28th Apr 2005 12:00
GlaxoSmithKline PLC28 April 2005 Issued: 28th April 2005, London Results Announcement for the First Quarter 2005 GSK makes excellent start to 2005 with EPS of 21.1p, up 19% GlaxoSmithKline plc (GSK) today announces its results for the first quarter ended 31st March 2005. The full results,which have been prepared on an IFRS basis, are presented under "Income Statement" on page 6 and are summarised below. FINANCIAL RESULTS* Q1 2005 Q1 2004 Growth £m £m CER% £% Turnover 5,036 4,855 5 4 Operating profit 1,747 1,493 18 17 Profit before tax 1,711 1,466 18 17 Earnings per share 21.1p 18.0p 19 17 Q1 2005 SUMMARY* • Strong financial performance: - Total pharmaceutical sales up 6% (to £4.3 billion) and EPS up 19%. - US sales (+4% to £2.1 billion) impacted by the effect of generic competition to Wellbutrin SR and disruption to the supply of Paxil CR. Excluding these factors, US sales rose 13%. - Strong European sales growth (+10% to £1.4 billion), benefiting from good performance of Seretide and Avandia and the contribution of Fraxiparine, an anti-thrombotic agent acquired from Sanofi in September 2004. • Key growth drivers continue to perform strongly: - Seretide/Advair for asthma (+22% to £690 million). - Avandia/Avandamet for diabetes (+25% to £287 million). - Lamictal for epilepsy/bipolar disorder (+30% to £195 million). - Valtrex for herpes (+28% to £164 million). - Coreg for heart disease (+50% to £135 million). • Pipeline momentum continues: - In the USA, Vesicare for over-active bladder successfully launched in January; unique, once-monthly dosing osteoporosis treatment, Boniva, launched in April. - Good progress on key phase III assets, including Allermist for rhinitis and Cervarix for cervical cancer. • Update on Cidra manufacturing: - Based on the terms of the recently announced Consent Decree, GSK expects to begin re-supplying the US and other markets with both Paxil CR and Avandamet in mid-year. Commenting on the performance for the quarter and GSK's outlook, JP Garnier, Chief Executive Officer, said: "GSK is offto an excellent start in 2005. We are now entering a new phase of growth for the company as the impact of genericcompetition diminishes and the underlying strength of our business shows through. Great performances from our biggestproducts, Advair for asthma and Avandia for diabetes, are driving growth. GSK's future is bright and in 2005 we are ontrack to deliver our guidance of EPS growth in the low double-digit range." * The Group's practice is to discuss its results in terms of constant exchange rate (CER) growth. All commentaries compare 2005 results with 2004 in CER terms unless otherwise stated. See 'Accounting Presentation and Policies' on page 16 for fuller explanations of these matters. KEY GROWTH DRIVERS CONTINUE TO PERFORM STRONGLY • GSK's biggest selling product - Seretide/Advair for asthma and COPD - continues to grow very strongly with sales up 22% to £690 million. Advair had an excellent performance in the USA with sales up 25% to £380 million. In March, GSK, in collaboration with the American Lung Association, launched a new campaign which helps patients to assess their level of symptom control using the new Asthma Control TestTM. Sales were strong in Europe (+19% to £251 million). European sales are expected to benefit from the CONCEPT trial data published in March 2005. This study showed that patients receiving Seretide had significantly more symptom-free days, and a rate of asthma attacks almost half that of Symbicort with adjustable maintenance dosing. • Sales of the Avandia family of diabetes treatments (Avandia/Avandamet) rose 25% to £287 million in the quarter. Growth was strong in all regions: USA (+21% to £215 million), Europe (+53% to £32 million) and International markets (+31% to £40 million). In the first quarter, Avandia received FDA approval for two new indications: use in triple combination with metformin and a sulfonylurea (which makes it the only glitazone with this indication) and use at its highest dose of 8mg in combination with a sulfonylurea. In the USA, the disruption in supplies of Avandamet from the Cidra manufacturing site has been largely offset by conversion to Avandia. • Lamictal, GSK's epilepsy and bipolar disorder treatment, continues to perform very strongly with sales up 30% to £195 million during the quarter. US sales of Lamictal rose 38% to £120 million. • Sales of heart disease treatment Coreg rose 50% in the quarter to £135 million, benefiting from growth in three key areas of the heart disease market - hypertension, heart failure and post-myocardial infarction. • Sales of Valtrex, for herpes, rose 28% to £164 million, driven by a strong performance in the USA (+36% to £112 million) where the product is the clear market leader for the treatment and prevention of genital herpes. • GSK's portfolio of vaccines grew 3% to £248 million, led by a strong performance in Europe where sales grew 10%. International sales declined 4% impacted by the phasing of tender orders which are expected to recur later in the year. In the USA, Boostrix (a booster vaccine to prevent diphtheria, tetanus and pertussis) and Fluarix (to prevent flu) are expected to be launched during the second half of 2005. OTHER PRODUCTS • Sales of Flixonase/Flonase rose by 12% to £171 million during the quarter, benefiting from a particularly strong allergy season in Japan where sales more than doubled to £27 million. • GSK's HIV franchise had a solid quarter with sales up 6% to £363 million (US sales up 8% to £178 million), helped by good performances from newly launched drugs Epzicom/Kivexa and Lexiva, and a favourable comparison with a weak first quarter last year. • Other products performing well during the quarter included: Zofran (+8% to £189 million); Requip for Parkinson's Disease (+15% to £30 million); and Avodart, for the treatment of benign prostatic hyperplasia, sales of which more than doubled to £26 million. The quarter also included the first full quarter contributions from cardiovascular treatments Fraxiparine/Arixtra purchased from Sanofi in September 2004 (£56 million). • Overall sales of Seroxat/Paxil products fell 43% to £163 million as a result of generic competition to Paxil IR (-36% to £122 million) and the disruption to supplies of Paxil CR (-57% to £41 million). • Wellbutrin sales were down 23% to £163 million. Sales of Wellbutrin IR and SR (-75% to £32 million) continue to be affected by generic competition, which began in full in March 2004. However, this impact continues to be partially offset by the strong performance of Wellbutrin XL (+56% to £131 million). PIPELINE UPDATE Product launches • Vesicare, which GSK is co-promoting with Astellas for the treatment of over-active bladder, has performed well since its launch in the USA in January, with a faster uptake than recently launched competitors. Vesicare should benefit further from new data from the STAR study which showed superiority on a number of clinical endpoints compared to Detrol LA, the current market leader. The study will be published in a urology journal later this year. • Boniva, a potent oral bisphosphonate for the treatment of osteoporosis, was launched in the USA in April. Boniva's performance will benefit from its strong profile as the first product to be available in a convenient once-monthly dosing regimen. The US bisphosphonate market grew 20% to approximately $3 billion in 2004. • GSK remains on track for several other product launches in the USA during 2005, including: Requip for restless legs syndrome (approval expected Q2 2005); Boostrix childhood vaccine (Q2 2005); Entereg for post-operative ileus (H2 2005); and Fluarix flu vaccine (H2 2005). Other news • The clinical programme for Cervarix, GSK's HPV vaccine targeting cervical cancer, is progressing very well. GSK will present a clinical update for Cervarix, including exciting new preliminary trial data on 3rd May at the forthcoming International Papilloma Virus Conference in Vancouver. • Phase III data on Allermist in seasonal allergic rhinitis was received in the quarter. This showed significant superiority over placebo in the primary endpoint, nasal symptoms score, and all key secondary endpoints. Further phase III trials will complete during the year; US and EU filing is on track for 2006. • Lapatinib for solid tumours is progressing in a number of phase II and phase III studies. An update on the product and data from the phase II breast cancer studies will be presented at ASCO on 13th May. • GSK's dual-acting Cox-2 inhibitor '381, entered phase III development for osteo-arthritis and rheumatoid arthritis during the quarter. These studies will determine the dose to be used in long-term safety outcome studies for chronic indications, which are scheduled to start early next year. • Two pivotal phase III trials for Trexima - a product developed in partnership with Pozen for the treatment of migraine headaches - have now been completed. These show a statistically significant higher pain-free response for Trexima compared with the current gold standard, Imigran/Imitrex. Submission to the FDA is planned for Q3 2005. • The final data submission for Arranon (nelarabine), GSK's new treatment for acute lymphoblastic leukaemia and lymphoma, is expected to be filed with the FDA on 29th April. Arranon was awarded priority review status and a decision from the FDA is expected in H2 2005. • Excellent new phase II data has been received for Entereg for the treatment of constipation associated with opioid use. The data show a greater than two-fold increase in bowel function versus placebo for patients taking chronic opioid medication, a result which is clinically and statistically highly significant. Phase III studies are expected to start later this year, with filing in 2007. The phase II study in chronic idiopathic constipation not associated with opioid use did not show significant efficacy versus placebo. • Radafaxine ('162) for depression, has successfully completed further dose escalation trials and will enter phase III studies in Q3 2005. • '699, GSK's oral integrin antagonist for the treatment of multiple sclerosis and IBD, was put on clinical hold in the quarter while the FDA reviews the incidence of progressive multifocal leukoencephalopathy (PML) associated with the use of Tysabri, a recently launched injectable integrin antagonist. CONSUMER HEALTHCARE • Consumer Healthcare sales grew 2% with growth in International (+7%) and North American (+5%) markets offsetting lower sales in Europe (-2%). Operating profit for the business grew 23% benefiting from a favourable sales mix (growth from higher margin products), cost containment and lower advertising spending. • Over-the-counter medicine sales were £343 million (+5%). Sales growth was led by smoking control products which grew 17%, reflecting strong momentum behind the Commit lozenge in the USA and Europe. • Oral care sales were down 1% to £219 million. International sales were up 11% with strong performances by the Aquafresh, Sensodyne, Polident and Poligrip brands. Sales in Europe were down 6% versus a year ago, which benefited from the launch of new whitening products. • Nutritional healthcare products sales grew 1% to £135 million. FINANCIAL REVIEW These results have been prepared under International Financial Reporting Standards (see Accounting Presentation andPolicies on page 16). Operating profit and earnings per share Operating profit for Q1 2005 was £1,747 million, an 18% increase in CER terms (17% in sterling terms) compared with Q12004. EPS of 21.1 pence increased 19% in CER terms (17% in sterling terms) compared with Q1 2004 EPS. The adversecurrency impact of 2% reflected a weaker US dollar, partially offset by a stronger Euro. EPS growth benefited by 4% due to higher asset sale profits (primarily the sale of certain Levitra Europe andInternational rights), partly offset by higher provisions for legal matters and higher charges relating to programmesto deliver future cost savings. Excluding these items, EPS grew 15%. This was above the rate of sales growthprimarily due to lower SG&A costs arising from cost savings and the phasing of advertising and promotional expenses. Currencies The first quarter 2005 results are based on average exchange rates, principally £1/$1.91, £1/Euro 1.44 and £1/Yen 199.The period-end exchange rates were £1/$1.89, £1/Euro 1.45 and £1/Yen 202. Dividend On 28th April 2005 the Board declared a first interim dividend of 10 pence per share. This compares with a dividend of10 pence per share for Q1 2004. The equivalent dividend receivable by ADR holders is 38.0090 cents per ADS based on anexchange rate of £1/$1.90047. The dividend will have an ex-dividend date of 12th May 2005 and will be paid on 1st July2005 to shareholders and ADR holders of record on 14th May 2005. Under IFRS the liability for a dividend is only recognised in the period when it is declared and so the Q1 2005financial statements do not reflect this first interim dividend. Earnings guidance On an IFRS basis, 2005 EPS percentage CER growth is expected to be in the low double-digit range. Share buy-back programme In October 2002 GSK commenced a new £4 billion share buy-back programme. At 31st December 2004 £2,199 million had beenaccounted for from this programme. A further £206 million was spent in Q1 2005. The exact amount and timing of futurepurchases, and the extent to which repurchased shares will be held as Treasury shares rather than being cancelled, willbe determined by the company and is dependent on market conditions and other factors. GlaxoSmithKline - one of the world's leading research-based pharmaceutical and healthcare companies - is committed toimproving the quality of human life by enabling people to do more, feel better and live longer. For companyinformation including a copy of this announcement and details of the company's updated product development pipeline,visit GSK at www.gsk.com. Enquiries: UK Media Philip Thomson (020) 8047 5502 David Mawdsley (020) 8047 5502 Chris Hunter-Ward (020) 8047 5502 US Media Nancy Pekarek (215) 751 7709 Mary Anne Rhyne (919) 483 2839 Patricia Seif (215) 751 7709 European Analyst / Investor Duncan Learmouth (020) 8047 5540 Anita Kidgell (020) 8047 5542 Jen Hill (020) 8047 5543 US Analyst / Investor Frank Murdolo (215) 751 7002 Tom Curry (215) 751 5419 Brand names appearing in italics throughout this document are trade marks of GSK or associated companies with theexception of Levitra, a trade mark of Bayer, Vesicare, a trade mark of Astellas, Entereg, a trade mark of Adolor andBoniva, a trade mark of Roche, which are used under licence by the Group. Cautionary statement regarding forward-looking statements Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautionsinvestors that any forward-looking statements or projections made by the company, including those made in thisAnnouncement, are subject to risks and uncertainties that may cause actual results to differ materially from thoseprojected. Factors that may affect the Group's operations are described under 'Risk Factors' in the Operating andFinancial Review and Prospects in the company's Annual Report 2004. INCOME STATEMENT Three months ended 31st March 2005 Q1 2005 Growth Q1 2004 2004 £m CER% £m £m --- --- --- ---Turnover:Pharmaceuticals 4,339 6 4,168 17,100Consumer Healthcare 697 2 687 2,886 --- --- ---TURNOVER 5,036 5 4,855 19,986 Cost of sales (1,127) 9 (1,035) (4,360) --- --- ---Gross profit 3,909 4 3,820 15,626 Selling, general and administration (1,645) (3) (1,725) (7,201)Research and development (663) 2 (659) (2,904)Other operating income 146 57 235 --- --- --- Operating profit:Pharmaceuticals 1,626 18 1,395 5,126Consumer Healthcare 121 23 98 630 --- --- ---OPERATING PROFIT 1,747 18 1,493 5,756 Finance income 49 43 176Finance expense (98) (84) (362)Share of after tax profits of joint ventures and associates 13 14 60Profit on disposal of interest in associates - - 149 --- --- --- PROFIT BEFORE TAXATION 1,711 18 1,466 5,779 Taxation (488) (406) (1,757)Tax rate % 28.5% 27.7% 30.4% --- --- ---PROFIT AFTER TAXATION FOR THE PERIOD 1,223 17 1,060 4,022 --- --- --- Profit attributable to minority interests 21 23 114Profit attributable to shareholders 1,202 17 1,037 3,908 --- --- --- EARNINGS PER SHARE 21.1p 19 18.0p 68.1p --- --- --- Diluted earnings per share 21.0p 18.0p 68.0p --- --- --- PHARMACEUTICAL TURNOVER Three months ended 31st March 2005 Total USA Europe International -------------- --------------- ------------- ------------- £m CER% £m CER% £m CER% £m CER% ------ ----- ------ ----- ---- ----- ---- -----RESPIRATORY 1,198 12 591 12 416 10 191 18Seretide/Advair 690 22 380 25 251 19 59 11Flixotide/Flovent 154 - 61 1 49 (4) 44 4Serevent 79 (11) 24 (30) 40 (7) 15 30Flixonase/Flonase 171 12 120 - 14 (2) 37 >100 CENTRAL NERVOUS SYSTEM 758 (15) 478 (18) 184 (7) 96 (11)Seroxat/Paxil 163 (43) 50 (64) 52 (29) 61 (13) Paxil IR 122 (36) 11 (76) 52 (29) 59 (15) Paxil CR 41 (57) 39 (59) - - 2 74Wellbutrin 163 (23) 160 (23) - - 3 (28) Wellbutrin IR, SR 32 (75) 30 (76) - - 2 (41) Wellbutrin XL 131 56 130 56 - - 1 88Imigran/Imitrex 167 - 123 2 33 (6) 11 (1)Lamictal 195 30 120 38 63 20 12 9Requip 30 15 13 14 15 16 2 13 ANTI-VIRALS 603 9 301 16 186 - 116 8HIV 363 6 178 8 144 1 41 13Combivir 140 2 68 4 56 (2) 16 4Trizivir 74 (7) 39 (4) 31 (10) 4 (6)Epivir 66 (6) 25 (20) 30 2 11 18Ziagen 33 (12) 13 (24) 14 (4) 6 14Retrovir 11 8 4 6 4 (7) 3 40Agenerase, Lexiva 22 >100 14 >100 7 >100 1 >100Epzicom/Kivexa 17 - 15 - 2 - - - Herpes 197 16 114 33 36 (4) 47 1Valtrex 164 28 112 36 25 13 27 11Zovirax 33 (20) 2 (51) 11 (29) 20 (9) Zeffix 29 - 3 7 4 (4) 22 (1) ANTI-BACTERIALS 417 (1) 76 (29) 222 13 119 1Augmentin 192 (6) 46 (39) 98 16 48 13 Augmentin IR 154 10 12 (18) 95 13 47 13 Augmentin ES, XR 38 (40) 34 (43) 3 >100 1 (6)Zinnat/Ceftin 62 3 3 (2) 42 10 17 (10) METABOLIC 319 22 215 21 40 31 64 20Avandia, Avandamet 287 25 215 21 32 53 40 31 VACCINES 248 3 54 2 114 10 80 (4)Hepatitis 94 4 26 (13) 48 13 20 13Infanrix/Pediarix 83 9 28 20 40 12 15 (13)Rotarix 1 - - - - - 1 - ONCOLOGY AND EMESIS 235 9 171 12 43 - 21 6Zofran 189 8 139 10 33 (1) 17 6Hycamtin 25 7 17 10 7 - 1 4 CARDIOVASCULAR AND UROGENITAL 310 57 176 43 103 >100 31 39Coreg 135 50 133 52 - - 2 (29)Levitra 10 (39) 9 (12) 1 (79) - -Avodart 26 >100 12 >100 12 >100 2 >100Arixtra 4 - 2 - 2 - - -Fraxiparine 52 - - - 45 - 7 -Vesicare 3 - 3 - - - - - OTHER 251 (2) 17 (19) 80 2 154 (2)Zantac 59 (13) 13 (19) 16 (18) 30 (6) -------------- -------------- -------------- ------------- 4,339 6 2,079 4 1,388 10 872 5 -------------- -------------- -------------- ------------- Pharmaceutical turnover includes co-promotion income. CONSUMER HEALTHCARE TURNOVER Three months ended 31st March 2005 Growth £m CER% --------- ---------Over-the-counter medicines 343 5Analgesics 84 3Dermatological 39 (7)Gastrointestinal 58 2Respiratory tract 38 12Smoking control 83 17Natural wellness support 33 (4) Oral care 219 (1)Nutritional healthcare 135 1 --------- ---------Total 697 2 --------- --------- FINANCIAL REVIEW - INCOME STATEMENT Operating profit Q1 2005 Q1 2004 ---------------------- -------------------- % of % of Growth £m turnover £m turnover CER% £% ------ ------ ------ ------ ------ -----Turnover 5,036 100.0 4,855 100.0 5 4 Cost of sales (1,127) (22.4) (1,035) (21.3) 9 9Selling, general and administration (1,645) (32.7) (1,725) (35.5) (3) (5)Research and development (663) (13.1) (659) (13.6) 2 1Other operating income 146 2.9 57 1.2 ------ ------ ------ ------ ------ ----Operating profit 1,747 34.7 1,493 30.8 18 17 ------ ------ ------ ------ ------ ---- Overall the operating margin increased 3.9 percentage points as sterling operating profit increased 17% on a sterlingturnover growth of 4%. At constant exchange rates operating profit increased 18% and the margin increased 3.8percentage points, reflecting higher other operating income, a 3% decrease in selling, general and administration (SG&A) and only a 2% increase in R&D, partly offset by a 9% increase in cost of sales. Cost of sales increased as a percentage of turnover by 1.1 percentage points. At constant exchange rates the increasewas 0.8 percentage points, reflecting the loss of higher margin Wellbutrin SR sales and provisions related toaddressing FDA quality issues at the Cidra plant in Puerto Rico. SG&A as a percentage of turnover declined 2.8 percentage points. At constant exchange rates the decline was 2.6percentage points, reflecting a lower share-based payment charge, the timing of advertising and promotion expenditureand other general savings, partly offset by higher provisions for legal matters and higher charges relating toprogrammes to deliver future cost savings. All legal costs are now accounted for within SG&A. This includes litigation costs and provisions relating tolegal claims on withdrawn products, product withdrawals and anti-trust matters, previously accounted for withinother operating expense. The comparatives for 2004 have been restated on this basis. The full year effect in2004 is to reallocate £296 million of legal costs from other operating income into SG&A, and the analysis byquarter is as follows: Quarter 1 £22 millionQuarter 2 £180 millionQuarter 3 £54 millionQuarter 4 £40 million ---------- £296 million ----------Operating profit is unaffected by this reallocation. See Accounting Presentation and Policies on page 16 forfurther details. R&D expenditure as a percentage of turnover declined 0.5 percentage points, of which 0.1 percentage points was due tocurrency. The remaining 0.4 percentage point decline largely reflected a lower share-based payment charge.Pharmaceuticals R&D expenditure represented 14.7% of pharmaceutical turnover. Other operating income includes royalty income, equity investment disposals and impairments, product disposals and fairvalue adjustments to the Quest collar and Theravance options (a charge of £13 million in the quarter). Other operatingincome was £146 million in Q1 2005 compared with £57 million in Q1 2004. The increased income in 2005 is predominantlydue to the disposal of certain Levitra rights in Europe and International. Taxation The charge for taxation on profit amounting to £488 million represents an effective tax rate of 28.5%, which is theexpected rate for the year. Transfer pricing issues are described in the 'Taxation' note to the Financial Statements included in the Annual Report2004. Developments since the date of that report are as follows. With respect to the claims of the Internal Revenue Service (IRS) for the years 1997-2000, which are described in thenote, the Group contested these claims for additional taxes of $1.9 billion by filing a petition in the US Tax Court on12th April. The Group is also seeking to consolidate the IRS claims for 1997-2000 with those for 1989-1996 into asingle trial. The total claims for these periods amount to $4.6 billion of additional taxes and related interest of$3.0 billion, net of federal tax relief, giving a total of $7.6 billion. The Group's petitions against the IRS claimsinclude counter-claims for repayment of taxes totalling $1.8 billion, based partly by reference to an Advance PricingAgreement (APA) between SmithKline Beecham and the IRS covering the transfer pricing of Tagamet between 1991 and 1993.On 23rd December 2004 the IRS filed a motion for summary judgement to exclude any evidence relating to APAs from thecourt proceedings. On 31st March 2005 the trial judge denied the IRS motion and reserved ruling on the admissibility ofAPA evidence until full trial. A trial date for the 1989-1996 claims has been scheduled for October 2006. GSK continues to believe that the profits reported by its US subsidiaries for the period 1989 to date, on which it haspaid taxes in the USA, are more than sufficient to reflect the activities of its US operations. GSK is in continuing discussions with the Inland Revenue in respect of UK transfer pricing disputes. GSK uses the best advice in determining its transfer pricing methodology and in seeking to manage transfer pricingissues to a satisfactory conclusion and, on the basis of external professional advice, continues to believe that it hasmade adequate provision for the liabilities likely to arise from open assessments. However, there continues to be awide difference of views between the Group, the IRS, the Inland Revenue and other relevant taxation authorities whereopen issues exist. The ultimate liability for such matters may vary from the amounts provided and is dependent uponthe outcome of litigation proceedings and negotiations with the relevant tax authorities. Weighted average number of shares Q1 2005 Q1 2004 2004 millions million million ---- ---- ----Weighted average number of shares - basic 5,692 5,768 5,736Dilutive effect of share options and share awards 37 14 12 ---- ---- ----Weighted average number of shares - diluted 5,729 5,782 5,748 ---- ---- ---- Dividends Declared Payable Pence per share £m ---- ---- ---- ----2005First interim 28th April 2005 1st July 2005 10 570 2004First interim 29th April 2004 1st July 2004 10 575Second interim 27th July 2004 30th September 2004 10 573Third interim 28th October 2004 6th January 2005 10 571Fourth interim 10th February 2005 7th April 2005 12 683 ---- ---- 42 2,402 ---- ---- Under IFRS the liability for a dividend is only recognised when it is declared, which is currently after the accountingperiod to which it relates. The number of shares in issue, excluding those held by the ESOP Trusts and those held as Treasury shares at 31st March2005, was 5,682 million (31st March 2004: 5,749 million). STATEMENT OF RECOGNISED INCOME AND EXPENSE Q1 2005 Q1 2004 2004 £m £m £m ---- ---- ----Exchange movements on overseas net assets (62) (240) (30)Tax on exchange movements (4) (56) (73)Fair value movements on available-for-sale investments (29) - -Tax on fair value movements 6 - -Loss from own shares for employee share schemes (22) (21) (55)Revaluation of goodwill due to exchange 7 1 6Actuarial (losses)/gains on defined benefit plans (97) (7) 108Deferred tax on actuarial (losses)/gains on defined benefit plans 33 9 (17) ---- ---- ----Net losses recognised directly in equity (168) (314) (61) Profit attributable to shareholders 1,202 1,037 3,908 ---- ---- ----Total recognised income and expense for the period 1,034 723 3,847 ---- ---- ---- BALANCE SHEET 31st March 31st March 31st December 2005 2004 2004 £m £m £mASSETS ---- ---- ----Non-current assetsProperty, plant and equipment 6,130 5,986 6,197Goodwill 164 147 165Other intangible assets 2,508 2,161 2,513Investments in associates and joint ventures 218 216 209Other investments 324 260 298Deferred tax assets 1,999 2,007 2,032Other non-current assets 245 290 248 ---- ---- ----Total non-current assets 11,588 11,067 11,662 ---- ---- ----Current assetsInventories 2,130 2,110 2,193Trade and other receivables 4,990 4,646 4,814Liquid investments 1,490 1,460 1,512Cash and cash equivalents 2,774 1,526 2,467Assets held for sale 3 - 2 ---- ---- ----Total current assets 11,387 9,742 10,988 ---- ---- ----TOTAL ASSETS 22,975 20,809 22,650 ---- ---- ----LIABILITIESCurrent liabilitiesShort-term borrowings (1,686) (1,394) (1,582)Trade and other payables (4,838) (4,788) (4,838)Current tax payable (1,864) (1,759) (1,598)Short-term provisions (1,017) (759) (962) ---- ---- ----Total current liabilities (9,405) (8,700) (8,980) ---- ---- ----Non-current liabilitiesLong-term borrowings (4,083) (3,595) (4,381)Deferred tax provision (281) (101) (377)Pensions and other post-employment benefits (2,652) (2,937) (2,519)Other provisions (509) (641) (569)Other non-current liabilities (259) (244) (244) ---- ---- ----Total non-current liabilities (7,784) (7,518) (8,090) ---- ---- ----TOTAL LIABILITIES (17,189) (16,218) (17,070) ---- ---- ----NET ASSETS 5,786 4,591 5,580 ---- ---- ---- EQUITYShare capital 1,485 1,484 1,484Share premium account 326 273 304Other reserves (490) (739) (606)Retained earnings 4,230 3,317 4,126 ---- ---- ----Shareholders' equity 5,551 4,335 5,308Minority interests 235 256 272 ---- ---- ----TOTAL EQUITY 5,786 4,591 5,580 ---- ---- ---- RECONCILIATION OF MOVEMENTS IN EQUITY Q1 2005 Q1 2004 2004 £m £m £m ---- ---- ----Total equity at beginning of period, as previously reported 5,580 5,296 5,296Implementation of accounting for financial instruments under IAS 39 (12) - - ---- ---- ----Total equity at beginning of period, as adjusted 5,568 5,296 5,296Total recognised income and expense for the period 1,034 723 3,847Dividends declared (685) (808) (2,527)Ordinary shares issued 23 10 42Ordinary shares purchased and cancelled - (179) (201)Ordinary shares purchased and held as Treasury shares (206) (100) (799)Ordinary shares issued by ESOP Trusts 33 25 78Share-based payments 60 108 312Minority interests (41) (484) (468) ---- ---- ----Total equity at end of period 5,786 4,591 5,580 ---- ---- ---- FINANCIAL REVIEW - BALANCE SHEET Net assets The book value of net assets increased by £206 million from £5,580 million at 31st December 2004 to £5,786 million at31st March 2005, mainly arising from a reduction in net debt in the quarter. The carrying value of investments in associates and joint ventures at 31st March 2005 was £218 million with a marketvalue of £1,046 million. Equity At 31st March 2005 total equity had increased from £5,580 million at 31st December 2004 to £5,786 million. Theincrease arises from retained earnings partially offset by purchases of Treasury shares and further actuarial losses ondefined benefit plans in the quarter. At 31st March 2005 the ESOP Trusts held 172.5 million GSK ordinary shares at a book value of £2,481 million and amarket value of £2,093 million against the future exercise of share options and share awards, which have been deductedfrom other reserves. At 31st March 2005 GSK also held 86.3 million shares as Treasury shares, at a value of £1,005million, which have been deducted from retained earnings. CASH FLOW STATEMENT Three months ended 31st March 2005 Q1 2005 Q1 2004 2004 £m £m £m ---- ---- ----Operating profit 1,747 1,493 5,756Depreciation and other non-cash items 147 313 1,227Increase in working capital (88) (47) (158)Decrease in other net liabilities (259) (427) (298) ---- ---- --- 1,547 1,332 6,527Taxation paid (260) (271) (1,583) ---- ---- ----Net cash inflow from operating activities 1,287 1,061 4,944 ---- ---- ----Cash flow from investing activitiesPurchase of tangible fixed assets (126) (121) (788)Proceeds from sale of tangible fixed assets 17 2 53Purchase of intangible assets (55) (25) (255)Proceeds from sale of intangible fixed assets 165 - -Purchase of equity investments (5) (4) (103)Proceeds from sale of equity investments 3 3 58Purchase of businesses, net of cash acquired - - (297)Disposal of businesses and interest in associates - - 230Investment in joint ventures and associated undertakings (1) - (2)Interest received 61 34 173Dividends from joint ventures and associated undertakings 1 2 11 ---- ---- ----Net cash inflow/(outflow) from investing activities 60 (109) (920) ---- ---- ----Cash flow from financing activitiesDecrease/(increase) in liquid investments 22 (7) (53)Proceeds from own shares for employee share options 11 4 23Issue of share capital 23 10 42Share capital purchased for cancellation - (178) (201)Other financing cash flows (34) 33 49Purchase of Treasury shares (176) (90) (799)Redemption of preference shares issued by subsidiary - (440) (489)Increase in long-term loans - - 1,365Repayment of long-term loans (4) (4) (15)Net repayment of short-term loans (308) (10) (407)Net repayment of obligations under finance leases (15) - (22)Interest paid (96) (70) (350)Dividends paid to shareholders (571) (520) (2,475)Dividends paid to minority interests (58) (53) (75) ---- ---- ----Net cash outflow from financing activities (1,206) (1,325) (3,407) ---- ---- ---- Increase/(decrease) in cash and bank overdrafts in the period 141 (373) 617Exchange adjustments 13 (47) (93)Cash and bank overdrafts at beginning of period 2,355 1,831 1,831 ---- ---- ----Cash and bank overdrafts at end of period 2,509 1,411 2,355 ---- ---- ---- Cash and bank overdrafts at end of period comprise: Cash and cash equivalents 2,774 1,526 2,467 Overdrafts (265) (115) (112) ---- ---- ---- 2,509 1,411 2,355 ---- ---- ---- RECONCILIATION OF CASH FLOW TO MOVEMENTS IN NET DEBT Q1 2005 Q1 2004 2004 £m £m £m ---- ---- ----Net debt at beginning of the period (1,984) (1,648) (1,648)Increase/(decrease) in cash and bank overdrafts in the period 141 (373) 617Cash (inflow)/outflow from liquid investments (22) 7 53Net decrease/(increase) in long-term loans 4 4 (1,350)Net repayment of short-term loans 308 10 407Net repayment of obligations under finance leases 15 - 22Exchange adjustments 8 (2) 24Other non-cash movements 25 (1) (109) ---- ---- ----Movement in net debt 479 (355) (336) ---- ---- ----Net debt at end of the period (1,505) (2,003) (1,984) ---- ---- ---- FINANCIAL REVIEW - CASH FLOW Operating cash flow was £1,547 million in Q1 2005. This represents an increase of £215 million over Q1 2004principally due to higher operating profits. The operating cash flow is in excess of the funds needed for the routinecash flows of tax, capital expenditure on tangible assets and dividend payments, together amounting to £957 million.Receipts of £34 million arose from the exercise of share options: £11 million from shares held by the ESOP Trusts and£23 million from the issue of new shares. In addition, £176 million was spent on purchasing the company's shares to beheld as Treasury shares. LEGAL MATTERS The Group is involved in various legal and administrative proceedings, principally product liability, intellectualRelated Shares:
Glaxosmithkline