TIDMHLN
RNS Number : 5925R
Haleon PLC
02 March 2023
2 March 2023
2022 Full year results
Twelve months ended 31 December 2022 (unaudited)
Strong growth with a healthy balance of price and positive volume/mix
-- FY Revenue +13.8% to GBP10,858m, organic growth +9.0% with 4.3%
price and 4.7% volume/mix
-- Positive Power Brand performance across the portfolio, +10.1% organic
growth
-- 2/3 of our business gained or maintained market share(1) in the
12 months ended 31 December 2022
Pricing and efficiencies offsetting inflationary pressures
-- FY Reported operating profit increased 11.4% to GBP1,825m
-- FY Adjusted operating profit increased 13.8% to GBP2,472m, up 5.9%
constant currency
-- FY Adjusted operating profit margin 22.8%, flat year on year
Continued high cash generation
-- FY net cash flow from operating activities was GBP2,063m, which
included GBP435m related to the net cash outflow from separation,
restructuring and disposals; FY 2022 Free cash flow of GBP1,579m
-- Net debt at 31 December 2022 was GBP9,868m, with 3.6x net debt/adjusted
EBITDA
-- Inaugural final dividend proposed of 2.4p per share in respect of
trading since demerger on 18 July 2022
Positive outlook for 2023(2) , settlement on majority of PPI cases
-- FY2023 organic revenue growth expected to be 4-6%
-- FY2023 adjusted operating profit margin broadly flat after adverse
transactional FX of c. 40bps
-- Settlement reached to resolve the vast majority of PPI cases (Nexium24HR
and Prevacid24HR)
-- Positioned well to deliver on medium term guidance
Brian McNamara, Chief Executive Officer, Haleon said:
"2022 was an extraordinary year for Haleon, having successfully
demerged from GSK to become the first listed company 100% focused
on consumer health. All the result of significant work and
commitment from our colleagues around the world, and I would like
to thank them for their tireless efforts and achievements.
In our first FY results, we delivered a strong performance
whilst navigating a highly volatile environment. Our organic
revenue growth of 9.0% was well balanced between volume and price,
with two thirds of the business gaining or holding share. This
performance reflected the quality of our portfolio of category
leading brands, successful innovation, and excellent execution in
market.
Our agility across the business resulted in adjusted operating
profit growth of 5.9% constant currency despite significant
inflation, standalone costs and adverse transactional FX. Strong
free cash flow generation of GBP1.6bn enabled us to de-lever and
provides us with increased confidence in reducing debt faster than
originally expected.
As a standalone company we also further developed our
Responsible Business agenda, particularly on health inclusivity and
made progress delivering on our environmental ambitions."
Adjusted results (3) Reported results
Twelve months ended
31 December 2022 vs 2021 2022 vs 2021
========= =========== ======================= ========== ========
Organic revenue growth 9.0% Revenue GBP10,858m 13.8%
Adjusted operating
profit GBP2,472m 5.9%(4) Operating profit GBP1,825m 11.4%
Adjusted operating
profit margin 22.8% (60)bps(,4) Operating profit margin 16.8% (40) bps
Adjusted diluted earnings Diluted earnings per
per share 18.4p 2.8% share 11.5p (23.8)%
Free cash flow GBP1,579m GBP406m Net cash flow from GBP2,063m GBP707m
operating activities
========= =========== ======================= ========== ========
1. Market share statements throughout this report are estimates
based on the Group's analysis of third party market data of revenue
for 2022
including IQVIA, IRI and Nielsen data. Represents % of
brand-market combinations gaining or maintaining share (this
analysis covers > 85% of
Haleon's total revenue).
2. The commentary in this announcement contain forward-looking
statements and should be read in conjunction with the cautionary
note on page 23.
3. Organic revenue growth, Adjusted operating profit, Adjusted
operating profit margin, Adjusted diluted earnings per share and
Free cash flow are
non-IFRS measures; definitions and calculations of non-IFRS
measures can be found on pages 24 to 31.
4. Change at constant currency.
Outlook
For FY 2023 the Company expects:
-- Organic revenue growth of 4-6%
-- Adjusted operating profit margin broadly flat after absorbing c.40
bps adverse transactional foreign exchange impact based on current
market rates(1)
-- Net interest expense of c. GBP350m
-- Adjusted effective tax rate of 23-24%
1. As at 10 February 2023
Haleon's evolution into an agile Consumer Health
organisation
As a standalone company we are now taking advantage of
opportunities to evolve at speed across productivity, growth and
portfolio.
-- Increasing agility and productivity across the business: We have
identified further opportunities to optimise existing processes
and structures to become more agile. This will result in annualised
gross cost savings of c. GBP300 million over the next 3 years, with
the benefits largely in FY 2024 and FY 2025. We expect to incur
c.GBP150m restructuring costs in both FY 2023 and FY 2024.
-- Growth and portfolio: We have identified further opportunities
to drive growth across our strong portfolio of brands and structural
growth categories. We will invest behind these opportunities particularly
in areas such as innovation and are targeting to grow A&P and R&D
ahead of sales. Furthermore, we will be proactive in managing our
portfolio and will remain rigorous and disciplined where there are
opportunities for bolt-on acquisitions and divestment.
Taken together, these initiatives give us the capacity to invest
and fuel our confidence in delivering 4-6% organic top line growth
whilst delivering on our guidance of sustainable moderate margin
expansion.
Update on litigation
The Group recently reached a settlement agreement with
plaintiffs' counsel to resolve the vast majority of PPI cases
(Nexium24HR and Prevacid24HR) pending against the Group. The
financial impact is included in the FY results and is not material
to the Group's financial position, results of operations or cash
flows.
Dividend
Consistent with our previous guidance, the Board is declaring a
FY 2022 dividend of 2.4 pence which represents approx. 30% of
adjusted earnings for the period since listing.
Subject to shareholder approval, this dividend will be paid on
27 April 2023 to holders of ordinary shares and US American
Depositary Shares (ADS) on the register as of 17 March 2023 (the
record date). The ex-dividend date is 16 March 2023. For ordinary
shareholders wishing to participate in the Dividend Reinvestment
Programme (DRIP), the election deadline for the DRIP is 4 April
2023.
Reflecting our stated priorities to invest into the business for
growth and reduce leverage our current intention is, subject to
Board approval, to maintain our pay-out ratio around the current
level.
Subject to Board approval, future ordinary dividends are
expected to be paid half-yearly with approximately one third of the
dividend paid as an interim dividend, following the Company's
half-year results and paid in October, and the balance paid as a
final dividend, subject to shareholder approval, following the
Company's Annual General Meeting.
Presentation for analysts and shareholders:
A recorded results presentation by Brian McNamara, Chief
Executive Officer, and Tobias Hestler, Chief Financial Officer,
will be available shortly after 7am BST (8am CET) on 2 March 2023
and can be accessed at www.haleon.com/investors. This will be
followed by a Q&A session at 9:30am GMT (10:30am CET).
For analysts and shareholders wishing to ask questions, please
use the dial-in details below which will have a Q&A
facility:
UK: 0800 640 6441
US: +1 646 664 1960
All other: +44 203 936 2999
Passcode: 77 03 05
An archived webcast of the presentation will be available later
on the day of the results and can be accessed at
https://www.haleon.com/investors/
Financial reporting calendar
Q1 2023 Trading Statement 3 May 2023
HY 2023 Results 2 August 2023
Enquiries
Investors Media
Sonya Ghobrial +44 7392 784784 Zoe Bird +44 7736 746167
Rakesh Patel +44 7552 484646 Nidaa Lone +44 7841 400607
Emma White +44 7792 750133 Louise Pyman +44 7586 495121
Email: investor-relations@haleon.com Email: corporate.media@haleon.com
About Haleon plc
Haleon (LSE/NYSE: HLN) is a global leader in consumer health,
with a purpose to deliver better everyday health with humanity.
Haleon's product portfolio spans five major categories - Oral
Health, Pain Relief, Respiratory Health, Digestive Health and
Other, and Vitamins, Minerals and Supplements (VMS). Its
long-standing brands - such as Advil, Sensodyne, Panadol, Voltaren,
Theraflu, Otrivin, Polident, parodontax and Centrum - are built on
trusted science, innovation and deep human understanding.
For more information please visit www.haleon.com
Guiding strategy
Haleon is led by its purpose to deliver better everyday health
with humanity.
A clear approach to deliver on our growth ambitions is built on
a world class portfolio of category leading brands in a growing
sector across an attractive geographic footprint. This leverages
competitive capabilities combining human understanding with trusted
science, brand building and innovation, leading route to market and
leading digital capabilities.
Haleon aims to outperform through a focus on increasing
household penetration and capitalising on new and emerging growth
opportunities across channels and geographies, underpinned by a
strong focus on execution and financial discipline to improve
profitability and sustain reinvestment in growth. Critically,
running a responsible business, which is integral to all that we
do, allows Haleon to reduce risk and support performance.
Taken together, this is expected to drive 4-6% organic annual
revenue growth, a moderate expansion in our margins while
supporting our investment for growth, delivering consistent high
cash conversion and maintaining a focus on our clear and
disciplined capital allocation policy.
Business review - Delivering growth
The strength of Haleon's portfolio resulted in 9.0% organic
growth during the year, with the growth of Power Brands ahead of
this at 10.1%. Throughout the year, Haleon's agility and strategy
to outperform continued to deliver results through market share
gains driven by increased household penetration driven by exciting
innovations and activations. Across the portfolio and in the full
year, two thirds of Haleon's business gained or maintained market
share.
Leading portfolio - performance driven by innovation, brand
building and geographic and channel expansion
In Oral Health, where revenue increased 8.6% and organic revenue
grew 5.6%, Haleon maintained its track record of market
outperformance, with sales double the growth rate of the overall
market, mainly driven by increased penetration resulting in market
share gains across the portfolio, with all 3 Power Brands
Sensodyne, parodontax and Polident/Poligrip outperforming. This
growth was driven by strong brand building campaigns and
activation, key innovations and geographic expansion. We launched a
new formula with superior cleaning with Sensodyne Complete
Protection, continued building and activating the successful
Sensodyne Sensitivity & Gum across markets. The launch of
parodontax Gum+ paste, targeting bacteria between teeth and using
technology to neutralise bad breath in over ten markets, performed
well, driving continued market share gain. The parodontax brand
geographic expansion was also supported in India and South Africa
leveraging investment in Expert marketing capability. In Dental
Appliance Care, Poligrip Power Max Hold+ with a precision nozzle
was launched in over 15 markets and is outperforming, growing the
overall category.
In Vitamins, Minerals and Supplements, Haleon continued to see
share gain with 11.6% revenue growth and 5.0% organic growth. As
expected, growth slowed in the second half as the Group lapped
tough comparatives in the US from new capacity coming on stream and
increased consumption during Covid waves in 2021. Importantly,
underlying consumption remained broadly steady through the year.
Centrum outperformed growing share driven by new engaging brand
campaigns, new benefits innovations including products centred
around immunity with more natural and herbal ingredients saw strong
growth from geographic expansion in Middle East and Latin America.
Haleon continued to build on its trusted science, reinforcing brand
differentiation, with the clinical study completed on Centrum
Silver tablets, which demonstrated positive results on cognitive
capabilities of adults 65 years and older, thereby providing a new
claim and activation for the product. The brand also saw strong
growth from geographic expansion in Middle East, LatAm, and in
India we launched the brand in H2 and there remains significant
headroom for increased penetration.
In the US, Emergen-C continued to see growth with younger and
more diverse households through innovation such as Emergen-C Kidz.
In China, a gummy innovation for Caltrate enabled the brand to
reach new younger consumers. In addition, locally relevant brands
such as Scotts, BeTotal and Calsource delivered double digit
growth.
In Pain Relief, revenue increased 14.0% and organic revenue
growth was 8.9%. A standout performer was Panadol which again
gained share and saw organic growth in the high-teens percent.
Given the prolonged and sustained cold and flu season and resulting
increased demand for the brand through agility and execution in
market the brand gained share overall. The Take care Panadol
campaign was particularly successful, launched in over 10 markets
amplifying brand activation and relevance during a key Covid
vaccination period, driving brand growth and externally recognised
with industry awards. Advil also saw strong growth benefitting from
increased market activation and consumption during the cold and flu
season. The topical market continues to see weakness largely due to
strong consumption in the systemic analgesics market. That said,
Voltaren was up low single digit overall helped by innovation
leveraging clinical data.
In Respiratory Health, revenue increased 39.5% and organic
revenue growth of 32.6% reflected the strong cold and flu season
with sales significantly above 2019 levels in North America and
Europe in Q4. Cold and flu added 3% to Group organic sales in 2022.
Theraflu was supported by innovation launches including Theraflu
Flu Relief and excellent commercial execution which enabled the
brand to meet strong demand. Allergy organic revenue was up
mid-single digit driven by Flonase and we launched a differentiated
multi-symptom formula innovation (pain reliever, antihistamine,
decongestant) Flonase Flare Up Relief designed to attract consumers
looking for rapid relief.
Digestive Health and Other saw 7.4% revenue growth with organic
revenue growth of 2.9%, this business is split across three areas,
c.50% digestive, c.25% skin health and c.25% smoking cessation
brands. Challenging conditions in the preventative antacid market
adversely impacted Nexium, although our brands in the immediate
relief antacid category (e.g. Tums) saw growth. Skin Health saw
high-single digit growth, helped by Chapstick following the
addition of a new value distribution channel. In smoking cessation
organic growth was slightly down primarily reflecting a number of
large retailers reducing inventory towards the end of the year.
Innovation accelerating growth
The focus on innovation to accelerate growth continued and we
strengthened the portfolio with new launches. During the year
locally relevant propositions were launched across several markets,
targeting a younger consumer base for whom relevance is increased
with natural based propositions. These included Robitussin
Elderberry, and Emergen-C botanicals in the US, and non-medicated
Otrivin Breathe Clean and Theraflu Pro-Naturals in Central and
Eastern Europe.
Marketing effectiveness
Haleon Advertising and Promotion (A&P) spend was up 4% at
actual exchange rates (AER) and flat at constant currency (CER) for
the year, with spend equally split between offline and online media
channels. Importantly, consumer facing A&P spend excluding
Russia was up 6% (CER) for the year. In addition, Haleon drove
further efficiencies in A&P spend from bringing production
in-house. Furthermore, spend declined in Russia.
Within our A&P spend, Haleon placed greater investment on
streaming channels, retail media (commerce) and search directed
towards e-commerce. Marketing to Healthcare professionals
strengthened, with Haleon's HealthPartner portal now live in 50
markets, having recorded over 10 million unique visitors. During
the year, a number of successful marketing campaigns supported
performance with Haleon winning multiple awards globally across
creative and design.
Increased channel penetration
Within the channels there remains an opportunity for increased
e-commerce penetration, and e-commerce grew 16% to 9% of total
sales. Improved content, optimised media, increased investment in
high traffic events as well as refreshed 'brand stores' contributed
to growth. In the US and China, Haleon's two largest e-commerce
markets, sales grew 7% and 40%, respectively. Haleon also continues
to invest in digital capabilities across the business and was
recognised for the second year in a row at the Global Search
Awards.
Supported by strong execution and financial discipline
The business remains focused on driving efficiency,
effectiveness and agility to ensure investment delivers positive
returns.
Haleon successfully separated from GSK in July 2022, including
the completion of a technology systems cut over demonstrating
strong execution and capabilities across the business, and
successfully hiring and standing up all functions needed to operate
independently. Since then, the business has operated successfully
as a standalone company, with the total costs for this of
c.GBP0.2bn incurred during the year, including costs related to
software, the majority of which are in the cloud rather than
on-premise.
The costs to run independently were partly offset by the
incremental Pfizer synergies delivered during the year, taking the
aggregate annual synergies to over GBP600m (increased from GBP500m
at the Capital Markets Day in February 2022).
The Group remains focused on maintaining an efficient business.
Initiatives to drive value from third-party expenditure and offset
headwinds from input prices and commodity inflation continue,
including forward buying, value engineering and new supplier
introduction, and initiatives to ensure continuity of supply. Over
the year, Haleon managed to largely offset significant inflationary
cost pressures particularly on raw materials through a combination
of pricing, forward buying and other initiatives. That said, an
increase in freight costs and commodity costs along with
transactional FX losses resulted in adjusted gross profit margin
across the business being down 50bps at AER to 62.4%.
Furthermore, across the business, Haleon also undertook SKU
rationalisation, improved logistics productivity through
warehousing and outbound freight consolidation which helped to
partially offset freight and distribution cost inflation.
Simultaneously, the business continued its insourcing initiatives,
improved return on investment on promotional spend and optimised
price-pack architecture across the portfolio.
At the demerger, Haleon had net debt of GBP10,707m. Strong cash
generation since the separation from GSK, resulted in net debt at
31 December 2022 of GBP9,868m, which underpins Haleon's confidence
in its expectation to de-lever rapidly to an expected level of less
than 3x net debt/Adjusted EBITDA during 2024. Following demerger,
Haleon fully repaid GBP1.5bn of its term loan through a combination
of operational cash flows and GBP0.3bn of commercial paper issuance
in H2. Net debt at 31 December 2022 included GBP75m of adverse
translation FX incurred since the demerger. As debt is largely
matched to the regions where profit is earned, there is a natural
hedge on foreign exchange movements over time. At 31 December 2022,
87% of debt was fixed with the balance being exposed to floating
rates.
To further optimise its capital structure, on 2 March 2023,
shortly after the opening of the NYSE, Haleon will announce its
intention to exercise its option to redeem at par the $300m of
Callable floating Rate Senior Notes due in 2024 on 24 March
2023.
Running a responsible business
Running a responsible business remains an integral part of our
strategy. Haleon remains committed to reducing our environmental
impact, making everyday health more inclusive, and operating with
ethical and responsible standards of conduct.
Progressing against existing environmental targets
Haleon is on track to reduce its net Scope 1 and 2 carbon
emissions by 100% by 2030 (versus its 2020 baseline). Initiatives
in 2022 included the achievements of 100% renewable electricity
across all Haleon sites which we directly control and of Haleon's
first carbon neutral site in Suzhou, China aligned with PAS 2060.
Also in 2022, Haleon has announced its ambition to achieve Net Zero
carbon emissions from source to sale by 2040 aligned to guidance
from The Climate Pledge and Race to Zero, as well as submitted its
Scope 1, 2 and 3 goals to the Science Based Targets Initiative for
verification and has registered its commitment to Net Zero.
Haleon continues to develop solutions for all product packaging
to be recycle-ready by 2025 . Healthcare packaging currently has
limited recyclability in the current waste infrastructure due to
challenges associated with the collection and sorting of small
formats. For this reason, our recycle-ready goal is a key milestone
towards making all packaging recyclable or reusable by 2030, where
safety, quality and regulations permit. Supporting initiatives in
2022 included the launch of ENO in a recycle-ready format in India.
Haleon has also launched a new mouthwash bottle for Aquafresh in
Europe that uses 20% less plastic and is recycle-ready. The
roll-out of recycle-ready toothpaste tubes also continues across
Oral Healthcare brands, with over 350 million recycle-ready
toothpaste tubes launched in market in 2022.
Opportunity to make a difference with health inclusivity
We believe that Haleon has a compelling opportunity to make a
meaningful difference to helping improve health inclusivity. Haleon
aims to empower 50 million people a year to be more included in
opportunities for better everyday health by 2025. Haleon supported
Economist Impact in its publication of the world's first Health
Inclusivity Index in October 2022. We have supported the creation
of the Index to help governments, policymakers, health
professionals, civil society organisations and other businesses
take evidence-based actions to collectively help improve health
inclusivity. By developing a deep understanding of what holds
individuals back from getting the right treatment or appropriate
level of care, we can understand and inform our own actions as
Haleon to help people be more included in better everyday
health.
An example of putting this into action is work that Haleon and
Microsoft have collaborated on to expand the functionality of the
Seeing AI app for use on our consumer healthcare product labels.
This tool helps consumers who are blind, visually impaired or have
difficulty with reading the labels of products due to low literacy
to access Haleon's product label information by scanning the
barcode of Haleon products. Consumers can hear important use and
safety information as narrated by the Seeing AI app.
Other brand initiatives focused on promoting health inclusivity
in 2022 included Theraflu's Rest and Recover Program in the US, and
Otrivin's National Schools Partnership on the 'Actions to Breathe
Cleaner' program. The World Health Organisation estimates 93% of
children are breathing polluted air every day, and the aim of
Actions to Breathe Cleaner is to promote adoption of everyday
actions that school children can take to reduce the impact of air
pollution on their health. This includes in India, where Otrivin
through the Actions to Breathe Cleaner program has provided 10,000
'pollution capture pencils' to school children. The mixture used at
the core of the pencils was made by mixing graphite with residue
collected from twenty-two air purifiers installed by Otrivin at
three schools with the poorest air quality in Bengaluru.
These examples represent only highlights of the ways our brands
are bringing focus to Health Inclusivity through direct brand
actions, support for Health Professionals and building actionable
insights through research collaborations.
Building robust corporate governance
Haleon continues to build best practice corporate governance, in
line with the requirements of a dual LSE premium listed and NYSE
listed company. Board-level governance and committees have been
established to ensure alignment with all applicable requirements of
the UK Corporate Governance Code, Sarbanes-Oxley Act and New York
Stock Exchange Listing Standards. The Group's internal and external
operational governance links in directly to the Board-level
governance, enabling rapid escalation and visibility.
Operational review
Category performance
Revenue by product category for the twelve months ended 31
December 2022:
Revenue (GBPm) Revenue change
(%)
----------------- ----------------------------------
Constant Organic
2022 2021 Reported currency(1) (1)
--------- ------ --------- ------------- --------
Oral Health 2,957 2,724 8.6% 5.8% 5.6%
VMS 1,675 1,501 11.6% 5.3% 5.0%
Pain Relief 2,551 2,237 14.0% 9.4% 8.9%
Respiratory Health 1,579 1,132 39.5% 32.6% 32.6%
Digestive Health and
Other 2,096 1,951 7.4% 0.9% 2.9%
Group revenue 10,858 9,545 13.8% 8.7% 9.0%
1. Definitions and calculations of non-IFRS measures can be
found on pages 24 to 31.
All commentary refers to organic growth performance unless
otherwise stated.
Oral Health
-- Sensodyne delivered mid-single digit revenue growth reflecting
underlying brand strength, continued innovation and strong growth
across key markets particularly India and the Middle East & Africa.
Sales in China declined mid-single digit driven by lockdown restrictions.
-- parodontax delivered high-single digit revenue growth, with low-teens
percent growth in North America. Throughout the year, consumption
supported by innovation remained strong, running at approximately
three times that of the market.
-- Denture care revenue was up high-single digit as a result of strong
growth in EMEA and LatAm driven by easing of lockdown restrictions
coinciding with strong innovation and marketing around the product.
-- In Q4 category growth was mid-single digit, with weakness in Sensodyne
in US and China offset by strong growth in India, Middle East Africa
and Brazil.
VMS
-- Centrum revenue increased mid-single digit reflecting good growth
across Asia Pacific and EMEA & LatAm
-- Emergen-C revenue was up low-single digit with consumption skewed
towards Covid related demand and benefiting from new innovations
including Emergen-C Kidz. This was despite lapping increased capacity
coming on stream in 2021.
-- Caltrate increased mid-single digit given revenue growth in China
with a volatile performance throughout the year reflecting Covid
lockdowns resulting in decreasing traffic to pharmacies.
-- In Q4 revenue declined low-single digit, with high-single digit
growth in Emergen-C and mid-single digit growth in Caltrate partly
offset the low-single digit decline in Centrum due to comparatives.
Pain Relief
-- Panadol revenue growth was up high-teens percent with double digit
growth across all three regions and particular strength in Middle
East & Africa, Australia and South East Asia and Taiwan.
-- Advil revenue growth was low-double digit benefiting from increased
incidences of Flu, Covid and RSV. The later particularly led to
strong growth and market share gains for Advil Kids in the US.
-- Low-single digit revenue growth from Voltaren with high single digit
growth in US and mid-single digit growth in China partly offset
by a decline in Germany.
-- Revenue in Q4 was up high single digit due to double digit growth
in Panadol and Fenbid, with low single digit growth in Advil and
Voltaren.
Respiratory Health
-- A strong cold and flu season, well ahead of the historically low
season in 2021 underpinned the results across all regions with sales
up c. 30% compared to 2019. This added 3% to Group revenue growth
in 2022.
-- Theraflu and Robitussin revenues were up over 50% and Otrivin was
up over 30%. Results were underpinned by a number of new innovations
including the launch of Theraflu Max in the US which drove incremental
share and penetration gain for Theraflu.
Digestive Health and Other
-- Digestive Health which is around half of this reported product category
saw growth in Eno. Smokers health revenues declined slightly and
Skin health brands were up high-single digit.
Geographical segment performance
Performance by geographical segment for the twelve months ended
31 December:
Revenue (GBPm) Revenue change (%)
----------------- -------------------------------------------------------------
Constant
2022 2021 Reported currency(1) Organic(1) Price(1) Vol/Mix(1)
--------- ------ --------- ------------- ----------- --------- -----------
North America 4,116 3,525 16.8% 5.6% 5.9% 2.9% 3.0%
EMEA and LatAm 4,270 3,877 10.1% 10.0% 10.9% 6.4% 4.5%
APAC 2,472 2,143 15.4% 11.6% 10.6% 2.6% 8.0%
--------- ------ --------- ------------- ----------- --------- -----------
Group 10,858 9,545 13.8% 8.7% 9.0% 4.3% 4.7%
1. Price and Volume/Mix are components of Organic Revenue
Growth. Definitions and calculations of non-IFRS measures can be
found on pages 24 to 31.
Adjusted operating profit by geographical segment for the twelve
months ended 31 December:
Adjusted operating YoY change YoY constant
profit (GBPm) currency(1)
--------------------- ----------- -------------
2022 2021 2022 2022
---------- --------- ----------- -------------
Group operating profit 1,825 1,638 11.4% 2.3%
Reconciling items between
adjusted operating profit
and operating profit(2) 647 534 21.2% 17.0%
---------- --------- ----------- -------------
Group Adjusted operating
profit 2,472 2,172 13.8% 5.9%
---------- --------- ----------- -------------
North America 1,070 828 29.2% 11.4%
EMEA and LatAm 977 960 1.8% 1.1%
APAC 506 461 9.8% 5.2%
Corporate and other unallocated (81) (77) 5.2% 0.0%
---------- --------- ----------- -------------
Group Adjusted operating
profit 2,472 2,172 13.8% 5.9%
---------- --------- ----------- -------------
1. Definitions and calculations of non-IFRS measures can be
found on pages 24 to 31.
2. Reconciling items for these purposes are the Adjusting Items,
which are defined under "Use of Non-IFRS Measures". A
reconciliation between Operating profit and Adjusted operating
profit is included under "Use of Non-IFRS Measures".
Adjusted operating profit margin by geographical segment for the
twelve months ended 31 December:
Adjusted operating YoY change YoY constant
profit margin currency(1)
(%)
--------------------- ----------- ---------------
2022 2021 2022 2022
---------- --------- ----------- -------------
North America 26.0% 23.5% 2.5% 1.3%
EMEA and LatAm 22.9% 24.8% (1.9)% (2.0)%
APAC 20.5% 21.5% (1.0)% (1.2)%
Group(1) 22.8% 22.8% -% (0.6)%
---------- --------- ----------- -------------
1. Definitions and calculations of non-IFRS measures can be
found on pages 24 to 31.
2. Reconciling items for these purposes are the Adjusting Items,
which are defined under "Use of Non-IFRS Measures". A
reconciliation between Operating profit and Adjusted operating
profit is included under "Use of Non-IFRS Measures".
North America
-- Revenue grew 16.8% on a reported basis. Organic revenue growth was
+5.9%, with 2.9% price and 3.0% was volume/mix. During Q4, organic
revenue growth was +1.6% with 3.0% price and (1.4)% volume/mix.
The slight decline in Volume/Mix in Q4 reflecting the lapping of
a tough comparative in 2021 where supply of Advil, Centrum and Emergen-C
was increased, reduction in retailers inventories for Sensodyne
and in Smokers Health along with a recall at Tums which has now
been resolved.
-- Oral Health - revenue flat with Sensodyne flat due to changes in
retailer inventory patterns. Consumption of Sensodyne for the year
was up mid-single digit with market share gains. Low double-digit
growth was seen in parodontax and mid-single digit growth in Denture
Care offsetting a decline in Aquafresh.
-- VMS - revenue down low-single digit with low-single digit growth
at Emergen-C offset by a modest decline at Centrum. Underlying consumption
at Centrum has remained broadly steady throughout the year and the
brand continues to see market share gains.
-- Pain Relief - High-single digit revenue growth underpinned by Advil
benefitting from price increases and market activation combined
with increased demand during periodic Covid waves. Voltaren was
up high-single digit.
-- Respiratory Health - revenue growth up mid-thirties percent underpinned
by sustained incidences of cold and flu, including some benefit
from new Covid variants with similar symptoms, and successful market
activation. During Q4, elevated incidences of Cold and Flu led to
mid-twenties percent growth across Respiratory Health, with the
Cold and Flu sales being significantly ahead of 2019 levels. Theraflu
and Robitussin were particularly strong helped by new innovations
including Theraflu Max.
-- Digestive Health and Other - revenue up low-single digit with strong
growth in Chapstick offset by mid single digit decline in Smokers
Health and a slight decline in Digestive Health.
-- Adjusted operating profit margin increased 250bps at AER to 26.0%
and by 130bps at CER. Margin expansion was driven by pricing as
well as benefits from productivity improvements, portfolio optimisation
and strong cost management. This was partially offset by commodity
and freight headwinds and costs incurred as a standalone company.
The prior year reflected a favourable comparative following site
investments and one time manufacturing write-offs.
Europe, Middle East & Africa (EMEA) and Latin America (LatAm)
-- Revenue grew 10.1% on a reported basis. Organic revenue growth was
+10.9%, with 6.4% price and 4.5% volume/mix. During Q4, organic
revenue growth was +6.8% with 8.8% price and (2.0)% volume/mix.
The decline in volume/mix in Q4 reflected declines in Russia.
-- Oral Health - high-single digit revenue growth with good parodontax
growth, robust recovery in Denture Care and continued Sensodyne
growth, up mid-single digit.
-- VMS - revenue up high-single digit driven by high-single digit growth
in Centrum supported by entry into new markets including Egypt in
November 2022 along with high single digit growth from local strategic
brands.
-- Pain Relief - mid-single digit revenue growth largely reflecting
double-digit Panadol growth.
-- Respiratory Health - revenue up low-thirties percent due to a strong
cold and flu season significantly ahead of 2019 levels. During Q4,
revenue increased high-single digit reflecting strong comparators
from prior year and higher seasonal sales in Q3.
-- Digestive Health and Other - revenue up double-digit with good results
in all categories.
-- Geographically, LatAm and the Middle East & Africa saw strong double
digit revenue growth. Additionally, Europe saw high-single digit
revenue growth in Northern Europe and Southern Europe, along with
double digit growth across Central and Eastern Europe. This was
partly offset by challenging performance in Germany, albeit with
a marked improvement during Q4.
-- Adjusted operating profit margin decreased by 190bps at AER to 22.9%
or 200bps at CER largely driven by costs incurred as a standalone
company and adverse transactional foreign exchange. Beyond this,
higher commodity and freight costs were largely offset by pricing
and operational efficiency improvements across the business.
Asia-Pacific
-- Revenue grew 15.4% on a reported basis. Organic revenue growth was
+10.6%, with 2.6% price and 8.0% volume/mix. This included a one-off
benefit of c. 1% related to separation from changes in distribution
in Vietnam. During Q4, organic revenue growth was +8.3% with 1.5%
price and 6.8% volume/mix.
-- Oral Health - high-single digit revenue growth underpinned by double
digit growth at Sensodyne. Results reflected strong growth in India,
partly offset by some weakness in China from Covid related lockdowns.
-- VMS - high-single digit revenue growth supported by strong growth
in China, South East Asia and Taiwan along with momentum following
the launch of Centrum in India. Innovations around gender-based
vitamins and probiotics contributed to growth. Caltrate continued
to see strong growth with high single digit growth in China.
-- Pain Relief - revenue growth in the twenties percent benefitting
from over twenty percent growth in Panadol with strong growth in
South East Asia and Taiwan, and Australia. Voltaren was up mid-single
digit with good growth in China.
-- Respiratory Health - rebound in cold and flu season resulted in
revenue up mid-twenties percent.
-- Digestive Health and Other - revenue slightly down due to weakness
in Smokers Health and skin health brands.
-- Performance in South-East Asia, Taiwan and India were particularly
strong during the year, up over twenty percent. Revenue in China
increased high single digit for the year reflecting softness in
the second quarter from Covid related lock downs and a progressive
recovery during the second half of the year.
-- Adjusted operating profit margin decreased by 100bps at AER to 20.5%
or 120bps at CER due to higher A&P investment and costs incurred
to be a standalone company, more than offsetting positive operating
leverage from strong revenue growth.
Summary of financial performance (unaudited)
Income statement summary
2022 2021 %
GBPm GBPm change
--------------------------------------------- ------- ------ -------
Total revenue 10,858 9,545 13.8
---------------------------------------------- ------- ------ -------
Gross profit 6,577 5,950 10.5
Adjusted gross profit(1) 6,772 6,002 12.8
---------------------------------------------- ------- ------ -------
Operating profit 1,825 1,638 11.4
Adjusted operating profit(1) 2,472 2,172 13.8
---------------------------------------------- ------- ------ -------
Profit before tax 1,618 1,636 (1.1)
Adjusted profit before tax(1) 2,265 2,170 4.4
---------------------------------------------- ------- ------ -------
Profit after tax attributed to shareholders
of the Group 1,060 1,390 (23.7)
Adjusted profit after tax attributed
to shareholders of the Group(1) 1,700 1,652 2.9
Diluted earnings per share(2)
Reported (p) 11.5 15.1 (23.8)
Adjusted(1) (p) 18.4 17.9 2.8
1. Definitions and calculations of non-IFRS measures can be
found on pages 24 to 31.
2. Earnings per share calculation for the year ended 31 December
2021 have been adjusted retrospectively as required by IAS 33
"Earnings per share" due to the increase in the number of ordinary
shares outstanding as a result of the Demerger activities that took
place in July 2022. Diluted earnings per share for the year ended
31 December 2022 has been calculated after adjusting the weighted
average number of shares used in the basic calculation to assume
the conversion of all potential dilutive shares. There were no
dilutive equity instruments for the year ended 31 December
2021.
Revenue
Revenue increased 13.8% to GBP10,858m (2021: GBP9,545m).
Favourable foreign exchange added GBP478m to total revenue, mainly
due to strengthening of the US Dollar and Chinese Renminbi against
sterling. Revenue grew 9.0% organically.
Gross profit
Reported gross profit increased by 10.5% to GBP6,577m (2021:
GBP5,950m) with gross margin down 170bps at 60.6%. Similarly,
Adjusted gross profit increased by 12.8% to GBP6,772m (2021:
GBP6,002m) with Adjusted gross margin of 62.4% (2021: 62.9%).
Adjusted gross profit growth was largely driven by pricing,
favourable mix, Pfizer synergies and ongoing supply chain and
manufacturing efficiency benefits. This was offset by higher
commodity related costs and freight cost inflation along with
transactional FX losses.
Operating profit
Operating profit increased by 11.4% to GBP1,825m (2021:
GBP1,638m) and operating profit margin decreased by 40bps to 16.8%
(2021: 17.2%). Adjusted operating profit increased by 13.8% to
GBP2,472m (2021: GBP2,172m) and Adjusted operating profit margin at
AER was flat at 22.8% and declined by 60bps at CER.
Adjusting items within operating profit totalled GBP647m in 2022
(2021: GBP534m), representing GBP41m (2021: GBP195m) of costs
related to restructuring activities associated with the Pfizer
Transaction at a reduced level as we concluded the programme,
Separation and Admission costs of GBP411m (2021: GBP278m)
represented the culmination of costs relating to separating the
business from GSK and listing. Amortisation and impairment of
GBP172m (2021: GBP16m) including Intangible amortisation of GBP43m
(2021: GBP40m) and an Impairment charge of GBP129m largely relating
to the Preparation H brand and a brand primarily sold in Ukraine.
Disposals and others totalled GBP15m expense (2021: GBP45m expense)
which included GBP20m of net gains related to the disposal of
assets and business changes, offset by other items including a
legal provision with respect to PPI litigation. Beyond this,
transaction related costs were GBP8m (2021: GBPnil).
Adjusted operating profit growth was driven by strong revenue
growth including a healthy balance of volume and price/mix,
combined with Pfizer synergies partly offset by higher commodity
related and raw material costs, freight cost inflation, incremental
costs of operating as a standalone company and increased investment
in R&D.
For the year, A&P spend was up 4% and flat at CER
representing 18.7% of revenue (2021: 20.3%). A&P spend was flat
due to scale benefits from bringing production in-house and ceasing
advertising in Russia. Consumer facing A&P spend excluding
Russia was up 6% (CER) for the year. Adjusted R&D expenditure
totalled GBP303m, up 22.2% and 16.1% at CER (2021: GBP248m) and
included the transfer of additional activities to the R&D
functions following the implementation of a new operating model in
Q4 FY21.
Net finance costs
Net finance costs increased to GBP207m, reflecting interest of
GBP258m primarily related to the issuance of GBP9.2bn in notes in
March 2022 offset partly by interest income of GBP51m mainly
related to the on-lend of funds to the GSK Group and the Pfizer
Group before the demerger.
Tax charge
The statutory tax charge of GBP499m (2021: GBP197m) represented
an effective tax rate on IFRS results of 31% (2021: 12%). The 2022
tax charge included a GBP102m non-cash charge due to the
revaluation of US deferred tax liabilities given the increase in
the blended rate of US state taxes expected to apply as a result of
the demerger. In 2021 the tax charge included a GBP164m non-cash
credit relating to an uplift in the tax basis of certain intragroup
brand transfers. The tax charge on an Adjusted basis was GBP506m
(2021: GBP469m) and the effective tax rate on an Adjusted results
basis was 22% (2021: 22%).
Net capital expenditure
Net capital expenditure of GBP292m (2021: GBP149m) included
GBP328m (2021: GBP298m) related to the purchase of PP&E and
software. Proceeds from disposals of intangible assets declined to
GBP36m (2021: GBP137m). There were no proceeds from the sale of
PP&E (2021: GBP12m).
Net debt
At 31 December 2022, the Group's net debt was GBP9,868m, which
included amounts raised as part of the pre-funding commitment for
the demerger. Net debt is calculated as follows:
As at 31 December As at 31
2022 December 2021
------------------ ---------------
GBPm GBPm
---------------------------------- ------------------ ---------------
Cash and cash equivalents 684 414
Short-term borrowings (437) (79)
Long-term borrowings (10,003) (87)
Derivative financial assets 94 17
Derivative financial liabilities (206) (19)
Net Debt (9,868) 246
----------------------------------- ------------------ ---------------
As of 31 December 2022, the Group's senior unsecured long-term
credit rating was BBB from Standard and Poor's and Baa1 from
Moody's.
CONSOLIDATED INCOME STATEMENT (unaudited)
FOR THE YEARED 31 DECEMBER
2022 2021
GBPm GBPm
------------------------------------------------- -------- --------
Revenue 10,858 9,545
Cost of sales (4,281) (3,595)
------------------------------------------------- -------- --------
Gross profit 6,577 5,950
Selling, general and administration (4,483) (4,086)
Research and development (300) (257)
Other operating income 31 31
------------------------------------------------- -------- --------
Operating profit 1,825 1,638
Finance income 51 17
Finance expense (258) (19)
------------------------------------------------- -------- --------
Net finance costs (207) (2)
Profit before tax 1,618 1,636
Income tax (499) (197)
Profit after tax for the year 1,119 1,439
------------------------------------------------- -------- --------
Profit attributable to shareholders of the Group 1,060 1,390
Profit attributable to non-controlling interests 59 49
------------------------------------------------- -------- --------
Basic earnings per share (pence)(1) 11.5 15.1
Diluted earnings per share (pence)(1) 11.5 15.1
------------------------------------------------- -------- --------
1. Earnings per share calculation for the year ended 31 December
2021 have been adjusted retrospectively as required by IAS 33
"Earnings per share" due to the increase in the number of ordinary
shares outstanding as a result of the Demerger activities that took
place in July 2022. Diluted earnings per share for the year ended
31 December 2022 has been calculated after adjusting the weighted
average number of shares used in the basic calculation to assume
the conversion of all potential dilutive shares. There were no
dilutive equity instruments for the year ended 31 December
2021.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
FOR THE YEARED 31 DECEMBER
2022 2021
GBPm GBPm
------------------------------------------------------------------------------------ ------ ------
Profit after tax for the year 1,119 1,439
Other comprehensive income/(expenses) for the year
Items that may be subsequently reclassified to income statement:
Exchange movements on overseas net assets 598 (34)
Exchange movements on overseas net assets of non-controlling interests (10) -
Fair value movements on cash flow hedges 204 11
Reclassification of cash flow hedges to income statement (18) -
Related tax on items that may be subsequently reclassified to income statement(1) (44) (2)
------------------------------------------------------------------------------------ ------ ------
Total 730 (25)
------------------------------------------------------------------------------------ ------ ------
Items that will not be reclassified to income statement:
Remeasurement gains on defined benefit plan 123 27
Related tax on items that will not be reclassified to income statement (29) (12)
------------------------------------------------------------------------------------ ------ ------
Total 94 15
------------------------------------------------------------------------------------ ------ ------
Other comprehensive income/(expenses) net of tax for the year 824 (10)
------------------------------------------------------------------------------------ ------ ------
Total comprehensive income, net of tax for the year 1,943 1,429
------------------------------------------------------------------------------------ ------ ------
Total comprehensive income for the period attributable to:
Shareholders of the Group 1,894 1,380
Non-controlling interests 49 49
------------------------------------------------------------------------------------ ------ ------
Total comprehensive income, net of tax for the year 1,943 1,429
------------------------------------------------------------------------------------ ------ ------
(1) Includes tax on fair value movements on cash flow hedges of
GBP(48) million, netted off by tax on reclassification of cash flow
hedges to the income statement of GBP4 million.
CONSOLIDATED BALANCE SHEET (unaudited)
AS AT 31 DECEMBER
2022 2021
GBPm GBPm
---------------------------------------- --------- ---------
Non-current assets
Property, plant and equipment 1,757 1,563
Right of use assets 142 99
Intangible assets 28,436 27,195
Deferred tax assets 220 312
Post-employment benefit assets 25 11
Derivative financial instruments 44 12
Other non-current assets 132 8
---------------------------------------- --------- ---------
Total non-current assets 30,756 29,200
---------------------------------------- --------- ---------
Current assets
Inventories 1,348 951
Trade and other receivables 1,881 2,207
Loan amounts owing from related parties - 1,508
Cash and cash equivalents 684 414
Derivative financial instruments 50 5
Current tax receivables 96 166
---------------------------------------- --------- ---------
Total current assets 4,059 5,251
---------------------------------------- --------- ---------
Total assets 34,815 34,451
---------------------------------------- --------- ---------
Current liabilities
Short-term borrowings (437) (79)
Trade and other payables (3,621) (3,002)
Loan amounts owing to related parties - (825)
Derivative financial instruments (31) (18)
Current tax payables (210) (202)
Short-term provisions (71) (112)
---------------------------------------- --------- ---------
Total current liabilities (4,370) (4,238)
---------------------------------------- --------- ---------
Non-current liabilities
Long-term borrowings (10,003) (87)
Deferred tax liabilities (3,601) (3,357)
Post-employment benefit obligations (161) (253)
Derivative financial instruments (175) (1)
Long-term provisions (26) (27)
Other non-current liabilities (22) (8)
---------------------------------------- --------- ---------
Total non-current liabilities (13,988) (3,733)
---------------------------------------- --------- ---------
Total liabilities (18,358) (7,971)
---------------------------------------- --------- ---------
Net assets 16,457 26,480
---------------------------------------- --------- ---------
Equity
Share capital 92 1
Share premium - -
Other reserves (11,537) (11,632)
Translation reserve 1,046 448
Retained earnings 26,730 37,538
---------------------------------------- --------- ---------
Shareholders' equity 16,331 26,355
---------------------------------------- --------- ---------
Non-controlling interests 126 125
---------------------------------------- --------- ---------
Total equity 16,457 26,480
---------------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
FOR THE YEARED 31 DECEMBER
Non-
Share Share Other Translation Retained Shareholders' controlling Total
capital premium reserves reserve earnings equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
At 1 January 2022 1 - (11,632) 448 37,538 26,355 125 26,480
Profit after tax - - - - 1,060 1,060 59 1,119
Other comprehensive
income/(expenses) - - 142 598 94 834 (10) 824
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
Total comprehensive
income - - 142 598 1,154 1,894 49 1,943
Issue of share
capital of the
former ultimate
holding company 21,758 - - - - 21,758 - 21,758
Capital reduction of
the former ultimate
holding company (21,758) - - - - (21,758) - (21,758)
Transactions between
the former ultimate
holding company and
equity shareholder - 70 - - - 70 - 70
Effect of change of
ultimate holding
company (1) (70) (47) - - (118) - (118)
Transactions with
equity shareholders - - - - (47) (47) - (47)
Distributions to
non-controlling
interests - - - - - - (48) (48)
Dividends to equity
shareholders - - - - (11,930) (11,930) - (11,930)
Issue of share
capital 11,543 10,607 - - - 22,150 - 22,150
Capital reduction (11,451) (10,607) - - - (22,058) - (22,058)
Share based
incentive plans - - - - 15 15 - 15
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
At 31 December 2022 92 - (11,537) 1,046 26,730 16,331 126 16,457
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
Non-
Share Share Other Translation Retained Shareholders' controlling Total
capital premium reserves reserve earnings equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
At 1 January 2021 1 - (11,652) 482 37,281 26,112 111 26,223
Profit after tax - - - - 1,390 1,390 49 1,439
Other comprehensive
income/(expenses) - - 9 (34) 15 (10) - (10)
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
Total comprehensive
income - - 9 (34) 1,405 1,380 49 1,429
Contribution from
parent - - 11 - - 11 - 11
Distributions to
non-controlling
interests - - - - - - (35) (35)
Dividends to equity
shareholders - - - - (1,148) (1,148) - (1,148)
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
At 31 December 2021 1 - (11,632) 448 37,538 26,355 125 26,480
-------------------- --------- --------- --------- ----------- --------- ------------- ----------- ---------
CONSOLIDATED CASH FLOW STATEMENT (unaudited)
FOR THE YEARED 31 DECEMBER
2022 2021
GBPm GBPm
-------------------------------------------------------------------------------- -------- --------
Cash flows from operating activities
Profit after tax 1,119 1,439
Taxation charge 499 197
Net finance costs 207 2
Depreciation of property, plant and equipment and right of use assets 180 174
Amortisation of intangible assets 107 94
Impairment and assets written off, net of reversals 143 1
Gain on sale of intangible assets, property, plant and equipment and businesses (30) (31)
Other non-cash movements 24 (22)
Decrease in pension and other provisions (43) (36)
Changes in working capital:
Increase in inventories (292) (17)
(Increase)/decrease in trade receivables (85) 14
Increase in trade payables 387 41
Net change in other receivables and payables 171 (190)
Taxation paid (324) (310)
-------------------------------------------------------------------------------- -------- --------
Net cash inflow from operating activities 2,063 1,356
-------------------------------------------------------------------------------- -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (304) (228)
Proceeds from sale of property, plant, and equipment - 12
Purchase of intangible assets (24) (70)
Proceeds from sale of intangible assets 36 137
Loans to related parties (9,211) -
Proceeds from settlement of amounts invested with GSK finance companies 700 100
Interest received 19 16
-------------------------------------------------------------------------------- -------- --------
Net cash outflow from investing activities (8,784) (33)
-------------------------------------------------------------------------------- -------- --------
Cash flows from financing activities
Payment of lease liabilities (45) (38)
Interest paid (163) (15)
Dividends paid to shareholders (2,682) (1,148)
Distributions to non-controlling interests (48) (35)
Contribution from parent 18 4
Repayment of borrowings (1,518) -
Proceeds from borrowings 11,004 8
Other financing cash flows 345 (12)
-------------------------------------------------------------------------------- -------- --------
Net cash inflow/(outflow) from financing activities 6,911 (1,236)
-------------------------------------------------------------------------------- -------- --------
Increase in cash and cash equivalents and bank overdrafts 190 87
-------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts at the beginning of the year 406 323
Exchange adjustments 15 (4)
Increase in cash and cash equivalents and bank overdrafts 190 87
-------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts at end of year 611 406
-------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts at the end of year comprise:
Cash and cash equivalents 684 414
Overdrafts (73) (8)
-------------------------------------------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts at end of year 611 406
-------------------------------------------------------------------------------- -------- --------
Appendix
The unaudited financial information shown in this preliminary
results announcement was approved by the Board on 01 March 2023.
The financial information set out in the preliminary results
announcement does not constitute the Group's statutory accounts for
the financial years ended 31 December 2022 or 31 December 2021. The
financial information for the year ended 31 December 2021 is
derived from the prospectus which was published on 1 June 2022. The
auditors reported on the 2021 accounts is included within the
prospectus; their report was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement
under s498(2) or (3) of the Companies Act 2006. The audit of the
Group's statutory accounts for the year ended 31 December 2022 is
not yet complete. These 2022 statutory accounts will be finalised
on the basis of the financial information presented by the Board in
this preliminary results announcement. As the 2022 statutory
accounts are the first set of consolidated financial statements of
the Group, no filings have been delivered to the UK Registrar of
Companies. The 2022 statutory accounts will be delivered to the UK
Registrar of Companies in due course.
Cautionary note regarding forward-looking statements
This document contains certain statements that are, or may be
deemed to be, "forward-looking statements" (including for purposes
of the safe harbor provisions for forward-looking statements
contained in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934). Forward-looking
statements give Haleon's current expectations and projections about
future events, including strategic initiatives and future financial
condition and performance, and so Haleon's actual results may
differ materially from what is expressed or implied by such
forward-looking statements. Forward-looking statements sometimes
use words such as "expects", "anticipates", "believes", "targets",
"plans" "intends", "aims", "projects", "indicates", "may", "might",
"will", "should", "potential", "could" and words of similar meaning
(or the negative thereof). All statements, other than statements of
historical facts, included in this presentation are forward-looking
statements. Such forward-looking statements include, but are not
limited to, statements relating to future actions, prospective
products or product approvals, delivery on strategic initiatives
(including but not limited to acquisitions and dispositions,
realisations of efficiencies and responsible business goals),
future performance or results of current and anticipated products,
sales efforts, expenses, the outcome of contingencies such as legal
proceedings, dividend payments and financial results.
Any forward-looking statements made by or on behalf of Haleon
speak only as of the date they are made and are based upon the
knowledge and information available to Haleon on the date of this
document. These forward-looking statements and views may be based
on a number of assumptions and, by their nature, involve known and
unknown risks, uncertainties and other factors because they relate
to events and depend on circumstances that may or may not occur in
the future and/or are beyond Haleon's control or precise estimate.
Such risks, uncertainties and other factors that could cause
Haleon's actual results, performance or achievements to differ
materially from those in the forward-looking statements include,
but are not limited to, those discussed under "Risk Factors" on
pages 17 to 45 of Haleon's prospectus and under "Risk Factors" in
Haleon's Registration Statement on Form 20-F. Forward-looking
statements should, therefore, be construed in light of such risk
factors and undue reliance should not be placed on forward-looking
statements.
Subject to our obligations under English and U.S. law in
relation to disclosure and ongoing information (including under the
Market Abuse Regulations, the UK Listing Rules and the Disclosure
and Transparency Rules of the Financial Conduct Authority ("FCA")),
we undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. You should, however, consult any
additional disclosures that Haleon may make in any documents which
it publishes and/or files with the SEC and take note of these
disclosures, wherever you are located.
No statement in this document is or is intended to be a profit
forecast or profit estimate.
Use of non-IFRS measures (unaudited)
We use certain alternative performance measures to make
financial, operating, and planning decisions and to evaluate and
report performance. We believe these measures provide useful
information to investors and as such, where clearly identified, we
have included certain alternative performance measures in this
document to allow investors to better analyse our business
performance and allow greater comparability. To do so, we have
excluded items affecting the comparability of period-over-period
financial performance. Adjusted Results and other non-IFRS measures
may be considered in addition to, but not as a substitute for or
superior to, information presented in accordance with IFRS.
Constant currency
The Group's reporting currency is Pounds Sterling, but the
Group's significant international operations give rise to
fluctuations in foreign exchange rates. To neutralise foreign
exchange impact and to better illustrate the change in results from
one year to the next, the Group discusses its results both on an
"as reported basis" or using actual exchange rates (AER) (local
currency results translated into Pounds Sterling at the prevailing
foreign exchange rate) and using constant currency exchange rates
(CER). To calculate results on a constant currency basis, the Group
restates current year comparatives translating the income
statements of consolidated entities from their non-Sterling
functional currencies to Pounds Sterling using prior year exchange
rates. The currencies which most influence the constant currency
results of the Group and their exchange rates are shown in the
table below.
2022 2021
---- ----
Average rates:
US$/GBP 1.24 1.38
Euro/GBP 1.17 1.16
CNY/GBP 8.31 8.86
Swiss Franc/GBP 1.18 1.25
Adjusted results
Adjusted Results comprise Adjusted gross profit, Adjusted gross
profit margin, Adjusted operating profit, Adjusted operating profit
margin, Adjusted profit before taxation, Adjusted profit after
taxation, Adjusted profit attributable to shareholders, Adjusted
basic earnings per share, Adjusted diluted earnings per share,
Adjusted cost of sales, Adjusted Selling, General and
Administration (SG&A), Adjusted Research and Development
(R&D), Adjusted other operating income, Adjusted net finance
costs, Adjusted taxation charge, and Adjusted profit attributable
to non-controlling interests. Adjusted Results exclude Net
amortisation and impairment of intangible assets, Restructuring
costs, Transaction-related costs, Separation and Admission costs,
and Disposals and other, in each case net of the impact of taxes
(where applicable) (collectively, the Adjusting Items, which are
described in Adjusting Items).
We believe that Adjusted Results, when considered together with
the Group's operating results as reported under IFRS, provide
investors, analysts and other stakeholders with helpful
complementary information to understand the financial performance
and position of the Group from period to period and allow the
Group's performance to be more easily comparable.
Adjusting items
Adjusted Results exclude the following items (net of the impact
of taxes, where applicable):
Net amortisation and impairment of intangible assets
Net impairment of intangibles, impairment of goodwill and
amortisation of acquired intangible assets, excluding computer
software. These adjustments are made to reflect the performance of
the business excluding the effect of acquisitions.
Restructuring costs
From time to time, the Group may undertake business
restructuring programmes that are structural in nature and
significant in scale. The cost associated with such programmes
includes severance and other personnel costs, professional fees,
impairments of assets, and other related items.
Transaction-related costs
Transaction-related accounting or other adjustments related to
acquisitions including deal costs and other pre-acquisition costs,
when there is certainty that an acquisition will complete. It also
includes the costs of registering and issuing debt and equity
securities and the effect of inventory revaluations on
acquisitions.
Separation and Admission costs
Costs incurred in relation to and in connection with Separation,
UK Admission registration of the Company's Ordinary Shares
represented by the Company's American Depositary Shares (ADSs)
under the Exchange Act and listing of ADSs on the NYSE (the US
Listing). These costs are not directly attributable to the sale of
the Group's products and specifically relate to the foregoing
activities, affecting comparability of the Group's financial
results in historical and future reporting periods.
Disposals and others
Includes gains and losses on disposals of assets, businesses and
tax indemnities related to business combinations, legal settlements
and judgements, the impact of changes in tax rates and tax laws on
deferred tax assets and liabilities, retained or uninsured losses
related to acts of terrorism, significant product recalls, natural
disasters and other items. These gains and losses are not directly
attributable to the sale of the Group's products and vary from
period to period, which affects comparability of the Group's
financial results. From period to period, the Group will also need
to apply judgement if items of unique nature arise that are not
specifically listed above.
The following tables set out a reconciliation between IFRS and
Adjusted Results for the years ended 31 December 2022 and 31
December 2021:
Net
amortisation
and
impairment of Separation
Transaction and Disposals
2022 IFRS intangible Restructuring -related Admission and Adjusted
GBPm Results assets(1) costs(2) costs(3) costs(4) others(5) Results
--------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Revenue 10,858 - - - - - 10,858
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Gross profit 6,577 172 19 - 4 - 6,772
Gross profit
margin % 60.6% 62.4%
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Operating profit 1,825 172 41 8 411 15 2,472
Operating profit
margin % 16.8% 22.8%
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Net finance
costs (207) - - - - - (207)
Profit before
tax 1,618 172 41 8 411 15 2,265
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Income tax (499) (37) (7) (2) (55) 94 (506)
Effective tax
rate % 31% 22%
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Profit after tax
for the year 1,119 135 34 6 356 109 1,759
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
The following table shows the adjusting items to reconcile cost
of sales to adjusted cost of sales.
Net
amortisation
and Separation
impairment of Transaction and Disposals
2022 IFRS intangible Restructuring -related Admission and Adjusted
GBPm Results assets(1) costs(2) costs(3) costs(4) others(5) Results
-------------- -------- --------------- ------------- ----------- ---------- ---------- --------
Cost of sales (4,281) 172 19 - 4 - (4,086)
--------------- -------- --------------- ------------- ----------- ---------- ---------- --------
Cost of sales (4,281) 172 19 - 4 - (4,086)
--------------- -------- --------------- ------------- ----------- ---------- ---------- --------
The following table shows the adjusting items to reconcile
operating expenses to adjusted operating expenses among the
relevant components thereof.
Net
amortisation
and
impairment Separation
of Transaction and Disposals
2022 IFRS intangible Restructuring -related Admission and Adjusted
GBPm Results assets(1) costs(2) costs(3) costs(4) others(5) Results
----------------- -------- ------------- ------------- ----------- ---------- --------- --------
Selling, general
and
administration (4,483) - 25 8 407 44 (3,999)
Research and
development (300) - (3) - - - (303)
Other operating
income/(expense) 31 - - - - (29) 2
------------------ -------- ------------- ------------- ----------- ---------- --------- --------
Operating expenses (4,752) - 22 8 407 15 (4,300)
------------------ -------- ------------- ------------- ----------- ---------- --------- --------
The following table shows the adjusting items to reconcile
diluted earnings per share to adjusted diluted earnings per
share.
Net
amortisation
and
impairment Separation
of Transaction and Disposals
IFRS intangible Restructuring -related Admission and Adjusted
2022 Results assets(1) costs(2) costs(3) costs(4) others(5) Results
------------- -------- ------------- ------------- ----------- ---------- --------- --------
Profit
attributable
to
shareholders
(GBPm) 1,060 135 34 6 356 109 1,700
Weighted
average
number of
shares
(millions) 9,239 9,239
Diluted
earnings per
share (pence) 11.5 1.4 0.4 0.1 3.8 1.2 18.4
-------------- -------- ------------- ------------- ----------- ---------- --------- --------
1. Net amortisation and impairment of intangible assets :
includes impairment of intangible assets of GBP129m and
amortisation of intangible assets excluding computer software of
GBP43m.
2. Restructuring costs: includes amounts related to business transformation activities.
3. Transaction-related costs: includes amounts related to the
acquisition of a manufacturing site.
4. Separation and Admission costs: includes amounts incurred in
relation to and in connection with the separation and listing of
the Group as a standalone business.
5. Disposals and others: includes net gains on disposals of
assets and business changes totalling GBP20m, offset by other items
including a provision with respect to PPI litigation. The tax
effect includes a GBP102m tax charge related to the revaluation of
US deferred tax liabilities due to the increase in the blended rate
of US state taxes expected to apply as a result of the
demerger.
Net
amortisation
and
impairment Separation
of Transaction and Disposals
2021 IFRS intangible Restructuring -related Admission and Adjusted
GBPm Results assets(1) costs(2) costs costs(3) others(4) Results
-------------- -------- ------------- ------------- ----------- ---------- ---------- --------
Revenue 9,545 - - - - - 9,545
--------------- -------- ------------- ------------- ----------- ---------- ---------- --------
Gross profit 5,950 8 44 - - - 6,002
Gross profit
margin % 62.3% 62.9%
--------------- -------- ------------- ------------- ----------- ---------- ---------- --------
Operating
profit 1,638 16 195 - 278 45 2,172
Operating
profit margin
% 17.2% 22.8%
--------------- -------- ------------- ------------- ----------- ---------- ---------- --------
Net finance
costs (2) - - - - - (2)
Profit before
tax 1,636 16 195 - 278 45 2,170
--------------- -------- ------------- ------------- ----------- ---------- ---------- --------
Income tax (197) 8 (36) - (47) (197) (469)
Effective tax
rate % 12% 22%
--------------- -------- ------------- ------------- ----------- ---------- ---------- --------
Profit after
tax for the
year 1,439 24 159 - 231 (152) 1,701
--------------- -------- ------------- ------------- ----------- ---------- ---------- --------
The following table shows the adjusting items to reconcile cost
of sales to adjusted cost of sales.
Net
amortisation
and Separation
impairment of Transaction and Disposals
2021 IFRS intangible Restructuring -related Admission and Adjusted
GBPm Results assets(1) costs(2) costs costs(3) others(4) Results
-------------- -------- --------------- ------------- ----------- ---------- ---------- --------
Cost of sales (3,595) 8 44 - - - (3,543)
--------------- -------- --------------- ------------- ----------- ---------- ---------- --------
Cost of sales (3,595) 8 44 - - - (3,543)
--------------- -------- --------------- ------------- ----------- ---------- ---------- --------
The following table shows the adjusting items to reconcile
operating expenses to adjusted operating expenses among the
relevant components thereof.
Net
amortisation
and
impairment Separation
of Transaction and Disposals
2021 IFRS intangible Restructuring -related Admission and Adjusted
GBPm Results assets(1) costs(2) costs costs(3) others(4) Results
----------------- -------- ------------- ------------- ----------- ---------- --------- --------
Selling, general
and
administration (4,086) - 150 - 278 76 (3,582)
Research and
development (257) 8 1 - - - (248)
Other operating
income/(expense) 31 - - - - (31) -
------------------ -------- ------------- ------------- ----------- ---------- --------- --------
Operating expenses (4,312) 8 151 - 278 45 (3,830)
------------------ -------- ------------- ------------- ----------- ---------- --------- --------
The following table shows the adjusting items to reconcile
diluted earnings per share to adjusted diluted earnings per
share.
Net
amortisation
and
impairment of Separation
Transaction and Disposals
IFRS intangible Restructuring -related Admission and Adjusted
2021 Results assets(1) costs(2) costs costs(3) others(4) Results
--------------- -------- -------------- ------------- ----------- ---------- ---------- --------
Profit
attributable to
shareholders
(GBPm) 1,390 24 159 - 231 (152) 1,652
Weighted average
number of
shares
(millions) 9,235 9,235
Diluted earnings
per share
(pence) 15.1 0.2 1.7 - 2.5 (1.6) 17.9
---------------- -------- -------------- ------------- ----------- ---------- ---------- --------
1. Net amortisation and impairment of intangible assets:
includes impairment of intangible assets of GBP12m, reversal of
impairment of GBP36m and amortisation of intangible assets
excluding computer software of GBP40m.
2. Restructuring costs: includes amounts related to business transformation activities.
3. Separation and Admission costs: includes amounts incurred in
relation to and in connection with the separation and listing of
the Group as a standalone business.
4. Disposals and others: includes net gains on disposals of
assets and businesses totalling GBP31m, offset by tax indemnities
related to business combinations and other expense items totalling
GBP76m. Income tax includes a GBP164m tax credit related to an
uplift of the tax basis of certain intra-group brand transfers.
Organic revenue growth
Organic revenue growth represents the change in organic revenue
at CER from one accounting period to the next.
Organic revenue represents revenue, as determined under IFRS but
excluding the impact of acquisitions, divestments and closures of
brands or businesses, revenue attributable to manufacturing service
agreements (MSAs) relating to divestments and the closure of sites
or brands, and the impact of currency exchange movements.
Revenue attributable to MSAs relating to divestments and
production site or brand closures has been removed from organic
revenue because these agreements are transitional and, with respect
to production site closures, include a ramp-down period in which
revenue attributable to MSAs gradually reduces several months
before the production site closes. This revenue reduces the
comparability of prior and current year revenue and is therefore
adjusted for in the calculation of organic revenue growth.
Organic revenue is calculated period-to-period as follows, with
prior year exchange rates to restate current year comparatives:
- current year organic revenue excludes revenue from brands or businesses
acquired in the current accounting period;
- current year organic revenue excludes revenue attributable to brands
or businesses acquired in the prior year from 1 January of the comparative
period to the date of completion of the acquisition;
- prior year organic revenue excludes revenue in respect of brands
or businesses divested or closed in the current accounting period
from 12 months prior to the completion of the disposal or closure
until the end of the prior accounting period;
- prior year organic revenue excludes revenue in respect of brands
or businesses divested or closed in the previous accounting period
in full; and
- prior year and current year organic revenue excludes revenue attributable
to MSAs relating to divestments and production site closures taking
place in either the current or prior year, each an Organic Adjustment.
To calculate organic revenue growth for the period, organic
revenue for the prior year is subtracted from organic revenue in
the current year and divided by organic revenue in the prior year
.
The Group believes that discussing organic revenue growth
contributes to the understanding of the Group's performance and
trends because it allows for a year-on-year comparison of revenue
in a meaningful and consistent manner.
Organic revenue growth by individual geographical segment is
further discussed by price and volume/mix changes, which are
defined as follows:
- Price : Defined as the variation in revenue attributable to changes
in prices during the period. Price excludes the impact to organic
revenue growth due to (i) the volume of products sold during the
period and (ii) the composition of products sold during the period.
Price is calculated as current year net price minus prior year net
price multiplied by current year volume. Net price is the sales
price, after deduction of any trade, cash or volume discounts that
can be reliably estimated at point of sale. Value added tax and
other sales taxes are excluded from the net price.
- Volume/Mix: Defined as the variation in revenue attributable to
changes in volumes and composition of products in the period.
The following tables reconcile reported revenue growth for the
years ended 31 December 2022 and 31 December 2021 to organic
revenue growth for the same period by geographical segment and by
product category.
Geographical Segments
---------------------------------
North EMEA and
2022 vs 2021 (%) America LatAm APAC Total
------------------------------ ------- -------- ------ ------
Revenue Growth 16.8 10.1 15.4 13.8
Organic Adjustments of which: 0.3 0.9 (1.0) 0.2
Effect of Acquisitions - - (1.1) (0.3)
Effect of Disposals 0.1 0.4 - 0.2
Effect of MSAs 0.2 0.5 0.1 0.3
Effect of Exchange Rates (11.2) (0.1) (3.8) (5.0)
Organic Revenue Growth 5.9 10.9 10.6 9.0
------------------------------- ------- -------- ------ ------
Price 2.9 6.4 2.6 4.3
Volume/Mix 3.0 4.5 8.0 4.7
------------------------------- ------- -------- ------ ------
Geographical Segments
---------------------------------
North EMEA and
2021 vs 2020 (%) America LatAm APAC Total
------------------------------ ------- -------- ------ ------
Revenue Growth (6.7) (4.5) 4.3 (3.5)
Organic Adjustments of which: 2.4 3.4 2.0 2.7
Effect of Acquisitions - - - -
Effect of Disposals 2.5 3.1 2.2 2.7
Effect of MSAs (0.1) 0.3 (0.2) -
Effect of Exchange Rates 5.6 4.6 2.8 4.6
Organic Revenue Growth 1.3 3.5 9.1 3.8
------------------------------- ------- -------- ------ ------
Price 2.2
Volume/Mix 1.6
------------------------------- ------- -------- ------ ------
Product Categories
-------------------------------------------------------
Digestive
Oral Pain Respiratory Health and
2022 vs 2021 (%) Health VMS Relief Health Other Total
------------------------------ ------ ------ ------ ----------- ---------- ------
Revenue Growth 8.6 11.6 14.0 39.5 7.4 13.8
Organic Adjustments of which: (0.3) (0.2) (0.4) - 2.2 0.2
Effect of Acquisitions (0.3) (0.3) (0.5) - - (0.3)
Effect of Disposals - 0.1 0.1 - 0.8 0.2
Effect of MSAs - - - - 1.4 0.3
Effect of Exchange Rates (2.7) (6.4) (4.7) (6.9) (6.7) (5.0)
Organic Revenue Growth 5.6 5.0 8.9 32.6 2.9 9.0
------------------------------- ------ ------ ------ ----------- ---------- ------
Product Categories
-----------------------------------------------------
Digestive
Oral Pain Respiratory Health and
2021 vs 2020 (%) Health VMS Relief Health Other Total
------------------------------ ------ ---- ------ ----------- ---------- ------
Revenue Growth (0.8) 0.5 2.1 (12.8) (9.8) (3.5)
Organic Adjustments of which: - 0.3 0.3 6.4 7.6 2.7
Effect of Acquisitions - - - - - -
Effect of Disposals - 0.3 0.3 6.4 7.5 2.7
Effect of MSAs - - - - 0.1 -
Effect of Exchange Rates 5.2 3.4 4.1 4.6 5.3 4.6
Organic Revenue Growth 4.4 4.2 6.5 (1.8) 3.1 3.8
------------------------------- ------ ---- ------ ----------- ---------- ------
Adjusted EBITDA
Adjusted EBITDA is calculated as Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA) after adding back items
impacting the comparability of period over period financial
performance. Adjusted EBITDA does not reflect cash expenditures, or
future requirements for capital expenditures or contractual
commitments. Further, adjusted EBITDA does not reflect changes in,
or cash requirements for, working capital needs, and although
depreciation and amortisation are non-cash charges, the assets
being depreciated and amortised are likely to be replaced in the
future and adjusted EBITDA does not reflect cash requirements for
such replacements.
The reconciliation between profit after tax for the year and
Adjusted EBITDA for the years ended 31 December 2022 and 31
December 2021 is provided below:
GBPm 2022 2021
-------------------------------------------------------------------------------------------------- ------ ------
Profit After Tax 1,119 1,439
Add Back: Income tax 499 197
-------------------------------------------------------------------------------------------------- ------ ------
Less: Finance Income (51) (17)
Add Back: Finance Expense 258 19
-------------------------------------------------------------------------------------------------- ------ ------
Operating Profit 1,825 1,638
-------------------------------------------------------------------------------------------------- ------ ------
Net amortisation and impairment of intangible assets 172 16
Restructuring costs 41 195
Transaction-related costs 8 -
Separation and Admission costs 411 278
Disposals and others 15 45
-------------------------------------------------------------------------------------------------- ------ ------
Adjusted Operating Profit 2,472 2,172
-------------------------------------------------------------------------------------------------- ------ ------
Add Back: Depreciation of property, plant and equipment 142 139
Add Back: Depreciation of rights of use assets 38 35
Add Back: Amortisation of computer software 64 54
Add Back: Impairment of property, plant and equipment, rights of use assets and computer software
net of impairment reversals 14 13
-------------------------------------------------------------------------------------------------- ------ ------
Adjusted EBITDA 2,730 2,413
-------------------------------------------------------------------------------------------------- ------ ------
Free cash flow
Free cash flow is calculated as net cash inflow from operating
activities plus cash inflows from the sale of intangible assets,
the sale of property, plant and equipment and interest received,
less cash outflows for the purchase of intangible assets, the
purchase of property, plant and equipment, distributions to
non-controlling interests and interest paid.
We believe free cash flow is meaningful to investors because it
is the measure of the funds generated by the Group available for
distribution of dividends, repayment of debt or to fund the Group's
strategic initiatives, including acquisitions. The purpose of
presenting free cash flow is to indicate the ongoing cash
generation within the control of the Group after taking account of
the necessary cash expenditures for maintaining the capital and
operating structure of the Group (in the form of payments of
interest, corporate taxation and capital expenditure).
The reconciliation of net cash inflow from operating activities
to free cash flow for the years ended 31 December 2022 and 31
December 2021 is provided below:
GBPm 2022 2021
-------------------------------------------------- ------ ------
Net cash inflow from operating activities 2,063 1,356
Less: Net capital expenditure (292) (149)
Less: Distributions to non-controlling interests (48) (35)
Less: Interest paid (163) (15)
Add: Interest received 19 16
-------------------------------------------------- ------ ------
Free cash flow 1,579 1,173
-------------------------------------------------- ------ ------
1. Refer to Net capital expenditure for calculation.
Free cash flow conversion
Free cash flow conversion is calculated as free cash flow, as
defined above, divided by profit after tax. Free cash flow
conversion is used by management to evaluate the cash generation of
the business relative to its profit, by measuring the proportion of
profit after tax that is converted into free cash flow as defined
above.
The reconciliation of free cash flow conversion for the years
ended 31 December 2022 and 31 December 2021 is provided below.
2022 2021
------ ------
Free cash flow (GBPm) 1,579 1,173
Reported profit after tax (GBPm) 1,119 1,439
---------------------------------- ------ ------
Free cash flow conversion (%) 141% 82%
---------------------------------- ------ ------
Net capital expenditure
Net capital expenditure includes purchases net of sales of
property, plant and equipment and other intangible assets. Net
capital expenditure is used by management to measure capital
invested in the operating activities of the Group's business. The
reconciliation of net capital expenditure for the years ended 31
December 2022 and 31 December 2021 is provided below:
GBPm 2022 2021
----------------------------------------------------- ------ ------
Purchase of property, plant and equipment (304) (228)
Proceeds from sale of property, plant and equipment - 12
Purchase of intangible assets (24) (70)
Proceeds from sale of intangible assets 36 137
----------------------------------------------------- ------ ------
Net capital expenditure (292) (149)
----------------------------------------------------- ------ ------
Net debt
Net debt at a period end is calculated as short-term borrowings
(including bank overdrafts and short-term lease liabilities),
long-term borrowings (including long-term lease liabilities), and
derivative financial liabilities less cash and cash equivalents and
derivative financial assets.
We analyse the key cash flow items driving the movement in net
debt to understand and assess cash performance and utilisation in
order to maximise the efficiency with which resources are
allocated. The analysis of cash movements in net debt allows
management to more clearly identify the level of cash generated
from operations that remains available for distribution after
servicing the Group's debt. In addition, the ratio of net debt to
adjusted EBITDA is used by investors, analysts and credit rating
agencies to analyse our operating performance in the context of
targeted financial leverage.
The reconciliation of net debt to the different balance sheet
items as at 31 December 2022 and 31 December 2021 is provided
below.
GBPm 2022 2021
---------------------------------- --------- -----
Short-term borrowings (437) (79)
Long-term borrowings (10,003) (87)
Derivative financial liabilities (206) (19)
Cash and cash equivalents 684 414
Derivative financial assets 94 17
---------------------------------- --------- -----
Net Debt(1) (9,868) 246
---------------------------------- --------- -----
1. The sum of the Group's cash and cash equivalents and
derivative financial assets exceeded the sum of its short-term
borrowings, long-term borrowings and derivative financial
liabilities as at the year ended 31 December 2021 (a net cash
position).
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END
FR EAEDFEAADEAA
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March 02, 2023 02:00 ET (07:00 GMT)
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