Haleon plc — Q3 2023 Trading Statement
Filing: Form 6-K filed November 2, 2023. The unaudited trading statement covers the three and nine months ended September 30, 2023. Haleon is a global consumer-health company operating across Oral Health, VMS, Pain Relief, Respiratory Health, and Digestive Health and Other.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Reported revenue | £2,798m | £2,892m | £8,536m | £8,080m |
| Reported revenue growth | (3.3)% | — | 5.6% | — |
| Organic revenue growth | 5.0% | — | 8.5% | — |
| Operating profit | £584m | £569m | £1,725m | £1,469m |
| Operating margin | 20.9% | 19.7% | 20.2% | 18.2% |
| Adjusted operating profit | £689m | £725m | £1,960m | £1,916m |
| Adjusted operating margin | 24.6% | 25.1% | 23.0% | 23.7% |
| Profit after tax | £374m | £365m | £1,104m | £909m |
| Profit attributable to shareholders | £365m | £345m | £1,052m | £862m |
| Basic EPS | Not provided | Not provided | 11.4p | 9.3p |
Q3 organic growth comprised 6.6% price growth and a 1.6% volume/mix decline. Nine-month organic growth comprised 7.2% price growth and 1.3% volume/mix growth. Q3 adjusted operating profit grew 8.8% at constant currency, while reported adjusted operating profit declined 5.0% because of foreign-exchange effects. The filing does not provide cash flow, debt, cash balance, or liquidity figures.
Material changes versus the prior comparable period
- Q3 reported revenue declined 3.3%, but organic revenue increased 5.0%; nine-month reported revenue increased 5.6% and organic revenue increased 8.5%.
- Q3 operating profit increased 2.6% and operating margin expanded 120 basis points. Nine-month operating profit increased 17.4% and margin expanded 200 basis points.
- Q3 adjusted operating margin increased 90 basis points at constant currency but declined 50 basis points on a reported basis. Nine-month adjusted margin increased 10 basis points at constant currency but declined 70 basis points on a reported basis.
- Power Brands delivered strong growth: Q3 organic revenue increased 9.3% and nine-month organic revenue increased 9.8%.
- Q3 category performance was led by Oral Health at 9.4% organic growth, followed by Pain Relief at 6.2%, Respiratory Health at 4.2%, VMS at 1.4%, and Digestive Health and Other at 0.9%.
- Q3 regional organic growth was 10.8% in EMEA and LatAm, 5.9% in APAC, and negative 1.5% in North America.
- North American volume/mix was adversely affected by one-off retailer inventory adjustments in Digestive Health and Other and the expected decline in Emergen-C. Management stated that, excluding these factors, Q3 volume/mix would have been flat.
- Nine-month net finance costs increased to £269m from £110m, although profit after tax increased to £1,104m from £909m.
Guidance, outlook, risks, and unusual items
- FY 2023 guidance was reiterated: organic revenue growth of 7%–8%; adjusted operating profit growth of 9%–11% at constant currency; net interest expense of approximately £350m; and an adjusted effective tax rate of 23%–24%.
- Based on spot rates at September 30, 2023, Haleon estimated a negative foreign-exchange impact of approximately 3.5% on FY 2023 revenue and 6%–6.5% on adjusted operating profit.
- The Lamisil disposal to Karo Healthcare AB completed on October 31, 2023. Management expects the disposal to be slightly dilutive to FY 2023 constant-currency adjusted operating profit growth and to dilute adjusted operating margin in 2024, with the productivity program expected to offset the 2024 impact.
- Management cited uncertain economic and geopolitical conditions, competitive markets, foreign exchange, volume/mix pressure, normalization of post-pandemic demand, and retailer inventory adjustments as relevant considerations.
- The productivity program was described as progressing well and remaining on track. Adjusted results exclude amortization and impairment of intangible assets, restructuring, transaction-related, separation and admission, and disposal-related items.
- The filing contains forward-looking statements subject to the risk factors in Haleon’s 2022 Annual Report and Form 20-F. The filing states that its outlook is not a profit forecast or estimate.
Important facts for investors to verify
- Reconcile reported and organic performance, including the effects of currency, pricing, retailer inventory adjustments, Emergen-C normalization, and volume/mix.
- Assess whether the 7%–8% organic revenue and 9%–11% adjusted operating profit guidance remains achievable as pricing moderates and volumes develop.
- Review the impact of the completed Lamisil disposal on 2024 margins and adjusted operating profit.
- Examine debt balances, interest-rate exposure, cash generation, liquidity, and covenant headroom, which are not provided in this trading statement.
- Evaluate the sustainability of reported profit growth after adjusting for non-IFRS items and the reduction in separation and admission costs.
- Monitor North American demand, inventory normalization, competitive conditions, foreign-exchange movements, and economic and geopolitical risks.