TIDMGSK
RNS Number : 2501X
GlaxoSmithKline PLC
06 February 2013
Issued: Wednesday, 6 February 2013, London, U.K.
Unaudited Preliminary Results Announcement for the year ended 31 December 2012
GSK delivers 2012 core EPS of 112.7p and returns GBP6.3 billion to shareholders
6 new drugs filed since start of 2012; Phase III data expected on 14 assets in 2013/14
Core results*
2012 Q4 2012
GBPm CER% GBP% GBPm CER% GBP%
------- ----- ----- -------- ----- -----
Turnover 26,431 (1) (3) 6,802 - (3)
Core operating profit 8,330 (3) (5) 2,287 5 1
Core earnings per
share 112.7p - (2) 32.6p 9 4
----------------------- ------- ----- ----- -------- ----- -----
Total results
2012 Q4 2012
GBPm CER% GBP% GBPm CER% GBP%
------- ----- ----- -------- ----- -----
Turnover 26,431 (1) (3) 6,802 - (3)
Operating profit 7,392 (3) (5) 1,940 7 3
Earnings per share 92.9p (9) (11) 17.8p (24) (29)
-------------------- ------- ----- ----- -------- ----- -----
Summary
-- 2012 Group sales broadly in-line with 2011 (CER)
- Group sales -1%; flat excluding disposals of OTC brands
- Pharmaceuticals and Vaccines -2%; US -2% reflecting discontinuation
of certain products, Europe -7% reflecting ongoing austerity
measures, continued growth in EMAP +10%, Japan -6% (+5% excluding
Cervarix)
- Consumer Healthcare +5% excluding divestments
-- Successful R&D delivery: 6 new drugs filed since start of 2012
- Filings: Relvar/Breo (asthma, COPD), Anoro (LAMA/LABA for COPD),
trametinib (MEK) and dabrafenib (BRAF) (melanoma), dolutegravir
(HIV), albiglutide (type-2 diabetes)
- Phase III data expected on 14 assets in 2013 and 2014, including
9 new drugs and vaccines
-- New measures to drive strategic alignment and improve long-term
global competitiveness
- Expansion of new major change programme across manufacturing,
Europe and R&D to deliver annual cost savings of at least GBP1
billion by 2016 with associated total charges of GBP1.5 billion
- Strategic options to maximise efficiency and future performance
in Europe under evaluation
- Strategic review for Lucozade and Ribena brands to be initiated
-- Continued delivery of financial efficiencies, strong cash generation
and returns to shareholders
- 2012 core tax rate reduced to 24.4%; expect 24% in 2013.
- Adjusted net cash inflow from operating activities GBP7 billion
- GBP6.3 billion returned to shareholders; GBP2.5 billion of
shares repurchased; 2012 dividend 74p (+6%)
-- EPS and turnover growth expected in 2013
- Expect core EPS growth of 3-4% CER (from IAS 19R adjusted 2012
EPS of 111.4p) with turnover growth of around 1% CER
- Continued dividend growth and targeting share buy-backs of
GBP1-2 billion
The full results are presented under 'Income Statements' on page
28 and Core results reconciliations are presented on pages 43 to
46.
* For explanations of the measures 'Core results' and 'CER', see
page 26.
GSK's strategic priorities
We have focused our business around the delivery of three strategic
priorities, which aim to increase growth, reduce risk and improve
our long term financial performance:
-- Grow a diversified global business
-- Deliver more products of value
-- Simplify the operating model
Chief Executive Officer's review
In 2012, despite a challenging operating environment, we have maintained
core earnings per share on a CER basis, returned over GBP6.3 billion
to shareholders and made outstanding progress to advance potential
new medicines across multiple disease areas including respiratory,
oncology, diabetes and HIV.
Effective cost control and delivery of financial efficiencies enabled
the Group to deliver 2012 core EPS of 112.7p. We also continued
to deliver strong cash generation with adjusted net cash inflow
from operating activities of GBP7 billion before legal settlements.
We ended the year with Group sales down 1%. Excluding prior year
comparisons related to OTC product disposals, sales were flat.
In emerging markets, the benefits of investments made to increase
our exposure in both Pharmaceuticals and Consumer Healthcare are
evident in our 2012 performance. Total sales in emerging markets
now account for 26% of our business and grew 10% during the year.
At the divisional level, Consumer Healthcare sales grew 5%, excluding
divested OTC products. Meanwhile in Pharmaceutical and Vaccines,
sales in the US were down 2%, an improvement over 2011 when sales
were down 5%. In Japan, sales were down 6% but excluding sales of
Cervarix were up 5%.
The clear adverse impact to performance in 2012 was weaker than
expected sales from our European business (-7%). The impact of negative
pricing increased in the year and adversely impacted growth by approximately
6 percentage points.
In R&D, the Group made significant progress in 2012. We currently
have six key new products under regulatory review and expect phase
III data on 14 assets in 2013/14.
Over the next three years, GSK has the potential to launch around
15 new products globally. We are confident that we can sustain this
level of productivity and that we can deliver our long-term goal
of improving R&D returns to around 14%.
Allied to GSK's stronger, globally diversified sales base, this
R&D output provides a clear platform for growth, with 2013 marking
the start of what should be a series of growth years for GSK.
To maximise returns for the Group in this next period we continue
to make changes to simplify our operating model and release resources.
Today, we are announcing an expansion of our new major change programme,
the first phase of which was announced in the second quarter last
year. In total we expect the programme to deliver annual cost savings
of at least GBP1 billion by 2016 with associated total charges of
GBP1.5 billion.
This includes a series of technological advances and opportunities
to eliminate complexities, which we believe can continue to transform
our long-term cost competitiveness in both manufacturing and R&D.
Through this we are seeking to simplify our supply chain processes,
shorten cycle times, lower inventory levels and reduce our carbon
footprint. We believe these approaches can firmly position GSK at
the forefront of our industry.
In addition, given the sustained shift we have witnessed in the
European reimbursement and pricing environment, we plan to initiate
further restructuring of our European pharmaceuticals business to
reduce costs, improve efficiencies and reallocate resources to support
identified growth opportunities in these markets.
As we reduce our European cost base, we are also evaluating further
strategic options to ensure we develop new capabilities and are
able to maximise the value of our current and future portfolio in
this region. I expect us to make progress on this work during 2013.
This additional restructuring supports our strategy to change the
shape of our business and deliver sustainable long-term growth.
In the short term, it will also help to offset some of the pressure
we are seeing on our margin structure resulting from changes in
our business mix.
With increasing pipeline sales contribution from the end of 2013,
we remain confident that we can drive improvement in the core operating
margin over the medium term.
I am delighted with the excellent progress our Consumer Healthcare
business continues to make through increased focus around a core
portfolio of healthcare brands and in emerging markets, where we
are seeing very positive consumption trends and benefit from sales
and distribution synergies with pharmaceuticals. Investments to
maximise returns in these markets continue. Last year, we opened
a new innovation centre in China; and most recently, we increased
our shareholding in our Indian subsidiary.
In line with this strategic focus, we have decided to initiate a
review evaluating all strategic options for the Lucozade and Ribena
drinks brands, which are primarily marketed in established western
markets. These brands are iconic and the review will look at the
best ways to ensure their continued growth.
We also continue to strengthen our core business through acquisitions
and equity investments. In 2012, we completed three significant
transactions, with HGS, Shionogi and Theravance to increase our
share of the economics on key future growth assets.
At the same time, we continue to deliver targeted divestments at
the periphery of the Group, helping us to simplify our business
and realise value for shareholders. During the year, we completed
the divestment of Vesicare, multiple non-core OTC brands and Australian
pharmaceutical 'tail' products.
As we look ahead and given all the differing current dynamics for
GSK, we have decided to provide investors with our expected sales
and earnings performance this year.
We expect to deliver core EPS growth of 3-4% CER in 2013 and sales
growth of around 1% CER. Leverage will be generated through our
ongoing financial efficiencies. Sales growth is likely to be unevenly
phased in the year, particularly in the first quarter, where sales
are expected to decline due to year-on-year comparative factors.
We also expect to deliver further strong cash generation in 2013
and remain committed to using free cash flow to support increasing
dividends, share repurchases or, where returns are more attractive,
bolt-on acquisitions. Based on current market conditions we are
targeting share repurchases of GBP1-2 billion in 2013.
In closing, I would like to thank all our employees, partners and
suppliers for their continued commitment and support in 2012. We
are more confident than ever that GSK is well placed to succeed
in emerging and pro-innovation markets and that our R&D model is
working. This is creating clear, long-term capacity for GSK to deliver
sustained innovation and benefit to patients, and sustained performance
and returns to shareholders.
Sir Andrew Witty
Chief Executive Officer
Video interviews with CEO Sir Andrew Witty and CFO Simon Dingemans,
discussing today's results are available on www.gsk.com
All forward looking statements are based on 2012 restated numbers
adjusted for IAS 19R, at CER and barring unforeseen circumstances.
See 'Cautionary statement regarding forward-looking statements'
on page 26.
Contents Page
2012 results summary 1
Chief Executive Officer's review 2
Group performance 5
Divisional performance 15
Research and development 23
Definitions 26
Contacts 27
Income statements 28
Statement of comprehensive income 29
Pharmaceuticals and Vaccines turnover - 2012 30
Pharmaceuticals and Vaccines turnover - three months ended
31 December 2012 31
ViiV Healthcare turnover - twelve months and three months
ended 31 December 2012 32
Balance sheet 33
Statement of changes in equity 34
Cash flow statement - 2012 35
Segment information 36
Legal matters 39
Taxation 39
Additional information 40
Reconciliation of cash flow to movements in net debt 42
Core results reconciliations 43
Group performance
Group turnover by division, geographic region and segment
Group turnover by division 2012 Q4 2012
----------------------------------- -----------------------------------
Growth Growth
GBPm CER% GBPm CER%
------------ ------------ ------------ ------------
Pharmaceuticals 17,996 (2) 4,689 (1)
Vaccines 3,325 (2) 864 10
------------ ------------ ------------ ------------
Pharmaceuticals and Vaccines 21,321 (2) 5,553 -
Consumer Healthcare 5,110 - 1,249 -
------------ ------------ ------------ ------------
26,431 (1) 6,802 -
------------ ------------ ------------ ------------
Group turnover by geographic region 2012 Q4 2012
----------------------------------- -----------------------------------
Growth Growth
GBPm CER% GBPm CER%
------------ ------------ ------------ ------------
US 8,446 (4) 2,148 (4)
Europe 7,320 (7) 1,880 (6)
EMAP 6,780 10 1,776 14
Japan 2,225 (5) 560 (4)
Other 1,660 (3) 438 2
------------ ------------ ------------ ------------
26,431 (1) 6,802 -
------------ ------------ ------------ ------------
Group turnover outside US and Europe 10,665 5 2,774 8
------------ ------------ ------------ ------------
Group turnover by segment 2012 Q4 2012
----------------------------------- -----------------------------------
Growth Growth
GBPm CER% GBPm CER%
------------ ------------ ------------ ------------
Pharmaceuticals and Vaccines
- US 7,000 (2) 1,766 (2)
- Europe 5,001 (7) 1,311 (5)
- EMAP 4,736 10 1,312 16
- Japan 1,969 (6) 496 (4)
- ViiV Healthcare 1,374 (10) 338 (14)
Other trading and unallocated
- pharmaceuticals 1,241 (3) 330 4
------------ ------------ ------------ ------------
Pharmaceuticals and Vaccines 21,321 (2) 5,553 -
Consumer Healthcare 5,110 - 1,249 -
------------ ------------ ------------ ------------
26,431 (1) 6,802 -
------------ ------------ ------------ ------------
Turnover - 2012
Total Group turnover for 2012 was broadly in line with last year
(down 1% to GBP26,431 million), with a 2% decline in Pharmaceuticals
and Vaccines turnover partly offset by flat reported turnover in
Consumer Healthcare. Pharmaceuticals turnover was down 2%, primarily
as a result of the increased pressure from austerity measures in
Europe. Vaccines turnover declined 2%, reflecting the impact of
lower sales of Cervarix in Japan (2012: GBP132 million; 2011: GBP344
million) following the completion of the 2011 HPV vaccination catch-up
programme. Excluding Cervarix, Vaccines turnover increased 4%. Reported
Consumer Healthcare turnover was flat at GBP5,110 million, but excluding
the non-core OTC brands divested in H1 2012, Consumer Healthcare
turnover grew 5%.
US Pharmaceuticals and Vaccines turnover declined 2%. Excluding
the impact of Avandia, Pharmaceuticals and Vaccines sales were flat.
Pharmaceuticals turnover fell 2%, as sales declines for Avandia
as well as a number of older products including Arixtra and Valtrex,
were partly offset by an encouraging performance from new products,
particularly in Oncology which grew 18%, a GBP65 million sales contribution
from Benlysta and improved Respiratory sales, which grew 1%. Turnover
also benefited from the net effect of the incremental revenue from
the conclusion of the Vesicare co-promotion agreement in Q1 2012.
Vaccines sales were flat as the growth in sales of Infanrix/Pediarix
and Boostrix was offset by lower flu vaccines sales and adverse
comparisons for Hepatitis vaccines and Rotarix, which benefited
from significant CDC stockpile purchases in 2011.
Europe Pharmaceuticals and Vaccines turnover declined 7%, primarily
driven by the impact of various ongoing government austerity measures
including price cuts, parallel trade and generic substitution. This
decline resulted from adverse pricing effects of 6% and a 1% volume
decline. Pharmaceuticals sales declined 8% and Vaccines sales declined
4%. Despite a slight reduction in the rate of decline in the fourth
quarter, the underlying economic environment continued to be challenging.
EMAP Pharmaceuticals and Vaccines turnover increased 10% as strong
growth in Latin America (up 11% to GBP1,257 million), China (up
17% to GBP759 million) and India (up 10% to GBP304 million) was
partly offset by the effect of mandatory price reductions in a number
of markets, including Turkey and Korea. Pharmaceuticals turnover
increased 8%, with improved momentum after a slow first quarter,
as strong growth in Respiratory combined with good performances
in a number of established brands and the newer Oncology portfolio.
The Vaccines business recorded a strong performance but with expected
uneven delivery across the quarters, reflecting the phasing of tender
sales and a particular concentration towards the end of the year.
Japan Pharmaceuticals and Vaccines turnover fell 6% reflecting an
adverse comparison with strong Cervarix sales in 2011 despite a
material contribution from the third phase of the programme benefiting
Q1 2012. The catch-up programme is now complete. Excluding Cervarix,
Japan Pharmaceuticals and Vaccines turnover increased 5%. Pharmaceuticals
turnover grew 3% with strong growth from the recently launched products,
Lamictal, Avodart and Volibris, partly offset by the impact of the
mandatory biennial price cuts, which impacted growth by approximately
4 percentage points, and increasing generic competition to Paxil.
The Respiratory portfolio grew 6%, driven by a strong performance
from Xyzal, offsetting declines in Flixonase and Zyrtec. Adoair
(Seretide) grew 6% to GBP309 million. In Vaccines, Rotarix, which
launched in Q4 2011, contributed sales of GBP44 million.
ViiV Healthcare turnover declined by 10% primarily reflecting generic
competition in the US to Combivir and Epivir offsetting growth generated
by Epzicom and Selzentry.
Consumer Healthcare turnover, excluding the sales of the non-core
OTC brands that were divested in H1 2012, increased 5% with relatively
consistent performance over the quarters. This reflected continued
growth in Oral care, Nutrition and Wellness, partly offset by a
small decline in Skin health. On a regional basis, US sales grew
2% and Europe sales were flat, both impacted by continuing economic
pressures and the drag from alli. The Rest of World markets, particularly
India, the Middle East and China, continued to make a strong contribution
and grew 12%. Reported turnover for Consumer Healthcare was flat
at GBP5,110 million.
Turnover - Q4 2012
Total Group turnover for Q4 2012 was flat at GBP6,802 million. Pharmaceuticals
and Vaccines turnover was also flat in the quarter. Pharmaceuticals
turnover fell 1% with continued austerity pressures in European
markets, generic competition to Paxil in Japan and weaker than expected
stocking patterns in the US offsetting strong growth in EMAP. The
Vaccines business was up 10% to GBP864 million in the quarter, reflecting
strong performances in EMAP, including delivery of substantial tender
volumes, and the US. Vaccines also continued to be impacted by declining
Cervarix sales (down 53% to GBP44 million). Excluding Cervarix,
Vaccines sales increased 19%. Reported Consumer Healthcare turnover
was flat at GBP1,249 million, but excluding the non-core OTC brands
that were divested in H1 2012, turnover increased 7%.
In the US, Pharmaceuticals and Vaccines turnover declined 2%, with
Pharmaceuticals down 5% and Vaccines up 27%. Pharmaceuticals turnover
was impacted by the loss of sales of Vesicare following the conclusion
of the co-promotion agreement in Q1 2012 and a further decline in
Avandia sales. Excluding these items, sales declined 1% with a strong
performance from Oncology products, up 21% to GBP86 million and
a GBP27 million sales contribution from Benlysta, offset by a 6%
reduction in Respiratory sales. The reported growth of Respiratory
products was negatively impacted in the quarter by both refinements
to previous accruals for returns and rebates and wholesaler/retailer
stocking patterns, but estimated underlying growth for the key products
Advair, Flovent and Ventolin continued to be positive. During the
quarter there were some adjustments, (both positive and negative)
to previous accruals for returns and rebates that impacted reported
growth for several other products. Overall, the net effect of these
adjustments combined with some unfavourable stocking patterns was
not significant. There was a strong contribution from Vaccines in
the US with growth of 27%, primarily reflecting a strong performance
from Infanrix/Pediarix (sales more than doubled to GBP69 million)
which also benefited from a competitor supply issue.
Europe Pharmaceuticals and Vaccines continued to suffer from government
austerity measures, although the impact was reduced this quarter
as the phasing of some of these measures, including price cuts to
Seretide and Vaccines products, started to annualise. Price reductions
of 5% combined with a flat volume led to a decline in Pharmaceuticals
and Vaccines turnover of 5% to GBP1,311 million. Pharmaceuticals
turnover declined 5% to GBP1,045 million. Vaccines sales were also
down 5% to GBP266 million.
EMAP Pharmaceuticals and Vaccines sales rose 16% with growth generated
across a number of markets, primarily Latin America (up 23% to GBP321
million), the Middle East and Africa (up 12% to GBP385 million)
and China (up 14% to GBP210 million). Pharmaceuticals grew 11%,
primarily reflecting strong growth in Respiratory and CNS products,
together with continued momentum in other established brands. Vaccines
grew 39%, primarily as a result of the delivery of expected tender
shipments for Synflorix and Infanrix/Pediarix, particularly in the
Middle East/Africa.
Japan Pharmaceuticals and Vaccines turnover fell 4% in the quarter
reflecting an adverse comparison with strong Cervarix sales in Q4
2011 which benefited from the HPV vaccination catch-up programme.
Excluding Cervarix, Japan Pharmaceuticals and Vaccines turnover
increased 4% in the quarter. The Pharmaceuticals business grew 2%
despite the impact of the mandatory biennial price cuts and increased
generic competition to Paxil (down 28% to GBP47 million). The Respiratory
portfolio grew 10% to GBP170 million and there were strong contributions
from a number of recently launched products, including Lamictal
and Avodart.
ViiV Healthcare turnover declined by 14% primarily due to the continued
effect of generic competition in the US to Combivir and Epivir,
which more than offset growth of Epzicom and Selzentry.
Consumer Healthcare turnover, excluding the sales of the non-core
OTC brands that were divested in H1 2012, increased by 7%. This
reflected relatively strong growth across all four categories: Oral
care, Nutrition, Wellness and Skin health. On a regional basis,
ongoing growth was driven by the Rest of World markets (up 13%),
particularly India, the Middle East and China. Europe reported a
2% increase in sales in the face of continued economic pressures
and the adverse impact of alli. The US increased 6%, with organic
growth improved by promotional phasing and retailer stock movements.
Reported Consumer Healthcare turnover was flat at GBP1,249 million.
Core operating profit and margin
Core operating
profit 2012 Q4 2012
------------------------------------------------------- -------------------------------------------------------
Growth Growth
% of CER % of CER
GBPm turnover % GBPm turnover %
------------ ------------ ------------ ------------ ------------ ------------
Turnover 26,431 100 (1) 6,802 100 -
Cost of sales (7,078) (26.8) 1 (1,830) (26.9) -
Selling,
general and
administration (7,855) (29.7) - (1,927) (28.3) 2
Research and
development (3,474) (13.1) (5) (834) (12.3) (15)
Royalty income 306 1.1 - 76 1.1 (15)
------------ ------------ ------------ ------------ ------------ ------------
Core operating
profit 8,330 31.5 (3) 2,287 33.6 5
------------ ------------ ------------ ------------ ------------ ------------
Core profit
before tax 7,635 (4) 2,103 5
Core profit
after tax 5,771 (2) 1,635 7
Core profit
attributable
to
shareholders 5,536 (3) 1,577 6
Core earnings
per share 112.7p - 32.6p 9
------------ ------------ ------------ ------------
Core operating
profit by
division 2012 Q4 2012
------------------------------------------------------- -------------------------------------------------------
Growth Growth
Margin CER Margin CER
GBPm % % GBPm % %
------------ ------------ ------------ ------------ ------------ ------------
Pharmaceuticals 6,622 36.8 (6) 1,689 36.0 (6)
Vaccines 1,169 35.2 (1) 280 32.4 68
------------ ------------ ------------ ------------ ------------ ------------
Pharmaceuticals
and Vaccines 7,791 36.5 (5) 1,969 35.5 -
Consumer
Healthcare 938 18.4 (9) 237 19.0 (8)
------------ ------------ ------------ ------------ ------------ ------------
8,729 33.0 (5) 2,206 32.4 (1)
Corporate &
other
unallocated
costs (399) (32) 81 >(100)
------------ ------------ ------------ ------------ ------------ ------------
Core operating
profit 8,330 31.5 (3) 2,287 33.6 5
------------ ------------ ------------ ------------ ------------ ------------
Core operating profit by
segment 2012 Q4 2012
------------------------------------------------------- -------------------------------------------------------
Growth Growth
Margin CER Margin CER
GBPm % % GBPm % %
------------ ------------ ------------ ------------ ------------ ------------
Pharmaceuticals and Vaccines
- USA 4,786 68.4 1 1,209 68.5 (2)
- Europe 2,629 52.6 (11) 691 52.7 (9)
- EMAP 1,564 33.0 9 483 36.8 17
- Japan 1,179 59.9 (7) 302 60.9 4
- ViiV Healthcare 849 61.8 - 180 53.3 (11)
- Pharmaceutical R&D (2,778) (1) (710) (6)
Other trading and
unallocated
- pharmaceuticals (438) (35.3) 75 (186) (56.4) 9
------------ ------------ ------------ ------------ ------------ ------------
Pharmaceuticals and Vaccines 7,791 36.5 (5) 1,969 35.5 -
Consumer Healthcare 938 18.4 (9) 237 19.0 (8)
------------ ------------ ------------ ------------ ------------ ------------
8,729 33.0 (5) 2,206 32.4 (1)
Corporate & other unallocated
costs (399) (32) 81 >(100)
------------ ------------ ------------ ------------ ------------ ------------
Core operating profit 8,330 31.5 (3) 2,287 33.6 5
------------ ------------ ------------ ------------ ------------ ------------
Core operating profit - 2012
Core operating profit was GBP8,330 million, a 3% decrease in CER
terms on a turnover decline of 1% CER. The operating margin declined
by 0.6 percentage points to 31.5% compared with the 12 months to
December 2011 of which 0.3 percentage points was due to the expected
impact of the HGS acquisition. The remaining 0.3 percentage points
arose from flat SG&A on lower turnover, partially mitigated by lower
R&D expenditure. Operating profit also benefited from a number of
one-off items which were recognised in cost of sales, SG&A and R&D
including favourable adjustments totalling GBP395 million related
to the capping of future pensionable salary increases and a change
in the basis of future discretionary pension increases from RPI
to CPI in certain legacy plans.
Cost of sales increased to 26.8% of turnover (2011: 26.5%). This
primarily reflected the impact of lower sales, lower volumes and
adverse regional and product mix partially offset by one-off royalty
and pension adjustments and ongoing cost management.
SG&A costs as a percentage of sales were 29.7% compared with 29.1%
in 2011 reflecting flat costs on a turnover decline of 1%. Investments
in growth businesses and new product launches as well as additional
HGS costs were funded by ongoing cost management and one-off benefits.
R&D expenditure declined 5% to GBP3,474 million (13.1% of turnover)
compared with GBP3,678 million in 2011 (13.4% of turnover). Ongoing
cost management, including one-off benefits, and some beneficial
phasing effects, more than funded additional HGS costs.
Core operating profit - Q4 2012
Core operating profit was GBP2,287 million, a 5% increase in CER
terms on flat turnover. The operating margin increased by 1.2 percentage
points to 33.6% compared with Q4 2011 despite the expected effect
in the quarter of the HGS acquisition, which impacted the operating
margin by 0.4 percentage points. The increase in operating margin
during the quarter primarily reflected the benefit of lower R&D
expenditure, ongoing cost management and one-off benefits including
pension savings of GBP290 million, which offset investments in growth
products and new product launches.
Cost of sales was 26.9% of turnover compared with 26.9% in Q4 2011,
reflecting lower volumes, adverse regional and product mix and the
acquisition of HGS offset by ongoing cost management, including
a number of one-off benefits.
SG&A costs as a percentage of sales were 28.3% compared with 27.7%
in Q4 2011, as SG&A costs grew 2% on flat turnover. Investments
in growth businesses, HGS costs and new product launches were partially
funded by ongoing cost management, as well as a number of one-off
benefits.
R&D expenditure declined 15% to GBP834 million (12.3% of turnover)
compared with GBP995 million in Q4 2011 (14.3% of turnover). Ongoing
cost management, including one-off benefits and some beneficial
phasing effects more than funded additional HGS costs.
Restructuring programme
The Operational Excellence restructuring programme has delivered
approximately GBP2.5 billion of annual savings and remains on track
to deliver GBP2.8 billion of annual savings by 2014. Costs of GBP169
million were charged in the quarter (Q4 2011: GBP200 million) and
GBP392 million in the 12 months to December 2012 (2011: GBP590 million).
To date charges of GBP4.3 billion have been booked and a further
GBP0.6 billion has yet to be booked, the majority of which will
be booked in 2013.
In addition, restructuring charges of GBP165 million were booked
in H2 2012 related to the acquisition of HGS, which was acquired
on 3 August 2012. Total restructuring charges related to HGS are
expected to be GBP204 million, of which most is expected to be a
cash cost. The majority of the remaining HGS restructuring charges
will be booked in 2013.
New major change programme
The existing Operational Excellence programme is coming to a close
and will be supplemented by a new major change programme. This will
focus on opportunities to simplify our supply chain processes, as
previously announced in Q2 2012 and on building the Group's capabilities
in manufacturing and R&D, as well as restructuring in our European
business.
This new programme is expected to cost GBP1.5 billion, of which
the non-cash charge will be GBP350 million, and is expected to deliver
annual pre-tax savings of at least GBP1.0 billion by 2016. The majority
of the charges are expected to be booked by the end of 2015.
Core net income and core earnings per share - 2012
Despite an increase in net debt of GBP5.0 billion in 2012, net finance
expense for the year was broadly similar to 2011 at GBP724 million,
reflecting the benefits of our strategy to improve the funding profile
of the Group. The target to reduce the average effective annual
net funding ratio by approximately 200 basis points to around 6%
in 2013 has been achieved one-year earlier than planned.
Net debt increased by GBP5.0 billion in the twelve months primarily
due to payments of GBP1.9 billion to settle the Group's most significant
ongoing US federal government investigations within existing provisions
and the GBP2.0 billion cash cost of the acquisition of HGS. The
balance, as well as the Group's strong cash generation and the proceeds
from the disposal of the Consumer Healthcare OTC brands enabled
the financing of share repurchases of GBP2.5 billion and increased
dividend payments of GBP3.8 billion.
Tax on core profit amounted to GBP1,864 million and represented
an effective core tax rate of 24.4% (2011: 25.9%), meeting the target
rate of 25% two years ahead of expectations. GSK is now targeting
a core tax rate of around 24% for the full year 2013.
Core EPS was 112.7p, flat in CER terms and down 2% at actual rates
compared with 2011.
Core net income and core earnings per share - Q4 2012
Net finance expense was GBP194 million compared with GBP174 million
in Q4 2011. Net debt in the quarter increased by GBP170 million.
The Group's strong cash generation enabled the financing of share
repurchases of GBP650 million and an increased dividend payment.
Tax on core profit amounted to GBP468 million and represented an
effective core tax rate of 22.3% (Q4 2011: 24.2%).
Core EPS of 32.6p increased 9% in CER terms and 4% at actual rates.
Revision of IAS 19 'Employee benefits'
IAS 19 (Revised) will be implemented by GSK from 1 January 2013.
The main effect will be that the expected returns on pension scheme
assets will no longer be recognised in the income statement. Expected
returns will be replaced by income calculated using the same discount
rate as that used to measure the pension obligations. This discount
rate is based on market rates for high quality corporate bonds.
As a consequence, pension scheme costs will be higher under IAS
19 (Revised). For 2013 reporting, the results for 2012 will be restated
retrospectively, and the effect of the change, on 2012 results,
would have been to reduce core operating profit for the year by
approximately GBP92 million and core EPS by approximately 1.3p.
It is estimated that core operating profit in 2013 will be reduced
by approximately GBP160 million and core EPS by approximately 2.5p
by the change.
Outlook for 2013
In 2013, GSK expects core EPS growth of 3-4% CER with turnover growth
of around 1% CER. This will be calculated off an IAS 19 (Revised)
base of 111.4p and includes the impact of IAS 19 (Revised) in 2013.
Currency impact
The 2012 results are based on average exchange rates, principally
GBP1/$1.59, GBP1/EUR1.23 and GBP1/Yen 127. Comparative exchange
rates are given on page 40. The period end exchange rates were GBP1/$1.63,
GBP1/EUR1.23 and GBP1/Yen 141.
Core EPS for 2012 of 112.7p was flat in CER terms and down 2% at
actual rates. The currency impact reflected the strengthening of
Sterling against the Euro and a number of international currencies,
partially offset by the weakness of Sterling against the US Dollar
and Japanese Yen. In Q4 2012, core EPS of 32.6p increased 9% in
CER terms and 4% at actual rates.
Average rates for January were GBP1/$1.61, GBP1/EUR1.20 and GBP1/Yen
143. If exchange rates were to hold at these rates for the rest
of 2013, the estimated adverse impact on 2013 sterling turnover
would be around 1%, and if there were no further exchange gains
or losses, the estimated adverse impact on 2013 sterling core EPS
would be around 2%.
Core adjustments
The adjustments that reconcile core operating profit, profit after
tax and earnings per share to total results are as follows:
2012 2011
------------------------------------------------------------ ------------------------------------------------------------
Profit Profit
Operating after Operating after
profit tax EPS profit tax EPS
GBPm GBPm p GBPm GBPm p
------------ ------------ ------------ ------------ ------------ ------------
Core results 8,330 5,771 112.7 8,803 6,007 115.5
Intangible
asset
amortisation (477) (332) (6.8) (441) (304) (6.0)
Intangible
asset
impairment (693) (497) (7.3) (109) (68) (1.4)
Major
restructuring
costs (557) (843) (17.4) (590) (478) (9.5)
Legal costs (436) (286) (5.8) (157) (135) (2.7)
Other
operating
income/asset
disposals 1,254 964 18.2 301 436 8.7
Acquisition
adjustments (29) (33) (0.7)
------------ ------------ ------------ ------------ ------------ ------------
(938) (1,027) (19.8) (996) (549) (10.9)
------------ ------------ ------------ ------------ ------------ ------------
Total results 7,392 4,744 92.9 7,807 5,458 104.6
------------ ------------ ------------ ------------ ------------ ------------
Q4 2012 Q4 2011
------------------------------------------------------------ ------------------------------------------------------------
Profit Profit
Operating after Operating after
profit tax EPS profit tax EPS
GBPm GBPm p GBPm GBPm p
------------ ------------ ------------ ------------ ------------ ------------
Core results 2,287 1,635 32.6 2,264 1,582 31.2
Intangible
asset
amortisation (131) (91) (1.9) (100) (70) (1.4)
Intangible
asset
impairment (293) (216) (1.7) (58) (33) (0.7)
Major
restructuring
costs (245) (597) (12.3) (200) (155) (3.1)
Legal costs (91) (94) (1.9) (76) (66) (1.3)
Other
operating
income/asset
disposals 412 205 3.1 49 26 0.5
Acquisition
adjustments 1 (3) (0.1)
------------ ------------ ------------ ------------ ------------ ------------
(347) (796) (14.8) (385) (298) (6.0)
------------ ------------ ------------ ------------ ------------ ------------
Total results 1,940 839 17.8 1,879 1,284 25.2
------------ ------------ ------------ ------------ ------------ ------------
Full reconciliations between core results and total results are
set out on pages 43 to 46 and the definition of core results is
set out on page 26.
Total operating profit and total earnings per share - 2012
Total operating profit was GBP7,392 million compared with GBP7,807
million in 2011. The non-core items totalled GBP938 million in the
year (2011: GBP996 million).
The intangible asset amortisation of GBP477 million (2011: GBP441
million) included GBP39 million related to the amortisation of the
Benlysta intangible asset acquired as part of the HGS acquisition.
Intangible asset impairment charges of GBP693 million (2011: GBP109
million) included the impairments of Horizant, alli and the ViiV
Healthcare compound, lersivirine, totalling GBP491 million.
Major restructuring charges of GBP557 million (2011: GBP590 million)
included GBP165 million related to the acquisition of HGS and other
charges arising from the Operational Excellence programme.
Legal charges were GBP436 million (2011: GBP157 million). Various
Federal government investigations were resolved in Q2 2012 within
the existing pre-tax provision and the after tax cost was approximately
$150 million lower than provided. As a result, a credit was recorded
as a non-core tax charge in Q2 2012. However, due to the evolving
state litigation environment, GSK utilised the tax benefit arising
in recording an offsetting additional pre-tax provision of approximately
$180 million (equating to an after tax cost of $150 million) related
to these matters. This was recorded as a non-core legal charge in
SG&A in Q2 2012. The net effect of these movements on total earnings
was neutral. Other legal charges of GBP323 million principally related
to provisions for existing product liability and anti-trust matters.
Other operating income of GBP1,254 million (2011: GBP301 million)
included the profit on disposal of the non-core OTC brands of GBP559
million and the non-cash gains of GBP581 million arising on the
settlement of pre-existing collaborations as part of the HGS and
ViiV Healthcare/Shionogi joint venture acquisitions.
Acquisition accounting adjustments of GBP29 million (2011: GBPnil)
relate to the acquisition of HGS. All acquisition accounting related
adjustments related to this acquisition will be reported as non-core
items.
The charge for taxation on total profits amounted to GBP1,948 million
and represented a total effective tax rate of 29.1% (2011: 29.1%),
reflecting the differing tax effects of the various non-core items.
The largest single item arose from the centralisation of Pharmaceutical
intellectual property and product inventory ownership in the UK.
See 'Taxation' on page 39.
Total EPS was 92.9p for the year, compared with 104.6p in 2011 and
non-core items totalled 19.8p (2011: 10.9p). Non-core items included
a tax charge of GBP420 million (8.6p) arising from the centralisation
of Pharmaceutical intellectual property and product inventory ownership
into the UK. Transactions completed in 2012 resulted in a number
of significant non-cash accounting entries. However these largely
offset each other.
Total operating profit and total earnings per share - Q4 2012
Total operating profit was GBP1,940 million compared with GBP1,879
million in Q4 2011. The non-core items totalled GBP347 million in
the quarter (Q4 2011: GBP385 million).
The intangible asset amortisation of GBP131 million (Q4 2011: GBP100
million) included GBP23 million related to the amortisation of the
Benlysta intangible asset acquired as part of the HGS acquisition.
Intangible asset impairment charges of GBP293 million (Q4 2011:
GBP58 million) included GBP255 million related to the impairment
of the ViiV Healthcare compound, lersivirine.
Major restructuring charges of GBP245 million (Q4 2011: GBP200 million)
included GBP76 million related to the acquisition of HGS and other
charges arising from the Operational Excellence programme.
Legal charges of GBP91 million (Q4 2011: GBP76 million), principally
related to refinements to provisions for existing product liability
and anti-trust matters.
Other operating income of GBP412 million (Q4 2011: GBP49 million)
included a non-cash gain of GBP348 million arising on the settlement
of pre-existing collaborations on the acquisition of the remaining
50% of the ViiV Healthcare/Shionogi joint venture in the quarter.
The charge for taxation on total profits amounted to GBP912 million
(Q4 2011: GBP417 million) reflected the differing tax effects of
the various non-core items including the centralisation of Pharmaceutical
intellectual property and product inventory ownership in the UK.
See 'Taxation' on page 39.
Total EPS was 17.8p for the quarter, compared with 25.2p in Q4 2011
and non-core items totalled 14.8p (Q4 2011: 6.0p). Included within
the non-core items is a tax charge of GBP420 million (8.6p) arising
from centralisation of the Pharmaceutical intellectual property
and product inventory ownership into the UK.
Cash generation and conversion
Cash flow and net debt
2012 2011 Q4 2012
------------ ------------ ------------
Net cash inflow from operating activities
(GBPm) 4,375 6,250 1,914
Adjusted net cash inflow from operating
activities* (GBPm) 6,985 7,716 2,050
Free cash flow* (GBPm) 2,049 4,141 1,046
Adjusted free cash flow* (GBPm) 4,659 5,607 1,182
Free cash flow growth (%) (51)% (8)% (23)%
Free cash flow conversion* (%) 96% 104% 123%
Net debt (GBPm) 14,037 9,003 14,037
------------ ------------ ------------
* Adjusted net cash inflow from operating activities, free cash
flow, adjusted free cash flow and free cash flow conversion are
defined on page 26.
The net cash inflow from operating activities for the year was GBP4,375
million (2011: GBP6,250 million). Excluding legal settlements of
GBP2,610 million (2011: GBP1,466 million), the adjusted net cash
inflow from operating activities was GBP6,985 million (2011: 7,716
million), a 9% decrease in sterling terms over 2011. This primarily
reflected impact of a reduced operating profit and the phasing of
tax payments and capital expenditure.
The legal settlements of GBP2,610 million include the previously
announced payments to the US Government of GBP1.9 billion ($3 billion)
in settlement of certain investigations.
Free cash flow was GBP2,049 million. Excluding legal settlements,
adjusted free cash flow for the year was GBP4,659 million (2011:
GBP5,607 million), the decline largely reflecting the impact of
a reduced operating profit, phasing of tax payments and an increase
in capital expenditure. These factors also affected free cash flow
conversion although the ratio was also impacted by the benefit of
non-cash gains during the year.
The adjusted free cash flow, together with proceeds of GBP904 million
from the disposal of the non-core OTC brands, amounted to GBP5,563
million and enabled the Group to pay dividends to shareholders of
GBP3.8 billion, and spend GBP2.5 billion on repurchasing shares.
At 31 December 2012, net debt was GBP14.0 billion, compared with
GBP9.0 billion at 31 December 2011, comprising gross debt of GBP18.3
billion and cash and liquid investments of GBP4.3 billion. The expected
increase in net debt reflected the acquisition of HGS for GBP2,031
million, net of cash acquired, together with legal settlements in
the year. At 31 December 2012, GSK had short-term borrowings (including
overdrafts) repayable within 12 months of GBP3,631 million with
loans of GBP970 million repayable in the subsequent year.
In the quarter, net cash inflow from operating activities was GBP1,914
million, and adjusted net cash inflow from operating activities
(excluding legal settlements), was GBP2,050 million, down 13% in
sterling terms, primarily impacted by the timing of tax payments
and higher capital expenditure. After paying dividends to shareholders
and non-controlling interests of GBP833 million and making share
repurchases of GBP650 million, net debt increased by GBP170 million.
Working capital
31 December
31December 30 September 30 June 31 March 2011
2012 2012 2012 2012 (restated)
------------ ------------ ------------ ------------ ------------
Working capital conversion
cycle* (days) 194 213 212 215 202
Working capital percentage
of turnover (%) 21 23 22 22 21
------------ ------------ ------------ ------------ ------------
* Working capital conversion cycle is defined on page 26.
Working capital reduced by GBP397 million in 2012 compared with
a reduction of GBP477 million in 2011. In the year, the working
capital conversion cycle decreased by eight days to 194 days, reflecting
improvements in conversion for receivables, payables and inventory.
This was partly offset by the acquisition of HGS, which added three
days to the conversion cycle.
Returns to shareholders
GSK's commitment is to use free cash flow to support increasing
dividends, undertake share repurchases or, where returns are more
attractive, reinvest in the business, including bolt-on acquisitions.
Quarterly dividends
The Board has declared a fourth interim dividend of 22 pence per
share (Q4 2011: 21 pence per share). This brings the total ordinary
dividend for the year to 74 pence per share (2011: 70 pence).
Payment of dividends
The equivalent interim dividend receivable by ADR holders is 68.9480
cents per ADS based on an exchange rate of GBP1/$1.5670. The ex-dividend
date will be 20 February, with a record date of 22 February and
a payment date of 11 April 2013.
Paid/ Pence per
payable share GBPm
------------ ------------ ------------
2012
First interim 5 July 2012 17 846
Second interim 4 October 2012 17 830
Third interim 3 January 2013 18 870
Fourth interim 11 April 2013 22 1,062
------------ ------------
74 3,608
------------ ------------
2011
First interim 7 July 2011 16 814
Second interim 6 October 2011 16 809
Third interim 5 January 2012 17 847
Fourth interim 12 April 2012 21 1,043
------------ ------------
70 3,513
Supplemental 12 April 2012 5 248
------------ ------------
75 3,761
------------ ------------
Share repurchases
During the year, GSK repurchased 174.5 million shares (GBP2,493
million). GSK intends to make total repurchases of GBP1-2 billion
during 2013 where this use of funds delivers an attractive return.
The company issued 28.1 million shares under employee share schemes
amounting to GBP356 million (2011: GBP250 million).
The weighted average number of shares for 2012 was 4,912 million,
compared with 5,028 million in 2011.
The weighted average number of shares for Q4 2012 was 4,843 million,
compared with 4,962 million in Q4 2011.
Divisional performance
Pharmaceutical sales summary
2012 Q4 2012
------------------------------------ ------------------------------------
GBPm CER% GBPm CER%
------------ ------------ ------------ ------------
Respiratory 7,291 1 1,903 (1)
Anti-virals 753 (11) 203 3
Central nervous system 1,670 (2) 423 (2)
Cardiovascular and urogenital 2,431 - 571 (10)
Metabolic 171 (47) 48 (45)
Anti-bacterials 1,247 (7) 337 (2)
Oncology and emesis 798 19 219 26
Dermatology 850 (2) 226 5
Rare diseases 495 8 142 17
Immuno-inflammation 70 >100 29 >100
ViiV Healthcare (HIV) 1,374 (10) 338 (14)
Other 846 (6) 250 6
------------ ------------ ------------ ------------
17,996 (2) 4,689 (1)
------------ ------------ ------------ ------------
Respiratory
2012 (GBP7,291 million; +1%)
Respiratory sales increased 1%, with growth in the US, EMAP and
Japan offset by a decline in Europe. Total sales of Seretide/Advair
grew 1% to GBP5,046 million, Ventolin sales increased 6% to GBP631
million while Flixotide/Flovent sales fell 4% to GBP779 million.
Xyzal sales, almost exclusively made in Japan, doubled to GBP129
million.
In the US, sales of Advair were GBP2,533 million, up 1% compared
with 2% estimated underlying growth for the year (5% volume decline
more than offset by a 7% positive impact of price and mix). Flovent
sales declined 1% to GBP448 million, compared with estimated underlying
growth of 3% (4% volume increase partly offset by a 1% negative
impact of price and mix). Ventolin grew 14% to GBP277 million, while
estimated underlying growth was 11%, driven mostly by volume.
European Respiratory sales were down 5% reflecting the impact of
ongoing austerity measures. Over the whole year, Seretide sales
were down 4% to GBP1,447 million, as price cuts more than offset
volume growth of approximately 2%.
In EMAP, Respiratory sales grew 13%, with growth across most products
in the portfolio. Seretide grew 12% to GBP417 million with strong
growth in China and Latin America offsetting the impact of some
price reductions, principally in Turkey. Ventolin sales increased
10% to GBP171 million.
Q4 2012 (GBP1,903 million; -1%)
Respiratory sales in the quarter fell 1% to GBP1,903 million, as
declines in the US and Europe offset growth in EMAP and Japan. Seretide/Advair
sales declined 1% to GBP1,309 million and Flixotide/Flovent sales
fell 10% to GBP206 million, but Xyzal sales grew 68% to GBP36 million.
Ventolin sales grew 5% to GBP177 million.
In the US, as the clear market leaders in their respective categories,
Advair (ICS/LABA combination) and Flovent (single agent ICS) have
both benefited from overall prescription volume growth in the controller
market (LABA, ICS and anti-cholinergic products) which grew 3% in
the quarter. The underlying growth for key respiratory products
Advair, Flovent and Ventolin continued to be positive; however,
reported growth for all three products was significantly negatively
impacted in the quarter by both adjustments to previous accruals
for returns and rebates and wholesaler/retailer stocking patterns.
Reported sales of Advair fell 6% to GBP635 million. On an underlying
basis, sales for the quarter grew approximately 4% (3% volume decline
offset by a 7% positive impact of price and mix). (All market growth
and share data based on weekly IMS Health data).
In the US, Flovent declined 13% to GBP116 million with an estimated
underlying growth of 7% (2% volume increase and a 5% positive impact
of price and mix). Ventolin reported sales in the US grew 10% to
GBP79 million, with estimated underlying growth of approximately
20% (11% volume increase plus 9% positive impact of price and mix).
European Respiratory sales were down 3% reflecting the impact of
ongoing austerity measures. Seretide sales were down 1% to GBP374
million, as price cuts more than offset volume growth of approximately
3%.
Respiratory sales in EMAP grew 16%. Seretide grew 18% to GBP118
million with strong growth in China, Saudi Arabia and Latin America
and Ventolin sales increased 9% to GBP47 million.
Anti-virals
2012 (GBP753 million; -11%)
The 11% decline in Anti-virals sales largely resulted from generic
competition to Valtrex, which was down 25% to GBP252 million.
Q4 2012 (GBP203 million; +3%)
Valtrex sales declined 3% to GBP71 million, as a favourable adjustment
to previous accruals for returns and rebates in the US, was offset
by the effects of generic competition in Europe and price cuts in
Japan.
Central nervous system
2012 (GBP1,670 million; -2%)
Declines in Seroxat/Paxil sales of 14% to GBP374 million and Requip
sales of 22% to GBP164 million, primarily as a result of generic
competition, were only partially offset by the 14% growth of Lamictal
to GBP610 million.
In the US, the Lamictal franchise increased 18% to GBP332 million
as strong growth of Lamictal XR, approximately 45% of the US franchise,
more than offset the impact of generic competition to the immediate
release (twice a day) formulation. Generic competition to Lamictal
XR is now expected to start in the first quarter of 2013. In Japan,
sales of Lamictal IR grew 88% to GBP78 million, in part due to sales
for the recently launched bipolar indication.
Q4 2012 (GBP423 million; -2%)
The 2% decline in CNS sales was primarily attributed to declines
in Seroxat/Paxil, particularly in Japan, and Requip, impacted by
both generic competition and price cuts, offsetting the 18% increase
in sales of Lamictal.
Cardiovascular and urogenital
2012 (GBP2,431 million; flat)
Sales in the category were flat as the net benefit of the conclusion
of the Vesicare co-promotion agreement combined with growth in sales
of Avodart and Lovaza were offset by the impact of generic competition
to Arixtra and Coreg.
The Avodart franchise grew 7% to GBP790 million with growth driven
by strong contributions from the recent launches of the combination
product Duodart/Jalyn in Europe and of Avodart in Japan. In the
US, the decline in Avodart sales, in part due to the impact of labelling
changes implemented in 2011 and the availability of a generic competitor
in the same class, was partially offset by growth in Jalyn, and
combined sales fell 5%.
Lovaza grew 5% to GBP607 million primarily reflecting the benefit
of improved pricing. Lovaza continues to hold broadly flat market
share in a market which has declined approximately 7% compared with
2011, as economic pressures have resulted in fewer doctor visits
and reduced testing for asymptomatic conditions such as very high
triglycerides.
Q4 2012 (GBP571 million; -10%)
The 10% sales decline primarily reflected the loss of sales of Vesicare
following the conclusion of the co-promotion agreement in Q1 2012.
Lovaza sales fell 6% in the quarter reflecting the negative impacts
of both adjustments to previous accruals for returns and rebates
and wholesaler/retailer stocking patterns. Coreg sales declined
22% primarily as a result of generic competition.
Metabolic
2012 (GBP171 million; -47%)
The decline in Metabolic product sales continued to reflect the
loss of sales of Avandia, and the impact of declining sales of Bonviva
in Europe following the change in the deal structure.
Q4 2012 (GBP48 million; -45%)
The decline in Metabolic product sales continued to reflect the
loss of sales of Avandia, and the impact of declining sales of Bonviva
in Europe following the change in the deal structure.
Anti-bacterials
2012 (GBP1,247 million; -7%)
Anti-bacterials sales grew 5% in EMAP, primarily from Augmentin,
but this was more than offset by the impact of austerity measures
in Europe, which encouraged pharmacy-level generic substitution,
and generic competition in both Europe and the US.
Q4 2012 (GBP337 million; -2%)
Anti-bacterial sales growth in EMAP of 3% was offset by the impact
of austerity measures in Europe and generic competition in both
Europe and the US.
Oncology and emesis
2012 (GBP798 million; +19%)
Three new products, Votrient (up 88% to GBP183 million), Promacta
(up 76% to GBP130 million) and Arzerra (up 36% to GBP60 million)
all continued to grow strongly in the US, Europe and EMAP. Tykerb/Tyverb
also grew (up 6% to GBP239 million), with growth in the US, EMAP
and Japan offsetting a small decline in Europe. Both Hycamtin in
Europe and Argatroban in the US were adversely affected by generic
competition.
In the US, Votrient (up 59% to GBP91 million) benefited from the
launch of a new indication for use in advanced soft-tissue sarcoma.
Sales of Promacta grew 66% to GBP54 million, reflecting the continued
effect of longer-term use data that was added to the label in 2011.
Q4 2012 (GBP219 million; +26%)
Growth in the category in the quarter was driven by new products
Votrient (more than doubling to GBP62 million), Promacta (up 67%
to GBP38 million) and Arzerra (up 17% to GBP14 million). Argatroban
sales fell 45% to GBP11 million as a result of generic competition
in the US.
Dermatology
2012 (GBP850 million; -2%)
Sales declined 2% to GBP850 million, primarily as a result of the
decline in the US (down 14% to GBP228 million) which suffered from
the impact of generic competition to Evoclin, Extina and Duac. European
sales (up 5% to GBP156 million) benefited from the acquisition of
Toctino in the second half of the year. EMAP sales grew 7% to GBP388
million, reflecting strong growth in the promoted brands of Dermovate
and Bactroban.
Q4 2012 (GBP226 million; +5%)
Sales were up 5% in the quarter as growth in EMAP (up 13% to GBP104
million), together with the benefit of the acquisition of Toctino
in Europe, was only partially offset by a decline in the US (down
5% to GBP61 million). EMAP performance continued to be impacted
by ongoing supply issues, which are now close to resolution. Supply
of a generic version of Bactroban cream started in the US in January
2013.
Rare diseases
2012 (GBP495 million; +8%)
Volibris grew 35% to GBP127 million, led by a strong performance
in Japan. Mepron sales increased 26% to GBP93 million primarily
as a result of a favourable adjustment to US accruals for returns
and rebates recorded in the fourth quarter. Flolan sales fell 25%
to GBP135 million, largely as a result of the biennial price reduction
in Japan and generic competition in Europe.
Q4 2012 (GBP142 million; +17%)
Mepron sales increased 60% to GBP31 million in the quarter primarily
due to a favourable adjustment to US accruals for returns and rebates
and Volibris sales grew 29% to GBP35 million, while Flolan sales
declined 20% to GBP34 million.
Immuno-inflammation
2012 (GBP70 million; +>100%)
Reported Benlysta turnover was GBP70 million, of which GBP65 million
arose in the US. Total in-market sales of Benlysta in the US for
the year were GBP96 million.
Q4 2012 (GBP29 million; +>100%)
Reported Benlysta turnover was GBP29 million in the quarter, representing
GBP27 million of sales in the US and GBP2 million of sales in Europe.
ViiV Healthcare (HIV)
2012 (GBP1,374 million; -10%)
ViiV Healthcare sales declined by 10%, with the US down 22%, Europe
down 3%, and EMAP up 3%. Sales growth in Epzicom/Kivexa (up 10%
to GBP665 million) and Selzentry (up 20% to GBP128 million) were
more than offset by a 30% decline in the mature portfolio, primarily
as a result of generic competition in the US to Combivir and Epivir.
Q4 2012 (GBP338 million; -14%)
Sales in the quarter fell 14%, with the US down 25%, Europe down
2% and EMAP down 17%. Epzicom grew 1% to GBP166 million and Selzentry
grew 21% to GBP38 million, but the mature portfolio declined 33%.
Vaccines sales
2012 Q4 2012
------------------------------------ ------------------------------------
GBPm CER% GBPm CER%
------------ ------------ ------------ ------------
Total Vaccines sales 3,325 (2) 864 10
------------ ------------ ------------ ------------
2012 (GBP3,325 million; -2%)
Performance of the Vaccines business improved towards the end of
the year, with a significant increase in tender sales in Q4. The
2% overall decline in sales was primarily attributable to the adverse
comparison with strong Cervarix sales in 2011, which benefited from
the HPV vaccination catch-up programme in Japan, now complete. Cervarix
sales declined 46% to GBP270 million. Excluding Cervarix, Vaccines
sales increased by 4%.
Infanrix/Pediarix sales increased 17% to GBP775 million, primarily
reflecting strong tender orders in EMAP and growth in the US, which
benefited from a competitor supply shortage.
Rotarix sales grew 21% to GBP360 million, with strong sales growth
throughout EMAP as well as initial launch sales in Japan. In the
US, despite market share gains, sales declined 11%, primarily due
to a comparison with a very strong 2011, when sales benefited from
a large CDC stockpile purchase.
Synflorix sales increased 17% to GBP385 million, largely reflecting
continued strong growth in EMAP.
Boostrix sales increased 25% to GBP238 million, largely driven by
the US where the product continues to benefit from the expanded
indication for use in adults of 65 and older.
Sales of hepatitis vaccines fell 5% to GBP646 million as declines
in mature markets, partly the result of reduced government funding,
offset growth in EMAP of 21%.
Fluarix/Flulaval sales were down 11% to GBP200 million, primarily
the result of a 35% decline in the US, which reflected a reduction
in the number of doses sold (approximately 21 million doses) compared
with 2011 (approximately 34 million doses). Sales grew 15% in Europe
and 35% in EMAP.
The previously announced Japanese Vaccines joint venture between
GSK and Daiichi Sankyo Co., Ltd started operations on 2 July. The
JV holds the development and commercial rights for existing preventative
vaccines from both parent companies. GSK sells vaccines into the
JV at an agreed upon price, and this is reflected in turnover in
the second half of 2012, which was reduced by approximately GBP12
million by the change in structure. Both companies have an equal
stake in the joint venture and share the profits equally.
Q4 2012 (GBP864 million; +10%)
Vaccines sales grew 10% in the quarter as strong growth in Infanrix/Pediarix
and Rotarix more than offset the adverse comparison with 2011 on
Cervarix in Japan.
Infanrix/Pediarix sales increased 34% to GBP235 million, with growth
in the US and EMAP offsetting a small decline in Europe. Synflorix
sales increased 64% to GBP105 million, largely reflecting tender
phasing in EMAP. Hepatitis vaccines sales grew 1% and Rotarix grew
23%, led by EMAP and Japan. Boostrix sales grew 22%, largely driven
by a strong US performance, which continues to benefit from the
expanded indication for use in adults of 65 and older.
Sales from new pharmaceutical and vaccine launches
2012 Q4 2012
------------------------------------ ------------------------------------
GBPm CER% GBPm CER%
------------ ------------ ------------ ------------
Arzerra 60 36 14 17
Benlysta 70 >100 29 >100
Duodart/Jalyn 157 57 44 39
Lamictal XR 148 34 38 19
Nimenrix 1 - - -
Potiga/Trobalt 7 >100 3 -
Prolia 26 >100 9 >100
Promacta 130 76 38 67
Requip XL 89 (32) 18 (39)
Synflorix 385 17 105 64
Treximet 49 (14) 11 (20)
Volibris 127 35 35 29
Votrient 183 88 62 >100
Dermatology 7 (15) 2 9
------------ ------------ ------------ ------------
1,439 34 408 49
------------ ------------ ------------ ------------
New products are those launched in the last five years (2008 to
2012 inclusive). Total sales of new products were GBP1,439 million,
grew 34% in the year and represented 7% of Pharmaceuticals and Vaccines
turnover.
Nimenrix was approved by the European Medicines Agency in April
2012 for active immunization against invasive meningococcal disease
caused by Neisseria meningitides serogroups A,C, W-135 and Y. Launches
are now underway in several countries throughout Europe including
the UK, Germany and the Netherlands.
MenHibrix, a combination vaccine to help prevent meningococcal serogroups
C and Y and Hib disease, was approved by the FDA in June 2012. In
October 2012, the Advisory Committee on Immunization Practices of
the Centers for Disease Control and Prevention voted for a limited
recommendation for immunisation of infants at an increased risk
for meningococcal disease. The product is not yet available.
Fluarix Quadrivalent, the first four-strain intramuscular influenza
vaccine to help prevent disease caused by seasonal influenza, was
approved by the FDA in December 2012 for use in adults and children
(three years and older). Launch of Fluarix Quadrivalent is expected
in time for the 2013/14 influenza season.
Consumer Healthcare
2012 Q4 2012
------------------------------------------------------------------------ ------------------------------------------------------------------------
Growth excluding Growth excluding
non-core non-core
Turnover OTC products OTC products
GBPm CER% CER% GBPm CER% CER%
------------ ------------ ------------ ------------ ------------ ------------
Total
wellness 2,008 (10) 2 504 (12) 5
Oral care 1,797 8 8 445 10 10
Nutrition 1,050 8 8 235 9 9
Skin
health 255 (1) (1) 65 5 5
------------ ------------ ------------ ------------ ------------ ------------
Total 5,110 - 5 1,249 - 7
------------ ------------ ------------ ------------ ------------ ------------
2012 Q4 2012
------------------------------------------------------------------------ ------------------------------------------------------------------------
Growth excluding Growth excluding
non-core non-core
Turnover OTC products OTC products
GBPm CER% CER% GBPm CER% CER%
------------ ------------ ------------ ------------ ------------ ------------
USA 926 (9) 2 250 (4) 6
Europe 1,796 (6) - 440 (8) 2
Rest of
World 2,388 9 12 559 9 13
------------ ------------ ------------ ------------ ------------ ------------
Total 5,110 - 5 1,249 - 7
------------ ------------ ------------ ------------ ------------ ------------
2012 (GBP5,110 million; flat)
Consumer Healthcare turnover was flat for the year. Excluding the
non-core OTC brands that were divested in H1 2012, turnover increased
by 5%, reflecting strong growth in Rest of the World markets (approximately
47% of 2012 sales) of 12%, while the US, excluding the non-core
OTC brands, grew 2% for the year and Europe was flat.
Wellness sales were down 10% to GBP2,008 million, but excluding
the non-core OTC brands that were divested in H1 2012, the category
delivered 2% growth despite a number of supply interruptions. Gastro-intestinal
health, including Tums and Eno, led category growth at 11%. Pain
Management, including Panadol, also registered strong growth of
8% driven by growth in emerging markets. The Smoking reduction and
cessation & Respiratory health categories both delivered 4% growth.
Oral care sales grew 8% to GBP1,797 million. The Sensodyne Sensitivity
& Acid Erosion was the strongest performing brand, with sales up
15% to GBP706 million. Strong results from Denture care products
also helped to offset a 2% decline in Aquafresh sales.
Nutrition sales grew 8%. Family nutrition (Horlicks) grew 14% due
to strong growth in India. The Maxinutrition adult nutrition business
delivered 21% sales growth for the year. Strong emerging market
growth of Lucozade offset declines in Europe.
Skin health sales declined 1% to GBP255 million. Strong Bactroban
growth in China and solid results in Lip care (including Abreva)
were offset by a decline in sales of Hinds in Mexico.
Growth in Rest of World markets of 12% excluding the non-core OTC
products was broadly based with strong growth across most categories.
In Europe overall growth in Oral care and Wellness brands was almost
entirely offset by the loss of alli sales due to a supply issue.
In the US growth in Oral care, Gastro-intestinal health, and Smoking
reduction & cessation brands was also significantly offset by a
decline in alli sales as a result of the supply interruption that
was not resolved in the region until late in Q3 2012.
Q4 2012 (GBP1,249 million; flat)
Consumer Healthcare turnover was flat in the quarter. Excluding
the non-core OTC brands that were divested in H1 2012, turnover
increased by 7%.
Wellness reported a decline of 12%, but excluding the non-core OTC
brands that were divested in H1 2012, sales in the category grew
5%. Gastro-intestinal health led growth at 16%, driven by very strong
results on Eno which benefited from innovation including new flavours
and product formats, and Tums, which benefited from the Freshers
innovation. Pain management, including Panadol, also delivered strong
growth of 9%.
Oral care grew 10% in the quarter. Geographic expansion, including
in the Middle East, China and India and strong results in Indonesia,
were important drivers of growth in the category. Sensodyne Sensitivity
& Acid Erosion and Denture care products continued to deliver strong
growth.
Nutrition sales grew 9%. Family nutrition (Horlicks) grew 15% with
continued strong growth in India. Lucozade had strong growth in
emerging markets and low single digit percentage growth in Europe
bringing the brand to 4% overall growth for the quarter.
Skin health sales grew 5%. Skin health growth in the quarter was
driven by a strong performance of Bactroban in China and innovation
on Lip care (including Abreva) which grew 7%.
Growth in Rest of World markets of 13% excluding the non-core OTC
products continued to be broad based in the quarter with strong
growth across most categories. Europe sales grew 2% with growth
in Oral care and Smoking reduction & cessation and Respiratory health
products being partly offset by the loss of alli sales (due to ongoing
supply issue) and lower sales in Pain, down 12% which was due to
a temporary supply issue.
In the US sales grew 6%, led by strong performances in Gastro-intestinal
health, Smoking reduction & cessation and Skin care brands.
Research and development
GSK remains focused on delivering an improved return on its investment
in R&D. Sales contribution, reduced attrition and cost reduction
are all important drivers of an improving internal rate of return.
R&D expenditure is not determined as a percentage of sales but instead
capital is allocated using strict returns based criteria depending
on the pipeline opportunities available.
The operations of Pharmaceuticals R&D are broadly split into Discovery
activities (up to the completion of Phase IIa trials) and Development
work (from Phase IIb onwards) each supported by specific and common
infrastructure and other shared services where appropriate. R&D
expenditure for 2012 is analysed below.
2012 2011
GBPm GBPm
------------ ------------
Discovery 800 822
Development 1,655 1,669
Facilities and central support functions 366 477
------------ ------------
2,821 2,968
Vaccines 498 564
Consumer Healthcare 155 146
------------ ------------
Core R&D 3,474 3,678
------------ ------------
Amortisation and impairment of intangible assets 483 234
Major restructuring costs 11 97
------------ ------------
Total R&D 3,968 4,009
------------ ------------
GSK's Phase III/Registration Pharmaceuticals and Vaccines pipeline
The table below is provided as part of our quarterly update to show
events and changes to the late-stage pipeline during the quarter
and up to the date of this announcement. There were several news
events for late-stage pipeline assets in this quarter and these
are listed in the table below. Votrient sarcoma was approved in
Q3 and has been removed from the table.
In February 2011, the following 15 assets were listed as expected
to deliver Phase III data by the end of 2012: albiglutide, Anoro
(UMEC/VI, LAMA/LABA), dabrafenib (BRAF, 2118436), dolutegravir,
drisapersen (2402968), MAGE-A3 (event driven), migalastat HCl, Mosquirix
(RTS,S), otelixizumab, Patrome (IPX066), Promacta, Relvar/Breo (previously
known as Relovair), trametinib (MEK, 1120212), Tykerb and Votrient.
Of these, 14 have now reported some or all of their data. Three
of these have further data still to come: drisapersen, migalastat,
Mosquirix, and the MAGE-A3 studies are event driven with data expected
in 2013.
Since Q3 2012, the following pipeline milestones have been achieved:
-- receipt of data for Mosquirix in malaria in 6-12 week old infants;
-- US approval of Promacta for Hep C thrombocytopenia;
-- presentation of dolutegravir VIKING3 data at the International
Congress of Drug Therapy in HIV Infection;
-- Phase II B data in-house for drisapersen in DMD (not disclosed
due to ongoing Phase III study);
-- US approval of raxibacumab for inhalation anthrax;
-- filing of dolutegravir in US & EU;
-- US approval of Fluarix quadrivalent flu vaccine;
-- filing of Anoro (UMEC/VI) for COPD in US & EU;
-- receipt of 6 month data from Phase III study 011 for migalastat;
-- filing of albiglutide in US.
Of the 15 assets, 2 have now been approved (both new indications
for currently available drugs):
-- Votrient sarcoma;
-- Promacta/Revolade Hepatitis C thrombocytopenia (approved in US,
filed in Europe);
and, 6 have been filed (all new drugs):
-- Relvar/Breo (asthma and COPD);
-- trametinib (MEK) (filed in US);
-- dabrafenib (BRAF);
-- albiglutide (filed in US, expected to file in Europe in Q1 2013);
-- Anoro (UMEC/VI) COPD;
-- dolutegravir.
In addition, data are in house supporting filing of UMEC (LAMA)
monotherapy.
At the R&D Late-Stage Pipeline Review on 3 December 2012, the following
14 assets were listed as expecting to deliver Phase III data during
2013 and 2014: Votrient (ovarian), MAGE-A3 (melanoma & NSCLC), Tykerb
(breast, head & neck and gastric cancers), darapladib (atheroslorosis
- event driven), Arzerra (first line and relapsed CLL), drisapersen
(DMD), dabrafenib + trametinib combination use (metastatic melanoma),
fluticasone fluorate (asthma), mepolizumab (severe asthma), Benlysta
subcutaneous (SLE), vercirnon (Crohn's disease), migalastat (Fabry's
disease), Herpes Zoster vaccine, dolutegravir-Trii (HIV).
Six of these 14 assets are new drugs or vaccines that have not reported
any Phase III data previously: MAGE-A3, darapladib, mepolizumab,
Herpes Zoster vaccine, vercirnon and dolutegravir-Trii; and 3 are
new drugs that have reported some key data during 2011 and 2012:
drisapersen, migalastat and fluticasone furoate monotherapy.
Biopharmaceuticals US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
Arzerra CLL (first line Ph III Ph III
(ofatumumab) & relapsed)
--------------------- ------------------------------ ----------- ---------- ------------------------------
NHL (FL) Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
NHL (DLBCL) Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
Benlysta (s.c.) Systemic lupus Ph III Ph III
erythematosus
--------------------- ------------------------------ ----------- ---------- ------------------------------
albiglutide Type 2 diabetes Filed Ph III Filed in US on 14 January
Jan 2013 2013 and to be filed
in EU in Q1 2013.
--------------------- ------------------------------ ----------- ---------- ------------------------------
sirukumab Rheumatoid arthritis Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
mepolizumab Severe asthma Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
Cardiovascular & Metabolic US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
darapladib Atherosclerosis Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
Immuno-inflammation
----------------------------------------------------- ----------- ---------- ------------------------------
vercirnon (1605786, Crohn's disease Ph III Ph III
CCX282)
--------------------- ------------------------------ ----------- ---------- ------------------------------
Neurosciences US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
IPX066 Parkinson's disease n/a Ph III EU filing strategy under
review.
--------------------- ------------------------------ ----------- ---------- ------------------------------
Oncology US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
Promacta/Revolade Hepatitis C thrombocytopaenia Approved Filed Approved in US on 16
Nov 2012 May 2012 November 2012.
--------------------- ------------------------------ ----------- ---------- ------------------------------
Votrient Ovarian Ph III Ph III
(pazopanib)
--------------------- ------------------------------ ----------- ---------- ------------------------------
Tykerb/Tyverb Metastatic breast Ph III Filed
cancer - dual Feb 2012
blockade
--------------------- ------------------------------ ----------- ---------- ------------------------------
Adjuvant breast Ph III Ph III
cancer
--------------------- ------------------------------ ----------- ---------- ------------------------------
Head & neck cancer Ph III Ph III
------------------------------ ----------- ---------- ------------------------------
Gastric cancer Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
trametinib Metastatic melanoma Filed Ph III
(1120212, Aug 2012
MEK inhibitor)
--------------------- ------------------------------ ----------- ---------- ------------------------------
dabrafenib Metastatic melanoma Filed Filed
(2118436, BRAF July 2012 July
inhibitor) 2012
--------------------- ------------------------------ ----------- ---------- ------------------------------
trametinib Metastatic melanoma Ph III Ph III Recruitment completed
+ dabrafenib in Phase III study of
in combination combination use.
use
--------------------- ------------------------------ ----------- ---------- ------------------------------
Adjuvant melanoma Ph III Ph III Phase III studies commenced
in February 2013.
--------------------- ------------------------------ ----------- ---------- ------------------------------
Respiratory US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
Relvar/Breo COPD Filed Filed
(FF/VI) July 2012 June
2012
--------------------- ------------------------------ ----------- ---------- ------------------------------
Asthma Ph III Filed
June
2012
--------------------- ------------------------------ ----------- ---------- ------------------------------
Anoro (umeclidinium COPD Filed Filed Filed in US on 18 December
bromide (UMEC) Dec 2012 Jan 2013 2012 and in EU on 8 January
+ vilanterol 2013.
(VI))
--------------------- ------------------------------ ----------- ---------- ------------------------------
umeclidinium COPD Ph III Ph III
bromide (UMEC)
--------------------- ------------------------------ ----------- ---------- ------------------------------
vilanterol COPD Ph III Ph III
(VI)
--------------------- ------------------------------ ----------- ---------- ------------------------------
fluticasone Asthma Ph III Ph III Phase III data in-house
furoate (FF) and supports intention
to file in 2013.
--------------------- ------------------------------ ----------- ---------- ------------------------------
Rare Diseases US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
migalastat Fabry disease Ph III Ph III Supportive 6 month data
HCl from Phase III study
011 announced on 19 December
2012.
--------------------- ------------------------------ ----------- ---------- ------------------------------
drisapersen Duchenne muscular Ph III Phase IIB data in-house
(2402968) dystrophy but not disclosed due
to ongoing Phase III
study. Presentation of
results planned for a
congress in 2013.
--------------------- ------------------------------ ----------- ---------- ------------------------------
2696273 Adenosine deaminase Ph II/III
severe combined
immune deficiency
(ADA-SCID)
(Ex-vivo stem
cell gene therapy)
--------------------- ------------------------------ ----------- ---------- ------------------------------
Vaccines US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
Nimenrix MenACWY prophylaxis Ph II Approved
(MenACWY) Apr 2012
--------------------- ------------------------------ ----------- ---------- ------------------------------
MAGE-A3 Melanoma Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
NSCLC Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
Quadrivalent Influenza prophylaxis Approved Filed Approved in US on 14
flu Dec 2012 Mar 2012 December 2012.
--------------------- ------------------------------ ----------- ---------- ------------------------------
Herpes zoster Shingles prophylaxis Ph III Ph III
--------------------- ------------------------------ ----------- ---------- ------------------------------
Mosquirix (RTS,S) Malaria prophylaxis n/a n/a Announced data for Mosquirix
in malaria in
6-12 week old infants
on 9 November 2012.
--------------------- ------------------------------ ----------- ---------- ------------------------------
HIV (ViiV Healthcare) US EU News update in the quarter
----------------------------------------------------- ----------- ---------- ------------------------------
dolutegravir HIV integrase Filed Filed Filed in US and EU on
(S/GSK1349572) inhibitor Dec 2012 Dec 2012 17 December 2012. VIKING3
data presented at the
International Congress
of Drug Therapy in HIV
Infection on 13 November
2012.
--------------------- ------------------------------ ----------- ---------- ------------------------------
dolutegravir-Trii HIV integrase Ph III Ph III
inhibitor + abacavir
+ lamivudine
fixed dose combination
--------------------- ------------------------------ ----------- ---------- ------------------------------
Definitions
Core results
Core results exclude the following items from total results: amortisation
and impairment of intangible assets (excluding computer software)
and goodwill; major restructuring costs, including those costs following
material acquisitions; legal charges (net of insurance recoveries)
on the settlement of litigation and government investigations; other
operating income other than royalty income; disposals of associates,
products and businesses, and acquisition accounting adjustments
for material acquisitions, together with the tax effects of these
items. GSK believes this approach provides a clearer view of the
underlying performance of the core business and should make the
Group's results more comparable with the majority of its peers.
CER 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.
All commentaries are presented in terms of CER growth, unless otherwise
stated.
Free cash flow
Free cash flow is the net cash inflow from operating activities
less capital expenditure, interest and dividends paid to non-controlling
interests plus proceeds from the sale of property, plant and equipment
and dividends received from joint ventures and associated undertakings.
It is used by management for planning and reporting purposes and
in discussions with and presentations to investment analysts and
rating agencies. Free cash flow growth is calculated on a reported
basis.
Adjusted free cash flow
Adjusted free cash flow excludes payments made to settle legal disputes.
Free cash flow conversion
Free cash flow conversion is free cash flow as a percentage of earnings
excluding after-tax legal charges and legal settlements.
Adjusted net cash inflow from operating activities
Adjusted net cash inflow from operating activities excludes payments
made to settle legal disputes.
Working capital conversion cycle
The working capital conversion cycle is calculated as the number
of days sales outstanding plus days inventory outstanding, less
days purchases outstanding.
Brand names and partner acknowledgements
Brand names appearing in italics throughout this document are trademarks
of GSK or associated companies or used under licence by the Group.
Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the US Private Securities Litigation
Reform Act of 1995, the company cautions investors that any forward-looking
statements or projections made by the company, including those made
in this Announcement, are subject to risks and uncertainties that
may cause actual results to differ materially from those projected.
Factors that may affect the Group's operations are described under
'Risk Factors' in the 'Financial review
& risk section' in the company's Annual Report 2011 included as
exhibit 15.2 to the company's Annual Report on
Form 20-F for 2011.
Contacts
UK Media enquiries: David Mawdsley +44 (0) 20 8047 (London)
5502
Sarah Spencer +44 (0) 20 8047 (London)
5502
US Media enquiries: Mary Rhyne +1 919 483 0492 (North Carolina)
Stephen Rea +1 215 751 4394 (Philadelphia)
Analyst/Investor enquiries: Sally Ferguson +44 (0) 20 8047 (London)
Tom Curry 5543 (Philadelphia)
Gary Davies +1 215 751 5419 (London)
Lucy Budd +44 (0) 20 8047 (London)
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Jeff McLaughlin +44 (0) 20 8047 (Philadelphia)
Ziba Shamsi 2248 (London)
+44 (0) 20 8047
2406
+1 215 751 7002
+44 (0) 20 8047
3289
GlaxoSmithKline (GSK) together with its subsidiary undertakings,
the 'Group' - 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. GlaxoSmithKline's website www.gsk.com gives additional information
on the Group. Information made available on the website does not
constitute part of this document.
GlaxoSmithKline plc, 980 Great West Road, Brentford, Middlesex TW8
9GS, United Kingdom Registered in England and Wales. Registered
number: 3888792
Financial information
Income statements
2011 Q4 2011
2012 (restated) Q4 2012 (restated)
GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------
TURNOVER 26,431 27,387 6,802 6,978
Cost of sales (7,894) (7,648) (2,011) (1,949)
------------ ------------ ------------ ------------
Gross profit 18,537 19,739 4,791 5,029
Selling, general and administration (8,739) (8,510) (2,198) (2,172)
Research and development (3,968) (4,009) (1,141) (1,095)
Royalty income 306 309 76 91
Other operating income 1,256 278 412 26
------------ ------------ ------------ ------------
OPERATING PROFIT 7,392 7,807 1,940 1,879
Finance income 79 90 25 29
Finance expense (808) (799) (224) (204)
Profit on disposal of interest in
associates - 585 - 1
Share of after tax profits/(losses)
of associates
and joint ventures 29 15 10 (4)
------------ ------------ ------------ ------------
PROFIT BEFORE TAXATION 6,692 7,698 1,751 1,701
Taxation (1,948) (2,240) (912) (417)
Tax rate % 29.1% 29.1% 52.1% 24.5%
------------ ------------ ------------ ------------
PROFIT AFTER TAXATION FOR THE YEAR 4,744 5,458 839 1,284
------------ ------------ ------------ ------------
Profit attributable to non-controlling
interests 179 197 (25) 32
Profit attributable to shareholders 4,565 5,261 864 1,252
------------ ------------ ------------ ------------
4,744 5,458 839 1,284
------------ ------------ ------------ ------------
EARNINGS PER SHARE 92.9p 104.6p 17.8p 25.2p
------------ ------------ ------------ ------------
Diluted earnings per share 91.5p 103.2p 17.6p 24.9p
------------ ------------ ------------ ------------
Statement of comprehensive income
2012 2011
GBPm GBPm
------------ ------------
Profit for the year 4,744 5,458
Exchange movements on overseas net assets and net
investment hedges (257) (299)
Reclassification of exchange on disposal of overseas
subsidiary - (1)
Fair value movements on available-for-sale investments 77 (20)
Deferred tax on fair value movements on available-for-sale
investments (10) 23
Reclassification of fair value movements on available-for-sale
investments (19) (29)
Deferred tax reversed on reclassification of available-for-sale 10 -
investments
Actuarial losses on defined benefit plans (781) (969)
Deferred tax on actuarial movements in defined benefit
plans 221 268
Fair value movements on cash flow hedges (6) -
Reclassification of cash flow hedges to income statement 2 1
Share of other comprehensive income/(expense) of
associates and joint ventures 30 (8)
------------ ------------
Other comprehensive expense for the year (733) (1,034)
------------ ------------
Total comprehensive income for the year 4,011 4,424
------------ ------------
Total comprehensive income for the year attributable
to:
Shareholders 3,862 4,271
Non-controlling interests 149 153
------------ ------------
4,011 4,424
------------ ------------
Statement of comprehensive income
Q4 2012 Q4 2011
GBPm GBPm
------------ ------------
Profit for the period 839 1,284
Exchange movements on overseas net assets and net
investment hedges (64) (113)
Fair value movements on available-for-sale investments (43) 42
Deferred tax on fair value movements on available-for-sale
investments 6 2
Reclassification of fair value movements on available-for-sale
investments (7) 9
Deferred tax reversed on reclassification of available-for-sale
investments (4) (4)
Actuarial gains on defined benefit plans 264 286
Deferred tax on actuarial movements in defined benefit
plans (50) (77)
Fair value movements on cash flow hedges (5) 2
Deferred tax on fair value movements on cash flow
hedges 1 2
Reclassification of cash flow hedges to income statement 1 (2)
------------ ------------
Other comprehensive income for the period 99 147
------------ ------------
Total comprehensive income for the period 938 1,431
------------ ------------
Total comprehensive income for the period attributable
to:
Shareholders 977 1,421
Non-controlling interests (39) 10
------------ ------------
938 1,431
------------ ------------
Pharmaceuticals and Vaccines turnover
Year ended 31 December 2012
Rest of
Total USA Europe EMAP World
--------------------------- --------------------------- -------------------------- ----------------------------- ----------------------------
GBPm CER% GBPm CER% GBPm CER% GBPm CER% GBPm CER%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Respiratory 7,291 1 3,388 1 1,906 (5) 858 13 1,139 3
Avamys/Veramyst 246 5 59 (6) 62 2 63 24 62 2
Flixonase/Flonase 133 (3) 14 100 32 (11) 57 14 30 (31)
Flixotide/Flovent 779 (4) 448 (1) 122 (15) 55 8 154 (6)
Seretide/Advair 5,046 1 2,533 1 1,447 (4) 417 12 649 3
Serevent 145 (19) 51 (19) 64 (22) 3 - 27 (13)
Ventolin 631 6 277 14 126 (6) 171 10 57 (8)
Xyzal 129 100 - - - - 16 - 113 >100
Zyrtec 81 (16) - - - - 36 28 45 (34)
Other* 101 6 6 (33) 53 4 40 16 2 (100)
Anti-virals 753 (11) 57 (42) 74 (23) 360 2 262 (12)
Hepsera 126 (2) - - - - 95 (3) 31 -
Zovirax 89 (16) 3 (73) 21 (19) 35 (3) 30 (9)
Valtrex 252 (25) 35 (51) 33 (27) 37 - 147 (19)
Zeffix 243 - 15 27 16 (29) 188 3 24 (4)
Other* 43 37 4 100 4 100 5 >100 30 12
Central nervous
system 1,670 (2) 510 6 386 (15) 329 8 445 (3)
Imigran/Imitrex 190 (8) 72 (13) 67 (4) 7 - 44 (6)
Lamictal 610 14 332 18 112 (9) 75 7 91 58
Requip 164 (22) 19 (55) 76 (29) 14 25 55 8
Seroxat/Paxil 374 (14) (1) (100) 57 (9) 84 (5) 234 (19)
Treximet 49 (14) 49 (16) - - - - - -
Wellbutrin 84 4 12 (25) 44 4 28 26 - -
Other* 199 13 27 >100 30 (39) 121 15 21 31
Cardiovascular
and urogenital 2,431 - 1,461 (5) 504 1 292 18 174 23
Arixtra 195 (27) 68 (54) 91 - 28 33 8 (27)
Avodart 790 7 317 (5) 228 9 84 26 161 28
Coreg 133 (15) 132 (15) - - - - 1 -
Fraxiparine 233 4 - - 145 (4) 87 26 1 (50)
Lovaza 607 5 604 5 - - - - 3 -
Vesicare 175 37 174 37 - - 1 - - -
Other* 298 (13) 166 (20) 40 (17) 92 1 - -
Metabolic 171 (47) (12) - 29 (49) 65 10 89 (24)
Avandia products 6 (94) (12) - - 100 12 (33) 6 (59)
Other* 165 (18) - - 29 (52) 53 27 83 (18)
Anti-bacterials 1,247 (7) 20 (63) 403 (17) 735 5 89 (12)
Augmentin 608 (1) 1 - 202 (13) 367 8 38 (10)
Other* 639 (12) 19 (65) 201 (20) 368 2 51 (14)
Oncology and emesis 798 19 321 18 256 11 131 48 90 15
Arzerra 60 36 38 23 21 83 - - 1 (100)
Promacta 130 76 54 66 36 65 12 >100 28 87
Tyverb/Tykerb 239 6 68 5 87 (5) 54 36 30 7
Votrient 183 88 91 59 66 89 22 >100 4 -
Other* 186 (19) 70 (18) 46 (34) 43 11 27 (21)
Dermatology 850 (2) 228 (14) 156 5 388 7 78 (19)
Bactroban 124 3 51 (2) 26 - 39 17 8 (11)
Duac 87 (19) 38 (38) 24 4 13 8 12 -
Other* 639 - 139 (9) 106 6 336 6 58 (23)
Rare diseases 495 8 117 10 123 (6) 48 20 207 16
Flolan 135 (25) 33 (14) 23 (42) - - 79 (21)
Volibris 127 35 - - 73 12 9 80 45 96
Other* 233 26 84 22 27 4 39 11 83 50
Immuno-inflammation 70 >100 65 >100 4 >100 - - 1 -
Benlysta 70 >100 65 >100 4 >100 - - 1 -
Other
pharmaceuticals* 846 (6) 19 25 180 (23) 423 (2) 224 3
Vaccines 3,325 (2) 826 - 980 (4) 1,107 14 412 (29)
Boostrix 238 25 147 35 53 17 16 78 22 (19)
Cervarix 270 (46) 6 (25) 53 (2) 75 (19) 136 (61)
Fluarix, FluLaval 200 (11) 88 (35) 43 15 44 35 25 8
Hepatitis 646 (5) 266 (10) 197 (8) 128 21 55 (11)
Infanrix, Pediarix 775 17 218 32 376 - 120 85 61 9
Nimenrix 1 - - - 1 - - - - -
Rotarix 360 21 100 (11) 39 2 159 25 62 >100
Synflorix 385 17 - - 45 (8) 334 22 6 -
Other* 450 (13) 1 - 173 (18) 231 (12) 45 7
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
19,947 (1) 7,000 (2) 5,001 (7) 4,736 10 3,210 (5)
ViiV Healthcare
(HIV) 1,374 (10) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ----------
21,321 (2)
---------- ----------
Pharmaceuticals and Vaccines turnover
Three months ended 31 December 2012
Rest of
Total USA Europe EMAP World
--------------------------- --------------------------- -------------------------- ----------------------------- ----------------------------
GBPm CER% GBPm CER% GBPm CER% GBPm CER% GBPm CER%
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Respiratory 1,903 (1) 863 (6) 492 (3) 239 16 309 7
Avamys/Veramyst 60 13 16 23 13 - 18 33 13 (8)
Flixonase/Flonase 32 6 3 >100 8 - 16 23 5 (33)
Flixotide/Flovent 206 (10) 116 (13) 32 (14) 16 7 42 (4)
Seretide/Advair 1,309 (1) 635 (6) 374 (1) 118 18 182 6
Serevent 35 (18) 13 (14) 15 (25) 1 - 6 (11)
Ventolin 177 5 79 10 35 (5) 47 9 16 (6)
Xyzal 36 68 - - - - 3 (40) 33 100
Zyrtec 22 (4) - - - - 11 22 11 (20)
Other* 26 11 1 (67) 15 - 9 22 1 >100
Anti-virals 203 3 31 >100 14 (44) 95 3 63 (5)
Hepsera 33 (8) - - - - 25 (14) 8 13
Zovirax 22 (12) - - 4 (43) 10 - 8 -
Valtrex 71 (3) 20 >100 6 (42) 9 (9) 36 (21)
Zeffix 64 14 5 67 3 (40) 49 23 7 (13)
Other* 13 >100 6 >100 1 (100) 2 (100) 4 >100
Central nervous
system 423 (2) 128 6 93 (17) 92 16 110 (8)
Imigran/Imitrex 47 (11) 18 (15) 16 (6) 2 - 11 (14)
Lamictal 164 18 91 31 27 (13) 19 5 27 35
Requip 35 (29) 1 (82) 17 (23) 3 100 14 (18)
Seroxat/Paxil 91 (18) (1) - 15 (12) 23 - 54 (25)
Treximet 11 (20) 11 (27) - - - - - -
Wellbutrin 22 15 3 - 11 9 7 40 1 -
Other* 53 15 5 50 7 (57) 38 25 3 -
Cardiovascular
and urogenital 571 (10) 319 (20) 126 (2) 77 11 49 18
Arixtra 53 (4) 19 (13) 22 (4) 9 29 3 -
Avodart 208 4 79 (10) 61 7 21 22 47 26
Coreg 31 (22) 30 (23) - - - - 1 -
Fraxiparine 59 - - - 34 (13) 25 30 - -
Lovaza 148 (6) 147 (6) - - - - 1 -
Vesicare 1 (100) - - - - 1 - - -
Other* 71 (22) 44 (25) 9 - 21 (20) (3) (50)
Metabolic 48 (45) 2 (97) 9 (36) 16 (6) 21 (22)
Avandia products 7 (85) 1 (97) - - 4 - 2 (75)
Other* 41 (16) 1 100 9 (36) 12 (7) 19 (14)
Anti-bacterials 337 (2) 5 (17) 106 (11) 201 3 25 4
Augmentin 167 - - 100 54 (11) 102 6 11 -
Other* 170 (4) 5 (29) 52 (12) 99 1 14 8
Oncology and emesis 219 26 86 21 68 15 41 45 24 56
Arzerra 14 17 10 25 4 33 - - - (100)
Promacta 38 67 15 88 11 38 4 67 8 80
Tyverb/Tykerb 62 8 17 - 21 (5) 15 42 9 13
Votrient 62 >100 29 81 22 92 9 >100 2 >100
Other* 43 (17) 15 (32) 10 (31) 13 - 5 60
Dermatology 226 5 61 (5) 42 16 104 13 19 (18)
Bactroban 32 10 14 8 6 17 10 25 2 (50)
Duac 21 (19) 6 (57) 6 17 4 67 5 -
Other* 173 9 41 11 30 11 90 9 12 -
Rare diseases 142 17 37 33 31 (3) 15 15 59 20
Flolan 34 (20) 9 - 5 (44) - - 20 (19)
Volibris 35 29 - - 18 12 2 - 15 67
Other* 73 41 28 47 8 17 13 18 24 56
Immuno-inflammation 29 >100 27 >100 2 - - - - -
Benlysta 29 >100 27 >100 2 - - - - -
Other
pharmaceuticals* 250 6 8 - 62 (7) 113 7 67 (3)
Vaccines 864 10 199 27 266 (5) 319 39 80 (31)
Boostrix 55 22 33 48 14 (7) 5 >100 3 (43)
Cervarix 44 (53) 1 - 13 (24) 22 (15) 8 (80)
Fluarix, FluLaval 50 (2) 8 (59) 26 56 10 (23) 6 33
Hepatitis 160 1 60 7 50 (6) 33 19 17 (29)
Infanrix, Pediarix 235 34 69 >100 102 (8) 49 >100 15 13
Nimenrix - - - - - - - - - -
Rotarix 88 23 26 4 10 10 36 29 16 70
Synflorix 105 64 - - 13 (19) 90 92 2 50
Other* 127 2 2 - 38 (13) 74 8 13 27
------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
5,215 1 1,766 (2) 1,311 (5) 1,312 16 826 (1)
ViiV Healthcare
(HIV) 338 (14) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
------------ ----------
5,553 -
------------ ----------
ViiV Healthcare turnover
Year ended 31 December 2012
Rest of
Total USA Europe EMAP World
--------------------------- --------------------------- -------------------------- ----------------------------- ----------------------------
GBPm CER% GBPm CER% GBPm CER% GBPm CER% GBPm CER%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Combivir 179 (43) 24 (81) 64 (27) 79 (2) 12 (42)
Epivir 49 (54) 8 (81) 21 (31) 12 (55) 8 (23)
Epzicom/Kivexa 665 10 243 4 285 11 57 37 80 10
Lexiva 127 (9) 68 (9) 33 (20) 19 25 7 (14)
Selzentry 128 20 57 25 56 16 4 9 11 30
Trizivir 107 (13) 61 (11) 37 (21) 5 4 4 25
Other* 119 (16) 59 (24) 27 (10) 22 5 11 (17)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
1,374 (10) 520 (22) 523 (3) 198 3 133 (2)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Three months ended 31 December 2012
Rest of
Total USA Europe EMAP World
--------------------------- --------------------------- -------------------------- ----------------------------- ----------------------------
GBPm CER% GBPm CER% GBPm CER% GBPm CER% GBPm CER%
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Combivir 43 (37) 9 (69) 14 (22) 16 4 4 (27)
Epivir 10 (59) 2 (82) 4 (36) 3 (70) 1 (26)
Epzicom/Kivexa 166 1 59 (8) 73 9 11 (16) 23 11
Lexiva 32 (13) 17 (11) 7 (24) 6 7 2 (41)
Selzentry 38 21 17 33 15 23 1 11 5 (4)
Trizivir 26 (16) 16 (10) 8 (24) - (81) 2 >100
Other* 23 (41) 12 (48) 8 (33) 4 (33) (1) -
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
338 (14) 132 (25) 129 (2) 41 (17) 36 (4)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
* All "Other" Pharmaceuticals and Vaccines product sales totalled
GBP3,918 million and declined 7% in the year
* All "Other" Pharmaceuticals and Vaccines product sales totalled
GBP1,063 million and grew 1% in the quarter.
Balance sheet
31 December 31 December
2012 2011
GBPm GBPm
------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 8,776 8,748
Goodwill 4,359 3,754
Other intangible assets 10,161 7,802
Investments in associates and joint ventures 579 560
Other investments 787 590
Deferred tax assets 2,385 2,849
Derivative financial instruments 54 85
Other non-current assets 682 525
------------ ------------
Total non-current assets 27,783 24,913
------------ ------------
Current assets
Inventories 3,969 3,873
Current tax recoverable 103 85
Trade and other receivables 5,242 5,576
Derivative financial instruments 49 70
Liquid investments 81 184
Cash and cash equivalents 4,184 5,714
Assets held for sale 64 665
------------ ------------
Total current assets 13,692 16,167
------------ ------------
TOTAL ASSETS 41,475 41,080
------------ ------------
LIABILITIES
Current liabilities
Short-term borrowings (3,631) (2,698)
Trade and other payables (8,054) (7,359)
Derivative financial instruments (63) (175)
Current tax payable (1,374) (1,643)
Short-term provisions (693) (3,135)
------------ ------------
Total current liabilities (13,815) (15,010)
------------ ------------
Non-current liabilities
Long term borrowings (14,671) (12,203)
Deferred tax liabilities (1,004) (822)
Pensions and other post-employment benefits (3,105) (3,091)
Other provisions (699) (499)
Derivative financial instruments (2) (2)
Other non-current liabilities (1,432) (626)
------------ ------------
Total non-current liabilities (20,913) (17,243)
------------ ------------
TOTAL LIABILITIES (34,728) (32,253)
------------ ------------
NET ASSETS 6,747 8,827
------------ ------------
EQUITY
Share capital 1,349 1,387
Share premium account 2,022 1,673
Retained earnings 652 3,370
Other reserves 1,787 1,602
------------ ------------
Shareholders' equity 5,810 8,032
Non-controlling interests 937 795
------------ ------------
TOTAL EQUITY 6,747 8,827
------------ ------------
Statement of changes in equity
Share- Non-
Share Share Retained Other holder's controlling Total
capital premium earnings reserves equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January
2012 1,387 1,673 3,370 1,602 8,032 795 8,827
Profit for the
year 4,565 4,565 179 4,744
Other
comprehensive
(expense)/
income for
the year (734) 31 (703) (30) (733)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income
for the year - - 3,831 31 3,862 149 4,011
------------ ------------ ------------ ------------ ------------ ------------ ------------
Distributions to
non-controlling
interests (171) (171)
Dividends to
shareholders (3,814) (3,814) (3,814)
Changes in
non-controlling
interests (382) (382) 164 (218)
Forward contract
relating
to
non-controlling
interest 8 8 - 8
Shares issued 7 349 356 356
Ordinary shares
purchased
and
cancelled or
held as
Treasury
shares (45) (2,493) 45 (2,493) (2,493)
Consideration
received
for shares
transferred by
ESOP Trusts 58 58 58
Shares acquired
by ESOP
Trusts (37) (37) (37)
Write-down on
shares held
by ESOP
Trusts (80) 80 - -
Share-based
incentive plans 211 211 211
Tax on
share-based
incentive
plans 9 9 9
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 December
2012 1,349 2,022 652 1,787 5,810 937 6,747
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 2011 1,418 1,428 4,779 1,262 8,887 858 9,745
Profit for the
year 5,261 5,261 197 5,458
Other
comprehensive
expense
for the year (969) (21) (990) (44) (1,034)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total
comprehensive
income/(expense)
for the year - - 4,292 (21) 4,271 153 4,424
------------ ------------ ------------ ------------ ------------ ------------ ------------
Distributions to
non-controlling
interests (234) (234)
Dividends to
shareholders (3,406) (3,406) (3,406)
Changes in
non-controlling
interests 18 18
Forward contract
relating
to
non-controlling
interest (29) (29) (29)
Shares issued 5 245 250 250
Ordinary shares
purchased
and
cancelled or
held as Treasury
shares (36) (2,191) 36 (2,191) (2,191)
Consideration
received
for shares
transferred by
ESOP Trusts 45 45 45
Shares acquired
by ESOP
Trusts (36) (36) (36)
Write-down on
shares held
by ESOP
Trusts (345) 345 - -
Share-based
incentive plans 191 191 191
Tax on
share-based
incentive
plans 50 50 50
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 December
2011 1,387 1,673 3,370 1,602 8,032 795 8,827
------------ ------------ ------------ ------------ ------------ ------------ ------------
Cash flow statement
Year ended 31 December 2012
2012 2011
GBPm GBPm
------------ ------------
Profit after tax 4,744 5,458
Tax on profits 1,948 2,240
Share of after tax profits of associates
and joint ventures (29) (15)
Profit on disposal of interest in associates - (585)
Net finance expense 729 709
Depreciation and other non-cash items 1,085 1,677
Decrease in working capital 397 477
Decrease in other net liabilities (2,826) (2,248)
------------ ------------
Cash generated from operations 6,048 7,713
Taxation paid (1,673) (1,463)
------------ ------------
Net cash inflow from operating activities 4,375 6,250
------------ ------------
Cash flow from investing activities
Purchase of property, plant and equipment (1,051) (923)
Proceeds from sale of property, plant and
equipment 68 100
Purchase of intangible assets (469) (405)
Proceeds from sale of intangible assets 1,056 237
Purchase of equity investments (229) (76)
Proceeds from sale of equity investments 28 68
Purchase of businesses, net of cash acquired (2,235) (264)
Investment in associates and joint ventures (99) (35)
Proceeds from disposal of subsidiary and
interest in associate - 1,034
Decrease in liquid investments 224 30
Interest received 30 97
Dividends from associates and joint ventures 46 25
------------ ------------
Net cash outflow from investing activities (2,631) (112)
------------ ------------
Cash flow from financing activities
Proceeds from own shares for employee share
options 58 45
Issue of share capital 356 250
Shares acquired by ESOP Trusts (37) (36)
Shares purchased and cancelled or held as
Treasury shares (2,493) (2,191)
Purchase of non-controlling interests (14) -
Increase in long-term loans 4,430 -
Repayment of short-term loans (2,559) (8)
Increase in short-term loans 1,743 45
Net repayment of obligations under finance
leases (35) (38)
Interest paid (779) (769)
Dividends paid to shareholders (3,814) (3,406)
Distributions to non-controlling interests (171) (234)
Other financing items (36) 110
------------ ------------
Net cash outflow from financing activities (3,351) (6,232)
------------ ------------
Decrease in cash and bank overdrafts in
the year (1,607) (94)
Exchange adjustments (92) (108)
Cash and bank overdrafts at beginning of
the year 5,605 5,807
------------ ------------
Cash and bank overdrafts at end of the year 3,906 5,605
------------ ------------
Cash and bank overdrafts at end of the year
comprise:
Cash and cash equivalents 4,184 5,714
Overdrafts (278) (109)
------------ ------------
3,906 5,605
------------ ------------
Segment information
As announced on 28 March 2012, the Group has revised its segment
information disclosures to reflect changes in the internal reporting
structures with effect from 1 January 2012. The Pharmaceuticals
and Vaccines businesses in Emerging Markets and Asia Pacific (excluding
Australasia) have been combined into one segment (EMAP). In addition,
the classification of certain products has been changed in 2012,
including:
-- The transfer of OTC dermatology brands acquired with the Stiefel
business from the Pharmaceuticals and Vaccines business to Consumer
Healthcare in the US and Europe;
-- The creation of a Rare diseases therapy area; and
The transfer of Zovirax from the Dermatology therapy area to
-- the Anti-virals therapy area.
Comparative information has been restated on a consistent basis.
Operating segments are reported based on the financial information
provided to the Chief Executive Officer and the responsibilities
of the Corporate Executive Team (CET). Individual members of the
CET are responsible for each geographic segment of the Pharmaceuticals
and Vaccines business, ViiV Healthcare and the Consumer Healthcare
business as a whole, respectively.
R&D investment is essential for the sustainability of the pharmaceutical
businesses. However, for segment reporting, the US, Europe, EMAP
and Japan Pharmaceuticals and Vaccines operating profits exclude
allocations of globally funded R&D as well as central costs, principally
corporate functions and unallocated manufacturing costs. 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.
Other trading and unallocated pharmaceuticals and vaccines includes
Canada, Puerto Rico, Australasia, central vaccine tender sales and
contract manufacturing sales, together with costs such as vaccines
R&D, central dermatology costs and central manufacturing costs not
attributed to other segments.
The Pharmaceuticals R&D segment is the responsibility of the Chairman,
Research & Development and is reported as a separate segment.
Corporate and other unallocated costs and disposal profits include
corporate functions, costs for legal matters, fair value movements
on financial instruments and investments and profits on global asset
disposals.
Turnover by segment
2011
2012 (restated) Growth
GBPm GBPm CER%
------------ ------------ ------------
USA 7,000 7,022 (2)
Europe 5,001 5,700 (7)
EMAP 4,736 4,459 10
Japan 1,969 2,082 (6)
ViiV Healthcare 1,374 1,569 (10)
Other trading and unallocated pharmaceuticals
and vaccines 1,241 1,280 (3)
------------ ------------ ------------
Pharmaceuticals and Vaccines 21,321 22,112 (2)
Consumer Healthcare 5,110 5,275 -
------------ ------------ ------------
26,431 27,387 (1)
------------ ------------ ------------
Operating profit by segment
2011
2012 (restated) Growth
GBPm GBPm CER%
------------ ------------ ------------
USA 4,786 4,646 1
Europe 2,629 3,154 (11)
EMAP 1,564 1,481 9
Japan 1,179 1,249 (7)
ViiV Healthcare 849 882 -
Pharmaceuticals R&D (2,778) (2,801) (1)
Other trading and unallocated pharmaceuticals
and vaccines (438) (272) 75
------------ ------------ ------------
Pharmaceuticals and Vaccines 7,791 8,339 (5)
Consumer Healthcare 938 1,084 (9)
------------ ------------ ------------
Segment profit 8,729 9,423 (5)
Corporate and other unallocated costs and
disposal profits (399) (620) (32)
------------ ------------ ------------
Core operating profit 8,330 8,803 (3)
Non-core items (938) (996) (7)
------------ ------------ ------------
Total operating profit 7,392 7,807 (3)
Finance income 79 90
Finance costs (808) (799)
Profit on disposal of interest in associates - 585
Share of after tax profits/(losses) of
associates and joint ventures 29 15
------------ ------------ ------------
Profit before taxation 6,692 7,698 (11)
------------ ------------ ------------
Turnover by segment
Q4 2011
Q4 2012 (restated) Growth
GBPm GBPm CER%
------------ ------------ ------------
USA 1,766 1,813 (2)
Europe 1,311 1,430 (5)
EMAP 1,312 1,163 16
Japan 496 562 (4)
ViiV Healthcare 338 402 (14)
Other trading and unallocated pharmaceuticals
and vaccines 330 321 4
------------ ------------ ------------
Pharmaceuticals and Vaccines 5,553 5,691 -
Consumer Healthcare 1,249 1,287 -
------------ ------------ ------------
6,802 6,978 -
------------ ------------ ------------
Operating profit by segment
Q4 2011
Q4 2012 (restated) Growth
GBPm GBPm CER%
------------ ------------ ------------
USA 1,209 1,236 (2)
Europe 691 788 (9)
EMAP 483 423 17
Japan 302 323 4
ViiV Healthcare 180 209 (11)
Pharmaceuticals R&D (710) (763) (6)
Other trading and unallocated pharmaceuticals
and vaccines (186) (170) 9
------------ ------------ ------------
Pharmaceuticals and Vaccines 1,969 2,046 -
Consumer Healthcare 237 268 (8)
------------ ------------ ------------
Segment profit 2,206 2,314 (1)
Corporate and other unallocated costs and
disposal profits 81 (50) >(100)
------------ ------------ ------------
Core operating profit 2,287 2,264 5
Non-core items (347) (385) (9)
------------ ------------ ------------
Total operating profit 1,940 1,879 7
Finance income 25 29
Finance costs (224) (204)
Profit on disposal of interest in associates - 1
Share of after tax profits of associates
and joint ventures 10 (4)
------------ ------------ ------------
Profit before taxation 1,751 1,701 8
------------ ------------ ------------
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 2011.
At 31 December 2012, the Group's aggregate provision for legal and
other disputes (not including tax matters described under 'Taxation'
below) was GBP0.5 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 developments since the Annual Report
2011 (as previously updated by the Legal matters section of the
Results Announcements for Q1, Q2 and Q3 2012) relating to the Group.
Developments with respect to tax matters are described in 'Taxation'
below.
Taxation
Tax on core profit amounted to GBP1,864 million and represented
an effective tax rate of 24.4% (2011: 25.9%). The charge for taxation
on total profits amounted to GBP1,948 million and represented an
effective tax rate of 29.1% (2011: 29.1%). The Group's balance sheet
at 31 December 2012 included a tax payable liability of GBP1,374
million and a tax recoverable asset of GBP103 million.
Within the tax charge on non-core items there is a substantially
non-cash charge of GBP420 million relating to centralisation of
our Pharmaceutical intellectual property and product inventory ownership
into the UK. This restructuring of our trading arrangements and
increased investment in the UK reflects terms that GSK has agreed
to in discussions with various tax authorities and has been facilitated
by the introduction of the UK Patent Box rules. In particular, we
have agreed to enter into a bilateral Advance Pricing Agreement
with the Internal Revenue Service in the US and HM Revenue & Customs
in the UK, which will give us considerable certainty over our future
tax affairs. The restructuring will simplify our business and internal
trading arrangements by substantially decreasing administrative
complexity and will deliver supply chain and working capital efficiencies.
There will be non-core, non-cash tax charges totalling approximately
GBP600 million over the next two years arising from the unwinding
of deferred profit in inventory, as existing inventory produced
prior to the restructuring leaves the supply chain.
Transfer pricing and other issues are as previously described in
the 'Taxation' note to the Financial Statements included in the
Annual Report 2011. On 18 October, the Supreme Court of Canada issued
a decision in GSK's case with the Canada Revenue Agency (CRA) regarding
ranitidine transfer pricing. The Court rejected CRA's appeal and
sent the case back to the Tax Court for redetermination. There have
been no material changes to other tax matters since the publication
of the Annual Report.
GSK continues to believe that 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 or litigation.
Additional information
Accounting policies and basis of preparation
This unaudited Results Announcement contains condensed financial
information for the year and three months ended 31 December 2012
and should be read in conjunction with the Annual Report 2011, 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 2011.
The income statement, statement of comprehensive income, cash flow
statement and statement of changes in equity for the year ended
31 December 2012 and the balance sheet at that date, are subject
to completion of the audit and may also change should a significant
adjusting event occur before the approval of the Annual Report 2012.
As noted under 'Segment information' on page 36 the segments for
which turnover and operating profit are disclosed have been amended
to reflect changes in the Group's internal management structure
together with certain changes to the therapeutic classifications
of turnover by product. In addition, charges for amortisation and
impairment of intangible assets related to marketed products are
now reported in cost of sales rather than in SG&A. Comparative information
has been restated accordingly. The adjustment for 2011 increases
cost of sales and decreases SG&A by GBP316 million (Q4 2011: GBP54
million) from the amounts previously reported.
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 balance sheet at 31 December 2011 has
been derived from the full Group accounts published in the Annual
Report 2011, 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:
2012 2011 Q4 2012 Q4 2011
------------ ------------ ------------ ------------
Average rates:
US$/GBP 1.59 1.61 1.62 1.61
Euro/GBP 1.23 1.15 1.23 1.18
Yen/GBP 127 128 133 122
Period end rates:
US$/GBP 1.63 1.55 1.63 1.55
Euro/GBP 1.23 1.20 1.23 1.20
Yen/GBP 141 120 141 120
During 2012, average Sterling exchange rates were weaker against
the US Dollar and the Yen but stronger against the Euro compared
with the same period in 2011.
During Q4 2012 average Sterling exchange rates were stronger against
the US Dollar, the Yen and the Euro compared with the same period
in 2011. Year end Sterling exchange rates were stronger against
the US Dollar, the Yen and the Euro.
Weighted average number of shares
2012 2011
millions millions
------------ ------------
Weighted average number of shares - basic 4,912 5,028
Dilutive effect of share options and share awards 77 71
------------ ------------
Weighted average number of shares - diluted 4,989 5,099
------------ ------------
Q4 2012 Q4 2011
millions millions
------------ ------------
Weighted average number of shares -
basic 4,843 4,962
Dilutive effect of share options and
share awards 70 64
------------ ------------
Weighted average number of shares -
diluted 4,913 5,026
------------ ------------
At 31 December 2012, 4,827 million shares were in free issue (excluding
Treasury shares and shares held by the ESOP Trusts). This compares
with 4,958 million shares at 31 December 2011.
Net assets
The book value of net assets decreased by GBP2,080 million from
GBP8,827 million at 31 December 2011 to GBP6,747 million at 31 December
2012. This reflects shares repurchased exceeding profits retained
in the year. At 31 December 2012, the net deficit on the Group's
pension plans was GBP1,313 million compared with GBP1,476 million
at 31 December 2011. The decrease in the deficit primarily arose
from an increase in UK asset values together with special cash contributions
paid into the UK and US schemes and the one-off adjustments to the
UK pension obligations made during the year, partly offset by a
decrease in the rates used to discount UK pension liabilities from
4.8% to 4.4% and US pension liabilities from 4.4% to 3.8%.
The carrying value of investments in associates and joint ventures
at 31 December 2012 was GBP579 million, with a market value of GBP1,181
million.
At 31 December 2012, the ESOP Trusts held 75 million GSK shares
against the future exercise of share options and share awards. The
carrying value of GBP389 million has been deducted from other reserves.
The market value of these shares was GBP1,004 million.
During 2012, GSK purchased GBP2,493 million of shares either to
be held as Treasury shares or for cancellation. At 31 December 2012,
the company held 495 million Treasury shares at a cost of GBP6,602
million, which has been deducted from retained earnings.
Contingent liabilities
There were contingent liabilities at 31 December 2012 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 and 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 39.
Business acquisitions
On 3 August 2012, GSK completed the acquisition of Human Genome
Sciences, Inc. for total consideration of GBP2,282 million, plus
a gain on the revaluation of pre-existing collaborations of GBP233
million. The combined total consideration of GBP2,515 million represented
goodwill of GBP791 million, intangible assets of GBP1,249 million,
inventory of GBP204 million, cash acquired of GBP251 million and
other net assets of GBP20 million. These amounts are provisional
and may be subject to change.
Following the acquisition, GSK has implemented a restructuring plan
in order to realise synergies from the combined business. Restructuring
charges of GBP76 million were charged in the quarter. The total
cost of the restructuring plan is expected to be approximately GBP204
million, of which most is expected to be a cash cost. The restructuring
charges and the unwinding of the fair value and other acquisition
accounting adjustments will be reported as non-core items in GSK's
income statement.
In July 2012, the Group made one small business acquisition for
total consideration of approximately GBP146 million. This represented
goodwill of GBP41 million, intangible assets of GBP139 million and
other net liabilities of GBP34 million. These amounts are provisional
and may be subject to change.
In October 2012, GSK acquired the 50% shareholding in the Shionogi-ViiV
Healthcare joint venture from Shionogi in return for a 10% minority
shareholding in ViiV Healthcare. This was accounted for as a business
acquisition and intangible assets and other net liabilities of GBP1,777
million and GBP1,051 million, respectively were recognised. A gain
of GBP225 million arising primarily from the fair value of GSK's
existing shareholding was recorded in the income statement, together
with negative goodwill of GBP124 million. These amounts are provisional
and may be subject to change.
Reconciliation of cash flow to movements in net debt
2012 2011
GBPm GBPm
------------ ------------
Net debt at beginning of the year (9,003) (8,859)
Decrease in cash and bank overdrafts (1,607) (94)
Cash inflow from liquid investments (224) (30)
Net increase in long-term loans (4,430) -
Net repayment of/(increase in) short-term
loans 816 (37)
Net repayment of obligations under finance
leases 35 38
Net non-cash funds of subsidiaries acquired (3) (10)
Exchange adjustments 385 (10)
Other non-cash movements (6) (1)
------------ ------------
Increase in net debt (5,034) (144)
------------ ------------
Net debt at end of the year (14,037) (9,003)
------------ ------------
Core results reconciliations
The reconciliations between core results and total results for 2012
and 2011 and also Q4 2012 and Q4 2011 are set out below.
Income statement - Core results reconciliation
Year ended 31 December 2012
Other Acquisition
Core Intangible Intangible Major Legal operating adjust- Total
results amortisation impairment restructuring costs income ments results
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 26,431 26,431
Cost of sales (7,078) (378) (309) (128) (1) (7,894)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 19,353 (378) (309) (128) (1) 18,537
Selling, general
and
administration (7,855) (418) (436) (2) (28) (8,739)
Research and
development (3,474) (99) (384) (11) (3,968)
Royalty income 306 306
Other operating
income 1,256 1,256
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 8,330 (477) (693) (557) (436) 1,254 (29) 7,392
Net finance
costs (724) (1) (4) (729)
Share of after
tax profits
of associates
and joint
ventures 29 29
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 7,635 (477) (693) (558) (436) 1,254 (33) 6,692
Taxation (1,864) 145 196 (285) 150 (290) - (1,948)
Tax rate % 24.4% 29.1%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 5,771 (332) (497) (843) (286) 964 (33) 4,744
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 235 (136) 10 70 179
Profit
attributable
to
shareholders 5,536 (332) (361) (853) (286) 894 (33) 4,565
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 112.7p (6.8)p (7.3)p (17.4)p (5.8)p 18.2p (0.7)p 92.9p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of shares
(millions) 4,912 4,912
------------ ------------
Income statement - Core results reconciliation
Year ended 31 December 2011
Other Total
Core Intangible Intangible Major Legal operating results
results amortisation impairment restructuring costs income (restated)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 27,387 27,387
Cost of sales (7,259) (304) (12) (73) (7,648)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 20,128 (304) (12) (73) 19,739
Selling, general
and
administration (7,956) (397) (157) (8,510)
Research and
development (3,678) (137) (97) (97) (4,009)
Royalty income 309 309
Other operating
income - (23) 301 278
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 8,803 (441) (109) (590) (157) 301 7,807
Net finance
costs (707) (2) (709)
Profit on
disposal
of interests
in associates - 585 585
Share of after
tax
losses of
associates and
joint
ventures 15 15
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 8,111 (441) (109) (592) (157) 886 7,698
Taxation (2,104) 137 41 114 22 (450) (2,240)
Tax rate % 25.9% 29.1%
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 6,007 (304) (68) (478) (135) 436 5,458
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 197 197
Profit
attributable
to shareholders 5,810 (304) (68) (478) (135) 436 5,261
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 115.5p (6.0)p (1.4)p (9.5)p (2.7)p 8.7p 104.6p
------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of
shares
(millions) 5,028 5,028
------------ ------------
Income statement - Core results reconciliation
Three months ended 31 December 2012
Other Acquisition
Core Intangible Intangible Major Legal operating adjust- Total
results amortisation impairment restructuring costs income ments results
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 6,802 6,802
Cost of sales (1,830) (107) (13) (61) (2,011)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 4,972 (107) (13) (61) 4,791
Selling, general
and
administration (1,927) (181) (91) 1 (2,198)
Research and
development (834) (24) (280) (3) (1,141)
Royalty income 76 76
Other operating
income 412 412
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 2,287 (131) (293) (245) (91) 412 1 1,940
Net finance
costs (194) (1) (4) (199)
Share of after
tax profits
of associates
and joint
ventures 10 10
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 2,103 (131) (293) (246) (91) 412 (3) 1,751
Taxation (468) 40 77 (351) (3) (207) (912)
Tax rate % 22.3% 52.1%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 1,635 (91) (216) (597) (94) 205 (3) 839
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 58 (136) 53 (25)
Profit
attributable
to
shareholders 1,577 (91) (80) (597) (94) 152 (3) 864
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 32.6p (1.9)p (1.7)p (12.3)p (1.9)p 3.1p (0.1)p 17.8p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of shares
(millions) 4,843 4,843
------------ ------------
Income statement - Core results reconciliation
Three months ended 31 December 2011
Other Total
Core Intangible Intangible Major Legal operating results
results amortisation impairment restructuring costs income (restated)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 6,978 6,978
Cost of sales (1,876) (67) 13 (19) (1,949)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 5,102 (67) 13 (19) 5,029
Selling, general
and
administration (1,934) (162) (76) (2,172)
Research and
development (995) (33) (71) 4 (1,095)
Royalty income 91 91
Other operating
income - (23) 49 26
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 2,264 (100) (58) (200) (76) 49 1,879
Net finance
costs (174) (1) (175)
Profit on
disposal
of interest
in associates - 1 1
Share of after
tax
profits of
associates and
joint
ventures (4) (4)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 2,086 (100) (58) (201) (76) 50 1,701
Taxation (504) 30 25 46 10 (24) (417)
Tax rate % 24.2% 24.5%
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 1,582 (70) (33) (155) (66) 26 1,284
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 32 32
Profit
attributable
to shareholders 1,550 (70) (33) (155) (66) 26 1,252
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 31.2p (1.4)p (0.7)p (3.1)p (1.3)p 0.5p 25.2p
------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of
shares
(millions) 4,962 4,962
------------ ------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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