Haleon plc

Good morning, everyone, and welcome to Hedion's conference call to our first quarter trading statement. I'm Jo Russell, Head of Investor Relations, and with me today is Dawn Allen, our CFO. Just to remind listeners on the call that in the discussion today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning's announcement and the company's UK and SEC filings for more details. including factors that could lead to adverse results prematurely from those expressed in or implied by any such forward-looking statements. Today we'll focus on organic revenue performance. There is a full reconciliation of organic revenue in the appendix of the company's slide presentation. Following Dawn's remarks, we'll take your questions. For those listening to our webcast who would like to ask a question, you can find the details on page three of the press release. And with that, I'll hand over to Dawn. Thank you, Jo.

And good morning. We've had a good start to the year with our first quarter performance in line with our expectations. We delivered organic revenue growth of 3.5%, driven by strong market share gains across our key markets. We saw growth across all our categories and regions, which demonstrates the strength and resilience of our portfolio. despite a more challenging market backdrop. Our emerging markets continue to perform particularly well, up 6.5%, with marked strength in India and China, which saw double-digit growth in Sensodyne across both markets. Innovation continues at pace, and during the quarter, we had a number of successful launches, including Voltaren 2% strength in China, and expanding the Sensodyne clinical platform range and Otravin nasal mist in a number of markets. Whilst the macroeconomic backdrop continues to be volatile, our full-year guidance is unchanged, and we expect to deliver 4% to 6% organic revenue growth with organic profit ahead of this. Now let's look at the first quarter in more detail. Revenue of £2.9 billion reflected 3.5% organic growth, split 2.4% price and 1.1% volume mix. Reported revenue declined 2.3% in the quarter due to a 2.9% drag from the disposals of chapstick and non-US smokers' health business, and a 2.9% drag from translational foreign exchange due to sterling strength against a number of currencies. Now let's turn to the categories where we saw broad base growth. In oral health, revenue grew 6.6% ahead of the market driven by a strong performance in Sensodyne with continued share gains, underpinned by successful innovation and in-market execution across the Sensodyne clinical range. Clinical-wide continues to attract a younger demographic to the brand and has amongst the strongest repeat rates in the sector. Strong performances were seen in a number of markets, including India, China, Central and Eastern Europe, and the UK. Paradigm Tech grew double-digit, with strength across a number of markets, including China, where we are seeing strong consumer feedback following our launch at the end of last year. We're also seeing a strong performance across a number of markets, from Paradontex Gum Strengthen and Protect, a multi-format range across toothpaste and mouthwash, which has driven incremental share gains. And in the UK, we have seen a record market share for Paradontex. In VMS, revenues grew 0.9%, underpinned by innovation-driven growth in emergency and cow trade. Centrum declined mid-single digit. We saw good growth in Asia Pacific, EMEA and EMEA and LATAM, particularly in Middle Eastern Africa, Southeast Asia and Taiwan. This was more than offset by a decline in North America. This decline was driven by lapping a tough comparative from the activation of the cognitive function claims on Centrum Silver last year overall weakness in the multivitamin category, and increased promotional activity amongst competitors in North America. In China, we had a number of successful innovation launches, including Centrum Daily Wellness Packs tailored to Asian lifestyles, which we have also launched in South Korea, and it is performing well. In Caltrate, we rolled out a vitamin D with glucosamine that has had an even stronger effectiveness claim. Across OTC, pain relief grew 2.6%. This was driven by Advil and Voltaren, which were both up mid-single digit. During the quarter, we launched Voltaren 2% strength in China. Whilst it's early days, initial performance indicators are strong. Panadol was up low single digit, with growth held back by phasing of retailer stocking patterns in the Middle East and Africa. This is expected to reverse in Q2. As part of our drive to reach lower income consumers, we launched the Sonridor brand in Brazil. which uses Panadol's OptiSorb technology, initial results have been encouraging. In respiratory health, revenue was up 1.7%, with a stronger than expected cold and flu season towards the end of the quarter in North America, driving growth in Robitussin and Theraflu, which saw strong share gains in the US. This was partly offset by weaker season Elsewhere, Otrovin performed well, helped by the rollout of Otrovin nasal mist, which is driving share gains and market penetration, with 50% of users being non-spray users in the UK. And finally, digestive health and other was up 3%. This was driven by innovation in Tums and Eno. which was partly offset by decline in smokers health and NXIVM due to market softness. Now let's look at the regional performance starting with North America. As others have observed, the consumer and customer environment is cautious and uncertain. This has been seen in consumer confidence measures, which are at the lowest levels since 2021. Despite this, organic revenues grew 1% in the quarter, made up of 1.8% volume mix and 0.8% from negative price, with the latter largely driven by higher promotional activity relative to last year. The consumption saw healthy growth and was ahead of organic revenue growth. We have a strong position in North America, with the top five retailers making up more than half of our revenue. Whilst it appears that some retailers are more cautious in ordering patterns, our products continue to demonstrate their resilience. In Europe, Middle East, Africa and Latin America, organic revenue increased 5%. with 5.6% price and 0.6% decline in volume mix. Pricing in Europe was up around 4% and higher across markets in MIA and LATAM in line with inflation. The decline in volume mix was largely driven by weakness from the cold and flu season. Excluding this impact, volume mix would have been up around 1% for the region. Looking across the region, we saw strong growth in Latin America, up double digit, helped by pricing and the launch of Sonridol. Both Europe and Middle East and Africa grew mid-single digit, with strength in oral health and VMS. Finally, in Asia-Pacific, we saw good momentum. Organic revenue increased 4.2%. with growth coming from price of 1.5% and 2.7% from volume mix. We saw growth across all categories, except in respiratory health, which was impacted by a weaker cold and flu season. India performed well, up high single digit, helped by double digit consumption growth in sensor dimes. China was up mid-single digit with strength in oral health and VMS, underpinned by the innovations I mentioned earlier. We are well positioned in China with strong market positions and favorable structural tailwinds, with consumers increasingly focused on health products, which we are supporting through our e-commerce platforms. Turning now to our 2025 guidance. Whilst the macroeconomic environment remains both challenging and uncertain, we remain confident in our full year outlook. We expect to continue to deliver the guidance we set out at year end, with organic revenue growth of between 4% to 6% and organic profit growth ahead of organic revenue growth. Whilst the situation on tariffs remains dynamic, based on what we know today, the impact across our business is limited and is included in our guidance. On foreign exchange, the FX impact on revenue and profit in quarter one was broadly in line with our expectation. As you'll recall, at full year results, we provided an estimate of the translational FX impact for 2025 based on Bloomberg consensus rates averaged over the year. As of the 31st of March, this consensus indicates a headwind of 2% on revenue and 3% on adjusted operating profit. There is no change to our net interest expense or tax. guidance. So, in summary, our first quarter trading was in line with the expectations we set out earlier in the year, despite a dynamic and more challenging backdrop, which continues to remain uncertain. Our global portfolio is resilient, with strong brands solving consumer needs. Our innovation launches are performing well, And as I just mentioned, we have confidence in our full-year guidance. Before I open up to Q&A, I want to remind you all that we will be hosting our Capital Markets Day in London tomorrow. We will share more on our continued confidence in driving long-term growth with deep dives on categories and regions. and we'll share the opportunities we see across our supply chain. And with that, let me hand over to the operator to open up for Q&A.

Thank you. If you would like to ask a question, please press star float by one on your telephone keypad. To remove your question, please press star float by two. Again, to ask a question, please press star one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question. We'll pause here briefly as questions are registered. Thank you. We have our first question from Guilherme Dalmas from UBS.