TIDMAG99
RNS Number : 3232W
GlaxoSmithKline Capital PLC
22 April 2021
Publication of GlaxoSmithKline Capital plc's
Annual Report 2020
Today, 22 April 2021, GlaxoSmithKline Capital plc published on the
GlaxoSmithKline Group website, www.gsk.com, its Annual Report in
respect of the year ended 31 December 2020.
In compliance with Listing Rule 9.6.1 of the UK Financial Conduct
Authority ("FCA"), copies of GlaxoSmithKline Capital plc's 2020
Annual Report, have been submitted to the UK Listing Authority's
NSM submission portal via Electronic Submission System (ESS) . In
accordance with the FCA's Disclosure and Transparency Rules 4.1
and 6.3.5, Appendix A to this announcement contains GlaxoSmithKline
Capital plc's 2020 Annual Report, which includes a description of
the principal risks and uncertainties affecting it together with
a responsibility statement.
V A Whyte
Company Secretary
22 April 2021
Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995, GlaxoSmithKline plc (GSK) and the
company cautions investors that any forward-looking statements or
projections made by GSK, including those made in this announcement,
are subject to risks and uncertainties that may cause actual results
to differ materially from those projected. Such factors include,
but are not limited to, those described in GSK's Annual Report on
Form 20-F for 2020 and any impacts of the COVID-19 pandemic.
Appendix A
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report
for the year ended 31 December 2020
Registered office address:
980 Great West Road
Brentford
Middlesex TW8 9GS
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report for the year ended 31 December 2020
Contents Pages
Strategic report 1-3
Directors' report 4-7
Independent auditors' report 8-15
Income statement 16
Statement of comprehensive income 17
Balance sheet 18
Statement of changes in equity 19
Cash flow statement 20
Notes to the financial statements 21-33
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report for the year ended 31 December 2020
Strategic report for the year ended 31 December 2020
The Directors present their Strategic report on GlaxoSmithKline
Capital plc (the "Company") for the year ended 31 December
2020.
Principal activities and future developments
The Company is a member of the GlaxoSmithKline Group (the
"Group"). The principal activities of the Company during the
financial year were the issuance of notes under the Group's
European Medium Term Note programme and US shelf registration and
the provision of financial services to other companies within the
Group.
The Directors do not envisage any change to the nature of the
business in the foreseeable future.
Review of business
At 31 December 2020, the Company had in issue GBP12,664,804,000
European Medium Term Notes and GBP5,474,398,622 US Medium Term
Notes (2019: GBP11,807,444,000 and GBP5,650,654,000 respectively)
which mature at dates between 2021 and 2045. All notes currently in
issue pay interest on a fixed rate basis, with the exception of the
EUR1.5 billion (GBP1.3 billion) 2021 European Medium Term Note and
$750 million (GBP549 million) 2021 US Medium Term Note which are on
a floating rate basis.
On 12 May 2020, three new bonds totalling EUR750 million and
GBP1.5 billion were issued under the Group's European Medium Term
Note programme as follows:
-- EUR750 million (GBP741 million) 0.125% European Medium Term Note
2023;
-- GBP750 million 1.25% European Medium Term Note 2028;
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-- GBP750 million 1.625% European Medium Term Note 2035.
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On 1 October 2020, a new bond totalling $1.25 billion was issued
under the Group's US Shelf Bond Programme as follows:
-- $1.25 billion (GBP971 million) 0.534% US Medium Term Note 2023
Net proceeds of the GBP bond issues were used to satisfy general
GSK funding requirements. Net proceeds of the EUR bond issue were
applied in full towards the repayment of further outstanding
amounts under the acquisition facility ($5bn drawn under a bank
facility, which was used to fund the acquisition of Tesaro Inc. in
January 2019).
On 28 September 2020 the Company announced the early repayment
of the USD $1.25 billion 3.125% Note due May
2021, which was repaid on 13 October 2020.
The Company made a profit for the financial year of
GBP17,623,000 (2019: GBP14,583,000), which will be transferred to
reserves. The Directors are of the opinion that the current level
of activity and the year end financial position are satisfactory
and will remain so in the foreseeable future.
Principal risks and uncertainties
The Directors of GlaxoSmithKline plc manage the risks of the
Group at a group level, rather than at an individual statutory
entity level. For this reason, the Company's Directors believe that
a discussion of the Group's risks would not be appropriate for an
understanding of the development, performance or position of the
Company's business. The principal risks and uncertainties of the
Group, which include those of the Company, are discussed in the
Group's 2020 annual report which does not form part of this
report.
Key performance indicators (KPIs)
The Directors of the Group manage the Group's operations on an
operating segment basis. For this reason, the Company's Directors
believe that analysis using key performance indicators for the
Company is not necessary or appropriate for an understanding of the
development, performance or position of the Company's business. The
development, performance and position of the Group are discussed in
the Group's 2020 annual report which does not form part of this
report.
Impact of Brexit
The UK left the EU on 31 January 2020 and the Brexit transition
period ended on 31 December 2020 with a Trade and Cooperation
Agreement ('a deal') in place between the UK and EU. The Group's
overriding priority in preparing for the UK's exit from the EU has
been to maintain continuity of supply of our products to people in
the UK and EU.
The Group's post-Brexit operating model has been implemented,
and we continue to work closely with Governments in both the UK and
EU, as well as our third parties, on the effective implementation
of the deal and to ensure that our sector continues to thrive and
deliver innovation for consumers in both the UK and EU.
Over the longer term, we continue to believe that Brexit will
not have a material impact on our business.
Risks associated with COVID-19
The potential impact of the coronavirus outbreak on the
Company's and its subsidiaries' access to capital and ability to
lend and all its principal risks have been assessed with mitigation
plans put in place. The Company has accessed capital markets in
2020, and continues to monitor the situation closely, as this
continues to be a dynamic and an uncertain situation, with the
ultimate severity, duration and impact unknown at this point.
Section 172 Companies Act 2006 statement
The Company's governance architecture and processes operated to
ensure that all relevant matters are considered by the Board in its
principal decision-making, as a means of contributing to the
delivery of the Company long-term priorities of Innovation,
Performance and Trust.
In the performance of its duty to promote the success of the
Company and the long-term priorities, the Board has agreed to a
number of matters, including listening to and considering the views
of shareholders and the Company's other stakeholders to build trust
and ensure it fully understands the potential impacts of the
decisions it makes for our stakeholders.
Section 172 Companies Act 2006 statement (continued)
Further disclosures detailing how, during the year, the
Directors addressed the matters set out in Section 172(1) (a) to
(f) of the Companies Act, can be found in the consolidated
financial statements of the GlaxoSmithKline Group, of which the
Company is a member and no additional considerations are deemed
necessary for the Company as the relevant matters are all
considered in the GlaxoSmithKline Group accounts. Copies of the
consolidated financial statements can be obtained from the Company
Secretary, GlaxoSmithKline plc, 980 Great West Road, Brentford,
Middlesex, TW8 9GS. By order of the Board
Mr A Walker
For and on behalf of Glaxo Group Limited
Corporate Director
19 April 2021
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report for the year ended 31 December 2020
Directors' report for the year ended 31 December 2020
The Directors present their report and the audited financial
statements of GlaxoSmithKline Capital plc (the "Company") for the
year ended 31 December 2020.
Results and dividends
The Company's profit for the financial year is shown in the
income statement on page 16.
No dividend is proposed to the holders of ordinary shares in
respect of the year ended 31 December 2020 (2019: GBPnil).
Internal control framework
The GlaxoSmithKline plc Board is accountable for evaluating and
approving the effectiveness of the internal controls, including
financial, operational and compliance controls, and risk management
processes operated by the Group. The Internal Control Framework is
the means by which the Group ensures the reliability of financial
reporting and compliance with laws and regulations.
To ensure effective governance and promote an ethical culture,
the Group has in place the Risk Oversight and Compliance Council.
This team of senior leaders is mandated by the Board to assist the
Audit and Risk Committee in overseeing risk management and internal
control activities. It also provides the business units with a
framework for risk management and upward escalation of significant
risks, of which the Company operates within. Further information on
the Group's Internal Control Framework is discussed in the Group's
2020 Annual Report which does not form part of this report.
Financial risk
The Company issues notes under the Group's European Medium Term
Note programme and US shelf registration in order to meet
anticipated funding requirements for the Group. The strategy is to
diversify liquidity sources using a range of facilities and to
maintain broad access to funding markets. Details of derivative
financial instruments and hedging, and further information on risk
management policies, exposures to market, credit and liquidity risk
are disclosed in Note 2(l) and Note 4
The Company manages its cash flow interest rate risk on its
forecasted Euro and US Dollar denominated notes issued under the
Group's European Medium Term Note programme and US shelf
registration using treasury gilt locks and interest rate swaps. In
addition, the Company carries a balance in reserves that arose from
pre-hedging fluctuations in long-term interest rates when pricing
bonds issued in prior years. The balance is reclassified to finance
costs over the life of these bonds.
Directors and their interests
The Directors of the Company who were in office during the year
and up to the date of signing the financial statements were as
follows:
Mr I Mackay
Edinburgh Pharmaceutical Industries Limited
Glaxo Group Limited
No Director had, during the year or at the end of the year, any
material interest in any contract of significance to the Company's
business with the exception of the Corporate Directors, where such
an interest may arise in the ordinary course of business. A
Corporate Director is a legal entity of the Group as opposed to a
natural person (an individual) Director.
Directors' indemnity
Each of the Directors benefits from an indemnity given by the
Company under its articles of association. This indemnity is in
respect of liabilities incurred by the Director in the execution
and discharge of their duties.
In addition, each of the Directors who is an individual benefits
from an indemnity given by another Group company, GlaxoSmithKline
Services Unlimited. This indemnity is in respect of liabilities
arising out of third party proceedings to which the Director is a
party by virtue of their engagement in the business of the
Company.
Directors' interests
The following interests of the Director in office in the shares
of the ultimate parent undertaking, GlaxoSmithKline plc, at the
year end have been notified to the Company.
Ordinary Shares
========== ================ ============
At 31 Dec Granted Exercised / At 31 Dec 2020
2019 Lapsed
=================== ========== ================ ============ ===============
Performance Share
Plans
---------- ---------------- ------------ ---------------
Mr I Mackay 233,791 227,796 - 461,587
---------- ---------------- ------------ ---------------
At 31 Dec Granted Exercised / At 31 Dec 2020
2019 Lapsed
=================== ========== ================ ============ ===============
Deferred Annual
Bonus Plan
---------- ---------------- ------------ ---------------
Mr I Mackay - 36,655 - 36,655
---------- ---------------- ------------ ---------------
All share awards are over ordinary shares of GlaxoSmithKline
plc.
Further details of the above-mentioned Plans are disclosed in
the 2020 Annual Report of GlaxoSmithKline plc.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 "Reduced Disclosure
Framework", and applicable law). Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
Statement of Directors' responsibilities (continued)
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and
prudent;
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-- state whether applicable United Kingdom Accounting Standards, comprising
FRS 101, have been followed;
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-- subject to any material departures disclosed and explained in the
financial statements; and
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-- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the company will continue in
business.
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The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. The
Directors are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The following items have been included in the Strategic report
on page 1:
-- principal activities and future developments;
-- review of business;
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-- principal risks and uncertainties;
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-- key performance indicators;
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-- impact to Brexit;
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-- risks associated with COVID-19; and
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-- section 172 Companies Act 2006 Statement.
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Corporate Governance
As a subsidiary company of the Group which is listed on the New
York and London Stock Exchanges, the Company has developed
governance practices and processes that are fit for purpose.
The Directors have applied an undocumented system of governance
by:
(a) Promoting the purpose of the Group to deliver manufacturing and
distribution of medicines through its subsidiaries'operations.
(b) Regularly reviewing its composition to ensure that it has an appropriately
diverse balance of skills, backgrounds,experience and knowledge
and that individual directors have sufficient capacity to make a
valuable contribution.
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(c) To support effective decision-making Directors take into account
the System of Internal Control and the Code of Conductwhen acting
in their capacity as a Director of the Company.
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(d) In accordance with the governance practices and processes that it
adopts, the Board is supported by Systems of Internal Control to
identify opportunities to create and preserve value.
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(e) Having regard to and fostering good stakeholder relationships
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Stakeholder engagement
The Company aims to build enduring relationships with all its
stakeholders in the countries where it operates. The Company works
with its business partners in an honest, respectful and responsible
way and seeks to work with others who share the Company's
commitments to safety, ethics and compliance.
On behalf of the Company, the Group participates in industry
associations that offer opportunities to share good practices and
collaborate on issues of importance. Additionally, the Group works
with stakeholders on a range of issues that are relevant to its
business and relating to regulatory compliance matters.
Disclosure of information to auditors
As far as each of the Directors are aware, there is no relevant
audit information of which the Company's auditors are unaware, and
the Directors have taken all the steps that ought to have been
taken as a director to make themselves aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information.
Going concern basis
Having assessed the principal risks and other matters, including
the potential impact of the COVID- 19 pandemic, the Directors are
of the opinion that the current level of activity remains
sustainable. In relation to the challenges that arise from the
COVID- 19 pandemic, the considerations have included the
accessibility of additional capital and the potential risk to
liquidity. The Directors have taken into account that as part of
the Group, the Company has the ability to request support from the
Group where necessary and can take actions to ensure business
continuity through operational channels, as well as the ability to
manage variable costs. On the basis of those considerations, the
Directors believe that it remains appropriate to adopt the going
concern basis of accounting in preparing the financial
statements.
Independent auditors
Deloitte LLP have been appointed to act as the Company's
auditors by a resolution of the Board of Directors in accordance
with s489(3) Companies Act 2006.
By order of the Board
Mr A Walker
For and on behalf of Glaxo Group Limited
Corporate Director
19 April 2021
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report for the year ended 31 December 2020
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
Report on the audit of the financial statements
1. Opinion
In our opinion the financial statements of GlaxoSmithKline
Capital plc (the 'company'):
-- give a true and fair view of the state of the company's affairs
as at 31 December 2020 and of its profit for the year then ended;
-- have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard
101 "Reduced Disclosure Framework"; and
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-- have been prepared in accordance with the requirements of the Companies
Act 2006.
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We have audited the financial statements which comprise:
-- the income statement;
-- the statement of comprehensive income;
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-- the balance sheet;
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-- the statement of changes in equity;
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-- the cash flow statement; and
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-- the related notes 1 to 24 .
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The financial reporting framework that has been applied in their
preparation is applicable law and United Kingdom Accounting
Standards, including Financial Reporting Standard 101 "Reduced
Disclosure Framework" (United Kingdom Generally Accepted Accounting
Practice).
2. Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
auditor's responsibilities for the audit of the financial
statements section of our report.
We are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council's
(the 'FRC's') Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We confirm that the
non-audit services prohibited by the FRC's Ethical Standard were
not provided to the company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year
were:
-- Valuation of borrowings; and
-- Valuation of intercompany loan receivables.
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Materiality
The materiality that we used in the current year was GBP182
million which was determined on a range of measures including total
assets and external debt.
3. Summary of our audit approach (continued)
Scoping
Our audit of the company was scoped by obtaining an
understanding of the entity and its environment, including relevant
controls, and assessing the risk of material misstatement at the
entity level.
Significant Changes in our approach
There have been no significant changes in approach since the
prior year.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors' assessment of the company's
ability to continue to adopt the going concern basis of accounting
included:
-- Evaluating the assumptions on which management's assessment is based
including the company's access to sources of internal and external
financing and the potential impact of the Covid-19 pandemic on those
sources of finance;
-- Reading analyst reports, industry data and other external information
to determine if it provided corroborative or contradictory evidence
in relation to management's assumptions; and
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-- Evaluating the company's appropriateness of the going concern disclosures
in line with the requirements of IAS 1.
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Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
company's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Valuation of borrowings
Key audit matter description The company issues external borrowings under
its European Medium Term Note (EMTN) and US
Shelf Programme on behalf of other GSK Group
entities. This has resulted in the recognition
of material borrowing amounts including:
-- Short-term borrowings: GBP2.4 billion (2019:
GBP1.7 billion); and
-- Long-term borrowings: GBP15.8 billion (2019:
GBP15.8 billion).
In the current year, the external borrowings
increased by GBP0.7 billion due to the issuance
of four new bonds offset by the repayment of
three existing bonds. These are recognised as
financial liabilities measured at amortised
cost at the original effective interest rate,
computed based on the bond proceeds, costs of
issuance, coupon payments and redemption value.
Valuation of intercompany loan receivables Due
to the magnitude of the external debt held by
the company, we have identified a key audit
matter with respect to the calculation of the
effective interest rate and carrying value of
the borrowings under IFRS 9.
Borrowings are disclosed in Note 14 of the financial
statements with fair value disclosure in Note
16 of the financial statements. The accounting
policy for borrowings is disclosed in Note 2
of the financial statements.
How the scope of our audit We performed the following audit procedures:
responded to the key audit
matter
-- Agreed bond proceeds, bond costs, coupon rate
and redemption values to underlying agreements
and term sheets;
-- Recalculated the effective interest rate and
the carrying value of each bond using the key
inputs outlined above per the underlying agreements;
-- Assessed the appropriateness of the accounting
treatment applied for borrowings including the
recognition at amortised cost in line with IFRS
9 requirements;
-- Agreed the inputs used for the fair value disclosures
in the notes to the financial statements to
an independent source; and
-- Evaluated the appropriateness of disclosures
in respect to these liabilities included in
the notes to the financial statements.
Key observations We are satisfied that the calculation of the
effective interest rate and carrying value of
the external borrowings balance has been correctly
calculated and appropriately recorded in accordance
with IFRS 9.
Valuation of intercompany
loan receivables
Key audit matter description The bonds issued by the company are subsequently
loaned to GlaxoSmithKline Group companies. This
is divided as follows:
-- Short-term intercompany loan receivables: GBP2.5
billion (2019: GBP1.7 billion); and
-- Long-term intercompany loan receivables: GBP15.8
billion (2019: GBP15.8 billion).
These are recognised as financial assets measured
at amortised cost at the original effective
interest rate, computed based on the loan issued,
coupon payments and redemption value. As such,
we identified a key audit matter relating to
the calculation of the effective interest rate
and carrying value of the intercompany loan
receivables balance under IFRS 9.
Intercompany loan receivables are disclosed
in Note 11 of the financial statements with
the accounting policies disclosed in Note 2
of the financial statements.
We performed the following audit procedures:
-- Agreed bond proceeds, bond costs, coupon rate
and redemption values to underlying agreements
and term sheets;
-- Recalculated the effective interest rate and
the carrying value of each bond using the key
inputs outlined above per the underlying agreements;
-- Assessed the appropriateness of the accounting
treatment applied for borrowings including the
recognition at amortised cost in line with IFRS
9 requirements;
-- Agreed the inputs used for the fair value disclosures
in the notes to the financial statements to
an independent source; and
-- Evaluated the appropriateness of disclosures
in respect to these liabilities included in
the notes to the financial statements.
Key observations We are satisfied that the calculation of the
effective interest rate and carrying value of
the external borrowings balance has been correctly
calculated and appropriately recorded in accordance
with IFRS 9.
6. Our application of materiality
Materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Materiality GBP182 million (2019: GBP175 million)
Basis for determining We have determined materiality to be GBP182 million.
materiality In determining materiality, we applied a range of
measures, using 1% of total assets and 1% of total
external debt*. This range has remained unchanged
from 2019.
The increase in materiality from the previous year
is due to the increase in external borrowings of
GBP0.7 billion and associated increase in intercompany
receivables from the lending of the proceeds to
other entities within the group.
*External debt is defined as short-term and long-term
borrowings.
Rationale for the benchmark The company is the main UK debt issuer of the GlaxoSmithKline
applied Group. As such, total assets and external debt were
determined to be the most appropriate benchmarks
to apply as they relate to the primary focus of
management, shareholders and lenders in assessing
the performance on the entity.
Performance materiality
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial
statements as a whole. Performance materiality was set at 70% of
materiality for the 2020 audit (2019: 70%). In determining
performance materiality, we considered the following factors:
-- our risk assessment, including our assessment of the company's overall
control environment; and
-- our past experience of the audit, which has indicated a low number
of corrected and uncorrected misstatements identified in prior periods.
Error reporting threshold
We agreed with the Board of Directors that we would report to
them all audit differences in excess of GBP9.10 million (2019:
GBP8.75 million), as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. We also
report to the Board of Directors on disclosure matters that we
identified when assessing the overall presentation of the financial
statements.
7. An overview of the scope of our audit
Scoping
Our audit was scoped by obtaining an understanding of the entity
and its environment, including internal control, and assessing the
risk of material misstatement. Audit work to respond to the risks
of material misstatement was performed directly by the audit
engagement team.
Our consideration of the control environment
We obtained an understanding of the company's control
environment through audit procedures over the in-scope processes
for the purpose of the GlaxoSmithKline plc Group audit.
Subsequently, as part of our statutory audit process, we have
performed additional audit procedures in order to obtain an
understanding of all other key company processes. We structured our
audit approach to reflect how the company is organised as well as
ensuring our audit was both effective and risk focused. Based on
our scope and determination of audit approach, the audit engagement
team have obtained an understanding of the relevant controls over
the financial reporting process and have adopted a fully
substantive approach for the audit of the financial statements.
8. Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained in the annual report.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error. In preparing the financial statements, the
directors are responsible for assessing the company's ability to
continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative
but to do so.
10. Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
11. Extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below.
Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance with
laws and regulations, we considered the following:
-- the nature of the industry and sector, control environment and business
performance including the design of the company's remuneration policies,
key drivers for directors' remuneration, bonus levels and performance
targets;
-- results of our enquiries of management and the Board of Directors about
their own identification and assessment of the risks of irregularities;
-- any matters we identified having obtained and reviewed the company's
documentation of their policies and procedures relating to
-- identifying, evaluating and complying with laws and regulations
and whether they were aware of any instances of non-compliance;
-- detecting and responding to the risks of fraud and whether they
have knowledge of any actual, suspected or alleged fraud;
the internal controls established to mitigate risks of fraud or
non-compliance with laws and regulations; and
-- the matters discussed among the audit engagement team and relevant
internal specialists, including tax specialistsregarding how and where
fraud might occur in the financial statements and any potential indicators
of fraud.
As a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for
fraud.
In common with all audits under ISAs (UK), we are required to
perform specific procedures to respond to the risk of management
override.
We also obtained an understanding of the legal and regulatory
framework that the company operates in, focusing on provisions of
those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this
context included the UK Companies Act, Listing
Rules and tax legislation.
In addition, we considered provisions of other laws and
regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the
company's ability to operate or to avoid a material penalty.
Audit response to risks identified
As a result of performing the above, we did not identify any key
audit matters related to the potential risk of fraud or
noncompliance with laws and regulations.
Our procedures to respond to risks identified included the
following:
-- reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws
and regulations described as having a direct effect on the financial
statements;
-- enquiring of management, the Board of Directors and in-house and external
legal counsel concerning actual and potential litigation and claims;
-- performing analytical procedures to identify any unusual or unexpected
relationships that may indicate risks of material misstatement due
to fraud;
-- reading minutes of meetings of those charged with governance, reviewing
internal audit reports; and
-- in addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments;
assessing whether the judgements made in making accounting estimates
are indicative of a potential bias; and evaluating the business rationale
of any significant transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members including
internal specialists and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout the
audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act
2006 In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and the directors' report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
-- the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified any material misstatements in the strategic report
or the directors' report.
13. Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- we have not received all the information and explanations we require
for our audit; or
-- adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by
us; or
-- the financial statements are not in agreement with the accounting
records and returns.
We have nothing to report in respect of these matters.
Directors' remuneration
Under the Companies Act 2006 we are also required to report if
in our opinion certain disclosures of directors' remuneration have
not been made.
We have nothing to report in respect of this matter.
14. Other matters which we are required to address
Auditor tenure
We were appointed by the Board of Directors on 30 May 2018 to
audit the financial statements for the year ending 31 December 2018
and subsequent financial periods. The period of total uninterrupted
engagement including previous renewals and reappointments of the
firm is three years, covering the years ending 31 December 2018 to
31 December 2020.
Consistency of the audit report with the additional report to
the Board of Directors
Our audit opinion is consistent with the additional report to
the Board of Directors we are required to provide in accordance
with ISAs (UK).
15. Use of our report
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the
company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
The company has passed a resolution in accordance with section
506 of the Companies Act 2006 that the senior statutory auditor's
name should not be stated.
Deloitte LLP
Statutory Auditors
London, United Kingdom
20 April 2021
GlaxoSmithKline Capital plc
Income statement
for the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
============================== ==== ========== =========
Other operating loss 6 (179) (2,351)
Finance income 8 513,431 473,371
Finance expense 9 (491,495) (453,016)
============================== ==== ========== =========
Operating profit 21,757 18,004
============================== ==== ========== =========
Profit before taxation 21,757 18,004
Tax on profit 10 (4,134) (3,421)
============================== ==== ========== =========
Profit for the financial year 17,623 14,583
The results disclosed above for both the current year and prior
year relate entirely to continuing operations.
The notes on pages 21 to 33 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Statement of comprehensive income for the year ended 31 December
2020
2020 2019
Note GBP'000 GBP'000
============================================= ==== ======= ========
Profit for the financial year
Items that may be subsequently reclassified
to the income statement: 17,623 14,583
Fair value movements on cash flow hedges (5,480) (11,704)
Reclassification of cash flow hedges to the
income statement 3,984 3,239
Deferred tax on fair value movements on cash
flow hedges 10 678 1,439
============================================= ==== ======= ========
Other comprehensive income / (expense) for
the financial year (818) (7,026)
============================================= ==== ======= ========
Total comprehensive income for the financial
year 16,805 7,557
The notes on pages 21 to 33 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Balance sheet as at 31 December 2020
2020 2019
Note GBP'000 GBP'000
======================================= ===== ============= ============
Non-current assets
Deferred tax assets 10 4,021 3,343
Trade and other receivables 11 15,776,159 15,797,561
======================================= ===== ============= ============
Total non-current assets 15,780,180 15,800,904
======================================= ===== ============= ============
Current assets
Trade and other receivables 11 2,447,426 1,731,747
Prepayments and accrued income 12 145,580 134,752
Cash and cash equivalents 4 4
======================================= ===== ============= ============
Total current assets 2,593,010 1,866,503
======================================= ===== ============= ============
Total assets 18,373,190 17,667,407
======================================= ===== ============= ============
Current liabilities
Trade and other payables 13 (4,024) (5,811)
Short-term borrowings 14 (2,350,809) (1,657,233)
Accruals and deferred income 15 (137,021) (128,073)
Corporation tax (4,134) (3,421)
======================================= ===== ============= ============
Total current liabilities (2,495,988) (1,794,538)
======================================= ===== ============= ============
Net current assets 97,022 71,965
======================================= ===== ============= ============
Total assets less current liabilities 15,877,202 15,872,869
======================================= ===== ============= ============
Non-current liabilities
Long-term borrowings 14 (15,788,394) (15,800,866)
======================================= ===== ============= ============
Total non-current liabilities (15,788,394) (15,800,866)
======================================= ===== ============= ============
Total liabilities (18,284,382) (17,595,404)
======================================= ===== ============= ============
Net assets
======================================= ===== ============= ============
Equity 88,808 72,003
Called up share capital 20 100 100
Other reserves 21 (17,141) (16,323)
Retained earnings 105,849 88,226
======================================= ===== ============= ============
Total equity 88,808 72,003
The notes on pages 21 to 33 are an integral part of these
financial statements.
The financial statements on pages 16 to 33 were approved by the
Board of Directors on 19 April 2021 and signed on its behalf
by:
Mr A Walker
For and on behalf of Glaxo Group Limited Corporate Director
GlaxoSmithKline Capital plc
Statement of changes in equity for the year ended 31 December
2020
Called up Other reserves Retained Total
share capital earnings equity
GBP'000 GBP'000 GBP'000 GBP'000
===================================== ================== ================= ============== =======
At 1 January 2019 100 (9,297) 73,643 64,446
Profit for the year - - 14,583 14,583
Other comprehensive income/(expense)
for the financial year - (7,026) - (7,026)
===================================== ================== ================= ============== =======
At 31 December 2019 100 (16,323) 88,226 72,003
===================================== ================== ================= ============== =======
Profit for the year - - 17,623 17,623
Other comprehensive income/(expense)
for the financial year - (818) - (818)
===================================== ================== ================= ============== =======
At 31 December 2020 100 (17,141) 105,849 88,808
The notes on pages 21 to 33 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Cash flow statement
for the year ended 31 December 2020
2020 2019
Note GBP'000 GBP'000
=========================================== ==== ============== ===========
Cash flows from operating activities
Operating profit 21,757 18,004
Adjustments reconciling operating profit
to operating cash flows 7,001 3,838
Taxation paid (3,421) -
=========================================== ==== ============== ===========
Net cash inflow from operating activities 18 25,337 21,842
=========================================== ==== ============== ===========
Cash flows from financing activities
Proceeds from borrowings 3,111,197 4,845,302
Repayment of borrowings (2,737,670) (1,277,670)
Loans provided to Group undertakings (3,106,262) (4,833,620)
Loan repayments received from Group
undertakings 2,730,143 1,268,099
(Increase) / decrease in other receivables
with Group undertakings (22,745) (23,949)
=========================================== ==== ============== ===========
Net cash outflow from financing activities (25,337) (21,838)
=========================================== ==== ==============
Net movement in cash in the year - 4
================================================= ============== ===========
Cash at beginning of year 4 -
Movement in cash - 4
================================================= ============== ===========
Cash at end of year 4 4
The notes on pages 21 to 33 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2020
1. Presentation of the financial statements
General information
GlaxoSmithKline Capital plc (the "Company") is a public company
limited by shares and is incorporated and domiciled in the UK
(England and Wales). The address of the registered office is 980
Great West Road, Brentford, Middlesex TW8 9GS.
The Company is a member of the GlaxoSmithKline Group (the
"Group"). The Company's principal activity is the issuance of notes
under the Group's European Medium Term Note programme and US shelf
registration and the provision of financial services to other
companies within the Group.
2.Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied, unless otherwise stated.
(a) Basis of preparation
The financial statements have been prepared in accordance with
Financial Reporting Standard 101 "Reduced Disclosure Framework"
("FRS 101") to requirements set by the International Financial
Reporting Standards (IFRS).
Going concern
Having assessed the principal risks and other matters, including
the potential impact of the COVID- 19 pandemic, the Directors are
of the opinion that the current level of activity remains
sustainable. In relation to the challenges that arise from the
COVID- 19 pandemic, the considerations have included the
accessibility of additional capital and the potential risk to
liquidity. The Directors have taken into account that as part of
the GSK Group of companies, the Company has the ability to request
support from the Group where necessary and can take actions to
ensure business continuity through operational channels, as well as
the ability to manage variable costs. On the basis of those
considerations, the Directors believe that it remains appropriate
to adopt the going concern basis of accounting in preparing the
financial statements.
These financial statements have been prepared on the going
concern basis under the historical cost convention and in
accordance with the Companies Act 2006 as applicable to companies
using FRS 101.
Disclosure exemptions adopted
In preparing these financial statements, the Company has taken
advantage of some disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
-- Paragraph 38 of IAS 1 "Presentation of financial statements" comparative
information requirements in respect of:
- paragraph 79(a) (iv) of IAS 1
- 16 (statement of compliance with all IFRS); and
- 38B-D (additional comparative information);
-- Paragraph 30 and 31 of IAS 8 "Accounting policies, changes in accounting
estimates and errors" (requirement for the disclosure of information
when an entity has not applied a new IFRS that has been issued
but is not yet effective);
-- Paragraph 17 of IAS 24 "Related party disclosures" (key management
compensation); and
-- The requirements in IAS 24 "Related party disclosures" to disclose
related party transactions entered into between two or more wholly
members of a group
The financial statements of GlaxoSmithKline plc can be obtained
as described in Note 2(b).
The preparation of financial statements in conformity with FRS
101 requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process
of applying the Company's accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 3.
(b) Ultimate and immediate parent undertaking
The Company is a wholly owned subsidiary of the ultimate parent
company. GlaxoSmithKline plc, a company registered in England and
Wales, is the Company's ultimate parent undertaking and controlling
party. The largest and smallest group of undertakings for which
group financial statements are prepared and which include the
results of the Company are the consolidated financial statements of
GlaxoSmithKline plc. Copies of the consolidated financial
statements can be obtained from the Company Secretary,
GlaxoSmithKline plc, 980 Great West Road, Brentford, Middlesex TW8
9GS. The immediate parent undertaking is SmithKline Beecham
Limited. These financial statements are separate financial
statements.
2. Summary of significant accounting policies (continued)
(c) Foreign currency transactions
Foreign currency transactions are booked in the functional
currency of the Company at the exchange rate ruling on the date of
the transaction. Foreign currency monetary assets and liabilities
are translated into the functional currency at rates of exchange
ruling at the balance sheet date. Exchange differences are included
in the income statement. The functional and presentation currency
of the Company is Pounds Sterling.
(d) Other operating income
Management service fees are recognised in other operating income
on an accruals basis.
(e) Finance income and expense
Finance income and expenses are recognised on an accruals basis
using the effective interest method.
(f) Financial assets
Financial assets are measured at amortised cost, fair value
through other comprehensive income ('FVTOCI') or fair value through
profit or loss ('FVTPL'). The measurement basis is determined by
reference to both the business model for managing the financial
asset and the contractual cash flow characteristics of the
financial asset.
(g) Impairment of financial assets
Expected credit losses are recognised in the income statement on
financial assets measured at amortised cost.
For financial assets a 12-month expected credit loss ("ECL")
allowance is recorded on initial recognition. If there is evidence
of a significant increase in the credit risk of an asset, the
allowance is increased to reflect the full lifetime ECL. If there
is no realistic prospect of recovery, the asset is written off.
(h) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and current
balances with banks and similar institutions. They are readily
convertible into known amounts of cash and have an insignificant
risk of changes in value.
(i) Other payables
Other payables are initially recognised at fair value and then
held at amortised cost using the effective interest method.
Long-term payables are discounted where the effect is material.
(j) Borrowings
All borrowings, which comprise notes issued under the Group's
European Medium Term Note programme and US shelf registration, are
initially recorded at the amount of proceeds received, net of
transaction costs. Borrowings are subsequently carried at amortised
cost, with the difference between the proceeds, net of transaction
costs, and the amount due on redemption being recognised as a
charge to the income statement over the period of the relevant
borrowing.
(k) Taxation
Current tax is provided at the amounts expected to be paid or
refunded applying the rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is provided in full, on temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax assets
are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary
differences can be utilised. Deferred tax is provided on temporary
differences arising on investments in subsidiaries, associates and
joint ventures, except where the timing of the reversal of the
temporary differences can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax is provided using rates of tax that have been enacted
or substantively enacted by the balance sheet date.
2. Summary of significant accounting policies (continued)
(l) Derivative financial instruments and hedging
Derivative financial instruments can be used by the Company to
manage exposure to market risks. The Company does not hold or issue
derivative financial instruments for trading or speculative
purposes and does not currently hold any derivative financial
instruments.
Derivative financial assets and liabilities are classified as
held-for trading and are measured at fair value. Changes in the
fair value of any derivative instruments that do not qualify for
hedge accounting are recognised immediately in the income
statement.
The Company carries a balance in other comprehensive income that
arose from using treasury gilt locks and forward starting interest
rate swaps for pre-hedging fluctuations in long-term interest rates
when pricing bonds issued in prior and current years.
3. Critical accounting judgements and key sources of estimation
uncertainty
In preparing the financial statements, management is required to
make estimates and assumptions that affect the amounts of assets,
liabilities, revenue and expenses reported in the financial
statements. Actual amounts and results could differ from those
estimates. There are no required estimates or assumptions made in
the valuation of intercompany loans and borrowings.
4. Financial risk management
Risk management is carried out by the Group's Corporate Treasury
under policies and procedures approved annually by the Group's
Board of Directors, most recently on 15 October 2020. The role of
Corporate Treasury is to monitor and manage the Group's external
and internal funding requirements and financial risks, covering
foreign exchange, interest rate, liquidity, and credit risks in
support of the Group's strategic objectives. A Treasury Management
Group meeting, chaired by the Group's Chief Financial Officer, also
takes place on a monthly basis to review treasury activities.
As part of the Group's risk assessment, we continue to believe
that Brexit will not have a material impact on our business.
(a) Market risk
(i) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from
foreign currency transactions, primarily with respect to the US
dollar and Euro, in respect of bonds issued under the Group's
European Medium Term Note programme and US shelf registration.
The net proceeds of bond issuances received are subsequently
advanced as loans to other Group undertakings in the same currency
which minimises the foreign translation exposure within the
Company. On this basis, foreign exchange risk is not considered
material and the Company has not prepared a sensitivity
analysis.
4. Financial risk management (continued)
(ii) Interest rate risk
The Group's objective is to minimise the effective net interest
cost and to balance the mix of debt at fixed and floating interest
rates over time. The policy on interest rate risk management limits
the net amount of floating rate debt to a specific cap, reviewed
and agreed no less than annually by the GlaxoSmithKline Board.
The Company's interest rate risk arises mainly from deposits
with Group undertakings and cash held at floating rates which
expose the Company to interest rate risk. The Company has unsecured
borrowings, comprised of notes issued under the Group's European
Medium Term Note programme and US shelf registration, the majority
of which are at fixed rates, and expose the Company to fair value
interest rate risk.
The table below hypothetically shows the Company's sensitivity
to changes in interest rates in relation to Euro, Sterling and US
dollar floating rate financial assets. If interest rates applicable
to floating rate financial assets were to have increased by 1% (100
basis points), and assuming all other variables had remained
constant, it is estimated that the Company's finance income for
2020 would have increased by approximately GBP1,755,000 (2019:
GBP1,518,000 increase in finance income).
2020 2019
Increase in income Increase
in income
===================================================== ================== ==========
1% (100 basis points) increase in Euro interest
rates (2019: 1%) 536 398
1% (100 basis points) increase in Sterling interest
rates (2019: 1%) 802 723
1% (100 basis points) increase in US dollar interest
rates (2019: 1%) 417 397
The tables below illustrate the currency and interest rate
profiles arising from the Company's borrowings, loans and
receivable balances.
Currency and interest rate risk profile of borrowings
At 31 December Fixed rate
2020
==========================================
Weighted average interest Average years
rate for which rate
is fixed
Currency % GBP'000 GBP'000 GBP'000
================= ========================= =============== ============ ============= ============
US dollars 3.3 3 (4,925,014) (549,319) (5,474,333)
Sterling 4.3 15 (5,533,227) - (5,533,227)
Euro 1.5 5 (5,330,086) (1,801,557) (7,131,643)
================= ========================= =============== ============ ============= ============
Total borrowings 3.0 8 (15,788,327) (2,350,876) (18,139,203)
At 31 December Fixed rate
2019
==========================================
Weighted average interest Average years
rate for which rate
is fixed
Currency % GBP'000 GBP'000 GBP'000
================= ========================= =============== ============ ============= ============
US dollars 3.6 3 (5,083,553) (567,101) (5,650,654)
Sterling 5.0 18 (4,045,872) - (4,045,872)
Euro 1.2 6 (5,842,913) (1,801,557) (7,131,643)
================= ========================= =============== ============ ============= ============
Total borrowings 3.2 9 (14,972,338) (2,485,761) (17,458,099)
4 Financial risk management (continued)
Currency and interest rate risk profile of loans and
receivables
At 31 December 2020 Fixed rate Floating Total
rate
Currency GBP'000 GBP'000 GBP'000
============================ ============ ============ ==========
US dollars 4,893,727 591,055 5,484,782
Sterling 5,503,315 80,172 5,583,487
Euro 5,299,807 1,855,509 7,155,316
============================ ============ ============ ==========
Total loans and receivables 15,696,849 2,526,736 18,223,585
============================ ============ ============ ==========
At 31 December 2019 Fixed rate Floating Total
rate
Currency GBP'000 GBP'000 GBP'000
============================ ============ ============ ==========
US dollars 5,053,811 602,096 5,655,907
Sterling 4,024,022 72,268 4,096,290
Euro 5,816,305 1,960,446 7,776,751
============================ ============ ============ ==========
Total loans and receivables 14,894,138 2,634,810 17,528,948
2020 2019
Net currency exposure GBP'000 GBP'000
============================ ============ ============ ==========
US dollars 10,449 5,253
Euro 23,673 15,177
============================ ============ ============ ==========
34,122 20,430
(b) Credit risk
Credit risk is the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group
and arises from cash and cash equivalents, favourable derivative
financial instruments and deposits held with banks and financial
institutions, and outstanding loans and receivables. The Group sets
global counterparty limits for each of its banking and investment
counterparties based on long-term credit ratings from Standard and
Poor's and Moody's Investor Services ("Moody's"). Usage of these
limits is monitored daily and Corporate Treasury actively manages
its exposure to credit risk, reducing surplus cash balances
wherever possible.
There are no financial assets that are past due or impaired as
at 31 December 2020 (2019: GBPnil).
The Company did not hold any collateral as security or obtained
other credit enhancements as at 31 December 2020 (2019:
GBPnil).
The Company considers its maximum exposure to credit risk at 31
December 2020, without taking into account any collateral held or
other credit enhancements, to be GBP18,369,169,000 (2019:
GBP17,664,065,000) being the total of the Company's financial
assets of which the balances are all held within the
GlaxoSmithKline Group.
(c) Liquidity risk
Liquidity is managed centrally by the Group by borrowing in
order to meet anticipated funding requirements. The Group's cash
flow forecast and funding requirements are monitored on a monthly
basis by the Treasury Management Group and the strategy is to have
diversified liquidity sources using a range of facilities and to
maintain broad access to funding markets.
5. Capital management
The Group's financial strategy supports its strategic priorities
and is regularly reviewed by the Board. The capital structure of
the Group is managed through an appropriate mix of debt and equity
in order to optimise returns to shareholders whilst maintaining the
Group's credit ratings that provide the Company with flexibility to
access debt capital markets on attractive terms under the Group's
European Medium Term Note programme and US shelf registration.
The capital structure of the Company consists of net debt of
GBP18,139,200,000 (2019: GBP17,458,094,000) and shareholders' funds
of GBP88,808,000 (2019: GBP72,003,000) (see Statement of changes in
equity).
6. Operating profit
2020 2019
GBP'000 GBP'000
=========================================================== ======= =======
The following items have been credited / (charged)
in operating profit:
Exchange gains / (losses) on foreign currency transactions (79) (2,388)
Management fee (60) (66)
GlaxoSmithKline Services Unlimited provides various services and
facilities to the Company including finance and administrative
services for which a management fee was charged. Included in the
management fee is a charge for auditors' remuneration of GBP36,100
(2019: GBP36,100).
The disclosure of fees payable to the auditor and its associates
for other (non-audit) services has not been made and has been
disclosed in the Group's 2020 Annual Report which does not form
part of this report.
7. Employees
All of the Group's UK employees are remunerated by
GlaxoSmithKline Services Unlimited and receive no remuneration from
the Company. A management fee is charged by GlaxoSmithKline
Services Unlimited for services provided to the Company (see Note
6). The Company has no employees.
8. Finance income
2020 2019
GBP'000 GBP'000
============================================== ======= =======
Interest income arising from financial assets
at amortised cost 513,431 473,371
9. Finance expense
2020 2019
GBP'000 GBP'000
================================================== ========== =========
Interest expense arising on financial liabilities
at amortised cost (487,511) (449,777)
Reclassification of cash flow hedge from other
comprehensive income (3,984) (3,239)
================================================== ========== =========
Total finance expense (491,495) (453,016)
10. Taxation
2020 2019
Income tax charge on profit GBP'000 GBP'000
============================================ ============ =======
Current tax:
UK corporation tax at 19.00% (2019: 19.00%) (4,134) (3,421)
============================================ ============ =======
Total current tax (4,134) (3,421)
2020 2019
Reconciliation of total tax charge GBP'000 GBP'000
======================================================== ========== ========
Profit on ordinary activities before taxation 21,757 18,004
Profit on ordinary activities at the UK statutory rate
19.00% (2019: 19.00%) Effects of: (4,134) (3,421)
Permanent disallowables - interest treated as paid by
ultimate parent 92,943 85,739
Permanent deductions - Group relief received for no
payment (92,943) (85,739)
======================================================== ========== ========
Total tax charge for the year (4,134) (3,421)
The tax assessed for the year is no different (2019: no
different) than the standard rate of corporation tax in the UK for
the year ended 31 December 2020 of 19.00% (2019: 19.00%). The
differences are explained below:
10. Taxation (continued)
Factors that may affect future tax charges:
A UK corporation rate of 19% (effective 1 April 2020) was
substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This will increase
the company's future current tax charge accordingly. The deferred
tax asset at 31 December 2020 has been calculated at 19% (2019:
17%).
An intention to increase the UK corporation tax rate from 19% to
25% (effective 1 April 2023) was announced in the UK Budget on 3
March 2021. Deferred taxes have been measured using appropriate
rates substantively enacted at the balance sheet date. The overall
effect of the proposed changes from 19% to 25%, if these applied to
the deferred tax balance at 31 December 2020, would be an increase
in the deferred tax asset by approximately GBP1,270k.
2020 2019
Total tax (expense) / credit included in other comprehensive GBP'000 GBP'000
income
============================================================= ============= =======
Deferred tax:
Fair value movements on cash flow hedges 678 1,439
============================================================= ============= =======
Total tax (expense) / credit included in other comprehensive
income 678 1,439
============================================================= ============= =======
Other net Total
temporary
differences
Movement in deferred tax assets and liabilities GBP'000 GBP'000
============================================================= ============= =======
At 1 January 2020 3,343 3,343
Credit to comprehensive income 678 678
============================================================= ============= =======
At 31 December 2020 4,021 4,021
============================================================= ============= =======
After offsetting deferred tax assets and liabilities 2020 2019
where appropriate, the net deferred tax asset comprises:
GBP'000 GBP'000
============================================================= ============= =======
Deferred tax assets classified as non-current assets 4,021 3,343
============================================================= ============= =======
4,021 3,343
11. Trade and other receivables
2020 2019
GBP'000 GBP'000
===================================== ========== ==========
Amounts due within one year
Amounts owed by Group undertakings 2,447,426 1,731,747
Amounts due after more than one year
Long term deposits 320 360
Amounts owed by Group undertakings 15,775,839 15,797,201
===================================== ========== ==========
18,223,585 17,529,308
11. Trade and other receivables (continued)
Amounts due within one year deposits with Group undertakings of
GBP92,781,000 (2019: GBP77,063,000) which are unsecured, repayable
within one year and earn a market rate of interest (based on LIBOR
minus 0.125%) that is consistent with the Group's policy.
Amounts due within one year also include the net proceeds of
bond issuances that have been advanced as loans to Group
undertakings of GBP2,354,645,000 (2019: GBP1,654,684,000) which are
unsecured with interest charged between 0.05% and 2.9% per
annum.
Amounts due after more than one year include the net proceeds of
bond issuances that have been advanced as loans to Group
undertakings totalling GBP15,696,529,000 (2019: GBP15,724,932,000),
which are unsecured with interest charged at between 0.10% and
6.50% per annum and repayable at maturity dates between 2022 and
2045 and also include a call account with GlaxoSmithKline Finance
plc of GBP79,310,000 (2019: GBP72,268,000) which is unsecured, and
repayable on demand, which is consistent with the Group's policy.
The call account balance is classified as a non-current asset as
the amounts are not expected to be settled within the year.
12. Prepayments and accrued income
2020 2019
GBP'000 GBP'000
============================ ======= =======
Amounts due within one year 145,580 134,752
Accrued income relates to interest on amounts owed by Group
undertakings (see Note 11).
2020 2019
GBP'000 GBP'000
==================================== ========== ========
Amounts falling due within one year
Amounts owed to Group undertakings (4,024) (5,811)
==================================== ========== ========
(4,024) (5,811)
13 Trade and other payables
Amounts owed to Group undertakings are unsecured and repayable
on demand.
In the current financial year, corporation tax liability has
been presented separately on the balance sheet which has resulted
in the change of the comparatives on the balance sheet and to this
note. The change was made to align with the requirements of the
relevant financial standards.
14. Borrowings
2020 2019
GBP'000 GBP'000
============================================= ============ ============
Amounts falling due within one year
Loans payable:
EUR European Medium Term Notes (1,801,490) (1,657,233)
US$ US Medium Term Notes (549,319) -
============================================= ============ ============
(2,350,809) (1,657,233)
============================================= ============ ============
Amounts falling due after more than one year
Loans payable:
EUR European Medium Term Notes (5,330,086) (6,104,340)
GBP European Medium Term Notes (5,533,228) (4,045,872)
US$ US Medium Term Notes (4,925,080) (5,650,654)
============================================= ============ ============
(15,788,394) (15,800,866)
============================================= ============ ============
Total borrowings (18,139,203) (17,458,099)
14. Borrowings (continued)
2020 2019
Maturity of borrowings GBP'000 GBP'000
===================================================== ============ ============
In one year or less, or on demand
EURIBOR+0.20% EUR European Medium Term Note 2020 - (637,905)
0.000% EUR European Medium Term Note 2020 - (1,019,328)
3.125% US$ US Medium Term Note 2021 - -
LIBOR+0.35% US$ US Medium Term Note 2021 (549,319) -
LIBOR+0.30% EUR European Medium Term Note 2021 (1,351,541) -
0% EUR European Medium Term Note 2021 (449,949) -
===================================================== ============ ============
(2,350,809) (1,657,233)
===================================================== ============ ============
In more than one year, but not more than two years
LIBOR+0.30% EUR European Medium Term Note 2021 - (1,280,755)
0% EUR European Medium Term Note 2021 - (425,592)
3.125% US$ US Medium Term Note 2021 - (943,893)
LIBOR+0.35% US$ US Medium Term Note 2021 - (567,101)
2.850% US$ US Medium Term Note 2022 (1,462,747) -
2.875% US$ US Medium Term Note 2022 (1,097,314) -
===================================================== ============ ============
(2,560,061) (3,217,341)
===================================================== ============ ============
In more than two years, but not more than five years
2.850% US$ US Medium Term Note 2022 - (1,509,382)
2.875% US$ US Medium Term Note 2022 - (1,132,641)
0% EUR European Medium Term Note 2023 (449,632) (424,926)
0.125% EUR European Medium Term Note 2023 (673,048) -
0.534% US$ US Medium Term Note 2023 (913,467) -
1.375% EUR European Medium Term Note 2024 (894,036) (843,707)
3.000% US$ US Medium Term Note 2024 (728,293) (751,294)
4.000% EUR European Medium Term Note 2025 (670,363) -
===================================================== ============ ============
(4,328,839) (4,661,950)
===================================================== ============ ============
In more than five years
4.000% EUR European Medium Term Note 2025 - (632,791)
1.000% EUR European Medium Term Note 2026 (627,997) (593,265)
1.250% EUR European Medium Term Note 2026 (896,167) (846,415)
3.375% GBP European Medium Term Note 2027 (594,710) (593,994)
1.25% GBP European Medium Term Note 2028 (741,602) -
1.375% EUR European Medium Term Note 2029 (446,859) (422,037)
3.375% US$ US Medium Term Note 2029 (723,260) (746,343)
1.750% EUR European Medium Term Note 2030 (671,985) (634,852)
5.250% GBP European Medium Term Note 2033 (983,392) (982,530)
1.625% GBP European Medium Term Note 2035 (743,284) -
6.375% GBP European Medium Term Note 2039 (694,542) (694,138)
5.250% GBP European Medium Term Note 2042 (986,794) (986,528)
4.250% GBP European Medium Term Note 2045 (788,902) (788,682)
===================================================== ============ ============
(8,899,494) (7,921,575)
===================================================== ============ ============
Total borrowings (18,139,203) (17,458,099)
15. Accruals and deferred income
2020 2019
GBP'000 GBP'000
==================================== ========= =========
Amounts falling due within one year (137,021) (128,073)
Accruals relates to interest payable on borrowings (see Note
14).
16. Fair value of financial assets and liabilities
The fair values of the financial assets and liabilities are
included at the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
The following methods and assumptions were used to estimate the
fair values:
-- Cash and cash equivalents - approximates to the carrying amount;
-- Borrowings (European and US Medium Term Notes) - based on quoted market
prices (a level 1 fair value measurement);
-- Intercompany loans - approximates to the fair value of borrowings (European
and US Medium Term Notes); and
-- Receivables and payables - approximates to the carrying amount.
The carrying amounts and the fair values of the Company's
financial assets and liabilities at 31 December 2020 and 31
December 2019 are illustrated below.
2020 2019
Carrying Fair value Carrying Fair value
value value
GBP'000 GBP'000 GBP'000 GBP'000
====================================== ================ =============== ============== ==============
Cash and cash equivalents 4 4 4 4
Trade and other receivables:
Other receivables 145,580 145,580 134,752 134,752
Amounts owed by Group undertakings 18,223,265 21,184,077 17,528,948 19,952,387
====================================== ================ =============== ============== ==============
Total financial assets 18,368,849 21,329,661 17,663,704 20,087,143
====================================== ================ =============== ============== ==============
Financial liabilities measured
at amortised cost
GBP European Medium Term Notes (5,533,228) (8,044,821) (4,045,872) (5,903,688)
EUR European Medium Term Notes (7,131,576) (7,621,068) (7,761,573) (8,214,511)
US$ US Medium Term Notes (5,474,399) (5,765,875) (5,650,654) (5,834,188)
====================================== ================ =============== ==============
(18,139,203) (21,431,764) (17,458,099) (19,952,387)
Other payables (141,045) (141,045) (133,884) (133,884)
====================================== ================ =============== ============== ============
Total financial liabilities (18,280,248) (21,572,809) (17,591,983) (20,086,271)
====================================== ================ =============== ============== ============
Net financial assets and liabilities 88,601 (243,148) 71,721 872
The Company has no financial assets or liabilities measured at
fair value through profit and loss.
Financial liabilities measured at amortised cost for which the
fair value of GBP21,431,764,000 (2019: GBP19,952,387,000) is
disclosed in the table above are categorised as Level 1, where
quoted prices in active markets are used. Similarly, amounts owed
by Group undertakings, which include the net proceeds of bond
issuances advanced as loans, also approximate to the fair value of
these financial liabilities. All other assets and liabilities
approximate to the carrying amount.
16. Contractual cash flows for non-derivative financial
liabilities
The following table provides an analysis of the anticipated
contractual cash flows including interest payable for the Company's
nonderivative financial liabilities on an undiscounted basis.
Interest is calculated based on debt held at 31 December without
taking account of future issuance.
2020 2019
Debt Interest Debt Interest
on debt on debt
GBP'000 GBP'000 GBP'000 GBP'000
============================= ============ =========== ============ ===========
Due in less than one year (2,348,214) (428,382) (1,656,812) (458,095)
Between one and two years (2,564,290) (389,428) (3,214,565) (435,847)
Between two and three years (2,040,020) (352,750) (2,649,508) (360,792)
Between three and four years (1,632,016) (336,026) (424,926) (322,895)
Between four and five years (674,521) (312,670) (1,606,981) (311,541)
Between five and ten years (4,735,771) (1,431,335) (3,864,440) (1,237,489)
Greater than 10 years (4,250,000) (1,564,250) (4,137,484) (1,893,906)
============================= ============ =========== ============ ===========
Gross contractual cash flows (18,244,832) (4,814,841) (17,554,716) (5,020,565)
18. Adjustments reconciling operating profit to operating cash
flows
2020 2019
GBP'000 GBP'000
=================================================== ========= =========
Operating profit for the year 21,757 18,004
(Increase) / decrease in other receivables (10,788) (3,886)
Increase / (decrease) in other payables 7,160 1,164
Taxation paid (3,421) -
Exchange adjustments 79 2,388
Amortisation of bond costs 12,046 12,638
Fair value movements on cash flow hedges (5,480) (11,704)
Reclassification of cash flow hedges to the income
statement 3,984 3,239
=================================================== ========= =========
Net cash inflow from operating activities 25,337 21,843
19. Reconciliation of net cash flow to movement in net (debt) /
surplus
Other assets Liabilities from financing
activities
Cash and Amounts Borrowings Borrowings Total
cash equivalents owed by - due within - due after
Group undertakings one year 1 year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net surplus as at 1 January
2019 - 14,559,104 (1,349,459) (13,145,606) 64,039
Cash flows 4 3,589,469 1,277,670 (4,845,303) 21,840
Foreign exchange adjustments - (619,625) 172,870 444,367 (2,388)
Other non-cash adjustments:
Re-classification
(long-term
to short-term) - - (1,756,660) 1,756,660 -
Amortisation - - (1,654) (10,984) (12,638)
=============================== ================= ===================== ============= ============= =============
Net surplus as at 31 December
2019 4 17,528,948 (1,657,233) (15,800,866) 70,853
Net surplus as at 1 January
2020 4 17,528,948 (1,657,233) (15,800,866) 70,853
=============================== ================= ===================== ============= ============= =============
Cash flows - 398,864 2,737,670 (3,111,197) 25,337
Foreign exchange adjustments - 295,453 37,714 (333,245) (78)
Other non-cash adjustments:
Re-classification
(long-term
to short-term) - - (3,467,565) 3,467,565 -
Amortisation - - (1,395) (10,651) (12,046)
=============================== ================= ===================== ============= ============= =============
Net surplus as at 31 December
2020 4 18,223,265 (2,350,809) (15,788,394) 84,066
20. Called up share capital
2020 2019 2020 2019
Number of Number GBP'000 GBP'000
shares of shares
============================= =========== =========== ======= =======
Authorised
============================= =========== =========== ======= =======
Ordinary shares of GBP1 each
(2019: GBP1 each) 100,000 100,000 100 100
============================== =========== =========== ======= =======
Issued and fully paid
Ordinary shares of GBP1 each
(2019: GBP1 each) 100,000 100,000 100 100
21. Other reserves
Other reserves Retained earnings Total reserves
GBP'000 GBP'000 GBP'000
===================================== ============== ================= ==============
At 1 January 2020 (16,323) 88,226 71,903
Transferred from income and expense
in the year - 17,623 17,623
Fair value movements on cash flow
hedges (5,480) - (5,480)
Reclassification of cash flow hedges
to the income statement 3,984 - 3,984
Deferred tax effect of cash flow
hedges 678 - 678
===================================== ============== ================= ==============
At 31 December 2020 (17,141) 105,849 88,708
The cash flow hedge reserve relates to the cumulative fair value
changes of derivatives that arose from pre-hedging fluctuations in
longterm interest rates when pricing bonds issued in prior and
current years. The balance is reclassified to finance costs over
the life of the subsequently issued bonds.
21 Other reserves (continued)
Amount reclassified to profit or
loss
Hedging gains Hedged future As hedged Line item in which
/ (losses) recognised cash flows no item affects reclassification adjustment
in reserves longer expected profit or is included
to occur loss
2020 GBP'000 GBP'000 GBP'000 GBP'000
=============================== ===================== ================ ============= =============================
Pre-hedging of long-term
interest rates (17,141) - 3,984 Finance income/(expense)
2019
=============================== ===================== ================ ============= =============================
Pre-hedging of long-term
interest rates (16,323) - 3,239 Finance income/(expense)
22. Contingent liabilities/assets
Group banking arrangement
The Company, together with fellow Group undertakings, has
entered into a Group banking arrangement with the Company's
principal bank. The bank holds the right to pay and apply funds
from any account of the Company to settle any indebtedness to the
bank of any other party to this agreement. The Company's maximum
potential liability as at 31 December 2020 is limited to the amount
held on its accounts with the bank. No loss is expected to accrue
to the Company from the agreement.
23. Directors' remuneration
During the year, the Directors of the Company, with the
exception of the Corporate Directors, were remunerated as
executives of the Group and received no remuneration in respect of
their services to the Company (2019: GBPnil). Corporate Directors
received no remuneration during the year, either as executives of
the Group or in respect of their services to the Company (2019:
GBPnil).
24. Related party transactions
As a wholly owned subsidiary of the ultimate parent company,
GlaxoSmithKline plc, advantage has been taken of the exemption
afforded by FRS 101 "Reduced disclosure framework" not to disclose
any related party transactions with other wholly owned members of
the Group, or information around remuneration of key management
personnel compensation.
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END
ACSDKBBDKBKDQQB
(END) Dow Jones Newswires
April 22, 2021 06:22 ET (10:22 GMT)
Glaxosmsc 5.25% (LSE:AG99)
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