Good morning. Thank you for joining today's question-and-answer session regarding Haleon's Fiscal Year 2025 Results. My name is Sarah, and I will be your moderator. Now, I would like to hand the conference over to our host, Jo Russell. Please proceed.

Good morning, everyone, and welcome to Haleon's Full Year 2025 Results Q&A Conference Call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to actual results differing materially from those expressed or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. So hopefully, you've all had a chance to see that ahead of this call. And with that, let's open the call for Q&A, and I'll hand back to the operator.

Our first question is from Guillaume Delmas with UBS.

So one question. So my one question is on your organic sales growth guidance of 3% to 5% for 2026. It does seem to signal some sequential acceleration relative to the 3% you posted last year. So wondering what will be the main drivers behind this sequential improvement? I mean, is it predicated on category growth accelerating and/or your level of outperformance gaining further momentum? And then related to this, Brian, you reiterated your medium-term ambition of 4% to 6%. I guess what underpins your confidence in the 4% to 6% when you may be delivering organic sales growth below the bottom end of that range for now 2 consecutive years?

Thanks, Guillaume. I appreciate the question. So maybe let me take the 3% to 5% guidance, and I'll go to medium-term view. So if you take a step back and let's look at 2025, we grew 3%. That clearly was below what we were expecting when we were at Q3 based on the cold and flu season. But the U.S. was down about 0.5%. APAC and EMEA, LatAm grew mid-single digits. Now we did experience a market slowdown. A vast majority of that was obviously what we've talked about in the U.S. market and then the cold and flu category, which I mentioned. Now remember, 70% of our cold and flu business is also outside the U.S. So in that context, we did deliver competitive performance. We outgrew the market overall and 60% of the business gained and maintained share. Looking at 2026, we're not planning on material improvement in the market. Consumers are likely to stay cautious. We're absolutely focused on driving category growth. I'm confident we will continue and improve on our competitiveness. And that's through investment in A&P, strong innovation plan, sharper commercial execution behind our new operating model. And listen, the U.S. will return to growth in 2026. And that's based on the progress we've had to date. We ended the year where we expected to with inventories at the right place. Part of that is we did have softer cold and flu, but we had stronger Oral Health business, which helped offset that. And we also have plans in place that we know will help us improve through the year. So for instance, in Q2, we have a lot of key customers doing shelving resets. We're gaining distribution. We're gaining shelf placement. On the profit side, the productivity program continues to deliver. You saw the 220 basis points of gross margin improvement. We feel great about that. That, combined with the efficiencies coming from the operating model, will allow us to deliver high single-digit operating growth at constant currency and still invest in growth, still invest in A&P, R&D, and some key capabilities that we're continuing to build on. So now if we step back and think the medium-term guidance. I mean you said it, the guidance doesn't necessarily mean we're going to be outside the range. But obviously, part of the guidance is outside our medium-term range. I think it's an acknowledgment of the uncertain market we're dealing with. Based on what we know today, we'd expect to be in the middle of that range, based on what we know today. You also asked about the phasing. What we do know today is that Q1 cold and flu season is going to be below a year ago. We're now almost 2 months into the quarter. And the results, we saw a spike towards the end of the year, and then we saw it come down after that. So we're going to be below a year ago, and that's not only in the U.S., it's outside the U.S. My confidence, listen, these are still attractive categories. I still believe there's huge potential. Everything we've talked about in the past, closing the instant treatment gap, success of our premiumization continuing, the low-income consumer opportunity, which we're still only at the beginning at. And as we progress through 2026, I expect to see stronger performance in North America, as I said, and continued strength in emerging markets. We feel good about China, and I expect an acceleration in India. Actually, India for us is performing extremely well. And then as we continue to drive that productivity agenda, again, we will be able to continue to invest in the business, which again underpins my confidence in getting back to that 4% to 6% growth.

Our next question is from Warren Ackerman from Barclays.

It's Warren Ackerman here at Barclays. Outside of the numbers, Brian, could you talk about the new reorganization? You've got a new Chief Growth Officer, Chief Transformation Officer, new reporting structure, new hires in the U.S. other than Natalie I've seen. Can you maybe sort of walk us through how that's going to be a growth unlock and how you'll drive more volume growth in the U.S., more innovation? Anything you can say on sort of shelf resets and how things are shaping up in the U.S. in what is clearly a tougher operating environment?

Thank you, Warren. You captured the essence well. This is primarily about fostering growth and enhancing agility. Reflecting on our journey as a company, we are 3.5 years in, and our strategy is well-defined. There remains an opportunity for us to streamline and improve our operations and effectively drive our strategy to execution. Therefore, we established the Chief Growth Officer role, which integrates our category structure, marketing effectiveness, business insights, and a new commercial excellence function while introducing six operating units in place of our previous three regions. Latin America, India, and the Middle East and Africa will now participate more actively in our leadership discussions. A significant aspect of this is the newly formed commercial execution function, where we will leverage AI-driven tools for net revenue management and next best actions, allowing for faster implementation throughout the organization. This CGO role and the six operating units will help us accelerate our category strategies, utilize our scale more effectively, and better allocate resources to navigate the uncertain environment. Consequently, we are streamlining our organization, leading to the anticipated gross savings of $175 million to $200 million, which provides us with the flexibility to invest in growth opportunities, innovation, and enhancing our capabilities. Regarding the U.S., we have brought in new team members as part of these changes, including exceptional leaders in India and Latin America who possess deep market knowledge. Our leader in the Middle East and Africa is now part of the leadership team and brings remarkable talent. In the U.S., Natalie has made several adjustments among our category heads or general managers, promoting some of our top talents to the OTC business and acquiring external expertise in Oral Health and the Wellness category, which encompasses VMS and Digestive Health. As I mentioned earlier, we anticipate achieving significant distribution and shelving wins with several key customers across Oral Health, VMS, and Pain Relief in Q2, which is already secured. We are optimistic about our commercial execution and our innovation efforts. Particularly, in the U.S., our Oral Health category is performing exceedingly well, exceeding our expectations in Q4, which has helped us stabilize our position in a challenging cold and flu season.

Our next question is from David Hayes with Jefferies.

So just on emerging markets, there was a sequential slowdown in the fourth quarter. So just trying to dig a little bit deeper into whether the emerging is performing as you would expect it to be. And then which areas specifically maybe are not doing as well? And I guess in that context, Oral Care continues to be amazing and impressive, obviously, still in this difficult consumer environment. So is there something different about Oral Care and the dynamics there versus some of the other categories ex Respiratory because of the cold and flu? But it feels like Oral Care could ride the consumer dynamic whereas the other brands can't. Is there something you can point to that says that this is what's going to change as the consumer maybe picks up in the other areas?

Thank you, David. I'll address the Oral Care question in relation to other categories and then hand it over to Dawn for insights on our broader performance in emerging markets. Firstly, we are very optimistic about Oral Care, particularly since the clinical range in Sensodyne has been well received by consumers. This includes offerings beyond clinical white, such as clinical repair and clinical enamel strength. We are also seeing significant progress in countries like India, targeting low-income consumers with a focus on Oral Health. Parodontax is another exceptional brand for gum health that, while not as widely discussed as Sensodyne, is experiencing strong growth in the double digits, particularly in the mid-teens. Our recent launch in China is still in the early stages, but we are very pleased with the progress. Overall, we have a clear model for Oral Health, closely tied to dental recommendations and innovations that set us apart in the therapeutic space. Regarding other categories, when we consider the effects of cold and flu, we specifically refer to our cold and flu brands like Theraflu, Robitussin, and Otrivin within that segment. While other areas like Pain Relief and VMS do see some impact, it's not as pronounced. I genuinely believe we have strong categories that we can advance in. In Oral Health, we truly differentiate ourselves from competitors, maintaining over a decade of consistent single-digit to double-digit growth for Sensodyne. We are also seeing competitiveness in other segments while staying committed to innovation, seen in our new 12-hour patch launch for Voltaren across several European markets. Otrivin Nasal Mist is performing well, and we are increasing our market share there. We're also expanding our OptiSorb technology for Panadol into additional markets. Overall, we have a solid innovation strategy that will support our medium-term goals. Dawn?

Yes. Good morning, David. Hi, everyone. So let me talk a bit about emerging markets because we feel really excited about our emerging markets business. If I look at Asia Pac, first of all, I mean, we continue to deliver strong performance in Asia Pac. We expected an acceleration in half 2 versus half 1, and that has come through. And when I look at the growth drivers in Asia Pac, 80% of our growth is coming from volume mix. And that is a factor of us driving penetration and expanding reach across lower-income consumer groups. If I look within Asia Pac, let me talk about India. I mean, an incredible performance in India, double-digit growth in the year, an acceleration in quarter 4 on the back of the macro changes around GST, but also on the fact of our activations. If I look at our INR 20 pack, Sensodyne is performing incredibly well. We continue to expand our reach across rural areas, across villages based on our investment in terms of bringing our sales force in-house. And actually, I was out in India the first week of this year, and it was great to be on the ground with the team, visiting stores and really seeing our brands come to life. So that was India. If I look at China, we're also really excited about China, mid-single-digit growth in the year. And just some pockets to talk about. If I look at our e-com business, it's around 40% of our business in China. And Douyin, we're growing more than 100%. And our online to offline business is also growing double digits. So actually, we feel really good about China. If I move on then to EMEA, LatAm. EMEA, LatAm, actually, we've seen good performance, particularly across LatAm and EMEA, Middle East and Africa as well as Central Europe. But it is fair to say that whilst we've seen good performance, particularly in LatAm and specifically Brazil, we are seeing a much more challenging macro backdrop, both in terms of consumer behavior, but also in terms of retailer behavior as well. So we did see a slowdown in LatAm, particularly in quarter 4. And if I talk about kind of Middle East, Africa continues to perform well. Central Europe also has seen a good performance. But again, based on the soft cough, cold and flu season in quarter 4, we saw a slowdown in Central Europe because of that. But overall, as I said, we're really excited about emerging markets. It's a huge growth opportunity for us. When I look at our A&P investment, half of our increase in A&P investment in the year actually went to emerging markets, and you can see that coming through in the performance.

Our next question is from Celine Pannuti with JPMorgan.

My question is about the overall guidance and how you balance top line performance with margin improvement. Your strong margin delivery and cost savings initiatives look promising for the future. However, your top line performance has been disappointing. Over the last three years, volume growth has only been 1%, which falls short compared to leading competitors who are aiming for at least 2% or more. To achieve growth of 4% to 6%, what volume growth do you think is necessary? Additionally, considering the gap between margin improvement and volume performance, will you need to reinvest more or reconsider your pricing strategy to accelerate volume growth?

Thank you for the question, Celine. I'll start off and then let Dawn add her insights. Looking at our investments, I believe we are putting our resources in the right areas of the business. Our advertising and promotion investments were more than 7% higher than last year, and our research and development also exceeded last year by over 7%. This reflects the improvements we’ve made in gross margin and our supply chain, which allowed us to achieve a 220 basis point improvement in gross margin, enabling further investment in the business. We are focused on optimizing this investment. Notably, a significant portion of our additional investment this year has been directed towards Oral Health, which has yielded positive results. While we are aware that this year's cold and flu season is not as strong, and we may gain market share, overall volume growth will be challenging. Dawn, could you share your thoughts on how we see the future trajectory and the role of volume growth, which remains a priority for us?

Yes. Thanks for the question, Celine. And you're right, and Brian mentioned it, we are very focused on driving volume growth in 2026 and moving forward. We've always said that the right price volume mix split for this business is around 60-40, 40-60. I already talked about Asia Pac in terms of 80% of that growth is coming from volume on Asia Pac, and we feel really good about that. When I look at EMEA, LatAm, if I take out the two shoulders of the year, so if I take out Q1 and Q4 for 2025, where we had a soft cough, cold and flu season, actually, in Q2 and Q3, we did see a more balanced price volume mix profile. And that obviously should give us confidence moving forward that we can deliver that. And then if I look at North America, look, it's been a really challenging market in North America in 2025. But as Brian has talked about, we have put in place the key actions to drive volume growth in 2026, whether it's about us no longer doing destocking, whether it's about reducing the drag from smoker's health, the distribution builds that we expect to get from shelf resets as well as the strong activations. These are all important drivers in terms of driving the volume growth. So whilst for '26, I'm not going to guide to specific volumes, I would expect us to be improving the split of price volume mix in '26.

Our next question is from Olivier Nicolai with Goldman Sachs.

I got one question first. Could you go back to the change you have implemented in the U.S. over the last 12 months and specifically also the incentive structure you put in place for the new management there? And just following up on the press release on Page 5 regarding the overall equipment effectiveness. It has improved by 7 points in 2025. It's a bit lower than what you expected at H1. Should we assume a stronger improvement in '26 compared to '25 on these metrics?

Thank you for the question. I want to discuss our developments in the U.S. We appointed a new leader in the U.S. back in May. As we examined our overall operating model, the executive team collaborated closely to refine it. I previously mentioned this when Warren asked about it, and we coordinated this effort with the U.S. One significant change we've made is the introduction of a General Manager role in our categories, which will directly report to our U.S. President and will be aligned with our global category leaders. This will help us execute our strategy more efficiently. We've also implemented various changes in net revenue management and provided new tools, along with adjustments in our sales team and leadership structure. Most of these changes were finalized on January 8 when we revealed our broader plans for the U.S. We can typically implement these changes quickly, and I'm optimistic about their potential to drive growth. We've already seen positive results. Our inventories are on target, and Oral Health has performed exceptionally well. Advil gained market share in Q4, which is significant. We're identifying distribution opportunities mentioned in Q2, so I believe we're well-positioned to push these changes forward in the U.S.

Yes. And I think, look, in terms of the productivity program, Brian talked about it, we're really pleased with our supply chain productivity program. It was even better than we expected. I mean, 220 basis points improvement in gross margin is incredible in the year, and it is a collective effort across the whole organization. And that's important because it helps to drive flexibility and agility in the P&L to be able to invest for growth. And if you remember, we talked about 3 drivers of how are we going to deliver that gross margin improvement and productivity benefit. The first one we talked about was immediate accelerators. So this was reducing complexity in our supply chain, whether it's around the number of languages on pack, harmonizing packaging, formulations. And let me give you an example. So in Europe, in 2025, on our Aquafresh brand, we had 44 single language packs. And we've now reduced that to 18 multi-language packs in the year. And that is a huge optimization piece in terms of supply chain. The second area that you referenced in your question was around operational efficiency. And this is all about debottlenecking upfront, process improvements, equipment optimization. And let me give you an example of that. In our Levice factory in Europe, we reduced formulations by 30%. So if you think about the impact of that, that reduces changeover time, but it also increases the available capacity on that line, which is really important. So I think, as I said, it's an incredible effort that is helping us to continue to invest in the business to drive growth. Moving forward, I wouldn't expect to see it; it would be great if we had that level of improvement each year. But moving forward, 50 to 80 basis points is what we've built into our guidance. That will be a strong performance on supply chain productivity.

Our next question is from Jeremy Fialko with HSBC.

So the one for me is more on the U.S. market more generally. So the first element is just the pharma channel within the U.S. Do you see that continuing to be under pressure in 2026? Or do you think with some of the ownership changes there, there's the possibility that the channel could become a little bit better in some of the broader drops there, which have, I guess, led to pressure on inventories and overall sell-through could abate? And then maybe if you look at the U.S. more broadly, is it just a case of waiting for the consumer to get a bit better before the market growth can improve? Or are there some other elements that you think are kind of specific to the market getting a bit better, let's say, putting aside any cold and flu impacts?

Thanks, Jeremy. Thanks for the question. Let me take that. I think as you talk about the pharmacy channel, really, what we've talked about is the 2 big retailers in the U.S., which are Walgreens and CVS. What I can say is we see the channel shift that we've seen for many years, which is drug channel and obviously, e-com. E-com is growing quite aggressively, and that's Walmart.com or that's Amazon.com; that will continue. The dynamic we saw in 2025 was lower inventory levels in those retailers as they were dealing with their own challenges. We believe we're where we need to be, and now we're just managing normal channel shift as we can. And by the way, that channel shift is not a bad thing for us. If we look at our Amazon shares, 18 brands on Amazon account for 90% of our business on Amazon and 16 of those 18 brands have higher share online than offline. So as that channel shift moves, it's something we can take advantage of. We have good capabilities there. So we feel good about that channel shift. Yet to be seen what happens under new ownership at Walgreens, if that's a positive or not. But again, I don't feel like this is a situation that gets worse; we baked it in. We proactively managed our inventory levels to try to be at a place where we felt good about so we can stop talking about it as we move forward. In the overall market, you said ex seasonality, so I will take that out because there's certainly a seasonality impact that we're kind of seeing. Listen, what we see in the dynamic is we see the club channel doing a bit better, the dollar channel doing a bit better as consumers are looking for more value. Some consumers are looking for lower price points, while other consumers want value, higher price point, lower price per use. We're very focused on those 2 channels and increasing our offering to make sure that we're meeting the affordability issues of consumers in the U.S. And we believe we can also play a role, and we do play a role certainly in Oral Health in driving that category growth. So we're not sitting back and waiting for the categories to change. We're just acknowledging that there are some things we can't control. We're focused on competitiveness, growing market share. We feel confident in that, and we're focused on driving that category growth where we can.

Our next question is coming from Sarah Simon with Morgan Stanley.

Just one question from me. How important is it in terms of securing shelf space and sort of with your retailer negotiations to have that cold and flu business? Because I think in your bit to become a sort of steady compounder with predictable top line, this is obviously the kind of bit that's causing the biggest issue. So I'm just wondering how much do you need to own that business?

Thank you for the question, Sarah. Cold and flu products play a significant role in consumer health. Having been in consumer health for over 20 years, I’ve witnessed several cold and flu seasons. This year, we are experiencing two consecutive seasons that are down compared to last year, and we anticipate Q1 will also see a decline. While it’s not common, it has occurred before. Historically, I believe this category will grow over time, although current conditions in the U.S. are creating challenges. We believe in the importance of this category and have confidence in our position within it. It serves a crucial function for our customers, particularly in category management involving pain, cold, and flu products. Many of our brands, such as Panadol Cold and Flu and Advil Cold and Flu, overlap, making this category an essential part of our portfolio as we move forward.

Our next question is come from Karel Zoete with Kepler.

I'd like to go a bit deeper into 2 categories. The first one is the Digestive Health business. Historically, a good business for you, not so seasonal, but we've seen a slowdown in '25. What should we anticipate for '26? Why should things get better? And then coming back to pain, I know there's a bit of cold and flu impact in there. But if you zoom out, '24 and '25 have not been great years for pain despite some of your strongest franchises such as Panadol in Asia are there. So what is needed for the pain franchise to start performing more in line with the anticipated growth rates?

Thank you, Karel, for the questions. Let’s begin with Digestive Health. To provide some context, over 80% of our Digestive Health business is concentrated in three countries: the U.S., India, and Brazil. In India and Brazil, we have the ENO brand, which is performing exceptionally well and is integral to our growth strategy in these regions, especially in India. In the U.S., we have brands such as Tums, Nexium, Gas-X, and Benefiber, all of which are important. However, Nexium has faced challenges due to the competition from private labels. When looking at the overall U.S. market, we have gained share against private labels, but Nexium remains a challenge. We see potential in Digestive Health by supporting consumers on GLP-1s, which have side effects that Tums and Benefiber can alleviate. Additionally, we have Biotene, a mouthwash brand effective for dry mouth, and we've introduced a Centrum variant targeted at GLP-1 users. We believe there are significant opportunities across our categories to capitalize on this. As for Pain Relief, we have a solid portfolio. Voltaren is currently the leading topical analgesic worldwide, and we also have a robust patch business. We're launching a 24-hour patch in several markets, and it's performing well. Panadol is doing nicely in Asia, although we need to strengthen our systemic pain relief offerings in Europe, and we are taking steps to address that. Regarding Advil, we're seeing share growth in Q4, and with our new structure and focus, we're confident we'll improve Advil's performance. It's crucial that we enhance this part of the business. Historically, we have stated that OTC categories typically grow at 2% to 3%, and we believe we can exceed that. While these categories are facing some headwinds and the U.S. market has been slightly muted, we remain optimistic about our franchise and its global potential.

Our next question is from Edward Lewis with Rothschild & Co Redburn.

Brian, just returning to the medium-term guidance. Should we think that getting back to that range is all about the U.S.? Or do you think you can deliver against that with a structurally slower U.S. market but a greater contribution from the rest of the world, given the confidence you're obviously expressing about India and China?

Yes. As I consider the medium-term guidance, I do anticipate that the U.S. will perform better. We've outperformed the market in 2025, but I don't think we've maximized our performance. We can improve. Just outperforming the market isn't sufficient, and I'm confident we can do better. I expect an improvement in the U.S. environment over the next couple of years, potentially approaching the lower end of our algorithm growth. Additionally, we believe that emerging markets will continue to be a strong contributor over time, and our low-income consumer strategy is gaining traction in certain regions, providing us valuable insights, although it will take time to become significant. Overall, I still believe in the medium-term guidance of 4% to 6%, as nothing has fundamentally changed regarding our strategy and opportunities. This year, we're projecting 3% to 5% because the market remains uncertain, and we want to provide the right context for everyone regarding our current outlook. Given that we expect Q1 to be softer due to cold and flu seasons, we're currently positioned in the middle of that range, and we will update our expectations as the year progresses.

Our next question is from Tom Sykes with Deutsche Bank.

One quick follow-up and one on A&P, please. Are you able to quantify the shelf space stocking benefit that you'll get in either Q1 or Q2 in North America, please? And then just on the A&P spend, I mean, there can't be many consumer companies that have increased A&P by almost 8% to 20% of sales and still running at negative volumes. So where is the A&P ineffective? And where is it effective? And does it make much of a difference in your non-oral care businesses at the moment? And can you talk about whether you're allocating more of that A&P increase to oral care or to non-oral care, please?

Thanks, Tom. Thanks for the question. Let me take the U.S. stocking, and I'll pass it to Dawn on the A&P question. Listen, we're not going to guide to specific improvements on the shelving increases. But let's just say it's part of the thing that gives us the confidence as we progress through the year that we'll see stronger results because it's real. Consumers will see more of our brands. We will have bigger shelf space and, in a number of cases, we'll be at a better visibility point in some key resellers. Dawn, do you want to talk about A&P?

Thank you for the question. I would like to expand on Celine's comments regarding the margin profile. It's common for companies to reduce advertising and promotions during challenging market conditions, but we have chosen not to do so because we are committed to driving long-term sustainable growth for our business. This year, we increased our advertising and promotions by 7.5% and our research and development by 7.7%. We invest appropriately in our brands to foster sustainable growth. To provide additional context, half of the increase in advertising and promotions was directed toward Oral Health, which has experienced significant growth this year, particularly a strong performance in the fourth quarter, yielding an impressive return on investment. The other half was allocated to emerging markets such as India and D-com in China, which is crucial for our strategy. Additionally, we are focusing on engaging with experts, which is a vital component of our business model. This year, registrations on the Haleon Health portal increased by 27%, and our field force engagement rose by 16%. Our investments have been balanced and targeted, with a 12% growth in working media, leading to a mid-single-digit increase in overall return on investment. We've improved our global coverage to about three-quarters of our business and allocated 60% of our working media to digital, which aligns with the shifts in the economy. Overall, we consider this an important focus area, and I am confident about our healthy investment level of 20.5%. We are dedicated to enhancing the efficiency and effectiveness of our spending while ensuring a proper mix between digital and traditional media.

Okay. Super. Thanks, Dawn. Listen, I think we are going to close the call now. So thanks, everyone. I appreciate you joining us today. Look forward to catching up with all of you in upcoming meetings and roadshows. And please feel free to reach out to the IR team if you have any further questions. Really appreciate your continued interest and support in Haleon. Thanks, everybody.

Thank you. That concludes Haleon Fiscal Year 2025 Results Q&A. Thank you for your participation. You may now disconnect your lines.