Annual Report and Form 20-F 2023
We are a global leader in the growing consumer healthcare market:
£
190
bn
Market
1
5
Global categories
1
9
Power Brands
£
11.3
bn
Revenue
Haleon
at a glance
Our strategy:
Our strategy is designed to leverage our portfolio and capabilities
and has four key pillars:
1
Increase
household
penetration
2
Capitalise on
new and emerging
opportunities
3
Maintain strong
execution and
financial discipline
4
Run a responsible
business
Medium-term
financial guidance:
Annual organic revenue
2
growth of 4-6%
Organic operating
profit
2
growth ahead of
organic revenue
2
growth
Net debt/adjusted
EBITDA
2
expected to be
around 2.5x. Dividend to
grow at least in line with
adjusted earnings
Leadership position across five global categories
1,3
:
Over-the-Counter (OTC)
Oral Health
Vitamins, Minerals
and Supplements
(VMS)
Pain Relief
Respiratory
Health
Digestive Health
and Other
28
%
of 2023 revenue
15
%
of 2023 revenue
23
%
of 2023 revenue
15
%
of 2023 revenue
19
%
of 2023 revenue
1
Source: Nicholas Hall (2023) and Haleon’s analysis of third-party market data.
2
Definitions and calculations of non-IFRS measures can be found from page 43.
3
Oral Health market position refers to Therapeutic Oral Health which comprises c.90% of 2023 Oral Health revenues.
Photographs
Our front cover proudly
features Haleon employees
Charlene, Michael, Patricia,
Chehrazade, Alfonso
and Beatriz.
Throughout our Report you
will also find a selection of
imagery featuring some of our
brand marketing campaigns,
responsible business
initiatives and employees.
We extend our thanks to
all of those featured.
What’s
inside
Consolidated Financial Statements
Statement of Directors’
responsibilities
98
Independent auditor’s report
99
Reports of independent registered
public accounting firms
112
Consolidated income statement
116
Consolidated statement of
comprehensive income
117
Consolidated balance sheet
118
Consolidated statement of
changes in equity
119
Consolidated cash flow statement
120
Notes to the Consolidated
Financial Statements
121
Parent Company Financial Statements
Parent Company balance sheet
178
Parent Company statement of
changes in equity
179
Notes to the Parent Company
Financial Statements
180
Other Information
Directors’ Report
186
Group information
191
Shareholder information
208
Exhibits
212
Form 20-F cross-reference
214
Forward-looking statements
218
Glossary
219
Useful information
220
Strategic Report
2023 highlights
2
Chair’s statement
4
Chief Executive Officer’s review
5
Our business environment
6
Our business model
8
Our key stakeholders
10
Our strategy
12
Our market categories
13
Our culture and people
18
Our approach to sustainability
22
Our key performance indicators
32
2023 Business review
34
Use of non-IFRS measures
43
Our approach to risk
53
Viability statement
59
Statement of compliance
60
Corporate Governance
Our Board of Directors
62
Our Executive Team
64
Letter from the Chair
66
Governance structure
67
Board activities
68
Audit & Risk Committee Report
72
Environmental & Social
Sustainability Committee Report
77
Nominations & Governance
Committee Report
78
Directors’ Remuneration Report
80
Compliance with the UK Corporate
Governance Code
96
>>
See page 10
Suppliers
Investors
Health
Professionals
Governments and
industry regulators
Employees
Customers
Consumers
Our key stakeholders
Our approach to reporting
Integrated reporting
In addition to our shares being listed on the London Stock Exchange (LSE), Haleon
is a foreign private issuer (FPI) with American Depositary Shares (ADSs) listed on the
New York Stock Exchange (NYSE). We have produced a combined Annual Report
and Form 20-F to ensure consistency of information for both UK and US investors.
This Report contains disclosures required to meet both regulatory regimes.
The Report also includes non-IFRS measures, which we believe provide investors
and other stakeholders with important additional information about the
Company’s performance. Where used, they are indicated.
External websites and/or reports that are referred to in this Report are not
incorporated into and do not form part of this Report.
>>
Relevant policies are available on our website
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
Haleon
Annual Report and Form 20-F 2023
1
What’s inside
2023
highlights
Revenue
Revenue growth
Organic revenue growth
1
£
11.3
bn
4.1
%
8.0
%
(2022: £10.9bn)
(2022: 13.8%)
(2022: 9.0%)
Operating profit
Operating profit margin
Operating profit growth
£
2.0
bn
17.7
%
9.4
%
(2022: £1.8bn)
(2022: 16.8%)
(2022: 11.4%)
Adjusted operating profit
1
Adjusted operating
profit margin
1
Organic operating
profit growth
1
£
2.5
bn
22.6
%
10.8
%
(2022: £2.5bn)
(2022: 22.8%)
(2022: 5.9%)
Diluted earnings per share
Adjusted diluted earnings
per share
1
Total dividend
per ordinary share
2
11.3
p
17.3
p
6.0
p
(2022: 11.5p)
(2022: 18.4p)
(2022: 2.4p)
Net cash inflow from operating
activities
Free cash flow
1
Net debt/adjusted EBITDA
1
£
2.1
bn
£
1.6
bn
3.0
x
(2022: £2.1bn)
(2022: £1.6bn)
(3.6x as at 31 December 2022)
1
We use certain non-IFRS alternative performance measures to provide additional information about the Company’s performance. Non-IFRS measures may be considered in
addition to, but not as a substitute for or superior to, information presented in accordance with IFRS. Non-IFRS measures are defined and reconciled to the nearest IFRS measure,
see from page 43 for more details.
2
Includes the interim dividend of 1.8p paid on 5 October 2023, and the proposed final dividend of 4.2p per ordinary share. The total dividend represents a payout ratio of c.35%
of adjusted earnings (2022: c.30%). For 2022, the payout ratio reflects a proportion of adjusted earnings for the period since listing.
Revenue by geography
North America
£4.2bn
37%
EMEA & LatAm
£4.5bn
40%
APAC
£2.6bn
23%
Revenue by market category
Oral Health
£3.1bn
28%
VMS
£1.6bn
15%
Pain Relief
£2.7bn
23%
Respiratory Health
£1.7bn
15%
Digestive Health and Other £2.1bn
19%
Haleon
Annual Report and Form 20-F 2023
2
Strategic Report
Driving growth
through innovation
In 2023, we launched 68 new innovations, including Sensodyne
Pronamel Active Shield and Sensodyne Sensitivity & Gum,
which were named as the top two innovations in the US
toothpaste market. New packaging innovations included
Otrivin Nasal Mist, which dispenses a fine mist to bring
greater comfort to consumers.
68
new innovations
Evolving into an agile
consumer health company
During 2023, Haleon introduced a three-year productivity programme.
We took proactive steps to streamline the business by optimising
our processes and structures, and removing duplication across
functions. This is expected to deliver annualised gross
cost savings of c.£300m, largely in 2024 and 2025.
c.£
300
m
annualised gross cost savings
Health inclusivity
During 2023, in line with our purpose and responsible business
goals, we leveraged our brands to empower over 41m people
globally by helping to break down the barriers to health inclusivity
for marginalised groups. For example, our ‘Advil Pain Equity Project’
in the US championed equitable and accessible pain relief,
by highlighting pain inequity in Black communities.
41
m+
people empowered
Proactively managing
our portfolio
To reduce complexity across the business, we disposed of Lamisil
for £235m and recently announced the disposal of ChapStick for
$430m. This included receiving a passive minority stake in Suave
Brands Company (valued at $80m at the time of the transaction),
allowing Haleon to derive long-term value creation from ChapStick.
We also reached a licensing agreement with Futura Medical to
exclusively commercialise the first FDA approved topical
erectile dysfunction treatment for OTC use in the US.
£
0.6
bn
proceeds from announced disposals
Haleon
Annual Report and Form 20-F 2023
3
Strategic Report
2023 highlights
Chair’s
statement
Sir Dave Lewis
Chair
2023: a year of delivering everyday
health with humanity
2023 marked our first full calendar year
as a standalone business, during which
we made good progress in establishing
our position as a world-leading global
consumer health company, with strong
foundations to support long-term growth.
While we recognise we have much
more to achieve, it was good to see
the business demonstrate continued
momentum. We delivered meaningful
progress across all elements of our
strategy to drive sustainable growth and
shareholder returns, giving us confidence
that we are on the right course to achieve
medium and long-term success.
The transformation into a global
consumer health company continues
and the Board and I were encouraged
by visits to Haleon’s regional operations.
The opportunities ahead of Haleon
are significant.
Strong financial performance
Haleon’s financial performance is
driven by deep human understanding
and investment in trusted science,
coupled with strong execution and
financial discipline.
By harnessing these competitive
advantages, Haleon achieved organic
revenue growth of 8.0% (reported 4.1%),
ahead of our medium-term guidance.
Adjusted operating profit at constant
currency also grew strongly at 10.4%
(reported operating profit +9.4%).
Consistent with the priorities set out
at the time of listing, we have rapidly
de-levered to 3.0x net debt/adjusted
EBITDA as at 31 December 2023. Strong
cash generation enabled us to accelerate
debt repayment and we now expect to
operate at leverage of around 2.5x over
the medium-term. This underpinned our
decision to announce a capital allocation
of £500m for share buybacks in 2024.
Dividend
The Board is proposing a total dividend of
6.0p per ordinary share which represents
a pay-out ratio of approximately 35% of
2023 adjusted earnings. This includes a
final dividend of 4.2p per ordinary share.
In line with our capital allocation
priorities to invest for growth, explore
acquisitions and return surplus capital
to shareholders, our current intention
is to grow the dividend at least inline
with adjusted earnings.
Importance of governance,
purpose and culture
One of my priorities as Chair is to ensure
Haleon’s continued commitment to good
corporate governance, which supports
both our purpose and culture.
During 2023, we actively engaged with,
and responded to, UK regulatory
consultations on corporate governance,
reporting and disclosure reforms.
Our first digitally enabled AGM was held
in April 2023. We will continue to embrace
technology to maximise participation,
and will broadcast this year’s AGM from
Haleon’s offices in London.
We also embedded the Environmental
& Social Sustainability Committee,
which is focused on providing oversight
and effective governance over Haleon’s
environmental and social sustainability
agenda, and the external governance
and regulatory requirements relevant to
these areas. This included approving a
baseline year update for our virgin
plastic and Scope 3 carbon reduction
goals from 2020 to 2022, to align with
better data availability and accuracy.
Further progress was also made in
ensuring that our growth correlates with
our sustainability goals. For example,
70% of packaging for Haleon products
is recycle-ready, so we remain on track to
make all packaging recyclable or reusable
by 2030. We have also taken steps to
further enhance our safeguards around
modern slavery and the protection of
human rights, as they relate to Haleon’s
operations around the world.
In terms of building our culture, we
continued to embed our diversity,
equity and inclusion (DEI) principles
across the business, with a focus on
ethnicity and gender.
Priorities for 2024
The Board considers the following to
be our priorities for the year ahead:
—
Increasing agility and productivity
across the business, by continuing
to optimise and evolve existing
processes and structures.
—
Driving performance quality, by
focusing on the strategic pillars
which underpin our business.
—
Creating shareholder value through
effective capital allocation to
maximise shareholder returns.
—
Continued focus on strong corporate
governance and ethical behaviours.
T
hank you
On behalf of the Board, I would like to
thank the Executive Team and all Haleon
employees globally for their hard work
throughout the year. Their dedication has
enabled the business to achieve strong
financial performance, while delivering
on our strategic objectives and building
strong foundations for the future.
While we are pleased with the progress
made to date, we look forward to building
on these foundations and delivering
on future growth opportunities in 2024,
and beyond.
Haleon
Annual Report and Form 20-F 2023
4
Strategic Report
Chief Executive
Officer’s
review
Brian McNamara
Chief Executive Officer
Building a track-record for growth
I am very pleased with Haleon’s
performance in 2023, which despite the
challenging economic backdrop, saw
Haleon deliver strong financial results;
a testament to the strength of our
category-leading brands.
During the year, we advanced our ambition
to become more dynamic and agile, driven
by our purpose to deliver better everyday
health with humanity. As I reflect on
2023 and look to 2024 and beyond, I am
confident about our ability to continue
building a business that creates value
for all our stakeholders.
Our strategy is delivering
In 2023, we delivered organic revenue
growth of 8.0% (reported 4.1%), and
adjusted operating profit growth of 10.4%
at constant currency (reported operating
profit +9.4%). Importantly, this was
underpinned by growth in both price
and volume, reflecting the quality and
resilience of our brands. Haleon continued
to drive consumer preference, with 58% of
our brands maintaining or growing market
share. We also maintained our attractive
financial profile, delivering free cash flow
of £1.6bn, enabling us to de-lever faster
than expected to 3.0x leverage as at
31 December 2023.
Strong delivery against
strategic pillars
Our four strategic pillars underpin our
growth ambitions. Highlights last
year included:
—
Increasing household penetration,
with market share gains for many
of our category-leading brands.
Sensodyne performed well, as more
consumers sought the therapeutic
benefits of the brand’s sensitivity
toothpastes. For example, Sensodyne
Sensitivity & Gum and Sensodyne
Pronamel Active Shield were named
as the top two innovations in the US
toothpaste market. Panadol also
performed well, boosted by
addressing specialist need states
such as migraine and body pain.
—
Capitalising on new and emerging
opportunities, by innovating and
delivering our brands to more consumers
in more markets, and increasing channel
penetration. For example, we expanded
the Centrum global footprint by entering
new markets in Sweden, the Middle East
and Africa. Our e-commerce sales also
grew, increasing 17% over the year to
account for 10% of total sales globally.
—
Maintaining strong execution and
financial discipline, with operating
profit growing ahead of revenue
growth in 2023, delivering margin
expansion at constant currency and
positive operational leverage.
—
Running a responsible business, with
the business making good progress
against its ethical standards,
environmental and health inclusivity
goals. During 2023, we empowered over
41m people to be more included in
opportunities for better everyday health.
We met our aim for producing 1bn
recycle-ready toothpaste tubes two
years ahead of schedule and were
recognised by the Dow Jones
Sustainability Index Europe 2023.
We also progressed our Diversity,
Equity and Inclusion (DEI) ambitions,
including the launch of our diverse
talent programme.
Building a more agile and
dynamic business
We are focused on ensuring that Haleon
is best placed to deliver consistent
outperformance over the long-term. As an
independent company, we have a unique
opportunity to re-evaluate how the
business operates, ensuring we deliver
as effectively and efficiently as possible.
Our three-year productivity programme
is on track, delivering efficiencies and
greater agility, while supporting continued
investment. The programme is expected
to result in gross annualised cost savings
of c.£300m, largely in 2024 and 2025, with
around one third of the benefit expected
in 2024 and the remainder in 2025.
We also continue to actively manage our
portfolio, exploring opportunities for
divestments and bolt-on acquisitions that
offer strategic and commercial benefits.
Recent examples include the completion
of the Lamisil disposal in October 2023
and the disposal of ChapStick announced
in January 2024. These divestments
allow us to reduce complexity and
focus on higher growth brands, while
providing optionality in capital allocation,
consistent with the allocation of £500m
for share buybacks in 2024, announced
with full-year results.
Changes to our leadership team
During the year, we continued to
build our Executive Team to ensure the
right mix of capabilities and experience to
drive Haleon’s future growth and success.
Namrata Patel was appointed as Chief
Supply Chain Officer, together with
Ed Petter as Chief Corporate Affairs
Officer, and Björn Timelin as Head of
Strategy. Each bring strong leadership
credentials and experience with global
consumer-facing companies.
Confidence in delivering
on growth ambitions
I am confident in the strength of our
business and brand portfolio and
remain committed to our medium-term
growth targets. During 2024, we expect
to deliver organic revenue growth of
4-6% and organic profit growth ahead
of revenue growth. Together with our
focus on continued strong cash
generation and effective capital
allocation, we expect to drive value and
attractive returns for our shareholders.
Thank you
I’d like to thank all Haleon employees
for their enormous contribution during
a period of significant transformation.
I’m incredibly proud to work with such
a talented and dedicated global team.
On behalf of the Executive Team, I’d also
like to thank the Board for their ongoing
support and guidance.
Haleon
Annual Report and Form 20-F 2023
5
Strategic Report
Chief Executive Officer’s review
Consumer healthcare market 2018-2022 (£bn)
1
Oral Health
VMS
OTC
(inc. Pain Relief,
Respiratory Health,
Digestive Health and Other)
0
20
40
60
80
100
120
140
160
180
200
2018
2019
2020
2021
2022
Strong global market share positions
1
Peer 1
Peer 2
Peer 3
Peer 4
6.4
5.9
3.8
3.7
3.2
Top 5
23.0%
£100bn
OTC market
Peer 1
Peer 2
Peer 3
Peer 4
24.1
17.3
10.7
5.7
4.7
Top 5
62.5%
£28bn
Oral Care market
#1
in
Therapeutic
Oral Health
Our business environment
Industry overview and
competitive landscape
The global consumer healthcare market is one of the largest,
most resilient and fastest-growing segments across the consumer
staples space, reaching £190bn
1
in global value.
The definition of consumer healthcare
varies across competitors and industry
data sources. We define it as consisting
of Oral Health, VMS and OTC. The US is the
largest market, representing over 25%
1
of
the total market, with emerging markets,
notably China, India and Brazil, presenting
attractive penetration opportunities.
Brands differentiate through scientific
claims, innovation, premiumisation and
distinguished branding. The Oral Health
market is relatively consolidated with the
top five players making up nearly 65%
1
of the market. Haleon is the third largest
competitor in this market with approximately
11%
1
market share, though is the number
one player in Therapeutic Oral Health with
c.50%
1
market share in this sub-category.
VMS, in contrast, is highly fragmented, with
the largest player having approximately
3%
1
market share. Haleon is amongst the
largest players though market definitions
can significantly vary to include, amongst
others, food and sports nutrition
alongside multivitamins.
The OTC category is distinct, defined
primarily by its regulated status. OTC
medicines are available in retail distribution
channels (including pharmacies) without
prescription. OTC comprises several
categories defined by specific consumer
needs, with competition at category level.
These include, amongst others, Respiratory
Health, Pain Relief, Digestive Health, Skin
Health and Smokers’ Health. Respiratory
Health is the category most impacted by
seasonal demand which is heightened
from October to January in North America
and Europe from elevated flu incidences,
which are typical during that period.
Broader industry dynamics
Historically, large consumer health
businesses have existed as divisions
within a larger pharmaceutical group.
Haleon’s history reflects this, having
been formed by the combination of
three consumer health businesses over
the last decade, and prior to its listing
in 2022, being part of GSK. There is an
increasing trend in the sector for parent
pharmaceutical companies to consider
improving shareholder value via a
demerger of consumer health divisions.
In 2023, the former consumer health
division of Johnson & Johnson separated
to form a new listed consumer health
business, Kenvue. Additionally, Sanofi
announced in 2023 its intention to
separate its consumer health division via
the creation of a publicly listed company.
Other businesses in the sector include
Bayer, Church & Dwight, Colgate-Palmolive,
Nestle, Proctor & Gamble, Reckitt, and
Unilever, along with local players.
The overall consumer health industry is
highly competitive. Haleon has been able
to differentiate itself through its purpose,
driving innovation, supported by
investment in scientific and commercial
capabilities, technology and digital.
>>
See also our business model on page 8.
1
Source: Nicholas Hall (2023) and Haleon analysis of
third-party data.
Haleon
Annual Report and Form 20-F 2023
6
Strategic Report
Market
drivers
The consumer health industry has attractive fundamentals. Understanding the
environment and influences upon it informs our strategy, which allows us to be prepared
for, and respond to, change in the market, and drive long-term stakeholder value.
Long-term market drivers of population growth and a growing middle class represent a strong growth driver for the consumer
health industry. At the same time, ageing populations and the rising costs of healthcare are putting pressure on global health systems.
Broad trends indicate a shift towards self-care with consumers taking a more active role in their health, supported by advances
in digital technologies. All of these point towards favourable dynamics for the consumer healthcare market. Notably, the industry
has been resilient despite challenges during the COVID-19 pandemic, along with macroeconomic and inflationary pressures.
However, the macroeconomic environment remains uncertain, including geopolitical conflict leading to inflation, commodity and
input cost increases. Whilst some of the impacts are starting to dissipate, pressures on the consumer remain, including increased
cost of living. We indicate how Haleon is responding to these drivers in our strategy and market categories sections from page 12.
Global economic
shifts towards
emerging markets
2
bn people
approximate
increase in
global population
by 2050
Population growth and rising wealth in emerging markets continues to fuel economic
growth. The global population is expected to increase by almost 2bn people by
2050, with the growth fastest in developing countries. China and India are expected to
account for approximately half of the economic growth, with a total population close
to 3bn, and c.40% of global consumer spending expected within the next 20 years.
This represents a long-term growth driver for the consumer healthcare market, with
strong buying power driving increased per capita spend and usage in these economies.
Source: WHO
Ageing
populations
1.4
bn
Share of
population
aged 60 years
and over by 2030
The proportion of people aged 60 years and over is expected to increase from 1bn
in 2020 to 1.4bn by 2030, and to almost double to 2.1bn by 2050. Population
ageing – which started in high-income countries (e.g. Japan where 30% of the
population is over 60 years old), is now moving towards low- and middle-income
countries with two thirds of the global population who are 60 years and over
expected to live in low- and middle-income countries by 2050. This brings with
it an increased need for preventative care and self-care.
Source: WHO
Consumer focus
on health and
wellness
79
%
of consumers
believe wellness
is important
Consumers are increasingly taking ownership of their health, adopting more holistic
and personalised approaches. McKinsey note a substantial increase in consumer
prioritisation of wellness over the past two-to-three years. This continues to evolve
along with our understanding of how the climate change impacts human health,
which brings a broad spectrum of new and unanticipated healthcare needs and
opportunities. The documented effects of climate degradation include infectious
diseases, respiratory ailments, as well as mental health and neurological issues.
This represents a sizeable growth opportunity for the healthcare industry.
Source: McKinsey
Increasing
pressure on public
health systems
$
7.33
saved by US
healthcare system
for every $1 spent
on OTC medicine
OTC products in particular provide affordable and accessible healthcare options
for consumers and lower the overall costs to health systems. Globally, public health
systems are under pressure to meet increasing demand from patients against the
backdrop of financial constraint. In the US, consumer spend on OTC medicines
is estimated to save the US healthcare system $167bn from a combination of drug
cost savings and unneeded doctor visits.
Source: CHPA
Sizeable unmet
consumer needs
53
%
of adults suffer
from gum problems
and over 60%
don’t use a health
toothpaste
Targeted innovation across the consumer healthcare industry provides a means
to address emerging trends as well as premiumisation (where consumers switch
purchases to premium alternatives). In addition, emerging technologies can be
harnessed to allow consumers to directly manage their own health. Technology is
offering new options for education, coaching, engagement and patient support
to improve health outcomes. These trends are driving an important evolution in
preventative and self-care for consumers. In addition, advances in artificial
intelligence (AI) and digitalisation provide opportunities to drive greater
efficiencies in testing and innovation.
Sources: Deloitte’s Centre for
Health Solutions; and Global
U&A Refresh 2022 Clear
Haleon
Annual Report and Form 20-F 2023
7
Strategic Report
Our business environment
Our market categories:
Over-the-Counter (OTC)
Oral Health
Vitamins, Minerals
and Supplements
(VMS)
Pain Relief
Respiratory
Health
Digestive Health
and Other
Key resources:
Employees
Raw
materials
Suppliers
Manufacturing
capabilities
Sales &
distribution
Advertising &
promotion
Research &
development
Regulatory
expertise
Our competitive strengths:
Deep human understanding
Trusted science
We invest in a suite of proprietary assets to generate
deep human understanding to support brand innovation,
and enhance our engagement with Health Professionals
to help educate consumers. This includes dedicated
shopper research centres, consumer knowledge and
social listening data, all designed to generate and test
new insights and identify consumer needs.
We leverage the technical and scientific expertise
that comes from our scientists with strong regulatory
understanding, underpinned by clinical trials and
extensive studies. During the year, we delivered 86
publications supporting our expert engagement and
product claims. We continue to invest in research
and development (R&D) to support our innovation.
Guided by our purpose, we:
Innovate
Create meaningful
and distinctive brands
Drive Health
Professional advocacy
Through innovation, we address
unmet consumer needs and emerging
trends, target products towards a
particular demographic and improve
delivery mechanisms for existing
products which drive consumer
preference for our products.
Our investment in advertising and
promotion (A&P) activities such as
paid media, in-store promotions,
TV and print, coupled with a strong
focus on digital capabilities, has
enhanced our brand equity with
brands consumers trust, thereby
empowering more people to self-care.
We have direct and trusted relationships
with more than 3m Health Professionals,
together with access to the largest
network of pharmacies in the world,
who recognise the strength and efficacy
of our products which they recommend
to consumers, bringing new users to our
brands and categories.
Our business model
Haleon’s competitive advantage is derived from combining
deep human understanding with trusted science.
Haleon
Annual Report and Form 20-F 2023
8
Strategic Report
Reinvest in business
Focused reinvestment to drive
sustainable growth.
Pay down of debt
Since demerger, we have reduced net
debt by over £2bn. We finished the
year with leverage of 3.0x net debt/
adjusted EBITDA (vs c.4x at point of
demerger in July 2022). We are now
targeting to operate with leverage of
around 2.5x net debt/adjusted EBITDA
over the medium term.
Shareholder returns
Haleon has a dividend policy that looks
to balance all its stakeholders’ interests
while ensuring the long-term success of
the Company. The Board has proposed a
final dividend of 4.2p, taking the total
2023 dividend to 6.0p, representing
approximately 35% of 2023 adjusted
earnings. (2022: 30%). Including this
dividend, Haleon will have returned
£0.8bn to shareholders since demerger,
and going forward, expects to grow its
ordinary dividend at least in line with
adjusted earnings. In addition, Haleon
will allocate £500m to share buybacks
during 2024.
Capital
expenditure:
£
336
m
3
(3.0% of revenue)
Delivering value
Consumers
Customers
Employees
Governments
and industry
regulators
Health
Professionals
Investors
Suppliers
Organic
operating
profit growth
ahead of
organic
revenue
growth
1,2
High cash
conversion
Investing
for growth
Shareholder
returns
M&A
H
i
g
h
g
r
o
s
s
m
a
r
g
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n
d
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v
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t
m
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t
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n
A
&
P
a
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n
o
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t
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e
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n
u
e
g
r
o
w
t
h
1,
3
4
-
6
%
a
n
n
u
a
l
o
r
g
a
n
i
c
Driving value – our financial model
A sustainable growth model
Our competitive strengths combined with our ability to innovate, build brands and drive expert advocacy creates a sustainable model
for growth, and deliver attractive returns.
>>
See also our key stakeholders, 2023 Business review and approach to risk sections on pages 10, 34 and 53.
1
Over the medium-term.
2
Definitions and calculations of non-IFRS measures can be found from page 43.
3
Includes purchase of Property, Plant and Equipment (PP&E) and intangible assets.
Haleon
Annual Report and Form 20-F 2023
9
Strategic Report
Our business model
Our key
stakeholders
A strong understanding of, and
proactive engagement with, our key
stakeholders is fundamental to our
long-term performance and success.
Haleon has ongoing engagement
with its stakeholders at all levels of
the organisation, through a variety of
mechanisms. We value our stakeholder
interactions, the insights they give and
monitor outcomes.
Engagement occurs predominantly at
senior leadership and operational level,
with the Board providing oversight.
Directors also engage with stakeholders
directly, principally with investors
and customers.
>>
This section should be read in conjunction
with the ensuing pages, and also our
Board activities disclosure from page 68,
including our Section 172 statement and
communication with shareholders disclosure.
Consumers
Consumers want brands they
trust, that understand their
needs and care about the
environment and society.
Our consumers are at the
heart of everything we do.
We aim to provide products
that better meet their needs.
Customers
Our customers want safe, innovative and
accessible products that enable consumers
to improve their everyday health and which
have sustainability at their heart.
Customers, such as mass market
pharmacies, drug stores and
e-commerce retailers, are central
to our business as they provide our
products to consumers.
Suppliers
Suppliers value trust-based
relationships, underpinned
by responsible practices,
values and policies.
Maintaining healthy long-term
relationships with our suppliers
helps us protect business
continuity and achieve our
environmental ambitions.
Employees
Employees want to be part of a
purpose led, inclusive company
where they can be themselves,
and are supported to thrive in
their careers.
Our employees ensure our
business operates effectively.
It’s essential we attract and retain
the best people, and keep each
other safe, healthy and well.
Investors
Investors want sustainable
performance for long-term
shareholder value, strong
corporate governance and
commitment to the management
of responsible business issues.
We are committed to creating
long-term sustainable growth
and attractive returns for both
our debt and equity investors
delivered through the
Group’s strategy.
Health Professionals
Health Professionals want
effective and safe products
supported by reliable scientific
information and responsible
sales and marketing practices.
Our engagement with Health
Professionals, such as doctors,
dentists and pharmacists,
drives performance through
recommendations and help us
understand long-term trends.
Governments and industry
regulators
Effective, safe and accessible
products help reduce the burden
of healthcare costs and increase
opportunities for innovation and
business investment.
Governments and industry
regulators set the legal and
regulatory environment in which
we operate. We work with them
to advance everyday health
and manage risks.
Our key
stakeholders
Key
What matters to our stakeholders
Why they matter to Haleon
Haleon
Annual Report and Form 20-F 2023
10
Strategic Report
Stakeholder
Examples of how we engage
Examples of outcomes
Examples of measurement
Consumers
—
Marketing campaigns, brand
launches and promotions.
—
Regular consumer surveys
on better everyday health.
—
Community Investment
Programmes.
—
Consumer enquiries handled
by our Global Consumer
Relations team.
—
Launched purpose-driven
campaigns, such as the
‘Advil Pain Equity Project’.
—
Supported phase two of Economist
Impact’s Health Inclusivity Index.
—
Signed multi-year agreement with
Direct Relief to expand access
to everyday health.
—
Direct customer service feedback.
—
Brand incremental share
growth and equity scores.
—
Index scores and consumer insights.
—
Monetary and in-kind donations.
—
Level of consumer interactions.
—
Level of positive testimonials.
Customers
—
Interactive visits to our shopper
research centres.
—
Customer engagement days –
providing strategy and brand
updates.
—
Sector and customer collaboration
supporting underprivileged
consumers.
—
Shopper insights and tools to drive
sales.
—
Co-created new flavours, including
for our Tums brand.
—
Charitable donation and
awareness campaign with major
UK retailer.
—
Customer retention.
—
Growth in share of shelf and
distribution points.
—
Supplier awards and surveys
e.g. Advantage Group Survey.
—
Number of products donated
to charity.
Employees
—
Annual employee engagement
survey.
—
Global employee broadcasts.
—
Board and Executive Team
site visits.
—
Employee policies, programmes
and resources.
—
Employee Resource Groups (ERGs).
—
2023 employee engagement
score of 78%.
—
Introduced a simplified global
learning offering for all employees.
—
Launched new initiatives
including myWellbeing.
—
Held 10 global flagship ERG
events and 150 local events.
—
Monitoring employee
engagement survey results.
—
Number of employees joining
global broadcasts.
—
Number of employees engaged
in volunteering and adopting
intranet resources.
—
Level of participation in ERG events.
Governments
and industry
regulators
—
Collaboration with regulators
and industry bodies to establish
product and claims standards.
—
Direct and indirect engagement
on legislation reform.
—
Regular meetings and events for
key Government stakeholders
with senior leadership.
—
Health authority site inspections.
—
Supportive product evaluation
and claims environment for
Haleon products.
—
Membership of, and leadership
positions within industry
trade associations.
—
Held Health Inclusivity Index
Congressional Briefing (US).
—
100% of sites rated satisfactory.
—
Publication of supportive products
and claims standards by regulators.
—
Progress on legislation and
proportionate regulatory
frameworks.
—
Number of Government
engagements.
—
Site inspection success rate.
Health
Professionals
—
Research initiatives and campaigns.
—
Expansion of the Health Partner
Portal to cover more than 50
markets with over 665k users.
—
Expanded Centre for
Human Sciences.
—
122 webinars, with 91k hours of
content in 2023.
—
Launched global surveys, including
2023 Haleon Pain Index.
—
Activated local initiatives, such as
a micronutrient deficiency
campaign in India.
—
Launched Centre for Human
Sciences in Australian pharmacies.
—
Number of Health Professionals
participating in our surveys
and campaigns.
—
Level of Health Partner portal users.
—
Level of engagement with our
Centre for Human Sciences.
Investors
—
Roadshows, ‘fireside’ chats,
webcasts, conferences and
1:1 meetings.
—
‘Haleon Highlights’ Oral Health
investor event and brand
video series.
—
AGM, stock exchange
announcements and
results briefings.
—
Regular updates to the Board
and Executive Team on investor,
shareholder and analyst
perceptions.
—
Review of strategy and responsible
business agenda incorporating
investor feedback.
—
Investor and analyst surveys.
—
Feedback from investors
and analysts, including on results.
—
Level of analyst and investor
participation in webcasts and
other events.
Suppliers
—
Workshops and events on
responsible business, innovation
and productivity.
—
Our Supplier ESG Expectations
document.
—
Our Supplier Diversity Programme.
—
Liaised with suppliers on the UK
Prompt Payment Code.
—
New product and innovation ideas.
—
Defined ESG supplier targets.
—
Invoices for UK small and medium
sized enterprises (SMEs) paid
within 60 days.
—
Number of suppliers attending our
events and feedback scores.
—
Number of suppliers meeting our
requirements and expectations.
—
New business opportunities for
under-represented communities.
—
Proportion of SME suppliers paid
according to the Code.
Haleon
Annual Report and Form 20-F 2023
11
Strategic Report
Our key stakeholders
Our strategy
Our strategy is designed to grow our portfolio of leading brands and
market categories. We target sustainable above-market growth
and attractive returns, with our purpose and culture bringing
focus and clarity to the strategic decisions we make.
The Board and Executive Team review updates on strategy throughout the year, including deep dive sessions on our strategic choices,
to ensure continued focus on market drivers, relevance to our business model, and that capital is appropriately allocated. Using our
competitive strengths of deep human understanding and trusted science, we are well placed to meet the growing demand for self-care
and the opportunities to serve unmet consumer needs. Haleon does this by increasing condition awareness, building brand relevance
and its innovation pipeline, and capitalising on new and emerging trends. We are mindful of the challenging consumer environment
and pressures on people, and how this may impact self-care. The Company monitors and mitigates inflationary cost pressures with
initiatives such as early forward buying, value engineering and supply chain improvements. We remain focused on balancing price
and volume with net revenue management alongside cost and cash management.
Our strategy should be read in conjunction with the ensuing pages, where we give details of how our strategic pillars have been
incorporated into our activities.
Underpinning the way we run our business are four strategic pillars:
1
Increase household
penetration
2
Capitalise on new
and emerging
opportunities
3
Maintain strong
execution and
financial discipline
4
Run a responsible
business
Maximise significant growth
opportunities across our
categories by applying
our proven approach to
penetration-led growth.
Increase growth of our
brands across channels,
routes to market and
geographies.
Expand our portfolio through
new and emerging consumer
trends and by pursuing
Rx-to-OTC switches.
Focus on driving efficiency,
effectiveness and
agility to make every
investment count.
Make everyday health
more inclusive.
Protect the environment
and address social
sustainability barriers
to everyday health.
Embed strong
governance and ethical
business behaviours.
Key focus areas
—
Meaningful and
distinctive brands
— Innovation
—
Expert advocacy
—
Commercial excellence
Key focus areas
—
Channel expansion:
e-commerce
—
Geographic expansion
—
Portfolio expansion:
emerging consumer trends
—
Rx-to-OTC switches
Key focus areas
—
Quality and supply
chain (QSC)
—
Marketing execution
—
Commercial execution
—
Cash and cost control
Key focus areas
—
Health inclusivity
— Environment
—
Upholding our standards
Market drivers
Global economic shifts towards
emerging markets
Ageing populations
Consumer focus on health and wellness
Increasing pressure on public health
systems
Sizeable unmet consumer needs
Strategic pillars
1
Increase household penetration
2
Capitalise on new and emerging
opportunities
3
Maintain strong execution and
financial discipline
4
Run a responsible business
>>
See also our approach to sustainability, key performance indicators, 2023 Business review, approach to risk and Board activities sections on
pages 22, 32, 34, 53 and 68.
Haleon
Annual Report and Form 20-F 2023
12
Strategic Report
Brands
Our market
categories
Oral Health
2023 revenue
£
3,136
m
+
6.1
%
growth
+
10.6
%
organic growth
Global market share
1
10.7
%
>>
See page 40 for further information on
performance during the year.
Our 2023 focus areas
Strategic pillar
Market driver
—
Raised condition awareness and relevance through
meaningful and distinctive brands, and expert advocacy.
1
2
—
Drove innovation across our Therapeutic Oral Health products.
1
2
—
Continued to build on previous launches and roll-outs
into new markets.
1
2
—
Further optimised processes across our supply chain
and infrastructure.
3
—
Continued developing solutions for all our product
packaging to be recycle-ready by 2025 (where safety,
quality and regulations permit).
4
Our 2023 achievements
—
Launched Pronamel Active Shield in
the US. Strong activation with
increased dentist recommendations.
During the launch period, Pronamel
contributed 22% of all US toothpaste
market growth
2
.
—
Launched parodontax Active Gum
Repair into new markets, which has
been clinically proven to help
bleeding, swollen and inflamed
gums to repair, target and help
reverse early gum problems.
—
Rolled-out Polident Max Hold Plus
denture fixative range to new markets,
after its launch in 2022. This drove
strong growth of fixatives with
market share gains in this segment.
—
Launched Polident ‘Smiles Can’t Wait’
programme which supports access
to dentures, improving lives in
economically weaker areas of
Thailand and the Philippines.
—
Developed and initiated our
Healthy Mint Supply Chain strategy,
aimed at upholding health and
safety standards, improving
farmers’ livelihoods, supporting
health and gender empowerment
and reducing environmental impacts
of mint production.
What’s next
—
Drive growth through focus on
increasing consumer penetration on
therapeutic solutions, leveraging our
deep human understanding and trusted
science competitive advantage.
—
Further progress our innovation agenda
with the roll-out of Sensodyne Clinical
White toothpaste. This combines
sensitivity protection with clinically
proven teeth whitening ingredients.
—
Continue to progress our responsible
business agenda for all oral health
packaging to be recycle-ready by
2025, including our recycle-ready
toothpaste tubes.
The importance of Oral Health
The World Health Organization
recognises oral health diseases as
highly prevalent with more than 3.5bn
people affected
3
. Our aim is for our
products to help eradicate preventable
oral health problems. We are focused
on therapeutic oral health – sensitivity
and gum disease are widespread
therapeutic oral health conditions,
with around 45-50% of consumers
experiencing these conditions
4
.
Treatment rates are low with only a third
of users using a specialist toothpaste
4
.
Our position
We have a clearly defined position
and strategy as a premium, specialist,
therapeutic oral health player with
a number one position in sensitivity
with Sensodyne, and a number two
position in gum health with parodontax.
Moreover, we have a strong leadership
position in denture care. While we have
a broad geographic presence, emerging
markets comprise around a third of our
revenue vs nearly 50% for category, and
this provides an opportunity for us.
A key focus area remains driving
increased household penetration of
our brands. We continue to innovate
to meet therapeutic needs with the
consumer having four oral health
conditions on average.
1
Source: Euromonitor (2023) and Haleon analysis
of third-party market data.
2
Source: IRI sales data.
3
Source: UN World Health Organization Global
Health Status Report 2022.
4
Source: Clear U&A, December 2022 (US, India,
Turkey, Italy and Germany).
Haleon
Annual Report and Form 20-F 2023
13
Strategic Report
Our market categories
Brands
Our market categories
continued
Vitamins, Minerals
and Supplements (VMS)
2023 revenue
£
1,640
m
(2.1)
%
growth
+
0.9
%
organic growth
Global market share
1
3.1
%
>>
See page 40 for further information on
performance during the year.
Our 2023 focus areas
Strategic pillar
Market driver
—
Leveraged our science capabilities to drive strong
claims which resonate with consumers.
1
2
—
Drove further innovation across our brands through different
delivery formats, that targeted a younger demographic.
1
3
—
Continued to build on previous launches and roll-outs
into new markets.
1
2
—
Increased the recyclability of our packaging, reducing
the use of virgin petroleum-based plastics.
4
—
Ran condition awareness initiatives to improve consumers’
health literacy and self-care.
4
Our 2023 achievements
—
We continued to leverage our trusted
science focus through third-party
clinical studies on Centrum Silver, with
positive results on cognitive function,
which provided a new claim for the
product. This was activated across a
number of markets leading to share
gains in the US and China, as well as
across Europe and Latin America.
—
Having launched Centrum in India
through the e-commerce channel
in 2022, with a campaign to build
awareness around multivitamin
deficiency, we further expanded the
portfolio to include Benefit Blends.
In Egypt, we continued to gain market
share helped by strong awareness
campaigns using both traditional
and non-traditional channels. We also
expanded the Centrum global footprint
with new market entries into Sweden,
Libya and Iraq.
—
We continued to attract new users to
Caltrate’s Soft Chews, through its ‘easy
absorption’ benefit using the Douyin
app in China to engage with consumers.
—
We used our deep human
understanding to evolve delivery
formats and new use occasions. In the
US, we launched Emergen-C crystals,
a ‘no water needed’ solution delivering
key immune-supporting nutrients
which has had strong consumer
feedback and driven market
outperformance. We also continued
the expansion of the Centrum
gummies format, particularly
in APAC, North America, and Europe.
—
Launched Centrum products in the
US with bottle packaging utilising up to
100% post-consumer recycled plastic.
What’s next
—
Further build out our capabilities
and range with superior science-
backed solutions.
—
Collaborate with experts and key
opinion leaders globally to raise
awareness of micronutrient
deficiency and how Centrum can
fill nutritional gaps.
—
Continue to expand Centrum’s
geographic footprint via new
market entries and brand
migration opportunities.
—
Further activate marketing across
our new Emergen-C crystal range.
—
Continue to reduce the use of virgin
petroleum-based plastic in the
packaging of our products.
The importance of VMS
Globally, one third
2
of the population
have a micronutrient deficiency, which
increases the risk of developing chronic
disease. In addition, a number of trends
including inequality in healthcare,
sedentary lifestyles, poor nutrition and
climate-change factors, are contributing
to the growth of this category. Consumers
are looking to be more proactive in their
wellness regime and are using a variety
of approaches to look after their health
and overall wellness. Using VMS is
seen as a way to gain control and have
confidence that they are doing what
they can to stay healthy and well.
Our position
The VMS category is highly fragmented
with the top 20 players accounting for
around 23%
1
of the market. Haleon has
the leading position, with c.3%
1
share.
The vast majority of our revenues are
derived from three brands: Centrum –
the world’s leading multivitamin;
Caltrate – a leader in calcium/bone
health in China; and Emergen-C –
a leader in immunity in the US.
This portfolio is complemented by
smaller Local Growth brands, which
are leaders in their respective
markets/sub-categories.
1
Source: Nicholas Hall (2023) and Haleon analysis
of third-party market data.
2
Source: The Lancet Discovery Science.
Haleon
Annual Report and Form 20-F 2023
14
Strategic Report
Brands
Over-the-Counter (OTC)
Pain Relief
2023 revenue
£
2,652
m
+
4.0
%
growth
+
7.4
%
organic growth
Global market share
1
13.5
%
>>
See page 40 for further information on
performance during the year.
Our 2023 focus areas
Strategic pillar
Market driver
—
Responded and delivered to market demand in China
following the cessation of COVID-19-related restrictions.
1
2
—
Drove further innovation across our brands through natural
variants that target a younger demographic.
1
3
—
Continued to build on previous launches and roll-outs
into new markets.
1
2
—
Published the 5th Haleon Pain Index, designed to help
Health Professionals better understand health inclusivity
barriers to pain management.
4
Our 2023 achievements
—
Panadol achieved strong growth in
EMEA & LatAm as a result of the
success of the new ‘Release Starts
Here’ campaign. This campaign
addressed specialist need states such
as migraine, body pain and headache.
—
We launched natural variants across a
number of markets to expand our reach.
Our variants are designed to engage
with a younger consumer base. Recent
launches included Panadol PanaNatra,
which we launched in Australia.
—
We further extended the range of
Advil Dual Action to back pain, the third
most common pain indication, and an
underserved consumer need with only
20%
2
of consumers currently ‘very
satisfied’ with current back pain
treatments. The product has
received positive early feedback
with convenience, value and back
pain efficacy highlighted by users.
—
In China, Haleon was able to meet
increased consumer demand for
Fenbid following the lifting of
COVID-19 related restrictions,
despite tight labour conditions arising
from COVID-19. We doubled our
manufacturing output at our Tianjin
facility to ensure adequate supplies of
these products to Chinese consumers
and hospitals. Strong collaboration
with our suppliers ensured raw
material supply to our facility.
—
Initiated in 2022 and concluded in
2023, Haleon worked closely with the
Canadian government following the
surge in respiratory syncytial virus
(RSV) and incidences of cold and flu
cases in children with Children’s Advil.
—
Voltaren launched liquid capsules in
Italy and expanded its penetration of
24-hour patches globally. In addition,
the brand launched ‘Movement Coach’
in the UK, a digital health tool for
people in pain, and ‘HaltungsCheck,’
an AI-powered posture check tool built
in conjunction with physiotherapists,
in Germany.
What’s next
—
We are fuelling the growth of Panadol
by increasing our household penetration
and accessibility, and expanding
systemic presence in other markets.
—
We are also rebuilding relevance
for Voltaren Topical and increasing
penetration of Advil by upweighting
investment, innovation, and
brand relevance.
The importance of Pain Relief
Pain is a universal condition with
the vast majority of the population
experiencing pain and, on average,
people experience two pain conditions
per year. With ageing populations,
sedentary lifestyles and the impact of
climate change on consumer health,
pain incidence and frequency
continues to rise.
Our position
At a global level, the top five players
account for c.35%
1
of the category,
and Haleon is the market leader.
Our portfolio spans systemic and
topical sub-categories, led by three
Power Brands – Panadol, Advil and
Voltaren – and complemented by a
number of Local Growth brands
including Excedrin, Fenbid and Grandpa.
1
Source: Nicholas Hall (2023) and Haleon analysis
of third-party market data.
2
Source: Nielsen IQ.
3
Source: British Pain Society.
Haleon
Annual Report and Form 20-F 2023
15
Strategic Report
Our market categories
Brands
Our market categories
continued
Over-the-Counter (OTC)
Respiratory Health
2023 revenue
£
1,736
m
+
9.9
%
growth
+
13.7
%
organic growth
Global market share
1
5.9
%
>>
See page 41 for further information on
performance during the year.
Our 2023 focus areas
Strategic pillar
Market driver
—
Responded to increased global market demand following
the cessation of COVID-19-related restrictions.
1
2
—
Drove further innovation across our brands through
naturals that target a younger demographic.
1
3
—
Educated consumers on health impacts of air pollution
and actions they can take to help mitigate them.
4
—
Co-ordinated response to FDA advisory committee on
the efficacy of phenylephrine as a nasal decongestant
when consumed in tablet form.
3
Our 2023 achievements
—
Launched Otrivin Nasal Mist in three
European markets – Poland, Portugal
and Greece. This is a new technology
exclusive to Haleon that delivers a
more comfortable experience, with
the release of a wide, gentle mist,
and an easier side-actuation
method which aids consumers with
hand dexterity challenges.
—
Supported the innovation and
strong in-market commercial
execution of Theraflu. Theraflu Max+
saw particularly strong growth and now
accounts for c.25% of Theraflu sales in
the US. We also continued to see strong
uplift from natural products launched
in previous years, such as Theraflu
ProNatural and have expanded the
range into the UAE.
—
In allergy, we enhanced our offering
with Flonase Nighttime Allergy Relief.
—
We expanded our Robitussin range
with Robitussin Medi-Soothers, a
dual-action liquid-filled lozenge that
soothes sore throats and treats coughs.
—
Continued development and expansion
of Otrivin’s ‘Actions to Breathe Cleaner’
programme to educate children on air
pollution and actions they can take to
mitigate the impact on their health.
—
The Theraflu ‘Rest & Recover’ campaign
in the US and Poland raised awareness
of the barriers to sick leave for working
mothers. In the US, Theraflu advocated
for a policy change to have access to
paid sick leave.
What’s next
—
We are looking to maintain growth
of the portfolio and selectively
expand into key sub-categories.
—
Drive growth and penetration by
launching Otrivin Nasal Mist in
additional markets.
The importance of Respiratory
Health
Respiratory conditions are prevalent
globally, with annual incidence rates
tending to be high for cold and nasal
congestion
1
, lower for flu
1
and allergy
1
,
with c.70%
2
of sufferers claiming to
treat themselves for these conditions.
Consumers rely heavily on OTC
medicines to provide treatment.
Our position
The Respiratory Health category is
fragmented globally. The top five
players account for 27%
1
of the global
market. Haleon is the largest global
player in this category with c.6%
1
share.
Our portfolio consists of a mixture of
Power Brands, such as Otrivin and
Theraflu, along with a number of Local
Growth brands, including Flonase,
Robitussin and Contac.
1
Source: Nicholas Hall (2023) and Group analysis
of third-party market data.
2
Source: UN World Health Organization.
Haleon
Annual Report and Form 20-F 2023
16
Strategic Report
Brands
Over-the-Counter (OTC)
Digestive Health and Other
2023 revenue
£
2,138
m
+
2.0
%
growth
6.5
%
organic growth
Global market share
1
5.4
%
>>
See page 41 for further information on
performance during the year.
Our 2023 focus areas
Strategic pillar
Market driver
—
Drove further innovation across our brands through
naturals that target a younger demographic.
1
3
—
Launched products across the category that address
additional unmet consumer needs.
1
2
—
Continued to build on previous launches and roll-outs
into new markets.
1
2
Our 2023 achievements
—
Launched Tums + Sleep to target the
63% of US adults with occasional
heartburn and sleep issues. Tums +
Sleep is a chewy bite containing
melatonin that addresses not only
heartburn but also helps consumers
fall asleep.
—
Further drove innovation with the
launch of ENO Chewy Bites in Tangy
Lemon and Zesty Orange flavours.
This innovation is tailored to the
modern lifestyle, offering fast and
effective relief from acidity. The product
contains natural ingredients and
provides fast relief.
—
Rolled-out a natural proposition
of Fenistil across Central Eastern
Europe to bring new users into the
itch-relief category.
What’s next
—
Drive further innovation with the launch
of new products addressing unmet
need states and formats.
—
Further our responsible business
agenda, including continuing to shift
our laminate packaging for ENO into
recycle-ready sachets.
The importance of Digestive
Health and Other
Digestive health issues are prevalent,
with 60-80%
2
of the population
affected, and sufferers having around
five episodes per month on average.
Symptoms include acid reflux/
heartburn, bloating, flatulence,
indigestion, constipation and diarrhoea.
Sufferers frequently experience more
than one symptom at a time.
Our position
Haleon has the leading position in
Digestive Health driven by strong
positions in immediate-relief antacids.
We have a focused geographic presence
in Digestive Health across US, India and
Brazil, underpinned by our Local Growth
brands. This category also includes our
smoking-cessation brands such as
Nicorette, which has been helping
consumers quit smoking for over 40 years.
In addition, we have a number of Skin
Health brands including Bactroban, the
leading wound-healing brand in China,
and Zovirax and Abreva, the world’s two
leading cold sore treatments. During the
year, we reached agreements to divest
both ChapStick and Lamisil, which will
allow Haleon to reduce complexity in
the business and focus more resources
on higher growth brands.
1
Source: Nicholas Hall (2023) and Group analysis
of third-party market data.
2
Source: Proceedings of the Nutrition Society.
Haleon
Annual Report and Form 20-F 2023
17
Strategic Report
Our market categories
Our culture
and people
To ensure the long-term success of Haleon, we are focused on our purpose led culture.
We reinforce this through our core value, key behaviours and leadership standards.
In addition, a range of responsible business standards, policies and practices,
including our Code of Conduct, provide a framework to guide our approach in
delivering our strategy and business performance.
Our purpose:
To deliver better everyday
health with humanity
Our core value:
Seeking to always do
the right thing
Our key behaviours:
Go beyond
Do what matters most
Keep it human
Our leadership standards:
Drive growth
Deeply understand our
consumers and customers
Build ‘one’ Haleon
Motivate and unleash
potential
Our culture is supported by our
governance and organisational structure.
The Board is responsible for, and monitors,
our culture, including adherence to our
core value and behaviours to ensure they
are embedded and aligned to our strategy
and purpose. The Directors receive regular
reports on all aspects of culture, including
reports from our Speak Up channel and
results from our employee survey. The CEO
and Executive Team are responsible for
embedding our culture on a day-to-day
basis, as well as for implementing our
strategy, monitoring the Group’s
performance, and providing updates to
the Board on overall performance, risk
management and our system of internal
controls. We have 14 business units,
alongside global category and brand
teams, who are responsible for delivering
our strategy, innovation agenda and global
brand campaigns. They are supported by
global functions, in key areas including
ethics and compliance, corporate affairs,
sustainability, finance, human resources,
legal, marketing and R&D.
During 2023, we embarked on a three-year
productivity programme to transition to
an organisation focused on efficiency
and agility ensuring we deliver our
purpose and strategy. This has resulted
in structural changes and severances,
which we have aimed to handle sensitively
and in compliance with all applicable laws
and regulations. Inevitably, this has had
a short-term impact on our culture as we
embed our new structure and ways of
working. Additional details are in Note 6
to the Consolidated Financial Statements.
>>
Further details about our governance
structure and Board activities, including
consideration of culture are in the Corporate
Governance section from page 61.
Measuring our culture
Measuring and tracking our culture
is crucial to ensuring we deliver our
purpose and strategy, and remain a
trusted company. We have a range of
indicators including consumer, customer
and supplier feedback forums mentioned
in our stakeholder section, and not limited
to the examples below:
—
Annual mandatory Code of Conduct
training including anti-bribery and
corruption and keeping data secure
for all the Board, Executive Team,
employees and third-party temporary
workers, with a 98%
1
completion rate
in 2023. It is also part of onboarding
requirements for new starters.
—
A framework of internal financial
and operational controls, audit and
assurance programmes that monitor the
Company’s compliance with regulations
and internal procedures and policies.
Reports are sent to senior management,
the Executive Team and the Audit & Risk
Committee for monitoring, review and
discussion. Where required, corrective
measures are put in place to reinforce
appropriate procedures. During 2023,
no unsatisfactory rated internal audit
reports were issued.
—
Haleon encourages anyone, whether
working for the Company or not, to
speak up about misconduct, breaches of
policy or procedures, and suspected
violations of laws and regulations.
Concerns are managed independently
and can be raised in 35 languages via
web form, email, telephone, or post.
All cases are handled in accordance
with Haleon’s investigatory principles:
humanity, confidentiality, proportionality
and non-retaliation. Regular updates
and investigation reports are reviewed
by senior management and the Audit
& Risk Committee, and learnings are
converted into recommendations
and updated training.
>>
See also our business model, key
stakeholders, strategy, approach to risk and
financial statement sections on pages 8, 10,
12, 53 and from page 97.
1
Non-completion due to leavers during the period.
Haleon
Annual Report and Form 20-F 2023
18
Strategic Report
—
Our annual employee survey measures
both employee engagement and our
wider culture. Our 2023 results showed
78% of employees felt that Haleon
fulfils its core engagement values, and
78% feel that it fulfils its core cultural
objectives. Areas where we do well
include our customer focus, commitment
to the environment, society and
business ethics, whereas we need
to continue to focus on our work
processes and how we collaborate.
—
We measure our environmental, health
and safety performance across the
Company and conduct risk-based
audits that the Executive Team and
Board monitor. Metrics include, but are
not limited to, our reportable injury and
illness rate, which in 2023 was 0.14 per
100,000 hours worked
*1
, and there
were no fatalities
*2
.
—
We conduct regular conversations
and year-end reviews with employees,
which include them demonstrating
their actions and contributions during
the year against our core value and
behaviours, and where applicable,
leadership standards.
>>
See also our key stakeholders and key
performance indicator sections on
pages 10 and 32.
>>
See also the Audit & Risk Committee Report
from page 72.
*
KPMG LLP has issued independent limited assurance
over the selected data indicated using assurance
standard ISAE(UK)3000.
1
Includes employees and third-party temporary workers.
2
Includes employees, third-party temporary workers
and contractors.
Our people
Our people comprise of permanent
and fixed-term direct employees.
Our business is also supported
by third-party temporary workers
and contractors.
We aspire to have people policies that
provide equal opportunities, create
an inclusive culture and support our
purpose, strategy and long-term success.
Our initiatives and policies reflect
relevant employment law, including the
provisions of the Universal Declaration
of Human Rights and International
Labour Organization (ILO) Declaration on
Fundamental Principles and Rights at Work.
Attracting, fostering and
developing talent
During 2023, we worked to strengthen
our recruitment approach so that we
consistently attract leading talent,
maintain a diverse employee-base and
provide opportunities for career and
skills development to retain our existing
talent. New hires were made in roles
and locations strategically important
to business success, and we made
incremental improvements in key
performance areas. However, there remain
significant opportunities to optimise our
hiring processes and experiences for
candidates and stakeholders. We are
focused on this as part of our three-year
productivity programme.
Development and learning at Haleon
has three objectives: build the right
competencies to stay safe and compliant
within our regulatory environment;
develop strategic capabilities; and
provide employees with opportunities to
grow and reach their potential. In 2023,
we introduced a simplified global learning
offering to all employees through our
internal development portal and external
content libraries with a range of
development courses, videos and articles,
and supported by a mini-MBA in deep
human understanding.
To embed our leadership standards,
build capabilities and develop leadership
behaviours, we established a global
leadership development programme.
In addition, a suite of self-serve, leader-led
sessions were launched to support all
new teams as the business continues to
transform, which will be expanded in 2024.
We also launched a simplified approach
to talent management based on our
Leadership Standards, including holding
talent reviews throughout the year to
understand our talent landscape and the
strategic capabilities needed to drive
business growth. Furthermore, we evolved
and simplified our approach to assessing
and rewarding employee performance.
Through regular conversations, employee
performance is reviewed against
objectives, and performance outcomes
are calibrated across the business.
Employee health and wellbeing
Supporting our employees’ health and
wellbeing, building a culture that allows
them to be at their best and thrive is a
priority for us. Building on the initiatives
we already offer and as outlined in our
2022 Annual Report, in 2023 we focused
on the following:
—
MyWellbeing, a holistic energy-
management and resilience course that
equips participants with skills and tools
to optimise their own wellbeing.
—
Micro-learnings, themed webinars
and resources to increase capability
for oneself and others.
—
A health, safety and wellbeing
leadership programme available to all
our site leadership and business unit
leadership teams, which we will
embed into our wider leadership
curriculum in 2024.
—
Developing a respectful workplace
training module, focused on preventing
harassment and retaliation.
Looking ahead, we plan to review
and refresh our preventative health
programme, which gives employees and
their eligible dependants access to a core
set of healthcare services. We also expect
to launch a new occupational health and
wellbeing standard to improve governance
and oversight of our initiatives, and refresh
and relaunch our existing Mental Health
Matters training for line managers.
Workplace environment
During 2023, we opened new offices in
both London, UK, and Bengaluru, India,
with sensory rooms and green and open
spaces in which to connect, create and
collaborate. Our Bengaluru office was
awarded a ‘Gold’ accessibility score
by Mobility Mojo for offering a safe
environment for employees with
disabilities and neurodivergence.
Where possible, employees are able
to embrace our ‘Hybrid at Haleon’
philosophy, which empowers managers
and teams to trust each other and find
the right approach to drive performance.
For those working remotely, we have
enhanced controls and systems to ensure
our Company data is secure, including
awareness campaigns as part of our
wider commitment to the responsible
use, storage and protection of Company
and personal data. Important data
is safeguarded from corruption,
compromise or loss and we have
appropriate data retention schedules
to guide us as to when to delete data.
>>
See also our cyber-security disclosure
on page 21.
>>
Further details about employees can be
found across the Report including our
workforce engagement disclosure on
page 70, and Note 7 on page 128.
Haleon
Annual Report and Form 20-F 2023
19
Strategic Report
Our culture and people
Our culture and people
continued
Championing diversity, equity and
inclusion (DEI)
We are committed to creating a diverse,
inclusive and respectful workplace, and
view this as key to delivering our purpose
and strategy. We acknowledge that this
is an area for continual improvement,
including further strengthening our
diversity data and ensuring it is integrated
into our culture. Our position statement
applies to all employees and third-party
temporary workers. Our ambition is focused
on delivering three strategic priorities:
1
Employee belonging:
workplace
inclusion – create a work environment
that is inclusive and accessible where
all employees feel like they belong,
are valued and have tools to thrive.
2
Diverse representation:
workforce
diversity – attract, recruit, promote
and retain the best talent that reflects
a diverse workforce at all levels and
areas of the business.
3
Societal change:
community impact
– leverage our expertise to enable
health inclusivity through our business
relationships, brands and research.
Our global DEI council is sponsored by
the Chief Human Resources Officer and
chaired by the Global Head of Talent.
The council meets quarterly to discuss
priorities, drive accountability, and initiate,
fund and oversee the implementation of
Haleon’s global DEI activities.
We have made progress against our DEI
goals in 2023 with several initiatives that
incorporate key areas of diversity, including
ethnicity, disability, LGBTQ+ and gender.
—
Our diversity dashboard provides
insights around gender, allowing us
to track progress, and proactively
communicate findings and
recommendations back to the business.
—
We are piloting an athlete career
transition (ACT) programme to support
attracting and hiring diverse talent.
—
Our people-management development
programme develops DEI capabilities,
including how we address unconscious
bias. We launched our diverse talent
programme, designed to accelerate
leadership potential and career
progression, and have five cohorts
set up for 2024.
In addition, our four global ERGs
successfully delivered 10 flagship events
in 2023, with c.2,000 participants and
150 local events. Our ERGs help build
our inclusive culture and are instrumental
in providing different perspectives.
>>
See also our Nominations & Governance
Committee Report on page 78.
Company gender diversity
As at 31 December 2023
Men
Women
Other
Non-disclosed
Total
Directors
6
5
—
—
11
Executive Team
1
8
7
—
—
15
Executive Team
direct reports
51
48
—
1
100
Senior managers
2
908
739
—
5
1,652
All employees
13,516
11,768
5
119
25,408
1
At 15 March 2024, the Executive Team comprised 8 men, 4 women and 12 members overall.
2
Comprises Leadership roles as defined in our glossary.
Upholding our standards
We are committed to transparency,
integrity, consumer satisfaction, safety
and compliance with all relevant laws
and regulations. We have standards and
policies in place to ensure we uphold
the highest business ethics, including
consumer and pharmacovigilance policies
and processes. Our products undergo
extensive quality testing and controls
as part of our manufacturing processes.
In addition, we have portals for
consumers to get product information
and report adverse reactions.
Code of Conduct
Our Code promotes ethical business
conduct, and provides guidance to our
Board and Executive Team, employees
and third-party temporary workers.
Failing to comply with our Code is
deemed to be misconduct and can
result in disciplinary action, including
dismissal. Our suppliers, distributors,
agents, consultants and contractors are
also subject to many of its principles.
—
19 principles.
—
Available in 17 languages.
—
Mixture of written standards and a
decision tree approach to making the
right choices and guidance on when
to ask for advice.
Anti-bribery and corruption (ABAC)
Our ABAC Policy sets out our global
principles, standards, requirements and
zero-tolerance approach. All employees
and third-party temporary workers must
observe and uphold the policy.
—
Regular checks are run internally as
part of our financial control procedures,
and due diligence checks are performed
on all high-risk suppliers.
—
During 2023, an update on the state
of implementation of the policy was
reported to the Executive Team and
Audit & Risk Committee.
Human rights
Our Human Rights Policy sets out how we
integrate human rights into our business
operations and our relationships with
suppliers. We seek to align our human
rights procedures with international
agreements and guidelines, such as the
UN Guiding Principles on Business and
Human Rights (UNGPs) and the
Organisation for Economic Co-Operation
and Development’s (OECD) Guidelines
for Multinational Enterprises. We are
committed to upholding the Universal
Declaration of Human Rights and the core
labour standards set out by the ILO.
—
Our Human Rights Steering Committee
comprised of members of our Executive
Team and senior management, provide
oversight and support on key issues.
It is responsible for approving and
monitoring our human rights strategy
and action plan, which is reported to
the Environmental & Social
Sustainability Committee annually.
—
We have key actions across three
workstreams: building our capacity
to understand human rights risks;
strengthening due diligence processes;
and investing in business relationships
to prevent and mitigate risks and
remediate impacts.
—
During 2023, we initiated a saliency
assessment of human rights risks in
Haleon’s value chain to enable us to focus
on issues important to our business.
Haleon
Annual Report and Form 20-F 2023
20
Strategic Report
—
We developed an e-learning module,
translated into 15 languages, which
we launched in 2023 and will roll-out
further in 2024. A facilitators’ pack
was also developed for use at
manufacturing sites where workers
have no access to computers.
—
We developed an incident response
and communications plan, and ran
workshops for employees across key
business functions.
Responsible suppliers
Haleon’s supply chain has significant scale
and complexity with a mixture of direct
and indirect supplies and services such
as raw materials and logistics. We are a
member of Manufacture 2030, a platform
to drive consistency and transparency of
supplier sustainability reporting.
—
Our Supplier Code of Conduct
establishes the minimum environmental,
social and ethical standards to be met
by any entity that supplies products or
services to Haleon.
—
We follow set processes for contracting
with new suppliers, and those we
continue to work with, including due
diligence processes and using
approved buying channels.
—
In 2023, we launched our Supplier ESG
Expectations outlining targets that we
want our suppliers to meet, such as
moving to renewable electricity and
ensuring certain materials are covered
by industry-recognised certifications.
—
Our third-party risk management
process seeks to assess risks across
our supply chain, and where necessary
we undertake targeted in-depth due
diligence. We use a combination of
EcoVadis and Sedex assessments and
Pharmaceutical Supply Chain Initiative
audits to assess risks to drive
improvements.
Health and safety
We continue to embed our Environment,
Health, Safety and Wellbeing Policy and
three-year strategy to develop a zero-harm
culture and reduce significant incidents.
We have an environment, health and safety
(EHS) management system and are focused
on three pillars: to strengthen our health
and safety culture and capability; prevent
harm; and make it easier. Each pillar is
supported by annual targets and
objectives to drive continuous improvement,
which has helped reduce the number of
reportable and serious incidents.
—
We run risk-based health and safety
training for employees and third-party
temporary workers, which includes
how to identify measures to reduce
workplace risks.
—
All contractors working at Haleon
sites receive induction training and
instruction on working safely.
—
During 2023, we focused on refreshing
and integrating our global EHS and
engineering standards, reinforcing our
12 Life Saving Rules and deploying
our Leading with Care programme to
senior leaders across the Company.
—
Looking ahead, we are focused on
risk assessment training, and further
embedding our Leading with Care
programme and suite of EHS and
engineering standards.
>>
See also our statement of compliance on
page 60 with links to our standards and
policies, including our Code of Conduct
and Modern Slavery Statement.
Cyber-security
As detailed in our approach to risk and
risk factors, there is a risk that a cyber-
security attack could compromise our
ability to manufacture, distribute and
sell our products and services to our
customers. Our commitment to cyber-
security is reflected in our ongoing
investment into this area, which includes
the use of advanced technologies and
engagement of third-party experts to
provide additional support and
guidance. We have a dedicated cyber-
security threat intelligence function
focused on the threat landscape and
attack vectors that are targeting
healthcare providers, including
ransomware threats. Cyber intelligence is
integrated into our cyber-security risk
management and governance processes.
Haleon’s Chief Information Security
Officer is responsible for the cyber-
security function, and provides frequent
updates including current threats,
operational key risk indicators, and
cyber-security maturity improvements
to the Executive Team and Audit & Risk
Committee, who have oversight of our
information security and cyber risk
strategy. Cyber-security risk updates
are shared with the wider Board by
the Committee.
—
Our Chief Information Security Officer
has over 25 years of information
technology and security experience.
—
External consultants are engaged to
assess our cyber-security maturity
against the US National Institute
of Standards and Technology
Cybersecurity Framework (NIST CSF).
They help guide our plans and
processes to best protect Haleon
from threats including a framework
for data controls which covers our
digital supply chain.
—
We have a third-party risk management
process in place ensuring that inherent
risk assessments are completed for
third-party suppliers with additional
due diligence assessments completed
for higher-risk suppliers. Processes
include identification and mitigation
of risks, risk assessments, adherence
to information and control standards,
and incident notification requirements
in contracts.
—
We constantly look to mature our
cyber-security systems and controls to
keep pace with the threat landscape.
Our preparedness activities include
testing our response procedures and
processes by performing simulations
and crisis management exercises, and
penetration testing to develop our
response to potential incidents, such
as ransomware attacks. Vulnerability
management, monitoring and alerting
processes are in place to help protect
the Company against cyber attacks.
—
Our annual awareness campaigns
promote our global cyber-security
policies and procedures, handling of
confidential data, social media and
cyber-security practices, and remind
employees of resources available
to protect themselves, Haleon and
consumers. Internal policies for
protecting Company assets include
protection of information, acceptable
use of technology resources, AI and
related procedures. We are focused
on minimising risks through fostering
secure practices and behaviours,
for example, constant programmes
aimed at recognising and reporting
suspicious online behaviour
or phishing.
—
During 2023, Haleon did not identify
any significant cyber-security incidents.
>>
See also our approach to risk, Audit &
Risk Committee Report and Risk factors
on pages 53, 72 and 193.
Haleon
Annual Report and Form 20-F 2023
21
Strategic Report
Our culture and people
Our approach to
sustainability
As a global leader in consumer healthcare, we believe Haleon is well placed to
understand and help address several of the social and environmental barriers
holding people back from achieving better everyday health.
Our responsible business strategy is
committed to making everyday health
more inclusive, reducing our environmental
impact, and operating with ethical and
responsible standards of business
conduct. In 2023, we established the
Environmental & Social Sustainability
Committee (ESS), reflecting the strategic
importance of this area.
Progress against our responsible business
strategy was externally recognised in 2023,
our first year of rating by several ESG
indices. Haleon received a low-risk rating
by Sustainalytics and was recognised as
one of their 2024 ESG Top-Rated Companies.
We were also added to the Dow Jones
Sustainability Index Europe (DJSI) 2023,
and S&P’s 2024 Global Sustainability
Yearbook, based on our score in the top
decile of the Personal Products Category.
Health inclusivity
In 2023, we empowered over 41 million
people to be more included in opportunities
for better everyday health
1
, through
inclusive products, education programmes
and services. We aim to empower 50
million people a year by 2025. We track
the number of people engaging with a
Haleon brand or expert initiative to
improve their self-care. Our focus includes
those who are discriminated against
because of disability, age, race and
ethnicity, gender and sexuality. We take
action to improve health inclusivity by
driving change through our brands,
empowering self-care, investing in
research and action, and building
healthier communities through our
community investment programmes.
During 2023 we focused on:
—
The launch of ‘The Advil Pain Equity
Project’ with a long-term aim to help
address the bias and prejudice that
Black people in America experience
when they seek pain management.
—
In Thailand and the Philippines,
Polident’s ‘Smiles Can’t Wait’ provided
free dentures to over 1,500 people who
otherwise were not able to afford them,
and also provided accessible oral health
check-ups, samples, and educational
kits to over 50,000 people.
—
We expanded the reach of, and content
available on, the Haleon Health Partner
portal, an online database which
includes tools and materials to
support Health Professionals when
they have conversations with patients.
—
We continued to support Economist
Impact in their publication of the
second phase of the Health Inclusivity
Index (Index). Phase two of the Index
included the measurement of experience
of health inclusion across 42,000
people in 40 countries. The Index
found that more than three in five
people worldwide experience health
exclusion, with vulnerable and younger
populations the worst affected.
—
Following earthquakes in Turkey and
Syria, Haleon worked with Direct Relief
to sponsor dental clinics in the affected
areas, which provided treatment for
more than 10,000 people.
Environment
Haleon is focused on continually reducing
the environmental impact of its products
and operations. We are using leading
industry standards and working with
industry groups, peers and suppliers
to achieve our environmental aims.
We have set greenhouse gas (GHG)
emissions reduction goals aligned to
the Intergovernmental Panel on Climate
Change (IPCC) pathway to 1.5°C and aim
to achieve net zero carbon emissions
from source to sale by 2040, aligned to
guidance from The Climate Pledge and
Race to Zero. Haleon also works to raise
awareness of the linkages between
climate change, air pollution and health,
and has joined the Alliance for Clean Air.
1
Reporting period = 1 December 2022 – 30 November 2023. Where actual data on initiatives contributing to the goal has not been accessible, extrapolations have been applied
in a conservative manner to determine indicative results.
>>
More information, including all ESG indices ratings, is available at
www.haleon.com
/our-impact/esg-reporting-hub
>>
More information on the Health Inclusivity Index is available at
www.impact.economist.com
/projects/health-inclusivity-index
We continue to improve the data
collection processes used to measure
and track our Scope 3 emissions and
virgin petroleum-based plastic
footprint. We have updated our
baseline year from 2020 to 2022,
when we became a standalone
business, as the 2022 data used
to calculate and substantiate our
packaging footprint and value chain
emissions has greater availability
and accuracy. Our virgin plastic
reduction goal is calibrated
considering limitations in the use of
mechanically recycled plastic for
healthcare products. We are working
with suppliers to access bioplastics
and chemically recycled resins
suitable for healthcare products,
whilst introducing mechanically
recycled plastics in some product
formats where permitted.
Haleon
Annual Report and Form 20-F 2023
22
Strategic Report
Our aims
2023 Performance
1
Empower millions of people a year to be more included in opportunities for better
everyday health, empowering 50 million people a year by 2025.
41m+
(2022: 22m+)
Reduce our net Scope 1 and 2 carbon emissions by 100% by 2030 vs a 2020 baseline
2
.
48%
*
reduction
(2022: 44% reduction)
Reduce our Scope 3 carbon emissions from source to sale by 42% by 2030 vs
a 2022 baseline.
4%
increase in our estimated Scope 3
emissions footprint
Reduce our use of virgin petroleum-based plastic by 10% by 2025, and a third
by 2030 vs a 2022 baseline
3
.
3%
increase in our estimated virgin
petroleum-based plastic footprint
Develop solutions for all product packaging to be recycle-ready by 2025, as part
of our goal to make all packaging recyclable or reusable by 2030, where safety,
quality and regulations permit.
70%
*
recycle-ready packaging
(2022: 65% recycle-ready)
All key agricultural, forest and marine-derived materials used in our ingredients
and packaging to be sustainably sourced and deforestation-free by 2030
4
.
91%
of palm oil derivatives
(2022: 92% of palm oil derivatives)
48%
of paper-based packaging
In 2023, our Scope 3 emissions and virgin
petroleum-based plastic footprints have
increased in the reporting period due to
a mixture of volume growth, inventory
holding, and the mix of products sold.
We remain confident in our future
delivery based on our pipeline of
reduction projects that will contribute
towards achievement of these aims.
We achieved our goal of producing one
billion recycle-ready toothpaste tubes
since their initial launch in 2020, two
years ahead of our aim to achieve this
by 2025. We are also driving global
and local initiatives to collect, sort and
recycle our packaging. In 2023, Haleon
worked with Colgate-Palmolive, New
Jersey-based Mazza Recycling and San
Francisco-based AI company Glacier to
improve the sorting of toothpaste tubes
within waste at recycling centres in
New Jersey, US. This is part of our larger
industry combined efforts to increase
recycling of toothpaste tubes.
As part of our aim to source key
ingredients and packaging materials
more sustainably, we increased the
number of materials in scope for
sustainable sourcing reporting in 2023,
with a focus on also increasing our
percentage of sustainably sourced
paper materials.
As members of the Alliance for Water
Stewardship (AWS), we are taking
steps to enable more environmentally
sustainable and socially equitable
management of water. This includes
certifying our manufacturing sites with
the AWS certification by 2025 and aiming
for water neutrality for sites in water-
stressed basins by 2030. We achieved
our first water neutral site and our first
site recommended for AWS certification
in 2023, at Cape Town, South Africa.
*
KPMG LLP has issued independent limited assurance over the selected data indicated using assurance standards ISAE(UK)3000 and ISAE3410.
1
The 2023 reporting period for Scope 1 and 2 carbon emissions (market-based) and health inclusivity is 1 December 2022 - 30 November 2023. The 2023 reporting period for Scope 3
emissions, packaging and sustainable sourcing is 1 July 2022 – 30 June 2023. The 2020 and 2022 baseline reporting periods are the calendar years. The 2022 reporting period for
Scope 1 and 2 carbon emissions (market-based) and health inclusivity is the calendar year, and for packaging and sustainable sourcing is 1 July 2021 – 30 June 2022. Scope 1, 2 and 3
emissions calculated in line with the GHG Protocol. Scope 1 and 2 are emissions from Haleon’s direct operations. Scope 3 includes all indirect emissions from Haleon’s value chain,
and our source to sale commitments include GHG Protocol categories except 6, 7 and 10-15.
2
Calculated in accordance with methodology and data improvements and updated carbon emissions factors for our 2020 baseline, and so the 2022 value differs from the value
disclosed in the 2022 Annual Report and Form 20-F. Our updated total scope 1 & 2 emissions (market-based) 2020 baseline is 96 thousand tonnes CO
2
e, from the 89 thousand
tonnes CO
2
e reported in 2022
*
.
3
Scope includes product packaging and some devices, including toothbrushes. The calculation is based on our internal manufacturing data and does not include data on
third-party manufacturing.
4
Scope includes Haleon’s globally managed spend on key materials which are agricultural, forestry or marine-derived. Globally managed spend covers the majority of our
internal spend and expands across some of our third-party manufacturing network.
>>
Further details are in our TCFD and SECR disclosures from pages 24 and 188, our principal risk related to ESG on page 56, and Notes 1 and 12 to the
Consolidated Financial Statements on pages 123 and 133.
Haleon
Annual Report and Form 20-F 2023
23
Strategic Report
Our approach to sustainability
Audit & Risk Committee
Environmental & Social
Sustainability Committee
Remuneration Committee
Environment Steering Committee
Enterprise Risk
and Compliance Committee
Chief Executive Officer and Haleon Executive Team
Haleon Board
Sustainability Compliance and Risk Forum
Our purpose underpins our drive to tackle carbon emissions. We aim to
achieve net zero carbon emissions from source to sale by 2040 aligned
to guidance from The Climate Pledge and Race to Zero.
In accordance with TCFD guidance, we
have conducted a comprehensive analysis
to assess the risks and opportunities
linked to climate change that may have an
impact on our business. This statement
highlights the most significant risks
identified, along with any financial
implications, and outlines the
corresponding actions we are undertaking
in response.
Compliance statement
In accordance with the FCA’s Listing Rule
9.8.6R(8), Companies Act 2006, S414CB(A1)
and (2A), and the SEC’s Guidance Regarding
Disclosure Related to Climate Change
(2010), we present our TCFD compliance
statement and confirm that we have
made climate-related financial disclosure
for the year ended 31 December 2023
which is consistent with the TCFD
Recommendations and Recommended
Disclosures, on pages 24 – 31.
>>
We also include further climate-related
disclosures throughout the Annual Report,
including information on our principal risk
related to ESG on page 56, key performance
indicators on pages 32-33, Notes 1 and 12
of the Financial Statements on page 123
and from page 133, and a breakdown of
our GHG emissions on page 189.
The Board takes overall accountability
for risk and opportunity management,
including climate change. The Board
delegates specific matters related to
climate change to subcommittees in
the following ways:
—
The Environmental & Social
Sustainability Committee (ESS) reviews
progress against Haleon’s environmental
and social governance (ESG) metrics
and reviews delivery against its key
environmental and net zero priorities.
The Committee meets at least twice
a year and is composed of three
Non-Executive Directors. In their first
meeting, the Committee received an
‘Education and Assessment’ session,
facilitated by external experts, to
evaluate Haleon’s responsible
business strategy and goals,
including those on climate.
—
The Audit & Risk Committee meets at
least four times a year and oversees
Haleon’s principal risks, including
Haleon’s principal risk related to ESG,
which covers climate change (page 56).
—
The Remuneration Committee meets at
least four times a year and supports
Haleon’s climate strategy by aligning
Haleon’s Performance Share Plan with
ESG performance via the ESG qualifier.
This includes our Scope 1 and 2
decarbonisation commitment (page 83).
Governance
Governance over climate-related risks and opportunities is consistent with the governance
structures in place across Haleon, comprising of the Board, Board subcommittees,
executive and management-level governance committees, and specialist working groups
(see diagram below, with arrows indicating flow of information).
Task Force on Climate-related Financial Disclosures (TCFD)
Our approach to sustainability
continued
Haleon
Annual Report and Form 20-F 2023
24
Strategic Report
The Chief Executive Officer and the
Executive Team are responsible for the
delivery of Haleon’s responsible business
strategy, and they are supported by
various governance forums to monitor
the climate strategy, including the
management of climate-related risks
and opportunities.
—
The Environment Steering Committee
governs progress against Haleon’s
environment strategy and commitments,
including climate change commitments.
The Committee meets at least quarterly
and makes strategic recommendations
on managing our environmental
footprint for approval by the Executive
Team and the Board. It also monitors
climate-related risks and opportunities.
It is chaired by the Vice President of
Sustainability and Executive Team
members include the Chief Corporate
Affairs Officer, the Chief Supply Chain
Officer, and the Chief R&D Officer.
—
The Enterprise Risk and Compliance
Committee (ERCC) consists of members
of the Executive Team and Heads of
Audit and Risk, and of Ethics and
Compliance. The ERCC meets quarterly
and ensures that principal risks are
managed effectively, reviewing them
twice a year. This includes Haleon’s
principal risk related to ESG, which
covers climate-related risks (see page
56). The principal risk is owned by
the Chief Corporate Affairs Officer
and monitored through Haleon’s risk
management framework, described
from page 53.
—
Compliance and Risk Forums (CRF) are
conducted by our functional teams,
categories and business units, to
embed risk management in day-to-day
business operations. The Sustainability
CRF meets at least bi-monthly and is
responsible for monitoring, assessing,
and mitigating potential risks that may
impact Haleon’s responsible business
strategy delivery, including risks
associated with climate change.
Membership includes the Vice President
of Sustainability and members of the
sustainability team.
—
Working groups in our global functions,
global categories and business units
integrate responsible business targets,
principles and initiatives (including
climate change) into Haleon’s strategic
business planning process, capital
planning and budgeting, evaluation of
potential divestments or acquisitions,
day-to-day responsibilities and
metric management.
Responsible business scorecards,
at both enterprise-wide and business
unit level, track in-year targets against
our responsible business commitments,
including targets tracking carbon
emissions reduction. The ESS Committee
and the Executive Team receive progress
updates against these quarterly,
including performance against our
climate commitments, alongside
other information as a tool to inform
decision-making.
Responsible business targets are tied
to employee personal objectives and
performance evaluations where relevant,
including climate-related objectives for
executive management. Executive
remuneration incorporates specific
responsible business-related KPIs. For the
year ended 2023, this included climate-
related objectives (see pages 33 and 88).
Strategy and risk management
Identifying, assessing, and
managing climate-related risks
The process for identifying, assessing
and managing climate-related risks is
consistent with Haleon’s four-step
enterprise risk management process
described from page 53. This ensures
that accountability for the identification,
assessment, mitigation and monitoring of
risks is aligned with Haleon’s strategic
objectives. At the corporate level, ESG
and the integration of sustainability and
climate-related risks into our Business
and investment decisions was identified
as a principal risk 56, reflecting the level of
enterprise prioritisation.
The Sustainability CRF leads the climate
risk identification and assessment
process, which is formally conducted on
an annual basis. Risks are assessed by
taking into consideration the likely impact
(considering both financial and reputation
impacts), the probability of the risk, and
the controls that are in place to manage
the risk, in line with Haleon’s risk
management framework outlined from
page 53. This helps to identify where
management should focus its effort.
Continuous evaluation and management
of risk is embedded in our strategy to
ensure an appropriate, measured and
timely response. Risk owners are assigned
to climate risks and continually monitor
and assess each risk. A combination of
internal knowledge and external factors,
such as horizon scanning, legal and
regulatory developments, and emerging
climate science, are considered to
determine whether to mitigate, transfer or
accept climate-related risks. In some
cases, it may be deemed appropriate to
transfer the risk, for example by discharging
costs or liability to another party in our
value chain. Part of the risk assessment
process is also acceptance: establishing a
level of comfort with the risk, considering
our existing control strategies, and
considering them currently sufficient.
We also use scenario analysis and
stakeholder input to identify, assess and
manage climate-related opportunities, and
consider these in our strategy accordingly.
The most significant climate-related risks
and opportunities are described in detail
on pages 27 to 31 along with our plans
to manage these, with an impact summary
on page 123. These are considered to have
the most significant impact on our
business, strategy and financial planning.
Risk and mitigation plans undergo a formal
review at least once a year. Haleon will
conduct a climate-related risk and
opportunity assessment using scenario
analysis at least every three years.
Haleon
Annual Report and Form 20-F 2023
25
Strategic Report
Task Force on Climate-related Financial Disclosures (TCFD)
Task Force on Climate-related Financial Disclosures (TCFD)
continued
Our approach to sustainability
continued
Our resilience to climate change
As outlined in the climate-related risks on
pages 27 – 31, the quantitative scenario
analysis indicates that our business is not
at high risk of significant financial impacts
arising from climate-related risks in the
short-term. Any climate-related risks with
a medium-risk financial impact are either
projected to occur in the long-term or
have already been addressed through
our mitigating actions. As a result, we do
not anticipate the need for major changes
to our strategy in order to respond to
these risks.
In the medium and long-term, we will need
to consider transition risks. The transition
to a low-carbon economy could have
financial implications for Haleon, as
consumer preferences shift towards
sustainable products, potentially impacting
our market share and brand reputation.
Additionally, increased carbon taxes on
emissions across our operations and
supply chain could also have financial
impacts. However, these risks can be
mitigated if we achieve our carbon
reduction targets for emissions across
all scopes. We have already conducted
life-cycle assessments for 11 key products
to better understand and mitigate the
risks associated with their life-cycle
stages. You can read more in our Climate
Action Transition Plan, which is consistent
with the strategy outlined in this disclosure,
and goes into further detail.
In the long-term, we need to be aware
of the impacts of physical risks. Our key
facilities could be affected by flooding
and heatwaves, leading to disruption
and damage. Our Oral Health product line
could also be impacted by disruptions in
the supply of raw materials, particularly
wheat and corn, which are at a higher risk
of yield impact due to long-term climate
change. While we already have a resilient
sourcing strategy for these key crops, we
need to continue monitoring the situation.
The transition to a low-carbon economy
also presents an opportunity for Haleon,
as consumer preferences shift towards
more sustainable products. In order to
capitalise on this opportunity, we need
to improve the sustainability of our
products and make consumers aware
of these changes through substantiated
consumer messaging. See page 123 for
more information on how the impact
of climate change was considered in
financial planning.
Climate-related scenario analysis
Climate-related scenario analysis is
used to assess the potential impact of
climate-related risks and opportunities.
In 2022, we performed our first qualitative
analysis which we refreshed in 2023, both
qualitatively and quantitatively, to assess
the risks and opportunities in greater
detail and understand the impact of
climate change on our existing business
model. The results have been used to
inform our strategy and financial planning,
including updates to our underlying cash
flows for our planned actions to meet
our climate ambitions.
We worked with a climate analytics
company, Risilience, to quantify the
potential financial impact of our
physical and transition climate risks
and opportunities. Risilience used a
‘Digital Twin’, which is a data-driven digital
representation of our business and value
chain. This used data from our business
including current and approved financial
projections, market breakdown, key
facilities, raw materials and GHG footprint,
to stress test and quantify the potential
financial impact of climate risks and
opportunities under different scenarios.
The climate scenarios used as part of
the analysis are outlined below. We also
modelled a 2.5
o
C warming trajectory but
are disclosing the results with the highest
potential impact.
Warming trajectory by 2100
Climate scenario
Rationale behind climate scenario analysis selection
1.5°C
Paris Ambition:
Rapid transition
to a low-carbon
economy with orderly
emissions reductions
and rapid consumer
preference change.
Enables us to test our business strategy against the most optimistic scenario from a
climate-transition perspective.
Aligns with our target to be a net zero business by 2040, aligned to guidance from
The Climate Pledge and Race to Zero.
Aligns with TCFD and IPCC
1
recommendations to include a 2°C or lower scenario, with 1.5°C
scenario recommended as the ‘2°C or lower’, aligning with the latest scientific research
from the IPCC.
This scenario represents the ‘worst case’/highest potential for transition risk for our business.
>4°C
No Policy:
Reversal of
emissions reductions
and abolishment of
climate policy leading
to extreme warming.
Enables us to test business strategy against the worst-case scenario from a physical
risk perspective.
This scenario was used in our qualitative analysis in 2022.
A number of assumptions were made
in carrying out the analysis:
—
Current mitigating actions were not
modelled for any of the scenarios.
—
All scenarios were modelled
independently, i.e., no correlation
was assumed between different risks
and opportunities.
—
Investment costs required to
realise opportunities were not
taken into account.
While many scenario models and
techniques are advanced, we recognise
that knowledge in this area is growing,
and we expect models and pathways to
evolve with time. Models also have
limitations, and there are certain areas
which are challenging to model.
Additionally, in certain situations,
different models can project contrasting
results. In these situations, we have
considered how different outcomes
would impact our businesses.
1
We used the IPCC Representative Concentration Pathways (RCPs) to assess physical climate risk. RCPs are commonly used by climate scientists to assess physical climate risk,
with each pathway representing a different GHG concentration trajectory which can then be translated into global warming impacts. We used climate data from the World Climate
Research Programmes Coupled Model Intercomparison Project – Phase 6 (CMIP 6 – adjusted for spatial resolution and bias corrected) to do this translation. RCPs feed into climate,
crop and flood models. There are four RCP pathways with RCP8.5 representing the worst case scenario.
Haleon
Annual Report and Form 20-F 2023
26
Strategic Report
Impact of climate-related risks
and opportunities and resilience
of our strategy
For 2023, we have updated the time
horizons used to consider the impact of
climate risks and opportunities. The length
of the time horizons was reduced to allow
greater alignment to modelling capabilities
for quantitative scenario analysis and to
reduce the risk of modelling uncertainties
associated with using time horizons
beyond 2050. This provides more accurate
results compared to using longer time
horizons and aligns with our business
risk cycles, allowing us to use the analysis
for strategic decision making.
We define short, medium and long-term
horizons as follows:
—
Short-term (0-4 years):
aligns to
our financial planning and risk
management framework.
—
Medium-term (5-9 years):
aligns to
our interim Scopes 1, 2 and 3 emissions
reduction targets of 2030.
—
Long-term (10+ years):
aligns to our
net zero target of 2040 and the UK
Government’s net zero target of 2050.
The following climate risks and opportunities have been identified as those with the potential to be significant to our business over
the short, medium and long-term. For each risk and opportunity, further details are only provided for the scenario analysis with the
most significant impact to Haleon. The risks and opportunities as presented integrated several components of TCFD: strategy, risks,
and metrics and targets.
Physical risks
Risk
Impact analysis
Management of risk
Impact of extreme
weather events on
operations and
supply chain
The revenue and cost
impact of damage and
disruption to key
facilities from the
following climate
hazards: riverine, coastal
and flash flooding,
heatwaves, water stress,
and temperate and
tropical windstorms.
Potential impacts included in our Paris Ambition (1.5°C)
and No Policy (4°C) scenario analysis included:
—
Revenue disruption from the interruption of supply of
electricity, gas and water, due to heatwaves and flooding.
—
Inefficiencies in production due to disrupted
employee travel, e.g., caused by flooding.
—
Increased facility and operational down time,
due to damaged transport infrastructure.
—
Direct damage to stock, buildings, and contents
from flood and windstorms.
Under a No Policy (4°C) scenario, the hazards with the
greatest potential to impact our business are riverine
and flash flooding, and heatwaves, over the long-term
time horizon. Three of our sites, Guayama (Puerto Rico),
Tianjin (China) and Dungarvan (Ireland), are at greatest
risk of property damage from riverine flooding owing
to their close proximity to rivers.
Sites in the US, southern Europe and eastern China are
located in regions that could experience a rapid increase in
heatwave probability driven by global average temperatures
and the likelihood of prolonged extreme temperature events.
Heatwaves have the potential to cause disruption through
interrupting our supply chain (such as from infrastructure
damage to the road and rail network) as well as reducing the
productivity of our workforce through human health impacts.
The risk of water stress is considered to be low with 0.4%
of annual revenue from our owned sites being potentially
impacted in the long-term (by 2050).
Assumptions:
—
2023 financial values are kept constant up to 2050 and
acute physical risk shocks were applied to these values.
—
The revenue share for our sites was assumed to be site
revenue as a proportion of total revenue. The remaining
revenue share was split proportionally across third-party
manufacturers’ sites.
—
Meteorological conditions that could lead to water stress
(i.e., severe drought) were considered. Local geological
conditions were excluded from the analysis.
Actions:
—
Production sites are included within a
loss-prevention survey programme and are
routinely visited to ensure appropriate
resilience measures are in place, including
flood, wind and storm protection.
—
Our manufacturing sites have emergency
plans, disaster recovery plans, and business
continuity plans (BCPs), which we continuously
improve to further enable our sites to
withstand extreme weather events.
—
Our BCPs include options for multiple
sourcing for manufacturing of our products.
This is achieved by using a combination
of Haleon or third-party manufacturing
organisations’ sites, spread across
different geographies.
—
We conducted value-chain water footprint
analysis to better understand potential
water-related risks in specific geographies
and prioritise actions.
—
All our manufacturing sites are implementing
the AWS standard to address local
water-related risks and opportunities.
In 2023, our Cape Town site was
recommended for certification; it also
became water neutral following water
replenishment activities, which began in
2022 with WWF South Africa.
Metrics and targets:
—
All our manufacturing sites in water-stressed
basins to be water neutral by 2030.
We consider water neutral achieved
when the amount of water replenished
in the catchment exceeds the site’s
water withdrawal.
—
AWS certifications at our manufacturing
sites by 2025.
—
We aim to introduce additional metrics from
2024 to further track owned and third-party
sites’ exposure to extreme weather events.
Paris Ambition (1.5°C)
S
M
L
No Policy (4°C)
S
M
L
Financial impact of risk or opportunity
Low risk
Medium risk
High risk
Opportunity
£10m-£40m
£40m-£80m
>£80m
Key
Time horizon for impact
S
Short-term
M
Medium-term
L
Long-term
0-4 years
5-9 years
10+ years
Haleon
Annual Report and Form 20-F 2023
27
Strategic Report
Task Force on Climate-related Financial Disclosures (TCFD)
Task Force on Climate-related Financial Disclosures (TCFD)
continued
Physical risks
continued
Risk
Impact analysis
Management of risk
Reduced availability of
raw materials due to
chronic weather impact
The financial impacts
on ingredient
production due to
chronic climate
change induced by
changing temperature
and precipitation
patterns. The following
raw materials were
considered for the
analysis: corn,
wheat, mint, palm oil
and soybean.
Potential impacts included in our Paris Ambition (1.5°C)
and No Policy (4°C) scenario analysis included:
—
Reduction in crop yields leading to supply and demand
implications and price volatility.
—
Supply shortages which could prevent or limit the
production of key product lines and lead to a loss
in revenue.
—
Increased costs due to long-term chronic drought
affecting crop supply and implementation of adaptation
measures such as irrigation solutions.
Scenario analysis was conducted to assess the financial
impact of crop yield fluctuations caused by long-term
climate change for our key crops. Changes in rainfall and
temperature were assessed using data on crop sourcing
locations and crop vulnerability. The effects of sudden
hazards like heatwaves and droughts on crops were also
assessed, considering the sourcing locations with a high
likelihood or increasing probability of such events.
Changes in long-term precipitation and temperature patterns
under the No Policy (4°C) scenario are likely to affect wheat
and corn sourcing, with wheat experiencing the largest
average percentage yield decline of c.37% between 2023
and 2050. Our key sourcing regions for these crops (France,
US and UK) could also be impacted by extreme weather
events, such as drought or severe heatwave events, further
reducing crop yields.
In our Oral Health products, corn is a crucial ingredient.
However, the projected impact on corn yields in 2050 is
anticipated to be minimal, accounting for less than 3% of the
total revenue generated by Oral Health products in 2023.
Under the No Policy (4°C) scenario, certain areas of
central US may see corn yields decline as a result of
precipitation variation.
Assumptions:
—
2023 financial values are kept constant up to 2050 and
acute physical risk shocks are applied to these values.
—
The impact of climate conditions on raw material supply is
limited to temperature and precipitation. Other conditions,
such as soil quality, were excluded from the analysis.
—
Revenue impacts were considered in terms of reduced
crop yields leading to production limitations. Price
fluctuations were not considered in the analysis.
Actions:
—
Seek to assess feasibility of substituting raw
materials with lower-risk alternatives, for
example replacing corn-derived ingredients
with alternatives to reduce exposure to
yield and cost fluctuations.
—
We have a robust sustainable sourcing
strategy in place (see page 23).
—
Our sourcing strategy involves multiple
sourcing options from different geographies
and holding materials’ safety stocks where
feasible. Continuity of supply is a priority for
our procurement team.
—
Haleon has defined and launched its Supplier
ESG Expectations, which outlines the targets
we have set our suppliers, such as requiring
materials to be covered by industry-recognised
certifications where relevant.
—
Sustainability requirements are embedded
into tender processes.
Metrics and targets:
—
We aim for all of our key agricultural, forest,
and marine-derived materials to be sustainably
sourced and deforestation-free by 2030
1
.
For the key material supply chains in scope
of this goal, we use recognised global
certification programmes wherever possible,
for example Roundtable on Sustainable Palm
Oil (RSPO) Mass Balance certification for our
palm oil derivatives, and Forest Stewardship
Council (FSC) and Programme for the
Endorsement of Forest Certification (PEFC)
certifications for our paper packaging
materials. Where these are not available,
we are working with independent experts
to define clear standards and processes for
sustainable sourcing based on the specific
issues and opportunities for each material.
Paris Ambition (1.5°C)
S
M
L
No Policy (4°C)
S
M
L
1
Scope includes Haleon’s globally managed spend on key materials that are agricultural, forest, or marine-derived. Globally managed spend covers the majority of our internal spend
and expands across some of our third-party manufacturing network.
Our approach to sustainability
continued
Financial impact of risk or opportunity
Low risk
Medium risk
High risk
Opportunity
£10m-£40m
£40m-£80m
>£80m
Key
Time horizon for impact
S
Short-term
M
Medium-term
L
Long-term
0-4 years
5-9 years
10+ years
Haleon
Annual Report and Form 20-F 2023
28
Strategic Report
Transition risks
Risk
Impact analysis
Management of risk
Policy: carbon pricing
The financial impacts
of carbon taxes on
emissions across our
operations and
supply chain.
Potential impacts included in our Paris Ambition (1.5°C)
scenario analysis included the following (the No Policy
(4°C) scenario was not relevant):
—
Direct increase to overhead costs from Scope 1 and 2
emissions (e.g., cost of electricity and fuel).
—
Increased cost of raw materials from upstream suppliers
passing through increased costs from Scope 3 emissions.
—
Reduction in sales from passing the costs from carbon
taxes on to consumers.
Under a Paris Ambition (1.5°C) scenario where global carbon
prices are expected to grow significantly from 2023, the
potential impact is a medium risk if we do not reach our
SBTi-aligned target for Scope 1 and 2 emissions. However,
if we meet our SBTi target, the risk is significantly reduced as
we aim to achieve at least 95% absolute Scope 1 and 2
emissions reduction by 2030 (vs a 2020 baseline).
Indirect Scope 3 emissions account for the majority of our
exposure to carbon costs, particularly upstream emissions
associated with farming and processing, which could be
passed on by our suppliers. We have limited ability to
influence these costs as they will depend on the extent to
which suppliers reflect carbon tax expenditure within prices.
The risk of indirect Scope 3 costs will be greatly reduced
if we are able to meet our commitment to reduce Scope 3
emissions by 42% by 2030 (vs a 2022 baseline) and deliver
our net zero target by 2040, aligned to guidance from
Race to Zero and Amazon Climate Pledge.
Assumptions:
—
Business as usual emissions trajectory where emissions
grow proportionally to revenue growth.
—
Linear trajectories were used between scenario data points
to estimate climate pricing data for intervening years.
—
All global emissions are subject to carbon pricing and no
border adjustments were included in the analysis.
—
No risk is assumed under a No Policy (4°C) scenario. This
is due to this scenario representing a reversal of current
policies including currently implemented carbon prices.
—
Carbon price used in the analysis (2027 weight average
carbon price (USD/tonne): $83.45. Carbon prices used in
analysis were collated from sources such as the IMF, IEA
and NGFS.
Actions:
—
Delivery of our carbon emissions reduction
targets for Scopes 1, 2 and 3 carbon
emissions as outlined in our Climate Action
Transition Plan will mitigate our operations’
exposure to future carbon pricing and
environmental taxation.
—
We work with our suppliers and through
industry groups like Manufacture 2030 and
Energize to help suppliers map their carbon
emissions and take actions to reduce their
carbon footprint.
Metrics and targets:
—
Reduce absolute Scope 1 and 2 carbon
emissions by 95% by 2030 vs a 2020 baseline.
—
Reduce Scope 3 carbon emissions from source
to sale by 42% by 2030 vs a 2022 baseline
1
.
—
Achieve net zero carbon emissions from source
to sale by 2040, aligned to guidance from the
Climate Pledge and Race to Zero
1
.
Paris Ambition (1.5°C)
S
M
L
No Policy (4°C)
Not applicable
1
Our net zero and Scope 3 carbon emissions targets span carbon emission categories from source to sale (excluding GHG protocol categories 6, 7 and 10-15).
Financial impact of risk or opportunity
Low risk
Medium risk
High risk
Opportunity
£10m-£40m
£40m-£80m
>£80m
Key
Time horizon for impact
S
Short-term
M
Medium-term
L
Long-term
0-4 years
5-9 years
10+ years
Haleon
Annual Report and Form 20-F 2023
29
Strategic Report
Task Force on Climate-related Financial Disclosures (TCFD)
Task Force on Climate-related Financial Disclosures (TCFD)
continued
Transition risks
continued
Risk
Impact analysis
Management of risk
Changing consumer
preferences
The financial impact of
taking no action towards
the sustainability of
our products, and
consumer purchasing
shifting towards more
sustainable brands
(e.g., products with
less plastic or more
recyclable packaging).
Potential impacts included in our Paris Ambition (1.5°C)
and No Policy (4°C) scenario analysis included:
—
Reduction in product sales and loss in market share.
—
Reputational damage and reduction in brand loyalty.
Under a Paris Ambition (1.5°C) scenario, it is expected that
consumers will rapidly shift towards more sustainable
products. The unmitigated potential risk to our business is
considered to be medium. The majority of potential revenue
loss is driven by our Oral Health products which represent
the largest share of total revenue. Oral Health product
consumers in the US are likely to see a rapid shift towards
more sustainable products.
Assumptions:
—
Buying preferences will vary at differing rates across
global regions.
—
To model demand shifts of our products, consumer-led
demand for sustainable packaging was used as a proxy.
—
The risk was modelled under a scenario where we do
not act to improve the sustainability of our products,
in order to analyse the unmitigated impact of consumer
demand shifts.
Actions:
—
To meet or exceed the expectations of Haleon’s
key stakeholders, including consumers, we are
committed to deliver on our responsible
business strategy and targets (page 23).
—
We have carried out life-cycle assessments for
11 key products to better identify the risks and
opportunities across the life-cycle stages.
—
Haleon’s sustainability impact assessment tool
enables our R&D teams to calculate, analyse
and compare the impact of product and
packaging design decisions on key
environmental-impact parameters (including
carbon footprint and packaging).
—
We are participating in externally verified
sustainable choice ranges such as Amazon’s
‘Climate Pledge Friendly’ programme as well as
making substantiated statements in relation to
our products’ sustainability credentials.
—
With a focus on health inclusivity, our brands
seek to tackle specific barriers that stand in
the way of better everyday health. This includes
empowering consumers and Health
Professionals to better understand the impact
of climate change on health and equip both
with tools and solutions to manage and
mitigate the impact on everyday health.
Metrics and targets:
—
Haleon has set targets with an aim to respond
to changing consumer preferences, for
example our aims for 100% of product
packaging to be recycle-ready by 2025 and
recyclable by 2030 where safety, quality and
regulations permit, and to reduce our use of
virgin petroleum-based plastic packaging by
10% by 2025 and by a third by 2030 vs a 2022
baseline. See page 23 for our performance.
Where relevant, we incorporate environmental
credentials into consumer-facing statements or
listings in retailers’ sustainable choices ranges.
Paris Ambition (1.5°C)
S
M
L
No Policy (4°C)
S
M
L
Our approach to sustainability
continued
Financial impact of risk or opportunity
Low risk
Medium risk
High risk
Opportunity
£10m-£40m
£40m-£80m
>£80m
Key
Time horizon for impact
S
Short-term
M
Medium-term
L
Long-term
0-4 years
5-9 years
10+ years
Haleon
Annual Report and Form 20-F 2023
30
Strategic Report
Transition opportunities
Opportunity
Impact analysis
Management of opportunity
Changing consumer
preferences
The financial impacts of
taking action towards
the sustainability of
our products, and
consumer purchasing
shifting towards more
sustainable brands
(e.g., products with
less plastic or more
recyclable packaging).
Potential impacts included in our Paris Ambition (1.5°C)
and No Policy (4°C) scenario analysis included:
—
Changing consumer demand to low-carbon alternatives
leading to a gain in market share and an increase in
product sales.
—
Positive reputational impacts and increasing brand loyalty.
The potential market opportunity for more sustainable
products could be significant under a Paris Ambition (1.5°C)
scenario, equating to 2.6% additional revenue in 2032,
compared to baseline projected revenues. Consistent with
the risk above, the greatest potential for upside is driven by
our Oral Health products.
The size of the potential opportunity decreases in the long
term, as more products align with consumer preferences and
take actions to meet future climate targets. Therefore, the
opportunity reduces for product groups which have already
seen a sustainable shift.
Assumptions:
—
Buying preferences will vary at differing rates across
global regions. To model demand shifts for Haleon’s
products, consumer-led demand for sustainable
packaging was used as a proxy.
—
The opportunity was modelled under a future where
we work to improve the sustainability of our products
in order to understand the potential financial gains that
could be realised.
Actions:
—
Our actions are consistent with management
of the risk of changing consumer preferences.
Metrics and targets:
—
Haleon has set targets with an aim to
respond to changing consumer preferences,
for example our aims for 100% of product
packaging to be recycle-ready by 2025 and
recyclable by 2030 where safety, quality and
regulations permit, and to reduce our use of
virgin petroleum-based plastic packaging by
10% by 2025 and by a third by 2030 vs a 2022
baseline. See page 23 for our performance.
Where relevant, we incorporate environmental
credentials into consumer-facing statements or
listings in retailers’ sustainable choices ranges.
Paris Ambition (1.5°C)
S
M
L
No Policy (4°C)
S
M
L
Metrics and targets
We have made significant progress in
establishing our standalone responsible
business strategy as a separately listed
company (following listing in July 2022).
This has included the development of
targets, associated delivery plans to
meet targets, and performance and risk
management forums and processes.
As outlined in this disclosure, we have
developed metrics alongside our scenario
analysis which are used to monitor certain
risks and opportunities. This includes
cross-industry metrics and targets
recommended by TCFD, which can be
found mapped to risks and opportunities
on pages 27-31, in key performance
indicators on pages 32-33, in our Scope 1, 2
and 3 emissions set out in line with the UK
Government’s guidance on Streamlined
Energy and Carbon Reporting (SECR) on
pages 188-189, and built into our ESG
Qualifier as described on pages 33 and 83.
In August 2023, the Science Based Targets
initiative validated our near-term target
to reduce absolute Scope 1 and 2 GHG
emissions by 95% by 2030 from a 2020
base year
4
. We are also committed to
reducing absolute Scope 3 GHG emissions
from purchased goods and services,
capital goods, fuel and energy-related
activities, upstream transportation
and distribution, waste generated in
operations, upstream leased assets
and downstream transportation and
distribution by 42% versus our 2022
baseline within the same time frame.
This target, based on its original 2020
baseline, was also validated by the Science
Based Targets initiative. As described on
page 22, we have updated the baseline
year for our carbon Scope 3 and virgin
plastic reduction goals from 2020 to 2022.
We will re-submit our Scope 3 target with
its updated 2022 baseline for revalidation
this year.
Our 2023 performance is described
on pages 22-23. Performance against these
targets, along with additional
environmental metrics and reporting
methodologies, can be found on
our website.
Priorities for 2024
After completing our quantitative
scenario analysis at the end of 2023, our
main focus for the upcoming year will be
interpreting the findings and determining
the appropriate mitigating actions and
associated metrics and targets.
In line with our journey to meet our
net zero ambition, as published within
our Climate Action Transition Plan, we
continue to develop and refine metrics
to track and manage our transition risks
and opportunities. It is Haleon’s plan to
continue to evolve on this journey and
publish additional metrics in 2024. We will
also continue to develop our Climate
Action Transition Plan over time to
include a costed plan for our transition.
4
The target boundary includes biogenic land-related emissions and removals from bioenergy feedstocks.
>>
More information on our Climate Action Transition Plan is available at
www.haleon.com
/our-impact/esg-reporting-hub
Financial impact of risk or opportunity
Low risk
Medium risk
High risk
Opportunity
£10m-£40m
£40m-£80m
>£80m
Key
Time horizon for impact
S
Short-term
M
Medium-term
L
Long-term
0-4 years
5-9 years
10+ years
Haleon
Annual Report and Form 20-F 2023
31
Strategic Report
Task Force on Climate-related Financial Disclosures (TCFD)
We have several enterprise metrics monitoring performance across the business, from which we select our key performance indicators
(KPIs). These are the most applicable in tracking our strategic performance, sustainability and commitment to our key stakeholders.
The Board and Executive Team monitor our KPIs to ensure continued alignment to our strategy and, where applicable, they are linked
to Executive Directors’ remuneration. Having demerged from GSK in 2022, we are still in the process of building up five years of data.
>>
See also the Directors’ Remuneration Report from page 80, and forward-looking statements on page 218.
Strategic pillars
1
Increase household penetration
2
New and emerging opportunities
3
Strong execution and financial discipline
4
Responsible business
Executive Director Remuneration
Performance Share Plan
Annual Incentive Plan
1
Organic revenue growth, adjusted operating profit, free cash flow and net debt are
non-IFRS measures. Definitions and calculations of non-IFRS measures can be found
from page 43.
KPI
Relevance and calculation
Future focus
Organic revenue growth
1,2
1
2
3
Delivery on our 4-6% guidance.
Measures the strength of our
existing portfolio.
Data is derived directly from our
Financial Statements.
Continue to deliver on our
guidance prioritising driving
growth from recently
launched innovations.
2023
2020
2.8%
2
9.0%
3.8%
2
8.0%
2021
2022
Adjusted operating profit
1
1
2
3
Continued profitable growth.
Our adjusted operating profit
is an important indicator of the
strength of our business model.
Data is derived directly from our
Financial Statements.
Drive positive operating leverage
in the business whilst at the same
time ensuring healthy investment
to drive top-line growth. In 2024,
this KPI will be replaced by
organic profit growth to provide
a more direct representation of
the Company’s performance.
2023
2020
£
2.1
bn
£
2.5
bn
£
2.2
bn
£
2.5
bn
2021
2022
Free cash flow
1
3
A key component in measuring
the viability of our business.
Provides the business with
capacity to invest in the business,
pay down debt and make
shareholder returns.
Data is derived directly from our
Financial Statements.
Drive free cash flow through a
combination of working capital
management and efficiencies
across the business.
2023
2020
£
2.0
bn
£
1.6
bn
£
1.2
bn
£
1.6
bn
2021
2022
Net debt/adjusted EBITDA
1
3
Achieve less than 3x net debt/
adjusted EBITDA during 2024
3
.
Reducing our leverage
strengthens our balance sheet
and maintains our Investment-
Grade credit rating.
Data is derived directly from our
Financial Statements.
Operate a strong Investment-
Grade balance sheet with
medium-term leverage of c.2.5x
net debt/adjusted EBITDA.
In 2024, this will no longer be
a KPI given expected delivery
of less than 3.0x leverage
during the year.
2023
3.6x
3.0x
2022
Business gained/maintained
share
1
2
Drive market share gains through
brand building, innovation and
increased investment in A&P
and R&D.
The attractiveness of our products
is key for all our stakeholders,
giving them confidence in our
ability to increase household
penetration and capitalise on new
and emerging opportunities.
Based on Haleon’s analysis of
third-party market revenue data,
including IQVIA, IRI and Nielsen
data.
Ensure healthy investment in
A&P through numerous media
campaigns and drive innovation
through investment in R&D.
2023
66%
58
%
2022
Carbon reduction
4
4
Reduce our net Scope 1 and 2
carbon emissions by 100%, versus
our 2020 baseline by 2030.
Decarbonising our operations
is a key focus area and helps
protect against climate-related
transition risks.
We track the percentage change
in total tonnes of market-based
net Scope 1 and 2 GHG emissions
versus 2020.
We are focused on addressing
our remaining Scope 1 emissions
by transitioning to renewable-
energy-powered systems for
heating and cooling.
2023
44%
48%
*
2022
Our key performance indicators
2
Haleon portfolio revenue growth in 2020 and 2021 was 4.9% and 3.9% respectively
which illustrates the performance of the brands that make up the portfolio at the time
of the demerger.
3
In February 2022, Haleon expected to reach leverage of less than 3x net debt/adjusted
EBITDA by the end of 2024 (as presented at its Capital Markets Day).
*
KPMG LLP has issued independent limited assurance over the selected data indicated using assurance standards ISAE(UK)3000 and ISAE 3410.
Haleon
Annual Report and Form 20-F 2023
32
Strategic Report
KPI
Relevance and calculation
Future focus
Recycle-ready packaging
5
4
Develop recycle-ready solutions
for all product packaging by 2025,
as part of our goal to make all
packaging recyclable or reusable
by 2030, where safety, quality and
regulations permit.
A key priority and commitment
for Haleon is to play its part
to accelerate the transition to
a circular economy.
We track the percentage
of recycle-ready packaging
in market.
Continue to transition our
packaging to recycle-ready
formats using mono-materials
designed for recycling.
This will no longer be a KPI
in 2024 given our commitment
will complete in 2025. This KPI
will be replaced by reduction
in virgin petroleum-based
plastic packaging.
2023
65%
70%
*
2022
Gender diversity
4
Achieve gender parity (48-52%) in
leadership roles
6
globally by 2030.
We believe diversity is a key
source of competitive advantage
and an important consideration
for employees and investors.
Calculated as a percentage
of employees who self-identify
as female compared to overall
number of permanent employees.
Our 2024 goal is 45.5%, which
we are working towards through
targeted initiatives, and aiming
to ensure that our hiring,
pipeline and development
processes are bias free.
2023
43.7%
44.9%
*
2022
Employee engagement
4
Build a company where employees
are proud to work, feel inspired,
challenged, supported and have a
sense of personal accomplishment.
Ensuring employees feel Haleon
is fulfilling its core engagement
index measures is fundamental to
our long-term success. We track
responses to our core engagement
index measures in our annual
employee survey.
Continue to focus on
strengthening our work
processes to enhance
productivity, allow for greater
agility and deliver better
performance. Initiatives include
improving our communications
on change and future direction.
2023
80%
78%
2022
>>
KPMG LLP’s limited assurance statement and Haleon’s reporting criteria are available at
www.haleon.com
/our-impact/esg-reporting-hub
Following the strong strategic progress made since our de-merger, Haleon has reviewed its KPIs given a number of targets are within sight
of delivery. Net debt/adjusted EBITDA will no longer be a KPI in 2024 given expected delivery of less than 3.0x leverage during 2024.
The Company has a commitment to maintain an Investment-Grade balance sheet and operate at c.2.5x net debt/adjusted EBITDA over
the medium term. Additionally, given Haleon’s commitment to active portfolio management and the recently announced disposals of
Lamisil and ChapStick, the Board will now consider adjusted operating profit growth and adjusted operating margin on an organic basis
(i.e. excluding the impact of acquisitions and divestments, and at constant currency) which will give a more direct representation of
the Company’s performance. In addition, from 2024 we will focus on adjusted diluted EPS growth at constant currency to ensure value
creation across the business. In responsible business, given our commitment on recycle-ready packaging will complete in 2025, we will
replace this metric with reduction in virgin petroleum-based packaging, which will be included as part of the ESG qualifier in Haleon’s
2024-2026 Performance Share Plan (PSP) awards.
Our KPIs and Executive Director remuneration in 2023
Elements of our Executive Director
remuneration are linked to the delivery of
specific KPIs that are considered the most
relevant in assessing business performance
and our commitment to our stakeholders.
ESG qualifier
The PSP has an ESG qualifier with thresholds
set for three responsible business KPIs. If any
of the thresholds are missed, a reduction in the
level of vesting of up to 10% could be applied
for each missed threshold. If the metrics are
static or go backwards compared to the baseline,
a 25% reduction in the level of vesting could
be applied for each measure (i.e. a potential
overall reduction of up to 75%).
Performance Share Plan
50% linked to
net debt/Adjusted
EBITDA
50% linked
to cumulative
free cash flow
Annual Incentive Plan
60% linked
to organic
revenue growth
20% linked
to adjusted
operating profit
20% linked
to individual
business
objectives
4
The reporting period runs from 1 December 2022 to 30 November 2023.
Carbon offsets account for 25% of our market-based Scope 1 and 2 carbon emissions.
Calculated in accordance with methodology and data improvements, and updated
carbon emissions factors for our 2020 baseline, hence the 2022 result differs from
the value disclosed in the 2022 Annual Report and Form 20-F.
5
Reporting period runs from 1 July 2022 to 30 June 2023.
6
Leadership roles’ is defined in our glossary.
*
KPMG LLP has issued independent limited assurance over the selected data indicated using assurance standards ISAE(UK)3000 and ISAE 3410.
Haleon
Annual Report and Form 20-F 2023
33
Strategic Report
Our key performance indicators
2023 Business review
Chief Financial Officer’s review
Tobias Hestler
Chief Financial Officer
I am pleased to report strong financial
performance for 2023 demonstrating the
continued resilience of our business. Since
2021, the business has added £1.8bn of
additional revenue, £1.0bn of adjusted
gross profit and £0.4bn of adjusted
operating profit driving strong cash
generation. This meant we reached the
initial leverage target outlined at our
Capital Markets Day in February 2022, one
year ahead of our expectation. We have
therefore updated our capital allocation
priorities and plan to return £500m to
shareholders through buybacks in 2024.
Haleon is now on a journey to become
more agile and consumer focused with
a leading portfolio. During 2023, we
examined our processes to ensure that
they were fit for purpose and restructured
where necessary. Additionally, we
proactively managed our portfolio
and agreed to divest both Lamisil and
ChapStick which will drive more focus
to our key growth areas.
I would like to thank everyone at Haleon
for all their efforts across the business.
Profitable growth
For 2023, we reported revenue of £11.3bn
(+4.1%), delivering organic revenue growth
of 8.0%. Foreign exchange reduced revenue
by (3.8)% and net M&A by (0.1)%. We saw
broad-based organic growth demonstrating
the long-term attractiveness of our brands
and geographic footprint. Our strong
execution in market meant that we were
able to increase prices to help offset
inflationary cost pressures, whilst also
preserving volume growth.
Our growth was profitable, with operating
profit of £1,996m (+9.4%) and adjusted
operating profit up 10.4% at constant
currency reflecting strong operating
leverage across the business. This drove
adjusted operating margin growth of
50bps at constant currency. Margin was
down 20bps at actual exchange rates. EPS
was 11.3p, and adjusted EPS was 17.3p,
down 6.0% reflecting the annualisation
of our interest charge given 2023 was our
first full year as a standalone company.
Investments
We continued to ensure the business
remains fully invested whilst being
focused on cost discipline to deliver
value. This included investments into
our systems, processes and sales force.
Our A&P spend was flat and up 3% at
constant currency for the year. We drove
further efficiencies in spend through
agency consolidation and in-house
production. Spend was targeted across
advertising and expert engagement which
delivered strong ROI. Advertising spend
increased in key areas including Oral
Health and VMS, and in important growth
markets such as India and China.
Adjusted R&D expenditure totalled
£297m (2022: £303m), representing a
healthy level of spend into innovation.
Our gross capital expenditure was
£336m (2022: £328m) with spend focused
on sales and marketing, manufacturing
sites and technology, particularly in
automation.
Becoming agile and
consumer focused
During the year, we announced a programme
to increase agility and productivity across
the business which will result in annualised
gross cost savings of c.£300m, largely in
2024 and 2025. We are on-track to
deliver this through initiatives including
restructuring. As a result, a number of
employees have left the business as we
de-layer functions, increase the speed of
decision making and route to market.
Haleon is also focused on proactively
managing its portfolio and will remain
rigorous and disciplined where there
are opportunities. During 2023, we
disposed of Lamisil for £235m, and
reached an agreement to sell ChapStick
for approximately $430 million, and a
passive minority interest in Suave Brands
Company, allowing Haleon to participate
in further value creation of the brand.
Both Lamisil and ChapStick are strong
brands in their own right, but divesting
allows us to reduce complexity,
accelerate revenue growth, reduce
debt and drive shareholder returns.
Driving shareholder returns
Since demerger, our strong free cash flow
generation has allowed us to reduce net
debt by over £2bn, finishing the year at
£8.5bn with over £1bn of cash on hand.
Our debt is staggered and secured at
attractive rates. During 2023, we repaid
$300m of our 2024 notes, one year early.
We next have $700m due in March 2024
with $1.75bn due in March 2025, both of
which we expect to fund largely from our
operational cash flows.
Our leverage at the end of 2023 stood at
3.0x net debt/adjusted EBITDA. Hence,
leverage of less than 3x is in sight to be
achieved during 2024. Given this, we have
updated our capital allocation priorities.
Haleon is now targeting to operate at
around 2.5x net debt/adjusted EBITDA over
the medium term. We believe that this is the
right leverage to enable the business to
appropriately balance our capital allocation
priorities of continued investment for
growth, explore acquisitions and return
surplus capital to shareholders through
dividends and share buybacks.
Given these priorities, the Board has
proposed a final dividend for 2023 of 4.2p
per ordinary share and a total dividend of
6.0p per ordinary share, which represents
approximately 35% of our 2023 adjusted
earnings. As a result, since demerger, Haleon
will have returned £0.8bn in dividends
to shareholders. Going forward, Haleon
expects to grow its ordinary dividend at
least in line with adjusted earnings. In
addition, we expect to allocate capital
of £500m to share buybacks in 2024.
This reflects expected savings from our
productivity programme, cash proceeds
from announced disposals and
accelerated progress in de-leveraging.
Looking ahead
I am encouraged by the strength and
resilience of our business model to deliver
superior shareholder returns. There is
more to do as we become more agile and
consumer focused. Nevertheless, I am
confident Haleon will deliver another year
of strong performance. This, combined
with our capital allocation framework,
will drive value for all our stakeholders.
Haleon
Annual Report and Form 20-F 2023
34
Strategic Report
Revenue
Revenue increased 4.1% to £11,302m
(2022: £10,858m). Adverse foreign
exchange had a 3.8% impact on total
revenue. This was largely driven by the
Pound Sterling strengthening against the
Argentine Peso, the Chinese Renminbi and
other emerging market currencies. The net
impact of M&A
3
had a 0.1% adverse impact
largely from the disposal of Lamisil which
was completed in November 2023.
Revenue grew 8.0% organically for 2023.
Gross profit
Reported gross profit increased by 2.6%
to £6,747m (2022: £6,577m) with gross
margin down 90bps to 59.7%. Adjusted
gross profit increased by 3.4% or 7.3%
at constant currency to £7,001m (2022:
£6,772m) with adjusted gross margin
of 61.9% (2022: 62.4%).
Adjusted gross profit was driven by
pricing and ongoing supply chain, and
manufacturing efficiency benefits. This
helped offset higher commodity-related
costs and cost inflation which particularly
impacted performance in the first half.
During the second half of the year, these
headwinds eased resulting in growth in
adjusted gross profit margin in the
fourth quarter.
Operating profit
Operating profit increased by 9.4% to
£1,996m (2022: £1,825m) and operating
profit margin increased 90bps to 17.7%
(2022: 16.8%). Adjusted operating profit
increased by 3.1% to £2,549m (2022:
£2,472m) or 10.4% at constant currency.
Adjusted operating profit growth at
constant currency was driven by strong
revenue growth, partly offset by higher
A&P spend and investments into our
systems, processes and sales force.
In addition, adjusted operating profit
was impacted by higher commodity and
raw material costs, and cost inflation.
Net finance costs
Net finance costs were £368m (2022:
£207m). This reflected finance costs of
£402m (2022: £258m), primarily related
to the annualisation of interest on the
issuance of £9.2bn in notes in March 2022
and finance income of £34m (2022: £51m).
Tax charge
The statutory tax charge of £517m (2022:
£499m) represented an effective tax rate
on reported results of 31.8% (2022:
30.8%). The 2023 tax charge includes a
£155m non-cash charge related to
intragroup transfers. The 2022 tax charge
included a £102m non-cash charge due to
the revaluation of US deferred tax
liabilities given the increase in the blended
rate of US state taxes that applies due to
the demerger.
The tax charge on an adjusted basis was
£512m (2022: £506m) and the effective
tax rate on an adjusted basis was
23.5% (2022: 22.3%).
Profit after tax and earnings per
share
Profit after tax attributable to
shareholders of the Group was £1,049m
(2022: £1,060m), and adjusted profit
after tax attributable to shareholders
was £1,607m (2022: £1,700m), down 5.5%
at AER and up 2.5% at constant currency.
The increase at constant exchange rates
was driven by 10.4% growth in adjusted
operating profit which was partly offset
by the annualisation of interest costs and
the higher tax rate described above.
This resulted in diluted earnings per share
of 11.3p (2022: 11.5p) and adjusted diluted
earnings per share of 17.3p (2022: 18.4p).
Income statement summary
2023
£m
2022
2
£m
% change
Revenue
11,302
10,858
4.1
Revenue growth
4.1%
13.8%
Organic revenue growth
1
8.0%
9.0%
Gross profit
6,747
6,577
2.6
Adjusted gross profit
1
7,001
6,772
3.4
Operating profit
1,996
1,825
9.4
Adjusted operating profit
1
2,549
2,472
3.1
Net finance costs
(368)
(207)
77.8
Profit before tax
1,628
1,618
0.6
Adjusted profit before tax
1
2,181
2,265
(3.7)
Profit after tax attributed to shareholders of the Group
1,049
1,060
(1.0)
Adjusted profit after tax attributed to shareholders of the Group
1
1,607
1,700
(5.5)
Earnings per ordinary share
Diluted (pence)
11.3
11.5
(1.7)
Adjusted
1
(pence)
17.3
18.4
(6.0)
1
Definitions and calculations of non-IFRS measures can be found from page 43.
2
For a discussion of the Group’s financial and operating performance for the year ending 31 December 2021 and 31 December 2022, see Haleon’s 2022 Annual Report and Form 20-F,
pages 36-45, filed with the SEC on 20 March 2023.
3
Net M&A (predominately the disposal of Lamisil) includes the impact of Manufacturing Service Agreements (MSAs).
Haleon
Annual Report and Form 20-F 2023
35
Strategic Report
2023 Business review
2023 Business review
continued
Geographical segment performance
Revenue by geographical segment for the year ended 31 December
Revenue (£m)
Revenue change (%)
2023
2022
Reported
Constant
currency
1
Organic
1
Price
1
Vol/Mix
1
North America
4,195
4,116
1.9%
2.7%
2.7%
3.6%
(0.9)%
EMEA & LatAm
4,545
4,270
6.4%
12.4%
12.6%
12.8%
(0.2)%
APAC
2,562
2,472
3.6%
9.0%
9.0%
2.7%
6.3%
Group
11,302
10,858
4.1%
7.9%
8.0%
7.0%
1.0%
1
Price and volume/mix are components of organic revenue growth. Definitions and calculations of non-IFRS measures can be found from page 43.
Adjusted operating profit by geographical segment for the year ended 31 December
Adjusted operating
profit
1
(£m)
YoY
change
YoY constant
currency
1
2023
2022
2023
2023
Group operating profit
1,996
1,825
9.4%
19.1%
Reconciling items between adjusted operating profit and operating profit
2
553
647
(14.5)%
(14.1)%
Group adjusted operating profit
3
2,549
2,472
3.1%
10.4%
North America
1,107
1,070
3.5%
4.7%
EMEA & LatAm
1,010
977
3.4%
12.6%
APAC
541
506
6.9%
17.8%
Corporate and other unallocated
(109)
(81)
34.6%
6.1%
Group adjusted operating profit
2,549
2,472
3.1%
10.4%
1
Definitions and calculations of non-IFRS measures can be found from page 43.
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.
3
On a segment basis, adjusted operating profit is the measure of segment profit or loss reviewed by the Company’s chief operating decision maker. Adjusting items are not allocated
by segment, as these items are managed centrally by the Group, and therefore are not part of the measure of segment profit or loss reviewed by the Company’s chief operating
decision maker.
Haleon
Annual Report and Form 20-F 2023
36
Strategic Report
2023 Revenue
North America
37%
Geographical
segment performance
North America
change (%)
2023
£m
2022
£m
YoY
Constant
currency
1
Organic
1
Price
2
Vol/Mix
2
Revenue
4,195
4,116
1.9%
2.7%
2.7%
3.6%
(0.9)%
Adjusted operating profit
1
1,107
1,070
3.5%
4.7%
4.8%
n/a
n/a
Adjusted operating profit margin
1
26.4%
26.0%
0.4%
0.5%
0.5%
n/a
n/a
1
Definitions and calculations of non-IFRS measures can be found from page 43.
2
Price and volume/mix are components of organic revenue growth.
3
In 2024, Haleon will consider organic profit growth as a KPI replacing adjusted operating profit; See page 33.
Revenue was £4,195m (2022: £4,116m), a
growth of 1.9% on a reported basis which
included the negative effect of exchange
rates of (0.8)%. There was no impact from
net M&A. As a result, revenue grew 2.7%
on an organic basis with +3.6% price and
(0.9)% volume/mix.
Excluding the impact of foreign exchange
and net M&A, Oral Health revenue was up
high-single digit in the year, with double
digit growth in Sensodyne underpinned
by strong performance from Sensodyne
Pronamel Active Shield and Sensodyne
Sensitivity & Gum. VMS declined mid single
digit driven by weakness in the immunity
subcategory resulting in a double digit
decline in Emergen-C. Centrum declined
low-single digit, largely driven by
performance in the fourth quarter from
retailer stocking patterns. Centrum Silver
continued to see strong performance
following the activation of cognitive
function claims.
Respiratory Health revenue grew high-
single digit reflecting a strong cold and flu
season at the start of the year combined
with a normal seasonal sell-in and good
consumption in the second half. Pain Relief
grew low-single digit with strength in
Excedrin and Voltaren partly offset by
lower growth in Advil given the tough
comparative from strength last year in
Canada. Digestive Health and Other
revenue was flat reflecting low-single
digit growth in Digestive Health offset
by a decline in Skin Health.
Adjusted operating profit increased
3.5% at AER and 4.7% at constant currency
driven by pricing, strong cost management
and a one-time tax credit which more
than offset significant cost inflation in
material and labour costs across the
region. Adjusted operating profit margin
expanded 40bps at AER and 50bps at
CER to 26.4%.
Revenue growth
1.9
%
Organic revenue growth
1
2.7
%
Organic
profit growth
3
4.8
%
Haleon
Annual Report and Form 20-F 2023
37
Strategic Report
2023 Business review
2023 Revenue
EMEA & LatAm
40%
2023 Business review
continued
Geographical segment
performance
continued
Geographically, Latin America, Middle East
& Africa and Central and Eastern Europe all
saw strong double digit revenue growth
which was driven by price. Southern Europe
was up high single digit with strength in
Italy. Northern Europe was up mid-single
digit with particularly strong performance in
UK and recovered performance in Germany.
Adjusted operating profit increased 3.4%
at AER and 12.6% at constant currency
driven by pricing and operational efficiency
improvements that more than offset
inflationary cost pressures. The impact
of divestments was most pronounced
in this region, negatively impacting
adjusted operating profit growth by
80bps. Adjusted operating profit
margin decreased by 70bps at AER to
22.2% and increased 10bps at CER.
Revenue was £4,545m (2022: £4,270m),
a growth of 6.4% on a reported basis
which included the negative effect of
foreign exchange (6.0)% and net M&A
impact of (0.2)%. As a result, revenue grew
+12.6% on an organic basis with +12.8%
price and (0.2)% volume/mix. There was a
c.3% impact to revenue from pricing in
Turkey and Argentina, which impacted the
overall Group by c.1%.
Excluding the impact of foreign exchange
and net M&A, Oral Health, Respiratory
Health, Digestive Health and Other all
grew double digit.
In Oral Health, revenue was supported
by double digit growth across all three
Power Brands, Sensodyne, parodontax
and Polident/Poligrip. VMS saw low-single
digit growth with double digit growth in
Centrum partly offset by a decline in some
Local Growth brands.
Pain Relief increased high-single digit
driven by double digit growth in Panadol
given strength in Northern and Central
& Eastern Europe, and low-single digit
growth in Voltaren due to good growth in
Middle East & Africa and Southern Europe.
Respiratory Health saw strong demand in
Theraflu particularly in Central & Eastern
Europe as well as double digit growth in
Otrivin due to growth in Middle East and
Africa and Central and Eastern Europe.
In Digestive Health and Other, there was
double digit growth in Digestive Health,
Smokers Health and Skin Health. In Digestive
Health, ENO was particularly strong, and in
Skin Health Zovirax also saw strong growth.
Europe, Middle East & Africa (EMEA) and Latin America (LatAm)
change (%)
2023
£m
2022
£m
YoY
Constant
currency
1
Organic
1
Price
2
Vol/Mix
2
Revenue
4,545
4,270
6.4%
12.4%
12.6%
12.8%
(0.2)%
Adjusted operating profit
1
1,010
977
3.4%
12.6%
13.4%
n/a
n/a
Adjusted operating profit margin
1
22.2%
22.9%
(0.7)%
0.1%
0.2%
n/a
n/a
1
Definitions and calculations of non-IFRS measures can be found from page 43.
2
Price and volume/mix are components of organic revenue growth.
3
In 2024, Haleon will consider organic profit growth as a KPI replacing adjusted operating profit; See page 33.
Organic
profit growth
3
13.4
%
Organic revenue growth
1
12.6
%
Revenue growth
6.4
%
Haleon
Annual Report and Form 20-F 2023
38
Strategic Report
2023 Revenue
Asia Pacific
23%
Geographically, performance was
particularly strong in China, and up
double digit given strength in Fenbid
and Contac at the start of the year. India
saw high-single digit growth driven by
continued strong growth in Sensodyne.
Australia and New Zealand was up
mid-single digit underpinned by Panadol
performance and South East Asia &
Taiwan also saw mid-single digit growth.
Adjusted operating profit increased 6.9%
at AER and 17.8% at constant currency
driven by positive operating leverage from
strong revenue growth combined with
operational efficiencies which more than
offset inflationary cost pressure. Adjusted
operating profit margin increased by
60bps at AER to 21.1% or 170bps at CER.
Revenue was £2,562m (2022: £2,472m),
a growth of 3.6% on a reported basis
which included the negative impact of
exchange rates of (5.4)%. As a result,
revenue grew +9.0% on an organic basis
with +2.7% price and +6.3% volume/mix.
Excluding the impact of foreign exchange
and net M&A, Respiratory Health and Pain
Relief saw double digit growth. There was
strong demand for Contac and Fenbid
during the first half of the year, following
the cessation of COVID-19-related
lockdowns in China. Inventory in both
these products were pro-actively managed
in the second half of the year to normal
pre-pandemic levels. In Pain Relief,
performance was supported by Voltaren
and Panadol with strong results in China
and Australia respectively.
Oral Health grew mid-single digit driven
by mid-single digit growth in Sensodyne,
with double digit growth in India and
mid-single digit growth in China.
parodontax also delivered double digit
growth. VMS grew mid-single digit with
Centrum and Caltrate both up mid-single
digit. Digestive Health and Other
increased mid-single digit.
Asia Pacific (APAC)
change (%)
2023
£m
2022
£m
YoY
Constant
currency
1
Organic
1
Price
2
Vol/Mix
2
Revenue
2,562
2,472
3.6%
9.0%
9.0%
2.7%
6.3%
Adjusted operating profit
1
541
506
6.9%
17.8%
17.6%
n/a
n/a
Adjusted operating profit margin
1
21.1%
20.5%
0.6%
1.7%
1.6%
n/a
n/a
1
Definitions and calculations of non-IFRS measures can be found from page 43.
2
Price and volume/mix are components of organic revenue growth.
3
In 2024, Haleon will consider organic profit growth as a KPI replacing adjusted operating profit; See page 33.
Organic
profit growth
3
17.6
%
Organic revenue growth
1
9.0
%
Revenue growth
3.6
%
Haleon
Annual Report and Form 20-F 2023
39
Strategic Report
2023 Business review
2023 Business review
continued
Pain Relief
Revenue was £2,652m (2022: £2,551m),
a growth of + 4.0% on a reported basis
which included the negative effect of
exchange rates of (3.2)% and net M&A
impact of (0.2)%. This resulted in 7.4%
organic growth.
Growth in revenue excluding the impact of
foreign exchange and net M&A was driven
by double digit growth in Panadol due to
strength in Middle East and Africa and
Australia supported by improved capacity.
Voltaren grew mid-single digit with strong
growth in the US, Central and Eastern
Europe and Middle East and Africa.
Advil grew low single digit and was
impacted by more competitive market
conditions in the second half of the year
and a tough comparative from strong
demand in Canada last year following
the RSV surge and resulting surge in
medication needs for children with
Children’s Advil.
Fenbid grew over 50% due to exceptional
growth in H1 2023 due to the cessation
of COVID-19 lockdown restrictions,
with inventory levels normalising in H2.
Revenue declined in Q4 due to lapping the
tough comparatives for Fenbid given strong
growth in the prior year as COVID-19
lockdowns ended in China.
VMS
Revenue was £1,640m (2022: £1,675m),
a decrease of (2.1)% on a reported basis
which included the negative effect of
exchange rates of (3.0)%. This resulted
in 0.9% organic growth.
Growth in revenue excluding the impact of
foreign exchange and net M&A was driven
by low-single digit growth with double
digit growth in Centrum partly offset by a
decline in some Local Growth brands.
Centrum increased mid single digit with
LatAm and China both up double digit.
This partly offset a slight decline in North
America driven mainly by weakness in the
first half of the year. Caltrate increased
mid-single digit driven by a similar level of
growth in China. As expected, Emergen-C
declined double digit in North America
given the immunity category reversion to
pre-COVID-19 levels, although the brand
saw improved performance in Q4 up low
single digit in the region.
Oral Health
Revenue was £3,136m (2022: £2,957m),
a growth of +6.1% on a reported basis
which included the negative effect of
exchange rates of (4.5)%. This resulted
in 10.6% organic growth.
Growth in revenue excluding the impact of
foreign exchange was driven by Sensodyne
with North America, Middle East and
Africa, LatAm and India, all seeing double
digit growth. Parodontax benefited from
particularly healthy growth in Middle East
and Africa and US. Denture Care growth
was underpinned by strong performance
from innovations such as Polident Max
Hold+ and some recovery from the
COVID-19 pandemic. Elsewhere,
Aquafresh saw mid-single digit growth
driven by strong execution in-market.
Revenue by market category for the year ended 31 December
Revenue (£m)
Revenue change (%)
2023
2022
Reported
Constant
currency
1
Organic
1
Oral Health
3,136
2,957
6.1%
10.6%
10.6%
VMS
1,640
1,675
(2.1)%
1.0%
0.9%
Pain Relief
2,652
2,551
4.0%
7.3%
7.4%
Respiratory Health
1,736
1,579
9.9%
13.7%
13.7%
Digestive Health and Other
2,138
2,096
2.0%
6.0%
6.5%
Group revenue
11,302
10,858
4.1%
7.9%
8.0%
1
Price and volume/mix are components of organic revenue growth. Definitions and calculations of non-IFRS measures can be found from page 43.
Revenue by
market category
Haleon
Annual Report and Form 20-F 2023
40
Strategic Report
Digestive Health and Other
Revenue was £2,138m (2022: £2,096m),
a growth of +2.0% on a reported basis
which included (4.0)% negative effect of
exchange rates and (0.5)% from net M&A.
This resulted in organic growth of 6.5%.
Revenue excluding the impact of foreign
exchange, was driven by mid single digit
growth across the three areas in this
product category comprising c.50%
Digestive Health, c.25% Skin Health
and c.25% Smoking Cessation brands.
Growth in Digestive Health was
underpinned by strength in Tums, which
was particularly strong in the fourth
quarter following a recall in the same
period in 2022. Eno also saw double digit
growth that was partially offset by a
decline in Nexium. In Skin Health, double
digit growth in Bactroban was a key
growth driver.
Respiratory Health
Revenue was £1,736m (2022: £1,579m),
a growth of +9.9% on a reported basis
which included the negative effect of
exchange rates of (3.8)%. This resulted
in organic growth of 13.7%.
Growth in revenue excluding the impact
of foreign exchange, resulted from a strong
cold and flu season at the start of the year.
Following a normal seasonal sell-in in Q3,
cold and flu products saw low single digit
organic growth in North America and
double digit growth in EMEA & LatAm
during the fourth quarter. Contac sales
were particularly strong, mainly due to
significant growth in China in H1 following
the end of lockdowns at the end of 2022.
Allergy sales grew low single digit for the
year. Theraflu and Otrivin both increased
double digit, with strength in Central &
Eastern Europe and Middle East & Africa.
Haleon
Annual Report and Form 20-F 2023
41
Strategic Report
2023 Business review
Currency mix of net debt
(including swaps)
1
includes £208m of net
cash in other currencies
USD
54%
EUR
20%
GBP
1
11%
CNH
15%
Currency mix of total borrowings
(as issued)
USD
69%
EUR
21%
GBP
8%
Other
1%
0
450
900
1350
1800
2024
2025
2026
2027
2028
2029
2030
2032
2034
2038
2052
Bond debt maturity profile
(£m)
USD
EUR
GBP
548
707
650
646
398
763
299
1,561
1,551
1,336
775
2022
2023
Net debt
1
(£m)
De-leveraging through a combination of net debt reduction and
adjusted EBITDA growth
Adjusted EBITDA
1
(£m)
9,868
8,514
2022
2023
2,730
+4%
(14)%
2,831
Net debt/
adjusted EBITDA
1
2022
2023
3.6x
3.0x
2023 Business review
continued
Indebtedness, liquidity and financial risk management
separation costs which were offset by a
full year of interest costs and increased
restructuring costs.
Liquidity
At 31 December 2023, the Group had total
liquidity of £2,914m comprising £1,920m
of bank facilities and £1,044m of cash
and cash equivalents, less £50m of bank
overdrafts. The Group has undrawn credit
facilities of $1,300m (2022: $1,400m) with
maturity date of September 2024 and
£900m (2022: £1,000m) with maturity date
of September 2026. As at 31 December
2023, no amounts were drawn under these
facilities (2022: nil).
The Group uses short-term financing to
manage working capital requirements and
has access to a $10,000m US commercial
paper programme and a £2,000m Euro
commercial paper programme. There was
no commercial paper outstanding as of
31 December 2023 (2022: £302m).
Management believes that the Group
has sufficient working capital for present
requirements and to minimise liquidity risk,
the Group has policies to limit the amount
of debt maturing in any year. In addition,
policies require the Group to always
maintain a minimum available liquidity,
including undrawn revolving credit
facilities and available cash, less
commercial paper issued.
Interest rate risk
The Group’s strategic priorities are to
minimise interest costs and minimise
income statement volatility arising from
interest rates.
The Group has a policy to limit the amount
of floating rate debt it holds to manage
the amount of income statement volatility.
The Group will regularly assess its interest
rate profile in light of changes to market
interest rates.
At 31 December 2023, 77% of debt was
fixed with the balance being exposed
to floating rates.
Foreign exchange translation risk
The Group’s policy is to manage Group
net debt such that the currency mix of
debt broadly aligns with the currency
mix of earnings, considering relative
interest costs and practical implications.
The currency mix of debt includes the
impact of foreign exchange and cross-
currency swaps.
As at 31 December 2023, the Group’s
long-term and short-term credit ratings
were Moody’s: Baa1/P-2 and S&P: BBB/A-2.
Total borrowings/profit after tax was 8.3x
and net debt/adjusted EBITDA was 3.0x
as at 31 December 2023. Haleon expects
to operate with leverage of around 2.5x
net debt/adjusted EBITDA over the
medium term.
Cash generation
Net cash from operating activities totalled
£2,100m in 2023 (2022: £2,063m). Free
cash flow was £1,575m, a £4m decrease
versus 2022, driven by an increase in
operational cashflows and reduction in
Indebtedness
At 31 December 2023, the Group’s total
borrowings were £9,456m (2022: £10,440m),
and the Group’s net debt was £8,514m
(2022: £9,868m).
Long-term financing consists of $8,448m
in USD bonds, as well as €2,350m Euro
bonds and £700m GBP bonds issued in
March 2022 under a £10,000m Euro
Medium Term Note programme. $302m of
bond debt was repaid early in 2023 using
cashflows from operations. Bond financing
includes the $700m USD bond due March
2024, now classified as short-term debt
on the balance sheet.
1
Definitions and calculations of non-IFRS measures can be found from page 43.
Haleon
Annual Report and Form 20-F 2023
42
Strategic Report
Use of non-IFRS measures
We use certain alternative performance measures (APMs) 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 and
may not be directly comparable with
similar measures used by other companies.
Additionally, we are unable to present
reconciliations of forward-looking
information for non-IFRS measures
because we are unable to forecast
accurately certain adjusting items
required to present a meaningful
comparable IFRS forward-looking
financial measure.
Adjusted results exclude net amortisation
and impairment of intangible assets,
restructuring costs, transaction-related
costs, separation and admission costs,
and disposals and others, in each case net
of the impact of taxes (where applicable)
(collectively, the 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.
Adjusted results include the benefits
of restructuring programmes but exclude
significant costs (such as significant
legal, restructuring and transaction items).
They should not be regarded as a complete
picture of the Group’s financial performance,
which is presented in the Group’s reported
results. The exclusion of other adjusting
items may result in adjusted results being
materially higher or lower than reported
results. In particular, when significant
impairments, restructuring charges and
legal costs are excluded, adjusted results
will be higher than reported results.
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.
Changes to APMs
In 2023, we introduced organic operating
profit growth as a new APM. Organic
operating profit growth differs from our
presentation of adjusted operating profit
growth as it is further adjusted for the
effects of acquisitions, divestments, MSAs,
and exchange rates. Management believes
that presenting organic operating profit
growth contributes to the understanding
of the Group’s performance in a meaningful
and consistent way as well as aligning
with our organic revenue growth measure.
The new APM was effective from 1 January
2023 but we have presented alongside
2022 comparatives.
Beginning in 2024, our organic revenue
growth calculation will cap pricing in excess
of 26 percent per annum for countries
experiencing hyperinflation. For Haleon,
this will apply to Argentina and Turkey.
Corresponding adjustments will be made
to all income statement related lines when
calculating organic growth changes.
Additionally, we are no longer presenting
free cash flow conversion and net capital
expenditure as APMs since they are
simply a mathematical derivation of free
cash flow in proportion to profit after
tax and an aggregation of cash flow line
items, respectively.
Adjusted results
Adjusted results comprise adjusted cost of
sales, adjusted gross profit, adjusted gross
profit margin, adjusted selling, general and
administration (SG&A), adjusted research
and development (R&D), adjusted other
operating income/(expense), adjusted
operating expenses, adjusted operating
profit, adjusted operating profit margin,
adjusted net finance costs, adjusted profit
before tax, adjusted income tax, adjusted
effective tax rate, adjusted profit after tax,
adjusted profit attributable to shareholders
and adjusted diluted earnings per share.
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 significant
acquisitions including deal costs and other
pre-acquisition costs when there is certainty
that an acquisition will complete. It also
includes costs of registering and issuing
debt and equity securities and the effect
of inventory revaluations on acquisitions.
Haleon
Annual Report and Form 20-F 2023
43
Strategic Report
Use of non-IFRS measures
Use of non-IFRS measures
continued
Disposals and others
Includes gains and losses on disposals
of assets, businesses and tax indemnities
related to business combinations, legal
settlement and judgements, 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.
Separation and admission costs
Costs incurred in relation to and in
connection with separation, UK admission
and registration of the Company’s ordinary
shares represented by the Company’s
American Depositary Shares (ADSs) under
the US Exchange Act of 1934 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.
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 year ended 31 December 2023:
2023
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
results
Revenue
11,302
—
—
—
—
—
11,302
Gross profit
6,747
224
26
—
4
—
7,001
Gross profit margin %
59.7%
61.9%
Operating profit
1,996
224
169
2
120
38
2,549
Operating profit margin %
17.7%
22.6%
Net finance costs
(368)
—
—
—
—
—
(368)
Profit before tax
1,628
224
169
2
120
38
2,181
Income tax
(517)
(53)
(35)
—
(29)
122
(512)
Effective tax rate %
31.8%
23.5%
Profit after tax for the year
1,111
171
134
2
91
160
1,669
The following table shows the adjusting items to reconcile cost of sales to adjusted cost of sales:
2023
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
results
Cost of sales
(4,555)
224
26
—
4
—
(4,301)
Cost of sales
(4,555)
224
26
—
4
—
(4,301)
The following table shows the adjusting items to reconcile operating expenses to adjusted operating expenses among the relevant
components thereof:
2023
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
results
Selling, general and administration
(4,413)
—
129
2
116
6
(4,160)
Research and development
(311)
—
14
—
—
—
(297)
Other operating income/(expense)
(27)
—
—
—
—
32
5
Operating expenses
(4,751)
—
143
2
116
38
(4,452)
The following table shows the adjusting items used to reconcile diluted earnings per share to adjusted diluted earnings per share:
2023
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
results
Profit attributable to shareholders (£m)
1,049
171
134
2
91
160
1,607
Weighted average number of shares (millions)
9,263
9,263
Diluted earnings per share (pence)
11.3
1.8
1.4
—
1.1
1.7
17.3
1
Net amortisation and impairment of intangible assets:
includes impairment of intangible assets of £185m and amortisation of intangible assets excluding computer software of £39m.
2
Restructuring costs:
includes amounts related to business transformation activities.
3
Transaction-related costs:
includes amounts related to 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 losses on disposals of assets and businesses totalling £38m. The tax effect includes a £155m deferred tax charge related to intragroup transfers.
Haleon
Annual Report and Form 20-F 2023
44
Strategic Report
The following tables set out a reconciliation between IFRS and adjusted results for the year ended 31 December 2022:
2022
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
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 %
30.8%
22.3%
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:
2022
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
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:
2022
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
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 used to reconcile diluted earnings per share to adjusted diluted earnings per share:
2022
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
3
Separation and
admission
costs
4
Disposals
and others
5
Adjusted
results
Profit attributable to shareholders (£m)
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 £129m and amortisation of intangible assets excluding computer software of £43m.
2
Restructuring costs:
includes amounts related to business transformation activities.
3
Transaction-related costs:
includes amounts related to 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 £20m, offset by other items including a provision with respect to PPI litigation. The tax
effect includes a £102m deferred 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.
Haleon
Annual Report and Form 20-F 2023
45
Strategic Report
Use of non-IFRS measures
Use of non-IFRS measures
continued
The following tables set out a reconciliation between IFRS and adjusted results for the year ended 31 December 2021:
2021
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
Separation and
admission
costs
3
Disposals
and others
4
Adjusted
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 %
12.0%
21.6%
Profit after tax for the year
1,439
24
159
—
231
(152)
1,701
The following table shows the adjusting items used to reconcile cost of sales to adjusted cost of sales:
2021
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
Separation and
admission
costs
3
Disposals
and others
4
Adjusted
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:
2021
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
Separation and
admission
costs
3
Disposals
and others
4
Adjusted
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 used to reconcile diluted earnings per share to adjusted diluted earnings per share:
2021
£m
IFRS
results
Net amortisation
and impairment
of intangible
assets
1
Restructuring
costs
2
Transaction-
related costs
Separation and
admission
costs
3
Disposals
and others
4
Adjusted
results
Profit attributable to shareholders (£m)
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 £12m, reversal of impairment of £36m and amortisation of intangible assets
excluding computer software of £40m.
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 £31m, offset by tax indemnities related to business combinations and other expense items
totalling £76m. Income tax includes a £164m tax credit related to an uplift of the tax basis of certain intragroup brand transfers.
Haleon
Annual Report and Form 20-F 2023
46
Strategic Report
Constant currency
The Group’s reporting currency is Pound
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 Pound Sterling at the
prevailing foreign exchange rate) and using
constant currency exchange rates (CER).
To calculate results on a constant currency
basis, prior year exchange rates are used
to restate current year comparatives.
The principal currencies and relevant
exchange rates in the key markets where
the Group operates are shown below.
Average rates:
2023
2022
2021
USD/£
1.24
1.24
1.38
Euro/£
1.15
1.17
1.16
CNY/£
8.81
8.31
8.86
Organic revenue growth and
organic operating profit growth
Our organic growth measures take our
adjusted results and further exclude the
impact of divestments, acquisitions,
MSAs relating to divestments and closure
of production sites, and the impact of
foreign currency exchange movements
from one period to the next. The Group
believes discussing organic revenue
growth and organic operating profit
growth contributes to the understanding
of the Group’s performance and trends
because it allows for a year-on-year
comparison of revenue and operating profit
in a meaningful and consistent manner.
Organic measures are calculated period to
period as follows, using prior year exchange
rates to restate current year comparatives:
—
Current year organic measures exclude
revenue and operating profit from brands
or businesses acquired in the current
accounting period.
—
Current year organic measures exclude
revenue and operating profit attributable
to brands or businesses acquired in the
prior year from 1 January to the date
of completion of the acquisition.
—
Prior year organic measures exclude
revenue and operating profit in respect
to 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 measures exclude
revenue and operating profit in respect
to brands or businesses divested or
closed in the previous accounting
period in full.
—
Prior year and current year organic
measures exclude revenue and
operating profit attributable to MSAs
relating to divestments and closure of
production sites taking place in either
the current or prior year, each an organic
adjustment. These adjustments are
made because these agreements are
transitional in nature and, with respect
to production site closures, include
a ramp-down period in which revenue
and operating profit attributable to
MSAs gradually reduces several months
before the production site closes.
To calculate organic growth for the period,
organic measures for the prior year are
subtracted from organic measures in the
current year and divided by organic
measures in the prior year.
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
sold in the period.
Haleon
Annual Report and Form 20-F 2023
47
Strategic Report
Use of non-IFRS measures
Use of non-IFRS measures
continued
The following tables reconcile reported revenue growth and reported operating profit growth to organic revenue growth and organic
operating profit growth, respectively, for the periods presented.
Geographical segments
North America
EMEA &
LatAm
APAC
Total
2023 vs 2022 (%)
Revenue growth
1.9
6.4
3.6
4.1
Organic adjustments
—
0.2
—
0.1
Effect of exchange rates
0.8
6.0
5.4
3.8
Organic revenue growth
2.7
12.6
9.0
8.0
Price
3.6
12.8
2.7
7.0
Volume/mix
(0.9)
(0.2)
6.3
1.0
North
America
EMEA &
LatAm
APAC
Corporate
and other
unallocated
Total
2023 vs 2022 (%)
Operating profit growth
—
—
—
—
9.4
Adjusting items
—
—
—
—
(14.5)
Adjusted operating profit growth
3.5
3.4
6.9
34.6
3.1
Effect of exchange Rates
1.2
9.2
10.9
(28.5)
7.3
Adjusted operating profit growth (CER)
4.7
12.6
17.8
6.1
10.4
Organic adjustments
0.1
0.8
(0.2)
—
0.4
Organic operating profit growth
4.8
13.4
17.6
6.1
10.8
North America
EMEA &
LatAm
APAC
Total
2022 vs 2021 (%)
Revenue growth
16.8
10.1
15.4
13.8
Organic adjustments
0.3
0.9
(1.0)
0.2
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
Haleon
Annual Report and Form 20-F 2023
48
Strategic Report
North
America
EMEA &
LatAm
APAC
Corporate
and other
unallocated
Total
2022 vs 2021 (%)
Operating profit growth
—
—
—
—
11.4
Adjusting items
—
—
—
—
21.2
Adjusted operating profit growth
29.2
1.8
9.8
5.2
13.8
Effect of exchange rates
(17.9)
(0.6)
(4.2)
5.2
(7.8)
Adjusted operating profit growth (CER)
11.3
1.2
5.6
—
6.0
Organic adjustments
0.2
1.3
(3.4)
—
(0.1)
Organic operating profit growth
11.5
2.5
2.2
—
5.9
North America
EMEA &
LatAm
APAC
Total
2021 vs 2020 (%)
Revenue growth
(6.7)
(4.5)
4.3
(3.5)
Organic adjustments
2.4
3.4
2.0
2.7
Effect of exchange rates
5.6
4.6
2.8
4.6
Organic revenue growth
1
1.3
3.5
9.1
3.8
Price
2.2
Volume/mix
1.6
North America
EMEA &
LatAm
APAC
Corporate
and other
unallocated
Total
2021 vs 2020 (%)
Operating profit growth
—
—
—
—
2.5
Adjusting items
—
—
—
—
12.2
Adjusted operating profit growth
(7.7)
12.0
22.3
36.3
4.7
Effect of exchange rates
6.5
7.6
2.9
3.6
6.4
Adjusted operating profit growth (CER)
(1.2)
19.6
25.2
39.9
11.1
Organic adjustments
7.1
3.1
4.7
—
5.3
Organic operating profit growth
5.9
22.7
29.9
39.9
16.4
1
Organic revenue growth for the year ended 31 December 2020 excludes revenue attributable to brands acquired as part of the Pfizer Transaction for the period 1 January 2020 to
31 July 2020 and includes revenue attributable to these brands for the period 1 August 2020 to 31 December 2020. Sales patterns during these two periods were materially impacted
by the COVID-19 pandemic, with increased sales during the former period driven by accelerated purchases by consumers, combined with increased consumption and sales during the
latter period negatively impacted by a reduction in consumer inventories and weak cold and flu incidence.
Haleon
Annual Report and Form 20-F 2023
49
Strategic Report
Use of non-IFRS measures
Use of non-IFRS measures
continued
Market categories
Oral Health
VMS
Pain Relief
Respiratory
Health
Digestive
Health and
Other
Total
2023 vs 2022 (%)
Revenue growth
6.1
(2.1)
4.0
9.9
2.0
4.1
Organic adjustments
—
—
0.2
—
0.5
0.1
Effect of exchange rates
4.5
3.0
3.2
3.8
4.0
3.8
Organic revenue growth
10.6
0.9
7.4
13.7
6.5
8.0
Oral Health
VMS
Pain Relief
Respiratory
Health
Digestive
Health and
Other
Total
2022 vs 2021 (%)
Revenue growth
8.6
11.6
14.0
39.5
7.4
13.8
Organic adjustments
(0.3)
(0.2)
(0.4)
—
2.2
0.2
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
Oral Health
VMS
Pain Relief
Respiratory
Health
Digestive
Health and
Other
Total
2021 vs 2020 (%)
Revenue growth
(0.8)
0.5
2.1
(12.8)
(9.8)
(3.5)
Organic adjustments
—
0.3
0.3
6.4
7.6
2.7
Effect of exchange rates
5.2
3.4
4.1
4.6
5.3
4.6
Organic revenue growth
1
4.4
4.2
6.5
(1.8)
3.1
3.8
1
Organic revenue growth for the year ended 31 December 2020 excludes revenue attributable to brands acquired as part of the Pfizer Transaction for the period 1 January 2020 to
31 July 2020 and includes revenue attributable to these brands for the period 1 August 2020 to 31 December 2020. Sales patterns during these two periods were materially impacted
by the COVID–19 pandemic with increased sales during the former period driven by accelerated purchases by consumers combined with increased consumption and sales during the
latter period negatively impacted by a reduction in consumer inventories and weak cold and flu incidence.
Haleon
Annual Report and Form 20-F 2023
50
Strategic Report
Adjusted EBITDA
Adjusted EBITDA is calculated as profit
after tax excluding income tax, finance
income, finance expense, adjusting items
(as defined on page 43), depreciation of
property, plant and equipment and right
of use assets, amortisation of computer
software, impairment of property, plant
and equipment, right of use assets and
computer software net of impairment
reversals. 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.
Adjusted EBITDA eliminates differences in
performance caused by variations in capital
structures (affecting net finance costs),
tax positions (such as the availability of net
operating losses against which to relieve
taxable profits), the cost and age of tangible
assets (affecting relative depreciation
expense) and the extent to which intangible
assets are identifiable (affecting relative
amortisation expense). As a result, we
believe that adjusted EBITDA provides
useful information to understand and
evaluate the Group’s operating results.
The reconciliation between profit after tax for the year and Adjusted EBITDA for the years ended 31 December 2023, 31 December 2022
and 31 December 2021 is provided below:
£m
2023
2022
2021
Profit after tax
1,111
1,119
1,439
Add back: Income tax
517
499
197
Less: Finance income
(34)
(51)
(17)
Add back: Finance expense
402
258
19
Operating profit
1,996
1,825
1,638
Net amortisation and impairment of intangible assets
224
172
16
Restructuring costs
169
41
195
Transaction-related costs
2
8
—
Separation and admission costs
120
411
278
Disposals and others
38
15
45
Adjusted operating profit
2,549
2,472
2,172
Add back: Depreciation of property, plant and equipment
152
142
139
Add back: Depreciation of right of use assets
49
38
35
Add back: Amortisation of computer software
69
64
54
Add back: Impairment of property, plant and equipment, rights
of use assets and computer software net of impairment reversals
12
14
13
Adjusted EBITDA
2,831
2,730
2,413
Haleon
Annual Report and Form 20-F 2023
51
Strategic Report
Use of non-IFRS measures
Use of non-IFRS measures
continued
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 2023, 31 December 2022
and 31 December 2021 is provided below:
£m
2023
2022
2021
Net cash inflow from operating activities
2,100
2,063
1,356
Purchase of property, plant and equipment
(234)
(304)
(228)
Proceeds from sale of property, plant and equipment
—
—
12
Purchase of intangible assets
(102)
(24)
(70)
Proceeds from sale of intangible assets
246
36
137
Less: Distributions to non-controlling interests
(58)
(48)
(35)
Less: Interest paid
(404)
(163)
(15)
Add: Interest received
27
19
16
Free cash flow
1,575
1,579
1,173
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 2023 and 31 December 2022 is provided below:
£m
2023
2022
Short-term borrowings
(656)
(437)
Long-term borrowings
(8,800)
(10,003)
Derivative financial liabilities
(190)
(206)
Derivative financial assets
88
94
Cash and cash equivalents
1,044
684
Net debt
(8,514)
(9,868)
Haleon
Annual Report and Form 20-F 2023
52
Strategic Report
Accountability to stakeholders
for organisational oversight
Board
Board Committees
Audit & Risk | Environmental & Social Sustainability
Nominations & Governance | Remuneration
Enterprise Risk & Compliance Committee
Risk management at Haleon
Three lines
Leads and directs actions and
applications of resources to achieve
the objectives of the organisation
Expertise, support,
monitoring and challenge
on risk-related matters
Independent and objective
assurance and advice on all
matters related to the
achievements of objectives
Functions
Business units
Enterprise Risk Management
Expert Risk & Control Functions
Internal Audit
1
2
3
First
line
Second
line
Third
line
Top down
Internal inputs
—
Board/Board Committees
—
Enterprise Risk & Compliance Committee
—
Annual enterprise risk assessment
—
Internal data and insights
—
Strategic objectives
—
Internal audit outcomes
Bottom up
External inputs
—
Expert risk & control functions
—
Business unit and function ongoing
risk/control strategy review
—
Business unit and function annual
risk assessment
—
UK Corporate Governance Code,
laws and regulations
—
External partners
—
External audit outcomes
Our approach to risk
We understand the challenges and uncertainties we face and
take a proactive approach to risk management to maximise
opportunities, drive informed commercial decision-making,
and protect our people and assets.
Risk management framework
At Haleon, management of risk is firmly
embedded in our strategy to achieve our
long-term goals. We have a diverse range
of risks and have appropriate processes
and tools to identify risks before
they materialise.
We have simplified and embedded the
risk management framework within the
strategy and planning cycle, which ensures
accountability for the identification,
assessment, mitigation and monitoring of
risks aligned with our strategic objectives.
The framework supports information flow
and open communication between the
Board, the Audit & Risk Committee (ARC),
the Executive Team, our functions,
business units, markets and sites.
Our framework defines the essential
elements of the Group’s approach to risk
management and compliance programmes,
ensuring risks associated with conducting
business activities are effectively controlled,
in line with the Board’s risk appetite and
compliance with regulatory requirements.
The framework is aligned to the three
lines model which assigns roles and
responsibilities for the management
of risks within Haleon.
Risk governance
The Board has ultimate accountability
for managing the Group’s risks and setting
our risk appetite in line with our strategic
objectives. The Board ensures appropriate
oversight through various mechanisms,
including strategy meetings, management
reports and reviews of selected risk areas.
To assist the Board in discharging its
responsibilities, the ARC is responsible for
reviewing and assessing the effectiveness
of the Group’s risk management and
internal control systems, covering the
Group’s enterprise risks, financial and
operational controls and procedures.
Control
strategy
Management
action and
reporting
Risk
identification
Assessment
of residual risk
and prioritisation
Haleon
Annual Report and Form 20-F 2023
53
Strategic Report
Our approach to risk
Our approach to risk
continued
and result in an adverse effect on the
business. Haleon also faces other enterprise
risks that we manage as part of our
integrated risk management framework
and include health and safety, product
quality, product user safety, financial,
and legal and compliance.
Our principal risks remain unchanged
from the previous year and are not listed
in any particular order and do not comprise
an exhaustive list of risks associated with
the business. While a robust assessment of
these risks has been undertaken, additional
risks not known to the Board or assessed
to be less significant may also materialise
Our principal risks
Our principal risks are a subset of our
enterprise risks and are deemed by the
Board to be the most significant risks
faced by the Group, including those that
can materially impact our performance
and/or reputation and could threaten our
long-term business model or liquidity.
The annual enterprise risk assessment
(ERA) for 2023 included a risk survey and
interviews with the Board, Executive Team
and business unit general managers to
identify and evaluate both current and
emerging risks, and to inform the 2024
internal audit plan. The ERA outcome also
reflects on whether we think the impact
and likelihood associated with each of our
enterprise risks are increasing or decreasing.
The top-down process is complemented
by horizon scanning to identify external
trends, and inputs from risk review
meetings at all levels of the organisation
help us identify opportunities and/or
emerging risks.
The ERA results have been shared with the
ARC and the Board to confirm the principal
risks and agree on the Group’s risk
management priorities for 2024.
These governance forums provide the
ERCC with a bottom-up view of risks
and issues along with oversight of how
the key risks are being managed. Open
communication and adequate reporting
remain essential to ensure Haleon’s
leaders maintain a sound risk culture
and are kept informed to allow for swift
decisions and meaningful actions.
An annual management confirmation review
across each business unit and function
ensures key risks are well managed and that
corrective and preventative actions are in
place to address any significant gaps.
Assessing risk
We continuously assess and evaluate the
risks posed by the changing environments
in which we operate to ensure an
appropriate, measured, and timely response
by considering potential impacts and most
likely scenarios.
The Executive Team is joined by the
Heads of Audit & Risk and Ethics &
Compliance to form the Enterprise Risk and
Compliance Committee (ERCC). The ERCC
meets quarterly and ensures that risks
are adequately managed, and the risk
management framework is effectively
deployed throughout the Group. The ERCC
discusses enterprise and emerging risks,
reviews industry trends, regulatory
developments, high-profile incidents
and critical audit findings. Each enterprise
risk is owned by an ERCC member, who is
accountable for designing and implementing
risk mitigation strategies and regularly
reporting risk updates to the ARC
and ERCC.
At a functional, business unit, market
and site level, regular risk review meetings
ensure a more granular review of risk and
operationalisation of strategic priorities.
Principal risk and
link to strategy
Description and risk development
Mitigation
1
2
3
4
Growth model
Our success
depends on our
ability to identify
and explore business
opportunities to
deliver organic
growth.
Failure to meet our medium-term organic growth
objectives due to inadequate strategic and/or financial
planning, lack of innovation, and deficient execution could
result in erosion of shareholder value and damage to
our reputation.
The potential room for growth given the limited penetration
of some categories and the fit of consumer health care with
the consumer’s needs and social demographic trends will
continue to attract competitors at a global and local level.
This exposes us to the risk of our product portfolio not
being aligned to consumer needs or demands, and
innovation not being responsive to competitor offerings,
changes in consumer preference or market structure.
In addition, the risk of increasing customer concentration,
market consolidation and shifts in sales channel structures
can lead to increasing pressure on pricing and margins.
This risk remains unchanged from 2022.
We have implemented a clear strategy to achieve our
organic growth objectives by increasing household
penetration and capitalising on new and emerging
opportunities. This is underpinned by a granular
understanding of consumer’s habits and needs.
We continuously review and benchmark our performance
against competitors, analysing internal and external data
when performing our annual business planning and
budgeting process, and monthly business reviews.
Our business unit leaders remain aligned to execute our
growth strategy, capitalise on our Power Brands, expanding
them across geographies and leading markets, and build
our local strategic brands in markets. We follow an
integrated forecast and demand planning process while
keeping discipline in pricing drivers across markets and
driving efficient commercial execution. Global and local
teams are mobilised and functioning to deliver effective
growth across all product portfolio categories.
We remain resilient in our value proposition across sales
channels, exploring opportunities to further enhance
routes to market, profitability, market share and growing
our digital capabilities.
>>
See also our business model on page 8.
Trend key
Increasing risk
Decreasing risk
Unchanged
New risk
Strategy key
Increase household penetration
Capitalise on new and emerging
opportunities
3
Maintain strong execution
and financial discipline
4
Run a responsible business
1
2
Haleon
Annual Report and Form 20-F 2023
54
Strategic Report
Trend key
Increasing risk
Decreasing risk
Unchanged
New risk
Strategy key
Increase household penetration
Capitalise on new and emerging
opportunities
3
Maintain strong execution
and financial discipline
4
Run a responsible business
1
2
Principal risk and
link to strategy
Description and risk development
Mitigation
3
4
People and
organisation
Talent attraction and
retention is pivotal
to the success of
Haleon as is the
effectiveness of our
operating structures.
Inability to attract, develop and retain a diverse range
of skilled employees as we deliver a fit for the future
organisation in a highly competitive market, which
could have an impact on our ability to achieve our
strategic objectives.
If we do not execute effective talent management
processes, including career progression and driving people
engagement, we will not be successful in establishing
a strong employer brand and ultimately affect our ability
to have a workforce that is realising its full potential.
Failing to pursue a fit for the future, efficient organisation
in a fast-paced environment could impair the achievement
of our objectives.
This risk remains unchanged from 2022.
We continuously work to attract and retain the best talent.
Our annual Haleon employee survey continued to show
high-level participation (84%) and provided valuable
insights that will drive our actions and improve our
reputation as a desirable workplace.
We continue our activities enhancing leadership standards,
implementing a new performance management process
and embedding our culture.
Our employer value proposition initiatives through social
media channels continue to further develop our corporate
brand and reputation. We remain active in strengthening
our talent acquisition processes.
We remain committed to being a modern employer,
with a DEI strategy and investment in employee
experience activities.
We continue to develop our structures in a way that
will deliver a fit for the future, fast-paced consumer
organisation that is capable of enabling growth.
>>
See also our culture and people section from page 18.
2
4
Trusted ingredients
Haleon’s brands
must reflect
trusted science
and ingredients
to consumers.
Loss of customer confidence due to not pursuing
best-in-class science or not monitoring and responding
to emerging ingredient data and changes in consumer
perception of product ingredients could negatively impact
our brands and our reputation.
The regulatory and public scrutiny of the safety, efficacy,
purity and potential environmental impact of ingredients
in healthcare products remains a key area of focus.
Failure to actively monitor ingredient-related risks and
address emerging ingredient regulations and industry
and market trends can negatively impact our business
and reputation. Our priority areas include: responsible
practices to address active pharmaceutical ingredients
in the environment; appropriate use of titanium dioxide
inclusive of nanomaterials; and monitoring the potential
for nitrosamine formation in our products. We take these
responsible business actions to ensure our products
are safe when used as directed and compliant with
existing regulations.
This risk has increased in 2023 to reflect the rapidly
increasing pressure and scrutiny from governments,
regulators, NGOs and consumers over the safety and
efficacy of ingredients within consumer
healthcare products.
Our approach and success as a global consumer health
company is underpinned by our understanding of the
evolving science of ingredients and deep human
understanding of consumer needs and preferences.
We have extensive controls in place designed to evaluate
benefits and risks and identify potential concerns about
ingredients. Whenever we introduce a new ingredient into
our portfolio, we conduct an independent evidence-based
review of the ingredient’s safety.
We manage ingredient-related risks through an established
trusted ingredients framework, enabling us to collect
intelligence from multiple external sources, anticipating
and detecting early signals to inform our approach and
action plans to tackle ingredient risk.
We have cross-functional dedicated resources across
Haleon that provide expertise in informing our choices
of active ingredients and excipients/additives. We actively
participate in industry associations to gain insights and
to impact the environment we operate in for the benefit
of consumers.
>>
Haleon may incur liabilities or be forced to recall products as a result of real or perceived product quality or other
product-related issues, see page 196.
>>
More information is available at
www.haleon.com
/our-impact/environment/sourcing-trusted-ingredients-sustainably
Haleon
Annual Report and Form 20-F 2023
55
Strategic Report
Our approach to risk
Our approach to risk
continued
Principal risk and
link to strategy
Description and risk development
Mitigation
1
2
3
4
Supply chain
resilience
Continued challenges
to our supply chain
capacity test our
resilience to ensure
we meet increasing
customer demand.
Disruption or constraints in our global sourcing and supply
network due to external or internal factors or insufficient
capacity leading to the inability to meet consumer
demand and desired service levels.
The end-to-end supply chain has also been impacted by
rising commodity and energy costs and remains a key area
of focus.
This risk has increased in 2023, mainly in anticipation
of the impact from ongoing and potential geopolitical
and environmental factors.
We continue to focus on optimising our capacity to
respond to future needs and deliver to customers and
consumers efficiently, while adhering to local regulations
and safety standards.
We continue to invest in internal and third-party capacity
and alternate raw material suppliers to support demand
especially for Panadol, Emergen-C, Theraflu and Otrivin.
We continue to expand dual sourcing for the most critical
raw materials to increase supply chain resilience and
accommodate changes in our portfolio and geopolitical
and market conditions.
Crisis and business continuity management plans are
in place and tested every year with different scenarios
enabling teams to respond to incidents and identify
opportunities for continuous improvement. We rely
on transparent team communication to support swift
decision-making towards recovering critical business
functions and assets in the event of a disruption.
2
4
Environmental,
social and governance
Sustainability and
climate-related risks
are integrated into
our business and
investment decisions.
Failure to address existing and emerging environmental,
social and governance risks could materially damage
our reputation leading to significant financial losses.
Responsible performance is critical to our investors,
customers, consumers and employees.
We are partially reliant on infrastructure changes
and external factors to achieve our goals. Important
dependencies include: the pace at which global energy
supplies switch to renewables; the recycling industry
developing technology to recycle small formats; the
availability of responsibly and sustainably sourced or
recycled materials; and the rapidly changing regulatory
and legislative environment.
The uncertain nature of climate change, governmental
response and consumer behaviour bring additional
challenges and opportunities.
While we continue to operate in a fast-moving external
reporting and regulatory environment, the risk remains
unchanged from 2022.
Being a responsible business is central to Haleon’s
strategy and purpose, and is underpinned by robust
Executive Team sponsorship, governance processes
and overseen by the Environmental & Social
Sustainability Committee.
Our responsible business goals and policies cover the
areas of highest impact materiality for Haleon, namely:
carbon emissions; plastics and packaging; product
quality; safety and health inclusivity. Our goals in these
areas and for sustainable sourcing, waste and water are
set using detailed analyses, benchmarking, and materiality
assessments to ensure they are ambitious, relevant, and
achievable. Our health inclusivity initiatives empower
people to be more included in opportunities for better
everyday health and strengthen our brand and corporate
reputation with consumers, customers and other key
stakeholders.
We maintain and continue to develop collaborative
relationships with external partners and organisations
to find solutions for complex interconnected issues
which require wider systems change. We closely monitor
changes in consumer attitudes and behaviours, policy
and regulatory developments and update our climate
risk modelling and action plan regularly through our
TCFD programme of work and disclosures.
>>
See also our approach to sustainability from page 22,
including our TCFD disclosure.
Strategy key
Increase household penetration
Capitalise on new and emerging
opportunities
3
Maintain strong execution
and financial discipline
4
Run a responsible business
1
2
Trend key
Increasing risk
Decreasing risk
Unchanged
New risk
Haleon
Annual Report and Form 20-F 2023
56
Strategic Report
Principal risk and
link to strategy
Description and risk development
Mitigation
4
Cyber-security
Haleon’s operations
depend on robust
and secure IT
systems and
information
management.
Major disruption to our IT systems, including through cyber
attacks, could materially impact our operations, harm our
reputation and lead to significant financial losses.
We see cyber attacks increasing in scope, scale and
sophistication as geopolitical competition and conflict
mounts. As our activities rely on digital services, such
adversity could disrupt our global business, our research
and development, supply chain and sales, and ultimately
impact our results and reputation.
The likelihood of such threats continues to be on the rise
due to our public profile, use of third parties who support
various activities, the increasingly dynamic geopolitical
situation and our manufacturing processes relying on
end-of-life equipment for some critical processes.
Thus, cyber-security continues to be a key risk and
we respond accordingly.
This risk has increased since 2022 due to an increase
in cyber attacks, phishing incidents and enhancements
needed to Haleon’s infrastructure in order to comply with
the US National Institute of Standards and Technology
Cybersecurity Framework (NIST CSF).
Our focus remains on ensuring Haleon operates with secure,
resilient IT systems and manages information adequately.
We operate and continuously improve the maturity of our
technology control framework. We continue to enhance
our strategy in relation to identity and access management
to optimise the usage of tools, simplify workflows and
consistently apply key cyber-security concepts
and capabilities.
Our focus remains on ensuring our operational technology
is superior and robust to support Haleon’s business needs
and to facilitate targeted intervention as necessary.
We engage leading external organisations to optimise
our cyber defences and the maturity of our operating
practices. This includes regular assurance of our cyber
maturity, independent security and penetration testing
and crisis management exercises.
2
3
4
Geopolitical
instability
Changes in the
geopolitical
landscape are
continuously
monitored.
Failure to monitor and respond to the increasing
geopolitical tensions destabilising key markets can impair
our ability to deliver our growth and strategic objectives,
leading to commercial, financial and reputational losses,
challenging the exchange of products and services, and
restricting the movement of talent.
Increased sanctions, other supranational guidelines and
the imposition of tariffs raise our risk profile and could
lead to severe trade disruptions, cash flow constraints,
and restricted opportunities for strategic growth.
International cooperation remains under pressure,
including the increasingly complex political relationship
between China and the US, our two largest markets,
which may hinder the prospects of current trade deals
and increase retaliation.
This risk has increased in 2023 as a result of increasing
protectionist policies. Looking forward into 2024, it is
expected to be an important year with many countries
around the world heading into government elections.
We remain vigilant in monitoring the geopolitical trends
and how they are likely to impact our business from a
people, cash flow and access to products perspective.
Geopolitical risks are considered and managed within
our continuity planning for both our internal resilience
and the resilience of our extended supply chain.
We assess and depend on the robustness of crisis
management and business continuity plans which are
in place for all key markets and sites. Scenario analysis
is applied in our planning processes to assess potential
impacts. Our trade compliance and sanctions teams
monitor upcoming changes in regulation and oversee
import and export activities.
We are deeply concerned about ongoing crises in various
parts of the world. Our response to these situations is led
by our purpose to deliver better everyday health with
humanity, putting our employees’ safety, security and
wellbeing first. We remain focused on ensuring access to
our essential health products and providing humanitarian
support, including areas impacted by crises and conflict.
Trend key
Increasing risk
Decreasing risk
Unchanged
New risk
Strategy key
Increase household penetration
Capitalise on new and emerging
opportunities
3
Maintain strong execution
and financial discipline
4
Run a responsible business
1
2
Haleon
Annual Report and Form 20-F 2023
57
Strategic Report
Our approach to risk
Our approach to risk
continued
Emerging risks
Emerging risks are uncertainties or potential disruptors that have not yet crystallised into specific risks and whose potential impact
is difficult to predict. They are reviewed by the Board alongside our enterprise risks.
>>
See also our culture and people, approach to sustainability (including our TCFD disclosure), Audit & Risk Committee Report and risk factors sections
on pages 18, 22, 72 and 193.
Emerging risk and
link to strategy
Description and risk development
Outlook
2
3
4
Macroeconomic
uncertainty
Haleon’s operations
benefit from a stable
macroeconomic
environment.
Macroeconomic uncertainty represents challenging
conditions that affect the economies where we operate.
For instance, significant increases in energy costs and
inflationary pressures, including materials, wages and
transportation costs, may adversely impact consumer
behaviours and our cost structure. The continuation of
higher interest rates could result in higher financing
costs and cash outflows. Changes to fiscal and monetary
policies may lead to unexpected tax exposures for the
Group. Fluctuations between trading currencies introduce
exposure to transactional and translational currency risks.
Macroeconomic volatility in key markets remains on the
horizon for 2024. We remain proactive and vigilant in
monitoring the financial conditions and assessing the
potential impact of these scenarios on our business
model and financial targets.
2
3
4
Mass Generative AI
Haleon could utilise
AI in a controlled, and
risk-conscious manner
to find efficiency gains
or add new business
capabilities.
AI has the potential to both significantly disrupt the
industry within which we operate and create opportunities
to drive competitive advantage.
Adoption of AI within the business is still at nascent stages
with regulatory guidelines still evolving. Unclear use of AI
may cause a misalignment with the organisation’s culture,
generate unreliable outputs and may also impact
potential business growth.
AI capabilities and expectations continue to grow rapidly.
We are actively monitoring the progress in this area
including changes to the regulatory landscape and
continue to assess AI’s impact on Haleon and Haleon’s
AI adoption goals.
Strategy key
Increase household penetration
Capitalise on new and emerging
opportunities
3
Maintain strong execution
and financial discipline
4
Run a responsible business
1
2
Trend key
Increasing risk
Decreasing risk
Unchanged
New risk
Haleon
Annual Report and Form 20-F 2023
58
Strategic Report
Viability statement
The assessment considered the Group’s
prospects related to revenue, operating
profit and free cash flow. The Directors
considered the maturity dates for the
Group’s debt obligations and its access to
public and private debt markets, including
its committed credit facilities. The Directors
also carried out a robust review and
analysis of the principal risks facing the
Group, including those risks that could
materially and adversely affect the Group’s
business model, future performance,
solvency and liquidity.
Stress testing was performed on a number
of scenarios, including the potential impact
of severe but plausible scenarios over
the viability period for each potential
combination of principal risks identified
below. In total, four individual scenarios
have been created incorporating a
In accordance with Provision 31 of the
2018 UK Corporate Governance Code,
the Directors have assessed the viability of
the Group by considering the activities and
principal risks together with factors likely
to affect the Group’s future development,
performance, financial position, cash flows,
liquidity position and borrowing facilities,
as described in the Annual Report.
The Directors’ assessment of viability has
been made over a three-year period, which
corresponds to the Group’s planning cycle.
Additionally, the Directors believe this
presents the readers of the Annual Report
with a reasonable degree of confidence
over the period assessed.
combination of principal risks, with
a fifth collective scenario, which combines
all the individual scenarios. Mitigating
actions for such scenarios include reducing
A&P spend, reducing capital spend,
pausing M&A activity and cancelling
shareholder dividends.
Based on the assessment described
above and considering the Group’s current
financial position, debt maturity profile,
stable cash generation, access to liquidity,
geographic diversification and lack of
concentration of supply, the Directors have
a reasonable expectation that the Group
is well positioned to manage principal risks
and potential downside impacts of such
risks materialising. As a result, the Directors
expect that the Company will be able to
continue in operation and meet its liabilities
as they fall due over the assessment period.
Scenario modelled
Key assumptions
Link to principal risks
Scenario 1:
A climate event results in a major
manufacturing site shutdown for 18 months,
causing disruption to the supply chain
increasing commodity, freight and labour
costs and a Group-wide cyber event which
would cause lost sales for two weeks.
—
Decrease in net revenue and gross profit
as a result of a loss of product sales.
—
Increase in commodity, freight and labour
costs of other manufacturing sites.
—
Supply chain resilience.
—
Trusted ingredients.
—
Environmental, social and governance.
— Cyber-security.
Scenario 2:
No sales price increases or
volume growth over the forecast period
across all product categories to reflect slower
economic growth and competitor activity.
—
No price increases and forecasted growth,
with a corresponding impact on cost of
goods sold due to lower volumes.
—
Growth model.
—
Geopolitical instability.
—
Macroeconomic uncertainties
(emerging risk).
Scenario 3:
Inability to access capital market,
inflationary pressure, foreign currency
volatility, interest and tax risks, and
geopolitical risks.
—
Failure to further issue commercial paper.
—
Double interest costs on floating rate
debt bonds.
—
Depreciation of major local currencies
where the Group generates its profits
by 5% against pound sterling.
—
No revenue and operating profit generated
from countries involved in armed conflict
across the plan period.
—
Geopolitical instability.
—
Macroeconomic uncertainties
(emerging risk).
Scenario 4:
A significant incident that leads
to a product recall and reputational damage
for a key brand resulting in nil sale of
products from this brand for six months.
—
75% decrease in sales and operating profit
for a Power Brand for six months.
—
Significant legal fine (5% of group turnover)
—
Write off all inventories relating to the
product of the above Power Brand.
—
Additional investment in A&P to rebuild
the brand.
—
Growth model.
—
Supply chain resilience.
—
Trusted ingredients.
Scenario 5:
Combination of all the above
scenarios together with mitigating actions
that could reasonably be implemented.
—
Reduced A&P spend, reduced capital spend,
and cancellation of shareholder dividends.
—
All the above.
Haleon
Annual Report and Form 20-F 2023
59
Strategic Report
Viability statement
Statement of compliance
Section 172 statement
Details relevant to how the Directors have had regard to the matters set out in Section 172(1)(a) to (f) of the Companies Act 2006 can
be found across the Report, including, but not limited to, the Chair’s statement and CEO review on pages 4 and 5, culture and people
from page 18, and our approach to sustainability from page 22. The Section 172 statement is provided on page 69.
Non-financial and sustainability information statement
Non-financial and sustainability information, including a description of policies, due diligence processes, outcomes and risks and
opportunities can be found in the Annual Report as set out below. Internal verification and disclosure controls apply to all the
information covered in these areas. Our Climate-related Financial Disclosures are contained in the TCFD disclosure on pages 24 to 31
and, for item (h), also on pages 32, 188 and 189.
>>
Further information about our responsible business assurance activities can be found at
www.haleon.com
/our-impact/esg-reporting-hub
A description of the business model
Our business model
8
Environmental matters
Our approach to sustainability
22
Task Force on Climate-related
Financial Disclosures
24
Our key performance indicators
32
Our approach to risk
53
Environmental & Social Sustainability
Committee Report
77
Note 1 General information:
Impact of climate change
123
Note 12 Property, plant and
equipment: Impact of climate change
133
Streamlined Energy and
Carbon Reporting
188
Employee matters
Our key stakeholders
10
Our culture and people
18
Our key performance indicators
32
Our approach to risk
53
Section 172 statement
69
Workforce engagement
70
Directors’ Remuneration Report
80
Miscellaneous Reporting
Requirements
187
Social matters
Our approach to sustainability
22
Environmental & Social Sustainability
Committee Report
77
Human rights
Our culture and people
20
Anti-corruption and anti-bribery
Our culture and people
20
Audit & Risk Committee Report
72
Policy, due diligence and outcomes
Our approach to risk
53
Viability statement
59
Audit & Risk Committee Report
72
Non-financial key performance indicators
Our key performance indicators
32
Environment
www.haleon.com
/our-impact/environment
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
www.haleon.com
/who-we-are/our-policy-positions
www.haleon.com
/our-impact/esg-reporting-hub
Employees
www.haleon.com
/our-impact/upholding-our-standards
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
www.haleon.com
/who-we-are/our-policy-positions
www.haleon.com
/our-impact/gender-pay-gap
www.haleon.com
/our-impact/esg-reporting-hub
Social matters and business conduct
www.haleon.com
/our-impact/upholding-our-standards
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
www.haleon.com
/who-we-are/our-policy-positions
www.haleon.com
/our-impact/esg-reporting-hub
Human rights and modern slavery
www.haleon.com
/our-impact/upholding-our-standards
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
www.haleon.com
/our-impact/esg-reporting-hub
Our Modern Slavery Act Statement can be found at
www.haleon.com
under RESOURCES
Anti-corruption and anti-bribery
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
The Strategic Report on pages 2 to 60 was approved by the Board on 15 March 2024.
Amanda Mellor
Company Secretary
Our key policies and positioning statements, including our Code of Conduct can be found on Haleon’s website:
Haleon
Annual Report and Form 20-F 2023
60
Strategic Report
Corporate
Governance
Contents
Our Board of Directors
62
Our Executive Team
64
Letter from the Chair
66
Governance structure
67
Board activities
68
Section 172 statement
69
Workforce engagement
70
Board development, effectiveness and performance
71
Audit & Risk Committee Report
72
Environmental & Social Sustainability Committee Report
77
Nominations & Governance Committee Report
78
Directors’ Remuneration Report
80
Compliance with the UK Corporate Governance Code
96
Centrum
Centrum is a leading global multivitamin
brand, with a range of specially crafted
formulations backed by over 40 years
of nutritional science. In 2023, the brand
launched an award-winning campaign for
Centrum Silver, leveraging the results of
a study completed with COSMOS that
showed the tablets can improve cognitive
function and episodic memory for those
aged 65+.
The image shown above is taken from the
Centrum ‘You Did It’ campaign.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
61
Board composition
Chair
1
Executive
Directors
2
Independent
Non-Executive
Directors
6
Non-Executive
Directors
2
Ethnicity
White
9
Mixed/Multiple
ethnic groups
2
Gender
Men
6
Women
5
Board and Committee
membership key:
Committee Chair
A
Audit & Risk
E
Environmental &
Social Sustainability
N
Nominations &
Governance
R
Remuneration
Our Board of Directors
Chair and Executive Directors
Sir Dave Lewis
Chair
N
Appointed:
23 May 2022
Skills and experience:
Dave was
Group Chief Executive of Tesco plc
from 2014 until September 2020.
Prior to joining Tesco, he spent
28 years at Unilever plc, holding
a variety of leadership roles in
Europe, Asia and the Americas,
including President Americas and
Global President for Personal Care.
Other significant appointments:
—
PepsiCo Inc.
(Non-Executive Director)
—
World Wildlife Fund UK (Chair)
Brian McNamara
Chief Executive Officer
Appointed:
23 May 2022
Skills and experience:
Brian joined
GSK’s Consumer Healthcare
business as Head of Europe and
the Americas in 2015. He was
previously at Novartis AG where
he held senior leadership roles,
including serving as OTC Division
Head and as a member of the
Novartis Executive Committee.
He began his career at Procter
& Gamble, where he gained
extensive experience in product
supply, brand marketing, and
customer leadership.
Other significant appointments:
—
The Consumer Goods Forum
(Board Member)
—
Mondelēz International, Inc.
(Non-Executive Director)
Tobias Hestler
Chief Financial Officer
Appointed:
23 May 2022
Skills and experience:
Tobias
joined GSK’s Consumer Health Joint
Ventures as CFO in 2017. He has
previously held a number of local
and global finance leadership roles
at Novartis in the US and Europe,
culminating in the position of CFO
at Sandoz, the generics division of
Novartis AG.
Other significant appointments:
—
No external appointments
Independent Non-Executive Directors
Manvinder Singh (Vindi) Banga
Senior Independent Non-Executive
Director (SID)
A
N
R
Appointed:
18 July 2022
Skills and experience:
Vindi spent
33 years at Unilever plc, culminating
in becoming President of the Global
Foods, Home and Personal Care
businesses and executive board
member. He has subsequently held
a range of non-executive
directorships, including at GSK plc
(as Senior Independent Director),
Marks & Spencer plc (as Senior
Independent Director), the
Confederation of British Industry
(CBI) and Thomson Reuters Corp.
Other significant appointments:
—
Clayton Dubilier & Rice LLC
(Operating Partner)
—
UK Government Investments
Limited (Chairman)
—
Marie Curie Trust (Chairman)
Tracy Clarke
Independent Non-Executive
Director
A
E
N
R
Appointed:
18 July 2022
Skills and experience:
Tracy held
a range of senior executive
positions during her 30-year
tenure at Standard Chartered Bank,
where her last role was Private
Bank CEO and Regional CEO,
Europe & Americas. Tracy’s prior
non-executive roles include Chair
of the Remuneration Committees
of Sky plc and Eaga plc and
Remuneration Committee
member of Inmarsat plc.
Other significant appointments:
—
TP ICAP Group plc (Non-
Executive Director and
Remuneration Committee Chair)
—
Starling Bank Limited (Senior
Independent Director and
Remuneration Committee Chair)
Deirdre Mahlan
Independent Non-Executive
Director
A
N
R
Appointed:
18 July 2022
Skills and experience:
Deirdre is
a qualified accountant and held
a number of senior finance and
general management roles during
her 27-year career at Diageo,
including President, Diageo North
America and Chief Financial Officer
of Diageo plc. Prior to Diageo, she
held senior finance roles in Joseph
Seagram and Sons, Inc. and PwC.
Deirdre was a Non-Executive
Director of Experian plc from
2012 to 2022.
Other significant appointments:
—
Duckhorn Portfolio, Inc.
(Interim President, Chief
Executive Officer and Chair)
—
Kimberly-Clark Corporation
(Non-Executive Director)
The detailed breakdown
of gender and ethnic
representation as
required by the Listing
Rules is shown on page 79.
Haleon
Annual Report and Form 20-F 2023
62
Corporate Governance
Skills and experience
(excluding Executive Directors)
This table shows the number of Directors with each relevant skill/experience.
Consumer
Healthcare
International
Supply chain
Technology
Digital/innovation
Regulatory
Finance
M&A/transformation
Sustainability/
responsible business
Employee engagement
Governance/investor
7
5
9
3
1
2
3
3
7
5
2
5
Independent Non-Executive Directors
Marie-Anne Aymerich
Independent Non-Executive
Director
E
Appointed:
18 July 2022
Skills and experience:
Marie-Anne
previously led the worldwide Oral
Care category at Unilever plc where
she developed a portfolio of new
premium brands. Prior to that,
Marie-Anne was Brand General
Manager of LVMH Group’s Dior
perfume and beauty business.
Before joining LVMH, Marie-Anne
was Managing Director for
Unilever’s Home Care and
Personal Care business in France.
Other significant appointments:
—
Pierre Fabre Group
(Non-Executive Director)
—
Academy of St Martin in the Fields
(Trustee, member of
Nomination Committee)
Dame Vivienne Cox
Independent Non-Executive
Director
A
E
R
Appointed:
18 July 2022
Skills and experience:
Vivienne
worked for BP plc for 28 years,
holding senior leadership roles
including Executive Vice President
and Chief Executive of BP’s gas,
power and renewables business.
Vivienne’s previous non-executive
directorships include GSK plc,
where she was Workforce
Engagement Director, BG Group plc,
Rio Tinto plc, Pearson plc and the
UK Government’s Department for
International Development.
Other significant appointments:
—
Victrex plc (Chair)
—
Venterra Group plc
(Non-Executive Director)
Asmita Dubey
Independent Non-Executive
Director
Appointed:
18 July 2022
Skills and experience:
Asmita has
over 25 years of experience
working in consumer businesses
and is currently Chief Digital &
Marketing Officer of L’Oréal Group.
She has extensive experience of
working and building joint business
partnerships in China and served on
GSK’s Consumer Healthcare Digital
Advisory Board for two years from
March 2020 to March 2022.
O
ther significant appointments:
—
L’Oréal (Chief Digital &
Marketing Officer and member
of Executive Committee)
Amanda Mellor
Company Secretary
Appointed:
23 May 2022
Skills and experience:
Amanda
brings extensive experience in
company secretarial, corporate
governance, investor relations
and investment banking.
Other appointments:
—
Volution Group plc
(Senior Independent Director)
—
GC100 (Executive
Committee Member)
Company Secretary
Non-Executive Directors
(nominated by Pfizer Inc.)
David Denton
Non-Executive Director
Appointed:
1 March 2023
Skills and experience:
Dave is
Chief Financial Officer and
Executive Vice President for Pfizer
Inc. providing strategic global
financial leadership. He has over
25 years of finance and operational
expertise including more than
20 years in the healthcare sector.
Prior to joining Pfizer in 2022, he
was CFO and Executive Vice
President of Lowe’s Companies Inc.
from 2018. Previously, he was
executive vice president and CFO
of CVS Health Corporation.
Other significant appointments:
—
Pfizer Inc. (Chief Financial Officer
and Executive Vice President)
Bryan Supran
Non-Executive Director
Appointed:
18 July 2022
Skills and experience
: Bryan is
Senior Vice President & Deputy
General Counsel for Pfizer Inc.
with responsibility for counselling
Pfizer management and directors
on strategic initiatives and business
development transactions. During
his tenure at Pfizer, he also has led
Pfizer’s intellectual property and
international legal teams and
provided legal support for
Pfizer’s R&D and manufacturing
organisations. Previously, Bryan
worked at Ropes & Gray LLP.
Other significant appointments:
—
Pfizer Inc. (Senior Vice President
and Deputy General Counsel)
>>
Further details can be found at
www.haleon.com
/who-we-are/leadership
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
63
Our Board of Directors
Ethnicity
White
8
Mixed/Multiple
ethnic groups
1
Not specified/
Prefer not to say
1
Gender
Men
6
Women
4
Our Executive Team
In addition to Brian McNamara and Tobias Hestler, the Executive Team comprises:
Keith Choy
President, Asia Pacific
Appointed:
16 December 2021
Skills and experience:
Keith has
almost 30 years’ experience in the
consumer-packaged goods and
health industries and joined GSK’s
Consumer Healthcare business in
2019. He was previously President,
International Markets for Pfizer
Consumer Healthcare. Keith
has also held roles at Wyeth
Pharmaceutical and Gillette.
Filippo Lanzi
President, EMEA & LatAm
Appointed:
16 December 2021
Skills and experience:
Filippo
joined GSK in 2015 holding
leadership roles in south and
central eastern Europe prior to
becoming APAC Regional Head.
He then became Head of EMEA in
2019, prior to leading LatAm, too.
Before this, he worked for Novartis
OTC as General Manager in Italy
and Greece. Filippo also held
positions at Johnson & Johnson
and Nestlé S.A.
Mairéad Nayager
Chief Human Resources Officer
Appointed:
1 March 2022
Skills and experience:
Mairéad
was Chief Human Resources Officer
at Diageo plc for six and a half years
until January 2022, having
previously held a number of HR
leadership roles across Diageo’s
businesses in Europe and Africa
during her 16-year tenure. Prior to
joining Diageo, Mairéad spent three
years at the Irish Business and
Employers Confederation (IBEC).
Mairéad will be leaving Haleon in
May 2024.
Lisa Paley
President, North America
Appointed:
16 December 2021
Skills and experience:
Prior to
joining GSK’s Consumer Healthcare
business in 2019, Lisa spent a
decade at Pfizer Consumer
Healthcare where she was most
recently President, North America.
She was previously Vice President
of Sales at Johnson & Johnson
and also held various roles at
Pfizer Consumer Healthcare/
Warner-Lambert.
Namrata Patel
Chief Supply Chain Officer
Appointed:
6 November 2023
Skills and experience:
Namrata has
extensive global experience in
manufacturing and end-to-end
supply chain management. She has
held senior leadership positions at
companies including The Coca-Cola
Company, Gillette and Procter &
Gamble and currently sits on the
board of Oxford Biomedica plc
as an Independent Non-Executive
Director.
Bart Derde (Chief Supply
Chain Officer), Amy
Landucci (Chief Digital
and Technology Officer),
Jooyong Lee (Head of
Strategy and Office of
the CEO), and Teri Lyng
(Head of Transformation
and Sustainability)
served as members of
the Executive Team from
16 December 2021 to 31
December 2023.
The detailed breakdown
of gender and ethnic
representation as
required by the Listing
Rules is shown on page 79.
Haleon
Annual Report and Form 20-F 2023
64
Corporate Governance
Ed Petter
Chief Corporate Affairs Officer
Appointed:
1 January 2024
Skills and experience:
Ed has
spent the last seven years at BT
Group plc as Group Corporate
Affairs Officer and a member of
the Executive Committee. He has
previously held leadership roles
at Lloyds Banking Group and
McDonald’s after spending four
years working in consultancy
at McKinsey & Company and
Blue Rubicon.
Franck Riot
Chief R&D Officer
Appointed:
16 December 2021
Skills and experience:
Franck has
over 20 years’ experience leading
R&D in consumer-led industries.
Prior to joining GSK’s Consumer
Healthcare business in 2019, he
was Vice President of Research and
Innovation for the Essential Dairy
and Plant-Based Division, Danone
S.A. Before this, he was Group R&D
Director at Nomad Foods and
previously held a variety of R&D
leadership roles at Danone.
Tamara Rogers
Chief Marketing Officer
Appointed:
16 December 2021
Skills and experience:
Tamara has
30 years of experience in FMCG.
Prior to joining GSK’s Consumer
Healthcare business in 2019,
Tamara spent nearly 25 years
at Unilever plc, most recently
as Executive Vice President,
Personal Care, North America
and prior to that, SVP Global
Deodorants. Tamara is a board
member of the Global Self-Care
Federation.
Bjarne Philip Tellmann
General Counsel
Appointed:
16 December 2021
Skills and experience:
Prior to
joining GSK’s Consumer Healthcare
business in 2020, Bjarne was
General Counsel of Pearson plc,
before which he held a range of legal
leadership roles at The Coca-Cola
Company in the US, Europe and
Asia and at Kimberly-Clark
Corporation. Bjarne began his
career in private practice at Sullivan
& Cromwell LLP and White and
Case LLP.
Bjarne will be leaving Haleon in
March 2024.
Bjorn Timelin
Head of Strategy
Appointed:
2 October 2023
Skills and experience:
Bjorn was
Senior Partner at McKinsey &
Company specialising in strategic
and commercial topics for
consumer-facing companies,
with clients across the retail,
consumer packaged goods, media,
and luxury goods sectors. Prior to
this he spent four years at Procter
& Gamble’s beauty care division
in the UK and Switzerland.
>>
Further details can be found at
www.haleon.com
/who-we-are/leadership
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
65
Our Executive Team
Letter from the Chair
Sir Dave Lewis
Chair
As I shared in my Chair’s statement
on page 4, this has been a year of
encouraging progress for Haleon in its
first full year since listing in July 2022.
Following the significant work last
year to enable Haleon to operate as
a standalone Company, the Board’s
role in 2023 has been to guide and
support the management team
delivering on the Company’s strategic
and financial plans, and building
Haleon’s capabilities to drive
sustainable profitable growth.
Haleon has great potential for growth.
We have made positive progress in
2023 and I am pleased with the
commitment and focus of the Board
and all Haleon employees to drive
the Company forward and continue
to create sustainable value for
our shareholders.
Board focus
The Board held several strategic discussions
in 2023, including an offsite meeting with
the Executive Team in October to review
our long-term category and market
ambitions, financial targets and investment
plans. Deep dives provided insights across
key strategic areas including the consumer
healthcare landscape, our China and US
businesses, supply chain, innovation, and
cyber-security risks. These enhanced the
Board’s understanding of Haleon’s key
deliverables, risks and opportunities.
During the year, the Board visited our Oral
Health facility in Weybridge, UK and Pain
Relief center in Richmond, Virginia, US.
I also had the opportunity to visit Haleon
operations in Brazil, India, and Mexico.
Seeing our regional operations first-hand
provided insight into major markets and
R&D initiatives. It also gave Directors a
chance to meet employees across different
locations. Employee engagement has
continued to develop during the year and
feedback on the Company’s activities is
regularly discussed by the Board. Further
detail on our workforce engagement and
the Workforce Engagement Director’s
statement is set out on page 70.
Monitoring our culture, people and
sustainability ambitions are key areas of
oversight for the Board. Our discussions
centred on the cultural transformation
programme to create a purpose led,
consumer centric, and performance
focused culture, which is supported
by focus on performance, simplification
and productivity.
Directors also considered and fulfilled
duties in relation to Haleon’s governance,
risk and controls during the year. They
received training on directors’ duties and,
in line with all employees, completed
training on the Code of Conduct, including
anti-bribery and corruption. Details on
the Board’s activities for 2023 are
provided on page 68.
Embedding the Environmental &
Social Sustainability Committee
Running a responsible business is one of
our four strategic pillars, and underpins
the way we operate. The Environmental
& Social Sustainability Committee was
established in March 2023 to provide
oversight of this important area. The
Committee had a thorough induction
process covering Haleon’s responsible
business strategy and the ESG regulatory
landscape. The Committee then focused
on progress against our key environmental
and health inclusivity goals and
sustainability strategy. Further information
is provided on page 77.
Board succession planning
The Board welcomed Dave Denton as a
Non-Executive Director in March 2023.
He replaced John Young as a representative
director of Pfizer. Dave received a full
induction following his appointment.
Talent, capabilities and succession
planning remains a key area of focus for
the Board, Executive Team and senior
management, and our commitment to
having a diverse and inclusive pipeline of
talent underpins our efforts to cultivate
top talent capable of leading the Company
for the future. Detail on the work of the
Nominations & Governance Committee
on this are provided on page 78.
Board annual performance review
The Board conducted an internal review
of its effectiveness for 2023. After
completing Haleon’s first full year as a
standalone company, the opportunity
to review our progress and identify
any needed changes in approach, was
particularly important. I was pleased
with the Board’s engagement with this
review and that the Directors were
positive about what had been achieved
to date, and objective as to the areas
of focus going forward. You can read
further details on page 71.
Annual General Meeting (AGM)
Haleon held its first AGM in April 2023.
We were pleased with the level of
international participation, and that the
digital format enabled greater accessibility
from across our global shareholder base.
We will be continuing the digital focus for
our 2024 AGM on 8 May 2024, which will
be broadcast from our offices in London.
Details on how to join the meeting will be
provided in our Notice of Meeting.
Haleon
Annual Report and Form 20-F 2023
66
Corporate Governance
Governance structure
The Board
The Board’s main role is
to promote the long-term
sustainable success of
the Company, generating
value for shareholders and
contributing to wider society.
It sets the Company’s
purpose, values, strategy
and long-term objectives.
The Board is also responsible
for the Group’s system of
corporate governance,
activities, risk management
and financial performance.
Audit & Risk
Committee
>>
See page 72
The role of the Committee is to oversee the integrity of the financial
reporting and audit process, and to oversee the maintenance of sound
internal controls and risk management systems. The Committee
monitors the effectiveness of internal and external audit and reviews
concerns about financial fraud and whistleblowing.
Nominations &
Governance
Committee
>>
See page 78
The role of the Committee is to lead the process for appointments to
the Board and make recommendations to ensure plans are in place
for orderly succession to both the Board and senior management
positions, and oversee a diverse succession pipeline. The Committee
also has a role to ensure that the Company is managed to high
standards of corporate governance.
Remuneration
Committee
>>
See page 80
The role of the Committee is to set the broad structure for the
Company’s Remuneration Policy and to determine the remuneration
of the Chair, the Executive Team and the Company Secretary.
The Committee is also responsible for reviewing workforce
remuneration and the alignment of incentives and rewards with
the Company’s culture.
Environmental &
Social Sustainability
Committee
>>
See page 77
The role of the Committee is to provide oversight and effective
governance over progress with the environmental and social
sustainability agenda and the external governance and regulatory
requirements relevant to these areas.
The Chief Executive Officer (CEO) is responsible for:
—
Developing Haleon’s strategic direction for consideration
by the Board.
—
Implementing the strategy and reporting on progress.
—
Day-to-day management of the Company, communicating
expectations in relation to Company culture and ensuring
responsible business conduct across the business.
—
Providing effective leadership, co-ordination and
performance management of the Executive Team.
The Executive Team is responsible for:
—
Supporting the CEO on the delivery of Haleon’s strategy.
—
Providing input into strategic and operational decisions
aligned to business priorities, and supporting on the delivery
of actions.
—
Supporting the CEO in implementing decisions made by
the Board.
Board and Committee meetings and attendance during 2023
Board papers are circulated to all
Directors in advance of the meeting
allowing sufficient time for their
consideration. If any Director is unable to
attend a meeting, they can communicate
their opinions and comments on the
matters to be considered via the Chair of
the Board or the relevant Committee Chair.
Following the conclusion of each scheduled
Board meeting, without the Executive
Directors present, the Chair holds a
session with the Non-Executive Directors.
Director
Board
Audit & Risk
Committee
Nominations
& Governance
Committee
Remuneration
Committee
Environmental &
Social Sustainability
Committee
Chair and Executive Directors
Sir Dave Lewis
6/6
3/3
Brian McNamara
6/6
Tobias Hestler
6/6
Independent Non-Executive Directors
Vindi Banga
6/6
7/7
3/3
5/5
Marie-Anne Aymerich
6/6
2/2
Tracy Clarke
6/6
7/7
3/3
5/5
2/2
Dame Vivienne Cox
6/6
7/7
5/5
2/2
Asmita Dubey
1
5/6
Deirdre Mahlan
6/6
7/7
3/3
5/5
Non-Executive Directors
Bryan Supran
6/6
John Young
2
1/1
David Denton
3
5/5
1
Apologies in advance of the meeting.
2
Stepped down from the Board on 28 February 2023.
3
Appointed to the Board on 1 March 2023.
>>
Matters reserved for the Board, Committees’ terms of reference, along with the Chair, CEO and SID’s role descriptions are available
at
www.haleon.com
/who-we-are/Governance/board-and-board-committees
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
67
Governance structure
Board activities
The Board reviewed and discussed a wide range of Company activities during the year. The table below gives insight into the matters
reviewed by the Board, the nature of Board discussion, and the relevant factors considered within the context of Section 172(1)(a) to (f)
of the Companies Act 2006 (‘Section 172’).
Key areas of Board discussion
Item
Activity
Group strategy
A
B
C
— Reviewed the strategic and operational performance of the business by brand, market categories
and regions.
— Discussed the global economy, geopolitics, and impact on growth and performance.
— Considered the global consumer and competitive landscape and opportunities for innovation.
— Received a deep dive into the supply chain and discussed the quality supply chain (QSC) five-year strategy.
—
Reviewed investment and divestment opportunities, and approved the divestments of Lamisil and ChapStick.
Financials and performance
A
F
— Reviewed and approved the 2024-26 corporate plan and 2024 financial plan.
— Monitored Haleon’s financial performance and growth against the 2023 financial plan and external
commitments.
— Discussed financial performance against the 2023-2025 plan, future outlook and analyst consensus.
— Considered the approach to capital allocation and returns, including allocating £500m of capital for
share buybacks in 2024.
— Reviewed and approved the dividend policy, reviewed the approach to the 2022 dividend and approved
the 2022 final dividend, the 2023 interim dividend and the proposed 2023 final dividend.
— Approved the quarterly, half-yearly and full-year results, the 2022 Annual Report and Accounts and
Notice of 2023 AGM.
Risk management
E
— Discussed the Company’s system of risk management and internal controls (alongside regular updates
from the Audit & Risk Committee).
— Assessed the effectiveness of the Company’s risk and control processes.
— Reviewed the Company’s principal risks and mitigation plans.
People, culture and values
A
B
— Discussed the results from the employee engagement survey and 2024 focus areas including business
process design and optimisation.
— Discussed Haleon’s productivity programme, and considered updates on progress and culture.
— Discussed and approved the 2023 Gender Pay Gap Report for publication.
— Reviewed proposals for the Weybridge Research & Development Innovation facility, and approved the
building of an Innovation facility to support the Oral Health Category.
— Reviewed proposals for new office space in London and the benefit to UK-based employees.
— Considered Haleon’s cultural ambition to be purpose led, consumer centric and performance focused
and ongoing progress.
Governance
A
E
— Considered reports from the Chairs of each Board Committee on key areas of Committee
discussion and focus.
— Discussed progress made against the action plans from the 2022 Board effectiveness review.
— Approved changes to various governance policies to simplify and better align with Haleon’s
operating model.
— Received and discussed regular updates on key governance and disclosure matters, including
recent consultations on the UK Corporate Governance Code.
Shareholder and engagement
A
E
F
— Discussed the external environment including global indicators and inflation trends.
— Considered updates from Investor Relations, including share price and valuation analysis,
market engagement and ownership analysis, and the views of institutional investors.
— Received and discussed updates on employee engagement by the Workforce Engagement Director.
— Reviewed the preparations for the 2023 AGM and the enhanced digital focus.
Sustainability
C
D
E
— Approved the Modern Slavery Statement.
— Approved the establishment of the Environmental & Social Sustainability Committee.
— Considered Haleon’s sustainability agenda and progress plan against each of our
strategic market categories.
D
Community and environment
E
Business conduct
F
Members of the Company
Relevant Section 172 factors
Long term
B
Employees
C
Business relationships
A
>>
See also our key stakeholders and culture and people sections on pages 10 and 18.
Haleon
Annual Report and Form 20-F 2023
68
Corporate Governance
Section 172 statement
The Board considers that, during 2023,
it has acted to promote the long-term
success of the Company for the benefit
of its members while having due regard
to the factors set out in Section 172.
Understanding the needs and expectations
of the Company’s stakeholders is
fundamental to Haleon’s purpose: to deliver
better everyday health with humanity.
Examples of how Section 172 duties and
key stakeholders were considered by the
Board when making key decisions during
2023 are set out below.
Divestment of Lamisil and ChapStick
The Board considered the following Section 172 factors:
the long-term success of the Company, its relationship with suppliers,
the need to act fairly between members, and maintaining high standards of business conduct.
How the Board had regard to these factors:
—
Towards the end of 2022, the Board conducted a strategic portfolio review to identify potential divestment and investment
opportunities that would support Haleon’s growth ambitions.
—
The Board considered the brand portfolio segmentation and the optimum timing and priority of divestments to enhance
organic growth and returns over the longer term.
—
The Board received updates on the brand portfolio, competitive landscape and customer perspectives throughout 2023.
—
In assessing divestment options, the Board considered the financial impact, marketability, separation issues, speed of execution,
and simplification of the supply chain.
—
To enable strategic focus on the Power Brands and Local Growth brands, the Board agreed to divest the Lamisil and ChapStick
brands.
—
The Board reviewed the offers received for the sale of Lamisil and ChapStick. In accepting each final offer, the Board considered
the level of return, the financial impact of the divestment on Haleon, impact on employees, the business risks, and the timescale
for delivery. The Board considered that these divestments would enable Haleon to focus on the key strategic areas for
longer-term, sustainable growth.
Cultural transformation
The Board considered the following Section 172 factors:
employees, business relationships, maintaining high standards of
business conduct, and the long-term success of the Company.
How the Board had regard to these factors:
—
The Company has been on a journey of cultural transformation to evolve Haleon’s culture as an independent consumer health business.
—
Employees have been engaged on initiatives to support Haleon in shaping its enterprise culture and to ultimately influence its
performance and growth and drive behaviours.
—
The Board had a dedicated session on culture to review the feedback from the 2023 employee engagement survey and the
progress being made towards Haleon’s ambition to be purpose led, consumer centric and performance focused and the key
areas of focus for management in 2024.
—
The Board discussed and considered the impact of the Haleon productivity programme as part of Haleon’s cultural evolution.
—
The Board regularly discussed feedback from workforce engagement activities during the year and considered the plan
for workforce engagement for 2024.
—
The Board encouraged management to keep customers at the heart of any cultural change. This led to an expansion of the cultural
descriptors to include ‘consumer centric’, recognising the need for a clear link between purpose, culture and brand in a consumer
health business.
Communication with shareholders
During the year, Directors engaged with
shareholders and investors through
face-to-face and virtual meetings to
discuss progress and performance
against Haleon’s strategy.
—
The CEO and CFO conducted fireside
chats with analysts and investors, as
well as in-person meetings at a number
of investor roadshows.
—
The Chair met with certain major
institutional shareholders of the Group.
—
The Chair of the Remuneration
Committee corresponded with major
institutional shareholders in relation to
2024 annual and long-term incentives.
—
Delivered Haleon’s first AGM, with
participation from retail shareholders.
—
Shareholders’ views were regularly
discussed by the Board through reports
from the CEO, CFO and updates from
the Investor Relations team.
Board conduct and standards
The Board places a high value in setting
the right standards of conduct for the
Company, and creating a culture which
enables and encourages employees to
do the right thing. Training on the Code
of Conduct was completed by all Board
members, which included anti-bribery
and corruption.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
69
Section 172 statement
Dame Vivienne Cox
Workforce Engagement Director
During the year, I have enjoyed the
opportunity to engage with employees
across different parts of the
Company, which I have found
insightful and valuable.
The sessions have highlighted:
the positive actions taking place to
deliver health inclusivity and the
opportunities to further educate and
work closely with communities; the
collaborative team mindset which is
an enabler to innovation; the need
to simplify processes and further
invest in the business to accelerate
competitive intelligence; and the
clear support for Haleon’s purpose,
strategy and culture.
Looking ahead to 2024, I will be
seeking to engage on a number
of topics including brand and
customers, remuneration, innovation
and consumer focus, purpose and
health inclusivity, and work processes
as an enabler of engagement.
Workforce engagement
In line with Provision 5 of the UK Corporate
Governance Code, the Board regularly
assesses the appropriateness of the
mechanism for workforce engagement.
The Board believes that the mechanism
of a designated Non-Executive Director
remains the most effective method for
Haleon to enable the employee voice
to be heard, and for key insights to be
brought into the Boardroom.
Employee insight
The Board values the opportunity to
engage with employees. It is vital to
understand the issues that are important
to our employees across Haleon’s markets
and regions, learn about their experience
of working at Haleon and be aware of any
challenges that need to be addressed.
Alongside providing an insight into the
Company’s culture, maintaining a pulse on
employee engagement enables
understanding of current and future drivers
of attraction and retention at Haleon.
Engagement plan
In preparing the workforce engagement
plan for 2023, the key drivers of engagement
originated from the 2022 employee
engagement survey, which identified the
need to better manage workload, streamline
processes, improve communication channels
and provide opportunities for career growth.
During 2023, I met with employees on five
occasions. It was important to ensure these
sessions included a cross-business group of
culturally diverse employees from across
our key markets and functions. Amongst
other matters, the sessions explored:
—
Health inclusivity, which was a
session with members of various ERGs.
—
Innovation enablement, which was
a session that took place during the
Board’s visit to the US, and was joined
by members of the US R&D team.
—
Culture, performance and purpose,
which was joined by Quality Supply
Chain employees.
—
Work processes, which was conducted
over two sessions, joined by APAC
senior managers, and the second
session joined by EMEA & LatAm
senior managers.
These sessions offered valuable insight
into drivers of employee engagement at
Haleon. The discussions highlighted the
progress made towards developing a
caring culture grounded in safety and
quality, and employee connections to
Haleon’s purpose and vision. Key points
raised included further promoting
employee wellbeing, streamlining
systems and processes for greater agility,
continuing to foster local empowerment,
and unifying culture through change.
Continued engagement
In addition to my activities, direct
engagement with employees remains
extremely valuable, and the Board had
the opportunity to meet with employees
during its visits to the Oral Health facility
in Weybridge, UK and the R&D site in
Virginia, US. In addition, the Board receives
regular verbal updates from management,
which will continue to form a regular part
of the Board’s agenda for 2024, alongside
updates on employee survey results, and
detailed summaries at the end of each
financial year.
Workforce engagement
Board activities
continued
>>
See also the consideration of workforce pay
and approach to engagement on page 92.
Haleon
Annual Report and Form 20-F 2023
70
Corporate Governance
Board development, effectiveness and performance
Training, development and
induction
A central piece of Haleon’s culture is a
commitment to support the continuing
development of all employees. Directors are
very supportive of this and are committed
to their own ongoing professional
development. The training programmes
available to the Board are under continual
review and are updated in line with the
most pressing developments in both
Haleon’s governance structure and the
broader commercial environment.
During 2023, the Directors participated
in internal training sessions including
directors’ duties and disclosure
obligations, the Code of Conduct and
anti-bribery and corruption. The Board
also received briefings on a range of
strategically important matters to ensure
they were informed of developments in
these areas, and were provided with
regular governance updates on topical
issues including, changes to the UK
Corporate Governance Code and other
potential changes in governance and
sustainability reporting.
A structured induction programme was
prepared for David Denton who joined
the Board on 1 March 2023. This covered,
amongst other matters, strategy, Group
structure, directors’ duties, governance,
key operations, finance, risk and internal
audit, legal, ESG and HR.
Board effectiveness and evaluation
The Board undertakes an annual evaluation
process to assess how it, its Committees
and individual Directors are performing,
and to highlight areas for improvement or
evolution. The Board reviewed progress
against each action from the 2022 Board
and Committee action plans, and
determined that progress had been
made against all actions.
For 2023, the Board adopted a question
and discussion-based evaluation process
conducted by the Company Secretary.
Other regular meeting attendees were
also requested to provide feedback.
Findings on the Committees were shared
with each respective Committee Chair,
whilst those on the Board as a whole
were shared with the Nominations &
Governance Committee, before discussion
with the wider Board. Action plans for
the Board and each Committee were
agreed for 2024, and are detailed in
the table below.
Directors’ performance
Evaluation of each Director’s individual
performance was carried out by the Chair.
The reviews will be used as the basis for
recommending the re-election of Directors
by shareholders at the next AGM. The Chair
had one-to-one discussions with each
Director to discuss, amongst other things:
—
Their performance and individual
effectiveness.
—
Their time commitment to Haleon,
including the potential impact of
outside interests.
—
Their ongoing personal development.
—
The Board’s composition, including
Non-Executive Director succession plans.
—
Current and future Committee
membership and structure.
—
The effective functioning of the Board.
The Chair review process was led by the
Senior Independent Non-Executive
Director who sought feedback from the
Non-Executive Directors separately,
Action plan
Board
— Focus on delivery of strategic objectives, driving performance and shareholder returns.
— Continue focus on cultural evolution and interactions with our talent and key business areas.
— Enhance oversight of risk management and internal controls to reflect changes to the UK Corporate Governance Code.
Audit & Risk
Committee
— Continue oversight and focus on key areas of the Committee’s remit.
— Continue focus on risk management with further deep dives on key areas, including IT and cyber-security.
— Review compliance with the UK Corporate Governance Code on internal controls and continue focus on SOX.
Environmental &
Social Sustainability
Committee
— Review delivery of Haleon’s first Responsible Business Report.
— Continue focus on Haleon’s preparedness for current and future external sustainability disclosures, including the
Corporate Sustainability Reporting Directive.
— Continue oversight of the delivery of sustainability KPIs and targets.
Nominations &
Governance
Committee
— Continue focus on succession planning for the Board and the Executive Team.
— Enhance oversight of subsidiary governance.
— Support development, talent management and succession planning of senior management.
Remuneration
Committee
— Continue oversight and focus on key areas of the Committee’s remit.
— Review executive remuneration structures and targets to ensure balance with Company-wide offering and wider
workforce decisions.
— Focus on effectiveness and transparency of disclosures and reporting.
without the Chair present, and also took
into account the views of the Executive
Directors. The feedback was collated
and shared with the Chair.
Key findings and conclusion
Overall, Directors felt positive about the
Board and how it functioned, noting the
step-up in effectiveness during 2023 with
the completion of the first full annual
cycle of Board activities and disclosures
since Haleon’s listing in 2022. The culture
of the Board was considered to be positive
with open, direct discussions, good
engagement and interactions with the
Executive Team. The Board was felt to
have a strong mix of experience and
relevant expertise to support the business.
Directors noted that Board and Committee
operations and governance worked well,
with discussions supported by good
quality papers and comprehensive
agendas. Progress had been made in
relation to strategy and this would
continue to be an area of focus for 2024.
Progress had also been made in relation
to risk, with all key risks appropriately
prioritised during the year. All Board
Committees were felt to be well established
and supported by experienced Chairs.
The Environmental & Social Sustainability
Committee had made a good start with
its remit, developing its understanding
of the sustainability agenda, data
and commitments.
Each of the Directors is considered to be
an effective member of the Board and all
Directors as at the date of this Report will
seek re-election at the AGM.
An externally facilitated Board evaluation
will be undertaken in 2024.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
71
Board development, effectiveness and performance
Audit & Risk Committee Report
Deirdre Mahlan
Chair
Letter from the Chair
During the year, the Committee has
focused on its core objectives in
overseeing the integrity of the Group’s
financial reporting process, the
effectiveness of the external audit
and the robustness of the Company’s
control environment to manage risks.
The Committee has closely monitored
the Group’s successful first year of
compliance with Section 404 of the
US Sarbanes-Oxley Act (SOX), as
well as the effectiveness of the audit
process as we transitioned to our
new external auditor, KPMG LLP.
The Committee has also had a series
of deep dives into the Group’s
cyber-security controls and technology
infrastructure, product user safety and
trusted ingredients. Further information
on this and our other activities are set
out later in this report.
Changes in regulatory reporting,
including the recent updates to the
UK Corporate Governance Code and
the impact to the Group, will be an
additional area of focus for the
Committee in 2024.
Key duties and responsibilities
The Committee’s responsibilities include
monitoring and reviewing:
—
The integrity of financial reporting
of the Company’s Financial Statements
including reviewing significant
judgements and the adequacy
of related disclosures.
—
The external and internal audit process
and performance of the Internal Audit
function and the external auditor.
—
The effectiveness of the Company’s
system of internal control.
—
The process for the management
of related-party transactions.
—
The Group’s risk management system,
and the identification and management
of risks.
—
The Company’s process for monitoring
compliance with legal and regulatory
requirements and ethical codes
of practice.
Membership and meetings
The Committee comprises solely
Independent Non-Executive Directors.
Details are set out on pages 62 and 63,
together with details of their attendance
for the year on page 67.
The Chair, CEO, CFO, General Counsel,
Group Financial Controller, Head of Audit,
Risk and Assurance, and the lead audit
partner from KPMG LLP regularly attend
meetings, with other attendees invited
as appropriate. The Committee also met
without management present and met
privately with the audit partner and with
the Head of Audit, Risk and Assurance.
The Board has confirmed that it is satisfied:
—
That the Committee members
collectively possess an appropriate
breadth of recent and relevant financial
expertise including competence in
accounting and/or audit and experience
in the consumer healthcare industry.
—
That Deirdre Mahlan possesses the
relevant attributes to be the designated
Audit Committee Financial Expert in
accordance with US federal securities
laws and regulations.
Looking ahead
The Committee will continue to
focus on its key areas of responsibility,
including the Group’s financial reporting
and disclosures, internal control over
financial reporting, the effectiveness of
KPMG LLP as external auditor and the
approach to the 2024 external audit.
In addition, the Committee will consider
the impact of the recent changes to the
UK Corporate Governance Code which
take effect in 2025 and the further
development of the Group’s enterprise
risk management framework and
compliance programmes. Controls
surrounding the IT environment will
remain a particular area of focus for the
Committee as the Group continues to
embed changes in the IT landscape post
separation and make improvements in IT
controls. The Committee will continue to
review key IT initiatives and related risks
and progress in the maturity of the control
environment at each Committee meeting.
Haleon
Annual Report and Form 20-F 2023
72
Corporate Governance
Committee activities
External reporting
— Discussed and recommended to the Board for approval, the quarterly trading statements, interim and full-year financial statements,
and the 2023 Annual Report.
— Reviewed the Group’s policy on the use of non-IFRS measures and adjusting items including disclosure and presentation, as well as the
introduction of organic operating profit growth as a new non-IFRS measure.
— Reviewed and challenged the going concern assumptions for 2023 and the principles underpinning the longer-term viability statement.
— Reviewed and challenged the treatment of key accounting matters and judgements including the estimation of the recoverable amount
of indefinite life brands.
— Considered tax and treasury matters, and compliance with statutory reporting obligations.
— Assessed whether the Annual Report, as a whole, was fair, balanced, and understandable.
Internal and external audit
— Approved the statutory audit engagement letter for KPMG LLP in respect of Haleon plc and its subsidiaries for the period ended
31 December 2023.
— Held periodic meetings with the external auditor, without management present.
— Reviewed and agreed policies and processes designed to safeguard independence of the external auditor, including the approval of the
2024 Non-Audit Services Policy.
— Assessed the effectiveness of the external auditor.
— Approved the 2024 Internal Audit plan.
— Received and discussed regular updates on the 2023 Internal Audit Plan from the Head of Audit Risk and Assurance, and met him regularly
without management present.
Internal controls
— Received and discussed regular updates on internal controls, including the results of testing, and discussed instances where the
effectiveness of internal controls was considered to be insufficient or required remediation.
— Considered the assessment to determine the Company’s status as an FPI.
— Reviewed the Group’s first SOX evaluation and certification of internal controls over financial reporting for the year ended 31 December 2023.
Related-party transactions
— Reviewed related parties for IFRS purposes as part of the year-end process.
Risk management
— On behalf of the Board, reviewed the processes by which the Group’s principal risks are identified and managed and received periodic
reports of the status of principal risks; reported any issues arising from these reports to the Board.
— Undertook detailed reviews of key risk areas and processes including digital and technical infrastructure, and cyber-security.
— Reviewed tax and treasury policies and considered consistency with the risk appetite of the Company.
— Considered the Group’s insurance policy and insurance programmes.
— Reviewed the effectiveness of the risk management and internal control systems.
Compliance
— Received and discussed regular updates from the General Counsel on legal issues.
— Monitored fraud reporting, the confidential hotline and whistleblowing arrangements, and discussed trends with management.
— Reviewed and discussed reports from the Compliance function, including updates on Haleon’s Speak Up, concerns management and internal
investigations framework.
— Considered the new ethics and compliance model.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
73
Audit & Risk Committee Report
Audit & Risk Committee Report
continued
Financial and narrative reporting
During the year, the Committee reviewed
and recommended approval of the
interim and full-year financial statements,
and associated releases. In conducting
its review, the Committee assessed
key judgement areas, going concern
and viability statements, and
impairment reviews.
The Committee evaluated whether the
Annual Report, taken as a whole, was
fair, balanced and understandable and
contained the necessary information
for shareholders to assess the Group’s
performance, business model and strategy.
To support this assessment, management
established processes to ensure
consistency of disclosures, address
financial reporting risks and co-ordinate
Company-wide input. In fulfilling its role,
the Committee recommended to the Board
for approval, a near-final version of the
Annual Report at its February 2024
meeting following the Committee’s
assessment that it was fair, balanced,
and understandable.
Internal audit
The Internal Audit function provides
independent, objective assurance to
the Board, the Committee and senior
management on the adequacy and
effectiveness of Haleon’s risk management,
governance, and internal control processes.
The appointment of the Head of Audit,
Risk and Assurance is a matter reserved
to the Committee. The Head of Audit, Risk
and Assurance holds regular discussions
with the Committee Chair and provides
regular reports to the Committee on the
function’s activities. The effectiveness of
the Internal Audit function, including its
quality, experience and expertise relative
to the size of the business, was continually
monitored through reports received by the
Committee during the period. These reports
provided key internal audit observations
and described proposed improvement
measures and related time frames given
to management.
The Committee approved the annual work
plan which includes risk-based reviews
of financial, operational, strategic and
governance risks, reviews of emerging risks
and business change activity, together with
assurance over risk management activities.
The 2024 Internal Audit plan will be
regularly reviewed and updated as
required to reflect evolving assurance
requirements and priorities.
Throughout the year, the Committee
reviewed key disclosures and reporting
requirements to ensure clear communication
of material information to shareholders.
This included assessing assumptions
underlying impairment testing, calculating
gain/loss on disposal of intangible brand
assets, the going concern and viability
assessments and climate-related
financial reporting.
The Committee received updates on the
control environment, financial reporting
integrity, the Annual Report verification
process, including management’s checklist
confirming compliance with the relevant
regulatory requirements, and external
audit outcomes. The key audit matters
reviewed by the external auditor and
the related outcomes are set out in the
external auditor’s report on pages 99-115.
The Committee monitors engagements
with external stakeholders relevant to
its areas of oversight, including the UK’s
Financial Reporting Council (FRC) and the
US Securities and Exchange Commission.
The FRC carried out a review of Haleon’s
Annual Report for the year ended
31 December 2022. No significant
questions or queries were raised, and
the Group took into consideration their
recommendations when preparing this
Annual Report. The Committee notes that
the FRC’s review does not provide assurance
that the Annual Report is correct in all
material respects as the FRC’s role is not to
verify information provided, but to consider
compliance with reporting requirements.
During the year the Committee also
reviewed correspondence from the FRC’s
Audit Quality Review (AQR) team, who
reviewed Deloitte’s audit of the Group’s
2022 Financial Statements as part of its
annual inspection of audit firms. The
Committee received and reviewed the final
report from the AQR team which identified
no key findings or other findings, and
noted several areas of good practice.
Significant reporting matters in relation to the Financial Statements considered by the Committee during 2023
Accounting area
Committee’s conclusion and response
Recoverable
amount of indefinite
life brands
As at 31 December 2023, the Group had approximately £18,073m of intangible assets that are indefinite life brands.
The Group tests at least annually whether indefinite life brands have suffered any impairment. Impairment testing
is inherently judgemental and requires management to make multiple estimates, including those related to the future
revenue growth of each brand, terminal growth rates, profit margins, and discount rates. The Committee reviewed
information on the impairment tests performed, focusing on the critical assumptions as well as any changes from
the prior year.
In 2023, the Group recognised non-cash net impairment charges totalling £184 million, principally related to the
ChapStick brand, as it was determined the carrying value was less than the estimated recoverable amount. The Committee
noted the decrease in the recoverable amount of the ChapStick brand was mainly driven by the Group’s strategic
decision to sell the brand below its carrying value. For those brands with limited levels of headroom, the Committee
also reviewed and challenged sensitivity analyses provided by management to understand the impact of changes
in key assumptions. The Committee was satisfied with the assumptions utilised by management and also considered
and reviewed the Group’s relevant impairment disclosures. Refer to Note 14 of the Consolidated Financial Statements
on page 136 for further detail.
Haleon
Annual Report and Form 20-F 2023
74
Corporate Governance
US Sarbanes-Oxley Act of 2002 (SOX)
The Group is required to comply with the
provisions of SOX, specifically Sections
302 and 404, as it relates to an FPI listed
on a US exchange. During 2023, the
Group completed a successful first year
of compliance with Section 404 of SOX.
The Group’s internal control over financial
reporting was deemed to be designed
and operating effectively as at
31 December 2023. This is a significant
achievement for the Group and the
Committee was satisfied with the progress
in implementing the requirements under
Section 404 of SOX with respect to
internal controls over financial reporting.
The Committee will continue to monitor
the progress of the Group’s internal
control optimisation efforts, remediation
of internal control deficiencies, and
internal controls related to technology
systems and associated infrastructure.
>>
See also our management’s report on
internal control over financial reporting
on page 192.
Internal control and
risk management
The Board is responsible for establishing
procedures to manage risk and oversee
the Group’s internal control framework
including setting risk appetite in line with
the Group’s strategic objectives, and
ensuring appropriate oversight through
various mechanisms, including strategy
meetings, management reports and
reviews of selected risk areas.
On behalf of the Board, the Committee
is responsible for reviewing and assessing
the effectiveness of the Group’s risk
management and internal control systems.
A fundamental part of the work carried out
included the review of the Group’s principal
risks and its financial and operational
controls and procedures. The Committee
discussed information on risk mitigation
plans, internal control maturity and areas
for improvement.
The Group’s approach to risk management
and internal controls has further evolved
and will continue to be refined throughout
2024. The risk management framework
is designed to actively manage, rather
than eliminate, the significant risks
and uncertainties the Group may face.
Consequently, the Group’s internal control
system can only provide reasonable, but
not absolute, assurance over its
principal risks.
In 2023, a top-down enterprise risk
assessment was conducted to review and
prioritise the Group’s principal risks, assess
the magnitude of risk exposure, and
highlight any emerging risks. In parallel, a
bottom-up risk identification was performed
across business units, markets, sites and
functions. The Committee reviewed the
findings, agreed on the principal risks and
concluded that management’s approach
to risk and risk appetite was satisfactory.
>>
See also our approach to risk section
from page 53.
The Committee reviewed and endorsed
a range of policies and programmes,
including:
—
The Company’s Code of Conduct (Code)
and its core value of seeking to always
do the right thing, applicable to the
Board, Executive Team, employees
and third-party temporary workers.
The Code supports and encourages
good judgement while maintaining
a culture of risk accountability.
—
The mandatory anti-bribery and
corruption (ABAC) training.
—
The annual confirmation process from
business unit and function general
managers attesting their governance
responsibility and the effectiveness
of the internal control framework,
including issue response through
corrective and preventative actions.
—
Internal controls, discussing
opportunities to further simplify and
evolve the framework in line with our
strategy and operating model.
—
The crisis and business continuity
management procedures.
—
Haleon’s concerns management and
data analysis measuring traction
and progress.
—
Risk deep dives over principal risks,
including trusted ingredients, cyber-
security (and IT infrastructure), and
other enterprise risk areas such as
treasury, tax and trade compliance.
Based on the Committee’s activities
performed throughout the year, and
its annual effectiveness review, the
Committee considered the Group’s system
of internal control and risk management
under the provisions of the UK Corporate
Governance Code for the year ended
31 December 2023 and up to the date of
approval of the Annual Report are effective.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
75
Audit & Risk Committee Report
Audit & Risk Committee Report
continued
Cyber-security and
technology infrastructure
Following the Committee’s review
of Haleon’s enterprise systems and
technology infrastructure environment
in December 2022, certain risk areas were
identified. During the year, the Committee
received progress updates on the
mitigation and remediation plans for these
risks and was pleased that the remediation
commitments due for completion in 2023
were successfully achieved.
The Committee also received deep dives
into a number of cyber-security risks
during the year. The Haleon Information
Security team commissioned an external
partner, PwC, to conduct an assessment
of Haleon as a standalone company
in the first quarter of 2023 leveraging
the industry standard framework,
National Institute of Standards and
Technology (NIST) Cybersecurity
Framework. This assessment provided
an objective baseline across all assets.
The findings were discussed with
the Committee along with a prioritised
plan which continues to grow cyber-
security maturity for the Company.
The Committee received and discussed
a deep dive into some of the risk areas
and will continue to monitor the
progress in this area.
External audit
Following an audit tender carried out in
2022, KPMG LLP was appointed as auditor
of the Group and engaged in respect of
the statutory audit of Haleon plc and its
subsidiaries for the 2023 financial year.
Nicholas Frost was appointed the lead
audit partner for the period ended
31 December 2023.
During the period, the Committee
reviewed and discussed the plans for the
external audit, the proposed audit fees,
and terms of engagement. It reviewed the
external audit process and quality and
experience of the audit partner engaged
in the audit and also considered the extent
and nature of the challenge demonstrated
by the external auditor in their work and
interactions with management.
The Committee regularly receives reports
from the external auditor on the progress
of its audit activities. The Committee
reviews the contents of these reports,
the level of professional judgement and
challenge of management assumptions
demonstrated by the external auditor
and, where appropriate, requests that
management respond to that challenge
and tracks management response to
ensure a satisfactory outcome to the
challenges raised.
In considering the independence of
KPMG LLP, the Committee received
a statement of independence from the
external auditor, a report describing
the arrangements to identify, report
and manage any conflicts of interest, and
reviewed the extent of non-audit services
provided to the Group. The Committee
confirmed its satisfaction with the
effectiveness and independence of KPMG
LLP with respect to their engagements in
their respective jurisdictions.
The Committee assessed the effectiveness
of the external audit process including the
quality of the audit team and involvement
by the lead audit partner, the adequacy
of audit planning, the timely and robust
execution of the audit, the quality of
communications to the Committee, and
auditor independence and objectivity.
The Committee concluded that the 2023
external audit was effective, and that the
external auditor continued to perform
effectively. Following the Committee’s
recommendation, the Board recommends
to shareholders the reappointment of
KPMG LLP as the external auditor for 2024.
The total fees paid to KPMG LLP for the
year ended 31 December 2023 were
£17.1m, of which £1.2m related to non-
audit work. Details of the fees paid to the
external auditor are in Note 6 to the
Consolidated Financial Statements on
page 127.
Non-audit services
The Committee has adopted a policy
designed to safeguard the independence
and objectivity of the external auditor.
This policy, which complies with the FRC’s
2019 Revised Ethical Standard and SOX,
sets out a framework for determining
whether it is appropriate to retain the
external auditor to provide non-audit
services and outlines the process for
pre-approving non-audit fees.
The policy includes a list of permitted
non-audit services in line with the relevant
regulations. Any service not on this list
is prohibited.
The Committee has pre-approved the
use of the external auditor for non-audit
services where:
—
They are included in the policy’s list
of permitted non-audit services; and
—
They are approved by the Group
Financial Controller, or their designate
in certain defined circumstances, when
not exceeding £100,000; or
—
They are approved by the CFO and the
Chair of the Audit & Risk Committee
when they exceed £100,000.
The total fee for non-audit services
provided by the external auditor is
reported to the Audit & Risk Committee
on a quarterly basis. Management’s
approval based on monetary limits is
not a delegation of authority for approval
by the Audit & Risk Committee, but rather
a confirmation of adherence to the policy
for permissible non-audit services.
The Committee reviews the nature and
level of non-audit services undertaken
by the external auditor during the year
to satisfy itself that there is no impact
on its independence.
During the period ended 31 December 2023,
the external auditor undertook non-audit
work in relation to other assurance
services, corporate finance and other
services and was paid a total of £1.2m.
The Committee considers for the year
ended 31 December 2023, that the
Company has complied with the
Competition and Markets Authority’s
Statutory Audit Services for Large
Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 and the
FRC’s Audit Committees and the
External Audit: Minimum Standard.
Haleon
Annual Report and Form 20-F 2023
76
Corporate Governance
Environmental & Social Sustainability
Committee Report
Marie-Anne Aymerich
Chair
Letter from the Chair
The Committee was established in
March 2023 and has since started
to lay down some good foundations.
We held an extensive education
session covering Haleon’s responsible
business strategy, its goals and the
external ESG landscape. In addition,
the Committee held two formal
meetings during the rest of the year.
During those meetings we spent
significant time considering
Haleon’s sustainability disclosures,
the vast regulatory and reporting
requirements in this area, and
received comprehensive deep dives
on areas within the Committee’s
remit including packaging and
health inclusivity.
The Committee has covered much
ground since March, but there is more
to do in 2024 to support the delivery
of Haleon’s sustainability ambitions
and disclosure obligations.
Key duties and responsibilities
The Committee’s responsibilities for
environmental and social sustainability
(ESS) include monitoring and reviewing:
—
Haleon’s progress against its ESS agenda
and associated external governance
and regulatory requirements.
—
Emerging ESS issues that could impact
the Group’s operations, ESS initiatives,
or reputation.
—
Haleon’s ESS engagement with
relevant external stakeholders,
NGOs and other interested parties.
—
The ESS disclosures within the
Annual Report and external ESS
reporting, including the Climate
Action Transition Plan.
Membership and meetings
The Committee comprises solely
Independent Non-Executive Directors.
Details are set out on pages 62 and 63,
together with details of attendance for
the year on page 67. The Chair, CEO,
Head of Transformation and Sustainability,
VP Sustainability, and the Sustainability
Programme Director regularly attended
meetings in 2023. Other attendees were
invited to meetings as appropriate.
Committee induction
Following the establishment of the
Committee, an induction session was
held with input from external experts.
The session covered Haleon’s responsible
business strategy, environmental and
social sustainability, the external
environment and mandatory reporting,
regulations and disclosures relevant to the
Committee’s remit. This helped to shape
the Committee’s agenda for the rest of
2023, with particular focus on Haleon’s
health inclusivity strategy, sustainable
packaging, and external reporting.
Key metrics and future reporting
As part of the deep dive sessions, the
Committee reviewed the scope and ambition
of the Company’s health inclusivity and
packaging targets. The Committee
reviewed the threshold level of impact
required for the Company to measure
achievement against Haleon’s social
impact goal, and considered how to
balance the breadth of reach of the
initiatives versus the depth of impact.
The Committee also approved an update
to Haleon’s baseline year for our Scope 3
carbon emissions and virgin petroleum-
based plastic reduction targets.
In addition to Haleon’s current ESS
ambitions, the Committee considered
Haleon’s future external ESG disclosure
requirements, including how to most
effectively and efficiently balance
reporting requirements from different
jurisdictions as a global business.
Looking ahead
The Committee will continue to focus
on oversight in relation to packaging,
carbon net zero, health inclusivity and
progress against the Company’s
sustainability ambitions.
Committee activities
Responsible business strategy
—
Reviewed Haleon’s half-year performance against the responsible business scorecard measures.
Key metrics
— Received and discussed a deep dive on the progress of Haleon’s health inclusivity strategy
and social impact goals as well as sustainable packaging.
— Reviewed and approved the updates to Haleon’s baseline year from 2020 to 2022 for our
Scope 3 carbon emissions and virgin petroleum-based plastic reduction targets.
External reporting
— Considered external reporting in relation to TCFD and CSRD reporting, Haleon’s Responsible
Business Report and human rights.
Stakeholder engagement
— Discussed regular updates on stakeholder engagement.
>>
See also our approach to sustainability from page 22.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
77
Environmental & Social Sustainability Committee Report
Nominations & Governance
Committee Report
Sir Dave Lewis
Chair
Letter from the Chair
This year the Committee focused on
succession planning for the Executive
Team, given there has been a number
of changes. The Committee also had
sessions on talent and succession
within the wider organisation and
received insight into the broader
talent agenda for senior management.
Discussions during the year also
focused on progress against the
Board’s Diversity & Inclusion Policy,
diversity at the top two management
levels of the Group and progress
against our responsible
business ambitions.
In addition, we continued to regularly
consider the composition of the
Board and discussed Non-Executive
Director succession.
The Committee will continue to focus
on its key areas of responsibility with
a particular emphasis on developing
a strong and diverse talent pipeline
at the Board and senior
management level.
Key duties and responsibilities
The Committee’s responsibilities include:
—
Leading the process for appointments
to the Board.
—
Ensuring plans are in place for orderly
succession to both the Board and senior
leadership positions.
—
Overseeing the development of
a diverse pipeline for succession at
Board and senior management level.
—
Reviewing and recommending the
Board Diversity & Inclusion Policy.
—
Monitoring and, where appropriate,
recommending changes to the
Company’s corporate governance
framework.
Membership and meetings
Excluding the Chair, who was considered
independent on appointment, the
Committee comprises solely Independent
Non-Executive Directors.
Details are set out on pages 62 and 63,
together with details of attendance for
the year on page 67. The CEO and the
Chief Human Resources Officer regularly
attended meetings, with other attendees
invited as appropriate.
Sucession planning
The Committee continued to build on its
existing processes to strengthen its focus
on succession planning. During 2023,
it assessed the composition of the Board
in terms of the balance of Executive
and Non-Executive roles, and its skills,
experience, diversity, capacity and tenure.
The Committee also discussed the
Company’s leadership requirements
including assessing the Executive Team’s
capabilities and development plans
against the current and future succession
needs. In addition, it reviewed the people
strategy and talent agenda more broadly
to help in developing a pipeline of
potential future leaders.
With the exception of David Denton
who was appointed on 1 March 2023, the
Directors were all newly appointed in July
2022 and the Committee considers that
the Board’s membership and composition
remains appropriate.
Composition, time commitment
and independence
Further to the disclosure on page 71,
the Committee assessed the composition
and effectiveness of the Board and its
Committees. This included reviewing the
Committee activities
Succession planning
— Considered Non-Executive Director’s tenure and succession planning arrangements for the
Board including the CEO and CFO.
— Reviewed the composition of the Executive Team and discussed key experiences, strengths,
development areas, performance and succession coverage.
— Reviewed and discussed the Board skills and experience matrix for Non-Executive Directors.
Board composition and diversity
— Reviewed the composition of the Board and its Committees, including diversity metrics.
— Discussed progress against objectives and approved the updated Board Diversity
& Inclusion Policy.
Evaluation and annual assessment
of performance
— Assessed the independence of the Non-Executive Directors.
— Recommended to the Board each Director stand for re-election by shareholders at the
Company’s 2023 AGM.
— Reviewed and made recommendations to the Board in respect of each Director’s actual,
potential or perceived conflicts of interest.
— Reviewed the independence and time commitments of the Non-Executive Directors.
Governance
—
Considered the creation of a Conduct and Standards Group and reviewed its Terms of Reference.
— Discussed the feedback from the 2023 Board and Committee effectiveness review and the
action plans.
— Recommended the membership of the Environmental & Social Sustainability Committee.
— Considered the Director induction plan for David Denton.
Haleon
Annual Report and Form 20-F 2023
78
Corporate Governance
balance of skills, experience, and diversity
represented. It also assessed each
Non-Executive Director’s time commitment
and reported the outcomes of this activity
to the Board. The assessment considered
internal responsibilities and the number
and nature of the Directors’ external
commitments. All Non-Executive Directors
demonstrated they have sufficient time
to devote to their present role.
The Senior Independent Director (SID)
reviewed the time commitment of the
Chair as part of his annual review of the
Chair’s performance. In line with Provision
11 of the UK Corporate Governance Code,
over half of our Board members are
Independent Non-Executive Directors.
Bryan Supran and David Denton are not
considered independent as they are
nominees of Pfizer.
Board diversity, equity and inclusion
The Board and its Committees have a
diverse mix of gender, socio-economic
and ethnic backgrounds, knowledge,
personal attributes, skills and experience.
While all Director appointments are based
on merit, each candidate is assessed
against objective criteria, with the prime
objective to maintain and enhance the
Board’s overall effectiveness.
The Committee monitors progress against
the Board and its Committees’ diversity
objectives which are set out in the Board
Diversity & Inclusion Policy (the Policy), as
part of its Board and Committee succession
planning and, in addition to the skills and
experience matrix, has regular regard to
external guidance on improving diversity.
As a result of this, the Board updated the
Policy during 2023, to reflect evolving best
practice and regulation.
A copy of the Policy can be found on our
website, as outlined below.
As at 15 March 2024, the Company met
the recommendations of the FTSE Women
Leaders Review on gender diversity, and
the Parker Review objective on board
ethnic minority representation. The Board
met and exceeded the FCA Listing Rules
requirements in respect of female
representation and ethnic diversity, as set
out in the table below. While no women
currently serve as Chair, SID, CEO or CFO
as required by the Listing Rules, three
out of the four Board Committee Chairs,
as well as the Workforce Engagement
Director, are appointments currently
held by women. As part of our succession
planning and as appointments to the
Board are considered, we will be mindful
of the Listing Rules requirements.
Gender representation as at 31 December 2023
Number of
Board members
Percentage
of the Board
Number of senior
positions on the Board
(Chair, SID, CEO
and CFO)
Number in
executive
management
1
Percentage
of executive
management
Men
6
55%
4
8
53%
Women
5
45%
0
7
47%
Not specified/prefer not to say
—
—
—
—
—
Ethnicity representation as at 31 December 2023
Number of
Board members
Percentage
of the Board
Number of senior
positions on the Board
(Chair, SID, CEO
and CFO)
Number in
executive
management
1
Percentage
of executive
management
White British or other White (including
minority-white groups)
9
82%
3
12
80%
Mixed/Multiple Ethnic Groups
—
—
—
—
—
Asian/Asian British
2
18%
1
2
17%
Black/African/Caribbean/Black British
—
—
—
—
—
Other ethnic group, including Arab
—
—
—
—
—
Not specified/prefer not to say
—
—
—
1
2
3%
>>
Information on the gender balance of the Executive Team and their direct reports is available on page 20.
>>
See our Board Diversity & Inclusion Policy at
www.haleon.com
/who-we-are/Governance/board-and-board-committees
1
Executive management is defined as members of the Haleon Executive Team (including the CEO and CFO).
2
Representing one individual based in a country in which it is illegal to collect diversity data.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
79
Nominations & Governance Committee Report
Letter from the Chair
I am delighted to present the Directors’
Remuneration Report for Haleon plc
for the year ended 31 December 2023.
Our first Directors’ Remuneration
Policy received strong shareholder
support and was approved by 98.2%
of shareholders at the 2023 AGM.
The first Directors’ Remuneration
Report received 98.7% support
from our shareholders. Both the
Remuneration Policy and its
implementation in 2023 were
designed to reward performance
that delivers, at a minimum, Haleon’s
investment case and drive growth,
and it was therefore pleasing that
shareholders have endorsed this
approach. The Committee remains
confident that the remuneration
structure in place supports a
management team that is committed
to delivering consistently strong
performance, while creating a
sustainable, values and purpose-led
Company. I would like to thank the
shareholders that engaged with me
and provided helpful feedback as
the Committee designed, refined and
finalised the remuneration structure.
Tracy Clarke
Chair of the Remuneration Committee
15 March 2024
Tracy Clarke
Chair
diversity in leadership roles. As the
business is getting closer to reaching its
initial deleveraging target (below 3.0x
net debt/adjusted EBITDA), to ensure
that the performance measures continue
to support the most critical strategic
objectives, for the 2024-2026 performance
cycle the net debt/adjusted EBITDA
measure (50% weighting) will be replaced
with a combination of two alternative
measures, adjusted diluted earnings per
share growth (EPS) (30% weighting) and
organic operating margin improvement
(operating margin) (20% weighting).
EPS will drive a focus on bottom-line
performance, whilst operating margin will
enhance the focus on profitable growth,
both of which are critical to driving
long-term shareholder value. The addition
of EPS and operating margin improvement
will rebalance the incentive structure
towards a focus on profitability, highlighting
the importance of achieving margin
improvement alongside top-line growth.
Despite this change in the 2024-2026
metrics, our strategy remains consistent.
The 50% weighting on cumulative free
cash flow will remain for 2024 as it
continues to be a strategic priority to
drive financial discipline. The generation
of stable cash flow is a critical part of
how value is created for our shareholders,
including our ability to deliver returns.
In addition, as the external commitment
on recycle-ready packaging runs to 2025,
this threshold will be replaced by a
metric assessing the reduction in virgin
petroleum-based packaging as part of
the ESG qualifier for the 2024-2026 cycle.
This metric is aligned with Haleon’s
external commitment to reduce use of
virgin petroleum-based plastic, with the
threshold taking into account the change
in the baseline from 2020 to 2022, as set
out on page 22.
In combination across the 2024 AIP and
PSP, the financial measures have been
chosen to align our Executive Directors’
remuneration with our strategy to deliver
sustainable above-market growth and
attractive returns, while running a
responsible business, which is integral
to all that we do.
Rewarding 2023 performance
2023 was a year of strong financial
performance against a set of stretching
targets. Organic revenue growth was
achieved at 8.0% and adjusted operating
profit growth was achieved at 10.4%.
However, as these targets were set in a
high inflation environment, when reviewing
these outcomes the Committee carefully
considered the impact of inflation
experienced in several markets in the
context of wider business performance
in 2023. On this basis, the Committee
considered it appropriate to apply
discretion to the 2023 annual incentive plan
(AIP) outcome which resulted in a reduction
of c.10 ppts compared to the formulaic
result. The overall outcome under the 2023
AIP was therefore 75.2% of the maximum
opportunity for the CEO and 77.7% of
maximum opportunity for the CFO.
The Haleon PSP Refill awards granted
in March 2023 vested in March 2024, by
reference to the performance period ended
on 31 December 2023. These awards vested
at 81% of maximum, based on performance
against the Cumulative free cash flow and
net debt/adjusted EBITDA targets. The full
details of the 2023 remuneration paid to
Directors and the basis for its determination
are set out on pages 84-88.
2024 remuneration structure
There have been no changes to the
Directors’ Remuneration Policy approved
by shareholders at the 2023 AGM.
For 2024, the AIP performance measures
remain (subject to aligning names and
definitions of measures to the Company’s
financial KPIs) Organic revenue growth
(60% weighting), Organic operating profit
growth (20% weighting) and individual
business objectives (IBOs) (20% weighting).
Following review and due consideration,
the Committee concluded that the balance
of measures remains in line with the
investment case for Haleon, in particular
the weighting towards organic revenue
growth, and so no changes were made
to the AIP structure for 2024.
The 2023 PSP performance measures
included cumulative free cash flow (50%),
net debt/adjusted EBITDA (50%) and ESG
qualifier thresholds on carbon reduction,
recycle-ready packaging and gender
Directors’ Remuneration Report
Haleon
Annual Report and Form 20-F 2023
80
Corporate Governance
I am very grateful for the support and
valuable comments that we have received.
The Committee will continue to ensure that
the performance measures support our
strategy, including the delivery of
attractive returns.
I remain available for any shareholders
who wish to discuss our policy, or any of
the content set out in this report, ahead
of the 2024 AGM.
in July 2022. This is in line with the average
4.5% increase awarded to UK employees.
The base fees for Non-Executive Directors
will also increase by 4.5%.
Shareholder engagement
In December 2023, I wrote to our largest
shareholders regarding the changes we
are making to the 2024 PSP performance
measures and other aspects of the
implementation of our Directors’
Remuneration Policy in 2024.
>>
Further information about the measures and
targets linked to incentive awards is provided
on pages 85-89.
Having considered all relevant factors,
including workforce remuneration
arrangements, inflation rates and market
practice, the Committee approved a 4.5%
salary increase for the Executive Directors
and a 4.5% fee increase for the Chair, the
first pay increase awarded to the Executive
Directors and the Chair since the demerger
Committee activities
Executive remuneration
and incentive plans
— Approving the 2023 AIP and PSP targets and the 2022 AIP outcome.
— Considering updates on the 2023 AIP.
— Approving the 2024 AIP and PSP measures and targets.
— Approving 2023 and 2024 remuneration arrangements for the members of the Haleon Executive Team,
including the Executive Directors, and the Company Secretary.
— Noting regular market updates on executive remuneration, investors’ views and governance.
Stakeholder engagement
— Considering shareholder feedback on the 2022 Directors’ Remuneration Report and the outcomes
of the 2023 AGM.
— Considering and approving the 2023 shareholder engagement timeline and materials.
— Discussing the workforce remuneration arrangements.
Governance
— Approving the final 2022 and 2023 Directors’ Remuneration Reports.
— Noting updates on the operation of share plans.
— Approving amendments to the malus and clawback policy.
— Approving the 2023 schedule of business and noting risk management procedures for the Committee.
— Approving appointment of the independent Committee advisers.
— Considering and approving relevant documents, policies and delegated authorities to allow the
Committee to effectively discharge its responsibilities.
Key duties and responsibilities
The Remuneration Committee’s principal
responsibilities are:
—
Making recommendations to the Board
on remuneration principles and policy
as applied to Executive Directors.
—
Setting, reviewing and approving
individual remuneration arrangements
for the Chair of the Board, Executive
Directors, senior leadership and the
Company Secretary, and such other
executives as required.
—
Designing remuneration policies and
practices that support the Company’s
strategy and promote its long-term
sustainable success.
—
Ensuring that performance conditions
are transparent, stretching and
rigorously applied.
—
Enabling the use of discretion over
outcomes and recovery and withholding
of awards where the Committee deems
this to be appropriate.
—
Making recommendations to the Board
concerning the introduction of new
share incentive plans which require
Board or shareholder approval.
—
Reviewing employee remuneration and
key related policies, and the alignment
of incentives and rewards, with the
Company’s culture and taking these
into account when determining the
policy for executive remuneration.
Membership and meetings
The Committee comprises solely
Independent Non-Executive Directors.
Details are set out on page 62 and 63,
together with details of attendance for
the year on page 67. The Chair, CEO,
Chief Human Resources Officer, Global
Head of Reward and a representative from
the independent remuneration adviser
(PwC) attend meetings on a regular basis.
Other attendees are invited to meetings
as appropriate. The Committee also meets
without management present. No Directors
or executives are present when their own
remuneration is discussed and they are
not involved in determining their
own remuneration.
>>
Details of the Committee effectiveness review are set out on page 71.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
81
Directors’ Remuneration Report
The current Directors’ Remuneration Policy (Policy) was approved at the 2023 AGM and is expected to apply until the 2026 AGM.
The Committee is comfortable that the current Policy operated as intended during 2023 and that the overall 2023 remuneration paid
to Directors as set out below and within the Annual Report on Remuneration, was appropriate.
>>
The complete Policy is available on the Company’s website:
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
Summary of the application of the Directors’ Remuneration Policy in 2023 and 2024
Element
2023
2024
2025
2026
2027
2028
Application for 2023
Application for 2024
Base Salary
2023 base salaries:
— CEO: £1,250,000
— CFO: £700,000
2024 base salaries:
— CEO: £1,306,250 (+4.5%)
— CFO: £731,500 (+4.5%)
Benefits
Benefits operate in line
with the Policy
Benefits will operate in line
with the Policy
Pension arrangements
Employer contributions:
— CEO: 7% of salary
— CFO: 7% of salary
No change
Annual Incentive Plan
(AIP)
Deferral period
Maximum AIP opportunities:
— CEO: 200% of salary
— CFO: 200% of salary
2023 performance measures:
— 60% Organic
revenue growth
1
—
20% Adjusted
operating profit
— 20% IBOs
50% of any AIP earned
is deferred for three years
No change to AIP opportunities
2024 performance measures
(no change):
— 60% Organic revenue growth
— 20% Organic operating
profit growth
— 20% IBOs
50% of any AIP earned
is deferred for three years
Performance Share Plan
(PSP)
Vesting period
Holding period
2023 PSP award levels:
— CEO: 450% of salary
— CFO: 350% of salary
2023 performance measures:
— 50% Cumulative free
cash flow
— 50% Net debt/adjusted
EBITDA
— ESG qualifier
No change to PSP award levels
2024 performance measures:
— 50% Cumulative free
cash flow
—
30% Adjusted diluted
EPS growth
— 20% Organic operating
margin improvement
— ESG qualifier
Share ownership
requirements
Share ownership
requirements:
— CEO: 450% of salary
— CFO: 350% of salary
No change
1
Organic revenue growth was referred to as ‘organic sales growth’ in the 2022 Directors’ Remuneration Report. This measure has not changed, however, the name has been aligned with
the strategic KPI for ease of reference.
Malus and clawback
The Committee may apply malus and clawback at any time prior to the second anniversary of the date the cash element of an annual
bonus is paid, or a share award vests. The Committee may only invoke these malus and clawback provisions in accordance with the Haleon
malus and clawback policy from time to time, in circumstances such as a material misstatement of results; a failure of risk management
resulting in material financial loss; an error or material misstatement which results in an overpayment (such as in the assessment of
performance); a corporate failure of the Company; employee misconduct; or material reputational damage to the Company.
In addition, on 1 December 2023, the Company adopted a mandatory clawback policy that complies with the SEC requirements
introduced during the year.
Remuneration at a glance
Directors’ Remuneration Report
continued
Haleon
Annual Report and Form 20-F 2023
82
Corporate Governance
Minimum
£1,509,000
100%
24%
16%
26%
20%
26%
33%
56%
58%
41%
£6,274,000
£9,634,000
£5,763,000
Target
Maximum
Actual 2023
CEO
Fixed pay
PSP
AIP
CFO
Minimum
£794,000
100%
26%
17%
39%
23%
30%
53%
51%
53%
8%
£3,025,000
£4,644,000
£2,046,000
Target
Maximum
Actual 2023
CEO
75.2%
77.7%
CFO
CEO
81%
81%
CFO
2023 remuneration scenarios and actual remuneration received
The charts below show the potential levels of remuneration which could be received by the Executive Directors under different
performance scenarios based on the levels of regular AIP and PSP awards granted in the year, as well as actual remuneration received
in respect of 2023 including vesting of the PSP Refill awards.
What performance means for Executive Directors’ pay in 2023
At Haleon, remuneration packages are designed to ensure strong alignment between pay and performance. 2023 saw the Company
perform strongly against its financial and strategic objectives which has been appropriately reflected in the incentive outcomes, as set
out in the Annual Report on Remuneration from page 84.
2023 AIP outcome
Following a year of strong performance, the formulaic AIP
outcomes were 85.1% of maximum (CEO) and 87.6% of maximum
(CFO). However, in line with the Committee’s discretion, the
outcome was reduced by c.10 ppts to reflect higher than
expected inflation experienced in several markets.
2023 PSP Refill awards
The PSP Refill awards vested at 81% of maximum, in line with
performance against the cumulative free cash flow and net debt/
adjusted EBITDA targets, combined with considerable progress
on responsible business objectives.
Link between incentive measures and strategy
There is a strong link between Haleon’s performance measures and the Company’s strategy. A combination of financial and non-financial
measures has been chosen to ensure that executive remuneration is aligned with the key performance indicators (KPIs) used by the
business to monitor performance against our strategic priorities. The table below sets out the incentive measures and weightings
used in 2023:
Strategic KPI (as shown on
pages 32-33 of this report)
AIP measures
PSP measures
Organic revenue growth
Organic revenue growth (60% weighting)
Adjusted operating profit
Adjusted operating profit (20% weighting)
Net debt to adjusted EBITDA
Net debt/adjusted EBITDA (50% weighting)
Free cash flow
Cumulative free cash flow (50% weighting)
Carbon reduction
Carbon reduction (ESG qualifier)
Recycle-ready packaging
Recycle-ready packaging (ESG qualifier)
Gender diversity
Gender diversity (ESG qualifier)
Further details of the performance measures for the 2023 AIP and PSP awards, and how they are aligned with Company strategy and
the creation of shareholder value, are set out on pages 85-88 of this Directors’ Remuneration Report. 2024 AIP and PSP performance
measures aligned with the 2024 strategic KPIs are set out on pages 87 and 89 of this Directors’ Remuneration Report.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
83
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Remuneration
Planned implementation for 2024
Content within a box indicates that all the information in the panel is planned for implementation in 2024.
‘Single figure’ of remuneration – Executive Directors (audited)
The following table shows a single total figure of remuneration for each Executive Director in respect of qualifying services for the
2023 and 2022 financial years.
£000
Brian McNamara
2023
Brian McNamara
2022
3,4
Tobias Hestler
2023
Tobias Hestler
2022
3
Salary
1,250
719
700
410
Benefits
171
474
5
45
35
Pension
88
87
49
36
Total fixed remuneration
1,509
1,280
794
481
AIP
1
1,880
1,014
1,088
518
PSP
2
2,374
—
164
—
Total variable remuneration
4,254
1,014
1,252
518
Total remuneration
6
5,763
2,294
2,046
999
1
The value of the 2023 AIP includes both the cash (50% of the AIP) and deferred portion (50% of the AIP). The deferred part of the bonus is subject to malus and clawback in
accordance with the malus and clawback policies, but no further performance conditions.
2
2023 PSP vesting shows the PSP Refill awards which vested in March 2024. The value of awards has been calculated based on the average share and ADS price over the last three
months of 2023 (£3.2887/$8.2421) and includes the accumulated dividends delivered in the form of shares. The actual value of vesting PSP Refill awards, based on the share price
on the vesting date could not be calculated prior to the publication of this Report and therefore will be shown in the 2024 Report. Due to the share price appreciation over the vesting
period, the estimated value per share of the 2023 PSP Refill awards is higher than the value per share at grant by $50,156 (£40,448) for Brian McNamara and by £2,900 for Tobias
Hestler. The value of the 2023 PSP Refill award for Brian McNamara has been converted to GBP using the average 2023 exchange rate of 1.24. There were no Haleon PSP awards
vesting in 2022.
3
2022 remuneration is shown for the period between Directors’ appointment (23 May 2022) and the end of the financial year (31 December 2022).
4
Pre-demerger remuneration for Brian McNamara was set in US Dollars and has been converted to GBP in the table above, using the average 2022 exchange rate of 1.24.
5
The value of 2022 benefits for Brian McNamara has been restated to show the actual cost of tax equalisation arrangements provided in line with the GSK plc policy, as set out in the
2022 Directors’ Remuneration Report. The total reduction in this value was £55,780.
6
Each remuneration element is rounded to the nearest £1,000, and totals reflect the sum of these rounded values.
Salary (audited)
Executive Directors received no salary increases in 2023.
Executive Director
Annual base salary
as of 1 January 2023
Annual base salary
as of 1 April 2023
Brian McNamara
£1,250,000
£1,250,000
Tobias Hestler
£700,000
£700,000
2024 salaries
The Committee carefully considered whether any increases should be awarded to Executive Directors’ salaries in 2024. Factors that
have been taken into account when considering Directors’ pay included investors’ expectations, external environment, Company
performance, planned salary increases for the wider employee population, personal performance of the executives and competitive
market positioning of the total remuneration packages against the main peer groups. In 2023 these peer groups included constituents
of the FTSE 30 (excluding financial services) and a bespoke group of large international FMCG companies
1
. The Committee noted that
Executive Directors’ salaries had not been reviewed since the demerger. Based on the considerations set out above, the Committee
approved a 2024 salary increase of 4.5% for the Executive Directors, in line with the average increase which will be awarded to the
wider UK workforce.
Executive Director
Annual base salary
from 1 April 2024
% increase
Brian McNamara
£1,306,250
4.5
Tobias Hestler
£731,500
4.5
1
In 2023 this group included Diageo, AstraZeneca, GSK, British American Tobacco, Vodafone Group, Imperial Brands, Danone S.A., Heineken N.V., Burberry Group, Associated British
Foods, L’Oréal S.A., Pernod Ricard SA, Sanofi and Siemens Healthineers AG.
Benefits (audited)
2023 benefits for Executive Directors included private healthcare (including spouse or partner and eligible dependent children), life
assurance/death in service benefit, membership of a Group Income Protection plan (including self-insured, where appropriate, in line
with standard policy), personal tax and financial planning, car travel, reimbursement of expenses properly incurred in the ordinary
course of business, which are deemed to be taxable benefits, and (for the CEO only) home security services. Executive Directors are
eligible to participate in the HM Revenue and Customs (HMRC) approved Haleon Share Save Plan and Share Reward Plan. Details of
Executive Directors’ rights under the Share Save Plan are set out in the ‘Outstanding share options’ table on page 95.
Haleon
Annual Report and Form 20-F 2023
84
Corporate Governance
2024 benefits
Benefits for 2024 remain in line with the Policy.
Pension
Both Executive Directors receive pension contributions at the rate of 7% of annual base salary which includes contributions to the
pension plan as well as cash allowances. Executive Directors do not participate in defined benefit pension plans.
Executive Director
Pension plan
contributions
Pension
allowance
Total 2023 pension
contributions
Brian McNamara
£0
£87,500
£87,500
Tobias Hestler
£5,333
£43,667
£49,000
2024 Pension
Pension for 2024 remains in line with the Policy. Approach to pension arrangements for Executive Directors is in line with the
broader workforce.
2023 Annual Incentive Plan (AIP) awards (audited)
The 2023 AIP awards were based on performance for the year ended 31 December 2023. 80% of the bonus opportunity is determined
by financial performance and 20% is based upon the achievement of IBOs.
The figures below represent the total 2023 AIP awards to be paid, including the portion payable in cash in 2024, and the portion
deferred into shares for a further three years to be released in 2027, subject to continued employment and malus and clawback
provisions. In line with the Policy, deferral provisions apply to 50% of the 2023 AIP value.
2023 AIP targets
2023 AIP outcome
AIP outcome
(% of max per element)
Performance measures
Weighting
Threshold
(25% of max)
Target
(50% of max)
Maximum
(100% of max)
Actual
Outcome
(% of max)
Brian
McNamara
Tobias
Hestler
Organic revenue growth
60%
3.3%
5.3%
7.3%
6.8%
88.5%
53.1%
53.1%
Adjusted operating profit
20%
3.4%
7.4%
11.4%
9.2%
73.0%
14.6%
14.6%
IBOs – Brian McNamara
20%
Details of performance
are set out on page 86.
7.5%
—
IBOs – Tobias Hestler
—
10.0%
AIP award (% of maximum)
75.2%
77.7%
AIP award (value)
£1,880,000
£1,087,800
The colour bars represent the actual outcome.
2023 was a year of strong financial performance. The 2023 AIP was subject to a set of ambitious targets which were defined at the
beginning of the year, in line with our stretching business plan. The outcomes were at the upper end of the improved guidance
provided by the Company at Half Year. Organic revenue growth was achieved at 8.0%, and adjusted operating profit growth was
achieved at 10.4% (this compares to the reported organic operating profit growth of 10.8% for 2023; from 2024, the AIP measure
will be aligned with the organic operating profit growth).
Given that targets were set in a high inflation environment, the Committee considered whether the incentive outcome fairly reflects
the underlying business performance. This analysis included determining the level of impact of higher-than-expected inflation
experienced in several markets on the outcome of the 2023 AIP.
Having discussed this impact, the Committee considered it appropriate to apply discretion to the 2023 AIP outcome which resulted
in a reduction to the organic sales growth outcome from 8.0% to 6.8% and the adjusted operating profit from 10.4% to 9.2% to reflect
the high inflationary impact. This has reduced the outcome of the 2023 AIP for the Executive Directors by c. 10 percentage points,
from 85.1% of maximum for the CEO and 87.6% of maximum for the CFO to 75.2% of maximum for the CEO and 77.7% of maximum
for the CFO respectively.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
85
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Remuneration
continued
Achievement of 2023 Individual Business Objectives (IBOs) (audited)
20% of the Executive Directors’ 2023 AIP is linked to the achievement of IBOs which were focused on key strategic objectives.
In addition to the objectives outlined in the bonus, there is an expectation that the Executive Directors will each demonstrate the
required high leadership standards and behaviours of the Company.
At the end of the year, the Committee considered the performance of each Executive Director against pre-set objectives. At its meeting
in February 2024, it concluded that 2023 had seen progress in the achievement of our strategic objectives, as described in the Strategic
Report. This has been reflected in the assessment of the Executive Directors’ 2023 IBOs, showing their contribution to the execution of
Group strategy during 2023. IBOs are calibrated with a high degree of stretch in them such that outcomes above target are only achieved
for exceptional performance over the performance period.
The table below summarises performance against the key 2023 IBOs for the current Executive Directors:
Brian McNamara
Objective
Description of performance
Portfolio Review
Carry out a category
portfolio review and
commence implementation
–
Review of category brand portfolio to align with Haleon’s strategic priorities.
–
Divested Lamisil successfully with agreement to divest Chapstick.
–
Evaluation of other M&A opportunities.
Culture
Develop the blueprint for
Haleon cultural
development and deliver
the streamlined organisation
objective
–
Culture plans devised and implementation started with further stages to be completed in 2024.
–
Changes implemented amongst others, include cascade of leadership standards through the organisation,
update of talent review processes, installation of employee health and wellbeing working groups, review
of the compensation and benefits policies.
Growth strategy
Define growth strategy for
key markets to deliver
accelerated growth
–
Long term strategy further developed for key markets to accelerate our growth momentum.
–
A number of strategic initiatives have been deployed, with further implementation steps to be completed
in 2024.
Recognising Mr McNamara’s performance against his IBOs during 2023, the Committee judged that 7.5% of a maximum of 20% attributable
to IBOs was appropriate to reflect the progress made against the stretching objectives set.
Tobias Hestler
Objective
Description of performance
Productivity
Build a 3-year
productivity plan
–
Productivity programme successfully set-up and in execution, in line with the Board-approved 3-year plan.
–
Savings goal fully embedded into operational plans across all business units.
–
2023 project milestones and targets have been delivered in line with expectations.
Review of strategy
in key markets
–
Review completed and aligned with the Board.
–
Kicked-off execution delivering a detailed project plan, and engagement strategy.
Portfolio Review
Carry out a category
portfolio review and
commence implementation
–
Review of category brand portfolio to align with Haleon’s strategic priorities.
–
Divested Lamisil successfully with binding agreement to divest Chapstick through a combination of cash and
passive minority structure allowing Haleon to participate in further value creation of the brand.
–
Evaluation of other M&A opportunities.
Recognising Mr Hestler’s performance against his IBOs during 2023, the Committee judged that 10% of a maximum of 20% attributable to IBOs
was appropriate to reflect the progress made against the stretching objectives set.
Haleon
Annual Report and Form 20-F 2023
86
Corporate Governance
Deferral policy for the 2023 AIP
In line with the Policy, 50% of the 2023 AIP awards (to be paid in March 2024) have been deferred for three years into conditional
awards over Haleon shares, subject to continued employment and malus and clawback provisions.
Deferred Annual Bonus Plan (DABP) awards in respect of the 2022 AIP made in 2023 (audited)
The following table sets out details of mandatory deferral into the DABP of the 2022 AIP awards made on 23 March 2023:
Executive Director
Type of award
Nature of award
Number of shares subject to award
Grant price
1
Face value at grant
Brian McNamara
DABP
Conditional shares
127,512
£3.23
£411,865
Tobias Hestler
DABP
Conditional shares
70,995
£3.23
£229,314
1
Grant price is calculated as the average closing share price over the three business days immediately preceding the grant date.
2024 AIP awards
In line with the Policy, for 2024 the target and maximum AIP opportunities for our Executive Directors will be:
Executive Director
Target opportunity
(% of salary)
Maximum opportunity
(% of salary)
Brian McNamara
100%
200%
Tobias Hestler
100%
200%
Performance will be based on Group financial performance targets aligned to the Group’s KPIs, as well as IBOs. The measures and
percentage weightings will remain unchanged from 2023, with names and definitions updated to align with the strategic KPIs:
—
Organic revenue growth (60%);
—
Organic operating profit growth (20%); and
—
Individual Business Objectives (20%).
2024 AIP targets are considered commercially sensitive and will be disclosed in the 2024 Annual Report.
In line with the Policy, 50% of all 2024 AIP awards will be deferred for three years into conditional awards over Haleon shares, subject
to continued employment, malus and clawback provisions.
Performance Share Plan Refill awards vesting (audited)
As set out in our 2022 Report, ‘Refill’ share awards were granted to the Executive Directors (as well as other former GSK employees) in
respect of the lapsed portion of GSK share awards that were time pro-rated at demerger. PSP Refill awards were granted on 23 March
2023 and vested on 1 March 2024. The performance measures for the PSP Refill awards were aligned with the measures for the annual
2022 PSP awards, being cumulative free cash flow (50%) and net debt/adjusted EBITDA (50%). The targets were aligned with those
used for the 2022 award and were calibrated to reflect the shorter performance period.
Target ranges
Outcome
Performance measures
Weighting
Minimum
(25% vesting)
1
Maximum
(100% vesting)
1
Actual
outcome
Level
of vesting
Cumulative free cash flow
(Measured on a cumulative basis
over the performance period
FY 22-23)
50%
3,443m
88%
£2,905m
£3,543m
Net debt/adjusted EBITDA
(Measured as a ratio at year end 2023)
50%
3.0x
74%
3.4x
2.8x
Overall vesting level (% of maximum)
81%
The colour bars represent the actual outcome.
1
Straight-line interpolation is applied for performance between minimum and maximum.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
87
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Remuneration
continued
The Committee also considered progress made during 2023 on carbon reduction, recycle-ready packaging and gender diversity when
determining the vesting outcome. Based on the considerable progress on responsible business objectives shown in 2023, no reduction
was applied to the level of vesting shown below.
Executive Director
Number of
shares awarded
Type of award
Percentage of the PSP
Refill award vesting
Number of
shares vesting
Value of
shares vesting
2
Brian McNamara
434,906
ADS
1
81%
357,197
£2,374,237
Tobias Hestler
60,878
Ordinary shares
81%
50,011
£164,471
1
Each ADS represents two ordinary shares.
2
The value of the 2023 PSP Refill award at vesting for Brian McNamara has been converted to GBP using the average 2023 exchange rate of 1.24.
Due to the share price appreciation over the vesting period, the estimated value per share of the 2023 PSP Refill awards is higher than
the value per share at grant by $50,156 (£40,448) for Brian McNamara and by £2,900 for Tobias Hestler.
Performance Share Plan awards made in 2023 (audited)
Brian McNamara and Tobias Hestler were granted awards with a face value of 450% of salary and 350% of salary respectively.
The following table sets out details of awards made on 23 March 2023:
Executive Director
End of the
performance period
Type of
award
Nature of
award
Number of shares
subject to award
Grant price
1
Face value
at grant
Brian McNamara
31 December 2025
PSP
Conditional shares
1,741,487
£3.23
£5,625,000
Tobias Hestler
31 December 2025
PSP
Conditional shares
758,514
£3.23
£2,450,000
1
Grant price is calculated as the average closing share price over the three business days immediately preceding the grant date.
Performance measures for the PSP awards granted in 2023
Target ranges
Measure
Weighting
Minimum
(25% vesting)
1
Maximum
(100% vesting)
1
Cumulative free cash flow
(Measured on a cumulative basis over the performance period FY 23-25)
50%
£4.520bn
£5.520bn
Net debt/adjusted EBITDA
(Measured as a ratio at year end 2025)
50%
2.7x
2.3x
1
Straight-line interpolation is applied for performance between minimum and maximum.
An ESG qualifier is also included within the 2023 PSP design, to reflect commitments that the Company has made on carbon reduction,
recycle-ready packaging and gender diversity.
In designing the ESG qualifier, the Committee has set thresholds for each of the three measures and, at the end of the performance
period, if any of the thresholds are missed, a reduction in the level of vesting of 10% could be applied for each missed threshold.
In addition, if the metrics are static or go backwards compared to the 2022 baseline, a 25% reduction in the level of vesting could
be applied for each measure (i.e., a potential overall reduction of up to 75%).
The ESG qualifier thresholds for the 2023 PSP are as follows:
Measure
Threshold
Carbon reduction
(Measured for 12 months to November 2025)
At least 48% reduction in Scope 1 and 2 carbon emissions from the 2020 level.
Recycle-ready packaging
(Measured for 12 months to June 2025)
At least 80% of packaging should be recycle-ready.
Diversity
(Quarterly average in 2025)
At least 45% of leadership roles should be held by women.
In determining the vesting levels and any adjustment which should apply, the Committee will also consider wider factors, including
whether broader plans to meet Haleon’s responsible business commitments are on track.
Haleon
Annual Report and Form 20-F 2023
88
Corporate Governance
Performance Share Plan awards to be made in 2024
Brian McNamara and Tobias Hestler will be granted awards with a face value of 450% of salary and 350% of salary respectively.
Performance measures for the 2024 PSP awards
The 2023 PSP performance measures included cumulative free cash flow (50%), net debt/adjusted EBITDA (50%) and the ESG
qualifier threshold on carbon reduction, recycle-ready packaging and gender diversity in leadership roles. As the business is getting
closer to reaching its initial deleveraging target (below 3.0x net debt/adjusted EBITDA), to ensure that the performance measures
continue to support the most critical strategic objectives, for the 2024-2026 performance cycle the net debt/adjusted EBITDA measure
(50% weighting) will be replaced with a combination of two alternative measures, adjusted diluted earnings per share growth (EPS)
(30% weighting) and organic operating margin improvement (operating margin) (20% weighting). This change in financial metrics does
not signal a change in strategy, which remains consistent.
EPS will be aligned with the headline adjusted diluted EPS metric disclosed in the Annual Report and will be measured as compound
growth over the performance period at constant currency (i.e., cumulative growth calculated each year on an organic basis, at constant
currency and removing the impact of acquisitions and divestments). It is expected that one-off events, such as M&A, which were not
anticipated at the time of target setting, will be excluded from the calculation in the year when the event occurred. In addition, the
impact of any share buybacks will be considered by the Remuneration Committee on a case-by-case basis.
Operating margin targets will be expressed as a cumulative basis points (bps) improvement and measured at constant currency.
This measure is derived from organic revenue growth and organic profit growth and as such, excludes the impact of acquisitions,
divestments, closures of brands, and the impact of translational currency exchange movements. It will be based on margin improvement
over the performance period (i.e., cumulative improvement calculated each year on an organic basis).
The 50% weighting on cumulative free cash flow will remain for 2024 as it continues as a strategic priority to drive financial discipline.
The generation of stable cash flow is a critical part of how value is created for our shareholders, including our ability to deliver returns.
Target ranges
Measure
Weighting
Minimum
(25% vesting)
1
Maximum
(100% vesting)
1
Cumulative free cash flow
(Measured on a cumulative basis over the performance period FY 24-26)
50%
£5.310bn
£6.490bn
Adjusted diluted EPS growth
(Measured as % growth on a cumulative basis over three years)
30%
6% p.a.
10% p.a.
Organic operating margin improvement
(Measured as bps improvement on a cumulative basis over three years)
20%
+100 bps
+270 bps
1
Straight-line interpolation is applied for performance between minimum and maximum.
The Committee reviews the mix of measures in incentives on an annual basis and will continue to consider whether the performance
measures remain aligned with our strategic priorities.
An ESG qualifier is also included within the 2024 PSP design, to reflect commitments that the Company has made on carbon reduction,
the use of plastic and gender diversity. The operation of the qualifier is unchanged from 2023, such that at the end of the performance
period, if any of the thresholds are missed, a reduction in the level of vesting of 10% could be applied for each missed threshold.
In addition, if the metrics are static or go backwards compared to the 2023 baseline, a 25% reduction in the level of vesting could
be applied for each measure (i.e., a potential overall reduction of up to 75%).
The carbon reduction and gender diversity ESG thresholds were retained in the 2024-2026 measures. The external commitment on
recycle-ready packaging runs to 2025, and therefore this metric will be replaced by a metric assessing the reduction in virgin petroleum-
based packaging as part of the ESG qualifier for the 2024-2026 cycle, in line with Haleon’s commitment to reduce the use of virgin
petroleum-based plastic. The threshold was set taking into account the change in the baseline year from 2020 to 2022, as the 2022
data used to calculate our packaging footprint has greater availability and accuracy. More detail can be found on page 22.
The ESG qualifier thresholds for the 2024 PSP are as follows:
Measure
Threshold
Carbon reduction
(Measured for 12 months to November 2026)
At least 55% reduction in Scope 1 and 2 carbon emissions from the 2020 level.
Reduction in virgin petroleum-based packaging
(
Measured for 12 months to June 2026)
At least 12% reduction from the 2022 level.
Diversity
(Quarterly average in 2026)
At least 46% of leadership roles should be held by women.
In determining the vesting levels and any adjustment which should apply, the Committee will also consider wider factors, including
whether broader plans to meet Haleon’s responsible business commitments are on track.
Corporate Governance
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Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Remuneration
continued
Principles addressed when determining the remuneration outcomes for Executive Directors
When determining the remuneration outcomes, the Committee had regard to a number of key principles: clarity and simplicity of the
incentive structure (remuneration aligned with market practice, consisting of a single short-term incentive and long-term incentive),
avoiding payment for failure (a range of design features take into account risk, including malus and clawback provisions), proportionality
(rewarding performance against stretching targets), and acting in line with our purpose and culture when setting remuneration. The full
description of how our Policy aligns with these principles is set out on page 86 of the 2022 Annual Report, available on the website at
www.haleon.com
.
In addition, when determining incentive outcomes, the Committee may use its discretion to ensure that a fair and balanced outcome
is achieved, taking into account the overall performance of the Company, including all relevant external factors and the experience of
shareholders. Any use of discretion would be explained in the Directors’ Remuneration Report and may, as appropriate, be the subject
of consultation with the Company’s major shareholders.
Payments for loss of office and to past Directors (audited)
There were no payments to Directors for loss of office and no payments to past Directors during 2023.
Total shareholder return (TSR)
The chart shows the monthly value, from the time of demerger to 31 December 2023, of a notional sum of £100 invested in Haleon
shares on 18 July 2022, compared to £100 invested in the FTSE 100 on the same date. The FTSE 100 Index was chosen as the
comparator because the Company is a constituent of this index. To provide shareholders with additional context, the chart also shows
a bespoke group of large international FMCG companies used for remuneration benchmarking: Diageo, AstraZeneca, GSK, British
American Tobacco, Vodafone Group, Imperial Brands, Danone S.A., Heineken N.V., Burberry Group, Associated British Foods, L’Oréal
S.A., Pernod Ricard SA, Sanofi and Siemens Healthineers AG.
Jul
2022
Jul
2023
Jun
2023
May
2023
Apr
2023
Mar
2023
Feb
2023
Jan
2023
Aug
2022
Aug
2023
Sep
2022
Sep
2023
Oct
2022
Oct
2023
Nov
2022
Nov
2023
Dec
2023
Dec
2022
70
80
90
100
110
120
Total shareholder return
Haleon
FTSE 100
Large international
FMCG companies
Chief Executive Officer – historical remuneration information
The table below shows the remuneration of the Chief Executive Officer in place at the time over the same period.
Year
2022
2023
Chief Executive Officer
Brian McNamara
Brian McNamara
Single figure of total remuneration (£’000)
1
2,294
5,763
AIP outcome (% of maximum)
2
72%
75%
PSP vesting (% of maximum)
3
n/a
81%
1
Pre-demerger remuneration for Brian McNamara was set in US Dollars and has been converted to GBP in the table above, using the average 2022 exchange rate of 1.24.
2
2022 AIP value has been pro-rated for the period between Director’s appointment (23 May 2022) and the end of the financial year (31 December 2022).
3
There were no PSP awards vesting in 2022.
Relative importance of spend on pay
The table below sets out the amounts payable in respect of 2022 and 2023 on all-employee pay and dividends:
Year
2022
2023
Total staff costs
1
£1,835m
£2,149m
Dividends
2
£11,930m
£388m
1
Total staff costs are presented in line with Note 7 to the Financial Statements.
2
Dividends are presented in line with Note 10 to the Financial Statements.
Haleon
Annual Report and Form 20-F 2023
90
Corporate Governance
Chief Executive Officer’s pay compared with employee pay
The table below compares the CEO’s ‘single figure’ of total remuneration to that received by three representative UK employees
in 2023 and 2022. The total remuneration for each quartile employee, and the salary component within this, is also outlined below.
Year
Method
4
25th percentile
pay ratio
Median
pay ratio
75th percentile
pay ratio
2023
1
Option B
93:1
50:1
38:1
2022
2,3
Option B
64:1
32:1
24:1
1
2023 CEO single figure includes the value of the PSP Refill award which was made to compensate the value foregone on early vesting of the GSK award. This award vested in March 2024.
2
2022 CEO single figure does not include any long-term incentive component as the first Haleon PSP award was made to the CEO in 2022. The 2022 CEO pay ratio has been recalculated
based on the restated value of the 2022 benefits for the CEO, as shown in the single figure table in this report.
3
The total 2022 remuneration for employees is based on earnings between 23 May 2022 and 31 December 2022 and the 2022 bonus pro-rated for that period.
4
See Methodology below.
Year
25th percentile
£000
Median
£000
75th percentile
£000
2023 salary
49
67
91
2023 total remuneration
62
114
152
Methodology
In line with the approach taken in 2022, we have chosen to use Option B as our preferred methodology to calculate the CEO pay ratio.
Given the complexity of the pay arrangements for different categories of UK employees at Haleon, this approach allows us to leverage
the existing gender pay gap calculations and thus presents a practical and efficient approach, using robust and meaningful data that
is representative of the remuneration levels for UK employees.
The Company used data from the 2023 gender pay gap calculation to determine employees positioned at each pay quartile and
excluded those employees who left the Company before 31 December 2023. Remuneration was calculated in line with the methodology
used to determine the single total figure of remuneration for the CEO, as presented in this Report. Remuneration figures are determined
with reference to the financial year ending on 31 December 2023. The remuneration covers salary, benefits and pension contributions,
bonus in respect of 2023 which will be paid in March 2024 and share awards without performance conditions granted in 2023.
No components were omitted from the calculation and no adjustments were made to any of the pay elements. Where required, actual
remuneration was converted into a full-time equivalent by pro-rating earnings to reflect full-time contractual working hours.
The Committee determined that the identified employees are reasonably representative of the pay quartiles, since the structure of
their remuneration arrangements is in line with that of the majority of employees in the UK. The Committee believes that the median
pay ratio for the 2023 financial year is consistent with the pay, reward and progression policies for the Company’s UK employees.
The change in the CEO pay ratio from the prior year is primarily attributed to the vesting of the Haleon PSP Refill awards for the CEO
whereas the 2022 single figure of remuneration did not include any long-term incentive awards.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
91
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Remuneration
continued
Percentage change in remuneration
The table below sets out how the change in remuneration for each Director between 2022 and 2023 compared to a wider UK employee
comparator group:
Change in 2023 against 2022
Salary/fees
1
(% change)
Benefits
2
(% change)
Bonus
3
(% change)
Executive Directors
Brian McNamara
0%
-52%
4%
Tobias Hestler
0%
5%
8%
Chair and Non-Executive Directors
Sir Dave Lewis
0%
19%
n/a
Manvinder Singh (Vindi) Banga
0%
-52%
n/a
Marie-Anne Aymerich
0%
191%
n/a
Tracy Clarke
0%
-89%
n/a
Dame Vivienne Cox
0%
-87%
n/a
David Denton
4
n/a
n/a
n/a
Asmita Dubey
0%
-35%
n/a
Deirdre Mahlan
0%
146%
n/a
Bryan Supran
4
n/a
-43%
n/a
John Young
5
0%
-11%
n/a
Average for all UK employees
6,7
6%
35%
18%
1
Change in salary/fees for Directors is shown as the change from the post-demerger annual rate of salary applicable for 2022 to the rate applicable for 2023.
2
Change in benefits for Directors is shown as annualised value of post-demerger benefits for 2022 compared with the full value of benefits in 2023.
3
Change in bonus for the Executive Directors is shown as the annualised value of the post-demerger 2022 AIP compared with the full value of the 2023 AIP.
4
David Denton and Bryan Supran do not receive Non-Executive Director fees. David Denton joined the Board with effect from 1 March 2023.
5
John Young stepped down from the Board with effect from 28 February 2023.
6
Only a very small number of individuals are employed by the same entity as Directors. As the number of employees is fewer than five, data for this entity is not presented.
Therefore the table above shows a comparison to the average remuneration for all UK employees of Haleon.
7
Average change in salary for the UK employees is the average increase awarded to the UK workforce in 2023. Average change in benefits for the UK employees represents a change
in the medical benefit offering in the UK between 2022 and 2023 which resulted in an increase in the average monthly premium. Average change in bonus for the UK employees is
calculated as the change in the business multiplier between 2022 and 2023 and will be re-stated in the 2024 report when actual bonus data is available.
Consideration of workforce pay and approach to engagement
The Board receives regular updates on employee engagement, including employee engagement survey results, with a detailed update
presented annually. In addition, workforce engagement is covered on page 70, which includes commentary on how the views of
employees were considered by the Board.
To ensure that the remuneration-related decisions are fair and appropriate, the Committee considered employees’ pay increases
when determining the appropriate salary levels for the Executive Directors and fees for the Chair. In addition, the Committee was
provided with an update on bonus outcomes for the wider employee population, which were taken into account to ensure that the
bonus outcomes appropriately reflect business performance at all levels in the organisation. Furthermore, the Committee approved
the implementation of Haleon’s all-employee share plans and agreed the terms and details of the 2023 and 2024 share awards made
to the executives and other senior employees. In 2023, the Workforce Engagement Director, Dame Vivienne Cox, conducted a series
of meetings with various groups of employees across multiple geographies and functions. She covered the role of the Board and the
Committee in one of her sessions, setting out how the Remuneration Committee operates and how it considers wider workforce
remuneration arrangements.
In addition, employees have been informed about the alignment between the executive remuneration structure and the wider
workforce remuneration arrangements as part of the wider reward communications. The Directors’ Remuneration Policy, which
is available on Haleon’s website, has been shared with employees, providing an opportunity to view and assess the remuneration
structure which applies to the Board. The Company always welcomes employee feedback, and views on executive remuneration
will be shared with the Committee.
Haleon
Annual Report and Form 20-F 2023
92
Corporate Governance
Remuneration Committee advisers
During 2023, PwC was the independent remuneration adviser to the Committee. PwC was appointed by the Committee in August 2022.
As part of this process, the Committee considered the services that PwC provided to other FTSE 100 companies and Haleon’s
competitors, as well as other potential conflicts of interest. PwC is a member of the Remuneration Consultants’ Group and voluntarily
operates under their code of conduct when providing advice on executive remuneration in the UK. PwC regularly meets with the
Chair of the Committee without management present. The Committee is comfortable that the PwC engagement partner and team
providing remuneration advice to the Committee do not have connections with Haleon or its individual Directors that may impair their
independence and objectivity. The total fees paid to PwC for the provision of independent advice to the Committee in 2023 were
£74,500 charged on a fixed fee as well as time and materials basis. During 2023, PwC also provided other services to Haleon entities,
including tax advice, internal audit and assurance, controls (e.g., SOX, organisational controls and cyber-security assessments), general
management consultancy, advice relating to Group-wide projects, staff augmentation for cyber-security specific requirement, short
and medium secondees, deals and transactions work. Remuneration advice is provided by an entirely separate team within PwC.
Statement of voting at the Annual General Meeting (AGM)
The Directors’ Remuneration Policy and the 2022 Directors’ Remuneration Report were approved by shareholders at the 2023 AGM.
Each of these resolutions received a significant vote in favour by shareholders and the Committee is grateful for this support and
endorsement by our shareholders. The votes received were:
Resolution
For
%
Against
%
Withheld
To approve the Directors’ Remuneration Report
7,769,899,285
98.72%
101,062,356
1.28%
34,883,051
To approve the Directors’ Remuneration Policy
7,728,166,817
98.19%
142,531,194
1.81%
35,150,085
Directors’ service contracts and letters of appointment
Brian McNamara’s and Tobias Hestler’s service contracts, dated 9 May 2022 and 10 May 2022 respectively, are subject to a 12-month
notice period and any payments for loss of office will be in line with the Directors’ Remuneration Policy disclosed in the 2022 Annual
Report. Executive Directors’ service contracts are available for inspection at the Company’s registered office and included as exhibits
to this Annual Report and Form 20-F. The Non-Executive Directors and the Chair were each appointed by a letter of appointment for
an initial term of three years, and either party may terminate the appointment on three months’ notice, or, if earlier, with the consent
of the Board. All Non-Executive Directors are subject to annual re-election by shareholders at the AGM and there is no provision in
their letters of appointment giving them a right to compensation upon early termination.
2023 Non-Executive Directors’ remuneration
The Chair is entitled to receive an annual fee which was set at £700,000 per annum for 2023. The 2023 base fee for each other
Non-Executive Director was £95,000 per annum. Bryan Supran and David Denton are Pfizer employees and do not receive any fees
for acting as Non-Executive Directors of Haleon plc. Additional fees payable in 2023 were as follows:
—
£50,000 per annum for the Senior Independent Director;
—
£30,000 per annum for the Workforce Engagement Director;
—
£40,000 per annum for chairing the Audit & Risk Committee;
—
£40,000 per annum for chairing the Remuneration Committee; and
—
£30,000 per annum for chairing the Environmental & Social Sustainability Committee.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
93
Directors’ Remuneration Report
Directors’ Remuneration Report
continued
Annual Report on Remuneration
continued
2024 Non-Executive Directors’ remuneration
The Board reviewed the Non-Executive Directors’ fees and, at the recommendation of the Chair and the CEO, approved a 4.5% increase
to the base fee for the Non-Executive Directors, bringing the 2024 base fee to £99,275 per annum. In addition, a 4.5% increase was
applied to the Chair’s annual fee, bringing the 2024 Chair’s fee to £731,500 per annum. No other changes were made to the remuneration
of the Non-Executive Directors.
‘Single figure’ of remuneration – Non-Executive Directors (audited)
The table below shows the actual fees paid to our Non-Executive Directors in 2023 and 2022.
Non-Executive Director
2,4
2023 fees
(£000)
2023 benefits
(£000)
2023 total
remuneration
(£000)
2022 fees
(£000)
1
2022 benefits
(£000)
2022 total
remuneration
(£000)
Sir Dave Lewis
700
5.6
706
426
2.9
429
Manvinder Singh (Vindi) Banga
145
0.6
146
66
0.6
67
Marie-Anne Aymerich
120
3.0
123
43
0.5
44
Tracy Clarke
135
0.2
135
61
0.6
62
Dame Vivienne Cox
125
0.4
125
57
1.3
58
David Denton
3
0
0.2
0
—
—
—
Asmita Dubey
95
1.8
97
43
1.3
44
Deirdre Mahlan
135
14.2
149
61
2.6
64
Bryan Supran
0
6.1
6
—
4.9
5
John Young
3
16
0.8
17
43
0.5
44
1
Remuneration shown in the table in respect of 2022 includes fees and benefits for the period between 23 May-31 December 2022 for Sir Dave Lewis and 18 July-31 December 2022
for all other Directors, in line with their appointment dates.
2
In addition to the Directors listed in the table, prior to separation and demerger, Victoria Whyte and David Redfern were appointed as administrative directors on 20 October 2021
and resigned on 23 May 2022. They were not remunerated for these duties.
3
John Young stepped down from the Board with effect from 28 February 2023. John was succeeded as Non-Executive Director and representative of Pfizer by David Denton with effect
from 1 March 2023.
4
Fees and total remuneration have been rounded to the nearest £1,000 for presentation purposes, and totals reflect the sum of these rounded values.
Statement of Directors’ shareholding and share interests (audited)
Total shareholding of Directors on 31 December 2023 is shown below.
Director
Shares
beneficially
owned
1
Shares
not subject to
performance
Options not subject
to performance
Shares
subject to
performance
Total interest
Share
ownership
as % of 2023
salary/fee
2
Share
ownership
requirement
met
Chair
Sir Dave Lewis
94,627
—
—
—
94,627
44%
n/a
Executive
Directors
Brian McNamara
246,572
129,069
4,717,325
5,092,966
82%
No
Tobias Hestler
11,631
71,861
7,919
1,732,883
1,824,294
23%
No
Non-Executive
Directors
Manvinder Singh
(Vindi) Banga
329,800
—
—
—
329,800
1136%
n/a
Marie-Anne Aymerich
27,884
—
—
—
27,884
96%
n/a
Tracy Clarke
12,504
—
—
—
12,504
43%
n/a
Dame Vivienne Cox
0
—
—
—
0
0%
n/a
David Denton
0
—
—
—
0
n/a
n/a
Asmita Dubey
0
—
—
—
0
0%
n/a
Deirdre Mahlan
80,000
—
—
—
80,000
276%
n/a
Bryan Supran
50,000
—
—
—
50,000
n/a
n/a
John Young
3
80,541
—
—
—
80,541
277%
n/a
1
Beneficial interest also includes shares held indirectly through Haleon ADSs and shares/ADSs held by connected persons.
2
Share ownership as % of 2023 salary/fee is based on the average share price between 1 July and 31 December 2023 of £3.2716. Shares that count towards the requirement include
beneficial holdings and unvested DABP shares on an after-tax basis.
3
John Young stepped down from the Board with effect from 28 February 2023. John was succeeded as Non-Executive Director and representative of Pfizer by David Denton with effect
from 1 March 2023. The shareholding shown above is as of John Young’s resignation date.
The following changes to Directors’ interests in ordinary shares or ADSs occurred between 31 December 2023 and 7 March 2024
(being the latest practicable date): 440,123 ADSs vested for Brian McNamara (357,197 released and 82,926 lapsed) and 61,621 shares
vested for Tobias Hestler (50,011 released and 11,610 lapsed) under the PSP Refill awards on 1 March 2024.
Haleon
Annual Report and Form 20-F 2023
94
Corporate Governance
Non-Executive Directors, including the Chair, are encouraged to build up a personal holding in the shares of the Company equal to the
value of one year of their annual base fee. Executive Directors are required to build and maintain significant holdings of shares in Haleon
over time (450% of salary for the CEO and 350% of salary for the CFO). Until these requirements have been met, Executive Directors
are required to hold all Haleon shares acquired under the PSP and/or DABP (net of income tax and National Insurance contributions).
Executive Directors are required to comply with shareholding requirements for two years after leaving the Company, at a level equal
to the lower of their shareholding requirement immediately prior to departure or their actual shareholding on departure. During this
period, former Executive Directors will be required to seek permission to deal from the Company Secretary.
Outstanding share options
The following table sets out the share options held by Executive Directors in the Haleon Share Save Plan as at the end of the period.
No other Directors participated in any option scheme.
Date of grant
Exercise
price
Market
price at
31 Dec
2023
Exercise period
Number of options
Beginning
End
Beginning
of period
Granted
Exercised
Cancelled
Forfeited
Lapsed
End of
period
Tobias
Hestler
1,2
22 Dec 22
£2.2728
£3.2165
1 Feb 26
31 Jul 26
7,919
3
Nil
Nil
Nil
Nil
Nil
7,919
1
No gain was made by Directors in 2023 on the exercise of these options.
2
No price was paid for the award of any option.
3
The total number of shares under option is calculated based on a three-year savings period with contributions of £500 per month. The exercise price represents a 20% discount from
the share price at the time the invitations were sent to UK employees. The total face value of the award based on the share price on 31 December 2023 of £3.2165 is £7,473.
Additional disclosures
Further information is provided on compensation and interests of Directors and senior management. For the purpose of this disclosure,
this group includes the Executive and Non-Executive Directors and the Executive Team.
The following table sets out aggregate remuneration for this group for 2023.
2023 remuneration
£000
Total compensation paid
37,381
Aggregate increase in accrued pension benefits (net of inflation)
—
Aggregate payments to defined contribution schemes
1,204
During 2023, members of this group were awarded shares and ADSs under the Company’s share plans, as set out in the table below.
To align the interests of senior management with those of shareholders, Executive Directors and Executive Team members are required
to build and maintain significant holdings of shares in Haleon over time. Selected Executive Team members are required to hold shares
to an equivalent multiple of three times their base salary.
Awards
Dividend equivalents
Shares
ADSs
Shares
ADSs
Performance Share Plan
6,326,775
1,084,997
165,726
21,370
Share Value Plan
1
26,418
19,155
0
0
Deferred Investment Awards
1,2
0
0
5,035
0
1
Executive Directors are not eligible to receive Deferred Investment Awards or participate in the Share Value Plan.
2
Deferred Investment Award made in 2022 represents a conversion of the legacy GSK Deferred Investment Award into Haleon shares.
At 7 March 2024 (being the latest practicable date), this group and persons closely associated with them had the following interests
in shares and ADSs of the Company. Interests awarded under the various share plans are described in Note 26 to the Financial
Statements, ‘Employee share schemes’ on page 167.
Interests as at 7 March 2024
1
Shares
ADSs
Owned
759,468
445,200
Unexercised options
7,919
0
Deferred Annual Bonus Plan
200,930
0
Performance Share Plan
12,524,482
663,441
Share Value Plan
2
11,196
0
Deferred Investment Awards
2,3
417,387
0
1
This disclosure excludes employees who ceased to be members of the Haleon Executive Team by 7 March 2024.
2
Executive Directors are not eligible to receive Deferred Investment Awards or participate in the Share Value Plan.
3
Deferred Investment Award made in 2022 represents a conversion of the legacy GSK Deferred Investment Award into Haleon shares.
Corporate Governance
Haleon
Annual Report and Form 20-F 2023
95
Directors’ Remuneration Report
Compliance with the
UK Corporate Governance Code
The Board considers that the Company has
applied the principles and complied fully
with the provisions set out in the 2018 UK
Corporate Governance Code (the Code)
for the period from 1 January 2023 to
31 December 2023.
The table below summarises how the
principles of the Code have been applied
throughout this period. It should be read
in conjunction with the Strategic Report and
Corporate Governance section, including
the Directors’ Remuneration Report.
>>
See also our summary statement outlining
differences between the Group’s UK
corporate governance practices from
those of US companies on page 208.
>>
The Code is published on the FRC website:
www.frc.org.uk
Code principle
Page(s)
Board leadership and company purpose
A
The Board effectiveness review showed that the Board continues to operate effectively. This is attributed to the
diverse and complementary expertise of the Directors, which promotes balanced decision-making focused on
long-term sustainable success. Careful procedures manage conflicts of interest should they arise with Directors
linked to the controlling shareholder, including recusal from certain Board discussions where required.
62, 63, 71, 186
B
The Board has agreed the strategic direction of the Group and monitored the strategy, medium plans and evolution
of the culture and values at its meetings during 2023.
68
C
The Board monitors performance and KPIs through regular updates, presentations and deep dives into key areas.
The Company’s controls and risk management processes are overseen by the Audit & Risk Committee.
68, 75
D
Stakeholder engagement activities during the period included meetings with major institutional shareholders,
shareholder representative bodies and employees (through the Workforce Engagement Director). The AGM also
provides the opportunity for the Board to engage directly with shareholders.
69, 70
E
The Board received updates on policies and practices throughout the period. Any employee can raise matters
of concern confidentially through the Speak Up programme which is overseen by the Audit & Risk Committee.
68, 73
Division of responsibilities
F
The Chair has led the Board effectively during 2023, demonstrating objective judgement and promoting a culture
of openness and debate.
71
G
There is an appropriate balance of Executive, Independent Non-Executive and Non-Executive Directors. There is
a clear division of responsibilities between the Chair and the Chief Executive.
62, 63, 67, 78
H
The Non-Executive Directors have diverse backgrounds and skill sets. The Board effectiveness and evaluation review
concluded that all Non-Executive Directors are effective and devote appropriate time to their duties. The Chair meets
regularly with Non-Executive Directors without Executive Directors present.
62, 63, 71, 78
I
The Chair and Company Secretary ensure the Board and its Committees receive timely, accurate and clear information
to support their decision-making.
71
Composition, success and evaluation
J
Appointments to the Board are led by the Nominations & Governance Committee save where Pfizer nominates
Non-Executive Directors under the relationship agreement. Directors are subject to annual re-election at the AGM.
78
K
The Board skills matrix is maintained and reviewed by the Nominations & Governance Committee, who also reviews
membership of Board Committees on a regular basis.
78
L
The Board effectiveness and evaluation review concluded that the Board continues to operate effectively. The Senior
Independent Director led the review of the Chair’s performance.
71
Audit, risk and internal control
M
The Audit & Risk Committee is responsible for assessing the independence and effectiveness of the external auditor
and the internal audit function. It has reviewed all of the Group’s published Financial Statements.
73
N
The Board is satisfied that the Annual Report, taken as a whole is fair, balanced and understandable. The viability and
going concern statements specifically cover the Board’s assessment of the current and future prospects of the Group.
59, 74, 98, 190
O
The Board and, as appropriate, the Audit & Risk Committee (in line with its terms of reference) has reviewed the
principal risks, monitors risk appetite and oversees the internal control framework.
68, 75
Remuneration
P
The Remuneration Committee has developed a policy on Executive Director remuneration which was approved
by shareholders at the 2023 AGM.
82
Q
No Directors are involved in deciding their own remuneration outcomes. The Remuneration Committee followed
a clear process while developing the Directors’ Remuneration Policy.
81
R
The Remuneration Committee exercises independent judgement and considers the application of discretion
permitted when determining the outcome of performance-related Executive remuneration.
80, 83, 85, 86, 90
Haleon
Annual Report and Form 20-F 2023
96
Corporate Governance
Financial Statements
Consolidated
Financial
Statements
Contents
Statement of Directors’ responsibilities
98
Independent auditor’s report
99
Reports of independent registered public
accounting firms
112
Consolidated income statement
116
Consolidated statement of comprehensive income
117
Consolidated balance sheet
118
Consolidated statement of changes in equity
119
Consolidated cash flow statement
120
Notes to the Consolidated Financial Statements
121
Sensodyne:
Sensodyne is a leading global range
of toothpastes, mouthwashes and
toothbrushes designed to tackle
sensitivity. The brand is a key growth
driver in Oral Health, delivering double
digit growth and gaining market share
in 2023. In the US, Sensodyne recently
launched two new innovations, Pronamel
Active Shield and Sensitivity & Gum.
The image above is taken from the
Sensodyne ‘Faces and Dentists’ campaign.
Haleon
Annual Report and Form 20-F 2023
97
Disclosure Guidance and Transparency Rules
The Directors confirm to the best of their knowledge:
—
The Consolidated Financial Statements, prepared in
accordance with a relevant financial reporting framework, give
a true and fair view of the assets, liabilities, financial position
and profit or loss of the Parent Company and the undertakings
included in the consolidation taken as a whole.
—
The Annual Report, including the Strategic Report, includes a
fair review of the development and performance of the business
and the position of the Parent Company and the Group taken
as a whole, together with a description of the principal risks
and uncertainties that it faces.
—
In accordance with Disclosure Guidance and Transparency Rule
(DTR) 4.1.16R, the financial statements will form part of the
annual financial report prepared under DTR 4.1.17R and
4.1.18R. The auditor’s report on these financial statements
provides no assurance over whether the annual financial report
has been prepared in accordance with those requirements.
UK Corporate Governance Code
The Directors consider that this Annual Report and Form 20-F,
taken as a whole, is fair, balanced and understandable and that it
provides the information necessary for shareholders to assess the
Parent Company’s and the Group’s position and performance,
business model and strategy.
Disclosure of information to auditors
Each of the Directors who held office as at the date of approval
of this Report confirm that:
—
They have taken steps to make themselves aware of relevant
audit information (as defined by Section 418(3) of the
Companies Act 2006).
—
None of the Directors are aware of any relevant audit
information which has not been disclosed to the Company’s
and Group’s auditor.
For and on behalf of the Board
Brian McNamara
Tobias Hestler
Chief Executive Officer
Chief Financial Officer
15 March 2024
15 March 2024
Financial Statements and accounting records
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. The Directors have prepared
the Consolidated Financial Statements in accordance with United
Kingdom (UK) adopted international accounting standards in
conformity with the requirements of the Companies Act 2006,
and the Parent Company Financial Statements in accordance with
UK accounting standards. The Consolidated Financial Statements,
also comply with International Financial Reporting Standards
(IFRS), as issued by the International Accounting Standards Board
(IASB), including interpretations issued by the IFRS
Interpretations Committee (IFRIC), and International Financial
Reporting Standards. Under company law directors must not
approve the Financial Statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Parent
Company and the Group, and the profit or loss for that period.
In preparing these Financial Statements, the Directors are
required to:
—
Select suitable accounting policies and apply them consistently.
—
Make judgements and accounting estimates that are reasonable.
—
Provide additional disclosures when compliance with the
specific requirements of the financial reporting framework
are insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the
entity’s financial position and financial performance.
—
State whether the Consolidated Financial Statements have
been prepared in accordance with UK-adopted international
accounting standards.
—
State for the Parent Company Financial Statements whether
applicable UK accounting standards, comprising FRS 102,
have been followed.
—
Prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Parent Company
and the Group will continue in business.
The Directors are responsible for ensuring that the Parent
Company and the Group keep adequate accounting records
that are sufficient to show and explain the Parent Company’s and
the Group’s transactions and disclose with reasonable accuracy
the financial position of the Parent Company and the Group to
enable them to ensure that the Financial Statements comply with
the Companies Act 2006. The Directors also have responsibility
for the system of internal control, safeguarding the assets of the
Parent Company and the Group, and taking reasonable steps to
prevent and detect fraud and other irregularities. Under applicable
law and regulations, they also have responsibility for preparing
a Directors’ Report, Strategic Report, Directors’ Remuneration
Report, and Corporate Governance Statement. The Directors
are responsible for the maintenance and integrity of the Annual
Report including on Haleon’s website. Legislation in the UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Statement of Directors’ responsibilities
Haleon
Annual Report and Form 20-F 2023
98
Financial Statements
Haleon
Annual Report and Form 20-F 2022
Financial Statements
Independent auditor’s report
to the members of Haleon plc
1. Our opinion is unmodified
Additional opinion in relation to IFRS as issued by IASB
As explained in note 1 to the Group financial statements, the Group, in addition to complying with its legal obligation to apply
UK-adopted International Financial Reporting Standards, has also applied International Financial Reporting Standards as issued
by the International Accounting Standards Board (IASB).
In our opinion, the Group financial statements have been properly prepared in accordance with IFRS as issued by the IASB.
What our opinion covers
We have audited the Group and Parent Company financial statements of Haleon plc (the Company) for the year ended 31 December 2023
(FY23) included in the Annual Report, which comprise:
Group (Haleon plc and its subsidiaries)
Parent Company (Haleon plc)
Consolidated income statement
Balance sheet
Consolidated statement of comprehensive income
Statement of changes in equity
Consolidated balance sheet
Notes to the Parent Company financial statements, including
the accounting policies in Notes 1 and 2.
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes to the Consolidated Financial Statements, including
the accounting policies in Notes 1 to 3.
In our opinion:
—
the financial statements of Haleon plc give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 December 2023, and of the Group’s profit for the year then ended;
—
the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
—
the Parent Company financial statements have been properly prepared in accordance with UK accounting standards, including
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
—
the Group and Parent Company financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Haleon
Annual Report and Form 20-F 2023
99
Independent auditor’s report to the members of Haleon plc
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion and matters included in this report are consistent with those discussed and included in our
reporting to the Audit & Risk Committee.
We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed public interest entities.
2. Overview of our audit
Factors driving
our view of risks
The macro-economic environment has been a driving
factor in our risk assessment, as general economic
uncertainty has led to high commodity and other input
cost inflation affecting many countries the Group
operates and sells in. Price increases and the impact
on volumes sold, together with the broader impact on
margin and operating profit across markets and brands
are areas considered during our risk assessment.
The Group holds brands with indefinite lives where
a high degree of estimation uncertainty exists with
regards to assumptions and estimates used in the
Group’s analysis of the recoverable amount. The key
assumptions are terminal growth rate and discount
rate. There is significant auditor judgement involved
in evaluating these assumptions. We identified that the
indefinite life brand most sensitive to possible change
in key assumptions used in the valuation models is
Preparation H. The effect of these matters could result
in a potential range of reasonable outcomes greater
than our materiality for the financial statements
as whole.
The investment in subsidiaries in the Parent Company
Financial Statements is deemed to be material. As a
result this is considered to be the area that has the
greatest effect on our overall Parent Company audit.
Key Audit Matters
Item
Valuation of indefinite life brands
4.1
Recoverability of Parent
Company’s investment in
subsidiaries
4.2
Audit and Risk
Committee
Interaction
During the year, the Audit & Risk Committee met seven times. KPMG are invited to attend all Audit & Risk
Committee meetings and are provided with an opportunity to meet with the Audit & Risk Committee in
private sessions without the Executive Directors being present. For each Key Audit Matter, we have set out
communications with the Audit & Risk Committee in section 4, including matters that required particular
judgement for each.
The matters included in the Audit & Risk Committee Report on page 74 are materially consistent with our
observations of those meetings.
Our independence
We have fulfilled our ethical responsibilities under,
and we remain independent of the Group in accordance
with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities.
We have not performed any non-audit services during
FY23 or subsequently which are prohibited by the FRC
Ethical Standard.
We were first appointed as auditor by the shareholders
of the Company on 20 April 2023. The period of total
uninterrupted engagement is for one financial year
ended 31 December 2023.
The Group engagement partner is required to rotate
every 5 years. Nicholas Frost became the Group
engagement partner for the current year and will be
required to rotate off the engagement following the
FY27 audit.
Component signing partners served as component
signing partners for the FY22 PCAOB audit, performed
by KPMG LLP US, and continue to be involved in the
Group audit. The average tenure of component signing
partners, as set out in section 7 is 2 years, with the
shortest being 1 and the longest being 2.
Total audit fee
£15.9m
Audit related fees
(including interim review)
£1.2m
Other services
£0.0m
Non-audit fee as a % of total audit
and audit related fee %
3.0%
Date first appointed
20 April 2023
Uninterrupted audit tenure
1 year
Next financial period which
requires a tender
FY33
Tenure of Group
engagement partner
1 year
Average tenure of component
signing partners
2 years
Independent auditor’s report
to the members of Haleon plc
continued
Haleon
Annual Report and Form 20-F 2023
100
Financial Statements
Financial Statements
Materiality
(Item 6 below)
The scope of our work is influenced by our view of
materiality and our assessed risk of material misstatement.
We have determined overall materiality for the Group
financial statements as a whole at £100m and for the
Parent Company financial statements as a whole at £97m.
Materiality for the Group financial statements as a
whole was set at £100m, determined with reference
to a benchmark of Group profit before tax, normalised to
exclude separation costs of £120m, certain restructuring
costs of £147m, and the impairment of the ChapStick
brand upon transfer to held for sale of £170m. We adjusted
for these items because they do not represent the normal,
continuing operations of the Group. Our Group materiality
representing 4.8% of this metric.
Materiality for the Parent Company financial statements
was determined with reference to a benchmark of Parent
Company total assets of which it represents 0.4%.
Materiality levels used
in our audit (£m)
Group
Group Materiality
GPM
Group Performance Materiality
HCM
Highest Component Materiality
PLC
Parent Company Materiality
LCM
Lowest Component Materiality
AMPT
Audit Misstatement Posting Threshold
Group Scope
(Item 7 below)
We performed risk assessment and planning procedures
to determine which of the Group’s components are likely
to include risks of material misstatement to the Group
financial statements, the type of procedures to be
performed at these components and the extent of
involvement required from our component auditors
around the world.
The Group audit has 16 in-scope reporting components
over which we required procedures to be performed to
provide us with the evidence required to conclude on the
Group Financial Statements as a whole. We performed
a full scope audit at 1 component and specified audit
procedures at 15 components.
The components within the scope of our work accounted
for the percentages illustrated opposite.
The Group operates four shared service centres,
in Poland, Malaysia, Costa Rica and India, the outputs
of which are included in the financial information of the
reporting components they service and therefore they are
not separate reporting components. Each of the shared
service centres is subject to specific risk-focused testing
of transaction processing and review controls.
The Group team has also performed testing of centrally
managed controls (manual and automated), testing of
general IT controls over centrally managed IT systems
and performance of specific risk focused audit procedures
over purchases, revenue, payroll and journal entries on
behalf of the components.
In addition, we have performed Group level assessment
on the remaining components to determine whether further
risks of material misstatement exist in those components.
The remaining 32% of total Group revenue, 15% of total
profits and losses comprising Group profit before tax and
15% of total Group assets is represented by 183 reporting
components, none of which individually represented more
than 3% of any of total Group revenue, Group profit before
tax or total Group assets.
We consider the scope of our audit, as communicated
to the Audit & Risk Committee, to be an appropriate basis
for our audit opinion.
Coverage of Group
Financial Statements
Full Scope Audits
Specified risk-focused
audit procedures
Remaining components
0
20
40
60
80
100
100
Group
80
HCM
75
GPM
97
PLC
10
LCM
5
AMPT
Profit
Before Tax
23%
48%
29%
Revenue
33%
35%
32%
Total
Assets
3%
83%
14%
Haleon
Annual Report and Form 20-F 2023
101
Independent auditor’s report to the members of Haleon plc
The impact of
climate change
on our audit
In planning our audit, we considered the impacts of climate change on the Group’s business and its
financial statements.
The Group set targets to achieve net zero carbon emissions from source to sale by 2040, aligned to guidance
from the Climate Pledge and Race to Zero. Further information has been provided in the Group’s Strategic
Report on page 22. The Group continues to align its climate-related disclosures with the recommendations
of the Task Force on Climate Related Financial Disclosure (TCFD) and the Companies Act. These disclosures
are included on pages 24-31 of the Annual Report.
Climate change risk could have a significant impact on the Group’s business as it adapts its strategy and
operations to address the potential financial risks which could arise from both the physical and transition
risks associated with climate change. To evaluate and assess the resilience of its business to climate change,
the Group assessed the impact of damage and disruption caused by extreme weather events, reduced
availability and increased price volatility of raw materials due to climate change, carbon pricing regulations
and loss of attractiveness due to consumers’ increasing expectations. These are the areas in which the
Group foresees the greatest potential for disruption. Further information can be found on pages 27 to 31.
As part of our audit, we have made inquiries of management to understand the extent of the potential impact
of climate change risk on the Group’s Financial Statements. We have performed a risk assessment of how
climate risks facing the Group, particularly those relating to the impact of damage and disruption caused by
extreme weather events, reduced availability and increased price volatility of raw materials due to climate
change, carbon pricing regulations and loss of attractiveness due to consumers’ increasing expectations,
and the Group’s strategy to mitigate these risks, may affect the financial statements and our audit. Our risk
assessment focused on the risk climate change may pose to the determination of future cash flows within
the Group going concern assessment and assessment over the valuation of indefinite life brands, as well
as the impact on the carrying amount and useful lives of property, plant, and equipment. We also held
discussions with our own climate change professionals to challenge our risk assessment.
On the basis of our risk assessment, we determined that while climate change poses a risk to the determination
of future cash flows, the risk to the audit from climate change alone is not significant, as such there was no
impact on our Key Audit Matters.
We have read the climate-related information in the front half of the Annual Report, and considered
consistency with the statements and our audit knowledge.
3. Going concern, viability and principal risks and uncertainties
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the
Parent Company or to cease their operations, and as they have concluded that the Group’s and the Parent Company’s financial position
means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt
over their ability to continue as a going concern for at least a twelve months from the date of approval of the financial statements
(the going concern period).
Going concern
We used our knowledge of the Group, its industry, and the general economic
environment to identify the inherent risks to its business model and analysed
how those risks might affect the Group’s and Company’s financial resources
or ability to continue operations over the going concern period. The risks that
were considered most likely to adversely affect the Group’s and Company’s
available financial resources over this period were:
—
Commodity inflation and pricing
—
Selling price and volume sensitivity
We also considered realistic second order impacts, such as business
transformation and portfolio management failure.
We considered whether these risks could plausibly affect the liquidity in the
going concern period by assessing the degree of downside assumptions that,
individually and collectively, could result in a liquidity issue, considering the
Group’s current projected cash and facilities and the outcome of their reverse
stress testing.
We considered whether the going concern disclosure in Note 1 to the
financial statements gives a full and accurate description of the Directors’
assessment of going concern.
Accordingly, based on those procedures, we found the directors’ use of
the going concern basis of accounting without any material uncertainty for
the Group and Parent Company to be acceptable. However, as we cannot
predict all future events or conditions and as subsequent events may result
in outcomes that are inconsistent with judgements that were reasonable at
the time they were made, the above conclusions are not a guarantee that
the Group or the Parent Company will continue in operation.
Our conclusions
—
We consider that the Directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate;
—
We have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s
or Parent Company’s ability to continue as a going
concern for the going concern period;
—
We have nothing material to add or draw attention to
in relation to the directors’ statement in Note 1 to the
financial statements on the use of the going concern
basis of accounting with no material uncertainties that
may cast significant doubt over the Group and Parent
Company’s use of that basis for the going concern
period, and we found the going concern disclosure
in Note 1 to be acceptable; and
—
The related statement under the Listing Rules set out
on page 190 is materially consistent with the financial
statements and our audit knowledge.
Independent auditor’s report
to the members of Haleon plc
continued
Haleon
Annual Report and Form 20-F 2023
102
Financial Statements
Financial Statements
Disclosures of emerging and principal risks and longer-term viability
Our responsibility
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ disclosures in
respect of emerging and principal risks and the viability statement,
and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add
or draw attention to in relation to:
—
the Directors’ confirmation within the viability statement on
page 59 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity;
—
the Principal Risks disclosures describing these risks and how
emerging risks are identified and explaining how they are being
managed and mitigated; and
—
the Directors’ explanation in the viability statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that
period to be appropriate, and their statement as to whether
they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We are also required to review the viability statement set out on
page 59 under the Listing Rules.
Our work is limited to assessing these matters in the context
of only the knowledge acquired during our financial statements
audit. As we cannot predict all future events or conditions and
as subsequent events may result in outcomes that are inconsistent
with judgements that were reasonable at the time they were
made, the absence of anything to report on these statements
is not a guarantee as to the Group’s and Parent Company’s
longer-term viability.
Our reporting
We have nothing material to add or draw attention to in relation
to these disclosures.
We have concluded that these disclosures are materially
consistent with the financial statements and our audit knowledge.
Haleon
Annual Report and Form 20-F 2023
103
Independent auditor’s report to the members of Haleon plc
4. Key Audit Matters
What we mean
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on:
—
The overall audit strategy;
—
The allocation of resources in the audit; and
—
Directing the efforts of the engagement team.
We include below the Key Audit Matters in decreasing order of audit significance together with our key audit procedures to address those
matters and our results from those procedures. These matters were addressed, and our results are based on procedures undertaken,
for the purpose of our audit of the financial statements as a whole. We do not provide a separate opinion on these matters.
4.1 Valuation of indefinite life brands (group)
Financial Statement Elements
Our results
FY23
Intangible Assets — Indefinite life brands
£18,073m
Intangible Assets — Impairment
£184m
FY23: Acceptable
Description of the Key Audit Matter
Forecast-based assessment
Indefinite life brands are impaired when their carrying amount
exceeds their recoverable amount. There is inherent uncertainty with
regard to assumptions and estimates involved in the Group’s forecast
based assessment of the recoverable amount of indefinite life
brands. In particular, there is significant auditor judgement involved
in evaluating the terminal growth rate and discount rate used in the
analysis of the recoverable amount of the indefinite life brands.
The indefinite life brands most at risk of material misstatement
were identified using sensitivity analysis on key assumptions and
a review of potential triggering events that could be indicative of
an impairment in the carrying value of the brands. An impairment
charge of £129m was recognised during the prior year, largely in
relation to Preparation H, with an impairment charge of £184m
recognised during the current year, largely in relation to the
impairment of the ChapStick brand upon transfer to held-for-sale
of £170m. We identified that the indefinite life brand most
sensitive to possible change in key assumptions used in the
valuation models is Preparation H, for which the carrying value
is £1,103m as at 31 December 2023.
The effect of these matters is that, as part of our risk assessment,
we determined that the evaluation of the recoverability of the
carrying value of Preparation H has a high degree of estimation
uncertainty with a potential range of reasonable outcomes
greater than our materiality for the financial statements as a
whole. The financial statements (Note 14) disclose the sensitivity
estimated by the Group for this brand.
Our response to the risk
Our procedures to address the risk included:
—
Control design and operation:
Evaluating the design and testing the
operating effectiveness of certain internal controls within the indefinite
life brands impairment testing process, including controls related
to the development of the terminal growth rate and discount rate;
—
Sensitivity analysis:
Performing sensitivity analysis on the terminal
growth rate and discount rate to assess their impact on the Group’s
determination that the fair value less cost to sell (FVLCTS) exceeds
the carrying value;
—
Valuation expertise:
Involving our own valuation professional with
specialised skills and knowledge, who assisted in independently
developing a range of terminal growth rate and discount rate using
publicly available market data for comparable companies and comparing
these rates to those utilised by the Group to assess their reasonableness;
—
Historical comparison:
Challenging projected revenue by comparing
historical projections to actual results to assess the Group’s ability
to accurately forecast;
—
Benchmarking and assessing assumptions:
Assessing and challenging
revenue growth rate against externally derived publicly available data,
including broker and analyst reports, industry reports, media reports,
macro-economic assumptions, academic and scientific studies, and
regulatory changes; and
—
Assessing transparency:
Assessing whether the Group’s disclosures
detail the critical estimates and sensitivities including any impact
of reasonable possible changes regarding the impairment testing
of indefinite life brands.
Communications with Haleon plc’s Audit & Risk Committee
Our discussions with and reporting to the Audit & Risk Committee included:
—
Our approach to the audit of indefinite life brands, including details of our planned substantive procedures and extent of our controls reliance;
—
Our conclusions on the appropriateness of the Group’s impairment assessment, including assumptions used by the Group in their
FVLCTS based assessment to calculate the recoverable amount of indefinite life brands and whether the terminal growth rate and
discount rate used by the Group were reasonable; and
—
The adequacy of disclosures, particularly as it relates to the critical estimates and sensitivities with regard to the impairment testing.
Areas of particular auditor judgement
The evaluation of the assumptions used by the Group in the analysis of the recoverable amount of indefinite life brands is an area requiring
significant auditor judgement. The assumptions are the terminal growth rate and discount rate.
Our results
We found the indefinite life brands balance, and the related impairment charge, to be acceptable.
Further information in the Annual Report and Accounts: See the Audit & Risk Committee Report on page 72 for details on how the
Audit & Risk Committee considered recoverable amount of indefinite life brands as an area of significant attention, Note 3 for
the accounting policy on indefinite life brands and Note 14 for the financial disclosures.
Independent auditor’s report
to the members of Haleon plc
continued
Haleon
Annual Report and Form 20-F 2023
104
Financial Statements
Financial Statements
4.2 Recoverability of the company’s investment in subsidiaries (parent company only)
Financial Statement Elements
Our results
FY23
Investment in Subsidiaries
£22,266m
FY23: Acceptable
Description of the Key Audit Matter
Low risk, high value
The carrying amount of the Company’s investment in subsidiaries
represents 99.9% of the Company’s total assets.
We do not consider the carrying amounts of these investments
to be at a high risk of significant misstatement, or to be subject to
a significant level of judgement. However, due to their materiality
in context of the Parent Company accounts, this is considered to
be the area with the greatest effect on our overall audit strategy
and allocation of resources in planning and completing our audit
of the parent company.
Our response to the risk
We performed a substantive approach rather than seeking to rely on
any of the company’s controls because the nature of the balance is
such that we would expect to obtain audit evidence primarily through
the detailed procedures described below.
Our procedures to address the risk included:
—
Tests of detail:
Comparing the carrying amount of the Parent
Company’s direct investments with the relevant subsidiary’s draft
balance sheet to identify whether their net assets, being an
approximation of the minimum recoverable amount, were in excess of
their carrying amount and assessing whether those subsidiaries have
historically been profit making;
—
Comparing valuations:
Comparing the carrying amount of the
Company’s investment in subsidiaries with the expected value of the
business based on the net assets of the Group, as well as to the market
capitalisation; and
—
Indicators:
Evaluating the considerations of indicators of impairment
of the Parent Company’s direct investments.
Communications with Haleon plc’s Audit & Risk Committee
Our discussions with and reporting to the Audit & Risk Committee included:
—
Our approach to the audit of the recoverability of the parent company’s investments in subsidiaries, including the planned substantive
procedures; and
—
An assessment of indicators of impairment from the conclusion reached in the Group impairment workings.
Our results
We found the conclusion that there is no impairment of the investment in subsidiaries to be acceptable.
Further information in the Annual Report and Accounts:
See Note 2 of the parent company financial statements for the accounting
policy and Note 5 of the parent company financial statements for the financial disclosures.
5. Our ability to detect irregularities, and our response
Fraud — identifying and responding to risks of material misstatement due to fraud
Fraud Risk Assessment
To identify risks of material misstatement due to fraud (fraud risks) we assessed events or
conditions that could indicate an incentive or pressure to commit fraud, or provide an opportunity
to commit fraud. Our risk assessment procedures included:
—
Inquiring of directors, the Audit & Risk Committee, internal audit and inspection of policy
documentation as to the Group’s high-level policies and procedures to prevent and detect
fraud, including the internal audit function, and the Group’s channel for “whistleblowing”,
as well as whether they have knowledge of any actual, suspected or alleged fraud;
—
Reading Board and Audit & Risk Committee minutes;
—
Considering remuneration and incentive schemes and performance targets for senior
management;
—
Using analytical procedures to identify unusual or unexpected relationships; and
—
Using our own forensic professionals with specialised skills and knowledge to assist us
in identifying the fraud risks based on discussions of the circumstances of the Group.
Risk communications
We communicated identified fraud risks throughout the audit team and remained alert to any
indications of fraud throughout the audit. This included communication from the Group to
component audit teams of relevant fraud risks identified at the Group level and requests to
component audit teams to report to the Group audit team any instances of fraud that could
give rise to a material misstatement at the Group level.
Fraud risks
As required by auditing standards, and taking into account possible pressures to meet profit targets,
we performed procedures to address the risk of management override of controls, in particular
the risk that Group and component management may be in a position to make inappropriate
accounting entries and the risk of bias in accounting estimates. On this audit we do not believe
there is a fraud risk related to revenue recognition as the revenue model is non-complex with
limited estimation or manual intervention. Revenue is disaggregated between a significant
number of components and remuneration targets are based on Group performance rather than
component performance.
We did not identify any additional fraud risks.
Haleon
Annual Report and Form 20-F 2023
105
Independent auditor’s report to the members of Haleon plc
Procedures to address
fraud risks
In determining the audit procedures, we have taken into account the results of our evaluation
and testing of the operating effectiveness of the Group-wide fraud risk management controls.
We also performed the following:
—
Identifying journal entries to test for all in-scope components based on risk criteria and
comparing the identified entries to supporting documentation. These included journal entries
posted to seldom used accounts, journal entries posted by a user who only posted few entries
for the fiscal year, journal entries containing a pre-defined list of keywords and those posted
with an unusual account combination; and
—
Assessing whether the judgements made in making accounting estimates are indicative
of a potential bias.
Laws and regulations — identifying and responding to risks of material misstatement relating to compliance
with laws and regulations
Laws and regulations
risk assessment
We identified areas of laws and regulations that could reasonably be expected to have a material
effect on the financial statements from our general commercial and sector experience, through
discussion with the Directors and other management (as required by the auditing standards), from
inspection of the Group’s regulatory and legal correspondence and discussion with the Directors and
other management the policies and procedures regarding compliance with laws and regulations.
Risk communications
We communicated identified laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit. This included communication from the Group
to in-scope component audit teams of relevant laws and regulations identified at a Group level,
and requested for in-scope component auditors to report any instances of non-compliance with
laws and regulations that could give rise to a material misstatement at a Group level.
Direct laws context
and link to audit
The potential effect of these laws and regulations on the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly affect the financial statements
including financial reporting legislation (including related companies’ legislation), distributable
profits legislation and taxation legislation. We assessed the extent of compliance with these laws
and regulations as part of our procedures on the related financial statement items.
Most significant indirect
law/ regulation areas
Secondly, the Group is subject to many other laws and regulations where the consequences
of non-compliance could have a material effect on amounts or disclosures in the financial
statements, for instance through the imposition of fines or litigation. We identified the following
areas as those most likely to have such an effect:
—
Competition legislation (reflecting the Group’s involvement in a number of ongoing
investigations by national competition authorities);
—
Employment legislation (reflecting the Group’s significant and geographically diverse work force);
—
Health and safety regulation (reflecting the nature of the Group’s production and
distribution processes);
—
Consumer product law such as product safety and product claims (reflecting the nature of the
Group’s diverse product base);
—
Fraud, corruption and bribery legislation, including the Foreign Corrupt Practices Act and UK
bribery act (reflecting the Group’s global operations, including higher risk jurisdictions);
—
Sanctions (reflecting the Group’s global operations, including higher risk jurisdictions);
—
Contract legislation (reflecting the Group’s extensive use of trademarks, copyright and patents);
—
Data privacy (requirements from existing data privacy laws); and
—
Environmental regulation (reflecting nature of the Group’s production and distribution processes).
Auditing standards limit the required audit procedures to identify non-compliance with these laws
and regulations to enquiry of the directors and other management and inspection of regulatory
and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed
to us or evident from relevant correspondence, an audit will not detect that breach.
Known actual or
suspected matters
In relation to the criminal investigations into allegations of misconduct by competition investigation
in Germany discussed in Note 22, we performed inquiries, obtained legal confirmations, and
assessed disclosures against our understanding from legal correspondence.
Context
Context of the ability
of the audit to detect
fraud or breaches of
law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have
detected some material misstatements in the financial statements, even though we have properly
planned and performed our audit in accordance with auditing standards. For example, the further
removed non-compliance with laws and regulations is from the events and transactions reflected
in the financial statements, the less likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remained a higher risk of non-detection of fraud, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect material misstatement. We are
not responsible for preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Independent auditor’s report
to the members of Haleon plc
continued
Haleon
Annual Report and Form 20-F 2023
106
Financial Statements
Financial Statements
6. Our determination of materiality
The scope of our audit was influenced by our application of materiality. We set quantitative thresholds and overlay qualitative
considerations to help us determine the scope of our audit and the nature, timing and extent of our procedures, and in evaluating
the effect of misstatements, both individually and in the aggregate, on the financial statements as a whole.
£100M
Materiality for
the group financial
statements as a whole
What we mean
A quantitative reference for the purpose of planning and performing our audit.
Basis for determining materiality and judgements applied
Materiality for the Group financial statements as a whole was set at £100m, determined with reference to
a benchmark of Group profit before tax, normalised to exclude specific separation costs of £120m, certain
restructuring costs of £147m, and the impairment of the ChapStick brand upon transfer to held for sale of
£170m. We adjusted for these items because they do not represent the normal, continuing operations of
the Group.
We determined that normalised Profit before Taxation is the main benchmark for the Group. We consider
normalised Profit before Taxation to be a key indicator of performance, the basis for earnings, and therefore
the primary focus of a reasonable investor. We have inspected analyst consensus data and other investor
commentary for signals of alternate significant influencers of economic decisions. No revisions to our
calculation methodology resulted therefrom.
Our Group materiality of £100m was determined by applying a percentage to the normalised Profit before
Taxation. When using a benchmark of normalised Profit before Taxation to determine overall materiality,
KPMG’s approach for listed considers a guideline range up to 5% of the measure. In setting overall Group
materiality, we applied a percentage of 4.8% to the benchmark.
Materiality for the Parent Company financial statements as a whole was set at £97m, determined with
reference to a benchmark of Parent Company total assets, of which it represents 0.4%.
£75M
Performance
materiality
What we mean
Our procedures on individual account balances and disclosures were performed to a lower threshold,
performance materiality, to reduce to an acceptable level the risk that individually immaterial misstatements
in individual account balances add up to a material amount across the financial statements as a whole.
Basis for determining performance materiality and judgements applied
The Group performance materiality was set at £75m, which equates to 75% of materiality for Haleon plc’s
Group financial statements as a whole.
The Parent Company performance materiality was set at £74m, which equates to 75% of materiality for the
Parent Company financial statements as a whole.
We applied this percentage in our determination of performance materiality because, although we did
identify specific IT findings, the majority of factors did not indicate an elevated level of risk.
£5M
Audit misstatement
posting threshold
What we mean
This is the amount below which identified misstatements are considered to be clearly trivial from a
quantitative point of view. We may become aware of misstatements below this threshold which could alter
the nature, timing and scope of our audit procedures, for example if we identify smaller misstatements
which are indicators of fraud.
This is also the amount above which all misstatements identified are communicated to Haleon plc’s
Audit & Risk Committee.
Basis for determining the audit misstatement posting threshold and
judgements applied
We set our audit misstatement posting threshold at £5m, which equates to 5% of our materiality for the
Group financial statements. We also report to the Audit & Risk Committee any other identified
misstatements that warrant reporting on qualitative grounds.
The overall materiality for the Group financial statements of £100m compares as follows to the main financial statement caption
amounts:
Total Group
Revenue
Group profit
before tax
Total Group
Assets
FY23
FY23
FY23
Financial statement caption
£11,302m
£1,628m
£34,055m
Group Materiality as % of caption
0.9%
6.1%
0.3%
Haleon
Annual Report and Form 20-F 2023
107
Independent auditor’s report to the members of Haleon plc
7. The scope of our audit
Group scope
What we mean
How the Group audit team determined the procedures to be performed across the Group.
The Group has 199 reporting components that are primarily country based. In order to determine
the work performed at the reporting component level, we identified those components which
we consider to be of individual financial significance, those which were significant due to risk and
those remaining components on which we are required to perform procedures to provide us with
the evidence we require in order to conclude on the Group financial statements as a whole.
The Group has 16 in-scope reporting components over which we required procedures to be
performed to provide us with the evidence required to conclude on the Group Financial Statements
as a whole. We performed a full scope audit at 1 component and specified audit procedures at
15 components. The Group team performed procedures on the items excluded from normalised
Group profit before tax.
We have determined individually financially significant components as those contributing at least
10% of revenue or total assets. We selected revenue and total assets because these are the most
representative of the relative size of components. All individually financially significant components
are full-scope audits. The components for which we performed specified audit procedures were
not financially significant enough to require a full scope audit for Group reporting purposes but
did present specific individual risks that needed to be addressed.
In addition, we have performed Group level analysis on the remaining components to determine
whether further risks of material misstatement exist in those components.
Scope
Number of
components
Range of
materiality applied
Full scope audit
1
£80m
Audit of one or more account balances
0
—
Specified audit procedures
15
£10m-£50m
In addition to the full scope audit over one component, we subjected 12 components to specified
risk-focused audit procedures over revenue, 10 components to specific risk-focused audit
procedures over purchases, 10 components to specific risk focused audit procedures over inventory,
4 components to specific risk focused audit procedures over income tax and 3 components to
specific risk-focused audit procedures over payroll expenses.
We were able to rely upon the Group’s internal control over financial reporting in some areas
of our audit, where our controls testing supported this approach, which enabled us to reduce the
scope of our substantive audit work; in the other areas the scope of the audit work performed
was fully substantive.
The Group operates four shared service centres in Poland, Malaysia, Costa Rica and India.
Their outputs are included in the financial information of the reporting components they service
and therefore are not considered separate reporting components.
The Group audit team and shared service centre teams have performed audit procedures on the
following areas of behalf of the components:
—
Testing of manual controls operated from the Group’s shared service centres;
—
Testing of automated controls and system generated information within centrally managed
IT systems
—
Testing of general IT controls over centrally managed IT systems; and
—
Performance of specific risk focused audit procedures over purchases, revenue, payroll and
journal entries
The Group team instructed auditors of the shared service centres to perform specified risk-focused
audit procedures, predominantly the testing of transaction processing and review controls, and
the information to be reported back. Additional procedures are performed at certain reporting
components to address the audit risks not covered by the work performed over the shared
service centres.
These items were audited centrally because the processes and controls were operated and
managed centrally at the Group or shared service centre level. The Group team communicated the
results of these procedures to the component teams. The work on all components was performed
by component auditors, whilst the parent company audit was performed by the Group team.
Independent auditor’s report
to the members of Haleon plc
continued
Haleon
Annual Report and Form 20-F 2023
108
Financial Statements
Financial Statements
Group audit
team oversight
What we mean
The extent of the Group audit team’s involvement in component audits.
As part of determining the scope and preparing our audit plan and strategy the Group audit team held
various meetings with our component auditors across the world to discuss key audit risks and obtain input
from component teams.
Instructions
The Group audit team instructed component auditors as to the areas to be covered, including the relevant
risks detailed above and the information to be reported back.
The Group audit team allocated components materialities and approved the statutory materiality when
components used it for reporting purposes, having regard to the mix of size and risk profile of the components.
Virtual meetings and calls
The Group audit team held regular virtual meetings with the component auditors in scope for Group
reporting. These meetings were held to understand the business, any updates to the risk assessment and
any issues and findings. The findings reported to the Group audit team were discussed in more detail with
component auditors and any further work required by the Group audit team was then performed by the
component auditors.
Global conference
The Group team hosted a conference in June 2023 in London. This conference emphasised key areas of the
Group audit instructions and allowed for the sharing of risk assessment considerations and Group updates.
It helped the Group team to enhance our understanding of the component auditors’ perspective on the
overall audit approach and improve two-way communication.
The conference covered key Group developments, the origins of risk and the deployment of data and
analytic tools.
Site visits
The Group audit team visited the following component teams during the year:
—
Shared Service Centres: Poland, Malaysia, Costa Rica and India
—
Other component auditors: United States, China, Switzerland, Italy and Japan
Review of work papers
The Group audit team also inspected selections of the component team’s key work papers related to
significant and certain other audit risks and assessed the appropriateness of conclusions and consistencies
between reported findings and work performed.
Haleon
Annual Report and Form 20-F 2023
109
Independent auditor’s report to the members of Haleon plc
8. Other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance conclusion thereon.
All Other Information
Our responsibility
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work,
the information therein is materially misstated or inconsistent
with the financial statements or our audit knowledge.
Our reporting
Based solely on that work we have not identified material
misstatements or inconsistencies in the other information.
Strategic Report and Directors’ Report
Our responsibility and reporting
Based solely on our work on the other information described above we report to you as follows:
—
we have not identified material misstatements in the Strategic Report and the Directors’ Report;
—
in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
—
in our opinion those reports have been prepared in accordance with the Companies Act 2006.
Directors’ Remuneration Report
Our responsibility
We are required to form an opinion as to whether the part
of the Directors’ Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Our reporting
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance disclosures
Our responsibility
We are required to perform procedures to identify whether
there is a material inconsistency between the financial
statements and our audit knowledge, and:
—
the directors’ statement that they consider that the annual
report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy;
—
the section of the annual report describing the work of the
Audit & Risk Committee, including the significant issues that the
Audit & Risk Committee considered in relation to the financial
statements, and how these issues were addressed; and
—
the section of the annual report that describes the review
of the effectiveness of the Group’s risk management and
internal control systems.
Our reporting
Based on those procedures, we have concluded that each of these
disclosures is materially consistent with the financial statements and
our audit knowledge.
We are also required to review the part of the Corporate
Governance Statement relating to the Group’s compliance with
the provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in this respect.
Other matters on which we are required to report by exception
Our responsibility
Under the Companies Act 2006, we are required to report
to you if, in our opinion:
—
adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
—
the Parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
—
certain disclosures of directors’ remuneration specified by
law are not made; or
—
we have not received all the information and explanations
we require for our audit.
Our reporting
We have nothing to report in these respects.
Independent auditor’s report
to the members of Haleon plc
continued
Haleon
Annual Report and Form 20-F 2023
110
Financial Statements
Financial Statements
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 98, the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group
and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using
the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities
.
The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and
Transparency Rules (DTR) 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has
been prepared in accordance with those requirements.
10. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006
and the terms of our engagement by the Company. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Nicholas Frost (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London, E14 5GL
15 March 2024
Haleon
Annual Report and Form 20-F 2023
111
Independent auditor’s report to the members of Haleon plc
Report of independent registered
public accounting firm
To the Shareholders and Board of Directors
Haleon plc:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheet of Haleon plc and subsidiaries (the Company) as of December 31, 2023,
the related consolidated income statement, statement of comprehensive income, statement of changes in equity, and cash flow
statement for the year ended December 31, 2023 and the related notes (collectively, the consolidated financial statements). We also
have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in
Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organisations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023,
in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board
(IASB). Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2023 based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee
of Sponsoring Organisations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the
Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Haleon
Annual Report and Form 20-F 2023
112
Financial Statements
Financial Statements
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
is material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as
a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or
on the accounts or disclosures to which it relates.
Assessment of the recoverable amounts for the Preparation H intangible assets
As discussed in Note 14 to the Consolidated Financial Statements, as of December 31, 2023, the Company has £1,103 million of
indefinite useful life intangible asset related to its Preparation H brand. As discussed in Note 3, the Company performs impairment
testing on an annual basis and whenever events or changes in circumstances indicate that a brand’s carrying value may exceed its
recoverable amount. The recoverable amount utilised in the impairment test is estimated using a fair value less costs to sell model,
which relies on certain assumptions and estimates. Key assumptions and estimates used by management in determining the
recoverable amounts include the terminal growth rate and discount rate.
We identified the assessment of the recoverable amount for the Preparation H intangible asset as a critical audit matter. A high
degree of auditor judgment was required to evaluate the terminal growth rate and discount rate used to estimate the recoverable
amount of the brand. The terminal growth rate and discount rate included subjective determinations of future market and economic
conditions that were sensitive to variation. Minor changes to the assumptions used could have had a significant effect on the
Company’s determination of the recoverable amount. Additionally, specialised skills and knowledge were needed to evaluate
the discount rate.
The following are the primary procedures we performed to address this critical audit matter:
—
evaluated the design and tested operating effectiveness of certain internal controls related to the indefinite life brands
impairment process. This included controls over the development of the terminal growth rate and discount rate
—
challenged the Company’s terminal growth rate by comparing to publicly available data
—
performed sensitivity analysis on the terminal growth rate and discount rate to assess their impact on the Company’s
determination that the fair value exceeds the carrying value
—
involved a valuation professional with specialised skills and knowledge who assisted in independently developing a range of
discount rates and terminal growth rates using publicly available market data for comparable companies and comparing these
rates with the rates by the Company.
/s/ KPMG LLP
We have served as the Company’s auditor since 2023.
London, United Kingdom
15 March 2024
Haleon
Annual Report and Form 20-F 2023
113
Report of independent registered public accounting firm
Report of independent registered
public accounting firm
To the Shareholders and the Board of Directors.
Haleon plc:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Haleon plc and subsidiaries (the Company) as of December 31, 2022,
the related consolidated income statement, statement of comprehensive income, statement of changes in equity, and cash flow statement
for the year ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022,
and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit(s) in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter
or on the accounts or disclosures to which it relates.
Impairment testing of Indefinite Life Brands
As disclosed in Notes 3 and 14 to the consolidated financial statements, at December 31, 2022, the Company’s balance sheet
includes £19,333 million of indefinite useful life intangible assets related to its brands (Indefinite Life Brands). The Company
performs impairment testing on an annual basis and whenever events or changes in circumstances indicate that a brand’s carrying
value may exceeds its recoverable amounts. The recoverable amounts utilized in the impairment tests are estimated using a fair
value less costs to sell model, which relies on certain assumptions and estimates. Key assumptions and estimates used by
management in determining the recoverable amounts include revenue growth rates and discount rates.
We identified the impairment testing of Indefinite Life Brands as a critical audit matter. A high degree of challenging auditor judgment
was required to evaluate the projected revenue growth rates and discount rates used to estimate the recoverable amounts of the
brands. The revenue growth rates and discount rates included subjective determinations of future market and economic conditions
that were sensitive to variation. Minor changes to assumptions used could have had a significant effect on the Company’s
determination of the recoverable amounts. Additionally, specialized skills and knowledge were needed to evaluate the discount rates.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain
internal controls related to the Indefinite Life Brands impairment process. This included controls over the development of the
revenue growth rates and discount rates. We evaluated the revenue growth rates used in the Indefinite Life Brands impairment by:
—
comparing the Company’s historical forecasts to actual results to evaluate the Company’s historical ability to accurately forecast
—
comparing the Company’s historical results to the forecasts to evaluate the Company’s ability to accurately forecast
—
comparing the cash flow projections used in the impairment tests with available external industry data to assess the
reasonableness of the assumptions used.
We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the discount rates used in
the impairment tests by comparing them to discount rates that were developed using publicly available market data, including that
of comparable companies.
/s/KPMG LLP
We served as the Company’s auditor for 2022.
New York, New York
March 20, 2023
Haleon
Annual Report and Form 20-F 2023
114
Financial Statements
Financial Statements
To the Shareholders and the Board of Directors of Haleon UK Holdings (No.2) Limited (formerly known has
GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited).
Opinion on the Financial Statements
We have audited the accompanying consolidated income statements, the consolidated statements of comprehensive income, the
consolidated statements of changes in equity, and the consolidated cash flow statements of Haleon UK Holdings (No.2) Limited
(formerly known as GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited) and its subsidiaries (the “Company”) (predecessor
to Haleon plc), for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the results of the Company’s operations and its cash
flows for the year ended December 31, 2021, in conformity with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or
fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by the management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte LLP
London, United Kingdom
11 March 2022 (20 March 2023 as to Note 11)
We began serving as the Company’s auditor in 2019. In 2022 we became the predecessor auditor.
Haleon
Annual Report and Form 20-F 2023
115
Report of independent registered public accounting firm
Consolidated income statement
for the year ended
Notes
31 December
2023
£m
31 December
2022
£m
31 December
2021
£m
Revenue
4
Cost of sales
(4,555 )
(4,281 )
(3,595 )
Gross profit
Selling, general and administration
(4,413 )
(4,483 )
(4,086 )
Research and development
(311 )
(300 )
(257 )
Other operating (expense)/income
5
(27 )
Operating profit
6
Finance income
8
Finance expense
8
(402 )
(258 )
(19 )
Net finance costs
(368 )
(207 )
(2 )
Profit before tax
Income tax
9
(517 )
(499 )
(197 )
Profit after tax for the year
Profit attributable to shareholders of the Group
Profit attributable to non-controlling interests
Basic earnings per share (pence)
11
Diluted earnings per share (pence)
11
Haleon
Annual Report and Form 20-F 2023
116
Financial Statements
Consolidated statement of comprehensive income
for the year ended
Notes
31 December
2023
£m
31 December
2022
£m
31 December
2021
£m
Profit after tax for the year
Other comprehensive (expenses)/income for the year
Items that may be subsequently reclassified to the income statement:
Exchange movements on overseas net assets
23
(420 )
(34 )
Exchange movements on overseas net assets of non-controlling interests
23
(7 )
(10 )
Fair value movements on cash flow hedges
25
Reclassification of cash flow hedges to the income statement
25
(23 )
(18 )
Related tax on items that may be subsequently reclassified to the income statement
1
9
(44 )
(2 )
Total
(438 )
(25 )
Items that will not be reclassified to the income statement:
Remeasurement gains on defined benefit plan
20
Related tax on items that will not be reclassified to the income statement
9
(29 )
(12 )
Total
Other comprehensive (expenses)/income, net of tax for the year
(432 )
(10 )
Total comprehensive income, net of tax for the year
Total comprehensive income for the year attributable to:
Shareholders of the Group
Non-controlling interests
1
Includes tax on fair value movements on cash flow hedges of £(2 )m (2022: £(48 )m), netted off by tax on reclassification of cash flow hedges to the income statement of £6 m (2022: £4 m).
Haleon
Annual Report and Form 20-F 2023
117
Financial Statements
Consolidated statement of comprehensive income
Consolidated balance sheet
as at
Notes
31 December
2023
£m
31 December
2022
£m
Non-current assets
Property, plant and equipment
12
Right of use assets
13
Intangible assets
14
Deferred tax assets
9
Post-employment benefit assets
20
Derivative financial instruments
25
Other non-current assets
16
Total non-current assets
Current assets
Inventories
15
Trade and other receivables
16
Cash and cash equivalents
17
Derivative financial instruments
25
Current tax receivables
Assets held for sale
27
Total current assets
Total assets
Current liabilities
Short-term borrowings
19
(656 )
(437 )
Trade and other payables
18
(3,526 )
(3,621 )
Derivative financial instruments
25
(40 )
(31 )
Current tax payables
(288 )
(210 )
Short-term provisions
21
(130 )
(71 )
Total current liabilities
(4,640 )
(4,370 )
Non-current liabilities
Long-term borrowings
19
(8,800 )
(10,003 )
Deferred tax liabilities
9
(3,487 )
(3,601 )
Post-employment benefit obligations
20
(157 )
(161 )
Derivative financial instruments
25
(150 )
(175 )
Long-term provisions
21
(39 )
(26 )
Other non-current liabilities
(53 )
(22 )
Total non-current liabilities
(12,686 )
(13,988 )
Total liabilities
(17,326 )
(18,358 )
Net assets
Equity
Share capital
23
Other reserves
23
(10,960 )
(10,491 )
Retained earnings
Shareholders’ equity
Non-controlling interests
Total equity
Board of Directors and signed on its behalf by:
Tobias Hestler
Chief Financial Officer
Haleon
Annual Report and Form 20-F 2023
118
Financial Statements
Consolidated statement of changes in equity
for the year ended
Notes
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Shareholders’
equity
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 January 2023
(10,491 )
Profit after tax
Other comprehensive (expenses)/income
(431 )
(425 )
(7 )
(432 )
Total comprehensive (expenses)/income
(431 )
Distributions to non-controlling interests
(58 )
(58 )
Dividends to equity shareholders
10
(388 )
(388 )
(388 )
Share-based incentive plans
26
Tax on share-based incentive plans
Purchase of shares by employee
benefit trusts
(38 )
(38 )
(38 )
At 31 December 2023
(10,960 )
Notes
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Shareholders’
equity
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 January 2022
(11,184 )
Profit after tax
Other comprehensive income/(expenses)
(10 )
Total comprehensive income
Issue of share capital of the former
ultimate holding company
Capital reduction of the former ultimate
holding company
(21,758 )
(21,758 )
(21,758 )
Transactions between the former ultimate
holding company and equity shareholders
1
Effect of change of ultimate
holding company
(1 )
(70 )
(47 )
(118 )
(118 )
Transactions with equity shareholders
1
(47 )
(47 )
(47 )
Distributions to non-controlling interests
(48 )
(48 )
Dividends to equity shareholders
1
10
(11,930 )
(11,930 )
(11,930 )
Issue of share capital
Capital reduction
(11,451 )
(10,607 )
(22,058 )
(22,058 )
Share-based incentive plans
26
At 31 December 2022
(10,491 )
Notes
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Shareholders’
equity
£m
Non-
controlling
interests
£m
Total
equity
£m
At 1 January 2021
(11,170 )
Profit after tax
Other comprehensive income/(expenses)
(25 )
(10 )
(10 )
Total comprehensive income/(expenses)
(25 )
Contribution from parent
23
Distributions to non-controlling interests
(35 )
(35 )
Dividends to equity shareholders
1
10
(1,148 )
(1,148 )
(1,148 )
At 31 December 2021
(11,184 )
1
Equity shareholders refers to GSK and Pfizer, which held equity interests of 68 % and 32 % in the Group respectively prior to the demerger as described in Note 1.
Haleon
Annual Report and Form 20-F 2023
119
Financial Statements
Consolidated statement of changes in equity
Consolidated cash flow statement
for the year ended
Notes
31 December
2023
£m
31 December
2022
£m
31 December
2021
£m
Cash flows from operating activities
Profit after tax
Taxation charge
9
Net finance costs
8
Depreciation of property, plant and equipment and right of use assets
12, 13
Amortisation of intangible assets
14
Impairment and assets written off, net of reversals
4
Loss/(gain) on sale of intangible assets, property, plant and equipment and businesses
(30 )
(31 )
Share-based incentive plan expense
26
Other non-cash movements
(11 )
(22 )
Increase/(decrease) in pension and other provisions
(43 )
(36 )
Changes in working capital:
Increase in inventories
(131 )
(292 )
(17 )
Decrease/(increase) in trade receivables
(85 )
Increase in trade payables
Net change in other receivables and payables
(126 )
(190 )
Taxation paid
(445 )
(324 )
(310 )
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
(234 )
(304 )
(228 )
Proceeds from sale of property, plant, and equipment
Purchase of intangible assets
(102 )
(24 )
(70 )
Proceeds from sale of intangible assets
Purchase of business, net of cash acquired
27
(71 )
Loans to related parties
24
(9,211 )
Proceeds from settlement of amounts invested with GSK finance companies
24
Interest received
Net cash outflow from investing activities
(134 )
(8,784 )
(33 )
Cash flows from financing activities
Payment of lease liabilities
(55 )
(45 )
(38 )
Interest paid
(404 )
(163 )
(15 )
Dividends paid to shareholders
(388 )
(2,682 )
(1,148 )
Distributions to non-controlling interests
(58 )
(48 )
(35 )
Contribution from parent
Repayment of borrowings
19
(553 )
(1,518 )
Proceeds from borrowings
19
Purchase of shares by employee benefit trust
(38 )
Other financing cash flows
(72 )
(12 )
Net cash (outflow)/inflow from financing activities
(1,568 )
(1,236 )
Increase in cash and cash equivalents and bank overdrafts
Cash and cash equivalents and bank overdrafts at the beginning of the year
Exchange adjustments
(15 )
(4 )
Increase in cash and cash equivalents and bank overdrafts
Cash and cash equivalents and bank overdrafts at the end of the year
Cash and cash equivalents and bank overdrafts at the end of the year comprise:
Cash and cash equivalents
17
Overdrafts
(50 )
(73 )
(8 )
Cash and cash equivalents and bank overdrafts at the end of the year
Haleon
Annual Report and Form 20-F 2023
120
Financial Statements
Financial Statements
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
121
The Company has ordinary shares with a nominal value of £0.01 per share. The Group’s shares are listed and traded on the London Stock
Exchange (LSE) with American Depositary Shares (ADSs) listed and traded on the New York Stock Exchange (NYSE) (LSE/NYSE: HLN).
The registered address of the Company is Building 5, First Floor, The Heights, Weybridge, Surrey, England, KT13 0NY.
by the International Accounting Standards Board (IASB IFRS), including interpretations issued by the IFRS Interpretations Committee
(IFRIC) and International Financial Reporting Standards as adopted by the United Kingdom (UK IFRS) (together IFRS) and the Companies
Act 2006. IFRS as adopted by the UK differs in certain respects from IFRS as issued by the IASB. The differences have no impact on the
Until July 2022, Haleon UK Holdings (No.2) Limited (HHL2) (previously, GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited
(CHHL2)), the former ultimate holding company of the Group and the accounting predecessor, was jointly owned by GSK plc and its
subsidiaries which held the majority controlling equity interest of 68%, and Pfizer Inc. and its subsidiaries which held a non-controlling
equity interest of 32%. In July 2022, following the execution of a series of legal acts and contractual arrangements, including the
spin-off to the shareholders of GSK, the Company was established to succeed HHL2 as the new ultimate holding company of the
Group, with 55% of its equity interest held by the shareholders of GSK, 32% of its equity interest held by Pfizer and approximately 13%
of its equity interest held by GSK. This corporate restructuring was contemplated and executed as one single economic event yet
sequenced via multiple legal proceedings and activities. Management concluded that the predecessor (carryover) basis of accounting
is appropriate because the corporate restructuring was instigated by GSK and its shareholders without the involvement of outside
third parties or new investors.
This set of Consolidated Financial Statements have been prepared as if the Group had been in existence throughout all the periods
presented by applying the principles of predecessor accounting in accordance with SEC Regulation C Rule 405 and IFRS although the
actual legal transaction and corporate reorganisation occurred in July 2022. There was no economic change or event impacting the
reporting entity because the business activities of the predecessor and successor remained identical and only the legal form and
Accounting convention
Statements are presented in Pound Sterling (GBP, £), the functional currency of the Company and presentation currency of the Group,
Financial period
These Consolidated Financial Statements cover the financial year from 1 January 2023 to 31 December 2023, with comparative figures
for the financial years from 1 January 2022 to 31 December 2022 and from 1 January 2021 to 31 December 2021.
The Directors have reviewed the Group’s cash flow forecasts, financial position and exposure to principal risks and have formed the
view that the Group will generate sufficient cash to meet its ongoing requirements for at least 12 months from the date the Financial
Statements have been authorised. At 31 December 2023, the Group had cash and cash equivalents, net of bank overdrafts, of £994m
and undrawn credit facilities of $1.3bn and £900m with initial maturity dates of September 2024 and September 2026, respectively.
As a result, the Directors believe that it is appropriate to adopt the going concern basis of accounting in preparing the Group’s
Entities over which the Group has the power to direct the relevant activities so as to affect the returns to the Group, generally through
control over the financial and operating policies from either voting or contractual rights, are accounted for as subsidiaries. Interests
acquired in entities are consolidated from the date the Group acquires control and interests sold are deconsolidated from the date
control ceases.
Notes to the Consolidated Financial Statements
continued
122
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Where, as part of a business combination, the Group is not able to exercise control over a particular operation due to the existence of
legal or other restrictions, the associated assets and liabilities are not consolidated, and a financial asset or liability is recognised for
the economic benefit or obligation to be received under the contribution agreement. The assets and liabilities are consolidated, and the
associated financial asset or liability derecognised, on the date at which the Group is able to exercise control over these operations.
Transactions and balances between subsidiaries are eliminated and no profit before tax is recognised on sales between subsidiaries
until the products are sold to customers outside the Group. Transactions with non-controlling interests are recorded directly in equity.
Deferred tax relief on unrealised intra-group profit is accounted for only to the extent that it is considered recoverable. Refer to Note
The Consolidated Financial Statements are presented in GBP, which is also the Company’s functional currency. Each entity in the
Group determines its own functional currency and items included in the financial statements of each entity are measured using that
functional currency.
Foreign currency transactions in individual Group companies are translated into functional currency using exchange rates at the date
of the transaction. Foreign exchange gains and losses from settlement of these transactions, and from translation of monetary assets
and liabilities at the rates prevailing on the reporting period date, are recognised in the income statement except when deferred in
equity as qualifying hedges. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at
the rates prevailing at the date when the fair value was measured. Non-monetary items measured in terms of historical cost in a foreign
currency are not retranslated.
In preparing the Consolidated Financial Statements, the balances in individual Group companies are translated from their functional
currency into GBP. The income statement, the cash flow statement and all other movements in assets and liabilities are translated at
average rates of exchange as a proxy for the transaction rate, or at the transaction rate itself if more appropriate. Assets and liabilities
are translated at the closing rates at the end of the reporting period.
The effect of exchange rate differences during the year on net assets of foreign operations is recorded in equity.
The Group applies hedge accounting to certain exchange differences arising between the functional currencies of a foreign operation
and the functional currency of the parent entity, regardless of whether the net investment is held directly or through an intermediate
parent. Differences arising on retranslation of a financial liability designated as a foreign currency net investment hedge are recorded in
other comprehensive income/(expenses) and accumulated in equity to the extent that the hedge is effective, which may be subsequently
reclassified to the consolidated income statement. These differences are reported within profit or loss to the extent that the hedge is
ineffective. Gains and losses on the hedging instrument accumulated in equity are reclassified to profit or loss on the disposal or partial
disposal of the foreign operation.
The principal currencies and relevant exchange rates in the key markets where the Group operates are shown below:
| Average rates | Year end rates | |||||
2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |
USD/£ | 1.24 | 1.24 | 1.38 | 1.27 | 1.20 | 1.35 |
Euro/£ | 1.15 | 1.17 | 1.16 | 1.15 | 1.13 | 1.19 |
CNY/£ | 8.81 | 8.31 | 8.86 | 9.06 | 8.31 | 8.56 |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
123
Impact of climate change
In preparing these Consolidated Financial Statements we have considered the impact of climate change. The Group does not believe
that there is a material impact on the financial reporting judgements and estimates arising from climate change in the short term and
as a result the valuation of our assets and liabilities has not been significantly impacted by these risks as at 31 December 2023.
In concluding, we specifically considered the impact of climate change on the following areas:
Financial Statement area | Relevant climate-related risks | Relevant ESG targets | Relevant Note for further information | ||
Property, plant and equipment | — | Damage and disruption caused | — | Carbon reduction | Note 12 ‘Property, plant |
by extreme weather events | — | Water neutrality at our | and equipment’ | ||
— | Carbon pricing regulations | manufacturing sites | |||
Goodwill and intangible brands | — | Damage and disruption caused | — | Carbon reduction | Note 14 ‘Intangible assets’ |
by extreme weather events | — | Recycle-ready packaging | |||
— | Reduced availability and | — | Sustainably sourced and | ||
increased price volatility of raw | deforestation-free ingredients | ||||
materials due to climate change | and packaging | ||||
— | Carbon pricing regulations | — | Reduced use of virgin | ||
— | Loss of attractiveness due to | petroleum-based plastic | |||
consumers’ increasing expectations | |||||
Inventory | — | Reduced availability and | — | Recycle-ready packaging | Note 15 ‘Inventories’ |
increased price volatility of raw | — | Sustainably sourced and | |||
materials due to climate change | deforestation-free ingredients | ||||
— | Carbon pricing regulations | and packaging | |||
— | Reduced use of virgin | ||||
petroleum-based plastic | |||||
Going concern and viability | — | Damage and disruption caused | Viability assessment | ||
by extreme weather events | |||||
Whilst there is currently no short-term impact anticipated from climate change, the judgements and estimates of the Group will be regularly
The accounting policies adopted are the same as those which were applied for the previous financial year except as set out below under
the heading ‘Recent accounting developments’.
Where an accounting policy is generally applicable to a specific note to the Consolidated Financial Statements, the policy is described
within that note.
The accounting policies below have been applied throughout the Consolidated Financial Statements and apply to the Financial
Statements as a whole.
Revenue
enters into relate to sales orders containing single performance obligations for the delivery of consumer health products.
Product revenue is recognised when control of the goods is passed to the customer. The point at which control passes is determined by
each customer arrangement, but generally occurs on delivery to the customer.
rebates and coupons). Revenue includes fixed and variable consideration.
Variable consideration arises on the sale of goods as a result of discounts and allowances given and accruals for estimated future returns
and rebates. Discounts can either be on-invoice or off-invoice whilst allowances and rebates are generally off-invoice. The discounts,
allowances and promotional rebates are recognised as a deduction from revenue at the time that the related revenue is recognised or
when the Group has committed to pay the consideration, whichever is later. Variable consideration is not included in the transaction
price until it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.
continued
124
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Notes to the Consolidated Financial Statements
The methodology and assumptions used to estimate returns and rebates are monitored and adjusted regularly in light of contractual
and legal obligations, historical trends, past experience and projected market conditions. Once the uncertainty associated with the
returns and rebates is resolved, revenue is adjusted accordingly. The differences between actual amounts settled and the estimated
accrued amounts are recognised as a change in management estimate in the subsequent reporting period. The assumptions used in
estimation are based on known facts with a high level of accuracy. In addition, the Group’s promotional programmes are typically
short-term in nature resulting in lower inherent estimation uncertainty.
Some contracts for the sale of consumer health products provide customers with a right to return the goods within a specified period.
A refund liability is recognised for the goods that are expected to be returned (i.e., the amount not included in the transaction price).
A right of return asset (and the corresponding adjustment to cost of sales) is also recognised for the right to recover the goods from
the customer. The Group uses the most likely amount method to estimate the variable consideration in contracts with a right to return.
The Group also provides retrospective volume rebates to certain customers once the products purchased during the period exceed the
threshold specified in the contract. A refund liability is recognised for the expected future rebates (i.e., the amount not included in the
transaction price). The Group applies the most likely amount method to estimate the variable consideration in the contract related to
The Group has elected to apply the practical expedient not to disclose the aggregate amount of transaction price allocated to performance
Research and development (R&D) expenditure is charged to the income statement in the period in which it is incurred. R&D expenditure
comprises expenditure that is directly attributable to the research and development of new products or variants, including the costs
attributable to the generation or improvement of intellectual property and product registrations, depreciation and amortisation of
On 20 June 2023, the UK Finance (No.2) Bill 2022-23 was substantively enacted in the UK, including legislation to implement in the UK
certain parts of the OECD’s Pillar Two regime for periods beginning on or after 1 January 2024. Refer to Note 9 ‘Taxation’ for further
information about the anticipated impact of this legislation. On 19 July 2023, the UK Endorsement Board adopted the temporary,
mandatory deferred tax exception to IAS 12, as issued by the IASB in May 2023. The exception has been applied and the Group has
neither recognised nor disclosed information about deferred tax assets or liabilities relating to Pillar Two income taxes.
IFRS 17 ‘Insurance Contracts’ is effective from 1 January 2023 and introduces a new model for accounting for insurance contracts.
We have reviewed existing arrangements and concluded that IFRS 17 is not material for the Group. We have also reviewed other new
standards or amendments to standards that have been issued by the IASB and are effective from 1 January 2023 and concluded that
they are not material to the Group.
All new accounting standards, amendments to accounting standards and interpretations that have been published by the IASB and
are not effective for 31 December 2023 reporting periods, have not been early adopted by the Group. These standards, amendments
In preparing the Consolidated Financial Statements, management is required to make judgements about when or how items should be
recognised in the Consolidated Financial Statements and estimates and assumptions that affect the amounts of assets, liabilities, income
and expenses reported in the Consolidated Financial Statements. Actual amounts and results could differ from those estimates.
There are no critical accounting judgements. The following is the key source of estimation uncertainty.
Indefinite life brands
Estimation of the recoverable amount of indefinite life brands requires significant estimates of the value of each brand. The Group
reviews indefinite life brands for impairment at least annually or when there is an indication that the assets may be impaired. The
recoverable amounts of indefinite life brands are estimated using the fair value less costs to sell methodology. These calculations
use management’s estimates consistent with current budgets and plans that have been formally approved, assumptions of market
participants and are based on discounted cash flow forecasts using estimated long-term growth rates. Refer to Note 14 ‘Intangible
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
125
—
North America
— Europe, Middle East, Africa and Latin America (EMEA & LatAm)
— Asia Pacific (APAC)
No operating segments have been aggregated to form the above reportable operating segments.
The Group’s Commercial Operations Board, which consists of the CEO, CFO and other members of senior leadership, is the Chief
Operating Decision Maker (CODM) who monitors the operating results of the Group’s reportable segments separately for the purpose
of making decisions about resource allocation and performance assessment. The CODM uses a measure of adjusted operating profit
to assess the performance of the reportable segments. Adjusted operating profit is defined as operating profit less net intangible
amortisation and impairment of brands, licences, and patents, restructuring costs, transaction-related costs, separation and admission
costs, and disposals and others. The CODM does not review IFRS operating profit or total assets on a segment basis.
by geographical segment is included below:
2023 |
2022 |
2021 |
|
£m |
£m |
£m |
|
North America |
4,195 |
4,116 |
3,525 |
EMEA & LatAm |
4,545 |
4,270 |
3,877 |
APAC |
2,562 |
2,472 |
2,143 |
Group revenue |
11,302 |
10,858 |
9,545 |
Transactions between Haleon’s geographical regions are carried out at arm’s length terms in accordance with appropriate transfer
pricing rules and Organisation for Economic Cooperation and Development (OECD) principles.
Adjusted operating profit by segment
2023 | 2022 | 2021 | |
£m | £m | £m | |
Group operating profit | 1,996 | 1,825 | 1,638 |
Reconciling items between Group operating profit and Group adjusted operating profit 1 | 553 | 647 | 534 |
Total | 2,549 | 2,472 | 2,172 |
North America | 1,107 | 1,070 | 828 |
EMEA & LatAm | 1,010 | 977 | 960 |
APAC | 541 | 506 | 461 |
Corporate and other unallocated | (109) | (81) | (77) |
Total | 2,549 | 2,472 | 2,172 |
1
The reconciling items above include:
a
Net amortisation and impairment of intangible assets of £224m (2022: £172m, 2021: £16m): Amortisation and impairment of intangible assets, excluding computer software and
impairment of goodwill net of reversals of impairment.
b
Restructuring costs of £169m (2022: £41m, 2021: £195m): Expenses related to business transformation activities where the plans are sufficiently detailed and well advanced, and
where a valid expectation to those affected has been created.
c
Transaction-related costs of £2m (2022: £8m, 2021: £nil): Costs related to acquisition of a manufacturing site.
d
Separation and admission costs of £120m (2022: £411m, 2021: £278m): Costs incurred in relation to and in connection with separation and listing of the Group as a standalone business.
e
Notes to the Consolidated Financial Statements
continued
126
Haleon
Annual Report and Form 20-F 2023
Financial Statements
The primary products sold by each of the reportable segments consist of Oral Health, Vitamins, Minerals and Supplements, Pain Relief,
Respiratory Health, Digestive Health and Other products and the product portfolio is consistent across the reportable segments. Analysis
of revenue by market category is included below:
2023 | 2022 | 2021 | |
£m | £m | £m | |
Oral Health | 3,136 | 2,957 | 2,724 |
Vitamins, Minerals and Supplements | 1,640 | 1,675 | 1,501 |
Pain Relief | 2,652 | 2,551 | 2,237 |
Respiratory Health | 1,736 | 1,579 | 1,132 |
Digestive Health and Other | 2,138 | 2,096 | 1,951 |
Group revenue | 11,302 | 10,858 | 9,545 |
Revenue attributable to the country of domicile and foreign countries with the most significant contribution to the Group’s revenue are
included below:
2023 | 2022 | 2021 | |
£m | £m | £m | |
UK | 381 | 348 | 327 |
US & Puerto Rico | 3,755 | 3,692 | 3,187 |
China | 966 | 907 | 801 |
Rest of the World | 6,200 | 5,911 | 5,230 |
Group revenue | 11,302 | 10,858 | 9,545 |
Other segmental information
Other | |||||
EMEA & | reconciling | ||||
North America | LatAm | APAC | items | Total | |
£m | £m | £m | £m | £m | |
Year ended 31 December 2023 | |||||
Impairment charges | 3 | 5 | 2 | 190 | 200 |
Impairment reversal | — | — | — | — | — |
Year ended 31 December 2022 | |||||
Impairment charges | 2 | 7 | 1 | 133 | 143 |
Impairment reversal | — | — | — | — | — |
Year ended 31 December 2021 | |||||
Impairment charges | 5 | 5 | 2 | 25 | 37 |
Impairment reversal | — | — | — | (48) | (48) |
2023 | 2022 | 2021 | |
£m | £m | £m | |
UK | 405 | 440 | 430 |
US & Puerto Rico | 7,622 | 8,519 | 7,884 |
Rest of the World | 20,844 | 21,508 | 20,551 |
Non-current assets | 28,871 | 30,467 | 28,865 |
Financial Statements
Other operating expense/income includes income and expense from all other operating activities which are not related to the
ordinary course of business of the Group, such as gains/losses from disposals and transaction-related costs.
In 2023, the Group recognised £10m loss on disposal of the Lamisil brand.
In 2022, the Group recognised a £24m gain on the disposal of the Polocard brand, a product sold in Poland. In 2021 the Group
recognised a net gain on disposals of intangible assets and businesses of £31m, which included divestments of Transderm Scop,
made when an obligation exists for a future liability in respect of a past event and where the amount of the obligation can be reliably
estimated. Advertising & Promotion (A&P) expenditure is charged to the income statement as incurred. Shipment costs on intercompany
Key expenses included in operating profit
2023 | 2022 | 2021 | |
£m | £m | £m | |
Advertising and promotion 1 | 2,023 | 2,026 | 1,941 |
Distribution costs 1 | 237 | 237 | 209 |
Separation and admission costs | 120 | 411 | 278 |
Restructuring costs | 169 | 41 | 195 |
1
Reported within selling, general and administration expense
Separation and admission costs represent costs incurred in relation to and in connection with the separation and listing of the Group as
a standalone business in 2022. Separation and admission costs are reported within cost of sales (2023: £4m, 2022: £4m, 2021: £nil) and
the selling, general and administration expense (2023: £116m, 2022: £407m, £2021: £278m).
Restructuring costs
Restructuring costs are recognised and provided for, where appropriate, in respect of the direct expenditure of a business reorganisation
where the plans are sufficiently detailed and well advanced, and where a valid expectation to those affected has been created by either
starting to implement the restructuring plans or announcing its main features. Restructuring costs are those mainly related to specific
Board-approved restructuring programmes, including integration costs following material acquisitions, which are structural in nature
and significant in scale.
Restructuring costs include severance and other personnel costs, professional fees, impairments of assets, and other related items.
Haleon may undertake restructuring programmes in response to changes in the Group’s trading environment and overall strategy or
following significant acquisitions. Costs, both cash and non-cash, of these programmes are provided for as individual elements are
approved and meet the accounting recognition criteria. As a result, charges may be incurred over a number of years following the
initiation of a major restructuring programme.
Restructuring costs in 2023 mainly relate to business transformation activities associated with our programme to increase productivity
and agility. In 2022 and 2021, restructuring costs mainly related to activities aiming to generate synergies from the integration of the
Pfizer Group’s Consumer Healthcare business into the Group’s business, following the Pfizer Transaction completed on 31 July 2019.
Refer to Note 21 ‘Provisions’ for further details about the Group’s restructuring provisions.
A breakdown of the restructuring costs is included below:
2023 | 2022 | 2021 | |
£m | £m | £m | |
Cost of sales | 26 | 19 | 44 |
Selling, general and administration, and other operating expenses | 129 | 25 | 150 |
Research and development | 14 | (3) | 1 |
Total | 169 | 41 | 195 |
2023 | 2022 | 2021 | |
£m | £m | £m | |
Cash | 168 | 39 | 175 |
Non-cash | 1 | 2 | 20 |
Total | 169 | 41 | 195 |
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
127
Notes to the Consolidated Financial Statements
continued
128
Haleon
Annual Report and Form 20-F 2023
Financial Statements
In April 2023 KPMG LLP (UK) was appointed as external auditor for the Group. In the previous year, in light of UK and US rules on
independence, the Group had two external auditors KPMG LLP (US) and Deloitte LLP. KPMG LLP (US) was appointed to conduct an
audit of the Group’s financial statements under the rules and standards of the US Securities and Exchange Commission (SEC) and the
US Public Company Accounting Oversight Board (PCAOB) standards. Deloitte LLP was engaged in respect of the statutory audit of
the financial statements of the Group’s parent company and its subsidiaries in accordance with International Standards of Auditing
(UK ISAs). A fee breakdown for each firm is shown in the table below.
2023 | 2022 | 2021 | ||
£m | £m | £m | ||
KPMG LLP (UK) | Audit of Group Consolidated Financial Statements | 11 | — | — |
Audit of the Company’s subsidiaries | 5 | — | — | |
Audit services | 16 | — | — | |
Other services 1 | 1 | — | — | |
Total | 17 | — | — | |
KPMG LLP (US) | Audit of Group Consolidated Financial Statements | — | 14 | — |
Audit services | — | 14 | — | |
Other services 1 | — | 3 | — | |
Total | — | 17 | — | |
Deloitte LLP | Audit of Parent Company and Consolidated Financial Statements 2 | — | 10 | 5 |
Audit of the Company’s subsidiaries | — | 5 | 6 | |
Audit services | — | 15 | 11 | |
Other assurance services 3 | — | 6 | 2 | |
Total | — | 21 | 13 |
1
Other services provided by KPMG relate to permissible tax compliance and advisory services £nil (2022: £2.5m), other audit-related services £1.2m (2022: £0.3m) and other services
£nil (2022: £0.2m)
2
Includes (2022: £nil, 2021: £0.9m) in relation to incremental audit work performed for audit opinions issued in compliance with PCAOB auditing standards in preparation for the
proposed separation of the Group from GSK.
3
Employees
The average number of employees by individual geographical segment and the Group’s total employment costs are included below.
Average number of employees
2023 | 2022 | 2021 | |
’000 | ’000 | ’000 | |
North America | 5 | 5 | 6 |
EMEA & LatAm | 12 | 10 | 12 |
APAC | 7 | 6 | 5 |
Total 1 | 24 | 21 | 23 |
1
The increase in average number of employees is mainly due to the build-up of sales force in India after the termination of the Consignment Selling Agreement (CSA) with Unilever,
employees of the acquired manufacturing site in Brazil, and the recruitment for Haleon standalone support function after the demerger. The increase was partially offset by the impact
of the productivity programme.
2023 | 2022 | 2021 | |
£m | £m | £m | |
Wages and salaries | 1,723 | 1,534 | 1,287 |
Social security costs | 176 | 163 | 147 |
Pensions and other post-employment costs (Note 20) | 54 | 52 | 30 |
Share-based incentive plans (Note 26) | 88 | 78 | 59 |
Severance costs from integration and restructuring activities | 108 | 8 | 95 |
Total | 2,149 | 1,835 | 1,618 |
Financial Statements
Remuneration of key management personnel
Key management personnel comprises the Executive Directors and the Executive Team. The compensation of key management
personnel in respect of their services to the Group in aggregate was as follows:
Remuneration of key management personnel
2023 | 2022 | 2021 | |
£m | £m | £m | |
Wages and salaries | 19 | 18 | 12 |
Social security costs | 2 | 1 | 1 |
Pensions and other post-employment costs | 1 | 1 | 2 |
Share-based incentive plans | 15 | 9 | 7 |
Non-executive directors fees | 2 | — | — |
Total | 39 | 29 | 22 |
Directors’ remuneration
In 2021, two of GSK nominated Directors had responsibility for managing the Consumer Healthcare business and also undertook a
variety of work relating to the wider GSK. It is not deemed practicable to make an apportionment of remuneration for the Company.
income on other financial assets. Finance expense includes interest costs in relation to financial liabilities including interest on bonds
and lease liabilities, which represents the unwind of the discount rate applied to lease liabilities. Borrowing costs are recognised based
Net finance costs
2023 | 2022 | 2021 | |
£m | £m | £m | |
Interest income on financial assets at amortised cost: | |||
Other receivables | — | 38 | 10 |
Cash and cash equivalents | 25 | 18 | 3 |
Financial assets measured at fair value through profit or loss | 7 | (5) | 4 |
Net gains and losses arising from: | |||
Financial instruments mandatorily measured at fair value through profit or loss | (109) | 208 | (35) |
Retranslation of loans and bonds | 111 | (208) | 35 |
Total finance income | 34 | 51 | 17 |
Interest expense arising on: | |||
Financial liabilities at amortised cost | (409) | (274) | (7) |
Derivatives at fair value through profit or loss | — | 6 | (5) |
Reclassification of hedges from other comprehensive income | 23 | 18 | — |
Finance expense arising on lease liabilities | (5) | (4) | (4) |
Other finance expense | (11) | (4) | (3) |
Total finance expense | (402) | (258) | (19) |
Net finance costs | (368) | (207) | (2) |
Income tax
Current tax payable or recoverable is based on taxable profit for the year, and any adjustments in respect of prior periods. Taxable
profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in
different years or may never be taxable or deductible. The amount of current tax payable or receivable is the best estimate of the
amount expected to be paid to, or received from, tax authorities. It is calculated using tax rates and laws that have been substantively
enacted at the reporting date.
Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different
taxable entities which intend to settle the current tax assets and liabilities on a net basis.
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
129
Notes to the Consolidated Financial Statements
continued
Tax is charged or credited to the income statement, except when it relates to items charged or credited to other comprehensive
income/(expense) or directly to equity, in which case the tax is recognised in other comprehensive income/(expense) or in equity.
The Group recognises provisions for uncertain tax positions when it is probable that a tax authority would not accept an uncertain
tax treatment. This is done by assuming the tax authority will examine all the amounts and would have full knowledge of all related
information when making those examinations. Uncertain tax positions are assessed and measured on an issue-by-issue basis within
the jurisdictions that we operate either using management’s estimate of the most likely outcome where the issues are binary, or the
expected value approach where the issues have a range of possible outcomes.
Where open tax matters exist, the ultimate liability for such matters may vary from the amounts provided and is dependent upon
the outcome of negotiations with the relevant tax authorities or, if necessary, litigation proceedings. At 31 December 2023, the Group
had recognised provisions of £148m in respect of such uncertain tax positions (2022: £159m and 2021: £150m). Due to the number
of uncertain tax positions held and the number of jurisdictions to which these relate, it is not practicable to give meaningful
sensitivity estimates.
The Group recognises interest on late paid taxes as part of financing costs, and any penalties, if applicable, as part of the income
Tax charged to the income statement
The major components of income tax expense are:
Taxation charge/(credit) based on profits for the period
2023 | 2022 | 2021 | |
£m | £m | £m | |
Current year charge | 570 | 412 | 361 |
Charge in respect of prior periods | (31) | 25 | (50) |
Total current taxation | 539 | 437 | 311 |
Total deferred taxation | (22) | 62 | (114) |
Total | 517 | 499 | 197 |
The tax charge on the Group’s profit for the year can be reconciled from the standard rate of corporation tax in the UK of 23.5%
(2022: 19%, 2021: 19%) as follows:
Reconciliation of the taxation rate on the Group profits
2023 | 2022 | 2021 | |
£m | £m | £m | |
Profit before tax | 1,628 | 1,618 | 1,636 |
UK statutory rate of taxation of 23.5% (2022: 19%, 2021: 19%) | 383 | 307 | 311 |
Differences in overseas taxation rates | (2) | 72 | 105 |
Benefit of substance-based tax rulings | (21) | (15) | (18) |
R&D tax credits | (6) | (3) | (2) |
Tax losses not recognised | — | 1 | 3 |
Permanent differences on disposals, acquisitions and transfers | 155 | — | (164) |
Items non-deductible/taxable for tax purposes | 55 | 56 | 3 |
Re-assessment of prior year estimates | (65) | 5 | (70) |
Changes in tax rates | 18 | 76 | 29 |
Total tax charge | 517 | 499 | 197 |
The Group has a substantial business presence in many countries around the world. The effect of overseas tax rates represents the
tax impact on profits arising outside the UK that are then taxed at rates different to the statutory rate in the UK. In 2023 this results
in a reduction to the tax charge due to the increase in the statutory rate of tax in the UK, whereas in 2022 and 2021 this impact was
to increase the tax charge. In all years, beneficial incentives offered in certain countries have reduced the overall tax charge.
The tax effect of disposals, acquisitions and transfers can vary from the accounting profit or loss that arises. The items recorded in
2023 and 2021 relate to intra-group transfers. The tax impact of these transfers are a charge and a credit respectively, reflected in
deferred tax, and relates to the different tax rates and rules that exist in various jurisdictions around the world.
Items non-deductible/taxable for tax purposes include irrecoverable withholding taxes, charges on controlled foreign companies,
as well as legal and transactional fees that are not deductible for tax purposes.
130
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
131
The re-assessment of prior year estimates includes settlements reached following conclusion of tax authority review and differences
between final tax return submissions and liabilities accrued in these financial statements; the release of prior year uncertain tax
positions and a one-off deferred tax adjustment of £37m.
The impact of changes in tax rates results from the revaluation of temporary differences due to new tax rates coming into force. In 2023,
this primarily relates to new Cantonal legislation substantively enacted in Switzerland that increases the applicable tax rate from 2025.
In 2022 and 2021, similar changes to tax rates impacted the Group in the US and the UK respectively.
Future tax charges, and therefore the effective tax rate, may be affected by factors such as acquisitions, disposals, restructurings, the
location of research and development activity, tax regime reforms, agreements with tax authorities and resolution of open matters as
the Group continues to bring its tax affairs up to date around the world.
On 20 June 2023, the UK Finance (No.2) Bill 2022-23 was substantively enacted in the UK, including legislation to implement in the UK
certain parts of the OECD’s Pillar Two regime for periods beginning on or after 1 January 2024. These rules will apply to the Group.
The primary purpose of this legislation is to introduce a global minimum tax rate of 15%, to address concerns about the tax
contributions of large multinationals. The Group operates in territories where the tax rate is below 15%.
Tax authorities around the world are responding to the new rules in a variety of ways, with examples being the introduction of
corporate income tax, amendments to statutory rates of tax, and the introduction of ‘Domestic Minimum Top Up Taxes’. The precise
implementation of the changes will dictate how any additional tax will be calculated and reported by the Group in the future. Based
on the rules in force at the reporting date, it is estimated that the impact of Pillar Two will increase the adjusted effective tax rate of
the Group by less than 1%, primarily driven by top up taxes in respect of Switzerland.
In addition to the amounts charged to the income statement, tax of £6m has been credited directly to equity or through
comprehensive income/(expense) (2022: £73m debit, 2021: £14m debit) of which a £5m credit (2022: £5m debit, 2021: £nil), is included
in current tax and a £1m credit (2022: £68m debit, 2021: £14m debit) is included in deferred tax and principally relates to cash flow
amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
It is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that temporary differences or
taxable profits will be available against which deductible temporary differences can be utilised.
Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business
combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax
liabilities are not recognised to the extent they arise from the initial recognition of non-tax deductible goodwill. In addition, the Group
has neither recognised nor disclosed information about deferred tax assets or liabilities relating to Pillar Two income taxes as required
by the temporary, mandatory deferred tax exception to IAS 12. Refer to Note 2 ‘Accounting policies’.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint arrangements, except where the Group is able to control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting period date and adjusted to reflect changes in the Group’s
assessment that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated
at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates that have
Deferred tax assets and liabilities comprise of:
2023 | 2022 | |
£m | £m | |
Deferred tax assets | 265 | 220 |
Deferred tax liabilities | (3,487) | (3,601) |
Total | (3,222) | (3,381) |
Notes to the Consolidated Financial Statements
continued
132
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Movement in deferred tax assets and liabilities
Pensions & | |||||||
Accelerated | other post- | Other net | |||||
capital | employment | Intra-group | temporary | ||||
allowances | Intangibles | benefits | Tax losses | profit | differences | Total | |
£m | £m | £m | £m | £m | £m | £m | |
As at 1 January 2023 | (90) | (3,641) | 30 | 14 | 135 | 171 | (3,381) |
Exchange adjustments | 6 | 153 | (1) | (1) | (12) | (9) | 136 |
(Charge)/credit to income statement | (10) | (125) | 6 | (2) | 52 | 101 | 22 |
(Charge)/credit to statement of | |||||||
comprehensive income | — | — | (3) | — | — | 3 | — |
Credit directly to equity | — | — | — | — | — | 1 | 1 |
At 31 December 2023 | (94) | (3,613) | 32 | 11 | 175 | 267 | (3,222) |
Pensions & | |||||||
Accelerated | other post- | Other net | |||||
capital | employment | Intra-group | temporary | ||||
allowances | Intangibles | benefits | Tax losses | profit | differences | Total | |
£m | £m | £m | £m | £m | £m | £m | |
As at 1 January 2022 | (66) | (3,438) | 50 | 9 | 117 | 283 | (3,045) |
Exchange adjustments | (6) | (233) | 3 | 1 | 12 | 17 | (206) |
(Charge)/credit to income statement | (18) | (78) | 1 | 4 | 6 | 23 | (62) |
(Charge)/credit to statement of | |||||||
comprehensive income | — | — | (24) | — | — | (44) | (68) |
Reclassification and other movements | — | 108 | — | — | — | (108) | — |
At 31 December 2022 | (90) | (3,641) | 30 | 14 | 135 | 171 | (3,381) |
Provision for deferred tax liabilities of £37m (2022: £40m) has been made in respect of the taxation that would arise on the future
distribution of retained profits by certain overseas subsidiaries. Deferred tax is not provided on temporary differences of £206m
(2022: £385m) arising on unremitted profits as management can control any future reversal and does not consider such a reversal
to be probable.
The Group has recognised a deferred tax asset for trading losses of £11m (2022: £14m) on the basis of management forecasts which
demonstrate these losses should be recovered in the foreseeable future. No deferred tax asset has been recognised in respect of
gross tax losses of £260m (2022: £266m) due to the unpredictability of future profits. Included in this unrecognised amount are US
state tax losses of £175m (2022: £178m) which can only be carried forward for between 15 and 20 years. These losses expire at various
when they become payable to Company’s shareholders. Final dividends are recognised when they are approved by shareholders. The
Board are proposing a final dividend for the year ended 31 December 2023 of 4.2p per ordinary share. Subject to shareholder approval
Dividends declared and paid during the year
| 2023 | 2022 | 2021 | |||||||
Total | Total | Total | |||||||
Dividend per | dividend | Dividend per | dividend | Dividend per | dividend | ||||
Paid/payable | share (pence) | (£m) | Paid/payable | share (£) | (£m) | Paid/payable | share (£) | (£m) | |
2023 interim dividend | 5 Oct 2023 | 1.8 | 166 | n/a | n/a | n/a | n/a | n/a | n/a |
2022 final dividend | 27 Apr 2023 | 2.4 | 222 | n/a | n/a | n/a | n/a | n/a | n/a |
Pre-demerger dividends 1 | n/a | n/a | n/a | n/a | 11,930 | 11,930 | n/a | 1,148 | 1,148 |
1
During 2022 and 2021, the Group declared and paid a series of dividends to GSK and Pfizer under the Shareholders’ Agreement valid at that time. The dividends per share for the
dividends declared and paid before the demerger activities that took place in July 2022 were paid from the former ultimate holding company of CHHL2 and were calculated based
on CHHL2’s share structure. In 2022, the Group utilised a £9,211m loan plus £37m of interest receivable from its former equity shareholders, prior to the demerger, to partially fund
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
133
of share units in issue during the year after deducting treasury shares or shares held by employee benefit trusts (EBTs) if any.
Basic earnings per share for the year ended 31 December 2021 has been adjusted retrospectively, as required by IAS 33 ‘Earnings per
share’, to reflect the share structure of the Company resulting from the increase in the number of ordinary shares outstanding as a result
of the demerger activities that took place in July 2022. As a result, basic earnings per share for the year ended 31 December 2021 has
been calculated by dividing the profit attributable to shareholders by the Company’s weighted average number of shares in issue,
with 9,234,573,831 shares outstanding upon the completion of the demerger activities.
Diluted earnings per share has been calculated after adjusting the weighted average number of shares used in the basic calculation
to assume the conversion of all potentially dilutive shares. There were no dilutive shares in 2021.
The total number of shares held in connection with employee long-term incentive schemes as at 31 December 2023 was 10.4m. These
were acquired for the purpose of meeting equity settled share-based payment obligations and are sufficient for the expected vesting
Earnings per share
2023 | 2022 | 2021 | |
Profit after tax attributable to equity shareholders (£m) | 1,049 | 1,060 | 1,390 |
Weighted average number of shares (million) | 9,235 | 9,235 | 9,235 |
Weighted average number of shares (held by EBTs) (million) 1 | (2) | — | — |
Basic weighted average number of shares (million) | 9,233 | 9,235 | 9,235 |
Effect of dilutive potential shares (million) | 30 | 4 | — |
Diluted weighted average number of shares (million) | 9,263 | 9,239 | 9,235 |
Basic earnings per share (pence) | 11.4 | 11.5 | 15.1 |
Diluted earnings per share (pence) | 11.3 | 11.5 | 15.1 |
1
The total number of shares held as at 31 December 2023 was 10.4m. The impact of these shares on the basic weighted average number of shares was only 2m because these shares
were acquired towards the end of the accounting period. These shares were acquired to meet the equity settled share-based payment obligations vesting in Q1 2024.
impairment losses.
The cost of property, plant and equipment includes directly attributable incremental costs incurred in acquisition and installation of
the assets.
reviewed, and where appropriate adjusted annually. Estimated useful lives of the major categories of assets are shown below:
Freehold buildings | 20 to 50 years |
Leasehold land and buildings | Lease term or 20 to 50 years |
Plant and machinery | 10 to 20 years |
Equipment and vehicles | 3 to 10 years |
exist. If an indication of impairment exists, the recoverable amount of the asset or cash generating unit is estimated and any
impairment loss is charged to the income statement as it arises.
Where there has been a change in the estimates used to determine recoverable amount and an impairment loss subsequently reverses,
the carrying amount of the asset is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that
would have been determined had no impairment loss been recognised for the asset in prior years and an impairment loss reversal is
recognised immediately in the income statement.
On disposal of property, plant and equipment, the cost and related accumulated depreciation and impairments are derecognised from
Notes to the Consolidated Financial Statements
continued
Plant, | ||||
Land and | equipment | Assets under | ||
buildings | and vehicles | construction | Total | |
£m | £m | £m | £m | |
Cost at 1 January 2022 | 920 | 1,486 | 299 | 2,705 |
Exchange adjustments | 59 | 86 | 20 | 165 |
Additions | 4 | 9 | 292 | 305 |
Disposals and write-offs | (13) | (130) | — | (143) |
Reclassifications | (40) | 201 | (222) | (61) |
Cost at 31 December 2022 | 930 | 1,652 | 389 | 2,971 |
Exchange adjustments | (44) | (69) | (19) | (132) |
Additions | 1 | 1 | 230 | 232 |
Additions from business acquisitions | 24 | 14 | 22 | 60 |
Disposals and write-offs | (4) | (54) | — | (58) |
Reclassifications | 63 | 164 | (249) | (22) |
Cost at 31 December 2023 | 970 | 1,708 | 373 | 3,051 |
Depreciation at 1 January 2022 | (277) | (833) | — | (1,110) |
Exchange adjustments | (16) | (52) | — | (68) |
Charge for the year | (29) | (113) | — | (142) |
Disposals and write-offs | 9 | 110 | — | 119 |
Depreciation at 31 December 2022 | (313) | (888) | — | (1,201) |
Exchange adjustments | 12 | 40 | — | 52 |
Charge for the year | (33) | (119) | — | (152) |
Disposals and write-offs | 2 | 44 | — | 46 |
Reclassifications | 2 | (2) | — | — |
Depreciation at 31 December 2023 | (330) | (925) | — | (1,255) |
Impairment at 1 January 2022 | (6) | (22) | (4) | (32) |
Exchange adjustments | (1) | (3) | — | (4) |
Impairment losses | — | (8) | — | (8) |
Disposals and write-offs | 4 | 20 | — | 24 |
Reclassifications | — | 7 | — | 7 |
Impairment at 31 December 2022 | (3) | (6) | (4) | (13) |
Exchange adjustments | — | 1 | — | 1 |
Impairment losses | — | (4) | (3) | (7) |
Disposals and write-offs | — | 3 | — | 3 |
Impairment at 31 December 2023 | (3) | (6) | (7) | (16) |
Depreciation and impairment at 31 December 2022 | (316) | (894) | (4) | (1,214) |
Depreciation and impairment at 31 December 2023 | (333) | (931) | (7) | (1,271) |
Net book value at 31 December 2022 | 614 | 758 | 385 | 1,757 |
Net book value at 31 December 2023 | 637 | 777 | 366 | 1,780 |
Reversals of impairment arise from subsequent reviews of the impaired assets where the conditions which gave rise to the original
Reclassifications include £22m for 2023 (2022: £54m) related to assets under construction that have been reclassified to computer
software in intangible assets during the year.
134
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
135
Impact of climate change
Management undertook a modelling exercise to estimate the potential impact that extreme weather events could have on the Group’s
manufacturing sites. Management considered that the hazards with the greatest potential impact over the long-term time horizon are
riverine and flash flooding, and heatwaves. Given the geographical spread of the Group’s manufacturing sites, the prospect of every
site being impacted in any given year, or for every year, is considered remote and as a result, the level of loss potentially arising would
not be considered significant for the Group. In addition, the majority of the Group’s assets have useful lives that end ahead of the
medium- to long-term timescales expected for extreme climate events to occur. Therefore, we consider that there is no material
payments to be paid over the lease term at the lease commencement date except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low-value assets (defined as assets with an initial fair value less than approximately £10,000).
The right of use asset is initially measured at cost, being the present value of the lease payments paid or payable, plus any initial direct
costs incurred in entering into the lease and less any lease incentives received. Non-lease components are accounted for separately
from the lease components in plant and equipment leases but are not separately accounted for in land and buildings or vehicle leases.
owned property, plant and equipment. In other cases, right of use assets are depreciated over the shorter of the useful life of the asset
or the lease term. The lease term is the non-cancellable period of the lease plus any periods for which the Group is ‘reasonably certain’
Lease liabilities are initially measured at the value of the lease payments over the lease term that are not paid at the commencement
date and are usually discounted using the incremental borrowing rates of the applicable Group entity (the rate implicit in the lease is
used if it is readily determinable). Lease payments included in the lease liability include both fixed payments and in-substance fixed
payments during the term of the lease.
After initial recognition, the lease liability is recorded at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments or if the Group’s assessment of the lease term changes; any changes in the lease liability
Right of use assets
Land and |
Plant and |
|||
buildings |
equipment |
Vehicles |
Total |
|
£m |
£m |
£m |
£m |
|
Net book value at 1 January 2022 |
88 |
1 |
10 |
99 |
Exchange adjustments |
8 |
— |
1 |
9 |
Additions |
62 |
— |
10 |
72 |
Depreciation |
(30) |
(1) |
(7) |
(38) |
Net book value at 31 December 2022 |
128 |
— |
14 |
142 |
Exchange adjustments |
(6) |
— |
(1) |
(7) |
Additions |
39 |
1 |
13 |
53 |
Depreciation |
(39) |
— |
(10) |
(49) |
Disposals and write-offs |
(17) |
— |
— |
(17) |
Net book value at 31 December 2023 |
105 |
1 |
16 |
122 |
The total cash outflow for leases amounted to £55m in 2023 (2022: £45m, 2021: £38m). The Group has lease commitments relating
to leases that have not commenced at year end of £1m (2022: £30m). Refer to Note 19 ‘Borrowings’ for further details on the Group’s
Notes to the Consolidated Financial Statements
continued
136
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Goodwill arising on consolidation represents the excess of the fair value of the consideration transferred over the fair value of the
Group’s share of the identifiable assets and liabilities of the acquired subsidiaries at the date of acquisition. Goodwill is not subject to
amortisation but is tested annually for impairment, or more frequently where indicators of impairment exist and is carried at cost less
any accumulated impairment losses.
For the purpose of impairment testing, assets are grouped in cash generating units (CGUs). A CGU is identified as the lowest aggregation
of assets that generate largely independent cash inflows, and which is looked at by management for monitoring and managing the business.
If the recoverable amount of the CGU is less than the carrying amount, an impairment loss is allocated first to reduce the carrying amount
of any goodwill allocated to the CGU and then to the other assets of the CGU pro rata on the basis of the carrying amount of each asset
in the CGU. Any impairment loss is immediately recognised in the consolidated income statement and an impairment loss recognised for
goodwill is not subsequently reversed.
The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
Management uses the approved three-year strategic plan and the projected cash flows for a further two-year period as the basis for
the Group CGUs value in use calculations.
Intangible assets are recognised when they are identifiable, the Group controls the asset, it is probable that future economic benefits
attributed to the asset will flow to the Group and the cost of the asset can be reliably measured.
Separately purchased brands are initially measured at cost, being the purchase price as at the date of acquisition. Acquired brands are
valued independently and recognised at fair value when the Group completes a business combination from third parties, where brands
have a value which is substantial and long term and where the brands either are contractual or legal in nature or can be sold separately
from the rest of the businesses acquired. The determination of the fair values of the separately identified intangibles is based, to a
considerable extent, on management’s judgement. Brands are amortised over their estimated useful lives of up to 20 years, except where
it is considered that the useful economic life is indefinite.
Indefinite life brands mainly comprise trademarks and brands for which there is no foreseeable limit to the period over which they are
expected to generate net cash inflows. These are considered to have an indefinite life, given the strength and durability of the brands
and the level of advertising and promotion support. These brands are in relatively similar, stable and profitable market sectors, with
similar risk profiles, and their size, diversification and market shares mean that the risk of market-related factors causing a reduction in
the lives of the brands is considered to be relatively low. The Group is not aware of any material legal, regulatory, contractual, competitive,
economic or other factors which could limit their useful lives. Accordingly, they are not amortised.
Intangible assets are stated at cost less provisions for amortisation and impairments. Licences, patents, know-how and marketing rights
separately acquired or acquired as part of a business combination are amortised over their estimated useful lives, generally not exceeding
20 years, using the straight-line basis from the time they are available for use. The estimated useful lives for determining the amortisation
charge consider patent lives, where applicable, as well as the value obtained from periods of non-exclusivity. Asset lives are reviewed
and, where appropriate, adjusted annually.
Any development costs incurred by the Group and associated with acquired licences, patents, know-how or marketing rights are written
off to the income statement when incurred.
The costs of acquiring and developing computer software for internal use and internet sites for external use are capitalised as intangible
fixed assets where the software or site supports a significant business system and the expenditure leads to the creation of an asset.
Enterprise Resource Planning (ERP) systems software is amortised over 7-10 years and other computer software over 3-5 years.
The carrying values of all non-current assets are reviewed for impairment, either on a standalone basis or as part of a larger CGU, when
there is an indication that the assets might be impaired. Additionally, intangible assets with indefinite useful lives and intangible assets
which are not yet available for use are tested for impairment annually. Any provision for impairment is charged to the income statement.
If the recoverable amount of an intangible is less than the carrying amount, an impairment loss is recognised in the income statement.
The recoverable amount is the higher of fair value less costs of disposal and value in use. Impairment losses are only reversed if there
has been a change in estimates used to determine recoverable amounts and only to the extent that the revised recoverable amounts
Financial Statements
Intangible assets
Amortised | ||||||
brands, | ||||||
Indefinite life | licences | Computer | Assets under | |||
Goodwill | brands | and patents | software | construction | Total | |
£m | £m | £m | £m | £m | £m | |
Cost at 1 January 2022 | 8,246 | 18,325 | 697 | 472 | — | 27,740 |
Exchange adjustments | 150 | 1,090 | (3) | 14 | — | 1,251 |
Additions | — | 178 | 3 | 21 | — | 202 |
Disposals and write-offs | — | (122) | (23) | (6) | — | (151) |
Reclassifications | — | — | — | 54 | — | 54 |
Transfer to assets held for sale | — | (6) | — | — | — | (6) |
Cost at 31 December 2022 | 8,396 | 19,465 | 674 | 555 | — | 29,090 |
Exchange adjustments | (82) | (689) | (11) | (10) | (1) | (793) |
Additions | 3 | — | 7 | 4 | 76 | 90 |
Disposals and write-offs | — | — | (28) | (24) | — | (52) |
Reclassifications | — | (7) | 44 | 17 | 8 | 62 |
Transfer to assets held for sale | — | (556) | (295) | — | — | (851) |
Cost at 31 December 2023 | 8,317 | 18,213 | 391 | 542 | 83 | 27,546 |
Amortisation at 1 January 2022 | — | — | (197) | (219) | — | (416) |
Exchange adjustments | — | — | (12) | (3) | — | (15) |
Charge for the period | — | — | (43) | (64) | — | (107) |
Disposals and write-offs | — | — | 23 | 5 | — | 28 |
Transfer to assets held for sale | — | — | — | — | — | — |
Amortisation at 31 December 2022 | — | — | (229) | (281) | — | (510) |
Exchange adjustments | — | — | 8 | 8 | — | 16 |
Charge for the period | — | — | (39) | (69) | — | (108) |
Disposals and write-offs | — | — | 28 | 21 | — | 49 |
Reclassifications | — | — | (32) | — | — | (32) |
Transfer to assets held for sale | — | — | 53 | — | — | 53 |
Amortisation at 31 December 2023 | — | — | (211) | (321) | — | (532) |
Impairment at 1 January 2022 | — | (122) | — | (7) | — | (129) |
Exchange adjustments | — | (3) | — | — | — | (3) |
Impairment losses | — | (129) | — | (6) | — | (135) |
Disposals and write-offs | — | 122 | — | 1 | — | 123 |
Impairment at 31 December 2022 | — | (132) | — | (12) | — | (144) |
Exchange adjustments | — | 6 | — | — | — | 6 |
Impairment losses | — | (184) | (1) | (1) | — | (186) |
Reversal of impairment losses | — | — | — | — | — | — |
Reclassifications | — | — | (8) | — | — | (8) |
Disposals and write-offs | — | — | — | 3 | — | 3 |
Transfer to assets held for sale | — | 170 | — | — | — | 170 |
Impairment at 31 December 2023 | — | (140) | (9) | (10) | — | (159) |
Amortisation and impairment at 31 December 2022 | — | (132) | (229) | (293) | — | (654) |
Amortisation and impairment at 31 December 2023 | — | (140) | (220) | (331) | — | (691) |
Net book value at 31 December 2022 | 8,396 | 19,333 | 445 | 262 | — | 28,436 |
Net book value at 31 December 2023 | 8,317 | 18,073 | 171 | 211 | 83 | 26,855 |
The net book value of computer software included £122m (2022: £133m) of internally generated costs. During the year ended
31 December 2022, additions to indefinite life brands included £174m of non-cash purchases which were settled by offsetting a
liability owed to the Group by GSK.
In 2023, the Group completed the disposal of the rights in Lamisil, an amortised brand, for cash consideration of £235m. This resulted in
a pre-tax loss on disposal of £10m. Lamisil was transferred to asset held for sale, and subsequently disposed of before the end of the year.
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
137
Notes to the Consolidated Financial Statements
continued
138
Haleon
Annual Report and Form 20-F 2023
Financial Statements
On 21 December 2023, the Group entered into a binding agreement for the sale of the ChapStick brand to Suave Brands Company,
a portfolio company of Yellow Wood Partners. Under the terms of the transaction, the Group will receive pre-tax cash proceeds of
approximately £337m ($430m), as well as a passive minority interest in the Suave Brands Company. Cash proceeds include approximately
£16m ($20m) from the release of working capital allocated to ChapStick. At the time of entering into the binding agreement, the minority
interest in the Suave Brands Company was valued at approximately £63m ($80m).
The Group recognised an impairment of £170m in the income statement as the consideration received net of cost to sell was less than
the carrying value of the brand. The Group has reclassified £377m of intangible asset after impairment and £16m of inventory relating
to the brand as an asset held for sale. The divestment is consistent with the Group’s strategy of proactively managing its portfolio.
Asset held for sale include the recoverable assets attributable to the ChapStick brand.
Goodwill mainly arose from the Novartis Transaction in 2015 (£2.6bn) and the Pfizer Transaction in 2019 (£5.6bn).
Goodwill is allocated to the Group’s CGUs as follows:
2023 | 2022 | |
£m | £m | |
North America | 3,247 | 3,277 |
EMEA & LatAm | 2,926 | 2,955 |
APAC | 2,144 | 2,164 |
Net book value at 31 December | 8,317 | 8,396 |
The recoverable amounts of the CGUs are assessed using a value in use model (2022: value in use). Value in use is calculated using a
discounted cash flow approach, with a pre-tax discount rate applied to the projected risk-adjusted pre-tax cash flows and terminal value.
The discount rate used is based on the pre-tax weighted average cost of capital (WACC) of the CGUs. The discount rates are specific to
each CGU and are determined based on the cost of capital, including a market premium and country-specific political risk premiums.
Details relating to the discounted cash flow model used in the impairment tests of the APAC, EMEA & LatAm, and North America CGUs
are as follows:
Valuation basis | Value in use | ||
Key assumptions | Sales growth rates | ||
Profit margins | |||
Terminal growth rates | |||
Discount rates | |||
Taxation rates | |||
Determination of assumptions | Growth rates are internal forecasts based on both internal and external market information. | ||
Margins reflect past experience, adjusted for expected changes. | |||
Terminal growth rates are based on internal projections and external forecasts of the relevant markets. | |||
Discount rates are based on the Group WACC, adjusted where appropriate. | |||
Taxation rates are based on appropriate rates for each CGU. | |||
Period of specific projected cash flows | Five years | ||
Terminal growth rates | 2023 | 2022 | |
North America | 2.0% p.a. | 2.4% p.a. | |
EMEA & LatAm | 2.6% p.a. | 3.3% p.a. | |
APAC | 2.4% p.a. | 3.3% p.a. | |
Discount rates (pre-tax) | 2023 | 2022 | |
North America | 7.9% | 8.0% | |
EMEA & LatAm | 13.2% | 11.9% | |
APAC | 10.2% | 9.3% |
The terminal growth rate does not exceed the long-term projected growth rate for the Group. Goodwill is monitored for impairment
at individual CGU level. In each case the valuation indicated substantial headroom such that it is remote that a reasonably possible
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
139
Indefinite life brands and amortised brands impairment
Indefinite life brands comprise a portfolio of consumer health products. The net book value of the major brands are as follows:
2023 | 2022 | |
£m | £m | |
Advil | 3,521 | 3,707 |
Voltaren | 2,725 | 2,725 |
Centrum | 1,850 | 1,943 |
Caltrate | 1,680 | 1,811 |
Otrivin | 1,385 | 1,385 |
Robitussin | 1,174 | 1,239 |
Preparation H | 1,103 | 1,164 |
Nexium | 706 | 743 |
Fenistil | 598 | 598 |
Emergen-C | 464 | 490 |
Theraflu | 444 | 452 |
Panadol | 396 | 395 |
Sensodyne | 281 | 291 |
Nicotinell | 246 | 246 |
Excedrin | 186 | 196 |
Polident | 130 | 134 |
Biotene | 126 | 130 |
Vitasprint | 118 | 120 |
Corega | 116 | 118 |
ChapStick 1 | — | 575 |
Other brands | 824 | 871 |
Total | 18,073 | 19,333 |
1
ChapStick has been classified as an asset held for sale as at 31 December 2023.
The Group tests all its indefinite life brands for impairment by applying a fair value less costs to sell model using a three-year strategic
plan approved by management and cash flows beyond the three-year period are extrapolated using the terminal growth rates. All
brands were tested for impairment using brand-specific assumptions which included a discount rate equal to the Group’s post-tax
WACC of 7.5% (2022: 7.0%; 2021: 6.0%) adjusted where appropriate for country and currency risks, and apply to the post-tax cash
flows. This valuation methodology uses significant inputs which are not based on observable market data, and therefore this valuation
technique is classified as level 3 of the fair value hierarchy. In addition to the discount rate, the main assumptions include future sales
price and volume growth, product contribution and the future expenditure required to maintain the product’s marketability and
registration in the relevant jurisdictions. These assumptions are based on past experience and are reviewed as part of management’s
budgeting and strategic planning cycle. The terminal growth rates applied of between 0% and 3% (2022: 0% and 3%; 2021: -3% and
3%) are management’s estimates which align with those of market participants’ estimate of future long-term average growth rates for
the relevant markets.
In 2023, the Group recorded a non-cash impairment charge of £170m upon signing a definitive agreement to dispose ChapStick, an
indefinite life brand, which has been classified as an asset held for sale as at 31 December 2023. In addition, the Group also recorded
an impairment of £15m relating to a collection of smaller brands as these brands are experiencing sales volume decline year on year.
Additionally, in 2023, the carry value of Preparation H continues to be sensitive to reasonably possible changes in key assumptions.
The post-tax discount rate used for the brand is 6.8% (2022: 6.75%) and terminal growth rate is 2.5% (2022: 2.5%). If the discount rate
for Preparation H had been 0.5% higher or the terminal growth rate, had been 0.5% lower than management’s estimates respectively,
the Group would have had to recognise an impairment of £115m or £75m, respectively.
Other than as disclosed above, management do not consider that any reasonably possible changes in the key assumptions would
cause the fair value less costs to sell of the individually significant brands disclosed above to fall below their carrying values.
In 2022, the Group recorded an impairment charge of £111m for Preparation H since the carrying value of the brand was higher than
the recoverable amount. The decrease in recoverable amount was mainly driven by an increase in the discount rate applied to the
forecasted future cash flows from 6% to 6.75%. If the discount rate for Preparation H had been 0.25% higher or the revenue growth
rate, including terminal growth rate, had been 0.25% lower than management’s estimates respectively, the Group would have had to
recognise a further impairment of £70m or £75m respectively.
Notes to the Consolidated Financial Statements
continued
140
Haleon
Annual Report and Form 20-F 2023
Financial Statements
For Robitussin’s impairment testing in 2023, we have applied a post-tax discount rate of 6.5% (2022: 6.75%) and terminal growth rate
of 2.5% (2022: 2.5%). Robitussin’s carrying value is no longer sensitive to any reasonably possible changes to key assumptions in 2023.
Robitussin was sensitive to reasonably possible changes in key assumptions in 2021 and continued to be sensitive in 2022. Although
the brand had recovered from the lower cold and flu incidence resulting from COVID-19 social distancing measures from previous
years, the discount rate increased in 2022 causing the brand’s headroom to continue to be low at approximately 15% of its carrying
value. The only reasonably possible change in key assumptions that would make the recoverable amount of Robitussin be equal or
less than the carrying value would be to increase the discount rate of 6.75% by 0.6%.
For 2021, the income statement charge for net impairment losses includes impairments of Zyrtec, Treely and capitalised costs for a
Certain assets were transferred from intangible assets to assets held for sale and subsequently disposed of during the year.
A breakdown of the amortisation, impairment losses and reversals is included below:
Net impairment | ||||||
Amortisation | losses/(reversals) | |||||
2023 | 2022 | 2021 | 2023 | 2022 | 2021 | |
£m | £m | £m | £m | £m | £m | |
Cost of sales | 55 | 61 | 57 | 185 | 129 | (32) |
Selling, general and administration | 53 | 46 | 37 | 1 | 6 | 8 |
Research and development | — | — | — | — | — | 8 |
Total | 108 | 107 | 94 | 186 | 135 | (16) |
Impact of climate change
The Group has stress tested the future cash flows for the potential impact of climate change and concluded that there is sufficient
headroom for goodwill. Preparation H’s recoverable amount is sensitive to reasonably possible changes in key assumptions that would
lead to an immaterial additional impairment charge due to either physical damage in our manufacturing sites or the associated costs
of future transition risk. Carbon pricing is the highest potential transition risk that could have a medium risk in medium- to long-term
time frame. With continued decarbonisation efforts and Haleon’s focus on meeting the targets to minimise carbon pricing impacts,
direct costs and related production overheads) and net realisable value. Cost is determined on a first in, first out basis. Net realisable
Composition of inventory balances
2023 |
2022 |
|
£m |
£m |
|
Raw materials and consumables |
298 |
310 |
Work in progress |
20 |
35 |
Finished goods |
1,090 |
1,003 |
Total |
1,408 |
1,348 |
The total cost of inventories recognised as an expense and included in cost of sales amounted to £4,196m in 2023 (2022: £3,970m,
2021: £3,462m). This includes inventory write-down of £178m (2022: £118m, 2021: £174m). The Group reverses and reassesses its
inventory provisions in full every reporting period.
The reversals of prior year write-downs of inventories in 2023 is £74m (2022: £40m, 2021: £63m) and these reversals principally arise
from the reassessment of usage or demand expectations prior to inventory expiration.
Impact of climate change
The Group’s inventory turnover cycle is much shorter than the longer-term time horizons associated with the climate-related risks and
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
141
for expected credit losses which are measured at an amount equal to lifetime expected credit losses. In determining credit risk, the Group
considers reasonable and supportable information that is relevant and available without undue costs or effort. This includes both
quantitative and qualitative information and analysis based on the Group’s ageing of the receivables, customers’ payment history, and
forward-looking information including wider macroeconomic factors. Trade receivables sold under a non-recourse factoring agreement
are derecognised at the point of sale as risks and rewards are substantially transferred.
When a trade receivable is determined to have no reasonable expectation of recovery it is written off, firstly against any expected
credit loss allowance available and then to the income statement.
Subsequent recoveries of amounts previously provided for or written off are credited to the income statement. Long-term receivables
Trade and other receivables
| 2023 |
2022 |
|||||
Current |
Non-current |
Total |
Current |
Non-current |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Trade receivables, net of expected credit loss allowance |
1,352 |
— |
1,352 |
1,487 |
— |
1,487 |
Other prepayments and accrued income |
107 |
— |
107 |
106 |
— |
106 |
Employee loans and advances |
5 |
— |
5 |
6 |
— |
6 |
Other third-party receivables |
392 |
114 |
506 |
282 |
132 |
414 |
Total |
1,856 |
114 |
1,970 |
1,881 |
132 |
2,013 |
2023 |
2022 |
|
£m |
£m |
|
At 1 January |
41 |
53 |
Exchange adjustments |
(2) |
2 |
Charge for the year |
2 |
14 |
Subsequent recoveries of amounts provided for |
(7) |
(19) |
Utilised |
(5) |
(9) |
At 31 December |
29 |
41 |
Set out below is the information about the credit risk exposure of the Group’s trade receivables using a provision matrix:
Year ended 31 December 2023
| Trade receivables |
|||||||
| Days past due |
|||||||
Greater |
|||||||
181 days- |
than |
||||||
Current |
0-30 days |
31-90 days |
91-180 days |
1 year |
1 year |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Estimated total gross carrying amount at default |
1,210 |
102 |
25 |
12 |
15 |
17 |
1,381 |
Expected credit loss |
5 |
1 |
1 |
2 |
4 |
16 |
29 |
Year ended 31 December 2022
| Trade receivables |
|||||||
| Days past due |
|||||||
Greater |
|||||||
181 days- |
than |
||||||
Current |
0-30 days |
31-90 days |
91-180 days |
1 year |
1 year |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Estimated total gross carrying amount at default |
1,386 |
58 |
30 |
15 |
12 |
27 |
1,528 |
Expected credit loss |
6 |
1 |
1 |
2 |
4 |
27 |
41 |
Notes to the Consolidated Financial Statements
continued
142
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customer base being large and diverse.
No single customer represents more than 10% of the Group’s sales.
Within other third-party receivables, £230m (2022: £157m) was classified as financial assets. The expected credit loss in other
receivables is not deemed significant, hence no credit loss allowance is recognised. Refer to Note 25 ‘Capital and financial risk
operating purposes with an original maturity of three months or less, that are readily convertible to a known amount of cash and
subsidiaries where it is held. Restrictions include exchange controls and taxes on repatriation.
Cash and cash equivalents held in the following currencies, that mostly influence the Group, are presented below:
2023 |
2022 |
|
£m |
£m |
|
Pound Sterling (GBP) |
634 |
253 |
Taiwan Dollar (TWD) |
46 |
72 |
United States Dollar (USD) |
39 |
59 |
Indian Rupee (INR) |
36 |
49 |
Euro (EUR) |
29 |
25 |
Others |
260 |
226 |
Total |
1,044 |
684 |
effect is material. Trade payables are derecognised when the original liability is either discharged, usually through payment, or
2023 |
2022 |
|
£m |
£m |
|
Trade payables |
1,855 |
1,835 |
Customer return and rebate accruals |
717 |
738 |
Other payables and accruals |
374 |
558 |
Wages and salaries |
365 |
290 |
Accrued interest on financial liabilities |
100 |
104 |
Social security |
45 |
39 |
VAT payables |
49 |
34 |
Deferred income |
21 |
23 |
Total |
3,526 |
3,621 |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
143
Customer return and rebate accruals are provided for by the Group at the point of sale in respect of the estimated rebates, discounts
or allowances payable to customers. Accruals are made at the time of sale but the actual amounts paid are based on claims made some
time after the initial recognition of the sale. The level of accrual is reviewed and adjusted quarterly in light of historical experience of
actual rebates, discounts or allowances given and returns made and any changes in arrangements. The assumptions used in estimation
are based on known facts with a high level of accuracy. In addition, the Group’s promotional programmes are typically short-term in
nature resulting in lower inherent estimation uncertainty. As a result, management considered no likelihood of material change in the
next financial year.
Customer return and rebate accruals are not presented net against any trade receivables that may be owing from the same customer
as the offsetting criteria in IAS 32 have not been met.
Refer to Note 24, ‘Related party transactions’ for further details on amounts payable to GSK and Pfizer.
the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the
The corresponding liability to the lessor is recognised as a lease obligation within short-term and long-term borrowings. The carrying
amount is subsequently increased to reflect interest on the lease liability and reduced by lease payments made.
For calculating the discounted lease liability on leases, the implicit rate in the lease is used. If this is not available, the incremental
borrowing rate with a lease-specific adjustment is used. Finance costs are charged to the income statement to produce a constant
periodic rate of charge on the remaining balance of the obligations for each accounting period.
Variable rents are not part of the lease liability and the right of use asset. These payments are charged to the income statement as
2023 |
2022 |
|||||
Current |
Non-current |
Total |
Current |
Non-current |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Commercial paper |
— |
— |
— |
(302) |
— |
(302) |
Loan and overdrafts |
(60) |
— |
(60) |
(91) |
— |
(91) |
Lease liabilities |
(48) |
(89) |
(137) |
(44) |
(117) |
(161) |
Non-voting preference shares |
— |
(25) |
(25) |
— |
(25) |
(25) |
Bonds |
(548) |
(8,686) |
(9,234) |
— |
(9,861) |
(9,861) |
Total |
(656) |
(8,800) |
(9,456) |
(437) |
(10,003) |
(10,440) |
Notes to the Consolidated Financial Statements
continued
144
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Carrying value |
||
2023 |
2022 |
|
Bonds 1 |
£m |
£m |
$300m SOFR + 0.89% callable medium term note due 2024 2 |
— |
249 |
$700m 3.024% callable medium term note due 2024 |
548 |
581 |
$1,750m 3.125% medium term note due 2025 |
1,336 |
1,385 |
€850m 1.250% medium term note due 2026 |
707 |
694 |
$2,000m 3.375% medium term note due 2027 |
1,561 |
1,653 |
£300m 2.875% medium term note due 2028 |
299 |
299 |
$1,000m 3.375% medium term note due 2029 |
775 |
822 |
€750m 1.750% medium term note due 2030 |
650 |
663 |
$2,000m 3.625% medium term note due 2032 |
1,551 |
1,652 |
€750m 2.125% medium term note due 2034 |
646 |
659 |
£400m 3.375% medium term note due 2038 |
398 |
398 |
$1,000m 4.000% medium term note due 2052 |
763 |
806 |
Total |
9,234 |
9,861 |
1
These instruments contain a variety of different features including early redemption options, call options, put options and mandatory early redemption options, which depend on
different triggering events such as change in control, change in laws, regulations and tax law. These features are considered embedded derivatives. These features have not been
accounted for separately from the instruments as they are considered closely related to the bonds.
2
The issuers, Haleon UK Capital plc (formerly GSK Consumer Healthcare Capital UK plc), Haleon US Capital LLC (formerly GSK Consumer
Healthcare Capital US LLC) and Haleon Netherlands Capital B.V. (formerly GSK Consumer Healthcare Capital NL B.V.) formally changed
their names in March 2023.
Short-term borrowings
As at 31 December 2023, the Group had within short-term borrowings, Pre-Separation USD Notes of $700m (£548m) (31 December
2022: £nil). The average effective pre-swap interest rate of all short-term notes in issue as at 31 December 2023 was 3.02%
(31 December 2022: nil).
The Group has access to a £2bn Euro commercial paper programme and a $10bn US Dollar commercial paper programme pursuant to
which members of the Group may issue commercial paper from time to time. The weighted average interest rate on the commercial
paper as at 31 December 2023 was nil (31 December 2022: 3.23%).
As at 31 December 2023, the Group had short-term bank loans of £10m (31 December 2022: £18m). The weighted average interest rate
on short-term bank loans as at 31 December 2023 was 7.8% (31 December 2022: 6.7%).
Long-term borrowings
As at 31 December 2023, the Group had within long-term borrowings, Euro Medium Term Notes and USD Notes of £8,686m
(31 December 2022: £9,861m), of which £4,783 m (31 December 2022: £5,299m) will fall due in more than five years. The average
effective pre-swap and post-swap interest rate of all long-term notes in issue as at 31 December 2023 was 3.0% and 3.6% respectively
(31 December 2022: 3.1% and 3.2%).
On 2 March 2023, the Group exercised its option to redeem at par the $300m of Callable Floating Rate Senior Notes due 2024 on
24 March 2023. The carrying value of the bond was equal to the par value at the settlement date hence no gain or loss was recognised.
On 17 July 2022, as part of the demerger activities, the Company issued 25,000,000 non-voting preference shares of £1.00 each to
Pfizer Inc. with a coupon rate of 9.5% per annum. The non-voting preference shares (NVPS) command a mandatory quarterly coupon
and can only be redeemed after a period of five years. The Group has, therefore, classified the non-voting preference shares as a
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
145
Committed credit facilities
The Group has undrawn credit facilities of £900m and $1,300m with initial maturity dates of September 2026 and September 2024
respectively. As at 31 December 2023, no amounts were drawn under these facilities.
The maturity analysis of lease liabilities recognised on the Group balance sheet is as follows:
2023 | 2022 | |
£m | £m | |
Due within one year | (48) | (44) |
Due between one and two years | (36) | (36) |
Due between two and three years | (25) | (25) |
Due between three and four years | (14) | (21) |
Due between four and five years | (7) | (13) |
Due after five years | (7) | (22) |
Total | (137) | (161) |
Refer to Note 8 ‘Net finance costs’ for further details on finance expense arising on lease liabilities.
Fair value | |||||
adjustments, | |||||
At | interest | At | |||
1 January | Foreign | and | 31 December | ||
2023 | Cash flows | exchange | reclassification | 2023 | |
£m | £m | £m | £m | £m | |
Reconciliation of movement in liabilities to cash flow statement | |||||
Long-term borrowings | (9,886) | 243 | 412 | 520 | (8,711) |
Short-term borrowings | (320) | 310 | 15 | (563) | (558) |
Lease liabilities | (161) | 55 | 8 | (39) | (137) |
Derivative financial instruments | (112) | 72 | — | (62) | (102) |
Total financial liabilities arising from financing activities | (10,479) | 680 | 435 | (144) | (9,508) |
Cash and cash equivalents net of bank overdrafts | 611 | 398 | (15) | — | 994 |
Total | (9,868) | 1,078 | 420 | (144) | (8,514) |
Fair value | |||||
adjustments, | |||||
At | interest | At | |||
1 January | Foreign | and other | 31 December | ||
2022 | Cash flows | exchange | movements | 2022 | |
£m | £m | £m | £m | £m | |
Reconciliation of movement in liabilities to cash flow statement | |||||
Long-term borrowings | — | (9,209) | (772) | 95 | (9,886) |
Short-term borrowings | (41) | (277) | — | (2) | (320) |
Lease liabilities | (117) | 45 | (11) | (78) | (161) |
Derivative financial instruments | (2) | (345) | — | 235 | (112) |
Total financial liabilities arising from financing activities | (160) | (9,786) | (783) | 250 | (10,479) |
Cash and cash equivalents net of bank overdrafts | 406 | 190 | 15 | — | 611 |
Total | 246 | (9,596) | (768) | 250 | (9,868) |
Notes to the Consolidated Financial Statements
continued
146
Haleon
Annual Report and Form 20-F 2023
Financial Statements
These arrangements have been developed in accordance with local practices in the countries concerned. Pension benefits can be
provided by state schemes, by defined contribution schemes, whereby retirement benefits are determined by the value of funds arising
from contributions paid in respect of each employee, or by defined benefit schemes, whereby retirement benefits are based on employee
pensionable remuneration and length of service. In certain countries, pension benefits are provided on an unfunded basis, some are
administered by trustee companies. The Group also provides other post-employment benefits, mainly post-employment healthcare
plans in the US. These plans are predominantly unfunded. Formal, independent, actuarial valuations of the Group’s main plans are
undertaken regularly, normally at least every three years.
For defined benefit retirement plans, the difference between the fair value of the plan assets and the present value of the plan liabilities
is recognised as an asset or a liability on the consolidated balance sheet. Defined benefit plan liabilities are assessed using the projected
unit funding method and applying the principal actuarial assumptions at the reporting period date consistent with the advice of qualified
actuaries. Pension scheme assets are measured at fair value at the balance sheet date. The amount of any pension fund asset
recognised on the balance sheet is limited to any future refunds from the plan or the present value of reductions in future
contributions to the plan.
The amount charged to operating costs in the income statement is the cost of accruing pension benefits promised to employees over
the year, plus the costs of individual events such as past service benefit changes, settlements, curtailments plus the finance charge for
interest on net liability (such events are recognised immediately in the income statement).
Remeasurements of the net defined benefit liability (or asset) comprise actuarial gains and losses and the return on plan assets
excluding amounts included in net interest. Actuarial gains and losses are taken to the consolidated statement of comprehensive
income. Actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising
from differences between the previous actuarial assumptions and what has actually occurred. The return on plan assets, in excess of
interest income, and costs incurred for the management of plan assets are also taken to other comprehensive income.
The costs of other post-employment liabilities are calculated in a similar way to defined benefit pension schemes and spread over the
period during which benefit is expected to be derived from the employees’ services. Future cash flows are discounted at rates reflecting
the yields of high-quality corporate bonds.
Discount rates are derived from AA-rated corporate bond yields, except in countries where there is no deep market in corporate
bonds, government bond yields are used instead. Discount rates are selected to reflect the term of the expected benefit payments.
Projected inflation rate and pension increases are long-term predictions based on the yield gap between long-term index-linked and
fixed-interest government bonds, where available, or on long-term inflation forecasts.
For the year ended 31 December 2021, GSK operated certain pension schemes in which the Group’s UK and US employees participated.
These schemes included defined benefit arrangements where the assets were held independently of the Group’s finances and which were
funded partly by contributions from members and partly by contributions from GSK at rates advised by independent qualified actuaries.
Before the demerger from GSK in July 2022, it was announced that GSK’s UK defined benefit plans and US cash balance pension plans
were closed to future accruals and GSK would continue to maintain the plans only for existing participants. GSK charged the Group
a management fee relating to the pension arrangements for the Group’s UK and US employees calculated as if the arrangements were
on a defined contribution basis. The costs of such defined contribution arrangements were not included with the pension charge.
This arrangement is not in practice post demerger.
Following the demerger from GSK, the Group operates its own defined contribution pension schemes for the Group’s UK and US employees.
In addition, there are a number of post-employment healthcare schemes, the principal one of which is in the US.
Financial Statements
Assumptions
The Group has applied the following financial assumptions in assessing the defined benefit liabilities:
2023 |
2022 |
|
%pa |
%pa |
|
Germany |
||
Rate of increase of future earnings |
3.0 |
3.0 |
Discount rate |
3.3 |
3.7 |
Expected pension increases |
2.1 |
2.5 |
Inflation rate |
2.1 |
2.5 |
Switzerland |
||
Rate of increase of future earnings |
2.0 |
2.0 |
Discount rate |
1.4 |
2.2 |
Expected pension increases |
N/A |
N/A |
Inflation rate |
1.3 |
1.3 |
Ireland |
||
Rate of increase of future earnings |
2.0 |
2.0 |
Discount rate |
3.3 |
3.6 |
Expected pension increases |
3.0 |
3.0 |
Inflation rate |
2.1 |
2.4 |
Rest of World |
||
Rate of increase of future earnings |
N/A |
N/A |
Discount rate |
5.1 |
5.4 |
Expected pension increases |
N/A |
N/A |
Inflation rate |
2.5 |
2.5 |
The average life expectancy assumed now for an individual at the age of 60 and projected to apply in the years stated below for an
individual then at the age of 60 is as follows:
As at 31 December 2023
Germany |
Switzerland |
Ireland |
Rest of World |
|||||
Years |
Male |
Female |
Male |
Female |
Male |
Female |
Male |
Female |
Current |
25.3 |
29.0 |
26.6 |
28.5 |
26.9 |
29.7 |
27.3 |
28.7 |
Projected for 2043 |
28.1 |
31.3 |
28.5 |
30.2 |
29.7 |
31.9 |
28.9 |
30.2 |
As at 31 December 2022
Germany |
Switzerland |
Ireland |
Rest of World |
|||||
Years |
Male |
Female |
Male |
Female |
Male |
Female |
Male |
Female |
Current |
25.7 |
29.4 |
26.5 |
28.4 |
26.8 |
29.5 |
27.3 |
28.6 |
Projected for 2042 |
28.7 |
31.7 |
28.4 |
30.1 |
29.4 |
31.7 |
28.8 |
30.1 |
The mortality rates are based on standard tables in each country (Heubeck 2018 in Germany, BVG 2020 in Switzerland and ILT15 in
Ireland) with allowances for future improvements.
Income statement
2023 |
2022 |
2021 |
|
£m |
£m |
£m |
|
German pension schemes |
5 |
5 |
4 |
Swiss pension schemes |
9 |
9 |
5 |
Irish pension schemes |
2 |
5 |
6 |
Other overseas pension schemes |
28 |
24 |
5 |
Unfunded post-employment healthcare schemes |
10 |
9 |
10 |
Total |
54 |
52 |
30 |
Analysed as: |
|||
Defined benefit pension schemes |
26 |
27 |
22 |
Defined contribution pensions schemes |
28 |
25 |
8 |
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
147
Notes to the Consolidated Financial Statements
continued
The costs of the defined benefit pension and post-employment healthcare schemes are charged in the income statement as follows:
Other post- |
|||
employ |
Total post- |
||
Net |
retirement |
employ |
|
pensions |
obligations |
retirement |
|
total |
total |
obligations |
|
£m |
£m |
£m |
|
2023 |
|||
Cost of sales |
10 |
8 |
18 |
Research and development |
1 |
— |
1 |
Selling, general and administration |
7 |
— |
7 |
31 December 2023 |
18 |
8 |
26 |
2022 |
|||
Cost of sales |
12 |
9 |
21 |
Research and development |
1 |
— |
1 |
Selling, general and administration |
5 |
— |
5 |
31 December 2022 |
18 |
9 |
27 |
2021 |
|||
Cost of sales |
10 |
10 |
20 |
Research and development |
— |
— |
— |
Selling, general and administration |
2 |
— |
2 |
31 December 2021 |
12 |
10 |
22 |
The amounts recorded in the income statement and statement of comprehensive income in relation to the defined benefit pension and
post-employment healthcare schemes were as follows:
2023 |
2022 |
2021 |
|||||||
Other |
Other |
Other |
|||||||
post- |
post- |
post- |
|||||||
employment |
employment |
employment |
|||||||
Pensions |
benefits |
Total |
Pensions |
benefits |
Total |
Pensions |
benefits |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
31 December |
|||||||||
Amounts charged to operating profit: |
|||||||||
Current service cost |
16 |
6 |
22 |
16 |
7 |
23 |
18 |
8 |
26 |
Past service cost/(credit) |
1 |
— |
1 |
1 |
— |
1 |
(4) |
— |
(4) |
Gain from settlement |
— |
— |
— |
— |
— |
— |
(3) |
— |
(3) |
Net interest cost |
1 |
2 |
3 |
1 |
2 |
3 |
1 |
2 |
3 |
Total |
18 |
8 |
26 |
18 |
9 |
27 |
12 |
10 |
22 |
Remeasurements recorded in the |
|||||||||
statement of comprehensive income |
(6) |
1 |
(5) |
(91) |
(32) |
(123) |
(8) |
(19) |
(27) |
Balance sheet
The assets of funded schemes are generally held in separately administered trusts, either as specific assets or as a proportion of a
general fund or are insurance contracts. Assets are invested in different classes in order to maintain a balance between risk and return.
Investments are diversified to limit the financial effect of the failure of any individual investment.
The pension plans are exposed to risk that arises because the estimated market value of the plans’ assets might decline, the investment
returns might reduce, or the estimated value of the plans’ liabilities might increase.
Long-term investment strategies for the plans, with investments across a broad range of assets, have been agreed with the trustees to
include return-seeking assets to generate future returns and liability-matching assets to better match future pension obligations. The
main market risks within the asset portfolio are credit risk, interest rates, long-term inflation, equities and property risk.
The plan liabilities are a series of future cash flows with relatively long duration. On an IAS 19 basis, these cash flows are sensitive to
changes in the expected long-term inflation rate and the discount rate (AA corporate bond yield curve) where an increase in long-term
inflation corresponds with an increase in the liabilities, and an increase in the discount rate corresponds with a decrease in the liabilities.
148
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
149
The fair values of the assets and liabilities of the German, Swiss and Irish defined benefit pension schemes, together with aggregated
data for other defined benefit pension schemes in the Group are as follows:
31 December 2023
Germany |
Switzerland |
Ireland |
Rest of World |
Total |
|
£m |
£m |
£m |
£m |
£m |
|
Listed equities |
53 |
76 |
47 |
5 |
181 |
Property |
— |
71 |
— |
— |
71 |
Listed bonds |
56 |
91 |
154 |
19 |
320 |
Insurance contracts |
23 |
49 |
— |
— |
72 |
Other assets |
1 |
31 |
2 |
12 |
46 |
Fair value of assets |
133 |
318 |
203 |
36 |
690 |
Asset ceiling restriction |
— |
(29) |
— |
— |
(29) |
Fair value of assets after asset ceiling |
133 |
289 |
203 |
36 |
661 |
Present value of scheme obligations |
(184) |
(289) |
(174) |
(50) |
(697) |
Recognised on the balance sheet |
(51) |
— |
29 |
(14) |
(36) |
Included in post-employment benefit assets |
— |
— |
29 |
7 |
36 |
Included in post-employment benefit obligations |
(51) |
— |
— |
(21) |
(72) |
Total |
(51) |
— |
29 |
(14) |
(36) |
Actual return on plan assets |
11 |
16 |
20 |
2 |
49 |
31 December 2022
Germany |
Switzerland |
Ireland |
Rest of World |
Total |
|
£m |
£m |
£m |
£m |
£m |
|
Listed equities |
48 |
81 |
69 |
6 |
204 |
Property |
— |
70 |
— |
— |
70 |
Listed bonds |
49 |
80 |
110 |
21 |
260 |
Insurance contracts |
26 |
46 |
— |
— |
72 |
Other assets |
— |
8 |
2 |
12 |
22 |
Fair value of assets |
123 |
285 |
181 |
39 |
628 |
Asset ceiling restriction |
— |
(34) |
— |
— |
(34) |
Fair value of assets after asset ceiling |
123 |
251 |
181 |
39 |
594 |
Present value of scheme obligations |
(185) |
(251) |
(163) |
(47) |
(646) |
Recognised on the balance sheet |
(62) |
— |
18 |
(8) |
(52) |
Included in post-employment benefit assets |
— |
— |
18 |
7 |
25 |
Included in post-employment benefit obligations |
(62) |
— |
— |
(15) |
(77) |
Total |
(62) |
— |
18 |
(8) |
(52) |
Actual loss on plan assets |
(19) |
(36) |
(67) |
(3) |
(125) |
The defined benefit pension obligation is analysed as follows:
2023 |
2022 |
|
£m |
£m |
|
Funded |
(684) |
(633) |
Unfunded |
(13) |
(13) |
Total |
(697) |
(646) |
Notes to the Consolidated Financial Statements
continued
The movement in the net defined benefit liability is as follows:
Present | Net | Net post- | ||
Fair value | value of | pensions | employment | |
of assets | obligation | total | obligations | |
£m | £m | £m | £m | |
At 1 January 2022 | 680 | (822) | (142) | (100) |
Exchange adjustments | 45 | (56) | (11) | (8) |
Service cost | — | (16) | (16) | (7) |
Past service cost | — | (1) | (1) | — |
Interest income/(cost) | 6 | (7) | (1) | (2) |
Remeasurements: | ||||
Return on plan assets, excluding amounts included in interest | (131) | — | (131) | — |
Gain from change in financial assumptions | — | 235 | 235 | 25 |
Experience (losses)/gains | — | (13) | (13) | 7 |
Employers’ contributions | 28 | — | 28 | — |
Scheme participants’ contributions | 7 | (7) | — | — |
Benefits paid | (41) | 41 | — | 1 |
At 31 December 2022 | 594 | (646) | (52) | (84) |
Exchange adjustments | 6 | (8) | (2) | 6 |
Service cost | — | (16) | (16) | (6) |
Past service cost | — | (1) | (1) | — |
Interest income/(cost) | 18 | (19) | (1) | (2) |
Remeasurements: | ||||
Return on plan assets, excluding amounts included in interest | 31 | — | 31 | — |
Gain from change in financial assumptions | — | (24) | (24) | (1) |
Experience (losses)/gains | — | (3) | (3) | 2 |
Employers’ contributions | 32 | — | 32 | — |
Scheme participants’ contributions | 7 | (7) | — | — |
Benefits paid | (27) | 27 | — | 1 |
At 31 December 2023 | 661 | (697) | (36) | (85) |
A reconciliation of the net post-employment benefit to the balances recognised on the consolidated balance sheet is as follows:
2023 | 2022 | |
£m | £m | |
Net pension obligations | (36) | (52) |
Net post-employment obligations | (85) | (84) |
Net post-employment benefit | (121) | (136) |
Post-employment benefit assets recognised on the consolidated balance sheet | 36 | 25 |
Post-employment benefit obligations recognised on the consolidated balance sheet | (157) | (161) |
Net post-employment benefit | (121) | (136) |
Employer contributions for 2024 are estimated to be approximately £31m in respect of defined benefit pension schemes and £1m in
respect of post-employment medical benefits.
The defined benefit pension and post-employment obligations analysed by membership category is as follows:
Pension | Post-employment obligations | |||
2023 | 2022 | 2023 | 2022 | |
£m | £m | £m | £m | |
Active | (354) | (389) | (76) | (81) |
Retired | (229) | (150) | (5) | (3) |
Deferred | (115) | (107) | (4) | — |
Total | (697) | (646) | (85) | (84) |
The approximate effect of changes in assumptions used on the benefit obligations and on the annual defined benefit and post-employment
costs are detailed below. This information has been determined by taking into account the duration of the liabilities and the overall
profile of the plan membership.
150
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
151
Sensitivity analysis
2023 |
2022 |
|
£m |
£m |
|
0.50% decrease in discount rate: |
||
Increase in annual pension cost |
2.2 |
2.2 |
Increase in annual post-employment benefits cost |
0.2 |
0.2 |
Increase in pension obligation |
47.4 |
42.9 |
Increase in post-employment benefits obligation |
3.8 |
3.7 |
0.50% increase in discount rate: |
||
Decrease in annual pension cost |
(2.1) |
(2.5) |
Decrease in annual post-employment benefits cost |
(0.2) |
(0.2) |
Decrease in pension obligation |
(42.7) |
(38.8) |
Decrease in post-employment benefits obligation |
(3.5) |
(3.3) |
1% increase in the rate of future healthcare inflation: |
||
Increase in annual post-retirement cost |
0.3 |
0.3 |
Increase in post-retirement obligation |
2.4 |
2.3 |
1% decrease in the rate of future healthcare inflation: |
||
Decrease in annual post-retirement cost |
(0.3) |
(0.3) |
Decrease in post-retirement obligation |
(2.4) |
(2.6) |
A one year increase in life expectancy: |
||
Increase in annual pension cost |
0.7 |
0.6 |
Increase in annual post-employment benefits cost |
0.1 |
— |
Increase in pension obligation |
18.0 |
16.2 |
Increase in post-employment benefits obligation |
0.9 |
1.0 |
The weighted average duration of the defined benefit obligation is as follows:
Years
2023 |
2022 |
|
Pension benefits |
14 |
15 |
Post-employment benefits |
14 |
13 |
Notes to the Consolidated Financial Statements
continued
152
Haleon
Annual Report and Form 20-F 2023
Financial Statements
the amount of the obligation can be reliably estimated and where the outflow of economic benefit is probable.
Provisions are measured at management’s best estimate of the most likely outcome of the expenditure required to settle the obligation
at the reporting date and are discounted to present value where the effect is material. Provisions are classified as non-current where
Provisions
Restructuring |
Other |
||
programmes |
provisions |
Total |
|
£m |
£m |
£m |
|
As at 1 January 2022 |
(112) |
(27) |
(139) |
Exchange adjustments |
(4) |
(2) |
(6) |
Charge for the period |
(7) |
(50) |
(57) |
Reversed unused |
35 |
5 |
40 |
Utilised |
50 |
15 |
65 |
Other movements |
2 |
(2) |
— |
As at 31 December 2022 |
(36) |
(61) |
(97) |
Exchange adjustments |
1 |
2 |
3 |
Charge for the period |
(87) |
(30) |
(117) |
Reversed unused |
4 |
3 |
7 |
Utilised |
25 |
10 |
35 |
Other movements |
(1) |
1 |
— |
As at 31 December 2023 |
(94) |
(75) |
(169) |
2023 |
2022 |
|
£m |
£m |
|
To be settled within one year |
(130) |
(71) |
To be settled after one year |
(39) |
(26) |
Total provisions |
(169) |
(97) |
Other provisions include employee-related, legal, environmental, and other provisions. Refer to Note 6, ‘Operating profit’ for further
considered probable or cannot be measured reliably. No provision is made for contingent liabilities, but there is a chance that they
At 31 December 2023, contingent liabilities, comprising guarantees and other items arising in the normal course of business, amounted
to £29m (2022: £30m).
The Group is involved in significant legal and administrative proceedings, principally relating to product liabilities. The most significant
of these matters, other than tax matters, are described herein. Provision is made for the outcome of tax, legal and other disputes
where it is both probable that the Group will suffer an outflow of funds and it is possible to make a reliable estimate of that outflow.
Legal proceedings
The Group may become involved in legal proceedings, in respect of which it is not possible to determine whether a potential outflow
is probable, or to make a reliable estimate of the expected financial effect, if any, that could result from the proceedings. In these
cases, appropriate disclosure about such cases would be included but no provision would be made. Costs associated with claims
made by the Group against third parties are charged to the income statement as they are incurred.
The Group makes provision for these proceedings on a regular basis as summarised in the accounting policy above.
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
153
With respect to each of the legal proceedings described below, other than those for which a provision has been made, the Group is
unable to make a reliable estimate of the expected financial effect at this stage. The Group does not believe that information about
the amount sought by the plaintiffs, if that is known, would be meaningful with respect to those legal proceedings. This is due to a
number of factors, including, but not limited to, the stage of proceedings, the entitlement of parties to appeal a decision and clarity
as to theories of liability, damages and governing law.
The Group’s position could change over time, and, therefore, there can be no assurance that any losses that result from the outcome
of any legal proceedings will not exceed by a material amount the value of the provisions reported in the Group’s financial statements.
If this were to happen, it could have a material adverse impact on the results of operations of the Group in the reporting period in
which the judgements are incurred or the settlements entered into.
Zantac litigation
GSK and/or Pfizer have been named as defendants (alongside other manufacturers of ranitidine, as well as retailers and distributors)
in personal injury lawsuits, as well as economic injury and medical monitoring class actions, filed in the US involving Zantac. The Group
understands that outside the US, there are class actions and individual actions pending against GSK and Pfizer in Canada, along with
a class action against GSK in Israel.
The Group is not a party to any Zantac claims and the Group has never marketed Zantac in any form in the US or Canada. The Group is
not primarily liable for any OTC or prescription Zantac claims.
The Group has received notices of potential claims for indemnification relating to OTC Zantac arising out of the Stock and Asset
Purchase Agreement (SAPA), which the Group has rejected on the basis that the scope of the indemnities set out in the SAPA only
covers the Consumer Healthcare businesses of GSK and Pfizer as conducted when their Consumer Healthcare joint venture was
formed in 2018. At that time, neither GSK nor Pfizer marketed OTC Zantac in the US or Canada.
Proton pump inhibitor litigation
The Group is a defendant in the ongoing proton pump inhibitor (PPI) litigation, in which plaintiffs allege that their use of PPIs caused
serious bodily injuries, predominantly kidney-related injuries.
The Group 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 was recognised in the Group’s Consolidated Financial Statements for
2022, and is not material to the Group’s financial position, results of operations or cash flows.
German competition litigation
In 2013, GlaxoSmithKline Consumer Healthcare GmbH & Co. KG and other members of a working group of a German trademark
association were fined by the Federal Cartel Office of Germany as a result of the exchange of certain information related to retailers
during meetings from 2004 to 2006.
Following the fine imposed by the Federal Cartel Office in 2013, the Group is party to civil proceedings in Germany brought by or on
behalf of retailers against the Group and other manufacturers of branded drugstore products, alleging that the exchange of information
within the working group led to higher purchase prices being paid by the retailers, and claiming that the Group and other working
group members are jointly and severally liable for potential damages. The proceedings are taking place in different courts across
2023 |
2022 |
|
£m |
£m |
|
Contracted for but not provided in the Consolidated Financial Statements: |
||
Intangible assets |
134 |
107 |
Property, plant and equipment |
58 |
126 |
Total |
192 |
233 |
Notes to the Consolidated Financial Statements
continued
154
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Share premium includes any premiums received on the issue of share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax benefits.
Other reserves include the following:
—
EBT shares reserve comprise shares held by an employee benefit trust in connection with the Group’s share-based incentive plans.
—
Cash flow hedge reserve comprises gains and losses relating to these types of financial instruments.
—
Merger reserve arises as a result of business combinations of entities under common control.
—
Other reserves comprise mainly differences between the fair value of the consideration paid for an investment, and the carrying
value of assets and liabilities acquired from business combinations under common control.
Translation reserve arises from the foreign currency translation of the Group’s foreign operations into the Group’s presentation currency.
Retained earnings includes all current and prior years’ retained profits, remeasurement gains/(losses), including any tax impacts on
Share capital and share premium
At |
||
31 December |
||
2022 and 2023 |
||
Ordinary shares at £0.01 each |
Number |
9,234,573,831 |
Share capital |
£’000 |
92,346 |
Share premium |
£’000 |
— |
The table above presents the movement of share capital and share premium of the Company for the year ended 31 December 2023.
All ordinary shares are issued and fully paid. All ordinary shares rank equally with regard to the Company’s residual assets. Holders of
these shares are entitled to dividends declared from time to time and are entitled to one vote per share at general meetings of the
Company. All rights attached to the Company’s shares held by the Group are suspended until those shares are reissued. The redeemable
preference shares carry limited class voting rights and no dividend rights.
Other reserves
The analysis of other reserves is as follows:
Cumulative |
|||||
translation |
EBT shares |
Cash flow |
Merger |
||
reserve |
reserve 1 |
hedge reserve |
reserve |
Total |
|
£m |
£m |
£m |
£m |
£m |
|
As at 1 January 2022 |
448 |
— |
8 |
(11,640) |
(11,184) |
Other comprehensive income |
— |
— |
142 |
— |
142 |
Effective portion of changes in fair value of hedging instruments |
— |
— |
— |
— |
— |
Amount reclassified to income statement |
— |
— |
— |
— |
— |
Effect of change in ultimate holding company |
— |
— |
— |
(47) |
(47) |
Exchange movements on overseas net assets |
598 |
— |
— |
— |
598 |
As at 31 December 2022 |
1,046 |
— |
150 |
(11,687) |
(10,491) |
Other comprehensive income |
— |
— |
12 |
— |
12 |
Effective portion of changes in fair value of hedging instruments |
— |
— |
— |
— |
— |
Amount reclassified to income statement |
— |
— |
(23) |
— |
(23) |
Purchase of shares by employee benefit trust |
— |
(38) |
— |
— |
(38) |
Exchange movements on overseas net assets |
(420) |
— |
— |
— |
(420) |
As at 31 December 2023 |
626 |
(38) |
139 |
(11,687) |
(10,960) |
1
Shares owned through an EBT. The total number of shares held in connection with employee share schemes as at 31 December 2023 was 10.4m.
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
155
The cumulative translation exchange in equity is attributable to:
Total |
|||
Non- |
cumulative |
||
Shareholders |
controlling |
translation |
|
of the Group |
interests |
reserve |
|
£m |
£m |
£m |
|
As at 1 January 2022 |
448 |
16 |
464 |
Exchange movements on overseas net assets |
598 |
(10) |
588 |
As at 31 December 2022 |
1,046 |
6 |
1,052 |
Exchange movements on overseas net assets |
(420) |
(7) |
(427) |
As at 31 December 2023 |
626 |
(1) |
625 |
Related parties
Upon the completion of the demerger on 18 July 2022, GSK ceased to be a related party of the Group under IAS 24, ‘Related
Party Disclosures’.
There were no significant transactions with Pfizer for the year ended 31 December 2023. The Group undertook significant transactions
with entities from within GSK during the period ended 18 July 2022, and the year ended 31 December 2021 and with entities from
within Pfizer for the years ended 31 December 2022 and 2021.
The Group had transactions with related parties under manufacture and supply agreements, distribution agreements, support service
agreements, provision of research and development, toll-manufacturing services and transitional services agreements. In addition, the
Group earned net interest income resulting from funds on-lent to GSK and Pfizer. All related party transactions are undertaken at arm’s
length in accordance with the Group transfer pricing policy.
Where the legal completion of local transfer of assets and liabilities has been delayed, but the Group is able to exercise control over
the relevant activities, the relevant net assets and profits have been recognised in the results.
Transaction values for the year ended 31 December (unless otherwise indicated):
Pfizer companies |
GSK companies |
||||
Period ended |
|||||
2023 |
2022 |
2021 |
18 July 2022 |
2021 |
|
£m |
£m |
£m |
£m |
£m |
|
Sales of goods |
— |
— |
— |
91 |
114 |
Purchases of goods |
— |
— |
— |
(41) |
(81) |
Services, royalties, and other income |
— |
— |
— |
74 |
20 |
Services, royalties, and other expense |
— |
(5) |
(68) |
(135) |
(354) |
Interest income |
— |
12 |
— |
30 |
10 |
Interest expense |
— |
— |
— |
(2) |
(4) |
Dividend paid |
124 |
3,801 |
367 |
8,129 |
781 |
Balance outstanding as at 31 December:
Pfizer companies |
GSK companies |
|||
2023 |
2022 |
2023 |
2022 |
|
£m |
£m |
£m |
£m |
|
Other amounts owing to related parties |
— |
— |
— |
— |
Other amounts owing from related parties |
— |
— |
32 |
51 |
Loan amounts owing to related parties |
— |
— |
— |
— |
Loan amounts owing from related parties |
— |
— |
— |
— |
Pre demerger, the Group had a £9,211m loan receivable from GSK/Pfizer together with £37m accrued interest receivable. This loan was
primarily funded by proceeds from the bond offerings during the first half of 2022 (refer to Note 19 ‘Borrowings’). The loan receivable
and interest accrued were exchanged to partially settle the £11,930m of pre-demerger dividend.
Notes to the Consolidated Financial Statements
continued
As at 31 December 2023, other amounts owing from GSK of £32m (2022: £51m) comprise balances arising from arrangements set up
with GSK before the demerger activities. Since these balances occurred when GSK was still a related party of the Group, they are
disclosed in the table above.
As at 31 December 2021, the loan amounts owing from related parties of £1,508m were held with GSK finance companies as part of
the Group’s banking arrangements received at the new risk-free benchmark rate -0.05% and were repayable on demand.
As at 31 December 2021, the loan amounts owing to related parties of £825m were held with GSK finance companies as part of the
Group’s banking arrangements. These balances were unsecured with interest largely paid at the new risk free benchmark rate +0.10%
or loss (FVTPL). The measurement basis is determined by reference to both the business model for managing the financial asset and
the contractual cash flow characteristics of the financial asset. For financial assets other than trade receivables, a 12-month expected
credit loss allowance is recorded on initial recognition. If there is subsequent evidence of a significant increase in the credit risk of an
asset, the allowance is increased to reflect the full lifetime expected credit loss. If there is no realistic prospect of recovery, the asset
Derivative financial instruments are used to manage exposure to market risks. The principal derivative instruments used by the Group
are forward foreign exchange contracts and swaps.
Derivative financial instruments are classified as held-for-trading and are measured at fair value. Derivatives designated as hedging
instruments are classified on inception as fair value hedges, cash flow hedges or net investment hedges. The treatment of changes in
the value of derivatives depends on their use as explained below.
Fair value hedges
Certain derivatives are held to hedge the risk of changes in value of a specific bond or other loan. In these situations, the Group designates
the liability and related derivative to be part of a fair value hedge relationship. The carrying value of the bond is adjusted by the fair
value of the risk being hedged, with changes going to the income statement. Gains and losses on the corresponding derivative are also
recognised in the income statement. The amounts recognised are offset in the income statement to the extent that the hedge is effective.
Ineffectiveness may occur if the critical terms do not exactly match, or if there is a value adjustment resulting from a change in credit
risk (in either the Group or the counterparty to the derivative) that is not matched by the hedged item. When the relationship no longer
meets the criteria for hedge accounting, the fair value hedge adjustment made to the bond is amortised to the income statement using
the effective interest method.
Cash flow hedges
Derivatives are also held to hedge the uncertainty in timing or amount of future forecast cash flows. Such derivatives are designated as
being part of cash flow hedge relationships. For an effective hedge, gains and losses from changes in the fair value of derivatives are
recognised in equity. Any ineffective elements of the hedge are recognised in the income statement. Ineffectiveness may occur if there
are changes to the expected timing of the hedged transaction. If the hedged cash flow relates to a non-financial asset, the amount
accumulated in equity is subsequently included within the carrying value of that asset. For other cash flow hedges, amounts deferred
in equity are taken to the income statement at the same time as the related cash flow. When a derivative no longer qualifies for hedge
accounting, any cumulative gain or loss remains in equity until the related cash flow occurs. When the cash flow takes place, the cumulative
gain or loss is taken to the income statement. If the hedged cash flow is no longer expected to occur, the cumulative gain or loss is taken
to the income statement immediately.
Net investment hedges
Certain derivatives and financial liabilities are designated as hedges of the currency risk on the Group’s investment in foreign
subsidiaries. Differences arising on retranslation of a financial liability designated as a foreign currency net investment hedge and
the fair value of derivatives are recorded in equity to the extent that the hedge is effective. These differences on retranslation and
the fair value of derivatives are reported within the income statement to the extent that the hedge is ineffective. Gains and losses
accumulated in equity are included in the income statement when the foreign operation is disposed of.
Derivatives for which hedge accounting is not applied
Derivatives not designated as hedges are held in order to hedge certain balance sheet items and commodity exposures. No hedge
The key objectives of the Group’s treasury activities are to minimise the net cost of financial operations and reduce volatility arising
from financial risks.
Treasury activities are governed by the Board. The Group has a Treasury Risk Committee (TRC), chaired by the CFO, that meets on
a regular basis to review treasury activities. The TRC’s members receive management information relating to treasury activities.
156
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
157
The Group may use a variety of financial instruments to finance its operations and derivative financial instruments to manage market
risks from these operations. Derivatives principally comprise of foreign exchange forward contracts and swaps which are used to
manage interest rate and foreign exchange risk on borrowings.
Derivatives are used exclusively for hedging purposes in relation to underlying business activities and not as trading or
speculative instruments.
The Group manages its capital to ensure that entities in the Group are able to operate as going concerns whilst availing themselves
of intercompany funding where appropriate.
2023 |
2022 |
|
£m |
£m |
|
Cash and cash equivalents |
1,044 |
684 |
Short-term borrowings |
(656) |
(437) |
Long-term borrowings |
(8,800) |
(10,003) |
Derivative financial assets associated with long-term borrowings |
69 |
44 |
Derivative financial liabilities associated with long-term borrowings |
(169) |
(181) |
Total equity |
16,729 |
16,457 |
Total capital |
8,217 |
6,564 |
As at 31 December 2023, the Group’s long-term credit rating with S&P Global Ratings (S&P) is BBB (stable outlook) (2022: BBB) and with
Moody’s Investors Service (Moody’s) it is Baa1 (stable outlook) (2022: Baa1). The Group’s short-term credit ratings are A-2 and P-2 with
The Group’s policy is to borrow centrally in order to meet anticipated funding requirements. The strategy is to diversify liquidity sources
and to maintain broad access to financial markets. Each day, the Group sweeps cash to or from a number of global subsidiaries and
central treasury accounts for liquidity management purposes.
The Group uses both notional and physical cash pool arrangements as appropriate by location and currency. For notional cash pools,
liquidity is drawn against foreign currency balances to provide both local funding and central liquidity as required and with balances
actively managed and maintained to appropriate levels. As balances in notional pooling arrangements are not settled across currencies,
gross cash and overdraft balances are reported. At 31 December 2023, the Group had £656m (2022: £437m) of borrowings repayable
within one year and held £1,044m (2022: £684m) of cash and cash equivalents.
The Group uses short-term financing to manage working capital requirements and has access to a $10,000m US commercial paper
programme and a £2,000m Euro commercial paper programme, both of which were established in August 2022. At 31 December 2023,
the Group had nil (2022: $225m) of US commercial paper in issue and nil (2022: €130m) of Euro commercial paper in issue.
The Group has access to two revolving credit facilities: a $1,300m facility maturing in September 2024; and a £900m facility maturing
in September 2026 with a one-year extension option. These committed facilities were undrawn at 31 December 2023.
Long-term financing consists of $8,448m in USD bonds, as well as €2,350m Euro bonds and £700m GBP bonds issued under a
Foreign exchange risk management
Foreign currency transaction exposures arising on internal and external trade flows are selectively hedged. The Group’s objective is
to minimise the exposure of overseas operating subsidiaries to transaction risk by matching local currency income with local currency
costs where possible. Foreign currency cash flows may be hedged selectively as approved by the TRC. Cash surpluses or borrowing
requirements of subsidiary companies are usually managed centrally using foreign exchange forward contracts and swaps to hedge
future repayments back into the originating currency.
Borrowings denominated in, or swapped into, foreign currencies that match investments in overseas Group assets may be treated as
a hedge against the relevant assets. Forward contracts in major currencies are also used to reduce exposure to the Group’s investment
in overseas assets. Refer to ‘Net investment hedges’ section of this Note for further details.
Notes to the Consolidated Financial Statements
continued
158
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Credit risk is the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group, and arises
on cash and cash equivalents and favourable derivative financial instruments held with banks and financial institutions as well as
credit exposures to wholesale and retail customers, including outstanding receivables.
The Group considers its maximum credit risk to be £2,777m (2022: £2,441m) which is the total of the Group’s financial assets, excluding
other investments which bear equity risk rather than credit risk.
The Group’s greatest concentration of credit risk at 31 December 2023 is £342m with HSBC (A-/A3), and £158m with Citigroup Inc.
(BBB+/A3). The Group’s greatest concentration of credit risk at 31 December 2022 was £310m with HSBC (A-/A3), and £158m with
Citigroup Inc. (BBB+/A3).
There has been no change in the estimation techniques or significant assumptions made during the current reporting period in assessing
the loss allowance for financial assets at amortised cost since the adoption of IFRS 9.
Treasury-related credit risk
The Group has continued to maintain a consistent approach to counterparty risk throughout the year. The aggregate credit risk in respect
of financial instruments that the Group may have with one counterparty is limited by reference to the long-term credit ratings assigned
for that counterparty by a recognised credit rating agency (e.g., S&P or Moody’s.) The Group measures expected credit losses over
cash and cash equivalents as a function of individual counterparty credit ratings and associated 12-month default rates. Based on the
available credit ratings, the credit risk of outstanding financial instruments has not increased significantly since their initial recognition.
Expected credit losses over cash and cash equivalents and third-party financial derivatives are deemed to be immaterial and so have
not been recognised. No such loss has been experienced during 2023 and 2022. The credit ratings of counterparties are set out in the
below table.
BB+/Ba1 |
||||||
and below |
||||||
AAA/Aaa |
AA/Aa |
A/A |
BBB/Baa |
or unrated |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
2023 |
||||||
Bank balances and deposits |
22 |
2 |
229 |
248 |
84 |
585 |
Money market funds |
93 |
363 |
— |
— |
— |
456 |
Cash and cash equivalents |
115 |
365 |
229 |
248 |
84 |
1,041 |
Government securities |
— |
— |
— |
— |
3 |
3 |
Derivative financial instruments |
— |
2 |
87 |
— |
— |
89 |
Total |
115 |
367 |
316 |
248 |
87 |
1,133 |
2022 |
||||||
Bank balances and deposits |
— |
87 |
276 |
252 |
59 |
674 |
Money market funds |
10 |
— |
— |
— |
— |
10 |
Cash and cash equivalents |
10 |
87 |
276 |
252 |
59 |
684 |
Derivative financial instruments |
— |
— |
59 |
35 |
— |
94 |
Total |
10 |
87 |
335 |
287 |
59 |
778 |
The credit ratings in the above tables are as assigned by S&P and Moody’s. Where the opinion of the two rating agencies differs, the
lower rating of the two is assigned to the counterparty. Where local rating or Fitch data is the only source available, the ratings are
converted to global ratings equivalent to those of S&P or Moody’s using published conversion tables.
Wholesale and retail credit risk
The Group does not have a substantial wholesale and retail credit risk as a result of its diversified geographical presence, product
offering, consumer profile, and historical credit loss information. Where appropriate, the Group utilises credit insurance and receivables
factoring to minimise the credit risk of the trade receivables in the Group (refer to Note 16 ‘Trade and other receivables’ for further
details about the Group’s expected credit losses). Factoring arrangements are based on a portfolio approach and are used to mitigate
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
159
The Group manages the interest rate risk on its net debt portfolio, with the objectives of minimising the effective net interest cost and
income statement volatility.
The Group’s main interest rate risk arises from borrowings and investments with floating rates and from the refinancing of maturing
fixed-rate debt where any changes in interest rates will affect future cash flows. The policy on interest rate risk management limits the
net amount of floating-rate debt to a specific cap.
77% of the Group’s debt was held at fixed rates as at 31 December 2023 (2022: 87%), including the impact of swaps. Any bond debt
with less than three months to maturity is considered floating rate.
The forward starting interest rate contracts, exchanging floating interest for fixed interest, were designated as cash flow hedges to
hedge the interest variability of the interest cash flows associated with the future fixed-rate debt.
The interest rate swap contracts, exchanging fixed interest rate for floating interest, have been designated as fair value hedges to
hedge the variability in fair value associated with the Group’s fixed-rate debt. The interest rate swaps and the interest payments on
the loan occur simultaneously and the fair value of interest rate swaps and the fair value of related debt affect the income statement
Derivative financial instruments and hedging
Derivative financial instruments are used to mitigate exposure to foreign exchange transactional risks of the Group. The fair value of
a derivative financial instrument is classified as a non-current asset or liability if the remaining maturity is more than 12 months and as
a current asset or liability if the maturity is less than 12 months. All foreign exchange contracts are for periods of 12 months or less.
The Group has the following derivative financial instruments:
2023 | 2022 | |||||
Notional | Fair value | Fair value | Notional | Fair value | Fair value | |
amount | of assets | of liabilities | amount | of assets | of liabilities | |
£m | £m | £m | £m | £m | £m | |
Non-current | ||||||
Fair value hedges — interest rate swap contracts | 3,210 | — | (109) | 2,207 | 2 | (139) |
Net investment hedges — cross currency interest rate swaps | 910 | 44 | — | 910 | 1 | (36) |
Current | ||||||
Net investment hedges — foreign exchange contracts | 1,140 | 5 | (3) | 329 | 1 | (8) |
Cash flow hedges — foreign exchange contracts | 437 | 14 | (5) | — | — | — |
Derivatives designated and effective as hedging instruments | 5,697 | 63 | (117) | 3,446 | 4 | (183) |
Non-current | ||||||
Cross currency interest rate swap contracts | 1,409 | 20 | (40) | 1,409 | 41 | — |
Current | ||||||
Foreign exchange contracts | 2,116 | 5 | (33) | 3,364 | 49 | (23) |
Derivatives classified as held for trading | 3,525 | 25 | (73) | 4,773 | 90 | (23) |
Total derivative instruments | 9,222 | 88 | (190) | 8,219 | 94 | (206) |
Fair value hedges
At issuance in March 2022, $1,750m and €850m bonds were converted from fixed rate to floating rate using interest rate swaps as
Cash flow hedges
In 2022, the Group entered into forward starting interest rate swaps (derivatives) to pre-hedge interest rate risk on the fixed rate
bonds issued in March 2022. These derivatives were designated in a cash flow hedge relationship. The derivatives were settled in
March 2022 and as a result cash flow hedges were terminated with a net cash inflow of £206m. The element of gains/losses of these
cash flow hedges relating to other comprehensive income is being amortised to the income statement as per the maturity profile of
the loan notes.
In 2023, the Group established a programme of hedging highly probable forecast transactional foreign exchange exposure using
foreign exchange contracts (FX forwards and FX swaps). The key exposure designated under cash flow hedge accounting are forecast
receipts from customers and payments to suppliers, capital expenditure and other administration expenses payable in foreign currency.
Notes to the Consolidated Financial Statements
continued
160
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Net investment hedges
At 31 December 2023 and 31 December 2022, certain foreign exchange contracts and cross currency interest rate swaps were
designated as net investment hedges in respect of the foreign currency translation risk arising on consolidation of the Group’s net
investment in its European (Euro) and Chinese (CNY) foreign operations as shown in the table above.
The carrying value of the EUR bonds in Note 19 ‘Borrowings’ included £1,503m (2022: £1,526m) that were also designated as hedging
instruments in net investment hedges in respect of the foreign currency translation risk arising on consolidation of the Group’s net
investment in its European (Euro) foreign operations. For net investment hedges, the balance in the foreign currency translation reserve
in relation to continuing hedges is £(77)m (2022: £140m).
Hedging instruments
Change in |
||||
fair value for |
||||
Notional |
recognising |
Carrying value |
||
principal |
hedge |
assets/ |
||
Average |
value |
ineffectiveness |
(liabilities) |
|
strike price |
£m |
£m |
£m |
|
2023 |
||||
Cash flow hedges |
||||
Below 10 years |
||||
FX forward contracts/FX swaps |
N/A |
437 |
8 |
8 |
Fair value hedges |
||||
Below 10 years |
||||
EUR IRS |
1.3% |
739 |
(35) |
(35) |
USD IRS |
3.4% |
2,471 |
(74) |
(74) |
Net investment hedges |
||||
Below 10 years |
||||
EUR FX swaps |
1.1 |
631 |
1 |
1 |
CNH CCIRS |
8.6 |
910 |
44 |
44 |
CNH FX swaps/forward |
9.0 |
510 |
1 |
1 |
EUR bonds |
N/A |
869 |
18 |
(858) |
10-30 years |
||||
EUR bonds |
N/A |
652 |
13 |
(646) |
2022 |
||||
Fair value hedges |
||||
Below 10 years |
||||
EUR IRS |
1.3% |
754 |
(59) |
(59) |
USD IRS |
3.1% |
1,454 |
(78) |
(78) |
Net investment hedges |
||||
Below 10 years |
||||
EUR FX swaps |
1.2 |
329 |
(7) |
(7) |
CNH CCIRS |
8.6 |
910 |
(35) |
(35) |
EUR bonds |
N/A |
887 |
(55) |
(867) |
10-30 years |
||||
EUR bonds |
N/A |
665 |
(43) |
(659) |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
161
Hedged items
| 2023 |
2022 |
|||||||
Change in |
Change in |
|||||||
value for |
Balance in |
value for |
Balance in |
|||||
Accumulated |
calculating |
cash flow |
Accumulated |
calculating |
cash flow |
|||
Carrying |
fair value |
hedge |
hedge |
Carrying |
fair value |
hedge |
hedge |
|
amount |
adjustments 1 |
ineffectiveness |
reserve 2 |
amount |
adjustments 1 |
ineffectiveness |
reserve 2 |
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
Cash flow hedges |
||||||||
Pre-hedging of long-term interest rate |
— |
— |
— |
(133) |
— |
— |
— |
(150) |
Transactional FX forecast exposure 3 |
437 |
— |
— |
(7) |
— |
— |
— |
|
Fair value hedges |
||||||||
Bonds 4 |
(3,131) |
109 |
109 |
— |
(2,078) |
122 |
122 |
— |
Net investment hedges |
||||||||
Net assets in foreign currency 5 |
3,571 |
(77) |
(77) |
— |
2,791 |
140 |
140 |
— |
1
Accumulated fair value adjustments on the hedged items included in the carrying amount of the hedged item.
2
Balance in cash flow hedge reserve for continued transactional FX forecast hedges and discontinued hedges net of tax.
3
In 2023 the Group established a programme to hedge forecast transactional foreign exchange exposure.
4
The difference in change in value for calculating hedge ineffectiveness between derivatives and bonds is due to upfront cash receipt on derivatives and hedge ineffectiveness.
5
Relates to net investment hedges which is part of the translation reserve in equity.
The following table details the effectiveness of the hedging relationships and the amounts reclassified from the hedging reserve to
the income statement for cash flow hedges, recognised under finance income or expense. There was no ineffectiveness on fair value
or net investment hedges.
Hedging gains/(losses) |
Hedge |
Hedged future cash |
||
in other comprehensive |
ineffectiveness |
flows no longer |
As hedged item |
|
income |
in profit or loss |
expected to occur |
affects profit or loss |
|
£m |
£m |
£m |
£m |
|
2023 |
||||
Cash flow hedges |
||||
Transactional FX hedge |
9 |
— |
— |
2 |
Pre-hedging of long-term interest rates |
||||
Below 10 years |
158 |
— |
— |
19 |
10-30 years |
29 |
— |
— |
3 |
2022 |
||||
Cash flow hedges |
||||
Pre-hedging of long-term interest rates |
||||
Below 10 years |
169 |
3 |
— |
18 |
10-30 years |
35 |
— |
— |
— |
The table on the next page presents the carrying amounts and the fair values of the Group’s financial assets and liabilities. The fair
values of the financial assets and liabilities are included at the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
The following methods and assumptions were used to estimate the fair values:
—
Cash and cash equivalents carried at amortised cost, trade and other receivables and certain other non-current assets, loans amounts
owing from/(to) related parties, trade and other payables and certain other non-current liabilities: approximates to the carrying amount.
—
Cash and cash equivalents (money market funds) carried at fair value: based on net asset value of the funds.
—
Short-term loans, overdrafts and commercial paper: approximates to the carrying amount because of the short maturity of
these instruments.
—
Interest rate swaps and foreign exchange contracts: based on present value of contractual cash flows using market-sourced data
(exchange rates and interest rates) at the balance sheet date.
—
Long-term loans: based on executable quotes or thinly traded prices (a level 2 fair value measurement) for European and US Medium
Term Notes; based on present value of contractual cash flows for non-voting preference shares and based on the approximation of
Notes to the Consolidated Financial Statements
continued
162
Haleon
Annual Report and Form 20-F 2023
Financial Statements
2023 |
2022 |
|||
Carrying |
Carrying |
|||
value |
Fair value |
value |
Fair value |
|
£m |
£m |
£m |
£m |
|
Financial assets measured at amortised cost: |
||||
Cash and cash equivalents |
588 |
588 |
674 |
674 |
Trade and other receivables and certain other non-current assets |
1,595 |
1,595 |
1,663 |
1,663 |
Loan amounts owing from related parties |
— |
— |
— |
— |
Financial assets mandatorily measured at fair value through profit or loss: |
||||
Held for trading derivatives that are not in a designated and effective hedging |
||||
relationship |
25 |
25 |
90 |
90 |
Cash and cash equivalents (money market funds) |
456 |
456 |
10 |
10 |
Derivatives designated and effective as hedging instruments |
||||
Fair value hedge |
— |
— |
2 |
2 |
Cash flow hedge |
14 |
14 |
— |
— |
Net investment hedge |
49 |
49 |
2 |
2 |
Total financial assets |
2,727 |
2,727 |
2,441 |
2,441 |
Financial liabilities measured at amortised cost: |
||||
Short-term loans and overdrafts |
(60) |
(60) |
(91) |
(91) |
Other bonds |
(4,601) |
(4,301) |
(7,783) |
(6,935) |
Commercial papers |
— |
— |
(302) |
(302) |
Non-voting preference shares |
(25) |
(25) |
(25) |
(25) |
Trade and other payables and certain other non-current liabilities in scope of IFRS 9 |
(3,123) |
(3,123) |
(3,253) |
(3,253) |
Bonds in a designated hedge relationship |
(4,634) |
(4,474) |
(2,078) |
(2,081) |
Financial liabilities mandatorily measured at fair value through profit or loss: |
||||
Held for trading derivatives that are not in a designated and effective hedging |
||||
relationship |
(73) |
(73) |
(23) |
(23) |
Derivatives designated and effective as hedging instruments |
||||
Fair value hedge |
(109) |
(109) |
(139) |
(139) |
Cash flow hedge |
(5) |
(5) |
— |
— |
Net investment hedge |
(3) |
(3) |
(44) |
(44) |
Total financial liabilities |
(12,633) |
(12,173) |
(13,738) |
(12,893) |
Net financial assets and financial liabilities |
(9,906) |
(9,446) |
(11,297) |
(10,452) |
Financial instruments held at fair value shown according to the fair value hierarchy is provided below. Financial assets and liabilities
held at fair value are categorised by the valuation methodology applied in determining their fair value. Where possible, quoted prices
in active markets are used (level 1). Where such prices are not available, the asset or liability is classified as level 2, provided all
significant inputs to the valuation model used are based on observable market data. If one or more of the significant inputs to the
valuation model is not based on observable market data, the instrument is classified as level 3.
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
163
Level 1 |
Level 2 |
Level 3 |
Total |
|
At 31 December 2023 |
£m |
£m |
£m |
£m |
Financial assets at fair value through profit or loss: |
||||
Held for trading derivatives that are not in a designated and effective hedging relationship |
— |
25 |
— |
25 |
Cash and cash equivalents (money market funds) |
456 |
— |
— |
456 |
Derivatives designated and effective as hedging instruments: |
||||
Cash flow hedge |
— |
14 |
— |
14 |
Net investment hedge |
— |
49 |
— |
49 |
Total financial assets |
456 |
88 |
— |
544 |
Financial liabilities at fair value through profit or loss: |
||||
Held for trading derivatives that are not in a designated and effective hedging relationship |
— |
(73) |
— |
(73) |
Derivatives designated and effective as hedging instruments |
||||
Fair value hedge |
— |
(109) |
— |
(109) |
Cash flow hedge |
— |
(5) |
— |
(5) |
Net investment hedge |
— |
(3) |
— |
(3) |
Total financial liabilities |
— |
(190) |
— |
(190) |
Level 1 |
Level 2 |
Level 3 |
Total |
|
At 31 December 2022 |
£m |
£m |
£m |
£m |
Financial assets at fair value through profit or loss: |
||||
Held for trading derivatives that are not in a designated and effective hedging relationship |
— |
90 |
— |
90 |
Cash and cash equivalents (money market funds) |
10 |
— |
— |
10 |
Derivatives designated and effective as hedging instruments in a fair value hedge |
||||
Fair value hedge |
— |
2 |
— |
2 |
Cash flow hedge |
— |
— |
— |
— |
Net investment hedge |
— |
2 |
— |
2 |
Total financial assets |
10 |
94 |
— |
104 |
Financial liabilities at fair value through profit or loss: |
||||
Held for trading derivatives that are not in a designated and effective hedging relationship |
— |
(23) |
— |
(23) |
Derivatives designated and effective as hedging instruments in a fair value hedge |
||||
Fair value hedge |
— |
(139) |
— |
(139) |
Cash flow hedge |
— |
— |
— |
— |
Net investment hedge |
— |
(44) |
— |
(44) |
Total financial liabilities |
— |
(206) |
— |
(206) |
Other assets and liabilities in scope of IFRS 9
The following table reconciles financial instruments within trade and other receivables and other non-current assets which fall within
the scope of IFRS 9 to the relevant balance sheet amounts.
The financial assets are predominantly non-interest earning. Non-financial instruments include tax receivables and prepayments,
which are outside the scope of IFRS 9.
| At 31 December 2023 | At 31 December 2022 | |||||
Financial | Non-financial | Financial | Non-financial | |||
instruments | instruments | Total | instruments | instruments | Total | |
£m | £m | £m | £m | £m | £m | |
Trade and other receivables (Note 16) | 1,567 | 289 | 1,856 | 1,634 | 247 | 1,881 |
Other non-current assets (Note 16) | 28 | 86 | 114 | 29 | 103 | 132 |
Total | 1,595 | 375 | 1,970 | 1,663 | 350 | 2,013 |
Notes to the Consolidated Financial Statements
continued
164
Haleon
Annual Report and Form 20-F 2023
Financial Statements
The following table reconciles financial liabilities within trade and other payables, other provisions and other non-current liabilities
which fall within the scope of IFRS 9 to the relevant balance sheet amounts. Accrued wages and salaries are included within financial
liabilities. Non-financial instruments include payments on account, tax and social security payables and provisions which do not arise
from contractual obligations to deliver cash or another financial asset, which are outside the scope of IFRS 9.
| At 31 December 2023 |
At 31 December 2022 |
|||||
Financial |
Non-financial |
Financial |
Non-financial |
|||
instruments |
instruments |
Total |
instruments |
instruments |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Trade and other payables (Note 18) |
(3,064) |
(462) |
(3,526) |
(3,224) |
(397) |
(3,621) |
Provisions (Note 21) |
(11) |
(158) |
(169) |
(11) |
(86) |
(97) |
Other non-current liabilities |
(48) |
(5) |
(53) |
(18) |
(4) |
(22) |
Total |
(3,123) |
(625) |
(3,748) |
(3,253) |
(487) |
(3,740) |
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally enforceable right to
offset the recognised amounts, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
There are also arrangements that do not meet the criteria for offsetting but still allow for the related amounts to be offset in certain
circumstances, such as bankruptcy or the termination of a contract.
The following tables set out the financial assets and liabilities that are offset, or subject to enforceable master netting arrangements and
other similar agreements but not offset, as at 31 December 2023 and 31 December 2022. The column ‘Net amount’ shows the impact on
the Group’s balance sheet if all offset rights were exercised.
Net financial |
|||||
Gross financial |
assets/ |
||||
Gross financial |
assets/ |
(liabilities) |
Related |
||
assets/ |
(liabilities) |
per balance |
amounts |
||
(liabilities) |
set off |
sheet |
not offset |
Net amount |
|
At 31 December 2023 |
£m |
£m |
£m |
£m |
£m |
Financial assets |
|||||
Derivative financial assets |
88 |
— |
88 |
(68) |
20 |
Financial liabilities |
|||||
Derivative financial liabilities |
(190) |
— |
(190) |
68 |
(122) |
At 31 December 2022 |
|||||
Financial assets |
|||||
Derivative financial assets |
94 |
— |
94 |
(58) |
36 |
Financial liabilities |
|||||
Derivative financial liabilities |
(206) |
— |
(206) |
58 |
(148) |
Amounts which do not meet the criteria for offsetting on the balance sheet but could be settled net in certain circumstances principally
relate to derivative transactions under International Swaps and Derivatives Association (ISDA) agreements where each party has the
option to settle amounts on a net basis in the event of default of the other party. As there is presently not a legally enforceable right
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
165
Sensitivity analysis
The two major foreign currencies in which the Group’s financial instruments are denominated are US Dollars and Euros. Financial
instruments are only considered sensitive to foreign exchange rates where they are not in the functional currency of the entity that
holds them. Intercompany loans which are fully hedged to maturity with a currency swap have been excluded from this analysis.
2023 |
2022 |
|
(Decrease)/ |
(Decrease)/ |
|
increase |
increase |
|
in income |
in income |
|
£m |
£m |
|
10 cent appreciation of the US Dollar |
— |
(1) |
10 cent depreciation of the US Dollar |
— |
1 |
10 cent appreciation of the Euro |
3 |
13 |
10 cent depreciation of the Euro |
(2) |
(10) |
The equity impact, shown below, for foreign exchange sensitivity relates to derivative and non-derivative financial instruments hedging
the Group’s net investments in its European (Euro) and Chinese (CNY) foreign operations.
2023 |
2022 |
|
(Decrease)/ |
(Decrease)/ |
|
increase |
increase |
|
in equity |
in equity |
|
£m |
£m |
|
10 cent appreciation of the CNY |
(17) |
(11) |
10 cent depreciation of the CNY |
16 |
11 |
10 cent appreciation of the Euro |
(210) |
(182) |
10 cent depreciation of the Euro |
177 |
152 |
The Group is exposed to interest rate risk on its outstanding borrowings and investments where any changes in interest rates will affect
future cash flows or the fair values of financial instruments. The table below shows the Group’s hypothetical sensitivity to changes in
interest rates in relation to Pound Sterling, US Dollar and Euro variable rate financial assets and liabilities, including derivatives. If the
interest rates applicable to floating-rate financial assets and liabilities were to have increased by 1% (100 basis points), and assuming
other variables had remained constant, it is estimated that the Group’s finance income for 2023 would have decreased by approximately
£47m (2022: decreased by approximately £45m). A 1% (100 basis points) movement in US Dollar interest rates would not have any
impact to equity (2022: no impact to equity). A 1% (100 basis points) movement in interest rates in relation to Pound Sterling or Euro is
not deemed to have a material effect on equity (2022: not deemed to have a material effect on equity).
2023 |
2022 |
|
Increase/ |
Increase/ |
|
(decrease) |
(decrease) |
|
in income |
in income |
|
£m |
£m |
|
1% (100 basis points) increase in Pound Sterling interest rates |
17 |
6 |
1% (100 basis points) increase in US Dollar interest rates |
(43) |
(32) |
1% (100 basis points) increase in Euro interest rates |
(19) |
(18) |
Notes to the Consolidated Financial Statements
continued
166
Haleon
Annual Report and Form 20-F 2023
Financial Statements
The following table provides an analysis of the anticipated contractual cash flows including interest payable for the Group’s borrowings
on an undiscounted basis. Interest is calculated based on debt held at the balance sheet date without taking account of future issuance.
Floating-rate interest is estimated using the prevailing interest rate at the balance sheet date. Cash flows in foreign currencies are
Trade |
||||||
payables |
||||||
and other |
||||||
Interest |
liabilities |
|||||
Interest on |
Lease |
on lease |
not in |
|||
Borrowings |
borrowings |
liabilities |
liabilities |
net debt |
Total |
|
At 31 December 2023 |
£m |
£m |
£m |
£m |
£m |
£m |
Due in less than one year |
608 |
275 |
48 |
22 |
3,110 |
4,063 |
Between one and two years |
1,336 |
236 |
36 |
5 |
13 |
1,626 |
Between two and three years |
707 |
220 |
25 |
2 |
— |
954 |
Between three and four years |
1,561 |
176 |
14 |
1 |
— |
1,752 |
Between four and five years |
299 |
163 |
7 |
— |
— |
469 |
After five years |
4,783 |
1,143 |
7 |
— |
— |
5,933 |
Gross contractual cash flows |
9,294 |
2,213 |
137 |
30 |
3,123 |
14,797 |
At 31 December 2022 |
||||||
Due in less than one year |
393 |
316 |
44 |
3 |
3,242 |
3,998 |
Between one and two years |
830 |
291 |
36 |
2 |
9 |
1,168 |
Between two and three years |
1,385 |
248 |
25 |
2 |
1 |
1,661 |
Between three and four years |
694 |
230 |
21 |
1 |
1 |
947 |
Between four and five years |
1,653 |
184 |
13 |
1 |
— |
1,851 |
After five years |
5,299 |
1,370 |
22 |
2 |
— |
6,693 |
Gross contractual cash flows |
10,254 |
2,639 |
161 |
11 |
3,253 |
16,318 |
cash flows. Cash flows in foreign currencies are translated using spot rates at 31 December. The gross cash flows of foreign exchange
contracts are presented for the purposes of this table although, in practice, the Group uses standard settlement arrangements to
reduce its liquidity requirements on these instruments.
2023 |
2022 |
|||
Receivables |
Payables |
Receivables |
Payables |
|
£m |
£m |
£m |
£m |
|
Foreign exchange contracts |
||||
Due in less than one year |
6,171 |
(6,180) |
5,476 |
(5,455) |
Interest rate swap contracts |
||||
Due in less than one year |
216 |
(289) |
153 |
(198) |
Between one and two years |
3,274 |
(3,326) |
173 |
(222) |
Between two and three years |
1,332 |
(1,294) |
1,916 |
(2,009) |
Between three and four years |
349 |
(347) |
573 |
(524) |
Between four and five years |
30 |
(29) |
— |
— |
After five years |
862 |
(864) |
— |
— |
Gross contractual cash flows |
12,234 |
(12,329) |
8,291 |
(8,408) |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
167
is calculated at the grant date using a fair value model and is charged to the income statement over the vesting period with
a corresponding adjustment to the equity share-based payment reserve. At the end of each reporting period, the Group reviews its
charge and revises it accordingly based on the number of shares expected to vest. The impact of the revision of the original estimates,
if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate.
For cash-settled share-based payments, the fair value of service rendered is based on the fair value of the liability related to the
Description of the Group’s plans
The Group operates a number of share-based payment schemes for Executive Directors and other employees which are predominantly
equity-settled, however may be cash-settled in certain locations.
Performance Share Plan
Under the Performance Share Plan, awards are granted to Executive Directors and other employees over ordinary shares or ADS in
Haleon plc at no cost. The percentage of each award that vests is based upon the performance of the Group over a defined measurement
period with dividends reinvested during the same period. The performance conditions attached to each award are based on two measures
over a three-year performance period. These are currently cumulative free cash flow (50%) and the ratio of net debt/adjusted EBITDA
(50%). In addition, an environmental, social and governance (ESG) qualifier applies which can reduce the level of the overall vesting by
up to 75%. The fair value of the awards is determined based on the closing share price on the day of grant. Starting from 2024, the
performance conditions are planned to be cumulative free cash flow (50%), adjusted diluted EPS (30%) and organic operating margin
improvement (20%) with the ESG qualifier working the same way.
Share Value Plan
Under the Share Value Plan, awards are granted to qualifying employees over ordinary shares or ADS in Haleon plc at no cost. These
awards generally vest after three years and there are normally no performance conditions attached. The fair value of these awards is
determined based on the closing share price on the day of grant and adjusted for the expected dividend yield of 1.54% (2022: 1.59%)
during the vesting period.
Share Save and Share Reward Plans
The Share Save and Share Reward Plans are HMRC-approved savings-related plans. These plans are made available to all UK employees.
The Share Save Plan enables participants to save up to £500 per month, over a fixed three-year period. At the end of the fixed period
the savings can be used to purchase ordinary shares in the Company at a predetermined discount of up to 20%, which is set at the time
of each Share Save launch.
Participants of the Share Reward Plan contribute up to £125 per month to purchase Haleon plc ordinary shares. The Company
then matches these purchases on a one-for-one basis. Participants are eligible to receive dividends during the holding period either
as cash or reinvested to buy further shares. The shares are placed in a UK resident trust and are available to the individual with tax
advantages after a five-year period.
Deferred Annual Bonus Plan (DABP)
Executive Directors are required to defer 50% of any bonus earned into an award over ordinary shares or ADS under the DABP, which
will normally vest on the third anniversary of grant, subject to continued employment. DABP awards are eligible for dividend equivalent
payments in respect of dividends that would have been paid on the ordinary shares or ADS up to the date the awards vest.
Incentives in the form of shares in the Group’s equity shareholder, GSK plc, were provided to employees under share award schemes
until the demerger date. The share-based compensation charge for these schemes has been recorded in the income statement as
selling, general and administration (2022: £61m, 2021: £59m). This expense was incurred in the form of a charge from GlaxoSmithKline
Services Unlimited, as calculated under IFRS 2. The share-based payment schemes that were operated prior to demerger have vested
early with all Haleon participants treated as good leavers.
Haleon has also issued Deferred Investment Awards, representing the conversion of legacy GSK awards subsequently issued in
Haleon plc ordinary shares. This is a cash-settled share-based payment transaction.
Notes to the Consolidated Financial Statements
continued
168
Haleon
Annual Report and Form 20-F 2023
Financial Statements
The total cost between each of the relevant schemes is as below:
Charge (£m) |
2023 |
2022 |
Equity-settled |
||
Performance Share Plan |
17 |
6 |
Share Value Plan |
58 |
9 |
Share Save Plan |
1 |
— |
Cash-settled |
||
Share Value Plan |
11 |
2 |
Total |
87 |
17 |
The Group has £13m of outstanding liabilities as at 31 December 2023 in relation to cash-settled awards (2022: £2m). There were no
cancellations or modifications to awards in 2023 or 2022.
The movements in ordinary shares, ADS awards and share options during the year, split between each of the relevant schemes, are
shown below:
Performance Share Plan |
Share Value Plan |
Share Save Plan 1 |
|||
Number of share awards (’000) |
Ordinary shares |
ADS |
Ordinary shares |
ADS |
Share options |
At 1 January 2022 |
|||||
Awards granted |
9,479 |
1,620 |
23,664 |
7,590 |
4,623 |
Dividends reinvested |
— |
— |
|||
Awards released/exercised |
— |
— |
— |
— |
— |
Awards cancelled |
— |
— |
— |
— |
— |
At 31 December 2022 |
9,479 |
1,620 |
23,664 |
7,590 |
4,623 |
Awards granted |
9,785 |
2,093 |
18,881 |
6,370 |
1,163 |
Dividends reinvested |
230 |
44 |
7 |
— |
n/a |
Awards released/exercised |
— |
— |
(653) |
(319) |
(9) |
Awards cancelled |
(453) |
(206) |
(2,958) |
(786) |
(287) |
At 31 December 2023 |
19,041 |
3,551 |
38,941 |
12,855 |
5,490 |
1
Number of share options exercisable as at 31 December 2023 was 168,350 (2022: nil).
Fair value of awards
The weighted average fair values of share awards and share options granted during the year were as below:
Weighted fair value |
2023 |
2022 |
Performance Share Plan |
||
Ordinary shares |
£3.33 |
£2.74 |
ADS |
$8.37 |
$6.23 |
Share Value Plan |
||
Ordinary shares |
£3.21 |
£2.70 |
ADS |
$8.00 |
$6.03 |
Share Save Plan 1 |
||
Share options |
£0.93 |
£0.89 |
1
Weighted average exercise prices (£) for options exercised during the year was £2.27.
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
169
For the purposes of valuing options in relation to the Share Save Plan to arrive at the share-based payment charge, a Black-Scholes
option pricing model has been used. The assumptions used in the model are as follows:
2023 Grant | 2022 Grant | |
Weighted average fair value at the measurement date (£) | 0.93 | 0.89 |
Risk-free interest rate (%) | 3.53 | 3.54 |
Expected dividend yield (%) | 1.88 | 1.59 |
Volatility (%) | 23.63 | 31.37 |
Expected life (years) | 3.5 | 3 |
Share Save Plan-related options grant price (including 20% discount) (£) | £2.66 | £2.27 |
The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the share options is
indicative of future trends, which may not necessarily be the actual outcome.
At 31 December 2023, the range of exercise prices on options outstanding were between £2.27 and £2.66 (2022: £2.27) with remaining
weighted average contractual life of 2.3 years (2022: 3.0 years). The weighted average market price on exercise during the year was £3.28.
There has been no change in the effective exercise price of any outstanding options during the year.
Employee benefit trusts
The Group sponsors employee benefit trusts (EBTs) to acquire and hold shares in Haleon plc to satisfy awards made under employee
share plans. The trustees of the EBTs purchase shares with finance provided by the Group by way of gifts or loans. The costs of running
the EBTs are charged to the income statement. Shares held by the EBTs are deducted from other reserves and amortised down to the
value of proceeds, if any, receivable from other subsidiaries on exercise by a transfer to retained earnings. The trustees have waived
their rights to dividends on the shares held by the EBTs. At 31 December 2023, the EBTs held 10.4m shares (2022: 0.2m shares) with a
predecessor accounting. Such business combinations are accounted for by recognising all assets and liabilities acquired at their previous
carrying values with effect from the beginning of the earliest period reported in the financial statements. No new goodwill arises from
such transactions and the differences between the fair value of the consideration paid and the carrying value of assets and liabilities
acquired is recorded within equity in the merger reserve.
Business combinations where common control does not exist before the transaction are accounted for using the acquisition accounting
method. Identifiable assets, liabilities and contingent liabilities acquired are measured at fair value at acquisition date. The consideration
transferred is measured at fair value and includes the fair value of any contingent consideration. Where the consideration transferred,
together with the non-controlling interest, exceeds the fair value of the net assets, liabilities and contingent liabilities acquired, the excess
is recorded as goodwill, denominated in the currency of the operation acquired.
The costs related to business combinations are charged to the income statement in the period in which they are incurred. Where not all
the equity of a subsidiary is acquired, the non-controlling interest is recognised either at fair value or at the non-controlling interest’s
Acquisitions
On 28 April 2023, the Group completed the acquisition of the Jacarepaguá (Brazil) manufacturing site from GSK for a final consideration
of £70m (BRL 434m) as a part of the demerger which has been accounted for as business combination. The fair value of the assets and
liabilities recorded has been finalised in the year ending 31 December 2023 which resulted in the recognition of a bargain purchase
gain of £7m. The gain from bargain purchase is a result of an increase in the fair value of identified assets during the period prior to
Notes to the Consolidated Financial Statements
continued
170
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Non-controlling interests comprises equity interests in entities not attributable, directly or indirectly, to a parent. The Group’s
shareholder approval at the Company’s AGM, this dividend will be paid on 16 May 2024 to holders of ordinary shares and ADRs on
A subsidiary is an entity directly or indirectly controlled by the Company. Control is achieved where the Company has existing rights
that give it the current ability to direct the activities that affect the Company’s returns and exposure or rights to variable returns from
the entity.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting policies in line with those used by the Group. All intra-group
transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in the net assets of
consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount
of those interests at the date of the original acquisition and the non-controlling shareholder’s share of changes in equity since the
date of the acquisition. Total comprehensive income is attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
List of subsidiaries
A full list of the Company’s subsidiaries (as defined in the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008) as at 31 December 2023 is detailed below:
Effective % |
|||
Company name |
ownership |
Security |
Registered address |
Wholly owned subsidiaries |
|||
Altogether Services, Inc. |
100% |
Common |
c/o United Corporate Services Inc., 10 Bank Street, |
Suite 560, White Plains NY 10606, United States |
|||
Consumer Healthcare Holdings Limited 2 |
100% |
Ordinary |
Building 5, First Floor, The Heights, Weybridge, |
Surrey, KT13 0NY, England |
|||
Consumer Healthcare Intermediate Holdings Limited 2 |
100% |
Ordinary |
Building 5, First Floor, The Heights, Weybridge, |
Surrey, KT13 0NY, England |
|||
Duncan Consumer Healthcare Philippines Inc. |
100% |
Common |
23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, |
Bonifacio Global City, Taguig City, 1634, Philippines |
|||
Ferrosan (No.2) AB 4 |
100% |
Ordinary |
Gävlegatan 16, 113 30, Stockholm, Sweden |
Ferrosan ApS |
100% |
A Shares, |
Delta Park 37, 2665, Vallensbæk Strand, Denmark |
B Shares |
|||
Glaxo Wellcome Ceylon Limited |
100% |
Ordinary, |
121 Galle Road, Kaldemulla, Moratuwa, Sri Lanka |
Ordinary B |
|||
GlaxoSmithKline Asia Private Limited |
100% |
Equity |
Patiala Road, Nabha 147201, Dist Patiala, Punjab, India |
GlaxoSmithKline Consumer Healthcare (Hong Kong) |
100% |
Ordinary |
23/F., Tower 6, The Gateway, 9 Canton Road, Tsimshatsui, |
Limited |
Kowloon, Hong Kong |
||
GlaxoSmithKline Consumer Healthcare (Thailand) Limited |
100% |
Ordinary |
13th Floor, Unit 13.06, Wave Place Building, 55 Wireless |
Road, Lumpini Sub-district, Pathumwan District, Bangkok, |
|||
10330, Thailand |
|||
GlaxoSmithKline Consumer Healthcare (UK) (No.1) |
100% |
Ordinary |
Building 5, First Floor, The Heights, Weybridge, |
Limited |
Surrey, KT13 0NY, England |
||
GlaxoSmithKline Consumer Healthcare GmbH |
100% |
Ordinary |
Schottenring 25, Wien, 1010 |
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG 2 |
100% |
Partnership |
Barthstr. 4, 80339, München, Germany |
Capital |
|||
GlaxoSmithKline Consumer Healthcare Investments |
100% |
Ordinary |
Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland |
(Ireland) (No 3) Limited 4 |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
171
Effective % | |||
Company name | ownership | Security | Registered address |
GlaxoSmithKline Consumer Healthcare Japan K.K. | 100% | Ordinary | 1-8-1 Akasaka Minato-ku, Tokyo, Japan |
GlaxoSmithKline Consumer Healthcare Mexico, | 100% | Ordinary, | Boulevard Adolfo Ruiz Cortines No. 3720, Torre 3 Piso 11, |
S. De R.L. de C.V. | Ordinary | Colonia Jardines del Pedregal, Alcaldía Alvaro Obregón, | |
Variable | Ciudad de México, C.P. 01900, Mexico | ||
GlaxoSmithKline Consumer Healthcare Pte. Ltd. 2 | 100% | Ordinary | 23, Rochester Park #03-02, Singapore, 139234, Singapore |
GlaxoSmithKline Consumer Healthcare Sdn. Bhd. | 100% | Ordinary | Lot 89, Jalan Enggang, Ampang / Hulu Kelang Industrial |
Estate, Selangor Darul Ehsan, 68000 Ampang, Malaysia | |||
GlaxoSmithKline Consumer Healthcare Vietnam | 100% | Charter | Floor 16, Metropolitan, 235 Dong Khoi, Ben Nghe Ward, |
Company Limited | Capital | District 1, Ho Chi Minh City, Vietnam | |
GlaxoSmithKline Consumer Private Limited | 100% | Equity | Patiala Road, Nabha 147201, Dist Patiala, Punjab, India |
GlaxoSmithKline Dungarvan Limited | 100% | Ordinary | Knockbrack, Dungarvan, Co Waterford, X35 RY76, Ireland |
GlaxoSmithKline Panama S.A. | 100% | Ordinary | Urbanizacion Industrial Juan D, Calles A Y B, |
Republic of Panama, Panama | |||
GlaxoSmithKline Paraguay S.A. | 100% | Ordinary | Oficial Gilberto Aranda 333, Planta Alta casi Salvador del |
Mundo, Asuncion, Paraguay | |||
GlaxoSmithKline Tuketici Sagligi Anonim Sirketi | 100% | Nominative | Esentepe Mah. Bahar Sk. Özdilek River Plaza, Vyndham |
Grand No: 13 İç Kapı No: 80 Şişli, Istanbul, Turkey | |||
GSK Bangladesh Private Limited | 100% | Ordinary | K-248/1 Dewalibari, Konabari, Gazipur-1700, Bangladesh, |
Gazipur, 1700, Bangladesh | |||
GSK CH Caricam Sociedad de Responsabilidad Limitada | 100% | Participation | Urbanizacion Industrial Juan D, Calles A Y B, |
interests | Republic of Panama, Panama | ||
GSK Consumer Healthcare Chile SpA | 100% | Interests share Av. Andrés Bello N°2687, 25th floor, Las Condes, Chile | |
GSK Consumer Healthcare Holdings (No.5) Limited | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
KT13 0NY, England | |||
GSK Consumer Healthcare Holdings (No.6) Limited | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
KT13 0NY, England | |||
GSK Consumer Healthcare Peru S.R.L | 100% | Ordinary | Av Jorge Basadre 349, piso 5, San Isidro, Lima, 05W-109, |
Peru | |||
GSK Consumer Healthcare Singapore Pte. Ltd. | 100% | Ordinary | 23, Rochester Park #03-02, Singapore, 139234, Singapore |
GSK Consumer Healthcare Trinidad and Tobago Limited | 100% | Ordinary | Level 2, Invader’s Bay Tower, Invader’s Bay, Port-of-Spain, |
Trinidad | |||
Haleon (China) Co. Ltd (formerly GlaxoSmithKline | 100% | Registered | Room 506, No.1 Shen’gang Boulevard, Lin-gang Special |
Consumer Healthcare (China) Co. Ltd) 3 | Capital | Area of China Pilot Free Trade Zone, Shanghai, 200000, | |
China | |||
Haleon (Shanghai) Health Management Consulting | 100% | Registered | Unit 03, 25th floor, No. 90 Qirong Road, Pilot Free Trade |
Co., Ltd. | Capital | Zone, China (Shanghai), China | |
Haleon (Suzhou) Pharmaceutical Co., Ltd. (formerly Wyeth | 100% | Registered | 4 Baodai West Road, Suzhou, Jiangsu Province, |
Pharmaceutical Co. Ltd) 3 | Capital | 215128, China | |
Haleon (Suzhou) Technology Co., Ltd. | 100% | Registered | Second floor of the Administrative building, No. 669, |
(formerly GlaxoSmithKline (Suzhou) Trading Co. Ltd) 3 | Capital | Gangpu, Guoxiang Street, Wuzhong Economic | |
Development Zone, Suzhou, China | |||
Haleon (Taizhou) Technology Co., Ltd (formerly | 100% | Registered | Room 708 in Building D, Phase II of New Drug Innovation |
GlaxoSmithKline Technology (Taizhou) Co. Ltd) 3 | Capital | Base, Taizhou, Jiangsu Province, 225300, China | |
Haleon Alcala, S.A. (formerly SmithKline Beecham S.A.) 3 | 100% | Ordinary | Ctra de Ajalvir Km 2.500, Alcala de Henares, 28806, |
Madrid, Spain | |||
Haleon Australia Pty Ltd | 100% | Ordinary | Level 48, 8 Parramatta Square, 10 Darcy Street, Parramatta, |
Sydney NSW 2150, Australia | |||
Haleon Belgium N.V. (formerly GlaxoSmithKline Consumer | 100% | Ordinary | Da Vincilaan 5, 1930 Zaventem, Belgium |
Healthcare S.A.) 3 | |||
Haleon Brasil Distribuidora Ltda (formerly GlaxoSmithKline | 100% | Quotas | Av das Americas, 3500, 4th floor, rooms 407-420, |
Brasil Produtos para Consumo e Saude Ltda) 3 | Rio de Janeiro, RJ, 22621-000, Brazil | ||
Haleon Canada ULC / Haleon Canada SRI | 100% | A Class | 1133 Melville Street, Suite 3500, The Stack, Vancouver BC |
(formerly GlaxoSmithKline Consumer Healthcare | Preference, | V6E 4E5, Canada | |
ULC/GlaxoSmithKline Soins De Sante Aux | Common | ||
Consommateurs SRI) 3 |
Notes to the Consolidated Financial Statements
continued
172
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Effective % | |||
Company name | ownership | Security | Registered address |
Haleon CH Israel Ltd (formerly GSK Consumer Healthcare | 100% | Ordinary | 25 Basel Street, Petech Tikva 49510, Israel |
Israel Ltd) 3 | |||
Haleon CH SARL (formerly GSK Consumer Healthcare | 100% | Ordinary | Route de I’Etraz, 1197 Prangins, Switzerland |
SARL)2,3 | |||
Haleon Colombia S.A.S. (formerly GlaxoSmithKline | 100% | Ordinary | Carrera 7 No. 113-43 Piso 4, Colombia |
Consumer Healthcare Colombia S.A.S.) 3 | |||
Haleon Costa Rica S.A. (formerly GlaxoSmithKline Costa | 100% | Ordinary | Oficentro Terracampus, Edificio, Uno, Quinto Piso, |
Rica S.A.) 3 | Autopista Florencio del Castillo, kilometro siete, Cartago, | ||
La Unión San Diego, Costa Rica | |||
Haleon Czech Republic s.r.o. (formerly Consumer Healthcare | 100% | Ordinary | Hvezdova 1734/2c, Prague, 4 140 00, Czech Republic |
Czech Republic s.r.o.) 3 | |||
Haleon Denmark Aps (formerly GlaxoSmithKline | 100% | Ordinary | Delta Park 37, 2665, Vallensbæk Strand, Denmark |
Consumer Healthcare Aps) 3 | |||
Haleon EG General Trading LLC (formerly GSK Consumer | 100% | Quotas | North 90th street, Boomerang Building, 5th District, |
Healthcare Egypt LLC) 3 | Cairo, Egypt | ||
Haleon EG Limited (formerly GSK Consumer Healthcare | 100% | Ordinary | North 90th street, Boomerang Building, 5th District, |
Egypt Limited) 3 | Cairo, Egypt | ||
Haleon Finland Oy (formerly GlaxoSmithKline Consumer | 100% | Ordinary | Energiakuja 3, Helsinki, 00180, Finland |
Healthcare Finland Oy) 3 | |||
Haleon France (formerly GlaxoSmithKline Santé | 100% | Ordinary | 23 rue François Jacob, 92500, Rueil-Malmaison, France |
Grand Public) 3 | |||
Haleon Germany GmbH | 100% | Ordinary | Barthstr. 4, 80339, München, Germany |
Haleon Hellas Single Member Societe Anonyme (formerly | 100% | Ordinary | 274 Kifissias Avenue Halandri, Athens, 152 32, Greece |
GlaxoSmithKline Consumer Healthcare Hellas Single | |||
Member Societe Anonyme) 3 | |||
Haleon Holdings (No.2) LLC (formerly GSK Consumer | 100% | LLC Interests | Corporation Service Company, 251 Little Falls Drive, |
Healthcare Holdings No. 2 LLC) 2,3 | Wilmington DE 19808, United States | ||
Haleon Hungary Korlátolt Felelosségu Társaság | 100% | Membership | H-1124, Csorsz utca 43, Budapest, Hungary |
(formerly GlaxoSmithKline-Consumer Hungary Kft.) 3 | Interests | ||
Haleon Insurance Limited (formerly GSK Consumer | 100% | Ordinary | Dorey Court, Admiral Park, St Peter Port, GY1 4AT, Guernsey |
Healthcare Insurance Limited) 3 | |||
Haleon Intermediate Holdings Limited 1,2 | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
KT13 0NY, England | |||
Haleon Ireland Limited (formerly GlaxoSmithKline | 100% | Ordinary | 12 Riverwalk, Citywest Business Campus, Dublin 24, Ireland |
Consumer Healthcare (Ireland) Limited) 3 | |||
Haleon Italy Manufacturing S.r.l. (formerly Pfizer | 100% | Quotas | 90, Via Nettunese, 04011, Aprilia (Prov. di Latin), Italy |
Consumer Manufacturing Italy S.r.l.) 2,3 | |||
Haleon Italy S.r.l. (formerly GlaxoSmithKline Consumer | 100% | Ordinary | Via Monte Rosa 91, Milano, Italy, 20149 |
Healthcare S.r.l.) 3 | |||
Haleon Kazakhstan Limited Liability Partnership | 100% | Charter | 32 A Manasa Str., Bostandyk District, Almaty, 050008, |
(formerly GSK CH Kazakhstan LLP) 3 | Capital | Kazakhstan | |
GlaxoSmithKline Limited 3 | 100% | Ordinary | Likoni Road, PO Box 78392, Nairobi, Kenya |
Haleon Korea Co., Ltd. (formerly GlaxoSmithKline | 100% | Ordinary | 9F LS Yongsan Tower, 92 Hangang-daero, Yongsan-gu, |
Consumer Healthcare Korea Co., Ltd.) 3 | Seoul, 04386, Republic of Korea | ||
Haleon Levice, s.r.o. (formerly GSK Consumer Healthcare | 100% | Ordinary | Priemyselny Park Gena, Ul. E. Sachsa 4-6, 934 01, |
Levice, s.r.o.) 3 | Levice, Slovakia | ||
Haleon Netherlands B.V. (formerly GlaxoSmithKline | 100% | Ordinary | Van Asch van Wijckstraat 55G, 3811 LP, Amersfoort, |
Consumer Healthcare B.V.) 3 | Netherlands | ||
Haleon Netherlands Capital B.V. (formerly GSK Consumer | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Healthcare Capital NL B.V.) 3 | KT13 0NY, | ||
Haleon New Zealand ULC | 100% | Ordinary | Level 1, 1.04, 12 Madden Street, Auckland, 1010, |
New Zealand | |||
Haleon Norway AS (formerly GlaxoSmithKline Consumer | 100% | Ordinary | Lysaker Torg 5, 3rd floor, Lysaker, 1366, Norway |
Healthcare Norway AS) 3 | |||
Haleon Philippines, Inc. (formerly GlaxoSmithKline | 100% | Common | 23rd Floor, The Finance Centre, 26th Street Corner 9th Avenue, |
Consumer Healthcare Philippines Inc.) 3 | Bonifacio Global City, Taguig City, 1634, Philippines |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
173
Effective % | ||
Company name | ownership Security | Registered address |
Haleon Poland sp. z.o.o. (formerly GlaxoSmithKline | 100% Ordinary | Rzymowskiego 53, 02-697, Warszawa, Poland |
Consumer Healthcare Sp. z.o.o.) 3 | ||
Haleon Portugal, Lda. (formerly GlaxoSmithKline | 100% Ordinary | Rua Dr Antonio Loureiro Borges No 3, Arquiparque, |
Consumer Healthcare, Produtos para a Saude e Higiene, | Quota | Miraflores, 1495-131, Alges, Portugal |
Lda) 3 | ||
Haleon Romania SRL (formerly GlaxoSmithKline Consumer | 100% Ordinary | 1-5 Costache Negri Street, Opera Center One, 6th floor |
Healthcare S.R.L.) 3 | (Zone 2), District 5, Bucharest, Romania | |
GlaxoSmithKline Consumer Healthcare Saudi Limited 3 | 100% Ordinary | 603 Salamah Tower, 6th Floor, Madinah Road, |
Al-Salamah District, Jeddah 21425, Saudi Arabia | ||
Haleon Schweiz AG (formerly GSK Consumer Healthcare | 100% Ordinary | Suurstoffi 14, 6343, Rotkreuz, Switzerland |
Schweiz AG) 3 | ||
Haleon Slovakia s. r. o. (formerly GlaxoSmithKline | 100% Ownership | Galvaniho 7/A, Bratislava, 821 04, Slovakia |
Consumer Healthcare Slovakia s. r. o.) 3 | Interests | |
Haleon South Africa (Pty) Ltd (formerly GlaxoSmithKline | 100% Ordinary | 17 Muswell Road South, Block D - Wedgefield Phase 2, |
Consumer Healthcare South Africa (Pty) Ltd) 3 | Bryanston, Gauteng, 2191, South Africa | |
Haleon Spain, S.A. (formerly GlaxoSmithKline Consumer | 100% Ordinary | Severo Ochoa, 2, Parque Tecnologico de Madrid, Tres |
Healthcare, S.A.) 3 | Cantos, 28760, Madrid, Spain | |
Haleon Sweden AB (formerly GlaxoSmithKline Consumer | 100% Ordinary | Gävlegatan 16, 113 30, Stockholm, Sweden |
Healthcare AB) 3 | ||
Haleon UK Capital plc (formerly GSK Consumer | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Healthcare Capital UK plc) 2,3 | KT13 0NY, England | |
Haleon UK Corporate Director Limited (formerly GSK | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Holdings (No.4) Limited) 3 | KT13 0NY, England | |
Haleon UK Corporate Secretary Limited (formerly GSK | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Holdings (No.8) Limited) 3 | KT13 0NY, England | |
Haleon UK Enterprises Limited 2 | 100% Voting shares | Building 5, First Floor, The Heights, Weybridge, Surrey, |
KT13 0NY, England | ||
Haleon UK Export Limited | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
(formerly GSK Consumer Healthcare Export Limited) 3 | KT13 0NY, United Kingdom | |
Haleon UK Finance (USD) Limited (formerly | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
GlaxoSmithKline Consumer Healthcare Finance | KT13 0NY, England | |
No.2 Limited) 3 | ||
Haleon UK Finance Limited (formerly GlaxoSmithKline | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Finance Limited) 3 | KT13 0NY, England | |
Haleon UK Holding Canada Limited (formerly GSK | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Canada Holding Company Limited) 3 | KT13 0NY, England | |
Haleon UK Holding New Zealand Limited (formerly GSK | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
New Zealand Holding Company Limited) 3 | KT13 0NY, England | |
Haleon UK Holding Sri Lanka Limited (formerly | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
GlaxoSmithKline Consumer Healthcare Sri Lanka | KT13 0NY, England | |
Holdings Limited) 3 | ||
Haleon UK Holdings (No.1) Limited (formerly GSK | 100% Non-voting | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Holdings (No.1) Limited) 2,3 | preference | KT13 0NY, England |
shares; | ||
Ordinary | ||
Haleon UK Holdings (No.2) Limited (formerly | 100% A Shares; | Building 5, First Floor, The Heights, Weybridge, Surrey, |
GlaxoSmithKline Consumer Healthcare Holdings | B Shares; | KT13 0NY, England |
(No.2) Limited) 2,3 | Preference | |
shares; | ||
Deferred | ||
shares | ||
Haleon UK Holdings (No.3) Limited (formerly GSK | 100% Non-voting | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Holdings (No.3) Limited) 3 | preference | KT13 0NY, England |
shares; | ||
Ordinary | ||
Haleon UK Holdings (No.7) Limited (formerly GSK | 100% Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Holdings (No.7) Limited) 3 | KT13 0NY, England |
Notes to the Consolidated Financial Statements
continued
174
Haleon
Annual Report and Form 20-F 2023
Financial Statements
Effective % | |||
Company name | ownership | Security | Registered address |
Haleon UK Holdings Limited (formerly GlaxoSmithKline | 100% | A Shares, | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare Holdings Limited) 2,3 | B Shares, | KT13 0NY, England | |
C Shares | |||
Haleon UK IP (No.2) Limited (formerly Stiefel Consumer | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Healthcare (UK) Limited) 3 | KT13 0NY, England | ||
Haleon UK IP Limited (formerly GlaxoSmithKline | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare (UK) IP Limited) 2,3 | KT13 0NY, England | ||
Haleon UK Research Limited | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
KT13 0NY, England | |||
Haleon UK Services Limited 2 | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
KT13 0NY, England | |||
Haleon UK Trading Limited (formerly GlaxoSmithKline | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
Consumer Healthcare (UK) Trading Limited) 2,3 | KT13 0NY, England | ||
Haleon UK Trading Services Limited (formerly | 100% | Ordinary | Building 5, First Floor, The Heights, Weybridge, Surrey, |
GlaxoSmithKline Consumer Trading Services Limited) 2,3 | KT13 0NY, United Kingdom | ||
Haleon US Capital LLC (formerly GSK Consumer | 100% | LLC Interests | Corporation Service Company, 251 Little Falls Drive, |
Healthcare Capital US LLC) 2,3 | Wilmington DE 19808, United States | ||
Haleon US Holdings Inc. (formerly GSK Consumer | 100% | Preferred, | Corporation Service Company, 251 Little Falls Drive, |
Healthcare Holdings (US) Inc.) 3 | Common | Wilmington DE 19808, United States | |
Haleon US Holdings LLC (formerly GlaxoSmithKline | 100% | LLC Interests | Corporation Service Company, 251 Little Falls Drive, |
Consumer Healthcare Holdings (US) LLC) 2,3 | Wilmington DE 19808, United States | ||
Haleon US Inc. (formerly GSK Consumer Health, Inc.) 3 | 100% | Common | Corporation Service Company, 251 Little Falls Drive, |
Wilmington DE 19808, United States | |||
Haleon US IP LLC (formerly GlaxoSmithKline Consumer | 100% | LLC Interests | Corporation Service Company, 251 Little Falls Drive, |
Healthcare (US) IP LLC) 3 | Wilmington DE 19808, United States | ||
Haleon US LLC (formerly GlaxoSmithKline Consumer | 100% | LLC Interests | Corporation Service Company, 2595 Interstate Drive Suite 103, |
Healthcare L.L.C.) 3 | Harrisburg PA 17110, United States | ||
Haleon US Services Inc. (formerly GSK Consumer | 100% | Common | Corporation Service Company, 251 Little Falls Drive, |
Healthcare Services, Inc.) 3 | Wilmington DE 19808, United States | ||
Iodosan S.p.A. | 100% | Ordinary | Via Monte Rosa 91, Milano, Italy, 20149 |
JSC Haleon Rus (formerly GlaxoSmithKline | 100% | Ordinary | Premises III, Room 9, floor 6, Presnenskaya nab. 10, |
Healthcare AO) 3 | 123112, Moscow, Russian Federation | ||
Kuhs GmbH | 100% | Ordinary | Barthstr. 4, 80339, München, Germany |
Limited Liability Company “Haleon Ukraine” | 100% | Ownership | Pavla Tychyny avenue, 1-V, Kiev, 02152, Ukraine |
(formerly GlaxoSmithKline Healthcare Ukraine O.O.O.) 3 | Interests | ||
N.C.H. — Nutrition Consumer Health Ltd | 100% | Ordinary | 14 Hamephalsim St, Petach Tikva, Israel |
Northstar Switzerland SARL | 100% | Ordinary | Route de I’Etraz 2, c/o Haleon CH SARL, 1197 Prangins, |
Switzerland | |||
P.T. Sterling Products Indonesia | 100% | A Shares; | Pondok Indah Office Tower 5 Level 12, Suite 1201, Jalan |
B Shares | Sultan Iskandar Muda Kav. V-TA, Pondok Pinang, Jakarta | ||
Selatan 12310, Indonesia | |||
Panadol GmbH | 100% | Ordinary | Barthstr. 4, 80339, München, Germany |
PF Consumer Healthcare B.V. | 100% | Class A, | Van Asch van Wijckstraat 55G, 3811 LP Amersfoort, |
Class B | Netherlands | ||
PF Consumer Healthcare Brazil Importadora e | 100% | Quota | Barueri, at Avenida Ceci, No.1900, Block III, Part 67, |
Distribuidora de Medicamentos Ltda | Tambore District, Sao Paulo, 06460, Brazil | ||
PF Consumer Healthcare Canada ULC/ | 100% | Common | 1133 Melville Street, Suite, 3500, The Stack, Vancouver BC |
PF Soins De Sante SRI | V6E 4E5, Canada | ||
PF Consumer Healthcare Holding B.V. | 100% | Ordinary | Van Asch van Wijckstraat 55G, 3811 LP Amersfoort, |
Netherlands | |||
PF Consumer Taiwan LLC | 100% | Interests | The Corporation Trust Company, Corporation Trust Center, |
1209 Orange Street, Wilmington DE 19801, United States | |||
Pfizer Laboratories PFE (Pty) Ltd. | 100% | Common | Flushing Meadows Building, The Campus, 57 Sloane Street, |
Bryanston 2021, South Africa |
Financial Statements
Notes to the Consolidated Financial Statements
Haleon
Annual Report and Form 20-F 2023
175
Effective % | |||
Company name | ownership | Security | Registered address |
Pfizer PFE Colombia S.A.S | 100% | Common | Carrera 7 No. 113-43 Piso 4, Colombia |
PT Haleon Indonesia Trading | 100% | Ordinary | Pondok Indah Office Tower 5 Level 12, Suite 1201, Jalan |
Sultan Iskandar Muda Kav. V-TA, Pondok Pinang, Jakarta | |||
Selatan 12310, Indonesia | |||
PT. Bina Dentalindo 4 | 100% | Ordinary | Gedung Graha Ganesha Lantai 3, Jl Raya Bekasi Km 17, No5, |
Jakarta Timur 13930, Indonesia | |||
Stafford-Miller (Ireland) Limited 2 | 100% | Ordinary | Clocherane, Youghal Road, Dungarvan, Co. Waterford, |
Ireland | |||
Sterling Drug (Malaya) Sdn Berhad | 100% | Ordinary | Lot 89, Jalan Enggang, Ampang / Hulu Kelang Industrial |
Estate, Selangor Darul Ehsan, 68000 Ampang, Malaysia | |||
Sterling Products International, Incorporated | 100% | Common | Corporation Service Company, 251 Little Falls Drive, |
Wilmington DE 19808, United States | |||
Treerly Health Co., Ltd | 100% | Registered | Unit 01A, Room 3901, No 16. East Zhujiang Road, Tianhe |
Capital | District, Guangzhou City, China | ||
Wyeth Pharmaceuticals Company | 100% | Partnership | State Road No. 3, Kilometer 142.1, Guayama, 00784, |
Interests | Puerto Rico |
Subsidiaries where the effective interest is less than 100%
Effective % | |||
Company name | ownership | Security | Registered address |
GSK-Gebro Consumer Healthcare GmbH | 50.0% | Ordinary | Bahnhofbichl 13, 6391 Fieberbrunn, Kitzbühel, Austria |
Haleon Pakistan Limited (formerly GlaxoSmithKline | 85.8% | Ordinary | 11-A, 11th Floor, Sky Tower (East Wing), Dolmen City, HC-3, |
Consumer Healthcare Pakistan Limited) 3 | Block 4, Scheme-5, Clifton, Karachi, Sindh 75600, Pakistan | ||
Haleon US Enterprises Inc. (formerly Beecham | 88.0% | Common | Corporation Service Company, 251 Little Falls Drive, |
Enterprises Inc.) 3 | Wilmington DE 19808, United States | ||
Haleon US LP (formerly GlaxoSmithKline Consumer | 88.0% | Partnership | Corporation Service Company, 251 Little Falls Drive, |
Healthcare, L.P.) 2,3 | Interests | Wilmington DE 19808, United States | |
Pfizer Biotech Corporation | 55.0% | Ordinary | 24F, No. 66, Sec 1, Zhong Xiao W. Rd, Taipei 100, Taiwan |
Sino-American Tianjin Smith Kline | 55.0% | Ordinary | Cheng Lin Zhuang Industrial Zone, Dong Li District, |
& French Laboratories Ltd 2 | Tianjin, 300163, China | ||
SmithKline Beecham (Private) Limited | 99.7% | Ordinary | World Trade Center, Level 34, West Tower, Echelon Square, |
Colombo 1, Sri Lanka |
The following UK subsidiaries will take advantage of the audit exemption set out within Section 479A of the Companies Act 2006,
supported by guarantees issued by Haleon plc (under Section 479C of the Companies Act 2006) over their liabilities for the year ended
31 December 2023. Unless otherwise stated, the undertakings listed below are owned, either directly or indirectly, by the Company.
Company | |
Name | number |
Consumer Healthcare Holdings Limited | 11986432 |
Consumer Healthcare Intermediate Holdings Limited | 11986416 |
GlaxoSmithKline Consumer Healthcare (UK) (No.1) Limited | 00753340 |
Haleon UK Holding Canada Limited | 12342809 |
Haleon UK Holding New Zealand Limited | 12342879 |
Haleon UK Holding Sri Lanka Limited | 09400298 |
Haleon UK Holdings (No.1) Limited | 13355627 |
Haleon UK Holdings (No.3) Limited | 13401293 |
Haleon UK Holdings (No.7) Limited | 13414769 |
Notes to the Consolidated Financial Statements
continued
176
Haleon
Annual Report and Form 20-F 2023
Financial Statements
The following UK subsidiaries, having not traded during the year will take advantage of the audit exemption set out within Section 480
of the Companies Act 2006 for the year ended 31 December 2023. Unless otherwise stated, the undertakings listed below are owned,
either directly or indirectly, by the Company.
Company |
|
Name |
number |
GSK Consumer Healthcare Holdings (No. 5) Limited |
13401372 |
GSK Consumer Healthcare Holdings (No. 6) Limited |
13401308 |
Haleon UK Corporate Director Limited |
13401336 |
Haleon UK Corporate Secretary Limited |
13434151 |
1
Directly held by Haleon plc.
2
Principal subsidiary of the Group as at 31 December 2023.
3
The Company changed its name during the period between 1 January 2023 and 15 March 2024. The former name of the Company is included in brackets. The Group has a programme
of action to rename and harmonise all legal entity names to reflect the Haleon brand.
4
Financial Statements
Haleon
Annual Report and Form 20-F 2023
177
Parent Company
Financial
Statements
Contents
Parent Company balance sheet | 178 |
Parent Company statement of changes in equity | 179 |
Notes to the Parent Company Financial Statements | 180 |
Theraflu:
Theraflu has a range of products to treat
the symptoms of cold and flu. In 2023,
the brand rolled out several new
flavours to address taste barriers and
expanded its ‘Rest & Recover’ campaign,
which advocates for paid sick leave.
The campaign now offers over $600k
in micro-grants to give people the rest
and recovery they deserve.
The image shown above is taken from
the Theraflu ‘Hot beats Cold’ campaign.
as at 31 December
178
Haleon
Annual Report and Form 20-F 2023
Financial Statements
2023 |
2022 |
||
Note |
£m |
£m |
|
Fixed assets |
|||
Investments |
5 |
22,266 |
22,190 |
Current assets |
|||
Debtors: amounts falling due within one year |
6 |
308 |
14 |
Total current assets |
308 |
14 |
|
Creditors: amounts falling due within one year |
7 |
(2) |
(180) |
Net current assets/(liabilities) |
306 |
(166) |
|
Total assets less current liabilities |
22,572 |
22,024 |
|
Creditors: amounts falling due after one year |
8 |
(25) |
(25) |
Net assets |
22,547 |
21,999 |
|
Capital and reserves |
|||
Share capital |
9 |
92 |
92 |
Other reserves |
72 |
15 |
|
Retained earnings 1 |
11 |
22,383 |
21,892 |
Shareholder’s equity |
22,547 |
21,999 |
1
The profit for the year was £879m (Period from incorporation 20 October 2021 to 31 December 2022: loss of £166m).
The notes on pages 180 to 184 form part of these Parent Company Financial Statements.
The Parent Company Financial Statements on pages 178 to 184 were approved by the Board of Directors and signed on its behalf by:
Tobias Hestler
Chief Financial Officer
15 March 2024
Financial Statements
Parent Company statement of changes in equity
for the year ended 31 December
Parent Company statement of changes in equity
Haleon
Annual Report and Form 20-F 2023
179
Share |
Share |
Other |
Retained |
|||
capital |
premium |
reserves |
earnings |
Total |
||
Notes |
£m |
£m |
£m |
£m |
£m |
|
At 1 January 2023 |
92 |
— |
15 |
21,892 |
21,999 |
|
Ordinary shares issued |
9 |
— |
— |
— |
— |
— |
Capital reduction |
9 |
— |
— |
— |
— |
— |
Share-based incentive plans |
— |
— |
76 |
— |
76 |
|
Purchase of shares by employee benefit trust |
— |
— |
(19) |
— |
(19) |
|
Dividend paid |
— |
— |
— |
(388) |
(388) |
|
Profit for the period |
11 |
— |
— |
— |
879 |
879 |
At 31 December 2023 |
92 |
— |
72 |
22,383 |
22,547 |
Share |
Share |
Other |
Retained |
|||
capital |
premium |
reserves |
earnings |
Total |
||
Notes |
£m |
£m |
£m |
£m |
£m |
|
At 20 October 2021 |
— |
— |
— |
— |
— |
|
Ordinary shares issued |
9 |
11,543 |
10,607 |
— |
— |
22,150 |
Capital reduction |
9 |
(11,451) |
(10,607) |
— |
22,058 |
— |
Share-based incentive plans |
— |
— |
15 |
— |
15 |
|
Loss for the period |
11 |
— |
— |
— |
(166) |
(166) |
At 31 December 2022 |
92 |
— |
15 |
21,892 |
21,999 |
1. Presentation of the Financial Statements
Description of business
range of Oral Health, Vitamins, Minerals and Supplements (VMS), Pain Relief, Respiratory Health, Digestive Health and Other products
in more than 100 countries.
The principal activity of the Company is to act as the parent holding company of the Group.
The Company is a public company limited by shares and is incorporated and domiciled in England with registered number 13691224.
The address of the Company’s registered office is Building 5, First Floor, The Heights, Weybridge, Surrey, England, KT13 0NY.
In 2022, the Company’s accounting reference period was extended to 31 December 2022 and hence comparatives cover the period from
20 October 2021 to 31 December 2022.
Basis of preparation
The Parent Company Financial Statements, which are prepared using the historical cost convention and on a going concern basis, are
prepared in accordance with Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of
Ireland’ and the Companies Act 2006.
The Parent Company Financial Statements are presented in Pound Sterling (GBP, £), the functional currency of the Company, and all
values are denominated in millions of GBP (£m or £ million) unless stated otherwise.
As permitted by Section 408 of the Companies Act 2006, the income statement of the Company is not presented in this Annual Report.
In these Parent Company Financial Statements, the Company is considered to be a qualifying entity (for the purposes of this FRS) and
has applied the exemptions available under FRS 102 in respect of the following disclosures:
—
The requirements of Section 7 Statement of Cash Flows.
—
The requirements of Section 3 Financial Statement Presentation paragraph 3.17(d).
—
The requirements of Section 33 Related Party Disclosures.
—
The requirements of Section 11 Financial Instruments.
—
The requirements of Section 12 Other Financial Instruments.
—
The requirements of Section 28 to disclose information about Key Management Personnel compensation.
—
The requirements of Section 26 Share Based Payments.
Where required, equivalent disclosures are given in the Consolidated Financial Statements of the Group.
Going concern basis
The Company operates as the investment holding company for the Group, holding investments in subsidiaries financed by Group
companies and occasionally acting as financial guarantor of certain subsidiaries of the Group. As the Company is an intrinsic part of the
Group’s structure and considering the likelihood of the guarantees being called upon, the Directors have a reasonable expectation that
Group companies will continue to support the Company through trading and cash generated from trading for the foreseeable future.
Accounting principles and policies
The preparation of the balance sheet in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the balance sheet. Actual amounts could differ from those estimates.
The balance sheet has been prepared in accordance with the Company’s accounting policies approved by the Board and described
in Note 2.
Key accounting judgements and estimates
There are no key judgements or significant estimates.
Notes to the Parent Company
Financial Statements
Haleon
Annual Report and Form 20-F 2023
180
Financial Statements
2. Accounting policies
The accounting policies below have been applied throughout the Parent Company Financial Statements and apply to the Parent Company
Financial Statements as a whole.
Foreign currency transactions
Foreign currency transactions are recorded at the exchange rate ruling on the date of transaction. Foreign currency assets and liabilities
are translated at rates of exchange ruling at the balance sheet date.
Operating income and expenditure
Income and expenditure are recognised in respect of services provided or received when supplied in accordance with contractual terms.
An accrual is made when an obligation exists for a future liability in respect of a past event and where the amount of the obligation can
be reliably estimated.
Interest receivable and interest payable
Interest receivable and similar income includes interest receivable on intercompany loans. Interest payable and similar charges includes
interest payable on intercompany loans. Interest receivable and interest payable are recognised in profit or loss as they accrue, using
the effective interest rate method.
Dividends
Dividends received are included in the profit and loss account in the year in which the right to receive the payment is established. Final
dividends are recorded in the reserves upon shareholder approval. Interim dividends are deducted from reserves when they are paid.
Dividends in the statement of changes in equity are recognised at their fair value at the date of receipt.
Taxation
Current tax is provided at the amounts expected to be paid or refunded applying tax rates that have been enacted or substantively
enacted by the balance sheet date. This takes into account taxation deferred due to timing differences between the treatment of
certain items for taxation and accounting purposes.
Deferred tax is provided in full, using the liability method, in respect of all timing differences that have originated but not reversed at
the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax
in the future have occurred at the balance sheet date. Deferred tax assets are only recognised to the extent that they are considered
recoverable against future taxable profits and from which the future reversal of underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are
expected to reverse. Deferred tax liabilities and assets are not discounted.
The Company has applied the exception under the FRS 102 amendment for recognising and disclosing information about deferred tax
assets and liabilities related to Pillar Two income taxes.
Investments in subsidiaries
Investments in subsidiaries are held at cost less accumulated impairment losses.
The carrying value of investments are reviewed for impairment at least once a year or more frequently when there is an indication that
the investment might be impaired. The primary method used to assess if the investment is impaired is to evaluate against the Group’s
valuation on the basis of overall market capitalisation. Another assessment method used is to compare the carrying value of each
investment against its share of the net assets value of the investment or against its share of the valuation of the subsidiary based on
expected discounted cash flows. Any impairment charge is recognised in the income statement in the year concerned.
Share-based payments
Incentives in the form of equity-settled share-based payments are provided to certain employees which are measured at fair value
(excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate
of the shares that will eventually vest, adjusted for the effect of non-market based vesting conditions.
Incentives in the form of shares provided by the Company to employees of its subsidiaries represents additional capital contributions.
An addition to the Company’s investment in subsidiary undertakings is reported with a corresponding increase in shareholders’ equity.
Refer to Note 26 of the Consolidated Financial Statements for details of the charge.
The Company sponsors Employee Benefit Trusts (EBTs) to acquire and hold shares in Haleon plc to satisfy awards made under
employee share plans. Shares in the Company acquired by the trust are deducted from equity until shares are vested, cancelled,
reissued or disposed.
Financial assets and liabilities
Financial assets and liabilities are recognised on the Company’s balance sheet when the Company becomes a party to the contractual
provisions of the instrument and derecognised when it ceases to be party to such provisions. Financial liabilities are classified as
current if they are legally due to be paid within 12 months of the balance sheet date.
Financial Statements
Haleon
Annual Report and Form 20-F 2023
181
Notes to the Parent Company Financial Statements
Financial assets and liabilities are initially measured at fair value and are subsequently reported at amortised cost.
Receivables are recognised initially at fair value, and subsequently at amortised cost using the effective interest rate method, less any
expected credit losses.
Amounts owed to Group undertakings and other payables are recognised initially at the transaction price and subsequently measured
at amortised cost using the effective interest method. Non-interest bearing payables are stated at their nominal value as they are due
on demand.
Non-current liabilities are classified as financial liabilities in accordance with IFRS 9. They are recognised initially at the transaction price
and subsequently measured at amortised cost using the effective interest method.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or
receivable, net of the direct costs of issuing the equity instruments.
3. Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Company and Consolidated Financial Statements are disclosed in Note 6 to
the Consolidated Financial Statements.
4. Employees
The Company has employees to provide management services to subsidiary undertakings. Below is the summary of the employee costs:
Employee costs
2023
£m
2022
£m
Wages and salaries
2.1
0.2
Social security costs
0.3
0.1
Pension and other post-employment costs
0.5
0.1
Share-based payments
0.5
0.1
Total
3.4
0.5
The average monthly number of persons employed by the Company during the year/period
2023
2022
Finance
4
1
Total
4
1
5. Investments
Subsidiary
undertakings
£m
Cost
At 20 October 2021
—
Additions
22,175
Share-based payments to employees of subsidiaries
15
At 31 December 2022
22,190
Additions
—
Share-based payments to employees of subsidiaries
76
At 31 December 2023
22,266
Impairment
At 20 October 2021
—
At 31 December 2022
—
Impairment
—
At 31 December 2023
—
Net book value
At 31 December 2022
22,190
At 31 December 2023
22,266
Details of the subsidiary undertakings of the Company as at 31 December 2023 are given in Note 30 of the Consolidated Financial Statements.
Notes to the Parent Company
Financial Statements
continued
Haleon
Annual Report and Form 20-F 2023
182
Financial Statements
6. Debtors: amounts falling due within one year
2023
£m
2022
£m
Amounts owed by Group undertakings
282
5
Other prepayments and accrued income
6
—
Corporation tax
20
9
Total
308
14
Amounts owed by Group undertakings are unsecured, interest free and repayable on demand except for a call account balance of
£275m (2022: £nil) which is unsecured and repayable on demand with interest received at SONIA rate less 0.05%.
7. Creditors: amounts falling due within one year
2023
£m
2022
£m
Amounts owed to Group undertakings
(1)
(180)
Other payables and accruals
(1)
—
Total
(2)
(180)
Amounts owed to Group undertakings are unsecured, interest free and repayable on demand except for a call account balance of £nil
(2022: £0.9m) which is unsecured and repayable on demand with interest paid at SONIA rate plus 0.1%.
8. Creditors: amounts falling due after more than one year
2023
£m
2022
£m
Other payables
(25)
(25)
Other payables relate to the 25,000,000 issued Non-Voting Preference Shares with a coupon rate of 9.5% per annum. The non-voting
preference shares are entitled to receive a quarterly dividend and can only be redeemed after 5 consecutive calendar years commencing
on the date of issue, 17 July 2022, and hence the Company has an unavoidable obligation to deliver cash. The Company has, therefore,
classified the non-voting preference shares as a financial liability.
9. Share capital
Number
of shares
2023
£m
2022
£m
Issued and fully paid
Ordinary shares of £0.01 each
9,234,573,831
92
92
Total ordinary shares of £0.01 each
9,234,573,831
92
92
Movements in share capital and share premium are set out in Note 23 of the Consolidated Financial Statements.
10. Other reserves
The analysis of other reserves is as follows:
EBT shares
reserve
1
£m
Share-based
payment
reserve
£m
Total
£m
As at 20 October 2021
—
—
—
Share-based incentive plans
—
15
15
As at 31 December 2022
—
15
15
Share-based incentive plans
—
76
76
Purchase of shares by employee benefit trust
1
(19)
—
(19)
As at 31 December 2023
(19)
91
72
1
Shares owned through an Employee Benefit Trust (EBT). The total number of shares held in connection with employee share schemes as at 31 December 2023 was 5.3m. Another 5.1m
shares were held through a trust by a Group company as at 31 December 2023.
Financial Statements
Haleon
Annual Report and Form 20-F 2023
183
Notes to the Parent Company Financial Statements
11. Retained earnings
The profit of the Company for the year was £879m (2022: loss of £166m).
In the year 2023, the Company paid total dividends of £388m (2022: £nil) and as a result has £22,383m of reserves available for
distribution as at 31 December 2023 (2022: £21,892m).
12. Other guarantees and contingent liabilities
The total amount of guarantees is £9,476m (2022: £10,471m). This consists of guarantees relating to:
—
The bond issuances by Group companies Haleon US Capital LLC (formerly GSK Consumer Healthcare Capital US LLC), Haleon UK
Capital plc (formerly GSK Consumer Healthcare Capital UK plc) and Haleon Netherlands Capital B.V. (formerly GSK Consumer
Healthcare Capital NL B.V.).
—
International Swaps and Derivatives Association agreements for other Group companies.
—
Surety bonds for other Group companies.
Details regarding certain legal actions which involve the Company are set out in Note 22 to the Consolidated Financial Statements.
Notes to the Parent Company
Financial Statements
continued
Haleon
Annual Report and Form 20-F 2023
184
Financial Statements
Other
Information
Contents
Directors’ Report
185
Streamlined Energy and Carbon Reporting
188
Group information
191
History and development of the Group
191
Director and Executive Team shareholdings
192
Executive Director benefits upon
termination of office
192
Property, plant and equipment
192
Disclosure controls and procedures
192
Management’s report on internal control over
financial reporting
192
Change in certifying accountant
192
Risk factors
193
Description of securities other than equity securities
202
Articles of Association
203
Impact of regulation
204
Exchange controls and restrictions on payment
of dividends
204
Material contracts
205
Shareholder information
208
Summary of significant corporate governance
differences from NYSE listing standards
208
Purchases of equity securities by the Company
and affiliated purchasers
208
Dividend history
209
Shareholder profiles
209
Tax information for shareholders
210
Exhibits
212
Form 20-F cross reference
214
Forward-looking statements
218
Glossary
219
Useful information
220
Voltaren:
Voltaren is a topical pain relief brand,
used in over 40 million households
globally and sold in 87 countries around
the world. In 2023, the brand launched
Voltaren Hot Cookie, a 24-hour medicated
patch which delivers continuous pain
relief with almost no wasted product.
Voltaren also leveraged AI to launch
‘HaltungsCheck,’ a posture check tool
in Germany and a digital health tool,
‘Movement Coach’ in the UK.
The image above is taken from the Voltaren
‘It’s not just movement’ campaign.
Other Information
Haleon
Annual Report and Form 20-F 2023
185
Haleon
Annual Report and Form 20-F 2023
185
Shares
As at 31 December 2023, the Company had 9,234,573,831
ordinary shares of £0.01 each and 25,000,000 non-voting
preference shares of £1.00 each in issue. No shares were held
in Treasury. There are no special control rights or restrictions
on share transfers or limitations on the holding of any class of
shares. Further information about the Company’s ordinary shares
and non-voting preference shares can be found in Articles of
Association on page 203.
At its AGM held in April 2023, Haleon received shareholder
approval to make purchases of its own ordinary shares
(i) on-market up to a maximum number representing 10% of its
issued share capital and (ii) off-market up to a maximum number
representing 4.99% of its issued share capital from each of GSK
and Pfizer, subject to limitations on the maximum price applicable
to each purchase, and noting that no more than 10% of its issued
share capital would be purchased in aggregate pursuant to these
authorities. During the year, the Company did not purchase any
of its own shares. Resolutions seeking shareholder authority for
the purchase of the Company’s shares will be put to shareholders
at the AGM to be held on 8 May 2024.
Dividends and dividend policy
On 29 February 2024, the Board proposed a final dividend of
4.2p per ordinary share which will be paid, subject to shareholder
approval, following the Company’s 2024 AGM
.
The Company paid
an interim dividend of 1.8p per ordinary share on 5 October 2023
in respect of its 2023 half-year results. In respect of trading since
demerger to 31 December 2022, the Company paid a final
dividend of 2.4p per ordinary share on 27 April 2023.
Haleon has a dividend policy that looks to balance all its
stakeholders’ interests while ensuring the long-term success of
the Company. Subject to market conditions and Board approval,
Haleon expects to grow its ordinary dividend at least in line
with adjusted earnings. 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 the balance paid as a final dividend,
subject to shareholder approval, following the Company’s AGM.
Dividends are announced in Pound Sterling, with an equivalent
US Dollar amount paid in respect of the Company’s ADSs.
See Note 10 to the Consolidated Financial Statements on page 132,
for information on dividends paid on non-voting preference shares.
Financial risk management
The Group’s financial risk management objectives and policies,
including its use of financial instruments, are set out in Note 25
to the Consolidated Financial Statements from page 156.
Future business developments of the Group
Details of these are set out in the Strategic Report from page 2.
Group subsidiaries
As a Group that operates globally, Haleon’s operations and
activities are carried out by subsidiaries, branches and scientific/
representative offices established under the laws of many
jurisdictions. A full list of subsidiaries is provided at Note 30
of the Consolidated Financial Statements from page 170.
Directors’ powers
The Directors may exercise all the powers of the Company,
subject to the Articles of Association (Articles), legislation and
regulation. This includes the ability, subject to shareholder
approval at Haleon’s AGM each year, to exercise the authority
to allot or purchase the Company’s shares. Further details of
the powers of the Directors can be found in the Articles of
Association section on page 203.
Conflicts of interest
Under the Articles and as permitted by the Companies Act,
the Board may authorise any matter which would otherwise
involve a Director breaching their duty to avoid conflicts
of interest and may attach to any such authorisation such
conditions and/or restrictions as the Board deems appropriate
(including in respect of the receipt of information or restrictions
on participation at Board meetings). The Board has a formal
system for Directors to declare such situations to be considered
for authorisation by those Directors who have no interest in the
matter being considered. Situations considered by the Board and
authorisations given are recorded in the Board minutes and in a
register of conflicts maintained by the Company Secretary and
are reviewed annually by the Board. The Board believes that this
system operates effectively.
Insurance and indemnities
The Company maintained directors’ and officers’ liability insurance
cover during the period of this Annual Report. Each Director
also benefits from an indemnity provided by the Company in
respect of any proceedings brought by third parties against
them personally in their capacity as Director.
Code of Conduct
Our Code of Conduct (Code) applies to the Board and Executive
Team, employees and third-party temporary workers and complies
with the NYSE rules as set out in Section 406 of SOX. Our Code
includes a prohibition on engaging in insider trading or use of
non-public information that could manipulate the price of Haleon’s
shares, either to our own advantage or for another person and
also applies to any other company with which we do business.
Further details on our Code are set out in the Strategic Report on
pages 18 and 20, and the Board’s oversight of the Code is set out
on pages 69 and 75.
Directors’ Report
This Directors’ Report contains information to be given
in accordance with the Companies Act 2006. Relevant
information below, which is contained elsewhere in this
Annual Report, is incorporated by cross reference.
>>
Our Code is available at
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
Haleon
Annual Report and Form 20-F 2023
186
Other Information
The Companies (Miscellaneous Reporting)
Regulations 2018
Employee engagement
The below statement relates to our employees as defined in the
glossary and should be read in conjunction with our stakeholder
and people disclosures in the Strategic Report on pages 10
and 18, respectively, Section 172 statement and workforce
engagement disclosures from page 69, and other engagement
disclosures in the Directors’ Remuneration Report from page 80.
During 2023, the key forms of engagement to provide
information to our employees included a fortnightly global email
‘Connecting Haleon’, intranet global news page, CEO-led global
broadcasts, fireside chats on priority topics, internal social
media channels, dedicated senior manager calls, as well as
regional leadership calls and direct emails, videos and business
function team meetings. Employees have been consulted and
given opportunities to express their views and concerns through
participation in the annual employee engagement survey, team
meetings, townhalls, ERGs, and Q&As at global broadcasts and
fireside chats. They have been made aware of the financial and
economic factors affecting the performance of the Company
through quarterly, global broadcasts and emails from the CEO,
internal social media updates, as well as functional and regional
team meetings. The Chair and Directors have engaged with
employees through direct interactions, ‘employee listening
sessions’ with our Workforce Engagement Director and other
opportunities held during the year to meet Executive Directors
via video meetings or in person.
Engagement with suppliers, customers and others
in a business relationship with Haleon
Our business relationships with our suppliers, customers and
others are fundamental to our success. During the year, the Board
considered matters related to them and had regard to the impact
of decisions on them as detailed in the Section 172 statement on
page 69. The Board monitors relationships through a mixture of
presentations, reports and direct engagement. Details of how
relationships have been maintained throughout the year are set
out in the our key stakeholders section on page 10.
Share plan details
2023 share awards and grants to employees
Our current policy is to settle the majority of awards or grants
under the Company’s share plans with shares purchased in
the market, however, the Company continues to review this
policy. The Company’s share plans incorporate the Investment
Association’s current guidelines on dilution. During the year, the
Company satisfied its obligations under its share plans solely
by the purchase of shares in the market, accordingly there has
been no dilution from the awards made. As at 31 December 2023,
there were 5,489,346 options outstanding, solely in respect of the
Company’s HMRC-approved all-employee Share Save Plan.
Employee benefit trusts (EBTs)
The Group operates EBTs for the benefit of employees and
former employees. The EBTs purchase ordinary shares or ADSs
in the market and release them to current and former employees
in satisfaction of share awards. During 2023, the EBTs released
414,105 ordinary shares and 316,435 ADSs. At 31 December 2023
the EBTs held 5,309,233 ordinary shares and 2,545,712 ADSs in the
Company. The EBTs adopt a prudent approach to purchasing shares,
using funds provided by the Group, based on expectations of
future requirements.
Shares or ADSs that have not been allocated to share plan
participants are held by the EBTs and although the trustee has
the right to vote or abstain from exercising their voting rights in
relation to those shares, it has a policy of not voting, which is in
line with guidelines. The trustee also has the right to accept or
reject any offer relating to the shares or ADSs in any way it sees
fit. Dividend waivers are in place in respect of unallocated shares
and ADSs held in the EBTs.
significant interest in the Company including 32% of Haleon’s
shares and thus of the voting rights of the Company. As a result,
Pfizer possesses sufficient voting power to exercise significant
influence over all matters requiring shareholder approval,
including the election or removal of Directors and advisers,
the declaration of dividends, whether to accept the terms of
a takeover offer and other matters to be determined by the
Haleon shareholders.
In addition, Pfizer has the right to nominate two persons to
be appointed to the Board as representative Directors for so
long as it continues to hold 20% or more of Haleon’s shares in
issue, and a right to nominate one person to be appointed as a
representative Director for so long as it continues to hold less
than 20% but at least 10% of Haleon’s shares in issue.
Significant shareholders
The following persons have disclosed an interest in the issued
ordinary share capital of the Company in accordance with the
requirements of rules 5.1.2 or 5.1.5 of the FCA’s Disclosure
Guidance and Transparency Rules. The Company’s major
shareholders have the same voting rights as other shareholders.
The Company does not know of any arrangements the operation
of which may result in a change in its control. Other than as set
out below, no changes to major shareholdings were disclosed to
the Company between 31 December 2023 and 7 March 2024.
The Company is a party to the Pfizer Relationship Agreement,
the principal purpose of which is to regulate the continuing
relationship between the Company and its controlling
shareholder, Pfizer Inc., following demerger. Pfizer retains a
Number of ordinary shares disclosed as a percentage
of the Company’s issued share capital at:
Shareholder
Date of latest disclosure
to the Company
Number of ordinary
shares disclosed
Date of latest disclosure
to the Company
31 December 2023
Pfizer
3 August 2022
2,955,063,626
1
32%
32%
GSK and certain controlled undertakings of GSK
18 January 2024
385,320,110
4.17%
7.42%
1
Pfizer holds its interest in ordinary shares and ADSs.
Other Information
Haleon
Annual Report and Form 20-F 2023
187
Directors’ Report
Significant agreements and change of
control provisions
The Group is a party to certain arrangements which could be
terminated upon a change of control of the Company (and/
or the Group’s UK and US debt-issuing entities) and which are
considered significant in terms of their potential impact on
the business of the Group as a whole. These arrangements
include each series of notes issued under the Company’s
EMTN programme and the USD note programme.
The notes contain a redemption or purchase upon change of
control provision which, if triggered, allows note holders to
exercise their option to require the UK and US debt-issuing
entities to redeem, or at such issuers’ options, to purchase,
the notes and pay any accrued and unpaid interest due.
Further information on the notes issued and outstanding under
the programmes as at 31 December 2023 is available in Note 19
to the Consolidated Financial Statements from page 143.
In addition, the Company is a party to the Pfizer Relationship
Agreement, the principal purpose of which is to regulate the
continuing relationship between the Company and its controlling
shareholder, Pfizer, following demerger. This terminates upon
Pfizer (or a member of its group) ceasing to hold at least 10% of
Haleon’s ordinary shares. Throughout the period under review,
the Company has complied with provisions and obligations in
the Pfizer Relationship Agreement and, as far as the Company
is aware, Pfizer has also complied. Further information on the
Pfizer Relationship Agreement can be found on page 207.
Streamlined Energy and Carbon Reporting (SECR)
In line with the requirements set out in the UK Government’s
guidance on SECR, the table on page 189 represents Haleon’s
energy use and associated carbon emissions from electricity
and fuel in the UK and the rest of the world (ROW), calculated
with reference to the Greenhouse Gas Protocol: A Corporate
Accounting and Reporting Standard. In our 2022 reporting period,
the UK accounted for 4% of our global total energy use as well as
3% of our Scope 1 and 2 emissions (location-based).
Energy efficiency action taken
In 2023, we focused on developing and beginning to implement
our strategy to reduce Scope 1 carbon emissions, having achieved
100% renewable electricity at sites within our operational control
in 2022. This strategy, when fully implemented, will replace most
of our fossil-fuelled boilers with electric ones to meet our 2030
goal to reduce our absolute Scope 1 and 2 carbon emissions by
95% versus our 2020 baseline. To maintain 100% renewable
electricity at sites within our operational control, we utilise a
combination of on-site solar, Power Purchase Agreements (PPAs),
and renewable electricity certificates. In 2023, we spent more
than £5.7m on energy-reduction projects to install additional
solar generation at two of our sites, as well as implement more
energy-efficient equipment and improved metering at several
of our sites.
Employment of disabled persons
Our commitment is to ensure our workforce reflects the
diversity of the communities within which we operate, and we
believe in the power of diversity as a source of competitive
advantage. We are striving to create an inclusive environment in
which everyone can contribute and feel a sense of belonging, are
understood and valued, treated fairly and equally, and supported
to progress and thrive. We want our employees to be able to
be their authentic selves and, as a result, perform at their best.
All employees must ensure an equitable and inclusive culture
free of discrimination and encourage respectful and inclusive
behaviour. Every effort is made to ensure that applications for
employment from disabled people are fully and fairly considered
and that disabled employees have equal opportunities for
training, career development and promotion.
Political donations
The Group does not make political contributions or sponsor
political meetings, conferences, conventions, or events, as set
out in our Anti-Bribery and Corruption (ABAC) Policy. In the
year to 31 December 2023, the Group did not make any political
contributions or provide any sponsorship.
In accordance with the Federal Election Campaign Act in the US,
Haleon employees are able to make personal contributions to
our US Political Action Committee (PAC). A PAC is a corporate
or labour-based political committee that collects voluntary
contributions from eligible US employees into a separate fund.
In donating to the PAC, participating eligible employees are
exercising their legal right to pool their resources and make
political contributions, which are subject to strict limitations
under US law. The fund is managed by a board of directors of
participating employees from Haleon’s US operating company
and makes contributions or expenditures in connection with
Federal and State elections. The PAC is not controlled by Haleon.
The operations of the Haleon PAC are reviewed regularly to
ensure compliance with applicable US laws. Disclosure reports
for the Haleon PAC can be viewed at
www.fec.gov
. In 2023, a
total of $57,500 was donated to political organisations by the
Haleon PAC.
English law requires prior shareholder approval for political
contributions to political parties and independent election
candidates as well as for any political expenditure. The definitions
of political donations, political expenditure and political
organisations used in the legislation are, however, quite broad.
As a result, the definitions may cover legitimate business activities
not in the ordinary sense considered to be political donations
or political expenditure, nor are they designed to support any
political party or independent election candidate. Therefore,
notwithstanding our policy, and while we do not intend to make
donations to any political parties or organisations, nor to incur
any political expenditure, we will annually seek shareholder
authorisation for any inadvertent expenditure as a precautionary
measure to ensure that the Company and its subsidiaries do not
inadvertently breach the legislation.
Directors’ Report
continued
>>
See also our approach to sustainability section from page 22.
>>
See our ABAC Policy at
www.haleon.com
/who-we-are/Governance/codes-policies-and-standards
>>
See our position on political advocacy at
www.haleon.com
/who-we-are/our-policy-positions
Haleon
Annual Report and Form 20-F 2023
188
Other Information
Streamlined Energy and Carbon Reporting
continued
2021
1
2021
Total
1
2022
1
2022
Total
1
2023
2
2023
Total
2
Carbon emissions from our Operations
3
UK
ROW
Global
UK
ROW
Global
UK
ROW
Global
Total Scope 1 GHG emissions
(thousands
of tonnes CO
2
e, including on-site fuel use,
fleet mileage and refrigerant losses)
3
57
60
3
53
56
2
*
58
*
60
*
Total Scope 2 GHG emissions
(location-based)
(thousands of tonnes CO
2
e)
3
145
148
3
137
140
3
*
139
*
142
*
Total Scope 2 GHG emissions
(market-based)
(thousands of tonnes CO
2
e)
—
15
15
—
7
7
—
*
7
*
7
*
Total Scope 1 & 2 GHG emissions
(location-based)
(thousands of tonnes CO
2
e)
6
203
209
6
190
196
5
*
197
*
202
*
Total Scope 1 & 2 GHG emissions
(market-based)
(thousands of tonnes CO
2
e)
3
72
75
3
61
64
2
*
65
*
67
*
Total GHG emissions offset
(thousands of tonnes CO
2
e)
—
—
—
—
9
9
—
*
17
*
17
*
Total net Scope 1 & 2 carbon emissions
(market-based)
4
(thousands of tonnes CO
2
e)
3
72
75
3
51
54
2
*
48
*
50
*
Total energy consumed
(GWh)
32
669
701
29
652
681
27
*
670
*
697
*
Total renewable energy
consumed
(GWh)
16
299
315
15
344
359
15
*
356
*
371
*
Total renewable electricity
consumed
(GWh)
16
279
295
15
312
328
15
*
326
*
341
*
Renewable electricity
(%)
100%
83%
84%
100%
100%
100%
100%
100%
100%
*
Renewable energy
(%)
50%
45%
45%
52%
53%
53%
56%
53%
53%
*
Intensity Ratio
GHG emissions intensity
(location-based)
(tonnes of CO
2
e per £m revenue)
5
19
22
22
17
18
18
14
*
18
*
18
*
Carbon emissions from our value chain
Total Scope 3 carbon emissions
(thousands of tonnes CO
2
e)
2,333
2,336
>>
KPMG LLP’s limited assurance opinion and Haleon’s reporting criteria are available at
www.haleon.com
/our-impact/esg-reporting-hub
*
KPMG LLP has issued independent limited assurance over the selected data indicated using assurance standards ISAE(UK)3000 and ISAE3410.
1
Data for 2021 and 2022 have been calculated in accordance with methodology and data improvements, for example replacing estimates with actuals. The 2022 results have also been
re-stated to align with the calendar year, rather than December 2021 – November 2022 as they were reported in the 2022 Annual Report and Form 20-F. As a result, some values differ
slightly from the values disclosed in the 2022 Annual Report and Form 20-F, as disclosed in Haleon’s Basis of Reporting, available on the ESG Reporting Hub.
2
For the 2023 reporting period we have used data from 1 December 2022 to 30 November 2023. The exception is Scope 3, where the 2023 reporting period is 1 July 2022 to 30 June 2023.
3
GHG emissions are expressed in carbon dioxide equivalents (CO
2
e) reflecting the effective amount of CO
2
generated by all gas emissions which add to the greenhouse effect and
global warming. Carbon emissions have been calculated according to the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (updated with Scope 2 guidance).
For further information on the methodologies used to calculate our emissions and energy metrics, please see our reporting criteria Basis of Reporting available at the web address
outlined above. Scope of reporting is sites over which Haleon has full operational control.
4
This calculation takes the total emissions offset in the reporting period into account.
5
Carbon emissions intensity is derived from the ratio of the total Scope 1 and 2 GHG emissions (location-based) (tCO
2
e) from all sites where we have full operational control to the
total revenue in the same reporting period. This provides a stable and comparable metric at this time.
Other Information
Haleon
Annual Report and Form 20-F 2023
189
Directors’ Report
Directors’ Report
continued
Going concern
The Directors believe that it is appropriate to adopt the going concern basis of accounting in preparing the Group’s Consolidated
Financial Statements. Further detail as to the Directors’ assessment is set out in Note 1 to the Consolidated Financial Statements
on page 121.
An overview of the business activities of Haleon, including a review of the principal business risks that the Group faces, is given in
the Strategic Report on pages 54 to 58 and in Group information from page 191. The scenarios considered and assessment made by
the Directors with respect to the Company’s risk factors and viability are set out on page 59.
Directors’ Report
In addition to the information set out herein, this Directors’ Report incorporates by reference the following sections of this Annual Report:
—
Strategic Report from page 2, including R&D from page 8.
—
Corporate Governance from page 61.
—
Statement of Directors’ responsibilities, including Disclosure of information to auditors on page 98.
—
Group information from page 191, including Articles of Association and Material contracts on pages 203 and 205.
—
Note 24 to the Consolidated Financial Statements (Related party transactions) from page 155.
—
Note 29 to the Consolidated Financial Statements (Post balance sheet events) from page 170.
—
Shareholder information from page 208.
The only matters to report in respect of Listing Rule 9.8.4 are in relation to material contracts (set out from page 205) and agreements
with controlling shareholders (set out on pages 186, 187 and from page 205).
By order of the Board
Amanda Mellor
Company Secretary
Haleon plc
Registered in England and Wales, Company number 13691224
15 March 2024
Haleon
Annual Report and Form 20-F 2023
190
Other Information
On 2 March 2015, GSK and Novartis formed a consumer
healthcare joint venture to combine the majority of GSK’s
consumer healthcare business and all of Novartis’ OTC business.
Novartis’ business provided GSK with a meaningful incremental
presence in OTC. The combination added a leading portfolio of
globally recognised consumer-preferred and expert-recommended
brands in the Pain Relief, Respiratory Health, Smokers’ Health and
Skin Health categories to the Group’s business.
In June 2018, GSK acquired Novartis’ shareholding in the
GSK/Novartis JV for $13bn, enabling GSK to take full operational
and strategic control of the business.
On 31 July 2019, GSK completed a transaction with Pfizer to
combine substantially all of GSK and Pfizer’s respective consumer
healthcare businesses into a new world-leading consumer
healthcare joint venture (the Pfizer Transaction). The transaction,
which was transformational to the scale of the Group’s business,
brought together two businesses with highly complementary
geographic footprints and brand portfolios.
While the Group retained its strong European footprint, completion
of the transaction also provided the Group with incremental
geographical scale in the US, where it became the leader in
OTC/VMS, and in China, where it became the leading OTC/VMS
multinational. From a portfolio perspective, the transaction
provided the Group with global leadership in the higher-growth
VMS market as well as a leading presence in the US Pain Relief
market complementing the Group’s existing Pain Relief portfolio.
Since completion of the Pfizer Transaction and prior to demerger,
GSK owned 68% of the ordinary shares in the entity through
which both GSK and Pfizer held their equity interests in the joint
venture, with Pfizer holding the remaining 32%.
Alongside integration of the Pfizer consumer healthcare business,
the Group exited approximately 50 non-strategic and growth-
dilutive OTC and skincare assets from 2019 to 2021 to raise
£1.1bn of net proceeds. These disposals have further focused
the business on higher-growth categories, markets and channels
and thereby enhanced the growth profile of Haleon.
History and development of the Group
Haleon is the result of the combination of three consumer
health businesses over the last decade. The focus of the business
has been sharpened through divestment of growth-dilutive
brands and those outside of our core categories. In addition,
the scientific and consumer products’ experience of its legacy
businesses has been enhanced by investment in commercial
and scientific capabilities, technologies and facilities, most
notably in the digital sphere.
On 18 July 2022, Haleon demerged from GSK creating a company
with management, infrastructure, capital allocation and incentives
focused specifically on consumer healthcare.
The Group has a strong and established presence in all key
channels relevant for consumer healthcare and a scale which allows
it to effectively engage with retail partners of all sizes, buying
groups, distributors, pharmacy chains and individual pharmacies.
Prior to demerger, the Group had transformed since 2012 through
progressive strategic M&A and divestments to create a world
leader in consumer health.
The Group’s scale greatly expanded through the successful
combination of the legacy GSK consumer healthcare business
with the Novartis consumer healthcare business in 2015, and the
subsequent combination of this business with the Pfizer consumer
healthcare business in 2019. In addition, the Group’s focus has
been sharpened since 2012 through the progressive divestment
of GSK’s nutritionals businesses and the divestment by the
Group of non-strategic OTC brands, including its programme
of divestments of non-strategic and growth-dilutive brands
(with aggregate net proceeds from divested brands of £1.1bn)
during the period from 2019 to 2021. This deliberate strategy has
resulted in a portfolio more focused on higher-growth categories,
markets and channels. These transactions also provided a
catalyst for a broader transformation of the Group.
Prior to its combination with the Novartis consumer healthcare
business in 2015, GSK’s consumer healthcare business was
already one of the world’s leading OTC and Oral Health
companies with a long heritage in consumer health products
dating back to the 18th century. The Group sold a range of
leading OTC brands across Respiratory Health, Pain Relief,
Digestive Health, Skin Health and Smokers’ Health, together with
a strong portfolio of Oral Health brands. Geographically, the GSK
consumer healthcare business had a strong presence in higher-
growth emerging markets in the Middle East, Africa and Asia,
which complemented its businesses in Europe and North America.
GSK ownership
Demerger from GSK and
independent listing
2022
2020
Exit of non-
strategic
categories
to Unilever
2021
Significant divestment programme
Disposal of 50 non-strategic
growth-dilutive assets
2019
Joint Venture
formation:
Pfizer Consumer
Healthcare
2018
Full buyout
of Novartis
from JV
2015
Joint Venture
formation:
Novartis
Consumer
Healthcare
2013
Divest
Exit of beverages
2012
Exit of non-strategic
OTC
Group information
Other Information
Haleon
Annual Report and Form 20-F 2023
191
Group information
—
Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the
Group. Internal control over financial reporting is designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of Financial Statements
for external purposes in accordance with IFRS.
—
Management conducted an evaluation of the effectiveness
of internal control over financial reporting based on the
framework, Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO).
—
There have been no changes in the Group’s internal control
over financial reporting during 2023 that have materially
affected, or are reasonably likely to materially affect, the
Group’s internal control over financial reporting.
—
Management has assessed the effectiveness of internal
control over financial reporting as at 31 December 2023 and
concluded it is effective.
—
KPMG LLP, which has audited the Consolidated Financial
Statements of the Group for the year ended 31 December 2023,
has also assessed the effectiveness of the Group’s internal
control over financial reporting under Auditing Standard 2201
of the Public Company Accounting Oversight Board (US).
Their audit report is set out from page 112.
Change in certifying accountant
On 20 April 2023, Haleon shareholders approved the
appointment of KPMG LLP (KPMG UK) as its principal accountants
for the financial year ending 31 December 2023 at its AGM.
KPMG US, which was formerly serving as the Company’s principal
accountants in respect of the US, declined to stand for re-election.
The decision to change principal accountants was approved by
the Haleon plc Board on the recommendation of the Company’s
Audit & Risk Committee.
In respect of the financial year ended 31 December 2022, there
were no: (i) disagreements with KPMG US on any matter of
accounting principles or practices, financial statement disclosure,
or auditing scope or procedures, which disagreements if not
resolved to their satisfaction would have caused them to make
reference in connection with their opinion to the subject matter
of the disagreement, or (ii) reportable events.
The audit report of KPMG US on the Consolidated Financial
Statements of Haleon plc and subsidiaries as of and for the year
ended 31 December 2022 did not contain any adverse opinion
or disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope, or accounting principles.
We did not consult KPMG UK during our two most recent
financial years or any subsequent interim period regarding (i) the
application of accounting principles to a specified transaction,
either completed or proposed or the type of audit opinion
that might be rendered on our Financial Statements; or (ii) any
matter that was the subject of a disagreement as that term is
used in Item 16F(a)(1)(iv) of Form 20-F or a ‘reportable event’
as described in Item 16F(a)(1)(v) of Form 20-F.
Director and Executive Team shareholdings
As at 7 March 2024, being the latest practicable date prior
to publication of this Annual Report, the Directors and the
Executive Team members had beneficial interests in 1,649,868
Haleon ordinary shares (including ordinary shares held indirectly
through Haleon ADSs), representing 0.02% of that class. These
shareholdings indicate all Directors’ or Executive Team members’
beneficial interests and those held by their spouses and other
connected persons. As at 7 March 2024, no Director or Executive
Team member held more than 1% of the total issued share capital
or has a beneficial interest in the shares of any subsidiary.
Executive Director benefits upon termination
of office
Further information can be found in the Directors’ Remuneration
Report from page 80.
Property, plant and equipment
The Group has interests in properties in numerous countries.
None of these interests is individually material in the context
of the Group as a whole. Such properties are used by the
Group predominantly for manufacturing, distribution and R&D
activities. In particular, the Group owns a supply chain of 24
in-house dedicated consumer health manufacturing sites, with
key sites located in Levice (Slovakia), Dungarvan (Ireland), Nyon
(Switzerland) and Guayama (Puerto Rico). In addition, the Group
owns four R&D centres in Richmond, Virginia (USA), Weybridge
(UK), Maidenhead (UK) and Suzhou (China) providing it with a
broad range of in-house scientific capabilities.
The Group is not aware of any environmental issues affecting
its properties which would have a material impact upon the
Group, and there are no material encumbrances on its properties.
The Group believes its existing facilities are satisfactory for its
current business and it currently has no plans to construct new
facilities or expand or improve its current facilities in a manner
that is material to the Group.
Disclosure controls and procedures
The Group carried out an evaluation under the supervision and
with the participation of members of the Group’s management,
including the CEO and CFO, of the effectiveness of the design
and operation of the Group’s disclosure controls and procedures
as required by Item 15(a) of Form 20-F as at 31 December 2023.
Based on their evaluation, the CEO and the CFO concluded that,
as at that date, the Company maintained an effective system of
disclosure controls and procedures.
Management’s report on internal control
over financial reporting
In accordance with the requirements of Section 404 of SOX,
the following report is provided by management in respect
of the Company’s internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the US Securities
Exchange Act of 1934, as amended (the Exchange Act)).
Group information
continued
Haleon
Annual Report and Form 20-F 2023
192
Other Information
The Group’s ability to execute its marketing and sales strategy
is subject to challenges
As a consumer products business, the Group relies on a strategy
of leveraging its existing brands and products to drive increased
sales and profits. The successful implementation of this strategy
depends on, among other things, the Group’s ability to: identify
and offer competitively priced products that appeal to evolving
consumer preferences; formulate its strategy in response to these
changing consumer preferences; innovate successfully on its
existing products; and effectively utilise a range of distribution
channels in its key markets.
Failure to execute this strategy successfully for any reason,
including any reduction in consumer demand for the types of
products which the Group offers due to changes in consumer
lifestyle, environmental concerns, economic downturns or other
considerations could have a material adverse effect on the Group’s
business, prospects, financial condition and results of operations.
The Group’s business results are impacted by the Group’s
ability to manage disruptions in the Group’s global supply chain
The Group is engaged in the manufacturing and sourcing of
products and materials on a global scale. The Group’s operations
and those of its suppliers, contract manufacturers and logistics
providers have been and may continue to be disrupted by a
number of factors, including, but not limited to: increased and/
or changing regulation, as well as regulatory compliance issues;
environmental events, including natural disasters (such as fires,
floods and earthquakes) and any potential effect of climate
change; global shipping, logistics, transport and warehousing
constraints, for example due to regional or local conflicts (such
as the recent conflict in the Middle East and shipping disruption
in the Red Sea) or widespread health emergencies, such as
pandemics or epidemics any of which may lead to delays in
deliveries and constraints on shipping and logistics as a result
of local lockdowns; global supply chain disruption impacting
their suppliers; strikes and other labour disputes; cybersecurity
failures or incidents; loss, impairment, closure or disruption of
key manufacturing sites; loss of, or capacity constraints relating
to key suppliers or contract manufacturers; raw material and
product quality or safety issues (see The Group may incur
liabilities or be forced to recall products as a result of real or
perceived product quality or other product-related issues on
page 196); industrial accidents or other occupational health
and safety issues; the impact on the Group’s suppliers of tighter
credit or capital markets; the lack of availability, or retention,
of qualified personnel; governmental incentives and controls
(including exchange controls, import and export restrictions,
such as new or increased tariffs, sanctions, quotas or trade
barriers); acts of war (see The Group’s business may be impacted
by the effects of regional and local conflicts on page 200) or
terrorism, political unrest or uncertainty, fires or explosions, and
other external factors over which the Group has no control; and
increases in ingredient, commodity, utilities and oil prices.
While the product ranges of the Group’s leading brands are
manufactured by multiple sources, some of the Group’s products
are currently primarily manufactured at a single location and the
loss of the use of all or a portion of any of these manufacturing
facilities or the loss of the use of, or capacity constraints at, key
suppliers in relation to the Group’s other products could impact
the Group’s ability to provide these products.
Risk factors
The Group has identified a broad range of risks relating to its
business and the industry in which it operates. These risks
are described below and, together with all other information
contained in this Annual Report, should be carefully considered
in evaluating the Group. The risks and uncertainties described
below represent those we consider to be material as at the date
of this Annual Report, with material risks being those to which
senior management pay particular attention and which could
cause the delivery of the Group’s strategy, financial condition,
results of operations and/or prospects to differ materially from
expectations. However, these risks and uncertainties are not the
only ones facing the Group.
If any of the following risks occur, our business, financial condition,
results of operations and prospects could be materially and
adversely affected. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial
also may impair our business operations.
Risks relating to the Group’s business and industry
The Group operates in a highly competitive market
The Group faces substantial and increasing competition in all
of its product categories and geographic markets. There are
relatively low barriers to entry in certain product categories in
many of the markets in which the Group operates (particularly
in the VMS category) and accordingly the Group’s businesses
compete with companies of all sizes on many different fronts,
including cost-effectiveness, product effectiveness and quality,
brand recognition and loyalty, technological innovations,
consumer convenience, promotional activities, new product
introductions and expansion into new markets and channels.
The Group expects to continue to see heightened activity from its
competitors worldwide, including: (i) increasing and aggressive
competition from smaller, high-growth companies which often
operate on a regional basis, and may disrupt existing route-to-
market models; (ii) increasing competition from multinational
corporations moving for the first time into, or expanding or
focusing their presence (whether through acquisitions, disposals,
demergers or other means) in the global consumer healthcare
market; (iii) continuing competition from private label products,
which are brands sold exclusively by a particular retailer; and (iv)
an increase in the introduction and aggressive marketing of new
products in high demand healthcare areas.
Some of the Group’s competitors may conduct more effective
advertising and promotion activities than the Group does,
introduce competing products more quickly and/or respond more
effectively to business and economic conditions and changing
consumer preferences, including by launching innovative new
products. If the Group is unable to anticipate the timing and scale
of these threats across its markets or to successfully respond to
them, then its brand loyalty may be harmed, it may lose market
share and its business, prospects, results of operations and
financial condition may be materially adversely affected.
Other Information
Haleon
Annual Report and Form 20-F 2023
193
Group information
and capitalise on access to data) and price comparison sites,
changing consumer preferences (as consumers increasingly
shop online), and, in certain categories (particularly VMS),
the increased presence of alternative retail channels, such as
subscription services, sales through social media platforms
and direct-to-consumer businesses (especially those which
specialise in rapid distribution). The strong growth in e-commerce
and the emergence of alternative retail channels may create
pricing and margin pressures and/or adversely affect the
Group’s relationships with key retailers. If the Group is not
able to successfully manage and adapt to these changes in
the retail landscape, the Group’s business, prospects, results
of operations and financial condition could be materially and
adversely affected.
The Group may not be able to develop and commercialise
new products effectively
The future growth of the Group is to a significant extent
dependent on its ability to develop new products or new
formulations of existing products. The Group’s ability to launch
new products and to expand into adjacent categories, channels
of distribution or markets is affected by whether the Group
can successfully: identify, develop and fund technological
innovations; obtain and maintain necessary intellectual
property protection and avoid infringing intellectual property
rights of others; obtain and maintain approvals and registrations
of regulated products in the countries in which the Group has
business operations; anticipate the needs and preferences of
consumers and customers by, among other things, effectively
utilising digital technology and marketing and data analytics to
gain new commercial insights and develop or identify relevant
products aligned to those preferences; and successfully
compete to in-license products.
The identification, development and introduction of innovative
new products that drive incremental sales involves considerable
time, costs and effort, as well as significant risk that any new
product may not generate sufficient customer and consumer
interest and sales to become a profitable product or to cover
the costs of its development and promotion. New products
must be developed to meet the Group’s own rigorous internal
specifications, as well as the relevant regulatory and safety
requirements imposed in our various markets. Each of these
restrictions means that a new product can fail to make it to
market at any stage or do so in a cost-effective manner. In addition,
new products that make it to market may not be accepted quickly
or significantly in the marketplace.
Any failure to develop and commercialise new products in a
timely fashion may lead to decreased market share, decreased
revenue and/or increased R&D costs and, consequently, may
materially and adversely affect the results of the Group’s
operations and financial condition.
Failure to retain key talent or attract new talent
The Group relies upon a number of key executives and employees
who have an in-depth understanding of the consumer healthcare
industry and the Group’s technologies, products, programmes,
collaborative relationships and strategic goals. While the Group
follows a disciplined, ongoing succession planning process and
has succession plans in place for those individuals comprising
our Board of Directors and our Executive Team (as set out on
pages 62 to 65) (Senior Management) and other key executives,
these do not guarantee that the services of qualified senior
executives will continue to be available to the Group at all times.
In addition, the Group purchases certain raw and packaging
materials from single-source suppliers or a limited number of
suppliers and new suppliers may have to be qualified under
industry, governmental and its own standards, which can require
additional investment and take a significant period of time.
Although the Group has contingency plans in place, such as dual
sourcing programmes and alternative supply arrangements, those
plans may not be sufficient to mitigate manufacturing or supplier
interruptions, and the Group may also be limited in its ability to
pass on any increases in the prices it charges for its products as a
result of fixed-price supply agreements or hedging arrangements.
A significant disruption to the manufacturing or sourcing of
products or materials for any reason, including those mentioned
above, could interrupt product supply and, if not remedied,
could lead to litigation or regulatory action, product delistings by
retailers, financial penalties, and reputational damage that could
materially and adversely affect the Group’s business, results of
operations and financial condition.
Increasing dependence on key retail customers, changes in
the policies of the Group’s retail customers, the emergence
of alternative retail channels and the rapidly changing
retail landscape
The Group’s products are sold in a highly competitive
global marketplace which has experienced increased trade
concentration and the growing presence, in both traditional and
digital operations, of large-scale retailers, including pharmacies,
discounters and e-commerce retailers. The Group is increasingly
dependent on certain retailers, and some of these retailers have
and may continue to have greater bargaining strength than the
Group does. For example, similar to its competitors, while the
Group maintains relationships with a variety of significant retailers
across its key markets, sales attributable to its top five largest
retailers account for over half of the Group’s revenue in the
US market.
The Group’s large-scale retail customers, including pharmacies,
may use their leverage to demand higher trade discounts,
allowances, display fees or increased investment, which could
lead to reduced sales or profitability. The loss of a key retailer or
a significant reduction in sales to a key retailer could materially
and adversely affect the Group’s business, prospects, results of
operations and financial condition. The Group’s business might also
be negatively affected by the growing presence and bargaining
strength of customers who operate internationally and retail
buying alliances (horizontal alliances of retailers, retail chains or
entire retailer groups that cooperate in pooling their resources)
and the enhanced leverage that such alliances possess.
The Group has also been and may continue to be negatively
affected by changes in the policies or practices of the Group’s
retail trade and pharmacy customers, such as inventory de-stocking,
limitations on access to shelf space, delisting of the Group’s
products, or environmental, sustainability, supply chain or
packaging initiatives and other conditions.
Private label products sold by the Group’s retail customers,
which are typically sold at lower prices than branded products,
are a source of competition for certain of the Group’s products.
In addition, the retail landscape in many of the Group’s markets
continues to evolve as a result of the rapid growth of e-commerce
retailers (who are able to generate private label products
Group information
continued
Risk factors
continued
Haleon
Annual Report and Form 20-F 2023
194
Other Information
Failure to respond effectively to the challenges raised by
climate change and other sustainability and ESG matters
Concern over climate change and social impacts has increased
the focus on the sustainability of practices and products in the
market and may result in new or additional legal and regulatory
requirements to reduce or mitigate the effects of climate change
on the environment and social impacts. Areas of focus relevant
to the Group’s business include, among others, responsible
sourcing and deforestation, the use of plastic, energy and
water, the recyclability or recoverability of packaging, including
single-use and other plastic packaging, and the use of certain
materials, such as palm oil where the environmental or social
impact of the material can attract scrutiny. New or additional
legal and regulatory requirements more stringent than the
Group’s current legal and regulatory obligations and/or the
Group’s existing practices and procedures, may require the
Group to revise its operations and supply chain management.
Such requirements may also require upgrades to our systems and
processes for capturing ESG data, and compliant ESG reporting
may therefore be dependent on those upgrades being in place
and fully embedded. There may also be financial impacts as
governments implement taxation initiatives, such as extended
producer responsibility taxes or carbon taxes, to help recover
the cost of managing plastic waste and the impacts of climate
change. There may also be reputational impacts, including
related impacts such as product delistings with customers or
loss of preference with consumers, investors, employees or other
stakeholders, should the Group fail, or be perceived to fail, to
meet either its publicly stated sustainability goals or community
expectations in relation to sustainability initiatives. For further
information on the specific climate-related risks facing the Group,
see Task Force on Climate-related Financial Disclosures, from
page 24. These developments may result in increased costs and
disruption to the Group’s operations, and to loss of revenue,
which could materially and adversely affect the Group’s business,
results of operations, cash flows and financial condition.
The Group may not be able to sufficiently protect its intellectual
property rights or avoid claims of infringement on the
intellectual property rights of others
The Group relies on various types of intellectual property rights
such as trade marks, patents, copyrights and designs, whether
registered or unregistered, as well as unpatented proprietary
knowledge and trade secrets, to protect its business. However,
these rights do not afford complete protection against third
parties’ claims and infringements, for example, due to territorial
limitations on intellectual property protections in certain
markets in which the Group operates. Additionally, there can be
no assurance that third parties will not independently develop
knowledge and trade secrets that are similar to the Group’s, or
develop products or brands that compete effectively with the
Group’s products and brands without infringing, misusing or
otherwise violating any of the Group’s intellectual property rights.
The Group’s intellectual property rights may also be challenged
in the future. In the event of such a challenge, the Group could
incur significant costs to defend its intellectual property rights,
even if it is ultimately successful. Additionally, there is a risk that
the Group will not be able to obtain licences for the intellectual
property rights necessary to support new product introductions
and product innovations.
Competition for such talent is intense, and there can be no
assurance that the Group will be able to continue to attract and
retain such talent.
If the Group is unable to recruit, attract and retain talented,
highly qualified Senior Management and other key people for any
reason the Group’s business, prospects, results of operations and
financial condition could be materially and adversely affected.
Damage to the Group’s reputation
Maintaining the Group’s strong reputation and trust with consumers
and customers globally is critical to selling the Group’s branded
products. Negative publicity, posts or comments on social
media about the Group, its products, the ways it does business,
threatened or pending litigation or regulatory proceedings, its
public policy engagement, environmental, social and governance
practices, including as they relate to diversity, equality and
inclusion, the health, safety and welfare of employees or other
stakeholders, or relations with its employees, or regulatory
infractions, violations of sanctions or anti-bribery rules, whether
or not deserved, could jeopardise the Group’s reputation and/or
expose it to adverse press and social media attention. Whether
true or untrue, such negative publicity, posts or comments on
social media could damage the Group’s brands and its reputation
and/or lead to boycotts of its products. Moreover, the Group’s
reputation could be harmed as a result of inappropriate use of
its branded products being promoted on social media and any
associated negative publicity.
The Group’s reputation may also be adversely affected if
third parties with whom the Group contracts (or an owner,
acquirer or other related party of such), including its suppliers,
manufacturers and customers, fail to maintain high ethical,
social and environmental standards, comply with local laws
and regulations or become subject to other negative events or
adverse publicity. While the Group has policies and procedures
for managing third-party relationships, it may not be possible to
fully ensure that third parties adhere to the same standards and
values as the Group or to replace third-party relationships in a
timely and/or cost-effective manner.
Counterfeiting is a common issue for successful brands and has
been amplified by the growth of e-commerce. Although the Group
has an anti-counterfeiting programme in place, third parties
continue to sell counterfeit versions of the Group’s products.
These counterfeits are inferior in quality to the genuine Group
products and may pose safety risks to consumers. Consumers of
the Group’s brands could confuse the Group’s products with or
purchase these counterfeit products. The consumption of inferior
quality products, which consumers believe to be genuine (and,
in some instances, may cause consumer safety issues) could also
damage the reputation of the Group and its brands and lead to a
reduction in market share.
Damage to the Group’s reputation or loss of consumer confidence
in the Group’s products for these or any other reasons could
materially and adversely affect the Group’s business, results of
operations, cash flows and financial condition, as well as require
resources to rebuild the Group’s reputation.
Other Information
Haleon
Annual Report and Form 20-F 2023
195
Group information
Furthermore, such product quality or other product-related
issues also expose the Group to a significant risk of litigation,
particularly product liability claims, and regulatory action
(see Risks related to litigation, disputes and regulatory
investigations, from page 199).
Failure by the Group to manufacture its products in accordance
with good manufacturing practices could have the potential to
do significant damage to the Group’s reputation and materially
and adversely affect the results of its operations and financial
condition. In addition, if any of the Group’s competitors or
customers supply faulty or contaminated products to the market,
the Group’s industry could be negatively impacted, which in turn
could have material adverse effects on the Group’s business.
A cyber-security incident, data breach or a failure of a key
information technology system
The Group relies extensively on information technology systems
(IT systems), including some which are managed, hosted, provided
and/or used by third parties, including cloud-based service
providers, and their vendors, in order to conduct its business.
Although the Group has a broad array of information security
measures in place, the Group’s IT systems, including those of
third-party service providers with whom it has contracted, have
been, and will likely continue to be, subject to computer viruses
or other malicious codes, unauthorised access attempts, phishing
and other cyber-attacks.
Cyber-attacks and other cyber incidents are occurring more
frequently, are constantly evolving in nature, are becoming
more sophisticated and are being made by groups, individuals
and nation states with a wide range of expertise and motives.
While the Group has implemented systems, monitoring and
training to prevent cyber-attacks and other cyber incidents from
being successful, the Group cannot guarantee that its security
efforts will protect against breaches or breakdowns of its, or its
third-party service providers’, IT systems since the techniques
used in these attacks change frequently and may be difficult to
detect for periods of time, and so such cyber-attacks may from
time to time succeed. In addition, the Group cannot guarantee
that it or its third-party service providers’ response to any such
incidents will fully remedy the extent of the damage caused by
these incidents. Although the Group has policies and procedures
in place to ensure that all personal information collected by it
or its third-party service providers is securely maintained, data
breaches due to human error or intentional or unintentional
conduct may still occur in future.
Furthermore, the Group periodically upgrades its IT systems
or adopts new technologies. If such an upgrade or new
technology does not function as designed, does not go as
planned or increases the Group’s exposure to a cyber-attack or
cyber incident, it may adversely impact the Group’s business,
including its ability to ship products to customers, issue invoices
and process payments or order raw and packaging materials.
If the Group were to suffer a significant loss or disclosure of
confidential business or stakeholder information as a result of
a breach of its IT systems, including those of third-party service
providers with whom it has contracted, or otherwise, the Group
may suffer reputational, competitive and/or business harm, incur
significant costs and be subject to government investigations,
litigation, fines and/or damages, which may materially and
adversely impact the Group’s business, prospects, results of
operations and financial condition.
The Group also uses intellectual property rights in-licensed from
licensors. The Group’s licences to such intellectual property rights
may not provide exclusive or unrestricted rights in all fields of use
and in all territories in which the Group may wish to develop or
commercialise its products in the future, may restrict its rights to
offer certain products in certain markets, and may not grant the
Group full control over the maintenance, protection, enforcement
or use of such intellectual property rights, leaving the Group
reliant on the licensors to conduct such activities.
Further, the agreements under which the Group licenses
intellectual property rights from others are complex, and the
provisions of such agreements may be susceptible to multiple
interpretations. As such, resolution of any dispute relating to
such contracts may be costly, time-consuming and ultimately
narrow the scope of the Group’s rights to the intellectual
property being licensed, or increase what the Group believes to
be its financial or other obligations under the relevant agreement.
Infringement, misuse or other violation of any of the Group’s
intellectual property rights, including by current or former
employees, contractors or third parties, may dilute or diminish
the value and goodwill of the Group’s brands and products in
the marketplace, which could materially and adversely affect
the Group’s results of operations and make it more difficult for
the Group to maintain a strong market position, leading to a
material and adverse effect on the Group’s business and results
of operations.
The Group may incur liabilities or be forced to recall products
as a result of real or perceived product quality or other
product-related issues
Failure to comply with good manufacturing or good distribution
practices and regulations, as well as other regulations in relation
to product quality, throughout the Group’s in-house and contract
manufacturing supply and distribution chains, could lead to
product supply interruptions, product recalls or withdrawals,
litigation and/or regulatory enforcement action and fines from
regulators, despite employee training, promotion of a health and
safety culture, and control measures and systems being in place
that are designed to ensure that the safety and quality of the
Group’s products is maintained. Additionally, products may be
contaminated or tampered with during distribution or at stores.
The Group is increasingly using new technology to enhance the
manufacture and testing of its products, such as the deployment
of new electronic documentation systems and advanced
laboratory information management tools. Such technology is
inherently susceptible to the threat of cyber-attacks which pose
an ongoing risk to the integrity of product quality data and its
audit trail. The Group also continues to be reliant on third parties
and is continuing to undertake a global network rationalisation
programme to reduce the number of manufacturing sites it uses,
both of which are factors that may increase the risks to safe and
timely supply of products.
Product recalls or withdrawals arising as a result of real or
perceived product quality, efficacy, safety, environmental or other
product-related issues, whether initiated on a voluntary basis or
otherwise, can result in a range of adverse consequences to the
Group, including lost sales, the requirement to hold increased
inventories of substitute products, the cost of re-formulations,
damaged relationships with regulators, loss of market share to
competitors, adverse publicity and reputational harm, in addition
to the direct costs of implementing any recall.
Group information
continued
Risk factors
continued
Haleon
Annual Report and Form 20-F 2023
196
Other Information
manufacturing components; a decrease in the Group’s workforce
or in the efficiency of such workforce as a result of illness, travel
restrictions, absenteeism or governmental regulations and
transportation and logistics challenges; failure of third parties on
which the Group relies to meet their obligations to the Group, or
significant disruptions in their ability to do so; restrictions on the
Group’s employees’ ability to work and travel, mandated closure
of certain distributors or retailers, the Group’s offices, shared
business service centres and/or operating and manufacturing
facilities, or other restrictions that could prevent the Group as
well as its third-party partners, suppliers or customers from
sufficiently staffing operations; disruptions and volatility in the
global capital markets, which may increase the cost of capital
and/or adversely impact the Group’s access to capital; and/or
volatility in foreign exchange rates and in raw and packaging
materials and logistics costs.
Despite the Group’s efforts to manage these impacts, their
ultimate impact also depends on factors beyond the Group’s
knowledge or control, including the duration, severity and
geographic scope of an outbreak, the availability, widespread
distribution and use of safe and effective vaccines and the
actions taken to contain its spread and mitigate its public health
and economic effects.
The Group may not successfully acquire and integrate other
businesses, license rights to technologies or products, form
and manage alliances, or divest businesses
The Group may decide in the future to pursue acquisitions,
technology licensing arrangements, strategic alliances or
divestitures as part of its business strategy. The Group may
not complete these transactions in a timely manner, on a cost-
effective basis or at all. In addition, the Group may be subject
to regulatory constraints or limitations or other unforeseen
factors that prevent it from realising the expected benefits
of such transactions.
Even if the Group is successful in completing an acquisition,
the products, intellectual property and technologies that are
acquired may not be successful or may require significantly
greater resources and investments than originally anticipated.
The Group may be unable to integrate acquisitions successfully
into its existing business, and the Group may be unable to
achieve expected operating margin improvements, synergies or
efficiencies. The Group could also incur or assume significant
debt and unknown or contingent liabilities in connection with
acquisitions. The Group’s reported operating results could be
negatively affected by acquisition or disposition-related charges,
amortisation of expenses related to intangibles and charges
for impairment of long-term assets. The Group may be subject
to litigation in connection with, or as a result of, acquisitions,
dispositions, licences or other alliances and the Group may be
liable for future or existing litigation and claims related to the
acquired business, disposition, licence or other alliance because
either the Group is not indemnified for such claims or the
scope or availability of indemnification is limited. These effects
could cause the Group to incur significant expenses and could
materially and adversely affect the Group’s business, results of
operations and financial condition.
While the Group has disaster recovery and business continuity
plans in place, if its IT systems were damaged, breached or were
to cease to function properly for any reason or if it does not
effectively resolve such issues on a timely basis, the Group may
suffer interruptions in its ability to manage or conduct business
as well as reputational harm, and may be subject to governmental
investigations and litigation, any of which may materially and
adversely impact the Group’s business, prospects, results of
operations and financial condition.
The Group relies on third parties in many aspects of its business
Due to the scale and scope of the Group’s business, the Group
relies on relationships with third parties, including its suppliers,
contract manufacturers, distributors, contractors, commercial
banks, joint venture partners and external business partners, for
route to market and for certain administrative and other functions.
If the Group is unable to effectively manage and maintain its
third-party relationships, including its contractual arrangements,
if such third parties fail to meet their obligations to the Group or
if there are substantial disruptions in the relationships between
the Group and third parties, the Group’s results of operations
could be adversely impacted.
For example, in China, part of the Group’s business is conducted
through a joint venture between Haleon, the Tianjin Pharmaceutical
Group and Tianjin Pharmaceutical Da Ren Tang Group Corporation
Limited (the TSK&F Joint Venture), pursuant to a joint venture
agreement which is due to expire in September 2024.
The Group is in discussions with the joint venture parties to agree
an extension to the term of the TSK&F Joint Venture or alternative
arrangements for the continued operation of its business.
There can be no assurance that any extension, or alternative
arrangements, would be implemented by September 2024 on
terms which allow the Group to continue to operate its business
in China on materially the same basis as it currently operates
under the TSK&F Joint Venture, or at all. If the Group does not
agree an extension to the term of the TSK&F Joint Venture or
implement alternative arrangements, then the continuity and
development of part of its operations and route to market in
China, as well as its business, results of operations and cash
flows in that market, may be adversely affected.
Third-party relationships inherently involve the Group holding a
lesser degree of control over business operations, and compliance
with laws, regulations and Group policies and practices than is
available for the Group’s own operations and compliance. As such,
the Group’s financial, reputational, operational and legal risk is
potentially increased, including in respect of health and safety,
environmental, social and governance issues, modern slavery,
and anti-bribery and corruption.
The Group faces various risks related to pandemics, epidemics
or similar widespread public health concerns
A pandemic, epidemic or similar widespread health concern
could have a variety of impacts on the Group’s business, results
of operations, cash flows and financial condition, including:
effects on the health, safety and wellbeing of the Group’s
employees, including key employees; volatility in the demand for
and availability of the Group’s products; decreases in demand
and sales for certain of the Group’s products such as Theraflu
and Robitussin due to a particularly weaker cold and flu season;
changes in regulatory policy, including restrictions on sales of
certain products; disruptions to the Group’s global supply chain
due to, among other things, the availability of raw materials or
Other Information
Haleon
Annual Report and Form 20-F 2023
197
Group information
Risks relating to changes in law and the political and
economic environment, regulation and legislation
The Group’s business is subject to legal and regulatory risks
in all the markets in which it operates
They apply to most aspects of the Group’s products, including
their development, ingredients, formulation, manufacture,
packaging content, labelling, storage, transportation, distribution,
export, import, advertising, promotion beyond therapeutic
indications, sale and environmental impact. Many different
governmental and regulatory authorities in the Group’s markets
regulate and have jurisdiction over different aspects of the
Group’s business activities. In addition, the Group’s selling
practices are regulated by competition law authorities in the UK,
as well as in the EU, the US and other markets.
Additionally, in China, where the Group has significant sales
and operations, governmental authorities introduced changes
in regulations relating to registrations of all generic medicines
(including OTC products) and recently introduced changes for oral
health products. These affect both new and existing products
and impose increased data submission requirements for products
the Group markets in China. There is a risk that commercialisation
of certain products of the Group may be restricted in China if the
Group is unable to comply with these regulatory changes on the
required timetable.
Because of the Group’s extensive international operations,
the Group could be materially and adversely affected by
violations of worldwide anti-bribery laws, including those
that prohibit companies and their intermediaries from making
improper payments to government officials or other third parties
for the purpose of obtaining or retaining business, such as the US
Foreign Corrupt Practices Act, the UK Bribery Act 2010, and other
laws that prohibit commercial bribery. Additionally, in certain
jurisdictions, the Group’s engagement with Health Professionals
and other external leaders is subject to applicable restrictions.
While the Group’s policies mandate compliance with such laws,
the Group cannot provide assurance that the Group’s internal
control policies and procedures will always protect the Group
from reckless or criminal acts committed by its employees,
joint venture partners or agents. Similarly, due to the Group’s
international operations, the Group could also be materially and
adversely affected by any violations of international sanctions
laws, which continue to evolve in response to geopolitical events
(see also The Group’s business may be impacted by the effects of
regional and local conflicts, on page 200).
While it is the Group’s policy to comply with all legal and
regulatory requirements applicable to the Group’s business,
there can be no guarantee that the Group will always achieve
full compliance and a finding that the Group is in violation of,
or out of compliance with, applicable laws or regulations could
subject the Group to civil remedies, including fines, damages,
injunctions or product recalls, or criminal sanctions. Even if a
claim is unsuccessful, is without merit or is not fully pursued,
the Group may incur costs in responding to such a claim and
negative publicity surrounding such assertions regarding the
Group’s products, processes or practices.
The Group faces risks relating to the regulation and perception
of the ingredients it uses in its products
Regulatory bodies and consumer groups may, from time to time,
request or conduct reviews of the use of certain ingredients that
are used in manufacturing the Group’s products. If the result
of such reviews is an inability to use, or restrictions on the use
Risks relating to the Group’s leverage and debt
service obligations
Prior to the demerger, the Group incurred financial indebtedness
in order to fund the pre-demerger dividend (as described in
Note 10 to the Consolidated Financial Statements). As a result,
the Group has higher leverage levels than are reflected in the
Group’s longer-term strategy and has significant debt service
obligations. The Group’s longer-term strategy to improve its
financial risk profile, including by reducing levels of indebtedness,
may not be successful.
The Group’s outstanding financial indebtedness as at
31 December 2023 is set out in Note 19 to the Consolidated
Financial Statements.
The degree to which the Group is leveraged could have important
consequences for the Group’s business, including, but not
limited to: increasing the Group’s vulnerability to, and reducing
its flexibility to respond to, a downturn in the Group’s business
or general adverse economic and industry conditions; limiting
the Group’s ability to obtain additional financing in the longer
term; requiring the dedication of a substantial portion of the
Group’s cash flow from operations to the payment of interest
on the Group’s indebtedness and the repayment of principal,
thereby reducing the availability of such cash flow to fund
capital expenditures, dividends, joint ventures, acquisitions
or other general corporate purposes; increasing the cost of
future borrowings for the Group; a downgrade in the Group’s
credit rating, which may, in turn, increase the cost of the Group’s
financing arrangements and make it difficult for the Group to
access financing on commercially acceptable terms or at all;
limiting the Group’s flexibility in planning for, or reacting to,
changes in the Group’s business and the competitive environment
and the industry in which it operates; and placing the Group
at a competitive disadvantage as compared to some of its
competitors, to the extent that they are not as highly leveraged.
Any of these or other consequences or events could have a material
adverse effect on the Group’s business, financial condition and
results of operations. In addition, the Group may incur substantial
additional indebtedness in the future. The covenants in existing
financing instruments do not fully prohibit the Company or its
subsidiaries from incurring more indebtedness. If new debt is
added to the Group’s debt levels, the risks that it faces could
intensify. The incurrence of additional indebtedness would
increase the leverage-related risks described herein and would
increase the risk of a downgrade in the Group’s credit rating.
Goodwill and indefinite-life intangible assets are a material
component of the Group’s balance sheet and may be subject
to impairments
The Group has recorded a significant amount of goodwill and
indefinite-life intangible assets on its balance sheet as set out
in Note 14 to the Consolidated Financial Statements. The Group
tests the carrying values of goodwill and indefinite-life intangible
assets for impairment at least annually and whenever events or
circumstances indicate the carrying value may not be recoverable.
The estimates and assumptions about future results of operations
and cash flows made in connection with impairment testing could
differ from future actual results of operations and cash flows.
Any resulting impairment charge, although non-cash, could have
a material adverse effect on the Group’s results of operations
and financial condition.
Group information
continued
Risk factors
continued
Haleon
Annual Report and Form 20-F 2023
198
Other Information
Sustained elevated interest rates may in future increase the
Group’s interest expenses associated with these and future debt
obligations and thereby reduce cashflow available for other
purposes. Any hedging arrangements entered into by the Group
to offset this risk may prove not to be fully effective or available
on terms that are acceptable to the Group.
Risks related to litigation, disputes and
regulatory investigations
The Group is, and may in the future be, subject to legal proceedings,
disputes and regulatory and governmental investigations in
various contexts, including consumer fraud actions, competitor
and regulatory challenges to product and marketing claims,
competition law investigations, product liability and quality
claims, human resources claims, contractual disputes and
other disputes or claims arising in the ordinary course of its
business operations.
These legal actions, disputes and investigations may relate
to aspects of the Group’s businesses and operations that
are specific to the Group, or that are common to companies
that operate in the Group’s markets, and this risk may be
enhanced in circumstances where the Group is operating in new
markets. Legal actions and disputes may arise under contracts,
regulations or from a course of conduct taken by the Group, and
may be class actions. Further information on legal proceedings
impacting the Group are detailed in Note 22 to the Consolidated
Financial Statements, on page 152.
In connection with acquisitions, disposals or other transactions,
the Group may enter into contractual arrangements pursuant
to which the Group may become exposed to litigation risk
despite not being a party to proceedings in relation to which the
indemnities may be implicated. In connection with the separation
as further set out below under “The Group has indemnification
obligations in favour of the GSK Group and the Pfizer Group,
which could be significant”, GSK and Pfizer have each served the
Group with notice of potential claims for indemnification relating
to OTC Zantac, the outcome of which claims is currently uncertain.
The Group has rejected both GSK’s and Pfizer’s requests for
indemnification on the basis that the scope of the indemnities
set out in the joint venture agreement only covers the consumer
healthcare businesses of GSK and Pfizer when the Consumer
Healthcare JV was formed in 2018.
Given the large or indeterminate amounts of damages sometimes
sought by claimants, other sanctions that might be imposed
(including the Group no longer being able to use key claims)
and the inherent unpredictability of litigation and disputes,
it is possible that an adverse outcome to any litigation, dispute,
government or regulatory investigation could have a material
adverse effect on the Group’s business, financial condition,
results of operations and prospects. The Group has made
provisions for legal disputes and matters, including amounts
relating to legal and administrative proceedings, which we
believe are reasonably possible (but not probable) to be realised.
Given the inherent uncertainty of litigation, it is possible that
we might incur additional liabilities as a consequence of the
proceedings and claims brought against us, including those
that are not currently believed by us to be reasonably possible.
Details of these contingencies are included within Other
provisions as set out in Note 21 to the Consolidated Financial
Statements, on page 152.
of, certain ingredients and/or any requirement for remedial
action, the Group may incur significant additional costs and/
or need to invest substantial resources to make formulation
adjustments to its products. Additionally, the Group may be
adversely affected by the findings and any remedial actions
resulting from the EU’s ongoing investigations into the impact
of pharmaceuticals in the environment.
While the Group monitors and seeks to respond to and
address the impact of any emerging regulatory and legislative
developments, new or more stringent ingredient legislation could
have a negative impact on the Group’s business, undermine the
Group’s reputation and goodwill and affect consumer demand or
trade customer demand for products containing such ingredients.
If the Group voluntarily removes, or is required to remove, certain
ingredients from its products, it may not be able to develop an
alternative formulation, successfully modify its existing products
or obtain necessary regulatory approvals on a timely basis, or
at all, which could materially and adversely impact the Group’s
business, prospects, financial condition and results of operations.
The Group’s business is subject to market fluctuations and
general economic conditions, including inflationary pressures
and increased interest rates
Uncertainty, fluctuations or negative trends in the international
economic climate have had and could continue to have a
material adverse effect on the Group’s business and profitability.
There will be market fluctuations and economic factors that
will be beyond the Group’s control, but that will have the
potential to materially and adversely affect its business, revenue,
financial condition and operating results.
Such factors include: (i) inflation or deflation; (ii) changes in
government, fiscal and monetary policies; (iii) changes in the
financial standing of the Group’s customers, suppliers and
consumers, including levels of employment, real disposable
income, salaries and wage rates; (iv) consumer confidence and
consumer perception of economic conditions; (v) retailers’
perception of consumer spending habits; (vi) technological
change; (vii) exposure to possibly adverse governmental or
regulatory actions in countries where the Group operates or
conducts business; (viii) levels of volatility in global markets; (ix)
exposure to the effects of economic sanctions or other restrictive
economic measures as a result of the Group’s global presence;
and (x) any change or development in global, national or regional
economic and political conditions.
For example, the Group is exposed to inflationary pressures
and commodity prices, which generally affect the Group
through their impact on payroll and supply costs (including
freight). Whilst the Group may increase product prices in order
to mitigate the impact of inflation, competitive pressures may
constrain the Group’s ability to fully recover any increased costs
in this way, and so the Group may remain subject to market risk
with respect to inflationary pressures and increases in commodity
prices. In addition, the Group’s initiatives to offset headwinds
from inflation in input prices and commodities, including forward
buying, value engineering and alternative supply arrangements,
may not be sufficient to mitigate these risks.
Relatedly, the Group is also subject to risks arising from the
recent rapid increase of interest rates in many markets around
the world. In particular, the Group has obligations under
financial instruments that bear interest at floating rates, and
borrowings under the Group’s bank financing facilities (see
Note 25 to the Consolidated Financial Statements, from page 156).
Other Information
Haleon
Annual Report and Form 20-F 2023
199
Group information
The Group faces risks including but not limited to:
—
Disruption to the Group’s business operations, including
adverse impacts on its employees and on its revenue derived
in regions involved in conflict.
—
Foreign exchange risk relating to its revenues denominated in
relevant currencies. For example, the Group generates revenue
from sales of its products in Russia in Russian Rubles, and
denominates its significant costs in other currencies, such as
Pound Sterling, Euro and USD. Sanctions against Russia have
increased volatility in the value of the Russian Ruble, which
may affect the results of the Group’s operations in Russia as
the relative value between its derived revenues and incurred
costs fluctuates. The Group may not be able to offset any
devaluation of such currencies through increased prices of
its products. In addition, the imposition of exchange controls
may limit the Group’s ability to repatriate profits from its
operations in relevant countries.
—
Reduced demand for the Group’s products which exposes
the Group to increased counterparty risk in relation to
customers and receivables from customers.
—
Compliance with global sanctions regimes, and possible counter
measures imposed in response, many of which are evolving
rapidly and are increasingly complex to operate within.
—
Potential litigation risk from the Group’s counterparties seeking
to assert their rights for payments that are unable to be made
by the Group because of sanctions imposed on counterparties
or financial institutions.
—
Reputational risks associated with the Group’s continued
presence in certain markets. Negative publicity surrounding
the Group’s continued presence and/or supply of products in
countries involved in conflict could damage the Group’s brands
and its reputation, lead to boycotts of its products outside the
conflict region and/or have consequences on the continuation
of operations and/or sales, including a determination by the
Group to discontinue all sales in such countries.
—
As part of the Russian Government’s indicated plans to seize
the assets of western companies leaving Russia, in the event
that the Group discontinues its Russian operations, the
potential (i) nationalisation of the Group’s Russian assets,
(ii) devaluing of the Group’s Russian patents and trademarks
and (iii) introduction of restrictions on, or imposition of
unfavourable terms in respect of, payments made from
Russia or relating to assets in Russia.
The impact of conflict remains highly uncertain and there may
be additional risks to the Group arising out of or relating to the
current conflicts and escalating military conflicts globally, which
could also have a material adverse effect on the Group’s business.
Failure to comply with regulation regarding the use of
personal data
The Group is subject to regulations in the jurisdictions in which it
operates regarding the use of personal data. The Group collects
and processes personal data from its consumers, customers,
business contacts and employees as part of the operation of its
business, and therefore it must comply with data protection and
privacy laws. Those laws generally impose certain requirements
on the Group in respect of the collection, retention, use and
processing of such personal information. Notwithstanding its
efforts, the Group is exposed to the risk that this data could
be wrongfully appropriated, lost, disclosed, retained, stolen
or processed in breach of data protection laws.
EU GDPR and the GDPR as it forms part of retained EU law in the
UK as well as the increased data protection regulation in other
The Group faces risks associated with significant
international operations
The Group operates on a global basis. While geographic
diversity helps to reduce the Group’s exposure to risks in any
one country or part of the world, it also means that the Group
faces risks associated with significant international operations,
including, but not limited to: exchange rate risks; regulatory
limits on the import and export of products, or repatriation
of earnings (including exchange and export/import controls);
political or economic instability, geopolitical events and rising
geopolitical trade tensions as well as social or labour unrest;
foreign ownership and investment restrictions and the potential
for nationalisation or expropriation of property or other
resources; changes to trade policies and agreements and other
foreign or domestic legal and regulatory requirements, including
those resulting in potentially adverse tax consequences or the
imposition of and/or the increase in onerous trade restrictions,
tariffs and/or price controls (including requirements to exclusively
utilise local manufacturing); and changes to labour laws, travel or
immigration restrictions.
Any or all of the foregoing risks could adversely impact consumer
confidence, affect the Group’s product mix and/or have a
significant impact on the Group’s ability to sell its products on
a competitive basis in international markets and may materially
and adversely affect its business, prospects, results of operations
and financial condition.
Volatility in material and other costs could materially
and adversely impact the Group’s profitability
Increases in the costs of and/or a reduction in the availability
of materials, including active pharmaceutical ingredients and
excipients and raw and packaging material commodities, as well
as labour, energy, logistics and other necessary services, such
as those seen during the COVID-19 pandemic and in relation
to inflationary pressures, may adversely affect the Group’s
profit margins. If material and other cost increases continue in
the future, the Group may be unable to pass along such higher
costs in the form of price increases, achieve cost efficiencies,
or otherwise manage the exposure through sourcing strategies,
ongoing productivity initiatives and the potential use of
commodity hedging contracts. Sustained price increases may
lead to declines in sales volumes as competitors may not adjust
their prices or consumers may decide not to pay higher prices,
which could lead to sales declines and loss of market share
and could materially and adversely affect the Group’s business,
results of operations and financial condition.
The Group’s business may be impacted by the effects
of regional and local conflicts
The Group monitors the effects of regional and local conflicts.
However, the broader economic consequences of Russia’s
invasion of Ukraine and other recent regional conflicts, including
in the Middle East, continue to be difficult to predict, and the
ongoing global geopolitical and economic instability related to
the actions of governments relating thereto (including sanctions
measures), the effects of which include (but are not limited to)
changes in commodity, freight, logistics and input costs, could
continue to adversely impact the Group’s business and/or the
trading prices of its securities.
Group information
continued
Risk factors
continued
Haleon
Annual Report and Form 20-F 2023
200
Other Information
Changes in the tax systems of the countries in which the Group
operates could adversely affect the Group’s financial condition
and results of operations
Many countries, including the ones in which the Group operates,
change their tax laws from time to time, including by legislation,
regulation, administrative practice, judicial action or entering into
or amending tax treaties. The Group’s financial condition and
results of operations may be adversely affected by such changes.
For example, the Organisation for Economic Co-Operation and
Development’s base erosion and profit shifting project and Pillar
Two regime, which is focused on establishing a global minimum
corporate taxation rate, has caused or is anticipated to cause
changes in the tax laws of many countries in which the Group
operates, and it is estimated that Pillar Two will increase the
adjusted effective tax rate of the Group by less than 1%. Similarly,
the US Government routinely proposes changes to US tax laws, and
such changes, including any expansion of the scope of the US anti-
inversion rules, could also adversely affect the Group’s tax profile.
Risks relating to separation of its business from GSK
The Group has indemnification obligations in favour of the GSK
Group and the Pfizer Group, which could be significant
The Group, GSK, and Pfizer, entered into the Pfizer Stock and Asset
Purchase Agreement (Pfizer SAPA) on 19 December 2018 pursuant
to which the Group, GSK, and Pfizer agreed to form a new global
consumer healthcare joint venture. The Pfizer SAPA, as amended
from time to time, including by the Pfizer SAPA Amendment
Agreement, contains certain cross indemnities among the Group,
the GSK Group and the Pfizer Group. Among other provisions, the
Group is required to indemnify the GSK Group and Pfizer Group in
respect of “Purchaser Liabilities” and “Assumed Liabilities.” GSK
and Pfizer have each served the Group with notice of potential
claims under the relevant indemnification provisions in the
Pfizer SAPA in relation to possible liabilities connected with OTC
Zantac which the Group has rejected (see Legal proceedings in
Note 22 to the Consolidated Financial Statements, on page 152).
It is not possible, at this stage, to meaningfully assess whether the
outcome will result in a probable outflow, or to quantify or reliably
estimate what liability (if any) the Group may have to GSK and/or
Pfizer under the relevant indemnities.
In addition the Group has entered into a tax covenant with GSK and
Pfizer on 1 June 2022 (the Tax Covenant), effective from the time
of the Demerger. The Tax Covenant contains certain indemnities
(subject to certain financial and other limitations) in respect of
taxation given from GSK and Pfizer to Haleon (and vice versa).
If any amounts payable by the Group under these indemnities (or
additional taxes imposed on the Group that are not indemnified
by GSK and/or Pfizer under the Tax Covenant) are substantial, this
could have a material adverse effect on the financial condition,
results of operations and/or prospects of the Group.
The Tax Covenant will restrict the Company’s ability to engage
in certain transactions
The Tax Covenant imposes certain restrictions on the Company
which largely fall away from July 2024. For example, there are
restrictions on certain asset disposals as well as on certain internal
restructuring transactions (including liquidations or the issuance or
redemption of stock or debt of certain subsidiaries of the Company).
Although the Company does not currently anticipate that these
restrictions would have a material adverse impact on the Company,
these restrictions may reduce the Company’s ability to engage in
certain business transactions that otherwise might be advantageous,
until July 2024 when the majority of such restrictions fall away.
jurisdictions, such as China, Russia and the US, introduced the
potential for significant new levels of fines for non-compliance
based on turnover. As part of its ongoing compliance with
applicable requirements, the Group may be required to expend
significant capital or other resources and/or modify its operations
to meet such requirements, any or a combination of which could
have a material adverse effect on the Group’s business, financial
condition and financial results, or otherwise harm its reputation.
The Group is exposed to risks relating to fluctuations in
currency exchange rates and related hedging activities
The Group operates internationally and holds assets, incurs
liabilities, generates sales and pays expenses in a variety of
currencies other than Pound Sterling (the currency in which it reports
its financial results). The most significant foreign currency exposures
are to the USD, Euro, Swiss Franc and Chinese Renminbi, including
$8,448m of USD-denominated bonds and €2,350m of Euro-
denominated bonds incurred by the Group as at 31 December 2023.
Fluctuations in exchange rates for foreign currencies have reduced
and could continue to reduce the Pound Sterling value of sales,
earnings and cash flows the Group receives from markets outside
the UK, increase its supply costs (as measured in Pound Sterling)
in those markets, negatively impact its competitiveness in those
markets or otherwise materially and adversely impact its business
or financial condition. The Group’s foreign currency exposure will
be greater for so long as the leverage levels of the Group are higher
than are reflected in the Group’s longer-term strategy, the success
of which cannot be guaranteed. The Group aims to manage this
risk through hedging where possible and practical; however, such
hedging activities may be ineffective or may not offset more than
a portion of the adverse financial effect resulting from variations
to such rates. The Group is also exposed to counterparty credit
(or repayment) risk under hedging contracts. To the extent
any hedging activities of the Group are wholly or partially
ineffective, or to the extent a hedging counterparty fails to meet
its obligations under any hedging agreement, this could result in
losses which could have a material adverse effect on the Group’s
business, results of operations and financial condition.
Determinations made by the Group with respect to the
application of tax law may result in challenges from or disputes
with tax authorities which result in the payment of additional
amounts for tax
The worldwide nature of the Group’s operations means that the
Group is subject to the tax laws in each country in which it operates.
Tax laws are complex and on occasion are subject to interpretation
by Haleon and the relevant fiscal authorities, such that this may
result in conflict and creates the risk of double taxation.
Additionally, the Group is subject to many different forms
of taxation within any given jurisdiction in which it operates
(including, but not limited to, corporate income taxes, capital
gains taxes on direct or indirect transfers of ownership, stamp
duty and similar transfer taxes, value added taxes, property
taxes and social security and other payroll taxes). The global
tax environment across all taxes continues to change rapidly
creating further complexity and uncertainty. This means that
the Group may be subject to domestic and cross-border tax
authority disputes in the future, which could result in the payment
of additional amounts of tax. Such potential disputes and the
resulting payment obligations could have a material adverse
effect on the Group’s business, results of operations and financial
condition. At 31 December 2023, the Group had recognised
provisions of £148 million in respect of uncertain tax positions.
Other Information
Haleon
Annual Report and Form 20-F 2023
201
Group information
Group information
continued
Description of securities other than equity securities
Fees and charges payable by ADR holders
The Company’s American Depositary Receipt (ADR) programme is administered by J.P. Morgan Chase Bank, N.A. (the Depositary), as
the Depositary. The holder of an ADR may have to pay the following fees and charges to the Depositary in connection with ownership
of the ADR:
Category
Depositary actions
Associated fee or charge
Depositing or substituting the
underlying shares
Each person to whom ADRs are issued against deposits of shares,
including deposits and issuances in respect of: (i) share
distributions, stock splits, rights, mergers or (ii) exchange of
securities or any other transactions or event or other distribution
affecting the ADSs or the deposited securities.
Up to $5.00 for each 100 ADSs
(or portion thereof) issued or
delivered (as the case may be).
Receiving or distributing dividends
Distribution of cash/stock dividends.
$0.05 or less per ADS.
Selling or exercising rights
Distribution or sale of securities, the fee being in an amount equal
to the fee for the execution and delivery of ADSs which would
have been charged as a result of the deposit of such securities.
Up to $5.00 for each 100 ADSs
(or portion thereof).
Withdrawing, cancelling or reducing
an underlying security
Surrendering ADSs for cancellation and withdrawal of deposited
property.
Up to $5.00 for each 100 ADSs
(or portion thereof)
surrendered or cancelled
(as the case may be).
Transferring, combination or split-up
of receipts
Not applicable.
Not applicable.
General depositary services,
particularly those charged on an
annual basis
1
Other services performed by the Depositary in administering the
ADRs.
A fee of $0.05 or less per ADS
per calendar year held on the
applicable record date(s)
established by the Depositary.
Fees and expenses of the Depositary
Fees and expenses incurred by the Depositary or the Depositary’s
agents on behalf of holders, including in connection with: (i) stock
transfer or other taxes and other governmental charges, (ii)
cancellation transaction fees and delivery expenses, (iii), transfer
or registration expenses in connection with the deposit and
withdrawal of deposited securities, (iv) expenses in connection
with the conversion of foreign currency into US Dollars (which are
paid out of such foreign currency); (v) cable, telex, facsimile
transmission/delivery and (vi) any other charge payable by the
ADR Depositary or its agents.
As incurred by the Depositary.
1
With effect from 6 December 2022, Haleon agreed that the Depositary could charge an administration fee of $0.03 per ADR annually.
Direct and indirect payments by the Depositary
The Depositary anticipates reimbursing Haleon for certain expenses incurred by it that are related to the establishment and
maintenance of the ADR programme upon such terms and conditions as Haleon and the Depositary may agree from time to time.
The Depositary may make available to Haleon a set amount or a portion of the Depositary fees charged in respect of the ADR
programme or otherwise upon such terms and conditions as Haleon and the Depositary may agree from time to time. In respect
of the year ended 31 December 2023, the Depositary made payments of approximately $16.2m.
Under certain circumstances, including removal of the Depositary or termination of the ADR programme by Haleon, Haleon is required
to repay certain amounts paid to it and to compensate the Depositary for payments made or services provided on behalf of Haleon.
Haleon
Annual Report and Form 20-F 2023
202
Other Information
The non-voting preference shares rank pari passu with all other
non-voting preference shares and have preferential dividend
rights ahead of the ordinary shares, entitling holders to quarterly
cumulative dividends at a fixed rate of 9.5% per annum for five
years from the date of the issue, following which the rate shall be
reset for each subsequent period of five consecutive years at the
rate equal to the Bank of England base rate prevailing at the time
of reset plus 7.5%. Dividends on the non-voting preference shares
which have become payable are required to be paid in full before
any repurchases or distributions can be made with respect to the
ordinary shares.
Any dividend unclaimed after a period of six years from the date it
was declared or became due for payment is forfeited and reverts
to the Company unless the Board decides otherwise.
The Board may decide how dividends or other money payable in
cash relating to a share are paid. If shareholders fail to provide
the necessary details to enable payment, or if payment cannot be
made using the details provided by the shareholder, the dividend
or other amount payable will be treated as unclaimed.
Rights on a winding up
The non-voting preference shares carry preferential rights to
participate in a distribution of capital in the event of insolvency
(including on a winding-up) up to an amount equal to their
nominal value plus accrued dividend and any arrears or deficiency
in amount of the cumulative dividend. The ordinary shares do not
carry any rights to participate in a capital distribution (including
on a liquidation) other than those that exist as a matter of law.
Under the Companies Act, upon a liquidation, after the claims of
creditors have been satisfied and subject to any special rights
attaching to any other class of shares in the Company (including
the non-voting preference shares), surplus assets (if any) are
distributed among the shareholders in proportion to the number
and nominal amounts of their ordinary shares.
Redemption of non-voting preference shares
Each non-voting preference share is redeemable in whole at the
option of the Company or each relevant shareholder in respect
of its entire holding on any date falling not less than five years
after the date on which that share was issued or, if earlier, on the
Company undergoing a change of control.
General meetings
The Company is required to give at least 21 days’ notice of a
general meeting unless a special resolution reducing the period
to not less than 14 days has been passed at the immediately
preceding AGM.
The Board may decide to allow persons entitled to attend
and participate in a general meeting to do so by simultaneous
attendance and participation by means of an electronic facility
with no member necessarily in physical attendance at the
electronic meeting, and to permit Directors or others to attend
and speak, and the chair of the meeting to preside, by electronic
means. Shareholders present in person or by proxy by means of
such electronic facility will be counted in the quorum for, and be
entitled to participate in, the relevant general meeting.
Restrictions in respect of designated persons
The Company can apply restrictions and take certain actions in
relation to its shares where the Company believes the holder is or
may be designated as a sanctioned person by certain authorities
(including the UK, US, EU or any respective governmental
institutions) or where it would be unlawful by virtue of any
applicable sanctions laws.
Articles of Association
The Articles of Association, adopted on 31 May 2022, contain
(amongst others) provisions to the following effect. Any amendment
requires the approval of shareholders by a special resolution at
a general meeting. The Company’s objects are unrestricted.
Directors
The Board has the authority to manage the business of the
Company, for example, through powers to issue and repurchase its
shares, subject where required to shareholder resolutions. Subject
to certain exceptions, the Directors do not have power to vote at
Board meetings on matters in which they have a material interest.
The Company by ordinary resolution, or the Board, may appoint
any person permitted by law to do so and willing to act to be a
Director. In addition to any power of removal under legislation,
the Company may by special resolution remove a Director before
the expiration of their period of office and may (subject to the
Articles) by ordinary resolution appoint another person as a
Director in their place. All Directors must retire from office at
the AGM each year and may offer themselves for re-election.
Rights and restrictions
The liability of shareholders is limited to the amount, if any,
unpaid on the ordinary shares held by them.
Subject to any rights attached to existing shares, the Company
may issue (i) shares with such rights and restrictions as the
Company may by ordinary resolution decide, or (if there is no
such resolution or so far as it does not make specific provision)
as the Board may decide and (ii) redeemable shares, and the
Board may determine the terms and conditions applied to shares
so issued. Such rights, restrictions, terms and conditions apply
to the relevant shares as if they were set out in the Articles.
Shareholders are entitled to vote at a general meeting or
class meeting on a poll. Any resolution put to a vote at a
general meeting of the Company shall be decided on a poll.
The Companies Act and the Articles provide that on a poll
every shareholder has one vote per ordinary share held and
a shareholder may vote in person or by one or more proxies.
The proxies appointed by them taken together have the same
voting rights as the shareholder could exercise in person. In the
case of joint holders, the vote of the senior who tenders a vote is
accepted to the exclusion of the votes of the other joint holders
and seniority is determined by the order in which the names
stand in the register. Non-voting preference shares do not confer
any right to vote at a general meeting. Non-voting preference
shareholders are, however, entitled to vote at any class meeting
of non-voting preference shareholders.
A shareholder is not entitled to vote any share held by them
at any general or class meeting if any call or other sum then
payable remains unpaid or if that shareholder has been served
with a restriction notice (as defined in the Articles) after failure
to provide the Company with information concerning interests in
those shares required to be provided under the Companies Act.
Dividends
The Company may by ordinary resolution declare dividends not
exceeding the amount recommended by the Board. Subject to
the Companies Act, the Board may pay dividends whenever the
financial position of the Company, in the opinion of the Board,
justifies its payment.
Other Information
Haleon
Annual Report and Form 20-F 2023
203
Group information
Impact of regulation
The Group’s activities are subject to regulation on a local and
international level that impact the Group’s activities. The majority
of the Group’s products can be categorised according to four
principal regulatory classifications: OTC medicines; medical devices;
foods; and cosmetics. Each is subject to regulatory regimes that
restrict research, development, manufacturing, testing, marketing
and sale of the Group’s products, and the process of obtaining
regulatory approvals and ongoing compliance with applicable laws,
regulations and other requirements necessitate the expenditure
of substantial time and financial resources, which can increase
the cost and complexity of the Group’s business (see, for example,
The Group may not be able to develop and commercialise new
products effectively in the Risk Factors section on page 193).
In the US, the FDA is our principal regulator and we must also
comply with regulations promulgated by other federal and
state authorities. In the EU, the regulatory system is based on
a network of national competent authorities in the European
Economic Area, working together with the European Medicines
Agency and the European Commission. In China, the National
Medical Products Administration (and affiliated institutions) is
the primary regulator supervising and regulating drugs, medical
devices and cosmetics.
—
OTC medicines.
OTC medicines are regulated according to
guidelines and standards published by the International
Council for Harmonisation of Technical Requirements for
Pharmaceuticals for Human Use. The requirements govern,
among other things, pre-clinical and clinical testing, pre- and
post-marketing approval, production, distribution, import,
export, and advertising. Failure to comply can result in recalls,
seizures, injunctions, refusal or withdrawal of approval of
products, fines or criminal prosecution.
—
Medical devices.
All medical devices must satisfy safety
and performance, quality system (some low-risk devices
may be exempt) and labelling requirements, with the
degree of regulatory scrutiny increasing with the potential
risks of the medical device. Regulatory controls on medical
devices, including pre-market authorisation requirements,
may require the provision of stringent supporting material,
including (among other things) independent external audits
of the manufacturer’s quality systems, independent external
review of the technical data and documentation of relevant
clinical evidence to support the manufacturer’s claims.
—
Food.
Most food products do not require pre-market
authorisation, although specific categories (such as food
supplements, foods for special medical purposes or dietary
supplements) may require notification of sale to regulators.
In some countries, such as China, products classified as
functional health foods require a formal pre-market review
and registration. Products in this category are subject to
strict quality and safety standards, including for packaging
and product composition.
—
Cosmetics.
Cosmetics can be classified differently by territory:
a cosmetic in one country may be classified as a medicine,
or even a medical device, in another country (e.g., fluoride
toothpaste is a cosmetic in the EU and a drug in the US). Some
countries require pre-market approval involving the provision
of safety assessments, manufacturing data and raw material
functionality, while other countries require no registration.
Group information
continued
Additional laws, regulations and other requirements materially
relevant to the Group’s business include:
—
Claims and labelling.
The labelling and advertising for all
product classifications which the Group markets is subject to
applicable laws in markets in which the Group operates, which
may specify text format and the order of information, require
specific information and statements, and restrict misleading,
unfair or unsubstantiated claims in advertisements and on
labels. Regulatory authorities may take enforcement action
against businesses which fail to comply with relevant rules.
—
Pricing.
The Group’s activities are also subject to price
control laws and regulations in some of the markets in which
it operates. For example, in China, in respect of medicines
(both Rx and OTC) in the hospital channel, the government
regulates prices through a centralised procurement mechanism,
medical insurance reimbursement standards and strengthened
regulation of medical and pricing practices.
—
Consumer safety and quality.
The Group is subject to vigilance
regulations designed to ensure the safety of its products,
whether in the development pipeline, already approved,
or post-launch. These regulations require the collection,
detection, assessment, monitoring and prevention of adverse
events/undesirable effects, through (among other things)
inspection by health authorities, reporting of serious safety
events, and preparation of periodic safety reports. The Group
is also subject to quality regulations that apply to innovation,
manufacturing practices, testing, marketing, post-marketing
studies and reporting by product classification. These regulations
can require pre- and post-approval inspections of facilities
to ensure good manufacturing practice compliance, and the
imposition of quality systems regulations on medical devices.
Exchange controls and restrictions on payment
of dividends
Other than certain economic sanctions in force from time to
time, there are no governmental laws, decrees or regulations
in the UK restricting the import or export of capital or affecting
the remittance of dividends, interest or other payments to
non-resident holders of ordinary shares or ADRs. There are
no limitations under English law or the Articles on the right of
non-resident or foreign owners to be the registered holders of,
or to exercise voting rights in, ordinary shares or ADRs.
Haleon
Annual Report and Form 20-F 2023
204
Other Information
Material contracts
The contracts listed below have been entered into by the
Company or a member of the Group within the two years
immediately preceding the date of this Annual Report and are
material to the Company or any member of the Group (other
than contracts entered into in the ordinary course of business)
or were subsisting during this period of review and are contracts
of significance with a controlling shareholder in accordance with
Listing Rule 9.8.4R(10).
Pfizer Stock and Asset Purchase Agreement
Pursuant to a stock and asset purchase agreement dated
19 December 2018 and amended and restated on 31 July
2019 (the Pfizer SAPA), GSK, Pfizer and GlaxoSmithKline
Consumer Healthcare Holdings (No.2) Limited (now known as
Haleon UK Holdings (No.2) Limited) (CH JVCo, as the holding
company for the Group prior to separation) agreed to form
a new global consumer healthcare joint venture (the GSK/
Pfizer JV), through: (i) the acquisition by CH JVCo of the Pfizer
Contributed CH Business (as defined below) from Pfizer and
(ii) the transfer by GSK to CH JVCo of those parts of the GSK
Contributed CH Business (as defined below) not already owned
by GlaxoSmithKline Consumer Healthcare Holdings Limited (now
known as Haleon UK Holdings Limited) (GSKCHH, the former
holding company of the Group). Completion of the transaction
(Pfizer Completion) took place on 31 July 2019. Following the
Demerger, the Group has assumed the obligations of CH JVCo
under each of the contracts disclosed in this section.
Asset Perimeter: GSK Contributed CH Business
The “GSK Contributed CH Business” has the meaning given to
“Purchaser Business” in the Pfizer SAPA, which was defined as
follows: (i) the worldwide business of researching, developing,
manufacturing, marketing, commercialising, distributing and
selling the products sold under the brand names listed for GSK
in an annex to the Pfizer SAPA as conducted by GSK (directly
and indirectly) as of the date of the Pfizer SAPA and as of
immediately prior to Pfizer Completion; (ii) the business reflected
in certain specified financial statements of the GSK Contributed
CH Business, including the assets, rights, properties, activities,
operations and liabilities that comprised such business; (iii) the
business of marketing, commercialising, distributing and selling
any over-the-counter healthcare or medicine products, wellness
products and other personal care, oral care, nutrition, skin
health, cosmetic and related products (the Consumer Healthcare
Products) as conducted by GlaxoSmithKline Asia Private Limited
(including pursuant to the Consignment Selling Agreement)
as of the date of the Pfizer SAPA and as of immediately prior
to Pfizer Completion; and (iv) to the extent not otherwise
reflected in the financial statements referred to in (ii) above,
the research and development of any Consumer Healthcare
Products, as conducted by GSK (directly and indirectly) through
its consumer healthcare business (directly or indirectly pursuant
to a contractual arrangement with any other GSK business, to the
extent of the GSK consumer healthcare business’ right pursuant
to such contractual arrangement), as of the date of the Pfizer
SAPA and as of immediately prior to Pfizer Completion, but
excluded: the worldwide business of researching, developing,
manufacturing, marketing, commercialising, distributing and
selling pharmaceutical products to the extent such business
and the economic benefit attached to such business was not
reflected in the financial statements referred to in (ii) above; and
the excluded assets listed for GSK in an annex to the Pfizer SAPA,
namely: (i) the assets within the scope of (and proceeds of) GSK’s
divestment of the Horlicks brand and other consumer healthcare
nutrition products in India to Unilever N.V. (which completed on
1 April 2020); (ii) GlaxoSmithKline Consumer Healthcare Limited
(GSK’s listed subsidiary in India); (iii) GlaxoSmithKline Bangladesh;
(iv) GlaxoSmithKline Consumer Nigeria plc; (v) Imitrex and
Ventolin; and (vi) certain manufacturing sites in Argentina, Brazil,
Indonesia, India and Nigeria.
The parties subsequently agreed to transfer manufacturing
sites in Indonesia, Argentina and Brazil into the Group.
Asset Perimeter: Pfizer Contributed CH Business
The “Pfizer Contributed CH Business” has the meaning given
to “Business” in the Pfizer SAPA, which was defined as the
worldwide business of researching, developing, manufacturing,
marketing, commercialising, distributing and selling: the products
sold under the brand names listed for Pfizer in an annex to the
Pfizer SAPA, as conducted by Pfizer (directly and indirectly) as of
the date of the Pfizer SAPA and as of immediately prior to Pfizer
Completion; and any over-the-counter consumer healthcare or
medicine products, wellness products and other personal care,
oral care, nutrition, skin health, cosmetic and related products,
as conducted by Pfizer (directly and indirectly) through its Pfizer
consumer healthcare business unit (directly or indirectly pursuant
to a contractual arrangement with any other Pfizer business unit,
to the extent of the Pfizer consumer healthcare business unit’s
rights pursuant to such contractual arrangement) as of the date of
the Pfizer SAPA and as of immediately prior to Pfizer Completion,
but excluded: (i) any product marketed, commercialised,
distributed or sold under the brands Diflucan One, Feldene
Gel or Ponstan (or any other products containing the same or
similar compounds as such products) in any jurisdiction; (ii)
any pharmaceutical products or pharmaceutical products that
have become or may in the future become, in whole or in part,
over-the-counter products (other than the products included
in the definition of “Business”); and (iii) any product containing
any of the following compounds (or marketed, commercialised,
distributed or sold under any of the following brands) in any
jurisdiction: (a) Sildenafil citrate (Viagra); (b) Celecoxib (Celebrex);
(c) Varenicline (Chantix/Champix); (d) Atorvastatin (Lipitor); (e)
Gabapentin (Neutontin); and (f) Fesoterodine (Toviaz).
Indemnities
Under the Pfizer SAPA, GSK and Pfizer each agreed to indemnify
each other and the Group in respect of losses (other than losses
relating to tax, which were subject to a separate regime – see
below) relating to certain liabilities that the parties agreed would
be retained by GSK or Pfizer, respectively, relating to, among other
things: (i) the assets that were excluded from the GSK Contributed
CH Business or the Pfizer Contributed CH Business respectively
(as described above); (ii) liabilities under any pension or other
employee benefit plans not sponsored by GSKCHH or another
member of the Group, subject to certain exceptions; and (iii) any
liabilities arising from any third-party claim in respect of products
containing talc or asbestos distributed or sold by GSK or Pfizer at
any time before Pfizer Completion.
The Group is required to indemnify GSK and Pfizer in respect
of “Purchaser Liabilities” and “Assumed Liabilities”, which were
defined as follows: “Purchaser Liabilities” means any and all
liabilities (other than certain specified exceptions – including
those liabilities GSK agreed to indemnify the Group in respect
of, as summarised above) of GSK or any of its affiliates, whether
arising prior to, on or after Pfizer Completion, to the extent
resulting from or arising out of the past, present or future
ownership, operation, use or conduct of the Purchaser Business,
where “Purchaser Business” has the meaning described above
under the section entitled “Pfizer Stock and Asset Purchase
Agreement—Asset Perimeter: GSK Contributed CH Business”; and
Other Information
Haleon
Annual Report and Form 20-F 2023
205
Group information
Separation Co-operation and Implementation
Agreement
The Separation Co-operation and Implementation Agreement
(the SCIA) was entered into on 1 June 2022 among GSK, Pfizer,
CH JVCo and the Company, among others, and details certain
actions that were to be taken and arrangements that were to be
implemented to effect completion of, or which otherwise relate
to, the Separation. The SCIA records the obligations of the parties
relating to such matters and contains certain terms on which
relations between the parties are governed following completion
of the Separation.
The SCIA also sets out certain other rights and obligations of
the parties relating to, among other things, information rights
and confidentiality. Pursuant to the terms of the SCIA, Pfizer has
certain rights to certain information regarding the Company and
the Group. Subject to certain exceptions, those rights will not
apply if and when Pfizer and members of Pfizer’s group cease
to hold, in aggregate, Haleon ordinary shares or Haleon ADSs in
respect of such Haleon shares representing at least 10% of the
Haleon shares in issue (or the ordinary shares of any ultimate
holding company thereof from time to time).
Tax Covenant
In accordance with the SCIA, the Company, GSK and Pfizer, among
others, entered into a tax covenant on 1 June 2022, which has
been effective from the time of the Demerger (the Tax Covenant).
Subject to certain financial and other customary limitations, the
Tax Covenant contains certain indemnities in respect of taxation
given from GSK and Pfizer to the Company (and vice versa) where
it has been agreed that such taxes are properly allocable to the
indemnifying party. Amongst other things, GSK and Pfizer have
provided the Company with indemnities for tax arising (if any)
pursuant to certain pre-demerger reorganisation steps within
the Group and the steps which comprised the Separation. As is
customary for demerger transactions, the Company has provided
a more limited set of tax indemnities to GSK and Pfizer.
The Tax Covenant also imposes certain restrictions on the Company,
which largely fall away from July 2024. For example, there are
restrictions on certain asset disposals as well as on certain
internal restructuring transactions (including liquidations or the
issuance or redemption of stock or debt of certain subsidiaries
of the Company). Although the Company does not currently
anticipate that these restrictions would have a material adverse
impact on the Company, these restrictions may reduce the
Company’s ability to engage in certain business transactions
that otherwise might be advantageous, until July 2024 when
the majority of such restrictions fall away.
Exchange Agreements
Subject to and shortly after completion of the demerger, a series
of share-for-share exchanges occurred pursuant to certain share
exchange agreements in order to rationalise the Company’s
shareholding structure such that GSK, the Scottish Limited
Partnerships (SLPs) and Pfizer hold their remaining interests
in the consumer healthcare business by holding shares in the
Company, as the listed parent company.
Pfizer Exchange Agreement
On 1 June 2022, Pfizer and the Company, among others, entered
into an exchange agreement pursuant to which Pfizer transferred
all of its interests in the company that held 32% of the ordinary
shares in the Group prior to separation to the Company in
exchange for the issuance by the Company of Haleon ordinary
shares to Pfizer and J.P. Morgan Chase Bank N.A. (as depositary
on behalf of Pfizer), representing in aggregate 32% of the issued
“Assumed Liabilities” means any and all liabilities (other than
certain specified exceptions – including those liabilities Pfizer
agreed to indemnify the Group in respect of, as summarised
above) of Pfizer or any of its affiliates, whether arising prior to,
on or after Pfizer Completion, to the extent resulting from or
arising out of the past, present or future ownership, operation,
use or conduct of the Business, where “Business” has the
meaning described above under “Pfizer Stock and Asset Purchase
Agreement—Asset Perimeter: Pfizer Contributed CH Business”.
The Pfizer SAPA Amendment Agreement also extends the Group’s
indemnification obligations in favour of GSK and Pfizer to include,
among other things, all losses (other than losses relating to tax,
which were subject to a separate regime (see below)) relating to
liabilities to the extent resulting from or arising out of the past,
present or future ownership, operation, use or conduct of the
consumer healthcare business since Pfizer Completion, subject to
certain exceptions (see Pfizer SAPA Amendment Agreement below).
In respect of tax, each of GSK and Pfizer provided an indemnity,
subject to customary exclusions and limitations, to the Group in
respect of, among other things, tax liabilities of the companies
contributed to the GSK/Pfizer JV arising up to the point of
Pfizer Completion.
The indemnities provided by each of GSK, Pfizer and the Group
under the Pfizer SAPA survived completion of the Demerger
and Separation.
Pfizer SAPA Amendment Agreement
On 1 June 2022, GSK, Pfizer, CH JVCo and the Company entered
into the second amendment agreement to the Pfizer SAPA (the
Pfizer SAPA Amendment Agreement) to implement certain
amendments, including: (i) amendments to the Pfizer SAPA
that were deemed appropriate as a result of the Group being
an independent, separate business from GSK and Pfizer from
Separation; (ii) amendments that were deemed appropriate as
a result of an overlap with certain other ancillary agreements
that are currently being entered into as part of the Separation;
and (iii) to include the Company in the Pfizer SAPA indemnity
framework by way of a guarantee given by the Company of
CH JVCo’s indemnification obligations under the Pfizer SAPA.
Pursuant to the Pfizer SAPA Amendment Agreement: (i) the
Group’s indemnification obligations under the Pfizer SAPA (as
described under Pfizer Stock and Asset Purchase Agreement—
Indemnities on the previous page), were extended to include,
among other things, all losses (other than losses relating to tax,
which were subject to a separate regime) relating to liabilities
to the extent resulting from or arising out of the past, present
or future ownership, operation, use or conduct of the consumer
healthcare business since Pfizer Completion, subject to certain
exceptions primarily related to liabilities retained by each of
Pfizer and GSK, respectively, under the Pfizer SAPA; and (ii) the
Company, which is deemed a ‘Purchaser Indemnified Party’
under the Pfizer SAPA and has the benefit of the indemnities
given to CH JVCo under the Pfizer SAPA, has provided a
guarantee of CH JVCo’s indemnity obligations under the Pfizer
SAPA (as described under Pfizer Stock and Asset Purchase
Agreement— Indemnities on the previous page), as amended
by the Pfizer SAPA Amendment Agreement.
The Pfizer SAPA Amendment Agreement also includes provisions
related to the release of guarantees given by Pfizer for the benefit
of companies in the Group (or vice versa).
Group information
continued
Material contracts
continued
Haleon
Annual Report and Form 20-F 2023
206
Other Information
Registration Rights Agreement
The Registration Rights Agreement (the Registration Rights
Agreement) was entered into on 1 June 2022 among the
Company, Pfizer, GSK and the SLPs. GSK, Pfizer and the SLPs,
together with their respective affiliates, successors or permitted
assigns, to the extent they are holders or beneficial owners
of the Company’s registrable securities, are referred to in the
Registration Rights Agreement as “Holders”. The Company’s
registrable securities include all shares and ADSs held by the
Holders in the Company after Separation and equity securities
issued in exchange or replacement thereof.
The Registration Rights Agreement provides for certain demand
and piggyback registration rights to the Holders. The Company
filed a shelf registration statement on Form F-1 (the Shelf
Registration Agreement) on 28 July 2022 in partial satisfaction
of the demand registration rights. Additionally, pursuant to the
demand registration rights: (i) following the expiration of the
lock-up restrictions in the Lock-up Deed, each Holder now has the
right to sell any part of its registrable securities in an underwritten
offering pursuant to the Shelf Registration Statement (the Shelf
Underwriting) by delivering a written request to the Company.
The Company shall give notice of such request to the Holders of
other registrable securities registered on the Shelf Registration
Statement, and, subject to certain limitations, include in the Shelf
Underwriting the registrable securities of the other requesting
Holders; (ii) if the Shelf Registration Statement is not available for
use by the Holders, each Holder may require the Company to file
one or more registration statements covering all or any part of its
registrable securities, subject to certain limitations. The Company
shall use its reasonable best efforts to file or confidentially
submit with the SEC such registration statement no later than
60 days from receipt of request from the Holder if the registration
is on Form F-1 or Form S-1 (or 30 days if the registration is on
Form F-3 or Form S-3); and (iii) the Registration Rights Agreement
includes customary provisions that permit the Company to
postpone filing or confidentially submitting a registration
statement, or if a registration statement has been filed or
confidentially submitted, suspend use of, or withdraw, such
registration statement for a limited duration to avoid disclosing
material non-public information in certain circumstances.
The Holders also have certain ‘piggyback’ registration rights,
pursuant to which they will be entitled to register the resale
of their registrable securities alongside certain offerings of
securities that the Company may undertake, subject to “cutback”
in certain such cases.
The Registration Rights Agreement contains customary
indemnification obligations on the part of the Company and,
in certain circumstances, the Holders.
The Company is obligated to pay all expenses associated with the
registration of the registrable securities under the Registration
Rights Agreement, except for transfer taxes and commissions
payable in an underwritten offering (payable by the Holders).
The Registration Rights Agreement terminates with regards to
the Holders affiliated with GSK and the Holders affiliated with
Pfizer when they, respectively, cease to hold registrable securities
representing more than 1% of Haleon’s outstanding ordinary shares.
and outstanding Haleon ordinary shares immediately following
separation (to the nearest whole Haleon ordinary share), and
25 million non-voting preference shares.
Following completion of these transactions, the Company
indirectly owned 100% of the Group.
Pfizer Relationship Agreement
The relationship agreement between the Company and
Pfizer was entered into as a deed on 1 June 2022 (the Pfizer
Relationship Agreement). The principal purpose of the Pfizer
Relationship Agreement is to regulate the continuing relationship
between the Company and Pfizer after Admission. References
to aggregate interests in Haleon ordinary shares in the Pfizer
Relationship Agreement include both direct holdings of Haleon
ordinary shares and interests in Haleon ordinary shares held
indirectly through holdings of Haleon ADSs.
Pursuant to the Pfizer Relationship Agreement, Pfizer has
undertaken, that, for so long as Pfizer is a controlling shareholder
(as defined in Appendix I to the Listing Rules), it shall (and shall
procure that its associates (as defined in Appendix I of the Listing
Rules) shall): (i) conduct all transactions and arrangements
with the Company and the Group at arm’s length and on normal
commercial terms; (ii) not take any action that would have
the effect of preventing the Company from complying with its
obligations under the Listing Rules; and (iii) not propose or
procure the proposal of a shareholder resolution of the Company
which is intended or appears to be intended to circumvent the
proper application of the Listing Rules. For so long as Pfizer is a
controlling shareholder, it shall (and shall, so far as it is legally
able to do so, procure that its associates shall) not take any action
which precludes the Company or any other member of the Group
from carrying on an independent business as its main activity.
Under the Pfizer Relationship Agreement, Pfizer is granted the
right to nominate two persons to be appointed to the Board
as representative directors for so long as it and its affiliates
together continue to hold 20% or more of the Haleon ordinary
shares in issue and a right to nominate one person to be
appointed to the Board as a representative director for so long
as it and its affiliates together continue to hold less than 20%
but at least 10% of the Haleon ordinary shares in issue. Pfizer
is subject to customary standstill provisions, subject to certain
exceptions, and the Pfizer Relationship Agreement imposes
certain obligations on the Company in connection with seeking
shareholder authority to carry out share repurchases to ensure
that no such repurchases result in a requirement for Pfizer to
make a general offer for Haleon ordinary shares in accordance
with Rule 9 of the City Code (provided that Pfizer has not itself
entered into any disqualifying transactions).
Under the Pfizer Relationship Agreement, Pfizer agrees to procure
that any member of its group that held an interest in Haleon
ordinary shares on Admission shall, for such time as that member
of Pfizer’s group holds an interest in Haleon ordinary shares,
comply with the provisions of the Pfizer Relationship Agreement
as if that member of Pfizer’s group were a party to the Pfizer
Relationship Agreement with the same obligations as Pfizer.
The Pfizer Relationship Agreement will terminate on the date
that Pfizer and its affiliates cease to hold at least 10% of the
Haleon ordinary shares in issue.
Other Information
Haleon
Annual Report and Form 20-F 2023
207
Group information
Purchases of equity securities by the Company and affiliated purchasers
During the financial year ended 31 December 2023, the following ordinary shares (including ordinary shares held indirectly through
Haleon ADSs) were purchased by the Company’s Employee Benefit Trusts. No shares were repurchased by the Company.
Period
Total number of shares
purchased
1
Average price paid
per share (£)
Total number of shares
purchased as part
of publicly announced
plans or programmes
Maximum number of
shares that may
yet be purchased under
the plans or programmes
1 January – 31 January
Nil
Nil
Nil
N/A
1 February – 28 February
Nil
Nil
Nil
N/A
1 March – 31 March
Nil
Nil
Nil
N/A
1 April – 30 April
Nil
Nil
Nil
N/A
1 May – 31 May
58,157
3.42
Nil
N/A
1 June – 30 June
Nil
Nil
Nil
N/A
1 July – 31 July
Nil
Nil
Nil
N/A
1 August – 31 August
3,050,000
3.30
Nil
N/A
1 September – 30 September
Nil
Nil
Nil
N/A
1 October – 31 October
Nil
Nil
Nil
N/A
1 November – 30 November
Nil
Nil
Nil
N/A
1 December – 31 December
8,100,000
3.40
Nil
N/A
1
Shares purchased on the open market in the UK and US.
Committees
The Company has a number of Board Committees which are
similar in purpose and constitution to those required for domestic
companies under NYSE rules. The NYSE requires US companies to
have audit, remuneration and nominating/corporate governance
committees composed entirely of independent directors, as
defined under the NYSE rules. The Company’s Nominations &
Governance, Audit & Risk, and Remuneration Committees consist
entirely of Non-Executive Directors who are independent under
the standards of the Code, which may not necessarily be the
same as the NYSE independence standards. The nominating/
governance committee is responsible for identifying individuals
qualified to become members of the Board and to recommend
to the Board a set of corporate governance principles. As the
Company is subject to the Code, the Company’s Nominations
& Governance Committee is responsible for nominating, for
approval by the Board, candidates for appointment to the Board
and its Committees. The Company’s Nominations & Governance
Committee consists of the Chair and Independent Non-Executive
Directors. The Chair of the Company is not a member of either the
Remuneration or Audit & Risk Committees. As set out on page 72,
the Audit & Risk Committee is chaired by Deirdre Mahlan, an
Independent Non-Executive Director, who, in the Board’s view,
has the experience and qualifications to satisfy the criterion
under US rules for an ‘audit committee financial expert’.
Shareholder approval of equity compensation plans
The NYSE rules for US companies require that shareholders must
be given the opportunity to vote on all equity-compensation
plans and material revisions to those plans. Haleon complies with
UK requirements that are similar to the NYSE rules. The Board,
however, does not explicitly take into consideration the NYSE’s
detailed definition of what are considered ‘material revisions’.
The Group’s statement of compliance with the UK Corporate
Governance Code issued in July 2018 by the Financial Reporting
Council (the Code) is set out on page 96.
The Company’s ADSs are listed on the NYSE and we are subject
to the reporting and other requirements of the SEC applicable
to US foreign private issuers. We are required to disclose any
significant ways in which our corporate governance practices
differ from those followed by US companies under the Listing
Standards of the NYSE.
The significant differences between Haleon’s corporate
governance practices as a UK company and those required
by NYSE standards for US companies are as follows.
Independence
The Code’s principles recommend that at least half the Board,
excluding the Chair, should consist of independent non-executive
directors. As at 7 March 2024, the Board consisted of the Chair,
independent at the time of his appointment, two Executive
Directors, six Independent Non-Executive Directors and two
Non-Executive Directors who were nominated to the Board
by Pfizer. The Pfizer-nominated Directors are not considered
independent. NYSE listing rules applicable to US companies
state that companies must have a majority of independent
directors. The NYSE has set out six bright line tests for director
independence. The Board’s judgement is that, with the
exception of the Pfizer-nominated Non-Executive Directors,
the Non-Executive Directors are independent and, as such,
Independent Non-Executive Directors make up a majority of
the Board. However, it did not explicitly take into consideration
the NYSE’s tests in reaching this determination.
Summary of significant corporate governance
differences from NYSE listing standards
Shareholder information
Haleon
Annual Report and Form 20-F 2023
208
Other Information
Dividend history
The table below sets out the dividends declared following demerger and for each subsequent financial year in respect of the
Company’s ordinary shares and ADSs.
>>
Information about dividends paid prior to demerger can be found in Note 10 to the Consolidated Financial Statements on page 132.
Pence
US$
2023
6.0
—
1
2022
2.4
0.0597319
1
The US Dollar equivalent of the final dividend will be set based on the actual foreign exchange rate achieved by the Company prior to payment. Two ordinary shares represent one
ADS and the US Dollar equivalent of the interim dividend paid to ADS holders on 5 October 2023 was $0.043871 per ADS.
Shareholder profiles
Analysis of shareholdings as at 31 December 2023
Holding of shares
Number of accounts
% of total accounts
% of total shares
Number of shares
Up to 1,000
44,592
72.57
0.16
14,387,545
1,001 – 5,000
12,918
21.02
0.30
28,116,370
5,001 – 100,000
3,126
5.09
0.52
48,228,639
100,001 to 1,000,000
464
0.76
1.91
176,085,656
Over 1,000,000
347
0.56
97.11
8,967,755,621
Totals
61,447
100
100
9,234,573,831
Held by
Institutional and corporate holders
59,888
97.46
33.35
3,080,071,136
Individuals and other corporate bodies
1,558
2.54
49.39
4,560,566,969
Guaranty Nominees Limited
1
0.00
17.26
1,593,935,726
J.P. Morgan Chase Bank, N.A. is the Depositary for the Company’s ADR programme. The Company’s ADSs are listed on the NYSE.
Ordinary shares representing the Company’s ADR programme, which is managed by the Depositary, are registered in the name of
Guaranty Nominees Limited.
As at 7 March 2024, (being the latest practicable date prior to publication of this Annual Report) Guaranty Nominees Limited held
1,595,245,726 ordinary shares representing approximately 17.26% of the Company’s issued share capital.
As at the latest practicable date, the number of holders of ordinary shares in the US was 853 with holdings of 874,591 ordinary shares,
and the number of registered holders of ADSs was 15,580 with holdings of 797,614,464 ADSs. Certain of these ordinary shares and
ADSs were held by brokers or other nominees. As a result, the number of holders of record or registered holders in the US is not
representative of the number of beneficial holders or of the residence of beneficial holders.
Other Information
Haleon
Annual Report and Form 20-F 2023
209
Shareholder information
Shareholder information
continued
Stamp duty and stamp duty reserve tax
UK stamp duty and/or stamp duty reserve tax (SDRT) will, subject
to certain exemptions, be payable on the transfer of shares at a
rate of 0.5% (rounded up to the nearest £5 in the case of stamp
duty) of the consideration for the transfer. Notwithstanding this,
provided that an instrument is executed in pursuance of the
agreement that gave rise to the charge to SDRT and that instrument
is stamped within six years of the agreement (including being
stamped as exempt) any SDRT charge should be cancelled and
any SDRT which has already been paid will be repaid.
UK stamp duty and/or SDRT will, subject to certain exemptions,
be payable on any transfer of shares to the ADS custodian or
depositary at a rate of 1.5% of the amount of any consideration
provided (if transferred on sale), or their value (if transferred for
no consideration). However, no stamp duty or SDRT should be
payable on the transfer of, or agreement to transfer, an ADS.
US shareholders
This section describes the material US federal income tax
consequences to a US holder (as defined below) of owning shares
or ADSs. It applies to you only if you hold your shares or ADSs
as capital assets for tax purposes. This discussion addresses
only US federal income taxation and does not discuss all of
the tax consequences that may be relevant to you in light of
your individual circumstances, including foreign, state or local
tax consequences, estate and gift tax consequences, and tax
consequences arising under the Medicare contribution tax on net
investment income or the alternative minimum tax. This section
does not apply to you if you are a member of a special class of
holders subject to special rules, including: a dealer in securities,
a trader in securities that elects to use a mark-to-market method
of accounting for securities holdings, a tax-exempt organisation,
a life insurance company, a person that actually or constructively
owns 10% or more of the combined voting power of our voting
stock or of the total value of our stock, a person that holds
shares or ADSs as part of a straddle or a hedging or conversion
transaction, a person that purchases or sells shares or ADSs
as part of a wash sale for tax purposes, or a person whose
functional currency is not the US Dollar. This section is based on
the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations, published rulings
and court decisions, all as currently in effect, as well as on the
Convention Between the US and the UK (the Treaty). These
authorities are subject to change, possibly on a retroactive basis.
In addition, this section is based in part upon the representations
of the Depositary and the assumption that each obligation in the
Deposit Agreement and any related agreement will be performed
in accordance with its terms.
You are a US holder if you are a beneficial owner of shares or
ADSs and you are, for US federal income tax purposes: a citizen
or resident of the US, a domestic corporation, an estate whose
income is subject to US federal income tax regardless of its
source, or a trust if a US court can exercise primary supervision
over the trust’s administration and one or more US persons are
authorised to control all substantial decisions of the trust.
If an entity or arrangement that is treated as a partnership for
US federal income tax purposes holds the shares or ADSs, the
US federal income tax treatment of a partner will generally
depend on the status of the partner and the tax treatment of
the partnership.
Tax information for shareholders
A summary of certain UK tax and US federal income tax
consequences for holders of shares and ADSs who are citizens
of the UK or the US is set out below. It is not a complete analysis
of all the possible tax consequences of the purchase, ownership
or sale of these securities. It is intended only as a general guide.
Holders are advised to consult their advisers with respect to the tax
consequences of the purchase, ownership or sale of their shares or
ADSs and the consequences under state and local tax laws in the US
and the implications of the current UK/US tax conventions.
US holders of ADSs generally will be treated as the owners of the
underlying shares for the purposes of the current UK/US double
taxation conventions relating to income and gains (Income
Tax Convention), estate and gift taxes (Estate and Gift Tax
Convention), and for the purposes of the Internal Revenue Code
of 1986, as amended.
UK shareholders
This summary only applies to a UK resident shareholder that
holds shares as capital assets.
Taxation of dividends
For the 2023/2024 UK tax year, UK resident individuals are
entitled to a dividend tax allowance of up to £1,000, so that the
first £1,000 of dividends received in a tax year will be free of tax.
Dividends in excess of this allowance will be taxed at 8.75% for
basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35%
for additional rate taxpayers.
UK resident shareholders that are corporation taxpayers should
note that dividends payable on ordinary shares are generally
entitled to exemption from corporation tax provided certain
conditions are met.
Taxation of capital gains
UK resident shareholders may be liable for UK tax on gains on the
disposal of shares or ADSs.
For disposals by individuals in the 2023/2024 UK tax year, a
taxable capital gain accruing on a disposal of shares or ADSs
will be taxed at 10% for basic rate taxpayers, or 20% if, after all
allowable deductions, the individual’s taxable income for the year
exceeds the basic rate income tax banding. Note this is following
the use of any exemptions available to the individual taxpayer
such as the annual exempt amount.
A disposal by corporation tax payers may give rise to a chargeable
gain for the purposes of UK corporation tax, depending on the
circumstances and subject to any available exemption or relief.
Corporation tax is charged on gains at the rate of corporation tax
applicable to that company.
Inheritance tax
Individual (UK-domiciled or otherwise) shareholders may be
liable to UK inheritance tax on the transfer of shares or ADSs.
Tax may be charged on the amount by which the value of the
shareholder’s estate is reduced as a result of any transfer by way
of lifetime gift or other disposal at less than full market value.
In the case of a bequest on death, tax may be charged on the
value of the shares at the date of the shareholder’s death. If such
a gift or other disposal were subject to both UK inheritance tax
and US estate or gift tax, the Estate and Gift Tax Convention
would generally provide for tax paid in the US to be credited
against tax payable in the UK.
Haleon
Annual Report and Form 20-F 2023
210
Other Information
Sales or dispositions
If you sell or otherwise dispose of your shares or ADSs, you
will recognise capital gain or loss for US federal income tax
purposes equal to the difference between the US Dollar value
of the amount that you realise and your tax basis, determined
in US Dollars, in your shares or ADSs. Capital gain of a non-
corporate US holder is generally taxed at preferential rates where
the property is held for more than one year. The gain or loss
will generally be income or loss from sources within the US for
foreign tax credit limitation purposes.
Passive foreign investment company (PFIC)
classification
We believe that we should not be currently classified as a
PFIC for US federal income tax purposes and we do not expect
to become a PFIC in the foreseeable future. However, this
conclusion is a factual determination that is made annually and
thus may be subject to change. It is therefore possible that we
could become a PFIC in a future taxable year. The discussion
above in this section assumes that we are not classified as a PFIC
for US federal income tax purposes.
If we were to be treated as a PFIC, any gain realised on the sale or
other disposition of your shares or ADSs would in general not be
treated as capital gain. Instead, you would generally be treated
as if you had realised any gain and certain ‘excess distributions’
ratably over your holding period for the shares or ADSs. Amounts
allocated to the current year and any year before we were a
PFIC would be taxed as ordinary income and amounts allocated
to other years would be taxed at the highest tax rate in effect
for each such year, and would be subject to an interest charge
in respect of the tax attributable to each such year. In addition,
dividends that you receive from us would not be eligible for the
preferential tax rate if we were a PFIC (or treated as a PFIC with
respect to you) either in the taxable year of the distribution or
the preceding taxable year, but instead would be taxable at rates
applicable to ordinary income. If you own our shares or ADSs
during any year that we are a PFIC with respect to you, you may
be required to file IRS Form 8621.
You should consult your own tax adviser regarding the US federal,
state and local tax consequences of owning and disposing of
shares and ADSs in your particular circumstances.
In general, and taking into account the earlier assumptions, for
US federal income tax purposes, if you hold ADRs evidencing
ADSs, you will be treated as the owner of the shares represented
by those ADRs. Exchanges of shares for ADRs, and ADRs for
shares, generally will not be subject to US federal income tax.
Distributions
Under the US federal income tax laws, the gross amount of any
distribution we pay out of our current or accumulated earnings
and profits (as determined for US federal income tax purposes),
other than certain pro-rata distributions of our shares that
are generally not taxable, will be treated as a dividend that is
subject to US federal income taxation. If you are a non-corporate
US holder, dividends that constitute qualified dividend income
will be taxable to you at the preferential rates applicable to
long-term capital gains provided that you hold the shares or
ADSs for more than 60 days during the 121-day period beginning
60 days before the ex-dividend date and meet other holding
period requirements. Dividends we pay with respect to the shares
or ADSs generally will be qualified dividend income provided
that, in the year that you receive the dividend, the shares or ADSs
are readily tradable on an established securities market in the
US or we are eligible for the benefits of the Treaty. Our ADSs are
listed on the NYSE and we therefore expect that dividends on the
ADSs will be qualified dividend income. In addition, we believe
that we are currently eligible for the benefits of the Treaty and
that dividends on the shares and ADS will be qualified dividend
income on that basis, but there can be no assurance that we will
continue to be eligible for the benefits of the Treaty. Dividends
will generally be income from sources outside the US and will
generally be ‘passive’ income for the purposes of computing the
foreign tax credit allowable to you.
The dividend is taxable to you when you, in the case of shares,
or the Depositary, in the case of ADSs, receive the dividend,
actually or constructively. The dividend will not be eligible
for the dividends-received deduction generally allowed to US
corporations in respect of dividends received from other US
corporations. The amount of the dividend distribution that you
must include in your income will be the US Dollar value of the
Sterling payments made, determined at the spot Sterling/US Dollar
rate on the date the dividend is distributed, regardless of whether
the payment is in fact converted into US Dollars. Generally,
any gain or loss resulting from currency exchange fluctuations
during the period from the date the dividend is distributed to the
date you convert the payment into US Dollars will be treated as
ordinary income or loss and will not be eligible for the special
tax rate applicable to qualified dividend income. The gain or loss
generally will be income or loss from sources within the US for
foreign tax credit limitation purposes. Distributions in excess of
current and accumulated earnings and profits, as determined
for US federal income tax purposes, will be treated as a non-
taxable return of capital to the extent of your basis in the shares
or ADSs and thereafter as capital gain. However, we do not
expect to calculate earnings and profits in accordance with US
federal income tax principles. Accordingly, you should expect to
generally treat distributions we make as dividends.
Other Information
Haleon
Annual Report and Form 20-F 2023
211
Shareholder information
Exhibits
The following exhibits are filed as part of this Annual Report on Form 20-F with the SEC, and are publicly available through the
SEC’s website.
>>
www.sec.gov
and search Haleon plc under Company Filings.
Exhibit 1
1
Articles of Association of the Company dated 31 May 2022.
Exhibit 2.1
1
Form of Deposit Agreement, among the Registrant, J.P. Morgan Chase Bank, N.A., as Depositary, and all Holders and
Beneficial Owners from time to time of American Depositary Shares issued thereunder.
Exhibit 2.2
1
Form of American Depositary Receipt representing American Depositary Shares representing ordinary shares of the
Registrant (included in Exhibit 2.1).
Exhibit 2.3
1
Indenture dated as of 24 March 2022 among GSK Consumer Healthcare Capital US LLC, GSK Consumer Healthcare
Capital UK plc, GlaxoSmithKline plc and the Registrant as guarantors and Deutsche Bank Trust Company Americas,
as trustee, registrar, paying agent, transfer agent and calculation agent.
Exhibit 2.4
Description of Securities Registered Under Section 12 of the Exchange Act.
Exhibit 4.1
1
Service Agreement between Haleon UK Services Limited and Brian McNamara dated 9 May 2022.
Exhibit 4.2
1
Service Agreement between Haleon UK Services Limited and Tobias Hestler dated 10 May 2022.
Exhibit 4.3
1
Stock and Asset Purchase Agreement between Pfizer Inc., GSK plc and GlaxoSmithKline Consumer Healthcare
Holdings Limited dated as of 19 December 2018. Certain confidential information contained in this exhibit has been
omitted from this exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the
Registrant if publicly disclosed.
Exhibit 4.4
1
Amendment Agreement dated as of 31 July 2019 to the Stock and Asset Purchase Agreement by and among Pfizer
Inc., GSK plc, GlaxoSmithKline Consumer Healthcare Holdings Limited and GlaxoSmithKline Consumer Healthcare
Holdings (No. 2) Limited dated as of 19 December 2018.
Exhibit 4.5
1
Second Amendment Agreement dated as of 1 June 2022 to the Stock and Asset Purchase Agreement by and
among Pfizer Inc., GSK plc, GlaxoSmithKline Consumer Healthcare Holdings Limited and GlaxoSmithKline Consumer
Healthcare Holdings (No. 2) Limited dated as of 19 December 2018. Certain confidential information contained
in this exhibit has been omitted from this exhibit because it is both (i) not material and (ii) would likely cause
competitive harm to the Registrant if publicly disclosed.
Exhibit 4.6
1
Asset Transfer Framework Agreement dated as of 1 June 2022 between GSK plc, GlaxoSmithKline Consumer Healthcare
Holdings Limited and GlaxoSmithKline Consumer Healthcare Holdings (No. 2) Limited. Certain confidential information
contained in this exhibit has been omitted from this exhibit because it is both (i) not material and (ii) would likely
cause competitive harm to the Registrant if publicly disclosed.
Exhibit 4.7
1
Demerger Agreement dated as of 1 June 2022 between the Registrant and GSK plc.
Exhibit 4.8
1
Tax Covenant dated as of 1 June 2022 between GSK plc, Pfizer, Inc., GlaxoSmithKline Consumer Healthcare Holdings
Limited, GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited and the Registrant. Certain confidential
information contained in this exhibit has been omitted from this exhibit because it is both (i) not material and
(ii) would likely cause competitive harm to the Registrant if publicly disclosed.
Exhibit 4.9
1
Separation Co-Operation and Implementation Agreement dated as of 1 June 2022 between GSK plc, Pfizer Inc., the
Registrant, GlaxoSmithKline Consumer Healthcare Holdings (No. 2) Limited, GlaxoSmithKline Consumer Healthcare
Holdings Limited, Anacor Pharmaceuticals, Inc. and PF Consumer Healthcare Holdings LLC
2
. Certain confidential
information contained in this exhibit has been omitted from this exhibit because it is both (i) not material and (ii)
would likely cause competitive harm to the Registrant if publicly disclosed.
Exhibit 4.10
1
Exchange Agreement dated as of 1 June 2022 between GSK plc and the Registrant.
Exhibit 4.11
1
Exchange Agreement dated as of 1 June 2022 between GSK (No.1) Scottish Limited Partnership, GSK (No.2) Scottish
Limited Partnership, GSK (No.3) Scottish Limited Partnership and the Registrant.
Exhibit 4.12
1
Exchange Agreement dated as of 1 June 2022 between Pfizer Inc., Anacor Pharmaceuticals, Inc. and the Registrant.
Exhibit 4.13
1
Pfizer Relationship Agreement dated as of 1 June 2022 between the Registrant and Pfizer Inc.
Exhibit 4.14
1
Transition Services Agreement dated as of 1 June 2022 between GlaxoSmithKline Services Unlimited,
GlaxoSmithKline LLC, Haleon UK Services Limited and GlaxoSmithKline Consumer Healthcare Holdings (US) LLC.
Certain confidential information contained in this exhibit has been omitted from this exhibit because it is both
(i) not material and (ii) would likely cause competitive harm to the Registrant if publicly disclosed.
1
Incorporated by reference.
2
This entity was dissolved on 28 December 2022.
Haleon
Annual Report and Form 20-F 2023
212
Other information
Exhibit 4.15
1
Registration Rights Agreement dated as of 1 June 2022 between the Registrant, Pfizer Inc., GSK plc, GSK (No.1)
Scottish Limited Partnership, GSK (No.2) Scottish Limited Partnership and GSK (No.3) Scottish Limited Partnership.
Exhibit 4.16
1
Trust Deed dated as of 16 March 2022 among GSK Consumer Healthcare Capital UK plc, GSK Consumer Healthcare
Capital NL B.V., GSK plc and the Registrant as guarantors and Deutsche Trustee Company Limited as trustee for
the noteholders.
Exhibit 4.17
1
Term Loan Facility dated as of 18 February 2022 among GlaxoSmithKline Consumer Healthcare Holdings (No. 2)
Limited, Bank of America, N.A., London Branch, Banco Santander, S.A., London Branch, Barclays Bank PLC, BNP
Paribas Fortis SA/NV, BNP Paribas, Citibank, N.A., London Branch, Deutsche Bank AG, London Branch, Goldman
Sachs Bank USA, HSBC Bank plc, J.P. Morgan Chase Bank, N.A., London Branch, Mizuho Bank, Ltd., Morgan Stanley
Bank N.A. and Standard Chartered Bank (Hong Kong) Limited. Certain confidential information contained in this
exhibit has been omitted from this exhibit because it is both (i) not material and (ii) would likely cause competitive
harm to the Registrant if publicly disclosed.
Exhibit 4.18
Rules of the Haleon plc Share Value Plan 2023.
Exhibit 4.19
Rules of the Haleon plc Performance Share Plan 2023.
Exhibit 4.20
Rules of the Deferred Annual Bonus Plan 2023.
Exhibit 8
List of subsidiaries of Haleon plc as at 31 December 2023 (can be found on pages 170-176).
Exhibit 12.1
Certification of Brian McNamara filed pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Exhibit 12.2
Certification of Tobias Hestler filed pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
Exhibit 13.1
Certification of Brian McNamara and Tobias Hestler furnished pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 15.1
Consent of KPMG LLP (UK).
Exhibit 15.2
Consent of KPMG LLP (US).
Exhibit 15.3
Consent of Deloitte LLP.
Exhibit 17
1
List of Subsidiary Issuers of Guaranteed Securities.
Exhibit 97
Compensation recovery policy.
Exhibit 101.INS
Inline XBRL Instance Document.
Exhibit 101.SCH
XBRL Taxonomy Extension Schema.
Exhibit 101.CAL
XBRL Taxonomy Extension Schema Calculation Linkbase.
Exhibit 101.DEF
XBRL Taxonomy Extension Schema Definition Linkbase.
Exhibit 101.LAB
XBRL Taxonomy Extension Schema Label Linkbase.
Exhibit 101.PRE
XBRL Taxonomy Extension Schema Presentation Linkbase.
Exhibit 104
Cover Page Interactive Data File – (formatted as Inline XBRL and contained in Exhibit 101).
1
Incorporated by reference.
Other Information
Haleon
Annual Report and Form 20-F 2023
213
Exhibits
Disclosures cross referenced in the table below and in the following pages will be included in Haleon’s Annual Report on Form 20-F
for 2023 filed with the SEC.
Item
Form 20-F caption
Location
Page
1
Identity of Directors, senior management
and advisers
Not applicable
2
Offer statistics and expected timetable
Not applicable
3
Key information
3A (Reserved)
Not applicable
3B Capitalisation and indebtedness
Not applicable
3C Reason for the offer and use of proceeds
Not applicable
3D Risk factors
Group information: Risk factors
193
4
Information on the company
4A History and development of the company
Consolidated Financial Statements: Note 1 General information
121
Group information: History and development of the Group
191
Useful information: Investor information – Website and
electronic communication
220
4B Business overview
Haleon at a glance
Inside
front cover
Consolidated Financial Statements: Note 1 General information
121
Consolidated Financial Statements: Note 4 Segment information
125
Group information: Risk factors
193
Group information: Impact of regulation
204
4C Organisational structure
Consolidated Financial Statements: Note 30 Subsidiaries
170
Group information: History and development of the Group
191
4D Property, plant and equipment
Strategic Report: Our Business model
8
Consolidated Financial Statements: Note 12 Property, plant
and equipment
133
Directors’ Report: Streamlined energy and carbon reporting
188
Group information: Property, plant and equipment
192
4A
Unresolved staff comments
Not applicable
5
Operating and financial review and prospects
5A Operating results
Strategic Report: Our market categories
13
Strategic Report: Our key performance indicators
32
Strategic Report: 2023 Business Review
34
Strategic Report: Viability statement
59
Consolidated Financial Statements: Note 1 General information
– ‘Foreign Currencies’
121
Consolidated Financial Statements: Note 2 Accounting policies
123
Consolidated Financial Statements: Note 25 Capital and financial risk
management – ‘Net investment hedges’, ‘Foreign exchange risk
management’ and ‘Foreign exchange sensitivity’
156
Group information: Risk factors – Risks relating to changes in law and
the political and economic environment, regulation and legislation
193
Form 20-F cross reference
Haleon
Annual Report and Form 20-F 2023
214
Other information
Item
Form 20-F caption
Location
Page
5B Liquidity and capital resources
Strategic Report: 2023 Business review – ‘indebtedness, liquidity
and financial risk management’
42
Strategic Report: Use of non-IFRS measures
43
Strategic Report: Viability statement
59
Consolidated Financial Statements: Note 8 Net finance costs
129
Consolidated Financial Statements: Note 16 Trade and other receivables
141
Consolidated Financial Statements: Note 17 Cash and cash equivalents
142
Consolidated Financial Statements: Note 19 Borrowings
143
Consolidated Financial Statements: Note 22 Contingent liabilities
and commitments
152
Consolidated Financial Statements: Note 25 Capital and financial
risk management
156
5C Research and development,
patents and licenses, etc.
Strategic Report: Our business model
8
Strategic Report: Our market categories
13
Consolidated Financial Statements: Consolidated income statement
116
Consolidated Financial Statements: Note 14 Intangible assets
136
5D Trend information
Strategic Report: 2023 Business review
34
5E Critical accounting estimates
Not applicable
Non-GAAP financial measures
Strategic Report: 2023 Business review
34
Strategic Report: Use of non-IFRS measures
43
6
Directors, senior management and employees
6A Directors and senior management
Corporate Governance: Our Board of Directors
62
Corporate Governance: Our Executive Team
64
Directors’ Report: Significant shareholders
187
6B Compensation
Corporate Governance: Directors’ Remuneration Report
80
Consolidated Financial Statements: Note 7 Employees and remuneration
of key management personnel
128
Consolidated Financial Statements: Note 20 Pensions and other
post-employment benefits
146
6C Board practices
Corporate Governance: Our Board of Directors
62
Corporate Governance: Our Executive Team
64
Corporate Governance: Governance structure
67
Corporate Governance: Audit & Risk Committee Report
72
Corporate Governance: Environmental & Social Sustainability
Committee Report
77
Corporate Governance: Nominations & Governance Report
78
6D Employees
Consolidated Financial Statements: Note 7 Employees and remuneration
of key management personnel
128
6E Share ownership
Corporate Governance: Directors’ Remuneration Report – Annual Report
on Remuneration
84
Consolidated Financial Statements: Note 26 Employee share schemes
167
Group information: Directors’ and Executive Team shareholdings
192
6F Disclosure of a registrant’s action to
recover erroneously awarded compensation
Not applicable
Other Information
Haleon
Annual Report and Form 20-F 2023
215
Form 20-F cross reference
Form 20-F cross reference
continued
Item
Form 20-F caption
Location
Page
7
Major shareholders and related party transactions
7A Major shareholders
Directors’ Report: Significant shareholders
187
Shareholder information: Shareholder profiles
209
7B Related party transactions
Consolidated Financial Statements: Note 24 Related party transactions
155
Group information: Material contracts
205
7C Interests of experts and counsel
Not applicable
8
Financial information
8A Consolidated statements and other
financial information
Strategic Report: Use of non-IFRS measures
43
Consolidated Financial Statements
97
Reports of independent registered public accounting firms
112
Directors’ Report: Dividends and dividend policy
186
8B Significant changes
Consolidated Financial Statements: Post balance sheet events
170
9
The offer and listing
9A Offer and listing details
Useful information: Trading markets
220
9B Plan of distribution
Not applicable
9C Markets
Useful information: Trading markets
220
9D Selling shareholders
Not applicable
9E Dilution
Not applicable
9F Expenses of the issue
Not applicable
10
Additional information
10A Share capital
Not applicable
10B Memorandum and articles of association
Group information: Articles of Association
203
Shareholder information: Exhibit 1
212
10C Material contracts
Group information: Material contracts
205
10D Exchange controls
Group information: Exchange controls and restrictions on payment
of dividends
204
10E Taxation
Shareholder information: Tax information for shareholders
210
10F Dividends and paying agents
Not applicable
10G Statement by experts
Not applicable
10H Documents on display
Useful information: Investor information – AGM and documents on display
220
10I Subsidiary information
Not applicable
10J Annual Report to security holders
Not applicable
11
Quantitative and qualitative disclosures
about market risk
Consolidated Financial Statements: Note 25 Capital and financial
risk management
156
12
Description of securities other than equity securities
12A Debt securities
Not applicable
12B Warrants and rights
Not applicable
12C Other securities
Not applicable
12D American depositary shares
Group information: Fees and charges payable by ADR holders
202
Haleon
Annual Report and Form 20-F 2023
216
Other information
Item
Form 20-F caption
Location
Page
13
Defaults, dividend arrearages
and delinquencies
Not applicable
14
Material modifications to the rights
of security holders and use of proceeds
Not applicable
15
Controls and Procedures
15A Disclosure controls and procedures
Group information: Disclosure controls and procedures
192
15B Management’s annual report on internal
control over financial reporting
Group information: Management’s report on internal control over
financial reporting
192
15C Attestation report of the registered
public accounting firm
Reports of independent registered public accounting firms
112
15D Changes in internal control over
financial reporting
Not applicable
16
(Reserved)
16A
Audit committee financial expert
Governance: Audit & Risk Committee Report
72
Shareholder information: Summary of significant corporate governance
differences from NYSE listing standards – Committees
208
16B
Code of ethics
Directors’ Report: Code of Conduct
186
16C
Principal accountant fees and services
Corporate Governance: Audit & Risk Committee Report – External audit
76
Corporate Governance: Audit & Risk Committee Report– Non-audit services
76
Group Financial Statements: Note 6 Operating profit
127
16D
Exemptions from the listing standards
for audit committees
Not applicable
16E
Purchase of equity securities by the issuer
and affiliated purchasers
Shareholder information: Purchases of equity securities by the Company
and affiliated purchasers
208
16F
Change in registrant’s certifying accountant
Corporate Governance: Audit & Risk Committee Report – External audit
76
Group information: Change in certifying accountant
192
16G
Corporate Governance
Shareholder information: Summary of significant corporate governance
differences from NYSE listing standards
208
16H
Mine safety disclosure
Not applicable
16I
Disclosure regarding foreign jurisdictions
that prevent inspections
Not applicable
16J
Insider trading policies
Not applicable
16K
Cybersecurity
Strategic Report: Our culture and people
18
Strategic Report: Our approach to risk
53
Governance Report: Audit & Risk Committee Report
72
Group information: Risk factors
193
17
Financial statements
Not applicable
18
Financial statements
Consolidated Financial Statements
97
19
Exhibits
Other information: Exhibits
212
Other Information
Haleon
Annual Report and Form 20-F 2023
217
Forward-looking statements
This Annual Report and Form 20-F 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 US Securities
Act and Section 21E of the Exchange Act). 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 Report 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, 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 Annual Report and Form 20-F. 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 193 to 201 of this Annual Report & 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 US 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), 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.
Forward-looking statements
Haleon
Annual Report and Form 20-F 2023
218
Other information
ADR
American Depositary Receipt
ADR depositary
J.P. Morgan Chase Bank, N.A.
ADS
American Depositary Share, listed on the New York Stock Exchange
AER
Actual exchange rates
Annual Report or Report
The Annual Report and Form 20-F
APAC
Asia Pacific region
CER
Constant currency exchange rates
CMO
Third-party contract manufacturing organisations
Companies Act
The UK Companies Act 2006, as amended
Company, Group or Haleon
Haleon plc and its subsidiaries
Consumer Staples sector
Companies that produce and sell items considered essential for everyday use
Employee
Persons on permanent or fixed-term contracts, who are directly employed by Haleon plc or its subsidiaries
(does not include third-party temporary workers or contractors)
EMEA
Europe, Middle East and Africa region
EMTN
Euro Medium Term Note
ERG
Employee resource group
FCA
UK Financial Conduct Authority
FDA
The US Food and Drug Administration
FRC
UK Financial Reporting Council
Health Professional(s)
Pharmacy, dental, respiratory and dermatology wellness professionals and related teams
IASB
International Accounting Standards Board
ISSB
International Sustainability Standards Board
LatAm
Latin America region
Leadership roles
Employees within our compensation grades 0-5. These roles include members of the Executive Team,
their direct reports (excluding administration support), heads of department and other upper management
Local Growth brands
Local strategic brands that have scale and leadership positions
LSE
London Stock Exchange
MSA
Manufacture and Supply Agreement
NYSE
New York Stock Exchange
Ordinary share
£0.01 pence each in the Company
OTC
Over-the-Counter. Three market categories are collectively known as OTC: Pain Relief, Respiratory Health
and Digestive Health and Other. Purchases of products in these categories are controlled but do not
require a prescription
Parent Company
Haleon plc
Power Brands
Haleon’s nine large-scale multinational brands: Advil, Centrum, Otrivin, Panadol, parodontax, Polident,
Sensodyne, Theraflu and Voltaren
Rx-to-OTC switches
Switches of products requiring a prescription to products with OTC status
SEC
US Securities and Exchange Commission
VMS
Vitamins, Minerals and Supplements
Workforce
Haleon’s employees
>>
For definitions of our non-IFRS measures see from page 43.
Glossary
Other Information
Haleon
Annual Report and Form 20-F 2023
219
Useful information
Shareholder security
Many companies have become aware that their shareholders
have received unsolicited telephone calls or correspondence
concerning investment matters. These are typically from ‘brokers’
who target UK shareholders, offering to sell them what often turn
out to be worthless or high-risk shares in US or UK investments.
These operations are commonly known as ‘boiler rooms’.
More detailed information on this or similar activity can be found
on the FCA website at
www.fca.org.uk/consumers
. Details of
any share dealing facilities that the Company endorses will be
included in Company mailings.
Trading markets
The principal trading market for the Company’s ordinary shares
is the LSE. The ordinary shares are also listed on the NYSE, trading
in the form of ADSs evidenced by ADRs and traded under the
ticker symbol ‘HLN’. Each ADS represents two ordinary shares.
American Depositary Receipts
The Company has a sponsored ADR facility with J.P. Morgan Chase
Bank, N.A., as Depositary. Each ADR represents two ordinary
shares. All enquiries regarding ADR holder accounts and payment
of dividends should be directed to:
J.P. Morgan Chase Bank, N.A.
Shareowner Services,
PO Box 64504, St. Paul,
MN 55164-0504, USA
+1 800 990 1135 (US calls) (toll-free)
+1 651 453 2128 (non-US calls)
www.shareowneronline.com
under ‘contact us’
www.adr.com
AGM and documents on display
The Company’s AGM will be held on 8 May 2024. Terms and
conditions of all Directors’ appointments will be available for
inspection at the Company’s registered office during normal
business hours and during the AGM.
Shareholders may electronically appoint a proxy to vote on their
behalf at the 2024 AGM. Shareholders who hold their shares
through CREST may appoint proxies through the CREST electronic
proxy appointment service, by using the procedures described
in the CREST Manual.
Financial calendar
Event
Proposed date
2023 Final dividend
— Ex-dividend date
14 March 2024
— Record date
15 March 2024
— Payment date
1
16 May 2024
2024 first quarter trading statement
1 May 2024
2024 Annual General Meeting
8 May 2024
2024 half-year results
1 August 2024
2024 third quarter trading statement
31 October 2024
Financial year end
31 December
1
Payment is subject to shareholder approval at the AGM.
Website and electronic communication
Haleon is committed to reducing the cost and environmental
impact of producing and distributing printed documents in
large quantities and this Annual Report and Form 20-F 2023
has been made available to shareholders through our website
at
www.haleon.com
. The Company is subject to the information
requirements of the Securities Exchange Act of 1934 applicable to
US foreign private issuers. In accordance with these requirements,
the Company files its Annual Report and Form 20-F and other
related documents with the SEC. The SEC maintains an internet
site at www.sec.gov that contains reports and other information
regarding issuers, including Haleon, that file electronically with
the SEC.
Ordinary share registrar
For information on a range of shareholder services, including
enquiries concerning individual shareholdings, notification
of a shareholder’s change of address and amalgamation of
shareholder accounts (in order to avoid duplicate mailing of
shareholder communications), shareholders should contact the
Company’s Registrar, Equiniti, using the contact details below.
Equiniti Limited,
Aspect House, Spencer Road, Lancing, West Sussex
BN99 6DA, UK
+44 (0) 371 384 2227
Dividend services and bank mandate
The Company only makes dividend and other distribution
payments into a nominated bank account. Shareholders
must complete and return a direct payment instruction to the
Company’s Registrar, Equiniti, in order to ensure your payments
are received quickly and securely into your UK bank account.
Dividend reinvestment plan (DRIP)
As an alternative to receiving cash dividends, shareholders may
choose to reinvest your dividends to buy more Haleon ordinary
shares through the dividend reinvestment plan (DRIP). A DRIP
election form can be downloaded from
www.shareview.co.uk
or requested by contacting Equiniti using the contact details above.
Ordinary shareholders can alternatively sign up to Equiniti’s new
service, EQ Boost. Through this service, ordinary shareholders
can boost cash dividends and convert them into eVouchers for
a range of retailers. You can access further information or sign
up for EQ Boost at
www.shareview.co.uk/Clients/EQBoost
Overseas payment service
It is also possible for overseas shareholders to have their
dividends paid directly to their bank accounts in a local currency.
Charges are payable for this service.
Useful information
Haleon
Annual Report and Form 20-F 2023
220
Other information
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Haleon
Annual Report and Form 20-F 2023
Haleon plc
Registered office address:
Building 5, First Floor,
The Heights
Weybridge
Surrey KT13 0NY
England
www.haleon.com
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