TIDMAG99
RNS Number : 7686K
GlaxoSmithKline Capital PLC
12 April 2018
Publication of GlaxoSmithKline Capital plc's
Annual Report 2017
Today, 12 April 2018, GlaxoSmithKline Capital plc published on
the GlaxoSmithKline Group website, www.gsk.com, its Annual Report
in respect of the year ended 31 December 2017.
In compliance with Listing Rule 9.6.1 of the UK Financial Conduct
Authority ("FCA"), copies of GlaxoSmithKline Capital plc's 2017
Annual Report, have been submitted to the UK Listing Authority's
National Storage Mechanism and will shortly be available for inspection
at http:/www.morningstar.co.uk/UK/NSM.
In accordance with the FCA's Disclosure and Transparency Rules
4.1 and 6.3.5, Appendix A to this announcement contains GlaxoSmithKline
Capital plc's 2017 Annual Report, which includes a description
of the principal risks and uncertainties affecting it together
with a responsibility statement.
V A Whyte
Company Secretary
12 April 2018
Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995, GlaxoSmithKline plc (GSK) and the
company caution investors that any forward-looking statements
or projections made by GSK and the company, 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
under Item 3.D "Principal risks and uncertainties" in GSK's Annual
Report on Form 20-F for 2017.
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report
for the year ended 31 December 2017
Registered office address:
980 Great West Road
Brentford
Middlesex
TW8 9GS
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Annual Report
for the year ended 31 December 2017
CONTENTS
Page
Strategic report 1
Directors' report 2-5
Independent auditors' report 6-11
Income statement 12
Statement of other comprehensive income 13
Balance sheet 14
Statement of changes in equity 15
Cash flow statement 16
Notes to the financial statements 17-29
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Strategic report for the year ended 31 December 2017
The Directors present their Strategic report on GlaxoSmithKline
Capital plc (the "Company") for the year ended 31 December 2017.
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 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
The Company made a profit for the financial year of GBP8,318,000
(2016: GBP11,297,000), 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.
At 31 December 2017, the Company had in issue GBP9,026,788,000
European Medium Term Notes and GBP1,473,973,000 US Medium Term
Notes (2016: GBP7,874,858,000 and GBP3,214,961,000 respectively)
which mature at dates between 2019 and 2045. All notes currently
in issue pay interest on a fixed rate basis.
During the year, the $2 billion 1.500% US Medium Term Note matured
in May 2017 and the EUR1.25 billion 5.625% European Medium Term
Note matured in December 2017.
On 5 September 2017, three new bonds totalling EUR2.4 billion
were issued under the Group's European Medium Term Note programme
as follows:
EUR1.2 billion (GBP1.1 billion) 0.000% European Medium Term
-- Note 2020;
EUR700 million (GBP640 million) 1.000% European Medium Term
-- Note 2026; and
EUR500 million (GBP457 million) 1.375% European Medium Term
-- Note 2029.
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 2017 Annual Report which does not form part of this report.
Key Performance Indicators (KPIs)
The Directors of the Group manage the Group's operations on an
operating segment basis. For this reason, the Company's Directors
believe that analysis using key performance indicators for the
Company is not necessary or appropriate for an understanding of
the development, performance or position of the Company's business.
The development, performance and position of the Group are discussed
in the Group's 2017 Annual Report which does not form part of
this report.
By order of the Board
Mr A Walker
For and on behalf of Glaxo Group Limited
Corporate Director
5 April 2018
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Directors' report for the year ended 31 December 2017
The Directors present their report and the audited financial statements
of the Company for the year ended 31 December 2017.
Results and dividends
The Company's profit for the financial year is shown in the income
statement on page 12.
No dividend is proposed to the holders of ordinary shares in respect
of the year ended 31 December 2017 (2016: GBPnil).
Internal control framework
The Internal Control Framework is the means by which the Group
ensures compliance with laws and regulations, the reliability
of financial reporting and comprehensive risk management. The
Directors of the Group are 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.
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 2017 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 in order to meet anticipated funding requirements.
The strategy is to diversify liquidity sources using a range of
facilities and to maintain broad access to funding markets. Details
of derivative financial instruments and hedging, and further information
on risk management policies, exposures to market, credit and liquidity
risk are disclosed in Note 2(l) and 4 respectively.
Previously, the Company had entered into treasury gilt locks to
manage interest rate risk on its forecasted Euro and Sterling
denominated notes issued under the Group's European Medium Term
Note programme. In 2017, the Company entered into forward starting
interest rate swaps to manage the interest rate risk on its forecasted
Euro denominated notes.
At 31 December 2017, none of the Company's total debt issuances
were exposed to floating interest rates and interest is paid on
a fixed rate basis.
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 S Dingemans
Edinburgh Pharmaceutical Industries Limited
Glaxo Group Limited
No Director had, during the year or at the end of the year, any
material interest in any contract of significance to the Company's
business with the exception of the Corporate Directors (Edinburgh
Pharmaceutical Industries Limited and Glaxo Group Limited), where
such an interest may arise in the ordinary course of business.
A corporate director is a legal person (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 2017
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 Dec At 31 Dec
2016 Acquired Disposed 2017
Shares
------------------------------- -------------------- -------------- ------------------- -----------------
Mr S Dingemans 186,434 87,818 (32,529) 241,723
------------------------------- -------------------- -------------- ------------------- -----------------
At 31 Dec Exercised/ At 31 Dec
2016 Granted lapsed 2017
Options
-------------------------------- -------------------- -------------- ------------------- -----------------
Mr S Dingemans - 29,931 (29,931) -
-------------------------------- -------------------- -------------- ------------------- -----------------
At 31 Dec Exercised/ At 31 Dec
2016 Granted lapsed 2017
Share Save
------------------------------- -------------------- -------------- ------------------- -----------------
Mr S Dingemans 712 248 (238) 722
------------------------------- -------------------- -------------- ------------------- -----------------
At 31 Dec Exercised/ At 31 Dec
2016 Granted lapsed 2017
Performance Share Plans
-------------------------------- -------------------- -------------- ------------------- -----------------
Mr S Dingemans 643,346 222,513 (207,650) 658,209
------------------------------- -------------------- -------------- ------------------- -----------------
At 31 Dec Exercised/ At 31 Dec
2016 Granted lapsed 2017
Deferred Annual Bonus Plan
-------------------------------- -------------------- -------------- ------------------- -----------------
Mr S Dingemans 153,622 66,423 (44,895) 175,150
------------------------------- -------------------- -------------- ------------------- -----------------
All share awards are over ordinary shares of GlaxoSmithKline plc.
Further details of the above-mentioned Plans are disclosed in
the 2017 Annual Report of GlaxoSmithKline plc.
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Directors' report for the year ended 31 December 2017
Statement of directors' responsibilities in respect of the financial
statements
The directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulation.
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:
l select suitable accounting policies and then apply them consistently;
l
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;
l make judgements and accounting estimates that are reasonable
and prudent; and
l 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:
l principal activities and future developments;
l review of business; and
l principal risks and uncertainties.
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 2017.
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.
GlaxoSmithKline Capital plc
(Registered number: 2258699)
Directors' report for the year ended 31 December 2017
Independent auditors
Following the signing of the accounts, the Company will be appointing
Deloitte LLP as statutory auditors for the 2018 financial year.
By order of the Board
Mr A Walker
For and on behalf of Glaxo Group Limited
Corporate Director
5 April 2018
GlaxoSmithKline Capital plc
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
Report on the audit of the financial statements
Opinion
In our opinion, GlaxoSmithKline Capital plc's financial statements:
l give a true and fair view of the state of the company's
affairs
at 31 December 2017 and of its profit and cash flows for the
year then ended;
l have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom
Accounting
Standards, comprising FRS 101 "Reduced Disclosure Framework",
and applicable law); and
l have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the Annual
Report, which comprise: the balance sheet as at 31 December 2017;
the income statement, the statement of comprehensive income, the
cash flow statement, the statement of changes in equity for the
year then ended; and the notes to the financial statements, which
include a description of the significant accounting policies.
Our opinion is consistent with our reporting to those charged with
governance.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors' responsibilities
for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We remained independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC's Ethical Standard, as applicable
to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC's Ethical Standard were not provided
to the company.
We have provided no non-audit services to the company in the period
from 1 January 2017 to 31 December 2017.
Our audit approach
Overview
l Overall materiality: GBP52.5 million (2016: GBP50.1 million),
based on 0.5% of external debt.
l Full scope statutory audit.
l Risk of material misstatement in long-term borrowings.
l Risk of material misstatement in intercompany loans.
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective
judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events
that are inherently uncertain.
GlaxoSmithKline Capital plc
Independent auditors' report to the members of
GlaxoSmithKline
Capital plc
The scope of our audit (continued)
We gained an understanding of the legal and regulatory framework
applicable to the company and the industry in which it operates,
and considered the risk of acts by the company which were contrary
to applicable laws and regulations, including fraud. We designed
audit procedures to respond to the risk, recognising that the risk
of not detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as fraud
may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. We designed
audit procedures that focused on the risk of non-compliance related
to the Data Protection Act, the Money Laundering Act, Corporation
tax laws and regulations and the Companies Act 2006. Our tests
included inspecting monthly Treasury Management Group meeting minutes
for identification of any breaches of laws and regulations and
reviewing board meeting minutes. We did not identify any key audit
matters relating to irregularities, including fraud. As in all
of our audits we also addressed the risk of management override
of internal controls, including testing journals and evaluating
whether there was evidence of bias by the directors that represented
a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors' professional
judgement, were of most significance in the 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) identified by the auditors, including 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, and any comments we make on the results of
our procedures thereon, 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.
This is not a complete list of all risks identified by our audit.
How our audit addressed the key
Key audit matter audit matter
Risk of material misstatement
in long-term borrowings
GlaxoSmithKline Capital plc issues Our approach in respect of long
external borrowings under its term borrowings was underpinned
EMTN and US Shelf programme on by the testing of key controls,
behalf of other GlaxoSmithKline including those surrounding new
Group entities. This is the entity's debt issuances and repayment
principal activity. As at 31 December of existing debt.
2017 GBP10.5 billion of external
debt was held by GlaxoSmithKline We substantively tested the additions
Capital plc. The risk being completeness and payments of external debt,
and valuation of the long term recalculating the subsequent
borrowings. amortised cost of borrowings
as of the year end as well as
comparing the fair value disclosures
to external independent sources.
We determined that this testing
provided us with sufficient audit
evidence that new debt issuances
and repayments of existing debt
had been recorded appropriately.
GlaxoSmithKline Capital plc
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
How our audit addressed the key
Key audit matter audit matter
Risk of material misstatement
in intercompany loans
The external bonds issued by GlaxoSmithKline Our approach in respect of intercompany
Capital plc are subsequently on loans was underpinned by the
lent to fellow Group entities. testing of key controls, including
These intercompany loans match those surrounding intercompany
the external borrowings in both positions.
terms and maturity. The risk being
the recoverability of intercompany We agreed the intercompany loans
receivables. balances through matching within
the group-wide consolidation
system and substantively tested
the recoverability of the intercompany
loans by assessing the financial
position of each relevant entity.
We determined that this testing
provided us with sufficient audit
evidence that intercompany loans
had been recorded appropriately.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the company, the
accounting processes and controls, and the industry in which it
operates.
GlaxoSmithKline Capital plc is a member of the GlaxoSmithKline
Group. The company's principal activity is the issuance of notes
under the Group's European and US Medium Term Note programme and
the provision of financing services to other companies within the
Group.
Materiality
The scope of our audit was influenced by our application of materiality.
We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine
the scope of our audit and the nature, timing and extent of our
audit procedures on the individual financial statement line items
and disclosures and in evaluating the effect of misstatements,
both individually and in aggregate on the financial statements
as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Overall materiality GBP52.5 million (2016: GBP50.1 million).
How we determined
it 0.5% of external debt.
Rationale for benchmark GlaxoSmithKline Capital plc is the main UK debt
applied issuer of the GlaxoSmithKline Group. The entity
on lends the proceeds to other Group entities
applying a small margin on the on lending. The
primary role of the entity is to issue external
debt, and as such we believe that the external
debt balance is the most appropriate benchmark
in assessing the performance of the entity and
is a generally accepted auditing benchmark.
We agreed with those charged with governance that we would report
to them misstatements identified during our audit above GBP2.6
million (2016: GBP2.5 million) as well as misstatements below that
amount that, in our view, warranted reporting for qualitative reasons.
GlaxoSmithKline Capital plc
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you when:
l the directors' use of the going concern basis of accounting
in the preparation of the financial statements is not
appropriate;
or
l 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.
However, because not all future events or conditions can be predicted,
this statement is not a guarantee as to the company's ability to
continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors' report
thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report,
any form of assurance 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 an apparent
material inconsistency or material misstatement, we are required
to perform procedures to conclude whether there is a material misstatement
of 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
based on these responsibilities.
With respect to the Strategic report and Directors' report, we
also considered whether the disclosures required by the UK Companies
Act 2006 have been included.
Based on the responsibilities described above and our work undertaken
in the course of the audit, ISAs (UK) require us also to report
certain opinions and matters as described below.
Strategic report and Directors' report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors'
report for the year ended 31 December 2017 is consistent with the
financial statements and has been prepared in accordance with applicable
legal requirements.
In light of the knowledge and understanding of the company and
its environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and
Directors' report.
GlaxoSmithKline Capital plc
Independent auditors' report to the members of GlaxoSmithKline
Capital plc
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors' responsibilities
set out on page 4, the directors are responsible for the preparation
of the financial statements in accordance with the applicable framework
and for being satisfied that they give a true and fair view. The
directors are also responsible for such internal control as they
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.
Auditors' 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 auditors' report
that includes our opinion. Reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC's website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditors' report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company's members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
l we have not received all the information and explanations we
require for our audit; or
l adequate accounting records have not been kept by the
company,
or returns adequate for our audit have not been received from
branches not visited by us; or
l certain disclosures of directors' remuneration specified by
law are not made; or
l the financial statements are not in agreement with the
accounting
records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
We were appointed by the directors on 1 December 1993 to audit
the financial statements for the year ended 31 December 1994 and
subsequent financial periods. The period of total uninterrupted
engagement is 24 years, covering the years ended 31 December 1994
to 31 December 2017.
GlaxoSmithKline Capital plc
Independent auditors' report to the members of
GlaxoSmithKline
Capital plc
Other matters
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.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 April 2018
GlaxoSmithKline Capital plc
Income statement
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
========================================== ===== =========== ===========
Other operating (loss)/income (824) 2,711
Finance income 8 387,262 399,340
Finance expense 9 (376,137) (387,930)
========================================== ===== =========== ===========
Operating profit 6 10,301 14,121
Profit before taxation 10,301 14,121
Tax on profit 10 (1,983) (2,824)
========================================== ===== =========== ===========
Profit for the financial year 8,318 11,297
------------------------------------------ ----- ----------- -----------
The results disclosed above for both the current year and prior
year relate entirely to continuing operations.
The notes on pages 17 to 29 are an integral part of these financial
statements.
GlaxoSmithKline Capital plc
Statement of comprehensive income
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
Profit for the financial year 8,318 11,297
Items that may be subsequently reclassified
to the income statement:
Fair value movements on cash flow hedges (3,943) -
Reclassification of cash flow hedges
to the income statement 1,118 954
Deferred tax on cash flow hedges 10 480 (283)
================================================ ===== ======== ========
Other comprehensive (loss)/income for
the financial year (2,345) 671
================================================ ===== ======== ========
Total comprehensive income for the financial
year 5,973 11,968
------------------------------------------------ ----- -------- --------
The notes on pages 17 to 29 are an integral part of these financial
statements.
GlaxoSmithKline Capital plc
Balance Sheet
as at 31 December 2017
2017 2016
Note GBP'000 GBP'000
------------------------------------------ ----- ------------- -------------
Non-current assets
Deferred tax assets 2,373 1,893
Loans and receivables 10,434,878 8,353,138
------------------------------------------ ----- ------------- -------------
Total non-current assets 10,437,251 8,355,031
------------------------------------------ ----- ------------- -------------
Current assets
Loans and receivables 101,855 2,767,682
Prepayment and accrued income 107,833 110,223
Cash and cash equivalents 1 2
========================================== ===== ============= =============
Total current assets 209,689 2,877,907
========================================== ===== ============= =============
Total assets 10,646,940 11,232,938
------------------------------------------ ----- ------------- -------------
Current liabilities
Other payables (4,864) (5,026)
Short-term borrowings - (2,679,716)
Accruals and deferred income 15 (103,680) (106,431)
------------------------------------------ ----- ------------- -------------
Total current liabilities (108,544) (2,791,173)
------------------------------------------ ----- ------------- -------------
Net current assets 101,145 86,734
------------------------------------------ ----- ------------- -------------
Total assets less current liabilities 10,538,396 8,441,765
------------------------------------------ ----- ------------- -------------
Non-current liabilities
Long-term borrowings (10,500,761) (8,410,103)
------------------------------------------ ----- ------------- -------------
Total non-current liabilities (10,500,761) (8,410,103)
------------------------------------------ ----- ------------- -------------
Total liabilities (10,609,305) (11,201,276)
------------------------------------------ ----- ------------- -------------
Net assets 37,635 31,662
------------------------------------------ ----- ------------- -------------
Equity
Called up share capital 100 100
Other reserves (11,588) (9,243)
Retained earnings 49,123 40,805
------------------------------------------ ----- ------------- -------------
Total equity 37,635 31,662
------------------------------------------ ----- ------------- -------------
The notes on pages 17 to 29 are an integral part of these financial
statements.
The financial statements on pages 17 to 29 were approved by the
Board of Directors on 5 April 2018 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 2017
Called
up share Other Retained Total
capital reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------
At 1 January 2016 100 (9,914) 29,508 19,694
Profit for the year - - 11,297 11,297
Other comprehensive income for
the financial year - 671 - 671
----------------------------------- ---------- ---------- ---------- --------
At 31 December 2016 100 (9,243) 40,805 31,662
----------------------------------- ---------- ---------- ---------- --------
Profit for the year - - 8,318 8,318
Other comprehensive loss for the
financial year - (2,345) - (2,345)
=================================== ========== ========== ========== ========
At 31 December 2017 100 (11,588) 49,123 37,635
----------------------------------- ---------- ---------- ---------- --------
The notes on pages 17 to 29 are an integral part of these financial
statements.
GlaxoSmithKline Capital plc
Cash flow statement
for the year ended 31 December 2017
2017 2016
Note GBP'000 GBP'000
-------------------------------------------- ----- ------------ ---------
Cash flow from operating activities
Operating profit 10,301 14,121
Adjustments reconciling operating profit
to operating
cash flows 5,775 9,277
-------------------------------------------- ----- ------------ ---------
Net cash inflow from operating activities 18 16,076 23,398
-------------------------------------------- ----- ------------ ---------
Cash flow from financing activities
Proceeds from borrowings 2,183,800 -
Repayment of borrowings (2,639,347) -
Loans provided to Group undertakings (2,183,800) -
Loan repayments received from Group
undertakings 2,619,680 -
Increase/(decrease) in other receivables
with Group
undertakings 3,590 (23,398)
-------------------------------------------- ----- ------------ ---------
Net cash outflow from financing activities (16,077) (23,398)
-------------------------------------------- ----- ------------ ---------
Net movement in cash in the year (1) -
-------------------------------------------- ----- ------------ ---------
Cash at beginning of year 2 2
Movement in cash (1) -
-------------------------------------------- ----- ------------ ---------
Cash at end of year 1 2
-------------------------------------------- ----- ------------ ---------
The notes on pages 17 to 29 are an integral part of these financial
statements.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
1 Presentation of the financial statements
General information
GlaxoSmithKline Capital plc (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
the provision of financial services to other companies within the
Group.
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.
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 100 "Application of Financial Reporting Requirements"
("FRS 100") and Financial Reporting Standard 101 "Reduced Disclosure
Framework" ("FRS 101").
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:
l Paragraph 38 of IAS 1 "Presentation of financial statements" comparative
information requirements in respect of:
- paragraph 79(a) (iv) of IAS 1;
l The following paragraphs of IAS 1 "Presentation of financial statements":
- 16 (statement of compliance with all IFRS); and
- 38B-D (additional comparative information)
l 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);
l Paragraph 17 of IAS 24 "Related party disclosures" (key management
compensation); and
l The requirements in IAS 24 "Related party disclosures" to disclose
related party transactions entered into between two or more wholly
owned 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.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
2 Summary of significant accounting policies (continued)
(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.
(f) Financial assets
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater
than 12 months after the end of the reporting period. These are classified
as non-current assets. The Company's loans and receivables represent
intercompany balances with other Group undertakings, which are carried
at amortised cost using the effective interest method.
(g) Impairment of financial assets
The Company assesses at the end of each reporting period whether there
is objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets
is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that occurred
after the initial recognition of the asset (a "loss event") and that
loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can
be reliably estimated.
Evidence of impairment may include indications that the debtors or
a group of debtors is experiencing significant financial difficulty,
default or delinquency in interest or principal payments, the probability
that they will enter bankruptcy or other financial reorganisation,
and where observable data indicates that there is a measurable decrease
in the estimated future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.
For loans and receivables, the amount of the loss is measured as the
difference between the asset's carrying amount and the present value
of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset's original
effective interest rate. The carrying amount of the asset is reduced
and the amount of the loss is recognised in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring
after the impairment was recognised, the reversal of the previously
recognised impairment loss is recognised in the income statement.
(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.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
2 Summary of significant accounting policies (continued)
(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, 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 instruments are classified as held-for-trading and are carried
in the balance sheet at fair value.
Changes in the fair value of derivatives designated as cash flow hedges
are recognised in other comprehensive income to the extent that the
hedges are effective. Ineffective portions are recognised in profit
or loss immediately. Amounts deferred in other comprehensive income
are reclassified to the income statement when the hedged item affects
profit or loss.
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 Key accounting judgements and estimates
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. The following
are considered to be the key accounting judgements and estimates made.
(a) Taxation
Current tax is provided at the amounts expected to be paid or refunded,
and deferred tax is provided on temporary differences between the
tax bases of assets and liabilities and their carrying amounts, at
the rates that have been enacted or substantively enacted by the balance
sheet date.
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, based on management's assumptions relating
to the amounts and timing of future taxable profits.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
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 20 July 2017. 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.
(a) Market risk
(i) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from foreign
currency transactions, primarily with respect to the US dollar and
Euro, in respect of bonds issued under the Group's European Medium
Term Note programme.
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) Interest rate risk
The Group's objective is to minimise the effective net interest cost
and to balance the mix of debt at fixed and floating interest rates
over time. The policy on interest rate risk management limits the
amount of floating interest payments to a prescribed percentage of
operating profit.
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 borrowings, comprised
of notes issued under the Group's European Medium Term Note programme,
which are at fixed rates and expose the Company to fair value interest
rate risk.
The table below hypothetically shows the Company's sensitivity to
changes in interest rates in relation to Euro, Sterling and US dollar
floating rate financial assets. If interest rates applicable to floating
rate financial assets were to have increased by 1% (100 basis points),
and assuming all other variables had remained constant, it is estimated
that the Company's finance income for 2017 would have increased by
approximately GBP1,018,000 (2016: GBP1,064,000 increase in finance
income).
2017 2016
Increase in Increase
income in income
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
1% (100 basis points) increase in Euro interest
rates (2016: 1%) 398 375
1% (100 basis points) increase in Sterling
interest rates (2016: 1%) 450 350
1% (100 basis points) increase in US dollar
interest rates (2016: 1%) 170 339
------------------------------------------------------ ---------------------------- -----------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
4 Financial risk management (continued)
(a) Market risk (continued)
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
-----------------------------------------
Weighted Average years
average for which
interest rate
At 31 December 2017 rate is fixed Total
Currency % GBP'000
-------------------- ------- ----------- ---------------------------- -----------------
US dollar 3.0 2 (1,473,973)
Sterling 5.0 20 (4,053,006)
Euro 1.5 7 (4,973,782)
----------------------------------------- ----------- ---------------------------- -----------------
Total borrowings 3.2 10 (10,500,761)
Fixed rate
-----------------------------------------
Weighted Average years
average for which
interest rate
At 31 December 2016 rate is fixed Total
Currency % GBP'000
-------------------- ------- ----------- ---------------------------- -----------------
US dollars 2.2 3 (3,214,961)
Sterling 5.0 21 (4,050,413)
Euro 3.0 5 (3,824,445)
----------------------------------------- ----------- ---------------------------- -----------------
Total borrowings 3.4 10 (11,089,819)
-------------------- ------------------ ----------- ---------------------------- -----------------
Currency and interest rate risk profile of loans and receivables
At 31 December 2017 Fixed rate Floating rate Total
Currency GBP'000 GBP'000 GBP'000
-------------------- ------- ----------- ---------------------------- -----------------
US dollars 1,464,741 17,003 1,481,744
Sterling 4,024,022 45,025 4,069,047
Euro 4,946,115 39,827 4,985,942
----------------------------------------- ----------- ---------------------------- -----------------
Total loans and receivables 10,434,878 101,855 10,536,733
----------------------------------------- ----------- ---------------------------- -----------------
At 31 December 2016 Fixed rate Floating rate Total
Currency GBP'000 GBP'000 GBP'000
-------------------- ------- ----------- ---------------------------- -----------------
US dollars 3,196,145 33,887 3,230,032
Sterling 4,024,023 34,996 4,059,019
Euro 3,794,309 37,460 3,831,769
----------------------------------------- ----------- ---------------------------- -----------------
Total loans and receivables 11,014,477 106,343 11,120,820
----------------------------------------- ----------- ---------------------------- -----------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2017
4 Financial risk management (continued)
Net currency exposure
2017 2016
GBP'000 GBP'000
------------- ----- -------- ----------- ---------------------------- -----------------
US dollars 7,771 15,071
Euro 12,160 7,324
------------------------------------------------------ ---------------------------- -----------------
19,931 22,395
(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, derivative financial instruments and deposits
with banks and financial institutions. 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 2017 (2016: GBPnil).
The Company did not hold any collateral as security or obtained other
credit enhancements as at 31 December 2017 (2016: GBPnil).
The Company considers its maximum exposure to credit risk at 31 December
2017, without taking into account any collateral held or other credit
enhancements, to be GBP10,644,567,000 (2016: GBP11,231,045,000) being
the total of the Company's financial assets of which the balances
are all held within the GlaxoSmithKline Group, see Note 16.
(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.
The capital structure of the Company consists of net debt of GBP10,500,760,000
(2016: GBP11,089,817,000) and shareholders' funds of GBP37,635,000
(2017: GBP31,662,000) (see Statement of changes in equity).
6 Operating profit
2017 2016
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
The following items have been
(charged)/credited
in operating profit:
Exchange (losses)/gains on foreign currency
transactions (768) 2,758
Management fee (56) (47)
-------------------- ------------------- ----------- ---------------------------- -----------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
6 Operating profit (continued)
GlaxoSmithKline Services Unlimited provides various services and facilities
to the Company including finance and administrative services for which
a management fee was charged of GBP56,254 in 2017 compared with GBP47,085
in 2016. Included in the management fee is a charge for auditors'
remuneration of GBP35,575 (2016: GBP35,945).
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 2017 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
2017 2016
GBP'000 GBP'000
------------- ----- -------- ----------- ---------------------------- -----------------
Interest income arising from loans and receivables 387,262 399,340
9 Finance expense
2016 2015
GBP'000 GBP'000
------------- ----- -------- ----------- ---------------------------- -----------------
Interest expense arising on financial liabilities
at amortised cost (375,019) (386,976)
Reclassification of cash flow hedge from other
comprehensive income (1,118) (954)
------------------------------------------------------ ---------------------------- -----------------
Total finance expense (376,137) (387,930)
10 Taxation
2017 2016
Income tax expense on ordinary activities GBP'000 GBP'000
=========================================== ============================ =================
Current tax:
UK Corporation tax at 19.25% (2016: 20.00%) (1,983) (2,824)
====================================================== ============================ =================
Total current tax (1,983) (2,824)
----------------------------------------- ----------- ---------------------------- -----------------
The tax assessed for the year is no different (2016: no different)
than the standard rate of corporation tax in the UK for the year ended
31 December 2017 of 19.25% (2016: 20.00%). The offsetting differences
are explained below:
2017 2016
Reconciliation of total tax charge GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
Profit on ordinary activities before taxation 10,301 14,121
Profit on ordinary activities at the UK statutory
rate of 19.25% (2016: 20.00%) (1,983) (2,824)
Effects of:
Permanent disallowables - interest treated as
paid by ultimate parent 72,134 77,369
Permanent deductions - Group relief received
for no payment (72,134) (77,369)
------------------------------------------------------ ---------------------------- -----------------
Total tax charge for the year (1,983) (2,824)
------------------------------------------------------ ---------------------------- -----------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31
December 2017
10 Taxation (continued)
Factors that may affect future tax charges:
The tax rate for the current year is lower than the prior year, due
to changes in the UK corporation tax rate, which decreased from 20%
to 19% from 1 April 2017. Changes to the UK corporation tax rates
were substantively enacted as part of Finance Bill 2016 (on 6 September
2016). These include reductions to the main rate, to reduce the rate
to 17% from 1 April 2020. This will impact the Company's future current
tax charge accordingly. Deferred taxes at the balance sheet date have
been measured using these enacted tax rates and reflected in these
financial statements.
2017 2016
Tax (credit)/expense included in other
comprehensive
income GBP'000 GBP'000
=========================================== ============================ =================
Deferred tax:
Fair value movements on cash flow hedges (480) 162
Change in tax rates - 121
------------------------------------------------------ ---------------------------- -----------------
Total tax (credit)/expense included in other
comprehensive income (480) 283
------------------------------------------------------ ---------------------------- -----------------
Movement in deferred tax assets and
liabilities
Other net
temporary
differences Total
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
At 1 January 2017 1,893 1,893
Credit to comprehensive income 480 480
------------------------------------------------------ ---------------------------- -----------------
At 31 December 2017 2,373 2,373
After offsetting deferred tax assets and liabilities where appropriate,
the net deferred tax assets comprises:
2017 2016
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
Deferred tax assets 2,373 1,893
Deferred tax liabilities - -
------------------------------------------- ---------------------------- -----------------
2,373 1,893
11 Loans and receivables
2017 2016
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
Amounts due within one year
Amounts owed by Group undertakings 101,855 2,767,682
Amounts due after more than one year
Amounts owed by Group undertakings 10,434,878 8,353,138
------------------------------------------------------ ---------------------------- -----------------
10,536,733 11,120,820
------------------------------------------------------ ---------------------------- -----------------
Amounts due within one year are call accounts with Group undertakings
of GBP45,025,000 (2016: GBP34,996,000) 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 includes
deposits with Group undertakings of GBP56,830,000 (2016: GBP71,347,000)
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.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December
2017
11 Loans and receivables (continued)
Amounts due within one year also include the net proceeds of bond
issuances that have been advanced as loans to Group undertakings of
GBPnil (2016: GBP2,661,339,000, which were unsecured with interest
charged between 1.77% and 5.76% per annum and repaid in 2017).
Amounts due after more than one year include the net proceeds of bond
issuances that have been advanced as loans to Group undertakings totalling
GBP10,434,878,000 (2016: GBP8,353,138,000), which are unsecured with
interest charged at between 0.21% and 6.50% per annum and repayable
at maturity dates between 2019 and 2045.
12 Prepayments and accrued income
2017 2016
GBP'000 GBP'000
=========================================== ============================ =================
Amounts due within one year 107,833 110,223
------------------------------------------------------ ---------------------------- -----------------
Accrued income relates to interest on amounts owed by Group undertakings
(see Note 11).
13 Other payables
2017 2016
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
Amounts falling due within one year
Amounts owed to Group undertakings (2,881) (2,202)
Corporation tax (1,983) (2,824)
(4,864) (5,026)
------------------------------------------------------ ---------------------------- -----------------
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.
14 Borrowings
2017 2016
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
Amounts falling due within one year
Loans payable:
EUR European Medium Term Notes - (1,067,597)
US$ US Medium Term Notes - (1,612,119)
------------------------------------------------------ ---------------------------- -----------------
- (2,679,716)
------------------------------------------------------ ---------------------------- -----------------
Amounts falling due after more than one
year
Loans payable:
EUR European Medium Term Notes (4,973,782) (2,756,848)
GBP European Medium Term Notes (4,053,006) (4,050,413)
US$ US Medium Term Notes (1,473,973) (1,602,842)
------------------------------------------------------ ---------------------------- -----------------
(10,500,761) (8,410,103)
------------------------------------------------------ ---------------------------- -----------------
Total borrowings (10,500,761) (11,089,819)
------------------------------------------------------ ---------------------------- -----------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
14 Borrowings (continued)
2017 2016
Maturity of borrowings GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
In one year or less, or on demand
1.500% US$ US Medium Term Note 2017 - (1,612,119)
5.625% EUR European Medium Term Note 2017 - (1,067,597)
------------------------------------------------------ ---------------------------- -----------------
- (2,679,716)
------------------------------------------------------ ---------------------------- -----------------
In more than one year, but not more than two years
0.625% EUR European Medium Term Note 2019 (1,323,623) -
------------------------------------------- ---------------------------- -----------------
(1,323,623) -
------------- ----- -------- ----------- ---------------------------- -----------------
In more than two years, but not more than
five years
0.625% EUR European Medium Term Note 2019 - (1,276,450)
0.000% EUR European Medium Term Note 2020 (1,059,379) -
2.850% US$ US Medium Term Note 2022 (1,473,973) -
------------------------------------------- ---------------------------- -----------------
(2,533,352) (1,276,450)
------------------------------------------------------ ---------------------------- -----------------
In more than five years
2.850% US$ US Medium Term Note 2022 - (1,602,842)
1.375% EUR European Medium Term Note 2024 (876,117) (844,930)
4.000% EUR European Medium Term Note 2025 (658,647) (635,468)
1.000% EUR European Medium Term Note 2026 (617,178) -
3.375% GBP European Medium Term Note 2027 (593,400) (592,734)
1.375% EUR European Medium Term Note 2029 (438,838) -
5.250% GBP European Medium Term Note 2033 (986,476) (985,626)
6.375% GBP European Medium Term Note 2039 (695,330) (695,110)
5.250% GBP European Medium Term Note 2042 (988,603) (988,133)
4.250% GBP European Medium Term Note 2045 (789,197) (788,810)
------------------------------------------------------ ---------------------------- -----------------
(6,643,786) (7,133,653)
------------------------------------------------------ ---------------------------- -----------------
Total borrowings (10,500,761) (11,089,819)
------------------------------------------------------ ---------------------------- -----------------
15 Accruals and deferred income
2017 2016
GBP'000 GBP'000
------------------------------------------- ---------------------------- -----------------
Amounts falling due within one year (103,680) (106,431)
------------------------------------------------------ ---------------------------- -----------------
Accruals relates to interest payable on
borrowings
(see Note 14).
Fair value of financial assets and
16 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.
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
16 Fair value of financial assets and liabilities (continued)
The carrying amounts and the fair values of the Company's financial
assets and liabilities at 31 December 2017 and 31 December 2016 are
illustrated below.
2017 2016
Carrying Carrying
value Fair value value Fair value
GBP'000 GBP'000 GBP'000 GBP'000
------------- ----- ---- --------------- ------------- ------------- -----------------
Cash and cash
equivalents 1 1 2 2
Loans and receivables:
Other receivables 107,833 107,833 110,223 110,223
Amounts owed by Group
undertakings 10,536,733 12,413,202 11,120,820 13,151,640
-------------------------- --------------- ------------- ------------- -----------------
Total financial assets 10,644,567 12,521,036 11,231,045 13,261,865
-------------------------- --------------- ------------- ------------- -----------------
Financial liabilities measured at
amortised
cost:
GBP European
Medium Term
Notes (4,053,006) (5,688,556) (4,050,413) (5,762,307)
EUR European
Medium Term
Notes (4,973,782) (5,221,979) (3,824,445) (4,147,107)
US$ US Medium
Term Notes (1,473,973) (1,502,667) (3,214,961) (3,242,226)
-------------------- ---- --------------- ------------- ------------- -----------------
(10,500,761) (12,413,202) (11,089,819) (13,151,640)
Other payables (106,561) (106,561) (108,633) (108,633)
Total financial
liabilities (10,607,322) (12,519,763) (11,198,452) (13,260,273)
-------------------- ---- --------------- ------------- ------------- -----------------
Net financial assets and
liabilities 37,245 1,273 32,593 1,592
-------------------------- --------------- ------------- ------------- -----------------
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 GBP(12,413,202,000) (2016: GBP(13,151,640,000)) 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.
2017 2016
Interest Interest
Debt on debt Debt on debt
GBP'000 GBP'000 GBP'000 GBP'000
------------- ----- ---- --------------- ------------- ------------- -----------------
Due in less than one year - (305,389) (2,681,279) (367,440)
Between one and two years (1,327,434) (305,389) - (295,249)
Between two and three
years (1,061,947) (297,094) (1,282,051) (295,249)
Between three and four
years - (297,091) - (287,238)
Between four and five
years (1,481,481) (275,982) - (287,234)
Between five and ten
years (2,768,142) (1,178,556) (3,108,630) (1,180,179)
Greater than 10 years (3,942,478) (2,262,168) (4,100,000) (2,453,875)
-------------------------- --------------- ------------- ------------- -----------------
Gross contractual cash
flows (10,581,482) (4,921,669) (11,171,960) (5,166,464)
-------------------------- --------------- ------------- ------------- -----------------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
18 Adjustments reconciling operating profit to operating cash flows
2017 2016
GBP'000 GBP'000
========================== =============== ============= ============= =================
Operating profit for the year 10,301 14,121
Decrease/(increase) in other receivables 2,390 (4,831)
(Decrease)/increase in other payables (4,896) 4,416
Exchange adjustments 768 (2,758)
Amortisation of bond costs 10,338 11,496
Fair value movements on cash flow hedges (3,943) -
Reclassification of cash flow hedges to
the income statement 1,118 954
------------------------------------------------------ ------------- ------------- -----------------
Net cash inflow from
operating
activities 16,076 23,398
-------------------------- --------------- ------------- ------------- -----------------
19 Reconciliation of net cash flow to movement in net (debt)/surplus
Liabilities from financing
Other assets activities
Amounts Borrowings Borrowings
Cash and owed - -
cash by Group due within due after
equivalents undertakings 1 year 1 year Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================ ============= ============== ============ ============= =========
Net surplus as at 1 January
2016 2 10,058,660 - (10,042,319) 16,343
Cash flows - 23,398 - - 23,398
Foreign exchange adjustments - 1,038,762 (400,900) (635,104) 2,758
Other non-cash adjustments:
Reclassification (long-term
to short-term) - - (2,275,615) 2,275,615 -
Amortisation - - (3,201) (8,295) (11,496)
-------------------------------- ------------- -------------- ------------ ------------- ---------
Net surplus as at 31 December
2016 2 11,120,820 (2,679,716) (8,410,103) 31,003
-------------------------------- ------------- -------------- ------------ ------------- ---------
Net surplus as at 1 January
2017 2 11,120,820 (2,679,716) (8,410,103) 31,003
Cash flows (1) (439,470) 2,639,347 (2,183,800) 16,076
Foreign exchange adjustments - (144,617) 41,918 101,931 (768)
Other non-cash adjustments:
Amortisation - - (1,549) (8,789) (10,338)
------------------------------- ---- ----------- ------------ ------------- ---------
Net surplus as at 31 December
2017 1 10,536,733 - (10,500,761) 35,973
------------------------------- ---- ----------- ------------ ------------- ---------
20 Called up share capital
2016
2017 Number
Number of of 2017 2016
shares shares GBP'000 GBP'000
================================= ============ =============== ========== ==========
Authorised
Ordinary Shares of GBP1 each
(2016: GBP1 each) 100,000 100,000 100 100
-------------------------------------- ------------ --------------- ---------- ----------
Issued and fully paid
Ordinary Shares of GBP1 each
(2016: GBP1 each) 100,000 100,000 100 100
-------------------------------------- ------------ --------------- ---------- ----------
GlaxoSmithKline Capital plc
Notes to the financial statements for the year ended 31 December 2017
21 Other reserves
Retained Total
Other reserves earnings reserves
GBP'000 GBP'000 GBP'000
================================= ============ =============== ========== ==========
At 1 January 2017 (9,243) 40,805 31,562
Transferred from income and expense in
the year - 8,318 8,318
Fair value movements on cash flow hedges (3,943) - (3,943)
Reclassification of cash flow hedges to
the income statement 1,118 - 1,118
Deferred tax effect of cash flow hedges 480 - 480
---------------------------------------------------- --------------- ---------- ----------
At 31 December 2017 (11,588) 49,123 37,535
---------------------------------------------------- --------------- ---------- ----------
The cash flow hedge reserve relates to the cumulative fair value changes
of derivatives representing the pre-hedging of debt issuances. The
reserve is amortised over the life of the subsequently issued bonds.
22 Contingent liabilities/assets
Group bank 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 2017 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
(2016: GBPnil). Corporate Directors received no remuneration during
the year, either as executives of the Group or in respect of their
services to the Company (2016: 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
within the Group. There are no other related party transactions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKBDPNBKDFQD
(END) Dow Jones Newswires
April 12, 2018 10:01 ET (14:01 GMT)
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