|
33
|
28
|
|
135
|
52
|
51
|
|
106
|
33
|
31
|
|
Anoro
Ellipta
|
144
|
32
|
28
|
|
98
|
27
|
21
|
|
29
|
45
|
45
|
|
17
|
42
|
50
|
|
Arnuity
Ellipta
|
13
|
8
|
-
|
|
11
|
10
|
10
|
|
-
|
-
|
-
|
|
2
|
-
|
(50)
|
|
Incruse
Ellipta
|
87
|
43
|
38
|
|
60
|
46
|
39
|
|
20
|
33
|
33
|
|
7
|
40
|
40
|
|
Relvar/Breo
Ellipta
|
333
|
13
|
9
|
|
186
|
3
|
(2)
|
|
71
|
31
|
28
|
|
76
|
25
|
26
|
|
Trelegy
Ellipta
|
77
|
>100
|
>100
|
|
58
|
>100
|
>100
|
|
15
|
>100
|
>100
|
|
4
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala/Mepolizumab
|
173
|
43
|
38
|
|
107
|
29
|
23
|
|
44
|
83
|
79
|
|
22
|
57
|
57
|
|
Avamys/Veramyst
|
73
|
12
|
12
|
|
-
|
-
|
-
|
|
17
|
-
|
-
|
|
56
|
17
|
17
|
|
Flixotide/Flovent
|
166
|
2
|
-
|
|
94
|
3
|
(2)
|
|
26
|
-
|
(4)
|
|
46
|
2
|
7
|
|
Ventolin
|
215
|
-
|
(1)
|
|
110
|
(1)
|
(6)
|
|
36
|
-
|
(3)
|
|
69
|
1
|
7
|
|
Other
|
63
|
(5)
|
(5)
|
|
-
|
-
|
-
|
|
7
|
17
|
33
|
|
56
|
(2)
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
1,276
|
10
|
6
|
|
786
|
10
|
3
|
|
317
|
9
|
7
|
|
173
|
15
|
18
|
|
Dolutegravir products
|
1,205
|
14
|
9
|
|
766
|
11
|
5
|
|
291
|
15
|
13
|
|
148
|
28
|
29
|
|
Tivicay
|
452
|
14
|
10
|
|
281
|
10
|
3
|
|
104
|
20
|
18
|
|
67
|
24
|
28
|
|
Triumeq
|
691
|
5
|
1
|
|
429
|
-
|
(6)
|
|
182
|
10
|
8
|
|
80
|
29
|
29
|
|
Juluca
|
62
|
>100
|
>100
|
|
56
|
>100
|
>100
|
|
5
|
-
|
-
|
|
1
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epzicom/Kivexa
|
30
|
(29)
|
(31)
|
|
4
|
-
|
(25)
|
|
11
|
(35)
|
(35)
|
|
15
|
(29)
|
(29)
|
|
Selzentry
|
31
|
3
|
(3)
|
|
16
|
-
|
(13)
|
|
9
|
(10)
|
(10)
|
|
6
|
50
|
50
|
|
Other
|
10
|
(63)
|
(52)
|
|
-
|
-
|
-
|
|
6
|
(50)
|
(50)
|
|
4
|
(56)
|
(33)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
136
|
40
|
34
|
|
121
|
39
|
31
|
|
10
|
43
|
43
|
|
5
|
67
|
>100
|
|
Benlysta
|
138
|
42
|
34
|
|
121
|
39
|
31
|
|
10
|
43
|
43
|
|
7
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Pharmaceuticals
|
1,407
|
1
|
1
|
|
189
|
(16)
|
(20)
|
|
368
|
4
|
2
|
|
850
|
5
|
7
|
|
Dermatology
|
115
|
(1)
|
2
|
|
1
|
(80)
|
(80)
|
|
43
|
8
|
5
|
|
71
|
-
|
6
|
|
Augmentin
|
146
|
2
|
3
|
|
-
|
-
|
-
|
|
49
|
7
|
7
|
|
97
|
-
|
2
|
|
Avodart
|
149
|
-
|
(1)
|
|
3
|
-
|
(67)
|
|
60
|
(6)
|
(8)
|
|
86
|
5
|
7
|
|
Coreg
|
14
|
(39)
|
(43)
|
|
14
|
(39)
|
(43)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Eperzan/Tanzeum
|
4
|
(74)
|
(80)
|
|
4
|
(72)
|
(78)
|
|
-
|
-
|
-
|
|
-
|
-
|
-
|
|
Imigran/Imitrex
|
40
|
11
|
8
|
|
19
|
27
|
27
|
|
14
|
(7)
|
(13)
|
|
7
|
17
|
17
|
|
Lamictal
|
159
|
(5)
|
(8)
|
|
83
|
(2)
|
(9)
|
|
30
|
15
|
15
|
|
46
|
(19)
|
(18)
|
|
Requip
|
23
|
(18)
|
(21)
|
|
1
|
(50)
|
(50)
|
|
9
|
-
|
(11)
|
|
13
|
(24)
|
(24)
|
|
Serevent
|
22
|
(8)
|
(12)
|
|
12
|
(8)
|
(15)
|
|
8
|
-
|
-
|
|
2
|
(33)
|
(33)
|
|
Seroxat/Paxil
|
46
|
(2)
|
(4)
|
|
-
|
-
|
-
|
|
10
|
-
|
-
|
|
36
|
(3)
|
(5)
|
|
Valtrex
|
33
|
6
|
6
|
|
7
|
75
|
50
|
|
7
|
17
|
17
|
|
19
|
(10)
|
(5)
|
|
Zeffix
|
16
|
(20)
|
(25)
|
|
-
|
-
|
-
|
|
1
|
(50)
|
(50)
|
|
15
|
(17)
|
(22)
|
|
Other
|
640
|
8
|
10
|
|
45
|
(27)
|
(24)
|
|
137
|
6
|
5
|
|
458
|
14
|
16
|
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
Pharmaceuticals
|
4,810
|
6
|
4
|
|
2,119
|
4
|
(1)
|
|
1,110
|
7
|
6
|
|
1,581
|
7
|
9
|
|
|
--------
|
--------
|
--------
|
|
--------
|
----------
|
--------
|
|
--------
|
---------
|
--------
|
|
--------
|
---------
|
--------
|
|
Vaccines turnover - year ended 31 December 2018
|
|
|
Total
|
US
|
Europe
|
International
|
|||||||||||
|
|
_______
|
|
|
|
|||||||||||
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meningitis
|
881
|
(1)
|
2
|
|
374
|
10
|
13
|
|
336
|
(14)
|
(15)
|
|
171
|
7
|
22
|
|
Bexsero
|
584
|
5
|
9
|
|
200
|
32
|
34
|
|
311
|
(9)
|
(11)
|
|
73
|
18
|
52
|
|
Menveo
|
232
|
(15)
|
(12)
|
|
174
|
(7)
|
(5)
|
|
17
|
(50)
|
(50)
|
|
41
|
(23)
|
(15)
|
|
Other
|
65
|
8
|
7
|
|
-
|
-
|
-
|
|
8
|
(47)
|
(47)
|
|
57
|
27
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
523
|
7
|
10
|
|
385
|
7
|
9
|
|
66
|
35
|
33
|
|
72
|
(8)
|
(1)
|
|
Fluarix, FluLaval
|
523
|
7
|
10
|
|
385
|
7
|
9
|
|
66
|
35
|
33
|
|
72
|
(8)
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
784
|
>100
|
>100
|
|
733
|
>100
|
>100
|
|
2
|
-
|
-
|
|
49
|
-
|
-
|
|
Shingrix
|
784
|
>100
|
>100
|
|
733
|
>100
|
>100
|
|
2
|
-
|
-
|
|
49
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Vaccines
|
3,706
|
(1)
|
-
|
|
1,209
|
5
|
8
|
|
1,157
|
-
|
(1)
|
|
1,340
|
(8)
|
(6)
|
|
Infanrix,
Pediarix
|
680
|
(8)
|
(7)
|
|
296
|
(10)
|
(8)
|
|
266
|
(16)
|
(17)
|
|
118
|
20
|
28
|
|
Boostrix
|
517
|
(8)
|
(7)
|
|
265
|
1
|
3
|
|
162
|
(12)
|
(14)
|
|
90
|
(20)
|
(19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
808
|
17
|
19
|
|
458
|
21
|
24
|
|
245
|
22
|
21
|
|
105
|
(7)
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
521
|
(1)
|
1
|
|
126
|
(5)
|
(2)
|
|
110
|
16
|
15
|
|
285
|
(4)
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
424
|
(17)
|
(17)
|
|
-
|
-
|
-
|
|
58
|
(13)
|
(13)
|
|
366
|
(17)
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra,
Varilrix
|
305
|
1
|
2
|
|
-
|
-
|
-
|
|
159
|
(3)
|
(4)
|
|
146
|
6
|
9
|
|
Cervarix
|
138
|
3
|
2
|
|
-
|
-
|
-
|
|
20
|
(31)
|
(34)
|
|
118
|
12
|
12
|
|
Other
|
313
|
6
|
6
|
|
64
|
45
|
49
|
|
137
|
32
|
30
|
|
112
|
(24)
|
(25)
|
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
Vaccines
|
5,894
|
14
|
16
|
|
2,701
|
45
|
48
|
|
1,561
|
(2)
|
(4)
|
|
1,632
|
(3)
|
-
|
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover - three months ended 31 December
2018
|
|
|
Total
|
US
|
Europe
|
International
|
|||||||||||
|
|
|
|
-
|
|
|||||||||||
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
|
|
Growth
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
£m
|
£%
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meningitis
|
188
|
(6)
|
(9)
|
|
50
|
(25)
|
(39)
|
|
78
|
(9)
|
(10)
|
|
60
|
25
|
33
|
|
Bexsero
|
114
|
(1)
|
(3)
|
|
23
|
44
|
13
|
|
72
|
(6)
|
(8)
|
|
19
|
(14)
|
5
|
|
Menveo
|
44
|
(32)
|
(37)
|
|
27
|
(47)
|
(55)
|
|
4
|
(20)
|
(20)
|
|
13
|
44
|
56
|
|
Other
|
30
|
43
|
38
|
|
-
|
-
|
-
|
|
2
|
(50)
|
(50)
|
|
28
|
65
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
193
|
74
|
69
|
|
135
|
90
|
83
|
|
31
|
82
|
82
|
|
27
|
17
|
17
|
|
Fluarix, FluLaval
|
193
|
74
|
69
|
|
135
|
90
|
83
|
|
31
|
82
|
82
|
|
27
|
17
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
221
|
>100
|
>100
|
|
205
|
>100
|
>100
|
|
1
|
-
|
-
|
|
15
|
-
|
-
|
|
Shingrix
|
221
|
>100
|
>100
|
|
205
|
>100
|
>100
|
|
1
|
-
|
-
|
|
15
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Vaccines
|
877
|
-
|
(3)
|
|
276
|
29
|
18
|
|
267
|
(6)
|
(7)
|
|
334
|
(11)
|
(11)
|
|
Infanrix,
Pediarix
|
165
|
5
|
1
|
|
75
|
39
|
30
|
|
60
|
(20)
|
(21)
|
|
30
|
7
|
7
|
|
Boostrix
|
139
|
4
|
(1)
|
|
64
|
31
|
20
|
|
37
|
(27)
|
(29)
|
|
38
|
12
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
190
|
18
|
14
|
|
103
|
34
|
23
|
|
60
|
22
|
22
|
|
27
|
(23)
|
(17)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
134
|
6
|
4
|
|
25
|
(11)
|
(21)
|
|
28
|
12
|
12
|
|
81
|
11
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
106
|
(5)
|
(6)
|
|
-
|
-
|
-
|
|
21
|
(16)
|
(16)
|
|
85
|
(1)
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra,
Varilrix
|
64
|
(3)
|
(4)
|
|
-
|
-
|
-
|
|
32
|
(17)
|
(18)
|
|
32
|
17
|
15
|
|
Cervarix
|
15
|
(76)
|
(81)
|
|
-
|
-
|
-
|
|
5
|
(17)
|
(33)
|
|
10
|
(82)
|
(86)
|
|
Other
|
64
|
12
|
10
|
|
9
|
46
|
(3)
|
|
24
|
80
|
75
|
|
31
|
(17)
|
(11)
|
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
Vaccines
|
1,479
|
22
|
18
|
|
666
|
78
|
65
|
|
377
|
(2)
|
(4)
|
|
436
|
(3)
|
(2)
|
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
--------
|
--------
|
--------
|
|
Balance sheet
|
|
|
|
|
31 December 2018
£m
|
|
31
December 2017
£m
|
|
ASSETS
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
|
11,058
|
|
10,860
|
|
Goodwill
|
|
|
5,789
|
|
5,734
|
|
Other
intangible assets
|
|
|
17,202
|
|
17,562
|
|
Investments
in associates and joint ventures
|
|
|
236
|
|
183
|
|
Other
investments
|
|
|
1,322
|
|
918
|
|
Deferred
tax assets
|
|
|
3,887
|
|
3,796
|
|
Derivative
financial instruments
|
|
|
69
|
|
8
|
|
Other
non-current assets
|
|
|
1,576
|
|
1,413
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
41,139
|
|
40,474
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Inventories
|
|
|
5,476
|
|
5,557
|
|
Current
tax recoverable
|
|
|
229
|
|
258
|
|
Trade
and other receivables
|
|
|
6,423
|
|
6,000
|
|
Derivative
financial instruments
|
|
|
188
|
|
68
|
|
Liquid
investments
|
|
|
84
|
|
78
|
|
Cash
and cash equivalents
|
|
|
3,874
|
|
3,833
|
|
Assets
held for sale
|
|
|
653
|
|
113
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
16,927
|
|
15,907
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
58,066
|
|
56,381
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
Short-term
borrowings
|
|
|
(5,793)
|
|
(2,825)
|
|
Contingent
consideration liabilities
|
|
|
(837)
|
|
(1,076)
|
|
Trade
and other payables
|
|
|
(14,037)
|
|
(20,970)
|
|
Derivative
financial instruments
|
|
|
(127)
|
|
(74)
|
|
Current
tax payable
|
|
|
(965)
|
|
(995)
|
|
Short-term
provisions
|
|
|
(732)
|
|
(629)
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
(22,491)
|
|
(26,569)
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
Long-term
borrowings
|
|
|
(20,271)
|
|
(14,264)
|
|
Corporation
tax payable
|
|
|
(272)
|
|
(411)
|
|
Deferred
tax liabilities
|
|
|
(1,156)
|
|
(1,396)
|
|
Pensions
and other post-employment benefits
|
|
|
(3,125)
|
|
(3,539)
|
|
Other
provisions
|
|
|
(691)
|
|
(636)
|
|
Derivative
financial instruments
|
|
|
(1)
|
|
-
|
|
Contingent
consideration liabilities
|
|
|
(5,449)
|
|
(5,096)
|
|
Other
non-current liabilities
|
|
|
(938)
|
|
(981)
|
|
|
|
|
|
|
|
|
Total non-current liabilities
|
|
|
(31,903)
|
|
(26,323)
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
(54,394)
|
|
(52,892)
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
3,672
|
|
3,489
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
Share
capital
|
|
|
1,345
|
|
1,343
|
|
Share
premium account
|
|
|
3,091
|
|
3,019
|
|
Retained
earnings
|
|
|
(2,137)
|
|
(6,477)
|
|
Other
reserves
|
|
|
2,061
|
|
2,047
|
|
|
|
|
|
|
|
|
Shareholders' equity
|
|
|
4,360
|
|
(68)
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
|
|
(688)
|
|
3,557
|
|
|
|
|
|
|
|
|
TOTAL EQUITY
|
|
|
3,672
|
|
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 year
|
|
|
3,623
|
|
3,623
|
423
|
4,046
|
|
Other comprehensive income for the year
|
|
|
124
|
131
|
255
|
(1)
|
254
|
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Total
comprehensive income for the year
|
|
|
3,747
|
131
|
3,878
|
422
|
4,300
|
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(570)
|
(570)
|
|
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
|
|
|
(3,927)
|
|
(3,927)
|
|
(3,927)
|
|
Shares
issued
|
2
|
72
|
|
|
74
|
|
74
|
|
Realised
after tax profits on disposal of
equity
investments
|
|
|
56
|
(56)
|
|
|
-
|
|
Share
of associates and joint ventures
realised profits on disposal of
equity investments
|
|
|
38
|
(38)
|
|
|
-
|
|
Write-down
on shares held by ESOP Trusts
|
|
|
(265)
|
265
|
|
|
-
|
|
Share-based
incentive plans
|
|
|
360
|
|
360
|
|
360
|
|
Tax on
share-based incentive plans
|
|
|
2
|
|
2
|
|
2
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
At 31 December 2018
|
1,345
|
3,091
|
(2,137)
|
2,061
|
4,360
|
(688)
|
3,672
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1
January 2017
|
1,342
|
2,954
|
(5,392)
|
2,220
|
1,124
|
3,839
|
4,963
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
1,532
|
|
1,532
|
637
|
2,169
|
|
Other comprehensive income for the year
|
|
|
899
|
(37)
|
862
|
(149)
|
713
|
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Total
comprehensive income for the year
|
|
|
2,431
|
(37)
|
2,394
|
488
|
2,882
|
|
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(789)
|
(789)
|
|
Contribution
from non-controlling interests
|
|
|
|
|
|
21
|
21
|
|
Dividends
to shareholders
|
|
|
(3,906)
|
|
(3,906)
|
|
(3,906)
|
|
Changes
in non-controlling interests
|
|
|
|
|
|
(2)
|
(2)
|
|
Shares
issued
|
1
|
55
|
|
|
56
|
|
56
|
|
Shares
acquired by ESOP Trusts
|
|
10
|
581
|
(656)
|
(65)
|
|
(65)
|
|
Write-down
on shares held by ESOP Trusts
|
|
|
(520)
|
520
|
|
|
-
|
|
Share-based
incentive plans
|
|
|
333
|
|
333
|
|
333
|
|
Tax on
share-based incentive plans
|
|
|
(4)
|
|
(4)
|
|
(4)
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
At 31
December 2017
|
1,343
|
3,019
|
(6,477)
|
2,047
|
(68)
|
3,557
|
3,489
|
|
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
------------
|
|
Cash flow statement - year ended 31
December 2018
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
|
|
Profit after tax
|
4,046
|
|
2,169
|
|
|
Tax on
profits
|
754
|
|
1,356
|
|
|
Share
of after tax profits of associates and joint ventures
|
(31)
|
|
(13)
|
|
|
Profit
on disposal of interest in associates
|
(3)
|
|
(94)
|
|
|
Net
finance expense
|
717
|
|
669
|
|
|
Depreciation,
amortisation and other adjusting items
|
1,763
|
|
2,981
|
|
|
Increase
in working capital
|
(247)
|
|
(737)
|
|
|
Contingent
consideration paid
|
(984)
|
|
(594)
|
|
|
Increase
in other net liabilities (excluding contingent consideration
paid)
|
3,732
|
|
2,521
|
|
|
|
|
|
|
|
|
Cash generated from operations
|
9,747
|
|
8,258
|
|
|
Taxation
paid
|
(1,326)
|
|
(1,340)
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
8,421
|
|
6,918
|
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
(1,344)
|
|
(1,545)
|
|
|
Proceeds
from sale of property, plant and equipment
|
168
|
|
281
|
|
|
Purchase
of intangible assets
|
(452)
|
|
(657)
|
|
|
Proceeds
from sale of intangible assets
|
256
|
|
48
|
|
|
Purchase
of equity investments
|
(309)
|
|
(80)
|
|
|
Proceeds
from sale of equity investments
|
151
|
|
64
|
|
|
Contingent
consideration paid
|
(153)
|
|
(91)
|
|
|
Disposal
of businesses
|
26
|
|
282
|
|
|
Proceeds
from disposal of interest in associates
|
3
|
|
196
|
|
|
Investment
in associates and joint ventures
|
(10)
|
|
(15)
|
|
|
Decrease
in liquid investments
|
-
|
|
4
|
|
|
Interest
received
|
72
|
|
64
|
|
|
Dividends
from associates and joint ventures
|
39
|
|
6
|
|
|
|
|
|
|
|
|
Net cash outflow from investing activities
|
(1,553)
|
|
(1,443)
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
Issue
of share capital
|
74
|
|
56
|
|
|
Shares
acquired by ESOP Trusts
|
-
|
|
(65)
|
|
|
Decrease
in short-term loans
|
(1,986)
|
|
(3,200)
|
|
|
Increase
in long-term loans
|
10,138
|
|
2,233
|
|
|
Net
repayment of obligations under finance leases
|
(28)
|
|
(23)
|
|
|
Purchase
of non-controlling interests
|
(9,320)
|
|
(29)
|
|
|
Interest
paid
|
(766)
|
|
(781)
|
|
|
Dividends
paid to shareholders
|
(3,927)
|
|
(3,906)
|
|
|
Distributions
to non-controlling interests
|
(570)
|
|
(779)
|
|
|
Contributions
from non-controlling interests
|
21
|
|
21
|
|
|
Other
financing items
|
(25)
|
|
93
|
|
|
|
|
|
|
|
|
Net cash outflow from financing activities
|
(6,389)
|
|
(6,380)
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and bank overdrafts in the
year
|
479
|
|
(905)
|
|
|
|
|
|
|
|
|
Cash
and bank overdrafts at beginning of the year
|
3,600
|
|
4,605
|
|
|
Exchange
adjustments
|
8
|
|
(100)
|
|
|
Increase/(decrease)
in cash and bank overdrafts
|
479
|
|
(905)
|
|
|
|
|
|
|
|
|
Cash and bank overdrafts at end of the year
|
4,087
|
|
3,600
|
|
|
|
|
|
|
|
|
Cash
and bank overdrafts at end of the year comprise:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
3,874
|
|
3,833
|
|
|
Cash
and cash equivalents reported in assets held for sale
|
485
|
|
-
|
|
|
|
|
|
|
|
|
|
4,359
|
|
3,833
|
|
|
Overdrafts
|
(272)
|
|
(233)
|
|
|
|
|
|
|
|
|
4,087
|
|
3,600
|
|
|
|
|
|
|
|
|
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
|
|
|
2018
£m
|
|
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
17,269
|
|
17,276
|
|
-
|
|
2
|
|
Vaccines
|
5,894
|
|
5,160
|
|
14
|
|
16
|
|
Consumer
Healthcare
|
7,658
|
|
7,750
|
|
(1)
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
30,821
|
|
30,186
|
|
2
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|
|
2018
£m
|
|
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,420
|
|
8,667
|
|
(3)
|
|
-
|
|
Pharmaceuticals
R&D
|
(2,676)
|
|
(2,740)
|
|
(2)
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
5,744
|
|
5,927
|
|
(3)
|
|
-
|
|
Vaccines
|
1,943
|
|
1,644
|
|
18
|
|
25
|
|
Consumer
Healthcare
|
1,517
|
|
1,373
|
|
10
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
9,204
|
|
8,944
|
|
3
|
|
7
|
|
Corporate
and other unallocated costs
|
(459)
|
|
(376)
|
|
22
|
|
15
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
8,745
|
|
8,568
|
|
2
|
|
6
|
|
Adjusting
items
|
(3,262)
|
|
(4,481)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
5,483
|
|
4,087
|
|
34
|
|
43
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
81
|
|
65
|
|
|
|
|
|
Finance
costs
|
(798)
|
|
(734)
|
|
|
|
|
|
Profit
on disposal of associates
|
3
|
|
94
|
|
|
|
|
|
Share
of after tax profits of associates
and joint ventures
|
31
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
4,800
|
|
3,525
|
|
36
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Turnover by segment
|
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,810
|
|
4,540
|
|
6
|
|
4
|
|
Vaccines
|
1,479
|
|
1,208
|
|
22
|
|
18
|
|
Consumer
Healthcare
|
1,908
|
|
1,891
|
|
1
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
8,197
|
|
7,639
|
|
7
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|
|
Q4 2018
£m
|
|
Q4
2017
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
2,340
|
|
2,314
|
|
1
|
|
(3)
|
|
Pharmaceuticals
R&D
|
(778)
|
|
(717)
|
|
9
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
1,562
|
|
1,597
|
|
(2)
|
|
(6)
|
|
Vaccines
|
420
|
|
231
|
|
82
|
|
71
|
|
Consumer
Healthcare
|
352
|
|
302
|
|
17
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
2,334
|
|
2,130
|
|
10
|
|
5
|
|
Corporate
and other unallocated costs
|
(138)
|
|
(92)
|
|
50
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
2,196
|
|
2,038
|
|
8
|
|
4
|
|
Adjusting
items
|
(642)
|
|
(1,526)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
1,554
|
|
512
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Finance
income
|
24
|
|
16
|
|
|
|
|
|
Finance
costs
|
(209)
|
|
(154)
|
|
|
|
|
|
Profit
on disposal of associates
|
-
|
|
66
|
|
|
|
|
|
Share
of after tax profits of associates
and joint ventures
|
5
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
1,374
|
|
442
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
Legal matters
The
Group is involved in significant legal and administrative
proceedings, principally product liability, intellectual property,
tax, anti-trust and governmental investigations as well as related
private litigation, which are more fully described in the 'Legal
Proceedings' note in the Annual Report 2017.
At 31
December 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 developments since the date of the
Annual Report 2017.
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
2018, the charge for taxation on Total profits amounted to
£754 million and represented an effective tax rate of 15.7%
(2017: 38.5%). Tax on Adjusted profits amounted to
£1,535 million and represented an effective Adjusted tax rate
of 19.0% (2017: 21.0%).
In the
quarter, the tax on Total profits amounted to £74 million and
represented an effective tax rate of 5.4% (Q4 2017:
>100%). Tax on Adjusted profits amounted to £355
million and represented an effective Adjusted tax rate of 17.5% (Q4
2017: 20.0%).
The
reduction from the prior year effective tax rate on Total profits
was driven primarily by a favourable comparison with the impact of
US tax reform, which resulted in a number of charges in Q4
2017. The Total tax charge in 2018 included the effect of a
reduced estimate of the 2017 impact of US tax reform of £125
million (£101 million in Q4 2018), following additional
guidance being released by the IRS and a re-assessment of estimates
of uncertain tax positions following the settlement of a number of
open issues with tax authorities. The reduction from the
prior year effective tax rate on Adjusted profit was driven
primarily by the reduction in the US Federal tax rate.
The
Group's balance sheet at 31 December 2018 included a current tax
payable liability of £965 million, a non-current tax payable
liability of £272 million and a tax recoverable asset of
£229 million.
|
|
Additional information
|
|
Accounting policies and basis of preparation
|
|
This
unaudited Results Announcement contains condensed financial
information for the year and three monthsended 31 December 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
will 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 audit of the statutory accounts for
the year ended 31 December 2018 is not yet complete. 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:
|
|
|
|
|
2018
|
|
2017
|
|
Q4 2018
|
|
Q4
2017
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Average
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
|
US$/£
|
|
|
1.33
|
|
1.30
|
|
1.27
|
|
1.36
|
|
|
|
Euro/£
|
|
|
1.13
|
|
1.15
|
|
1.13
|
|
1.15
|
|
|
|
Yen/£
|
|
|
147
|
|
145
|
|
144
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Period-end
rates:
|
|
|
|
|
|
|
|
|
|
||
|
|
|
US$/£
|
|
|
1.27
|
|
1.35
|
|
1.27
|
|
1.35
|
|
|
|
Euro/£
|
|
|
1.11
|
|
1.13
|
|
1.11
|
|
1.13
|
|
|
|
Yen/£
|
|
|
140
|
|
152
|
|
140
|
|
152
|
|
During Q4 2018, average Sterling exchange rates were weaker against
the US Dollar, the Euro and Yen compared with the same period in
2017. During the year ended 31 December 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 period-end
rates.
|
|
Weighted average number of shares
|
|
|
|
|
|
2018
millions
|
|
2017
millions
|
|
|
|
|
|
|
Weighted
average number of shares - basic
|
4,914
|
|
4,886
|
|
Dilutive
effect of share options and share awards
|
57
|
|
55
|
|
|
|
|
|
|
Weighted
average number of shares - diluted
|
4,971
|
|
4,941
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
Q4 2018
millions
|
|
Q4
2017
millions
|
|
|
|
|
|
|
Weighted
average number of shares - basic
|
4,920
|
|
4,891
|
|
Dilutive
effect of share options and share awards
|
58
|
|
-
|
|
|
|
|
|
|
Weighted
average number of shares - diluted
|
4,978
|
|
4,891
|
|
|
|
|
|
|
Because
the Group reported losses attributable to shareholders in Q4 2017,
there is no dilution effect of share options and share
awards.
At 31
December 2018, 4,923 million shares were in free issue (excluding
Treasury shares and shares held by the ESOP Trusts). This
compares with 4,891 million shares at 31 December
2017.
|
|
Net assets
|
|
The
book value of net assets increased by £183 million from
£3,489 million at 31 December 2017 to £3,672 million at
31 December 2018. This primarily reflected the Total profit
for the year and re-measurement gains on defined benefit plans
exceeding dividends paid in the year.
The
carrying value of investments in associates and joint ventures at
31 December 2018 was £236 million (31 December 2017: £183
million), with a market value of £487 million (31 December
2017: £372 million).
At 31
December 2018, the net deficit on the Group's pension plans was
£995 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%, partly
offset by lower UK assets.
At 31
December 2018, the post-retirement benefits provision was
£1,379 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 31
December 2018, trade and other payables were £14,037 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 primarily funded by utilising the
proceeds of bonds issued with maturity dates 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 £1,240 million (31
December 2017: £1,304 million).
Contingent
consideration amounted to £6,286 million at 31 December 2018
(31 December 2017: £6,172 million), of which £5,937
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 £252 million in respect of
preferential dividends. The liability for preferential
dividends due to Pfizer at 31 December 2018 was £15 million
(31 December 2017: £17 million). An explanation of the
accounting for the non-controlling interests in ViiV Healthcare is
set out on page 64.
Of the
contingent consideration payable (on a post-tax basis) at 31
December 2018, £837 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 31 December 2018 have been calculated based on the
period-end exchange rates, primarily US$1.27/£1 and
€1.11/£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
|
|
176
|
|
(6)
|
|
5 cent
depreciation of US Dollar
|
|
|
(33)
|
|
(163)
|
|
6
|
|
10 cent
appreciation of US Dollar
|
|
|
75
|
|
367
|
|
(13)
|
|
10 cent
depreciation of US Dollar
|
|
|
(64)
|
|
(313)
|
|
11
|
|
5 cent
appreciation of Euro
|
|
|
21
|
|
54
|
|
14
|
|
5 cent
depreciation of Euro
|
|
|
(19)
|
|
(49)
|
|
(13)
|
|
10 cent
appreciation of Euro
|
|
|
44
|
|
114
|
|
29
|
|
10 cent
depreciation of Euro
|
|
|
(37)
|
|
(95)
|
|
(25)
|
|
|
|
|
|
|
|
|
|
|
Movements
in contingent consideration are as follows:
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Contingent
consideration at beginning of the year
|
6,172
|
|
5,896
|
|
Re-measurement
through income statement
|
1,251
|
|
961
|
|
Cash
payments: operating cash flows
|
(984)
|
|
(594)
|
|
Cash
payments: investing activities
|
(153)
|
|
(91)
|
|
|
|
|
|
|
Contingent
consideration at end of the year
|
6,286
|
|
6,172
|
|
|
|
|
|
|
The re-measurements of contingent consideration in the year
reflected updated forecasts, exchange rate movements and the unwind
of the discounts on the liabilities. The cash settlement in
the period included£793 million (2017: £671 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 fortax
purposes.
|
|
At 31 December 2018, the ESOP Trust held 41.6 million GSK shares
against the future exercise of share options and share
awards. The carrying value of £161 million has been
deducted from other reserves. The market value of these
shares was £619 million.
At 31 December 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 31 December 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 58.
|
|
Business acquisitions and disposals
|
|
On 3
December 2018, GSK announced the agreement to acquire Tesaro, Inc.,
an oncology focused biopharmaceutical company, for $5.1 billion
(approximately £4.0 billion). The transaction completed
on 22 January 2019.
On 3
December 2018, GSK announced the agreement to
divest Horlicks and a number of other
Consumer Healthcare Nutrition brands plus the Group's 82% stake in
GlaxoSmithKline Bangladesh Limited to Unilever plc, and to merge
one of the Group's Indian subsidiaries, GSK Consumer Healthcare
Limited, with Hindustan Unilever Limited. Proceeds comprise
approximately £0.6 billion in cash and approximately 133.8
million shares in Hindustan Unilever Limited with a value at 31
December 2018 of £2.75 billion. The relevant assets and
liabilities have been moved to Assets held for sale in the Group's
balance sheet. This transaction is expected to complete by
the end of 2019.
On 19
December 2018, GSK announced the agreement with Pfizer, Inc. to
combine the two groups' consumer healthcare businesses into one
joint venture. GSK will have a majority equity interest of
68% and Pfizer will have an equity interest of 32%. The
transaction is subject to approval by GSK shareholders and is
expected to complete by end of 2019.
|
|
Reconciliation of cash flow to movements in net debt
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Net
debt at beginning of the year
|
(13,178)
|
|
(13,804)
|
|
|
|
|
|
|
Increase/(decrease)
in cash and bank overdrafts
|
479
|
|
(905)
|
|
Decrease
in liquid investments
|
-
|
|
(4)
|
|
Repayment
of short-term loans
|
1,986
|
|
3,200
|
|
Increase
in long-term loans
|
(10,138)
|
|
(2,233)
|
|
Net
repayment of obligations under finance leases
|
28
|
|
23
|
|
Exchange
adjustments
|
(776)
|
|
585
|
|
Other
non-cash movements
|
(22)
|
|
(40)
|
|
|
|
|
|
|
Increase
in net debt
|
(8,443)
|
|
626
|
|
|
|
|
|
|
Net
debt at end of the year
|
(21,621)
|
|
(13,178)
|
|
|
|
|
|
|
Net debt analysis
|
|
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
|
|
Liquid
investments
|
|
|
84
|
|
78
|
|
Cash
and cash equivalents
|
|
|
3,874
|
|
3,833
|
|
Cash
and cash equivalents reported in assets held for sale
|
|
485
|
|
-
|
|
|
Short-term
borrowings
|
|
|
(5,793)
|
|
(2,825)
|
|
Long-term
borrowings
|
|
|
(20,271)
|
|
(14,264)
|
|
|
|
|
|
|
|
|
Net
debt at end of the period
|
|
|
(21,621)
|
|
(13,178)
|
|
|
|
|
|
|
|
|
Free cash flow reconciliation
|
|
|
2018
£m
|
|
2017
(revised)
£m
|
|
Q4
2018
£m
|
|
|
|
|
|
|
|
|
Net
cash inflow from operating activities
|
8,421
|
|
6,918
|
|
4,119
|
|
Purchase
of property, plant and equipment
|
(1,344)
|
|
(1,545)
|
|
(502)
|
|
Proceeds
from sale of property, plant and equipment
|
168
|
|
281
|
|
98
|
|
Purchase
of intangible assets
|
(452)
|
|
(657)
|
|
(133)
|
|
Proceeds
from disposals of intangible assets
|
256
|
|
48
|
|
91
|
|
Net
finance costs
|
(694)
|
|
(717)
|
|
(291)
|
|
Dividends
from joint ventures and associates
|
39
|
|
6
|
|
-
|
|
Contingent
consideration paid (reported in investing
activities)
|
(153)
|
|
(91)
|
|
(30)
|
|
Distributions
to non-controlling interests
|
(570)
|
|
(779)
|
|
(35)
|
|
Contributions
from non-controlling interests
|
21
|
|
21
|
|
-
|
|
|
|
|
|
|
|
|
Free
cash flow
|
5,692
|
|
3,485
|
|
3,317
|
|
|
|
|
|
|
|
|
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
dolutegravir-containing products have a favourable impact on the
proportion of the preferential dividends that is allocated to
GSK. Adjusting items are allocated to shareholders based on
their equity interests. GSK was entitled to approximately 85%
of the Total earnings and 82% of the Adjusted earnings of ViiV
Healthcare for 2018. Re-measurements of the liabilities for
the preferential dividends allocated to Pfizer and Shionogi are
included within other operating income.
Acquisition-related arrangements
As
consideration for the acquisition of Shionogi's interest in the
former Shionogi-ViiV Healthcare joint venture in 2012, Shionogi
received the 10% equity stake in ViiV Healthcare and ViiV
Healthcare also agreed to pay additional future cash consideration
to Shionogi, contingent on the future sales performance of the
products being developed by that joint venture, principally
dolutegravir. Under IFRS 3 'Business combinations', GSK was
required to provide for the estimated fair value of this contingent
consideration at the time of acquisition and is required to update
the liability to the latest estimate of fair value at each
subsequent period end. The liability for the contingent
consideration recognised in the balance sheet at the date of
acquisition was £659 million. Subsequent re-measurements
are reflected within other operating income/expense and within
Adjusting items in the income statement in each period, and at 31
December 2018, the liability, which is discounted at 8.5%, stood at
£5,937 million.
Cash
payments to settle the contingent consideration are made to
Shionogi by ViiV Healthcare each quarter, based on the actual sales
performance of the relevant products in the previous quarter.
These payments reduce the balance sheet liability and hence
are not recorded in the income statement. The cash payments
made to Shionogi by ViiV Healthcare in 2018 were £793
million.
Because
the liability is required to be recorded at the fair value of
estimated future payments, there is a significant timing difference
between the charges that are recorded in the Total income statement
to reflect movements in the fair value of the liability and the
actual cash payments made to settle the
liability.
The
cash payments 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:
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Contingent
consideration at beginning of the year
|
5,542
|
|
5,304
|
|
Re-measurement
through income statement
|
1,188
|
|
909
|
|
Cash
payments: operating cash flows
|
(703)
|
|
(587)
|
|
Cash
payments: investing activities
|
(90)
|
|
(84)
|
|
|
|
|
|
|
Contingent
consideration at end of the year
|
5,937
|
|
5,542
|
|
|
|
|
|
|
Of the
contingent consideration payable (on a post-tax basis) to Shionogi
at 31 December 2018, £815 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:
|
|
|
2018
£m
|
|
2017
£m
|
|
|
|
|
|
|
Pfizer
put option
|
1,240
|
|
1,304
|
|
Pfizer
preferential dividend
|
15
|
|
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.
|
|
|
GlaxoSmithKline plc
|
|
|
(Registrant)
|
|
|
|
|
Date: February
06, 2019
|
|
|
|
|
|
|
By: VICTORIA
WHYTE
--------------------------
|
|
|
|
|
|
Victoria Whyte
|
|
|
Authorised
Signatory for and on
|
|
|
behalf
of GlaxoSmithKline plc
|