RNS Number : 6316G

GlaxoSmithKline Capital PLC

24 July 2019

Publication of GlaxoSmithKline Capital plc

Interim Management Report 2019

Today, 24 July 2019, GlaxoSmithKline Capital plc (the "Company") published on the GlaxoSmithKline Group ("GSK") website, www.gsk.com *, its Interim Management Report in respect of the period ended 30 June 2019.

In compliance with Listing Rule 9.6.1 of the UK Financial Conduct Authority ('FCA'), copies of Company's Interim Management 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 4.2 and 6.3.5, Appendix A to this announcement contains the Company's Interim Management Report, which includes a description of the principal risks and uncertainties affecting it together with a responsibility statement.

V A Whyte

Company Secretary

24 July 2019

* https://www.gsk.com/en-gb/about-us/policies-codes-and-standards/other-reports

Cautionary statement regarding forward-looking statements

GSK cautions investors that any forward-looking statements or projections made by GSK, including those made in this announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Such factors include, but are not limited to, those described under Item 3.D Principal risks and uncertainties in the company's Annual Report on Form 20-F for 2018.

APPENDIX A

GlaxoSmithKline Capital plc

(Registered number: 2258699)

Interim Management Report

for the half year ended 30 June 2019

Registered office address:

980 Great West Road

Brentford

Middlesex

TW8 9GS

Contents	Page
Interim report	1-2
Income statement	3
Statement of comprehensive income	4
Statement of financial position	5
Statement of changes in equity	6
Cash flow statement	7
Notes to the financial statements	8-12

Results announcement and interim management report for the half year ended 30 June 2019

Performance

GlaxoSmithKline Capital plc (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 half year ended 30 June 2019 of £7,229,000 (2018: £16,814,000), which will be transferred to reserves. The Directors are of the opinion that the current level of activity and the period end financial position are satisfactory and will remain so in the foreseeable future.

No dividend is proposed to the holders of ordinary shares in respect of the period ended 30 June 2019 (2018: £nil).

At 30 June 2019, the Company had in issue £11,321,857,000 European Medium Term Notes and £5,877,518,000 US Medium Term Notes (31 December 2018: £11,357,479,000 and £3,137,587,000, respectively), which mature at dates between 2019 and 2045. All notes currently in issue pay interest on a fixed rate basis, with the exception of the €750 million (£672 million) 2020 European Medium Term Note and $750 million (£591 million) 2021 US Medium Term Note which are on a floating rate basis.

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 2018 Annual Report which does not form part of this report.

Details of the Company's financial risk management is also disclosed in the Company's Annual Report for the year ended 31 December 2018.

Directors' responsibility statement

The Board of Directors approved this document on 22 July 2019.

The Directors confirm that to the best of their knowledge this unaudited condensed financial information for the six months ended 30 June 2019 has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" and that the interim management report herein includes a true and fair view of the information required by Disclosure and Transparency Rules (DTR) 4.2.7.

Approach to Brexit

In preparing for the UK's exit from the EU (Brexit), the Directors of the Group have taken a risk-based approach to maintain continuity of supply of our medicines, vaccines and consumer healthcare products to the people in the UK and EU at the 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 approach to Brexit would not be appropriate for an understanding of the impact of Brexit to the position of the Company's business. The Group's approach to Brexit, which include those of the Company, are discussed in the Group's 2018 annual report which does not form part of this report.

The Directors of the Company are:

Mr S Dingemans (resigned on 1 May 2019)

Mr I Mackay (appointed on 1 May 2019)

Edinburgh Pharmaceutical Industries Limited

Glaxo Group Limited

By order of the Board

Mr A Walker

For and on behalf of Glaxo Group Limited

Corporate Director

22 July 2019

Internet

This Announcement and other information about the GSK Group are available on the website at: http://www.gsk.com.

Income statement
for the half year ended 30 June 2019
		Period ended	Period ended
		30 June 2019	30 June 2018
	Note	£'000	£'000
Other operating income/(expense)		(465)	214
Finance income	3	226,897	172,296
Finance expense	4	(217,507)	(151,712)
Operating profit	2	8,925	20,798
Profit before taxation		8,925	20,798
Tax on profit	5	(1,696)	(3,984)
Profit for the financial period		7,229	16,814

Statement of comprehensive income
for the half year ended 30 June 2019
		Period ended	Period ended
		30 June 2019	30 June 2018
		£'000	£'000
Profit for the financial period		7,229	16,814
Items that may be subsequently reclassified to the income statement:
Fair value movements on cash flow hedges		(12,159)	1,288
Reclassification of cash flow hedges to the income statement		1,368	731
Deferred tax on cash flow hedges		1,834	(124)
Other comprehensive income for the financial period		(8,957)	1,895
Total comprehensive income for the financial period		(1,728)	18,709

Statement of financial position
As at 30 June 2019
		30 June 2019	31 December 2018
	Note	£'000	£'000
Non-current assets
Deferred tax assets		3,738	1,904
Loans and receivables	6	15,107,976	13,087,653
Total non-current assets		15,111,714	13,089,557
Current assets
Loans and receivables	6	2,139,171	1,471,451
Prepayments and accrued income	7	130,458	131,225
Cash and cash equivalents		4,155	-
Total current assets		2,273,784	1,602,676
Total assets		17,383,664	14,692,233
Current liabilities
Other payables	8	(7,448)	(7,792)
Accruals and deferred income	10	(115,957)	(124,929)
Short-term borrowings		(2,016,271)	(1,349,459)
Total current liabilities		(2,139,676)	(1,482,180)
Net current assets		134,108	120,496
Total assets less current liabilities		15,243,988	13,210,053
Non-current liabilities
Long-term borrowings	9	(15,183,104)	(13,145,607)
Total non-current liabilities		(15,183,104)	(13,145,607)
Total liabilities		(17,322,780)	(14,627,787)
Net assets		62,718	64,446
Equity
Called up share capital	13	100	100
Other reserves		(18,254)	(9,297)
Retained earnings		80,872	73,643
Total equity		62,718	64,446

Statement of changes in equity
for the half year ended 30 June 2019
	Called up share capital	Other reserves	Retained earnings	Total equity
	£'000	£'000	£'000	£'000
At 1 January 2018	100	(11,588)	49,123	37,635
Profit for the financial period	-	-	16,814	16,814
Other comprehensive income for the    financial period	-	1,895	-	1,895
At 30 June 2018	100	(9,693)	65,937	56,344

	Called up share capital	Other reserves	Retained earnings	Total equity
	£'000	£'000	£'000	£'000
At 1 January 2019	100	(9,297)	73,643	64,446
Profit for the financial period	-	-	7,229	7,229
Other comprehensive income for the    financial period	-	(8,957)	-	(8,957)
At 30 June 2019	100	(18,254)	80,872	62,718

Cash flow statement
for the half year ended 30 June 2019
		Period ended	Period ended
		30 June 2019	30 June 2018
	Note	£'000	£'000
Cash flows from operating activities
Operating profit		8,925	20,798
Adjustments reconciling operating profit to    operating cash flows	12	(13,983)	(20,852)
Net cash (outflow)/inflow from operating activities		(5,058)	(54)
Cash flows from financing activities
Proceeds from borrowings		2,630,777	3,650,522
Repayment of borrowings		-	-
Loans provided to Group undertakings		(2,618,537)	(3,648,326)
Loan repayments received from Group undertakings		-	-
(Increase)/decrease in current accounts with Group    undertakings		(3,027)	(2,142)
Net cash inflow/(outflow) from financing activities		9,213	54
Net movement in cash in the period		4,155	-
Cash at beginning of period		-	1
Movement in cash		4,155	-
Cash at end of period		4,155	1

Notes to the financial statements for the half year ended 30 June 2019
1	Accounting presentation and policies
	This unaudited Results Announcement containing condensed financial information for the six months ended 30 June 2019 is prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" using the recognition and measurement requirements of Financial Reporting Standard 101 "Reduced Disclosure Framework" and in accordance with the Listing Rules of the UK Listing Authority.
2	Operating profit
									Period ended		Period ended
									30 June 2019		30 June 2018
									£'000		£'000
	The following items have been (charged) / credited in operating profit:
	Exchange gains/(losses) on foreign currency transactions								(465)		214
3	Finance income
									Period ended		Period ended
									30 June 2019		30 June 2018
									£'000		£'000
	Interest income arising from loans with Group undertakings								226,897		172,296
4	Finance expense
									Period ended		Period ended
									30 June 2019		30 June 2018
									£'000		£'000
	Interest expense arising on financial liabilities at amortised cost								(216,139)		(150,981)
	Reclassification of cash flow hedge from other comprehensive income								(1,368)		(731)
	Total finance expense								(217,507)		(151,712)
5	Taxation
									Period ended		Period ended
									30 June 2019		30 June 2018
	Income tax expense on ordinary activities								£'000		£'000
	Current tax:
	UK corporation tax at 19% (2018: 19%)								(1,696)		(3,984)
	Total current tax								(1,696)		(3,984)
									Period ended		Period ended
									30 June 2019		30 June 2018
	Total tax (expense) / credit included in other comprehensive income								£'000		£'000
	Deferred tax:
	Fair value movements on cash flow hedges								1,834		(124)
	Total tax (expense) / credit included in other comprehensive income								1,834		(124)
6	Loans and receivables
									30 June 2019		31 December 2018
									£'000		£'000
	Amounts due within one year
	Amounts owed by Group undertakings								2,139,171		1,471,451
									2,139,171		1,471,451
	Amounts due after more than one year
	Amounts owed by Group undertakings								15,107,976		13,087,653
									15,107,976		13,087,653
									17,247,147		14,559,104
	Amounts due within one year are call accounts with Group undertakings of £51,360,000 (2018: £51,647,000) which are unsecured, repayable on demand and earn a market rate of interest (based on 1 week LIBOR minus 0.125%) that is consistent with the Group's policy, and includes deposits with Group undertakings of £81,749,000 (2018: £78,574,000) which are unsecured, repayable on demand and earn a market rate of interest (based on LIBOR minus 0.125%) that is consistent with the Group's policy.
	Amounts due within one year also include the net proceeds of bond issuances that have been advanced as loans to Group undertakings of £2,006,062,000 (2018: £1,341,230,000) which are unsecured with a fixed interest rate of 1.05% and a floating interest rate of EURIBOR+ 20bps per annum.
	Amounts due after more than one year are the net proceeds of bond issuances that have been advanced as loans to Group undertakings, which are unsecured with fixed interest charged between 0.21% and 6.50% per annum and floating interest charged at LIBOR plus 56bps and repayable at maturity dates between 2020 and 2045.
7	Prepayments and accrued income
									30 June 2019		31 December 2018
									£'000		£'000
	Amounts due within one year								130,458		131,225
	Accrued income relates to interest on amounts owed by Group undertakings (see Note 6).
8	Other payables
									30 June 2019		31 December 2018
									£'000		£'000
	Amounts falling due within one year
	Amounts owed to Group undertakings								-		(2,040)
	Corporation tax								(7,448)		(5,752)
									(7,448)		(7,792)
	The corporation tax creditor contains amounts which will be paid to fellow Group companies under Group relief.
9	Borrowings
									30 June 2019		31 December 2018
									£'000		£'000
	Amounts falling due within one year
	Loans payable:
	€ European Medium Term Notes								(2,016,271)		(1,349,459)
									(2,016,271)		(1,349,459)
	Amounts falling due after more than one year
	Loans payable:
	€ European Medium Term Notes								(5,260,810)		(5,964,309)
	£ European Medium Term Notes								(4,044,776)		(4,043,711)
	US$ Medium Term Notes								(5,877,518)		(3,137,587)
									(15,183,104)		(13,145,607)
	Total borrowings								(17,199,375)		(14,495,066)
									30 June 2019		31 December 2018
	Maturity of borrowings								£'000		£'000
	In more than one year, but not more than two years
	0.625% € European Medium Term Note 2019								-		(1,349,459)
	LIBOR + 20bps € European Medium Term Note 2020								-		(677,246)
	0.000% € European Medium Term Note 2020								(1,074,095)		(1,079,415)
	LIBOR + 35bps US$ US Medium Term Note 2021								(589,998)		-
	3.125% US$ Medium Term Note 2021								(981,576)		-
									(2,645,669)		(3,106,120)
	In more than two years, but not more than five years
	LIBOR + 35bps US$ US Medium Term Note 2021								-		(589,385)
	3.125% US$ Medium Term Note 2021								-		(980,151)
	2.85% US$ Medium Term Note 2022								(1,570,005)		(1,568,052)
	2.875% US$ Medium Term Note 2022								(1,178,283)		-
	3.000% US$ US Medium Term Note 2024								(781,340)		-
									(3,529,628)		(3,137,588)
	In more than five years
	1.375% € European Medium Term Note 2024								(888,797)		(892,962)
	4.000% € European Medium Term Note 2025								(666,688)		(669,903)
	1.000% € European Medium Term Note 2026								(625,295)		(628,546)
	1.250% € European Medium Term Note 2026								(892,021)		(896,568)
	3.375% £ European Medium Term Note 2027								(593,669)		(593,351)
	3.375% US$ US Medium Term Note 2029								(776,316)		-
	1.375% € European Medium Term Note 2029								(444,766)		(447,022)
	1.750% € European Medium Term Note 2030								(669,148)		(672,647)
	5.250% £ European Medium Term Note 2033								(982,114)		(981,711)
	6.375% £ European Medium Term Note 2039								(694,060)		(693,984)
	5.250% £ European Medium Term Note 2042								(986,369)		(986,216)
	4.250% £ European Medium Term Note 2045								(788,564)		(788,448)
									(9,007,807)		(8,251,358)
	Total borrowings due after one year								(15,183,104)		(14,495,066)
10	Accruals and deferred income
									30 June 2019		31 December 2018
									£'000		£'000
	Amounts falling due within one year								(115,957)		(124,929)
	Accruals relates to interest payable on borrowings (see Note 9).
11	Fair value of financial assets and liabilities
	The fair values of the financial assets and liabilities are included at the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
	The following methods and assumptions were used to estimate the fair values:
	·	Cash and cash equivalents - approximates to the carrying amount;
	·	Borrowings (European and US Medium Term Notes) - based on quoted market prices (a level 1 fair value measurement);
	·	Intercompany loans - approximates to the fair value of borrowings (European and US Medium Term Notes); and
	·	Receivables and payables - approximates to the carrying amount.
	The carrying amounts and the fair values of the Company's financial assets and liabilities at 30 June 2019 and 31 December 2018 are illustrated below.
					30 June 2019					31 December 2018
					Carrying value	Fair value				Carrying value		Fair value
					£'000	£'000				£'000		£'000
	Cash and cash equivalents				4,155	4,155				-		-
	Loans and receivables:
	Other receivables				130,458	130,458				131,225		131,225
	Amounts owed by Group undertakings				17,247,147	19,467,188				14,559,104		16,387,153
	Total financial assets				17,381,760	19,601,801				14,690,329		16,518,378
	Financial liabilities measured at amortised cost:
	£ European Medium Term Notes				(4,044,776)	(5,697,927)				(4,043,711)		(4,088,154)
	€ European Medium Term Notes				(7,277,081)	(7,724,089)				(7,313,768)		(8,627,556)
	US$ US Medium Term Notes				(5,877,518)	(6,045,172)				(3,137,587)		(3,671,443)
					(17,199,375)	(19,467,188)				(14,495,066)		(16,387,153)
	Other payables				(115,957)	(115,957)				(126,969)		(126,969)
	Total financial liabilities				(17,315,332)	(19,583,145)				(14,622,035)		(16,514,122)
	Net financial assets				66,428	18,656				68,294		4,256
	The Company has no financial assets or liabilities measured at fair value through profit or loss.
	Financial liabilities measured at amortised cost for which the fair value of £19,467,188,000 (31 December 2018: £16,387,153,000) as 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 are approximate to the carrying amount.
12	Adjustments reconciling operating profit to operating cash flows
										Period ended		Period ended
										30 June 2019		30 June 2018
										£'000		£'000
	Operating profit									8,925		20,798
	Adjustments:
	Decrease/(increase) in other receivables									767		3,317
	(Decrease)/increase in other payables									(11,012)		(13,836)
	Exchange adjustments									307		(3,565)
	Amortisation of bond costs									6,746		(8,787)
	Fair value movements on cash flow hedges									(12,159)		1,288
	Reclassification of cash flow hedges to the income statement									1,368		731
												-
										(13,983)		(20,852)
	Net cash (outflow)/inflow from operating activities									(5,058)		(54)
13	Called up share capital
					30 June 2019	31 December 2018				30 June 2019		31 December 2018
					Number of shares	Number of shares				£'000		£'000
	Authorised
	Ordinary Shares of £1 each (31 December 2018: £1 each)				100,000	100,000				100		100
	Issued and fully paid
	Ordinary Shares of £1 each (31 December 2018: £1 each)				100,000	100,000				100		100
14	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.

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