Full Year 2023 Haleon PLC Earnings Call

Unknown Executive: So that gives you about a 20 bps negative, and that's largely driven by the dollar and the euro. So it's the big currency.

Negative that's largely driven by the dollar and the euro so it's a big it's.

Unknown Executive: So of course, we'll update you as we go through the year and in our ed memoirs each quarter, how that evolves. We've given you the M&A building blocks, which are down one and three, that gives you another about 40 bps of growth in March, and that is negative. And then I think, as you said, we said we were very confident in our guidance. One, we were very confident in the four to six sales growth guidance, but we're also very confident in being able to grow organic profit ahead of the rate of sales growth. And if you just want to put it a little bit into perspective, you see what we delivered in 23.

The big currencies of course will update you as we go through the year and our admin loss each quarter, how that evolves, we've given your M&A building blocks.

Which is down one three that gives you. Another about 40 bps margin that is negative and then I think as you said.

We said, we're very confident in our in our guidance one we're very confident in the 4% to 6% sales growth guidance, but we're also very confident in being able to grow organic profit ahead of the rate of sales growth and if you just want to put it doesn't get into perspective, you see what we delivered in 'twenty three we delivered 60 bps of margin improvement so.

Unknown Executive: We delivered 60 bps of margin improvement, so operating profit grew nearly three points ahead of the rate of sales growth. And then on your question on how we see that going on the P&L line. So on gross margin, we expect gross margin to grow ahead of the rate of sales growth. You've seen that come through in Q4. So in Q4, gross margin was up 70 bps, given the easing of inflationary pressures, and pricing coming through a little bit of help because we didn't have the recall we had in the prior year. But overall, I think the algorithm is not working on that.

Operating profit grew nearly three points ahead of the rate of south crowds.

And then on your question on how we see that going through the P&L lines. So on gross margin. We expect gross margin to grow ahead of the rate of sales growth you have seen that come through in Q4. So in Q4 gross margin was up 70 bps.

Given easing off inflationary pressures the pricing coming through.

A little bit of help because we didn't have to recall, we had in the prior year, but overall I think.

The algorithm is thoughts of working on that and then as you mentioned the productivity program program. We said about a third of the 300 million to come through again, we feel confident in the 300 million delivery about a third of that to drop.

Unknown Executive: And then, as you mentioned, the productivity program. We said about a third of the 300 billion would come through. Again, we feel confident in the 300 billion delivery. About a third of that would drop to help us next year. But it's not going to drop to the bottom line because we want to use and want to have the flexibility to use that to invest in the business. And investing in the business for us means, one, systems, tools, processes, because as you know, we're doing this program because we need to make the business more agile and faster, and we have to reinvest a bit in the business in that. Secondly, investing in R&D, clinical trials, we've seen great results we had last year in VMS trials on Centrum and other things we have done. So investment there.

<unk>.

To help us next year, but it's not going to drop to the bottom line, because we're going to use and want to have the flexibility to use that to invest into business.

Investing in the business for US means one systems tools processes, because as you know we're doing this program because we need to make the business more apps on and foster and behalf to reinvest a bit in the business on that secondly, investing in R&D clinical trials, we've seen great results, we had last year.

On Vms trials from Centrum other things we have done so investment there and then lastly, investing in A&P, because we want to grow A&P more than we did.

Unknown Executive: And then lastly, investing in A&P because we want to grow A&P more than we did in Q3. So all of that with the productivity program and gross margin going up gives us confidence that we'll have operating leverage also in 2024. And then your second question was about price volume and how to think about that going into the new year. So let me maybe take a step back.

We did in 2003, so all of that with the productivity program and gross margin going up gives us confidence that we'll have operating leverage also.

In 2024.

And then your second question was on price price volume and how to think about that going into the new year. So let me maybe take a step back. So first of all we've grown volume for the year not just last year also throughout the prior year. So I think this business has been and we've delivered a very resilient business, but we've been very mindful on how.

Unknown Executive: So first of all, we've grown volume for the year, not just last year, but also throughout the prior year. So I think this business has been, we've delivered a very resilient business, and we've been very mindful of how much price we took. So I think it shows you the resilience of the business. So we believe also next year we'll be able to do both, grow price and grow volume. Now, last year, as we had said, was more price-led. So last year, 85% of the growth came from price. 15% came from volume.

Much price we took.

So I think shows you the resilience of the business. So we believe also next year, we'll be able to do both.

Both price and grow volume now last year as we had said was more price led last year, 85%.

The growth came from price 15 came from volume in the longer run we want to be back to about a 50 50 between the 224 will be a stepping stone in that direction, but we won't be back to 50 50. So I think that's how I would see that going going into 'twenty four.

Guillaume Gerard Vincent Delmas: In the longer run, we want to be back to about a 50-50 between the two. 24% will be a stepping stone in that direction, but we won't be back there. So I think that's how I would see it going into 2014. Thank you very much. The next question comes from the line of Guillaume Delmas, UBS. Please go ahead. Thank you. Good morning, Tobias, Brian, and Sonya.

Thank you very much.

The next question comes from the line of Guillaume Delmas UBS. Please go ahead.

Thank you good morning.

Yes, Brian that Sonya, so I've got two questions.

Unknown Executive: So I've got two questions. The first one is about your respiratory health division, which had a very strong finish to the year, quite in sharp contrast to most of your listed competitors. So could you maybe shed some light on this surprisingly strong performance in Q4? And also, I guess, you know, making sure that there were no one-offs or any particular sell-in, sell-out discrepancy that could explain this good Q4. And then my second question is about your VMS operation, because there's been a clear improvement towards the end of the year, led, it sounds, by Caltrack in China, Centrum, and also some stabilization for emergency. So with additional marketing support put behind this business, and also against the backdrop of improved category growth, would it be fair to assume that VMS should return to its medium-term ambition of mid to high single-digit growth as early as 2024 Thank you. Thanks, Guillaume. Let me try, I'll take those questions.

First one is on your recipe retrofit health Division.

Which had a very strong finish to the year.

In sharp contrast to move stuff sure listed competitors.

Could you maybe shed some light on this surprisingly strong performance in Q4 and also I guess, you know, making sure that there were no one offs or any particular sell in sell out discrepancy.

That could explain this.

Good Q4 and.

And then my second question is on.

Vms operation because there has been a key improvement towards the end of the year.

It sounds like.

I'll try can China Centrum and also some stabilization for emergency.

With additional marketing support.

Behind this business and also against the backdrop of improved category growth would it be fair to assume that Vms should return to its medium term ambition of mid to high single digit growth.

Earnings in 2024, thank you.

Thanks, Gil let me I'll take those questions. Let me start with respiratory performance I think youre right. We did see good growth in Q4, our respiratory portfolio, just under 11% and was seven 5% in the back half.

Unknown Executive: Let me start with respiratory performance. I think you're right. We did see good growth in Q4 of our respiratory portfolio, just under 11%, and it was 7.5% in the back half. Now, I think one of the reasons that those results look different than some of our competitors is that it also has to do with our portfolio and geographic footprint. So, for example, the U.S. is about 32% of our respiratory business. Now, in the U.S., in the back half, our business was basically flat in respiratory, but the market was down kind of mid to high single digits. Now, 68% of our business is outside the U.S., and we saw much higher incidences in some other geographies, specifically places like Central and Eastern Europe, Japan, and Turkey, and we performed quite well in those environments. So, you know, as we look at the outlook, we're looking for a more normal season. Now, of course, what's normal is always a debatable question, but Tobias shared some slides in the presentation that showed if you look at the U.S. environment, it's getting back to kind of pre-COVID levels.

I think one of the reasons that those results look different.

And some of our competitors is it also has to do with our portfolio and geographic footprint. So for example, the U S is about 32% of our respiratory business now in the U S. In the back half our business was.

Basically flat and respiratory but the market was down kind of mid to high single digits. Now so 68% of our business is outside the U S and we saw much higher.

<unk> phase in some other geography, specifically places like central Eastern Europe, Japan, and Turkey, and we performed quite well in this environment. So as we as we look though the outlook. We're looking for a more normal season now of course, what's normal.

He is a debatable question, but to be a shared some slides in the presentation that showed if you look at the U S environment is getting back to kind of pre COVID-19 levels. We expect this to be a business that fluctuate plus or minus a half to 1% on a very extreme.

Unknown Executive: We expect this to be a business that fluctuates plus or minus a half to a percent on a very extreme good or high season or low season. So, you know, overall, I think that's the difference. Nothing particularly on one-offs or discrepancies in inventories or anything like that that I would highlight. On VMS, you're right.

Good or.

Hi season, or low season. So overall I think that's the difference nothing, particularly in one offs or discrepancies in inventories or anything like that.

I would highlight.

On Vms.

You are right, we continue to see a more normalization of that.

Unknown Executive: We continue to see more normalization of that category. Tobias, again, shared in the presentation some market share slides, and you see that Caltrade and Centrum have done quite well, and, frankly, Emergency has won the share. Now, they won share in a declining market, and we're seeing that stabilize as we get towards the end of the year. But we continue to be optimistic about this category. I'm not going to give any specific guidance for next year on it, but we think the category overall will get back to more pre-COVID growth levels. And honestly, this is also an area where I just highlight Centrum and what's happening there. Really strong performance on Centrum last year, driven by the clinical study, which now we have three different outputs of that clinical study that show that Centrum Silver increases cognitive function by 60% among a population of people 60 and older.

Of that category.

To do this again shared in the presentation some.

Some market share slide you see that Cal trade than centrum.

Have done quite well and frankly emergency his one share now they won share in a declining market and we're seeing that stabilize as we get towards.

Get towards the end of the year, but we continue to be optimistic on this category I'm not going to give any specific guidance for next year on it but we think the category overall will get back to more Cree pre COVID-19 kind.

Kind of growth levels and honestly. This is also an area where.

I'd, just highlight centrum and what's happening there really strong performance on centrum.

Last year, driven by the clinical study, which now we have three different outputs of that clinical study that showed that centrum silver and.

<unk> increased cognitive function by 60% amount of population of people 60 and older.

Unknown Executive: We're seeing that really drive differentiation in the marketplace, so we're excited about those kind of things where we can really make a difference in VMS, and maybe let me add one thing. Going back to the cause and flu topic. So there's another differentiator for us is in our product in our product portfolio So we have terror flu Neocitron and some European marks and in Canada Which is which is a hot drink and that tends to do better in season where you have more flu-like symptoms So when you really feel under the weather when you're in bed when you have a fever So and and the type of box that went around especially in Europe and Q4 were more of this heavier nature So I think that helps again I think it shows you a bit the strength of our geographic portfolio But also the strengths of our in the diversity of our product portfolio, which makes this business very resilient, Very clear. Thank you. The next question comes from the line of Iain Simpson, Barclays, please go ahead. Thank you very much.

Being that really drive differentiation in the marketplace. So we're excited about those kind of things, where we can really make a difference in dms.

And maybe let me add one thing.

Going back to the cold and flu topics. So theres, another differentiator for us and our product and our product portfolio. So we have Tara flu.

Nios it run in some European markets and in Canada, which is which is a hot drink and that tends to do better in season, where you have more flu like symptoms. So when you really feel under debate around here and bad when you have a fever. So.

And the type of box advent around especially in Europe in Q4, where more of this heavier in nature. So I think that.

That helps again, because I think it shows you a bit the strength of our geographic portfolio, but also the strengths of <unk> and the diversity of our product portfolio, which makes this business very resilient.

Very clear thank you.

The next question comes from the line of <unk> Simpson Barclays. Please go ahead.

Thank you very much couple of questions for me if I may.

Iain Simpson: A couple of questions from me, if I may. Firstly, just to go through that margin point again to make sure I've understood you correctly. So, you've quantified the headwind from portfolio and FX effects. That's the sort of 60-70 basis point headwind.

Firstly just to go through that margin point again to make sure if I understood you correctly say.

You've quantified the.

The headwind from portfolio and FX effects.

So sort of 60 to 70 basis point headwind.

Iain Simpson: You've got some cost saves, but I assume that it sounds like a lot of those will be reinvested to further drive growth. So, effectively, in order to get margins flat for this year, we probably have to assume that organic margin expansion would be, I don't know, let's call it 50 bps plus, which I guess is possible, but also might be a bit of a stretch. So, perhaps as we think about reported margin this year versus 2023, we should be thinking about it maybe flat to small down. Would that be a fair characterisation, just to make sure I've understood you?

So some cost saves.

I assume that it sounds like a lot of those will be reinvested to drive growth. So effectively in order to get margins flat for this year, we probably have to assume that organic margin expansion would be on that let's call. It 50 bps plus.

Which I guess its possible, but also Mike David if a stretch say, perhaps as pleased as we think about reported margin.

<unk> 'twenty three we should be thinking about it maybe flat to small down would that affect characterization just to make sure if I understood you.

Iain Simpson: And then secondly, just getting onto that Capital Return, that 500 million buyback. Very welcome. Is that something that you will be doing through the year as a kind of, you know, everyday buyback program? Or is that 500 million buyback headroom something that you will kind of hold in your back pocket to potentially allow you to participate in any future placements? Thank you so much.

And then secondly, just getting on to that.

Capital return that $500 million buyback very welcome is that something that you will be doing through the year. That's a kind of an everyday buyback program or is that $500 million buyback headroom something that you will kind of hold in your back pocket to potentially allow you to participate in any future.

<unk>. Thank you so much.

Sure. Thanks, Thanks, Ian so so on the margin right. So I think first of all knock on the guide on the reported margin right because theres two pieces in the reported margin once a translational FX, that's going to move up and down. So we're going to update you every quarter on what that what is going to be the numbers I've given you.

Unknown Executive: Sure, thanks. Thanks, Iain. So, on the margin, right? So, I think, first of all, knock on the guide on the reported margin, right? Because there are two pieces to the reported margin.

Unknown Executive: One's a translational FX that's going to move up and down. So, we're going to update you every quarter on what that is going to be. The numbers I've given you are now the dollar and the euro, as I said earlier. M&A is also moving, right? We might acquire somewhat, you might have another divestment. You might, the closing of the divestment might be two months earlier, two months later. So, that's a moving piece.

You are now the dollar and the Euro as I said earlier.

Earlier M&A is also moving right we might acquire somewhat you might have another divestment you might the closing of the diverse might be two months earlier two months later, so that's a moving piece again, we'll update you on that as part of our.

Unknown Executive: Again, we'll update you on that as part of our ed memoirs, right? And then, I think, on organic profit growth, I think you should, I think, take some comfort from us being able to deliver 10.8% organic profit growth against the sales growth, organic sales growth of eight. So, that's nearly three points ahead of that.

At memoirs, right and then I think on the organic profit growth I think you should take some comfort from us being able to deliver 10, 8% organic profit growth.

Growth against the sales growth organic sales growth of eight so that's needed three points ahead of that and that was in a year, where gross margin was actually down in percentage of sales and we didn't have a 100 million to us from a productivity program come through so I think we have more room to lots of room to reinvest but.

Unknown Executive: And that was in a year where gross margin was actually down in percent of sales, and we didn't have 100 million plus from a productivity program come through. So, I think we have more room to, lots of room to reinvest. But, of course, I don't know what's in your model, but I think your Q4 should give you a bit of an indication that gross margin growing ahead of the rate of sales growth will help. Yes, we'll still have some inflation, but inflation pressures are lower.

Of course, I don't know what the New York, What's in your model, but I think Q4 should give you a bit of an indication that gross margin.

Growing at half the rate of sales growth will help yes, we'll have some inflation still by the inflation pressures are lower.

Unknown Executive: We'll have less pricing, of course, as well, but I think we're getting back to a more normal price. So, I think, in my view, overall, this growth algorithm is really working, and it's yielding results. And then, I think that's, for me, a great segue to the share buyback, because that algorithm is working, and the strong cash conversion is working. And we did a bit of the divestments we announced. I think that gave us the option to do two things.

Pricing of course, as well, but I think we're getting back to a more normal. So I think in my view all of this growth algorithm is really working and it's yielding.

And then I think Thats for me a great segue to the to the share buyback I think ultimately it goes that algorithm is working and the strong cash conversion is working and we did we.

We did a bit of the divestments, we announced I think that gave us the option to do two things one to update our capital allocation priority is probably a year earlier than what we have committed two years ago. So you've seen in the slide deck.

Unknown Executive: One, to update our capital allocation priorities, probably a year earlier than what we had committed two years ago. So, you've seen in the slide deck the new capital allocation framework. And with that, we're able to announce both an increase in the dividend and a commitment that the dividend, going forward, will grow at least in line with earnings. And then, secondly, announcing a $500 million share buyback.

The new capital allocation framework.

And if that were able to announce both earnings and increase in the dividend also in the commitment that dividend going forward will grow at least in line with earnings and then secondly, announcing a 500 million share buyback now specifically on the share buyback. We said, we're going to do it during 2024, and we're going to do with either on the open market or.

Unknown Executive: Now, specifically on the share buyback, we said we'd do it in 2024, and we'd do it either on the open market or buy it back from GSK or Pfizer if and when they do a listing. I mean, clearly, doing it in a placement would be preferred because you can get it at a discount.

Or buying it back from GSK or Pfizer, if and when they do a listing I mean clearly.

Doing it in a place things would be preferred because you can get it at a discount but of course, that's outside of my control because that's a pfizer and GSK decision, but of course, the best the best value.

Unknown Executive: But, of course, that's outside of my control because that's a Pfizer and GSK decision. But, of course, the best value and the highest shareholder value creation you're going to get if we can go through a placement. But if the placement wouldn't happen, then, of course, we would go and do this and execute this on the open market. So, we're ready for both of those things.

And the highest.

Shareholder value creation, youre going to get if we can go through replacing but if the placings wouldn't it wouldn't happen then of course, we would go into this and execute this on the on the open market. So we're ready for both of those things and.

Chris Pitcher: And we're going to do it again in 2024. So, again, in summary, I think the new capital allocation framework really shows you the value creation we're driving and also, I think, the optionality we have in that with returning cash back to shareholders. And also, then, don't forget that's on top of us having reduced debt by over $2 billion within 18 months. And with the dividend, we announced that $800 million of dividends would go back to shareholders plus another $500 million. So, you're in the high billions of debt reduction and returning money to shareholders as a result of that. Again, proving the model, in my view, that's really coming through. Very clear on the margin and congratulations on cranking the cash machine. The next question is from Chris Pitcher, Redburn; please go ahead. Hi, good morning, everyone.

Do it during during 2024, so again no in summary, I think the new capital allocation framework really shows you the value creation, we're driving and also I think the Optionality, we have in that with returning cash back to the cash back to shareholders and also then don't forget that's on top of.

US having reduced debt by over 2 billion within 18 months.

And with the dividend, we announced at <unk> $800 million dividend going back to shareholders plus another $500 million so you're.

And the highest III billions of debt reduction and returning money to shareholders. As a result of that again proving the model in my view, that's really coming through.

Very clear on the margin and congratulations on cranking the cash machine.

The next question is from Chris pitcher Redburn. Please go ahead.

Hi, good morning, everyone.

Chris Pitcher: A couple of questions for me. Following on from the cash question, clearly, you've done some divestments. You're under no pressure to do divestments, but you're talking in the statement about sort of active portfolio management. On the acquisition side, there hasn't been much on that front. Are you now in a position; do you have greater capacity to pursue deals? Was it just an issue of availability and price that perhaps we haven't seen as much on that side of the equation? And then on India, could we have a bit more detail on that?

Couple of questions for me so following on from the cash.

Question.

Clearly you've done some some divestments you're under no pressure to do divestments, but you're talking in the statement about sort of active portfolio management on the acquisition side that there hasnt been much on that front are you now in a position to have greater capacity.

Just a few deals.

Was it just an issue of availability and price that was perhaps we haven't seen as much on that side of the equation and then on India.

Could you talk a bit more detail on that I mean, India sales were up high single digit, but sensor volume was up double digits, implying the rest of the portfolio was quite a bit slower can you give us a share of how the business now split between.

Chris Pitcher: I mean, India's sales were up high single digits, but Sensodyne was up double digits, implying the rest of the portfolio was quite a bit slower. Can you give us a share of how the business now splits between Eno, Sensodyne, Centrum, et cetera, following their launch? And was there any disruption from the transition from Hindustan Unilever that maybe affected some of those brands?

Sensitive I am central et cetera holiday alone and was there any disruption from the transition from Hindustan Unilever that maybe affected some of those brands I see youre going to ramp up marketing clearly, we should expect an acceleration in India just wanted to check that was wrong.

Unknown Executive: I see you're going to ramp up marketing. Clearly, we should expect an acceleration in India. Just wanted to check that was right. Thanks.

Thanks.

Unknown Executive: Let me take the first question. So on active portfolio management, which we said, you know, we want to do, and a year ago, we said, you know, divest in both on acquisition, expect divestment first, feel good about the two divestments we made, both Lamisil and Chapstick, in both cases, fantastic brands, just not strategic for us and not growth drivers for us. And in both cases, I think we got really good value for those businesses, so value accretive to the shareholders, and we'll continue to look for opportunities to simplify the portfolio and strengthen the portfolio. But We are under no pressure to do that.

Chris Let me take the first question. So on active active portfolio management, which we said we want to do in a year ago. We said you know divest in bolt on acquisitions, we expect divestment first feel good about the two divestments, we made both lamisil and chapstick in both cases fantastic brands, just not strategic for us or not.

Both drivers for us and in both cases, I think we got really good value for those businesses some value accretive to this.

As shareholders and we will continue to look for opportunities to simplify.

The portfolio and strengthen and strengthen the portfolio, but we are under no pressure to do that we only do that if it makes sense sentiment creates value doing that helps ultimately to create the company we want to create as far as we do have capacity to do bolt on M&A.

Unknown Executive: We only do that if it makes sense and if it creates value, so that helps ultimately to create the company we want to create. As far as we do have capacity to do both in M&A, and if we find something that is attractive and strategically makes sense and brings value, we would have the capacity and ability to do that. But I probably wouldn't make any more comments beyond that. Ganesh, do you want to talk about Indian food?

If we find something that is attractive and strategically makes sense and brings the value and we would have the capacity and ability to do that but I would probably wouldn't make anymore.

<unk> comments.

On that Anthony.

If you want to talk Indian yes.

Unknown Executive: Yeah, so look, in India, first of all, I think the shift and the change in the business model, building up our own sales forces and getting out of the distribution deal with Unilever, have worked very well. Of course, this is a heavy, heavy undertaking, and you always have, you know, a small bubble here or there, but I think the team has nailed that very, very well. As a result, shifting all that over, probably sales growth and sales growth into distribution talent were a little bit lower in Q4 than you would normally see. But from a sellout perspective, the business is doing really, really well. And the numbers for the year were, I think, you know; they were close to double digits.

On India I think.

First of all I think the.

The shift in the change in the business model building up our own sales forces and getting out of the distribution deal, but you don't have the labor worked very well of course. This is a heavy heavy undertaking and you always have a small bubble here or there, but I think the team has landed that very very well as a result shifting all of that over appropriate sales growth and sales growth into the distribution channel.

It was a little bit lower in Q4 than what you would normally we would see but from a sellout perspective. The business is doing really really well and the numbers about a year, where I think there were close to double digits. So I think it's I think overall they performed well and also they started the year with very strong momentum yeah. So.

Unknown Executive: So I think it's, you know, I think overall they performed well. And they also started the year with very strong momentum. Yeah. So overall, I think, you know, as we always said, this is a market for us that should grow in the double digits, in the teens for us. And I think we're also very heavily investing in the market, right? So I think both in 23, but also into 24, we continue to support that market, not just with investment in the sales forces and in building the machine to do it ourselves, but also in terms of A&P and with launching further brands in the market, like taking Centrum into bricks and mortar and other things. So overall, the big switch was done, executed successfully, and I think now we really, you know, see that as a growth driver for us in the future. Thank you very much. The next question is from David Hayes, Jefferies. Please go ahead. Good morning, all.

So I think overall I think.

As we always said is a market for us that should grow in the double digit in the teens for us and I think we're also very heavily investing into the market right. So I think we both.

In 2003, but also into 'twenty four we continue to support that market not just with the investment in the.

And the sales force and building the machine to do it ourselves, but also in in terms of A&P and with launching further brands in the market like taking certain.

Centrum into brick and mortars, and other things. So overall the big switch was done executed successfully and I think now.

Really see that as a growth driver for us into the future as well.

Thank you very much.

The next question is from David Hi, Yes, definitely please go ahead.

David Hayes: I've got one follow-up and two questions, if I can, just to follow up and maybe push you a bit more on the net cost savings versus the gross cost savings. So I'm interpreting it as £100 million of gross, none of it falling through to the bottom line this year really, and then looking to next year, £200 million of gross. Is there any way you can give us an indication of what the net benefit might be budgeted for in 2025 as you phase in those savings? And then there are two other questions.

Good morning.

And then one follow up on two questions. If I can just just a follow up and maybe push you a bit more on the.

Net cost savings versus the gross cost savings so I'm interpreting.

$100 million of gross none of it flowing through to the bottom line. This year really and then looking into next year $200 million gross.

Is there any way you can give us an indication of a net benefit might be budgeted for.

In 2025 issue as you phase in those savings.

And then number two other questions.

David Hayes: A&P spent, I think, down 80 basis points since the sales in 2023. Can you just talk us through the drivers of that? I'm assuming there's a bit of Russia, suspension of A&P, maybe some agency continued rationalisation post falling out of GSK, but just a bit of dynamics on that 80 basis points would be helpful. And then, on the first quarter guidance that you're giving, close to 4% MSG, could you commit to the volumes you think will be positive within that number in the first quarter, just to push on that as well? Thank you. Great, thanks, David.

A&P spend I think down 80 basis points since just say it was in 2003 can you just talk us through the drivers of the obviously, there's a bit of Russia suspension of A&P, maybe some agency continue rationalization postponing out GSK, but just the dynamics on that by 80 basis points to be helpful. And then my final one on the first quarter guidance that you're giving.

Close to 4% Ashish could you commit to the volumes do you think we positively in that number in the first quarter just to push on that as well. Thank you.

Great. Thanks, David listen I'll I'll answer the A&P.

Unknown Executive: Listen, I'll answer the A&P question and then pass it to Tobias to do your follow up and the Q1 guidance. So, you know, first of all, on A&P, I just want to be very clear that we are absolutely committed to investing in our brands, and we believe investing in A&P is important. Also investing in R&D, and in our case, in the expert side of our business model, which is really important in oral health with dentists, but also with pharmacists with our OTC business. And, you know, we do start A&P's percentage sales in a relatively healthy place at 17.9%. But as you said, this year, we grew A&P by 3%. And as the year goes on, we're very active in the way we manage A&P and ensure we get the best return.

And then pass it to be to do your follow up in the Q1 guidance. So.

First of all on A&P, just want to be very clear that we are absolutely committed to investing in our brands and we believe even investing in A&P is as important also investing in R&D and in our case.

And the expert side of our business model, which is really important in oral health, but dentists, but also in part with pharmacists with.

With our OTT business and we do start.

A&P as a percent of sales in a relatively healthy place in 17, 9%, but as you said this year, we grew A&P, 3%.

And as the year goes on and we're very active in the way, we manage A&P and ensure we get the best return. So for example in 2023.

Unknown Executive: So, for example, in 2023, our A&P investment will find oral health very strong, and you've seen that come out in results. And actually, we continue to invest in VMS, and we're able to take share, an example of emergency care, which Tobias showed in the presentation, in a declining market, which I think positions us and strengthens us for the future. On the contrary, in respiratory in the U.S., where we saw lower incidences and some disruption due to some ingredient questions on PE phenylephrine, we actually pulled back from our AMP spend there as a conscious choice because we felt like the returns weren't there in that level of market.

A&P investment profile oral health was once an aerie was very strong and you've seen that come out in our results and actually we continue to invest in Vms and we're able to take share. An example, an emergency which to be as shown in the presentation in a declining market, which I think positions us and strengths is up for the future.

On the contrary in respiratory in the U S, where we saw lower incidences and some disruption due to some.

Ingredient questions on P. E phenylephrine, we actually pulled back from our A&P spend there is a conscious choice because we feel like the returns weren't there and that level of market. So and so when we look across the portfolio. We are actively managing that and making sure that we're investing for growth or investing in the right places, but not <unk>.

Unknown Executive: So, and you know, we look across the portfolio; we are actively managing that and making sure that we're investing for growth or investing in the right places, but not investing just to invest. And then, as you said, within that there are efficiencies. We're always looking to, you know, be more efficient in our non-working AMP, and we see that obviously grow slower than overall AMP. So there's, there's a number of dynamics in there, but we feel good about the investment needs to be, as said earlier, we expect in 2024 to continue to invest in AMP and drive growth and invest at a rate higher than the. Good. Thanks.

Investing just to invest and then as you said within that there is efficiencies we're always looking to.

Even more efficient in our non working.

Our non working A&P and we see that obviously grow slower than overall A&P. So theres a number of dynamics in there, but we feel good about the investment needs to be et cetera earlier, we expect in 2020 for it to continue to invest in A&P and drive growth and invest at a rate higher than this year.

Unknown Executive: And so coming back to the productivity question. So look, we're not going to split out what the product is, the productivity program, and how much of that drops to the bottom line. But I mean, let me go back to why we did the productivity program.

And so coming back to the productivity question. So look we're not going to split out what is the product the productivity program and how much of that drops to the bottom line, but I mean, let me go back to why we did the productivity program. We did it because we won't have to drive agility in that business to make the business faster more agile.

Unknown Executive: We did it because we want and have to drive agility in that business to make the business faster, more agile. And, and then secondly, we also did it because it gives us the comfort that we can invest in the business in R&D and A&P. And I think that's where there are slight differences to 23. We didn't have the tailwind from a productivity program going into 24. Now we have this tailwind.

Sure.

And then secondly, we also did it because it gives us the comfort that we can invest into the business in R&D in A&P and I think that's I think where there are slight differences. The 'twenty three if you didn't have the tailwind from a productivity program going into 'twenty. Four we have this tailwind and that helps us being able to fund.

Unknown Executive: And that helps us be able to fund the things we want to fund. And actually, that helps us, you know, to continue to be competitive in a still difficult market environment where, in some places, we have seen volumes declining, and we have to battle for the volume growth that also we're committed to getting. And I think that gives us, I think, the confidence that we'll be in this four to six range. And secondly, that we can grow operating profit ahead of the rate of sales growth in 24, even in an environment out there where people might be putting more money back into A&P that they had taken out earlier. And then just on, on Q1.

The things we wanted to.

Want to fund that actually that helps US you know that we will be able to continue.

Continue to be competitive and still a difficult market environment, where in some places we have seen volumes declining we have to battle for the volume growth that.

Also we're committed to get then I think that gives us I think the confidence that to be in this 4% to six range and secondly that we can grow.

Operating profit ahead of the rate of sales growth in 2004, even in an environment out there for people who might be putting more money back into A&P that they had taken out that they had taken now.

Earlier, and then just on on Q1, so we're not going to split out and give quarterly guidance on price and volume right, but if you just think in the backup of my deck, you'll see a little bit the considerations for sales growth.

Unknown Executive: So we're not going to split out and give quarterly guidance on price and volume. Okay. But if you just, you know, I think in the back of my deck, you see a little bit of consideration for sales growth. So look, oral care, DMS, digestive health, and other pretty clean from a run rate point of view; there's nothing undue and in the base. And then there is, we have to cycle over pain relief and respiratory health.

Oral care Vms.

BMS digestive health and other political clean from a from a run rate point of view, there's nothing under you and in the base and then there is we have to cycle over pain relief in respiratory health and you'll see that.

Bruno Montaigne: And you see that in the backup, and we mentioned it earlier in the call. And look, if you want to take a little bit of a step back, take comfort in what will be delivered in Q4. We did six and a half percent sales growth cycling over tough comms with some volume, and some volume growth as well. And then again, you know, that's the strength of the portfolio geographically and from a product mix point of view that the categories give us. Thank you. The next question comes from the line of Bruno Montaigne, Bernstein. Please go ahead. Hi, good morning.

See that in the backup and we mentioned that earlier.

In the call and look if you want to take a little bit of a step back take comfort for will be delivered in Q4, we did six in the office and sales growth cycling over tough comps with some volume with some volume growth as well and then again, that's the strength of the portfolio geographically.

And from a product mix point of view not the categories give us soon.

Thank you.

The next question comes from the line of Bruno maintained thanks Tina. Please go ahead.

Hi, Good morning, My first question is on innovation and R&D.

Bruno Montaigne: My first question is on innovation and R&D. If I understand the slides correctly, R&D is down as a percentage of sales. I just want to understand if that is linked to the RDC switches that are maybe further delayed or maybe off the table?

Read the slides correctly R&D is down as a percentage of sales.

One of them to stand as a link to the Arctic to see switches or there may be further delays or maybe off the table and if you could say anything about the sexual health product license that you gained a little while ago when will that start impacting organic growth with the business. My second question is coming back to hyperinflation.

Bruno Montaigne: And if you could say anything about the sexual health product license that you gained a little while ago, when will that start impacting organic growth for the business? My second question is coming back to hyperinflation. I'm not totally clear how hyperinflation capping will impact pricing and organic growth.

I'm totally clear, how hyperinflation capping will impact the pricing and the organic growth, but my question is on your margin bridges, you talk about operating leverage I would say the plus 50 60 basis points. This year and then you have the negative effects.

Bruno Montaigne: But my question is, on your margin bridges, you talk about operating leverage, let's say +50, 60 basis points this year, and then you have the negative effects. Clearly, a big part of operating leverage and the effects is Argentina and the like. So will your new approach to hyperinflation also reduce the amount of the kind of operating leverage you would have quoted for 2023 and, therefore, the effects? So will that new approach also impact the way you report those EBIT margin bridges? Thank you. Thanks, Bruno.

Clearly a big part of the operating leverage and the effects as Argentina and the like so will your new approach to hyperinflation also reduce the amount of kind of operating leverage you would ask quoted for 2023, and therefore, the effects will that new approach.

So impact the way you report those EBIT margin bridges. Thank you.

Okay, Thanks, Bruno and I'll start with the innovation R&D and then pass it onto to be so.

Unknown Executive: And I'll start with innovation and R&D and then pass it on to Tobias. As for innovation and R&D, we believe in investing in that. What you saw coming through in the numbers was a bit of the efficiencies and effectiveness of the things we're driving across the business on some structural things and some, you know, we exited some TSAs, for instance, with GSK on pharmacovigilance and kind of took that in. So, that's the slight percentage of sales decline that you see. We're very committed to delivering. This year, we had 67 new product launches.

Yeah.

On innovation and R&D, we believe in investing in that we you saw coming through in the numbers was a bit of the efficiencies and effectiveness of the things that we're driving across the business on on some structure things in some.

We exited some TSA as for instance, with GSK on Pharmacovigilance and kind of took that and so that's.

That's the that's the slight.

Percentage of sales decline that you see we're very committed to delivering this year. We had 67 new product launches. This year very proud of some of the innovation that way and if you look at the U S market, where we launched <unk> an active protein animal shield.

Unknown Executive: Very proud of some of the innovation that went. If you look at the U.S. market, where we launched Sensodyne Active Pronamel Shield, year two of Sensodyne Sensitivity & Gum, the two biggest innovations in the U.S. toothpaste market. Things like Emergency Crystals, which is a new form and be able to take emergency medicine without water.

Two of sensitized sensitivity and gum, the two biggest innovations in the U S toothpaste market.

Things like emergency crystals, which is a new form and be able to take.

Emergency without water again off to a really nice start and an actress and Australia, which is a natural pain relief brand with clinical claims we think is a new frontier.

Unknown Executive: And then, off to a really nice start, Paninatras in Australia, which is a natural pain relief brand with clinical claims. We think it's a new frontier and opportunity we're working our way into. So, we feel good about the innovation, always feel like we can do better, and always pushing for more there. But, we're going to invest where we need to invest in that space. Your question on the sexual health launch? We haven't given much of an update. We expect to launch that within the next 12 months, and we'll update the market as we have more clarity and can give more perspective on that. Tobias, do you want to go further?

Frontier and opportunity, we're working our way into so we feel good about the innovation always feel like we can do better and always pushing for more there, but we're going to invest where we need to invest in that space. Your question on the.

The sexual health.

We haven't given much of an update we expect to launch that within the next 12 months.

We will update the market as we have more clarity and can give more perspective on that.

To be if you want to.

Unknown Executive: Just one small build on R&D. There's also a small accounting change we made. There were some G&A costs that, in the old days, as we spun out of GSK, were still reported in R&D. We simplified our accounting, so some of it moved into the SG&A line just to be more consistent. So that was also another reason for you to see a little bit less on the R&D line, which has shifted over into another line, but that's also now out of the base going forward. Now, on your hyperinflation question, yes, Bruno, you're absolutely right.

Just one small building R&D Theres also.

Small accounting change we made there was some G&A costs that in the old days to be spun out of GSK versatility reported in R&D, we simplified our accounting for some of it moved into the SG&A line just to be more a more consistent and so that was also another reason for you saw a little bit less on the R&D line, which has shifted over into <unk>.

Other line, but that's also now also out of the base going forward and then on your hyperinflation question yet yes.

You're absolutely right I think the Argentina, and Turkey, because we did not apply hyperinflation accounting in 2023 gave us a bit of a tailwind.

Unknown Executive: I think Argentina and Turkey, because we did not apply hyperinflation accounting in 2023, gave us a bit of a tailwind on both the sales numbers but also on the operating profit number. Now, of course, there are also transactional losses in that because these markets tend to import. So I think in Turkey, we do not have our own manufacturing, so they have to import mostly from hard currency production sites. In Argentina, we have our own production, but there's still raw materials and certain materials that you can't get in the country. That's offset.

Give us a bit of a tail then.

On both the sales numbers, but also on the on the operating profit number now of course, there's also transactional losses and not because these markets tend to export import so I think in Turkey. If you do not have our own manufacturing so they have to import from.

Most of them hard to hard currencies production sites.

In Argentina, we have our own production, but they are still raw materials in certain materials that you cant get into country. That's offset so so but look in the mix I'm I'm not concerned about the ability to drive operating margin going forward, even with applying hyperinflation accounting.

Unknown Executive: But in the mix, I'm not concerned about the ability to drive operating margin going forward, even with applying hyperinflation accounting going forward. Thank you. Anything on the Rx2OTC switches and the innovation? Is there any update there? No, no, no update to speak of.

Going going forward with them.

Thank you and anything on the Rx to OTC switches in the innovation is any other data.

No no no update to speak of I think as we said again two years ago. We said, we would expect that in the pipeline. We have two switches that can potentially launch in 'twenty five 'twenty six we since then those that had been delayed based on discussions with the FDA. So really no update on that and obviously we've done the deal on <unk>.

Unknown Executive: I think, as we said again, two years ago, we said we'd expect that in the pipeline, we have two switches that could potentially launch in 25 and 26. We've since said those have been delayed based on discussions with the FDA. So really, no update on that.

Unknown Executive: And obviously, we've done the deal on sexual health, which is, which is, in a way, an RxOTC switch is a direct switch to OTC. And we're excited about that, that opportunity. Thank you. This question comes from the line of Celine Pannuti, JP Morgan. Please go ahead. Smith.

Actual health, which is a which is in a way an rx to OTC switches or direct to OTC and we're excited about that that opportunity there.

Thank you.

The next question comes from the line of Simeon Polo T. J P. Morgan. Please go ahead.

Celine A.H. Pannuti: Thank you. Good morning, everyone. My first question is on the balance sheet or the leverage. So you said you were three times.

Thank you. Good morning, everyone. My first question in terms of balance sheet leverage. So you said you got two times do you have a goal of two five times given thats you are going to do that.

Celine A.H. Pannuti: Do you still have a goal of 2.5 times, given that you are going to do this share buyback and you announced the dividend? Would you please update us on that? My second question is on pricing. Can you talk about your ability to price and, you know, what kind of regions or, you know, quantum of pricing we should be looking forward to as additional pricing in 2024, if any? And then lastly, can you talk about the volume performance in INIE LATAM, which was negative, as negative as in Q3. Although, in Q3, there were some, I think, one-off issues. So could you shed light on that?

Back when you announced the Disney does so yeah, if you could.

Data on that.

My second question is on pricing can you talked about.

Ability to price and what kind of regions.

Clinton of pricing, we should be looking for that additional pricing in 2020, if any.

Then lastly.

Can you talk about the volume performance in EMEA, and a plan which was.

Maybe I'll keep asking you can see that in Q2.

We went in Q3, there were some I think one off issues. So could you shed light on that thank you.

Celine A.H. Pannuti: Thank you. Great. Thanks, Celine.

Great. Thanks Helane.

Unknown Executive: First, let me just talk about the pricing ability thing. I think, as we look at next year, we continue to expect to see pricing, but we also expect to have volume growth through for the full year. And as we've always said, we try to be very conscious of how we take pricing because we want to continue to see that volume growth very proud of 2022 and 2023. And what we've been able to do is deliver the pricing environment, certainly in mass markets, places like us and across Europe is challenging, but we believe that we still have the ability to take price. And certainly, in pharmacies across Europe, it's much more about the decision we want to make on the pricing we can take and the consumer elasticity because there's really not a retailer in between us and the ability to take pricing as it's mostly independent pharmacy, and our OTC portfolio in Europe pretty much goes 100% through that channel.

Can you just talk the pricing ability thing I think as we look at next year. We continue to expect to see pricing. We also expect to have volume growth through for the for the full year.

And as we've always said we try to keep.

Very conscious of how we take pricing because we want to continue to see that volume growth very proud of 2022, and 2023 and what we've been able to.

To deliver the pricing environment, certainly in mass markets places like U S and across Europe is challenging, but we believe that we have there's still the ability to take price and certainly in pharmacies across Europe. It's much more about the decision we want to make on the pricing, we can take and the consumer elasticity.

Because there is really not a retailer in between us and the ability to take pricing as it's mostly independent pharmacy, and our OTC portfolio in Europe pretty much goes 100% through that.

Through that channel and then overall listen we feel good about the performance of our business in Europe.

Unknown Executive: And then overall, listen, we feel good about the performance of our business in Europe, Middle East, Africa, and Latin America. We did see some volume declines there, but as you noted, we've been able to take good prices and, and the volume declines really differentiated geographically. So a place like Latin America would see a bit more volume decline, and that links a little bit to Tobias's point also in the hyperinflation comments in Argentina.

Europe Middle East Africa, and Latin America, we did see some.

See some volume declines there as you noted we've been able to take good pricing and the volume declines really.

<unk> differentiated geographically so places like Latin America.

You would see a bit more volume decline and it links a little bit too.

<unk> at this point also on the hyperinflation.

Comments in Argentina.

Unknown Executive: But overall, we feel good about the makeup of the business. And then you have regions like Asia, where we had low inflation, and we continue to see really strong volume growth in that region and expect to continue to see good volume. Yeah, look, you're on the on the leverage question, right?

But overall, we feel good about the makeup of the business and then you have regions like Asia, where we had low inflation and we continue to see really strong volume growth in that region and expect to continue to see good volume growth.

Yeah look on your on your on the.

On the leverage question right. When we set our medium term target is to be around two point right. It doesn't mean, two five sharp but around that two five number we think that when you but with all the analysis. We've done we think this is the right longer term.

Unknown Executive: And we said our medium film target is to be around. It doesn't mean 2.5 sharp, but around that 2.5 number, we think that with all the analysis we've done, we think this is the right longer-term, more medium-term leverage range, taking all the components into account, interest rates, and all the other capital allocation priorities. So I think that's why we aligned with the board to target around 2.5 over the medium term. Now, how we get there, I mean, I think you should take some confidence from our deleveraging path. We started around 4, so slightly above 4 about 18 months ago, and we're down to 3.0 now.

More medium term leverage range, taking all of the components into account interest rate and all the other capital allocation priorities. So I think thats why we are aligned with the board.

To target around $2 five number over the medium term now I think how we get there I mean, I think you should take some.

Some confidence from our deleveraging path, we saw that you know around four so slightly above four.

18 months ago, and we're down to 3.0 now.

Unknown Executive: And I think the strong cash generation of this business will not change going forward. So I think as we keep executing on this model, we can do both. We can deleverage.

And I think we even though I think that the strong cash generation of this business will not will not change going forward. So I think as we keep executing in the model.

There we can do both we can deleverage and then also I think when you think about the share buyback now we have the income from the diverse that that helped to partially fund that.

Unknown Executive: And then also, I think when you think about the share buyback now, we have the income from the divest that helped to partially fund that. And lastly, also, I mean, if you just take our cash position, we ended the year with a strong cash position. We ended the year with a billion of cash on the balance sheet, no commercial paper outstanding.

Lastly, also I mean, if you just take at our cash position. We ended the year with a strong cash position. So ended the year was $1 billion of cash.

On the balance sheet and no commercial paper outstanding.

Unknown Executive: And I think that allows us to pay back the bond, the $700 million bond that's due now in March from cash, and also to pay out the dividend. So I think overall, I think the business is in a very strong place from a cash position. And I think it's delivering exactly what we have promised to do, and even ahead of time on that. Thank you. The next question comes from the line of Olivier Nicolai, Goldman Sachs. Please go ahead.

And I think that allows us to pay back the bonds the $700 million bump. That's you know in March from cash and also to pay out the dividend. So I think overall I think the business is.

A very strong place from a cash position.

And I think it's delivering exactly on what we have promised to do.

And even ahead of time on that.

Thank you.

The next question comes from the line of Olivier Nicolai of Goldman Sachs. Please go ahead.

Olivier Nicolai: Hi, good morning, Brian, Tobias, and Sonya. I've got two questions, please. First, going back to oral health, could you give us a bit more details on the strong growth acceleration you've seen throughout the year? How much of this growth could be explained by the distribution gain that you still got on the power non-tax or polydom? And then just to follow up, if I may, on the marketing expense, which grew 3% in currency but declined as a percentage of sales to 17.9%. Now, you mentioned that some of the reduction was in respiratory, but that did not prevent you from outperforming your peers, so I'm keen to hear your thoughts there.

Hi, good morning, Brian to be essence, Sony I got two questions. Please first going back to all hence could you give us a bit more details on strong growth acceleration you've seen throughout the year.

How much of this growth could be explained by the distribution gain but you still got on the power <unk>, probably done and if that will continue to be a boost in.

Before and then just a follow up if I may on <unk>.

The marketing expense, which.

Grew 3% constant currency, but declining as a percent of fares to 17, 9% now you mentioned about some of the reduction was in risk.

Respiratory.

But did not prevented you from outperforming your peso Q2, a year for that but also going forward.

Olivier Nicolai: But also, going forward, is 18% roughly a percentage of sales? Is that roughly the correct level we should think about? Thank you. Thank you. Thanks for the questions, Olivier. Let me start with Oral Health.

Is 18% roughly.

Sure.

Roughly as a correctly that we should we should think about thank you.

Thanks, Thanks for the questions Louise let me start on oral health. So yes, very good about the oral health performance.

Unknown Executive: So, yeah, we're very good about the Oral Health performance, and as you saw from the presentation, really strong share growth across the three power brands, which is a vast majority of our business, and different dynamics across all three. So Sensodyne continues to see strong growth. Obviously, there was pricing, but also volume growth in that business, and I think that growth was really driven by some very good innovations and performance-behind innovations. So I mentioned Sensodyne Proactive Enamel Repair, Year 2, in many places as Sensodyne Sensitivity in Gum.

As you saw from the presentation really strong share growth across the three.

Our brands, which is vast majority of our business and different dynamics across all three so sensitive line continues to see strong growth. Obviously, there was pricing, but also volume growth on that business and I think that growth is really driven by some very good.

Innovation and performance by innovation, So I mentioned <unk>.

Proactive enamel repair a year or two in many places.

<unk> sensitivity and gum. So we're really seeing the model, which is the dental detail model. The innovation. The recommendation continue to be very strong and hold up very well in a in a volatile kind of economic.

Unknown Executive: So we're really seeing the model, which is the dental detail model, the innovation, the recommendation, continue to be very strong and hold up very well in a volatile kind of economic environment. Also, we just launched in the U.S. and a few other markets, Sensodyne Clinical White in Q1, which is an innovation we are very, very excited about. As you may know, whitening is a big trend in the market, but whitening toothpastes are actually very bad for sensitive people with sensitive teeth, and we have a product that actually does both, two shades whiter and 24-7 sensitivity protection.

Environment also we just launched in the U S and a few other markets centered on clinical white in Q1, which is an innovation. We are very very excited about as you may know.

Whitening is a big trend in the market, but whitening toothpaste actually are very bad for some.

People with sensitive teeth, and we have a product that actually does all too.

Two shades whiter and $24 seven sensitivity protection. So feel good about that paradigm that is a bit of us continuing to activate where it's been in market.

Unknown Executive: So feel good about that. Paranontac is a bit of a can us continue to activate where it's been in the market, but maybe we haven't had the capacity to allocate resources. We're seeing it react very well to brands and also to investment and to growth. And then I would say on denture care, which is a bit of a bounce back from COVID. So what happened during COVID in that population, an older population, less disposable income, as social occasions went down, the usage of the category went down. Obviously, we're about half that category on a global basis.

Maybe we haven't had the capacity resource allocate we're seeing it react very well to brands and also to investment and to the growth.

And then I would say on denture care Denture care is a bit of a bounce back from Covid. So what happened during COVID-19 and that population an older population less disposable income as social occasions went down.

The usage of the category went down obviously, we're about half of that category on a global basis.

Unknown Executive: And now we're seeing that come back, but also strong innovation there too, because our Max Grip Hold product that went out truly, truly has made a difference for that consumer segment. But you wouldn't expect to see that level of growth going forward, because there's a bit of a base effect. So overall, feel good about that. On the A&P investment in respiratory, again, as I mentioned, and Tobias mentioned a bit about our brands, but the geographic footprint, our respiratory portfolio is very different than our competitors. So yes, we decided to invest less in certain markets where we weren't seeing it, and we were still able to deliver. We believe in investing in A&P, no question about it. I'm not going to put a number on what I think the right level is, because we do want to be active in the way we manage that and in the way we drive growth and we drive returns on our A&P. But I feel good about the choices.

And now we're seeing that come back, but also strong innovation there too because our match group hold product that went out truly truly.

It made a difference for that consumer segment, but you wouldn't expect to see that level of growth going forward. Because there is a bit of a bit of a bit of a base effect. So overall feel good about that on the on the A&P investment and on respiratory again as I mentioned.

And to be as mentioned a bit on our brands, but the geographic footprint of our respiratory portfolio is very different than our competitors.

So, yes, we decided to invest less in certain markets, where we werent seeing it and we were still able.

To deliver we believe in investing in A&P no question about it I'm not going to put a number on what I think the right level is because we do want to be active in the way, we manage that and in the way, we we drive growth and we drive returns.

Of our A&P, but feel good about the choices and I think the big.

Unknown Executive: And I think the big data point for me is, if you remember at half year we're at 55% of the business gaining and maintaining share, at full year for all of 2023, we're at 58%. So while we're making those choices, we're continuing to see competitiveness strengthen. We've always, by the way, wanted to do more and be more competitive and even see that number go up, but we feel really good about where we, you know, ended up for the full year and the choices we made.

Data point for me is if you remember at half year, we were at 55% of the business, gaining and maintaining share at full year for all of 2023.

So while were making those choices, we're continuing to see the competitiveness strength.

Strengthened we always by the way are.

Wanting to do more and be more competitive and even see that number go up but we feel really good about.

Where are we where we ended for the full year and the choices we make.

Unknown Executive: Maybe just to add two little bills to what Brian said, about just the 58% of the business gaining share, just a reminder, that covers over 90% of our revenues. So this is really our full business, all the brands, all the markets, wherever we get market share data, so it's a really holistic measure against the 11 billion in revenue that we have. And I think I just want to, you know, point that point, point, point that out a bit.

Maybe just to add it to two little girls to what Brian said on just under 58% of the business gaining share. Its just a reminder that covers over 90% of our revenue. So this is really powerful business all of the brands all the markets wherever we get market share data. So it's a really holistic measure against.

The $11 billion of revenue that.

That we have and I think just want to point at that point.

When that out a bit.

Unknown Executive: So, I think it is a very strong number overall. Thank you very much.

So.

I think very strong strong number overall.

Thank you very much.

The next question comes from BNP.

Michael Omanadze: The next question comes from Michael Omanadze, BNP Paribas. Please go ahead. Hi, thank you. One question, one follow-up from me, please. Can you please comment on the consumer environment in your categories? Are you observing any down-trading at all in your key markets?

BNP Paribas. Please go ahead.

Alright, thank you.

One question one follow up for me please.

Can you please comment on the consumer environment in your categories are you observing any down trading at all in your key markets.

Michael Omanadze: And in terms of the follow-up, just to make sure I understood correctly, you said that longer term you are targeting your organic growth to be roughly half and half split between volume and price and that 2024 will be a step in that direction. Does that mean that you expect pricing to still be a higher contributor of growth in 2024?

And in terms of the follow up just to make sure I understood correctly.

Said that longer term your targets Hank you.

Your organic growth to be roughly half and half split between volte.

Volume and price and that 'twenty 'twenty four will be a step in that direction.

Does that mean that you expect pricing to still be higher contributor of growth in 2024, just to make sure I understood. This correctly.

Unknown Executive: Thanks. Great. Thanks for the question. Let me take the first one, and I'll pass it to Tobias on the pricing.

Great. Thanks for the.

A question, let me take the first one off asset asset based on the pricing.

Unknown Executive: As far as the consumer environment in key markets, I think we mentioned a bit, it does change geographically a bit from what we see. And as I mentioned before, Asia continues to be quite strong, with low inflation in that market, and we can see this good volume growth. If you look at the U.S. environment... It's been a bit tougher environment in the sense that, you know, we've seen volume declines in certain categories. But what I would say is it's really a story category by category story.

As far as the consumer environment in key markets I think.

We mentioned a bit it does.

Changed geographically a bit on what we see and as I mentioned before Asia continues to be quite strong low inflation.

In that market and we can see good volume growth. If you look at the U S environment.

It is.

It's been a bit tougher environment in the sense that.

We've seen kind of volume declines in certain categories, but what I would say is it's really a category by category story. So as immunity category as we shared saw significant decline because of.

Unknown Executive: So the immunity category, as we shared, saw a significant decline because of the explosive growth that happened during COVID. If you look at respiratory, in the first half, we saw good growth. And then in the back half, due to seasonality, we saw that category decline. And in oral health, we've continued to see real strength in that category, you know. As far as down trading and private label, the US would be the largest private label market.

The explosive growth that happened during Covid, if you look at respiratory in the first half we saw good growth in the back half due to seasonality, we saw that category declined and on oral health. We've continued to see real strength in that category.

Going on as far as downstream and private label in U S would be the largest private label market are really not seeing that on a broad basis and across our portfolio.

Unknown Executive: We're really not seeing that on a broad basis and across our portfolio. Actually, overall, in private label in the US, we've gained here. Now, it's different category by category, smoking cessation, a little different, it's a higher priced product.

Actually overall in private label in the U S. We've gained here now different category by category smoking cessation of little different it's a higher priced product, but I'd say overall nothing material is happening that's impacting the business overall in that way.

Unknown Executive: But I'd say overall that nothing material is happening that's impacting the business overall. Yes, I think you understand this correctly. So there will be more of more of our growth coming from price than from volume next year. So it's a stepping stone in that direction. In the medium term, we think we're going to be back at the round of 50-50. Now, the 50-50 was 60-40, 40-60, depending on the year when you launch and how you take prices. But a stepping stone in that direction, but clearly still more skewed to price, but significantly less than it was last year with the 7-1 or the 85-15 between the two.

This.

Yes, I think you understood. This correctly, so there will be more and more of our growth coming from price and from volume next year. So it's a stepping stone in that direction.

In the medium term, we think we're going to be back at the around the 50 50 and outlook is the 50 50 or 60, 40, 40 60, depending on the year when you launch and how you can take price, but stepping stone in that direction, but clearly still more skewed to price, but significantly less than it was last year with the with the 701 or 80 515 between the two.

Unknown Executive: That's very clear. Thank you. This question comes from the line of Tom Sykes, Deutsche Bank. Please go ahead. Thank you. Good morning, everybody.

That's very clear thank you.

The next question comes from the line of Tom Sykes Deutsche Bank. Please go ahead.

Thank you good morning.

Everybody Firstly just on <unk>.

Thomas Richard Sykes: Firstly, just on China OTC and I guess the renewal of the China JV is due in September. Is there anything you can say on that and whether any terms will change and maybe what the phasing of China OTC does to the phasing of groups? And then just on North American growth, are you seeing any impact of increased OTC allowances from insurance companies? And do you get a sort of flushing of FSA eligible products or accounts for FSA eligible products in Q4, which rather accentuates the seasonality at all of OTC?

China, ATC and I guess, the renewal of the China right J D.

<unk>.

In September is there anything you can say on that and whether any terms.

We will change.

And maybe won't phasing if China ATC, just the phasing of group.

But the ability.

And then just on North American growth, you're seeing any impact of increased.

T C allowances from insurance companies.

And do you get it.

Sort of Flushing of FSA eligible.

Counts FSA, unless you put product in Q4, which Rhonda accentuates the seasonality.

All of the OTC.

Thomas Richard Sykes: Thank you. Great. Let me do this.

<unk>.

Great. Let me remind you that somebody mentioned OTC, China I'll touch on your U S question ought to be as talk about the status.

Unknown Executive: Let me mention OTC China. I'll touch on your U.S. question, and I'll have Tobias talk about the status of the joint venture. So, first of all, in OTC in China, you know, you remember a year ago when COVID lockdowns came off and sales restrictions on our products like Senbid, which is an ibuprofen pain reliever and contact cold and flu product.

Venture So first of all in OTC and in China.

If you remember a year ago when Covid Lockdowns came off also sales restrictions on our products like <unk>.

Which is an ibuprofen pain reliever and contact cold and flu product we saw significant demand.

Unknown Executive: We saw significant demand for two reasons. Sales restrictions were taken off, and COVID went through the country, and we treat those symptoms. So, very proud of the way our China organization will react from a supply chain standpoint. Demand quadrupled overnight, and we're able to really react and help meet that demand. And that certainly will be a factor for our China business in Q1 and Q2 as we look forward. Now, that's already incorporated into our Q1 guidance, which will be slightly below our four to six percent guidance. But overall, we feel very good about that market and our business here, and it grew by healthy double digits in 2023. On North American growth and the impact of the FSA, really, there was really no impact to speak of.

For two reasons sales recession.

Covid went through the country and we treat those symptoms. So very proud of the way our China organization will react from a supply chain demand when you bolt overnight and we're able to really react and help meet that demand and that certainly will be a factor for our China business.

In Q1, and Q2 as we let folks know that's already incorporated into our Q1 guidance is that we will be slightly below our full year, 46% guidance, but overall, we feel very good about that market and our business here and it grew at healthy double digits in 2023, North American growth.

And the impact of the FSA no really no impact to speak up we think they're good to have in place and it's good that people can use.

Unknown Executive: We think they're good to have in place, and it's good that people can use those funds in a tax-free way to buy OTC products. But I would say there would be no analysis where we have to say it had any material impact on our business. Tobias, you want to talk to the China Joint Venture? Yeah, so look, on the joint venture, so we're in, as you can imagine, we're in discussions with our partner. I mean, I've said before, this is a joint venture, I think where, you know, both partners need each other. And I think, so I'm very confident in the continuation of the joint venture. And we would update you throughout the year if there's anything that would change other than that. I think this is a joint venture that has worked well for us. We're very happy with the performance; our partner is very happy with the performance. So I think from our perspective, there are no concerns about that.

Can you use those funds in a tax free way to buy OTC products, but I would say there would be no analysis, we have to say I had any material impact on our business to be sure Juan talk to China.

Sure Yeah. So look on the joint venture so we're and as you can imagine we're in discussions with our partner I mean, I've said before this is a choice. This is a joint venture.

Think we're.

<unk> partners need each other and I think so I'm glad we're very confident on the continuation of the of the joint venture and we would update drawing two out throughout the year. If there's anything that would changes in that I think this is a joint venture that has done well for us, but we're very happy with the performance of our partner is very happy with the performance.

So I think from our perspective, no no concerns on that end.

Unknown Executive: And if there's any material change, we would, of course, tell you timely. And also from a phasing point of view, I think in the back of my deck, you see. I mean, remember FinBit, but not all the FinBit growth last year is going to disappear again because FinBit came back from reduced use because it was blocked for sales before. So we're going to retain some of that upside. And then also, we have seen very strong and continued success in the other categories in China. CalTrade, you've seen that in my deck, I've shared the sellout numbers that we had on that brand. That's our largest brand in China. Sensodyne had a weaker half-year performance last year and started to perform very well in the second half of the year.

If theres any material change we would of course tell you tell you timely and also for me from a phasing point of view I think in the back of my deck, you see I mean remember Ben bids, but not all defended growth last year, it's going to disappear again, because its been bid came back from a reduced use because it was blocked for sales.

Four so we're going to retain some of that.

Outside and then you also we have seen very strong and continued success on the other categories in China <unk> seen that in my deck I've shared the sell out numbers.

That we had on that brand is our largest brand in China since <unk> had a weaker half one last year and started to perform very well in the second half of the year. So we go with good momentum into the year. So you have some offsets in other part of the category in China. So it's not just you know the.

Unknown Executive: So we go with good momentum into the year. So you have some offsets in other parts of the category in China. So it's not just, you know, defended and, as a result, confident that China will be a growth contributor and will be additive to growth in 2024 as well for the full year.

Defended and as a result confidence.

China will be a growth contributor through and will be additive to growth.

<unk> 24, as well for the full year.

Unknown Executive: I'll give you one more question. Thanks. We have a follow-up question from David Hyatt. Hello, sorry to come back; just want to completely clarify the share buyback, which I may have not quite caught. So the 500 million, you kind of mentioned that that may be impacted by the way you use that by what GSK and Pfizer do, so just to be clear, you could, for example, do 500 in the first six months of the year, nothing in the back half, if the dynamics of what they choose to do made that attractive, and then I guess if you are maybe to do more divestments in the year, that 500 could change, this Is that a fair comment?

Take one more question.

We have a follow up question from David <unk>.

Please.

Sorry to come back just wanted completely caught up on the share buyback, which look quite cool.

So the $500 million you kind of mentioned that that may be impacted the rate.

But what GSK and Pfizer do so so just to be clear.

For example, do you 500 in the first six months of the year.

I think in the back half of the dynamics of what they choose to do that.

And then I guess.

Maybe to do more divestments in the year that 500 could change.

Youll agree low team with the board you could be flexible on that and maybe do more of the second half of.

The balance sheet flexibility with which to get more favorable.

As I said comments thank you.

David Hyatt: Thank you. So, first of all, look, I think we've allocated 500 million dollars of capital for ShareWebEx. We're going to do 500 million. How we do it, we want to do it in the best possible way. And, you know, I think, you know, preferably if there was a placement, it would be through that because we get a discount. Now, we're going to do it in 24 hours, so that's the timing we have set for that. So we have to do this flexibly, I have the cash, and we'll do that flexibly in the most efficient way for the shareholders. I think you understand that part correctly. In terms of capital allocation decisions, so, I mean, look, if we would do exactly as I laid out the thing in my presentation, the new capital allocation framework, right? And I think so.

So first of all look I think we've allocated $500 million of copper before share buybacks, we're going to do $500 million, how we do it we want to do it in the best possible way.

I think preferably if there would be a place things would be better off because we get a discount now we're going to do it in before so.

But at the timing we have we have said we have set for that so we have to flex to that I have the cash.

We will do that flexibly in the most efficient way for Florida.

For the shareholders I think you understood that that part correctly.

In terms of capital allocation decisions. So I mean look if we would do exactly laid out the thing in my presentation, the new capital allocation framework right and I think.

Unknown Executive: One thing that doesn't change is the high cash generated nature of that business. So if we're in a situation that we have excess cash like we have now coming through toward the end of the year and plus the divestment, we sit down and go through the three buckets. Have we invested properly in the business? Hick.

One thing that doesn't change that the high cash generative nature of that of that business. So if we're in a situation that we have excess cash like we have now coming through towards the end of the year and with lots of divestments, we sit down and go through the three buckets halfway invested.

Business.

Unknown Executive: If we've done that, then you move on to either any bolt-on or any M&A opportunities that are commercially compelling and accretive in value. And then, lastly, if none of those exist, then we will look at what to do with the excess cash. So we would look at, does it make sense to pay down more of the debt, or does it make sense to return it, for example, via shareholders, via buybacks, or via dividends? And I think that's exactly how we came to the decision because share buybacks are, at the moment, the best way and the most value-accretive way to do with that excess cash. And that's why we made the decision to allocate 500 million to the share buyback. We would go exactly by that same logic if and when a situation arises that we have excess cash on our hands.

We've done that then you move on to are there any bolt on M&A opportunities that are commercially compelling and accretive and value and then lastly, if none of those excess then we will look at what to do with the excess cash. So we would look at does it make sense to pay down more debt or does it makes sense.

To return this for example by our shareholders.

Via buybacks or via dividend, so and I think.

That's exactly how we came to the decision because share buybacks are at the moment.

First way and the most.

Value accretive way, what we can do with that excess cash and Thats why we made position to allocate $500 million of share buyback and we would go exactly to that same logic, if and when the situation would arise that we have excess cash and on our hats soon.

Unknown Executive: Great, thank you. Okay, great. Great, thanks, David. Okay, great.

Great. Thank you okay great.

Great. Thanks, David Okay, great listen thanks, very much everyone always appreciate your time and the engagement in your question. It's been another successful year of delivery for Haley on building on our track record as a Standalone company.

Unknown Executive: Listen, thanks very much, everyone. I always appreciate your time and the engagement and your questions. It's been another successful year of delivery for Haleon, building on our track record as a standalone company. I feel really confident about the year ahead, and we remain well positioned to deliver our 2024 and our medium-term guidance.

Feel really confident about the year ahead, and we remain well positioned to deliver our 2024 and our medium term guidance. So hope you all have a good rest of the day and if there's any further questions as always feel free to reach out to sanya and the rest of the relation statement. Thanks again.

Unknown Executive: So, hope you all have a good rest of the day. And if there's any further questions, as always, feel free to reach out to Sonya and the rest of the relations team. Thanks again. Ladies and gentlemen, the conference is now over. Thank you for choosing Cards Call and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Ladies and gentlemen, the conference is now over thank you for choosing chorus call and thank you for participating in the conference you May now disconnect your lines Goodbye.

Okay.

Yes.