SmithKline Beecham's Financial Performance in 1998: Key Takeaways and Statistics

Strategic Insights -

The unaudited results for SmithKline Beecham's nine months ended September 30, 1998 show significant changes in accounting policies and financial performance. The company adopted Financial Reporting Standard 10, "Goodwill and Intangible Assets," which reduced the amortization period for purchased goodwill from 40 years to 20 years. This change resulted in a reduction of £9 million in operating profit for the third quarter of 1998 and £26 million for the first nine months.

The company also changed its policy on intangible fixed assets and shareholders' funds, eliminating the revaluation reserve and reducing tangible fixed assets and shareholders' funds by £85 million at December 31, 1996, £118 million at September 30, 1997, and £124 million at December 31, 1997. The company's earnings per share for the third quarter of 1997 and the first nine months of 1997 were reduced by 0.2 pence and 0.5 pence, respectively.

In terms of segment information, the company reported significant sales growth in its consumer healthcare and pharmaceutical product sales. The company's new products, including Famvir, Coreg, Hycamtin, Kytril, Requip, Paxil, Havrix, Twinrix, and Infanrix, drove sales growth in the consumer healthcare segment.

The company's taxation policy was also updated, with an estimated effective tax rate of 27.0% for the year ended December 31, 1998. The company's consolidated shareholders' funds were affected by ongoing lawsuits related to billing and marketing practices of its clinical laboratory business.

Key Takeaways:

  • SmithKline Beecham adopted Financial Reporting Standard 10, "Goodwill and Intangible Assets," reducing the amortization period for purchased goodwill from 40 years to 20 years, resulting in a £9 million reduction in operating profit for the third quarter of 1998 and £26 million for the first nine months.
  • The company eliminated the revaluation reserve and reduced tangible fixed assets and shareholders' funds by £85 million at December 31, 1996, £118 million at September 30, 1997, and £124 million at December 31, 1997.
  • The company's earnings per share for the third quarter of 1997 and the first nine months of 1997 were reduced by 0.2 pence and 0.5 pence, respectively.
  • The company reported significant sales growth in its consumer healthcare and pharmaceutical product sales, driven by new products such as Famvir, Coreg, Hycamtin, Kytril, Requip, Paxil, Havrix, Twinrix, and Infanrix.
  • The company's taxation policy was updated, with an estimated effective tax rate of 27.0% for the year ended December 31, 1998.
  • The company's consolidated shareholders' funds were affected by ongoing lawsuits related to billing and marketing practices of its clinical laboratory business.

Statistics:

  • £9 million reduction in operating profit for the third quarter of 1998 due to the adoption of Financial Reporting Standard 10.
  • £26 million reduction in operating profit for the first nine months of 1998 due to the adoption of Financial Reporting Standard 10.
  • £85 million reduction in tangible fixed assets and shareholders' funds at December 31, 1996.
  • £118 million reduction in tangible fixed assets and shareholders' funds at September 30, 1997.
  • £124 million reduction in tangible fixed assets and shareholders' funds at December 31, 1997.
  • 27.0% estimated effective tax rate for the year ended December 31, 1998.
  • 27.6% effective tax rate for the first nine months of 1997.
  • 27.6% effective tax rate for the year ended December 31, 1997.

Sources:

  • SmithKline Beecham Notes to the Interim Financial Statement, September 30, 1998.
  • Financial Reporting Standard 10, "Goodwill and Intangible Assets."