10th Feb 2005 12:30
GlaxoSmithKline PLC10 February 2005 Issued: 10th February 2005, London Part 1 of 2 GlaxoSmithKline plc Financial statements in accordance with International Financial Reporting Standards 2003 Full year 2004 Quarter 1 2004 Quarter 2 2004 Half-year 2004 Quarter 3 2004 9 months 2004 Quarter 4 2004 Full year GlaxoSmithKline prepares its financial results in £ sterling. Accordingly these IFRS Financial statements are prepared in £ sterling. www.gsk.com Brand names appearing in italics throughout this document are trade marks of GlaxoSmithKline or associated companieswith the exception of Levitra a trade mark of Bayer which is 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 on Form 20-F for 2003. Table of contents Page Basis of preparation .............................................................................................. 4 Income statement Explanation of IFRS income statement adjustments................................................................... 72003 Full year........................................................................................... 92004 Quarter 1............................................................................................. 112004 Quarter 2............................................................................................. 132004 Half-year..............................................................................................152004 Quarter 3............................................................................................. 172004 9 months.............................................................................................. 192004 Quarter 4............................................................................................. 212004 Full year............................................................................................. 23 Turnover Pharmaceuticals2003 Full year............................................................................................. 262004 Quarter 1............................................................................................. 272004 Quarter 2............................................................................................. 282004 Half-year............................................................................................. 292004 Quarter 3............................................................................................. 302004 9 months.............................................................................................. 312004 Quarter 4............................................................................................. 322004 Full year ............................................................................................ 33 Consumer Healthcare2003 Full year............................................................................................. 342004 Quarter 1..............................................................................................342004 Quarter 2..............................................................................................342004 Half-year..............................................................................................342004 Quarter 3 .............................................................................................352004 9 months...............................................................................................352004 Quarter 4............................................................................................. 352004 Full year............................................................................................. 35 Balance sheet Explanation of IFRS balance sheet adjustments...................................................................... 37At 31st December 2003.............................................................................................. 39At 31st March 2004................................................................................................. 41At 30th June 2004...................................................................................................43At 30th September 2004............................................................................................. 45At 31st December 2004.............................................................................................. 47 Table of contents PageCash flow statement Explanation of IFRS cash flow statement adjustments................................................................. 502003 Full year............................................................................................. 512004 Quarter 1............................................................................................. 522004 Quarter 2............................................................................................. 532004 Half-year..............................................................................................542004 Quarter 3............................................................................................. 552004 9 months.............................................................................................. 562004 Quarter 4............................................................................................. 572004 Full year............................................................................................. 58 Statement of recognised income and expense 2003 Full year............................................................................................ 602004 Full year............................................................................................ 60 Reconciliation of movements in equity 2003 Full year............................................................................................ 612004 Full year............................................................................................ 61Reconciliation by component of equity at 1st January 2003.......................................................... 62 Basis of preparation IntroductionFollowing a European Union Regulation issued in 2002, GlaxoSmithKline is moving to reporting its financialresults in accordance with International Financial Reporting Standards (IFRS) from 1st January 2005. Thisdocument presents the unaudited consolidated results of GlaxoSmithKline plc converted from the current UKGenerally Accepted Accounting Principles (UK GAAP) basis onto an IFRS basis for the full years 2003 and 2004 andfor the quarters of 2004. The transition date to IFRS for GlaxoSmithKline is 1st January 2003. Basis of preparationThis document has been prepared on the basis of all IFRS and Standing Interpretations Committee (SIC) andInternational Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the IASB effectivefor 2005 reporting. In addition, the IASB issued an amendment to IAS 19, Employee Benefits, in December 2004.This amendment permits the full recognition of actuarial gains or losses that occur in the year outside theincome statement in a similar way to FRS 17 under UK GAAP. Although not effective until annual periodsbeginning on or after 1st January 2006, the amendment may be adopted early. GlaxoSmithKline intends to adoptthis amendment to IAS 19 for 2005 reporting and so the information presented in this document has been preparedon that basis, which is a change from the basis on which the IFRS information published on 29th October 2004 wasprepared. The effect of this change is to increase the pension and other post-employment benefit provisions at 31stDecember 2003, 31st March 2004 and 30th June 2004 by £435 million, £438 million and £704 million, respectively,from those presented on 29th October 2004. Consequential adjustments to the deferred tax assets and minorityinterests have also been made. The income statement for the year ended 31st December 2003 is unaffected, butfor the quarter ended 31st March 2004 and the six months ended 30th June 2004 profit before tax increased by £4million and £7 million, respectively, from those presented on 29th October 2004. The financial information presented within this document is unaudited. IFRS 1 exemptionsIFRS 1, First-Time Adoption of International Financial Reporting Standards, permits those companies adoptingIFRS for the first time to take some exemptions from the full requirements of IFRS in the transition period.GlaxoSmithKline intends to take the following key exemptions: (a) Business combinations: Business combinations prior to the transition date (1st January 2003) have not been restated onto an IFRS basis;(b) Employee benefits: All cumulative actuarial gains and losses have been recognised in equity at the transition date;(c) Share-based payments: IFRS 2, Share-based Payment, applies to share-based instruments, such as share options, granted after 7th November 2002, but GlaxoSmithKline has elected to adopt full retrospective application of the Standard;(d) Financial instruments: Financial instruments in the comparative periods to be presented in the Annual Report 2005 (i.e. 2004 and 2003) are recorded on the existing UK GAAP basis, rather than in accordance with IAS 32, Financial Instruments: Disclosure and Presentation, and IAS 39, Financial Instruments: Recognition and Measurement (see below). The financial information contained in this document has been prepared on the basis of taking these exemptions. Financial instrumentsOne of the exemptions available under IFRS 1 relaxes the requirement for comparative information to be presentedin the Annual Report 2005 to comply with IAS 32 and IAS 39. GlaxoSmithKline intends to take advantage of thisexemption, and so in 2003 and 2004 financial instruments will continue to be accounted for and presented on a UKGAAP basis. On 1st January 2005 there is an adjustment to the opening balance sheet to reflect the movementsfrom the UK GAAP carrying values to the IAS 39 values, which for many financial instruments will be fair value. The financial instruments concerned are: (a) Held at fair value under IFRS with movements recorded in equity: • Equity investments • Liquid investments • Derivatives classified as cash flow hedging instruments. (b) Held at fair value under IFRS with movements recorded in the income statement: • Equity collar linked to the Group's investment in Quest Diagnostics, Inc. • Put and call options linked to the Group's strategic alliance with Theravance, Inc. • Other derivatives not classified as hedging instruments, including embedded derivatives • Derivatives classified as fair value hedges together with the hedged element of the relevant asset orliability. (c) Presentation differences only • Non-equity minority interests (repaid during 2004). Although valuations are inherently unpredictable, the only items that are likely to have a material impact are the Questcollar and the Theravance put and call options. If the IAS 39 valuation rules had been applied in 2004 the overalleffect would have been to reduce profit before tax by some £98 million, principally arising from a reduction in thevalue of the Quest collar (£42 million) and the recognition of the net liability for the Theravance put and call options(£53 million). Effective tax rateThe effective rate of taxation for 2003 IFRS restated financial statements is 27.7%. This is the rate which wasforecast to apply throughout 2004 and is therefore the rate which was applied to the results for the first threequarters of 2004. The actual tax rate for the full year 2004 was 30.4%. This increase was partly attributable to anincrease in the UK GAAP tax rate for the year and partly to a non-recurring increase in deferred tax arising from thedifferent treatments of certain intercompany items between UK GAAP and IFRS. Presentation of the financial statementsThe financial statements contained in this document adopt an IFRS style but with a UK GAAP emphasis in order to minimisethe number of restatement adjustments. It is possible that certain aspects of the presentation of these financialstatements may change as further guidance is issued or a different reporting practice is established. UK GAAP restatement for 2003The UK GAAP results for 2003 have been restated following the implementation of UITF Abstract 38, Accounting for ESOPTrusts, and related amendments to Abstract 17, Employee Share Schemes. UITF 38 changed the presentation of an entity'sown shares held in an ESOP trust from requiring them to be recognised as assets to requiring them to be deducted inarriving at shareholders' funds. UITF 17 (revised) requires that the minimum expense should be the difference betweenthe fair value of the shares at the date of award and the amount that an employee may be required to pay for the shares(i.e. the intrinsic value of the award), spread over the vesting period. The restated information for 2003 has beenpresented in the quarterly UK GAAP Results Announcements in 2004. Further informationThis document was approved by the Board of Directors on 10th February 2005 and is available on the company's website:www.gsk.com or in hard copy from the Company Secretary. Income statement Explanation of IFRS income statement adjustments 2003 Full year 2004 Quarter 1 2004 Quarter 2 2004 Half-year 2004 Quarter 3 2004 9 months 2004 Quarter 4 2004 Full year Explanation of IFRS income statement adjustments A summary of the principal differences between UK GAAP and IFRS as they apply to GlaxoSmithKline are as follows: (a) Customer allowances This adjustment is a reclassification between turnover and expenses with no profit or cash flow effect. IFRS has nodetailed rules in relation to when certain marketing and promotional expenditure should be deducted from turnoverrather than recorded as an expense. However these rules do exist under US GAAP in EITF 01-09, Accounting forConsideration Given by a Vendor to a Customer, which requires most marketing, advertising, and promotion payments madeto customers to be deducted from turnover. This has the most significant impact in the Consumer Healthcare businesswhere payments to large retailers for in-store advertising, preferential shelf-space, product listings etc. arecommonplace. GlaxoSmithKline believes that this reflects best practice in revenue recognition and hence, in the absence of detailedguidance under IFRS, has decided to adopt a revenue recognition policy under IFRS in line with EITF 01-09. Thereforegoing forward there would be no difference between turnover reported under IFRS and turnover reported under US GAAP. (b) Share-based payments The present UK GAAP approach to share-based payments is to record any intrinsic loss on grant suffered by the company.This means that for share options granted at the market price, there is no charge to the income statement. Where sharesor options are granted at no cost to the employee (e.g. under long-term incentive plans) the income statement ischarged with an amount equal to the market price on the date of the award, spread over the performance period (usuallythree years). IFRS 2, Share-based Payment, and its UK GAAP equivalent, FRS 20, both of which come into force in 2005, requires thefair value of the equity instruments issued to be charged to the income statement. For share awards granted to seniorexecutives, although the calculation is different, the resultant charge is not materially different from that under UKGAAP. The major difference arises in respect of share options; of the £368 million adjustment in 2003 some £350million arises from the grant of share options at market price to approximately 12,000 employees. GlaxoSmithKline haschosen to recognise all unvested options and awards retrospectively. The impact of IFRS on share-based payments in 2004 fell to £309 million and is expected to reduce to £200-£250 millionin 2005. The considerably higher charge in 2003 arises from two main factors. Relatively few share options weregranted during 2000 when the GW/SB merger was being finalised, but then in 2001 there was a full "catch-up" grant earlyin the year followed by the normal annual grant in November 2001. In addition, the grants in 2001 were made at anaverage share price in excess of £18. These share options became exercisable in 2004 and therefore fall out of thecharge in 2005, when the charge will reflect more current share prices and more normal grant levels. GlaxoSmithKline receives a tax credit, as appropriate, which relates to share options and awards when exercised, basedon the gains the holders make and dependent on the tax rules in the country in which the deduction is claimed. Thedeferred tax asset represents an estimate of future tax relief for this gain and is based on the potential gainsavailable to the option or award holders at the balance sheet date. The movement in deferred tax asset from onebalance sheet to the next may result in either a tax credit or tax charge in the income statement. (c) Coreg amortisation The North American rights to Coreg were acquired at the time of the GW/SB merger as partial consideration for therequired disposal of Kytril to Roche. Under UK GAAP this was accounted for as an exchange of assets with no value beingattributed to Coreg on the balance sheet. IFRS, however, requires the acquired rights to Coreg to be added tointangible assets at their fair value on the date of acquisition of $400 million, and then amortised over theirremaining useful life of eight years. (d) Other intangible assets amortisation Under UK GAAP, GlaxoSmithKline amortises intangible assets over their estimated expected useful lives from acquisition,which can be up to a maximum of 15 years. IFRS only permits amortisation to commence when the asset becomes availablefor use, with annual impairment testing required before this point. GlaxoSmithKline has determined that the point atwhich amortisation of product-related assets commences under IFRS will normally be regulatory approval. The majorityof GlaxoSmithKline's intangible assets relates to the acquisition of rights to compounds in development and so has notreached the point at which amortisation commences. This has led to a reduction in the amortisation charge in theperiods presented, but it is likely to increase in the future as these compounds reach regulatory approval andamortisation is then charged over a shorter period. (e) Goodwill amortisation UK GAAP requires goodwill to be amortised over its estimated expected useful life, which GlaxoSmithKline has determinedto be normally no longer than 20 years. Under IFRS, however, goodwill is considered to have an indefinite life and sois not amortised, but is subject to annual impairment testing. This adjustment therefore reverses the goodwillamortisation charged under UK GAAP, including that recorded in the profit on share of associates line relating to theacquisition of the Group's interest in Quest Diagnostics, Inc. Under the business combinations exemption of IFRS 1,goodwill previously written off direct to reserves under UK GAAP is not recycled to the income statement on thedisposal or part-disposal of the subsidiary or associate, as it would be under UK GAAP. The adjustment relating to thedisposal of part of the Group's interest in Quest Diagnostics, Inc. is also reflected here. (f) Pensions and other post-employment benefits GlaxoSmithKline accounts under UK GAAP for pensions and other post-employment benefits (OPEBs) in accordance with SSAP24, which spreads the costs of providing the benefits over the estimated average service lives of the employees. Theadditional FRS 17 disclosures give the pension fund surpluses and deficits and the liabilities for OPEBs based on thevaluation methodologies required by that Standard. IAS 19 takes a similar valuation approach to FRS 17, and in accordance with the transitional provisions of IFRS 1 thesurpluses and deficits have been recognised on the balance sheet at the transition date of 1st January 2003. Inaddition, following an amendment to IAS 19 issued by the IASB in December 2004, it is permitted to recognise anymovements in the surpluses or deficits immediately in balance sheets, but outside the income statement, in a similarway to FRS 17. This means that, in most cases, the balance sheet reflects the full surplus or deficit positions of thefunds. The income statement for the year ended 31st December 2003 is unaffected, but for the quarter ended 31st March2004 and the six months ended 30th June 2004 profit before tax increased by £4 million and £7 million, respectively,from those presented on 29th October 2004. The Group's policy is to charge out to the operating businesses the service cost element of the pension charge, whichthen gets reported within Cost of Sales, S,G&A or R&D as appropriate, but not to charge out the element related to thefunding deficit, which is all reported in S,G&A. Under IAS 19, the service cost element of the total charge isconsiderably higher than under SSAP 24 and the funding deficit element lower. This leads to an additionalreclassification adjustment between the income statement expense headings. In the USA, the recently enacted Medicare Prescription Drug, Improvement and Modernization Act is expected to lead topayments being received by GlaxoSmithKline from the US Government in respect of its employee healthcare plans. Atpresent there is no clear guidance on how these receipts should be accounted for under IAS 19. GlaxoSmithKline hasrecognised these potential receipts as a reduction in the actuarial loss during 2003. This treatment will change ifguidance is issued which requires a different accounting treatment. (g) Share of profits of associates The share of profits of associates is reported within profit before tax for the Group. However, IFRS requires thisshare of profits to be the net profit attributable to the Group, i.e. after interest, tax and minority interests of theassociate. This leads to a reclassification adjustment removing the share of the associates' interest, tax andminority interests from those lines in the income statement and netting them all together in the share of profits ofassociates line. (h) Other adjustments There are a number of other minor adjustments and reclassifications, the most significant of which relates to deferredtax on intercompany profit in inventory. Under UK GAAP, deferred tax on the provision for intercompany profit held in inventory is calculated at the supplyingcompany's effective tax rate. IFRS, however, takes a balance sheet approach to the recognition of deferred tax whichresults in the tax rate of the company holding the inventory at the balance sheet date being applied to the provision. If the proportions of the Group's inventory held in specific locations change significantly from one balance sheetdate to the next there could be a significant change in the value of the deferred tax asset, which is reflected throughthe tax charge for the year. INCOME STATEMENT Year ended 31st December 2003 Merger, UK GAAP restructuring business IFRS IFRS and disposal performance adjustments business of businesses IFRS (Note 1) (Note 2) performance (Note 3) statutory £m £m £m £m £m --- --- --- --- --- TURNOVER Pharmaceuticals 18,181 (67) 18,114 - 18,114 Consumer Healthcare 3,260 (304) 2,956 - 2,956 --- --- --- --- --- 21,441 (371) 21,070 - 21,070 Cost of sales (4,188) (33) (4,221) (356) (4,577) --- --- --- --- ---Gross profit 17,253 (404) 16,849 (356) 16,493% of sales 80.5% 80.0% 78.3% Selling, general and administration (7,579) 145 (7,434) (18) (7,452)% of sales 35.4% 35.3% 35.4%Research and development (2,770) (74) (2,844) (21) (2,865)% of sales 12.9% 13.5% 13.6% --- --- --- --- ---TRADING PROFIT 6,904 (333) 6,571 (395) 6,176% of sales 32.2% 31.2% 29.3% Other operating income/(expense) (133) 7 (126) - (126) --- --- --- --- ---Operating profit 6,771 (326) 6,445 (395) 6,050Share of after tax profits/(losses) of joint 93 (36) 57 - 57ventures and associatesProfit on disposal of business - - - 5 5 --- --- --- --- ---Profit before interest 6,864 (362) 6,502 (390) 6,112Finance costs, net (161) 8 (153) - (153) --- --- --- --- ---PROFIT BEFORE TAXATION 6,703 (354) 6,349 (390) 5,959 Taxation (1,838) 78 (1,760) 109 (1,651)Tax rate % 27.4% 27.7% 27.7% --- --- --- --- ---Profit after taxation 4,865 (276) 4,589 (281) 4,308Equity minority interests (94) (1) (95) - (95)Preference share dividends (12) - (12) - (12) --- --- --- --- ---PROFIT ATTRIBUTABLE TO SHAREHOLDERS 4,759 (277) 4,482 (281) 4,201 --- --- --- --- --- EARNINGS PER SHARE 82.0p (4.8)p 77.2p (4.9)p 72.3p --- --- --- --- --- Diluted earnings per share 81.7p (4.7)p 77.0p (4.9)p 72.1p --- --- --- --- --- Weighted average number of shares (millions) 5,806 5,806 5,806 --- --- --- Notes:1. The UK GAAP business performance results have been restated for the implementation of UITF 38 and UITF 17(revised).2. The analysis of these adjustments is shown on the next page.3. There are no IFRS adjustments on merger, restructuring and disposal of businesses. Analysis of IFRS adjustments to the Income Statement Year ended 31st December 2003 Other Share- Coreg intangible Pensions Share of Customer based amorti- assets Goodwill and profits of IFRS allowances payments amortisation amortisation OPEBs associates Other adjust- (a) (b) sation (d) (e) (f) (g) (h) (c) ments £m £m £m £m £m £m £m £m £m --- --- --- --- --- --- --- -- --- Turnover (371) - - - - - - - (371) Cost of sales 20 (41) - - - (12) - - (33) --- --- --- --- --- --- --- -- ---Gross profit (351) (41) - - - (12) - - (404) Selling, general 351 (220) (31) - 13 31 - 1 145andadministration Research and - (107) - 42 - (8) - (1) (74)development --- --- --- --- --- --- --- --- ---Trading profit - (368) (31) 42 13 11 - - (333) Other operating - - - - - - - 7 7income/(expenses) --- --- --- --- --- --- --- -- ---Operating profit - (368) (31) 42 13 11 - 7 (326) Share of after - - - 1 13 - (50) - (36)tax profits/(losses) of jointventures andassociates --- --- --- --- --- --- --- -- ---Profit before - (368) (31) 43 26 11 (50) 7 (362)interest Finance costs, - - - - - - 8 - 8net --- --- --- --- --- --- --- -- ---Profit before - (368) (31) 43 26 11 (42) 7 (354)taxation Taxation - 24 10 (13) - (7) 40 24 78 --- --- --- --- --- --- --- -- ---Profit after - (344) (21) 30 26 4 (2) 31 (276)taxation Minority - - - - - (3) 2 - (1)interests --- --- --- --- --- --- --- -- ---Profit - (344) (21) 30 26 1 - 31 (277)attributable toshareholders --- --- --- --- --- --- --- -- --- Earnings per - (5.9)p (0.3)p 0.5p 0.4p - - 0.5p (4.8)pshare (basic) --- --- --- --- --- --- --- -- --- INCOME STATEMENT Three months ended 31st March 2004 IFRS adjustments UK GAAP (Note) IFRS £m £m £m --- --- ---TURNOVER Pharmaceuticals 4,180 (12) 4,168 Consumer Healthcare 763 (76) 687 --- --- --- 4,943 (88) 4,855 Cost of sales (1,024) (11) (1,035) --- --- ---Gross profit 3,919 (99) 3,820% of sales 79.3% 78.7% Selling, general and administration (1,726) 23 (1,703)% of sales 34.9% 35.1%Research and development (631) (28) (659)% of sales 12.8% 13.6% --- --- ---TRADING PROFIT 1,562 (104) 1,458% of sales 31.6% 30.0% Other operating income/(expense) 35 - 35 --- --- ---Operating profit 1,597 (104) 1,493Share of after tax profits/(losses) of joint ventures and associates 22 (8) 14 --- --- ---Profit before interest 1,619 (112) 1,507Finance costs, net (43) 2 (41) --- --- ---PROFIT BEFORE TAXATION 1,576 (110) 1,466 Taxation (433) 27 (406)Tax rate % 27.5% 27.7% --- --- ---Profit after taxation 1,143 (83) 1,060Equity minority interests (22) 1 (21)Preference share dividends (2) - (2) --- --- ---PROFIT ATTRIBUTABLE TO SHAREHOLDERS 1,119 (82) 1,037 --- --- --- EARNINGS PER SHARE 19.4p (1.4)p 18.0p --- --- --- Diluted earnings per share 19.4p (1.4)p 18.0p --- --- --- Weighted average number of shares 5,768 5,768(millions) --- --- Note: The analysis of these adjustments is shown on the next page. Analysis of IFRS adjustments to the Income Statement Three months ended 31st March 2004 Other Share- Coreg intangible Pensions Share of Customer based amorti- assets Goodwill and profits of IFRS allowances payments amortisation amortisation OPEBs associates Other adjust- (a) (b) sation (d) (e) (f) (g) (h) (c) ments £m £m £m £m £m £m £m £m £m --- --- --- --- --- --- --- -- --- Turnover (88) - - - - - - - (88) Cost of sales 6 (12) - - - (6) - 1 (11) --- --- --- --- --- --- --- -- ---Gross profit (82) (12) - - - (6) - 1 (99) Selling, general 82 (62) (6) - 3 7 - (1) 23andadministration Research and - (30) - 9 - (6) - (1) (28)development --- --- --- --- --- --- --- -- ---Trading profit - (104) (6) 9 3 (5) - (1) (104) --- --- --- --- --- --- --- -- ---Operating profit - (104) (6) 9 3 (5) - (1) (104) Share of after - - - - 3 - (11) - (8)tax profits/(losses) of jointventures andassociates --- --- --- --- --- --- --- -- ---Profit before - (104) (6) 9 6 (5) (11) (1) (112)interest Finance costs, - - - - - - 2 - 2net --- --- --- --- --- --- --- -- ---Profit before - (104) (6) 9 6 (5) (9) (1) (110)taxation Taxation - 7 2 (3) - 2 8 11 27 --- --- --- --- --- --- --- -- ---Profit after - (97) (4) 6 6 (3) (1) 10 (83)taxation Minority - - - - - - 1 - 1interests --- --- --- --- --- --- --- -- ---Profit - (97) (4) 6 6 (3) - 10 (82)attributable toshareholders --- --- --- --- --- --- --- --- --- Earnings per - (1.7)p (0.1)p 0.1p 0.1p - - 0.2p (1.4)pshare (basic) --- --- --- --- --- --- --- --- --- INCOME STATEMENT Three months ended 30th June 2004 IFRS adjustments IFRS UK GAAP (Note) statutory £m £m £m --- --- ---TURNOVER Pharmaceuticals 4,266 (11) 4,255 Consumer Healthcare 798 (82) 716 --- --- --- 5,064 (93) 4,971 Cost of sales (1,031) (13) (1,044) --- --- ---Gross profit 4,033 (106) 3,927% of sales 79.6% 79.0% Selling, general and administration (1,641) 37 (1,604)% of sales 32.4% 32.3%Research and development (680) (16) (696)% of sales 13.4% 14.0% --- --- ---TRADING PROFIT 1,712 (85) 1,627% of sales 33.8% 32.7% Other operating income/(expense) (102) - (102) --- --- ---Operating profit 1,610 (85) 1,525Share of after tax profits/(losses) of joint ventures and associates 28 (12) 16Profit on disposal of interest in associate 41 4 45 --- --- ---Profit before interest 1,679 (93) 1,586Finance costs, net (48) 2 (46) --- --- ---PROFIT BEFORE TAXATION 1,631 (91) 1,540 Taxation (449) 23 (426)Tax rate % 27.5% 27.7% --- --- ---Profit after taxation 1,182 (68) 1,114Equity minority interests (25) - (25) --- --- ---PROFIT ATTRIBUTABLE TO SHAREHOLDERS 1,157 (68) 1,089 --- --- --- EARNINGS PER SHARE 20.1p (1.2)p 18.9p --- --- --- Diluted earnings per share 20.1p (1.2)p 18.9p --- --- --- Note: The analysis of these adjustments is shown on the next page. Analysis of IFRS adjustments to the Income Statement Three months ended 30th June 2004 Other Share- Coreg intangible Pensions Share of Customer based amorti- assets Goodwill and profits of IFRS allowances payments amortisation amortisation OPEBs associates Other adjust- (a) (b) sation (d) (e) (f) (g) (h) (c) ments £m £m £m £m £m £m £m £m £m --- --- --- --- --- --- --- -- --- Turnover (93) - - - - - - - (93) Cost of sales - (8) - - - (4) - (1) (13) --- --- --- --- --- --- --- -- ---Gross profit (93) (8) - - - (4) - (1) (106) Selling, general 93 (47) (7) - 3 (5) - - 37andadministration Research and - (22) - 11 - (4) - (1) (16)development --- --- --- --- --- --- --- -- ---Trading profit - (77) (7) 11 3 (13) - (2) (85) --- --- --- --- --- --- --- -- ---Operating profit - (77) (7) 11 3 (13) - (2) (85) Share of after - - - - 2 - (14) - (12)tax profits/(losses) of jointventures andassociates Profit on - - - - 4 - - - 4disposal ofinterest inassociates --- --- --- --- --- --- --- -- ---Profit before - (77) (7) 11 9 (13) (14) (2) (93)interest Finance costs, - - - - - - 2 - 2net --- --- --- --- --- --- --- -- ---Profit before - (77) (7) 11 9 (13) (12) (2) (91)taxation Taxation - 5 2 (4) - 5 12 3 23 --- --- --- --- --- --- --- -- ---Profit after - (72) (5) 7 9 (8) - 1 (68)taxation --- --- --- --- --- --- --- -- ---Profit - (72) (5) 7 9 (8) - 1 (68)attributable toshareholders --- --- --- --- --- --- --- -- --- Earnings per - (1.2)p (0.1)p 0.1p 0.2p (0.2)p - - (1.2)pshare (basic) --- --- --- --- --- --- --- -- --- INCOME STATEMENT Six months ended 30th June 2004 IFRS adjustments IFRS UK GAAP (Note) statutory £m £m £m --- --- ---TURNOVER Pharmaceuticals 8,446 (23) 8,423 Consumer Healthcare 1,561 (158) 1,403 --- --- --- 10,007 (181) 9,826 Cost of sales (2,055) (24) (2,079) --- --- ---Gross profit 7,952 (205) 7,747% of sales 79.5% 78.8% Selling, general and administration (3,367) 60 (3,307)% of sales 33.7% 33.6%Research and development (1,311) (44) (1,355)% of sales 13.1% 13.8% --- --- ---TRADING PROFIT 3,274 (189) 3,085% of sales 32.7% 31.4% Other operating income/(expense) (67) - (67) --- --- ---Operating profit 3,207 (189) 3,018Share of after tax profits/(losses) of joint ventures and associates 50 (20) 30Profit on disposal of interest in associate 41 4 45 --- --- ---Profit before interest 3,298 (205) 3,093Finance costs, net (91) 4 (87) --- --- ---PROFIT BEFORE TAXATION 3,207 (201) 3,006 Taxation (882) 50 (832)Tax rate % 27.5% 27.7% --- --- ---Profit after taxation 2,325 (151) 2,174Equity minority interests (47) 1 (46)Preference share dividends (2) - (2) --- --- ---PROFIT ATTRIBUTABLE TO SHAREHOLDERS 2,276 (150) 2,126 --- --- --- EARNINGS PER SHARE 39.5p (2.6)p 36.9p --- --- --- Diluted earnings per share 39.5p (2.6)p 36.9p --- --- --- Weighted average number of shares 5,756 5,756(millions) --- --- Note: The analysis of these adjustments is shown on the next page. Analysis of IFRS adjustments to the Income Statement Six months ended 30th June 2004 Other Share- Coreg intangible Pensions Share of Customer based amorti- assets Goodwill and profits of IFRS allowances payments amortisation amortisation OPEBs associates Other adjust- (a) (b) sation (d) (e) (f) (g) (h) (c) mentsRelated Shares:
Glaxosmithkline