GSK plc — 2021 Form 20-F summary
Reporting period: Fiscal year ended December 31, 2021; filed March 8, 2022. Although the request specifies 2021 Q4, this filing reports the full fiscal year, not standalone fourth-quarter results. Financial statements are prepared under IFRS as issued by the IASB. Deloitte gave unqualified opinions on the financial statements and internal control over financial reporting.
Financial performance and position
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Turnover | £34.114bn | £34.099bn | Flat at actual exchange rates; up 5% at constant exchange rates (CER) |
| Operating profit, reported | £6.201bn | £7.783bn | Down 20%; 2020 included a substantial gain on disposals |
| Operating profit, adjusted | £8.806bn | £8.906bn | Down 1% at actual exchange rates; up 9% CER |
| Profit before tax | £5.442bn | £6.968bn | Down 22% |
| Profit after tax | £5.096bn | £6.388bn | Down 20% |
| Profit attributable to shareholders | £4.385bn | £5.749bn | |
| EPS, reported / adjusted | 87.6p / 113.2p | 115.5p / 115.9p | Reported EPS down 24%; adjusted EPS down 2% at actual exchange rates, up 9% CER |
| Operating margin | 18.2% reported; 25.8% adjusted | 22.8% reported | Adjusted margin up 0.9 percentage points CER |
| Operating cash flow / free cash flow | £7.952bn / £4.437bn | £8.441bn / £5.406bn | Both declined |
| Net debt | £19.838bn | £20.780bn | Reduced by about £0.9bn |
- Revenue mix: Pharmaceuticals £17.729bn, up 10% CER; Vaccines £6.778bn, up 2% CER; Consumer Healthcare £9.607bn, flat CER. Xevudy COVID-19 treatment sales were £958m; COVID-19 solutions contributed about four percentage points to Group turnover growth.
- Profit drivers: Adjusted operating profit benefited from COVID-19 solutions, Pharmaceutical growth, cost controls and restructuring savings. Offsets included lower Shingrix sales, higher vaccine and Consumer Healthcare supply-chain costs, and increased R&D investment. Adjusted R&D expenditure was £4.776bn, 14.0% of turnover, up 8% CER.
- Cash and balance sheet: Year-end cash and cash equivalents were £4.274bn and liquid investments £61m. Total assets were £79.103bn, liabilities £57.761bn and equity £21.342bn. Operating cash flow fell partly due to exchange effects, higher receivables, RAR timing and separation costs. Capital expenditure on tangible and intangible assets was £2.931bn.
- Debt and liquidity: Net debt comprised £24.1bn gross debt less £4.3bn cash and liquid investments. The company stated it had sufficient working capital for present requirements and reported stable A/A2 long-term credit ratings. It reported £23.3bn of borrowings in its material cash requirements discussion; the balance-sheet borrowing totals differ in presentation and should be checked against the notes.
- Dividend: The 2021 dividend was 80p per share, unchanged from 2020. The company described an expected 2022 Group-equivalent distribution of about 52p per share, subject to the Consumer Healthcare company’s board decisions after separation, and expected new GSK to declare 45p per share for 2023.
Material changes, outlook and risks
- Reported profit declined substantially versus 2020, primarily reflecting the absence of the prior-year Horlicks and other Consumer Healthcare disposal gain. Adjusted EPS was broadly flat at actual exchange rates, with CER growth.
- GSK was preparing to separate Consumer Healthcare into Haleon, with completion targeted for mid-2022 and subject to shareholder and other conditions. GSK said the separation programme targeted £0.8bn annual savings by 2022 and £1.0bn by 2023, with estimated total programme costs of £2.4bn. Separation costs in 2021 were £314m; estimated total separation costs were £600m–£700m, excluding transaction costs.
- On February 1, 2022, ViiV Healthcare agreed a global settlement with Gilead concerning Biktarvy patent litigation. Gilead paid $1.25bn after year-end and agreed to 3% royalties on specified US sales through October 2027. The agreement affected year-end estimates of ViiV contingent consideration and the Pfizer put-option liability.
- COVID-19 affected demand for routine vaccines and other products, clinical trials, supply and operations; future effects remained uncertain. GSK also cited inflation and supply-chain pressures, cyber and data-security threats, product quality and patient safety, regulatory and pricing risks, litigation, tax uncertainty, and risks to R&D and product launches.
- GSK was monitoring Russia’s invasion of Ukraine and warned that sanctions, retaliation and wider geopolitical or economic effects could adversely affect its business.
- Contingent consideration was a significant obligation: £6.076bn at year-end, including £5.559bn related to Shionogi and ViiV; £958m was expected to be paid within one year. The company made £826m of cash payments to Shionogi in 2021.
- Management’s adjusted measures exclude specified amortisation, impairments, restructuring, transaction, legal, divestment and separation items. These are non-IFRS measures and are not a substitute for reported IFRS results.
Important facts for investors to verify
- Reconcile reported and adjusted earnings, especially the 2020 disposal gain and 2021 tax credit from revaluation of deferred tax assets.
- Review assumptions and sensitivity around the £5.559bn ViiV/Shionogi contingent consideration liability, Gilead settlement royalties and the Pfizer put option.
- Assess US returns, rebates and allowances estimates: the combined US Pharmaceuticals and Vaccines year-end accrual was £5.044bn in the Group discussion; the audit report cites $6.795bn. Confirm the currency, scope and reconciliation in the audited notes.
- Track cash conversion, capital spending, debt repayments and the sizable contractual commitments, including £12.1bn of intangible-asset commitments, much of which depends on future milestones.
- Confirm the conditions, timing, costs and expected financial and dividend effects of the Haleon separation; expected distributions remain subject to board decisions and completion.
- Review the full disclosures on legal proceedings, tax disputes and provisions, as some potential exposures could not be reliably estimated.