REG - GSK PLC - GSK disclose discontinued operations from Q2 2022
05/07/2022 12:45
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RNS Number : 3930R GSK PLC 05 July 2022
Issued: 5 July 2022, London UK
GSK to disclose discontinued operations from Q2 2022
GSK plc (LSE/NYSE: GSK) will as a consequence of its proposed demerger of the
Consumer Healthcare business on 18 July 2022 disclose its Q2 2022 results on
27 July 2022 in accordance with the requirements of IFRS 5 - 'Non-current
Assets Held for Sale and Discontinued Operations'. GSK has now satisfied the
formal criteria for treating Consumer Healthcare as a 'Discontinued operation'
effective from 30 June 2022, accordingly it will no longer present the
Consumer Healthcare business within 'Continuing operations' and will also
disclose the assets and liabilities of the Consumer Healthcare business as
assets and liabilities held for sale/distribution. The GSK Group ('Group')
will continue to consolidate the business for reporting purposes until the
demerger of the Consumer Healthcare business has completed. Details of the
demerger are included in the published Prospectus
(https://www.gsk.com/media/7702/haleon-plc-prospectus.pdf) and Circular
(https://www.gsk.com/media/7700/gsk-plc-circular.pdf) for the proposed
demerger of the Consumer Healthcare business to form Haleon plc ('Haleon').
Requirements of IFRS 5 - 'Non-current Assets Held for Sale and Discontinued
Operations'
GSK has satisfied the requirements under IFRS 5 to treat the Consumer
Healthcare business as a 'disposal group' effective from 30 June 2022, as it
is expected that the carrying amount of the disposal group will be recovered
principally through disposal and a distribution, it is available for
distribution in its present condition (subject only to the steps to be
completed that are usual and customary for the demerger of a business) and it
is considered highly probable (the expected date of the demerger being 18 July
2022).
As a consequence of meeting these formal criteria, the Consumer Healthcare
business will no longer be presented as 'Continuing operations', which will
result in the following changes to the presentation of the Q2 2022 results on
27 July 2022:
· Turnover, cost of sales, SG&A expenses, research and
development expenses, royalty income, other income and expenses, operating
profit, profit before taxation, profit after taxation from continuing
operations and Adjusted 1 results of the Group will be presented on the basis
of the 'Continuing operations' of the Group, with the component of the
post-tax Group results attributable to 'Discontinued operations' presented as
a single line item in the Income Statement. The Total post-tax results of the
Group will include 'Continuing' and 'Discontinued operations'.
· The earnings per share of the Group will be presented separately
between the earnings per share attributable to 'Continuing operations' and
earnings per share attributable to 'Discontinued operations'. Adjusted
earnings per share will only be presented for 'Continuing operations'.
Earnings per share for Q2 2022 and for prior periods will be adjusted to
reflect the impact of the GSK share consolidation expected to take place
following the demerger but prior to the Q2 results announcement on 27 July
2022. The earnings per share figures presented below are based on the current
pre-consolidation GSK share capital structure.
· Comparative income statement information will be re-presented on
a consistent basis;
· GSK will no longer present a Consumer Healthcare segment and
those items previously reported within the Consumer Healthcare segment that do
not form part of the 'Discontinued operations' of the Group will be shown as
part of 'Continuing operations' and reported within either the Commercial
Operations segment or Corporate and unallocated costs, as appropriate;
· Disclosure of the Total turnover, expenses, pre-tax profit and
tax expense of the 'Discontinued operations' will be reported as an additional
disclosure on a Total basis only;
· The respective totals of the net cash inflow from operations, the
net cash inflow from operating activities, the net cash flow from investing
activities and the net cash flow from financing activities will be shown split
between 'Continuing operations' and 'Discontinued operations'. Free cash
flow 2 will be presented only for 'Continuing operations';
· The assets and liabilities of the Consumer Healthcare 'disposal
group' will be presented on the face of the Group balance sheet as assets held
for sale/distribution and liabilities held for sale/ distribution respectively
as current assets and liabilities. Analysis of the main categories of assets
and liabilities reported as assets and liabilities held for sale/distribution
will be presented as a note to the financial statements.
Impact of the application of the requirements of IFRS 5
The application of the requirements of IFRS 5 has no impact on the total
post-tax results of the Group in the presentation of the restated historical
information. However, as a result of the reclassification of the assets and
liabilities of the Consumer Healthcare business (the 'disposal group') to
assets and liabilities held for sale/ distribution with effect from 30 June
2022, they are held at the lower of carrying amount and fair value less costs
to distribute and from that point onwards, depreciation and amortisation
ceases on those tangible and intangible assets reclassified as part of the
assets held for sale/distribution.
The application of IFRS 5 also has no impact on the total reported cash flows
of the Group, although under the requirements of IFRS 5, the total for each
category of the reported cash flows of the Group (net cash inflow from
operations, cash flow from operating activities, cash flow from investing
activities and cash flow from financing activities) should be presented split
between 'Continuing' and 'Discontinued operations'.
As a result of the presentational changes, cash generated from operations for
the full year 2021 was £7,249 million for 'Continuing operations' (Q1 2021:
£406 million; Q1 2022: £2,353 million) and cash generated from operations
was £1,994 million for 'Discontinued operations' (Q1 2021: £80 million; Q1
2022: £402 million).
Net cash inflow from continuing operating activities for the full year 2021
was £6,277 million (Q1 2021: £316 million; Q1 2022: £2,207 million) and net
operating cash flows attributable to discontinued activities was £1,675
million (Q1 2021: £15 million; Q1 2022: £335 million).
Net increase/(decrease) in cash and bank overdrafts from 'Continuing
operations' for the full year 2021 was £(2,505) million (Q1 2021: £(900)
million; Q1 2022: £283 million) and net increase/(decrease) in cash and bank
overdrafts attributable to 'Discontinued operations' was £1,091 million (Q1
2021: £(193) million; Q1 2022: £6,639 million).
Impact on the Group's reportable segments
The Group presents its segmental results based on the Adjusted results of the
Group from 'Continuing operations' and will therefore exclude the Consumer
Healthcare business from Q2 2022. As a result, the Group will no longer report
a Consumer Healthcare segment. The Group will continue to report the results
of the Commercial Operations segment and the Research and Development segment.
As a result of reporting the results of the continuing operations of GSK and
no longer reporting the Consumer Healthcare segment, the results of the
Commercial Operations segment and those costs shown under Corporate and
unallocated costs for prior periods have been revised. This reflects the
following principal changes:
· Certain revenues and costs reported within the Consumer
Healthcare segment will be split between the 'Continuing operations' and
'Discontinued operations' of the Group income statement, primarily reflecting
contract manufacturing that will continue to be performed by GSK on behalf of
the Haleon group after the demerger. The value of the sales and related costs
that will be included in the 'Continuing operations' of the Group will be
reported as part of the Commercial Operations segment;
· The Consumer Healthcare segment included some markets that were
not within the perimeter of the Consumer Healthcare joint venture with Pfizer
and will not be part of the Consumer Healthcare business to be demerged. These
will be reported as part of the Commercial Operations segment.
· Corporate costs that were allocated to the Consumer Healthcare
segment and will continue to be incurred by GSK after the demerger. These
costs will be reported within the Corporate and unallocated costs as
'Continuing operations'. Corporate costs incurred by GSK in prior periods on
behalf of Consumer Healthcare that have been transferred to Haleon group
companies ahead of the demerger will be reported as part of 'Discontinued
operations'.
The impact of these 'Continuing operations' sales and costs previously
reported in the Consumer Healthcare segment and that do not form part of the
'Discontinued operations' do not materially change the reported performance of
the Commercial Operations segment.
The tables below set out the revised format for reporting the income statement
under the requirements of IFRS 5 that will be applied from the Q2 2022
results, as applied to the Q1 2021, Q2 2021, Q3 2021, Q4 2021 and full year
2021 and the Q1 2022 results.
An Microsoft Excel version of this data is available on www.gsk.com
(http://www.gsk.com) .
About GSK
GSK is a science-led global healthcare company. For further information please
visit www.gsk.com/about-us (https://www.gsk.com/en-gb/about-us/) .
GSK enquiries:
Media enquiries: Tim Foley +44 (0) 20 8047 5502 (London)
Simon Moore +44 (0) 20 8047 5502 (London)
Madeleine Breckon +44 (0) 20 8047 5502 (London)
Kathleen Quinn +1 202 603 5003 (Washington DC)
Lyndsay Meyer +1 202 302 4595 (Washington DC)
Analyst/Investor enquiries: Nick Stone +44 (0) 7717 618834 (London)
Sonya Ghobrial +44 (0) 7392 784784 (Consumer)
James Dodwell +44 (0) 20 8047 2406 (London)
Mick Readey +44 (0) 7990 339653 (London)
Josh Williams +44 (0) 7385 415719 (London)
Jeff McLaughlin +1 215 751 7002 (Philadelphia)
Cautionary statement regarding forward-looking statements
GSK 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
the Company's Annual Report on Form 20-F for 2021, GSK's Q1 Results for 2022
and any impacts of the COVID-19 pandemic.
Registered in England & Wales:
No. 3888792
Registered Office:
980 Great West Road
Brentford, Middlesex
TW8 9GS
This Announcement does not constitute statutory accounts of the Group within
the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The
information for 2021 and 2020 has been derived from the full Group accounts
published in the Annual Report 2021.
Results by quarter for 2021, full year 2021 and Q1 2022 results presented
under IFRS 5
Total Results
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Full Year Q1 2022
£m £m £m £m £m £m
Continuing Operations
Turnover 5,155 5,838 6,627 7,076 24,696 7,190
Cost of sales (1,654) (1,708) (2,016) (2,785) (8,163) (2,717)
Gross profit 3,501 4,130 4,611 4,291 16,533 4,473
Selling, general and administration (1,509) (1,689) (1,679) (2,193) (7,070) (1,812)
Research and development (1,060) (1,167) (1,416) (1,376) (5,019) (1,103)
Royalty income 88 77 115 137 417 138
Other operating income / (expense) 190 (76) (251) (368) (505) 592
Operating profit 1,210 1,275 1,380 491 4,356 2,288
Finance income 6 4 3 1 14 8
Finance costs (198) (189) (195) (187) (769) (205)
Loss on disposal of interests in associates - (36) - - (36) -
Share of after tax profits of associates and joint ventures 16 16 3 (2) 33 (1)
Profit before taxation 1,034 1,070 1,191 303 3,598 2,090
Taxation (155) 201 (246) 117 (83) (327)
Tax rate % 15.0% (18.8%) 20.7% (38.6%) 2.3% 15.6%
Profit after tax from continuing operations 879 1,271 945 420 3,515 1,763
Profit after tax from discontinued operations 381 267 423 510 1,581 404
Profit after tax for the period 1,260 1,538 1,368 930 5,096 2,167
Profit (Loss) attributable to non-controlling interests from continuing 80 57 69 (6) 200 275
operations
Profit attributable to shareholders from continuing operations 799 1,214 876 426 3,315 1,488
Profit attributable to non-controlling interests from discontinued operations 107 86 131 187 511 90
Profit attributable to shareholders from discontinued operations 274 181 292 323 1,070 314
Total profit attributable to non-controlling interests 187 143 200 181 711 365
Total profit attributable to shareholders 1,073 1,395 1,168 749 4,385 1,802
1,260 1,538 1,368 930 5,096 2,167
Earnings per share from continuing operations 16.0p 24.3p 17.6p 8.4p 66.3p 29.7p
Earnings per share from discontinued operations 5.5p 3.6p 5.7p 6.6p 21.3p 6.2p
Total earnings per share 3 21.5p 27.9p 23.3p 15.0p 87.6p 35.9p
Reconciliation of Total Results from Continuing operations to Adjusted Results
from Continuing operations
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Full Year Q1 2022
£m £m £m £m £m £m
Total Operating profit from continuing operations 1,210 1,275 1,380 491 4,356 2,288
Intangible amortisation 191 186 190 194 761 186
Intangible impairment 13 7 264 62 346 (16)
Major restructuring 66 102 97 159 424 51
Transaction related 116 130 290 604 1,140 347
Divestments, significant legal and other items (271) (59) (12) (193) (535) (912)
Adjusted Operating profit from continuing operations 1,325 1,641 2,209 1,317 6,492 1,944
Total Earnings per share from continuing operations(3) 16.0p 24.3p 17.6p 8.4p 66.3p 29.7p
Intangible amortisation 3.1p 3.0p 3.1p 3.0p 12.2p 3.0p
Intangible impairment 0.2p 0.1p 4.0p 1.0p 5.3p (0.2)p
Major restructuring 1.1p 1.6p 1.5p 2.7p 6.9p 0.8p
Transaction related 1.1p 1.1p 4.0p 8.2p 14.4p 8.1p
Divestments, significant legal and other items (4.5)p (7.5)p (0.3)p (4.5)p (16.8)p
(15.5)p
Adjusted Earnings per share from continuing operations(3) 16.9p 22.6p 29.9p 18.8p 88.3p 25.8p
Adjusted result from continuing operations
Adjusted results are from continuing operations and exclude the Consumer
Healthcare business.
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Full Year Q1 2022
£m £m £m £m £m £m
Turnover 5,155 5,838 6,627 7,076 24,696 7,190
Cost of sales (1,435) (1,522) (1,797) (2,592) (7,346) (2,527)
Selling, general and administration (1,462) (1,646) (1,623) (2,018) (6,749) (1,769)
Research and development (1,021) (1,107) (1,112) (1,285) (4,525) (1,088)
Royalty income 88 78 114 136 416 138
Adjusted Operating profit 1,325 1,641 2,209 1,317 6,492 1,944
Net finance cost (190) (185) (190) (186) (751) (197)
Share of after tax profits of associates and joint ventures 16 16 3 (2) 33 (1)
Adjusted profit before taxation 1,151 1,472 2,022 1,129 5,774 1,746
Taxation (195) (244) (402) (77) (918) (291)
Tax rate % 16.9% 16.6% 19.9% 6.8% 15.9% 16.7%
Adjusted profit after taxation 956 1,228 1,620 1,052 4,856 1,455
Adjusted profit attributable to non-controlling interests 112 99 121 109 441 161
Adjusted profit attributable to shareholders 844 1,129 1,499 943 4,415 1,294
Adjusted earnings per share(3) 16.9p 22.6p 29.9p 18.8p 88.2p 25.8p
Impact of Covid solutions 4 (0.2)p 3.8p 1.5p 3.8p 8.8p 3.2p
Operating profit by segment (continuing operations)
Operating profits by segment are from continuing operations and exclude the
Consumer Healthcare business.
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Full Year Q1 2022
£m £m £m £m £m £m
Commercial Operations 2,446 2,872 3,461 2,703 11,482 3,120
Research and Development (1,030) (1,118) (1,139) (1,281) (4,568) (1,095)
Segment profit 1,416 1,754 2,322 1,422 6,914 2,025
Corporate & other unallocated costs (91) (113) (113) (105) (422) (81)
Adjusted operating profit 1,325 1,641 2,209 1,317 6,492 1,944
Impact of Covid solutions (12) 233 97 214 532 194
Commercial operations turnover
Q1 2021 Q2 2021 Q3 2021 Q4 2021 Full Year Q1 2022
£m £m £m £m £m £m
Specialty 1,575 1,879 2,019 2,778 8,251 3,135
Vaccines 1,224 1,571 2,174 1,809 6,778 1,669
Respiratory 1,492 1,514 1,492 1,550 6,048 1,535
Other General Medicines 864 874 942 939 3,619 851
General Medicines 2,356 2,388 2,434 2,489 9,667 2,386
Total Commercial Operations 5,155 5,838 6,627 7,076 24,696 7,190
US 2,218 2,782 3,390 3,524 11,914 3,586
Europe 1,257 1,260 1,333 1,520 5,370 1,660
International 1,680 1,796 1,904 2,032 7,412 1,944
Total Commercial Operations 5,155 5,838 6,627 7,076 24,696 7,190
Impact of Covid solutions - 276 209 920 1,405 1,307
1 Total and Adjusted Results - Adjusted results are a non-IFRS measure that
may be considered in addition to, but not as a substitute for, or superior to,
information presented in accordance with IFRS. Adjusted results exclude the
profits from discontinued operations from the Consumer Healthcare business and
the items defined on page 20 of the Q1 2022 results announcement in relation
to our continuing operations. The Q1 2022 results announcement is available at
www.gsk.com (http://www.gsk.com)
2 Free cash flow - Free cash flow is a non-IFRS measure that may be
considered in addition to, but not as a substitute for, or superior to,
information presented in accordance with IFRS. Free cash flow is defined on
page 42 of the Q1 2022 results announcement. The Q1 2022 results announcement
is available at www.gsk.com (http://www.gsk.com)
3 Earnings per share for Q2 2022 and for prior periods will be adjusted to
reflect the impact of the GSK share consolidation expected to take place
following the demerger (the earnings per share figures presented are based on
the current pre-consolidation GSK share capital structure).
4 COVID-19 solutions include the sales of pandemic adjuvant and other
COVID-19 solutions including vaccine manufacturing and Xevudy and the
associated costs but does not include reinvestment in R&D. This
categorisation is used by management and we believe is helpful to investors
through providing clarity on the results of the Group by showing the
contribution to growth from COVID-19 solutions.
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