GSK Plc annual report, Q4 FY2022

GSK plc — FY 2022 Form 20-F

Reporting period: Year ended December 31, 2022; filed March 10, 2023. This is an annual report, not a stand-alone Q4 filing. Financial statements are prepared under IFRS as issued by the IASB. Unless otherwise noted, amounts are in pounds sterling and comparatives are presented on a restated basis following the Consumer Healthcare demerger and share consolidation.

Business context and key performance

Following the July 18, 2022 demerger of Consumer Healthcare, GSK operates as a biopharmaceutical company focused on specialty medicines, vaccines and general medicines. The filing reports two segments: Commercial Operations and Total R&D.

MetricFY 2022Comparison / context
Turnover£29.324bnUp 19% at actual exchange rates (AER) and 13% at constant exchange rates (CER).
Total operating profit, continuing operations£6.433bn2021: £4.357bn; up 48% AER and 31% CER.
Adjusted operating profit£8.151bn2021: £6.493bn; up 26% AER and 14% CER.
Operating marginsTotal: 21.9%; adjusted: 27.8%Adjusted margin was up 1.5 percentage points AER and 0.3 points CER.
Profit after tax, continuing operations£4.921bn2021: £3.516bn.
Adjusted profit after tax / adjusted EPS£6.220bn / 139.7pAdjusted EPS was up 27% AER and 15% CER from 110.3p.
Total profit after tax / total EPS£15.621bn / 371.4pIncludes £10.7bn profit from discontinued operations, substantially reflecting the demerger; not representative of continuing earnings.
Cash from continuing operations / free cash flow£7.944bn / £3.348bnCash from operations rose from £7.249bn; free cash flow rose from £3.301bn.
Net debt£17.197bnDown from £19.838bn; gross debt £21.0bn and cash and liquid investments £3.8bn.

Revenue mix and material changes

  • Specialty Medicines: £11.269bn, up 37% AER and 29% CER. Xevudy contributed £2.309bn; excluding Xevudy, specialty sales were £8.960bn, up 23% AER and 15% CER. HIV, immunology and respiratory products also grew.
  • Vaccines: £7.937bn, up 17% AER and 11% CER, led by Shingrix (£2.958bn, up 72% AER and 60% CER) and meningitis vaccines. Pandemic vaccine/adjuvant sales fell sharply against the prior-year comparator.
  • General Medicines: £10.118bn, up 5% AER and 1% CER. Trelegy and the recovery in antibiotic demand offset generic competition.
  • COVID-19 solutions contributed approximately 3 percentage points to commercial turnover growth. Low-margin Xevudy sales weighed on adjusted operating profit growth and margin.
  • The Gilead settlement generated $1.25bn upfront for ViiV Healthcare, recognised as approximately £922m of income, plus a 3% royalty on specified US sales through October 2027.

Cash, debt, liquidity and distributions

  • Free cash flow was £3.348bn. Management cited higher operating profit and favorable collections, partly offset by Xevudy profit-share payments, pension contributions, contingent consideration payments, tax, capital expenditure and inventory growth.
  • Net debt declined by £2.6bn, reflecting free cash flow and the demerger-related reduction in debt, partly offset by acquisitions, shareholder dividends and adverse currency effects. Borrowings were £20.1bn; £3.8bn was repayable within one year.
  • GSK stated it had sufficient working capital for present requirements and expected long-term operating cash generation to fund operating costs, debt service, normal capital expenditure and routine obligations, subject to principal risks.
  • FY 2022 dividends totaled 61.25p per share after the share consolidation, compared with 100p in 2021. The stated policy is a progressive dividend guided by a 40%–60% payout ratio through the investment cycle; the filing cites an expected 2023 dividend of 56.5p per new ordinary share.

Outlook, commentary and risks

  • Based on known government contracts, GSK did not anticipate significant COVID-19 pandemic-related sales or operating profit in 2023. It expected this to reduce turnover growth by about 9% and adjusted operating profit growth by 6%–7% versus the comparison base; further variant-related opportunities remained uncertain.
  • Management linked adjusted earnings growth to sales, mix, lower inventory adjustments and higher royalty income, while noting increased launch investment, supply-chain, freight and distribution costs, and higher non-controlling interests.
  • Key exposures include product safety and quality, regulatory compliance, litigation and investigations, research and clinical-development execution, commercial and pricing pressure, data privacy and cybersecurity, supply continuity, inflation, foreign exchange and tax uncertainty.
  • Climate risks include extreme weather and water stress affecting supply, evolving environmental rules and costs, and the need for successful R&D and regulatory approval to reduce emissions from metered-dose inhalers.
  • The demerger leaves GSK smaller and less diversified, with greater exposure to pharmaceuticals and vaccines; the value of its retained Haleon investment is subject to market movements. GSK retained a 6.0% holding, while Scottish limited partnerships held 7.5% to support UK pension funding.
  • Legal matters include product-liability, patent, antitrust and other disputes. The auditor identified Zantac litigation as a significant legal matter; the reported provision for legal and other disputes was £218m, but potential outcomes and any additional exposure were not reliably estimable from the disclosed information.
  • The auditor highlighted estimation uncertainty in the £5.890bn ViiV-Shionogi contingent consideration liability, US returns-and-rebates accruals, intangible-asset valuations, uncertain tax positions and the Consumer Healthcare demerger. Management and Deloitte reported effective internal control over financial reporting; the financial-statement audit opinion was unqualified.

Important facts for investors to verify

  • Separate recurring continuing-operations performance from the demerger gain, Gilead settlement income, fair-value movements and other adjusting items; reconcile total and adjusted results.
  • Assess how much 2022 growth depended on Xevudy, pandemic-related sales and the Gilead payment, and compare with the stated 2023 COVID-related headwinds.
  • Review assumptions behind ViiV contingent consideration, including product sales forecasts, discounting and cash payments, and the £1.093bn Pfizer put-option liability.
  • Track US rebates and returns estimates, tax disputes, Zantac and other legal proceedings, and any changes to provisions or contingent exposures.
  • Confirm debt maturities, acquisition-related obligations, milestone commitments and pension funding needs; the disclosed £10.659bn intangible-asset commitments are maximum potential milestone amounts, not risk-adjusted forecasts.
  • Evaluate dividend sustainability against free cash flow, investment needs and the post-demerger business profile; review the retained Haleon stake and related pension-funding arrangements.