Haleon plc: Q1 2023 Trading Statement
Business context and reporting period
Haleon plc, a global consumer-health company, filed a Form 6-K containing its unaudited trading statement for the three months ended 31 March 2023. Its portfolio spans Oral Health, VMS, Pain Relief, Respiratory Health, Digestive Health and Other. The comparable period is Q1 2022.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | £2,986m | £2,627m | +13.7% reported; +9.9% organic |
| Gross profit | £1,840m | £1,613m | +14.1% |
| Operating profit | £627m | £466m | +34.5% |
| Operating margin | 21.0% | 17.7% | +330 bps |
| Adjusted operating profit | £691m | £631m | +9.5% reported; +3.3% constant currency |
| Adjusted operating margin | 23.1% | 24.0% | -90 bps reported; -140 bps constant currency |
| Profit before tax | £542m | £465m | +16.6% |
| Profit after tax | £415m | £357m | +16.2% |
| Basic EPS | 4.2p | 3.7p | +13.5% |
Net finance costs increased substantially to £85m from £1m, primarily reflecting the company’s standalone post-demerger structure. The filing does not provide Q1 cash flow, debt balances, liquidity balances or leverage ratios.
Revenue drivers and material changes
- Growth was supported by price increases of 7.1% and positive volume/mix of 2.8%. Positive volume/mix was reported across all regions despite annualising the prior-year ERP cutover and distribution-model effects.
- By category, Respiratory Health grew 33.0% organically, Pain Relief 11.0%, Digestive Health and Other 7.3%, and Oral Health 6.6%. VMS declined 3.7% organically, largely because of a difficult Emergen-C comparison in North America following strong Q1 2022 COVID-related demand.
- By region, organic growth was 13.1% in EMEA and LatAm, 11.7% in APAC and 5.1% in North America. APAC benefited from post-lockdown growth in China, while EMEA and LatAm included pricing benefits in high-inflation markets, particularly Turkey and Argentina.
- Reported operating profit benefited from a large reduction in separation and admission costs, which fell to £32m from £127m. Adjusted profit was supported by operational leverage and efficiencies but partly offset by higher standalone costs and adverse transactional foreign exchange.
- Finance expense rose to £95m from £8m, contributing to the increase in net finance costs.
Guidance, outlook and risks
Management maintained its FY 2023 outlook and expects organic revenue growth toward the upper end of the previously provided 4% to 6% range, assuming spot foreign-exchange rates as of 21 April 2023 are sustained. Other FY 2023 guidance from the 2 March 2023 full-year results remains unchanged.
Management cited brand strength, innovation and cost discipline as sources of confidence. Relevant uncertainties include inflation and cost pressures, foreign-exchange movements, the sustainability of respiratory demand and China-related recovery, difficult VMS and COVID-related comparisons, standalone operating costs, and execution following the demerger. The filing refers investors to the risk factors in Haleon’s 2022 Annual Report and Form 20-F. Forward-looking statements are subject to material risks and are not profit forecasts.
Investor verification points
- Verify the company’s Q1 cash generation, debt balances, liquidity and leverage in the half-year or full-year financial statements, as these are not provided in this trading statement.
- Assess whether pricing can offset inflation without weakening volume, mix or consumer demand.
- Monitor the durability of Respiratory Health growth, China’s post-lockdown recovery and the normalisation of restocking benefits.
- Track VMS performance, particularly Emergen-C, against the strong Q1 2022 comparison.
- Reconcile reported and adjusted profit, including separation, restructuring, amortisation, transaction and disposal-related items.
- Evaluate the effect of higher standalone costs, interest expense and transactional foreign exchange on full-year margins and earnings.