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AstraZeneca PLC (AZN)

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Friday 06 March, 2015

AstraZeneca PLC

ASTRAZENECA REFINES ITS FINANCIAL REPORTING

RNS Number : 7428G
AstraZeneca PLC
06 March 2015
 



AstraZeneca REFINES ITS FINANCIAL REPORTING

in line with evolving business model

 

6 March 2015

 

AstraZeneca today announces an update to the presentation of its Statement of Comprehensive Income, which will see revenue from externalisation becoming more visible to enhance transparency for investors. The change is effective from 1 January 2015 and will be reported as part of the Company's first quarter financial results on 24 April 2015. The impact is presentational and therefore does not impact Reported or Core profit.

 

As previously outlined, AstraZeneca's business model includes an increasing level of externalisation activity to create value from the strong science that exists in the pipeline. This will benefit patients whilst sharpening further the focus on our main therapy areas - Respiratory, Inflammation & Autoimmunity; Cardiovascular & Metabolic Disease and Oncology. The Company's two biotech centres, the Innovative Medicines Unit and MedImmune, continue to increase R&D productivity. Consequently AstraZeneca will consider opportunities to out-licence technologies and potential new medicines to ensure these reach patients as quickly as possible.

 

The updated financial reporting structure reflects the Company's entrepreneurial approach and provides a clear picture of a growing additional revenue stream.

 

Historically, reported revenue reflected only product sales (formerly known as sales revenue), with externalisation revenue forming part of other operating income presented below cost of goods sold (COGS). From 1 January 2015 externalisation revenue, alongside product sales, contribute to total revenue, which is shown above COGS. Externalisation revenue includes development, commercialisation, partnership and out-licence revenue, such as royalties and milestone receipts, together with income from services or repeatable licences.

 

Income will be recorded as externalisation revenue when the Company has an ongoing interest in the product and/or it is repeatable business and there is no derecognition of an intangible asset. Disposals of assets and businesses, where AstraZeneca does not retain an interest, will continue to be recorded in other operating income.

 

The Company has updated its revenue accounting policy with effect from 1 January 2015 and the prior-year financial results will be restated accordingly. An illustration of the change to the presentation of prior-period Core financial performance is shown in the appendix. These numbers are unaudited and are indicative of the impact of the change in policy.

 

2015 Financial Guidance

To reflect the change outlined above, the Company today provides 2015 total revenue guidance. Total revenue is expected to decline by mid single-digit percent at constant exchange rates (CER). This is consistent with previous guidance stating that sales revenue was expected to decline by mid single-digit percent at CER. Core EPS guidance is unchanged and Core EPS is expected to increase by low single-digit percent at CER.

 

The Company also provides the following non-guidance information related to currency sensitivity: Based on current exchange rates1, total revenue is expected to decline by low double-digit percent. This is consistent with previous expectations stating an anticipated sales revenue decline of low double-digit percent. Core EPS is expected to be broadly in line with 2014. For additional currency sensitivity information, please see below:

 





Average exchange rates versus USD




Impact of 5% weakening in exchange rate versus USD ($m)2

Currency

 


Primary relevance


2014


YTD

Feb 20151


Change

%


Total revenue

 


Core operating  profit

 

EUR


Product sales


0.75


0.87


(13)


(194)


(119)

JPY


Product sales


105.87


118.55


(11)


(105)


(75)

CNY


Product sales


6.16


6.23


(1)


(113)


(48)

SEK


Costs


6.86


8.22


(16)


(5)


95 

GBP


Costs


0.61


0.66


(7)


(34)


104 

Other3










(213)


(123)














1Based on average daily spot rates YTD to the end of February 2015.

2Based on 2014 actual group currency exposures.

3Other important currencies include AUD, BRL, CAD, KRW and RUB.

 

 ENDS -


Appendix

 

Impact of Revenue Accounting Changes

 

All numbers shown below are at actual exchange rates in $m unless otherwise stated.

 


Core Q1 2013

Core Q2 2013

Core Q3 2013

Core Q4 2013

Core FY 2013


Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Product Sales

6,385 

6,385 

6,232 

6,232 

6,250 

6,250 

6,844 

6,844 

25,711 

25,711 

Externalisation Revenue

12 

47 

12 

12 

83 

Total Revenue

6,397 

6,385 

6,279 

6,232 

6,262 

6,250 

6,856 

6,844 

25,794 

25,711 












Cost of Sales

(1,136)

(1,136)

(1,105)

(1,105)

(1,103)

(1,103)

(1,289)

(1,289)

(4,633)

(4,633)












Gross Profit

5,261 

5,249 

5,174 

5,127 

5,159 

5,147 

5,567 

5,555 

21,161 

21,078 












Distribution

(77)

(77)

(76)

(76)

(81)

(81)

(72)

(72)

(306)

(306)

R&D

(963)

(963)

(1,040)

(1,040)

(1,061)

(1,061)

(1,205)

(1,205)

(4,269)

(4,269)

SG&A

(2,055)

(2,055)

(2,173)

(2,173)

(2,154)

(2,154)

(2,483)

(2,483)

(8,865)

(8,865)

Other Income

158 

170 

171 

218 

164 

176 

176 

188 

669 

752 












Operating Profit

2,324 

2,324 

2,056 

2,056 

2,027 

2,027 

1,983 

1,983 

8,390 

8,390 

 

 

All numbers shown below are at actual exchange rates in $m unless otherwise stated.

 


Core Q1 2014

Core Q2 2014

Core Q3 2014

Core Q4 2014

Core FY 2014


Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Restated

As

Formerly

Presented

Product Sales

6,416 

6,416 

6,454 

6,454 

6,542 

6,542 

6,683 

6,683 

26,095 

26,095 

Externalisation Revenue

49 

302 

69 

41 

461 

Total Revenue

6,465 

6,416 

6,756 

6,454 

6,611 

6,542 

6,724 

6,683 

26,556 

26,095 












Cost of Sales

(1,193)

(1,193)

(1,156)

(1,156)

(1,180)

(1,180)

(1,359)

(1,359)

(4,888)

(4,888)












Gross Profit

5,272 

5,223 

5,600 

5,298 

5,431 

5,362 

5,365 

5,324 

21,668 

21,207 












Distribution

(72)

(72)

(77)

(77)

(87)

(87)

(88)

(88)

(324)

(324)

R&D

(1,098)

(1,098)

(1,208)

(1,208)

(1,275)

(1,275)

(1,360)

(1,360)

(4,941)

(4,941)

SG&A

(2,317)

(2,317)

(2,460)

(2,460)

(2,486)

(2,486)

(2,953)

(2,953)

(10,216)

(10,216)

Other Income

167 

216 

176 

478 

187 

256 

220 

261 

750 

1,211 












Operating Profit

1,952 

1,952 

2,031 

2,031 

1,770 

1,770 

1,184 

1,184 

6,937 

6,937 

 

 


NOTES TO EDITORS

 

About AstraZeneca

AstraZeneca is a global, innovation-driven biopharmaceutical business that focuses on the discovery, development and commercialisation of prescription medicines, primarily for the treatment of cardiovascular, metabolic, respiratory, inflammation, autoimmune, oncology, infection and neuroscience diseases. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide.

 

CONTACTS

 

Media Enquiries

 


Esra Erkal-Paler

+44 20 7604 8030

(UK/Global)

Vanessa Rhodes

+44 20 7604 8037

(UK/Global)

Ayesha Bharmal

+44 20 7604 8034

(UK/Global)

Jacob Lund

+46 8 553 260 20

(Sweden)

 

Investor Enquiries

 


Thomas Kudsk Larsen

+44 20 7604 8199

mob: +44 7818 524185

Karl Hård

+44 20 7604 8123

mob: +44 7789 654364

Eugenia Litz

+44 20 7604 8233

mob: +44 7884 735627

Craig Marks

+44 20 7604 8591

mob: +44 7881 615764

Christer Gruvris

+44 20 7604 8126

mob: +44 7827 836825

 

                                                                                                      

                                                                   

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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