TIDMHLN
RNS Number : 9364Z
Haleon PLC
20 September 2022
20 September 2022
2022 Half year results
Six months ended 30 June 2022
-- H1 revenue +13.4% to GBP5,188m, organic revenue growth
+11.6%; 3.7% price and 7.9% volume/mix
-- Strong power brand performance in H1: +13.4% organic growth
with Panadol, Theraflu, Otrivin, Advil and Centrum particularly
strong
-- 2/3 of our business gained or maintained share in the six months ended 30 June 2022(1)
-- E-commerce 9% total sales, growth in the high teens
-- H1 Reported operating profit increased 22.1% to GBP900m, with margin 17.3% up 120bps
-- H1 Adjusted operating profit increased 21.2% to GBP1,191m, up 15.5% at constant currency (CER)
-- H1 Adjusted operating margin 23.0%, up 90bps (CER) and 150bps at reported rates
-- H1 net cash from operating activities was GBP680m, which
included GBP224m related to the net cash outflow from separation,
restructuring and disposals; Free cash flow for H1 2022 was GBP553m
with free cash flow conversion of 102%
-- Net debt at 18 July 2022 was GBP10,707m; recently repaid GBP750m of GBP1.5bn term loan
-- FY22 organic revenue growth and Adjusted operating margin
guidance unchanged from HY Trading update on 27 July 2022
Brian McNamara, Chief Executive Officer, Haleon said:
"I am incredibly proud that in the first half Haleon
successfully completed its separation from GSK and became an
independent listed company. This was the result of a huge amount of
hard work and preparation, and I would like to thank all of my
colleagues for their tireless efforts, focus and commitment.
Haleon performed strongly in the first half of the year with
double digit revenue growth, importantly with a healthy balance of
price and volume/mix reflecting brand strength across our
portfolio. Furthermore, we gained or maintained share in most of
our business, demonstrating that continued investment is driving
sustainable growth, even in difficult market conditions. I am also
pleased that we delivered margin expansion in the first half
despite significant cost inflation and absorption of standalone
costs for the business. Strong free cash flow generation underpins
confidence in our ability to de-lever quickly over the coming
years.
Whilst navigating the current macro-economic challenges and
uncertainties, positive momentum in our business has continued into
the second half. This combined with the strength of the business
reinforces our confidence that we are well positioned to deliver on
guidance this year and over the medium term."
Adjusted results Reported results
Six months ended 30
June (unaudited) 2022 vs 2021 2022 vs 2021
========= ========= =========================== ========= =========
Organic revenue growth(2) 11.6%(3) Revenue GBP5,188m 13.4%
Adjusted operating
profit(2) GBP1,191m 15.5%(3) Operating profit GBP900m 22.1%
Adjusted operating 23 .0
profit margin(2) % 90 bps(3) Operating profit margin 17.3% 120 bps
Adjusted earnings per
share(2) 9.6p 21.5% Earnings per share 5.6p 5.7%
Free cash flow(2) GBP553m GBP364m Net cash from operating GBP680m GBP446m
activities
========= ========= =========================== ========= =========
1. Market share statements throughout this report are estimates
based on the Group's analysis of third party market data of revenue
for the first six months of 2022 including IQVIA, IRI and Nielsen
data. Represents % of brand-market combinations gaining or
maintaining share (this analysis covers > 85% of Haleon's total
revenue).
2 . Organic revenue growth, Adjusted operating profit, Adjusted
operating profit margin, Adjusted earnings per share and Free cash
flow are non-IFRS measures; definitions and calculations of
non-IFRS measures can be found on pages 38 to 45
3. Change at constant currency
4. The commentary in this announcement contain forward-looking
statements and should be read in conjunction with the cautionary
note on page 38
Outlook
FY2022 revenue and Adjusted operating margin guidance remains
unchanged from the trading update on 27 July 2022.
FY2022 organic revenue growth is expected to be 6-8%.
Adjusted operating margin in FY2022 is expected to be slightly
down at constant currency on last year (FY21: 22.8%). Strong
growth, the Pfizer synergies, pricing and ongoing supply
efficiencies, will largely offset Haleon standalone costs
(GBP175-GBP200m), continued investment, inflationary cost pressure
and the impact of Russia and Ukraine. Assuming current spot rates
are sustained for the rest of the year, currency will be slightly
positive on adjusted operating margin.
In FY2022, the Adjusted effective tax rate is now expected to be
at the lower end of the 22-23% range shared previously. FY2022 net
interest expense is unchanged at GBP0.2bn and net capex guidance is
unchanged from prior guidance, and remains c.3% sales.
Separation and Admission costs are now expected to be
approximately GBP0.5bn (at current spot rates) between FY2022 and
FY2024, with 80% of costs incurred in FY2022, and the balance split
across FY2023 and FY 2024. Admission costs are expected to be just
over GBP0.1bn. (Previously, Separation and Admission costs were
expected to be approximately GBP0.4bn between FY2022 and FY2024,
including Admission costs of up to GBP0.1bn most of which were
expected to be incurred in FY2022).
All medium term guidance is reiterated, namely annual organic
revenue growth of 4-6%, sustainable moderate Adjusted operating
margin expansion at constant currency, Net debt/Adjusted EBITDA
expected to be below 3x by the end of 2024 and initial dividend
expected to be at lower end of 30-50% pay-out range (subject to
Haleon Board approval).
Current trading
Positive momentum seen in the first half of the year has
continued into the third quarter, albeit at a slower rate as
expected, underpinning our guidance for FY2022 organic growth of
6-8%. We believe the business is well positioned to navigate the
current macro-economic challenges including rising inflation and
the potential impact this may have on consumer behaviour in the
future.
Update on Zantac
As Haleon stated in the Group's announcement on 11 August 2022,
Haleon is not a party to any Zantac claims.
Haleon has notified GSK and Pfizer that it rejects their
requests for indemnification on the basis that the scope of the
indemnities set out in the joint venture agreement only covers
their consumer healthcare businesses as conducted when the JV was
formed in 2018. At that time, neither GSK nor Pfizer marketed OTC
Zantac in the US or Canada.
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 7am BST (8am CET) on 20 September
2022 and can be accessed at www.haleon.com/investors. This will be
followed by a Q&A session at 11:30am BST (12:30pm CET).
For analysts and shareholders wishing to ask questions on the
Q&A call, please use the dial-in details below which will have
a Q&A facility:
UK: 0800 640 6441
US: +1 646 664 1960
All other: +44 203 936 2999
Passcode: 52 03 87
An archived webcast of the Q&A call will be available later
on the day of the results and can be accessed at
www.haleon.com/en/investors/
Financial reporting calendar
Q3 2022 Trading Statement 10 November 2022
FY 2022 Results March 2023
Q1 2023 Trading Statement May 2023
HY 2023 Results August 2023
Enquiries
Investors Media
Sonya Ghobrial +44 7392 784784 Zoe Bird +44 7736 746167
Rakesh Patel +44 7552 484646 Nidaa Lone +44 7841 400607
Emma White +44 7792 750133 Ross Whittam +44 7796 204198
Email: investor-relations@haleon.com Email: corporate.media@haleon.com
About Haleon plc
Haleon (LSE / NYSE: HLN) is a global leader in consumer health,
with brands trusted by millions of consumers globally. The Group
employs over 22,000 people across 170 markets, who are united by
Haleon's purpose - to deliver better everyday health with humanity.
Haleon's product portfolio spans five major categories - Oral
Health, Vitamins, Minerals and Supplements (VMS), Pain Relief,
Respiratory Health, Digestive Health and Other. Its long-standing
brands - such as Advil, Sensodyne, Panadol, Voltaren, Theraflu,
Otrivin, Polident, Parodontax and Centrum - are built on trusted
science, innovation and deep human understanding.
For more information please visit www.haleon.com
Business review
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. These leverages
competitive capabilities combining human understanding with trusted
science, brand building and innovation, leading route to market and
digital.
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, this is expected to drive 4-6% organic annual
sales growth, a moderate expansion in our margins while supporting
our investment for growth, delivering consistent high cash
conversion and maintaining a focus on our clear and disciplined
capital allocation policy.
Delivering growth
During the first half, Haleon grew revenue organically 11.6%,
with growth of Power Brands ahead of this at 13.4%. Haleon
delivered strong growth and market share through increased
household penetration, winning new consumers with exciting
innovations and activation, as well as channel expansion and
geographic expansion. In the first half 2/3 of Haleon's business
gained or maintained market share.
In Oral Health, where revenue grew 5.1% organically, Haleon
maintained its track record of market outperformance, with sales
double the growth rate of the overall market, mainly driven by
improved penetration of Sensodyne, particularly in e-commerce in
the US and Parodontax in major markets. In aggregate, this resulted
in category share growth with three quarters of the business
gaining or maintain market share. Parodontax, one of the fastest
growing toothpaste brands globally, launched in South Africa and
grew double digit in Middle East and Africa. Additionally in Dental
Appliance Care, our new innovation Poligrip Power Max Hold+ was
rolled out to 16 markets and is performing well.
In Vitamins, Minerals and Supplements, where organic revenue
growth was 11.9%, Haleon gained share overall including in the US
and China. During the first half in the US Emergen-C grew double
digit driven by engagement to drive growth with younger and more
diverse households, and through innovation including Emergen-C Kidz
which achieved 10% market share in its first year. This was
amplified by in-season omni-channel and digital activations. In
China, the Caltrate chewable tablets innovation enabled the brand
to reach new younger consumers.
In Pain Relief, organic revenue growth was 11.7%. A stand out
performer in the category was Panadol which gained share and saw
organic growth in the first half was up in the mid twenties
percent, double the level of the category. In the UK, the brand has
increased share through deliberate incremental A&P investment
in multi-channel media, as well as increased distribution and shelf
presence to recruit and maintain new user groups converted during
the pandemic.
In Respiratory Health organic revenue growth of 46.7% reflected
the strong cold and flu season. Theraflu was supported by
innovation launches and commercial execution which enabled the
brand to meet strong demand. Theraflu outperformed the market
gaining share from significantly improved penetration in the US
contributing to Respiratory Health category share gain overall.
Digestive Health and Other saw organic revenue growth of 3.5%.
Challenging conditions in the preventative antacid market adversely
impacted Nexium, although our brands in the immediate relief
antacid category, such as ENO and Tums performed well.
Haleon remains focused on innovating to underpin and accelerate
growth. In the first half this included extending the portfolio
demographically, with several natural variants launched in the
first half targeting a younger consumer base. These included
Theraflu Naturals, Robitussin Elderberry, and Emergen-C botanicals
in the US, and non-medicated Otrivin, Breathe Clean and Theraflu
Pro-Naturals in Central and Eastern Europe. In Oral Health, roll
out of Sensodyne Nourish continued into new markets across Europe
including the UK. Moreover, Parodontax Gum+ was launched in over
ten markets and is performing well, particularly in France. Also,
in Dental Appliance Care, our new innovation Poligrip Power Max
Hold+ was rolled out to 16 markets and is outperforming the market.
In Pain Relief Panadol Liquid gel caps were launched in Australia
with good early feedback. In VMS, we launched Centrum Multi-gummies
in tropical fruit.
During the first half a number of successful marketing campaigns
supported brand performance. In particular the Take care Panadol
campaign amplified brand activation and relevance during a key
COVID-19 vaccination period. Furthermore, the brand won several
awards for the campaign including the Annual International Award
for Innovation in Media. Elsewhere Haleon won the prestigious I-COM
data creativity award for the Flonase campaign which tracked flu
symptoms and targeted likely sufferers. For the first half Haleon
A&P spend was up 6% CER, equally split between offline and
online media channels, and with the increase reiterating the
commitments earlier this year to invest behind driving sustainable
growth.
From a channel perspective, there remains significant
opportunity for e-commerce penetration, and e-commerce grew high
teens percent in the first half to 9% of total sales. Improved
content, optimised media, increased investment in high traffic
events and refreshed 'brand stores' all contributed to growth. In
the US and China, Haleon's two largest e-commerce markets, sales
grew 20% and 30%, respectively. Haleon also continues to invest in
digital capabilities across the business and was recognised for the
second year in a row at the Global Search Awards. Notably our
digital portal marketing to Healthcare professionals is now live in
39 markets, with over 10m unique visitors.
Supported by strong execution and financial discipline
The business remains focused on driving efficiency,
effectiveness and agility to make every investment count.
Haleon successfully separated from GSK including the completion
of a technology systems cut over demonstrating strong execution and
capabilities across the business.
Following demerger, Haleon had net debt of GBP10,707m. Strong
cash generation during the first half underpins Haleon's confidence
in its ability to de-lever rapidly to less than 3x net
debt/Adjusted EBITDA by the end of 2024. Additionally, Haleon's
long-term and short-term ratings were confirmed (Moody's: Baa1/P-2
S&P: BBB/A-2). The Group successfully completed the financing
required for payment of the separation dividend and for the
management of its ongoing liquidity.
Haleon delivered c.70% of expected FY2022 Pfizer synergies in
the first half, and remains on track to deliver GBP120m synergies
in FY2022, taking the aggregate Pfizer annual synergies to GBP600m
(increased from GBP500m at the Capital Markets Day in February
2022).
Initiatives to drive value from third-party expenditure and
offset headwinds from input prices and commodity inflation
continue, including forward buying, value engineering and new
supplier introduction, and initiatives to ensure continuity of
supply. In the first half, Haleon managed to offset c. 40% of cost
inflation through forward buying and other initiatives, as well as
having hedged or locked through contracts c. 90% of H2 22
materials.
Furthermore, across the business, Haleon also undertook SKU
rationalisation, improved logistics productivity through
warehousing and outbound freight consolidation. Simultaneously, the
business continued its insourcing initiatives, improved ROI on
promotional spend and optimised price-pack architecture across the
portfolio.
Excellent execution in markets remains a key pillar for driving
growth and in Central and Eastern Europe, this was delivered
through new communication toolkits and a successful pre-selling
campaign underpinned share expansion in the first half for
Theraflu. In the US, partnering with retailers enabled excellent
execution both in store and online, enabled double digit Advil
growth supporting double digit organic growth in Pain Relief sales
over the first six months.
Running a responsible business
Running a responsible business remains an integral part of our
strategy, and Haleon remains committed to tackling environmental
and social barriers to everyday health.
On track with existing environmental targets
Haleon is on track to reduce its net Scope 1 and 2 carbon
emissions by 100% by 2030 (versus its 2020 baseline), and to reduce
its Scope 3 emissions (includes all relevant scope 3 carbon
emission categories as outlined in the greenhouse gas protocol
(GHG), the industry standard across the value chain) by 42% from
source to sale by 2030 (versus its 2020 baseline). Initiatives in
the first half included the agreement with Ameresco Solar Energy
covering our manufacturing facility in Oak Hill, NY, providing
electricity from a dedicated offsite solar park.
Haleon continues to develop solutions for all product packaging
to be recyclable or reusable by 2030, and to reduce use of virgin
petroleum based plastic by 1/3 by 2030. Examples in the first half
included lightweight recycled plastic and plastic free packaging
with Dr.BEST and Aquafresh toothbrushes in Europe.
Opportunity to make a difference with Health inclusivity
We continue to believe that Haleon has a compelling opportunity
to make a meaningful difference to helping improve health
inclusivity. Initiatives in the first half with our brands
promoting inclusivity, included the Theraflu Rest and Recover
initiative in North America and mobility initiatives with Caltrate
in Asia Pacific to engage adults in China on bone health.
Internally, Haleon launched a leading parental leave policy for
employees, entitling all employees, regardless of gender or
sexuality, to 26 weeks fully paid parental leave effective 1
January 2023.
Building robust corporate governance
Haleon continues to build best practice corporate governance, in
line with the requirements of a dual LSE premium listed and NYSE
listed company. Board-level governance and committees have been
established to ensure alignment with all requirements of the UK
Corporate Governance Code. The Group's internal and external
operational governance links in directly to the Board-level
governance, enabling rapid escalation and visibility.
Operational review
Revenue by product category for the six months ended 30 June
2022:
Revenue (GBPm) Revenue change
(%)
------------------ -------------------------
Constant Organic
2022 2021 Reported currency(1) (1)
------- --------- --------- ------------- --------
Oral Health 1,438 1,360 5.7% 5.4% 5.1%
VMS 816 702 16.2% 11.9% 11.9%
Pain Relief 1,248 1,093 14.2% 11.8% 11.7%
Respiratory Health 683 455 50.1% 46.7% 46.7%
Digestive Health and
Other 1,003 965 3.9% 0.3% 3.5%
Group revenue 5,188 4,575 13.4% 10.9% 11.6%
1. Definitions and calculations of non-IFRS measures can be
found on pages 38 to 45.
Oral Health
-- Sensodyne delivered mid-single digit revenue growth
reflecting underlying brand strength, continued innovation and
strong growth across key markets particularly Asia Pacific. This
more than offset the negative impact of the COVID-19 lockdown in
China in Q2.
-- Parodontax saw high-single digit revenue growth across all regions.
-- Denture care revenue was mid-single digit as a result of
strong growth in EMEA and LatAm driven by demand returning
following the decline seen during the pandemic.
VMS
-- Centrum revenue up mid-teens percent reflecting good growth
across all regions, and up double digit in North America and Asia
Pacific. Centrum and Emergen-C benefitted from increased capacity
in North America.
-- Caltrate increased high-single digit given growth in China.
Pain Relief
-- Panadol revenue up mid twenties percent reflecting a
successful post COVID-19 vaccination campaign and activation to
meet increased demand during the Omicron wave.
-- Advil growth in the low twenties percent benefitting from
increased demand and retail stocking patterns in the US.
-- Low single digit growth from Voltaren primarily driven by
growth in China and the US, which was partly offset by a decline in
Germany.
Respiratory Health
-- A strong cold and flu season, well ahead of the historically
low season in 2021 was supported by the COVID-19 Omicron wave
underpinning results across all regions. This added 4% to group
revenue growth in the first half.
-- In the US and Europe, the cold and flu season was around 20%
ahead of 2019 levels. As a result of the rebound, Theraflu revenue
more than doubled and Otrivin was up just under 50%.
Digestive Health and Other
-- Digestive Health which is around half of this reported
product category saw growth in Tums and Eno, Smokers health
revenues declined slightly and skin health brands were up on last
year.
Geographical segment performance
Revenue by geographical segment for the six months ended 30
June:
Revenue (GBPm) Revenue change (%)
----------------- -------------------------------------------------------------
Constant
2022 2021 Reported currency(1) Organic(1) Price(1) Vol/Mix(1)
-------- ------- --------- ------------- ----------- --------- -----------
North America 1,873 1,595 17.4% 10.0% 10.4% 2.1% 8.3%
EMEA and LatAm 2,069 1,903 8.7% 10.6% 12.1% 5.5% 6.6%
APAC 1,246 1,077 15.7% 13.0% 12.3% 3.1% 9.2%
-------- ------- --------- ------------- ----------- --------- -----------
Group 5,188 4,575 13.4% 10.9% 11.6% 3.7% 7.9%
1. Price and Volume/Mix are components of Organic Revenue
Growth. Definitions and calculations of non-IFRS measures can be
found on pages 38 to 45.
Adjusted operating profit by geographical segment for the six
months ended 30 June:
Adjusted operating YoY change YoY constant
profit (GBPm) currency
--------------------- ----------- -------------
2022 2021 2022 2022
---------- --------- ----------- -------------
North America 454 316 43.7% 29.0%
EMEA and LatAm 467 458 2.0% 6.2%
APAC 300 244 23.0% 18.7%
Corporate and other unallocated (30) (35) (14.3)% 40.0%
---------- --------- ----------- -------------
Group(1) 1,191 983 21.2% 15.5%
---------- --------- ----------- -------------
Reconciling items between
adjusted operating profit
and operating profit(2) (291) (246) 18.3% 16.6%
---------- --------- ----------- -------------
Group operating profit 900 737 22.1% 15.1%
---------- --------- ----------- -------------
1. Definitions and calculations of non-IFRS measures can be
found on pages 38 to 45.
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 YoY change YoY constant
profit margin currency
(%)
--------------------- ----------- ---------------
2022 2021 2022 2022
---------- --------- ----------- -------------
North America 24.2% 19.8% 4.4% 3.5%
EMEA and LatAm 22.6% 24.1% (1.5)% (0.9)%
APAC 24.1% 22.7% 1.4% 1.1%
Group(1) 23.0% 21.5% 1.5% 0.9%
---------- --------- ----------- -------------
1. Definitions and calculations of non-IFRS measures can be
found on pages 38 to 45.
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
-- Organic revenue growth in North America was +10.4%, with 2.1%
price and 8.3% volume/mix.
-- Oral Health - revenue up low single digit, with Sensodyne up
low single digit impacted by change in retailer inventory levels
and disproportionately impacted by the cutover in Q2. Good growth
in Parodontax.
-- VMS - revenue up mid teens percent given strong Centrum and
Emergen-C growth supported by increased capacity.
-- Pain Relief - double digit revenue growth driven by Advil
given increased demand during the Omicron wave and retail stocking
patterns.
-- Respiratory Health - revenue up over 50% helped by the
sustained rebound in cold and flu season well ahead of 2019 levels,
including some benefit from new COVID-19 variants with similar
symptoms, and successful market activation.
-- Digestive Health and Other - revenue flat with strong growth
in Chapstick offset by weakness in Smokers Health.
-- Adjusted operating margin increased 440bps to 24.2%, and by
350bps at constant exchange rates. Margin expansion was due to
strong operating leverage as well as benefits from productivity
improvements, portfolio optimisation and strong cost management
partially offset by commodity and freight headwinds. The prior year
reflected favourable comparatives following site investments and
one-time manufacturing write-offs.
Europe, Middle East & Africa (EMEA) and Latin America
(LatAm)
-- Organic revenue growth in EMEA and LatAm was 12.1%, with 5.5%
price and 6.6% volume/mix.
-- Oral Health - mid single digit revenue growth due to strong
Parodontax growth, robust recovery in Denture Care and continued
Sensodyne growth.
-- VMS - revenue increased double digit driven by high single
digit growth in Centrum and double digit growth in local strategic
brands.
-- Pain Relief - mid single digit revenue growth largely reflecting double digit Panadol growth.
-- Respiratory Health - revenue up over 50% due to a strong cold
and flu season significantly ahead of 2019 levels.
-- Digestive Health and Other - revenue up double digit with good results in all categories.
-- Particularly strong double digit revenue growth in Latin
America and Middle East & Africa underpinned H1 revenue.
Additionally, Europe saw high single digit revenue growth in
Northern Europe with strong double digit growth in Southern and
Central and Eastern Europe, which was partly offset by challenging
performance in Germany.
-- Adjusted operating margin declined by 150bps or 90bps at
constant exchange rates largely driven by reduced sales from Russia
/ Ukraine as well as the one-time adverse impact of stock and
receivable write-downs. Higher commodity and freight costs, and
increased investment in A&P was offset by positive operating
leverage, particularly from pricing, and efficiencies across the
business.
Asia-Pacific
-- Organic revenue growth in Asia-Pacific was 12.3%, with 3.1%
price and 9.2% volume/mix. This included a one-off benefit of c.2%
related to separation from changes in distribution in Vietnam.
-- Oral Health - high single digit revenue growth in Oral Health
reflected strong growth in India, partly offset by some weakness in
China from COVID-19 related lockdowns.
-- VMS - low double digit revenue growth supported by successful
immunity campaigns in China by Centrum and Caltrate, and Centrum in
Taiwan. Innovations around gender based vitamins and probiotics
contributed to growth.
-- Pain Relief - revenue growth in the mid twenties percent
benefitting from successful Panadol activation and execution in
markets including Australia, New Zealand, Malaysia and Taiwan
relating to Omicron COVID-19 wave and a successful campaign around
the COVID-19 vaccination.
-- Respiratory Health - rebound in cold and flu season resulted
in revenue up high twenties percent.
-- Digestive Health and Other - revenue slightly down due to weakness in skin health brands.
-- Performance in South-East Asia, Taiwan and India was
particularly strong during the first half and revenue up double
digit. Revenue in China increased mid single digit for the first
half despite a slowdown in the second quarter due to COVID-19
related lockdowns.
-- Adjusted operating margin increased 140bps or 110bps at
constant exchange rates to 24.1% driven by strong operating
leverage combined with efficiencies, which were partly offset by
higher A&P investment and higher commodity and freight related
costs.
Summary of financial performance
Income statement summary
2022 2021 %
GBPm GBPm change
--------------------------------------------- ------ ------ -------
Total revenue 5,188 4,575 13.4
---------------------------------------------- ------ ------ -------
Gross profit 3,211 2,814 14.1
Adjusted gross profit(1) 3,258 2,860 13.9
---------------------------------------------- ------ ------ -------
Operating profit 900 737 22.1
Adjusted operating profit(1) 1,191 983 21.2
---------------------------------------------- ------ ------ -------
Profit before tax 864 736 17.4
Adjusted profit before tax(1) 1,155 982 17.6
---------------------------------------------- ------ ------ -------
Profit after tax attributed to shareholders
of the Group 517 491 5.3
Adjusted profit after tax attributed
to shareholders of the Group(1) 883 729 21.1
Earnings per ordinary share(2)
Basic (p) 5.6 5.3 5.7
Adjusted(1) (p) 9.6 7.9 21.5
1. Definitions and calculations of non-IFRS measures can be
found on pages 38 to 45.
2. Basic earnings per share for all periods presented have 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.
Basic earnings per share has been calculated by dividing the profit
attributable to shareholders by the Company's weighted average
number of shares in issue, with 9,234,573,831 shares outstanding as
at the date of the report. There are no dilutive equity instruments
for the periods presented.
Revenue
Revenue increased 13.4% at reported exchange rates and by 11.6%
organically to GBP5,188m (H1 2021: GBP4,575m). Favourable foreign
exchange added GBP112m to total revenue, mainly due to
strengthening of the US Dollar against Sterling.
Gross profit
Reported gross profit increased by 14.1% to GBP3,211m (H1 2021:
GBP2,814m) with gross margin was up 40bps at 61.9%. Similarly,
Adjusted gross profit increased by 13.9% with Adjusted gross margin
of 62.8% (H1 2021: 62.5%).
Positive movements in Adjusted gross profit margin were largely
driven by pricing, favourable mix, Pfizer synergies and ongoing
supply chain and manufacturing efficiency benefits. This was partly
offset by higher commodity related costs and freight cost
inflation.
Operating profit
Operating profit and operating profit margin increased by 22.1%
to GBP900m (H1 2021: GBP737m) and by 120bps respectively to 17.3%
(H1 2021: 16.1%). Adjusted operating profit increased by 21.2% to
GBP1,191m (H1 2021: GBP983m) and Adjusted operating profit margin
increased by 150bps or by 90bps at constant exchange rates to
23.0%.
Adjusting items within operating profit totalled GBP291m in H1
2022 (H1 2021: GBP246m), representing GBP20m (H1 2021: GBP77m) of
costs related to restructuring activities associated with the
Pfizer JV Transaction at a reduced level as we come to the end of
the programme, Separation and Admission costs of GBP229m (H1 2021:
GBP105m) as expected given the peak of work to execute separation
will occur during 2022. Net Intangibles Amortisation and Impairment
of GBP40m (H1 2021: GBP21m) and Disposals and others of GBP2m (H1
2021: GBP43m).
Adjusted operating profit and margin were driven by operating
leverage as a result of the strong revenue growth, including
healthy balance of volume and price/mix, combined with Pfizer
synergies partly offset by higher commodity related costs and
freight cost inflation, incremental costs of operating as a
standalone company, and increased investment in A&P and
R&D.
During the first half, A&P spend increased 6% at CER to
represent 19.4% of revenue (H1 2021: 20.3%). A&P growth was
behind revenue growth primarily due to scale benefits, a stronger
than expected rebound across Respiratory Health and phasing of
spend. Adjusted R&D expenditure totalled GBP137m, up 23.4% (H1
2021: GBP111m) and included the transfer of additional activities
to the R&D functions following the implementation of a new
operating model in Q4 FY21.
Net finance costs
Net finance costs increased to GBP36m, reflecting interest of
GBP79 million related to the issuance of GBP9.2bn in notes in March
2022 offset partly by interest income of GBP43 million mainly
related to the on-lend of funds to GSK Group and the Pfizer Group
before the demerger.
Tax charge
The tax charge of GBP320m (H1 2021: GBP216m) represented an
effective tax rate on IFRS results of 37% (H1 2021: 29%). The
charge of GBP320m included a tax charge on adjusting items
totalling GBP75m. Included within this was a non-cash tax charge of
GBP104m that related 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 GBP245m (H1 2021: GBP224m) and the
effective tax rate on an Adjusted results basis was 21% (H1 2021:
23%).
Free cash flow
Net cash from operating activities totalled GBP680m in H1 2022
(H1 2021: GBP234m), which included a net cash outflow of GBP224m
related to separation, restructuring and disposals. Free cash flow
during H1 2022 was GBP553m, a GBP364m increase versus H1 2021. The
increase in free cash flow benefitted from strong H1 2022 operating
results, the phasing of tax payments due to repayments from prior
years, continued working capital management with improved payables
offset by higher receivables from strong revenue growth, as well as
disciplined capital spend management. These increases were offset
partially by annual distributions to non-controlling interests of
GBP47 million that were made H1 2022 versus H2 2021, and lower
proceeds from sale of intangible assets in H1 2022 vs 2021.
Six months to 30
June
2022 2021
-------- ---------
GBPm GBPm
-------------------------------------------------- -------- ---------
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
--------------------------------------------------- -------- ---------
Net capital expenditure
Net capital expenditure of GBP88m (H1 2021: GBP45m) included
GBP92m (H1 2021: GBP124m) related to the purchase of PP&E and
software offset partially by proceeds from the sale and disposal of
PP&E and intangible assets of GBP4m (H1: 2021: GBP79m).
Net debt
At 30 June 2022, the Group's net debt was GBP8,836m, which
mainly includes the amounts raised as part of the pre-funding
commitment for the demerger. Net debt is calculated as follows:
As at 30 As at 31 December
June 2022 2021
------------- ------------------
GBPm GBPm
-------------------------------------- ------------- ------------------
Cash and cash equivalents and liquid
investments 1,334 414
Short-term borrowings (332) (79)
Long-term borrowings (9,918) (87)
Derivative financial assets 146 17
Derivative financial liabilities (66) (19)
Net Debt (8,836) 246
--------------------------------------- ------------- ------------------
On 13 July 2022, the Group drew down GBP1,493m under a 3-year
term loan to complete the financing required for payment of the
separation dividends resulting in net debt at separation of
GBP10,707m.
As of 1 September 2022, the Group's long-term and short-term
credit ratings remain unchanged (Moody's: Baa1/P-2 S&P:
BBB/A-2)
Sources of liquidity
As at 18 July 2022, the completion date of the demerger, Haleon
had total liquidity of GBP2.9bn comprising GBP2.2bn ($1.4bn and
GBP1.0bn) of bank facilities and GBP716m of cash and cash
equivalents. The $1.4bn and GBP1.0bn Revolving Credit facilities
are undrawn. Subsequent to the demerger, Haleon launched a $10bn US
commercial paper programme and a GBP2bn Euro commercial paper
programme.
Post Balance Sheet Events
For information and further details about the demerger
activities that took place after 30 June 2022, see Note 15 of the
Notes to condensed consolidated financial statements.
Principal risks
The risks and uncertainties affecting the Group include, but are
not limited to, those discussed under "Risk Factors" on pages 17 to
45 of Haleon's prospectus and under "Risk Factors" in Haleon's
Registration Statement on Form 20-F. A summary of the 2022
principal risks areas are set out below and the nature and impact
of which remain essentially unchanged since the date of the
prospectus filing. These are not listed in order of significance
and are not the only ones facing the Group.
Competition: The Group operates in a highly competitive market
and failure to successfully compete with competitors could have a
material adverse effect on the Group's business.
Ability to identify and offer products at attractive prices that
appeal to consumer tastes and preferences: The Group's success
depends on its ability to anticipate and respond to changes in
consumer preferences and a failure to adapt its strategy
appropriately may have a material adverse effect on the Group's
business and/or financial condition.
Supply continuity: The Group's business results are impacted by
the Group's ability to manage disruptions in the Group's global
supply chain.
Distribution: Increasing dependence on key retail customers,
changes in the policies of the Group's retail customers, the
emergence of alternative retail channels and the rapidly changing
retail landscape may materially and adversely affect the Group's
business.
Innovation: The Group may not be able to develop and
commercialise new products effectively, which may materially and
adversely affect the results of the Group's operations and
financial condition.
Personnel attraction and retention: Failure to retain key
personnel or attract new personnel could have a material adverse
effect on the Group's business.
Reputation: Damage to the Group's reputation could have a
material adverse effect on the Group's
business.
Climate Change and Sustainability: Failure to respond
effectively to the challenges raised by climate change and other
sustainability matters may have a material adverse impact on the
Group's business and results of operations.
Pandemics, Epidemics or similar health concerns: A pandemic,
epidemic or similar widespread health concern could have, and
COVID-19 has had and will continue to have, a variety of impacts on
the Group's business, results of operations, cash flows and
financial condition.
Intellectual Property rights: The Group may not be successful in
obtaining, maintaining and enforcing sufficient intellectual
property rights to protect its business, or in avoiding claims that
the Group infringes on the intellectual property rights of
others.
Product recalls: The Group may incur liabilities or be forced to
recall products as a result of real or perceived product quality or
other product-related issues.
Cyber-security: Although the Group has a board array of
information security measures in place, the Group's IT systems have
been, and will continue to be, subject to computer viruses or other
malicious codes, unauthorised access attempts, phishing and other
cyber-attacks.
Legal and regulatory landscape: The Group's business is subject
to legal and regulatory risks in all the markets in which it
operates, which may have a material adverse impact on the Group's
business operations and financial condition.
Ingredient regulation: The Group faces risks relating to the
regulation and perception of the ingredients it uses in its
products, which could materially and adversely impact the Group's
business, prospects, financial condition and results of
operations.
Litigation, disputes and regulatory investigations: Litigation,
disputes and regulatory investigations may materially and adversely
affect the Group's business, financial condition, results of
operations and prospects.
Separation benefits: There can be no guarantee that the
anticipated benefits of the separation will be realised in full or
in part, or as to the timing when any such benefits may be
realised.
Macroeconomic factors: The Group's business is subject to market
fluctuations and general economic conditions, including
inflationary pressures, each of which may materially and adversely
affect the Group's business, financial condition, results of
operations and prospects. Uncertainty, fluctuations or negative
trends in the international economic climate have had and could
continue to have a material adverse effect on the Group's business
and profitability.
Related party transactions
Related party transactions are disclosed in note 13 to the
condensed set of financial statements. There have been no changes
to the related parties of the Group for the six-months period ended
30 June 2022. Upon the completion of the demerger on 18 July 2022,
the GSK Group ceased to be a related party of the Group under
IFRS.
Going Concern
The Directors have considered the Group's financial plan, in
particular with reference to the period through September 2023 and
taken into account debt maturities, treasury risk management
policies, exposures to market and credit risk and hedging
activities and the principal risks and uncertainties faced by the
Group. For purposes of the going concern assessment, the Directors
make estimates of likely future cash flows which take into account
recent performance, external forecasts, committed debt facilities
and management's knowledge and expertise of the cashflow
drivers.
Considering the above, the Group's diversified geographic
presence, product offering and consumer profile, the Directors
believe that it is appropriate to adopt the going concern basis of
accounting in preparing the Group's condensed consolidated
financial statements.
Responsibility Statement
The Board of Directors approved this Half-yearly Financial
Report on 19 September 2022.
The Directors confirm that to the best of their knowledge:
a) the condensed set of financial statements on pages 20 to 37
has been prepared in accordance with UK-adopted IAS 34 'Interim
Financial Reporting';
b) the interim management report on pages 1 to 16 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 266 to 268 of
Haleon's prospectus and page 199 of the 20-F dated 1 June 2022. A
list of current Directors is maintained on the Haleon plc website:
https://www.haleon.com/who-we-are/board-of-directors/
By order of the Board
Brian McNamara Tobias Hestler
Chief Executive Officer Chief Financial Officer
19 September 2022
Independent review report to Haleon plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements of the Haleon business in the half-yearly
financial report for the six months ended 30 June 2022 which
comprises the condensed consolidated income statement, the
condensed consolidated statement of other comprehensive income, the
condensed consolidated balance sheet, the condensed consolidated
statement of changes in equity, the condensed consolidated cash
flow statement and the related notes 1 to 15.
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 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
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" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. 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.
As disclosed in note 1, the annual financial statements of the
Group will be prepared in accordance with International Financial
Reporting Standards as issued by the IASB ("IASB IFRS") and UK
adopted International Accounting Standards ("UK IAS") (together
"IFRS"). The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
United Kingdom adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusion 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 to suggest 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 are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE (UK), however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, 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 company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the Group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. 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 paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the Company those
matters we are required to state to it in an independent review
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 formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
19 September 2022
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE (unaudited)
2022 2021
Notes GBPm GBPm
------------------------------------- ------ -------- --------
Revenue 2 5,188 4,575
Cost of sales (1,977) (1,761)
-------------------------------------- ------ -------- --------
Gross profit 3,211 2,814
Selling, general and administration (2,179) (1,978)
Research and development (136) (109)
Other operating income 4 10
Operating profit 2 900 737
Finance income 43 9
Finance expense (79) (10)
-------------------------------------- ------ -------- --------
Net finance costs 2 (36) (1)
Profit before tax 2 864 736
Income tax 5 (320) (216)
Profit after tax for the period 544 520
-------------------------------------- ------ -------- --------
Profit for the period attributable
to:
Shareholders of the Group 517 491
Non-controlling interests 27 29
-------------------------------------- ------ -------- --------
Basic earnings per share (pence) 10 5.6 5.3
Diluted earnings per share (pence) 10 5.6 5.3
-------------------------------------- ------ -------- --------
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE (unaudited)
2022 2021
GBPm GBPm
--------------------------------------------------------------- ------ -------
Profit after tax for the period 544 520
Other comprehensive income/(expenses) for the period
Items that may be subsequently reclassified to income
statement:
Exchange movements on overseas net assets and net
investment hedges 690 (272)
Fair value movements on cash flow hedges 197 -
Tax on fair value movements on cash flow hedges (48) -
Reclassification of cash flow hedges to income statement (6) -
--------------------------------------------------------------- ------ -------
833 (272)
--------------------------------------------------------------- ------ -------
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling (1) -
interests
Remeasurement gains/(losses) on defined benefit
plans 138 (5)
Deferred tax on actuarial movements in defined benefit (31) -
plans
--------------------------------------------------------------- ------ -------
106 (5)
Other comprehensive income/(expenses), net of tax
for the period 939 (277)
Total comprehensive income, net of tax for the
period 1,483 243
--------------------------------------------------------------- ------ -------
Total comprehensive income for the period attributable
to:
Shareholders of the Group 1,457 214
Non-controlling interests 26 29
--------------------------------------------------------------- ------ -------
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT (unaudited)
30 June 31 December
2022 2021
Notes GBPm GBPm
-------------------------------------------------- ------ --------- ------------
Non-current assets
Property, plant and equipment 1,659 1,563
Right of use assets 113 99
Intangible assets 28,543 27,195
Deferred tax assets 203 312
Post-employment benefit assets 29 11
Derivative financial instruments 8 14 12
Other non-current assets 45 8
-------------------------------------------------- ------ --------- ------------
Total non-current assets 30,606 29,200
-------------------------------------------------- ------ --------- ------------
Current assets
Inventories 1,149 951
Trade and other receivables 2,408 2,207
Loan amounts owing from related parties 13 9,211 1,508
Cash and cash equivalents and liquid investments 1,334 414
Assets held for sale 6 -
Derivative financial instruments 8 132 5
Current tax recoverable 159 166
-------------------------------------------------- ------ --------- ------------
Total current assets 14,399 5,251
-------------------------------------------------- ------ --------- ------------
Total assets 45,005 34,451
-------------------------------------------------- ------ --------- ------------
Current liabilities
Short-term borrowings 11 (332) (79)
Trade and other payables (3,546) (3,002)
Loan amounts owing to related parties 13 (3) (825)
Derivative financial instruments 8 (11) (18)
Current tax payable (236) (202)
Short-term provisions (71) (112)
-------------------------------------------------- ------ --------- ------------
Total current liabilities (4,199) (4,238)
-------------------------------------------------- ------ --------- ------------
Non-current liabilities
Long-term borrowings 11 (9,918) (87)
Deferred tax liabilities (3,655) (3,357)
Post-employment benefit obligations (142) (253)
Derivative financial instruments 8 (55) (1)
Other provisions (31) (27)
Other non-current liabilities (6) (8)
-------------------------------------------------- ------ --------- ------------
Total non-current liabilities (13,807) (3,733)
-------------------------------------------------- ------ --------- ------------
Total liabilities (18,006) (7,971)
-------------------------------------------------- ------ --------- ------------
Net assets 26,999 26,480
-------------------------------------------------- ------ --------- ------------
Equity
Share capital 12 1 1
Share premium 12 70 -
Other reserves 12 (11,553) (11,632)
Retained earnings 38,377 37,986
-------------------------------------------------- ------ --------- ------------
Shareholders' equity 26,895 26,355
-------------------------------------------------- ------ --------- ------------
Non-controlling interests 104 125
-------------------------------------------------- ------ --------- ------------
Total equity 26,999 26,480
-------------------------------------------------- ------ --------- ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE (unaudited)
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Shareholders' interests equity
equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----- --------- -------- --------- --------- --------------- ---------------- ---------
At 1 January
2022 1 - (11,632) 37,986 26,355 125 26,480
------------------- ----- --------- -------- ---------
Profit after tax - - - 517 517 27 544
Other
comprehensive
income/(expenses) - - 143 797 940 (1) 939
------------------- ----- --------- -------- --------- --------- --------------- ---------------- ---------
Total
comprehensive
income - - 143 1,314 1,457 26 1,483
Distributions
to
non-controlling
interests - - - - - (47) (47)
Dividends to
equity
shareholders 6 - - - (873) (873) - (873)
Issue of share
capital 12 21,758 - - - 21,758 - 21,758
Capital reduction 12 (21,758) - - - (21,758) - (21,758)
Transactions with
equity
shareholder 12 - 70 (64) (56) (50) - (50)
Other - - - 6 6 - 6
---------
At 30 June 2022 1 70 (11,553) 38,377 26,895 104 26,999
------------------- ----- --------- -------- --------- --------- --------------- ---------------- ---------
At 1 January 2021 1 - (11,652) 37,763 26,112 111 26,223
Profit after tax - - - 491 491 29 520
Other
comprehensive
expenses - - - (277) (277) - (277)
------------------- ----- --------- -------- --------- --------- --------------- ---------------- -----------
Total
comprehensive
income - - - 214 214 29 243
Transactions with
equity
shareholder 12 - - (2) - (2) - (2)
Dividends to
equity
shareholders 6 - - - (621) (621) - (621)
---------
At 30 June 2021 1 - (11,654) 37,356 25,703 140 25,843
------------------- ----- --------- -------- --------- --------- --------------- ---------------- -----------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE (unaudited)
2022 2021
Note GBPm GBPm
----------------------------------------------------- ----- -------- -------------
Cash flow from operating activities
Profit after tax 544 520
Adjustments reconciling profit after tax to
cash generated from operations 7 274 (134)
----------------------------------------------------- ----- -------- -------------
Cash generated from operations 7 818 386
Taxation paid (138) (152)
----------------------------------------------------- ----- -------- -------------
Net cash inflow from operating activities 680 234
----------------------------------------------------- ----- -------- -------------
Cash flow from investing activities
Purchase of property, plant and equipment (78) (89)
Proceeds from sale of property, plant and equipment 1 7
Purchase of intangible assets (14) (35)
Proceeds from sale of intangible assets 3 72
Loans to related parties 13 (9,211) -
Decrease in amounts invested with GSK finance
companies 13 700 499
Interest received 12 9
Net cash (outflow)/inflow from investing activities (8,587) 463
----------------------------------------------------- ----- -------- -------------
Cash flow from financing activities
Repayment of lease liabilities (17) (19)
Interest paid (4) (9)
Dividends paid to shareholders 6 (873) (621)
Distributions to non-controlling interests (47) -
Net contribution from parent 18 -
Repayment of short-term borrowings (11) -
Proceeds from long-term borrowings 11 9,241 1
Other financing cash flows(1) 239 (68)
----------------------------------------------------- ----- -------- -------------
Net cash inflow/(outflow) from financing activities 8,546 (716)
----------------------------------------------------- ----- -------- -------------
Increase/(decrease) in cash and cash equivalents
and bank overdrafts 639 (19)
----------------------------------------------------- ----- -------- -------------
Cash and cash equivalents and bank overdrafts
at beginning of year 405 323
Exchange adjustments 22 (9)
Increase/(decrease) in cash and cash equivalents
and bank overdrafts 639 (19)
----------------------------------------------------- ----- -------- -------------
Cash and cash equivalents and bank overdrafts
at end of period 1,066 295
----------------------------------------------------- ----- -------- -------------
Cash and cash equivalents and bank overdrafts
at the end of period comprise:
Cash and cash equivalents(2) 1,333 298
Overdrafts (267) (3)
----------------------------------------------------- ----- -------- -------------
Cash and cash equivalents and bank overdrafts
at end of period 1,066 295
----------------------------------------------------- ----- -------- -------------
(1) Other financial cash flows for the period ended 30 June 2022
include settlement of cash flow hedge of GBP206m.
(2) Cash and cash equivalents of GBP1,333m as at 30 June 2022 is
presented within "Cash and equivalents and liquid investments" in
the Condensed consolidated balance sheet, which comprised of both
cash and cash equivalents and liquid investments of GBP1m.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2022 (unaudited)
1 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited
("CHHL2") and its subsidiary undertakings (collectively, "the
Group", "the Haleon business") was owned by GSK plc ("the GSK
Group") and the Pfizer Inc. ("the Pfizer Group") for the period
ended 30 June 2022. In July 2022, Haleon plc ("the Company") became
the ultimate holding company of the Group through a series of
share-for-share exchanges with the former shareholders (the GSK
Group and the Pfizer Group) to acquire the Group ("the Demerger
activities"). The Demerger activities fall outside the scope of
IFRS 3 "Business Combinations" and the Company has accounted for
these transactions by adopting the principles of predecessor
accounting which reflects the economic substance of the Demerger
activities and means that, the future consolidated financial
statements will be prepared as if the Group had been in existence
throughout the periods presented.
Refer to Note 15, 'Post Balance Sheet Events' for the details of
the Demerger activities that took place in July 2022. The Earnings
per Share calculation as disclosed in Note 10 'Earnings per Share'
has been retrospectively adjusted for all periods using the
weighted average number of outstanding shares issued by the Company
as at the date of the report as per the requirements in IAS 33
"Earnings per Share".
The condensed consolidated financial statements ('interim
financial statements') of the Group for the six months to 30 June
2022 have been prepared in accordance with IAS 34 Interim Financial
Reporting issued by the International Accounting Standards Board
("IASB"), as adopted by the United Kingdom. These condensed
consolidated financial statements, which are unaudited, do not
include all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's Historical Financial Information ('HFI') as at and for the
year ended 31 December 2021 included in the Prospectus and the
Group's Registration Statement on Form 20-F dated 1 June 2022,
which is available on the Company's website. The annual financial
statements of the Group for the year ended 31 December 2022 will be
prepared in accordance with the International Financial Reporting
Standards as adopted by the United Kingdom ("UK IFRS") and in
compliance with the International Financial Reporting Standards as
issued by the IASB ("IASB IFRS").
The comparative information for the year ended 31 December 2021
does not constitute statutory accounts of CHHL2 as defined in
section 434 of the Companies Act 2006. A copy of the company only
statutory accounts of CHHL2 for that year has been delivered to the
Registrar of Companies. The auditor's report on those accounts was
not qualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
the report and did not contain statements under section 498(2) or
(3) of the Companies Act 2006.
The condensed consolidated financial statements do not include
all of the information required for a complete set of IFRS
financial statements. However, selected notes are included to
explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and
performance since the publication of the 2021 HFI report in the
Prospectus and the Group's Registration Statement on Form 20-F
dated 1 June 2022.
All accounting policies for recognition, measurement,
consolidation and presentation are as outlined in the 2021 HFI
report in the Prospectus and the Group's Registration Statement on
Form 20-F dated 1 June 2022 and these accounting policies are
applied consistently in preparation of the condensed consolidated
financial statements. The condensed financial statements have been
prepared on the historical cost basis, except for the revaluation
of certain financial instruments, and are presented in pounds
sterling, the presentation currency of the Group.
Going concern
The interim condensed consolidated financial statements have
been prepared on a going concern basis.
Judgements and estimates
The preparation of the condensed consolidated financial
statements requires management to make judgements about when or how
items should be recognised in the consolidated financial statements
and estimates and assumptions that affect the amounts of assets and
liabilities, income and expenses reported in the consolidated
financial statements. Actual amounts and results could differ from
these estimates. The critical areas of accounting estimates and
judgement are the same as those disclosed in the 2021 HFI report in
the Prospectus and the Group's Registration Statement on Form 20-F
dated 1 June 2022.
2 REVENUE AND SEGMENT INFORMATION
Analysis of revenue by geography is included below, the
composition of these geographical segments is reviewed on an annual
basis.
For management reporting purposes, the Group is organised into
business units based on geographical areas and has three reportable
segments, as follows:
- North America
- Europe, Middle East, Africa and Latin America (EMEA and
LatAm)
- Asia Pacific (APAC)
No operating segments have been aggregated to form the above
reportable operating segments.
The primary products sold by each of the reportable segments
consist of Oral Health, Vitamin, Minerals and Supplements (VMS),
Pain Relief, Respiratory Health, Digestive Health and Other
products and the product portfolio is consistent across the
reportable segments.
The Commercial Operations Board is the Chief Operating Decision
Maker ("CODM") who monitors the operating results of the Group's
business units separately for the purpose of making decisions about
resource allocation and performance assessment. The CODM uses a
measure of Adjusted operating profit to assess the performance of
the reportable segments. The CODM does not review IFRS operating
profit or total assets and liabilities on a segment basis.
2022 2021
Segmental information GBPm GBPm
-------------------------------------------------------------- ------ ------------
Revenue
North America 1,873 1,595
EMEA and LatAm 2,069 1,903
APAC 1,246 1,077
-------------------------------------------------------------- ------ ------------
5,188 4,575
Adjusted operating profit
-------------------------------------------------------------- ------ ------------
North America 454 316
EMEA and LatAm 467 458
APAC 300 244
Corporate and other unallocated (30) (35)
-------------------------------------------------------------- ------ ------------
1,191 983
Reconciling items between Adjusted operating profit and operating profit(1) :
Net amortisation and impairment of intangible assets (40) (21)
Restructuring costs (20) (77)
Transaction related costs - -
Separation and admission costs (229) (105)
Disposals and others (2) (43)
-------------------------------------------------------------- ------ ------------
Group operating profit 900 737
-------------------------------------------------------------- ------ ------------
Net finance costs (36) (1)
Profit before taxation 864 736
-------------------------------------------------------------- ------ ------------
1. The details of the reconciling items between Adjusted
operating profit and operating profit are included under "Use of
Non-IFRS Measures" on pages 38 to 45.
2022 2021
Revenue by product category GBPm GBPm
------------------------------------------ ------ ---------
Oral health 1,438 1,360
Vitamins, minerals and supplements (VMS) 816 702
Pain relief 1,248 1,093
Respiratory health 683 455
Digestive health and other 1,003 965
Total revenue 5,188 4,575
------------------------------------------ ------ ---------
3 IMPAIRMENT REVIEW
During the period ended 30 June 2022, Robitussin was still
recovering from a lower cold & flu incidence resulting from the
COVID-19 social distancing measures, and Preparation H was affected
by supply constraints. The Group has performed a sensitivity
analysis based on changes in key assumptions considered to be
reasonably possible by management leaving all other assumptions
unchanged. Sensitivity analysis for the period ended 30 June 2022
has identified these two brands as being sensitive to reasonably
possible changes in key assumptions. In order for the recoverable
amount to be equal to the carrying values of Robitussin and
Preparation H, either the discount rate would have to be increased
by 0.7% and 0.2% (31 December 2021: increased by 0.5% and 0.1%), or
the operating margin decreased by 5.3% and 3.0% (31 December 2021:
decreased by 4.1% and 1.5%), or the long term growth rate decreased
by 1.0% and 0.3% (31 December 2021: decreased by 0.7% and 0.2%)
respectively. The Group considers that changes in key assumptions
of this magnitude are reasonably possible in the current
environment.
Other than as disclosed above, the directors do not consider
that any reasonably possible changes in the key assumptions would
cause the fair value less costs of disposal of the individually
significant brands to fall below their carrying values.
4 EXCHANGE RATES
The Group operates in many countries and earns revenues and
incurs costs in many currencies. The results of the Group, as
reported in Sterling, are affected by movements in exchange rates
between Sterling and other currencies. Average exchange rates, as
modified by specific transaction rates for large transactions,
prevailing during the period, are used to translate the results and
cash flows of overseas subsidiaries into Sterling. Period-end rates
are used to translate the net assets of those entities. The
currencies which most influenced these translations and the
relevant exchange rates were disclosed in the table below.
Six months ended
30 June
2022 2021
--------- ----------
Average rates:
US$/GBP 1.30 1.39
Euro/GBP 1.19 1.15
Swiss Franc/GBP 1.22 1.26
CNY/GBP 8.38 8.96
As at As at 31
30 June December
2022 2021
--------- ----------
Period-end rates:
US$/GBP 1.21 1.35
Euro/GBP 1.16 1.19
Swiss Franc/GBP 1.16 1.23
CNY/GBP 8.11 8.56
5 TAX
For the six months ended 30 June 2022, the income tax expense
has been determined based on management's best estimate of the
effective tax rate applicable for the full year. This is then
applied to the pre-tax profit of the interim period, with the tax
due on adjusting items considered on an item by item basis.
6 DIVIDS
During the periods ended 30 June 2022 and 2021, the Group
declared and paid a series of dividends to GSK and Pfizer under the
Company's Shareholders Agreement valid at that time. These
dividends included the following:
-- On 30 March 2022, GBP421 per share for a total amount of GBP421m.
-- On 29 June 2022 GBP452 per share for a total amount of GBP452m.
-- On 30 June 2021, GBP621 per share for a total amount of GBP621m.
No further dividends were declared or paid.
Prior to the demerger, the Group declared and paid dividends of
GBP11,057m in July 2022. Further information about these dividends
are provided in Note 15 'Post balance sheet events'.
7 ADJUSTMENTS RECONCILING PROFIT AFTER TAX TO OPERATING CASH
FLOW
Six months ended
30 June
2022 2021
GBPm GBPm
----------------------------------------------------- -------- ---------
Profit after tax 544 520
Taxation charge 320 216
Net finance costs 36 1
Depreciation of property, plant and equipment
and rights of use assets 82 84
Amortisation of intangible assets 50 36
Impairment and assets written off, net of reversals 23 7
Profit on sale of intangible assets (3) (6)
Profit on sale of businesses - (4)
Other non-cash movements 6 (9)
Decrease in other non-current financial liabilities - 1
Decrease in pension and other provisions (44) (36)
Changes in working capital:
Increase in inventories (153) (82)
Increase in trade receivables (92) (9)
Increase/(decrease) in trade payables 144 (143)
Net change in other receivables and payables (95) (190)
----------------------------------------------------- ----
274 (134)
----------------------------------------------------- -------- --------- ----
Cash generated from operations 818 386
----------------------------------------------------- -------- --------- ----
8. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Financial assets and liabilities held at fair value are
categorised by the valuation methodology applied in determining
their fair value. Where possible, quoted prices in active markets
are used (Level 1). Where such prices are not available, the asset
or liability is classified as Level 2, provided all significant
inputs to the valuation model used are based on observable market
data. If one or more of the significant inputs to the valuation
model is not based on observable market data, the instrument is
classified as Level 3.
Level Level Level
1 2 3 Total
As at 30 June 2022 GBPm GBPm GBPm GBPm
--------------------------------------------------- ------ ------ ------ ------
Financial assets at fair value
Financial assets at fair value through
profit or loss:
Held for trading derivatives that are
not in a designated and effective hedging
relationship - 144 - 144
Cash and cash equivalents (money market
funds) 424 - - 424
Financial assets at fair value through
other comprehensive income:
Derivatives designated and effective as
hedging instruments - 2 - 2
424 146 - 570
--------------------------------------------------- ------ ------ ------ ------
Financial liabilities at fair value
Financial liabilities at fair value
through profit or loss:
Held for trading derivatives that are
not in a designated and effective hedging
relationship - (11) - (11)
Financial liabilities at fair value
through other comprehensive income:
Derivatives designated and effective
as hedging instruments - (55) - (55)
--------------------------------------------- ------------ ------ ------ --------
- (66) - (66)
---------------------------------------------------------- ------ ------ --------
Level Level Level
1 2 3 Total
As at 31 December 2021 GBPm GBPm GBPm GBPm
--------------------------------------------------- ------ ------ ------ ------
Financial assets at fair value
Financial assets at fair value through
profit or loss:
Held for trading derivatives that are
not in a designated and effective hedging
relationship - 5 - 5
Cash and cash equivalents (money market
funds) 3 - - 3
Financial assets at fair value through
other comprehensive income:
Derivatives designated and effective as
hedging instruments - 12 - 12
3 17 - 20
--------------------------------------------------- ------ ------ ------ ------
Financial liabilities at fair value
Financial liabilities at fair value
through profit or loss:
Held for trading derivatives that are
not in a designated and effective hedging
relationship - (18) - (18)
Financial liabilities at fair value
through other comprehensive income:
Derivatives designated and effective
as hedging instruments - (1) - (1)
--------------------------------------------- ------------ ------ ------ --------
- (19) - (19)
---------------------------------------------------------- ------ ------ --------
There are no material differences between the carrying value of
the Group's financial assets and liabilities and their estimated
fair values, with the exceptions of bonds, for which the carrying
values and fair values are set out in the table below:
As at 30 June As at 31 December
2022 2021
------------------- --------------------
Carrying Fair Carrying Fair
value value value value
GBPm GBPm GBPm GBPm
--------- --------- -------- ----------- -------
Bonds (9,819) (9,341) - -
--------- --------- -------- ----------- -------
The following methods and assumptions were used to estimate the
fair values of significant financial instruments on the balance
sheet:
- Cash and cash equivalents carried at amortised costs, Liquid
investments, Trade and other receivables and certain other
non-current assets, Loan amounts owing from/(to) related parties,
Trade and other payables and certain other non-current liabilities
- approximates to the carrying amount
- Interest rate swaps and foreign exchange forward contracts -
based on present value of contractual cash flows using market
sourced data (exchange rates or interest rates) at the balance
sheet date
- Short-term loans and overdrafts - approximates to the carrying
amount because of the short maturity of these instruments
- Long-term loans - based on quoted market price (a level 2 fair
value measurement) for European and US Medium Term Notes
9 RESTRUCTURING, SEPARATION AND ADMISSION COST
Restructuring
Restructuring costs mainly include personnel costs, impairments
of tangible assets and computer software relating to restructuring
programmes. The Group's restructuring costs in HY 2022 totalled
GBP20m (HY 2021: GBP77m) and were primarily related to activities
to generate synergies from the continued integration of the Pfizer
Group's Consumer Healthcare business into the Group's business.
Separation and admission cost
Separation and admission costs include costs incurred in
relation to and in connection with the separation and listing of
the Group as a standalone business and mainly include: costs for
disentangling systems and processes previously shared with the GSK
Group, costs for separating the corporate functions from the GSK
Group, costs in relation to the preparation and audit of public
documents required for the admission of the Company for trading on
the London Stock Exchange and New York Stock Exchange and sponsor
fees. Separation and admission costs totalled GBP229m in H1 2022
(H1 2021: GBP105m)
10 EARNINGS PER SHARE
Six months ended 30 June
2022 2021
Pence Pence
---------------------------- ------------- ------------
Basic earnings per share 5.6 5.3
---------------------------- ------------- ------------
Diluted earnings per share 5.6 5.3
---------------------------- ------------- ------------
Basic earnings per share for all periods presented have been
adjusted retrospectively as required by IAS 33 "Earnings per share"
to reflect the share structure of the Company due to the increase
in the number of ordinary shares outstanding as a result of the
Demerger activities that took place in July 2022. Basic earnings
per share has been calculated by dividing the profit attributable
to shareholders by the Company's weighted average number of shares
in issue, with 9,234,573,831 shares outstanding as at the date of
the report. Diluted earnings per share has been calculated after
adjusting the weighted average number of shares used in the basic
calculation to assume the conversion of all potentially dilutive
shares. However, there are no dilutive equity instruments.
As a part of the Demerger activities, the Company issued
25,000,000 non-voting preference shares of GBP1.00 each to Pfizer
Inc. These non-voting preference shares are not dilutive in
nature.
The numbers of shares used in calculating basic and diluted
earnings per share are reconciled below:
Six months ended 30 June
2022 2021
Weighted average number of shares in issue millions millions
-------------------------------------------- ------------- ------------
Basic 9,235 9,235
Dilution for share options and awards - -
-------------------------------------------- ------------- ------------
Diluted 9,235 9,235
-------------------------------------------- ------------- ------------
The basic and adjusted earnings per share calculated under the
share structure of CHHL2 as at 30 June 2022, with weighted average
of one million shares in issue for both basic and dilutive shares
are included below:
Six months ended 30 June
2022 2021
Pence Pence
---------------------------------------------------- -------------- -----------
Basic earnings per share 51,700 49,100
---------------------------------------------------- -------------- -----------
Diluted earnings per share 51,700 49,100
---------------------------------------------------- -------------- -----------
11 BORROWINGS
As at As at 31
30 June December
2022 2021
GBPm GBPm
Short-term borrowings
Loan and overdrafts (300) (49)
Lease liabilities (32) (30)
---------------------------------------------- --------- ----------
Total short-term borrowings (332) (79)
---------------------------------------------- --------- ----------
Long-term borrowings
Lease liabilities (99) (87)
GBP300,000,000 2.875 per cent. notes due (299) -
2028
GBP400,000,000 3.375 per cent. notes due (398) -
2038
EUR850,000,000 1.250 per cent. notes due (704) -
2026
EUR750,000,000 1.750 per cent. notes due (642) -
2030
EUR750,000,000 2.125 per cent. notes due (638) -
2034
$700,000,000 3.024 per cent. callable notes (577) -
due 2024
$300,000,000 floating rate callable notes (248) -
due 2024
$2,000,000,000 3.375 per cent. notes due (1,643) -
2027
$1,000,000,000 3.375 per cent. notes due (817) -
2029
$2,000,000,000 3.625 per cent. notes due (1,642) -
2032
$1,000,000,000 4.000 per cent. notes due (799) -
2052
$1,750,000,000 3.125 per cent. notes due (1,412) -
2025
Total long-term borrowings (9,918) (87)
---------------------------------------------- --------- ----------
Total borrowings (10,250) (166)
---------------------------------------------- --------- ----------
Short-term borrowings
As at 30 June 2022, the Group had a short-term bank loan of
GBP33m (31 December 2021: GBP42m). The weighted average interest
rate on the short-term bank loan as at 30 June 2022 was 8.8% (Dec
2021: 3.7%).
Long-term borrowings
As part of the preparation for separation of the Group from the
GSK Group, on 16 March 2022, GSK Consumer Healthcare Capital UK plc
and GSK Consumer Healthcare Capital NL B.V. (subsidiary
undertakings of the Group, the "EMTN Issuers") established a
GBP10,000,000,000 Euro Medium Term Note Programme (the "Programme")
pursuant to which the EMTN Issuers may issue notes from time to
time. The EMTN Issuers have issued the notes described under
"Pre-Separation Programme Notes" below under the Programme during
the period ended 30 June 2022.
In addition, on 24 March 2022 the US Issuer and GSK Consumer
Healthcare Capital UK plc issued a number of standalone bonds
pursuant to a private placement to institutional investors in the
USA and outside the USA in reliance on exemptions from the
registration requirements of the US Securities Act (as described
under "Pre-Separation USD Notes" below).
The payment of all amounts owing in respect of: (i) notes issued
under the Programme (including the notes in issuance, as described
under "Pre-Separation Programme Notes" below); and (ii) the
Pre-Separation USD Notes is guaranteed by the Company. As at 30
June 2022, the Group had long-term borrowings excluding lease
liabilities of GBP9,819m (30 June 2021, 31 December 2021: GBPnil),
of which GBP5,235m (30 June 2021, 31 December 2021: GBPnil) fell
due in more than five years. The average effective pre-swap
interest rate of all notes in issue as at 30 June 2022 was
approximately 2.93% (30 June 2021, 31 December 2021: nil).
Long-term borrowings repayable after five years carry interest
at effective rates between 1.75% and 3.86%, with repayment dates
ranging from 2028 to 2052.
12 SHARE CAPITAL, SHARE PREMIUM AND OTHER RESERVES
At 31 Transaction At 30 At
December Issue of Capital with equity June 30 June
2021 share capital Reduction shareholder 2022 2021
----------- ---------------- ------------- -------------- -------- ----------
Ordinary A
Shares at
GBP1.00 each Number 680,000 - - - 680,000 680,000
GBP'000 680 - - - 680 680
Ordinary B
Shares at
GBP1.00 each Number 320,000 - - - 320,000 320,000
GBP'000 320 - - - 320 320
Non Redeemable
Preference
Shares at
GBP1.00 each Number 300,000 - - - 300,000 300,000
GBP'000 300 - - - 300 300
D Deferred
Share at
GBP21,758,402,221.00 Number - 1 (1) - - -
-----------------------
GBP'000 - 21,758,402 (21,758,402) - - -
--------------------------------- ----------- ---------------- ------------- -------------- -------- ----------
Share capital GBP'000 1,300 21,758,402 (21,758,402) - 1,300 1,300
----------------------- --------- ----------- ---------------- ------------- -------------- -------- ----------
Share premium GBPm - - - 70 70 -
----------------------- --------- ----------- ---------------- ------------- -------------- -------- ----------
Ordinary A shares and Ordinary B shares carry equal rights.
Share premium was recognised on shares issued by CHHL2, the
ultimate holding company of the Group as at 30 June 2022, except
where CHHL2 has applied merger relief under Section 612 of the
Companies Act 2006. In such cases the excess of the fair value of
the assets and liabilities recognised into the Group, over the
nominal value of the share issued has been added to merger reserve
as per table disclosed above.
During the period ended 30 June 2022, CHHL2 issued one D
Deferred share of GBP21,758,402,221 to GSKCHHL. The D Deferred
share was non-redeemable and did not carry any voting rights,
dividend rights or rights in the event of a return of capital.
Subsequently, CHHL2 cancelled the fully paid up D Deferred share of
GBP21,758m in the share capital of CHHL2 held by GSKCHHL, to
convert the share capital into distributable profits.
CHHL2 also issued one Deferred share of one penny to GSKCHHL for
a consideration of GBP70m reflected in share premium. The Deferred
share is non-redeemable and does not carry any voting rights,
dividend rights or rights in the event of a return of capital.
On 29 June 2022, as part of the acquisition of the legal
ownership of the India consumer healthcare business from the GSK
Group, the Group declared a dividend of GBP56m to GlaxoSmithKline
Consumer Healthcare Holdings Limited ("GSKCHHL"). This dividend was
offset in full against the liability owed by GSKCHHL to the
Group.
Details of other reserves are included below:
6 months ended 30 June
2022 2021
------------------------------------- ------------ -----------
Other Reserves
At beginning of the period 11,632 11,652
Other comprehensive income (143) -
Transaction with equity shareholder 64 2
At end of the period 11,553 11,654
------------------------------------- ------------ -----------
Other Reserves include Merger Reserve that arise as a result of
acquisition of business and cash flow hedge reserve.
The transaction with the equity shareholder arose on the
transfer of certain operations from the GSK Group as part of a
reorganisation ahead of the Demerger activities.
13 RELATED PARTY TRANSACTIONS
The Group undertook significant transactions with entities from
within the GSK Group and Pfizer Group during the period ended 30
June 2022.
Entities within the GSK Group supplied goods to and purchased
goods from the Group during the period. The Group supplies goods to
companies within the GSK Group under Distribution Agreements in
those countries where the Group does not have its own local
operating company. In addition, entities from within the GSK Group
were engaged to provide support function services to the Group
under Support Services Agreements ("SSA") including: regulatory and
safety services; financial management and reporting; human
resources; payroll services; IT support; property management; legal
services; contract manufacturing; management of the Group's UK and
US pension schemes; and management of the Group's employee share
schemes.
In addition, the Group operated separate agreements with GSK
affiliates for the provision of research and development and for
toll-manufacturing services. Cash amounts were also held with GSK
financing companies.
Entities from within the Pfizer Group supplied services, goods
to and purchased goods and services from the Group during the
period via the Transitional Services Agreement. All related party
transactions are undertaken at the Group's best estimate of arm's
length pricing in accordance with the Group's Transfer Pricing
policy.
Where the legal completion of local transfer of assets and
liabilities has been delayed, but the Group is able to exercise
control over the relevant activities, the relevant net assets and
profits have been recognised in the results.
Pfizer companies GlaxoSmithKline companies
---------------------------------- ---------------------- ----------------------------
30 June 30 June 30 June 30 June
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
---------------------------------- -------- ------------ ----------- ---------------
Sales of goods - - 84 65
Purchases of goods - - (38) (50)
Services and royalty income - - 25 6
Services and royalty expense (2) (43) (101) (166)
Interest income 10 - 28 6
Interest expense - - (2) (3)
Dividend paid 279 199 594 422
---------------------------------- -------- ------------ ----------- ---------------
30 June 31 December 30 June 31 December
2022 2021 2022 2021
GBPm GBPm GBPm GBPm
---------------------------------- -------- ------------ ----------- ---------------
Other amounts owing to related
parties - (7) (354) (203)
Other amounts owing from related
parties - - 462 542
Loan amounts owing to related
parties - - (3) (825)
Interest receivable for loan
amounts owing from related
parties 10 - 23 -
Loan amounts owing from related
parties 2,948 - 6,263 1,508
---------------------------------- -------- ------------ ----------- ---------------
GBP9,211m principal loan amounts owing from related parties are
held with the GSK Group and the Pfizer Group as a result of the on
lend of the proceeds from the bonds issued in March 2022 to its
shareholders. These balances are unsecured with interest largely
paid at 1.365% and are repayable on demand. As at 31 December 2021,
the loan amounts owing from related parties of GBP1,508m were held
with GSK Finance companies as part of the Group's banking
arrangements paid at the new risk free benchmark rate - 0.05% and
were repayable on demand. The balance disclosed in this note
includes interests receivable for the loan amounts of GBP33m, which
is presented within Trade and other receivables on the condensed
consolidated balance sheet.
GBP3m (Dec 2021: GBP825m) loan amounts owing to related parties
are held with GSK Financing companies as part of the Group's
banking arrangements. These balances are unsecured with interest
largely received at the new risk free benchmark rate + 0.10% (31
December 2021: new risk free benchmark rate + 0.10%) and are
repayable on demand.
14 CONTINGENT LIABILITIES
Legal proceedings
The Group may become involved in significant legal proceedings
in respect of which it is not possible to determine whether a
potential outflow is probable. With respect to each of the legal
proceedings described below and on page 292-95 of the Group's
prospectus and pages 204-07 of the 20-F, other than those for which
a provision has been made, the Group is unable to make a reliable
estimate of the expected financial effect at this stage.
The Group's position could change over time, and, therefore,
there can be no assurance that any losses that result from the
outcome of any legal proceedings will not exceed by a material
amount the amount of the provisions reported in the Group's
financial statements. If this were to happen, it could have a
material adverse impact on the results of operations of the Group
in the reporting period in which the judgements are incurred or the
settlements entered into.
Zantac Litigation
GSK and/or Pfizer have been named as defendants (alongside other
manufacturers of ranitidine, as well as retailers and distributors)
in personal injury lawsuits filed in the US involving Zantac, the
bulk of which are pending in a Multidistrict Litigation ("MDL") in
the Southern District of Florida. There are also numerous unfiled
claims added to a registry implemented by the court presiding over
the MDL. Class actions alleging economic injury and medical
monitoring have also been filed in federal court. In addition to
the product liability cases filed in the MDL, cases have been filed
in several State Courts.
Outside the US, there are class actions and individual actions
pending against GSK and Pfizer in Canada, along with a class action
against GSK in Israel.
The Group is not a party to any Zantac claims and the Group has
never marketed Zantac in any form in the US or Canada. The Group is
not primarily liable for any OTC or prescription Zantac claims.
Pursuant to certain provisions in the Stock and Asset Purchase
Agreement ("SAPA"), GSK and Pfizer have each served the Group with
notice of potential claims for indemnification relating to OTC
Zantac. Haleon has also notified GSK and Pfizer that it rejects
their requests for indemnification on the basis that the scope of
the indemnities set out in the joint venture agreement only covers
their consumer healthcare businesses as conducted when the JV was
formed in 2018. At that time, neither GSK nor Pfizer marketed OTC
Zantac in the US or Canada. It is not possible, at this stage, to
meaningfully assess whether the outcome will result in a probable
outflow, or to quantify or reliably estimate what liability (if
any) that the Group may have to GSK and/or Pfizer under the claimed
indemnities.
15 POST BALANCE SHEET EVENTS
On 6 July 2022, the shareholders of GSK plc voted to approve all
resolutions required to implement the Demerger activities.
On 12 July 2022, the Directors of CHHL2, the ultimate holding
company of the Group as at 30 June 2022, approved a pre separation
cash dividend and a final sweep dividend for a total amount of
GBP11,004m which was paid to CHHL2's equity shareholders on 13 July
2022. Out of the total dividends of GBP11,004m, GBP7,483m was paid
to GSKCHHL, and GBP3,521m was paid to PF Consumer Healthcare
Holdings LLC ("PFCHHL"). The dividends paid to GSKCHHL and PFCHHL
were distributed onward to GSK plc and Pfizer Inc respectively. An
additional balancing dividend of GBP53m was declared to GSKCHHL on
12 July 2022 and paid on 13 July 2022.
On 12 July 2022, as part of the acquisition of the legal
ownership of the India consumer healthcare business from the GSK
Group, the Group declared an additional dividend of GBP23m to
GSKCHHL. This dividend was offset in full against the liability
owed by GSKCHHL to the Group.
During the first half of July 2022, the Group underwent a
business reorganisation by which it either sold or declared a
dividend in specie consisting of some of its subsidiary
undertakings to GSKCHHL. As a consequence of the demerger
activities, all these subsidiary undertakings became wholly owned
subsidiaries of the Company. From an accounting perspective, these
subsidiary undertakings will remain consolidated into the
financials results of the Group throughout the whole year.
On 13 July 2022, the Group drew down GBP1,493m under a 3-year
term loan from its term loan facility in preparation for the
payment of the pre separation cash dividend and the final sweep
dividend. The interest rate of on the loan was based on the
Sterling Overnight Interbank Average rate (SONIA) + 0.976%.
On 15 July 2022, the Group utilised the GBP9,211m principal loan
amounts owing from related parties plus
GBP33m of interest to partially fund the pre separation cash
dividend and the final sweeper dividend.
On 15 July 2022, the Company issued 5,084,190,079 ordinary
shares of GBP1.25 each to the shareholders of GSK plc to satisfy
the demerger dividend in specie declared by GSK plc, in exchange
for GSK plc transferring in its entirety its Ordinary A shares in
GSKCHHL to the Company. Upon the completion of this share-for-share
exchange, GSKCHHL became a non-wholly owned subsidiary of the
Company, with the Company holding a majority controlling equity
interest of 80.08% in GSKCHHL, which held 62% equity interest in
the Group on this date.
On 17 July 2022, the Company issued:
-- 692,593,037 ordinary shares of GBP1.25 each to the Scottish
Limited Partnerships established by the GSK Group companies, in
exchange for the Scottish Limited Partnerships transferring in
their entirety their Ordinary C shares in GSKCHHL to the Company.
Upon the completion of this share-for-share exchange, GSKCHHL
became a non-wholly owned subsidiary of the Company, with the
Company holding a majority controlling equity interest of 91.118%
in GSKCHHL.
-- 502,727,073 ordinary shares of GBP1.25 each to GSK plc, in
exchange for GSK plc transferring in its entirety its Ordinary B
shares in GSKCHHL to the Company. Upon the completion of this
share-for-share exchange, GSKCHHL became a wholly owned subsidiary
of the Company.
-- 2,955,063,626 ordinary shares of GBP1.25 each, and 25,000,000
non-voting preference shares of GBP1.00 each to Pfizer Inc., in
exchange for Pfizer Inc., the ultimate parent company of PFCHHL,
transferring in its entirety its shareholding in PFCHHL to the
Company. Upon the completion of this share-for-share exchange,
PFCHHL became a wholly owned subsidiary of the Company.
On 18 July 2022, regular trading of the Company's ordinary
shares commenced on the main market of the London Stock Exchange
(as a constituent of the FTSE 100).
On 22 July 2022, regular-way trading of the Company's American
Depositary Shares commenced on the New York Stock Exchange, having
trade on a when-issued basis from 18 July 2022 to 21 July 2022.
In July 2022, the Group established a GBP2bn Euro commercial
paper programme and a $10bn US Dollar commercial paper programme
pursuant to which members of the Group may issue commercial paper
from time to time.
On 3 August 2022, the Company reduced the nominal value of the
Company's Ordinary Shares from GBP1.25 per share to GBP0.01 per
share for an aggregate value of GBP11,451m, and cancelled in
entirety its share premium balance of GBP10,607m in accordance with
Companies Act 2006.
Consistent with the Group's deleveraging commitments, GBP500m of
the term loan was repaid in August 2022 and a further GBP250m in
September 2022 all through a combination of operating cash-flows
and proceeds from commercial paper issuance.
Appendix
Cautionary note regarding forward-looking statements
This document contains certain statements that are, or may be
deemed to be, "forward-looking statements" (including for purposes
of the safe harbor provisions for forward-looking statements
contained in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934). Forward-looking
statements give Haleon's current expectations and projections about
future events, including strategic initiatives and future financial
condition and performance, and so Haleon's actual results may
differ materially from what is expressed or implied by such
forward-looking statements. Forward-looking statements sometimes
use words such as "expects", "anticipates", "believes", "targets",
"plans" "intends", "aims", "projects", "indicates", "may", "might",
"will", "should", "potential", "could" and words of similar meaning
(or the negative thereof). All statements, other than statements of
historical facts, included in this presentation are forward-looking
statements. Such forward-looking statements include, but are not
limited to, statements relating to future actions, prospective
products or product approvals, future performance or results of
current and anticipated products, sales efforts, expenses, the
outcome of contingencies such as legal proceedings, dividend
payments and financial results.
Any forward-looking statements made by or on behalf of Haleon
speak only as of the date they are made and are based upon the
knowledge and information available to Haleon on the date of this
document. These forward-looking statements and views may be based
on a number of assumptions and, by their nature, involve known and
unknown risks, uncertainties and other factors because they relate
to events and depend on circumstances that may or may not occur in
the future and/or are beyond Haleon's control or precise estimate.
Such risks, uncertainties and other factors that could cause
Haleon's actual results, performance or achievements to differ
materially from those in the forward-looking statements include,
but are not limited to, those discussed under "Risk Factors" on
pages 17 to 45 of Haleon's prospectus and under "Risk Factors" in
Haleon's Registration Statement on Form 20-F and pages 15 to 16 of
this release. Forward-looking statements should, therefore, be
construed in light of such risk factors and undue reliance should
not be placed on forward-looking statements.
Subject to our obligations under English and U.S. law in
relation to disclosure and ongoing information (including under the
Market Abuse Regulations, the UK Listing Rules and the Disclosure
and Transparency Rules of the Financial Conduct Authority ("FCA")),
we undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. You should, however, consult any
additional disclosures that Haleon may make in any documents which
it publishes and/or files with the SEC and take note of these
disclosures, wherever you are located.
No statement in this document is or is intended to be a profit
forecast or profit estimate.
Use of non-IFRS measures (unaudited)
We use certain alternative performance measures to make
financial, operating, and planning decisions and to evaluate and
report performance. We believe these measures provide useful
information to investors and as such, where clearly identified, we
have included certain alternative performance measures in this
document to allow investors to better analyse our business
performance and allow greater comparability. To do so, we have
excluded items affecting the comparability of period-over-period
financial performance. Adjusted Results and other non-IFRS measures
may be considered in addition to, but not as a substitute for or
superior to, information presented in accordance with IFRS.
Adjusted results (unaudited)
Adjusted Results comprise Adjusted gross profit, Adjusted gross
profit margin, Adjusted operating profit, Adjusted operating profit
margin, Adjusted profit before taxation, Adjusted profit after
taxation, Adjusted profit attributable to shareholders, Adjusted
basic earnings per share, Adjusted diluted earnings per share,
Adjusted cost of sales, Adjusted Selling, General and
Administration ("SG&A"), Adjusted Research and Development
("R&D"), Adjusted other operating income, Adjusted net finance
costs, Adjusted taxation charge, and Adjusted profit attributable
to non-controlling interests. Adjusted Results exclude Net
amortisation and impairment of intangible assets, Restructuring
costs, Transaction-related costs, Separation and Admission costs,
and Disposals and other costs, in each case net of the impact of
taxes (where applicable) (collectively, the "Adjusting Items",
which are defined later in this section).
Management believes that Adjusted Results, when considered
together with the Group's operating results as reported under IFRS,
provide investors, analysts and other stakeholders with helpful
complementary information to understand the financial performance
and position of the Group from period to period and allow the
Group's performance to be more easily comparable.
The following tables set out a reconciliation between IFRS and
Adjusted Results for the six-month periods ended 30 June 2022 and
30 June 2021:
GBPm IFRS Net amortisation Restructuring Transaction Separation Disposals Adjusted
results and impairment costs(3) related and admission and results
of intangible costs costs(4) others(5)
assets(2)
2022
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Revenue 5,188 - - - - - 5,188
Cost of sales (1,977) 40 8 - - (1) (1,930)
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Gross profit 3,211 40 8 - - (1) 3,258
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Gross profit
margin % 61.9% 62.8%
Selling, general
and admin (2,179) - 13 - 229 7 (1,930)
Research and
development (136) - (1) - - - (137)
Other operating
income 4 - - - - (4) -
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Operating profit 900 40 20 - 229 2 1,191
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Operating profit
margin % 17.3% 23.0%
Net finance
costs (36) - - - - - (36)
Profit before
taxation 864 40 20 - 229 2 1,155
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Taxation (320) (6) (4) - (37) 122 (245)
Tax rate % 37% 21%
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Profit after
tax 544 34 16 - 192 124 910
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Shareholders of
the Group 517 34 16 - 192 124 883
Non-controlling
interests 27 - - - - - 27
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
Basic earnings
per Share(1) 5.6p 0.4p 0.2p - 2.1p 1.3p 9.6p
Weighted average
number of shares
(in million) 9,235 9,235
----------------- --------- ----------------- -------------- ------------ --------------- ----------- ---------
1. Basic and diluted earnings per share are the same in both
periods presented. Earnings per share calculation is performed
using the weighted average number of outstanding shares issued by
the Haleon plc as outlined in Note 10.
2. Net amortisation and impairment of intangible assets:
Includes impairment of intangible assets (H1 2022: GBP18m, H1 2021:
GBP2m) and amortisation of intangible assets excluding computer
software (H1 2022: GBP22m, H1 2021: GBP19m). Amortisation and
impairment of intangible assets arising from intangible assets
acquired in business combinations are adjusted to reflect the
performance of the business excluding the effect of acquisition
accounting.
3. Restructuring costs: Includes amounts related to business
transformation activities (H1 2022: GBP20m, H1 2021: GBP77m).
4. Separation and Admission costs: Includes amounts incurred in
relation to and in connection with the separation (H1 2022:
GBP186m, H1 2021: GBP105m) and listing (H1 2022: GBP43m, H1 2021:
Nil) of the Group as a standalone business.
5. Disposals and others: Includes gains and losses on disposals
of assets and businesses (H1 2022: GBP3m, H1 2021: GBP10m), tax
indemnities related to business combinations (H1 2022: GBP(5)m, H1
2021: nil), and other items (H1 2022: GBP4m, H1 2021: GBP33m). In
H1 2022, the tax effect includes a GBP104m tax charge related to
the revaluation of US deferred tax liabilities due to the increase
in the blended rate of US state taxes expected to apply as a result
of the demerger.
GBPm IFRS Net Restructuring Transaction Separation Disposals Adjusted
results amortisation costs(3) related and admission and others(5) results
and costs costs(4)
impairment
of intangible
assets(2)
2021
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Revenue 4,575 - - - - - 4,575
Cost of sales (1,761) 21 25 - - - (1,715)
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Gross profit 2,814 21 25 - - - 2,860
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Gross profit
margin % 61.5% 62.5%
Selling,
general
and admin (1,978) - 54 - 105 53 (1,766)
Research and
development (109) - (2) - - - (111)
Other operating
income 10 - - - - (10) -
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Operating
profit 737 21 77 - 105 43 983
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Operating
profit
margin % 16.1% 21.5%
Net finance
costs (1) - - - - - (1)
Profit before
taxation 736 21 77 - 105 43 982
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Taxation (216) (3) (17) - (20) 32 (224)
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Tax rate % 29% 23%
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Profit after
tax 520 18 60 - 85 75 758
Shareholders of
the Group 491 18 60 - 85 75 729
Non-controlling
interests 29 - - - - - 29
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Basic earnings
per Share(1) 5.3p 0.2p 0.6p - 0.9p 0.8p 7.9p
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
Weighted
average
number of
shares
(in millions) 9,235 9,235
---------------- --------- -------------- -------------- ------------ --------------- --------------- ---------
1. Basic and diluted earnings per share are the same in both
periods presented. Earnings per share calculation is performed
using the weighted average number of outstanding shares issued by
the Haleon plc as outlined in Note 10.
2. Net amortisation and impairment of intangible assets:
Includes impairment of intangible assets (H1 2022: GBP18m, H1 2021:
GBP2m) and amortisation of intangible assets excluding computer
software (H1 2022: GBP22m, H1 2021: GBP19m). Amortisation and
impairment of intangible assets arising from intangible assets
acquired in business combinations are adjusted to reflect the
performance of the business excluding the effect of acquisition
accounting.
3. Restructuring costs: Includes amounts related to business
transformation activities (H1 2022: GBP20m, H1 2021: GBP77m).
4. Separation and Admission costs: Includes amounts incurred in
relation to and in connection with the separation (H1 2022:
GBP186m, H1 2021: GBP105m) and listing (H1 2022: GBP43m, H1 2021:
Nil) of the Group as a standalone business.
5. Disposals and others: Includes gains and losses on disposals
of assets and businesses (H1 2022: GBP3m, H1 2021: GBP10m), tax
indemnities related to business combinations (H1 2022: GBP(5)m, H1
2021: nil), and other items (H1 2022: GBP4m, H1 2021: GBP33m). In
H1 2022, the tax effect includes a GBP104m tax charge related to
the revaluation of US deferred tax liabilities due to the increase
in the blended rate of US state taxes expected to apply as a result
of the demerger.
Constant currency (unaudited)
The Group's presentation currency is Pounds Sterling, but the
Group's significant international operations give rise to
fluctuations in foreign exchange rates. To neutralise foreign
exchange impact and to better illustrate the change in results from
one year to the next, the Group discusses its results both on an
"as reported basis" or using "actual exchange rates" ("AER") (local
currency results translated into Pounds Sterling at the prevailing
foreign exchange rate) and using constant currency exchange rates
("CER"). To calculate results on a constant currency basis, prior
year exchange rates are used to restate current year comparatives.
The currencies which most influence the constant currency results
of the Group and their exchange rates are shown in the below
table.
Six months to
30 June
2022 2021
------- ------
Average rates:
US$/GBP . . . . . . . .
. . . . . . . . . . . .
. 1.30 1.39
Euro/GBP . . . . . . .
. . . . . . . . . . . .
. . 1.19 1.15
Swiss Franc/GBP . . . .
. . . . . . . . . . . 1.22 1.26
CNY/GBP . . . . . . . .
. . . . . . . . . . . .
. 8.38 8.96
Organic revenue growth (unaudited)
Organic revenue growth represents the change in organic revenue
at CER from one accounting period to the next. Organic revenue
represents revenue, as determined under IFRS but excluding the
impact of acquisitions, divestments and closures of brands or
businesses, revenue attributable to manufacturing service
agreements ("MSAs") relating to divestments and the closure of
sites or brands, and the impact of currency exchange movements.
Revenue attributable to MSAs relating to divestments and
production site closures has been removed from organic revenue
because these agreements are transitionary and, with respect to
production site closures, include a ramp-down period in which
revenue attributable to MSAs gradually reduces several months
before the production site closes. This revenue reduces the
comparability of prior and current year revenue and is therefore
adjusted for in the calculation of organic revenue growth.
Organic revenue is calculated period-to-period as follows, with
prior year exchange rates to restate current year comparatives:
- current year organic revenue excludes revenue from brands or
businesses acquired in the current accounting period;
- current year organic revenue excludes revenue attributable to
brands or businesses acquired in the prior year from 1 January of
the comparative period to the date of completion of the
acquisition;
- prior year organic revenue excludes revenue in respect of
brands or businesses divested or closed in the current accounting
period from 12 months prior to the completion of the disposal or
closure until the end of the prior accounting period;
- prior year organic revenue excludes revenue in respect of
brands or businesses divested or closed in the previous accounting
period in full; and
- prior year and current year organic revenue excludes revenue
attributable to MSAs relating to divestments and production site
closures taking place in either the current or prior year, each an
"Organic Adjustment".
To calculate organic revenue growth for the period, organic
revenue for the prior year is subtracted from organic revenue in
the current year and divided by organic revenue in the prior
year.
The Group believes that discussing organic revenue growth
contributes to the understanding of the Group's performance and
trends because it allows for a year-on-year comparison of revenue
in a meaningful and consistent manner.
Organic revenue growth by individual region is further discussed
by price and volume/mix changes, which are defined as follows:
- Price: Defined as the variation in revenue attributable to
changes in prices during the period. Price excludes the impact to
organic revenue growth due to (i) the volume of products sold
during the period and (ii) the composition of products sold during
the period. Price is calculated as current year net price minus
prior year net price multiplied by current year volume. Net price
is the sales price, after deduction of any trade, cash or volume
discounts that can be reliably estimated at point of sale. Value
added tax and other sales taxes are excluded from the net
price.
- Volume/Mix: Defined as the variation in revenue attributable
to changes in volumes in the period.
The following tables reconcile reported revenue growth for the
six-month periods ended 30 June 2022 and 2021 to constant currency
and organic revenue for the same period by geographical segment and
product category:
Geographical Segments
-------------------------------------------------
2022 vs 2021 (%) North America EMEA and APAC Total
LatAm
------------------------------ -------------- --------- ------- -------------
Revenue Growth 17.4 8.7 15.7 13.4
Organic Adjustments 0.4 1.4 (0.6) 0.6
of which:
Effect of Acquisitions - - (0.7) (0.2)
Effect of Disposals 0.2 0.8 - 0.4
Effect of MSAs 0.2 0.6 0.1 0.4
Effect of Exchange Rates (7.4) 2.0 (2.8) (2.4)
Organic Revenue Growth 10.4 12.1 12.3 11.6
------------------------------ -------------- --------- ------- -------------
Price 2.1 5.5 3.1 3.7
Volume/Mix 8.3 6.6 9.2 7.9
------------------------------ -------------- --------- ------- -------------
Product Categories
------------------------------------------------------------------------
Oral Health VMS Pain Relief Respiratory Digestive Total
2022 vs 2021 (%) Health Health and
Others
--------------------------- ------------ ------ ------------ ------------ ------------ ------
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)
Effect of Disposals - 0.2 0.2 0.3 1.5 0.4
Effect of MSAs - - - - 1.7 0.4
Effect of Exchange
Rates (0.3) (4.4) (2.5) (3.7) (3.6) (2.4)
Organic Revenue
Growth 5.1 11.9 11.7 46.7 3.5 11.6
--------------------------- ------------ ------ ------------ ------------ ------------ ------
Adjusted EBITDA (unaudited)
Adjusted EBITDA is calculated as Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA), after adding back items
impacting the comparability of period over period financial
performance. Adjusted EBITDA does not reflect cash expenditures, or
future requirements for capital expenditures or contractual
commitments. Further, adjusted EBITDA does not reflect changes in,
or cash requirements for, working capital needs, and although
depreciation and amortisation are non-cash charges, the assets
being depreciated and amortised are likely to be replaced in the
future and adjusted EBITDA does not reflect cash requirements for
such replacements.
Adjusted EBITDA for the six-month periods ended 30 June 2022 and
2021 is as follows:
2022 2021
GBPm GBPm
----------------------------------------------- ------ ------
Profit After Taxation 544 520
Add Back: Taxation 320 216
------------------------------------------------ ------ ------
Profit Before Taxation 864 736
------------------------------------------------ ------ ------
Less: Finance Income (43) (9)
Add Back: Finance Expense 79 10
------------------------------------------------ ------ ------
Operating Profit 900 737
------------------------------------------------ ------ ------
Net Intangible Amortisation and Impairment 40 21
Restructuring Costs 20 77
Transaction Related Costs - -
Separation and Admission Costs 229 105
Disposals and Others 2 43
------------------------------------------------ ------ ------
Adjusted Operating Profit 1,191 983
------------------------------------------------ ------ ------
Add Back: Depreciation - Property, Plant and
Equipment 66 68
Add Back: Depreciation - Rights of Use Assets 16 16
Add Back: Amortisation - Computer Software 28 17
Add Back: Impairment - Property, Plant and
Equipment, Rights of Use Assets and Computer
Software 5 5
------------------------------------------------ ------ ------
Adjusted EBITDA 1,306 1,089
------------------------------------------------ ------ ------
Free cash flow (unaudited)
Free cash flow is calculated as net cash inflow from operating
activities plus cash inflows from the sale of intangible assets,
the sale of property, plant and equipment and interest received,
less cash outflows for the purchase of intangible assets, the
purchase of property, plant and equipment, distributions to
non-controlling interests and net interest.
Management believes free cash flow is meaningful to investors
because it is the measures of the funds generated by the Group
available for distribution of dividends, repayment of debt or to
fund the Group's strategic initiatives, including acquisitions. The
purpose of presenting free cash flow is to indicate the ongoing
cash generation within the control of the Group after taking
account of the necessary cash expenditures for maintaining the
capital and operating structure of the Group (in the form of
payments of interest, corporate taxation and capital
expenditure).
A reconciliation of net cash inflow from operating activities,
which is the closest equivalent IFRS measure to free cash flow, is
shown below:
Six months to 30
June
2022 2021
-------- ---------
GBPm GBPm
-------------------------------------------------- -------- ---------
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 flow conversion (unaudited)
Free cash flow conversion is calculated as free cash flow, as
defined above, divided by profit after tax. Free cash flow
conversion is used by management to evaluate the cash generation of
the business relative to its profit, by measuring the proportion of
profit after tax that is converted into free cash flow as defined
above. Free cash flow conversion is calculated as follows:
Six months to 30 June
2022 2021
----------- -----------
Free cash flow (GBPm) 553 189
Profit after tax (GBPm) 544 520
Free cash flow conversion (%) 102 36
-------------------------------- ----------- -----------
Net capital expenditure (unaudited)
Net capital expenditure includes purchases net of sales of
property, plant and equipment and other intangible assets. Net
capital expenditure is calculated as follows:
Six months to 30 June
2022 2021
GBPm GBPm
----------------------------------------------------- ---------- ------------
Purchase of property, plant and equipment (78) (89)
Proceeds from sale of property, plant and equipment 1 7
Purchase of intangible assets (14) (35)
Proceeds from sale of intangible assets 3 72
Net capital expenditure (88) (45)
------------------------------------------------------ ---------- ------------
Net debt (unaudited)
Net debt at a period end is calculated as short-term borrowings
(including bank overdrafts and short-term lease liabilities),
long-term borrowings (including long-term lease liabilities), and
derivative financial liabilities less cash and cash equivalents and
derivative financial assets.
Management analyses the key cash flow items driving the movement
in net debt to understand and assess cash performance and
utilisation in order to maximise the efficiency with which
resources are allocated. The analysis of cash movements in net debt
allows management to more clearly identify thelevel of cash
generated from operations that remains available for distribution
after servicing the Group's debt. In addition, the ratio of net
debt to adjusted EBITDA is used by investors, analysts and credit
rating agencies to analyse our operating performance in the context
of targeted financial leverage. Net debt is calculated as
follows:
As at 30 As at 31 December
June 2022 2021
-------------- ------------------
GBPm GBPm
-------------------------------------- -------------- ------------------
Cash and cash equivalents and liquid
investments 1,334 414
Short-term borrowings (332) (79)
Long-term borrowings (9,918) (87)
Derivative financial assets 146 17
Derivative financial liabilities (66) (19)
Net Debt (8,836) 246
--------------------------------------- -------------- ------------------
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END
IR BKCBPDBKBCCD
(END) Dow Jones Newswires
September 20, 2022 02:00 ET (06:00 GMT)
Grafico Azioni Haleon (LSE:HLN)
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Da Mar 2024 a Apr 2024
Grafico Azioni Haleon (LSE:HLN)
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