# Haleon delivers double digit organic revenue growth

- Link: https://www.directorstalkinterviews.com/haleon-delivers-double-digit-organic-revenue-growth/4121124569
- Published: 2023-08-02T07:45:56+01:00
- Author: Amilia Stone

**Haleon plc **(LON:HLN) has announced its 2023 half year results for the six months
ended 30 June 2023 (unaudited).

| **Strong growth, driven by price with another quarter of positive volume mix** | 
| ● | H1 revenue +10.6% to £5,738m, organic growth^(1) +10.4% with 7.5% price and 2.9% volume/mix | 
| ● | Power Brands +10.1% organic growth^(1); with _Sensodyne_, _parodontax_, _Panadol_, Denture Care and _Otrivin_ standouts | 
| ● | 55% of our business gained or maintained market share^(2) year to date |

| **Increased operating profit given positive operational leverage** | 
| ● | H1 Adjusted operating profit^(1) increased 8.9% constant currency to £1,271m | 
| ● | H1 Adjusted operating profit margin^(1) 22.2%, down 40bps constant currency | 
| ● | H1 Reported operating profit increased 26.8% to £1,141m |

| **Strong execution in delivering on deleveraging commitment     ** | 
| ● | H1 net cash flow from operating activities was £749m with Free cash flow of £369m | 
| ● | Net debt at 30 June 2023 was £9,525m, representing 3.4x last 12 months net debt/adjusted EBITDA^(1) | 
| ● | Agreed disposal of Lamisil for aggregate consideration of £235m; we expect total cash realised in connection with the disposal to be around £250m^(4). Completion expected in Q4. | 
| ● | Interim dividend declared of 1.8 pence per share |

| **Well placed for future growth, updated guidance** | 
| ● | FY2023 organic revenue growth^(1) now expected to be 7-8% | 
| ● | FY2023 adjusted operating profit growth of 9-11% constant currency | 
| ● | Well placed to deliver on medium term guidance |

> **Brian McNamara, Chief Executive Officer, Haleon said:**
> _“One year from listing, we are very pleased with Haleon’s first half results.
> We delivered double digit organic revenue growth, with both price and positive
> volume mix. Encouragingly this trend was consistent across the first and second
> quarters. Our growth was also broad based across regions and categories. Performance
> in the first half also remained competitive with c.55% of our business gaining
> or maintaining share^(2), reiterating the resilience of the brand portfolio._
> _Operating results constant currency were strong, underpinning the increase in
> full year organic sales growth and adjusted operating profit constant currency
> guidance shared today. At the same time, we will continue to invest in the business
> for long term sustainable growth._
> _Looking ahead, whilst we continue to expect a challenging environment given further
> pressure on consumer spending and global geopolitical and macroeconomic uncertainties,
> we remain confident in the resilience of Haleon’s incredible portfolio of category
> leading brands. Our strategy is delivering, demonstrated with the strength of 
> our results, and we remain confident that Haleon is well positioned for the rest
> of the year, as well as over the longer term.”_

1.     Organic revenue growth, Adjusted operating profit, Adjusted operating profit
margin, Adjusted diluted earnings per share and Free cash flow are
non-IFRS measures;
definitions and calculations of non-IFRS measures can be found on pages 34 to 43

2.     Market share statements throughout this report are estimates based on the
Group’s analysis of third party market data of revenue for ytd May 2023 including
IQVIA, IRI and Nielsen data. Represents % of brand-market combinations gaining or
maintaining share (this analysis covers c.90% of Haleon’s total revenue)

3.     The commentary in this announcement contain forward-looking statements and
should be read in conjunction with the cautionary note on page 34

4.     This includes an additional c.£15m expected to be realised from the release
of working capital allocated to Lamisil

| **Adjusted results****^(2)** | **Reported results** | 
| Six months ended 30 June | ** 2023** | **vs 2022** | ** ** | ** 2023** | **vs 2022** | 
| Organic revenue growth |    | 10.4% | Revenue | £5,738m | 10.6% | 
| Adjusted operating profit | £1,271m | 8.9%^(3) | Operating profit | £1,141m | 26.8% | 
| Adjusted operating profit margin | 22.2% | (40)bps^(3) | Operating profit margin | 19.9% | 260 bps | 
| Adjusted diluted earnings per share | 8.5p | (8.3)%^(3) | Diluted earnings per share | 7.4p | 32.1% | 
| Free cash flow | £369m | £(184)m | Net cash flow from operating activities | £749m | £69m |

1.     The commentary in this announcement contain forward-looking statements and
should be read in conjunction with the cautionary note on page 34.

2.     Organic revenue growth, Adjusted operating profit, Adjusted operating profit
margin, Adjusted diluted earnings per share and Free cash flow are
non-IFRS measures;
definitions and calculations of non-IFRS measures can be found on pages 34 to 43.

3.     Change at constant currency.

**Outlook**

| For FY 2023 the Company now expects:
● Organic revenue growth to be 7-8%. This compares with “towards the upper end of the 4-6% range” as shared in the Q1 Trading Statement on 3 May 2023.● Adjusted operating profit growth to be 9-11% constant currency● Net interest expense of c.£350m● Adjusted effective tax rate of 23-24% |

Dividend

Consistent with our previous guidance, the Board has declared a H1 2023 interim 
dividend of 1.8 pence per ordinary share.

This interim dividend is expected to be paid on 5 October 2023 to holders of ordinary
shares and US American Depositary Shares (ADS) on the register as of 25 August 2023(
the record date). The ex-dividend date is expected to be 24 August 2023. For ordinary
shareholders wishing to participate in the Dividend Reinvestment Programme (DRIP),
the election deadline for the DRIP is 14 September 2023.

Foreign exchange

Whilst we do not guide specifically on foreign exchange, translational foreign exchange
based on spot rates as at 30 June 2023 and using FY2022 results as a base, would
have a negative impact of c.4% on revenue and negative impact of c.6.5% on Adjusted
operating profit.

**Presentation for analysts and shareholders:**

A recorded results presentation by Brian McNamara, Chief Executive Officer, and 
Tobias Hestler, Chief Financial Officer, will be available shortly after 7:00am 
BST (8:00am CET) on 2 August 2023 and can be accessed at www.haleon.com/investors.
This will be followed by a Q&A session at 10:00am BST (11:00am CET).

For analysts and shareholders wishing to ask questions, please use the dial-in details
below which will have a Q&A facility:

| UK | 0800 358 1035 | 
| US | +1 646 664 1960 | 
| All other: | +44 204 587 0498 | 
| Passcode: | 01 70 24 |

An archived webcast of the presentation will be available later on the day of the
results and can be accessed at https://www.haleon.com/investors

**Financial reporting calendar**

| ** ** | 
| Q3 2023 trading statement | 2 November 2023 | 
| FY 2023 results | February 2024 |

**Guiding strategy**

Haleon is led by its purpose to deliver better everyday health with humanity. 

A clear approach to deliver on our growth ambitions is built on a world class portfolio
of category leading brands in a growing sector across an attractive geographic footprint.
This leverages competitive capabilities combining deep human understanding with 
trusted science, brand building and innovation, leading route to market and leading
digital capabilities.

Haleon aims to outperform through a focus on increasing household penetration and
capitalising on new and emerging growth opportunities across channels and geographies,
underpinned by a strong focus on execution and financial discipline to improve profitability
and sustain reinvestment in growth. Critically, running a responsible business, 
which is integral to all that we do, allows Haleon to reduce risk and support performance.

Taken together, over the medium term, this is expected to drive organic annual sales
growth of 4-6%, sustainable moderate adjusted operating margin expansion constant
currency per annum. All of this, whilst supporting our investment for growth, delivering
consistent high cash conversion and maintaining a focus on our clear and disciplined
capital allocation policy.

Business review – Maximising growth

The strength of Haleon’s portfolio resulted in 10.4% organic growth during H1 2023,
with the growth of Power Brands broadly in line with this at 10.1%. Additionally,
Local Growth brands outperformed in H1 2023, increasing 14.1%, supported by the 
strong growth in China by _Fenbid_ and _Contac_. Throughout the half, Haleon’s strategy
continued to deliver strong performance, underpinned by the Company’s ability to
leverage its deep human understanding combined with its trusted science capabilities.

Haleon continued to make strong progress against its four key strategic pillars 
during H1 2023.

**Leading portfolio – performance driven by innovation, brand building and geographic
and channel expansion**

Across the portfolio for the year to date (to the end of May 2023), 55% of Haleon’s
business gained or maintained market share with momentum improved in recent months.

In **Oral Health**, where revenue increased 10.5% and organic revenue grew 10.8%,
Haleon sustained its track record of outperformance, driven by double digit growth
by the Power Brands, and all three gained share. This very strong growth was driven
by successful brand building campaigns and activation, innovation and continued 
geographic expansion. There were a number of launches in the first half, particularly
leveraging our trusted science capabilities, including _Sensodyne Pronamel Active
Shield_ which uses our most advanced enamel protection technology. This product 
builds on existing Pronamel technology by optimising the formulation to drive more
fluoride into enamel, creating a remineralised surface that improves resistance 
to acidity. Having launched in the first half in the US, this innovation will be
rolled out in a number of markets during the second half of the year. We also launched
_parodontax Active Gum Repair_ which has been clinically proven to help bleeding,
swollen and inflamed gums to repair, reversing early gum problems. Early results
show strong consumer uptake. Additionally, we continued to see strong success from
previous launches such as _Polident Max Hold Plus_ which we launched in 2022 driving
strong growth of fixatives in the first half with consumption growing faster than
the market, and now present in 20 markets.

In **Vitamins, Minerals and Supplements** revenue was flat and declined 0.5% organically.
As expected, the tough comparatives from capacity coming on stream and subsequent
re-piping in the prior year impacted results as did the change in consumer behaviour
in the immunity subcategory, particularly in the US, as consumers became less concerned
about COVID-19.  _Centrum_ organic growth in the first half increased low-single
digit overall, driven by strength in EMEA and LatAm and to a lesser extent in Asia
Pacific. Haleon continued to leverage its trusted science focus through the clinical
studies completed in 2022 and earlier this year on _Centrum Silver_, which demonstrated
positive results on cognitive function of adults 65 years and older, thereby providing
a new claim and activation for the product. During the half, we activated this claim
across a number of markets leading to double digit growth and market share gains
in the multi-vitamin segment in the US and China.

We also continued to expand our _Centrum_ offering to new markets. Having launched
_Centrum_ in India through the e-commerce channel in October 2022 with a campaign
to build awareness around multivitamin deficiency, we further expanded the portfolio
to include _Benefit Blends_. _Centrum_ remained the number one multivitamin on Amazon
in India (by revenue), where 70% of new _Centrum_ consumers are also new to the 
multivitamin subcategory. Similarly in Egypt, where we launched the brand in November
2022, Haleon continued to drive further market share gains helped by strong awareness
campaigns using both traditional and non-traditional channels.

Haleon remains focused on using its unique consumer insight to evolve delivery formats
and deliver new use occasions to make it easier for consumers to use our products.
In the US in Q2 2023, Haleon launched _Emergen-C crystals_, a ‘no-water needed’ 
solution delivering key immune-supporting nutrients for adults and children which
has seen strong initial consumer feedback.

**In Pain Relief,** revenue increased 12.6% and was up 12.9% organically. _Fenbid_
and _Panadol_ were standout performers.

_Fenbid_ sales more than doubled, driven by the cessation of selling restrictions
following the end of COVID-19 lockdowns in China. _Panadol_ benefited from exceptional
growth in EMEA and LatAm as a result of the success of the new ‘Release starts here’
campaign, which leverages the overall brand franchise at the same time as addressing
specialist need states such as migraine, body pain, night and headache.

In line with our purpose and strategy to identify and support new and emerging health
trends, we launched natural variants across a number of markets to expand our reach,
as our natural launches are designed to engage with a younger consumer base. Recent
launches included _Panadol PanaNatra_ which we launched in Australia with strong
early results providing a platform for future innovation.

Haleon also launched _Voltaren 24 hour medicated patch_ in a number of markets which
delivered 60% incremental new sales and gained leading market share in the 24 hour
patch segment. In addition, we further extended the range of _Advil Dual Action_
to Back Pain, the third most common pain indication, and an underserved consumer
need with only 20% of consumers currently “very satisfied” with current back pain
treatments. The product has received positive early feedback with convenience, value
and back pain efficacy highlighted by users.

In **Respiratory Health** revenue increased 22.8% and organic revenue was up 22.0%.
This growth was largely delivered in the first quarter given the strong cold and
flu season and by growth in China of _Contac_ following the end of COVID-19 lockdowns.
Cold and flu added 2% to the Group’s first half organic sales. ** **

_Theraflu_ growth was strong, supported by successful innovation as well as strong
execution in market.  _Theraflu Max+_ saw particularly strong growth in its markets
and is now c.25% of _Theraflu_ sales in the US. Beyond this, we continued to see
strong uplift from natural products launched in previous years, such as _Theraflu
ProNaturals_.

In allergy, we enhanced our offering in allergy with _Flonase Nighttime Allergy 
Relief_, providing up to six hours relief from night time allergy symptoms. We also
expanded our _Robitussin_ range with _Robitussin Medi-Soothers_, a dual-action liquid-
filled lozenge that soothes sore throats and treats coughs.

**Digestive Health and Other** saw 8.6% revenue growth and organic revenue growth
of 7.7%. Revenue in this category is split across three areas, c.50% Digestive Health,
c.25% Skin Health and c.25% Smoking Cessation brands. Broad based growth across 
all of the subcategories supported performance in the first half.

We strengthened our position in _Tums_ in the US and grew household penetration 
within the strategic growth segment of young consumers.

We also rolled out a natural proposition of _Fenistil_ across Central Eastern Europe
to bring new users into the itch relief category.

**Innovation accelerating growth**

The focus on innovation to accelerate growth continued and we strengthened the portfolio
with new launches. During the year, locally relevant propositions were launched 
across several markets, targeting a younger consumer base for whom relevance is 
increased with natural based propositions.  We launched _Tums + Sleep_ in the US,
a melatonin-containing chewy bite product that addresses heartburn and helps consumers
fall asleep. In India, we targeted younger consumers to _Eno_ through _Eno Chewy
Bites_ which we launched in June through our online channel.

**Marketing effectiveness**

Haleon Advertising and Promotion (A&P) spend was up 4.0% at constant currency for
the half and up 4.7% AER, with spend equally split between offline and online media
channels. Importantly, consumer facing A&P spend excluding Russia was up 8.0% constant
currency for the half.

Marketing to Healthcare professionals strengthened with Haleon’s HealthPartner portal,
an online hub for healthcare professionals launched in 2019 in one market and now
scaled globally to 50 markets. During the first half, we scaled more engagements
with this platform and know from our analytics this helps secure more recommendations.
A recent study in the US showed that experts who have engaged on the portal recommend
our toothpaste about 30% more than those who haven’t.

Beyond this, we continued to roll out _Otrivin “Actions to Breathe Cleaner”_ campaign
where Haleon collects pollution by-products and uses them to make certified non-
toxic pencils for underprivileged children in India. This initiative has cleaned
over 8 billion cubic feet of air to date and driven over 240m impressions through
earned media and won a number of marketing awards including Campaign of the Year
and Gold Award (environmental category) at the Campaign PR Awards Asia.

**Increased channel penetration**

Within channels, there remains an opportunity for increased e-commerce penetration.
e-commerce represented 9% of Haleon’s sales year to date. Improved content, optimised
media, increased investment in high traffic events such as China contributed to 
growth. In China, one of Haleon’s largest e-commerce markets, sales grew double 
digit with strong _Sensodyne_ performance during the 618 shopping festival.   

**Maintain strong execution and financial discipline**

We fuel our growth agenda through strong execution and disciplined cost management.
In combination with sales growth, this approach enables us to free up resources 
for reinvestment, while creating value for our stakeholders.

Haleon continued to focus on driving value from third-party expenditure and offset
headwinds from input prices and commodity inflation through a combination of forward
buying, value engineering and new supplier introductions.

Haleon managed to largely offset inflationary cost pressures in the half through
a combination of pricing and other initiatives. However, this combined with transactional
foreign exchange losses resulted in adjusted gross profit up 9.1% constant currency
at £3.6bn and adjusted gross profit margin across the business down 70bps constant
currency at 62.3%.

Additionally, initiatives were put in place to ensure Haleon was able to meet demand
from consumers. For example, in China, _Fenbid_ and _Contac_ saw strong growth following
the lifting of COVID-19 related restrictions towards the end of 2022 despite tight
labour conditions arising from COVID-19 outbreaks. Haleon was able to double its
manufacturing output at its Tianjin facility to ensure adequate supplies of these
products to Chinese consumers and hospitals. Strong collaboration with partners 
ensured raw material supply to our facility.

Across the business, Haleon also undertook SKU rationalisation and improved logistics
productivity through warehousing and outbound freight consolidation which helped
to partially offset freight and distribution cost inflation. Simultaneously, the
business continued its insourcing initiatives, improved return on investment on 
promotional spend and optimised price-pack architecture across the portfolio.

During the half, we made good progress on our programme to increase agility and 
productivity across the business, with implementation now underway. This is expected
to result in annualised gross cost savings of c. £300 million over the next three
years, with the benefits largely expected in FY 2024 and FY 2025.

Separately, consistent with our strategy to be proactive in managing our portfolio,
Haleon reached an agreement with Karo Healthcare AB for the disposal of our rights
to Lamisil topical for a total consideration of £235 million. Including working 
capital to be released, the total cash realised from the disposal is expected to
be around £250 million. This disposal will also simplify Haleon’s portfolio and 
allow us to reallocate resources to other drivers of Haleon’s growth. The transaction
is expected to complete in Q4 2023. Proceeds from the disposal will be used to pay
down debt, underpinning our confidence to de-lever to net debt/Adjusted EBITDA below
3x during 2024.

In July, it was announced that Haleon had reached a licensing agreement with Futura
Medical to exclusively commercialise the first FDA approved topical erectile dysfunction(
ED) treatment for OTC use in US.

At the demerger in July 2022, Haleon had net debt of £10,707m, representing leverage
of around 4x net debt/Adjusted EBITDA. Strong cash generation and Adjusted EBITDA
growth since then, resulted in Haleon closing the first half with leverage of 3.4x.
Net debt at 30 June 2023 stood at £9,525m. As debt is largely matched to the regions
where profit is earned, there is a natural hedge on foreign exchange movements over
time.

**Run a responsible business**

Running a responsible business is one of our strategic priorities. We deliver our
strategy through three interconnected focus areas: our commitment to making everyday
health more inclusive, reducing our environmental impact, and operating with ethical,
responsible, and transparent behaviours and standards of conduct. In March, the 
Board established an Environmental & Social [Sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
Committee to focus on this important area for Haleon.

_Progressing against existing environmental targets_

We aim to reduce our Scope 3 carbon emissions from source to sale by 42% by 2030,
based on a 2020 baseline. To achieve this, we are working with our suppliers to 
accelerate their transition to renewable electricity, since purchased goods and 
services account for 56% of Haleon’s carbon emission footprint across Scope 1, 2
and 3. We held our first Supplier Sustainability Summit as Haleon with approximately
200 attendees, to share more about our Responsible Business goals and set clear 
expectations with our suppliers.  

We are also working to make our packaging more sustainable, including our aim to
reduce our use of virgin petroleum-based plastic by 10% by 2025, and a third by 
2030. As part of this effort, we are exploring the use of pulp-based alternatives
to plastic. We are now working with the Bottle Collective to explore the feasibility
and co-development of cellulose-based technologies as alternatives to virgin petroleum-
based plastics for the packaging of consumer health products. The Bottle Collective,
led by PA Consulting and PulPac, has a mission to tackle single-use plastic waste
by industrialising a recyclable high-speed, low-cost Dry Molded Fiber bottle process.

We are on track for all product packaging to be recycle-ready by 2025 where safety,
quality and regulations permit. We continue to roll-out our recycle-ready toothpaste
tubes globally and by the end of this year we expect to have launched around 1 billion
tubes in market since our roll out began in 2021, two years ahead of our plan to
reach this milestone in 2025.

_Opportunity to make a difference with health inclusivity_

Haleon aims to empower 50 million people a year to be more included in opportunities
for better everyday health by 2025. Several examples in H1 2023 demonstrate the 
work Haleon brands are doing to translate this ambition into action. Through our
_Panadol_ brand, we’ve partnered with the Indonesian healthcare app Halodoc to set
up a mobile clinic, _Panadol Klinik Cekatan_. We’ve extended this programme to create
the _Panadol Pain Phone_, a telemedicine unit which connects health professionals
to people with limited healthcare access. Designed to bridge the distance between
rural communities and medical experts, the _Panadol Pain Phone_ provides a video
screen for face-to-face interactions, as well as sensors that measure metrics such
as heart rate, blood pressure, temperature, and oxygen levels.

_Voltaren_ in the US launched a campaign aimed at helping caregivers prioritise 
their own physical health and movement. The brand launched the ‘Acts of Care’ campaign,
based on the idea that when caregivers hear from a loved one, it increases their
overall wellbeing. Brain mapping shows a 36% increase in wellbeing in caregivers
after they hear from a loved one about their value. This was measured with Emotiv
EEG headsets, which measured well-being based on brain wave changes in levels of
stress, relaxation, excitement, engagement, and attention. The campaign website 
also has advice for caregivers, to support their own physical and mental health.

Our work to help improve health inclusivity is being recognised. The Health Inclusivity
Index was awarded Best Data Visualisation at this year’s Webby Awards, which honour
excellence on the Internet. Haleon supported Economist Impact in the publication
of the Health Inclusivity Index in 2022, which was recognised this year for demonstrating
best in class use of data visualisation by representing complex datasets in innovative,
visually appealing and easily comprehensible ways.

**Operational review**

Category performance

Revenue by product category for the six months ended 30 June 2022 and 2023:

| ** ** | **Revenue (£m)** | ** ** | **Revenue change (%)** |   | 
| ** ** | **2023** | **2022** | ** ** | **Reported** | **Organic**^(1) | ** ** | 
| Oral Health | 1,589 | 1,438 |  | 10.5% | 10.8% |  | 
| VMS | 816 | 816 |  | – | (0.5)% |  | 
| Pain Relief | 1,405 | 1,248 |  | 12.6% | 12.9% |  | 
| Respiratory Health | 839 | 683 |  | 22.8% | 22.0% |  | 
| Digestive Health and Other | 1,089 | 1,003 |  | 8.6% | 7.7% |  | 
| **Group revenue** | **5,738** | **5,188** | ** ** | **10.6%** | **10.4%** |  |

1.     Definitions and calculations of non-IFRS measures can be found on pages 34
to 43

All commentary below refers to organic revenue growth unless otherwise stated.

Key category performance was as follows:

Oral Health

Organic revenue growth of 10.8%, with all 3 Power Brands delivering robust growth
and up double digit. _Sensodyne_ was driven by growth in North America, Middle East&
Africa and India. _Parodontax_ benefitted from particularly healthy growth in Middle
East and Africa. Denture Care growth was driven by strong performance from innovations
such as _Polident Max Hold +._

VMS

Organic revenue slightly declined at (0.5)%. As expected, _Emergen-C_ declined double
digit in North America due to a tough comparative as a result of the COVID-19 Omicron
wave last year and as consumers changed behaviour in this category following normalisation
of conditions post COVID-19. _Centrum_ increased low-single digit due to a difficult
comparative from trade sell-in following added capacity coming on stream last year.
The brand was particularly strong in EMEA & LatAm, up double digit, and saw good
growth in Asia Pacific where it increased mid-single digit, which partly offset 
a decline in North America. _Caltrate_ increased mid-single digit driven by a similar
level of growth in China.

Pain Relief

Organic revenue growth of 12.9% largely driven by very strong growth from _Fenbid_
in China following the end of lockdowns in Q4 2022. _Advil_ grew mid-single digit
overall. _Panadol,_ up high-single digit, was underpinned by strong performance 
in Middle East & Africa, Australia and Central & Eastern Europe. _Voltaren_ increased
mid-single digit due to strength in the US, Central and Eastern Europe, Italy and
India.

Respiratory Health

Organic revenue increased 22.0% given a strong cold and flu season in the first 
quarter, combined with re-stocking in EMEA and LatAm, and North America given particularly
low inventory levels at the end of last year. Allergy sales increased mid-single
digit. _Theraflu_ and _Otrivin_ both increased double digit with strength in Central&
Eastern Europe and Middle East & Africa. _Contac_ sales almost doubled, driven by
growth in China following the end of lockdowns in Q4 2022.

Digestive Health and Other

Organic revenue increased 7.7% with Digestive Health up mid-single digit underpinned
by mid-teens growth in _Tums_ and _Benefiber_, and mid single digit growth in _Eno._
Smokers Health revenue increased mid-single digit and Skin Health brands increased
mid-single digit driven by _Fenistil_.

Geographical segment performance

Performance by geographical segment for the six months ended 30 June:

|  | **Revenue (£m)** | ** ** | **Revenue change (%)** | 
|  | **2023** | **2022** | ** ** | **Reported** | **Organic^(1)** | ** ** | **Price^(1)** | **Vol/Mix^(1)** | 
| North America | 2,046 | 1,873 |  | 9.2% | 4.7% |  | 4.7% | – % | 
| EMEA and LatAm | 2,323 | 2,069 |  | 12.3% | 14.9% |  | 13.3% | 1.6% | 
| APAC | 1,369 | 1,246 |  | 9.9% | 11.6% |  | 2.3% |   9.3% | 
| **Group** | 5,738 | 5,188 | ** ** | 10.6% | 10.4% | ** ** | 7.5% | 2.9% |

1.     Price and Volume/Mix are components of Organic Revenue Growth. Definitions
and calculations of non-IFRS measures can be found on pages 34 to 43.

Adjusted operating profit by geographical segment for the six months ended 30 June:

|    | **Adjusted operating
profit (£m)
 |   | YoY change | YoY constant currency^(1) | 
|  | 2023 | 2022 |   | 2023 | 2023 | 
| Group operating profit | 1,141 | 900 |  | 26.8% | 29.9% | 
| Reconciling items between adjusted operating profit and operating profit^(2) | 130 | 291 |  | (55.3)% | (56.0)% | 
| Group Adjusted operating profit | 1,271 | 1,191 |  | 6.7% | 8.9% | 
|  |  |  |  |  |  | 
| North America | 471 | 454 |  | 3.7% | (2.0)% | 
| EMEA and LatAm | 542 | 467 |  | 16.1% | 17.6% | 
| APAC | 318 | 300 |  | 6.0% | 9.7% | 
| Corporate and other unallocated | (60) | (30) |  | 100% | (13.3)% | 
| Group Adjusted operating profit | 1,271 | 1,191 |  | 6.7% | 8.9% |

1.     Definitions and calculations of non-IFRS measures can be found on pages 34
to 43.

2.     Reconciling items for these purposes are the Adjusting Items, which are defined
under “Use of Non-IFRS Measures”. A reconciliation between Operating profit and 
Adjusted operating profit is included under “Use of Non-IFRS Measures”.

Adjusted operating profit margin by geographical segment for the six months ended
30 June:

|    | **Adjusted operating
profit margin (%)
 |   | YoY change | YoY constant currency^(1) | 
|  | 2023 | 2022 |   | 2023 | 2023 |   | 
| North America | 23.0% | 24.2% |  | (1.2)% | (1.5)% |   | 
| EMEA and LatAm | 23.3% | 22.6% |  | 0.7% | 0.5% |   | 
| APAC | 23.2% | 24.1% |  | (0.9)% | (0.5)% |   | 
| Group^(1) | 22.2% | 23.0% |  | (0.8)% | (0.4)% |   |

1.     Definitions and calculations of non-IFRS measures can be found on pages 34
to 43.

2.     Reconciling items for these purposes are the Adjusting Items, which are defined
under “Use of Non-IFRS Measures”. A reconciliation between Operating profit and 
Adjusted operating profit is included under “Use of Non-IFRS Measures”.

|  North America | 
| ● | Revenue grew 9.2% on a reported basis. Organic revenue growth was +4.7%, with 4.7% price and flat volume/mix. During Q2, organic revenue growth was +4.3% with 5.8% price and (1.5)% volume/mix. The decline in volume/mix in Q2 reflected some pull-forward of retailer purchasing in Q1 ahead of price increases and retailer stocking patterns. | 
| ● | Oral Health – revenue up high-single digit largely driven by strong demand for _Sensodyne,_ up double digit underpinned by continued innovation driving market share gains. | 
| ● | VMS – revenue down double digit due to lapping capacity coming on stream in 2022. _Emergen-C_ declined double digit given tough comparative in H1 2022 due to the Omicron wave. _Centrum_ declined high-single digit due to added capacity in the prior year comparative. | 
| ● | Pain Relief – high-single digit revenue growth underpinned by _Advil_ growth benefitting from price increases and market activation. _Excedrin_ up double digit helped by innovation. _Voltaren_ up double digit. | 
| ● | Respiratory Health – revenue grew double digit due to high incidence of cold and flu during Q1 and a shortage of cold/flu products in Canada. _Robitussin_ up double digit helped by cold and flu in the first quarter. _Flonase_ was flat given a softer allergy season. | 
| ● | Digestive Health and Other – revenue up low-single digit with strong demand in _Tums_ following a restock at the start of the year as well as pricing. _Nexium_ declined high-single digit. Smokers Health grew low-single digit. Skin Health revenues declined low-double digit due to a decline in _Abreva_ and _Chapstick_. | 
| ● | Adjusted operating profit declined 2.0% constant currency, with adjusted operating margin down 150bps constant currency to 23.0%. The decline in adjusted operating margin was driven by phasing of costs incurred as a standalone company, inflationary cost pressures along with increased costs to meet unexpected volatility in demand.  This was partially offset by pricing, efficiencies and strong cost management. |

| Europe, Middle East & Africa (EMEA) and Latin America (LatAm) | 
| ● | Revenue grew 12.3% on a reported basis. Organic revenue growth was +14.9%, with 13.3% price and 1.6% volume/mix. During Q2, organic revenue growth was +16.8% with 13.9% price and 2.9% volume/mix. | 
| ● | There was a c.3% benefit to both Q2 and H1 2023 revenue, from pricing in Turkey and Argentina which impacted the overall Group by c.1%. | 
| ● | Oral Health – double digit revenue growth with double digit growth in both _Sensodyne_ and _parodontax_ underpinned by the launch of _parodontax Active Gum Repair_ in EMEA. Denture care performed well, also up double digit following the launch of _Max Hold + Comfort_ in Europe. | 
| ● | VMS – revenue up mid-single digit driven by double digit growth in _Centrum_ with strong growth in Latin America supported by entry into new markets including Egypt towards the end of 2022. This was partly offset by a decline in _Calsource._ | 
| ● | Pain Relief – high-single digit growth largely reflecting double-digit _Panadol_ growth. _Voltaren_ grew mid single digit. | 
| ● | Respiratory Health – revenue up double digit due to a prolonged strong cold and flu season significantly ahead of 2019 levels supported by strength in _Theraflu_ and _Otrivin_. | 
| ● | Digestive Health and Other – revenue up double digit with good results in all categories. | 
| ● | Geographically, Latin America, Central & Eastern Europe, Middle East & Africa, and Southern Europe saw double digit revenue growth. Northern Europe and Germany were up high-single digit and mid-single digit respectively. | 
| ● | Adjusted operating profit increased 17.6% constant currency, with adjusted operating margin up 50bps constant currency at 23.3%. The adjusted operating margin uplift was largely driven by pricing, strong growth and efficiencies across the business. This offset phasing of costs incurred as a standalone company, cost inflation and adverse transactional foreign exchange. |

| Asia-Pacific | 
| ● | Revenue grew 9.9% on a reported basis. Organic revenue growth was +11.6%, with 2.3% price and 9.3% volume/mix. During Q2, organic revenue growth was +11.5% with 1.1% price and 10.4% volume/mix. | 
| ● | Oral Health – mid-single digit revenue growth with strength across _Sensodyne_ underpinned by penetration and premiumisation particularly in India and Japan. New innovation launches across _Poligrip_ helped drive double digit growth in Denture Care.    | 
| ● | VMS – increased mid-single digit with _Centrum_ up mid-single digit helped by new innovation including gender formulations and pricing in China. _Caltrate_ was also up mid-single digit led by demand in China, pricing and new innovations such as _Bone 50+_ in Taiwan. | 
| ● | Pain Relief – double digit revenue growth largely driven by _Fenbid_ in China due to the easing of restrictions and COVID-19 related demand in the region. _Panadol_ was flat, primarily due to the high comparison base from Omicron wave related demand in 2022. | 
| ● | Respiratory Health – revenue grew double digit helped by COVID-19 related demand in China. In particular, _Contac_ sales more than doubled driving growth in the category in the region. | 
| ● | Digestive Health and Other – revenue flat with strength in Skin Health partly offset by a lower than expected sell-out by _Eno_ in India. | 
| ● | Performance in China was particularly strong, up double digit reflecting strong demand following the easing of COVID-19 related restrictions, and subsequent rise in COVID-19 cases, which benefited Pain Relief and Respiratory Health. India and Japan saw high-single digit growth with Australia up mid-single digit. South East Asia saw low-single digit growth as it lapped strong comparatives in the prior year. | 
| ● | Adjusted operating profit increased 9.7% constant currency, with adjusted operating margin down 50bps constant currency to 23.2%. The margin decline reflected higher cost inflation and phasing of costs incurred to be a standalone company, more than offsetting cost management and positive operating leverage from strong revenue growth. |

**Summary of financial performance (unaudited)**

**Income statement summary**

| Six months ended 30 June |  | **2023** | **2022** | **%** | 
|  | ** ** | **  £m** | **  £m** | **change** | 
| **Total revenue** | ** ** | **5,738** | **5,188** | **10.6** | 
| **Gross profit** | ** ** | **3,550** | **3,211** | **10.6** | 
| Adjusted gross profit^(1) |  | 3,577 | 3,258 | 9.8 | 
| **Operating profit** | ** ** | **1,141** | **900** | **26.8** | 
| Adjusted operating profit^(1) |  | 1,271 | 1,191 | 6.7 | 
| **Profit before tax** | ** ** | **960** | **864** | **11.1** | 
| Adjusted profit before tax^(1) |  | 1,090 | 1,155 | (5.6) | 
| **Profit after tax attributed to shareholders of the Group** | ** ** | **687** | **517** | **32.9** | 
| Adjusted profit after tax attributed to shareholders of the Group^(1) |  | 791 | 883 | (10.4) | 
| **Diluted earnings per share^(2)** |  |  |  |  | 
| Reported (p) |  | 7.4 | 5.6 | 32.1 | 
| Adjusted^(1) (p) |  | 8.5 | 9.6 | (11.5) |

1.     Definitions and calculations of non-IFRS measures can be found on pages 34
to 43.

2.     Earnings per share calculation for the period ended 30 June 2022 has been
adjusted retrospectively as required by IAS 33 ‘Earnings per share’ due to the increase
in the number of ordinary shares outstanding as a result of the demerger activities
that took place in July 2022. Diluted earnings per share for the period ended 30
June 2023 has been calculated after adjusting the weighted average number of shares
used in the basic calculation to assume the conversion of all potential dilutive
shares.

Revenue

Revenue increased 10.6% to £5,738m (H1 2022: £5,188m). Favourable foreign exchange
added £11m to total revenue for the half year. This included a translational foreign
exchange benefit of £99m in the first quarter which largely reversed in the second
quarter to £(88)m as Sterling strengthened against a broad set of currencies. Revenue
grew 10.4% organically for H1 2023.

Gross profit

Reported gross profit increased by 10.6% to £3,550m (H1 2022: £3,211m) with gross
margin flat at 61.9%. Adjusted gross profit increased by 9.8% to £3,577m (H1 2022:
£3,258m) with Adjusted gross margin of 62.3% (H1 2022: 62.8%).

Adjusted gross profit margin was driven by pricing and ongoing supply chain, and
manufacturing efficiency benefits. This helped offset higher commodity related costs
and cost inflation, with the decline in margin largely driven by transactional foreign
exchange losses.

Operating profit

Operating profit increased by 26.8% to £1,141m (H1 2022: £900m) and operating profit
margin increased 260bps to 19.9% (H1 2022: 17.3%). Adjusted operating profit increased
by 6.7% to £1,271m (H1 2022: £1,191m) and Adjusted operating profit margin at AER
declined 80bps and 40bps at constant currency to 22.2%.

Adjusting items within operating profit totalled £130m in H1 2023 (H1 2022: £291m)
and included Separation and Admission Costs of £60m (H1 2022: £229m) representing
the tail end of costs relating to separating the business from GSK and listing in
July 2022. Amortisation and impairment of intangible assets was £23m (H1 2022: £
40m). We incurred restructuring costs of £30m (H1 2022: £20m) largely relating to
restructuring associated with our programme to increase productivity and agility.
Disposals and others totalled £10m (H1 2022: £2m). Transaction related costs were
£7m (H1 2022: nil).

Adjusted operating profit growth was driven by strong revenue growth partly offset
by higher commodity and raw material costs, cost inflation, and phasing of costs
related to operating as a standalone company.

During H1 2023, A&P spend was up 4.7% and 4.0% at constant currency representing
18.4% of revenue (H1 2022: 19.4%). A&P spend benefitted from bringing production
in-house and ceasing advertising in Russia. Consumer facing A&P spend excluding 
Russia was up 8.0% (constant currency) for the half.

R&D expenditure for H1 2023 was £142m (H1 2022: £136m). Adjusted R&D expenditure
totalled £141m, up 2.9% and 1.5% at constant currency (H1 2022: £137m).

Net finance costs

Net finance costs were £181m (H1 2022: £36m). This reflected finance costs of £219m
primarily related to the issuance of £9.2bn in notes in March 2022 and finance income
of £38m. In H1 2022, Haleon received interest income of £43m mainly related to the
on-lend of funds to GSK Group and Pfizer Group before the demerger which did not
occur in H1 2023.

Tax charge

The statutory tax charge of £230m (H1 2022: £320m) represented an effective tax 
rate on IFRS results of 24% (H1 2022: 37%). The H1 2022 tax charge included a £104m
non-cash charge due to the revaluation of US deferred tax liabilities given the 
increase in the blended rate of US state taxes expected to apply as a result of 
the demerger. The tax charge on an Adjusted basis was £256m (H1 2022: £245m) and
the effective tax rate on an Adjusted basis was 23% (H1 2022: 21%).

Profit after tax

Profit after tax attributable to shareholders of the Group was £687m (H1 2022: £
517m), and Adjusted profit after tax attributable to shareholders was £791m (H1 
2022: 883m), down 10.4% and 7.8% constant currency. The decline is largely driven
by the annualisation of interest costs and the higher tax rate described above which
more than offset growth in Adjusted operating profit.

This resulted in diluted earnings per share of 7.4p (H1 2022: 5.6p) and adjusted
diluted earnings per share of 8.5p (H1 2022: 9.6p).

Net capital expenditure

Net capital expenditure of £133m (H1 2022: £88m) included £144m (H1 2022: £92m) 
related to the purchase of PP&E and intangible assets. Proceeds from disposals of
intangible assets was £11m (H1 2022: £3m). There were no proceeds from the sale 
of PP&E (H1 2022: £1m).

**Net debt**

At 30 June 2023, the Group’s net debt was £9,525m.  Net debt is calculated as follows:

|  |  | **As at 30 June 2023** | **As at 31 December 2022** | 
|  | ** ** | **      £m** | **£m** | 
| Cash and cash equivalents |  | 490 | 684 | 
| Short-term borrowings |  | (1,097) | (437) | 
| Long-term borrowings  |  | (8,768) | (10,003) | 
| Derivative financial assets |  | 64 | 94 | 
| Derivative financial liabilities |  | (214) | (206) | 
| **Net Debt** |  | **(9,525)** | **(9,868)** |

As of 30 June 2023, the Group’s senior unsecured long-term credit rating was BBB
from Standard and Poor’s Global Ratings and Baa1 from Moody’s.

Risks and uncertainties

The principal risks facing the Group are as set out on pages 56-60 of our 2022 Annual
Report and Accounts under the following headings and have not changed: growth model;
people and organisation; trusted ingredients; supply chain resilience; environmental,
social and governance; cyber security; geopolitical instability. In our view, the
nature and impact of these principal risks are expected to remain unchanged for 
the remaining six months of the year. In addition to the principal risks, Haleon
also faces other enterprise risks that we manage as part of our integrated risk 
management framework, such as employee health and safety, financial, regulatory 
governance, legal & compliance, product quality and product user safety.

**Directors’ responsibility statement**

The Directors confirm that to the best of their knowledge:

a) the condensed set of financial statements on pages 20 to 33 has been prepared
in accordance with UK-adopted IAS 34 ‘Interim Financial Reporting’;

b) the interim management report on pages 1 to 17 includes a fair review of the 
information required by regulations 4.2.7 and 4.2.8 of the UK Financial Conduct 
Authority’s Disclosure Guidance and Transparency Rules.

The Directors of Haleon plc are listed on pages 64 to 65 of Haleon’s Annual Report
and Form 20-F 2022. A list of current Directors is maintained on the Haleon plc 
website: https://www.haleon.com/who-we-are/leadership/

Approved by the Board and signed on its behalf by:

| Brian McNamara | Tobias Hestler | 
| Chief Executive Officer | Chief Financial Officer |

1 August 2023

**Independent review report to Haleon plc**

Conclusion 

We have been engaged by Haleon plc (“the Company”) to review the condensed set of
financial statements in the half-yearly financial report for the six months ended
30 June 2023 which comprises condensed consolidated income statement, condensed 
consolidated statement of comprehensive income, condensed consolidated balance sheet,
condensed consolidated statement of changes in equity, condensed consolidated cash
flow statement and the related explanatory notes. 

Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial report
for the six months ended 30 June 2023 is not prepared, in all material respects,
in accordance with IAS 34 _Interim Financial Reporting_ as adopted for use in the
UK, IAS 34 _Interim Financial Reporting_ as issued by the International Accounting
Standards Board (“IASB”), and the Disclosure Guidance and Transparency Rules (“the
DTR”) of the UK’s Financial Conduct Authority (“the UK FCA”).

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements(
UK) 2410 _Review of Interim Financial Information Performed by the Independent Auditor
of the Entity_ (“ISRE (UK) 2410”) issued for use in the UK.  A review of interim
financial information consists of making enquiries, primarily of persons responsible
for financial and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half-yearly financial report and 
consider whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements. 

A review is substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us to 
obtain assurance that we would become aware of all significant matters that might
be identified in an audit.  Accordingly, we do not express an audit opinion.  

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in
an audit as described in the Basis for conclusion section of this report, nothing
has come to our attention that causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the directors have identified
material uncertainties relating to going concern that have not been appropriately
disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE(
UK) 2410. However, future events or conditions may cause the Group to cease to continue
as a going concern, and the above conclusions are not a guarantee that the Group
will continue in operation.

Directors’ responsibilities 

The half-yearly financial report is the responsibility of, and has been approved
by, the directors.  The directors are responsible for preparing the half-yearly 
financial report in accordance with the DTR of the UK FCA. 

As disclosed in Note 1, the annual financial statements of the Group are prepared
in accordance with UK-adopted international accounting standards.

The directors are responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS 34 as adopted
for use in the UK and IAS 34 _Interim Financial Reporting_ as issued by the IASB.

In preparing the condensed set of financial statements, the directors are responsible
for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.

Our responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set
of financial statements in the half-yearly financial report based on our review.
Our conclusion, including our conclusions relating to going concern, are based on
procedures that are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement
to assist the Company in meeting the requirements of the DTR of the UK FCA.  Our
review has been undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other purpose.  To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company for our review work, for this report, or for the conclusions we
have reached. 

**Nicholas Frost**

**for and on behalf of KPMG LLP **

_Chartered Accountants_ 

15 Canada Square, London, E14 5GL

1 August 2023

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