Q4 2024 Haleon PLC Earnings Call
Yes.
Okay.
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Speaker Change: Good morning, welcome Julia Twentyish Wentzville, Q&A cool on Jerusalem head of Investor Relations and I'm joined this morning by Brian Mike Miller, Chief Executive Officer, and Don Allan Our Chief Financial Officer.
Unknown Executive: Just to remind listeners on the course of the discussions today, the company may make certain forward-looking statements, including those referring to our estimates, plans and expectations. We refer to this morning's announcement as the country's UK and SET findings with more details, including factors that could lead to actual results that differ materially from those expressed in, or implied by, such broad legal terms. We have posted today's presentation on the website. We've prepared remarks in our video, running through the results in detail, so hopefully you've all had the chance to see that ahead of this call.
Speaker Change: Just your language news articles discussions today the company may make certain forward looking statements.
Todays research estimates plans and expectations.
Speaker Change: Please refer to this morning's announcement.
Speaker Change: U K and S E T bodies.
Speaker Change: Including factors that cause these actual results to differ materially from those expressed in.
Speaker Change: Our implied by such foolish.
Speaker Change: We have paid to shake presentation on the website. This morning.
Speaker Change: Nothing to read into that.
Speaker Change: In detail. So I hope you all had the chance to see that.
Speaker Change: These cool with that.
Unknown Executive: And with that, we'll go straight to opening the call with a Q&A.
Speaker Change: Great.
Speaker Change: Q&A. Thank you and then she brought into it.
Unknown Executive: Thank you, and over to Brian and Tom. Okay, let's open it up for Q&A.
Speaker Change: Okay, let's open it up for Q&A.
Speaker Change: Thank you Brian So I'll ask a question. Please press star followed by one on your telephone keypad now.
Unknown Executive: Thank you, Brian. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two.
Speaker Change: And your mind, Please press star followed by two.
Unknown Executive: When preparing to ask your question, please ensure your device is unmuted locally.
Speaker Change: Parents Ross your question because I'm sure the device is on mute.
Speaker Change: Italy.
Unknown Executive: We now have a question from Guillaume Delmas from UBS.
Guillaume: We now have a question from Guillaume demos from UBS.
Speaker Change: Please go ahead.
Guillaume Delmas: Please go ahead. Thank you very much. And good morning, Brian and Dawn. A couple of questions for me, please.
Thank you very much and good morning, Brian and John.
Speaker Change: Couple of questions for me please.
Guillaume Delmas: The first one is on your performance being skewed toward the second half of the year in 2025. So, given the strong momentum you're currently seeing in emerging markets, I'm thinking India and China in particular, but also the strong momentum in oral health, I mean, would it be fair to assume that the soft start to the year will be predominantly attributable to mature markets? I'm thinking the US here, and also mostly your OTC divisions. And then look, the second half, what underpins your confidence in some reacceleration? I mean, is it mostly down to the current Celine sellout discrepancy that will correct, or any other factors you would mention?
Speaker Change: The first one is on your performance being skewed towards the second half of the year in 2025, so given the strong momentum you're currently seeing in emerging markets I'm thinking, India and China in particular.
Speaker Change: But also the strong momentum in our oral health.
Speaker Change: I mean would it be fair to assume that the soft start to the year will be predominantly attributable to mature markets I'm thinking the U S. Here and also most of your OTC divisions.
Speaker Change: And then.
Speaker Change: The second half.
Speaker Change: What underpins your confidence in some reacceleration I mean is it must be down to the current sell in sell out discrepancy that will correct or any other factors you would mentioned.
Guillaume Delmas: And then my second question is on oral health. How sustainable do you think the current performance of the division is? I mean, in particular, how far do you think you are in the clinical wide journey, as in many more opportunities of distribution expansion, geographical rollouts? And maybe a tricky question for you, Brian, but do you think you have another clinical wide in your innovation pipeline that could be launched soon?
Speaker Change: And then my second question is on the oral health.
Speaker Change: How sustainable do you think the current performance of the Division is I mean in particular, how far do you think you are in the clinical wide journey.
Speaker Change: Minimal.
Speaker Change: As of distribution expansion geographical rollout.
Speaker Change: And maybe a tricky question for you, Brian but do you think you'll have another clinical whites in your innovation pipeline that could be launched soon thank you very much.
Brian McNamara: Thank you very much. Great. Thanks, Guillaume. Thanks for the two questions. Let me take those questions. I'll ask Dawn if she has any comments on top. First of all, on the performance, I think a couple things. What we saw the dynamic towards the end of the year is a low cold and flu season. Actually, to give perspective, in the US, the cold and flu category, the market was down 15%. It was also down 15% in the rest of the world. You may remember also that we're a little less exposed to the US for cold and flu, which means we're obviously more exposed to the rest of the world.
Speaker Change: Great.
Speaker Change: Thanks, Jill and thanks for the two questions let me let me.
Speaker Change: Let me take the let me take those questions I'll ask Don if he has any.
Comments on <unk> first of all on the performance I think a couple of things what we saw the dynamic towards the end of the year as a low cold and flu season.
Speaker Change: I actually think in perspective in the U S. The cold and flu category. The market was down 15%. It was also down 15% in the rest of the World. You May remember also that were a little less exposed to the U S for cold and flu, which means we're obviously more exposed to the to the rest of the world. That's been a benefit for both had been down 15%. So the <unk>.
Brian McNamara: That's been a benefit, but both have been down 15%. So the dynamic that's created is the sell-in happened. The consumption didn't happen to the level we were expecting it to. We assume an average season, which would not have been down. So as a result, we have higher inventory levels in the trade. That primarily impacts respiratory health, but it also has a lesser impact on pain relief category and also emergency specifically, which is an immunity brand in the US. And that is where that impact is.
Speaker Change: Dynamic that's created is the sell in happened the consumption didn't happen to the level, we were expecting a jewelry assume an average season, which would not have been down.
Speaker Change: So as a result, we have higher inventory levels in the trade that primarily impacts respiratory health, but it also has a lesser impact on pain.
Speaker Change: Pain relief category and also emergency specifically, which is an immunity brand in the U S in that.
Speaker Change: That is the that's where that impact is what is the confidence on the full year. We are confident in the let me start there with the 4% to 6% growth I think part of it is Gil listen the business underlying is performing well, 70%, 71% of the business gained and maintain share.
Brian McNamara: What is the confidence on the full year? We are confident, and let me start there, with the four to six percent growth. I think part of it is, Guillaume, listen, the business underlying is performing well. 71% of the business gained and maintained share, you know, for the full year. We feel good about that. We feel good about the innovation we have. We're launching this year, you know, and we know that Q1 is off to a slow start because of that dynamic. And also, in the US, there is a little bit of an inventory dynamic that's broader relating to some of the drug retailers, which are really struggling right now.
Speaker Change: For the full for the full year, we feel good about that we feel good about the innovation we have we're launching this year.
Speaker Change: And we know that Q1 is off to a slow start because of that dynamic and also in the U S. There is a little bit of an inventory dynamic thats broader relating to some of the growth drug retailers, but you are really struggling.
Speaker Change: Right now.
Brian McNamara: On oral health, just to say, Clinical White's been fantastic. We're gonna roll it out in about 12 more markets this year. We've also launched Clinical Repair. So Clinical is really a platform launch. We've launched that in Germany and three other markets. We'll launch it in more markets this year. We just launched in the U.S. Clinical Enamel Repair, which launched in February in the U.S. So actually, think about Clinical as a platform for us on innovation. So I feel great about our oral health business because it's not only sensitive. You know, we saw Paradigm Tax growing healthy double digits.
Speaker Change: On oral health just to say on a worldwide has been fantastic, we're going to roll it out.
Speaker Change: About 12 more markets. This year. We've also launched clinical repair. So clinical is really a platform unless we launched that in Germany and three other markets. We'll launch it in more markets. This year, we just launched in the U S clinical.
Speaker Change: <unk> Air which launched in February in the U S. So actually think about clinical as a platform for us on innovation. So I feel great about our oil business because it's not only centered on.
Speaker Change: We saw a paradigm dax growing healthy double digits, we saw denture care growing healthy double digits. It has really underpinned by strong.
Brian McNamara: We saw denture care growing healthy double digits. It's really underpinned by strong innovation. Yeah, I think that's fine.
Speaker Change: Innovation.
Brian: Yeah. Thank you very much Brian.
Dawn: I think just maybe three things, three specifics just to build on that in terms of what gives us confidence in half two. Brian talked about innovation, and let's be clear, innovation is working really well across all categories, whether it's Otravin, Naval Mist, whether it's things like Centrum Silver, you know, or the daily sachets that we've launched or Centrum Essentials, you know, Sensodyne Kids, as an example, I think innovation continues to drive category growth, you know, and resulting share gain. So I think that gives us confidence.
Speaker Change: I think just maybe three three things three specifics just to build on that in terms of what gives us confidence in half two Brian talked about innovation and that innovation is working really well across all categories, whether its entravision nasal mask.
Brian: Whether it's things like Sampson Silva.
Brian: All of the daily Sachet that we've launched <unk> Centrum essentials.
Brian: <unk> Kids as an example, I think innovation continues to drive tactically guidance.
Brian: Andre 17 share gains so I think that gives us confidence in the sector.
Dawn: I think the second... is Root2Market. So as you know, we're investing in India in terms of our own sales force. We've also obviously done the joint venture investment in China to enhance our Root2Market. So building distribution is also a critical lever. And I think the third lever, and you saw this in 24, we increased A&P investment 10.2% last year, 100 basis points. And we continue to invest in expert, both expert coverage and the number of samples. So I think if you look at the fundamental drivers in terms of the strength of the business and what underpins that confidence moving forward, I would look to those three things.
Brian: T. Each route to market. So as you know we are investing in edr intend to Fireeye Salesforce. We've also if you see them in the joint venture investment in China to enhance happened Tomorrow. So building distribution is also a critical Lisa and I think the.
Brian: Thirdly <unk>.
Brian: And you saw they've seen 24, we increased A&P investment and 10, 2% last year, a 100 basis points.
Brian: We continue to invest in ex but.
Brian: But ex that coverage and the number of samples and so I think if you look at the fundamental drivers in terms of the strength in the business and what underpins that confidence moving forward I would look today three things.
Okay.
Brian: Thank you both.
Unknown Executive: Thank you both.
Brian: Okay.
Speaker Change: We now have a question from David Hayes from Jefferies. Please go ahead.
David Hayes: We now have a question from David Hayes from Jefferies. Please go ahead. Thank you, good morning all, a couple for me, one on FX and one on...
David Hayes: Thank you good morning all.
Speaker Change: Couple from me, one on FX and one off.
Speaker Change: Uh huh.
Speaker Change: The balance sheet I guess, so just ask you on FX. So obviously, you're indicating that there's still as FX headwinds coming through in <unk> and 'twenty five I think when we were talking.
Speaker Change: To you and you talked to investors towards the end of last year beginning of this year. It felt like it might be a tailwind a small tailwind both in terms of top line and margin. So just to understand what maybe changed over the last month or two.
Whether there is some dynamic here that means that the visibility on the FX effects is something that's difficult for you to forecast so you're kind of right on top of it.
David Hayes: you're kind of right on top of going into the period. And then in terms of balance sheet usage, 500 million share buyback reloaded, does that leave you scope for M&A? I mean, the sense I think with investors is that you've been looking for acquisitions, the other side of these divestments to tidy up the portfolio. Is that something that you'd say you are actively prospecting, is to look at deals still even within that context?
Speaker Change: Can we get to the period and then in terms of balance sheet usage of 500 million share buyback reloaded does that leave you scope for M&A I mean, the sense I think with investors is the you've been looking for acquisitions. The other side of this these divestments to tidy up the portfolio is that something that you would say you are actively prospecting is to look at.
Speaker Change: Deals still even within that context, I guess to tie into a rock song you saw future are saying.
David Hayes: And I guess to tie into a rock song, you saw Futura saying a few weeks ago that they were cutting their 2025 outlook. Can you give us your perspective on that commentary? Has it been a bit disappointing? And or in terms of M&A, is that a business that you think you could look to actually fully participate in and maybe sort of change the strategy and maybe improve that momentum? Is that something that needs to be done?
Speaker Change: Few weeks ago that they would.
Speaker Change: The 2025 outlook can you give us the old perspective on that commentary as it being a bit disappointing and all sorts of M&A is that a business that you think you could look to actually fully participate in maybe sort of change the strategy and that might be.
Speaker Change: Prove that momentum or is that something that needs to be done. Thank you very much.
Unknown Executive: Thank you so much. Okay, thank you. Thank you, David.
Speaker Change: Okay. Thank you. Thank you David I'll start with Iraq, So I'll make a quick comment on balance sheet, and then pass it to Don two tenths on the rest so honor.
Brian McNamara: Well, I'll start with Aroxon, make a quick comment on balance sheet, and then pass it to Dawn to answer the rest. So, you know, on Aroxon, we did launch in October. I've always said, you know, this is a new OTC category, with a new brand, with a new consumer behavior. So we always expected it to be a bit of a slow startup. There's no question that the early trial and results have been slower than we expected. So, you know, we can continue. We believe this is a big need for consumers. We're continuing to look at it and understand what's happened.
Speaker Change: On a rock song we did launch in October.
Speaker Change: I've always said this is a new OTC category with a new brand with a new consumer behavior. So we always expected it to be a bit of a slow start up there is no question that the early.
Trial and results have been slower than we expected. So we continue we believe this is a big unmet need for consumers.
Speaker Change: Continuing to look at it and understand what's happens, but theres no question I wanted to be clear, it's a bit below our expectation now that said, that's all incorporated in our 4% to 6% guidance going forward. So we're still very confident.
Brian McNamara: But there's no question, I want to be clear, it's a bit below our expectations. Now, that said, that's all incorporated in our four to 6% guidance going forward. So, you know, we're still very confident on the full year.
Speaker Change: On a full year, just one comment on M&A and balance sheet is in our capital allocations are very clear investing growth bolt on M&A and return cash to shareholders.
Brian McNamara: Just one comment on M&A and balance sheet is, you know, our capital allocations are very clear, investing growth, bolt-on M&A, return cash to shareholders. Obviously, we're quite confident in our outlook and our cash flow, hence the increase in dividend and the $500 million of stock buyback. But we still have headroom to be able to do bolt-on M&A. If the right thing comes on and it strengthens our portfolio, we'll absolutely have the capability and ability to do that.
Speaker Change: We are quite confident in our outlook and our cash flow, hence the increase in dividend and the 500 million of stock buyback, but we still have headroom to be able to do bolt on M&A and the right thing comes on and it strengthens our portfolio, we'll absolutely have the capability and ability to do that.
Dawn: Dawn? Thanks, Brian. So, if I just take the currency question first, just a few things to say on this.
Brian: Yeah. Thanks, Brian So if I just take you.
Speaker Change: The currency question.
Speaker Change: Just a few things to say on this so I think the key.
Dawn: So, I think the geographical diversification of the group represents a key strength for us and provides attractive growth opportunities. The flip side of that is that obviously results in currency impact and fluctuations. And obviously, from a currency market perspective, that's something that we don't control. And I think if you look, if you look in the year, what we have was we don't guide to currency, we've tried to give our best view on the forecast. And we've taken the Bloomberg forward rate, which gives a headwind on the top line and the bottom line, minus 1, minus 2.5%.
Speaker Change: Geographic diversification.
Speaker Change: Breakfast is a key strength alright and.
Speaker Change: Provides attractive growth opportunities.
Flip side of that.
Speaker Change: Is that obviously, we don't see currency impact.
Speaker Change: And obviously from a currency mall cant dispatch it that's something that will be done.
Speaker Change: Control.
Speaker Change: If you look if you look in the year, what we have lost we can guide to currency. We've tried to give our best view on the forecast.
Speaker Change: And we've taken the bleeding that forward right.
Speaker Change: Which gives a headwind on the topline and Bottomline minus one minus two and half to send them. The reason why we've included that as opposed to spot rates.
Dawn: And the reason why we've included that as opposed to spot rates is because of the emerging market impact. So what you see in emerging markets is a higher level of inflation, but also then that results in a devaluation or the flip side in terms of currency. And if you just take the spot rate, the risk is you don't factor that into account. Now, if we were still forecasting on a spot rate basis, that would be 0.5 impact, negative 0.5 impact on revenue, a 1% impact on the bottom line.
Speaker Change: Because if the emerging market impact so what you see in emerging market is a high level of inflation, but also then that we don't see a devaluation of the flip side in terms of currency.
If you just take the spot rate. The risk is you don't factor that into account now if we were still forecasting on a spot rate basis that would be point.
Speaker Change: Five impact negative five and put some revenue a 1% impact on the bottom line. The other thing to say for this year. If you remember what happened in 2004, we saw a large negative impact in Q3, so if I look at the weighting of the Forex.
Dawn: The other thing to say for this year, if you remember what happened in 24, we saw a large negative impact in Q3. So if I look at the weighting of the forex impact this year, we expect a bigger drag in the first half versus the second half. Having said all of that, look, we recognize, you know, we recognize the frustration around currency. And as I said, whilst we don't control currency markets, we are looking at what are different options. So how can we reduce this? How can we mitigate this? And this is around strategic choices.
Speaker Change: <unk> this year, we expect a big drive.
Speaker Change: Drag in the first half first second half having said all of that we recognize you know we recognize the frustration around currency.
Speaker Change: And as you said, whilst we don't control, we don't tell currency markets. We are looking at different options. So how can we reduce that how can we mitigate the analyst is around strategic choices, so things such as supply chain.
Dawn: So things such as supply chain footprint, supply chain optimization, investment choices in different markets, pricing strategy with inflation and process optimization, so that we can match more closely revenues and costs.
Speaker Change: And supply chain optimization investment choices in different markets pricing strategy with inflation on process.
Speaker Change: Tim I think Shen says that we cannot smoke life slate revenues and costs.
Dawn: So that's kind of the current. Probably just one other thing to say on the balance sheet, obviously, every year, every year we do an exercise where we look at what's the available capital that we have, and what's the most optimal use of that capital. And actually, if you look at the track record, over the last few years, we've been really good in terms of capital allocation. We obviously did that exercise this year, we thought the most optimal use of that cash was to return 500 million surplus cash to shareholders. And to Brian's point, given that we have strong free cash flow in the business, and this remains a key focus for us moving forward, that enables us also, that gives us optionality, should there be an opportunity in terms of bolt-on M&S.
Speaker Change: That's kind of that's kind of the currency piece, probably just one other thing to say on the balance sheet. Obviously every year every year, we do an exercise where we did a cap.
A very little capital that we have on what's the most optimal use of that capital and not see if you look at the track record over the last few years have been really good in terms of capital allocation. We obviously did that exercise. This year, we sold the most optimal use of that cash was to return 500.
Speaker Change: Surplus cash to shareholders and to Brian's point, given that we have strong free cash flow in the business and this remains a key focus for us moving forward that enables us I wouldn't say that gives us optionality should that be an opportunity in terms of bolt on M&A.
Speaker Change: That's great great. Thank you.
Unknown Executive: That's great, great, thank you.
Speaker Change: Yes.
Unknown Executive: As a reminder, to ask a question, please press star followed by 1 on your telephone keypad.
Speaker Change: As a reminder to ask a question. Please press star followed by one on your telephone keypad.
Rashad Kawan: We now have a question from Rashad Kawan from Morgan Stanley. Please go ahead. Hey, good morning, Brian and Don, thanks for taking my questions. Just a couple for me. So first one, if I can ask about VMS, obviously, high single digit growth in 2024. How do you see the category from here? Do you feel like, you know, outside of the emergency volatility, it's back to where you expected it to be a few years ago back at your CMD? And maybe talk a little bit about the innovation pipeline that you have there. And then second question, just again, on the second half waiting point, I know you flagged inventory revaluation, I think is part of the reason why maybe profit growth will be second half waited.
Speaker Change: We now have a question from Russia Koran from Morgan Stanley.
Speaker Change: Please go ahead.
Russia Koran: Hey, good morning, Brian and John Thanks for taking my questions. Just a couple from me. So first one if I can ask about Vms, obviously high single digit growth in 2024.
Russia Koran: How do you see the category from here do you feel like outside of the emergency volatility it's back to where you expected it to be a few years ago back at CMT.
Russia Koran: And maybe talk a little bit about the innovation pipeline that you have there.
Russia Koran: And then second question just again on the second half waiting point I know you've flagged inventory revaluation I think as part of the reason why maybe profit growth will be second half weighted I don't recall that being discussed last year. So can you remind us of what that relates to and how much of a benefit it was last year and how that impacts the base. This year. Thank you.
Rashad Kawan: I mean, I don't recall that being discussed last year. So can you remind us of what that relates to and how much of a benefit it was last year and how that impacts the base this year? Thank you. Great, thanks, Rashad.
Speaker Change: Great. Thanks, Vishal I'll take the BMS question I'll pass it to Don on the inventory re Val in the say.
Brian McNamara: I'll take the VMS question.
Brian McNamara: I'll pass it to Dylan on inventory reval and the saving across the year. So yeah, I do believe that the VMS category is back to kind of where we would have expected it to be when we initially had our capital markets day, when You know, three days after Russia invaded Ukraine and the entire world changed and inflation came in and, and obviously, there was other spikes in COVID and all that kind of stuff. So I think the category is back, you're right, though, that emergency is a brand that's performed well for us, it's a great subcategory, but it does have a bit of a seasonal element to it.
Russia Koran: Across the year, so yes I.
Russia Koran: I do believe that the Vms categories back to kind of where we would have expected it to be when we initially had our capital markets day, which was.
Russia Koran: Three days after Russia invaded Ukraine in the entire world changed and the inflation came in and obviously there was other spikes in COVID-19 and all that kind of stuff. So I think the categories back Youre right, though that emergency as a brand has performed well for us it's a great sub category, but it does have a bit of a seasonal ella.
Russia Koran: <unk> to it and we certainly saw that with the with the extreme spikes in emergency during during Covid enduring the different variants and stuff. So outside of that piece of seasonality, we feel good about that business and as we've always said, we have a very unique asset in central being really the only global.
Brian McNamara: And we certainly saw that with the, with the extreme spikes in emergency during, during COVID and during the different variants and stuff. So outside of that piece of seasonality, we feel good about that business. And as we've always said, we have a very unique asset in Central. really the only global VMS brand in the world and over 68 countries, fantastic footprint in China with Caltrain and Centrum. So, you know, we feel good about that category and we feel like it's in a more stable place where we would expect it to be outside of that bit of seasonality.
Russia Koran: Brand in the world in over 68 countries fantastic footprint in China with Cal trade.
Russia Koran: And centrum, so we feel good about that category and we feel like it's in a more stable place, where we would expect it to be outside of that there is seasonality Don.
Dawn: Dawn. Yeah, so I think in terms of first half, second half waiting, two factors on that. You know, one, we've obviously talked about the seasonality impact in terms of cold and flu. You know, that's the first impact in terms of first half, second half on the bottom line. Second impact, as you've said, is the inventory valuation. And I think what's important on this is that we, you know, we are confident in delivering the full year guidance as we've laid out for this year. And, you know, any lapping impact in terms of inventory valuation is baked into that guidance.
Speaker Change: Yeah. So I think in terms of first half second half weighting two factors on that one.
Speaker Change: We've obviously talked about the seasonality impacts in terms of cough cold and flu.
Speaker Change: That's the test impact in terms of first half second half on the bottom line second impacts. It's as you said it the inventory inventory valuation and I think what's important.
Speaker Change: Yes.
Speaker Change: We you know we are confident in delivering the full NDA tightens as we've laid out for this year and you know any lasting impact in terms of inventory valuation is baked into that guidance. So that's the first thing to say the reason why we're calling it out is because the <unk>.
Dawn: So that's the first thing to say. The reason why we're calling it out is because it impacts the phasing, because this was a, you know, a benefit in the first half of last year. And just to give you some context, we haven't done inventory revaluation since the demerges. So 2024 was the first year that we did it. If you think about where inflation has come from in years 22, 23, inflation was higher. So obviously it does, you know, it does have an impact in the year. Moving forward, this is something that we will do annually each year.
Speaker Change: Tax the phasing because it isn't a.
Speaker Change: A benefit in the first half of last year and just to give you some context.
Speaker Change: We haven't done inventory revaluation since the demerge I'd say 'twenty two installments the first year that we did it.
Speaker Change: If you think about where inflation has come from in years 'twenty to 'twenty three inflation was higher so obviously it does it does have an impact in the yeah. Moving forward. This is something that we will do annually each year.
Dawn: You know, and we have done in 25 and, you know, there's a minimal impact. But as I said, I think what's the most important thing is that we are confident in the guidance for this year.
Speaker Change: And we have done in 'twenty, five and you know, there's a minimal impact, but as I've said I think the most important thing is that we are confident in the guidance this year.
Speaker Change: Thank you very much.
Speaker Change: We now have a question from Chris pitcher from Redburn.
Chris Pitcher: We now have a question from Chris Pitcher from Redburn. Please go ahead. Thanks very much. A general question, please. I mean, you're talking about, you know, retailer stock levels and things like cold and flu. But could you just give us a sense more broadly across the retail landscape in the US? Because we're hearing from lots of HPC companies that shipments are perhaps lagging underlying demand. Is there something a bit more deep seated in terms of your customers looking to save on cash if they become a bit more conservative on the on the consumer?
Speaker Change: Please go ahead.
Chris Pitcher: Thanks, very much a general question. Please I mean, we are talking about retailer stock levels and things like cold and flu.
Chris Pitcher: But could you just give us a sense more broadly across the retail landscape in the U S. Because we are hearing from lots of HBC companies.
Chris Pitcher: Shipments of perhaps lagging underlying demand this is something a bit more deep seated in terms of your customers.
Chris Pitcher: To save on cash if they become a bit more conservative.
Chris Pitcher: On the consumer and then.
Brian McNamara: And then a question for Dawn, a good performance on working capital. Now that you've been there a bit, how big an opportunity do you see in terms of working capital efficiencies to drive out? I know this is the last year of the operating efficiency program, but is there more to go for there? And if there is, could you help quantify it? Thanks. Great, thanks. Thanks for the questions, Chris. I'll take the first question on U.S. retail environment, and then I'll pass it over to Don. Listen, I think there are a couple of retailers that are struggling in the U.S.
Don Allan: A question for Don.
Speaker Change: This is not a good performance on working capital now that you've been there, but how big of an opportunity do you see in terms of working capital efficiencies to drive out. So I know this is the last year.
Speaker Change: Operating efficiency program, but is there more to go forward or if there is could you help quantify it.
Don Allan: Great. Thanks, Thanks for the questions Chris I'll take the first question on U S retail environment, and then I'll pass it over to Don.
Speaker Change: Listen I think.
Speaker Change: There are a couple of retailers that are struggling in the U S. In the drug channel openly and we do see some more pressure on inventory levels there.
Dawn: in the drug channel openly, and we do see some more pressure on inventory levels there. They have four-year results, and at the end of February, they're managing their four-year results. So I don't think there's anything particularly deeper-seated there or a massive shift happening, but I think we just have a couple of retailers that are struggling a bit more, and they're working to manage their cash. The bigger impact for us is a seasonality impact versus that. But that is something that, you know, we're not immune to either. But ultimately, you know, it's a seasonality impact, which impacts those, you know, primarily respiratory, but there's a couple other categories that I pointed out.
Speaker Change: They have full year results.
Speaker Change: At the end of February.
Speaker Change: Theyre managing their or their full year results. So I don't think theres anything, particularly deeper ceded there or a massive shift happening, but I think we just have a couple of retailers that are struggling a bit more and they're working to manage their cash.
Speaker Change: The bigger impact for us is a seasonality impact versus that but that is something that.
Speaker Change: We're not immune to either.
Speaker Change: But ultimately, it's the seasonality impact which impacts us.
Don Allan: Primarily respiratory but there's a couple of other categories that I pointed out Don.
Dawn: Yeah, I think I think on working capital, I think we made really good progress in 24. We improved working capital by 13 days, you know, and a portion of that driven by reduction in inventory. I think, you know, I think the opportunity on working capital, there's still a large opportunity, whether it's around payment terms with suppliers, whether it's around optimising receivable days in terms of our processes, you know, around cash collection. And I say the biggest area is inventory. Whether it's around optimising our demand planning, our supply chain planning processes, our supply footprint, or whether it's around the number of SKUs and formulations that we have.
Don Allan: Yes, I think I think from working capital I think we've made really good progress in trend. So we improved working capital by 13 days.
Don Allan: A portion of that is driven by reduction in inventory.
Don Allan: I think you know I think the opportunity on working cap and so there's still a large opportunity whether it's around payment terms with suppliers, whether it's around optimizing receivable days in terms of off price versus you know around cash collection.
Don Allan: I'd say the biggest area is inventory, whether it's around optimizing our demand planning our supply chain finding price. It says our supply footprint, whether it's around the number of Skus and formulations that we have I think that's actually.
Dawn: I think there's actually a big opportunity across the piece. And that's something, you know, that, like we did in 24, we will continue we will continue to focus on to unlock that opportunity.
Don Allan: A big opportunity across the piece and not something you know that like we did in 'twenty. Four we will continue we will continue to focus on the opportunity.
Unknown Executive: Thank you. Another reminder, if you'd like to ask a question, please press star followed by 1 on your telephone keypad.
Don Allan: Okay.
Speaker Change: Another reminder, if you'd like to ask a question. Please press star followed by one thank you Brad and I have a question from Tom Sykes from Deutsche Bank.
Tom Sykes: We now have a question from Tom Sykes from Deutsche Bank. Please go ahead. Yeah, morning. Thank you. A couple of questions.
Speaker Change: Please go ahead.
Speaker Change: Yes morning, <unk> couple of questions. One just firstly as you've taken over full ownership increased and shifted the China JV.
Tom Sykes: One, just firstly, as you've taken over full ownership or increased ownership of the China JV, is there anything in terms of accounting or oversight or so that you would pick out as something different to when you had a lower level of ownership at all? And are any of the reval, inventory revals, can you say anything geographically? Is any of that in China, please?
Speaker Change: Is there anything in terms of accounting already besides tool so that you would pick ounces.
Speaker Change: Something different to when you had a lower level of ownership.
Speaker Change: The tool.
Speaker Change: And really it's a LIFO inventory rebalancing can be sensing geographically is any of that in China. Please.
Tom Sykes: And then just on M&A and perhaps the innovation cycle that you have, you're obviously doing very well in oral and you're doing well in product, which is more a want rather than a need. And so therefore, when you think about your M&A, is it going to be focused on innovation? Is it focused on sort of health, if you like, or is it focused more on more regular consumer purchases, such as oral, maybe VMS, functional nutrition, etc? Okay, thanks for the question. Maybe a couple things. Coming on the China JV, you had a question related to China JV, I think on inventory revaluation, if there's any impact there, and then I'll just comment on, and I'll ask Don to comment on that, and then I'll come back and ask you a question.
Speaker Change: And then just on M&A and perhaps the innovation cycle that you have.
Speaker Change: Youre, obviously doing very well and in overall and you're doing well and product which is more.
Speaker Change: Rather than a need.
Speaker Change: And so therefore, when you think about your M&A.
Speaker Change: Is it going to be focused and innovation is it focused.
Speaker Change: On sort of house, if you like or is it focused more on more regular purchase more regular consumer purchases such as overall might be vms.
Speaker Change: One question on nutrition et cetera.
Speaker Change: Okay. Thanks for the question, maybe a couple of things let me.
Speaker Change: On the China JV you had a question related to China, JV I think on inventory revaluation, if there's any impact there and then I'll just comment on that.
Don Allan: I'll ask Don to comment on that and then I'll come back.
Don Allan: A question first of all on the China JV. So we've been just for perspective, the China JV was up 40% of our business in China, which was the OTC business. The other 60% of the business we write.
Brian McNamara: First of all, on the China JV, so we've been, just for perspective, the China JV was on 40% of our business in China, which was the OTC. The other 60% of the business we ran. We own completely, I should say, but we ran 100%. The opportunity for us in owning that business, obviously, EPS agreed to, as you've seen, financially made a lot of sense for us. But also having 100% control of the business allows us to drive a much more efficient and effective organization. Because of the JV structure, for instance, we had two sales forces that were frankly calling on the same customers.
Don Allan: We own completely I should say, but we ran 100% of that business the opportunity for us and owning that business, obviously EPS accretive <unk> seen financially made a lot of sense for us, but also having 100% control of the business allows us to drive a much more efficient and effective organization because of the JV structure for instance.
Don Allan: We had two sales forces that were frankly, calling on the same customers we needed to keep that separate because it's separate accounting and things like that so there is efficiencies that we can really.
Dawn: We needed to keep that separate because it's separate accounting and things like that. So there's efficiencies that we can really, we can drive in the business. And as you know, during these past few years, and I continue to be optimistic about China and the opportunity we have with China and our portfolio. Maybe just start with the Don. I think, Tom, you were asking about inventory revaluation and that had a specific impact on China. Yeah, I think maybe just a couple of things to say, obviously what I talked about in terms of historic impact of inflation, remember the biggest impact of inflation was in Europe.
Don Allan: We can drive in the business and as you know during <unk>.
Speaker Change: These past few years and I continue to be optimistic about China, and the opportunity avid China in RF portfolio got it.
Speaker Change: Maybe just start with the Dawn I think Tom you were asking about inventory revaluation and that had a specific impact on the China or not.
Speaker Change: I think maybe just a couple of things to that.
Speaker Change: Obviously, what I talked about in terms of historic impacts of inflation remember the biggest impacts of inflation was in Europe.
Dawn: So when I think about the inventory valuation piece, I think about that benefit more weighted to Europe, because that's obviously where the biggest inflation was, clearly from a The other thing probably just to build on Brian's point from a China perspective and accounting, to Brian's point, we've been running this business. So I think in terms of knowledge of the business, you know, the control environment. We've got a really strong team there, we've got a strong internal audit team, so I think you know those would be the factors I'd highlight. Yeah, great thoughts Tom.
Speaker Change: So when I think about the inventory valuation piece I'd think about that benefit more weighted to Europe, because that's obviously one of the biggest inflation loss clearly from a China perspective.
Speaker Change: No it's not that much the other thing probably just to build on Brian's point from a China perspective, and accounting to Bryan's point, we've been running we've been running this business. So I think in terms of knowledge of the business you know the control environment.
Speaker Change: And we've got really strong team that we've got strong internal audit team. So I think that is would be the factors I'd highlight yes.
Speaker Change: Great.
Brian McNamara: Back on the M&A question, just Tom, a chance for me to just talk about, I don't want to use oral health because you used that example as a why not a need, I mean what we see is because these products are delivering real benefits, so we talk about clinical white and we're getting dental recommendations. It really is incredible that we've seen in consumers really leaning into these innovations and new categories and that's why they've been so successful. Listen, I probably won't comment specifically on anything we're looking at in M&A, but obviously all time is something we said we're interested in, you know we'll evaluate things as they come, if they strategically strengthen the business and they financially make sense, we would obviously move forward, but we'll share more if there's ever a moment where there's something imminent to talk about.
Speaker Change: Back on the.
Speaker Change: M&A question, just kind of a chance for me to just talk about <unk>.
Speaker Change: Oral health because you use that example, as well I'm not a need I mean, what we see is because these products are delivering real benefits. So when you think about quick clinical white and we're getting dental recommendations. It really is incredible that we've seen and consumers really leaning into these innovations and new categories and Thats why.
Speaker Change: There has been so successful listen I, probably won't comment specifically on any anything we're looking at an M&A, but obviously bolt on is something we said we're interested in.
Speaker Change: We'll evaluate things as they come as they strategically strengthened the business.
Speaker Change: And then financially it makes sense, we would obviously move forward, but we'll share more as if there is any if there is ever a moment, where there is something imminent to talk about.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Is there any are there.
Unknown Executive: Is there any additional questions? Sorry. We currently have no further questions.
Speaker Change: Okay.
Speaker Change: Sorry.
Speaker Change: We currently have no further questions.
Speaker Change: So okay.
Unknown Executive: So I will hand back to the team. Okay, great.
Speaker Change: To the team.
Speaker Change: Okay, great listen thanks, so much for joining us look forward to catching up on uncork upcoming Roadshows and meetings and please feel free to reach out to our team with any questions and thanks for your continued interest and support in <unk>.
Unknown Executive: Listen, thanks so much for joining us. Look forward to catching up on upcoming road shows and meetings, and please feel free to reach out to our team with any questions, and thanks for your continued interest and support, and Haleon. Have a good day.
Speaker Change: Have a good day.
Speaker Change: Got it.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.