Haleon H1 2025 Earnings Report

Haleon EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.24
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Haleon Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $7.48 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Haleon Announcement Details

• Quarter: H1 2025
• Date: 8/7/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 4:30AM ET

Haleon (NYSE:HLN) plc, together with its subsidiaries, engages in the research, development, manufacture, and sale of various consumer healthcare products in North America, Europe, the Middle East, Africa, Latin America, and the Asia Pacific. The company provides oral health products, such as toothpastes, mouth washes, and denture care products under the Sensodyne, Polident, Parodontax, Biotene brands; and vitamins, minerals, and supplements under Centrum, Emergen-C, Caltrate brands. It also offers various over-the-counter products comprising nasal drops, and cold, flu, and allergy relief products under Otrivine, Theraflu, and Flonase brands for respiratory issues; anti-inflammatory and pain relief products under Voltaren, Panadol, and Advil brands; and antacids and antihistamine products under TUMS, ENO, and Fenistil brands for digestive health and other issues. The company was formerly known as DRVW 2022 plc and changed its name to Haleon plc in February 2022. Haleon plc was founded in 1715 and is headquartered in Weybridge, the United Kingdom.

Haleon H1 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: North America organic sales fell ~2% in Q2 with volumes down 1.8%, driven by consumer trade-down in smoking cessation, retailer destocking and inventory cuts, and continued pressure is expected in H2.
• Positive Sentiment: EMEA, Latin America and APAC delivered organic sales growth within the 4–6% target range, with Q2 volume growth acceleration and a 160 bps gross margin expansion boosting high single‐digit EBIT growth.
• Positive Sentiment: Advertising & Promotion spend rose to 20.8% of sales (up 130 bps) to support innovations, key markets (e.g., India, Central Europe, China) and expert recommendations, driving a 4% improvement in ROI.
• Neutral Sentiment: Advil and Centrum lost US share in H1, prompting new media campaigns, product claims (e.g., “slows cognitive aging by 60%”), innovations and a US Women’s Soccer partnership to target H2 recovery.
• Positive Sentiment: Halion reaffirmed medium-term targets of 4–6% organic sales growth and high single-digit operating profit growth, powered by supply-chain productivity gains and strong cash flow.

Presentation

[Jo Russell, Head - IR at Haleon]

Good morning, everyone, and welcome to Halion's Half Year twenty twenty five Results Q and A Conference Call. I'm Joe 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. 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.

[Jo Russell, Head - IR at Haleon]

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 and A, and I'll hand back to the operator.

[Operator]

Thank Our first question comes from Guillaume Delmas from UBS. So

[Guillaume Delmas, Equity Research Analyst at UBS Group]

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?

[Guillaume Delmas, Equity Research Analyst at UBS Group]

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 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 and P, increased significantly in the first half. I think it was up 130 basis points.

[Guillaume Delmas, Equity Research Analyst at UBS Group]

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 and 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? Thank you very much.

[Brian McNamara, CEO & Executive Director at Haleon]

Thanks, Guillaume. Appreciate the questions. Let me take the first one on North America, and I'll pass it to Don for the second question. And maybe just as I get into North America, we do feel good about EMEALATAM 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.

[Brian McNamara, CEO & Executive Director at Haleon]

But there's no doubt that North America has been a challenge. And maybe if you step back, 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 in certain categories. And smoking cessation is definitely one of them.

[Brian McNamara, CEO & Executive Director at Haleon]

I talked about it in the past. This is a 30 to $40 price point range. So we are seeing trade down in that category. Outside of that, we're not seeing trade down overall in the business. And that has been a drag on growth.

[Brian McNamara, CEO & Executive Director at Haleon]

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 ecom. Now I'd say in all cases, are we have strong presence in those channels. And I've talked about ecom 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.

[Brian McNamara, CEO & Executive Director at Haleon]

But I think everybody, all retailers in The US 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 a half percent and our consumption is slightly up about a half percent. 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 Tons and Benefiber are doing extremely well.

[Brian McNamara, CEO & Executive Director at Haleon]

But overall, we're not satisfied And we have a bit mixed performance in pain release 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.

[Brian McNamara, CEO & Executive Director at Haleon]

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, the back half of Q2, were we were back to share growth on Advil. Now on ZMS, we have two brands, Emergency and Centrum.

[Brian McNamara, CEO & Executive Director at Haleon]

On Emergency, we continue to see really strong consumption and and share gains. Now sales were up low single digits. Emergency was one of the brands that at the end of last year when we saw that very low cold influences in December, we started the year with a bit of higher inventories. But overall, the brand's very healthy. Centrum's been a challenge. Now overall on Centrum, really good growth. Mid single digit growth outside The US, high single digit growth in q two outside The US, but we saw declines in The US.

[Brian McNamara, CEO & Executive Director at Haleon]

Now a year ago is when we first activated our cognitive claims on Centrum Silver and we grew high teens consumption about four times 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 activating, reactivating the Sentrum Silver with a new claim, slows cognitive aging by 60%.

[Brian McNamara, CEO & Executive Director at Haleon]

Some innovations in The US on Sentrum in the back half. And we have a new partnership with US 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 and the whole environment. We want to more proactively manage that with them going forward.

[Brian McNamara, CEO & Executive Director at Haleon]

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 US 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 US. Really, really pleased with oral health in The US where we gained a half a 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.

[Brian McNamara, CEO & Executive Director at Haleon]

Why don't I pass it to Dawn to talk about A and P?

[Dawn Allen, CFO & Director at Haleon]

Yes. Thanks, Guillaume. Good morning, everyone. So I think the first thing to say is, as we laid Capital Markets Day, we have significant opportunity in supply chain productivity. And you saw that come through in the half.

[Dawn Allen, CFO & Director at Haleon]

And the benefit that's come through in gross margin has enabled us to continue to invest in A and P and R and D. And that provides the flexibility and agility that we talked about across the p and l. So in terms of if I focus then on A and P. So A and P is up 6.8% in the half to 20.8%. And we are leveraging A and 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.

[Dawn Allen, CFO & Director at Haleon]

And if I think about from an innovation perspective, you know, we we've been rolling out very successful innovation, particularly around our clinical range, nasal mist on Otrabin, and Panadol dual action. So the first area that we that has we've been focusing on in terms of spend is around supporting the innovations. 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 and also in China. And, obviously, experts and our, you know, recommendation by expert for our brands is a critical part, and that's the other area of our investment.

[Dawn Allen, CFO & Director at Haleon]

So but I 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.

[Dawn Allen, CFO & Director at Haleon]

If I look to the second half, I would expect us to continue a similar shape, and I would expect us to continue to invest across those areas that I talked about in terms of our A and P.

[Guillaume Delmas, Equity Research Analyst at UBS Group]

Thank you very much.

[Operator]

Thank you. Our next question comes from Rashaad Khawan from Morgan Stanley. Your line is now open. Please go ahead.

[Rashad Kawan, Equity Analyst at Morgan Stanley]

Hey, good morning, Brian and thanks for taking my questions. A couple for me please. 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.

[Rashad Kawan, Equity Analyst at Morgan Stanley]

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 costs from retailers continued more so than you expected, Smoker's 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.

[Rashad Kawan, Equity Analyst at Morgan Stanley]

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 to think of where we want to be is somewhere in the 60% range. Is that the right way to think about it longer term? Thank you.

[Brian McNamara, CEO & Executive Director at Haleon]

Thanks, Rasad. 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. If you remember last year, we did reduce and 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.

[Brian McNamara, CEO & Executive Director at Haleon]

We haven't talked about that yet, but that has an impact on us that Flonase is a pretty significant brand in The US environment. So, you know, Q3 needs to deal with that base on sell in. And the reality is the environment is uncertain. The environment is difficult in The US and the retailer environment and the stock and trade. And to be clear, I don't think our stock and trade levels are at are too high from historical or or verse tiers, but it's really the retailers tightly managing that as they're struggling with things like foot traffic and and sales growth and things in that difficult that difficult environment.

[Brian McNamara, CEO & Executive Director at Haleon]

And then the second question? Yeah. Gain to maintain share. Apologize. Yeah.

[Brian McNamara, CEO & Executive Director at Haleon]

No. Thank you, Rashad. So last year, we had a very strong result at 71%. I think I said it it was a fantastic result. I think I said at the time, well, listen, my objective and ambition is always to maximize that number to be clear.

[Brian McNamara, CEO & Executive Director at Haleon]

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 wanna 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 is the two that I talked about both in The US. Advil grew share for full year last year in twenty twenty twenty twenty four.

[Brian McNamara, CEO & Executive Director at Haleon]

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 q two, but this is the 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 kinda stabilize that in the back half.

[Brian McNamara, CEO & Executive Director at Haleon]

But those are two big things with those two growing share. Obviously, we would be well in the 60% range. But again, we wanna 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.

[Operator]

Our next question comes from Callum Elliott from Bernstein.

[Callum Elliott, Senior Analyst at Bernstein]

Perfect. Good morning, everyone. Thanks for the questions. I wanted to start with The U. S.

[Callum Elliott, Senior Analyst at Bernstein]

Again, hoping that we can talk about the retailer environment, which you called 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?

[Callum Elliott, Senior Analyst at Bernstein]

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 Halion 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.

[Callum Elliott, Senior Analyst at Bernstein]

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 deprioritize some of these 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? Thank you.

[Brian McNamara, CEO & Executive Director at Haleon]

Thanks, Hal. I appreciate the questions. Let me start first on The U. S. Retailer environment.

[Brian McNamara, CEO & Executive Director at Haleon]

Listen, we're like most companies that Walmart is our number one customer in The U. S. And roughly a quarter 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.

[Brian McNamara, CEO & Executive Director at Haleon]

And then it cascades down from there for all the big companies. Listen, in the end, what we own and control and need actively do is is perform and deliver market deliver share in The US. And also drive market growth. Listen, we are category leaders. So part of our role is to is, you know, while the market is is struggling a bit, part of our role is to grow those markets.

[Brian McNamara, CEO & Executive Director at Haleon]

And and 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.

[Brian McNamara, CEO & Executive Director at Haleon]

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 US is 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 you know, long consumer packs we're doing in India, the 20 rupee Sensidime pack. And we'll be launching more more SKUs on Sensidime as we look at the balance of the year and the next year, know, Centrum Recharge in India, you know, our Ken Rupee pack in India, our Our launch in Brazil that we talked about at Capital Markets Day at Somrador, which is our foray into systemic pain relief there with low income offering.

[Brian McNamara, CEO & Executive Director at Haleon]

So that continues to be there. The innovation led premiumization has always been core to our strategy and we're gonna continue doing it. And then core penetration is all about closing the sensitive gap. So listen, we're staying very committed to what we said at Capital Markets Day on the growth side till medium term, we will be where we need to be. Productivity, is the other thing I laid out at Capital Markets Day, I feel really, really good about our progress, to be honest with you.

[Brian McNamara, CEO & Executive Director at Haleon]

We had talked at Capital Markets Day, the reduction of SKUs that we did in 2024 that we weren't starting from zero. 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, gives us an awful lot of flexibility on how we can manage the P and L while we're facing a bit of growth headwinds in The U. S.

[Callum Elliott, Senior Analyst at Bernstein]

Thank you very much.

[Operator]

Thank you. Our next question is from Celine Panetti from JPMorgan. Your line is now open. Please go ahead.

[Celine Pannuti, Managing Director at JP Morgan]

Thank you. Good morning, everyone. 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.

[Celine Pannuti, Managing Director at JP Morgan]

I presume for this year, we'll land around 1%. So three years of 1% volume mix, what gives you confidence that you can deliver 4% to 6% in the midterm? I think we would 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.

[Celine Pannuti, Managing Director at JP Morgan]

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.

[Brian McNamara, CEO & Executive Director at Haleon]

Thank you. Listen, I'll answer the first question. I'll pass it to Dawn on the question about EMEALATAM. So listen, if you look unpick our results a little bit. If you look at EMEALATAM, volume growth accelerated from a half a point in q one to 1.6% in q two.

[Brian McNamara, CEO & Executive Director at Haleon]

In Asia Pac, volume mix accelerated from 3.3 to 3.9%. So if you and and but we were point 8%, you are correct, in the half. And that's completely linked to the dynamics and the challenges we're seeing in The US. US volume was down 1.8% in q two. So and point six in the in the half.

[Brian McNamara, CEO & Executive Director at Haleon]

So no question that we see the challenges and we're on it in The US 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 US as of May 1. I feel great about 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 in 2026. And I'm I'm absolutely continue to be confident on our medium term guidance. Dawn?

[Dawn Allen, CFO & Director at Haleon]

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, two thirds 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.

[Dawn Allen, CFO & Director at Haleon]

If I look over the last three years in Asia Pac, our growth is actually 4.6%. So actually, that, you know, it's very strong. It's consistent. If you look at EMEALATAM, again, improving trajectory in q two versus q one. If I look to the balance of the year, we'd expect a more balanced price volume mix growth.

[Dawn Allen, CFO & Director at Haleon]

And actually, you know, if you look over the last three years, you know, we've we've been seeing that trend in in that region in terms of volume growth. To Brian's point, you know, we talked about we've talked about the the situation in The US 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 it is to do with The US, 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.

[Dawn Allen, CFO & Director at Haleon]

Actually, we're we're seeing a good we're seeing a good performance. We're seeing high single digit growth in Central Europe, mid single digit growth in what, you know, what you might call kind of Continental or 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.

[Dawn Allen, CFO & Director at Haleon]

Actually, it's, you know, it's a core it's a core driver of that. And we've talked about some of the innovations, the successful innovations across the regions.

[Celine Pannuti, Managing Director at JP Morgan]

Thank you. May 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, like if you think about the my question about volume midterm, I mean, 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?

[Brian McNamara, CEO & Executive Director at Haleon]

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 specifically in The U. S. The gross margin improvement and with the leverage in the P and L has allowed us to invest in A and P and R and D in a healthy way and still drop the organic operating process to the bottom line.

[Brian McNamara, CEO & Executive Director at Haleon]

Obviously, still have a drag of a couple 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 tenant of the opportunity we have in productivity, which is coming through.

[Celine Pannuti, Managing Director at JP Morgan]

Excellent. Thank you.

[Operator]

Thank you. Our next question is from Warren Ackerman from Barclays. Your line is now open. Please go ahead.

[Warren Ackerman, MD and head of EU Consumer Staples Research at Barclays Investment Bank]

Yes. Hi, Brian, Dawn, Joe. It's Warren here, Barclays. Sorry, some of these have been asked. I had a few technicals.

[Warren Ackerman, MD and head of EU Consumer Staples Research at Barclays Investment Bank]

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 interested to get any perspective on that specific brand. And then secondly, on Smoker's Health, are you able to tell us how big it is in The U.

[Warren Ackerman, MD and head of EU Consumer Staples Research at Barclays Investment Bank]

S? And what your expectations are for Smoker's 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? Thanks.

[Brian McNamara, CEO & Executive Director at Haleon]

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 the 71% And that was a vista of strength as we exited the year and it gave us brought us into share growth for the full year.

[Brian McNamara, CEO & Executive Director at Haleon]

But it's been a bit up and down without question. The green shoots that we're seeing are, listen, we've we've we've had new new media campaign that was strong promotional plans in the back half. You know, we feel like we feel good about Advil and what we're be. Listen, if there's no question, this has been a battle with Kenview on Tylenol on Tylenol, which I said in the past. It is one thing that was working well for them and they doubled down.

[Brian McNamara, CEO & Executive Director at Haleon]

But we feel good about our brand and we feel good about the plans we have in the back half. Smoker's health for us is a couple 100,000,000 kind of business for us, that kind of range. Listen, we're we're looking at it. We expect that in the back half, you know, as we look at our at our plans that we'll see less decline in the back half on Smoker's Health. But we're not at a point where we think we'll get that back to growth.

[Brian McNamara, CEO & Executive Director at Haleon]

And because we don't expect much change in The US consumer environment, if that changes, then something would be different. We also do have an innovation on smokers' health, a dual layered tablet that we have FDA approval on. It will launch in ecommerce in the back half and a dual 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 can help us there. And then what was the third question?

[Brian McNamara, CEO & Executive Director at Haleon]

Oh, Sentrum. Apologize. Listen, on Sentrum, couple of things. I mentioned the new claim. Again, one of the things that drove Centrum tremendously in The US last year was the Centrum Silver claim we had on cognition.

[Brian McNamara, CEO & Executive Director at Haleon]

We're reactivating with the 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 a very big a very big topic for consumers in that in that cohort.

[Brian McNamara, CEO & Executive Director at Haleon]

So we have that. We do have a couple innovations that are going out. I won't talk specific of them because I don't think they've been announced to the the market, but a couple things that we think will also help firm up. And and listen, it's it's a big focus for us. Like I said, Centrum is a great brand.

[Brian McNamara, CEO & Executive Director at Haleon]

It's doing quite well outside The US, but clearly facing headwinds in The US on a base of tremendous performance a year ago. But again, we wanna grow despite what the base is, to be clear. So that's that's a big focus for us going forward.

[Warren Ackerman, MD and head of EU Consumer Staples Research at Barclays Investment Bank]

Thank you.

[Operator]

Thank you. Our next question comes from David Hayes from Jefferies. Your line is now open. Please go ahead.

[David Hayes, Managing Director at Jefferies]

Thank you. Good morning all. So a couple from last one on 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?

[David Hayes, Managing Director at Jefferies]

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 KenView 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?

[David Hayes, Managing Director at Jefferies]

And then given the partnership structure, is that why you've kept this business in The U. S. Whereas obviously you've exited to Europe? Is this something you're kind of stuck with? Or could we just see it as it could go at some point?

[David Hayes, Managing Director at Jefferies]

And then the margin question was just on putting it all together high single digit on organic, the FX and the M and A dynamics. Is the guide effectively for flattish margin year on year on a headline reported basis? Is that the right kind of conclusion? Thank you so much.

[Brian McNamara, CEO & Executive Director at Haleon]

Thanks for the question, 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.

[Brian McNamara, CEO & Executive Director at Haleon]

There's a part of it is with Apella. And Pella has a joint venture with Apella. And then KenView is a supplier of Nicorette. As you know, Nicorette is a brand that KenView owns outside of The US. So there there are supplier on that business and there is a three way partnership there.

[Brian McNamara, CEO & Executive Director at Haleon]

So listen, it's a category that's quite difficult to innovate in, if I'm being as I'm being honest with The innovation that we're gonna do, that we 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 we'll continue to do what we need to to get the growth. Listen, it plays a really important role to be honest with you with consumers and the healthcare systems and things like that. So but it is a complicated ownership structure to say the least. Dawn?

[Dawn Allen, CFO & Director at Haleon]

Yes. So let me just give you some specifics on Smoker's Health first. So to Brian's point, it is about 5%, six percent of S. Business.

[Dawn Allen, CFO & Director at Haleon]

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 of it has a disproportionate impact. That's the first thing to say.

[Dawn Allen, CFO & Director at Haleon]

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 of 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 and p and r and d, good cost control in g and a, you know, 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 in gross margin, investment in A and 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, you know, we've given we've given the guidance on FX, m and a, interest and tax remain unchanged.

[Dawn Allen, CFO & Director at Haleon]

So when you put it all when you put all of that together, I would say that we are comfortable where consensus is today.

[David Hayes, Managing Director at Jefferies]

Thank you. And just on the full year, I mean, looks like NRT, to your point, is fifty, sixty basis points of headwind. So that I know you just want to take out bits that aren't going well and getting to that game. But I guess it would be fair to say that without that, you'd be close you'd around a four, I guess, to the guidance point going down to 3.5. Is that a fair conclusion?

[Brian McNamara, CEO & Executive Director at Haleon]

Well, listen, I think, Dave, 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 in 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.

[David Hayes, Managing Director at Jefferies]

Okay. Got it. Thank you so much.

[Operator]

Thank you. Our next question comes from Tom Sykes from Deutsche Bank. Your line is now open. Please go ahead.

[Tom Sykes, MD - Equity Research at Deutsche Bank]

Good morning. Sorry to bang on about The U. S. Retailer trends again. But I think so there's obviously two issues.

[Tom Sykes, MD - Equity Research at Deutsche Bank]

One is the stock levels per channel and then another is the channel shift. So if the headwinds you've got at the moment, would you be able to split the volume headwinds between channels for the destocking and the channel shift? Because Amazon, I think, in your scanner sales has grown by over 30% the last twelve 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.

[Tom Sykes, MD - Equity Research at Deutsche Bank]

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, 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.

[Brian McNamara, CEO & Executive Director at Haleon]

Yes. Thanks for the questions, Tom. So listen, destocking by channel in The U. 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.

[Brian McNamara, CEO & Executive Director at Haleon]

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 twenties on in bricks and mortars and and more like 28 on Amazon.

[Brian McNamara, CEO & Executive Director at Haleon]

So as we see more move to there, we're moving to a channel with higher share. So I think it'd be hard to break down exactly, but I think the bigger impact is the downward pressure as retailers in The US 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. If I think about other countries, to be honest with you, know, we think about pharmacies in Europe. In Mainland Europe, 70% of our business goes through pharmacies.

[Brian McNamara, CEO & Executive Director at Haleon]

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 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.

[Brian McNamara, CEO & Executive Director at Haleon]

Sometimes our our pharmacy channel and us, and distributors in general are are are pretty good at at managing inventory levels and things like that. So, you know, I think that's really the the dynamic, I think, is very different, in The US than, let's say, in Mainland Europe where the the pharmacy model is, is just very different.

[Tom Sykes, MD - Equity Research at Deutsche Bank]

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

[Brian McNamara, CEO & Executive Director at Haleon]

No. Listen, it's on balance. So I look at ecom on a global basis and I look at that. It's all relatively similar. And it's all within our outlook and guidance.

[Brian McNamara, CEO & Executive Director at Haleon]

We expect that ecom will continue to grow. And by the way, Amazon is becoming less and less a piece of that as omnichannels become more important. Walmart, we're really strong in walmart.com and that's grown well. That's all within the context of our outlook and the medium term guidance we gave.

[Tom Sykes, MD - Equity Research at Deutsche Bank]

Okay. Thank you.

[Operator]

Thank you. Our next question comes from Oliver Nikolay from Goldman Sachs. Line is now open. Please go ahead.

[Olivier Nicolaï, Head - Consumer Staples Research at Goldman Sachs]

Hi, good morning, Ryan, Don and Joanna. Just one question on my side actually. Going back to The U. S. Performance for VMS and for respiratory health.

[Olivier Nicolaï, Head - Consumer Staples Research at Goldman Sachs]

Would you say that you are losing share against private labels? Or is it more against other branded players?

[Brian McNamara, CEO & Executive Director at Haleon]

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 is a move to private label. Frankly, we're primarily the branded player in The US. So that would be private label.

[Brian McNamara, CEO & Executive Director at Haleon]

In in the MS, it's it's probably more competitive pressures that we see. And again, where we gained significant share a year ago, some of that we are 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 in the down market.

[Brian McNamara, CEO & Executive Director at Haleon]

So it's really about the smoking business which is a down trade.

[Olivier Nicolaï, Head - Consumer Staples Research at Goldman Sachs]

Thank you.

[Operator]

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

[Brian McNamara, CEO & Executive Director at Haleon]

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

Participants

Executives

• Jo Russell, Head - IR
• Brian McNamara, CEO & Executive Director
• Dawn Allen, CFO & Director

Analysts

• Guillaume Delmas, Equity Research Analyst at UBS Group
• Rashad Kawan, Equity Analyst at Morgan Stanley
• Callum Elliott, Senior Analyst at Bernstein
• Celine Pannuti, Managing Director at JP Morgan
• Warren Ackerman, MD and head of EU Consumer Staples Research at Barclays Investment Bank
• David Hayes, Managing Director at Jefferies
• Tom Sykes, MD - Equity Research at Deutsche Bank
• Olivier Nicolaï, Head - Consumer Staples Research at Goldman Sachs