Haleon Q1 2024 Trading Statement

Solid start to the year demonstrating strenght of the portfolio

• Organic revenue growth² +3.0% with +5.0% price and (2.0)% volume/mix
• Reported revenue declined 2.2% to £2,919m, with FX impact of (4.6)% and M&A³ of (0.6)%
• Power Brands +5.2% organic revenue growth with particular strength from Sensodyne, parodontax, Polident/Poligrip and Centrum
• Strong performance in both Oral Health and VMS underpinned by successful innovation and good in-market execution
• Price benefitted from both carry-forward price and incremental price taken during the quarter
• Volume/mix declined, mainly as expected due to lapping tough prior year comparatives of Fenbid and Contac in China, Advil in Canada and a strong cold and flu season in Q1 2023, as well as some US retailer inventory adjustments in Q1 2024

Strong organic profit growth driven by positive operating leverage

• Organic profit growth² of +12.8% underpinned by strong operating leverage from gross margin expansion and cost efficiencies, with strong growth in A&P
• Adjusted operating profit margin² 24.2%, up 220bps organically; FX impact of (80)bps and M&A³ of (30)bps
• Reported operating profit +4.5% to £655m 

Continued progress to be more agile and competitive

• During Q1, Haleon purchased 102m ordinary shares for c. £315m in connection with Pfizer’s global offering as part of the £500m allocation to share buybacks which we expect to complete in 2024
• Productivity programme remains on track and additionally, we plan to close our Maidenhead facility

Reiteration of FY 2024 guidance

• Organic revenue growth expected to be 4-6%
• Positive operating leverage to deliver organic operating profit growth ahead of organic revenue growth

Brian McNamara, Chief Executive Officer, Haleon said:

“First quarter trading was solid and in line with guidance shared when we reported FY 2023 results. Organic revenue growth of 3.0% was impacted by lapping tough comparatives in the prior year particularly in Respiratory Health and Pain Relief. Despite this, strong innovation combined with successful execution of our go-to-market strategy underpinned performance in our Power Brands which grew 5.2% with particularly strong performance in our Oral Health and VMS portfolio.

Regionally, whilst growth was held back in the US from inventory adjustments by some retailers, Haleon’s consumption in this region was strong, up mid-single digit and ahead of the market. As such, we remain confident of delivering on our FY guidance.

During the quarter, we were also pleased to have bought back c. £315m of our shares in connection with Pfizer’s global offering. This reflects the great progress to date we have made deleveraging since listing and is consistent with our capital allocation priorities.

Looking ahead, we continue to expect the operating environment to remain challenging. However, we are confident that we are well positioned to deliver on both guidance for 2024 and over the medium term.”

2024 Outlook 

For FY 2024, the Company continues to expect:

• Organic revenue growth of 4-6%
• Organic operating profit growth ahead of organic revenue growth
• Net interest expense of c. £320m
• Adjusted effective tax rate of 24-25%

Other considerations for FY 2024:

• As previously guided, the disposals of Lamisil and ChapStick will dilute FY 2024 revenue and adjusted operating profit by c.1% and c.3% respectively. We expect the disposal of ChapStick to complete in May 2024.
• The proposed closure of our manufacturing facility in Maidenhead, UK will result in a more competitive business. This is expected to result in a total restructuring cost of c. £90m between FY 2024 and FY 2026, the majority of which is non-cash, and will deliver cost savings once completed.
• Whilst we do not guide specifically on foreign exchange, assuming exchange rates as at 31 March 2024 were to hold for the rest of 2024, the estimated unfavourable translational foreign exchange impact on FY 2024 results would be c.(2)% on revenue and c.(3)% on adjusted operating profit. This is unchanged from commentary shared at FY 2023 results.