Last checked at 31 Jul 2020 14:02
Publication of GlaxoSmithKline Capital plc
Interim Management Report 2020
Today, 29 July 2020, GlaxoSmithKline Capital plc (the "Company") published on the GlaxoSmithKline Group ("GSK") website, www.gsk.com *, its Interim Management Report in respect of the period ended 30 June 2020
In compliance with Listing Rule 9.6.1 of the UK Financial Conduct Authority ("FCA"), copies of the Company's Interim Management Report, have been submitted to the UK Listing Authority's NSM submission portal via the Electronic Submission System (ESS). A copy can be viewed at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
In accordance with the FCA's Disclosure and Transparency Rules 4.2 and 6.3.5, Appendix A to this announcement contains the Company's Interim Management Report, which includes a description of the principal risks and uncertainties affecting it together with a responsibility statement.
V A Whyte
Company Secretary
29 July 2020
* https://www.gsk.com/en-gb/about-us/policies-codes-and-standards/other-reports
Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, GlaxoSmithKline plc (GSK) and the company cautions investors that any forward-looking statements or projections made by GSK, including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Such factors include, but are not limited to, those described under Item 3.D "Risk Factors" in GSK's Annual Report on Form 20-F for 2019 and any impacts of the COVID-19 pandemic.
GlaxoSmithKline Capital plc
(Registered number: 02258699)
Interim Management Report
for the half year ended 30 June 2020
Registered office address:
980 Great West Road
Brentford
Middlesex TW8 9G
Contents
| Pages |
Interim report | 1-2 |
Income statement | 3 |
Statement of comprehensive income | 4 |
Statement of financial position | 5 |
Statement of changes in equity | 6 |
Cash flow statement | 7 |
Notes to the financial statements | 8-10 |
Results announcement and interim management report for the half year ended 30 June 2020
Performance
GlaxoSmithKline Capital plc (the "Company") is a member of the GlaxoSmithKline Group (the "Group"). The principal activities of the Company during the financial year were the issuance of notes under the Group's European Medium-Term Note programme and the provision of financial services to other companies within the Group.
The Directors do not envisage any change to the nature of the business in the foreseeable future.
Review of business
The Company made a profit for the half year ended 30 June 2020 of £10,366,000 (2019: £7,229,000), which will be transferred to reserves. The Directors are of the opinion that the current level of activity and the period end financial position are satisfactory and will remain so in the foreseeable future.
No dividend is proposed to the holders of ordinary shares in respect of the period ended 30 June 2020 (2019:
£nil).
At 30 June 2020, the Company had in issue £12,764,934,000 European Medium-Term Notes and £4,458,853,000 US Medium Term Notes (31 December 2019: £11,807,444,000 and £5,650,654,000, respectively), which mature at dates between 2020 and 2045. All notes currently in issue pay interest on a fixed rate basis, except for the €1.5 billion (£1.4 billion) 2021 European Medium Term Note and $750 million (£611 million) 2021 US Medium Term Note which are on a floating rate basis.
Principal risks and uncertainties
The Directors of GlaxoSmithKline plc manage the risks of the Group at a group level, rather than at an individual statutory entity level. For this reason, the Company's Directors believe that a discussion of the Group's risks would not be appropriate for an understanding of the development, performance or position of the Company's business. The principal risks and uncertainties of the Group, which include those of the Company, are discussed in the Group's 2019 Annual Report which does not form part of this report.
Details of the Company's financial risk management is also disclosed in the Company's Annual Report for the year ended 31 December 2019.
Approach to Brexit
In preparing for the UK's exit from the EU (BREXIT), our overriding priority has been to maintain continuity of supply of our products to people in the UK and EU. As a result, we have taken a risk-based approach to planning and mitigation, in conjunction and complete alignment with the Group, whilst the negotiations on future relationships between the UK and the European Union is negotiated.
We have significant experience of maintaining resilient supply chains and have used existing processes to develop a new supply model based on the UK leaving the EU. Uncertainty remains about the new operating environment after the transition ends on 31 December 2020, but all preparations are being taken to minimise disruption to the supply of our products to consumers.
Directors' responsibility statement
The Board of Directors approved this document on 27 July 2020.
The Directors confirm that to the best of their knowledge this unaudited condensed financial information for the six months ended 30 June 2020 has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" and that the interim management report herein includes a true and fair view of the information required by Disclosure and Transparency Rules (DTR) 4.2.7.
Risks associated with the coronavirus outbreak
The potential impact of the coronavirus outbreak on the Company's access to capital and ability to lend remains uncertain. Up to the date of this Report, the outbreak has not had a material impact on the trading results of the Company. However, we continue to monitor the situation closely, including the potential impacts on trading results. The situation could change at any time and there can be no assurance that the coronavirus outbreak will not have a material adverse impact on the future results of the Company.
The Directors of the Company are:
Mr I Mackay
Edinburgh Pharmaceutical Industries Limited
Glaxo Group Limited
By order of the Board
Mr A Walker
For and on behalf of Glaxo Group Limited
Corporate Director
27 July 2020
Internet
This Announcement and other information about the GSK Group are available on the website at:
http://www.gsk.com.
GlaxoSmithKline Capital plc
Income statement
for the half year ended 30 June 2020
|
| Period ended | Period ended 30 |
|
| 30 June 2020 | June 2019 |
| Note | £'000 | £'000 |
Other operating income / (expense) | 2 | 1,626 | (465) |
Finance income | 3 | 251,724 | 226,897 |
Finance expense | 4 | (240,553) | (217,507) |
Operating profit |
| 12,797 | 8,925 |
Profit before taxation |
| 12,797 | 8,925 |
Tax on profit | 5 | (2,431) | (1,696) |
Profit for the financial period |
| 10,366 | 7,229 |
Statement of comprehensive income
for the half year ended 30 June 2020
| Period ended | Period ended 30 |
| 30 June 2020 | June 2019 |
| £'000 | £'000 |
Profit for the financial period | 10,366 | 7,229 |
Items that may be subsequently reclassified to the income statement: |
|
|
Fair value movements on cash flow hedges | (5,480) | (12,159) |
Reclassification of cash flow hedges to the income statement | 1,879 | 1,368 |
Deferred tax on fair value movements on cash flow hedges | 1,078 | 1,834 |
Other comprehensive income for the financial period | (2,523) | (8,957) |
Total comprehensive income for the financial period | 7,843 | (1,728) |
Balance sheet
as at 30 June 2020
|
| 30 June 2020 | 31 December 2019 |
| Note | £'000 | £'000 |
Non-current assets |
|
|
|
Deferred tax assets |
| 4,421 | 3,343 |
Loans and receivables | 6 | 17,139,924 | 15,725,293 |
Total non-current assets |
| 17,144,345 | 15,728,636 |
Current assets |
|
|
|
Loans and receivables | 6 | 2,882,068 | 1,804,015 |
Prepayments and accrued income | 7 | 109,234 | 134,752 |
Cash and cash equivalents |
| 5 | 4 |
Total current assets |
| 2,991,307 | 1,938,771 |
Total assets |
| 20,135,652 | 17,667,407 |
Current liabilities |
|
|
|
Other payables | 8 | -5,811 | -5,811 |
Corporate tax | 8 | -5,853 | -3,421 |
Accruals and deferred income | 10 | -98,272 | -128,073 |
Short-term borrowings | 9 | -2,722,083 | -1,657,233 |
Total current liabilities |
| -2,832,019 | -1,794,538 |
Net current assets |
| 159,288 | 144,233 |
Total assets less current liabilities |
| 17,303,633 | 15,872,869 |
Non-current liabilities |
|
|
|
Long-term borrowings | 9 | -17,223,787 | -15,800,866 |
Total non-current liabilities |
| -17,223,787 | -15,800,866 |
Total liabilities |
| -20,055,806 | -17,595,404 |
Net assets |
| 79,846 | 72,003 |
Equity |
|
|
|
Called up share capital | 13 | 100 | 100 |
Other reserves |
| -18,846 | -16,323 |
Retained earnings |
| 98,592 | 88,226 |
Total equity |
| 79,846 | 72,003 |
Statement of changes in equity
for the half year ended 30 June 2020
| Called up share |
| Retained |
|
| capital | Other reserves | earnings | Total equity |
| £'000 | £'000 | £'000 | £'000 |
At 1 January 2019 | 100 | (9,297) | 73,643 | 64,446 |
Profit for the financial period | - | - | 7,229 | 7,229 |
Other comprehensive income for the financial period | - | (8,957) | - | (8,957) |
At 30 June 2019 | 100 | (18,254) | 80,872 | 62,718 |
| Called up share |
| Retained |
|
| capital | Other reserves | earnings | Total equity |
| £'000 | £'000 | £'000 | £'000 |
At 1 January 2020 | 100 | (16,323) | 88,226 | 72,003 |
Profit for the financial period | - | - | 10,366 | 10,366 |
Other comprehensive income for the financial period | - | (2,523) | - | (2,523) |
At 30 June 2020 | 100 | (18,846) | 98,592 | 79,846 |
Cash flow statement
for the half year ended 30 June 2020
|
| Period ended | Period ended |
|
| 30 June 2020 | 30 June 2019 |
| Note | £'000 | £'000 |
Cash flows from operating activities |
|
|
|
Operating profit |
| 12,797 | 8,925 |
Adjustments reconciling operating profit to operating cash flows | 12 | (166) | (13,983) |
Net cash (outflow) / inflow from operating activities |
| 12,631 | (5,058) |
Cash flows from financing activities |
|
|
|
Proceeds from borrowings |
| 2,140,275 | 2,630,777 |
Repayment of borrowings |
| (674,483) | - |
Loans provided to Group undertakings |
| (2,134,797) | (2,618,537) |
Loan repayments received from Group undertakings |
| 674,483 | - |
(Increase) / decrease in current accounts with Group undertakings |
| (18,109) | (3,027) |
Net cash inflow / (outflow) from financing activities |
| (12,630) | 9,213 |
Net movement in cash in the period |
| 1 | 4,155 |
Cash at beginning of period |
| 4 | - |
Movement in cash |
| 1 | 4,155 |
Cash at end of period |
| 5 | 4,155 |
Notes to the financial statements for the half year ended 30 June 2020
1 Accounting presentation and policies
This unaudited Results Announcement containing condensed financial information for the six months ended 30 June 2020 is prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" using the recognition and measurement requirements of Financial Reporting Standard 101 "Reduced Disclosure Framework" and in accordance with the Listing Rules of the UK Listing Authority. The same accounting policies and methods of computation are followed in the interim financial statements as compared with the most recent annual financial statements.
2 Operating profit
| Period ended | Period ended |
| 30 June 2020 | 30 June 2019 |
| £'000 | £'000 |
The following items have been credited / (charged) in operating profit: |
|
|
Exchange gains on foreign currency transactions | 1,626 | -465 |
3 Finance Income
| Period ended | Period ended |
| 30 June 2020 | 30 June 2019 |
| £'000 | £'000 |
Interest income arising from loans with Group undertakings | 251,724 | 226,897 |
4 Finance Expense
| Period ended | Period ended |
| 30 June 2020 | 30 June 2019 |
| £'000 | £'000 |
Interest expense arising on financial liabilities at amortised cost | -238,674 | -216,139 |
Reclassification of cash flow hedge from other comprehensive income | -1,879 | -1,368 |
Total finance expense | -240,553 | -217,507 |
5 Taxation
| Period ended | Period ended |
| 30 June 2020 | 30 June 2019 |
Income tax expense on ordinary activities | £'000 | £'000 |
Current tax: |
|
|
UK corporation tax at 19% (2019: 19%) | -2,431 | -1,696 |
Total current tax | -2,431 | -1,696 |
Total tax (expense) / credit included in other comprehensive income |
|
|
Deferred tax: |
|
|
Fair value movements on cash flow hedges | 1,078 | 1,834 |
Total tax (expense) / credit included in other comprehensive income | 1,078 | 1,834 |
6 Loans and other receivables
| Period ended | Period ended |
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Amounts due within one year |
|
|
Amounts owed by Group undertakings | 2,882,068 | 1,804,015 |
| 2,882,068 | 1,804,015 |
Amounts due after more than one year |
|
|
Long term deposits | 360 | 360 |
Amounts owed by Group undertakings - loans | 17,139,564 | 15,724,933 |
| 17,139,924 | 15,725,293 |
| 20,021,992 | 17,529,308 |
Amounts due within one year are call accounts with Group undertakings of £74,483,000 (2019: £72,268,000) which are unsecured, repayable on demand and earn a market rate of interest (based on 1 week LIBOR minus 0.125%) that is consistent with the Group's policy, and includes deposits with Group undertakings of £92,960,000 (2019: £77,063,000) which are unsecured, repayable on demand and earn a market rate of interest (based on LIBOR minus 0.125%) that is consistent with the Group's policy.
Amounts due within one year also include the net proceeds of bond issuances that have been advanced as loans to Group undertakings of £2,714,625,000 (2019: £1,654,684,000) which are unsecured with a fixed interest rate of 1.05% and a floating interest rate of EURIBOR+ 20bps per annum.
Amounts due after more than one year are the net proceeds of bond issuances that have been advanced as loans to Group undertakings, which are unsecured with fixed interest charged between 0.21% and 6.50% per annum and floating interest charged at LIBOR plus 56bps and repayable at maturity dates between 2021 and 2045.
7 Prepayments and accrued income
| Period ended | Period ended |
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Amounts due within one year | 109,234 | 134,752 |
8 Other payables
| Period ended | Period ended |
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Amounts falling due within one year |
|
|
Amounts owed to Group undertakings | -5,811 | -5,811 |
Corporation tax | -5,853 | -3,421 |
| -11,664 | -9,232 |
The corporation tax creditor contains amounts which will be paid to fellow Group companies under Group relief.
9 Borrowings
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Amounts falling due within one year |
|
|
Loans payable: |
|
|
€ European Medium-Term Notes | -1,094,489 | -1,657,233 |
US$ Medium Term Notes | -1,627,594 | - |
| -2,722,083 | -1,657,233 |
Amounts falling due after more than one year |
|
|
Loans payable: |
|
|
€ European Medium-Term Notes | -7,233,702 | -6,104,340 |
£ European Medium-Term Notes | -5,531,232 | -4,045,872 |
US$ Medium Term Notes | -4,458,853 | -5,650,654 |
| -17,223,787 | -15,800,866 |
Total borrowings | -19,945,870 | -17,458,099 |
|
|
|
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Maturity of borrowings | £'000 | £'000 |
In more than one year, but not more than two years |
|
|
LIBOR+0.30% € European Medium Term Note 2021 | -1,372,786 | -1,280,755 |
0% € European Medium Term Note 2021 | -456,582 | -425,592 |
3.125% US$ US Medium Term Note 2021 | - | -943,893 |
LIBOR+0.35% US$ US Medium Term Note 2021 | - | -567,101 |
2.85% US$ US Medium Term Note 2022 | -1,625,778 | - |
2.875% US$ US Medium Term Note 2022 | -1,219,820 | - |
| -4,674,966 | -3,217,341 |
In more than two years, but not more than five years |
|
|
2.85% US$ US Medium Term Note 2022 | - | -1,509,382 |
2.875% US$ US Medium Term Note 2022 | - | -1,132,641 |
0% € European Medium Term Note 2023 | -456,062 | -424,926 |
0.125% € European Medium Term Note 2023 | -682,410 | - |
1.375%€ European Medium Term Note 2024 | -906,169 | -843,707 |
3.000%US$ US Medium Term Note 2024 | -809,359 | -751,294 |
4% € European Medium Term Note 2025 | -679,555 | - |
| -3,533,555 | -4,661,950 |
In more than five years |
|
|
4% € European Medium Term Note 2025 | - | -632,791 |
1% € European Medium Term Note 2026 | -636,855 | -593,265 |
1.25% € European Medium Term Note 2026 | -908,701 | -846,415 |
3.375% £ European Medium Term Note 2027 | -594,324 | -593,994 |
1.25% £ European Medium Term Note 2028 | -741,128 | - |
1.375% € European Medium Term Note 2029 | -453,103 | -422,037 |
3.375% US$ US Medium Term Note 2029 | -803,896 | -746,343 |
1.75% € European Medium Term Note 2030 | -681,478 | -634,852 |
5.25% £ European Medium Term Note 2033 | -982,953 | -982,530 |
1.625% £ European Medium Term Note 2035 | -743,118 | - |
6.375% £ European Medium Term Note 2039 | -694,218 | -694,138 |
5.25% £ European Medium Term Note 2042 | -986,689 | -986,528 |
4.25% £ European Medium Term Note 2045 | -788,803 | -788,682 |
| -9,015,266 | -7,921,575 |
Total borrowings due after one year | -17,223,787 | -15,800,866 |
10 Accruals and deferred income
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Amounts falling due within one year | -98,272 | -128,073 |
Accruals relates to interest payable on borrowings (see Note 9).
11 Fair value of financial assets and liabilities
The fair values of the financial assets and liabilities are included at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the fair values:
• Cash and cash equivalents - approximate to the carrying amount;
• Borrowings (European and US Medium Term Notes) - based on quoted market prices (a level 1 fair value measurement);
• Intercompany loans - approximates to the fair value of borrowings (European and US Medium Term Notes); and
• Receivables and payables - approximate to the carrying amount.
The carrying amounts and the fair values of the Company's financial assets and liabilities at 30 June 2020 and 31 December 2019 are illustrated below.
|
| 30 June 2020 | 31 December 2019 | |
| Carrying value | Fair value | Carrying value | Fair value |
| £'000 | £'000 | £'000 | £'000 |
Cash and cash equivalents | 5 | 5 | 4 | 4 |
Loans and receivables: |
|
|
|
|
Other receivables | 109,234 | 109,234 | 134,752 | 134,752 |
Amounts owed by Group undertakings | 20,021,992 | 23,067,185 | 17,528,948 | 19,952,387 |
Total financial assets | 20,131,231 | 23,176,424 | 17,663,704 | 20,087,143 |
Financial liabilities measured at amortised cost: |
|
|
|
|
£ European Medium-Term Notes | -5,531,232 | -7,831,320 | -4,045,872 | -5,903,688 |
€ European Medium-Term Notes | -8,328,191 | -8,779,892 | -7,761,573 | -8,214,511 |
US$ US Medium Term Notes | -6,086,447 | -6,455,973 | -5,650,654 | -5,834,188 |
| -19,945,870 | -23,067,185 | -17,458,099 | -19,952,387 |
Other payables | -98,272 | -98,272 | -133,884 | -133,884 |
Total financial liabilities | -20,044,142 | -23,165,457 | -17,591,983 | -20,086,271 |
Net financial assets | 87,089 | 10,967 | 71,721 | 872 |
The Company has no financial assets or liabilities measured at fair value through profit or loss.
Financial liabilities measured at amortised cost for which the fair value of £23,067,185,000 (31 December 2019: £19,952,387,000) as disclosed in the table above are categorised as Level 1, where quoted prices in active markets are used. Similarly, amounts owed by Group undertakings, which include the net proceeds of bond issuances advanced as loans, also approximate to the fair value of these financial liabilities. All other assets and liabilities are approximate to the carrying amount.
12 Adjustments reconciling operating profit to operating cash flows
| Period ended | Period ended |
| 30 June 2020 | 31 December 2019 |
| £'000 | £'000 |
Operating profit | 12,797 | 8,925 |
Adjustments: |
|
|
Decrease/ (increase) in other receivables | 25,518 | 767 |
(Decrease) / increase in other payables | -29,800 | -11,012 |
Exchange adjustments | 2,608 | 307 |
Amortisation of bond costs | 5,109 | 6,746 |
Fair value movements on cash flow hedges | -5,480 | -12,159 |
Reclassification of cash flow hedges to the income statement | 1,879 | 1,368 |
| -166 | -13,983 |
Net cash (outflow) / inflow from operating activities | 12,631 | -5,058 |
13 Called up Share capital
| 30 June 2020 | 31 December 2019 | 30 June 2020 | 31 December 2019 |
| Number of shares | Number of shares | £'000 | £'000 |
Authorised |
|
|
|
|
Ordinary shares of £1 each (31 December 2019: £1 each) | 100,000 | 100,000 | 100 | 100 |
Issued and fully paid |
|
|
|
|
Ordinary shares of £1 each (31 December 2019: £1 each) | 100,000 | 100,000 | 100 | 100 |
14 Related party transactions
As a wholly owned subsidiary of the ultimate parent company, GlaxoSmithKline plc, advantage has been taken of the exemption afforded by FRS 101 "Reduced Disclosure Framework" not to disclose any related party transactions within the Group. There are no other related party transactions.