Haleon Plc · LSE:HLN
Haleon — H1 2022 Earnings Presentation
40 slides from Haleon's earnings presentation, September 2022
Slide 1: 2022 Half year results
2022 Half year results September 2022
Slide 2: Disclaimer
Disclaimer This presentation contains certain statements that are, or may be These forward-looking statements and views may be based on a number deemed to be, "forward-looking statements“ (including for purposes of of assumptions and, by their nature, involve known and unknown risks, the safe harbor
Slide 3: Brian McNamara, CEO
Brian McNamara CEO 2022 Half year results
Slide 4: Strong half year results with double digit revenue growth and margin expansion
Strong half year results with double digit revenue growth and margin expansion Competitive performance: 2/3 business gained or held share 1 Strong free cash flow underpinning confidence in ability to de-lever quickly Confidence in FY 2022 and medium term guidance H1 reiterates delivering growth cons
Slide 5: Clear approach to deliver growth ambitions
Clear approach to deliver growth ambitions World class Competitive Strategy to Growth portfolio capabilities outperform ambitions 4-6% organic annual revenue growth 1 Expanding margin 2 while investing for growth High cash conversion 3 Disciplined capital allocation 1 O rganic annual revenue growth
Slide 6: Delivering competitive growth
Delivering competitive growth 2 11.6% 3 organic revenue growth with 1 of business gaining or Power Brands ahead at 13.4% maintaining market share2 Supported by: Innovations and activations, Channel and geographic expansion 1 O rganic annual revenue growth (s ee appendix for definition), in the mediu
Slide 7: Oral Health
Oral Health Outperforming globally 3/4 business gained or maintained market share 1 including gains in key markets such as US and China Haleon Oral Health sales 2x market Sensodyne, parodontax and Polident all gained share globally 1 New Sensodyne and parodontax innovations launched Activated parodo
Slide 8: Vitamins, mineral and supplements
Vitamins, mineral and supplements Gaining market share in US and China 1 Double digit revenue growth driven by: New campaigns Optimised in-season New innovations + omni channel activation + across the three brands including Centrum Silver and Emergen C Kidz and increased A&P BBBB B 1 M arket s hare
Slide 9: Over-the-counter: Pain relief and Digestive Health
Over-the-counter: Pain relief and Digestive Health Panadol, ENO and Tums positively contributing to organic growth in H1 Pain relief Digestive Health & Other Panadol the standout ENO and Tums strong performer performers 9
Slide 10: Over-the-counter: Respiratory health
Over-the-counter: Respiratory health Contributing 4% to Haleon organic revenue growth1 Meeting demand Meaningful and strong cold and flu season and New innovations Covid-19 Omicron distinct brands 1 O rganic annual revenue growth (s ee appendix for definition) 10
Slide 11: Channel and geographic expansion
Channel and geographic expansion Combined with effective marketing Panadol does not elevate blood pressure the way ibuprofen c an E-commerce 9% total sales Grew Geographic expansion Successful high-teens percent parodontax activated marketing campaigns in new markets 11
Slide 12: Performance underpinned by strong execution and financial discipline
Performance underpinned by strong execution and financial discipline Demerger, listing Synergies Offsetting and separation inflationary pressures Successful separation c.70% of FY 2022 Pfizer Initiatives to offset input price synergies delivered and commodity inflation Technology systems cutover com
Slide 13: Responsible business integral to our strategy
Responsible business integral to our strategy Environmental commitment Continued brand initiatives to promote inclusivity including Theraflu in US and Caltrate in Asia Pacific On track to achieve 100% reduction in Scope 1 & 2 carbon emissions by 2030 and reduce Scope 3 carbon from source to sale by
Slide 14: Zantac
Zantac • Haleon is not a party to any Zantac claims • We have notified GSK and Pfizer that we reject their requests for indemnification • JV agreement was signed when JV was formed towards the end of 2018 • In our view, the indemnities set out in the JV agreement only cover GSK and Pfizer’s Consumer
Slide 15: Tobias Hestler, CFO
Tobias Hestler CFO 2022 Half year results
Slide 16: H1 key financials
H1 key financials £5.2bn £1.2bn 23.0% £0.6bn Revenue Adjusted Adjusted Free cash flow1 operating profit 1 operating profit margin1 11.6 +15.5 +150bps % % AER 102% & Organic revenue growth CER growth1 +90bps Free cash flow conversion1 CER 1 Rec onciliation of I FRS to A djusted res ults c an be found
Slide 17: Half year revenue growth
Half year revenue growth Delivering positive volume/mix and pricing £m +11.6% Organic revenue growth 3.7% (0.6%) 2.4% 7.9% Acquisitions, Foreign 5,188 Price exchange disposals and Volume/mix 4,575 MSA1 +13.4% Reported HY 2021 HY 2022 sales sales 1 I nc ludes 0 .2% from ac quisitions, (0 .4 )% from D
Slide 18: Broad based growth across categories
Broad based growth across categories Balanced between price and volume mix, and improved pricing in Q2 Revenue Organic revenue growth1 £m H1 Q2 Q1 Oral Health 1,438 5% 2% 8% VMS 816 12% 9% 15% Pain Relief 1,248 12% 5% 19% Respiratory Health 683 47% 40% 53% Digestive Health and Other 1,003 3% 3% 4% T
Slide 19: Strong revenue growth across regions
Strong revenue growth across regions Revenue North North America America Asia Pacific 10.4% OSG 1 £1,873m (H1 2021: £1,595m) EMEA & LATAM EMEA & LATAM 12.1% OSG 1 £2,069m (H1 2021: £1,903m) Asia Pacific 12.3% OSG 1 £1,246m (H1 2021: £1,077m) 1 Refers to O rganic revenue growth; Rec onciliation of I
Slide 20: North America
North America 10.4% 2.1% 8.3 % Oral health Sensodyne impacted VMS Good Centrum and Pain relief Increased demand Organic growth1 Price by change in retailer VMS growth for Advil due to Volume/ mix inventory levels supported by Omicron wave and and good growth increased capacity retailer stocking £1,8
Slide 21: EMEA & LATAM
EMEA & LATAM 12.1% 5.5% 6.6 % Oral health Strong parodontax VMS Growth driven by Pain relief Growth largely Organic growth1 Price growth and robust Centrum and local reflecting Volume/ mix recovery in Denture strategic brands Panadol performance Care as well £2,069 m 22.6% as continued Sensodyne gro
Slide 22: Asia Pacific
Asia Pacific 12.3% 3.1% 9.2 % Oral health Strong growth in VMS Double digit growth Pain relief Successful Panadol Organic growth1 Price India, partly offset supported by activation and Volume/ mix by some weakness in successful campaigns execution in markets China for Centrum and including Australia
Slide 23: Delivering positive operating leverage and profit growth
Delivering positive operating leverage and profit growth 1 £m H1 2022 H1 2021 % change Revenue 5,188 4,575 13.4 Power brand organic revenue growth ahead of Haleon organic growth (11.6%) Adjusted gross profit 2 3,258 2,860 13.9 Absorbed higher commodity related costs % Adjusted gross margin 2 62.8% 6
Slide 24: Strong adjusted operating profit growth
Strong adjusted operating profit growth £m (56) 326 (22) (95) 56 A&P R&D + 90bps Adjusted operating investment 1,191 Other SG&A FX margin improvement at CER Gross profit 983 150bps increase in Adjusted operating margin at reported rates Operating leverage Pfizer synergies Efficiencies Standalone cos
Slide 25: Structurally advantaged on COGS
Structurally advantaged on COGS Composition of Adjusted cost of goods sold Commodity and commodity related £1,930m costs <10% of sales 3% c.£0.2bn Other FY Inflation mid teens for commodity / Conversion costs materials and high ddgt for freight (Employment, maintenance, 37% 13% c.£0.7bn depreciation
Slide 26: Other P&L financial information
Other P&L financial information 1 £m H1 2022 H1 2021 % change Adjusted operating profit 2 1,191 983 21.2 Net finance costs (36) (1) n/m Reflects interest of £79m related to bonds issued in March 2022 offset by Adjusted tax 2 (245) (224) 9.4 interest income of £43m mainly related to the on-lend of fu
Slide 27: Adjusting items largely separation and admission costs
Adjusting items largely separation and admission costs £m H1 2022 H1 2021 % change Adjusted operating profit 1 1,191 983 21.2 Net amortisation and impairment (40) (21) n/m Includes £19m Ukraine brand impairment of intangible assets 2 Restructuring costs 3 (20) (77) n/m Pfizer integration programme c
Slide 28: Strong free cash flow generation
Strong free cash flow generation £m H1 2022 H1 2021 Adjusted operating profit 1 1,191 983 P&L adjusting items 2 (291) (246) Separation and admission costs to peak in 2022 Non-cash movements 3 158 108 Working capital and other movements 4 (240) (459) Impacted by phasing and H1 build up Taxation paid
Slide 29: Strong liquidity and long term capital structure in place
Strong liquidity and long term capital structure in place £10.7 bn c.2.8 % c.8.4 years Net debt as of Cost of debt Duration 2 demerger date 1 Commercial £2.9bn £750m paper Liquidity 3 Term loan Programme launched 5 paid down 4 1 Refers to 1 8 J uly 2 0 22, the c ompletion date of the H aleon G roup’
Slide 30: Outlook
Outlook for full year 2022 Organic annual revenue growth1 of 6-8% Adjusted operating margin1 down slightly at constant currency (FY21: 22.8%) Currency slight positive on adjusted operating margin 2 Adjusted effective tax rate1 at lower end of 22-23% Interest expense £0.2bn Net capex c. 3% of sales 1
Slide 31: Strong half year results with double digit revenue growth and margin expansion
Strong half year results with double digit revenue growth and margin expansion Competitive performance: 2/3 business gained or held share 1 Strong free cash flow underpinning confidence in ability to de-lever quickly Confidence in FY 2022 and medium term guidance H1 reiterates delivering growth cons
Slide 32: 2022 Half year results Q&A
2022 Half year results Q&A September 2022
Slide 33: Appendix
Appendix 2022 Half year results
Slide 34: Glossary
Glossary A number of Adjusted measures are used to report the performance of our business which Free cash flow is defined as net cash inflow from operating activities plus cash inflows are non-IFRS measures. Adjusted results, CER and other non-IFRS measures may be from the sale of intangible assets,
Slide 35: Medium term guidance
Medium term guidance Organic annual sales growth of 4-6%1 Sustainable adjusted operating margin expansion at constant currency 1 Net debt/EBITDA2 expect to be below 3x by the end of 2024 Initial dividend expected to be at the lower end of the 30-50% pay out range3 1 See appendix for definition 2 A d
Slide 36: IFRS and Adjusted Income Statement
IFRS and Adjusted Income Statement Unaudited H1 2021 H1 2022 Net Net amortisation Separation amortisation Separation and impairment Transaction and Disposals and impairment Transaction and Disposals IFRS of intangible Restructuring related admission and Adjusted IFRS of intangible Restructuring rela
Slide 37: Reconciliation of organic growth
Reconciliation of organic growth Product Categories Digestive Respiratory Health and 2022 vs 2021 (%) Oral Health VMS Pain Relief Health Others Total Revenue Growth 5.7 16.2 14.2 50.1 3.9 13.4 Organic Adjustments (0.3) 0.1 - 0.3 3.2 0.6 of which: Effect of Acquisitions (0.3) (0.1) (0.2) - - (0.2) Ef
Slide 38: Free cash flow
Free cash flow Free cash flow Six months to 30 June £m 2022 2021 Net cash inflow from operating activities 680 234 Less: Net capital expenditure (88) (45) Less: Distributions to non-controlling interests (47) - Less: Interest paid (4) (9) Add: Interest received 12 9 Free cash flow 553 189 Free cash
Slide 39: Debt profile
Debt profile Net debt £m Group net debt at 30 June 2022 Group net debt at 18 July 2022 c.8.4 years Short-term borrowings 332 332 Duration1 Long-term borrowings 9,918 11,433 Derivative financial liabilities 66 66 Cash and cash equivalents and liquid investments (1,334) (978) c.2.8% Derivative financi
Slide 40: 2022 Half year results
2022 Half year results Sonya Ghobrial Rakesh Patel Emma White Head of Investor Relations Director Director Sonya.x.Ghobrial@Haleon.com Rakesh.x.Patel@Haleon.com Emma.x.White@Haleon.com +44 7392 784784 +44 7552 484646 +44 7823 523562