Business Context and Reporting Period
Company: GlaxoSmithKline plc (GSK)
Filing Type: Form 6-K (Report of Foreign Issuer)
Date Issued: February 6, 2013
Subject: Announcement of the adoption of the amended International Accounting Standard on Employee Benefits (IAS 19R) effective January 1, 2013. The filing provides unaudited reconciliations of reported figures to restated figures for the full years 2011 and 2012, as well as quarterly breakdowns for 2012, to reflect the retrospective application of the new standard.
Key Financial Metrics (Restated under IAS 19R)
The following metrics reflect the revised figures under IAS 19R for the full fiscal years 2012 and 2011. Turnover remains unchanged by the accounting change.
| Metric (£ million) | FY 2012 Revised | FY 2011 Revised |
|---|---|---|
| Turnover | 26,431 | 27,387 |
| Operating Profit | 8,238 (Core) / 7,300 (Total) | 8,730 (Core) / 7,734 (Total) |
| Profit Before Taxation | 7,543 (Core) / 6,600 (Total) | 8,038 (Core) / 7,625 (Total) |
| Profit Attributable to Shareholders | 5,470 (Core) / 4,499 (Total) | 5,757 (Core) / 5,208 (Total) |
| Earnings Per Share (EPS) | 111.4p (Core) / 91.6p (Total) | 114.5p (Core) / 103.6p (Total) |
| Tax Rate | 24.4% (Core) / 29.1% (Total) | 25.9% (Core) / 29.1% (Total) |
Note: "Core Results" exclude certain items such as profit on disposal of associates. "Total Results" include all items. The filing does not provide specific data on cash flow, debt levels, or liquidity ratios.
Material Changes vs. Prior Period
The primary material change disclosed is the impact of the IAS 19R accounting standard change, which reduces reported profits and EPS compared to previously reported figures under the old standard.
- Impact on 2012 Pre-Tax Profit: Reduced by £92 million (from £7,635m to £7,543m in Core results).
- Impact on 2012 EPS: Reduced by 1.3p (from 112.7p to 111.4p in Core results).
- Impact on 2011 Pre-Tax Profit: Reduced by £73 million (from £8,111m to £8,038m in Core results).
- Impact on 2011 EPS: Reduced by 1.0p (from 115.5p to 114.5p in Core results).
- Operational Trend: On a revised basis, FY 2012 Turnover decreased by approximately 3.5% compared to FY 2011 (£26,431m vs £27,387m). Revised Core Operating Profit decreased by approximately 5.6% (£8,238m vs £8,730m).
Guidance, Outlook, and Risks
Accounting Change Details: The filing details two significant differences driving the profit reduction:
- Plan Asset Returns: Expected returns on plan assets are no longer recognized in the income statement. They are replaced by income calculated using the discount rate for pension obligations, resulting in higher plan benefit costs.
- Past Service Costs: These are now recognized in the income statement in the period of the plan amendment rather than being deferred.
Forward-Looking Statements: The filing includes a cautionary statement that forward-looking projections are subject to risks and uncertainties. Specific risk factors are referenced in the company's 2011 Annual Report (Form 20-F, Exhibit 15.2). No specific financial guidance for 2013 or beyond is provided in this document.
Unusual Items: The "Total Results" for 2011 included a £585 million profit on the disposal of an interest in associates, which is not present in the 2012 Total Results.
Key Facts for Investor Verification
- Accounting Standard Shift: Verify the full impact of IAS 19R on future pension cost projections and cash flow requirements, as the standard change increases reported costs.
- Core vs. Total Results: Distinguish between "Core Results" (operational performance) and "Total Results" (which include one-time items like the 2011 disposal profit) when analyzing year-over-year profitability trends.
- EPS Reduction: Confirm that the reduction in EPS (1.3p in 2012, 1.0p in 2011) is purely an accounting adjustment and does not reflect a change in underlying cash generation.
- Missing Data: Note that this filing does not contain data on debt levels, liquidity, or free cash flow; these must be sourced from the full Annual Report or other filings.