TIDMAG99
RNS Number : 5712L
GlaxoSmithKline Capital PLC
30 April 2020
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report
for the year ended 31 December 2019
Registered office
address:
980 Great West Road
Brentford
Middlesex
TW8 9GS
GlaxoSmithKline Capital
plc
(Registered number: 2258699)
Contents Pages
Strategic report 1-2
Directors' report 3-6
Independent auditors' report 7-12
Income statement 13
Statement of comprehensive income 14
Balance sheet 15
Statement of changes in equity 16
Cash flow statement 17
Notes to the financial statements 18-27
GlaxoSmithKline Capital
plc
(Registered number: 2258699)
Strategic report for the year ended 31 December 2019
The Directors present their Strategic report on GlaxoSmithKline
Capital plc (the "Company") for the year ended 31 December
2019.
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 2019, the Company had in issue GBP11,807,444,000
European Medium Term Notes and GBP5,650,654,000 US Medium Term
Notes (2018: GBP11,357,478,000 and GBP3,137,588,000 respectively)
which mature at dates between 2020 and 2045. All notes currently in
issue pay interest on a fixed rate basis, with the exception of the
EUR750 million (GBP676 million) 2020 European Medium Term Note, the
EUR1.5 billion (GBP1.1 billion) 2021 European Medium Term Note and
$750 million (GBP591 million) 2021 US Medium Term Note which are on
a floating rate basis.
On 25 March 2019, three new bonds totalling $3.5 billion were
issued under the Group's US shelf registration as follows:
-- $1,500 million (GBP1.1 billion) 2.875% US
Medium Term Note 2022;
-- $1,000 million (GBP763 million) 3.000% US
Medium Term Note 2024; and
-- $1,000 million (GBP763 million) 3.375% US
Medium Term Note 2029.
Net proceeds of the 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 23 September 2019, three new bonds totalling EUR2 billion were issued
under the Group's European Medium Term Note programme as follows:
-- EUR1,500 million (1.3 billion) 3M EURIBOR + 60bps European
Medium Term Note 2021
-- EUR500 million (0.4 billion) 0.00% European Medium
Term Note 2021
-- EUR500 million (0.4 billion) 0.00% European Medium
Term Note 2023
The Company made a profit for the financial year of GBP14,583,000 (2018:
GBP24,520,000), 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 2019 Annual Report which does not form part of this report.
There are no additional risks which have not already been addressed
by the Group's assessment.
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Strategic report for the year ended 31
December 2019
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 2019 Annual Report
which does not
form part of this report.
Approach to Brexit
In preparing for the UK's exit from the EU (Brexit), our overriding priority
has been to maintain continuity of supply of our medicines to people
in the UK and EU. As a result, we have taken a risk-based approach to
planning and mitigation, in conjunction and complete alignment with GSK,
while the future relationship between the UK and EU is negotiated. Our
activity has included: arranging the retesting and certifying of our
medicines in Europe; submitting marketing authorisation holder transfers;
updating packaging; securing additional warehousing; adjusting stock
levels in both the UK and EU, and supporting employees in obtaining settled
status or equivalent in both the UK and Europe.
Our Brexit plans prepare us for elements that are within our control.
Uncertainty remains about the new operating environment, and as a result
we support efforts to secure a status quo operating period post-Brexit.
Risks associated with the coronavirus outbreak
The potential impact of the coronavirus outbreak on the Company's access
to capital and ability to lend remains uncertain.
Up to the date these financial statements are signed, the outbreak has
not had a material impact on the trading results of the Company. However,
we continue to monitor the situation closely, including the potential
impacts on trading results, our supply continuity and our employees.
The situation could change at any time and there can be no assurance
that the coronavirus outbreak will not have a material adverse impact
on the future results of the Company.
Post balance sheet events
The directors have considered the impact on the Company of the
COVID-19 pandemic, which is a non-adjusting post balance sheet
event. The Directors do not consider that there have been any
material adverse changes to the carrying values of the Company's
assets nor material adjustments to liabilities subsequent to the
year-end which require disclosure in these financial
statements.
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's 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, the environment and the
communities in which we operate.
Matters identified that may affect the Company's performance in the long
term are set out in the principal risks disclosed both above and in the
Group's 2019 Annual Report.
By order of the Board
Mr A Walker
For and on behalf of Glaxo
Group Limited
Corporate Director
27 April 2020
GlaxoSmithKline Capital
plc
(Registered number: 2258699)
Directors' report for the year ended 31 December 2019
The Directors present their report and the audited financial
statements of GlaxoSmithKline Capital plc (the "Company") for the
year ended 31 December 2019.
Results and dividends
The Company's profit for the financial year is shown in the
income statement on page 13.
No dividend is proposed to the holders of ordinary shares in
respect of the year ended 31 December 2019 (2018:
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
2019 Annual Report which does not form part of this report.
Financial risk management
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(m) and Note 4 respectively.
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 (appointed 01 May 2019)
Edinburgh Pharmaceutical (appointed 28 February 2001)
Industries Limited
Glaxo Group Limited (appointed 28 February 2001)
Mr S Dingemans (appointed 01 April 2011, resigned
01 May 2019)
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.
GlaxoSmithKline Capital
plc
(Registered number: 2258699)
Directors' report for the year ended 31 December 2019
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 his or her 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 At 31 Dec
Dec 2018 2019 or
date of
Acquired Disposed leaving
------------------- ------------ ------------------------- -------------------------- ----------
Shares
Mr I Mackay - - - -
Mr S Dingemans 261,649 159,460 (121,802) 299,307
--------------------- ------------ ------------------------- -------------------------- ----------
At 31 Dec
2019 or
At 31 Exercised / date of
Dec 2018 Granted Lapsed leaving
------------------- ------------ ------------------------- -------------------------- ----------
Unvested shares not subject
to performance
Mr I Mackay - - - -
Mr S Dingemans 161,231 157,774 - 319,005
--------------------- ------------ ------------------------- -------------------------- ----------
At 31 Dec
2019 or
At 31 Exercised / date of
Dec 2018 Granted Lapsed leaving
------------------- ------------ ------------------------- -------------------------- ----------
Share Save
Mr I Mackay - - - -
Mr S Dingemans 722 - (722) -
--------------------- ------------ ------------------------- -------------------------- ----------
At 31 Dec
2019 or
At 31 Exercised / date of
Dec 2018 Granted Lapsed leaving
------------------- ------------ ------------------------- -------------------------- ----------
Performance Share
Plans
Mr I Mackay - 233,791 - 233,791
Mr S Dingemans 711,292 15,613 (256,202) 470,703
--------------------- ------------ ------------------------- -------------------------- ----------
At 31 Dec
2019 or
At 31 Exercised / date of
Dec 2018 Granted Lapsed leaving
------------------- ------------ ------------------------- -------------------------- ----------
Deferred Annual
Bonus Plan
Mr I Mackay - - - -
Mr S Dingemans 192,150 48,822 (86,088) 154,884
--------------------- ------------ ------------------------- -------------------------- ----------
All share awards are over ordinary shares of GlaxoSmithKline
plc.
Further details of the above-mentioned Plans are disclosed in
the 2019 Annual Report of GlaxoSmithKline plc.
GlaxoSmithKline Capital
plc
(Registered number: 2258699)
Directors' report for the year ended 31 December 2019
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.
In preparing the 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;
-- state whether applicable United Kingdom Accounting Standards,
comprising FRS 101, have been followed,
subject to any material departures disclosed and explained
in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the
company will continue in business.
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;
-- principal risks and uncertainties;
-- key performance indicators;
-- approach to brexit;
-- risks associated with the
coronavirus outbreak;
-- post balance sheet events;
and
-- section 172 Companies Act
2006 Statement.
Governance
The Company's approach to the Modern Slavery Act 2015 is set by
the Group. Each year, as part of their governance arrangements, the
Group formally reviews and approves its approach to the Modern
Slavery Act 2015 and has confirmed that the approach is still valid
for 2019.
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Directors' report for the year ended
31 December 2019
Stakeholder Engagement
The Company aims to build enduring relationships with its
business partners in an honest, respectful and responsible way.
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 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.
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. A resolution of the members to
appoint Deloitte LLP as auditors was passed at the Annual General
Meeting of the Company in accordance with s489(4) Companies Act
2006.
By order of the Board
Mr A Walker
For and on behalf of Glaxo
Group Limited
Corporate Director
27 April 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 2019 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
-- have been prepared in accordance with the requirements of
the
Companies Act 2006.
We have audited the financial statements which comprise:
-- income statement;
-- the statement of comprehensive
income;
-- balance sheet as at 31 December
2019;
-- the statement of changes in
equity;
-- the cash flow statement;
-- the statement of accounting
policies; and
-- the related notes 1 to 25 in
the financial statements.
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.
Materiality
The materiality that we used in the current year was GBP175 million,
which was determined on the basis of a blended measure
considering total assets and external debt.
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.
Independent auditors' report to the members of
GlaxoSmithKline Capital plc
Conclusions relating to going concern
We have reviewed the directors' statement of responsibilities in
relation to the financial statements about whether they consider
it appropriate to adopt the going concern basis of accounting in
preparing them and their identification of any material uncertainties
to the Company's ability to continue to do so over a period of at
least twelve months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the Company
and its subsidiaries, its business model and related risks including
where relevant the impact of COVID-19, the requirements of the applicable
financial reporting framework and the system of internal control.
We evaluated the directors' assessment of the Company's ability to
continue as a going concern, including challenging the underlying
data and key assumptions used to make the assessment, and evaluated
the directors' plans for future actions in relation to their going
concern assessment.
We are required by ISAs (UK) to report in respect of the following
matters where:
the directors' use of the going concern basis of accounting in preparation
of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant
doubt about the Company's ability to continue to adopt the going
concern basis of accounting for a period of at least
twelve months from the date when the financial statements are authorised
for issue.
We have nothing to report in respect of these matters.
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 and
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: GBP1.7 billion
(2018: GBP1.3 billion); and
-- Long-term borrowings: GBP15.8 billion
(2018: GBP13.1 billion).
In the current year, the external borrowings
increased by GBP3.1 billion due to the issuance
of six new 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.
Due to the magnitude of the external debt
held the Company, we have identified a key
audit matter with respect to the calculation
of the carrying value of the borrowings.
Borrowings are disclosed in Note 14 of the
financial statements with fair value disclosure
in Note 16. The accounting policy for borrowings
is disclosed in Note 2.
How the scope of our We performed the following audit procedures:
audit responded to the
key audit matter
-- Agreed bond proceeds, bond costs, coupon
rate and redemption amounts
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;
-- Validated the inputs used for the fair
value disclosures in the notes to the
financial statements to an independent
source; and
-- Evaluated the disclosures in respect
to these liabilities included in the notes
to the financial statements.
Independent auditors' report to the members of
GlaxoSmithKline Capital plc
Key audit matters (continued)
Key We are satisfied that the calculation of
observations 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: GBP1.8
billion (2018: GBP1.5 billion);
* Long-term intercompany loan receivables: GBP15.7
billion (2018: GBP13.1 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
carrying value of the intercompany loan receivables
balance.
Intercompany loan receivables are disclosed in Note 11 of the
financial statements with the accounting policies disclosed in Note
2.
How the scope of our audit We performed the following audit procedures:
responded to the key audit
matter
* Agreed loan amounts, coupon rate and redemption
amounts to underlying
agreements;
* Recalculated the effective interest rate and the
carrying value of each
intercompany loan using the key inputs outlined
above per the underlying
agreements;
* Reviewed board minutes for the completeness of all
loans entered into in
the period;
* Assessed the appropriateness of the accounting
treatment applied for
intercompany loans including the recognition
at amortised cost in line with
IFRS 9 requirements; and
* Evaluated the disclosures in respect to these assets
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 intercompany loan receivables has been
correctly calculated and appropriately recorded
in accordance with IFRS 9.
6. Our application of 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 GBP175 million (2018: GBP145 million)
Basis for determining materiality We have determined materiality to be
GBP175 million. In determining materiality,
we applied a blended approach, using
1% of total assets and 1% of total external
debt*.
The increase in materiality from the
previous year is due to the increase
in external borrowings of GBP3.1 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
applied of the GlaxoSmithKline 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.
Independent auditors' report to the members of
GlaxoSmithKline Capital plc
6. Our application of materiality (continued)
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 2019 audit (2018: 70%). In determining performance materiality,
we considered the following factors:
- our risk assessment, including our assessment of the entity'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 GBP8.75m (2018: GBP7.25m), 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
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.
The Company was subject to a full scope audit. There were no
component audit teams involved in the audit of this entity, with
the entire audit being conducted at GlaxoSmithKline's London Head
Office by a central audit team.
8. Other information
The directors are responsible for the other information. The
other information comprises the information included in the Annual
Report, other than the financial statements and our auditor's
report thereon.
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.
In connection with our audit of the financial statements, 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
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement in the financial statements or a
material misstatement of the other information. 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 respect of these matters.
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.
Details of the extent to which the audit was considered capable
of detecting irregularities, including fraud and non-compliance
with laws and regulations are set out below.
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.
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, and then
design and perform audit procedures responsive to those risks,
including obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
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, our procedures included 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
of irregularities;
-- any matters we identified having obtained and reviewed
the company's
documentation of their policies and procedures
relating to:
o identifying, evaluating and complying
with laws and regulations
and whether they were aware of any
instances
of non-compliance;
o detecting and responding to the risks
of fraud and whether they
have knowledge of any actual, suspected
or
alleged fraud; and
o the internal controls established to
mitigate risks related to
fraud or non-compliance with laws and
regulations.
-- the matters discussed among the engagement team and
involving relevant
internal specialists, including tax, regarding
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 and
identified the greatest potential for fraud in management
override
of controls. 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 non-
compliance with laws and regulations.
In addition to the above, our procedures to respond to risks
identified included the following:
-- reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with relevant
-- laws and regulations discussed above;
-- 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 and
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; 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, and
remained alert to any indications of fraud or non-compliance with
laws and regulations throughout the audit.
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
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 these matters.
14. Other matters
Auditor tenure
Following the recommendation of the Board of Directors, we were appointed
by the Company on 30 May 2018 to audit the financial statements of
the Company 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 two years, covering the
years
ending 2018 to 2019.
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
27 April 2020
GlaxoSmithKline Capital plc
Income statement
for the year ended 31 December
2019
2019 2018
Note GBP'000 GBP'000
--------------------------------- -----
Other operating income / (loss) 6 (2,351) 1,094
Finance income 8 473,371 377,474
Finance expense 9 (453,016) (348,296)
--------------------------------- ----- ---------- ----------
Operating profit 18,004 30,272
--------------------------------- ----- ---------- ----------
Profit before taxation 18,004 30,272
Tax on profit 10 (3,421) (5,752)
-----
Profit for the financial year 14,583 24,520
--------------------------------- ----- ---------- ----------
The results disclosed above for both the current year and prior
year relate entirely to continuing operations. The notes on pages
18 to 27 are an integral part of these financial statements.
GlaxoSmithKline Capital plc
Statement of comprehensive income
for the year ended 31 December 2019
2019 2018
Note GBP'000 GBP'000
Profit for the financial year 14,583 24,520
Items that may be subsequently reclassified
to the income statement:
Fair value movements on cash flow hedges (11,704) 1,288
Reclassification of cash flow hedges
to the income statement 3,239 1,472
Deferred tax on fair value movements
on cash flow hedges 10 1,439 (469)
Other comprehensive income / (loss)
for the financial year (7,026) 2,291
---------------------------------------------- ----- --------- --------
Total comprehensive income for the financial
year 7,557 26,811
---------------------------------------------- ----- --------- --------
The notes on pages 18 to 27 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Balance sheet
as at 31 December 2019
2019 2018
Note GBP'000 GBP'000
--------------------------------------- ----- ------------- -------------
Non-current assets
Deferred tax assets 10 3,343 1,904
Trade and other receivables 11 15,725,293 13,087,653
Total non-current assets 15,728,636 13,089,557
--------------------------------------- ----- ------------- -------------
Current assets
Trade and other receivables 11 1,804,015 1,471,451
Prepayments and accrued income 12 134,752 131,225
Cash and cash equivalents 4 -
--------------------------------------- ----- ------------- -------------
Total current assets 1,938,771 1,602,676
--------------------------------------- ----- ------------- -------------
Total assets 17,667,407 14,692,233
--------------------------------------- ----- ------------- -------------
Current liabilities
Other payables 13 (5,811) (2,040)
Corporation tax 13 (3,421) (5,752)
Short-term borrowings 14 (1,657,233) (1,349,459)
Accruals and deferred income 15 (128,073) (124,929)
--------------------------------------- ----- ------------- -------------
Total current liabilities (1,794,538) (1,482,180)
--------------------------------------- ----- ------------- -------------
Net current assets 144,233 120,496
--------------------------------------- ----- ------------- -------------
Total assets less current liabilities 15,872,869 13,210,053
--------------------------------------- ----- ------------- -------------
Non-current liabilities
Long-term borrowings 14 (15,800,866) (13,145,607)
Total non-current liabilities (15,800,866) (13,145,607)
--------------------------------------- ----- ------------- -------------
Total liabilities (17,595,404) (14,627,787)
--------------------------------------- ----- ------------- -------------
Net assets 72,003 64,446
--------------------------------------- ----- ------------- -------------
Equity
Called up share capital 20 100 100
Other reserves 21 (16,323) (9,297)
Retained earnings 88,226 73,643
--------------------------------------- ----- ------------- -------------
Total equity 72,003 64,446
--------------------------------------- ----- ------------- -------------
The notes on pages 18 to 27 are an integral part of these
financial statements.
The financial statements on pages 13 to 27 were approved by the
Board of Directors on 27 April 2020 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
2019
Called up Retained
share capital Other reserves earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2018 100 (11,588) 49,123 37,635
Profit for the year - - 24,520 24,520
Other comprehensive loss
for the financial year - 2,291 - 2,291
-------------------------------- --------------- --------------- ---------- -------------
At 31 December 2018 100 (9,297) 73,643 64,446
-------------------------------- --------------- --------------- ---------- -------------
Profit for the year - - 14,583 14,583
Other comprehensive income
for the financial year - (7,026) (7,026)
-------------------------------- --------------- --------------- ---------- -------------
At 31 December 2019 100 (16,323) 88,226 72,003
-------------------------------- --------------- --------------- ---------- -------------
The notes on pages 18 to 27 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Cash flow statement
for the year ended 31 December
2019
2019 2018
Note GBP'000 GBP'000
-------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Operating profit 18,004 30,272
Adjustments reconciling operating
profit to operating cash flows 3,838 (6,270)
Net cash inflow from operating activities 18 21,842 24,002
-------------------------------------------- ----- ------------ ------------
Cash flows from financing activities
Proceeds from borrowings 4,845,302 3,650,522
Repayment of borrowings (1,277,670) -
Loans provided to Group undertakings (4,833,620) (3,648,326)
Loan repayments received from Group 1,268,099 -
undertakings
(Increase) / decrease in other receivables
with Group undertakings (23,949) (26,199)
Net cash outflow from financing activities (21,838) (24,003)
-------------------------------------------- ----- ------------ ------------
Net movement in cash in the year 4 (1)
-------------------------------------------- ----- ------------ ------------
Cash at beginning of year - 1
Movement in cash 4 (1)
-------------------------------------------- ----- ------------ ------------
Cash at end of year 4 -
-------------------------------------------- ----- ------------ ------------
The notes on pages 18 to 27 are an integral part of these
financial statements.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
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 FRS101.
Disclosure exemptions adopted
In preparing these financial statements, the Company has taken
advantage of all 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;
* The following paragraphs of IAS 1 "Presentation of
financial statements":
- 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.
(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.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
2 Summary of significant accounting policies (continued)
(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.
(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 16 October 2019. 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, the potential effects of
Brexit have been considered and are not expected to be
material.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
4 Financial Risk Management (continued)
(a) Market risk
(i) 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.
(ii) 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.
2019 2018
Increase Increase
in income in income
GBP'000 GBP'000
-------------------------------------------- ----------- -----------
1% (100 basis points) increase in
Euro interest rates (2018: 1%) 398 533
1% (100 basis points) increase in Sterling
interest rates (2018: 1%) 723 516
1% (100 basis points) increase in US
dollar interest rates (2018: 1%) 397 233
---------------------------------------------- ----------- -----------
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
Fixed rate
------------------------
At 31 December Weighted Average
2019 average years for
interest which rate Fixed Floating
rate is fixed rate rate Total
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) (1,918,660) (7,761,573)
Total borrowings 3.2 9 (14,972,338) (2,485,761) (17,458,099)
------------------ ---------- ------------ ------------- ------------ -------------
Fixed rate
------------------------
At 31 December Weighted Average
2018 average years for
interest which rate Fixed Floating
rate is fixed rate rate Total
Currency % GBP'000 GBP'000 GBP'000
------------------ ---------- ------------ ------------- ------------ -------------
US dollars 3.9 3 (2,548,202) (589,385) (3,137,587)
Sterling 5.0 19 (4,043,711) - (4,043,711)
Euro 1.9 7 (6,636,522) (677,246) (7,313,768)
Total borrowings 3.6 10 (13,228,435) (1,266,631) (14,495,066)
------------------ ---------- ------------ ------------- ------------ -------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
(a) Market risk (continued)
(ii) Interest rate risk (continued)
Currency and interest rate risk profile of loans and
receivables
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
------------------------------ ----- ----------- ---------- -----------
At 31 December 2018 Fixed rate Floating Total
rate
Currency GBP'000 GBP'000 GBP'000
----------------------------- ----------- ---------- -----------
US dollars 2,536,151 612,730 3,148,881
Sterling 4,024,022 51,647 4,075,669
Euro 6,603,959 730,595 7,334,554
Total loans and receivables 13,164,132 1,394,972 14,559,104
------------------------------ ----- ----------- ---------- -----------
(ii) Interest rate risk
(continued)
2019 2018
Net currency exposure GBP'000 GBP'000
---------- -----------
US dollars 5,253 11,294
Euro 15,177 20,786
20,430 32,080
------------------------------------ ----------- ---------- -----------
(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 2019 (2018: GBPnil).
The Company did not hold any collateral as security or obtained
other credit enhancements as at 31 December 2019 (2018:
GBPnil).
The Company considers its maximum exposure to credit risk at 31
December 2019, without taking into account any collateral held or
other credit enhancements, to be GBP17,664,065,000 (2018:
GBP14,690,329,000) 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
GBP17,458,094,000 (2018: GBP14,495,066,000) and shareholders' funds
of
GBP72,003,000 (2018: GBP64,446,000) (see Statement of changes in
equity).
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
6 Operating
profit
2019 2018
GBP'000 GBP'000
-------------------------------------------------------- -------- --------
The following items have been credited / (charged)
in operating profit:
Exchange gains / (losses) on foreign
currency transactions (2,285) 1,151
Management fee (66) (57)
-------------------------------------------------------- -------- --------
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
(2018:
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 2019 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
2019 2018
GBP'000 GBP'000
---------------------------------------- -------- --------
Interest income arising from financial
assets at amortised cost 473,371 377,474
----------------------------------------- -------- --------
9 Finance expense
2019 2018
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Interest expense arising on financial
liabilities at amortised cost (449,777) (346,824)
Reclassification of cash flow hedge from
other comprehensive income (3,239) (1,472)
Total finance expense (453,016) (348,296)
-------------------------------------------- ---------- ----------
10 Taxation
2019 2018
Income tax charge on profit GBP'000 GBP'000
-------------------------------------------------- -------- --------
Current tax:
UK corporation tax at 19.00% (2018: 19.00%) (3,421) (5,752)
Total current tax (3,421) (5,752)
-------------------------------------------------- -------- --------
The tax assessed for the year is no different (2018: no
different) than the standard rate of corporation tax in the UK for
the year ended 31 December 2019 of 19.00% (2018: 19.00%). The
offsetting differences are explained below:
2019 2018
Reconciliation of total tax GBP'000 GBP'000
charge
------------------------------------------ --------- ---------
Profit on ordinary activities
before taxation 18,004 30,272
Profit on ordinary activities at the
UK statutory rate 19.00% (2018: 19.00%) (3,421) (5,752)
Effects of:
Permanent disallowables - interest
treated as paid by ultimate parent 85,739 65,884
Permanent deductions - Group relief
received for no payment (85,739) (65,884)
------------------------------------------- --------- ---------
Total tax charge for the year (3,421) (5,752)
-------------------------------------------- --------- ---------
Factors that may affect future tax charges:
A reduction in the UK corporation tax rate from 19% to 17%
(effective 1 April 2020) was substantively enacted on 6 September
2016, and the UK deferred tax asset as at 31 December 2019 has been
calculated based on this rate. The March 2020 Budget announced that
a rate of 19% would continue to apply with effect from 1 April
2020, and this change was substantively enacted on 17 March 2020.
This will increase the company's future current tax charge
accordingly and increase the deferred tax asset by GBP393,319.
2019 2018
Total tax (expense) / credit included in GBP'000 GBP'000
other comprehensive income
-------------------------------------------- -------- --------
Deferred tax:
Fair value movements on cash
flow hedges 1,439 (469)
-------------------------------------------- -------- --------
Total tax (expense) / credit included
in other comprehensive income 1,439 (469)
------------------------------------------- -------- --------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
10 Taxation (continued)
Other net
temporary
differences Total
Movement in deferred tax assets and liabilities GBP'000 GBP'000
------------- --------
At 1 January 2019 1,904 1,904
Credit to comprehensive income 1,439 1,439
At 31 December 2019 3,343 3,343
-------------------------------------------------- ------------- --------
After offsetting deferred tax assets and liabilities where
appropriate, the net deferred tax asset comprises:
2019 2018
GBP'000 GBP'000
----------------------------------------------- -------- --------
Deferred tax assets classified as non-current
assets 3,343 1,904
3,343 1,904
----------------------------------------------- -------- --------
11 Trade and other
receivables
2019 2018
GBP'000 GBP'000
----------- -----------
Amounts due within one year
Amounts owed by Group undertakings 1,804,015 1,471,451
Amounts due after more than one year
Long term deposits 360 -
Amounts owed by Group undertakings 15,724,933 13,087,653
17,529,308 14,559,104
--------------------------------------- ----------- -----------
Amounts due within one year include call accounts with Group
undertakings of GBP72,268,000 (2018: GBP51,647,000) which
are unsecured, repayable on demand and earn a market rate
of interest (based on 1 week LIBOR minus 0.125%) that is consistent
with the Group's policy, and also include deposits with Group
undertakings of GBP77,063,000 (2018: GBP78,574,000) which
are unsecured, repayable on demand and earn a market rate
of interest (based on LIBOR minus 0.125%) that is consistent
with the Group's policy.
Amounts due within one year also include the net proceeds
of bond issuances that have been advanced as loans to Group
undertakings of GBP1,654,684,000 (2018: GBP1,341,230,000)
which is unsecured with interest charged at 0.21% 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 GBP15,725,000 (2018: GBP13,087,653,000),
which are unsecured with interest charged at between 0.10% and
6.50% per annum and repayable at maturity dates between 2021 and
2045.
12 Prepayments and accrued income
2019 2018
GBP'000 GBP'000
----------------------------- -------- --------
Amounts due within one year 134,752 131,225
----------------------------- -------- --------
Accrued income relates to interest on amounts owed by Group
undertakings (see Note 11).
13 Other payables
2019 2018
GBP'000 GBP'000
------------------------------------- -------- --------
Amounts falling due within one year
Amounts owed to Group undertakings (5,811) (2,040)
Corporation tax (3,421) (5,752)
------------------------------------- -------- --------
(9,232) (7,792)
------------------------------------- -------- --------
Amounts owed to Group undertakings are unsecured and repayable
on demand.
The corporation tax creditor contains amounts which will be paid
to fellow Group companies.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
14 Borrowings
2019 2018
GBP'000 GBP'000
------------------------------------- ------------- -------------
Amounts falling due within
one year
Loans payable:
EUR European Medium Term Notes (1,657,233) (1,349,459)
(1,657,233) (1,349,459)
------------------------------------- ------------- -------------
Amounts falling due after more than
one year
Loans payable:
EUR European Medium Term Notes (6,104,340) (5,964,309)
GBP European Medium Term Notes (4,045,872) (4,043,711)
US$ US Medium Term Notes (5,650,654) (3,137,587)
-------------------------------------- ------------- -------------
(15,800,866) (13,145,607)
------------------------------------- ------------- -------------
Total borrowings (17,458,099) (14,495,066)
-------------------------------------- ------------- -------------
2019 2018
-------------------------------------- ------------- -------------
Maturity of borrowings GBP'000 GBP'000
-------------------------------------- ------------- -------------
In one year or less, or
on demand
0.625% EUR European Medium
Term Note 2019 - (1,349,459)
EURIBOR+0.20% EUR European Medium (637,905) -
Term Note 2020
0.000% EUR European Medium (1,019,328) -
Term Note 2020
(1,657,233) (1,349,459)
-------------------------------------- ------------- -------------
In more than one year, but not more
than two years
EURIBOR+0.20% EUR European Medium
Term Note 2020 - (677,246)
0.000% EUR European Medium
Term Note 2020 - (1,079,415)
LIBOR+0.30% EUR European Medium Term (1,280,755) -
Note 2021
0% EUR European Medium (425,592) -
Term Note 2021
3.125% US$ US Medium Term (943,893) -
Note 2021
LIBOR+0.35% US$ US Medium Term Note (567,101) -
2021
(3,217,341) (1,756,661)
-------------------------------------- ------------- -------------
In more than two years, but not more
than five years
LIBOR+0.35% US$ US Medium Term Note
2021 - (980,151)
2.850% US$ US Medium Term
Note 2022 (1,509,382) (589,385)
2,875% US$ US Medium Term
Note 2022 (1,132,641) (1,568,052)
0% EUR European Medium (424,926) -
Term Note 2023
1.375% EUR European Medium (843,707) -
Term Note 2024
3,000% US$ US Medium Term (751,294) -
Note 2024
(4,661,950) (3,137,588)
-------------------------------------- ------------- -------------
In more than five years
1.375% EUR European Medium
Term Note 2024 - (892,962)
4.000% EUR European Medium
Term Note 2025 (632,791) (669,903)
1.000% EUR European Medium
Term Note 2026 (593,265) (628,546)
1.250% EUR European Medium
Term Note 2026 (846,415) (896,568)
3.375% GBP European Medium
Term Note 2027 (593,994) (593,351)
1.375% EUR European Medium
Term Note 2029 (422,037) (447,022)
3,375% US$ US Medium Term (746,343) -
Note 2029
1.750% EUR European Medium
Term Note 2030 (634,852) (672,647)
5.250% GBP European Medium
Term Note 2033 (982,530) (981,711)
6.375% GBP European Medium
Term Note 2039 (694,138) (693,984)
5.250% GBP European Medium
Term Note 2042 (986,528) (986,216)
4.250% GBP European Medium
Term Note 2045 (788,682) (788,448)
(7,921,575) (8,251,358)
Total borrowings (17,458,099) (14,495,066)
--------------------------------------- ------------- -------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
15 Accruals and deferred income
2019 2018
GBP'000 GBP'000
------------------------------------- ---------- ----------
Amounts falling due within one year (128,073) (124,929)
------------------------------------- ---------- ----------
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 2019 and 31
December 2018 are illustrated below.
2019 2018
Carrying Carrying
value Fair value value Fair value
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------------- ------------- ------------- -------------
Cash and cash equivalents 4 4 - -
Trade and other receivables:
Other receivables 134,752 134,752 131,225 131,225
Amounts owed by Group
undertakings 17,528,948 19,952,387 14,559,104 16,387,153
Total financial assets 17,663,704 20,087,143 14,690,329 16,518,378
------------------------------ ------------- ------------- ------------- -------------
Financial liabilities
measured at amortised
cost:
GBP European Medium
Term Notes (4,045,872) (5,903,688) (4,043,711) (4,088,154)
EUR European Medium
Term Notes (7,761,573) (8,214,511) (7,313,768) (8,627,556)
US$ US Medium Term Notes (5,650,654) (5,834,188) (3,137,587) (3,671,443)
------------------------------ ------------- ------------- ------------- -------------
(17,458,099) (19,952,387) (14,495,066) (16,387,153)
Other payables (133,884) (133,884) (126,969) (126,969)
Total financial liabilities (17,591,983) (20,086,271) (14,622,035) (16,514,122)
------------------------------ ------------- ------------- ------------- -------------
Net financial assets
and liabilities 71,721 872 68,294 4,256
------------------------------ ------------- ------------- ------------- -------------
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 GBP19,952,387,000 (2018: GBP16,387,153,000) 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.
17 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
non- derivative financial liabilities on an undiscounted basis.
Interest is calculated based on debt held at 31 December without
taking account of future issuance.
2019 2018
Interest
Interest on
Debt on debt Debt debt
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------- ------------ ------------- ------------
Due in less than one
year (1,656,812) (458,095) (1,327,434) (394,427)
Between one and two
years (3,214,565) (435,847) (1,725,664) (390,015)
Between two and three
years (2,649,508) (360,792) (1,481,481) (356,350)
Between three and four
years (424,926) (322,895) (1,481,481) (301,316)
Between four and five
years (1,606,981) (311,541) - (278,875)
Between five and ten
years (3,864,440) (1,237,489) (3,653,097) (1,208,359)
Greater than 10 years (4,137,484) (1,893,906) (4,606,195) (2,096,217)
------------------------ ------------- ------------ ------------- ------------
Gross contractual cash
flows (17,554,716) (5,020,565) (14,275,352) (5,025,559)
------------------------ ------------- ------------ ------------- ------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
18 Adjustments reconciling operating profit to operating cash flows
2019 2018
GBP'000 GBP'000
----------------------------------------- --------- ---------
Operating profit for the year 18,004 30,272
(Increase) / decrease in other
receivables (3,886) (23,392)
Increase / (decrease) in other
payables 1,164 18,425
Exchange adjustments 2,387 (1,088)
Amortisation of bond costs 12,638 (2,975)
Fair value movements on cash
flow hedges (11,704) 1,288
Reclassification of cash flow hedges to
the income statement 3,239 1,472
------------------------------------------ --------- ---------
Net cash inflow from operating
activities 21,842 24,002
------------------------------------------ --------- ---------
19 Reconciliation of net cash flow to movement in net (debt) / surplus
Other assets Liabilities from
financing activities
Amounts Borrowings
Cash and owed by - due Borrowings
cash equivalents Group undertakings within - due Total
one after 1 year
year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net surplus as at 1
January 2018 1 10,536,733 - (10,500,761) 35,973
Cash flows (1) 3,674,525 - (3,650,522) 24,002
Foreign exchange adjustments - 347,846 (23,849) (322,909) 1,088
Other non-cash adjustments:
- - (1,323,622.00) 1,323,622.00 -
Amortisation - - (1,988) 4,963 2,975
----------------------------- --- ---------- -------------- ------------ ------
Net surplus as at 31
December 2018 - 14,559,104 (1,349,459) (13,145,607) 64,038
--------------------- ------------- ------------- -------------- -----------
Net surplus as at 1 January
2019 -14,559,104 (1,349,459) (13,145,607) 64,038
Cash flows 4 4,857,569 - (4,845,303) 12,270
Foreign exchange adjustments - (619,625) 172,870 444,367 (2,388)
Other non-cash adjustments:
Re-classification (long-term
to short-term) - - (1,756,661) 1,756,661 -
Amortisation - - (1,654) (10,984) (12,638)
-------------------------------- ---------- ----------- ------------ --------
Net surplus as at 31
December 2019 4 18,797,048 (2,934,904) (15,800,866) 61,282
--------------------- ------------- ------------- -------------- -----------
20 Called up share
capital
2019 2018 2019 2018
Number of Number of
shares shares GBP'000 GBP'000
========== ========== -------- --------
Authorised
Ordinary shares of GBP1
each (2017: GBP1 each) 100,000 100,000 100 100
------------------------- ---------- ---------- -------- --------
Issued and fully paid
Ordinary shares of GBP1
each (2017: GBP1 each) 100,000 100,000 100 100
------------------------- ---------- ---------- -------- --------
21 Other reserves
Other Retained Total reserves
reserves earnings
GBP'000 GBP'000 GBP'000
---------- ---------- ---------------
At 1 January 2019 (9,297) 73,643 64,346
Transferred from income and expense
in the year - 14,583 14,583
Fair value movements on cash
flow hedges (11,704) - (11,704)
Reclassification of cash flow hedges
to the income statement 3,239 - 3,239
Deferred tax effect of cash
flow hedges 1,439 - 1,439
At 31 December 2019 (16,323) 88,226 71,903
--------------------------------------- ---------- ---------- ---------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2019
21 Other reserves
(continued)
The cash flow hedge reserve relates to the cumulative fair value
changes of derivatives that arose from pre-hedging fluctuations in
long- term 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.
Amount reclassified to profit
or loss
--------------------------------------------------
Hedged future Line item
Hedging gains cash flows As hedged in which
/ (losses) no longer item affects reclassification
recognised expected profit or adjustment
in reserves to occur loss is included
2019 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------------- -------------- -------------- ------------------
Finance
Pre-hedging of long-term income /
interest rates (16,323) - 3,239 (expense)
-------------------------- -------------- -------------- -------------- ------------------
2018
-------------------------- -------------- -------------- -------------- ------------------
Finance
Pre-hedging of long-term income /
interest rates (9,297) - 1,472 (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 2019 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 (2018: GBPnil). Corporate Directors
received no remuneration during the year, either as executives of
the Group or in respect of their services to the Company (2018:
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.
25 Events after the end of reporting period
The Directors have considered the impact on the Company of the
COVID-19 pandemic, which is a non-adjusting post balance sheet
event. The Directors do not consider that there have been any
material adverse changes to the carrying values of the Company's
assets nor material adjustments to liabilities subsequent to the
year-end which require disclosure in these financial
statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SDSFWSESSESL
(END) Dow Jones Newswires
April 30, 2020 13:09 ET (17:09 GMT)
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