GlaxoSmithKline PLC — Interim / Quarterly Report 2021

Jul 29, 2021

Publication of GlaxoSmithKline Capital plc Interim Management Report 2021

Today, 29 July 2021, 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 2021.

In compliance with Listing Rule 9.6.1 of the UK Financial Conduct Authority ("FCA"), copies of the Company's Interim Management Report, have been submitted to the UK Listing Authority's NSM submission portal via the Electronic Submission System (ESS). A copy can be viewed at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

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 29 July 2021

*https://www.gsk.com/en-gb/about-us/codes-and-standards/#tab-9343

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 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 "Risk Factors" in GSK's Annual Report on Form 20-F for 2020 and any impacts of the COVID-19 pandemic.

APPENDIX A

GlaxoSmithKline Capital plc

(Registered number: 02258699)

Interim Management Report

for the half year ended 30 June 2021

Registered office address:

980 Great West Road

Brentford

Middlesex

TW8 9GS

GlaxoSmithKline Capital plc

(Registered number: 02258699)

Interim Management Report

for the half year ended 30 June 2021

Contents Pages

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	8-10

GlaxoSmithKline Capital plc

(Registered number: 02258699)

Results announcement and interim management report for the half year ended 30 June 2021

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 2021 of £6,685,000 (2020: £10,366,000), 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 2021 (2020:£nil).

At 30 June 2021, the Company had in issue £12,336,576,000 European Medium Term Notes and £4,851,788,000 US Medium Term Notes (31 December 2020: £12,664,804,000 and £5,474,398,622 respectively), which mature at dates between 2022 and 2045. All notes currently in issue pay interest on a fixed rate basis, with the exception of the €1.5 billion (£1.4 billion) 2021 European Medium Term Note, which is 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 2020 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 2020.

Impact of Brexit

The UK left the EU on 31 January 2020 and the Brexit transition period ended on 31 December 2020 with a Trade and Cooperation Agreement ('a deal') in place between the UK and EU. The Group's overriding priority in preparing for the UK's exit from the EU has been to maintain continuity of supply of our products to people in the UK and EU.

The Group's post-Brexit operating model has been implemented, and we continue to work closely with Governments in both the UK and EU, as well as our third parties, on the effective implementation of the deal and to ensure that our sector continues to thrive and deliver innovation for consumers in both the UK and EU.

Over the longer term, we continue to believe that Brexit will not have a material impact on our business.

Directors' responsibility statement

The Board of Directors approved this document on 23 July 2021.

The Directors confirm that to the best of their knowledge this unaudited condensed financial information for the six months ended 30 June 2021 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.

Risks associated with COVID-19

The potential impact of the coronavirus outbreak on the Company's and its subsidiaries' access to capital and ability to lend and all its principal risks have been assessed with mitigation plans put in place. The Company has accessed capital markets in 2020, and continues to monitor the situation closely, as this continues to be a dynamic and an uncertain situation, with the ultimate severity, duration and impact unknown at this point.

The Directors of the Company are:

Mr I Mackay 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

23 July 2021

Internet

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

GlaxoSmithKline Capital plc

Income statement for the half year ended 30 June 2021

		Period ended 30 June	Period ended 30 June
		2021	2020
	Note	£'000	£'000
Other operating income /	2	(1,197)	1,626
(expense)
Finance income	3	224,460	251,724
Finance expense	4	(215,009)	(240,553)
Operating profit		8,254	12,797
Profit before taxation		8,254	12,797
Taxation on profit	5	(1,569)	(2,431)
Profit for the financial		6,685	10,366
period

GlaxoSmithKline Capital plc

Statement of comprehensive income for the half year ended 30 June 2021

	Period ended 30 June	Period ended 30 June
	2021	2020
	£'000	£'000
Profit for the financial	6,685	10,366
period
Items that may be
subsequently reclassified
to the income statement:
Fair value movements on	0	(5,480)
cash flow hedges
Reclassification of cash	1,851	1,879
flow hedges to the
income statement
Deferred tax on fair value	46	1,078
movements on cash flow
hedges
Other comprehensive	1,897	(2,523)
income for the financial
period
Total comprehensive	8,582	7,843
income for the financial
period

GlaxoSmithKline Capital plc

Balance sheet

as at 30 June 2021

		30 June 2021	31 December 2020
	Note	£'000	£'000
Non-current assets
Deferred tax assets		3,780	4,021
Loans and receivables	6	12,955,837	15,776,159
Total non-current assets		12,959,617	15,780,180
Current assets
Loans and receivables	6	4,321,861	2,447,426
Prepayments and accrued
income	7	108,086	145,580
Cash and cash equivalents		4	4
Total current assets		4,429,951	2,593,010

Total assets		17,389,568	18,373,190
Current liabilities
Other payables	8	-	-4,024
Corporate tax		-5,417	-4,134
Accruals and deferred
income	10	-98,396	-137,021
Short-term borrowings	9	-4,238,047	-2,350,809
Total current liabilities		-4,341,860	-2,495,988
Net current assets		88,091	97,022
Total assets less current
liabilities		13,047,708	15,877,202
Non-current liabilities
Long-term borrowings	9	-12,950,318	-15,788,394
Total non-current
liabilities		-12,950,318	-15,788,394
Total liabilities		-17,292,178	-18,284,382
Net assets		97,390	88,808
Equity
Called up share capital	13	100	100
Other reserves		-15,244	-17,141
Retained earnings		112,534	105,849
Total equity		97,390	88,808

GlaxoSmithKline Capital plc

Statement of changes in equity for the half year ended 30 June 2021

	Called up share
	capital	Other reserves	Retained earnings	Total equity
	£'000	£'000	£'000	£'000
At 1 January 2020	100	(16,323)	88,226	72,003
Profit for the
financial period	-	-	10,366	10,366
Other
comprehensive
income for the
financial period	-	(2,523)	-	(2,523)
At 30 June 2020	100	(18,846)	98,592	79,846
	Called up share
	capital	Other reserves	Retained earnings	Total equity

	£'000	£'000	£'000	£'000
At 1 January 2021	100	(17,141)	105,849	88,808
Profit for the
financial period	-	-	6,685	6,685
Other
comprehensive
income for the
financial period	-	1,897	-	1,897
At 30 June 2021	100	(15,244)	112,534	97,390

GlaxoSmithKline Capital plc

Cash flow statement

for the half year ended 30 June 2021

		Period ended	Period ended
		30 June 2021	30 June 2020
	Note	£'000	£'000
Cash flows from
operating activities
Operating profit		6,685	12,797
Adjustments reconciling	12	4,863	(166)
operating profit to
operating cash flows
Net cash (outflow) /		11,548	12,631
inflow from operating
activities
Cash flows from financing
activities
Proceeds from borrowings		-	2,140,275
Repayment of borrowings		(533,048)	(674,483)
Loans provided to Group		-	(2,134,797)
undertakings
Loan repayments received		531,715	674,483
from Group undertakings
(Increase) / decrease in		(10,215)	(18,109)
current accounts with
Group undertakings
Net cash inflow /		(11,548)	(12,630)
(outflow) from financing
activities
Net movement in cash in		-	1
the period
Cash at beginning of		4	4
period
Movement in cash		-	1

Cash at end of period 4 5
---------------------------------

GlaxoSmithKline Capital plc

Notes to the financial statements for the half year ended 30 June 2021

1. Accounting presentation and policies

This unaudited Results Announcement containing condensed financial information for the six months ended 30 June 2021 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. The same accounting policies and methods of computation are followed in the interim financial statements as compared with the most recent annual financial statements.

2. Operating profit

	Period ended 30 June 2021	Period ended 30 June 2020
	£'000	£'000
The following items have been credited / (charged) in operating profit:
Exchange gains on foreign currency transactions	(1,197)	1,626

3. Finance income

	Period ended 30 June 2021	Period ended 30 June 2020
	£'000	£'000
Interest income arising from loans	224,460	251,724
with Group undertakings

4. Finance expense

	Period ended 30 June 2021	Period ended 30 June 2020
	£'000	£'000
Interest expense arising on financial	(213,158)	(238,674)
liabilities at amortised cost
Reclassification of cash flow hedge	(1,851)	(1,879)
from other comprehensive income
Total finance expense	(215,009)	(240,553)

5. Taxation

Period ended 30 June 2021 Period ended 30 June 2020
--------------------------------------------------------

Income tax expense on ordinary activities	£'000	£'000
Current tax:
UK corporation tax at 19% (2020: 19%)	(1,569)	(2,431)
Total current tax	(1,569)	(2,431)

	Period ended 30 June 2021	Period ended 30 June 2020
Total tax (expense) / credit included in other comprehensive	£'000	£'000
income
Deferred tax:
Fair value movements on cash flow hedges	46	1,078
Total tax (expense) / credit included	46	1,078
in other comprehensive income

6. Trade and other receivables

	30 June 2021	31 December 2020
	£'000	£'000
Amounts due within one year
Amounts owed by Group	4,321,861	2,447,426
undertakings
	4,321,861	2,447,426
Amounts due after more than one
year
Long term deposits	244	320
Amounts owed by Group	12,955,593	15,775,839
undertakings - loans
	12,955,837	15,776,159
	17,277,698	18,223,585

Amounts due within one year are deposits with Group undertakings of £97,699,618 (2019: £92,960,000) 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 £4,224,161,513 (2020: £2,714,625,000) which are unsecured with an interest rate between 0.045% and 3.2% per annum.

Amounts due after more than one year include the net proceeds of bond issuances that have been advanced as loans to Group undertakings, which are unsecured with fixed interest charged between 0.103% and 6.50% per annum and repayable at maturity dates between 2023 and 2045.

Amounts due after more than one year also include call accounts with Group undertakings of £81,724,873 (2020: £74,483,000) 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.

7. Prepayments and accrued income

	30 June 2021	31 December 2020
	£'000	£'000
Amounts due within one year	108,086	145,580

8. Trade and other payables

	30 June 2021	31 December 2020
	£'000	£'000
Amounts falling due within one	-	(4,024)
year
Amounts owed to Group	-	(4,024)
undertakings

9. Borrowings

	30 June 2021	31 December 2020
	£'000	£'000
Amounts falling due within one
year
Loans payable:
€ European Medium Term Notes	(1,716,270)	(1,801,490)
US\$ Medium Term Notes	(2,521,777)	(549,319)
	(4,238,047)	(2,350,809)
Amounts falling due after more
than one year
Loans payable:
€ European Medium Term Notes	(5,085,212)	(5,330,086)
£ European Medium Term Notes	(5,535,094)	(5,533,228)
US\$ Medium Term Notes	(2,330,012)	(4,925,080)
	(12,950,318)	(15,788,394)
Total borrowings	(17,188,365)	(18,139,203)

	30 June 2021	31 December 2020
Maturity of borrowings	£'000 £'000
In one year or less, or on demand
LIBOR+0.35% US\$ US Medium Term	-	(549,319)
Note 2021

LIBOR+0.30% € European Medium	(1,287,335)	(1,351,541)
Term Note 2021 0% € European Medium Term Note	(428,935)	(449,949)
2021
2.850% US\$ US Medium Term Note	(1,440,942)	-
2022
2.875% US\$ US Medium Term Note	(1,080,835)	-
2022
	(4,238,047)	(2,350,809)
In more than one year, but not more than two years
2.850% US\$ US Medium Term Note	-	(1,462,747)
2022
2.875% US\$ US Medium Term Note	-	(1,097,314)
2022
0.125% € European Medium Term	(642,169)	-
Note 2023
	(642,169)	(2,560,061)
In more than two years, but not
more than five years
0% € European Medium Term Note	(428,815)	(449,632)
2023
0.125% € European Medium Term Note 2023	-	(673,048)
0.534% US\$ US Medium Term Note	(899,955)	(913,467)
2023
1.375% € European Medium Term	(853,253)	(894,036)
Note 2024
3.000% US\$ US Medium Term Note	(717,565)	(728,293)
2024
4.000% € European Medium Term	(639,721)	(670,363)
Note 2025
1.250% € European Medium Term	(854,931)	-
Note 2026
	(4,394,240)	(4,328,839)
In more than five years
1.000% € European Medium Term Note 2026	(599,036)	(627,997)
1.250% € European Medium Term	-	(896,167)
Note 2026

3.375% £ European Medium Term	(595,045)	(594,710)
Note 2027
1.25% £ European Medium Term	(742,111)	(741,602)
Note 2028
1.375% € European Medium Term	(426,306)	(446,859)
Note 2029
3.375% US\$ US Medium Term Note	(712,493)	(723,260)
2029
1.750% € European Medium Term	(640,979)	(671,985)
Note 2030
5.250% £ European Medium Term	(983,840)	(983,392)
Note 2033
1.625% £ European Medium Term	(743,490)	(743,284)
Note 2035
6.375% £ European Medium Term	(694,621)	(694,542)
Note 2039
5.250% £ European Medium Term	(986,961)	(986,794)
Note 2042
4.250% £ European Medium Term	(789,027)	(788,902)
Note 2045
	(7,913,909)	(8,899,494)
Total borrowings	(17,188,365)	(18,139,203)

10. Accruals and deferred income

	30 June 2021 31 December 2020
	£'000	£'000
Amounts falling due within one year	(98,396)	(137,021)

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 2021 and 31 December 2020 are illustrated below

	30 June 2021			31 December 2020
	Carrying value	Fair value	Carrying value	Fair value
	£'000	£'000	£'000	£'000
Cash and cash	4	4	4	4
equivalents
Loans and
receivables:
Other receivables	108,086	108,086	145,580	145,580
Amounts owed by	17,277,454	19,682,835	18,223,265	21,184,077
Group undertakings
Total financial assets	17,385,544	19,790,925	18,368,849	21,329,661
Financial liabilities
measured at
amortised cost:
£ European Medium	(5,535,094)	(7,425,663)	(5,533,228)	(8,044,821)
Term Notes
€ European Medium	(6,801,482)	(7,201,869)	(7,131,576)	(7,621,068)
Term Notes
US\$ US Medium	(4,851,789)	(5,055,303)	(5,474,399)	(5,765,875)
Term Notes
	(17,188,365)	(19,682,835)	(18,139,203)	(21,431,764)
Other payables	(98,396)	(98,396)	(141,045)	(141,045)
Total financial	(17,286,761)	(19,781,231)	(18,280,248)	(21,572,809)
liabilities
Net financial assets	98,783	9,694	88,601	(243,148)

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 £19,781,231,000 (31 December 2020: £21,572,809,000) 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 30 June 2021	Period ended 30 June 2020
	£'000	£'000
Operating profit	6,685	12,797
Adjustments:
Decrease/ (increase) in other	37,570	25,518
receivables
(Decrease) / increase in other	(41,079)	(29,800)
payables
Exchange adjustments	1,114	2,608
Amortisation of bond costs	5,407	5,109
Fair value movements on cash flow	-	(5,480)
hedges
Reclassification of cash flow hedges	1,851	1,879
to the income statement
	4,863	(166)
Net cash (outflow) / inflow from	11,548	12,631
operating activities

13. Called up share capital

	30 June 2021	31 December 2020	30 June 2021	31 December 2020
	Number of shares	Number of shares	£'000	£'000
Authorised
Ordinary shares of	100,000	100,000	100	100
£1 each (31
December 2020: £1
each)
Issued and fully paid
Ordinary shares of	100,000	100,000	100	100
£1 each (31
December 2020: £1
each)

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.