HLN

Good morning. Welcome to today's Haleon's Q1 trading update. My name is Sarah, and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for question and answers at the end. If you'd like to ask a question, press star one on your telephone keypad. I'd like to pass the conference over to our host, Joanne Russell, Head of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to Haleon's conference call for our Q1 trading statement. I'm Joanne Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer, and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussion today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. Today we'll focus on organic revenue performance. There's a full reconciliation of organic revenue in the appendix of the company's slide presentation. Following Brian and Dawn's remarks, we will take your questions.

For those listening to our webcast who would like to ask a question, you can find the details on page three of today's press release. With that, I'll hand over to Brian.

Thanks, Jo, welcome to our Q1 2026 results call. We've navigated a challenging market in the Q1 where consumer confidence continued to weaken and delivered 2.2% organic revenue growth. The continued weakness in cold and flu that we highlighted at full year impacted group organic growth by 130 basis points. Once again, oral health performed strongly with innovation-led premiumization and geographic expansion, driving continued success in Sensodyne and parodontax. In VMS, Centrum saw an improved performance underpinned by innovation. We continue to make progress against our strategic priorities. Our productivity initiatives continue to drive strong gross margin improvement, consistent with our strategy to build more competitive consumer-focused supply chains. In March, we announced GBP 65 million investment in a new oral health facility in Shanghai. That's due to open in early 2028.

On culture, we are moving forward on the operating model changes we set out in January, which are designed to drive growth and agility. Coming back to growth, Dawn will take you through the numbers, first I'd like to look at North America, which is a good example of how our growth initiatives are progressing well. Over the past quarters, we've been very deliberate in strengthening both our marketing effectiveness and our in-market execution. While we have reorganized the team to follow our category-led approach, we have also created a cross-category platform team to capture opportunities that sit across the portfolio. A good example of this is GLP-1. We're taking a holistic view of consumer needs. This is not a single category opportunity. It spans VMS, digestive health, pain relief, and oral health, and we're aligning our brands to play across that full consumer journey.

In parallel, we are accelerating innovation and sharpening how we segment our brands to address consumer needs. The recent launch of Centrum Age Defy is a good example, allowing us to reach a younger consumer with a more tailored proposition. Alongside innovations such as Excedrin Rapid Relief, bringing faster-acting solutions to the market in a category where speed of relief matters. Taken together, these actions are starting to translate into performance. In Q1, North America returned to growth, up 1% overall. Let's look at our emerging markets, where we delivered organic revenue growth of 4.3%. That was largely due to weak cold and flu season in Central and Eastern Europe and Asia Pacific. Latin America, and particularly Brazil, also continued to be impacted by challenging consumer backdrop and performance challenges with higher promotional activity.

We've put in place a number of programs to support growth in Latin America, which we expect to positively impact performance from Q2 onwards. Examples include the launch of accessibility offerings across Sensodyne and Denture Care, along with activations we are planning around the FIFA World Cup for Eno. Despite the near-term headwinds, we remain confident in our emerging markets. We have strong brands. Our innovation pipeline, along with the actions we're taking to strengthen distribution, will allow us to reach more consumers. Turning now to the outlook. As we talked in February, outside of respiratory, we are not assuming a material improvement in global category growth. Despite the macroeconomic and consumer backdrop becoming more uncertain in recent weeks, we are maintaining our outlook for the year. Much will depend on the duration of the current conflict and any potential impact on the wider economies of our key markets.

We expect organic revenue growth to be between 3% and 5% for the full year. We will deliver improving growth momentum through the improved performance in North America that I've talked about, increased investment in our eCom channel in China, particularly Douyin, and an improvement in Latin America from some of the actions I outlined earlier. On profitability, our plans are on track, and we remain confident in strong gross margin expansion. That improvement we'll support by ongoing productivity initiatives, delivering high single-digit operating growth while allowing for continued healthy investment in the business. I'll now hand over to Dawn to take you through the numbers in more detail.

Thank you, Brian. Good morning, everyone. As expected, it has been a challenging start to the year. Category softness has continued, where consumer confidence remains under pressure, with our results also impacted by weak cold and flu season. From a consumer perspective, penetration levels across our categories continue to be resilient, but consumers are becoming more value-orientated and seeking more convenience. Against this backdrop, we delivered 2.2% organic revenue growth in the quarter, 2.4% from price and a decline of 0.2% in volume mix. Looking at the results in more detail, starting with our global categories. Oral health continued its strong momentum, delivering 8.3% growth, 2x ahead of the market. Key highlights were: in the U.S., growth was driven by the innovation rollout of Sensodyne Clinical Repair, along with parodontax Gum Strengthen & Protect.

This resulted in double-digit consumption growth, with Haleon growing four times the market. In India, our INR 20 Sensodyne pack performed well, with 70% of units being purchased by new consumers to the brand. Overall, our growth was balanced across price and volume mix. For VMS, we saw an improving trend at 1.7% organic revenue growth. This was largely driven by Centrum, and in particular, North America grew mid-single digit. This was due to the launch of Centrum Nutrient Replenish, targeting GLP-1 users, alongside continued strength in Centrum Silver, helped by the activation of biological aging claims. In Asia Pacific, the upgraded daily kits in China also performed well. On Caltrate, whilst consumption remained healthy, organic revenue growth was impacted by a tough comparative in the prior year.

In OTC, we saw a mixed performance, with strength on brands such as Panadol, Benefiber, and Tums offset by weak cold and flu season, as well as declines across Smoker's Health and Nexium. Within the pain category, revenue was broadly flat. Key highlights were Panadol maintaining strong momentum, driven by our new campaign, "That's One for Panadol," and an improving trend in Voltaren, driven by the rollout of our 2% formulation in India and Saudi Arabia following the success in China. Continued share gains in Advil in the U.S., driven by the no pain, more gain activation against a weak category. Within respiratory, organic revenue declined 3.4%. Around 60% of our portfolio is positioned against the cold and flu category, which was down in Central Eastern Europe and showed double-digit decline in North America and Asia-Pac.

In addition, Smoker's Health continued to be a drag, declining double-digit in the quarter. These factors more than offset strong performances from improved in-store execution and expert endorsement in Flonase, as well as continued strong performance and expansion on Otrivin nasal mist. For Digestive Health, strong innovation and activations on Benefiber and Tums was offset by weakness in Nexium and Eno to deliver 0.4% organic revenue decline. Finally, Therapeutic Skin Health and other grew 3% with continued strength in Bactroban, partly offset by a decline in Fenistil. Turning now to the regions. As Brian mentioned, North America returned to growth of 1%, 3.7% from price and 2.7% decline in volume mix.

In the quarter, we saw double-digit growth in oral health, alongside an improved performance on Centrum and continued strong performance across Tums, Benefiber, and Flonase, offset by double-digit decline in cold and flu. Moving forward, we are confident that growth in North America will accelerate as we move through the year. This will be underpinned by shelf resets, strong activations, including the partnership with U.S. Soccer for the 2026 FIFA World Cup, as well as further innovation. In EMEIA and LATAM, we delivered 2.1% organic revenue growth with 2.6% from price and 0.5% decline in volume mix. We saw a very different picture across the three operating units. In Europe, we continue to see resilient performance with modest revenue growth underpinned by outperformance in pharmacy and mass market channels.

This is against a backdrop of weaker consumption and lower consumer confidence. Strength in oral health, along with good growth in Panadol and an improving trend in Voltaren, was partly offset by weak cold and flu season in Central and Eastern Europe. In Middle East and Africa, we delivered high single-digit revenue growth with a good balance across price and volume mix, driven by innovation launches, including Panadol Dual Action and Voltaren 2%. Whilst performance in the quarter was not impacted by the Middle East conflict, we are monitoring the situation closely. In Latin America, revenue was slightly up. The macro picture has been more challenging, and we have seen performance issues in Brazil. In Asia Pacific, we delivered 4% growth with a higher-than-expected significant impact from the weak cold and flu season.

In China, we continue to outperform and grew mid-single digit with double-digit growth in the eCom channel, which now makes up around 40% of our revenues. Our innovation agenda also continued to deliver with our upgraded Centrum daily kits with benefits for metabolism, liver, and cardio performing well. We expect growth in China to accelerate as we build out further capabilities in Douyin through tripling the number of content pieces on the platform and doubling the number of key opinion leaders across VMS. In India, we grew double digit with excellent in-market execution, particularly for Sensodyne Pronamel. As a result, Sensodyne grew at five times the rate of the category with significant market share gains. In fact, Sensodyne has now reached double-digit market share in India.

Turning now to the remainder of the year, our guidance remains unchanged at 3%-5% organic revenue growth and high single-digit operating profit. We are watching carefully the potential impact from the conflict in the Middle East. Whilst we didn't see any significant impact in the quarter, we are mindful of potential changes in future consumer spending patterns and are monitoring costs in our supply chain closely. In summary, for Q1, oral health continued to outperform. North America returned to growth, and we saw continued resilience of our portfolio against a backdrop of softer consumer markets. Our productivity agenda continues to make excellent progress. This provides us with the flexibility and agility to continue to invest and navigate the macro uncertainty. With that, I'll hand back to the operator for the Q&A.

Thank you. Our first question is from Guillaume Delmas with UBS. Please go ahead.

Thank you very much. Good morning, Brian, Dawn, and Joanne. Two questions from me, please. First one, Brian, on your 2026 guidance, because you had a relatively soft start to the year, I think largely expected, maybe LatAm, China a little bit weaker than you anticipated. More importantly, there is now far more macro uncertainty versus a couple of months ago. My question here is, iterated the 2026 outlook, but have some of the key moving parts changed? You know, do you see now clear additional sources of downside or maybe conversely upside, particularly when it comes to savings?

Any color on how you look at the guidance now versus at the time of the full-year results, what maybe you're baking in at this stage for the Middle East, and I guess what underpins your confidence in meeting your guidance? My second question is on North America. I mean, it does seem category growth, even when we adjust for the weak cold and flu, not only is not improving, it seems category growth is getting worse, particularly in the OTC in the region. Can you maybe talk about the reasons for this for this kind of unusually negative category growth? Do you see any structural reasons for that, or is it just a bit cyclical and you would expect a pick-up?

Very lastly, in the meantime, how do you ensure you keep outperforming category growth and that the gap between you and category growth keeps on widening? Thank you very much.

Thanks, Guillaume. Let me start with full-year guidance. Taking a step back, as you said, Q1.

Slightly lower than expected, but not material, honestly. Broadly in line. Little more downside in cold and flu in Asia Pac, specifically China. From that perspective, nothing's changed since we guided. As you mentioned, what has changed is the uncertain macro environment, given the war. Hard to predict what's gonna happen, and we're monitoring it closely. To be clear, there was no impact in Q1. Dawn mentioned that. Middle East, by the way, just for perspective, is about 5% of our overall business. We do remain confident in the 3%-5% guidance and in, you know, accelerating growth through the balance of the year. That confidence comes from, first, North America. You know, benefiting from the shelf resets, which are happening at our largest customers.

They're happening as we speak, they're going into place now and into early May. Our partnership with the U.S. Soccer and the activation that's going to happen across category initiatives on things like GLP-1. Frankly, just overall improved execution behind a very strong and new team in North America. You know, secondly, we mentioned Latin America and Brazil. I mean, we did see a tough macroeconomic environment in Brazil. Our results were much softer there than they were in Q4. Now, we've made a leadership change in Brazil. We've also made a structure change where that now sits on my executive team, reporting directly to me. I was actually in Brazil three weeks ago with Andrés, our new leader there. He's got fantastic, by the way, Latin American consumer experience.

I'm really confident in the plans we've already put in place, the actions we've taken to see improvement in Q2 and an acceleration in the back half. Then obviously we're lapping softer comps in the back half in respiratory, and after two years of decline, we'd expect to see some growth off of that lower base. You mentioned it, Guillaume, I think on the profit side, productivity continues to progress ahead of our expectations, honestly. The strength of the gross margin improvement gives us the flexibility we need to invest in growth, which underpins the confidence of being able to deliver the guidance on the top line despite a very difficult macro environment, also the confidence in delivering the high single-digit operating profit growth with those uncertainties.

I mentioned a little bit, your second question was really on North America. You know, again, was in North America a couple weeks ago also. Really, really happy with the progress we've made there. The changes in distribution and shelving across oral health and pain relief and VMS are gonna have a real impact on the business, so I'm confident we can continue to outperform and perform in the market. Cold and flu was down pretty significantly in Q1 in North America. It has a little bit of a halo effect on some other categories, pain relief and immunity and VMS and things like that. Overall, again, I don't think that's a structural thing. I think it's a cyclical thing, and that we would expect that to kind of bounce back.

Where I am very confident is obviously in our ability to outperform and outperform more in the U.S. as we look at the balance of the year.

Thank you very much.

Thank you. Our next question is from Warren Ackerman from Barclays.

Morning, Brian, Dawn, Joe. It's, Warren here at Barclays. Two from me as well. Can you maybe, sort of drill in a little bit more on what you're seeing in Asia? I mean, you mentioned China, you expect acceleration with the Douyin, rollout. I guess cough, cold, flu was quite weak in China. Maybe if you can maybe outline what the underlying picture is in China and then what you kind of see on the go forward. Similar thing on India. Southeast Asia, are you seeing any kind of sort of weakness in some of the smaller sort of Southeast Asian markets given, the Middle East, conflict? Yeah, just any color on what you're seeing in those three big, buckets of Asia. Secondly, just back on cough, cold, flu.

I don't know whether, Dawn, you're able to just break it out for us in terms of what the impact was specifically in the U.S., in EMEA, LatAm and in Asia Pac, just so that we can sort of see what the underlying numbers are. Thank you.

Great. Thanks, Warren. Let me take the first one, and then I'll pass it to Dawn on cold and flu and impact in the U.S. First of all, in China, mid-single-digit growth in China. We have a brand in China called Contac, which is quite a big cold and flu brand, and we did not see a season at all, so that was a drag. We have a good business on Douyin in China, but we see a bigger opportunity there. You know, that business for us, by the way, grew 100% in Q1. Remember, we have over a billion-pound business in China.

The other thing about Douyin is it is in a channel where you can do OTC products based on regulatory, so it's really focused on our non-OTC portfolio, and we're quite confident in the acceleration that we're seeing and the capabilities we're building there. We feel good about China. India continues to be our star in, you know, seeing double-digit growth and frankly, oral health in China is doing incredibly well. The low-income consumer strategy we have there, the launch of Pronamel is driving very, very strong double-digit consumption growth. On Southeast Asian markets, I mean, we're monitoring it closely. We haven't seen a big impact to date.

It hasn't impacted Q1, but we're monitoring it closely because obviously we're seeing others in other categories seeing an impact in Southeast Asia. Overall, we're, you know, it seems to be fairly stable and continuing as is. Dawn, do you wanna talk?

Yeah.

... cough and flu?

Yeah. Thanks, Warren. Look, in terms of cough, cold, and flu, 130 basis points in the quarter. The way I think about that, I mean, you know, if you think about the majority of that is volume. If I compare it to Q4, where we had 150 basis points impact, so kind of broadly similar overall, but actually the spread, the split across the three regions is quite different. A much bigger impact in terms of North America and Asia-Pac, both of those down double digit. As I said, the way to think about that is from a volume perspective. North America, if you think about volume down overall 2.7%, actually most of that, cough, cold, and flu, and I think the same in Asia-Pac.

The reason why Asia-Pac, you know, is at 4%, as I said, big drag from cough, cold, and flu. I think in EMEA, LATAM, whilst we saw an impact in Central Europe, we didn't see really a large impact from cough, cold, and flu in LATAM. The other two things to talk about, if you look at overall respiratory, remember in respiratory, we have three parts. We have cough, cold, and flu, we have allergy in terms of Otrivin and Flonase, which were both very strong in the quarter, and we also obviously in the U.S. have smokers health. I think when you think about respiratory, you need to break it down into the three parts.

The last thing I would say, I mean, look, over the last two years, we've seen two weak seasons on cough, cold, and flu, particularly in North, you know, particularly overall in North America. If I think, you know, cough, cold, and flu volumes are down over that time, mid to high single-digit, it's not unheard of to have two weak seasons, but it is, you know, it is quite rare. All, you know, everything else being equal, if we look forward, you know, we are expecting to see improvement in cough, cold, and flu, you know, in terms of volume growth, particularly in the back half of the year.

Super. Thank you.

Thank you. Our next question is from Olivier Nicolai, from Goldman Sachs. You may ask your question.

Hi, good morning, Brian, Dawn, and Joe. Two questions, please. First of all, Q1, you saw double-digit decline in smoker health. Nexium also continued to decline. What is the strategy to get these brands back to growth? Would you also consider some portfolio adjustments, which would probably help you to reach your 4-6 midterm targets more easily without those drags? Secondly, just more for follow-up on previous comment from you, Brian, if you look at the Q1 growth, it was 3.5% once you adjust for the cold and flu impact of 130 basis points. Do you expect an acceleration from that level? Could you remind us where this acceleration will come from in terms of regions and categories in the coming quarters? Thank you.

Great. Let me take the first question, Olivier, and then I'll pass it to Dawn for the second question. Listen, no question, smoking category has been a challenge. As we said, it was down double digits in Q1. Overall, the category is down mid to high single digits, so actually there's a category issue there, but there also, as I said in the past, there's a share challenge with private label. Remember, these products are in the $30-$40 range, and with the U.S. consumer being under pressure. That said, we are very focused on stabilizing this business, and we're taking actions, increasing promotions to close price gaps to private label, incremental A&P investment. We're putting all those things in place. There are some green shoots.

To be clear, we're seeing very good growth on in Walmart and Amazon on the gum variant. We're doubling down in those areas to make sure that we can drive more success where we're having success. Obviously, it's a priority for us to stabilize as we move forward, and we have plans in place to do that. Your question on portfolio adjustment, of course, if there's an opportunity for us to strengthen the portfolio by bringing in higher growth assets and potentially divesting assets which aren't as core or strategic, we're absolutely open to that, and we're actively looking at opportunities there. Why don't I pass it over to Dawn?

Yeah. Thanks for the question. I mean, if, you know, when I, when I think about the building blocks for the year, you know, I would expect sequential improvement in growth as we move through the year. You will have seen we've held our guidance full year between 3%-5% organic revenue growth. The way I see the moving parts, obviously Brian's talked about North America. It's great that North America is back in growth, 1% growth. We feel really confident in terms of, you know, continued improvement in that growth rate, whether it's from shelf resets, strong activation, and the rollout of innovation. We have put more investment in North America as well. If I look at Asia-Pac, Brian also talked about, you know, China in particular. India continued double-digit growth.

I talked on the call about the strength in oral health, you know, and excellent execution, we expect that to continue, and mid-single digit growth on China. We're also increasing investment, a very strong performance on e-commerce and further investment going in Douyin. Also even if I look at markets like Australia, very strong activation in terms of our Panadol campaign. That's One for Panadol. I think Asia-Pac, you know, obviously Q1 impacted by cough, cold, and flu, I think the underlying performance and the key drivers remain intact in terms of, you know, strong performance moving forward. If I look at Europe, Middle East, Africa, and Latin America, let me break it down into the three parts because Europe actually it's a challenging backdrop in terms of category and consumer.

Within that, our performance remains resilient, actually, particularly given our strength in pharmacy channel, and I would expect that to continue. If I look at LATAM, a soft, you know, softer macro backdrop, stronger promotions in Q1. So I would expect that to improve as we move through the year. Brian talked about, you know, Andre, you know, new leadership in there. We feel good about that improvement. In terms of Middle East and Africa, actually, you know, a big shout-out to our commercial and supply teams, you know, that we did not see an impact in Q1. Actually, Q1 at high single-digit growth in Middle East and Africa is very strong. I would say in Q2, we have started to see an impact, particularly in terms of consumption, and we are watching that closely.

You know, Middle East probably is the area that remains uncertain. I think the other thing to talk about in that, whilst we haven't seen an impact in Southeast Asia, obviously it is an area that we are also monitoring closely, particularly given higher fuel prices, work from home, et cetera. As I said, you know, holding guidance, 3%-5% growth, organic revenue growth for the year, and sequential improvement in growth as we move through the year, you know, based on the moving, you know, the different moving parts that I've talked about.

Thank you very much, Victoria.

Thank you. Our next question is from Sarah Simon with Morgan Stanley. Please go ahead.

Yes, thanks. Most of my questions have been answered, but just one. Can you give us the weighting of cold and flu revenue through the quarters? That'd be helpful. Thank you.

Yeah, I could take that very quickly. It's roughly a third in Q1, about 15% in Q2, and then about split almost evenly Q3, Q4, about 30% each. Rough numbers.

Great. Thank you.

Thank you. Our next question is from Celine Pannuti with JPMorgan. Please go ahead.

Thank you very much. Good morning. My question on North America. Clearly a pleasing start, 1% growth. Pricing was very strong. Is that kind of level to be sustained or was there maybe less promo because of the weak cold and flu, and what kind of pricing are we expecting for the year? I mean, Q2 is your easiest comparative in North America. Are we expecting a strong bounce back, given what you said on the shelf reset? Are you still comfortable with the 2%, for North America for the year, or you think, maybe it could be higher? I don't know. Pricing, to me seems to be, quite a tailwind then. If you could comment on that.

My second one is on Europe, which clearly seems to have a bit more challenges in terms of the different moving parts that you mentioned, including the Middle East. You flagged that for Q2. Does that, obviously we can't predict what could happen maybe, you know, on the second half. You know, like, how comfortable are you that Europe is picking up in the second half of the year? I presume maybe just to finalize on the point you mentioned on outlook, you said sequential acceleration. Are we expecting Q2 to be within the 3%-5%? Thank you.

Okay, thank you, Celine. I'll take the second one on Europe, and I think you're probably talking Europe, Middle East, Africa, Latin America, in that context, it sounded like. I'll pass it to Dawn for the North America question and maybe the guidance phasing guidance question. Overall, in Middle East, it's 5% of our business. It's not a massive piece of our business. It's 5%. We are seeing consumption softness in a few countries there, no question. We don't know how long the conflict is gonna last or what the ultimate impact is gonna be on that side of it.

As we said earlier, as we're looking at all the input costs and the potential impact of a longer, a oil price perspective, obviously we feel very good about the productivity programs we have in place. Again, they're exceeding our expectations, and gross margin continues to show really strong progress. We feel like we have a lot of flexibility to deal with that. Frankly, we're better positioned than most just because we have high gross margins and lower exposure to those input costs. I think that's the Middle East piece. On Europe, I think Dawn mentioned it earlier too, which is, you know, we're a pharmacy-driven market there, so we're seeing probably less of the impact that maybe others have seen in a, in a more mass market driven.

Our toothpaste business is primarily mass market, but I have to say it continues to perform extremely well in Europe behind all the innovation and everything we've been driving there. Dawn, do you wanna address the North America one?

I think in North America, look, as we move through the year, we'd expect to see a more balanced price volume mix split. I think in Q1, I talked about the drag on volume from cough, cold, and flu. You know, obviously that will, you know, come out as we move through the year. I think from a pricing perspective, I mean, the price at 3.7%, that includes some carryover, particularly in Canada, I wouldn't expect that level of pricing moving forward to the future quarters. As I said, I think for North America, more balanced price volume mix. We've always talked in North America about the two main factors. One is our speed of improvement in terms of execution, and the other one is in terms of the category.

I think what, you know, I think from an execution point of view on what we're seeing in the Q1, actually we're seeing real positive momentum, and we're really pleased actually with the progress in North America. Obviously, you know, as what's also come up on the call is the category. The category remains still challenging, but actually our performance versus the category is improving in North America. When I look at the kind of phasing in terms of quarters, obviously we're not gonna guide to specific quarters. As I said, we expect, you know, sequential improvement in growth as we move through the year.

Thank you.

Thank you. Our next question is from Nicholas Turon with Bank of America. Please go ahead.

Hi, Brian. Hi, Dawn. Dawn, coming back on your comment on the cold and flu season. If we have a normal cold and flu season this year, what kind of growth rate you would expect in H2? That some sort of mid-single digit or double digit? The second question on LatAm, if I may. You expect an acceleration in Q2. Do you think you'll have some selling benefit in that, or is that all consumer driven? Thank you.

Yeah. I think, look, on cough, cold, and flu, I mean, I've already talked about this. You know, if you look, you know, over the last two years where we've had two weak seasons, cough, cold, and flu volumes have been down mid, you know, to high single digit. We would expect, therefore, to see volume growth in the back half of the year. I think in, you know, I think in terms of LatAm, it is a challenging macro environment, but we feel really good about the activations that we've got in place, both in terms of oral health and in terms of Eno. We are expecting, you know, improvement in the LatAm performance as we move through the year.

No, no selling benefit in LatAm? All consumer driven?

Yeah. All consumer driven.

Okay. Thank you very much.

Thank you. Our next question is from David Hayes with Jefferies. Please go ahead.

Thank you. Good morning, all. I'm going to be cheeky and do a follow-on, then two questions if I can. Just on the follow-up on the Middle East, you talked about some indications in the last few weeks of impact. Some companies have called out sort of 50% down in March. We're just trying to get a sense of, is it that kind of quantum that is the risk, or is it much less pronounced than that in terms of what you've seen at the moment? My two questions are just on the sort of price led growth versus the volume performance still coming through.

Is there a need, do you think, to review the price points across all markets, particularly maybe LatAm, to your points early on the competitiveness, and to apply some more competitiveness in pricing into the second half, maybe take SAD down and reinvest even more of the ongoing cost saving that you're achieving? And then the second one on input cost outlook for the second half. Some of your peers have sort of said if.

If oil, et cetera, stay as they are, they kinda give it a bit of indication or additional headwind. Is there anything you can give us on that in terms of the dynamics for the second half on cost? Thanks.

Thanks, David. Let me address a couple of things and pass it to Dawn, and you can talk the input costs and the headwind and stuff. First of all, Middle East Africa, we are seeing consumption down, like double-digit, but like, below teens, so to give you a range. We're not seeing 50% for sure, but we're seeing softness in the business, and that's why we wanted to call that out. Listen, on pricing and price gaps, we are focused on driving growth. If there are opportunities exist for us to tweak pricing, to tweak price gaps, we're gonna do that, and we're gonna make that happen.

Just a bit of a case study, I was in Brazil a few weeks back, and we have adjusted some of our price gaps for some key competitors and markets where maybe they got a little out of whack, and we saw almost an instantaneous kind of volume growth. We're on top of that. I don't see major pricing reset or anything like that, but where there's opportunities to tweak and make sure we're doing it. Because the gross margin savings improvement is so strong, we have the flexibility to do what we need to do to get the business where we want it from a growth perspective. Dawn, do you wanna talk.

Yeah.

I think, look, in terms of input costs, I mean, we are really well-placed because we've got a strong supply chain productivity program that is progressing really well. In terms of our exposure, so if you think about our cost base that's exposed to crude, it's about 3% of our revenue. If I look across total commodities, you know, including gums, vitamins, that's around 10%. We have fixed price contracts and hedging in most areas until the end of the year. What we have seen in the Q1, we've started to see the impact. We started to see surcharges on freight, quite small, but I would expect that to increase in the Q2 and also in the second half of the year.

As I said, I think, you know, we're really well-placed in terms of the strength of our productivity program, and that's why we've maintained our guidance full year for high single digit operating profit growth.

Thank you.

Thank you. There are no questions waiting at this time. I'll turn the conference back over to Brian McNamara for any further remarks.

Thanks, everyone. I appreciate you all, joining us today. Look forward to catching up with all of you in upcoming meetings and roadshows. Please feel free, as you always do, to reach out to the IR team if you have any further questions. Thanks for the continued interest and support in Haleon. Have a good day.

Thank you. That concludes Haleon's Q1 trading update. Thank you for your participation. You may now disconnect your line.

Good morning. Thank you for attending today's Haleon's Fiscal Year 2025 Results question-and-answer. My name is Sarah, and I'll be your moderator today. [Operator Instructions] I would like to pass the conference over to our host, Jo Russell. Please go ahead.

Good morning, everyone, and welcome to Haleon's Full Year 2025 Results Q&A Conference Call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. So hopefully, you've all had a chance to see that ahead of this call. And with that, let's open the call for Q&A, and I'll hand back to the operator.

[Operator Instructions] Our first question is from Guillaume Delmas with UBS.

So one question. So my one question is on your organic sales growth guidance of 3% to 5% for 2026. I mean it does seem to signal some sequential acceleration relative to the 3% you posted last year. So wondering what will be the main drivers behind this sequential improvement? I mean, is it predicated on category growth accelerating and/or your level of outperformance gaining further momentum? And then related to this, Brian, you reiterated your medium-term ambition of 4% to 6%. I guess what underpins your confidence in the 4% to 6% when you may be delivering an organic sales growth below the bottom end of that range for now 2 consecutive years?

Thanks, Guillaume. I appreciate the question. So maybe let me take the 3% to 5% guidance, and I'll go to medium-term view. So if you take a step back and let's look at 2025, we grew 3%. That clearly was below what we were expecting when we were at Q3 based on the cold and flu season. But the U.S. was down about 0.5%. APAC and EMEA, LatAm grew mid-single digits. Now we did experience a market slowdown. A vast majority of that was obviously what we've talked about in the U.S. market and then the cold and flu category, which I mentioned. Now remember, 70% of our cold and flu business is also outside the U.S. So in that context, we did deliver competitive performance. We outgrew the market overall and 60% of the business gained and maintained share. Looking at 2026, we're not planning on material improvement in the market. Consumers are likely to stay cautious. We're absolutely focused on driving category growth. I'm confident we will continue and improve on our competitiveness. And that's through investment in A&P, strong innovation plan, sharper commercial execution behind our new operating model. And listen, the U.S. will return to growth in 2026. And that's based on the progress we've had to date. We ended the year where we expected to with inventories at the right place. And that's -- part of that is we did have softer cold and flu, but we had stronger Oral Health business, which helped offset that. And we also have plans in place that we know is going to help us improve through the year. So for instance, in Q2, we have a lot of key customers doing shelving resets. We're gaining distribution. We're gaining shelf placement. On the profit side, the productivity program continues to deliver. You saw the 220 basis points of gross margin improvement. We feel great about that. That, combined with the efficiencies coming from the operating model, will allow us to deliver high single-digit operating growth at constant currency and still invest in growth, still invest in A&P, R&D and some key capabilities that we're continuing to build on. So now if we step back and think the medium-term guidance. I mean you said it, the guidance doesn't necessarily mean we're going to be outside the range. But obviously, part of the guidance is outside our medium-term range. I think it's an acknowledgment of the uncertain market we're dealing with. Based on what we know today, we'd expect to be in the middle of that range, based on what we know today. You also asked about the phasing. What we do know today is that Q1 cold and flu season is going to be below a year ago. We're now almost 2 months into the quarter. And the results, we saw a spike towards the end of the year, and then we saw it come down after that. So we're going to be below a year ago, and that's not only in the U.S., it's outside the U.S. My confidence, listen, these are still attractive categories. I still believe there's huge potential. Everything we've talked about in the past, closing the instant treatment gap, success of our premiumization continuing, the low-income consumer opportunity, which we're still only at the beginning at. And as we progress through 2026, I expect to see stronger performance in North America, as I said and continued strength in emerging markets. We feel good about China, and I expect an acceleration in India. Actually, India for us is performing extremely well. And then as we continue to drive that productivity agenda, again, we will be able to continue to invest in the business, which again underpins my confidence in getting back to that 4% to 6% growth.

Our next question is from Warren Ackerman from Barclays.

It's Warren Ackerman here at Barclays. Outside of the numbers, Brian, could you talk about the new reorganization? You've got a new Chief Growth Officer, Chief Transformation Officer, new reporting structure, new hires in the U.S. other than Natalie I've seen. Can you maybe sort of walk us through how that's going to be a growth unlock and how you'll drive more volume growth in the U.S., more innovation? Anything you can say on sort of shelf resets and how the things are shaping up in the U.S. in what is clearly a tougher operating environment?

Thanks, Warren. And I think you captured it. This is first and foremost about unlocking growth and agility. And I think about the journey we've been on as a company, we're now 3.5 years in as a company. The strategy we laid out is very clear. And there was still an opportunity for us to streamline and simplify the way we work and drive strategy to execution. So as you said, we created this Chief Growth Officer role that combines our category structure, our marketing effectiveness and capabilities, our business insights and analytics strategy and a new commercial excellence function. And then 6 operating units replacing our 3 regions. As you're aware, Latin America, India and Middle East, Africa will now have a seat around the leadership team table. So I think a couple of things. It's one on the commercial execution function that we've created. Centrally, we're driving AI-driven tools behind net revenue management, next best action. We're going to be able to drive this quicker and faster through the organization. This structure of CGO, the 6 operating units, is going to allow us to really, really much quicker drive our category strategies through to execution, better leverage scale, better be able to move resources around, react to, what I would say, as you said, a very uncertain environment. And then as a result of it, we're taking a layer out of the organization. So we're talking about a flatter, leaner organization, and that leads to the $175 million to $200 million in gross savings we talked about, which gives us incredible flexibility, frankly, to invest in those growth opportunities and to invest in innovation and drive the capabilities. Now your question on the U.S. -- specifically on the U.S., yes, well, first of all, overall in the team, we did, as part of those changes, bring new members of the team. We got a fantastic leader in India, a fantastic leader in Latin America that came from outside the company who know these markets extremely well. Our Middle East, Africa leader is now sitting on the leadership team, and she's an incredible talent. In the U.S., as part of all this, Natalie made a number of changes in our category heads or category general managers. So we have one of our top talents now on the OTC business. We brought external talent in Oral Health and in the Wellness category, which is a combination of VMS and Digestive Health. I mentioned it a bit earlier, Warren, but we know that in Q2, we will see across a number of key customers, some wins on distribution and shelving across Oral Health, VMS and Pain Relief, and that's locked. That's going to happen in Q2, and we feel good about that commercial execution. We also feel good about the innovation. The one thing I will say, it's broadly across the business, specifically in the U.S., Oral Health is doing incredibly well. And it really did better in Q4 than we expected, which again helped us offset, land the U.S. where we wanted to despite the tough cold and flu season.

Our next question is from David Hayes with Jefferies.

So just on emerging markets, there was a sequential slowdown in the fourth quarter. So just trying to dig a little bit deeper into whether the emerging is performing as you would expect it to be, like it to be at the moment. And then which areas specifically maybe are not doing as well? And I guess in that context, Oral Care continues to be amazing and impressive, obviously, still in this difficult consumer environment. So is there something different about Oral Care and the dynamics there versus some of the other categories ex Respiratory because of the cold and flu? But it feels like Oral Care could ride the consumer dynamic whereas the other brands can't. Is there something you point to that says that this is what's going to change as the consumer maybe picks up in the other areas?

Yes. Thanks, David. So listen, I will take the Oral Care question linking to other categories, and I'll pass it to Dawn to talk about what we're seeing more broadly in emerging markets. So first of all, we do feel really good, as you pointed about around Oral Care. And as we've been talking about now for a while, the clinical range in Sensodyne has really resonated well with consumers. And it's beyond clinical white, it's clinical repair, it's clinical enamel strength. Beyond that, we're seeing great progress in places like India with low-income consumer on Oral Health. And Parodontax is an amazing brand in gum health. We don't talk about it as much as Sensodyne. It's obviously not as big, but it's growing in the strong double digit in the mid-teens. We launched in China this past year. It's still quite early in our ramp-up for distribution, but we couldn't be happier with the progress that we're seeing there. So we feel great about Oral Health. And the Oral Health model is very, very clear. It's linked to the dental recommendation. It's linked to the innovation. And obviously, we compete on the therapeutic side of the business. Listen, in the other categories, quite -- listen, when we talk about the impact of cold and flu, to be clear, we talk about our cold and flu portfolio specifically, which are brands like Theraflu and Robitussin and Otrivin, which sit in that category. There is also impacts across other areas like Pain Relief and some VMS and things like that tend not to be as much but there does tend to be a little bit of that impact that happens, too. Fundamentally, I believe these are real strong categories that as we move forward, we can move ahead. I think we're just radically differentiated versus the competition in Oral Health in a way that's very, very unique. We're talking about now over 10 years of kind of high single-digit to double-digit growth in Sensodyne, and we continue to see that continuing to hum. And we're seeing good competitiveness in the other categories, but we're continuing to focus on innovation, things like our 12-hour patch launch on Voltaren in a number of European countries. Otrivin Nasal Mist continues to do well. We're growing aggressive share there. Our OptiSorb technology on Panadol, we're rolling out to another [indiscernible] market. So we feel like we have a good innovation plan that should underpin our -- certainly our medium-term guidance. Dawn?

Yes. Good morning, David. Hi, everyone. So let me talk a bit about emerging markets because we feel really excited about our emerging markets business. If I look at Asia Pac, first of all, I mean, we continue to deliver strong performance in Asia Pac. We expected an acceleration in half 2 versus half 1, and that has come through. And when I look at the growth drivers in Asia Pac, 80% of our growth is coming from volume mix. And that is a factor of us driving penetration and expanding reach across lower-income consumer groups. If I look within Asia Pac, let me talk about India. I mean, an incredible performance in India, double-digit growth in the year, an acceleration in quarter 4 on the back of the macro changes around GST, but also on the fact of our activations. If I look at our INR 20 pack and Sensodyne is performing incredibly well. We continue to expand our reach across rural areas, across villages based on our investment in terms of bringing our sales force in-house. And actually, I was out in India the first week of this year, and it was great to be on the ground with the team, visiting stores and really seeing our brands come to life. So that was India. If I look at China, we're also really excited about China, mid-single-digit growth in the year. And just some pockets to talk about. If I look at our e-com business, it's around 40% of our business in China. And Douyin, we're growing more than 100%. And our online to offline business is also growing double digits. So actually, we feel really good about China. If I move on then to EMEA, LatAm. EMEA, LatAm, actually, we've seen a good performance, particularly across LatAm and EMEA, Middle East and Africa as well as Central Europe. But it is fair to say that whilst we've seen a good performance, particularly in LatAm and specifically Brazil, we are seeing a much more challenging macro backdrop, both in terms of the consumer behavior, but also in terms of retailer behavior as well. So we did see a slowdown in LatAm, particularly in quarter 4. And if I talk about kind of Middle East, Africa continues to perform well. Central Europe also has seen a good performance. But again, based on the soft cough, cold and flu season in quarter 4, we saw a slowdown in Central Europe because of that. But overall, as I said, we're really excited about emerging markets. It's a huge growth opportunity for us. When I look at our A&P investment, half of our increase in A&P investment in the year actually went to emerging markets, and you can see that coming through in the performance.

Our next question is from Celine Pannuti with JPMorgan.

My question comes back on the overall guidance and how you manage top line performance versus margin improvement. Clearly, strong delivery in margin and your cost savings initiative augurs well for the years to come. At the same time, your top line has disappointed. And if I look at the past 3 years, volume has been 1%, which is quite low compared to the overall European staples, best-in-class are trying to achieve at least 2% and above. So in order to grow 4% to 6%, what kind of volume level do you think you need to have? And how do you -- like the discrepancy between margin progression and volume performance, does it mean that you may need to reinvest more or maybe look at your price positioning in order to grow volume faster?

No, thanks for the question, Celine. So let me kick that off, and then I'll pass it to Dawn to give a bit more perspective. I think if you take a step back, I do think we're investing in the right places on the business. If you look at our A&P investment in the last year, we were over 7% ahead of a year ago, and R&D was over 7% ahead of a year ago. That is the absolute benefit of the gross margin improvement and the improvements we've seen in our supply chain and structure, giving us 220 basis points of operating -- of gross margin improvement, which is allowing us to invest in the business. We continue to focus on where is the best of that investment. By the way, a lot of that incremental investment this year went against Oral Health, and you see the results that have come out. And we understand that in a lower cold and flu season, also while we can gain share, we're going to have a very difficult time driving volume overall. But maybe, Dawn, you can talk a little bit about how we see the algorithm going forward and where we see the role of volume growth, which we're very focused on volume growth. So Dawn?

Yes. Thanks for the question, Celine. And you're right, and Brian mentioned it, we are very focused on driving volume growth in 2026 and moving forward. We've always said that the right price volume mix split for this business is around 60-40, 40-60. I already talked about Asia Pac in terms of 80% of that growth is coming from volume on Asia Pac, and we feel really good about that. When I look at EMEA, LatAm, if I take out the two shoulders of the year, so if I take out Q1 and Q4 for 2025, where we had a soft cough, cold and flu season, actually, in Q2 and Q3, we did see a more balanced price volume mix profile. And that obviously should give us confidence moving forward that we can deliver that. And then if I look at North America, look, it's been a really challenging market in North America in 2025. But as Brian has talked about, we have put in place the key actions to drive volume growth in 2026, whether it's about us no longer doing destocking, whether it's about reducing the drag from smokers health, the distribution builds that we expect to get from shelf resets as well as the strong activations. These are all important drivers in terms of driving the volume growth. So whilst for '26, I'm not going to guide to specific volumes, I would expect us to be improving the split of price volume mix in '26.

Our next question is from Olivier Nicolai with Goldman Sachs.

I got one question first. Could you go back to the change you have implemented in the U.S. over the last 12 months and specifically also the incentive structure you put in place for the new management there? And just following up on the press release on Page 5 regarding the overall equipment effectiveness. It has improved by 7 points in 2025. It's a bit lower than what you expected at H1. Should we assume a stronger improvement in '26 compared to '25 on these metrics?

Yes. So thanks for the question. Let me talk a bit about the U.S. As you know, we announced a new leader in the U.S. in May. As we looked at our operating model structure broadly, we worked very closely as an executive team to define that. I talked a little bit earlier when Warren asked the question about that and we worked that very closely with the U.S. So one of the things we've done is we've created [indiscernible] category General Manager role, which obviously report directly up to our President of the U.S. and also are connected to our global category heads, which is going to help us really drive kind of this strategy to execution even faster. We're making a number of changes around net revenue management and the tools that we're providing. We've made a number of changes in our sales force and our sales leadership and structure. And all of that was really pretty much done on January 8 when we announced the broader stuff in the U.S., you obviously move much faster on those kind of changes. So I feel really good about those changes and how they're going to drive growth. And as I said, we've seen progress to date. There's no question about it. We ended up again where we expected to. Inventories are kind of where we expected to. Oral Health has been extremely strong. Advil grew share in Q4. So that was a really important element. We're seeing -- we see these opportunities on the distribution and stuff that I talked about in Q2. So I feel like we're in a very good place to really drive those changes in the U.S.

Yes. And I think, look, in terms of the productivity program, Brian talked about it, we're really pleased with our supply chain productivity program. It was even better than we expected. I mean, 220 basis points improvement in gross margin is incredible in the year, and it is a collective effort across the whole organization. And that's important because it helps to drive flexibility and agility in the P&L to be able to invest for growth. And if you remember, we talked about 3 drivers of how are we going to deliver that gross margin improvement and productivity benefit. The first one we talked about was immediate accelerators. So this was reducing complexity in our supply chain, whether it's around number of languages on pack, harmonizing packaging, formulations. And let me give you an example. So in Europe, in 2025, on our Aquafresh brand, we had 44 single language packs. And we've now reduced to 18 multi-language packs in the year. And that is a huge optimization piece in terms of supply chain. The second area that you referenced in your question was around operational efficiency. And this is all about debottlenecking upfront, process improvements, equipment optimization. And let me give you an example of that. In our Levice factory in Europe, we reduced formulations by 30%. So if you think about the impact of that, that reduces change over time, but it also increases the capacity, the available capacity on that line, which is really important. So I think, as I said, it's an incredible effort that is helping us to continue to invest in the business to drive growth. Moving forward, I wouldn't expect to see, it would be great if we had that level of improvement each year. But moving forward, 50 to 80 basis points is what we've built into our guidance. That will be a strong performance on supply chain productivity.

Our next question is from Jeremy Fialko with HSBC.

So the one for me is more on the U.S. market more generally. So the first element is just the pharma channel within the U.S. Do you see that continuing to be under pressure in 2026? Or do you think with some of the ownership changes there, there's the possibility that the channel could become a little bit better in some of the broader drops there, which have, I guess, led to pressure on inventories and overall sell-through could abate? And then maybe if you look at the U.S. more broadly, is it just a case of waiting for the consumer to get a bit better before the market growth can improve? Or are there some other elements that you think are kind of specific to the market getting a bit better, let's say, putting aside any cold and flu impacts?

Thanks, Jeremy. Thanks for the question. Let me take that. I think as you talk pharmacy channel, really, what we've talked about is the 2 big retailers in the U.S., which is Walgreens and CVS. What I can say is we see the channel shift that we've seen for many years, which is drug channel and obviously, e-com. E-com growing quite aggressively and that's walmart.com or that's amazon.com, that will continue. The dynamic we saw in 2025 was lower inventory levels in those retailers as they were dealing with their own challenges. We believe we're where we need to be, and now we're just managing normal channel shift as we can. And by the way, that channel shift is not a bad thing for us. If we look at our Amazon shares, 18 brands on Amazon account for 90% of our business on Amazon and 16 of those 18 brands have higher share online than offline. So as that channel shift moves, it's something we can take advantage of. We have good capabilities there. So we feel good about that channel shift. Yet to be seen what happens under new ownership at Walgreens, if that's a positive or not a positive. But again, I don't feel like this is a situation that if gets worse, we baked it in. We proactively managed our inventory levels to try to be at a place where we felt good about so we can stop talking about it as we move forward. In the overall market, you said ex seasonality, so I will take that out because there's certainly a seasonality impact that we're kind of seeing. Listen, what we see in the dynamic is we see club channel doing a bit better, dollar channel doing a bit better as consumers are looking for more value. Some consumers looking for lower price points, some consumers looking for -- different consumer want value, higher price point, lower price per use. We're very focused on those 2 channels and increasing our offering to make sure that we're meeting the affordability issues of consumers in the U.S. And we believe we can also play a role, and we do play a role certainly in Oral Health in driving that category growth. So we're not sitting back and waiting for the categories to change. We're just acknowledging that we -- there are some things we can't control. We're focused on competitiveness, growing market share. We feel confident in that, and we're focused on driving that category growth where we can.

Our next question is coming from Sarah Simon with Morgan Stanley.

Just one question from me. How important is it in terms of securing shelf space and sort of with your retailer negotiations to have that cold and flu business? Because I think in your bit to become a sort of steady compounder with predictable top line, this is obviously the kind of bit that's causing the biggest issue. So I'm just wondering how much do you need to own that business?

Okay. Sarah, thanks for the question. Let me take that. Listen, I think cold and flu plays an incredibly enormous role in consumer health and for consumers. And if you look over the history, I've been involved in the -- in consumer health now for over 20 years. So I've seen quite a few cold and flu seasons. This year, we're seeing kind of two seasons in a row that are down because if you remember last year, we were down. We know that Q1 is also going to be down. It doesn't happen that often, but it has happened in the past. We've experienced that in the past. I believe if you look over time, you're going to see growth in this category going forward. It's a bit exasperated this year because we are dealing with multiple headwinds in the U.S. environment, which this has compounded on. But I think it's a very important category. We feel good about our positions in the category and our portfolio. I think it's going to -- it plays a very important role for our customers, too, as you were saying, this is category management around pain and cold and flu. And frankly, cold and flu and pain have some common brands, Panadol Cold and Flu, Advil Cold and Flu. So we think it's an important part of the portfolio as we move forward.

Our next question is come from Karel Zoete with Kepler.

I'd like to go a bit deeper into 2 categories. The first one is the Digestive Health business. Historically, a good business for you, not so seasonal, but we've seen a slowdown in '25. What should we anticipate for '26? Why should things get better? And then coming back to pain, I know there's a bit of cold and flu impact in there. But if you zoom out, 2024, '25 have not been great years for pain despite of some of your strongest franchises such as Panadol in Asia are there. So what is needed for the pain franchise to start performing more in line with the anticipated growth rates?

Okay. Thanks very much, Karel. I appreciate the questions. So let me start with Digestive Health. If you think about our Digestive Health business, just to get us grounded, it is -- over 80% of that business is focused in 3 countries: U.S., India and Brazil. In India and Brazil, it's ENO, which is a fantastic brand and does very well in both cases and is part of our strategy and our growth strategy, certainly in both those countries and certainly in India. So now you get to the U.S. where we have Tums, we have Nexium, brands like Gasx and XLax, Benefiber, which is a fantastic brand. We have seen a drag on Nexium in the U.S. There's no question that is one brand in one category, and we're not alone in this that has been impacted by private label. If I zoom out and look at the U.S. overall, we've gained share versus private label. But Nexium has been a bit of a challenge there. One of the opportunities we see in Digestive Health, and we feel really good about and we're now working is supporting consumers on GLP-1s because there's multiple side effects on GLP-1s that brands like Tums and brands like Benefiber address. There's also side effects like dry mouth, which we have a mouthwash brand. We don't talk about much in the U.S., Biotene, which is actually quite effective in dry mouth. And there's nutritional supplementation, and we've actually created the Centrum variant that's specifically focused to GLP-1 consumers. So we see an opportunity across our categories to drive that. Tums is a tremendously performing brand and so is Benefiber. We have dealt with a little bit of a drag from the Nexium side of the business. Listen, on Pain Relief, it's a great portfolio. I mean, Voltaren is #1 topical analgesic in the world. By the way, we talk about -- a lot about the topical. We also have a very strong patch business. I mentioned earlier, we're launching 24-hour patch in a number of markets around the world, and we're seeing quite a successful pickup of that. Panadol has done quite well in Asia. We don't have quite the same strength of a systemic pain relief business through Europe, and we're addressing that. We're launching there. And the big thing is on Advil. Like I said, we're growing Advil share in Q4. We're really confident that now with the new structure, with the new focus, our ability to invest and everything else that will get Advil back to a more consistent performer. That's going to be important for us. So that's one of the things we need to make sure that we drive and deliver on the business. But overall, listen, we've always said the OTC categories in general would be 2% to 3% growth categories, and we could outgrow that. They've seen a little bit of headwinds here and in the U.S. as all categories have been a bit muted, again, not super declines, but a bit muted. So we're addressing that, but we feel very good about that franchise and the global nature of that franchise.

Our next question is from Edward Lewis with Rothschild & Co Redburn.

Brian, just returning to the medium-term guidance. Should we think that getting back to that range is all about the U.S.? Or do you think you can deliver against that with a structurally slower U.S. market but greater contribution from the rest of the world, given the confidence you're obviously expressing about India and China?

Yes. So listen, as I think about the medium-term guidance, I do expect that the U.S. will perform better. There's two things. We've outperformed the market, to be clear, in 2025. But do I feel like the performance is -- we're hitting it on all cylinders? We have not. We can do better. Just outperforming the market isn't enough, and I am confident we can do better. So we do expect an improvement in that U.S. environment. And I believe over the next couple of years, we'll get that U.S. environment, if not too close to the bottom end of our algorithm growth. Outside of that, we also expect that, again, over time, emerging markets will continue to be a strong contributor and the low-income consumer strategy we have, which is taking hold in certain places, and we're learning a lot, to be very clear. And that takes a bit of time to kind of build up to be significant, and we see those opportunities. So overall, I do feel the medium term of 4% to 6% that nothing has fundamentally changed versus what we have said and what we've said in the past about our strategy and our opportunities. What you're hearing from us this year is 3% to 5% because the market is still quite uncertain, and we want to make sure we're providing the proper context for everyone on where we see things are at. And again, where we sit now, knowing Q1 is going to be softer due to cold and flu, middle of the range is kind of where we're at on that, and we'll update as the year goes on.

Our next question is from Tom Sykes with Deutsche Bank.

One quick follow-up and one on A&P, please. Are you able to quantify the shelf space stocking benefit that you'll get in either Q1 or Q2 in North America, please? And then just on the A&P spend, I mean, there can't be many consumer companies that have increased A&P by almost 8% to 20% of sales and still running at negative volumes. So where is the A&P ineffective? And where is it effective? And does it make much of a difference in your non-oral care businesses at the moment? And can you talk about whether you're allocating more of that A&P increase to oral care or to non-oral care, please?

Thanks, Tom. Thanks for the question. Let me take the U.S. stocking, and I'll pass it to Dawn on the A&P question. Listen, we're not going to guide to specific improvements on the shelving increases. But let's just say it's part of the thing that gives us the confidence as we progress through the year that we'll see stronger results because it's real. Consumers will see more of our brands. We will have a bigger shelf space and in a number of cases, we'll be at a better visibility point in some key resellers. Dawn, do you want to talk about A&P?

Yes. Look, thanks for the question. And I think it also builds on one of the comments that Celine talked about in terms of the margin profile as well. So let me say a few words about that. I think, look, it's often easy for companies to cut A&P when the market is more challenging. We have not done that, and we haven't done that because we're really focused on ensuring the long-term sustainable growth for this business. So we -- you're right, we've increased A&P 7.5%. We've increased R&D 7.7% in the year. And we invest in our brands at a healthy and the right level to drive that sustainable growth. So if I kind of give a bit more color behind that. So what -- where has that increase in A&P, where has it gone? We've already talked about it. Half of that increase went to Oral Health. You've seen the growth momentum on that this year in terms of high single digit and acceleration in Q4 and the ROI on that Oral Health is incredibly strong. The other half, I referenced it earlier, went to emerging markets. So India, D-com in China, and that's really important. And the third area actually is around experts. So expert is a critical part of our business model in terms of the work that we're doing around the Haleon Health portal, where registrations have increased 27% in the year and on our field force engagement, which has also increased 16% in the year. So that's where the spend has gone. The other thing that we are particularly focused on as well as ensuring it's the right level is also around the return, the efficiency and the effectiveness. So in the year, we've improved our working, nonworking split, so 12% growth in working media. We've also increased our overall ROI mid-single digit, and we've increased the coverage, the global coverage to around 3/4 of our business. The other thing that we're focused on is also the mix. So 60% of our working media is allocated to digital. And that's an important balance for us as we think about the shift in the broader economy. So I would say, overall, look, it's an important focus area for us. We invest at a healthy level, 20.5%. I feel really good about that. And we also continue to focus on improving the efficiency and effectiveness of our spend as well as ensuring that we are shifting and having the right mix around digital versus legacy.

Okay. Super. Thanks, Dawn. Listen, I think we are going to close the call now. So thanks, everyone. I appreciate you joining us today. Look forward to catching up with all of you in upcoming meetings and roadshows. And please feel free to reach out to the IR team if you have any further questions. Really appreciate your continued interest and support in Haleon. Thanks, everybody.

Thank you. That concludes Haleon Fiscal Year 2025 Results Q&A. Thank you for your participation. You may now disconnect your lines.

Good morning. Thank you for attending today's Haleon 2025 Quarter 3 Trading Statement. My name is Sarah, and I'll be your moderator today. [Operator Instructions] I would like to pass the conference over to our host, Jo Russell, Head of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Haleon's conference call for our third quarter trading statement. I'm Jo Russell, Head of Investor Relations. And with me today is Dawn Allen, our CFO. Just to remind listeners on the call that in discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. Following Dawn's remarks, we will take your questions. For those listening to our webcast who would like to ask a question, you can find the dial-in details on Page 3 of today's press release. And with that, I'll hand over to Dawn.

Thank you, Jo, and good morning, everyone. We made good progress in the third quarter, driven by strong in-market execution and the continued rollout of our innovation pipeline, leaving us on track for our full year guidance. We delivered 3.4% organic revenue growth in the quarter with a good balance between price at 1.8% and volume mix of 1.6%. Looking across the regions, we saw consistent growth and sequential volume improvement across EMEA and LatAm and Asia Pacific, with emerging markets in both these regions up 7% led by India and strong growth in a number of smaller markets, including Thailand and Malaysia. In North America, despite the challenging consumer backdrop on consumption, we have outperformed the market each quarter this year, with particular strength in Oral Health, Respiratory and Digestive Health. Oral Health was once again the standout performer as Sensodyne continues to drive penetration with strong growth in a number of key markets, including the U.S., India and China. In India, we are continuing to make good progress by expanding our reach through expert coverage, which is up 70% since the start of the year. And we are bringing new innovations, including Sensodyne Pronamel to market. Our Sensodyne offering for lower-income consumers is now in over 500,000 outlets across 10,000 villages. From a strategic perspective, we are making great progress against our objectives as outlined at our Capital Markets Day. From a growth perspective, we continue to focus on driving category growth through innovation-led premiumization with a number of new market launches in Q3, closing the incidence treatment gap, an example is Otrivin Nasal Mist, which is seeing an over 80% repurchase intent amongst users and expanding reach to lower-income consumers with household penetration gains in India and Brazil. We also continue to deliver against our value creation framework. Our supply chain productivity agenda continues to move at pace. We have made significant progress across service, cost and inventory. And since the beginning of 2024, we have reduced the number of our SKUs by 19%, and we have improved overall equipment effectiveness by double digit. This improves both gross margin and results in better working capital and improved cash conversion. On A&P, we continue to invest at healthy levels as well as making progress on effectiveness and efficiency, where we are focused on improving both contribution to revenue and ROI. We are also continue to be disciplined in our cost base and are on track to deliver the remainder of our GBP 300 million target savings this year. All of this provides us with flexibility and agility in our P&L, enabling healthy investment in our brands and further strengthening our innovation pipeline to drive future growth. And finally, we are delivering on our capital allocation principles, having completed in the quarter the GBP 500 million we allocated to share buybacks for 2025. Now let's look at the quarter in more detail. Organic revenue growth was 3.4%, balanced between 1.8% from price and 1.6% from volume mix. Volume mix saw sequential improvement in the third quarter in EMEA and LatAm and Asia Pacific. Reported revenue grew 0.7% in the third quarter, impacted by the drag from divestments of 2.3% and 0.4% from foreign exchange. It's worth bearing in mind that this is the final quarter with a drag on reported revenue growth from announced divestments. Now let's look at the growth drivers, starting with our performance across the categories. Oral Health continued to deliver strong growth, up 6.9% in Q3. Growth was underpinned by innovation-led premiumization and geographic expansion. The key drivers of this were penetration growth in more than 80% of our major brand market combinations, high single-digit growth on Sensodyne, more than 2/3 of which came from volume and innovations, including the Sensodyne Clinical Platform and Pronamel Kids, and continued double-digit growth on parodontax, driven by innovation and our continued successful rollout in China. With exciting plans for continued innovations across our Oral Health business, the runway for future growth is strong. VMS grew 4.9% in Q3 with double-digit growth in Centrum. Key highlights were premium innovations, including Centrum Daily Kits in China and Korea, strength in Philippines from increased distribution of lower-income consumer packs and expanding distribution of local brands such as Caltrate in Latin America. In Pain Relief, we grew 3.7% for Q3. Panadol was up high single digit, underpinned by outperformance in U.K. and Southern Europe. Improved consumption in Voltaren, supported by innovations, including Voltamed, our new natural herbal product. Growth in these brands was partly offset by Advil. Whilst consumption continues to improve following the activation of new campaigns, performance was impacted by short-term supply constraint on Liqui-gels, which has now been resolved. Respiratory Health declined 1.8%, lapping elevated COVID cases in Q3 last year. The impact of declines in Smokers' Health moderated in Q3 compared to Q2. Otrivin continues to perform really well with Nasal Mist bringing new consumers into the spray category in markets, including Sweden, Poland and the U.K. Ahead of the start of the cold and flu season, we saw the sell-in of cold and flu products in Q3 at relatively normal levels. And Digestive Health grew 2.1%, including growth in Tums, thanks to innovations, including Tums Gummy Bites+, a strong performance in Benefiber from our Grow What Feels Good campaign and an improved performance from ENO in India. This performance overall was partly offset by a decline in Nexium. And finally, Therapeutic, Skin Health and Other declined 1.1% with strength in Bactroban in China, offset by a decline in Fenistil from a weak mosquito season in Europe. Turning now to the regions, starting with North America. In North America, we delivered organic revenue growth of 0.4%, driven by 0.7% price with volume/mix down 0.3%. In the quarter, we continued to drive market share with our consumption outperformance widening as we progress through the year. Organic revenue growth was driven by continued strength in Oral Health, driven by innovation, including Pronamel Clinical Enamel strength and successful activations, including Gum Expert on parodontax, a better VMS performance with Centrum growth and a strong performance from Benefiber and Tums. All of this was partly offset by Respiratory Health, which declined due to the continued weakness in Smokers' Health and from Pain with growth in Voltaren offset by a decline in Advil that I mentioned earlier. As we shared at half year, we feel there is more growth to be had from our North America business. We are focused on a number of initiatives, which will drive stronger results. These include further strengthening our innovation pipeline, accelerating net revenue management through strategic pricing, price pack architecture and channel mix and reinforcing our relationships with partners through key activations. And collectively, these actions, combined with our focus on ensuring inventory is in an appropriate level by the end of the year, sets us up well to return to growth next year. Turning now to Europe, Middle East, Africa and Latin America. Organic revenue increased 5.3% with sequential improvement in volume mix of 1.8% and price at 3.5%. Growth was driven by innovation-led premiumization across the clinical platform on Sensodyne Pronamel Kids and Otrivin Nasal Mist, a strong performance in VMS with Centrum up double digit, underpinned by a number of new launches, including Centrum Vital+ nutrient. And in Pain Relief, growth came from higher consumption of Voltaren and Panadol from innovation launches like Voltamed that I mentioned earlier. Looking across the region, Europe performed well with particular strength across the pharmacy channel, which makes up the majority of our revenue in the region. Whilst category growth slowed, we continue to outperform given our innovation and excellent in-market execution. Latin America grew double digit, driven by Colombia and Mexico. This was partly offset by weakness in Brazil, given a softer macroeconomic environment impacting category growth. And finally, turning to Asia Pacific. Organic revenue increased 5.1% with strong growth across India and Southeast Asia and sequential improvement in China. Across the region, volume/mix, which was up 4.4% and price was up 0.7%. With a relatively stable consumer market backdrop, we continue to drive category growth and expand our offering to lower-income consumers. India delivered double-digit growth. This was largely driven by strength in Sensodyne as we further increase distribution and drive penetration. We expect continued strong growth in the fourth quarter, driven by our sales force investment and an improving macro environment. Also in the quarter, China saw mid-single-digit growth with continued strength in Oral Health and VMS supported by key innovations, including Caltrate for Kids, Voltaren 2% and Fenbid Gold. Across China, consumers continue to invest in health and wellness, and we are well placed to capture on this trend given our focus on building trusted brands, closing the incident treatment gap and innovation-led premiumization. Our products are available across different channels, including pharmacies, hospitals and digital platforms, ensuring we can effectively serve a wide audience with different shopping habits. Digital has been a particular strength, growing 20% with our online to offline platform growing 25% and representing 1/3 of our e-commerce business. We have now fully integrated the OTC joint venture and are realizing the benefits of a more efficient route to market. We expect growth in China to improve further in the fourth quarter, helped by distribution and increased investment in the faster-growing e-com channel. Turning now to our 2025 guidance. We expect organic revenue growth of around 3.5%, assuming a normal cold and flu season. In North America, we expect growth in the second half to be broadly similar to the first half, with Q4 reflecting further action on inventory at slower-growing channels. We expect this to be completed by the end of the year. In Asia Pacific, we should see an acceleration in Q4, driven by stronger growth in China and India. And in EMEA and LatAm, we continue to expect a good performance driven by Europe with market share gains, offsetting a slightly softening macro picture. And in Latin America, we are closely watching the macro environment given the consumer pressures in the region. Finally, the pace of progress on our supply chain productivity initiatives provide a strong underpin to our expectation of high single-digit organic operating profit growth. So in conclusion, we delivered a good performance in Q3 and remain on track to deliver our full year guidance. We are pleased with the actions we are taking in the U.S., which sets us up to return to growth next year. We're continuing to invest behind our brands to build flexibility and agility in our P&L by unlocking productivity savings. Altogether, this should give us confidence in delivering against our value creation framework and our medium-term guidance. Now let's turn to questions. Operator, please, can you open up the lines?

[Operator Instructions] Our first question comes from Guillaume Delmas from UBS.

2 questions for me, please. The first one on North America. Dawn, I was wondering if you could talk a bit more about your performance in the region in the third quarter, which was clearly better than expected. I mean, what were the main drivers behind this sequential improvement? And were there any one-offs restocking benefits we should be aware of that may have flattered your performance in the region in Q3? And still on North America, looking ahead, so your guidance for the second half to be similar to the first half seems to suggest around minus 1% organic sales growth in Q4. So maybe if you could talk a little bit about the reasons for this anticipated slowdown sequentially? And last question on North America. I know it's early days, but for 2026, what would be your expectations? Because looking at the last 3 years, you've been growing by an average of, let's say, 1.5%. Wondering if your ambition is to materially accelerate next year versus this 1.5% run rate? And then the second question, shorter one, I promise, on Asia Pacific, strong but decelerating sequentially despite India being in double digits. So it would be helpful if you could shed some light on the main moving parts behind this slowdown. You sound confident about a Q4 uptick. Do you think you can maintain this momentum going into 2026?

Thanks, Guillaume. So let me take your 3 questions in turn, and I'll start with North America. So as we said at the half year, we expect half 2 to be broadly similar to half 1, and we're tracking in line with our expectations. As we know, it's a challenging environment in the U.S. We have outperformed the market in terms of consumption every quarter this year with particular strength across Oral Health and Digestive, and that gap has actually widened as we've moved through the year. Obviously, in our results, that's been masked by the inventory movements, the difference between sell-in and sell-out as retailers have managed their inventory and working capital. And if we look at Q3, there's a few moving parts. So of the 220 basis point swing from Q2 to Q3, there's 2 main things to call out. The first one is the drag from Smokers' Health has halved. So in Q2, this was 160 basis points drag. In Q3, it's now 80 basis points drag. And the remainder of the difference comes from better performance in Oral Health and Digestive Health, as I mentioned. If we then look forward to Q4, if we're working on the assumption that we expect half 2 to be broadly similar to half 1, that implies, as you said, around about a 1% decline in Q4. and that reflects tough comparatives from the prior year. Obviously, we're lapping the launch of Eroxon, and we have some further action to do inventory. So I think when we look towards next year, as I said, we expect the region to return to growth. You talked about where it had been historically. We would expect to get back to that level. I think as I referenced in the overview, we feel really good about the actions that we're taking in North America. Obviously, next year, we won't have the drag between sell-in and sellout. We would expect that to be -- we would expect that drag to kind of disappear, but as I said, I think with Natalie, I mean, Natalie is bringing deep consumer expertise and execution. We are focused on net revenue management, got new innovations coming to market. So I think we feel good about return to growth next year. So if I step out of North America and the U.S. and talk about Asia Pac, I'd say, overall, we're really pleased with our performance in Asia Pac. We've got double-digit growth in India. We've got mid-single-digit growth in China. And actually, in those markets, we continue to perform incredibly well. Yes, we are lapping some phasing in the prior year in terms of North Asia, particularly given the price increase phasing that we put through in Japan last year. But actually, given the momentum in that region, given that we expect the macro environment to improve in India in Q4 on the back of GST and on the back of tax changes as well as our activations and expanded distribution, I think we feel really good about that. And I'd say the same in China as well.

And Dawn, just to follow up and to confirm, so no one-offs in the third quarter in your performance in North America?

Yes, I wouldn't say that. I mean I'd say in Q3, that's the quarter where we sell-in ahead of the season. So we're obviously shipping in, in terms of the season. We have a price increase that goes live early November in the U.S. So -- but I guess, quarter 3 is still -- there's still quite a big time lag between those 2 pieces. And if you remember, in terms of tariffs, we always said that they were in the low tens of millions, and we're taking supply chain actions to mitigate that. The other piece, obviously, that we see is the pricing action that we're taking.

Our next question is from Olivier Nicolai from Goldman Sachs.

Just 2 questions, please. First of all, at group level, you had a strong pipeline of innovation across many categories in this year in 2025. Looking at next year, how do you see the strength of the pipeline? And is there any Rx to OTC that we should expect as well for full year '26? And then just going back to your guidance, I know it's early stage, but you did mention that you assume a normal cold and flu season. I know that the U.S. does not provide data at the moment. But perhaps anecdotally, how do you see things for the coming cold and flu season?

Yes. So let me kind of take the innovation pipeline question first, Olivier. So as I said, across actually all of our categories, we've seen real strength in terms of our innovation pipeline. From an Oral Health perspective, the Clinical range on Sensodyne continues to perform really well in terms of bringing new users into the category. We're actually gaining or holding share in more than 80% of our brand market combinations on Sensodyne. And actually, if you think about on Clinical, we've got 5 variants. On average, you've maybe got 2 of those variants in the market. So actually, there's huge, huge runway in terms of Oral Health. I also talked about Nasal Mist in terms of respiratory, in terms of Otrivin Nasal Mist. We are -- that innovation is recruiting new users into the category. I referenced purchase intent is now over 80%, and we've obviously got further rollout behind that. And maybe just to mention another one in VMS. So on Centrum, we have a new claim in terms of slowing cognitive aging that we've just launched as well as Centrum Essentials and Daily Kits. So actually, across all of our -- I could talk about that across all of our categories. We have an incredibly strong innovation pipeline that's actually performing really well, not only for us, but it's also growing the categories where we've launched it as well. I think from -- in terms of switches, we've always said that, that would be on top. We don't need switches in terms of our growth forecast. So I would focus more on the innovations that I've talked about in terms of driving growth. We have 2 that we're progressing, but I mean, it just continued -- it continues to progress. I wouldn't take that into account in terms of our growth at the moment. I think if we look at the second question, your question in terms of cough, cold and flu and our guidance, I mean, it's fair to say we have a great portfolio in cough, cold and flu. It's an attractive and relevant category for consumers. As you know, it's more seasonal. We have shared in the past, you'll see in the appendix, we've shared our normal chart that we show for the U.S. in terms of incidences. What you will see from that chart is obviously no 2 years are the same. It depends on the size of the peak and the timing of the peak. Sometimes it can be in Q4, sometimes it can be in Q1. if you remember, about 1/3 of our business for cough, cold and flu is in North America. We've got about half in EMEA, LatAm. And the thing I would say about that is the variability of when that peak happens and the size of the peak, that's the variability around the -- around 3.5% guidance for the year. So we plan for a normal season, but we obviously stay agile from a supply chain point of view in terms of is it better or worse.

Our next question is from David Hayes from Jefferies.

Just going to follow up on Guillaume's question if I can, in the U.S., just to sort of maybe quantify or get the dynamics a bit more. So just to be clear that you're saying there wasn't really any prebuying into the price increases that you've taken in oral and cough and cold in the quarter. Is that a fair summary? And then just in terms of the channel dynamics, can you talk us through maybe the growth rate comparisons in new channels, if we call them that like Amazon and Walmart versus the pharma channels? And is there an element of as the shift continues to happen, Amazon and Walmart are stocking up more as they're getting more of the market? Or is there no really offset in that sense? And then the second question is just on the supply chain cost savings all running to plan and very extensive. Is there any incidence or evidence that, that affects the service levels, the sales performance at all? Is there an inevitability that as you go through some of those changes there are some hindrances that will dissipate? Or would you say it's a completely separate dynamic?

Yes. David, so I think I obviously talked about the pricing piece coming early November. Let me talk a bit more about some of the other moving parts in terms of inventory and the channel dynamic. So as you know, we work closely with our retail partners on inventory levels. There isn't a one size fits all, and it obviously depends upon consumption. So for example, in the drug channel, our inventory is down double digit compared to this time last year. But obviously, in faster-growing channels like [ decom ], Actually, our inventory levels have increased, as you would expect on the back of more traffic and stronger consumption trends. And just to say there's obviously more work to do in Q4 on inventory, as I referenced. And our objective is to exit the year in a clean place on inventory and obviously grow on the back of that next year. I think from a channel dynamic, I mean, we continue to see really strong growth in the U.S. actually on digital. We're growing kind of double digit on Amazon. And I think we continue to partner really well. In terms of your other question, in terms of supply chain, I mean, as I talked about in the brief, we're actually making progress across service cost and inventory. And the reason that we're doing that, a, we're working closely with our customers, but also we're rolling out new supply chain, new systems and processes in terms of improving our forecast accuracy. And that's also helping us not only to reduce inventory, but also to improve service.

Our next question is from Jeremy Fialko from HSBC.

I know we've had quite a lot on the U.S. But I wanted to ask one more, but more a general question on the consumer because it feels like it's a very bifurcated environment where you've got certain things that are doing well, certain things that are struggling. So perhaps you could sort of break your business down a bit and explain from a consumer standpoint, which -- what stuff is going well, what things are going badly and why that's the case? And then secondly, you could talk a bit more about China. As you say, you're kind of most of the way through this merger of the sales forces from the 2 businesses that you bought together. So perhaps you could just talk about the progress that you've made there and how you think that you can be more effective over the coming quarters as a bigger combined organization?

Yes. Thanks, Jeremy. So let me talk about the U.S. first. So I think from a consumer perspective, I mean, we have seen consumption in the market track down this year. As I said, we are outperforming the market on consumption, and that gap has widened. So in Q3, we're outperforming around 100 basis points versus the market. So I think we're tracking well. I think from a consumer perspective, what's important for us is that we are across all channels, which we are so that we are where consumers are shopping. We have seen types of behaviors that we're seeing. We're seeing consumers buy either larger packs where the unit price is lower. We're also seeing consumers buy lower price point packs, for example, from dollar stores. So we are seeing them adjusting their purchasing behavior across the piece. And as I said, what's important to us is that we are across all channels so that we can cater for that behavior and also that we have a variation around our price pack architecture. In terms of China, I mean, we're really pleased with the joint venture. We have integrated the sales force. That means that we are able to optimize our visits to retailers. It also means that we are expanding our distribution to more tiers in terms of cities in China. And we continue to invest in that space. And I'd say I referenced it in the brief, we are across all channels in China. And we're actually outperforming the market across every channel. So I think there's a real underpin in terms of excellence in execution in that market.

Our next question is from Celine Pannuti from JPMorgan.

So I have 2 questions, but I'm sorry, I just want to clarify something on the U.S. So first of all, thank you for providing clarity on Q4 expectation. But just to put it simple, you basically are guiding at minus 0.5% for the U.S. this year. And I think sellout is somewhere between minus 1% and minus 1.5%. So -- and you're saying that you are -- so like it seems that your sell-in has been better than your sellout, yet you talk about easy stock levels for next year. So I just want to understand this part. And then my 2 questions. First, on Latin America and EMEA. If you can talk about the pricing evolution. We've seen that pricing has been a bit weaker and you were commenting about softness in consumer there. So we've seen sequential pricing deterioration. Should we expect that to continue? And maybe as well, whether that pricing in APAC, you were mentioning lapping Japan would improve or not in the fourth quarter. So that's on pricing. And then my second question is on the outlook for the year. So if I look at what you said for Q4, minus 1% Europe, U.S., EMEA, good and then an acceleration in APAC, I get to a growth rate that's lower in Q4 versus the 9 months. Is that the right level?

Yes. Let me take the -- I'll take the middle question first in terms of pricing. I think what we always see when we see a softer consumption environment, there's always the competitive pressure increases, the promotional activity increases. And as I talked about, we see a shift in terms of consumer behavior, either buying larger packs, cheaper unit price or smaller packs in terms of smaller initial outlay, and that obviously impacts pricing. The other thing I would say is actually in EMEA, LatAm, we have seen sequential volume improvement this year, which I think is good. The other thing to say is whilst we are seeing softness in consumption, actually, in Europe, we're pretty resilient. I'd say we're holding our own and Oral Health is the one category that is seeing -- that is not seeing the same level of softness. And the other thing to say in Europe is given our strength in pharmacy channels, we're also -- we've also got the resilience around that as well. I think when I look at the outlook for the year, I talked about an acceleration in Asia Pac, particularly in India and strong continued growth in China. In Europe, I talked about challenging consumption in some categories, but actually a resilient performance from us in terms of holding up. LatAm, we're obviously looking at -- we're obviously monitoring the macro environment. Whilst we had a good performance in Q3, driven by Colombia and Mexico, that macro environment, we're watching that closely. And obviously, I've talked through the moving parts in North America. And what's important there is that half is broadly similar to half 1. In terms of consumption in the U.S. and sell-in and sell-out, I think what I would say is we said at the beginning of the year, we had roughly 200 basis points difference between sell-in and sell-out. We've seen that gap narrow as we progress through the year. And as I talked, that's been different across different channels depending upon the consumptions in those channels. I think the other thing to say within that, I mean, Oral Health continues to be strong consumption. We continue to see strong growth. And in decom, I talked about our continued strength. I mean, our top 18 brands that, for example, that are on Amazon, 16 of those, we have a higher share online than we do offline. So I think that reflects the strength in that channel. And as I said, Q3, we always have the sell-in of cough, cold and flu. But as we look to Q4, we want to close that final gap in sell-in, sell-out. I probably think about that depending upon consumption is probably broadly another week, I think, to come out. And as I said, what's important for us is that we exit the year clean and that we return to growth in North America next year.

Our next question is from Karel Zoete from Kepler Cheuvreux.

I have a follow-up question with regards to the contribution of innovations in the third quarter and how that might look going forward because you highlighted a lot of things that you're enthusiastic about, part already answered on it. But can you quantify a bit more the contribution during Q3, some of the listing of it? And then how that might develop in the quarters thereafter? And then the second question is on Pain. The Pain franchise looked better, but the U.S. was quite soft. So can you speak about your Pain franchise, what goes well? And how should we look at the U.S?

Yes. Let me take the pain question first. I think, look, we talked about Advil. We launched our No Pain, More Gain campaign in July this year. That has -- we have seen improvement in some of our key metrics. So purchase intent is up. The messaging around relevancy is also up and actually ahead of the benchmark. Yes, we did see some supply issues in the third quarter in terms of Advil Liqui-gels, but that has now been resolved. And I think on Advil, what I would say is, whilst it's early days, we are seeing green shoots in terms of some of the metrics on Advil. And I think that should give us confidence, but it is early days. I think when we look at innovation, I talked about it. We had a number of new market launches in Q3. That's making a good contribution in terms of our growth and market expansion. I talked about some examples earlier in terms of our Clinical range, Otrivin Nasal Mist. If I give some others, I mean, across pain, if I reference pain a bit more, I mean, Voltaren and 2% in China, our natural Voltamed products in Germany, and also on Panadol in terms of whether it's Dual Action or whether it's our Panadol Four Count in Indonesia. So actually, what you see is across every category, innovation plays a really important role in our growth strategy, not only in terms of reaching lower-income consumers, but also in terms of driving premiumization through innovation. And I think that the science and the strength of the product differentiation is also what's setting us apart in terms of driving growth. So this is a really important growth lever. The contribution to growth varies across the categories. but we have significant headroom in terms of continued rollout across all of the pipeline of innovations that we have.

Our next question is from Ms. Misha Omanadze from BNP Paribas.

I have 2, please. So the first one would be on how you view the category in general terms. From the moment that Haleon came to market, you were saying that consumer health is relatively insulated from down-trading pressures. This is a category where brands matter a lot. Has 2025 and particularly the U.S. market, the evolution there changed your view in any sense on this category being not so much affected by down-trading? And I guess a follow-up question on that is that do you -- in the plus 4 to 6 medium-term growth target, has the regional composition of your growth expectation changed compared to 2022? Do you expect less growth to come from North America and more growth to come from the other 2 regions or not?

Thanks, Misha. So I think -- look, I think in terms of consumer health and in terms of our categories, I mean, there's incredible growth opportunity across all of our categories that we talked about at Capital Markets Day, whether it's broadening our reach to lower-income consumers, whether it's driving premiumization through innovation or whether it's closing the incidence treatment gap. So I think we continue to see huge headroom in terms of category growth. Consumers are increasingly more aware in terms of health. They're more focused on health and improving kind of daily lives in terms of health. So I think that continues. I think I would say also compared to other categories, we are a lot more resilient. I mean you see that. And if you think about Oral Health, it's been pretty resilient this year, in particular. Obviously, we're not immune to the macro environment, of course, that will have an impact. But I think what's important is the relative resilience versus other categories that's important. So I think that would be one thing to say. I think in terms of our regional expectations, I mean, we continue to see runway in terms of emerging markets growth, and you see that in our performance. In terms of North America, the size of the North America consumer health market, the consumer trends that underpin it, we do see growth potential in North America. We have said that we think there's more runway to go in terms of what we've seen versus our historic performance, and that is the proactive actions that the team are taking to ensure that we unlock that growth and that it plays an important role in terms of our 4% to 6%. So I think we feel really confident in terms of our medium-term guidance of 4% to 6% growth.

Our next question is from Tom Sykes from Deutsche Bank.

Sorry, I'm going to flog the U.S. horse again. But just in terms of the drag from the drug channel in Q4 versus Q3, are you expecting that drag to be similar? And then in terms of the budgeting for next year on the drug channel, are you saying that your inventories are in the right place for the existing drug channel footprint? Or are your inventories below where they would normally be because you're expecting the drug channel sellout to be worse next year? And then, please, just on China, sorry, I may have missed what the offline, online exposure you have is -- and sorry, whether you gave the sort of old e-com versus sort of the live streaming new e-com split, if it's possible to have that, please? And just are you targeting 11/11 in a different way to last year because that seems to be quite important to the Asia Pac or China pickup, please?

Yes. Let me take the China first. So as I talked about, we are present across all channels in China. E-com represents broadly 1/3 of our business. Within that, in terms of the different parts of that channel, obviously, Douyin, we're growing -- that channel is growing very fast and we are growing incredibly fast on the back of that. Online to offline actually also continues. We have strong presence there. That also continues to drive strongly double-digit growth and the same on e-com. So I think we're across -- we see growth across categories, driven by innovation on parodontax and VMS in terms of decom in China. And I think we're well placed to unlock that growth. And in terms of 11/11, you're right, it is an important event. It's a good growth driver. We are increasing our investment in that -- in the quarter. And that is one of the reasons that underpins our confidence in terms of Q4 growth in China. I think in terms of the U.S., I mean, I talked about it. We're working closely with retailers across every channel in terms of ensuring that we exit the year with the right level of stock so that we can grow next year. Obviously, it's not an exact science because it depends on consumption. But I think what we're demonstrating is that we're working closely. We're being agile to what's happening in terms of the different dynamics. The other thing I would say is this dynamic is not new. We have been dealing with this dynamic for a number of years quite successfully, and we'll continue to work with that dynamic in terms of where we're seeing stronger growth in some channels and where we're seeing less growth in other channels. And as I said, I think what's important for the U.S. is that we expect to see a return to growth next year.

Yes. And sorry, Dawn, just on that, just the drag from drug Q4 versus Q3, is that viewed as being similar in the U.S?

Yes. I think as I referenced earlier, in Q4, we still got more work to do in terms of ensuring that inventory lands in the right place. And I talked about depending upon consumption, the way to think about it is broadly another week to come out in terms of inventory.

Our next question is from Warren Ackerman from Barclays.

It's Warren here at Barclays. So I got kicked out for a little while, so I didn't catch everything that was being said. But can I just clarify a couple of things. On the Oral Care business, the 6.9% in the quarter, that was a bit lower than consensus, Dawn. Is there anything weird going on with Aquafresh and the Denture business outside of Sensodyne that's worth calling out this quarter? That's the first one. And then secondly, are you able to say something about the kind of promo environment that you're seeing in, say, U.S. VMS and maybe in Germany, our data is showing both are ticking up quite substantially. Just wondering whether you've got any comment on that? And then just finally, on the inventory side of things. You said that the -- and again, you might have answered this already. You said that you're outperforming the market in the U.S. by 100 bps. I think you said the 100 bps. But we can see that the U.S. sell-out this quarter is down 1.5%. So if you're outperforming by 100 bps, are you saying that the U.S. market sell-out this quarter is down 2.5%? And if that is the case, are you able to maybe highlight why -- where the market in the U.S. has slowed sequentially? I'm still not 100% clear on that piece.

Yes. So let me talk about Oral Health. I mean, I think you're right, we have seen a softer performance from Aquafresh, from Denture Care. And obviously, we're lapping the phasing pricing from the prior year in Japan. But as I said, I think we feel really positive about Oral Care. We're performing incredibly well. Yes, in markets, as I talked about, where you see increased competition and promo, we're seeing some of that, particularly you referenced VMS. So when consumption is soft, competitive intensity increases and alongside that often promo increases, we are seeing that in VMS in the U.S. In terms of the inventory piece, I mean, yes, you're right. The consumption has continued to drop in North America. So the number that you quoted in Q3, that would be broadly consistent with what we're seeing. And as I said, we are outperforming the market by around about 100 basis points in the quarter. The main drag that's coming from -- I mean, you talked about it. VMS, we're seeing increased promo. That's one of the main reasons why the category is coming down. The other category to talk about would be Respiratory because if you remember, we're lapping a COVID spike last year. So I think between those 2 categories, they're probably the biggest drivers in terms of why would the total market consumption be lower in Q3 or worse in Q3 than Q2. But as I said, in terms of our performance, we continue to outperform in terms of consumption and that outperformance has improved every quarter this year in the U.S.

Okay. Can I just clarify one other thing, Dawn, just quickly. So just sell-in, sell-out thing. So the sell-out, we think or we can see was down 1.5% this quarter on the scanner data, but you printed 0.4% organic growth. So that looks like a 200 bp restock compared to a 200 bps destock in the first half. So sequentially, that's 400 bps. And that includes the pharma destock. So if you actually look at the kind of gross restock, it's probably even higher than 200 bps, maybe 250, 300 bps. And you're saying, I think that a lot of that is not one-off. It's due to the fact that your inventories are naturally going up more in the faster-growing retailers like Amazon. So can you just clarify that, that actually that is the case rather than there's been buying ahead of pricing or any kind of weird kind of really early ordering? I'm just -- I'm still not quite clear on that piece.

Yes. I think there's a couple of things to say. I mean I referenced that different channels were in different spaces. I talked about we reduced inventories in drug channel versus the prior year. And we've also seen an increase in inventory in growing channels like Amazon, which is up double digit in the quarter. The other thing to say, obviously, in Q3, you've got the sell-in of cough, cold and flu. And I think that muddies the water a bit in terms of sell-in and sell-out. And obviously, as that stock sells through as we progress through Q4 and then obviously, depending upon the season, then we'll see the restock. But I think the important message around this is that we are making progress in terms of reducing the gap between sell-in and sellout. We expect to finish the year in a clean position, and we expect North America to return to growth next year.

Our next question is from Edward Lewis from Rothschild & Co Redburn.

Just 2 quick ones for me, I guess. Just looking at volume/mix growth in Asia Pac, I think it was up 4.4% this quarter on the 7.1% growth in the prior year. I guess there would have been some headwind potentially from GST in India. So it'd be interested to hear, Dawn, just sort of the difference there between sort of volume mix breakdowns. And then just on the SKU reduction, I see that's down to 19% now against minus 16%. I think it was in H1. How much impact would that have had in the quarter on volumes, if any at all? And is that -- do we expect more SKU reductions going forward?

Yes. So if I take the volume/mix question first in Asia Pac. I mean, if you look historically, 3/4 of our growth, 2/3 to 3/4 of our growth in Asia Pac is volume led. So I think it's a strong quality growth, and we continue to see that. And that's an important piece in terms of reaching lower-income consumers, broadening distribution. And that is driven by India and China, and we see double-digit volume growth in China. In terms of the SKU piece, you're right, we are making really good progress on this. And that is a key driver in terms of our productivity agenda. What we are doing as part of that exercise, whilst we are reducing the number of SKUs, what we're also thinking about is how do we ensure that for the consumer and for the shopper, a few things. One is that we have the range of our portfolio in terms of the consumers want. The other thing that we're doing is ensure that we're improving the shopability of our displays and our products are easier to find on shelf. So yes, there's an efficiency play with the SKU reduction, which is helping to take cost out, remove complexity in our supply chain, reduce inventory. But there's also a consumer benefit in terms of shopability, improvement on shelf and being really clear in terms of what are the range of our products. So I'd say from a volume perspective, I think we're managing that really well. And as we're taking SKUs out, what we're seeing is increased sellout of kind of our main runners or our top SKUs, which is what you would expect to see. And I think in terms of GST in India, actually, we didn't see a negative impact from that. It's an incredible job that the Indian team have done in terms of managing the execution of this across all of our packs at short notice. It's a reflection of the close partnership that we have with our customers, with our distributors and the team have managed it incredibly well. And as I said, we would expect that -- we would expect the benefit from that in terms of consumer offtake as we move into Q4 and as we move into next year as well.

We have a follow-up question from David Hayes from Jefferies.

I'm going to just flog this North American horse one more time, if I can. Just in terms of the -- just getting into the fourth quarter guidance of minus 1% and some of the context that you said. So broadly speaking -- I know I'm trying to simplify it probably too much. But broadly speaking, is the assumption that consumption will be basically flat year-on-year and then the 1-week reduction in the pharma channel will be, let's say, 100 basis points of headwind, and that's how you get to the minus 1% if you're thinking about the offtake shipment levels. Is that broadly the picture?

I think consumption is quite difficult to call. And I think there's a few moving parts. The first thing is, obviously, we've got a price increase, a modest price increase going live early September. We obviously need to see how the season plays out. We've talked about the variability in the cough, cold and flu season. And what we've said is globally on a full year basis, that could be -- in terms of the variability, either side of a normal season, that could be in the region of 50 to 100 basis points. So I think that that's probably a big swing factor. I think you've got the price increase. We could assume in that number, no change in consumption. But honestly, depending upon what happens with cough, cold and flu, as I talked about, there could be some variability around that. And as I said, I think the important message on North America is that we expect to end the year with clean inventory levels and get North America back to growth next year.

We have a follow-up question from Warren Ackerman from Barclays.

Again, it's Warren here. Just on pricing, are you able to kind of indicate to us, Dawn, roughly when your pricing lands in North America, how much pricing you're taking and how you feel your pricing timing, I guess, relative to peers? And are you building in any kind of elasticity assumptions on the volume elasticity assumptions on that pricing that you're taking? That's just one follow-up. And then second one, you may have mentioned this already on Brazil, did you break down or can you break down what you're seeing in Brazil by category in terms of like the market is obviously slower, but is there any kind of specific kind of category call-outs where you're seeing kind of more local competition or any other kind of sort of change in trend in that country?

Yes. I think in terms of the pricing, so as I said, the pricing goes live. It's effective at the beginning of November. It's across parts of our portfolio. It's kind of -- it varies across SKU, but I'd say kind of low single digits. It's mainly across Oral Health and cough, cold and flu. I think we -- given that the market has moved and others have taken pricing, it's hard to call on elasticity. But I'd say given that the market is moving, then you would expect to see a lower level of elasticity. And as I said, the strength of our brands, so why do consumers buy our brands, they're buying it in terms of the science, the strength of formulation and the differentiation in terms of the delivery of our brands. And obviously, the pricing is related to tariffs. As I said, we're mitigating the tariffs through supply chain initiatives and then there's a small amount of mitigation coming from price. If I think specifically about Brazil, I mean, it's well documented in terms of the macro environment in Brazil, in terms of interest rates and the challenge for consumers. I think in Brazil, we have a strong performance. We're outperforming the market in terms of pain and VMS, but the market is soft. I think the area of weakness is specifically coming from EO, actually, in Brazil. But as I say, I think across LatAm, we have a strong performance in Q3, up double digit. We continue to outperform, but we are watching the macro environment in LatAm because it is changeable. But I think long term, LatAm remains and will remain a key growth driver for us.

There are no questions waiting at this time. So I'll turn the conference back over to Dawn Allen for any further remarks.

Okay. Well, thank you, everyone, for your time and interest in Haleon. We look forward to meeting a number of you at our up-and-coming conferences. Our next formal update will be our full year results in February. If you have any further questions, please contact our Investor Relations team. Thank you.

Thank you.

Good morning, everyone, and welcome to Haleon's Half Year 2025 Results Q&A Conference Call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed in or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. So hopefully, you've all had the chance to see that ahead of this call. And with that, let's open the call for Q&A, and I'll hand back to the operator.

[Operator Instructions] Our first question comes from Guillaume Delmas from UBS.

So two questions for me, please. The first one on North America because in Q2, both EMEA, LatAm and APAC were well within your medium-term 4% to 6% organic sales growth guidance but North America was a clear outlier with a, I think, nearly 2% organic sales growth decline. So could you maybe help us unpack this performance in North America in Q2? And in particular, do you think it was primarily down to temporarily lower category growth? Is it down to significant discrepancy between sell-in and sell-out? Or are you also seeing some share erosion? And I guess last question on this. Would you expect North America to return to growth and ultimately back to the 4% to 6% range over the coming quarters or it may take a bit longer as the challenges persist? And then my second question is on A&P, increased significantly in the first half. I think it was up 130 basis points. A question here is in which areas are you disproportionately reinvesting? Do you feel you get some great returns on this incremental spend? And I guess, looking ahead, what should we expect for A&P spend as in was the first half a bit of a one-off? Or should we expect another marked step-up in H2 and beyond?

Thanks, Guillaume. Appreciate the questions. Let me take the first one on North America, and I'll pass it to Dawn for the second question. And maybe just as I get into North America, we do feel good about EMEA, LatAm and APAC and also feel good about the back half in both those areas. Also feel great about the organic profit growth driven by the gross margin, 160 basis points, and the strong cash flow. But there's no doubt that North America has been a challenge. And maybe if you step back, I think there's two market dynamics and then let me touch on our own performance. I mean, first, there's no doubt that there's a challenging consumer environment, and consumer confidence is at a low, and I think our categories are more resilient than most in that context. But we are impacted in certain categories and smoking cessation is definitely one of them. I talked about it in the past. This is $30 to $40 price point range. So we are seeing trade down in that category. Outside of that, we're not seeing a trade down overall in the business. And that has been a drag on growth. I think the second thing is we continue to see the shift to Dollar and Club, which are more value channels, which is what we're seeing in this consumer environment, and e-comm. Now I'd say in all cases, we have strong presence in those channels. And I've talked about e-comm, where 16 of our top 18 brands they actually have better shares online than offline. So that's very manageable. But we are continuing to see these inventory pressures, drug retailers, but I think everybody, all retailers in the U.S. are dealing with that kind of environment. Now as far as our performance. Our consumption is growing ahead of the market. Now to be clear, the market is slightly down, about 0.5%, and our consumption is slightly up, about 0.5%. So we're growing ahead of the market, but not significantly to be clear. Now we're seeing strong growth and market share gains in Oral Health and market share gains across Digestive Health, brands like Tums and Benefiber are doing extremely well. But overall, we're not satisfied with the performance. And we have a bit mixed performance in Pain Relief and VMS. So let me unpick that a bit. So in pain, in the first half, we have slightly lost share on Advil. Now we've taken action, we have new plans in place. We have a new media campaign that's on air live now, and we see early signs. I mean in the back half of Q2, we were getting -- we were back to share growth on Advil. Now on VMS, we have two brands, Emergen-C and Centrum. On Emergen-C, we continue to see really strong consumption and share gains. Now sales were up low single digits. Emergen-C was one of the brands that at the end of last year when we saw that very low cold and flu incidences in December, we started the year with a bit of higher inventories. But overall, the brand is very healthy. Centrum has been a challenge. Now overall on Centrum, really good growth, mid-single-digit growth outside the U.S., high single-digit growth in Q2 outside the U.S., but we saw declines in the U.S. Now a year ago is when we first activated our cognitive claims on Centrum Silver, and we grew high teens consumption, about 4x the market. So we're indexing across a high base. But listen, that said, even with a high base, our expectation is we continue to grow share. So we firmed up our plans. We have -- we are -- reactivating the Centrum Silver with a new claim, slows cognitive aging by 60% with some innovations in the U.S. on Centrum in the back half, and we have a new partnership with U.S. women's soccer that we're beginning to activate that we're optimistic about. So in the back half, I definitely expect to see improved share positions on Centrum and Advil, but we do believe the inventory reduction will continue to happen. As we look at inventories across retailers, I think they've been much more proactively managing their inventory levels as they're seeing issues with them delivering on their numbers in the whole environment. We want to more proactively manage that with them going forward. Really, really important that we do what we need to this year to make sure that we're at the right levels as we exit the year into next year. So in our around 3.5% guidance, we are not looking for a significant improvement in the U.S. environment at all, and we're expecting to continue to see inventory pressure. I will say though, looking forward to the medium term, we have a fantastic business in the U.S. Really, really pleased with Oral Health in the U.S. where we gained 0.5 share point in the first half and continue to go from strength to strength and we're confident in 2025, 2026 and beyond as we strengthen the business in the back half. Why don't I pass it to Dawn to talk about A&P?

Yes. Thanks, Guillaume. So I think the first thing to say is, as we laid out at our Capital Markets Day, we have significant opportunity in supply chain productivity. And you saw that come through in the half and the benefit that's come through in gross margin has enabled us to continue to invest in A&P and R&D, and that provides the flexibility and agility that we talked about across the P&L. So in terms of, if I focus then on A&P. So A&P is up 6.8% in the half to 20.8%, and we are leveraging A&P to focus on the three growth drivers that we've outlined, closing the incidence treatment gap, driving premiumization with our innovation and expanding reach to lower-income consumers. And if I think about from an innovation perspective, we've been rolling out very successful innovation, particularly around our clinical range, Nasal Mist on Otrivin and Panadol Dual Action. So the first area that we've been focusing on in terms of spend is around supporting the innovation. If I think from a geographic perspective, we've been focusing on driving growth in key markets, so particular markets like India, where we saw just under double-digit growth, in EMEA, in Central Europe and also in China. And obviously, experts and our recommendation by expert for our brands is a critical part, and that's the other area of our investment. But it's not just about increasing the investment. It's also about the effectiveness of that investment. And in the half, we've improved ROI by 4%, and we continue to look at the balance of working, nonworking and I think there's more opportunity for us to go on that. So I wouldn't say this is about phasing. If I look to the second half, I would expect us to continue with similar shape, and I would expect us to continue to invest across those areas that I talked about in terms of our A&P.

Our next question comes from Rashad Kawan from Morgan Stanley.

A couple for me, please. On -- first one on North America, again, and the 3.5% growth for this year. You said you're not expecting a significant improvement in the U.S. in the second half. I think the expectation, obviously, was that you'll see quite a meaningful step-up in Q3, in particular, given the late end to the cold and flu season last year and retailers starting from a low base. I guess, what's changed around expectations there? Is it just the destocking trends maybe cautiousness from retailers continued more so than you expected, Smokers' Health being weaker? Just trying to unpack kind of the key changes from when you spoke to us in Q1 versus where we are today. And then just second question on the business -- the percent of business gaining or maintaining share decelerating from the 71%, I think, in 2024 to 58%. Can you just kind of talk about what the key drivers of those are? And I think you've said in the past kind of think of where we want to be as somewhere in the 60% range. Is that the right way to think about it longer term?

Thank you, Rashad. I'll take both of those. I think first of all, on North America and we look at Q3, I mean a couple of dynamics are happening. You remember last year, we did reduce our PE products in cold and flu in Q2, and we repiped in Q3. Now this year, it didn't show up in the numbers because we had a low allergy season. We haven't talked about that yet, but that has an impact on us that Flonase is a pretty significant brand in the U.S. environment. So Q3 needs to deal with that base on the sell-in. And the reality is the environment is uncertain. The environment is difficult in the U.S. and the retailer environment and the stock and trade. And to be clear, I don't think our stock and trade levels are too high from historical or versus peers, but it's really the retailers tightly managing that as they're struggling with things like foot traffic and sales growth and things in that difficult environment. And then the second question? Gain to maintain share, I apologize. Yes. No. Thank you, Rashad. Last year, we had a very strong result at 71%. And I think I said it was a fantastic result. I think I said at the time, while, listen, my objective and ambition is always to maximize that number, to be clear, I felt like that was a high number that would be difficult to sustain, and you are correct, I've always said that where I feel like we want to be is at 60% plus, and we are slightly below that in the first half. If you look at the two of the -- two big drivers of that going from 71% to 58%, it's the two that I talked about, both in the U.S. Advil grew share for full year last year in 2024. And this year, in these numbers, it's not growing share. Again, we've seen green shoots, and we're growing in the back half of Q2, but this is a year-to-date number. And Centrum. Centrum is not growing share in the first half. And actually, we've seen consumption decline against that high base. Again, we are working on plans to kind of stabilize that in the back half. But those are two big things. With those two growing share, obviously, we would be well in the 60% range. But again, we want to maximize that number. I think 58% is a good number, but it is a bit below what I'd like to see on a consistent basis.

Our next question comes from Callum Elliott from Bernstein.

Perfect. And I wanted to just start with the U.S. again, hoping that we can talk about the retailer environment, which you call out again in the presentation. I guess my question is twofold. Firstly, maybe can you give me a sense or give us a sense of the channel split for your U.S. business and specifically how big the drug channel is as a percentage of revenues, which I guess is the problem that you're calling out? And then more broadly, the drag that you talk about, I'd love your thoughts, Brian, on whether there's anything that Haleon as a company can actively do to offset this? Or do you just have to accept that it's an externality, so to speak? And then my second question is on some of the strategy from the CMD. So you had obviously set out some very ambitious strategic plans just a few months ago. My question here is with the core business clearly struggling a little bit and sort of the negative revisions to the full year guidance that we've seen today, does that deemphasize or would deprioritize some of these -- some of the strategic push that you had spoken about at CMD in terms of democratizing, expanding access to lower-income consumers, lower price points whilst you fix the core business, so to speak? Or do you think of these as two completely separate things, Brian?

Thanks, Callum. Appreciate the question. Let me start first on the U.S. retailer environment. Listen, we're like most companies that Walmart is our #1 customer in the U.S. and roughly 1/4 of the business. We tend to be a little more skewed towards the drug channel, given our portfolio, the combination of the drug channel is less than what Walmart would be in the business and then it cascades down from there for all the big companies. Listen, in the end, what we own and control and need to actively do is perform and deliver market -- deliver share in the U.S. and also drive market growth. Listen, we are category leaders. So part of our role is -- while the market is struggling a bit, part of our role is to grow those markets. And we've done that in the past. We need to continue to do it. Obviously, the one place we continue to do it is in Oral Health. I mean we are driving category growth in Oral Health and that is our focus. So we need to deal with the current environment, but we're very focused on our performance and our share growth. Listen, as far as CMD ambitions, absolutely nothing changes. I feel really confident about the medium term. We are clearly dealing some headwinds on the business and in the U.S. is a challenging environment, and we're not immune to that right now. But as Dawn mentioned, as we look at our investment, part of our investment is that low-income consumer packs we're doing in India, the INR 20 Sensodyne pack and we'll be launching more SKUs on Sensodyne as we look at the balance of the year and into next year, Centrum Recharge in India, ENO, our INR 10 pack in India, our launch in Brazil that we talked about at Capital Markets Day, Sonridor, which is our foray into systemic pain relief there with low income offering. So that continues to be there. The innovation-led premiumization has always been core to our strategy, and we're going to continue doing it. And then core penetration is all about closing this incident gap. So listen, we're staying very committed to what we said at Capital Markets Day on the growth side. Feel medium term, we will be where we need to be. Productivity, which is the other thing I laid out at Capital Markets Day, I feel really, really good about our progress, to be honest with you. We had talked at Capital Markets Day the reduction of SKUs that we did in 2024 that we weren't starting from 0. We are seeing that pay dividends in the gross margin, 160 basis points in the first half, feel great about that. That enables us to deal with these growth headwinds, invest to make sure we're competitive going forward and deliver the operating leverage on the business. As Dawn said, it gives us an awful lot of flexibility on how we can manage the P&L while we're facing a bit of growth headwinds in the U.S.

Our next question is from Celine Pannuti from JPMorgan.

My first question is trying to a bit zoom out of the discussion on the short term. And if I look at your volume performance 0.8% this year, it was 1.3% last year. It was 1% the year before. I presume for this year we'll land around 1%. So 3 years of 1% volume mix. What gives you confidence that you can deliver 4% to 6% in the midterm? I think we will need a step-up in volume, and we are not seeing that. I mean yes, if you could explain what you think has not worked and why you seem confident that you can still do 4% to 6% in the midterm? And then my second question may be somehow related. We've seen -- you said you feel strong about Latin America. Europe, we've seen some other companies talking about weakness there. Yes, I would like to hear a bit your outlook in that region.

Thank you. Listen, I'll answer the first question, I'll pass it to Dawn on the question about EMEA, LatAm. So listen, if you look -- unpick our results a little bit, if you look at EMEA, LatAm, volume growth accelerated from 0.5 point in Q1 to 1.6% in Q2. In Asia Pac, volume mix accelerated from 3.3% to 3.9%. So if you -- and -- but we were at 0.8%, you are correct, in the half. And that's completely linked to the dynamics and the challenges we're seeing in the U.S. U.S. volume was down 1.8% in Q2. So -- and 0.6% in the half. So no question that we see the challenges, and we're on it in the U.S. environment. I talked about some of the actions we're taking to firm up the business in the back half. We do have new leadership in the U.S. as of May 1. I feel great about our leader there, and I'm confident that we'll do what we need to in the back half and really be set up to return to growth in 2026, and I'm absolutely continue to be confident in our medium-term guidance. Dawn?

Yes. Let me just -- I'll just build on that and then come to the Europe piece. So I think, as Brian said, if you look across the other regions, our volume has improved in Q2 versus Q1. If you look at Asia Pac, 2/3 of our growth in Q2 came from volume. And actually, we continue to see that accelerate. And I would expect second half the growth in Asia Pac to be more weighted to volume. If I look over the last 3 years in Asia Pac, our growth is actually 4.6%. So actually, it's very strong, it's consistent. If you look at EMEA, LatAm, again, improving trajectory in Q2 versus Q1. If I look to the balance of the year, we'd expect a more balanced price volume mix growth. And actually, if you look over the last 3 years, we've been seeing that trend in that region in terms of volume growth. To Brian's point, we've talked about the situation in the U.S. in terms of consumer environment, retailer environment and a couple of our brands, and so actually, when I look at the volume piece, it is to do with the U.S. and actually, we're seeing the shape we would expect to see across the other regions. And as I said, I would expect to see that shape in second half. If I then talk about Europe, in particular, actually, we're seeing Europe is pretty resilient. Actually, we're seeing a good performance, we're seeing high single-digit growth in Central Europe, mid-single-digit growth in what you might call kind of Continental or Western Europe. So for us, that's holding up pretty well. Why is it holding up so well? We see real strength in Oral Health. actually, is a core driver of that. And we talked about some of the innovations, the successful innovations across the regions.

Can I just follow up and maybe on the previous question, I think that Callum asked? I mean you have a high single-digit organic -- sorry, reported EBIT growth as a target going forward. Again, if you think about the -- my question about volume mid-term, I mean, does that kind of like -- if the growth is less important, would you want to reshuffle some of your potential profit growth back into the business, i.e., grow less, but try to stimulate volume?

Well, thanks for the follow-up, Celine. Listen, we guided to high single-digit growth -- operating profit growth at constant currency driven by the gross margin opportunity we have. So you can see this year, while again, we're a bit more challenged than we've been in the past on growth and specifically in the U.S., the gross margin improvement and with the leverage in the P&L has allowed us to invest in A&P and R&D in a healthy way, and still drop the organic operating profit to the bottom line. Obviously, we still have a drag of a couple of divestments that we will anniversary once we get through Q3. So no, again, I feel very confident about the algorithm we set out at Capital Markets Day and the fundamental tenet of the opportunity we have in productivity, which is coming through.

Our next question is from Warren Ackerman from Barclays.

Warren here at Barclays. I'm sorry some of these have been asked. I had a few technicals. So the first one, Brian, on Advil, you talked about some green shoots on that brand. What are you doing to fix it? I think it's been losing share for a long time. I'd be interested to get any perspective on that specific brand. And then secondly, on Smokers' Health, are you able to tell us how big it is in the U.S. and what your expectations are for Smokers' Health in the second half of the year? I mean, do you need to take pricing down to make it more competitive versus private label or something else? And then thirdly, on Centrum, thanks for your comments on Q2. Is there anything happening on Centrum on innovation in the back half where we should feel a bit brighter in terms of the outlook for Centrum in the U.S.?

Yes. So a couple of things. I think first on Advil, it has been a bit of an up and down story, to be honest with you. We did exit last year for the full year growing share on Advil. It was one of the things that contributed to 71% and that was a bit of strength as we exited the year, and it gave us -- brought us into share growth for the full year, but it's been a bit up and down without question. The green shoots that we're seeing are, listen, we've had new media campaign, there were strong promotional plans in the back half. We feel like we feel good about Advil and where we will be. Listen, there's no question, this has been a battle with Kenvue on Tylenol, which I said in the past, it is one thing that was working well for them, and they doubled down. But we feel good about our brand, and we feel good about the plans we have in the back half. Smokers' Health for us is a couple of hundred million kind of business for us, in that kind of range. Listen, we're looking at it. We expect that in the back half, as we look at our plans, that we'll see less decline in the back half on Smokers' Health, but we're not at a point where we think we'll get that back to growth and because we don't expect much change in the U.S. consumer environment, if that changes, then something would be different. We also do have an innovation on Smokers' health, a dual-layer tablet that we have FDA approval on. It will launch in e-commerce in the back half and then do a full launch in 2026. So that gives us some reason to believe that we'll have something that's differentiated in the market that can help us there. And then what was the third question?

Centrum.

Oh, Centrum, apologize. Listen, on Centrum, a couple of things. I mentioned the new claim. Again, one of the things that drove Centrum tremendously in the U.S. last year was the Centrum Silver claim we had on cognition. We're reactivating with a new claim. I think I mentioned it, it's slightly different, but it's meaningful and the new claim being slows cognitive aging by 60%. Aging, obviously, also is a very big topic for consumers in that cohort. So we have that. We do have a couple of innovations that are going out. I won't talk specific of them because I don't think they've been announced to the market, but a couple of things that we think will also help firm up. And listen, it's a big focus for us. Like I said, Centrum is a great brand. It's doing quite well outside the U.S., but clearly facing headwinds in the U.S. on a base of tremendous performance a year ago. But again, we want to grow despite what the base is, to be clear. So that's a big focus for us going forward.

Our next question comes from David Hayes from Jefferies.

So a couple from us, one nicotine replacement, and one on the margin. So nicotine replacement, just to come back to this, we may have missed this, but could you just quantify the drag that it had on the second quarter? And also, can you quantify what impact it has in that new guidance of 3.5% or around 3.5% growth for the full year? And staying with that topic, you just talked about new innovation, but it always feels like this is a little bit of a periphery category for you. I think it's a partnership with Kenvue and even Sanofi as well. So is it fair to say it's less of a focus for investment? How do you account for it given you've got these partnerships? Is it fully consolidated with the minority? And then given the partnership structure, is that why you've kept this business in the U.S. whereas obviously, you've exited in Europe? Is this something you're kind of stuck with? Or could we just see it as it could go at some point? And then the margin question was just on putting it all together, high single digit on organic, the FX and the M&A dynamics. Is the guide effectively for flattish margin year-on-year on a headline reported basis? Is that the right kind of conclusion?

Thanks for the questions, David. So listen, I'll pass the growth question, margin question on to Dawn, but let me start with the nicotine business and the structure. It is a bit of a three-way venture in the U.S. There's a -- part of it is with Opella, and Opella has -- it's a joint venture with Opella, and then Kenvue is a supplier of Nicorette. As you know, Nicorette is a brand that Kenvue owns outside of the U.S. So they are our supplier on that business, and there is a three-way partnership there. So listen, it's a category that's quite difficult to innovate in if I'm being honest with you. The innovation that we're going to -- that we will have is takes FDA approval, and it takes quite a bit to do it. So there's no question that, that's a business that is, I think, harder to innovate on, but it is in our portfolio, and we'll continue to do what we need to, to get to growth. Listen, it plays a really important role, to be honest with you, with consumers and the health care systems and things like that. So -- but it is a complicated ownership structure to say the least. Dawn?

Yes. So let me just give you some specifics on Smokers' Health first. So to Brian's point, it is about 5%, 6% of the kind of U.S. business and in the quarter, we did see significant decline. The impact, so it has a 60 basis points impact on the total group in terms of -- that would take us to 3.6%. And for North America, it would take minus -- it would take North America from minus 1.8% to minus 0.2%. So it is a big change in -- it is a big change in the quarter, and it has a size -- it has a disproportionate impact. That's the first thing to say. The second thing to say in terms of the margin, to Brian's point, we're really pleased with the margin in the first half, 9.9% growth, up 140 basis points. And it's not just the number, it's also the quality of that earnings in terms of the delivery through gross margin, investment in A&P and R&D, good cost control in G&A, which has then enabled that margin to come through. If I look to the second half, the shape that we've delivered in the first half, I would expect a similar type of shape in the second half in terms of strength in gross margin, investment in A&P and continued good cost control. If you think about the -- which is why we've updated the guidance to high single digit operating profit growth for the year. If you look at the other moving parts, obviously, we've given the guidance on FX, M&A, interest and tax remain unchanged. So when you put it all -- when you put all of that together, I would say that we are comfortable where consensus is today.

And just on the full year, I mean, it looks like NRT, to your point, is 50, 60 basis points of headwind. So did that -- I know you just don't want to take out bits that aren't going well and getting to that game. So I guess it would be fair to say that without that, you've been around 4%, I guess, to the guidance point going down to 3.5%. Is that a fair conclusion?

Well, listen, I think, David, it's hard to kind of speculate on that kind of thing. I think we don't expect that drag to continue at that level in the back half. So we'll see where it ends up at full year, but no question, it will be a drag on the growth in a full year, and it's made it more challenging for us to hit that low end of the guidance.

Our next question comes from Tom Sykes from Deutsche Bank.

Yes. Sorry to bang on about the U.S. retailer trends again. But I think -- so there's obviously two issues. One is the stock levels per channel. And then another is the channel shift. So of the headwinds you've got at the moment, would you be able to split the volume headwinds between channels that are destocking and the channel shift? Because Amazon, I think, in your scanner sales has grown by over 30% in the last 12 months, and the rest of your business is flat in aggregate. And so therefore, there's massive channel shifts occurring and so it would be helpful to try and understand what the shift impact versus destocking by channel is. And then why wouldn't this occur in other countries? I mean I appreciate that there are differences in regulation, but you're very overweight clearly in the pharma channel in Europe. And it feels like this is something that's going to be pervasive across all economies eventually. So just interested in your thoughts on that, please.

Yes. Thanks for the questions, Tom. So listen, destocking by channel in the U.S. Listen, the channel shift is something that's been happening over time for quite a while. The drug channel does tend to have higher inventory levels. So there's a bit of an impact there. But the biggest impact is, frankly, I think you're seeing inventory pressure across channels, maybe a bit disproportionately in drug because they're struggling more. And again, if you look at the Amazon growth, we do have stronger shares on Amazon. I talked about Sensodyne in the past, where we're in the low 20s in bricks and mortars and more like 28% on Amazon. So as we see more move to there, we're moving to a channel with higher share. So I think it would be hard to break down exactly, but I think the bigger impact is the downward pressure as retailers in the U.S. are feeling the pressure of the economic environment, the foot traffic and all those things and trying to manage that situation because again, outside of our categories, there's other categories that they deal with that are much more affected than we are, and that impacts their overall financial performance. When I think about other countries, to be honest with you, if you think about pharmacies in Europe. In Mainland Europe, 70% of our business goes through pharmacies, very, very low inventory levels in pharmacies. There is no real stocking up. We have people that call on pharmacies weekly in some cases for the bigger pharmacies and taking orders. So it's not like there is a massive stock-up opportunity or that they carry really high levels. Now there are distributors in between sometimes our pharmacy channel and us. And distributors in general, are pretty good at managing inventory levels and things like that. So I think that's really the dynamic. I think, is very different in the U.S. than, let's say, in Mainland Europe, where the pharmacy model is just very different.

Sorry, just one follow-up. Would you see the channel shift at all impacting your operating margin? Is Amazon lower margin than other parts of the business, please?

No. Listen, on balance, if I look at e-com on a global basis and I look at that, it's all relatively similar, and it's all within our outlook and guidance. We expect that e-com will continue to grow. And by the way, Amazon is becoming less and less a piece of that as omnichannel has become more important. Walmart were really strong in walmart.com, and that's grown well. So that's all within the context of our outlook and the medium-term guidance we gave.

[Operator Instructions] Our next question comes from Olivier Nicolai from Goldman Sachs.

Just one question on my side actually. Going back the U.S. performance for VMS and for Respiratory Health. Would you say that you are losing share against private labels? Or is it more against other branded players?

In Respiratory Health, to be clear, we're growing share on the balance of Respiratory Health. If you remember, we've now put smoking in Respiratory Health. That has moved to private label. Frankly, we're primarily the branded player in the U.S. So that would be private label. In VMS, it's probably more competitive pressures that we see. And again, where gained significant share a year ago, some of that we are now giving up. And as I said earlier, it's not our intention, and we're very focused on getting that back. But I would say that's probably the dynamic with the two. But again, if you look at respiratory, Theraflu has grown share really well; Robitussin, okay; even Flonase is in a down market. So it's really about the smoking business, which is a down trade.

Thank you. We currently have no further questions. So I'll hand back to our speaker team for closing remarks.

All right. Well, listen, thanks, everyone, for joining us today. I look forward to catching up with all of you on upcoming roadshows and meetings, and please feel free to reach out to the IR team with any further questions. Thanks for the continued interest and support in Haleon.

Good morning, everyone, and welcome to conference call for our first quarter trading statement. I'm Jo Russell, Head of Investor Relations. And with me today is Dawn Allen, our CFO. Just to remind listeners on the call that in the discussion today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's UK and SEC filings for more details, including factors that could actual results to differ materially from those expressed in or implied by any such forward-looking statements. Today, we'll focus on organic revenue performance. There is a full reconciliation of organic revenue in the appendix of the company's slide presentation. Following Dawn's remarks, we'll take your questions. [Indiscernible] you can find the detail on Page 3 of the company's presentation. And with that, I'll hand this to Dawn.

Thank you, Jo, and good morning. We had a good start to the year with our first quarter performance in line with our expectations. We delivered organic revenue growth of 3.5%, driven by strong market share gains across our key markets. We saw growth across all our categories and regions, which demonstrates the strength and resilience of our portfolio despite a more challenging market backdrop. Our emerging markets continue to perform particularly well, up 6.5% with marked strength in India and China, which saw double-digit growth in Sensodyne across both markets. Innovation continues at pace. And during the quarter, we had a number of successful launches, including Voltaren 2% strength in China, and expanding the Sensodyne clinical platform range and Otrivin Nasal Mist in a number of markets. Whilst the macroeconomic backdrop continues to be volatile, our full year guidance is unchanged. And we expect to deliver 4% to 6% organic revenue growth with organic profit ahead of this. Now let's look at the first quarter in more detail. Revenue of GBP2.9 billion reflected 3.5% organic growth, 2.4% price and 1.1% volume mix. Reported revenue declined 2.3% in the quarter due to a 2.9% drag from the disposals of Chapstick, and non-U.S. smokers health business, and a 2.9% drag from translational foreign exchange due to sterling strength against a number of currencies. Now let's turn to the categories where we saw broad-based growth. In Oral Health, revenue grew 6.6% ahead of the market, driven by a strong performance in Sensodyne with continued share gains underpinned by successful innovation and in-market execution across the Sensodyne clinical range. Clinical wise continues to attract a younger demographic to the brand and has amongst the strongest repeat rates in the sector. Strong performances were seen in a number of markets, including India, China, Central and Eastern Europe and the UK. Parodontax grew double digits with strength across a number of markets, including China, where we are seeing strong consumer feedback following our launch at the end of last year. We're also seeing a strong performance across a number of markets from Parodontax Gum Strengthen and Protect, a multi-format range across toothpaste and mouthwash, which has driven incremental share gains. And in the UK, we have seen a record market share for Parodontax. In VMS, revenues grew 0.9%, underpinned by innovation-driven growth in emergency and Caltrate. Centrum declined mid-single digit. We saw good growth in Asia Pacific, EMEA and EMEA and LatAm, particularly in Middle East and Africa, Southeast Asia and Taiwan. This was more than offset by a decline in North America. This decline was driven by lapping a tough comparative from the activation of the cognitive function claims on Centrum Silver last year, overall weakness in the multivitamin category, and increased promotional activity amongst competitors in North America. In China, we had a number of successful innovation launches, including Centrum Daily wellness packs tailored to Asian lifestyle, which we have also launched in South Korea, and it is performing well. In Caltrate, we rolled out a vitamin D with glucosamine that has had an even stronger effectiveness claim. Across OTC, pain relief grew 2.6%. This was driven by Advil and Voltaren, which were both up mid-single digits. During the quarter, we launched Voltaren 2% strength in China. Whilst it's early days, initial performance indicators are strong. Panadol was up low single digit with growth held back by phasing of retailer stocking patterns in the Middle East and Africa. This is expected to reverse in Q2. As part of our drive to reach lower income consumers, we launched the Sonridor brand in Brazil, which uses Panadol's Optiol technology. Initial results have been encouraging. In Respiratory Health, revenue was up 1.7%, with a stronger-than-expected cold and flu season towards the end of the quarter in North America, driving growth in Robitussin and Theraflu, which saw strong share gains in the U.S. This was partly offset by a weaker season elsewhere. Otravin performed well, helped by the rollout of Otravin Nasal Mist, which is driving share gains and market penetration with 50% of users being non-spray users in the UK. And finally, Digestive Health and Other was up 3%. This was driven by innovation in Tums and ENO, which was partly offset by a decline in smoker's health and Nexium due to market softness. Now let's look at the regional performance, starting with North America. As others have observed, the consumer and customer environment is cautious and uncertain. This has been seen in consumer confidence measures, which are at the lowest level since 2021. Despite this, organic revenues grew 1% in the quarter, made up of 1.8% volume mix and 0.8% from negative price, with the latter largely driven by higher promotional activity relative to last year. The consumption saw healthy growth and was ahead of organic revenue growth. We have a strong position in North America with the top 5 retailers making up more than half of our revenue. Whilst it appears that some retailers are more cautious in ordering patterns, our products continue to demonstrate their resilience. In Europe, Middle East, Africa and Latin America, organic revenue increased 5%, with 5.6% price and 0.6% decline in volume mix. Pricing in Europe was up around 4% and higher across markets in EMEA and LatAm, in line with inflation. The decline in volume mix was largely driven by weakness from the cold and flu season. Excluding this impact, volume mix would have been up around 1% for the region. Looking across the region, we saw strong growth in Latin America, up double digit, helped by pricing and the launch of Sonridor. Both Europe and Middle East and Africa grew mid-single digit with strength in oral health and VMS. Finally, in Asia Pacific, we saw good momentum. Organic revenue increased 4.2% with growth coming from price of 1.5% and 2.7% from volume mix. We saw growth across all categories, except in Respiratory Health, which was impacted by a weaker cold and flu season. India performed well, up high single digit, helped by double-digit consumption growth in Sensodyne. China was up mid-single digit with strength in oral health and VMS underpinned by the innovations I mentioned earlier. We are well positioned in China with strong market positions and favorable structural tailwinds with consumers increasingly focused on health products, which we are supporting through our e-commerce platforms. Turning now to our 2025 guidance. Whilst the macroeconomic environment remains both challenging and uncertain, we remain confident in our full year outlook. We expect to continue to deliver the guidance we set out at year-end with organic revenue growth of between 4% to 6%, and organic profit growth ahead of organic revenue growth. Whilst the situation on tariffs remains dynamic, based on what we know today, the impact across our business is limited and is included in our guidance. On foreign exchange, the FX impact on revenue and profit in quarter one was broadly in line with our expectation. As you'll recall, at full year results, we provided an estimate of the translational FX impact for 2025 based on Bloomberg consensus rates averaged over the year. As of the 31st of March, this consensus indicates a headwind of 2% on revenue and 3% on adjusted operating profit. There is no change to our net interest expense or tax guidance. So in summary, our first quarter trading was in line with the expectations we set out earlier in the year despite a dynamic and more challenging backdrop, which continues to remain uncertain. Our global portfolio is resilient with strong brands solving consumer needs. Our innovation launches are performing well. And as I just mentioned, we have confidence in our full year guidance. Before I open up to Q&A, I want to remind you all that we will be hosting our Capital Markets Day in London tomorrow. We will share more on our continued confidence in driving long-term growth, with deep dives on categories and regions and we share the opportunities we see across our supply chain. And with that, let me hand over to the operator to open up for Q&A.

Thank you. [Operator Instructions] We have our first question from Guillame Delmas from UBS.

Thank you very much. And good morning, Dawn. A couple of questions from me, please. First one on Q1 specifically and what may have surprised you either positively or negatively during the month of March? Because if I remember, at the time of the full year '24 results in early March, you sounded probably a little bit more cautious on Respiratory, but you ended up posting like a nice positive number in Q1, thanks to that double-digit development in the U.S. So if U.S. respi was potentially stronger than you anticipated, what were the areas that maybe proved a little bit softer in the Q1 and specifically that month of March? And then my second question is on your outlook for the year. So everything confirmed, reiterated this morning, you're still guiding for 4% to 6% organic sales growth. Maybe, Dawn, can you say if you will be back in that 4% to 6% range as early as Q2 or whether we will have to wait for the third quarter? And on this, again, what underpins your confidence in that material acceleration step-up in organic sales growth in the second half? Is it down to pricing? Is it the current retailers' inventory level that may be a bit low in some categories? And so you would expect some strong sell-in from Q3 onwards? So any color on that would be very helpful. Thank you very much.

Thank you. Yeah, good morning. So I think -- look, I think Q1, we had a good performance in 3.5% growth. And I think that reflects strength and resilience across our global portfolio. In terms of what surprised us, you're right, respiratory in the U.S. towards the end of the quarter picked up in terms of the number of cough, cold and flu incidences. But that was also balanced by softness actually in other parts of the globe. The other probably the other difference was in the U.S. and others have reported in this that the U.S. environment is uncertain. Consumers are cautious and we are seeing retailers or we have seen retailers take action in terms of their inventory levels in line with consumption. But as I said at the beginning, I think what you see from us is a strong balanced performance across all -- across parts of the globe and across our portfolio. In terms of the outlook for the year, we remain confident in our 4% to 6% guidance. As we said at year-end, we are expecting second half to be stronger than first half. And in Q2, we're expecting that to be broadly similar to Q1 given what I talked about in terms of the U.S. performance in terms of the U.S. market. What gives us confidence in the second half is 3 things. Number one is in terms of our innovation. I called it out in the summary, our innovation continues to perform incredibly well. In the second half, we're launching into a number of new markets and we'll also get the benefit of markets that we launched in the first half as we see continued momentum. The second area is in terms of our investment levels. So we continue to invest at healthy levels in A&P and in our route to market. And the third area is in a couple of pieces. So if you remember from Q4 last year, we saw a soft cough, cold and flu season. If we see a normal season this year, we'd expect to get a benefit from that. And when I look at certain geographies, geographies like India, where we expect to see the total market pickup in the second half on the back of government stimulus, we'd also expect to see a benefit from that. So I think that's what underpins our outlook for the year.

Thank you very much.

We'll have our next question from Rashad Kawan from Morgan Stanley.

Hey, good morning. Thanks for taking my questions. A couple for me, please. First, I mean, you talked about the challenging and uncertain environment, no surprise, obviously. But can you talk about just a bit more detail around what you're seeing in terms of change on the ground in consumption habits since your last update at the end of February, particularly in the U.S. I know you've called out multivitamins in particular being weak and you mentioned kind of retailer patterns, but have you seen any weakness or deterioration in other categories in terms of consumption? And then second question, just on tariffs. I know, Dawn, you addressed that in your opening remarks, but I think over 80% of your business in the U.S. is local. But the imported aspect here, can you remind us how much comes from China and what you think the impact could look like as things stand today and what mitigating actions that you are thinking about here? Thank you.

Yeah. Good morning. So a couple of pieces. So in terms of the U.S., I talked about and others have talked about consumer confidence being soft, which we're seeing that. And also from a retailer perspective, I mentioned that retailers have lined up inventory more in line with consumption trends. I think if I look at our categories in particular, I mean, oral health continues to perform well. Our innovations in terms of clinical -- the clinical range is driving strong trial and strong repeat rate, and we feel very confident in that. Yes, we had some phasing of shipments in the first half, but actually the fundamentals on oral health, both globally and in the U.S. remain very strong. In terms of VMS, we have seen a softness in terms of the overall category. I think in the first quarter, the VMS category was broadly flat and that is all of our categories that is a more discretionary category in terms of choice of the consumer. So we're seeing that. I think in terms of the other categories, respiratory, pain and digestive, actually a strong performance from us in the quarter. We are seeing slightly softer consumption trends. But overall, as I said, I think the fundamentals are strong. And if I come back out of that and what I talked about in terms of -- it's not just about the U.S., we have a global portfolio and we're balanced across the categories. And if I look at Europe, Latin America and Asia Pacific, they continue to perform incredibly well. If I move on to your second question in terms of tariff, what we said at year-end is that tariffs we expect tariffs to be in the kind of tens of millions, and that is built into our guidance. Yes, tariffs have changed in terms of the moving from impacts in Canada and Mexico to actually more global piece, as you called out, and also a shift in terms of just finished goods to actually also impacting raw materials. But as I said, the overall impact remains very similar to what we talked about from year-end and actually the impact from China is relatively small. So as I said, the overall impact for us is low tens of millions from what we know today on tariffs that is fully built into our guidance.

Thank you very much.

We have our next question comes from David Hayes from Jefferies.

Good morning, all. I quickly follow up on that last comment, if I can, in terms of the tens of millions, just to clarify, is that a gross number before any kind of mitigation plans that you might have in terms of pricing, et cetera? And then my 2 questions were after that. Just in terms of the puts and takes on the shipments relative levels in terms of oral care, seems to be a bit of a lag into the second quarter, but maybe a little bit of pre-shipment in terms of net pain relief. So just trying to understand whether the net of those 2 is pretty neutral or whether you should get a little bit of a net benefit in the second quarter? And then the last one was just on FX. So you obviously called out that it was the data at the end of March. But I guess the U.S. dollar sterling moved 3% or something in the last few weeks. So is there a spot rate update version of that available to sort of take today's rates running forward? Thank you.

Yeah. I think, look, let me kind of run through your questions, David. So in terms of tariffs, as I said, kind of in the low tens of millions. We're working proactively in terms of mitigation, in terms of leveraging dual sourcing where we can inventory levels. In all of these situations, there's always -- we always look at to balance the risk. But we also look at it from the other side and go where could this be an opportunity for us. It's an opportunity to develop deeper relationships with our retail partners. And it's also an opportunity in terms of it changes some of the competitive dynamics. So when we think about tariffs as well as managing changing tariffs, we also think about how do we look at risk mitigation, but also where are there opportunities, where can it open up opportunities for us. So when we talk about the tens of millions, or low tens of millions, that would be after those mitigation actions. The second thing in terms of the shipment phasing in the U.S. So yes, you're right, we had phasing of shipments lower on oral health in Q1, which we would expect to pick up as we move through the year and the reverse on relief. I would think about those 2 as broadly neutral. As I said, what's important for us is our consumption and share performance. And I think overall in the U.S. we continue to perform well. And then in terms of your third question on FX, so a few things to say on this. So Q1 translational FX impact came in where we expected it to be. We always expect the FX impact to be higher in the first half of the year than the second half of the year. If you remember what we're lapping in terms of Q3 last year, which was a big drag in terms of FX. So we always expected that phasing, it's in line with that. When we update our Bloomberg consensus forward rates at the end of March, we've called that out in the press release. That is broadly similar to what we said at the end of February. And actually, when we look at spot rates at the end of March, that's also very consistent with that as well. You're right to call out April and what we've seen over the last few weeks has been incredibly volatile. If I give you a forecast today, I'd probably have to change it maybe this afternoon or even tomorrow. I'd be updating it every day. So I think we're obviously watching that situation closely. We'll update you again at half year, hopefully, when things have settled down, but I mean, let's see.

We will have our next question comes from Warren Ackerman from Barclays.

Yeah, good morning. Warren here from Barclays. I've got a couple as well. The first one, Dawn, how much visibility do you have on U.S. retail inventory? Just thinking about where do you think inventory days are versus the start of the year? I mean you said that 5 customers are 50%, but what about the other 50%? How does that sort of split? And are you seeing any specific caution by channel? That's the first one. Second one, just on Central U.S. I think you said that the category for VMS was flat. Centrum is down double digits. So it looks like you're losing share in the U.S. Are you responding to the higher promos that you're seeing in the U.S. And is there any difference that you're seeing between Centrum Silver and kind of core Centrum everyday multi-itamins in terms of kind of what's holding up better? And just finally, India, I think you said Dawn, that you expect India category to accelerate on better macro. Can you maybe just spell that out? What kind of acceleration are you expecting in terms of the market growth?

Yes. So I think in terms of your first question. In terms of U.S. retailer inventory what we saw as we came into the quarter is higher inventory levels in terms of Respiratory given soft season in Q4, which has worked through in the quarter given strong performance on respiratory. We do have good visibility actually particularly in terms of our Top 10 retailers in the U.S. that we partner and work really closely with. I think at the end of the quarter, we see them broadly flat. As I referenced, retailers have looked at their inventory levels and balance that with consumption. I think from a channel I mean, very consistent trends in terms of what we've seen. [Indiscernible] continues to be under pressure, which is not new. We've been seeing that for a while now. What we're also seeing from a consumer perspective, given the consumer confidence piece is, consumers are either moving to buying in bulk from the larger retailers, if you think Costco or they're moving to lower initial outlay in terms of some of the dollar stores. So we are seeing some of that dynamic. But actually, if you look at our distribution and our coverage across the U.S., we're well placed. And as I said, we've been dealing with that channel dynamic for a while. So I think we're in a good position there. The other thing I'd say from a channel perspective, when I look at our e-commerce business in the U.S., actually, we're performing really well. So I'd say balanced across there. When I look at Centrum, we are -- I mean, we have the number one multivitamin brand globally with Centrum and it's underpinned by deep science and clinical claims. And if I just look globally Centrum for a minute, I mean, in China, as I mentioned, we launched our daily wellness kits. They're personalized to the consumer, to the Asian consumer. They are performing incredibly well. We've done -- we've also launched Centrum Essentials in Brazil, which again are tailored to the local market. That's a pack more aimed at lower income consumers, and that's driving value and both areas are gaining share. And also if I look at Caltrate and some of our local [Indiscernible] across BMS in Italy, they're also performing incredibly well. I think we need to look at the broad picture first. And then if I think about the U.S. yes, we are lapping in quarter one, a very strong quarter one from the previous year where we had activation on Centrum Silver. It was close to around 30% growth in the first quarter last year. And as we talked about, we've also seen the category slow down in the first quarter 2. But I think when we look at that, we always look at the balance across the categories. And I think Centrum Silver in particular, continues to perform well, not just in the U.S. actually, but more broadly globally.

And India?

Yes, India. Thank you for reminding me that. So I was out in India actually a few weeks ago, and it was great to see the team on the ground. We went out, we visited some of the villages outside of Delhi. It was good to see some of our packs out there. So Sensodyne 20, which continues to perform well. We also talked to consumers, the consumer that I was speaking to, he had a sachet of ENO that he got out of his pocket -- got a few sachets of ENO that he got out of his pocket to talk to us about that. And I think what I'm also seeing in India is just the coverage and the reach since we took the sales force in-house we're continuing to build that team and we're continuing to increase our coverage and reach. So we feel really good about India. The vast majority of our portfolio is gaining share. So I think it's a really strong performance. And as I referenced earlier on, if I think about some of the government stimulus that we expect to come through in the second half of the year, I think that gives us even more confidence in terms of India.

We have our next question comes from Celine Pannuti from JP Morgan.

Thank you, good morning. My first question is on the balance between volume, mix and pricing. I think you had mentioned that for the year, you expect that to be balanced. So with the 1%-plus in Q1, do you still expect around 2%-plus volume mix for the year? Given what you said about Q2 being roughly in line with Q1, that would imply quite an acceleration to around 3% in H2, and I wanted to understand where that would be coming from, since it seems that it will need to see a pickup in the U.S. market where you flagged a lot of uncertainty. My second question is on the division -- well, the region EMEA and LatAm. Could you please give us which now is growing in the mid-single-digit range. Could you please give us the split between LatAm performance and EMEA? And in both some of your peers have been talking about the slowdown in LatAm, but as normalization in the European market with some consumers as well starting to be a bit more cautious. So could you give us a view of what the market is looking like in those 2 regions? Thank you.

So I think -- I think in terms of pricing volume mix, what you've seen in the quarter is a balanced performance in terms of price volume mix, which is a continuation of what we saw in the second half of the year. As we move forward through the year, we'd expect to continue to see that balance. Obviously, it's different across different geographies and across different parts of the portfolio. But I think we would expect to see that balance continue. In terms of Europe and LatAm, we see a very strong performance across both. I think LatAm in particular, is high single digit and Europe is mid-single digit. So I think we feel really good about that. We're gaining share across parts of the portfolio. And I think it's a good performance, and I think we would expect to see that continue as we move through the year.

Just to follow up on the first question. Last year, fiscal year '24, volume mix was 1.3%. Do you expect an improvement this year on that number?

Can you just repeat the question?

Yes. I just trying to understand your point about balance because I thought the balance meant that the volume mix would be at least around 50% of your total like-for-like, so at least 2% volume mix. Do you expect volume mix to be at least 2% this year?

As I said, I think it will be balanced price volume mix is that 60-40, 40-60, it's difficult to say. I think what is important is that we have the balance. And as I said, that varies across different categories, across different geographies.

We have our next question from Tom Sykes from Deutsche Bank.

Thank you. Just on the -- trying to unpick the inventory issue a bit more in the U.S. How different are the ordering patterns of drug store chains versus e-commerce and large retailers, and how different are the inventory to sales that they hold because the channel shift does seem to be deflationary continually on the level of inventory that's held. And I guess, in particular, around cold and flu, I would assume that drug stores would order more earlier than others. So if cold and flu is based more on demand rather than prebuying, would that not make it less profitable over time? And then just finally on A&P, when you step up or you are stepping up A&P, as you said, is that around specific launches? Or is that in general, a step-up in A&P? And how long is normally the lag that you see between an A&P step-up and improved purchases, please?

Yeah. So thanks, Tom. Let me start with your second question first. I think in A&P, so we have a healthy level of A&P, and we feel really good about that. Last year, we were at 19.2% A&P of sales. I think what's important when we look at A&P is that we have the flexibility. So you've seen us dial it up, particularly in areas such as Sensodyne clinical platform where it's performing incredibly well. We're also investing in key markets, in key geographies. I talked about India earlier on. But we also dial it down in areas where we're not seeing the ROI come through, and you've seen us do that I think over time as well as ensuring that we continue at healthy rate, we're also very focused on improving the effectiveness and the ROI. And the other thing that's important in AP actually is expert because expert is a key part of our business model. We have very strong relationships with experts and that is an area that we continue to invest in across the globe. So I think that's in terms of A&P. I think on your inventory question, as I talked about earlier, we have really good relationships with retailers in the U.S. On our Top 10 retailers, we have visibility in terms of inventory levels. And we're very well versed in terms of working with retailers on different ordering patterns across different categories. And I think we'll continue to do that.

We have our next question comes from Edward Lewis from Redburn Atlantic.

Yes, thanks so much. I guess just a couple of questions from me. Just thinking about the whole VMS category, particularly in the U.S. it's been on a pretty good run, I guess, since COVID and coming into a more softening consumer economy over there, how do you think about sort of the category and the kind of feedback from retailers about the category? Any thoughts there [Indiscernible]? Then I guess we haven't really touched on China. It looks as though it was a good quarter. Just sort of initial thoughts on China as you consolidate your JV and you're having success with innovation. Just I guess I got an update on China would be appreciated.

Yeah. Let me take your second question first in terms of China. I mean we feel really good about China. We were up mid-single digit in the quarter. Like India, I was also out in China earlier in the year. And as I referenced in terms of the sales force perspective, we've obviously announced that we're buying out the remaining 12% in the China OTC joint venture. So that will mean that we will have a combined sales force, and we expect to get broad reach and benefit from that. The other thing to call out in China, strong performance across the categories, but also our e-commerce performance, which actually we have real strength in online to offline that we've developed over the last few years. We're also working with key influencers in terms of digital channels, Douyin and WeChat. And I think that continues to perform well. And also our bone off campaign in terms of Caltrate where we're partnering with the government in terms of bone density test, and actually solving for osteoporosis. So I think we have a really strong position in China. We feel really good. As I referenced, we launched Parodontax and that's performing incredibly well. And as you know, in China, gum health is a challenge in terms of population. So I think that brand is well placed actually to help in terms of that health need on China. So we feel good about that. In terms of VMS, I mean, I talked about this earlier in terms of our strength globally on Centrum and in the VMS portfolio. Yes, VMS, particularly in the U.S. is a more discretionary category. We have seen the category slow down in the first quarter. But I think the strength of our products, the strength of our claims underpinned by science. I think as consumer confidence continues to come back in the U.S., then we would expect to see a stronger performance. The other thing I would say in the U.S. is actually our emergency brand performed really well actually, as we saw an uptick in the cough, cold and flu season. Emergency also benefited from that.

Our next question comes from Victoria Petrova from Bank of America.

Thank you very much. My first question is on your expectations through the year. If I understand you correctly, Q2 should be kind of around Q1. And then our previous discussions or understanding was that Q3 is supposed to be better than Q2 and Q4 should also be better than Q2, not necessarily stronger than Q3, suggesting that sell-in into cold and flu season would be absolutely crucial. Are you confident that inventory levels are at the right level everywhere, not just in the U.S.? And what are your assumptions on the flu season in the fourth quarter to meet your expectations? That's probably number one. My second question is balance between disposals and M&A opportunity. You obviously have smaller sales, which is noncore for you in the United States. Do you think the environment for potential M&A changing? And does it also offer some more lucrative opportunity for you on the buy side of this equation? And very last clarification question, is there any update or change in trend on Ericsson? Thank you.

Yes. Okay. So let me kind of talk through those. So I think I outlined the reasons why we have -- earlier why we have confidence in terms of second half versus first half, whether it's around our innovation, our continued investment levels and also a more normalized season and certain geographies where we see stimulus from the government in terms of the geography picking up in terms of India. So I've outlined that. I think from an inventory level, I think we would expect to see there at normal level across the globe, we would expect to see that pick up as we -- our expectations are for a normal season in the last quarter of the year. I think in terms of your second question, what we've seen in terms of the M&A backdrop is obviously softness across all categories in terms of M&A. But I think we've done a really strong job in terms of portfolio optimization, if you think about the disposals that we've done, which has helped to delever the business. We're also very focused on acquisitions in terms of building depth and breadth in the categories that we're in, and we continue to remain focused on that. And in terms of your third question in terms of Eroxon, so as we talked at year-end, this is a new product, in a new category and a new consumer behavior for us. So that was always going to be more challenging. And I think that we've seen that in terms of the performance of Eroxon. The other thing to call out is just around kind of lock boxes, which we've seen a rise in lockboxes in the U.S. I mean when you go in store, a lot more products are locked up than historically we've seen, and that's impacted the performance of Eroxon. The other thing that we saw, given the nature of this product and given that it might not be a product that some people either want to ask for if it's in a lockbox or might not want to purchase in store if they're with other people, we saw it more weighted towards online. And therefore, the impact of initial reviews online had a disproportionate impact in terms of Eroxon. I think, as I said, this is always going to be challenging. And I think that's what we've seen in terms of the position of the product.

We have our next question comes from Jeremy Fialko from HSBC.

So first one, just to get a bit more color on the phasing in the full year. To clarify, you're saying Q2 will be about 3.5%, so that takes the first half to around 3.5%. And then you do understand the expected acceleration in H2. But just given the fact that the first half, you could end up being a bit below your guidance range, does it mean that it's more likely for the full year, you would end up towards the lower part the 4% to 6% range? Or is that not something that you would necessarily say at this stage? And then secondly, could you talk about the pricing element within the U.S. and we can see the pricing went a little bit negative in North America in Q1 because of higher promo. Is that something that you would expect to be the case in subsequent quarters? Or was it very specific to the activity that you had in this quarter and then you'd expect the pricing to be positive in subsequent quarters and over the full year?

Yeah. Thanks, Jeremy. I think, look, we've been clear in terms of we've reiterated our full year guidance in the 4% to 6%. And we've also talked about how we expect the phasing of that revenue performance to be delivered. We expect it to be second half weighted versus first half weighted and I've outlined the reasons why we feel confident in terms of second half. And we've also said that we expect Q2 to be broadly similar to Q1 given what we've talked about in terms of the U.S. In terms of your second question, in terms of pricing in the U.S. yes, Q1 was impacted by the promotional phasing. We would expect pricing to pick up as we move through the year in the U.S. And as I said, overall on the portfolio, we would expect to see a balance of pricing and volume mix.

We have our last question comes from Karel Zoete from Kepler.

Yes, good morning. Thanks for taking questions. I have a question with regards to greenfield introductions. Maybe it's something more for tomorrow, but you highlight a couple of successful launches in big markets. But can you talk a bit about the headroom for the different platforms you have when it comes to greenfield introductions?

Sorry, can you just repeat the first -- are you talking about innovation?

Yes, innovation. You called out Parodontax in China, I think you called out Brazil in the pain franchise, and a couple of others. So what are the big launches for this year, market entries, but also the longer-term headroom here?

Yes. I think if you take a step back and you think about consumer health more broadly, I mean, as a category, it is underpinned by consumer tailwinds, whether it's more broader macro consumer tailwinds in terms of rising middle class, in terms of preventative health care measures, whether it's around the incidence versus treatment gap across a number of our categories, the number of incidences is a lot higher than actually treated. So we do see significant headroom coming from that. We also see across a number of geographies just the maturity of the category. So if I take India as an example, the penetration on oral health as a category is high. But if I went to therapeutic oral health as a category, that has huge headroom for growth. So I think across incident versus treatment gap penetration opportunity and also from a premiumization point of view, if you think about what we've done with the Sensodyne clinical range in terms of premiumizing, those would be the types of levers. The other thing I would say is we're really excited about tomorrow at our Capital Markets Day. You're going to hear from the team in terms of our confidence, in terms of our future growth potential. And so you'll hear a lot more about that. Thanks for your interest on the call. As I said, we look forward to seeing a number of you tomorrow. And for those of you who can't join, our Capital Market presentations will be on the -- will be webcast on the Haleon website. In the meantime, if you have any further questions, please reach out to our Investor Relations team. Thanks, everyone. Bye.

Good morning, everyone. Welcome to Haleon's Full Year 2024 Q&A call. I'm Jo Russell, Head of Investor Relations. And I'm joined this morning by Brian McNamara, Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements including those refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's UK and SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed in or implied by such forward-looking statements. We have posted today's presentation on the website this morning with prepared remarks and our video running through the results in detail. So hopefully you all had the chance to see that ahead of this call. And with that, I'll go straight to opening the Q&A. Thank you, and over to Brian and Dawn.

Okay. Let's open it up for Q&A.

Thank you, Brian. [Operator Instructions] We now have a question from Guillaume Delmas from UBS. Please go ahead.

Thank you very much and good morning, Brian and Dawn. A couple of questions for me please. 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 looking at the second half, what underpins your confidence in some reacceleration? I mean, is it mostly down to the current sell-in, sell-out discrepancy that will correct or any other factors you would mention? 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 White journey as in many more opportunities of distribution expansion geographical rollout? And maybe a tricky question for you Brian, but do you think you have another Clinical White in your innovation pipeline that could be launched soon? Thank you very much.

Great. Thanks Guillaume. Thanks for the two questions. Let me take those questions. I'll ask Dawn if he has any comments on top. First of all on the performance, I think a couple of 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 less exposed to the US for cold and flu, which means we're obviously more exposed to the rest of the world. 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 release category and also emergency specifically, which is an immunity brand in the US. And that is the -- that's where that impact is. What is the confidence on the full year? We are confident and let me start there with the 4% to 6% growth. I think part of it is Guillaume, listen, the business underlying is performing well, 71% of the business gained and maintained share for the full year. We feel good about that. We feel good about the innovation we have we're launching this year. And we know that Q1 is off to a slow start because of that dynamic and also in the US. So 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. On Oral Health, just to say, Clinical White has been fantastic. We're going to roll it out in about 12 more markets this year. We've also launched clinical repair. So clinical is really a platform for us. We've launched that in Germany and three other markets. We'll launch it in more markets this year. We just launched in the US clinical enamel repair which launched in February in the US. 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 Sensodyne we saw paradontax growing healthy double digits, we saw Denture Care growing healthy double digits. It's really underpinned by strong innovation.

Thank you very much.

Yes I think just maybe three things -- three specifics just to build on that, in terms of what gives us confidence, in half 2. Brian talked about innovation. And let's be clear, innovation is working really well across all categories, whether it's Otrivin Nasal Mist, whether it's things like Centrum Silver or the daily sachets that we've launched or Centrum Essentials, Sensodyne Kids as an example. I think innovation continues to drive category growth and results in share gains. So I think that gives us confidence. I think the second piece, is route to market. So as you know, we are investing in India, in terms of our own sales force. We've also obviously, done the joint venture investment in China to enhance our route to market. So building distribution, is also a critical lever. And I think the third lever and you saw this in 2024, 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.

Thank you, both.

We now have a question from David Hayes from Jefferies. Please go ahead.

Thank you. Good morning, all. So a couple for me, one on FX and one on balance sheet, I guess. So just firstly, on FX. So obviously, you're indicated that there's still this FX headwind coming through in 2025. I think when we were talking to you and you were talking 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, and whether there's some dynamic here that means that the visibility on the FX effects is something that's difficult for you to forecast, until you're kind of right on top of where going into the period. And then in terms of balance sheet, you said £500 million share buyback reloaded. Does that leave you scope for M&A? I mean in a sense, I think with the investors is that, you've been looking for acquisitions on the other side of these divestments to tidy up the portfolio. Is that something that you'd say you are actively prospecting, if you look at deals, still even within that context? And I guess to tie it into Eroxon, 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? Thank you so much.

Okay. Thank you, David. Well, I'll start with Eroxon, make a quick comment on balance sheet and then pass it to Dawn to answer the rest. So on Eroxon, we did launch in October. 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 startup. There's 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. We're continuing to look at it and understand what happens, 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 4% to 6% guidance, going forward. So we're still very confident, on the full year. Just one comment on M&A and balance sheet is, our capital allocations are very clear, invest in 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. And if the right thing comes on, and it strengthens our portfolio, we'll absolutely have the capability and ability to do that. Dawn?

Yeah. Thanks, Brian. So if I just take your -- the currency question first. Just a few things to say on this. So I think the geographical diversification of the group represents a key strength for us and provides attractive growth opportunities. But 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 in the year what we have -- whilst 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%. 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 more 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 from revenue a 1% impact on the bottom line. The other thing to say for this year, if you remember what happened in 2024, 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 the frustration around currency. And as we 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. 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. So that's kind of the currency piece. Probably just one other thing to say on the balance sheet. Obviously, 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 GBP 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&A.

That’s great. Thank you.

[Operator Instructions] We now have a question from Rashad Kawan from Morgan Stanley. Please go ahead.

Hey, good morning, Brian. 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 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 weighted. 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. I'll take the VMS question I'll pass it to Dawn on inventory reval and the phasing 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 which was three days after Russia invaded Ukraine and the entire world changed and inflation came in. 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 sub-category, but it does have a bit of a seasonal element to it. And we certainly saw that with the extreme spikes in emergency 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 Centrum, being really the only global VMS brand in the world, in over 68 countries, fantastic footprint in China with Caltrate 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 bit of seasonality. Dawn?

Yeah. So I think in terms of first half, second half weighting two factors on that. One, we've obviously talked about the seasonality impact in terms of cough cold & flu. 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 are confident in delivering the full year guidance as we've laid out, for this year. And any lapping 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 it impacts the phasing, because it was a benefit in the first half of last year. And just to give you some context, we haven't done inventory revaluation since the demerger. So 2024, was the first year that we did it. If you think about where inflation has come from in years; 2022, 2023 inflation was higher. So obviously, it does have an impact in the year. Moving forward, this is something that we will do annually each year. And we have done in 2025 and 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 this year.

Thank you very much.

We now have a question from Chris Pitcher from Redburn. Please go ahead.

Thanks so much. A general question please. I mean, you're talking about 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 U.S.? Because we're hearing from lots of HPC companies that the shipments are perhaps lagging underlying demand. Is there something a bit more, deep seated in terms of your customers looking to save on cash? Have they become a bit more conservative on the consumer? And then a question for Dawn, there's 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 for the questions, Chris. I'll take the first question on U.S. retail environment. And then I'll pass it over to, Dawn. Listen, I think 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. They have full year results in -- at the end of February, they're managing their full 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 we're not immune to either. But ultimately, it's a seasonality impact which impacts those primarily respiratory, but there's a couple of other categories that I pointed out. Dawn?

Yeah. I think on working capital look, I think we made really good progress in 2024. We improved working capital by 13 days. As you know, a portion of that is driven by reduction in inventory. 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 optimizing, receivable days, in terms of our processes, around cash collection. And I'd say the biggest area is inventory. Whether it's around optimizing 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, I think there's actually a big opportunity across the piece and that's something that like we did in 2024, we will continue to focus on to unlock that opportunity.

Thank you.

[Operator Instructions] We now have a question from Tom Sykes from Deutsche Bank. Please go ahead.

Yes. Good morning. Thank you. A couple of questions. 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 also 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 reval, can you say anything geographically is any of that in China please? 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 and 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, et cetera?

Okay. Thanks for the question, Tom. Maybe a couple of things. Let me comment on the China JV. You had a question related to China JV, I think on inventory revaluation and if there's any impact there. And then I'll just comment, and then I'll ask Dawn to comment on that and then I'll comment on the M&A question. 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 business. The other 60% of the business we ran. We own completely, I should say. But we ran 100% of that business. The opportunity for us in owning that business, obviously, EPS accretive 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 we're frankly calling on the same customers. 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 to have with China and our portfolio in China. Maybe just throw it to Dawn. I think, Tom you were asking about the inventory revaluation has that had a specific impact on China or not?

Yes. I think maybe just a couple of things to say. I think you've -- obviously what I talked about in terms of historic impact of inflation. Remember the biggest impact of inflation was in Europe. 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 China perspective it's not that much. 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, the control environment we've got a really strong team there. We've got a strong internal audit team. So I think those would be the factors I'd highlight.

Yes. Great. Thanks, Dawn. Back on the M&A question just Tom a chance for me to just talk about -- I know you used Oral Health you used that as an example as a want not a need. I mean what we see is because these products are delivering real benefits. So you talked 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 bolt-on is something we said we're interested in. 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 any -- if there's ever a moment where there's something imminent to talk about.

Okay. Thank you.

Sorry. We currently have no further questions. So I'll hand back to the team.

Okay. Great. Listen thanks so much for joining us. I look forward to catching up on upcoming roadshows and meetings. And please feel free to reach out to our IR team with any questions. And thanks for your continued interest and support in Haleon. Have a good day.