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As filed with the Securities and Exchange Commission on September 29, 2022

Registration No. 333-266358

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

POST-EFFECTIVE AMENDMENT NO. 1

TO

FORM F-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Haleon plc

(Exact name of registrant as specified in its charter)

 

 

 

England and Wales
  2844
  Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

Building 5, First Floor, The Heights, Weybridge, Surrey,

KT13 0NY, United Kingdom Tel: +44 1932 822000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

GlaxoSmithKline Consumer Healthcare Holdings (US) LLC

184 Liberty Corner Road, Suite 200,

Warren NJ 07059, United States

Telephone: +1 908 293 4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

John Horsfield-Bradbury
Sullivan & Cromwell LLP
1 New Fetter Lane
London EC4A 1AN, United Kingdom
Tel.: +44 20 7959 8900
  Audra D. Cohen
Sullivan & Cromwell LLP
125 Broad Street
New York, NY 10004
Tel.: +1 212-558-4000
  Bjarne P. Tellmann
Senior Vice President and General Counsel
Haleon plc
Building 5, First Floor, The Heights,
Weybridge, Surrey, KT13 0NY,
United Kingdom
Tel: +44 20 8047 5000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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Explanatory Note

This Post-Effective Amendment No. 1 to the Registration Statement on Form F-1 (File No. 333-266358), as amended (the “Registration Statement”) of Haleon plc (the “Company”), originally declared effective by the Securities and Exchange Commission (the “SEC”) on August 9, 2022, is being filed pursuant to the undertakings in Item 9 of the Registration Statement to include the information contained in the Company’s Report on Form 6-K that was furnished with the SEC on September 20, 2022, including the Company’s unaudited consolidated interim financial statements as of 30 June 2022 and for the six months ended 30 June 2022 and 2021. The information included in this Post-Effective Amendment No. 1 updates and supplements the Registration Statement and the Prospectus contained therein.


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The information in this prospectus is not complete and may be changed. The selling securityholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated September 29, 2022

PRELIMINARY PROSPECTUS

Haleon plc

3,559,371,012 Ordinary Shares

295,506,362 American Depositary Shares, representing 591,012,724 Ordinary Shares

 

 

This prospectus relates to the offer and sale from time to time by the selling securityholders identified in this prospectus (collectively, the “selling securityholders”) of up to (i) 3,559,371,012 ordinary shares, nominal value £0.01 per share (“Ordinary Shares”) and (ii) 295,506,362 American Depositary Shares (“ADSs”), representing 591,012,724 Ordinary Shares, which were issued to the selling securityholders in connection with the Separation (as defined below).

This prospectus also covers any additional securities that may become issuable by reason of share splits, share dividends or other similar transactions.

Our registration of the Ordinary Shares and ADSs covered by this prospectus does not mean that the selling securityholders will offer or sell any of the Ordinary Shares and ADSs. The selling securityholders may sell the Ordinary Shares and ADSs covered by this prospectus in a number of different ways and at varying prices. For information on the possible methods of sale that may be used by the selling securityholders, you should refer to the section entitled “Plan of Distribution” beginning on page 284 of this prospectus.

All of the Ordinary Shares and ADSs offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from the sale of Ordinary Shares or ADSs by the selling securityholders.

We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution”.

The Ordinary Shares are admitted to the premium listing segment of the Official List of the UK Financial Conduct Authority (“FCA”) and traded on the main market for listed securities of the London Stock Exchange plc (“LSE”) under the symbol “HLN”. The ADSs are listed on the New York Stock Exchange (“NYSE”) under the symbol “HLN”. On 28 September 2022, the closing sale price as reported on the LSE of the Ordinary Shares was £2.79 per share and the closing sale price as reported on the NYSE of the ADSs was $5.98 per ADS.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.

Our principal executive offices are located at Building 5, First Floor, The Heights, Weybridge, Surrey, KT13 0NY, United Kingdom.

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of material risks of investing in our securities in “Risk Factors” beginning on page 31 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

Prospectus dated                 , 2022


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TABLE OF CONTENTS

 

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

     1  

PROSPECTUS SUMMARY

     9  

THE OFFERING

     13  

KEY FINANCIAL DATA

     15  

RISK FACTORS

     31  

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

     64  

USE OF PROCEEDS

     66  

DIVIDEND POLICY

     67  

CAPITALISATION

     68  

BUSINESS

     70  

BUSINESS OVERVIEW

     78  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     146  

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

     206  

COMPENSATION

     223  

DESCRIPTION OF SECURITIES

     239  

MEMORANDUM AND ARTICLES OF ASSOCIATION

     247  

EXCHANGE CONTROLS

     253  

AMERICAN DEPOSITARY SHARES

     254  

BENEFICIAL OWNERSHIP

     266  

SELLING SECURITYHOLDERS

     270  

MATERIAL CONTRACTS

     272  

TAXATION

     286  

PLAN OF DISTRIBUTION

     292  

SHARES ELIGIBLE FOR FUTURE SALE

     297  

EXPENSES RELATED TO THE OFFERING

     299  

LEGAL MATTERS

     300  

AUDITORS

     300  

EXPERTS

     300  

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

     301  

WHERE YOU CAN FIND MORE INFORMATION

     302  

We and the selling securityholders have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.

Except as otherwise set forth in this prospectus, neither we nor the selling securityholders have taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form F-1 that we filed with the United States Securities and Exchange Commission (the “SEC”). The selling securityholders may, from time to time, offer and sell any combination of the securities described in this prospectus in one or more offerings on a delayed or continuous basis.

We will not receive any proceeds from the sale of Ordinary Shares or ADSs to be offered by the selling securityholders pursuant to this prospectus. We will pay the expenses, other than underwriting discounts and commissions, if any, associated with the sale of our Ordinary Shares or ADSs pursuant to this prospectus. To the extent required, we and the selling securityholders, as applicable, will deliver a prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is part, to update the information contained in this prospectus. The prospectus supplement or post-effective amendment may also add, update or change information included in this prospectus. You should read both this prospectus and any applicable prospectus supplement or amendment, together with additional information described below under the caption “Where You Can Find More Information.” We have not, and the selling securityholders have not, authorized anyone to provide you with any information or to make any representation other than those contained in this prospectus or in any free writing prospectuses we have prepared. The information contained in this prospectus is current only as of the date on the front cover of the prospectus, regardless of the time of delivery or of any sale of our securities.

No offer of these securities will be made in any jurisdiction where the offer is not permitted.

Unless the context indicates otherwise, the terms “Haleon” or the “Company” refer to Haleon plc, and “the Group,” “we,” “our,” “us” or like terms, when used is in the context of any period prior to Separation (including, for the avoidance of doubt, the periods covered by the Financial Statements and Interim Financial Statements (each as defined below)), refer to CH JVCo together with its consolidated subsidiaries and subsidiary undertakings from time to time, and when used in the context of any period following Separation, refer to the Company together with its consolidated subsidiaries and subsidiary undertakings from time to time.

References to “Pounds Sterling,” “pence,” “£” or “p” are to the lawful currency of the United Kingdom, references to “€” are to the common currency of the European Monetary Union, and references to “USD,” “$” or “cents” are to the lawful currency of the United States.

CERTAIN DEFINED TERMS

In this prospectus:

 

“Consumer Healthcare Business”

the business of researching and developing, manufacturing, distributing, marketing, selling, promoting and/or otherwise commercialising Consumer Healthcare Products, in each case as conducted by the Company and its consolidated subsidiaries and subsidiary undertakings, together with any assets and/or entities that will form part of the Group pursuant to the Asset Transfer Framework Agreement (as defined below) and other ancillary and implementing agreements;

 

“CH JVCo”

GlaxoSmithKline Consumer Healthcare Holdings (No. 2) Limited, the holding company for the Consumer Healthcare Business prior to the Separation (as defined below);

 

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“Demerger”

the demerger of the predominant part of GSK’s interest in CH JVCo and its consolidated subsidiaries, by way of an interim dividend (the “Demerger Dividend”), in specie, declared by the board of directors of GSK and satisfied on 15 July 2022 by the transfer by GSK of the GSKCHH A Ordinary Shares (as defined below) to the Company in consideration for the issuance by the Company of Ordinary Shares to the holders of GSK Shares as of the Record Time (as defined below) in accordance with the Demerger Agreement (as defined below);

 

“Deposit Agreement”

the deposit agreement entered into between the Company, JPMorgan Chase Bank N.A., as depositary, and all holders and beneficial owners from time to time of ADSs issued thereunder;

 

“Directors”

the directors of the Company as at the date of this prospectus, as set out in “Board of Directors and Senior Management—Directors,” as the context requires;

 

“EEA”

the European Economic Area;

 

“EU”

the European Union;

 

“EU Member State” or “Member State”

a member state of the EU;

 

“FDA”

the US Food and Drug Administration;

 

“FMCG”

fast-moving consumer goods;

 

“GSK”

GSK plc;

 

“GSK ADS Custodian”

JPMorgan Chase Bank N.A., custodian of the GSK Shares underlying the GSK ADSs;

 

“GSK Group”

GSK and its consolidated subsidiaries and subsidiary undertakings from time to time, excluding those companies which form part of the Group;

 

“GSK ADSs”

American depositary shares of GSK, each representing two GSK Shares;

 

“GSK Shares”

ordinary shares of GSK plc;

 

“GSKCHH”

GlaxoSmithKline Consumer Healthcare Holdings Limited, the GSK subsidiary which held GSK’s interests in CH JVCo

 

“GSKCHH A Ordinary Shares”

A Ordinary Shares in the capital of GSKCHH;

 

“GSKCHH B Ordinary Shares”

B Ordinary Shares in the capital of GSKCHH;

 

“GSKCHH C Ordinary Shares”

C Ordinary Shares in the capital of GSKCHH;

 

“ADS Custodian”

JPMorgan Chase Bank N.A., custodian of the Ordinary Shares underlying the ADSs;

 

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“Depositary”

JPMorgan Chase Bank N.A., as depositary for the ADSs;

 

“Haleon Shareholder”

a holder of Ordinary Shares from time to time;

 

“IFRS”

the International Financial Reporting Standards as issued by the International Accounting Standards Board and International Financial Reporting Standards as adopted by the United Kingdom;

 

“JVCo A Ordinary Shares”

A Ordinary Shares in the capital of CH JVCo of £1 each;

 

“JVCo B Ordinary Shares”

B Ordinary Shares in the capital of CH JVCo of £1 each;

 

“JVCo Preference Shares”

non-voting preference shares in the capital of CH JVCo of £1 each;

 

“LSE”

London Stock Exchange plc or the market conducted by it, as the context requires;

 

“Pfizer”

Pfizer Inc.;

 

“Pfizer Group”

Pfizer together with its subsidiaries and subsidiary undertakings from time to time;

 

“PFCHH”

PF Consumer Healthcare Holdings LLC, a wholly-owned subsidiary of Pfizer which held Pfizer’s interest in CH JVCo;

 

“SEC”

the US Securities and Exchange Commission;

 

“SLPs”

(i) GSK (No. 1) Scottish Limited Partnership, a private fund limited partnership registered in Scotland with registration number SL035527 and whose principal place of business is at 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ (“SLP1”); (ii) GSK (No. 2) Scottish Limited Partnership, a private fund limited partnership registered in Scotland with registration number SL035526 and whose principal place of business is at 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ (“SLP2”); and (iii) GSK (No. 3) Scottish Limited Partnership, a private fund limited partnership registered in Scotland with registration number SL035525 and whose principal place of business is at 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ (“SLP3”), being the Scottish limited partnerships that each received shares in the Company pursuant to the SLP Exchange Agreement, and “SLP” shall be construed accordingly.

 

“Separation”

the Demerger, Share Exchanges (as defined below), UK Admission (as defined below) and other steps pursuant to which, among other things, the Company became a listed company holding the Consumer Healthcare Business as of 18 July 2022;

 

“subsidiary”

a subsidiary as that term is defined in section 1159 of the Companies Act 2006 of the UK, as amended (the “Companies Act”);

 

“subsidiary undertaking”

a subsidiary undertaking as that term is defined in section 1162 of the Companies Act;

 

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“Record Time”

5 p.m. New York time for the GSK ADSs on 15 July 2022;

 

“UK Admission”

the admission of the Ordinary Shares to the premium listing segment of the Official List of the Financial Conduct Authority of the UK (the “Official List” and the “FCA,” respectively) and to trading on the LSE’s main market for listed securities, which occurred on 18 July 2022;

 

“United Kingdom” or “UK”

the United Kingdom of Great Britain and Northern Ireland; and

 

“United States,” “USA” or “US”

the United States of America, its territories and possessions, any state of the United States of America, the District of Columbia and all other areas subject to its jurisdiction.

 

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Overview

The audited consolidated financial statements for the years ended 31 December 2021, 2020 and 2019 (the “Financial Statements”) included in this prospectus and the related financial information presented herein have been prepared in accordance with IFRS and reflect the consolidated financial results of CH JVCo prior to Separation and the Consumer Healthcare Business that is consolidated under the Company as the new holding company of the Group after Separation.

The unaudited interim condensed financial statements for the six months ended 30 June 2022 and 2021 (the “Interim Financial Statements”) included in this prospectus and the related financial information presented herein have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”), and reflect the consolidated financial results of CH JVCo prior to Separation and the Consumer Healthcare Business that is consolidated under the Company as the new holding company of the Group after Separation.

Reporting Framework

The financial information presented in this prospectus reflects the operating and financial performance of the Group, its cash flows and financial position and resources. The Group’s results as reported in accordance with IFRS represent the Group’s overall performance. The Group also uses a number of adjusted, non-IFRS, measures to report the performance of its business, as described below.

The consolidated financial statements for the year ended 31 December 2020 included in the Financial Statements have been restated for adjustments related to receivables and cost of sales arising from transitional service agreements. See Note 1 to the Financial Statements.

Description of Key Line Items in the Group’s Financial Statements

The following descriptions of key line items in the Financial Statements are relevant to the discussion of the Group’s results of operations in “Managements Discussion and Analysis of Financial Condition and Results of Operations.

 

Item

  

Represents

Revenue    Revenue from sales of goods to external customers against received orders. Revenue represents net invoice value including 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. Revenue is not recognised in full until it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The methodology and assumptions used to estimate rebates and returns 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. Value added tax and other sales taxes are excluded from revenue.
Cost of sales    Cost of sales includes all costs directly related to bringing products to their final selling destination. This includes purchasing and receiving costs and direct and indirect costs to manufacture products, including materials, labour and overhead expenses necessary to acquire and convert purchased materials and supplies into finished goods. Cost of sales also includes royalties on certain licenced products, inspection costs, freight charges, costs to operate equipment and depreciation and amortisation.

 

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Item

  

Represents

Selling, general and administration (“SG&A”)    SG&A expenses comprise advertising and promotion costs, selling costs, warehouse and distribution costs, corporate overheads, other administrative expenses and depreciation and amortisation.
Research and development (“R&D”)    R&D expenditure comprises expenditure that is directly attributable to the research and development of new products, including the costs attributable to the generation of intellectual property and product registrations, and depreciation and amortisation of equipment, real estate and IT assets used by the R&D function.
Other operating (expense)/income    Other operating (expense)/income includes income and expense from all other operating activities which are not related to the ordinary course business of the Group, such as gains/ losses from disposals and transaction costs.
Net finance costs    Net finance costs comprise finance costs and finance income, including net finance costs in relation to pensions and similar obligations. Finance income includes income on cash and cash equivalents and income on other financial assets. Finance costs include interest costs in relation to financial liabilities. This includes interest on lease liabilities, which represents the unwind of the discount rate applied to lease liabilities.
Income tax    Income tax is the expense resulting from the corporate income tax payable in the different countries in which the Group operates.

Adjusted Results and other non-IFRS financial measures

This prospectus contains a number of non-IFRS measures to report the performance of the Group’s business. Non-IFRS measures exclude amounts that are included in, or include amounts that are excluded from, the most directly comparable measure calculated and presented in accordance with IFRS, or are calculated using financial measures that are not calculated in accordance with IFRS. 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.

Management considers these metrics to be the non-IFRS financial measures used by the Group to help evaluate growth trends, establish budgets and assess operational performance and efficiencies. We believe that these non-IFRS financial measures, in addition to IFRS measures, provide an enhanced understanding of the Group’s results and related trends, therefore increasing transparency and clarity of the Group’s results and business.

There are no generally accepted accounting principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. The non-IFRS financial measures presented in this registration statement may not be comparable to other similarly titled measures used by other companies, have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Group’s operating results as reported under IFRS. We encourage investors and analysts not to rely on any single financial measure but to review the Group’s financial and non-financial information in its entirety.

 

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The following non-IFRS measures are presented in this prospectus:

Measure

 

Adjusted EBITDA

Adjusted EBITDA is one of the measures used by management to assess the financial performance of the Group’s business. It is defined as profit after tax excluding income tax, finance income, finance expense, Adjusting Items (as defined below and further described in “Key Financial Data—Adjusting Items”), depreciation of property plant and equipment, impairment of property plant and equipment, right-of-use assets and computer software net of reversals, depreciation of right-of-use assets, and amortisation of software intangibles.

 

  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). Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating the Group’s operating results in the same manner as the Group’s management.

 

  Adjusted EBITDA has limitations as a financial measure and investors should not consider it in isolation or as a substitute for analysis of the Group’s results of operations as reported under IFRS. In addition to the limitations inherent to all Adjusted Results (as defined below), some other limitations are:

 

   

Although depreciation and amortisation are non-cash charges, the assets being depreciated and amortised may have to be replaced in the future and Adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditure or lease extensions; and

 

   

Adjusted EBITDA does not reflect net finance expense/income, cash requirements for the Group’s working capital, transaction related costs, separation and admission costs and disposal costs.

 

Adjusted Results

Adjusted Results comprise Adjusted gross profit, Adjusted gross profit margin, Adjusted operating profit, Adjusted operating profit margin, Adjusted profit before taxation, Adjusted profit after taxation, Adjusted profit attributable to shareholders, Adjusted basic earnings per share, Adjusted diluted earnings per share, Adjusted cost of sales, Adjusted SG&A, Adjusted R&D, Adjusted other operating income, Adjusted net finance costs, Adjusted taxation charge, and Adjusted profit attributable to non-controlling interests. Adjusted Results exclude Net amortisation and impairment of intangible assets, Restructuring costs, Transaction-related costs, Separation and

 

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Admission costs, and Disposals and others, in each case net of the impact of taxes (where applicable) (collectively, the “Adjusting Items”, which are described in “Key Financial Data—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 compared against the majority of its peer competitors. As Adjusted Results include the benefits of restructuring programmes but exclude significant costs (such as Restructuring costs, Transaction-related costs and Separation and Admission costs) they should not be regarded as a complete picture of the Group’s financial performance as presented in accordance with IFRS. In particular, when significant impairments, Restructuring costs and Separation and Admission costs are excluded, Adjusted Results will be higher than IFRS results. For information on the Adjusting Items and further commentary on Adjusted Results, see “Key Financial Data”).

 

Constant currency

The Group’s reporting currency is Pounds Sterling, but the Group’s significant international operations give rise to fluctuations in foreign exchange rates. To neutralise foreign exchange impact and to better illustrate the change from one year to the next, the Group discusses its results both on an “as reported basis” or using “actual exchange rates” (“AER”) (local currency results translated into Pounds Sterling at the prevailing foreign exchange rate) and using constant currency exchange rates (“CER”). To calculate results on a constant currency basis, prior year exchange rates are used to restate current year comparatives. The currencies which most influence the constant currency results of the Group and their exchange rates are shown in the below table.

 

     H1 2022      H1 2021      2021      2020      2019  
Average rates:               

USD/£

     1.30        1.39        1.38        1.29        1.28  

Euro/£

     1.19        1.15        1.16        1.13        1.14  

CNY/£

     8.38        8.96        8.86        8.91        8.82  

Swiss Franc/£

     1.22        1.26        1.25        1.21        1.27  

 

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

 

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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).

 

Free cash flow conversion

Free cash flow conversion is calculated as free cash flow, as defined above, divided by profit after tax.

 

  Free cash flow conversion is used by us to evaluate the cash generation of the business relative to its profit, by measuring the proportion of profit after tax that is converted into free cash flow as defined above.

 

Net capital expenditure

Net capital expenditure is calculated as purchases of property, plant and equipment and other intangible assets, net of sales of property, plant and equipment and other intangible assets.

 

  Net capital expenditure is used by us to measure capital invested in the operating activities of the Group’s business.

 

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 us to more clearly identify the level of cash generated from operations that remains available for distribution after servicing the Group’s debt.

 

Organic revenue growth

Organic revenue growth represents the change in organic revenue at CER from one accounting period to the next.

 

  Organic revenue represents revenue, as determined under IFRS and excluding the impact of acquisitions, divestments and closures of brands or businesses, revenue attributable to manufacturing service agreements (“MSAs”) relating to divestments and the closure of sites or brands, and the impact of currency exchange movements.

 

 

Revenue attributable to MSAs relating to divestments and production site or brand closures has been removed from organic revenue because these agreements are transitional and, with respect to production site closures, include a ramp-down period in which revenue attributable to MSAs gradually reduces several months before the production site closes. This revenue reduces the

 

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comparability of prior and current year revenue and is therefore adjusted for in the calculation of organic revenue growth.

 

  Organic revenue is calculated period-to-period as follows, using prior year exchange rates to restate current year comparatives:

 

   

current year organic revenue excludes revenue from brands or businesses acquired in the current accounting period;

 

   

current year organic revenue excludes revenue attributable to brands or businesses acquired in the prior year from 1 January to the date of completion of the acquisition;

 

   

prior year organic revenue excludes revenue in respect of brands or businesses divested or closed in the current accounting period from 12 months prior to the completion of the disposal or closure until the end of the prior accounting period;

 

   

prior year organic revenue excludes revenue in respect of brands or businesses divested or closed in the previous accounting period in full; and

 

  prior year and current year organic revenue excludes revenue attributable to MSAs relating to divestments and production site closures taking place in either the current or prior year, each an “Organic Adjustment”.

 

  To calculate organic revenue growth for the period, organic revenue for the prior year is subtracted from organic revenue in the current year and divided by organic revenue in the prior year.

 

  By way of example:

 

   

The Pfizer Transaction (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting the Group’s results of operations and financial position—Pfizer Transaction”) completed on 31 July 2019. Organic revenue growth for the period FY 2019 to FY 2020 excludes revenue attributable to brands acquired as part of the Pfizer Transaction in respect of the period 1 January 2020 to 31 July 2020.

 

   

The Group completed the disposal of Breathe Right on 1 October 2020. Organic revenue growth for the period FY 2019 to FY 2020 excludes revenue attributable to Breathe Right from the period 1 October 2019 to 31 December 2019. Organic revenue growth for the period FY 2020 to FY 2021 excludes revenue attributable to Breathe Right in FY 2020.

 

  The Group believes that discussing organic revenue growth contributes to the understanding of the Group’s performance and trends because it allows for a year-on-year comparison of revenue in a meaningful and consistent manner.

 

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Organic revenue growth by individual segment is further discussed by price and volume/mix changes, which are defined as follows:

 

   

Organic Revenue Price Growth (“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.

 

   

Organic Revenue Volume/Mix Growth (“Volume/Mix”): Defined as the variation in revenue attributable to changes in volumes in the period. Volume/Mix excludes the impact to organic revenue growth due to changes in prices during the period. Volume/Mix is calculated as current volume minus prior year volume multiplied by prior year net price.

For a reconciliation of the closest measures prepared in accordance with IFRS to the applicable non-IFRS measures, see “Key Financial Data”.

Rounding of Figures

Certain financial information presented in tables in this prospectus has been rounded to the nearest whole number or the nearest decimal place. Therefore, the sum of the numbers in a column may not conform exactly to the total figure given for that column. In addition, certain percentages presented in the tables in this prospectus reflect calculations based upon the underlying information prior to rounding, and, accordingly, may not conform exactly to the percentages that would be derived if the relevant calculations were based upon the rounded numbers. Certain percentage shareholdings have also been rounded and therefore totals of such percentage shareholdings may vary slightly from their actual arithmetic totals.

No Incorporation of Website Information

The contents of any website mentioned in this prospectus or any website, directly or indirectly, linked to these websites have not been verified and do not form part of this prospectus, and information contained therein should not be relied upon.

Market and Industry Data

Other than in respect of statements of the type described in the paragraph below, unless the source is otherwise stated, the market and industry data in this prospectus constitute our estimates, using underlying data from independent third parties. Such data includes market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications and surveys (including publications and data compiled by Nicholas Hall and Euromonitor). Estimates extrapolated from this data involve risks and uncertainties and are subject to change based on various factors.

Unless otherwise stated, statements of market position are on the basis of sales to consumers in the relevant geographical market or product category in 2021, as reported by: (i) in the case of statements relating to Over the Counter (“OTC”) medicines and Vitamins, Minerals and Supplements (“VMS”), Nicholas Hall’s DB6 Consumer Healthcare Database at manufacturer’s selling prices; and (ii) in the case of statements relating to Oral Health, Euromonitor Passport ‘Oral Care’ at retail selling prices. The value of a market or product category and market size are provided on the basis of sales to consumers in 2021 in the relevant geographical market or product category, as reported by: (i) in the case of statements relating to OTC/VMS, Nicholas Hall’s DB6 Consumer Healthcare Database at manufacturer’s selling prices; and (ii) in the case of statements relating to Oral Health, Euromonitor Passport ‘Oral Care’ at manufacturer’s selling prices.

 

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The Group confirms that all third-party data contained in this prospectus has been accurately reproduced and, so far as the Group is aware and able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading.

Where third-party information has been used in this prospectus, the source of such information has been identified. While industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, the accuracy and completeness of such information is not guaranteed.

This prospectus includes trade marks, trade names and trade dress of other companies. Use or display by us of other parties’ trade marks, other parties’ trade names or other parties’ trade dress or products is not intended to and does not imply a relationship with, or endorsement or sponsorship by the Group of, the trade mark, trade name or trade dress owners. Solely for the convenience of investors, the Group’s brands are referred to in this prospectus without the ® symbol, but the absence of these references is not intended to indicate in any way that we will not assert our rights to these brands to the fullest extent permitted by law.

 

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PROSPECTUS SUMMARY

This summary highlights certain information about us, this offering and selected information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in the securities covered by this prospectus. For a more complete understanding of our Company and this offering, we encourage you to read and consider carefully the more detailed information in this prospectus, and any related prospectus supplement, including the information set forth in the section titled “Risk Factors” in this prospectus and any related prospectus supplement in their entirety before making an investment decision.

Overview

The Group is a world-leading consumer healthcare business, with a portfolio of category leading brands and approximately 23,000 people worldwide engaged in the research and development, manufacture and sale of a broad range of consumer healthcare products. The Group conducts business internationally across five consumer healthcare categories: Oral Health, Pain Relief, VMS, Respiratory Health and Digestive Health and Other. The Group has a strong footprint in the world’s consumer healthcare markets, including a commercial presence in over 170 markets and a number one or two OTC/VMS market position in countries which represented over 70 per cent. of the world’s OTC/VMS markets by value in 2021.

Corporate Information

Our Ordinary Shares are admitted to the premium listing segment of the Official List of the FCA and trading on the main market for listed securities of the LSE under the symbol “HLN” and our ADSs are listed on the New York Stock Exchange (“NYSE”) under the symbol “HLN”. The Company is domiciled in England and Wales with its registered and head office at Building 5, First Floor, The Heights, Weybridge, Surrey, KT13 0NY, United Kingdom. The telephone number of the Company’s registered office is +44 1932 822000 and its website is www.haleon.com. The information on the Company’s website does not form part of this prospectus.

SUMMARY OF RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those highlighted in the “Risk Factors” section of this prospectus. These risks include the following, any of which could have a material adverse effect on our business, financial condition or results of operations and the price of our Securities:

Risks Relating to the Group’s Business and Industry:

 

   

The Group operates in a highly competitive market and failure to successfully compete with competitors could have a material adverse effect on the Group’s business;

 

   

The Group’s success depends on its ability to anticipate and respond to changes in consumer preferences and a failure to adapt its strategy appropriately may have a material adverse effect on the Group’s business and/or financial condition;

 

   

The Group’s business results are impacted by the Group’s ability to manage disruptions in the Group’s global supply chain and a failure to manage disruptions appropriately may have a material adverse effect on the Group’s business and/or 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 may materially and adversely affect the Group’s business;

 

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The Group may not be able to develop and commercialise new products effectively, which may materially and adversely affect the results of the Group’s operations and financial condition;

 

   

Failure to retain key personnel or attract new personnel may materially and adversely affect the Group’s business;

 

   

Damage to the Group’s reputation could have a material adverse effect on the Group’s business;

 

   

Failure to respond effectively to the challenges raised by climate change and other sustainability matters may have a material adverse effect on the Group’s business and results of operations;

 

   

The Group may not be successful in obtaining, maintaining and enforcing sufficient intellectual property rights to protect its business, or in avoiding claims that the Group infringes on the intellectual property rights of others;

 

   

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;

 

   

A cyber-security incident, data breach or a failure of a key information technology system could materially and adversely impact the Group’s business;

 

   

The Group relies on third parties in many aspects of its business and ineffective management of these relationships could increase the Group’s financial, legal, reputational and operational risk;

 

   

The Group faces various risks related to pandemics, epidemics or similar widespread public health concerns, the ultimate impact of which is outside the Group’s control and which may materially and adversely affect the Group’s operations, cash flows and financial condition;

 

   

The implementation of complex strategic, operational and/or change initiatives gives rise to significant execution risks, which may affect the operational capacity of the Group and may materially and adversely impact the Group if these initiatives fail to meet their objectives;

 

   

The Group’s business is affected by seasonality, which could have a negative impact on the Group’s financial condition;

 

   

The Group may not successfully acquire and integrate other businesses, licence rights to technologies or products, form and manage alliances, or divest businesses;

 

   

The Group’s leverage and debt service obligations could materially and adversely affect its business, financial condition or results of operations;

 

   

The Group’s business and results of operations are affected by fluctuations in interest rates; and

 

   

Goodwill and indefinite-life intangible assets are a material component of the Group’s balance sheet and impairments of these assets could have a significant impact on its results.

Risks Relating to Changes in Law and the Political and Environment, Regulation and Legislation:

 

   

The Group’s business is subject to legal and regulatory risks in all the markets in which it operates, which may have a material adverse effect on the Group’s business operations and financial condition;

 

   

The Group faces risks relating to the regulation and perception of the ingredients it uses in its products, 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, each of which may materially and adversely affect the Group’s business, financial condition, results of operations and prospects;

 

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Litigation, disputes and regulatory investigations may materially and adversely affect the Group’s business, financial condition, results of operations and prospects;

 

   

The Group faces risks associated with significant international operations, which could negatively impact the Group’s business;

 

   

Volatility in material and other costs could materially and adversely impact the Group’s profitability;

 

   

The Group’s business may be impacted by the effects of Russia’s invasion of Ukraine;

 

   

Failure to comply with regulation regarding the use of personal data could lead to significant fines and regulatory action against the Group;

 

   

Failure to comply, or the costs of complying, with environmental and health and safety regulations could materially and adversely affect the Group’s operations;

 

   

The Group is exposed to risks relating to fluctuations in currency exchange rates and related hedging activities, which could negatively impact the Group’s financial condition and prospects;

 

   

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 Company is a foreign private issuer and, as a result, it is not subject to US proxy rules and is subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a US domestic public company; and

 

   

If the Company loses its foreign private issuer status in the future, it may incur significant additional expenses which could have a material adverse effect on the Group’s business, prospects, results of operations and financial condition.

Risks Relating to Separation:

 

   

The Group may fail to realise any or all of the anticipated benefits of Separation;

 

   

Following Separation, the Company operates as an independent publicly listed company and the Group could fail to meet the challenges involved in operating successfully as a standalone business;

 

   

For a period following Separation, the Company will be reliant on the GSK Group for the provision of certain services and any disruption to such services could be costly and materially and adversely affect the Group’s business, results of operations, financial conditions and prospects;

 

   

The Group has indemnification obligations in favour of the GSK Group and the Pfizer Group, which could be significant and have a material adverse effect on the financial condition, results of operations and/or prospects of the Group;

 

   

GSK and Pfizer may compete with the Group;

 

   

The Company’s status as a non-US corporation for US federal income tax purposes could be affected by a potential change in law; and

 

   

The Tax Covenant will restrict the Company’s ability to engage in certain transactions.

Risks Relating to the Ordinary Shares and ADSs:

 

   

An active trading market for the Ordinary Shares and the ADSs may not develop or be sustained;

 

   

The Pfizer Group retained a significant interest in the Company immediately after Separation and its interests may differ from those of the other holders of the Ordinary Shares and the ADSs;

 

   

There can be no assurance that dividends will be paid to holders of Ordinary Shares and ADSs;

 

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The market price of the Ordinary Shares and the ADSs may fluctuate;

 

   

Future sales of Ordinary Shares and ADSs, or the perception such sales might occur, could depress the market price of the Ordinary Shares and the ADSs;

 

   

The Company may decide to offer additional Ordinary Shares (including in the form of ADSs) in the future, diluting the interests of existing holders of Ordinary Shares and ADSs and potentially materially and adversely affecting the market price of Ordinary Shares and ADSs;

 

   

Holders of the Ordinary Shares and the ADSs may not be able to exercise pre-emption rights or participate in certain future issues of Ordinary Shares;

 

   

The ability of holders of the Ordinary Shares and the ADSs outside the UK to bring actions or enforce judgments against the Company or the Directors may be limited;

 

   

Haleon Shareholders outside the UK may be subject to exchange rate risk;

 

   

Holders of the ADSs are not treated as holders of the Ordinary Shares;

 

   

Holders of the ADSs will not have the same voting rights as the holders of the Ordinary Shares and may not receive voting materials in time to be able to exercise their right to vote;

 

   

Holders of the ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying Ordinary Shares;

 

   

Holders of the ADSs may not receive distributions on the underlying Ordinary Shares or any value for them if it is illegal or impractical to make them available to holders of the ADSs;

 

   

Holders of ADSs may not be entitled to a jury trial with respect to claims arising under the Deposit Agreement, which could result in less favourable outcomes to the plaintiff(s) in any such action; and

 

   

Forum selection provisions in the Deposit Agreement could limit the ability of holders of ADSs to obtain a favorable judicial forum for disputes with the Company and the Depositary.

 

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THE OFFERING

 

Issuer

Haleon plc, a public limited company incorporated in England and Wales.

 

Ordinary Shares offered by the selling securityholders

Up to 3,559,371,012 Ordinary Shares

 

Ordinary Shares outstanding

9,234,573,831 Ordinary Shares as of 15 September 2022

 

ADSs offered by the selling securityholders

Up to 295,506,362 ADSs (representing 591,012,724 Ordinary Shares)

 

ADSs outstanding

784,877,279 ADSs as of 15 September 2022

 

Use of proceeds

All of the Ordinary Shares and ADSs offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from such sales. See “Use of Proceeds.”

 

LSE ticker symbol for Ordinary Shares and NYSE ticker symbol for ADSs

“HLN”

 

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RECENT DEVELOPMENTS

On 11 August 2022, the Company issued a statement regarding Zantac, in which the Company noted the recent volatility in its share price and that it was aware of market speculation on Haleon’s potential liability in respect of Zantac product liability litigation. In addition, the Company noted that:

 

   

Haleon was not aware of any material developments in relation to the Zantac litigation since the Haleon prospectus was issued on 1 June 2022.

 

   

Haleon was not a party to any of the Zantac claims.

 

   

Haleon never marketed Zantac in any form in the U.S.

 

   

Haleon was not primarily liable for any OTC or prescription claims.

 

   

To the extent GSK and/or Pfizer are held liable in respect of OTC Zantac during the periods outlined below, Haleon may be required to indemnify GSK and/or Pfizer, only if the following conditions are met:

 

   

GSK and/or Pfizer are unable to recover in respect of OTC Zantac from any third parties who are ahead of Haleon and who have given indemnities under previous transfers of rights to OTC Zantac; and

 

   

Haleon is determined to be liable under the indemnification provisions among Haleon, Pfizer and GSK.

The US proceedings are at an early stage and relate to both prescription and OTC Zantac. All rights and marketing of OTC Zantac in the US from 1996-1998 were through a joint venture between GSK and Warner Lambert until 1998 when the joint venture was terminated and, following which, Warner Lambert retained the exclusive rights to the OTC product. In 2000, Warner Lambert was acquired by Pfizer, and Pfizer marketed OTC Zantac from 2000-2006, when Johnson & Johnson acquired Pfizer’s OTC business.

 

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KEY FINANCIAL DATA

Overview

The following unaudited interim consolidated income statement relating to the Group for the six-month periods ended 30 June 2022 (“H1 2022”) and 30 June 2021 (“H1 2021”) and the following unaudited interim consolidated balance sheet as at 30 June 2022 have been extracted from the Interim Financial Statements. The Interim Financial Statements have been prepared in accordance with IAS 34 and the Group’s accounting policies. The following selected consolidated financial data relating to the Group as at, and for the years ended, 31 December 2021, 31 December 2020 and 31 December 2019 has been extracted from the audited Financial Statements. The selected non-IFRS financial information and operating information relating to the Group set out below has been presented on the basis set out in “Presentation of Financial and Other Information”. The selected financial and operating information presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Consolidated income statement

For the six-month periods ended 30 June 2022 and 30 June 2021 and for the years ended 31 December 2021, 31 December 2020 and 31 December 2019.

 

£m    H1 2022     H1 2021     2021     2020     2019  

Revenue

     5,188       4,575       9,545       9,892       8,480  

Cost of sales

     (1,977     (1,761     (3,595     (3,982     (3,678

Gross Profit

     3,211       2,814       5,950       5,910       4,802  

Selling, general and administration

     (2,179     (1,978     (4,086     (4,220     (3,596

Research and development

     (136     (109     (257     (304     (292

Other operating income/(expense)

     4       10       31       212       (17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     900       737       1,638       1,598       897  

Finance income

     43       9       17       20       24  

Finance expense

     (79     (10     (19     (27     (35
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net finance costs

     (36     (1     (2     (7     (11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit before tax

     864       736       1,636       1,591       886  

Income tax

     (320     (216     (197     (410     (199

Profit after tax

     544       520       1,439       1,181       687  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Profit attributable to shareholders

     517       491       1,390       1,145       655  

Profit attributable to non-controlling interests

     27       29       49       36       32  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Consolidated balance sheet

As at 30 June 2022 and 31 December 2021.

 

£m    H1 2022     2021  

Non-current assets

    

Property, plant and equipment

     1,659       1,563  

Right of use assets

     113       99  

Intangible assets

     28,543       27,195  

Deferred tax assets

     203       312  

Post-employment benefit assets

     29       11  

Derivative financial instruments

     14       12  

Other non-current assets

     45       8  
  

 

 

   

 

 

 

Total non-current assets

     30,606       29,200  

Current assets

    

Inventories

     1,149       951  

Trade and other receivables

     2,408       2,207  

Loan amounts owing from related parties

     9,211       1,508  

Cash and cash equivalents and liquid investments

     1,334       414  

Assets held for sale

     6       —    

Derivative financial instruments

     132       5  

Current tax recoverable

     159       166  
  

 

 

   

 

 

 

Total current assets

     14,399       5,251  
  

 

 

   

 

 

 

Total assets

     45,005       34,451  
  

 

 

   

 

 

 

Current liabilities

    

Short-term borrowings

     (332     (79

Trade and other payables

     (3,546     (3,002

Loan amounts owing to related parties

     (3     (825

Derivative financial instruments

     (11     (18

Current tax payable

     (236     (202

Short-term provisions

     (71     (112
  

 

 

   

 

 

 

Total current liabilities

     (4,199     (4,238
  

 

 

   

 

 

 

Non-current liabilities

    

Long-term borrowings

     (9,918     (87

Deferred tax liabilities

     (3,655     (3,357

Pensions and other post-employment benefits

     (142     (253

Derivative financial instruments

     (55     (1

Other provisions

     (31     (27

Other non-current liabilities

     (6     (8
  

 

 

   

 

 

 

Total non-current liabilities

     (13,807     (3,733

Total liabilities

     (18,006     (7,971
  

 

 

   

 

 

 

Net assets

     26,999       26,480  
  

 

 

   

 

 

 

 

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£m    H1 2022     2021  

Equity

    

Share capital

     1       1  

Share premium

     70       —    

Other reserves

     (11,553     (11,632

Retained earnings

     38,377       37,986  
  

 

 

   

 

 

 

Shareholders’ equity

     26,895       26,355  
  

 

 

   

 

 

 

Non-controlling interests

     104       125  
  

 

 

   

 

 

 

Total equity

     26,999       26,480  
  

 

 

   

 

 

 

Selected balance sheet items

As at 31 December 2021, 31 December 2020 and 31 December 2019.

 

£m    2021     2020     2019  

Non-current assets

     29,200       29,122       29,900  

Current assets

     5,251       5,008       5,811  
  

 

 

   

 

 

   

 

 

 

Total Assets

     34,451       34,130       35,711  

Current liabilities

     (4,238     (4,014     (4,269

Non-current liabilities

     (3,733     (3,893     (4,030
  

 

 

   

 

 

   

 

 

 

Total liabilities

     (7,971     (7,907     (8,299
  

 

 

   

 

 

   

 

 

 

Net assets

     26,480       26,223       27,412  
  

 

 

   

 

 

   

 

 

 

Consolidated cash flow statement

For the six-month periods ended 30 June 2022 and 30 June 2021 and the years ended 31 December 2021, 31 December 2020 and 31 December 2019.

 

£m    H1 2022     H1 2021     2021     2020     2019  

Cash flow from operating activities

          

Profit after tax

     544       520       1,439       1,181       687  

Adjustments reconciling profit after tax to cash generated from operations

     274       (134     227       780       408  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash generated from operations

     818       386       1,666       1,961       1,095  

Taxation paid

     (138     (152     (310     (554     (309

Net cash inflow from operating activities

     680       234       1,356       1,407       786  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (outflow)/inflow from investing activities

     (8,587     463       (33     1,030       291  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash (outflow)/inflow from financing activities

     8,546       (716     (1,236     (2,437     (925
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase/(decrease) in cash and cash equivalents and bank overdrafts

     639       (19     87       —         152  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents and bank overdrafts at the beginning of the year

     405       323       323       329       191  

Exchange adjustments

     22       (9     (5     (6     (14

Increase/(decrease) in cash and cash equivalents and and bank overdrafts

     639       (19     87       —         152  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents and bank overdrafts at end of period

     1,066       295       405       323       329  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Non-IFRS financial measures

Adjusted Results

H1 2022 Adjusted Results

 

£M   IFRS
Results
    Net
Amortization and
Impairment of
Intangible
Assets
    Restructuring
Costs
    Transaction
Related
Costs
    Separation and
Admission Costs
    Disposal and
others
    Adjusted
Results
 

Gross profit

    3,211       40       8       —         —         (1     3,258  

Operating profit

    900       40       20       —         229       2       1,191  

Profit before tax

    864       40       20       —         229       2       1,155  

Profit after tax for the period

    544       34       16       —         192       124       910  

Profit attributable to shareholders of the Group

    517       34       16       —         192       124       883  

Basic earnings per Share1

    5.6p       0.4p       0.2p       —         2.1p       1.3p       9.6p  

Weighted average number of shares (in million)

    9,235                 9,235  

Diluted earnings per Share1

    5.6p       0.4p       0.2p       —         2.1p       1.3p       9.6p  

Weighted average number of shares (diluted) (in million)

    9,235                 9,235  

The following adjustments are made in arriving at Adjusted gross profit

 

Cost of sales

    (1,977     40       8       —         —         (1     (1,930

The following adjustments are made in arriving at Adjusted operating profit

 

Selling, general and admin

    (2,179     —         13       —         229       7       (1,930

Research and development

    (136     —         (1     —         —         —         (137

Other operating income

    4       —         —         —         —         (4     —    

The following adjustments are made in arriving at Adjusted profit before tax

 

Net finance costs

    (36     —         —         —         —         —         (36
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit after tax

 

Income Tax

    (320     (6     (4     —         (37     122       (245

The following adjustments are made in arriving at Adjusted profit attributable to shareholders

 

Profit for the period attributable to non-controlling interests

    27       —         —         —         —         —         27  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Earnings per share for the six-months ended 30 June 2022 reflects the number of ordinary shares outstanding for Haleon plc as a result of the Demerger activities that took place in July 2022. See Note 10 to the Interim Financial Statements.

 

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Table of Contents

H1 2021 Adjusted Results

 

£M   IFRS
Results
    Net
Amortization and
Impairment of
Intangible
Assets
    Restructuring
Costs
    Transaction
Related
Costs
    Separation and
Admission Costs
    Disposal
and
others
    Adjusted
Results
 

Gross profit

    2,814       21       25       —         —         —         2,860  

Operating profit

    737       21       77       —         105       43       983  

Profit before taxation

    736       21       77       —         105       43       982  

Profit after tax for the period

    520       18       60       —         85       75       758  

Profit attributable to shareholders of the Group

    491       18       60       —         85       75       729  

Basic earnings per Share2

    5.3p       0.2p       0.6p       —         0.9p       0.8p       7.9p  

Weighted average number of shares (in millions)

    9,235                 9,235  

Diluted earnings per Share2

    5.3p       0.2p       0.6p       —         0.9p       0.8p       7.9p  

Weighted average number of shares (diluted) (in millions)

    9,235                 9,235  

The following adjustments are made in arriving at Adjusted gross profit

 

Cost of Sales

    (1,761     21       25       —         —         —         (1,715

The following adjustments are made in arriving at Adjusted operating profit

 

Selling, general and admin

    (1,978     —         54       —         105       53       (1,766

Research and development

    (109     —         (2     —         —         —         (111

Other operating income

    10       —         —         —         —         (10     —    

The following adjustments are made in arriving at Adjusted profit before tax

 

Net finance costs

    (1     —         —         —         —         —         (1

The following adjustments are made in arriving at Adjusted profit after tax

 

Income tax

    (216     (3     (17     —         (20     32       (224
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit attributable to shareholders

 

Profit attributable to non-controlling interests

    29       —         —         —         —         —         29  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

2 

Earnings per share for the six-months ended 30 June 2021 reflects the number of ordinary shares outstanding for Haleon plc as a result of the Demerger activities that took place in July 2022. See Note 10 to the Interim Financial Statements.

 

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Table of Contents

2021 Adjusted Results

 

£M   IFRS
Results
    Net
Amortization and
Impairment
of Intangible
Assets
    Restructuring
Costs
    Transaction
Related
Costs
    Separation and
Admission Costs
    Disposal and
others
    Adjusted
Results
 

Gross profit

    5,950       8       44       —         —         —         6,002  

Operating profit

    1,638       16       195       —         278       45       2,172  

Profit before tax

    1,636       16       195       —         278       45       2,170  

Profit after tax for the year

    1,439       24       159       —         231       (152     1,701  

Profit attributable to shareholders

    1,390       24       159       —         231       (152     1,652  

Basic earnings per share

    139,000p       2,400p       15,900p       0p       23,100p       (15,200 )p      165,200p  

Weighted average number of shares

    1,000,000                 1,000,000  

Diluted earnings per share

    139,000p       2,400p       15,900p       0p       23,100p       (15,200 )p      165,200p  

Weighted average number of shares (diluted)

    1,000,000                 1,000,000  

The following adjustments are made in arriving at Adjusted gross profit

 

 

Cost of sales

    (3,595     8       44       —         —         —         (3,543
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted operating profit

 

 

Selling, general and administration

    (4,086     —         150       —         278       76       (3,582

Research and development

    (257     8       1       —         —         —         (248

Other operating income / (expense)

    31       —         —         —         —         (31     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit before tax

 

 

Net finance costs

    (2     —         —         —         —         —         (2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit after tax

 

 

Income tax

    (197     8       (36     —         (47     (197     (469
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit attributable to shareholders

 

Profit attributable to non-controlling interests

    49       —         —         —         —         —         49  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

2020 Adjusted Results

 

£M   IFRS
Results
    Net
Amortization and
Impairment
of Intangible
Assets
    Restructuring
Costs
    Transaction
Related
Costs
    Separation and
Admission Costs
    Disposal and
others
    Adjusted
Results
 

Gross profit

    5,910       81       89       91       —         2       6,173  

Operating profit

    1,598       97       411       91       66       (189     2,074  

Profit before tax

    1,591       97       411       91       66       (189     2,067  

Profit after tax for the year

    1,181       78       321       71       53       (120     1,584  

Profit attributable to shareholders

    1,145       78       319       71       53       (120     1,546  

Basic earnings per share

    114,500p       7,800p       31,900p       7,100p       5,300p       (12,000 )p      154,600p  

Weighted average number of shares

    1,000,000                 1,000,000  

Diluted earnings per share

    114,500p       7,800p       31,900p       7,100p       5,300p       (12,000 )p      154,600p  

Weighted average number of shares (diluted)

    1,000,000                 1,000,000  

The following adjustments are made in arriving at Adjusted gross profit

 

Cost of sales

    (3,982     81       89       91       —         2       (3,719
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted operating profit

 

Selling, general and administration

    (4,220     —         314       —         66       21       (3,819

Research and development

    (304     16       8       —         —         —         (280

Other operating income

    212       —         —         —         —         (212     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
The following adjustments are made in arriving at Adjusted profit before tax

 

   

Net finance costs

    (7     —         —         —         —         —         (7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
The following adjustments are made in arriving at Adjusted profit after tax

 

   

Income tax

    (410     (19     (90     (20     (13     69       (483
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit attributable to shareholders

 

Profit attributable to non-controlling interests

    36       —         2       —         —         —         38  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

2019 Adjusted Results

 

£M   IFRS
Results
    Net
Amortization and
Impairment of
Intangible
Assets
    Restructuring
Costs
    Transaction
Related
Costs
    Separation and
Admission Costs
    Disposal and
others
    Adjusted
Results
 

Gross profit

    4,802       36       69       366       —         —         5,273  

Operating profit

    897       36       330       366       —         25       1,654  

Profit before tax

    886       36       330       366       —         25       1,643  

Profit after tax for the year

    687       31       271       285       —         4       1,278  

Profit attributable to shareholders

    655       31       271       285       —         4       1,246  

Basic earnings per share

    65,500p       3,100p       27,100p       28,500p       0p       400p       124,600p  

Weighted average number of shares (basic)

    1,000,000                 1,000,000  

Diluted earnings per share

    65,500p       3,100p       27,100p       28,500p       0p       400p       124,600p  

Weighted average number of shares (diluted)

    1,000,000                 1,000,000  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted gross profit

 

 

Cost of sales

    (3,678     36       69       366       —         —         (3,207
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted operating profit

 

 

Selling, general and administration

    (3,596     —         236       —         —         8       (3,352

Research and development

    (292     —         25       —         —         —         (267

Other operating income

    (17     —         —         —         —         17       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit before tax

 

 

Net finance costs

    (11     —         —         —         —         —         (11
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit after tax

 

Income tax

    (199     (5     (59     (81     —         (21     (365
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following adjustments are made in arriving at Adjusted profit attributable to shareholders

 

Profit attributable to non-controlling interests

    32       —         —         —         —         —         32  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusting Items

Adjusted Results exclude the following items (net of the impact of taxes, where applicable):

Net amortisation and impairment of intangible assets

Impairment of intangibles and goodwill and amortisation of intangibles excluding computer software. Intangible amortisation and impairments arising from intangibles acquired in business combinations are adjusted to reflect the performance of the business excluding the effect of acquisition accounting.

 

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Table of Contents

It is the Group’s view that acquired intangible assets by their nature are fundamentally different from other depreciating assets that are replaced on a predictable cycle. The Group excludes the impact of non-cash amortisation associated with acquired intangible assets as this is not directly attributable to the sale of the Group’s products and varies from period to period, which affects comparability of the Group’s financial results. The costs to operate, maintain and extend the life of acquired intangible assets and purchased intellectual property are reflected in the Group’s operating costs as labour, overheads, etc.

Restructuring costs

Include personnel costs, associated with restructuring programmes, impairments of tangible assets and computer software relating to specific programmes approved by the board of the Company from time to time (the “Board”) that are structural and of a significant scale, where the costs of individual or related projects exceed £15 million. Restructuring costs also include integration costs following an acquisition, including in relation to personnel, manufacturing sites, real estate and IT infrastructure. These programmes can take several years to complete and are not directly attributable to the sale of the Group’s products. Further, costs associated with these programmes vary from period to period, which affects comparability of the Group’s financial results.

Restructuring costs do not include Separation and Admission costs (see “—Separation and Admission costs” below).

Transaction-related costs

Transaction-related accounting or other adjustments related to significant acquisitions. These costs are adjusted as they arise as a result of business combinations. In FY 2019 and FY 2020, these costs were related to the unwind of inventory fair value adjustments in connection with the Pfizer Transaction (as defined below), which was completed by the end of FY 2020. These costs 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.

Separation and Admission costs

Costs incurred in relation to and in connection with Separation, UK Admission and registration of Haleon Ordinary Shares represented by Haleon American Depositary Shares (“ADSs”) under the Exchange Act and listing of ADSs on the NYSE (the “US Listing”). These costs are not directly attributable to the sale of the Group’s products and specifically relate to the foregoing activities, affecting comparability of the Group’s financial results in historic and future reporting periods.

Disposals and others

Gains and losses on disposals of assets, businesses and tax indemnities related to business combinations, and other items. These gains and losses are not directly attributable to the sale of the Group’s products and vary from period to period, which affects comparability of the Group’s financial results.

 

23


Table of Contents

Organic revenue growth

The following tables reconcile reported revenue growth for the six-month periods ended 30 June 2022 and 30 June 2021 and for the years ended 31 December 2021, 31 December 2020 and 31 December 2019 to organic revenue growth for the same period by geographical segment and by product category.

Geographic Segments

 

£m

   APAC      EMEA/
LatAm
     N America      Total  

H1 2022 vs H1 2021 (%)

           

Revenue Growth

     15.7        8.7        17.4         13.4  

Organic Adjustments1

     (0.6      1.4        0.4        0.6  

of which:

           

Effect of Acquisitions

     (0.7      —          —          (0.2

Effect of Disposals

     —          0.8        0.2        0.4  

Effect of MSAs

     0.1        0.6        0.2        0.4  

Effect of Exchange Rates

     (2.8      2.0        (7.4      (2.4

Organic Revenue Growth

     12.3        12.1        10.4        11.6  

Price

     3.1        5.5        2.1        3.7  

Volume/Mix

     9.2        6.6        8.3        7.9  

Geographic Segments

 

£m

   APAC     EMEA/
LatAm
    N America     Total  

2021 vs 2020 (%)

        

Revenue Growth

     4.3     (4.5 %)      (6.7 %)      (3.5 %) 

Organic Adjustments1

     2.0     3.4     1.45          2.7

of which:

        

Effect of Acquisitions.

     —         —         —         —    

Effect of Divestments

     2.2     3.1     2.5     2.7

Effect of MSAs

     (0.2 %)      0.3     (0.1 %)      —    

Effect of Exchange Rates

     2.8     4.6     5.6     4.6

Organic Revenue Growth

     9.1     3.5     1.3     3.8

Geographic Segments

 

£m

   APAC     EMEA/
LatAm
    N America     Total  

2020 vs 2019 (%)

        

Revenue Growth

     20.7     4.1     31.2     16.7

Organic Adjustments1

     (15.9 %)      (5.0 %)      (32.1 %)      (16.6 %) 

of which:

        

Effect of Acquisitions.

     (19.9 %)      (8.8 %)      (33.9 %)      (19.7 %) 

Effect of Divestments

     4.0     4.5     1.2     3.2

Effect of MSAs

     —         (0.7 %)      0.6     (0.1 %) 

Effect of Exchange Rates

     0.9     4.0     1.6     2.7

Organic Revenue Growth

     5.7     3.1     0.7     2.8

 

24


Table of Contents

Product Categories

 

£m

   Oral
Health
     VMS      Pain
Relief
     Respiratory
Health
     Digestive
Health
and
Others
     Total  

H1 2022 vs H1 2021(%)

                 

Revenue Growth

      5.7           16.2        14.2         50.1        3.9        13.4  

Organic Adjustments1

     (0.3      0.1        —          0.3        3.2        0.6  

of which:

                 

Effect of Acquisitions

     (0.3      (0.1      (0.2      —          —          (0.2

Effect of Disposals

     —          0.2        0.2        0.3        1.5        0.4  

Effect of MSAs

     —          —          —          —          1.7        0.4  

Effect of Exchange Rates

     (0.3      (4.4      (2.5      (3.7      (3.6      (2.4

Organic Revenue Growth

     5.1        11.9        11.7        46.7        3.5        11.6  

Product Categories

 

£m

   Oral
Health
    VMS      Pain
Relief
     Respiratory
Health
    Digestive
Health
and
Others
    Total  

2021 vs 2020(%)

              

Revenue Growth

     (0.8 %)           0.5      2.1      (12.8 %)      (9.8 %)      (3.5 %) 

Organic Adjustments1

     —         0.3      0.3      6.4     7.6        2.7

of which

              

Effect of Acquisitions

     —         —          —          —         —         —    

Effect of Divestments

     —         0.3      0.3      6.4     7.5     2.7

Effect of MSAs

     —         —          —          —         0.1     —    

Effect of Exchange Rates

     5.2     3.4      4.1      4.6     5.3     4.6

Organic Revenue Growth2

     4.4     4.2      6.5      (1.8 %)      3.1     3.8

Product Categories

 

£m

   Oral
Health
     VMS     Pain
Relief
    Respiratory
Health
    Digestive
Health
and
Others
    Total  

2020 vs 2019(%)

             

Revenue Growth

     3.3      150.3     25.8     (1.5 %)      (0.1 %)      16.7

Organic Adjustments1

     —          (133.5 %)      (23.5 %)      (6.7 %)      (5.4 %)      (16.6 %) 

of which

             

Effect of Acquisitions

     —          (133.9 %)      (23.7 %)      (10.5 %)      (14.2 %)      (19.7 %) 

Effect of Divestments

     —          0.4     0.2     3.8     9.4     3.2

Effect of MSAs

     —          —         —         —         (0.6 %)      (0.1 %) 

Effect of Exchange Rates

     2.6      2.5     2.6     1.9     3.0     2.7

Organic Revenue Growth2

     5.9      19.3     4.9     (6.3 %)      (2.5 %)      2.8

 

Notes:

 

1.

As defined in “Presentation of Financial Information—Adjusted Results and other non-IFRS financial measures.”

 

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2.

Organic revenue growth for the period FY 2019 to FY 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 (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting the Group’s results of operations and financial position—Impact of macroeconomic factors and market trends on discretionary consumer spending”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting the Group’s results of operations and financial position Impact of COVID-19” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Description of the Group’s results of operations”).

Adjusted EBITDA

The reconciliation between profit after tax for the year and Adjusted EBITDA for the years ended 31 December 2021, 31 December 2020 and 31 December 2019 and for the six-month periods ended 30 June 2022 and 30 June 2021 is provided below.

 

£m    H1 2022     H1 2021     2021     2020     2019  

Profit after tax

     544       520       1,439       1,181       687  

Add Back: Income Tax

     320       216       197       410       199  

Less: Finance Income

     (43     (9     (17     (20     (24

Add Back: Finance Expense

     79       10       19       27       35  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Profit

     900       737       1,638       1,598       897  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Amortisation and Impairment of Intangible Assets

     40       21       16       97       36  

Restructuring Costs

     20       77       195       411       330  

Transaction Related Costs

     —         —         —         91       366  

Separation and Admission Costs

     229       105       278       66       —    

Disposals and Others

     2       43       45       (189     25  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Operating Profit

     1,191       983       2,172       2,074       1,654  

Add Back: Depreciation of property, plant and equipment

     66       68       139       167       167  

Add Back: Depreciation of right-of-use assets

     16       16       35       48       31  

Add Back: Amortisation – of software intangible assets

     28       17       54       40       35  

Add Back: Impairment of property, plant and equipment, rights of use assets and computer software net of impairment reversals

     5       5       13       22       (3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     1,306       1,089       2,413       2,351       1,884  

 

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Free cash flow

The reconciliation of net cash inflow from operating activities to free cash flow for the years ended 31 December 2021, 31 December 2020 and 31 December 2019 and for the six-month periods ended 30 June 2022 and 30 June 2021 is provided below.

 

£m    H1 2022     H1 2021     2021     2020     2019  

Net cash inflow from operating activities

     680       234       1,356       1,407       786  

Purchase of property, plant and equipment

     (78     (89     (228     (222     (190

Proceeds from sale of property, plant, and equipment

     1       7       12       6       51  

Purchase of intangible assets

     (14     (35     (70     (96     (53

Proceeds from sale of intangible assets

     3       72       137       924       120  

Distributions to non-controlling interests

     (47     —         (35     (31     (28

Interest paid

     (4     (9     (15     (19     (29

Interest received

     12       9       16       19       24  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

     553       189       1,173       1,988       681  

Free cash flow conversion

The reconciliation of free cash flow conversion for the years ended 31 December 2021, 31 December 2020 and 31 December 2019 and for the six-month periods ended 30 June 2022 and 30 June 2021 is provided below.

 

£m    H1 2022     H1 2021     2021     2020     2019  

Free cash flow

     553       189       1,173       1,988        681   

Profit after tax

     544       520       1,439       1,181       687  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow conversion

     102     36     82     168     99
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Capital Expenditure

The reconciliation of net capital expenditure for the six-month periods ended 30 June 2022 and 30 June 2021 is provided below:

 

£m    H1 2022     H1 2021  

Purchase of property, plant and equipment

     (78     (89

Proceeds from sale of property, plant and equipment

     1       7  

Purchase of intangible assets

     (14     (35

Proceeds from sale of intangible assets

     3       72  

Net capital expenditure

     (88     (45

Net debt

The reconciliation of net debt to the different balance sheet items for the years ended 31 December 2021, 31 December 2020 and 31 December 2019 and for the six-month period ended 30 June 2022 is provided below.

 

£m    H1 2022     2021     2020     2019  

Short-term borrowings

     (332     (79     (82     (64

Long-term borrowings

     (9,918     (87     (105     (121

Derivative financial liabilities

     (66     (19     (25     (2

Cash and cash equivalents and liquid investments

     1,334       414       334       340  

Derivative financial assets

     146       17       6       12  

Net debt1

     (8,836     246       128       165  

 

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Note:

 

1.

The sum of the Group’s cash and cash equivalents and liquid investments and derivative financial assets exceeded the sum of its short-term borrowings, long-term borrowings and derivative financial liabilities in the period 2019-H1 2022 (a net cash position). ‘Net debt’ is defined differently to ‘indebtedness’ referenced in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

Other selected financial and operating information

Regional performance

The table below sets out the Group’s regional revenue and Adjusted operating profit for the six-month periods ended 30 June 2022 and 30 June 2021.

 

     Revenue (£m)      Revenue change H1 21 - H1 22 %  
     H1
2022
     H1
2021
     Reported
Rates
    Constant
Current
    Organic  

North America

     1,873        1,595        17.4     10.0     10.4

EMEA and LatAm

     2,069        1,903        8.7     10.6     12.1

APAC

     1,246        1,077        15.7     13.0     12.3
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     5,188        4,575        13.4     10.9     11.6

 

     Adjusted Operating Profit
(£m)
    Adjusted Operating Profit
Margin (%)
 
     H1 2022     H1 2021     H1 2022     H1 2021  

North America

     454       316       24.2     19.8

EMEA and LatAm

     467       458       22.6     24.1

APAC

     300       244       24.1     22.7

Corporate and other unallocated

     (30     (35     n/a       n/a  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1,191       983       23.0     21.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Reconciling items between Adjusted operating profit and operating profit(1)

     (291     (246     n/a       n/a  
  

 

 

   

 

 

   

 

 

   

 

 

 

Group operating profit

     900       737       17.3     16.1

 

Notes:

 

1.

Reconciling items for these purposes are the Adjusting Items, which are defined within “—Adjusting Items” above. A reconciliation between IFRS and Adjusted Results is included at “—Adjusting Results” above.

The tables below set out the Group’s regional revenue and Adjusted operating profit for the years ended 31 December 2021, 31 December 2020 and 31 December 2019.1

 

     Revenue (£m)      Revenue change FY20-FY21 %     Revenue change FY19-FY20 %  
     2021      2020      2019      Reported
rates
    Constant
currency
    Organic     Reported
rates
    Constant
currency
    Organic2  

North America

     3,525        3,779        2,880        (6.7     (1.3     1.3       31.2       32.6       0.7  

EMEA and LatAm

     3,877        4,059        3,898        (4.5     —         3.5       4.1       8.4       3.1  

APAC

     2,143        2,054        1,702        4.3       7.1       9.1       20.7       21.8       5.7  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     9,545        9,892        8,480        (3.5 %)      1.0     3.8     16.7     19.3     2.8

 

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     Adjusted operating profit
(£m)
     Adjusted operating profit
margin %
 
     2021      2020      2019      2021     2020     2019  

North America

     828        897        660        23.5     23.7     22.9

EMEA and LatAm

     960        857        746        24.8     21.1     19.1

APAC

     461        377        311        21.5     18.4     18.3

Central and unallocated

     (77      (57      (63      n/a       n/a       n/a  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     2,172        2,074        1,654        22.8%       21.0     19.5
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Reconciling items3

     (534      (476      (757      n/a       n/a       n/a  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Group operating profit

     1,638        1,598        897        17.2     16.2     10.6

 

Notes:

 

1.

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 and funded 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. See note 6 to the Financial Statements beginning on page F-23.

2.

Organic revenue growth for the period FY 2019 to FY 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 (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting the Group’s results of operations and financial position—Impact of macroeconomic factors and market trends on discretionary consumer spending”).

3.

Reconciling items for these purposes are the Adjusting Items, which are defined at “—Adjusting Items” above. A reconciliation between IFRS and Adjusted Results is included at “—Adjusting Results” above.

Revenue by product category

The table below sets out the Group’s revenue by product category for the six-month periods ended 30 June 2022 and 30 June 2021.

 

     Revenue (£m)      Revenue change H1 21 - H1 22 %  
     H1
2022
     H1
2021
     Reported
rates
    Constant
currency
    Organic  

Oral Health

     1,438        1,360        5.7     5.4     5.1

VMS

     816        702        16.2     11.9     11.9

Pain Relief

     1,248        1,093        14.2     11.8     11.7

Respiratory Health

     683        455        50.1     46.7     46.7

Digestive Health and Other

     1,003        965        3.9     0.3     3.5
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     5,188        4,575        13.4     10.9     11.6

 

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The table below sets out the Group’s revenue by product category for the years ended 31 December 2021, 31 December 2020 and 31 December 2019.

 

     Revenue (£m)      Revenue change
FY20-FY21 %
    Revenue change
FY19-FY20 %
 
     2021      2020      2019      Reported
rates
    Constant
currency
    Organic     Reported
rates
    Constant
currency
    Organic  

Oral Health

     2,724        2,745        2,657        (0.8     4.4       4.4       3.3       5.9       5.9  

VMS

     1,501        1,494        597        0.5       3.9       4.2       150.3       154.6       19.3  

Pain Relief

     2,237        2,192        1,742        2.1       6.2       6.5       25.8       28.6       4.9  

Respiratory Health

     1,132        1,298        1,318        (12.8     (8.6     (1.8     (1.5     0.5       (6.3

Digestive Health and Other

     1,951        2,163        2,166        (9.8     (5.0     3.1       (0.1     2.5       (2.5
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     9,545        9,892        8,480        (3.5 %)      1.0     3.8     16.7     19.3     2.8

 

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RISK FACTORS

The risks and uncertainties relating to the Ordinary Shares and the ADSs, the Group’s business and the industry in which it operates, described below, together with all other information contained in this prospectus, should be carefully considered in evaluating the Group, the Ordinary Shares and the ADSs. The risks and uncertainties described below represent those we consider to be material as at the date of this prospectus. However, these risks and uncertainties are not the only ones facing the Group. You should carefully consider the information in this prospectus in light of your personal circumstances.

In addition to the other information set forth in this prospectus, you should carefully consider the risk factors discussed below when considering an investment in our Ordinary Shares and the ADSs and any risk factors and other information that may be set forth in the applicable prospectus supplement and any related free writing prospectus. If any of the following risks occur, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that case, the market price of our securities could decline and you could lose some or all of your investment. 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 and failure to successfully compete with competitors could have a material adverse effect on the Group’s business

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 an increase in the introduction and aggressive marketing of new products in high demand healthcare areas. In particular, the Group expects to experience: (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 in order to benefit from the higher profit margins on offer and greater consumer interest in health products and services; and (iii) continuing competition from “private label” products, which are brands sold exclusively by a particular retailer.

Some of the Group’s competitors may spend more aggressively on, or have 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. The Group’s ability to compete also depends on the strength of its brands and on its ability to enforce and defend its intellectual property against infringement and legal challenges by competitors.

The Group may be unable to anticipate the timing and scale of the threats posed by the many competitors across its markets or to successfully respond to them, which could harm the Group’s business. In addition, the cost of responding to the increasingly significant and widespread competition worldwide, including management time, out-of-pocket expenses and price reductions, may materially and adversely affect the Group’s performance.

Ultimately, a prolonged failure by the Group to compete effectively in its key markets could have a material adverse effect on the Group’s business, prospects, results of operations and financial condition.

 

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The Group’s success depends on its ability to anticipate and respond to changes in consumer preferences and a failure to adapt its strategy appropriately may have a material adverse effect on the Group’s business and/or financial condition

As a consumer products business, the Group relies on its ability to leverage its existing brands and products to drive increased sales and profits. This in turn depends on the Group’s ability to identify and offer products at attractive prices that appeal to consumer tastes and preferences, which are difficult to predict and evolve over time. The Group’s ability to implement this strategy depends on, among other things, its ability to:

 

   

continue to offer products that consumers want at competitive prices;

 

   

develop and maintain consumer interest in its brands and increase its brand recognition and loyalty;

 

   

innovate successfully on its existing products; and

 

   

effectively utilise a range of distribution channels in its key markets.

The Group may not be able to execute this strategy successfully, which could have a material adverse effect on the Group’s business, prospects, results of operations and/or financial condition.

In addition, any reduction in consumer demand for the types of products which the Group offers as a result of 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. For example, in recent years, there is increasing awareness of the environmental impact and sustainability of practices and products in the market (see “—Failure to respond effectively to the challenges raised by climate change and other sustainability matters may have a material adverse effect on the Group’s business 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 and a failure to manage disruptions appropriately may have a material adverse effect on the Group’s business and/or financial condition

The Group is engaged in 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;

 

   

widespread health emergencies, such as COVID-19 or other pandemics or epidemics, leading to delays in deliveries and constraints on shipping and logistics due to local lockdowns, such as the recent lockdowns in China may impact the delivery to and from China of the Group’s products, as well as resources required for its products;

 

   

strikes and other labour disputes;

 

   

disruptions in logistics;

 

   

cybersecurity failures or incidents;

 

   

loss, impairment, closure or disruption of key manufacturing sites;

 

   

loss of key suppliers or contract manufacturers;

 

   

supplier capacity constraints;

 

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Table of Contents
   

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” below);

 

   

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 of qualified personnel;

 

   

global shipping, logistics, transport and warehousing constraints;

 

   

governmental incentives and controls (including import and export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers);

 

   

acts of war (see “—Risks Applicable to the Group relating to Changes in Law and the Political and Economic Environment, Regulation and Legislation—The Group’s business may be impacted by the effects of Russia’s invasion of Ukraine”) 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 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. The loss of the use of all or a portion of any of the Group’s manufacturing facilities or the loss of the use of key suppliers could have a material adverse effect on the Group’s business, financial condition and results of operations.

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 price increases in the prices it charges for its products. For example, the Group has entered and may in the future enter into fixed price contracts or hedging arrangements in order to address increases in commodity prices and their effect on the Group’s ability to source materials for its products. However, if prices decrease, the Group will be unable to realise the benefit of the decrease due to fixed price contracts in place.

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 may materially and adversely affect the Group’s business

The Group’s products are sold in a highly competitive global marketplace which has experienced increased trade concentration and the growing presence of large-scale retailers, including pharmacies, as well as discounters and e-commerce retailers. With the growing trend towards retail trade consolidation, increased cross-border trade, the rapid growth of e-commerce and the integration of traditional and digital operations at key 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.

 

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Table of Contents

The Group’s large-scale retail customers, including pharmacies, may use their leverage to demand higher trade discounts, allowances, display fees or increased investment, including through display media, paid search, preparation fees and other programmes, 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. For example, a determination by a key retailer that any of the Group’s ingredients should not be used in certain consumer products or that the Group’s packaging does not comply with certain environmental, supply chain or packaging standards or initiatives could materially and adversely impact the Group’s business, prospects, results of operations and financial condition.

“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 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, which may materially and adversely affect the results of the Group’s operations and financial condition

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, including from the FDA, the European Medicines Agency (“EMA”), China’s National Medical Products Administration (“NMPA”) and other regulatory bodies in the countries in which the Group has business operations, including in relation to switches of products requiring a prescription to products with OTC status (“Rx-to-OTC switches”);

 

   

anticipate, quickly respond to, and benefit from 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 relevant marketing and advertising to identify new products that will align with consumer preferences; and

 

   

successfully compete to in-licence products.

 

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The identification, development and introduction of innovative new products that drive incremental sales involves considerable costs and effort, and 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. The Group’s ability to achieve a successful launch of a new product could also be adversely affected by pre-emptive actions taken by competitors in response to the launch, such as increased promotional activities and advertising. In addition, new products may not be accepted quickly or significantly in the marketplace.

The product development process is both time-consuming and costly and involves a high degree of business risk. In particular, the Group’s OTC products, including those in respect of which it is undertaking an Rx-to-OTC switch, are subject to lengthy development programmes and regulatory approval periods which can restrict the Group’s ability to innovate in this product area. The Group must develop, test and manufacture products to meet its own internal specifications and standards as well as all applicable regulatory and safety requirements, and it is possible that a new product can fail to make it to market at any stage of this process. Whilst the Group has a good track record of developing new products and executing Rx-to-OTC switches, there can be no guarantee that the Group will continue to be able to develop and commercialise new products at the rate required to retain or grow market share or that suitable opportunities for further Rx-to-OTC switches will become available to the Group.

Any failure to develop and commercialise new products in a timely fashion may decrease revenue and/or increase R&D costs and, consequently, may materially and adversely affect the results of the Group’s operations and financial condition.

Failure to retain key personnel or attract new personnel may materially and adversely affect the Group’s business

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 identified in “Board of Directors and Senior Management and Employees—Senior Management” (“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. Competition for such personnel in the consumer healthcare industry is intense, and there can be no assurance that the Group will be able to continue to attract and retain such personnel, particularly as competitors may attempt to recruit them.

Further, the Group’s ability to implement its strategy depends on the ability and experience of its Senior Management and other key employees. If the Group is unable to recruit, attract and retain talented, highly qualified Senior Management and other key people, including through competitive remuneration and benefits packages, appropriate career development, employee resilience and engagement programmes, the Group’s business, prospects, results of operations and financial condition could be materially and adversely affected. The Group is also working to advance cultural change through the implementation of diversity, equality and inclusion initiatives and through the implementation of a new purpose, strategy and culture programme throughout the organisation. If the Group does not (or is perceived not to) successfully implement these plans and initiatives, its ability to recruit, attract and retain talent may be materially and adversely impacted, which may in turn materially and adversely affect the Group’s business, results of operations and financial condition.

Damage to the Group’s reputation could have a material adverse effect on the Group’s business

Maintaining the Group’s strong reputation and trust with consumers and the Group’s customers globally is critical to selling the Group’s branded products. Negative publicity about the Group, the Group’s industry, the Group’s brands and products, the Group’s advertising and promotion practices, the Group’s use, storage and securing of technology and data, including personal data, the Group’s supply chain, the Group’s ingredients, the

 

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Group’s packaging, the Group’s research practices, threatened or pending litigation or regulatory proceedings, the Group’s public policy engagement, the Group’s 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 the Group’s 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.

The Group’s reputation may also be adversely affected if third parties with whom the Group contracts, 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. Such third parties may also enter into relationships with or be acquired by other third parties whose values, business practices and/or reputation expose the Group to the risk of adverse publicity and damage to its existing relationships by association. 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.

In addition, widespread use of digital and social media by consumers has greatly increased the accessibility of information and the speed of its dissemination. Negative publicity, posts or comments on social media about the Group, the Group’s brands, the Group’s products, including any ingredients used in its products, the Group’s packaging or the Group’s employees, whether true or untrue, could damage the Group’s brands and its reputation and/or lead to boycotts of its products. For example, during the COVID-19 pandemic, sales of Advil (an ibuprofen-based product) were adversely impacted by negative media coverage regarding the use of ibuprofen products in treating the symptoms of COVID-19. 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 success of the Group’s brands could also suffer if the Group’s marketing initiatives do not have the desired impact on a brand’s image or its ability to attract consumers.

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, such as Sensodyne, Panadol and ENO, including on online platforms and on social media. 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 these counterfeit products, purchasing the counterfeit products in error instead of the genuine Group 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 with affected consumers choosing in the future to buy competitors’ brands instead.

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.

Failure to respond effectively to the challenges raised by climate change and other sustainability matters may have a material adverse effect on the Group’s business and results of operations

Concern over climate change 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. 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 sourcing or environmental impact of the material can attract scrutiny. If new or additional legal and regulatory

 

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requirements relating to sustainability matters are more stringent than the Group’s current legal and regulatory obligations and/or the Group’s existing practices and procedures are inadequate to meet these requirements, this may require the Group to revise its operations and supply chain management, including, for example, by collecting used products, packaging or other materials from consumers and reintroducing them to the Group’s manufacturing cycle. There may also be financial impacts as governments implement taxation such as extended producer responsibility taxes or carbon taxes to help to recover the cost of managing plastic waste and the impacts of climate change. These developments may result in increased costs and disruption to the Group’s operations, which could materially and adversely affect the Group’s business, results of operations, cash flows and financial condition.

The Group’s reputation is also affected by its perceived sustainability credentials and its ability to meet its sustainability goals. There is increased public attention, including by non-governmental organisations, investors, customers, consumers, the Group’s employees and other stakeholders, on climate change and other sustainability matters. Despite the Group’s sustainability efforts, any failure or perceived failure to achieve its sustainability goals, including, among others, to reduce scope 1 and 2 emissions by 100 per cent. by 2030 (versus its 2020 baseline) and to make all product packaging recyclable or reusable by 2030 (versus its 2020 baseline and quality, safety and regulations permitting), or the perception (whether or not valid) that the Group has failed to act responsibly with respect to such matters or to effectively respond to new or additional legal or regulatory requirements regarding climate change, could result in adverse publicity and/or litigation which could materially and adversely affect the Group’s business and reputation. This could result in product delistings with customers or loss of preference with consumers, investors, employees or other stakeholders, which could materially and adversely affect the Group’s business, results of operations, cash flows and financial condition.

The Group is dependent on shifts in the wider industry to meet some of its sustainability goals and there is a risk that the Group will not meet its goals if those shifts do not take place. In order to reduce its scope 3 carbon footprint, the Group depends on shifts in the energy grid away from fossil fuels and towards renewable sources in the areas the Group sources from and sells its products. The Group’s transition to more sustainable packaging formats and circular business models is dependent on, among other things: the supply of recycled content or alternative non-virgin petroleum-based plastic materials; regulatory approval for use of alternative materials; the availability of new packaging technologies; and improvements in recycling infrastructure. In order to meet its sustainable sourcing goals, the Group also depends on the availability of sustainably sourced commodities at a reasonable cost. Adverse developments in respect of such dependencies may result in the Group failing to meet its sustainability goals and could lead to a material adverse effect on the Group’s reputation which, in turn, could materially and adversely affect its business, results of operations, cash flows and financial condition.

The Group may not be successful in obtaining, maintaining and enforcing sufficient intellectual property rights to protect its business, or in avoiding claims that the Group infringes 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, trade marks, patents, copyrights and designs are territorial; thus, the Group’s business can only claim optimal intellectual property protection in jurisdictions where the Group has obtained trade mark, patent, design and copyright registrations, or has obtained licences to use third-party trade marks, patents, copyrights or registered designs. While intellectual property laws are fairly harmonised around the world, certain countries’ laws may not protect the Group’s intellectual property rights to the same extent as afforded in the UK and the USA. 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.

 

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We cannot be certain that any of the Group’s registered (granted or pending) or unregistered trade marks, patents, copyrights, or designs will provide the Group with sufficient protection from competitors, or that any intellectual property rights which the Group does hold will not be invalidated, circumvented or 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 and perfect or, where appropriate, obtain licences for the intellectual property rights necessary to support new product introductions and product innovations. Additionally, the Group has licenced, and may licence in the future, trade marks, patents, trade secrets and other intellectual property rights to third parties. While the Group attempts to ensure that its intellectual property rights are protected when entering into business relationships, third parties may take actions that could materially and adversely affect the Group’s rights or the value of its intellectual property rights.

The Group also uses intellectual property rights in-licenced 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 and may restrict its rights to offer certain products in certain markets, including through non-compete provisions, or impose other obligations on the Group in exchange for its rights to the licenced intellectual property. In addition, the Group may not have full control over the maintenance, protection, enforcement or use of the intellectual property rights in-licenced from licensors, and therefore the Group may be reliant on the licensors to conduct such activities.

Disputes may arise between the Group and its licensors regarding the scope of rights or obligations under the relevant intellectual property licence agreements, including the scope of the Group’s rights to use the licenced intellectual property, the Group’s rights with respect to third parties, the Group’s and its licensors’ obligations with respect to the maintenance and protection of the licenced intellectual property, financial obligations of the Group to the licensor, and other interpretation-related issues. The agreements under which the Group licences intellectual property rights from others are complex, and the provisions of such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of the Group’s rights to the intellectual property being licenced, or increase what we believe to be its financial or other obligations under the relevant agreement. Termination of or disputes over such licences could result in the loss of significant rights.

Third parties may copy or otherwise obtain and misuse the Group’s proprietary knowledge, trade secrets, trade marks, patents, designs or copyrights, or infringe or otherwise violate the Group’s intellectual property rights. For example, the Group’s brands are well-established in the market and have attracted trade mark and patent infringers in the past. Additionally, the Group may not be able to prevent current and former employees, contractors and other parties from misappropriating the Group’s confidential and proprietary knowledge.

Infringement, misuse or other violation of any of the Group’s intellectual property rights may dilute or diminish the value and goodwill of its 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. While the Group protects its intellectual property rights, including through litigation, where necessary, it cannot economically prevent all infringements, misuses or other violations, and any litigation could be protracted and costly and could have a material adverse effect on the Group’s business and results of operations regardless of its outcome.

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

 

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and distribution chains could lead to product supply interruptions, product recalls or withdrawals, litigation and/ or regulatory enforcement action and fines from regulators, such as the FDA, EMA and NMPA, 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. By way of example, raw materials which the Group sources for production may become contaminated through the supply chain and other product defects may occur due to human error or equipment failure, among other things. 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 cyberattacks 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 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, 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. 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 “—Litigation, disputes and regulatory investigations may materially and adversely affect the Group’s business, financial condition, results of operations and prospects).

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 could materially and adversely impact the Group’s business

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. Such cyber-attacks and cyber incidents can take many forms, including cyber extortion, social engineering, password theft or introduction of viruses or malware, such as ransomware through phishing emails. For example, the Group experienced an increase in cyber-attacks and other cyber incidents in the months before Russia’s invasion of Ukraine, and there is a heightened risk of further cyber-attacks, including from state actors (see “—Risks Applicable to the Group relating to Changes in Law and the Political and Economic Environment, Regulation and Legislation—The Group’s business may be impacted by the effects of Russia’s invasion of Ukraine” below). While the Group has implemented systems, monitoring and training to prevent

 

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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.

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, including the poor performance of, failure of or cyber-attack on, third-party service providers, catastrophic events, power outages, cyber-security breaches, network outages, failed upgrades or other similar events and if the disaster recovery and business continuity plans do 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 and ineffective management of these relationships could increase the Group’s financial, legal, reputational and operational risk

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 functions (including the outsourcing of certain back office and consumer relations services). If the Group is unable to effectively manage and maintain its third-party relationships and the agreements under which the Group’s third-party partners operate, its results of operations could be adversely impacted.

For example, in China, part of the Group’s business is conducted through Sino-American Tianjin Smith Kline & French Laboratories Ltd., which is a joint venture between GlaxoSmithKline Consumer Healthcare (Overseas) Limited, the Tianjin Pharmaceutical Group and the Tianjin Zhongxin Pharmaceutical Group (the “TSK&F Joint Venture”), pursuant to a joint venture agreement which is due to expire in September 2024. If the Group does not renew these arrangements or implement alternative measures, in either case on acceptable terms, 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.

Failure of third parties to meet their obligations to the Group or substantial disruptions in the relationships between the Group and third parties could adversely impact the Group’s operations and financial results. Additionally, while the Group has policies and procedures for managing these relationships, they inherently involve 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, thereby potentially

 

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increasing the Group’s financial, reputational, operational and legal risk, including in respect of health and safety, environmental, social and governance issues, modern slavery, anti-bribery and corruption.

The Group faces various risks related to pandemics, epidemics or similar widespread public health concerns, the ultimate impact of which is outside the Group’s control and which may materially and adversely affect the Group’s operations, cash flows and financial condition

The Group faces various risks related to pandemics, epidemics or similar widespread public health concerns, including the COVID-19 pandemic. A pandemic, epidemic or similar widespread health concern could have, and COVID-19 has had and will continue to have, a variety of impacts on the Group’s business, results of operations, cash flows and financial condition, including:

 

   

the Group’s ability to continue to maintain and support the health, safety and well-being of the Group’s employees, including key employees;

 

   

volatility in the demand for and availability of the Group’s products, which may be caused by the temporary inability of the Group’s consumers to purchase the Group’s products due to illness, financial hardship, quarantine, government actions mandating the closure of the Group’s distributors or retailers or imposing travel or movement restrictions, shifts in demand and consumption away from more discretionary or higher priced products to lower-priced products, or pantry-loading activity;

 

   

increases in demand for certain of the Group’s products requiring the Group to increase its production capacity or acquire additional capacity at an additional cost and expense;

 

   

decreases in demand and sales for certain of the Group’s key 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. For example, amid the COVID-19 pandemic, in certain countries specific restrictions were introduced on the sale of cough and cold medicines in an attempt to prevent patients from self-medicating against COVID-19 at home. In China, in early 2020, certain local authorities introduced temporary restrictions on the sale of such medicines, which limited sales of Contac (nasal decongestant tablets that also relieve pain and reduce fever) and Fenbid (ibuprofen-based relief medicine) by the Group in 2020, adversely affecting the Group’s revenue in Asia Pacific (“APAC”) in FY 2020. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting the Group’s results of operations and financial position—Regulation;”

 

   

changes in purchasing patterns of the Group’s consumers, including the frequency of in-store visits by consumers to retailers and dental and skin health professionals and a shift to purchasing the Group’s products online from e-commerce retailers;

 

   

disruptions to the Group’s global supply chain (including the closure of manufacturing and distribution facilities) due to, among other things, the availability of raw and packaging materials or manufacturing components; a decrease in the Group’s workforce or in the efficiency of such workforce, including as a result of illness, travel restrictions, absenteeism or governmental regulations and transportation and logistics challenges, including as a result of port and border closures and other governmental restrictions or reduced shipping capacity;

 

   

failure of third parties on which the Group relies, including the Group’s retailers, suppliers, contract manufacturers, logistics providers, customers, commercial banks, joint venture partners and external business partners, to meet their obligations to the Group, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties;

 

   

significant changes in the economic and political conditions of the markets in which the Group operates, which could restrict and have restricted the Group’s employees’ ability to work and travel,

 

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could mandate and have mandated or caused the closure of certain distributors or retailers, the Group’s offices, shared business service centres and/or operating and manufacturing facilities, or otherwise could prevent and have prevented the Group as well as the Group’s third-party partners, suppliers or customers from sufficiently staffing operations, including operations necessary for the manufacture, distribution, sale and support of the Group’s products;

 

   

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, such as COVID-19, 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 implementation of complex strategic, operational and/or change initiatives gives rise to significant execution risks, which may affect the operational capacity of the Group and may materially and adversely impact the Group if these initiatives fail to meet their objectives

The Group has undertaken a number of, and may from time to time commence, strategic, operational and/or change initiatives. For example, the Group has previously implemented strategic initiatives to effectively integrate the Novartis International A.G. (“Novartis”) and Pfizer consumer healthcare businesses and execute a targeted programme of non-core asset divestments. There may be financial, operational, regulatory, customer and reputational implications if such initiatives fail (either wholly or in part) to meet their objectives, which could place strain on the operational capacity of the Group. The scale and nature of the programmes and management challenges may cause disruption to resourcing through heightened uncertainty, increased workloads and short-term resource stretch, which, in turn, could result in the disruption of business as usual activities. Implementing further strategic, operational and/or change initiatives may amplify these risks.

Any disruption caused by, or failure to successfully implement any such initiatives could have a material adverse effect on the Group’s ordinary course business and, consequently, its financial condition, results of operations and prospects, or otherwise harm the Group’s reputation.

The Group’s business is affected by seasonality, which could have a negative impact on the Group’s financial condition

Portions of the Group’s business are seasonal. This is driven by seasonal demand for certain products, including its cough, cold and flu, allergy and decongestant products, such as Theraflu and Robitussin. In respect of such products, if the seasonal effects which help to deliver performance are negatively impacted, including due to unfavourable economic conditions, this could have a material adverse effect on the Group’s financial condition and results of operations for the entire year. Government measures imposed in response to COVID-19, such as lockdowns and social distancing restrictions, have tempered the usual seasonal spikes in the incidence of flu and cold, thus reducing demand for the Group’s cold and flu product lines during FY 2021. Because of quarterly fluctuations caused by these and other factors, comparisons of the Group’s operating results across different fiscal quarters may not be accurate indicators of the Group’s future performance.

The Group may not successfully acquire and integrate other businesses, licence 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

 

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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, including claims from terminated employees, customers or third parties, 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.

The Group’s leverage and debt service obligations could materially and adversely affect its business, financial condition or results of operations

Prior to the date of this prospectus, the Group has incurred financial indebtedness in order to fund the Pre-Demerger Dividend (as defined below). 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.

As at 18 July 2022, the Group had the following financial indebtedness outstanding:

 

   

£300,000,000 2.875 per cent. notes due 29 October 2028 and £400,000,000 3.375 per cent. notes due 29 March 2038, each issued by GSK Consumer Healthcare Capital UK plc (the “UK Issuer”) pursuant to a £10,000,000,000 Euro Medium Term Note Programme (the “Programme”);

 

   

€850,000,000 1.250 per cent. notes due 29 March 2026, €750,000,000 1.750 per cent. notes due 29 March 2030 and €750,000,000 2.125 per cent. notes due 29 March 2034, each issued by GSK Consumer Healthcare Capital NL B.V. pursuant to the Programme;

 

   

$700,000,000 3.024 per cent. callable fixed rate senior notes due 2024, $300,000,000 callable floating rate senior notes due 2024, $2,000,000,000 3.375 per cent. fixed rate senior notes due 2027, $1,000,000,000 3.375 per cent. fixed rate senior notes due 2029, $2,000,000,000 3.625 per cent. fixed rate senior notes due 2032 and $1,000,000,000 4.000 per cent. fixed rate senior notes due 2052, each issued by GSK Consumer Healthcare Capital US LLC (the “US Issuer”) pursuant to a private placement to institutional investors in the USA and outside the USA;

 

   

$1,750,000,000 3.125 per cent. fixed rate senior notes due 2025 issued by the UK Issuer pursuant to a private placement to institutional investors in the USA and outside the USA;

 

   

£1,493,861,751 under the Term Loan Facility (as defined below) (noting the Term Loan Facility drawn prior to the date of the Pre-Demerger Dividend) (for a description of subsequent repayments by the Group of outstanding amounts under the Term Loan Facility, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Resources and Indebtedness—Term Loan Facility.”); and

 

   

£nil and $nil of RCF Loans (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Resources and Indebtedness—Revolving Credit Facilities”).

 

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See “Business—History and Development of the Company—The Demerger and Further Preparatory Steps—Pre-Separation dividends” for a description of the amounts (including the Pre-Demerger Dividend) that were distributed out of the Group, with no recourse, to GSK and Pfizer in connection with the Demerger. None of the Group’s debt continues to benefit from guarantees provided by GSK.

The degree to which the Group is leveraged could have important consequences to 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. In accordance with the terms and conditions of the Programme, the EMTN Issuers have capacity to issue up to £10,000,000,000 in principal amount of notes (inclusive of the Pre-Separation Programme Notes that have already been issued) which could further increase the Group’s leverage and financial indebtedness. In addition, the Group’s Revolving Credit Facilities make available £1,000,000,000 and $1,400,000,000 of commitments to provide RCF Loans which remain undrawn as at 31 August 2022. 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.

The Group’s business and results of operations are affected by fluctuations in interest rates

The Group is subject to risk from financial instruments that bear interest at floating rates, including one series of the Pre-Separation USD Notes and borrowings under the Group’s bank financing facilities (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Resources and Indebtedness”). These interest rates could rise significantly in the future, thereby increasing the Group’s interest expenses associated with these obligations and reducing cash flow available for other purposes.

The Group expects to hedge a portion of the interest rates on its financial instruments with the aim of achieving an appropriate balance of fixed-rate and floating-rate exposures. However, it may not be able to enter into, replace or extend such hedges on terms that are acceptable to the Group, or at all, and either the Group’s overall strategy or any individual hedge may not be fully effective, which would expose the Group to interest rate risk.

 

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Goodwill and indefinite-life intangible assets are a material component of the Group’s balance sheet and impairments of these assets could have a significant impact on its results

The Group has recorded a significant amount of goodwill and indefinite-life intangible assets, representing £28 billion as of 30 June 2022, on its balance sheet. 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. While we have concluded that the Group’s goodwill and indefinite-life intangible assets are not impaired, future events could cause us to conclude that the goodwill associated with a given segment, or one of the Group’s indefinite-life intangible assets, may have become impaired. Any resulting impairment charge, although non-cash, could have a material adverse effect on the Group’s results of operations and financial condition.

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, which may have a material adverse effect on the Group’s business operations and financial condition

The Group’s business is subject to extensive legal and regulatory requirements in all the markets in which it operates. Such legal and regulatory requirements 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 USA and other markets.

For example, 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.

New or more stringent legal or regulatory requirements, or more restrictive interpretations of existing requirements, could materially and adversely impact the Group’s business, results of operations and financial condition. For example, regulators have decided, and might decide in the future, that certain products of the Group should be prescription only or otherwise reclassified, resulting in new regulations and laws, including in respect of claims, becoming applicable to such products.

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 healthcare 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

 

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response to geopolitical events (see also see “—The Group’s business may be impacted by the effects of Russia’s invasion of Ukraine”) Violations of these laws, or allegations of such violations, could disrupt the Group’s business and materially and adversely affect its reputation and the Group’s business, prospects, results of operations and financial condition.

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, any of which could materially and adversely affect the Group’s business, results of operations and financial condition. Even if a claim is unsuccessful, is without merit or is not fully pursued, the cost of responding to such a claim, including management time and out-of-pocket expenses, and the negative publicity surrounding such assertions regarding the Group’s products, processes or business practices could materially and adversely affect the Group’s reputation, brand image and the Group’s business, prospects, results of operations and financial condition.

The Group faces risks relating to the regulation and perception of the ingredients it uses in its products, which could materially and adversely impact the Group’s business, prospects, financial condition and results of operations

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, the results of which may have a material adverse effect on the Group’s business as the Group may need to reformulate its products. For example, certain materials in consumer products are under scrutiny in the EU, such as Titanium Dioxide, Synthetic Amorphous Silica and the potential in medicines for Nitrosamine formation in medicines. If the result of such reviews is an inability to use or restrictions on the use 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, such as the levels of diclofenac measured in water in the EU.

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, each of which may materially and adversely affect the Group’s business, financial condition, results of operations and prospects

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

 

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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 effect the Group through their impact on payroll and supply costs (including freight). Inflationary pressures in FY 2021 increased the Group’s commodity, freight and payroll costs, which had an adverse impact on the Group’s operating profit and operating profit margin. 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.

Whilst the Group’s diversified geographic presence, product offering and consumer profile may help to mitigate its exposure to risks that are localised or product- or consumer group-specific, there can be no assurance that these risks would arise in such a way. The occurrence of any of these risks could materially and adversely affect the business, revenue, financial condition and operating results of the Group.

Litigation, disputes and regulatory investigations may materially and adversely affect the Group’s business, financial condition, results of operations and prospects

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.

For example, in the USA, the Group is a defendant in ongoing proton pump inhibitor (“PPI”) litigation, in which plaintiffs have alleged that their use of PPIs caused serious bodily injuries. The Group has filed motions to dismiss several hundred cases, but the court has not yet ruled on those motions. In addition, certain members of the GSK Group and the Pfizer Group are party to proceedings relating to the detection of N-Nitroso-dimethylamine in Zantac (ranitidine) products. Pursuant to the Pfizer SAPA, the Group is required to indemnify the GSK Group and the Pfizer Group in respect of “Purchaser Liabilities” and “Assumed Liabilities” (each as defined in the Pfizer SAPA), and the Pfizer Group and GSK Group 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 (see “—The Group has indemnification obligations in favour of the GSK Group and the Pfizer Group, which could be significant and have a material adverse effect on the financial condition, results of operations and/or prospects of the Group” below). Haleon has also notified the GSK Group and the Pfizer Group that it rejects their requests for indemnification on the basis that the scope of the indemnities set out in the Pfizer SAPA only covers their consumer healthcare businesses as conducted when the JV was formed in 2018. At that time, neither the GSK Group nor the Pfizer Group marketed OTC Zantac in the US or Canada. Further, in 2013, GlaxoSmithKline Consumer Healthcare GmbH & Co. KG and other members of a German trade mark association were fined by the Federal Cartel Office of Germany, as a result of the exchange

 

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of certain information during meetings from 2004 to 2006. Following the fine, the Group has become party to several civil proceedings in Germany for follow-on damages. An adverse outcome in such proceedings (or any other related proceedings) may have a material adverse effect on the Group’s business, reputation, results of operations and financial condition.

Although the Group has developed and implemented a set of standards, controls, and policies and procedures that are highly tailored to the specific requirements of the Group and the regulatory regimes of the jurisdictions in which it operates, there is no guarantee that those standards, controls, and policies and procedures will totally shield the Group from liability, and the Group remains exposed to the risk of potential civil and/or criminal actions leading to damages, fines and sanctions. For example, the risk of consumer fraud class actions, competitor, regulatory and governmental challenges to product and marketing claims, and product liability lawsuits remains significant. Governmental agencies such as the Federal Trade Commission (“FTC”) are very active in oversight of consumer products as they seek to prevent consumer fraud. The FTC may have changing enforcement priorities in this area, for example, the use of expert endorsements/testimonials, COVID-19-related marketing claims, all-natural marketing claims and environmental marketing claims. Consumer fraud actions, and competitor, regulatory and governmental challenges to product and marketing claims, and class action lawsuits affecting the Group 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.

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. At 30 June 2022, the Group had £14 million of provisions for legal disputes and matters, including amounts relating to legal and administrative proceedings, which are included within “Other provisions” as set out in the Interim Financial Statements.

The Group faces risks associated with significant international operations, which could negatively impact the Group’s business

The Group operates on a global basis with 96.6 per cent. of the Group’s revenue in FY 2021 originating in markets outside the United Kingdom. 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:

 

   

changes in exchange rates for foreign currencies (as set out in more detail at “—The Group is exposed to risks relating to fluctuations in currency exchange rates and related hedging activities, which could negatively impact the Group’s financial condition and prospects” below);

 

   

exchange controls, export controls, economic sanctions and other limits on the Group’s ability to import or export raw materials or finished products, including as a result of the COVID-19 pandemic, or to repatriate earnings from overseas;

 

   

political or economic instability, geopolitical events (such as Russia’s invasion of Ukraine), environmental events, widespread health emergencies, such as the COVID-19 pandemic or other pandemics or epidemics, natural disasters or social or labour unrest;

 

   

rising geopolitical trade tensions in the Group’s key markets, such as between the USA, Western Europe and China;

 

   

changing macroeconomic conditions in the Group’s markets;

 

   

lack of well-established, reliable and/or impartial legal systems in certain countries where the Group operates and difficulties in enforcing contractual, intellectual property or other legal rights;

 

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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, including as a result of the COVID-19 pandemic or other pandemics or epidemics.

Any or all of the foregoing risks could 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. In addition, a number of these risks may adversely impact consumer confidence and consumption, which could reduce sales volumes of the Group’s products or result in a shift in its product mix from higher margin to lower margin product offerings.

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, may adversely affect the Group’s profit margins. If material and other cost increases continue in the future and the Group is unable to pass along such higher costs in the form of price increases, achieve cost efficiencies, such as in manufacturing and distribution, or otherwise manage the exposure through sourcing strategies, ongoing productivity initiatives and the potential use of commodity hedging contracts, the Group’s business, results of operations and financial condition could be materially and adversely impacted. In addition, even if the Group were able to increase the prices of its products in response to material and other cost increases, the Group may not be able to sustain the price increases. Also, 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 Russia’s invasion of Ukraine

The Group is monitoring the effects of Russia’s invasion of Ukraine, with the board of directors of GSK overseeing and monitoring key risks. The board of directors of the Company will assume oversight and management of these risks after Separation. The Group’s operations and presence in Russia and Ukraine is limited and these markets accounted for less than 3 per cent. of each of the Group’s revenue and Adjusted operating profit in FY 2021 and H1 2022.

However, the broader economic consequences of the invasion are currently difficult to predict, and geopolitical instability, the imposition of sanctions and other restrictive measures against Russia and any retaliatory actions taken by Russia in response to such measures could adversely affect the global markets and the global geopolitical and economic environment, which could in turn adversely impact the Group’s business and/or the trading prices of its securities. Specifically, the Group faces the following risks:

 

   

The Group’s business includes employees based in Russia and Ukraine and revenue deriving from sales in Russia and Ukraine. The situation remains highly uncertain and the Group is actively monitoring the situation, the risks to its employees and the significant risk of disruption to its operations, including in relation to the importation and distribution of its products, in Russia and Ukraine and other countries in the region.

 

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The Group generates revenue from sales of its products in Russia in the Russian Ruble, while significant costs (notably, manufacturing and supply chain costs) associated with those products are denominated in other currencies, such as Euro and US Dollar. The international response to the invasion, including the imposition of international sanctions against Russia, has had a significant adverse effect on the value of the Russian Ruble, which has reduced the Group’s revenue from its operations in Russia without a corresponding reduction in costs, and the Group may not be able to offset the devaluation of the Russian Ruble 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 Russia.

 

   

The Group’s customers in Russia and Ukraine have been significantly negatively affected by the factors described above, which exposes the Group to increased counterparty risk in relation to these customers and receivables from these customers.

 

   

Given the Group’s international presence, it is subject to various global sanctions regimes, and similar laws, regulations or orders imposed in response to the invasion, many of which are evolving rapidly. The Group is monitoring changes to applicable global sanctions regimes to ensure it remains in compliance with its obligations, as any failure to comply with the evolving sanctions could present legal and reputational risks, which could, in turn, have a material adverse effect on the Group’s business. In addition, there is a risk that Russia’s response to the global sanctions regime, as well as additional international sanctions against Russia, creates regulatory uncertainty and presents further compliance challenges for the Group’s operations, which will increase compliance costs and make it difficult to continue operations in Russia.

 

   

There may be certain reputational risks associated with the Group’s continued presence in the Russian market. Negative publicity surrounding the Group’s continued presence and/or supply of products to the general public in Russia could damage the Group’s brands and its reputation, lead to boycotts of its products outside of Russia and/or have consequences on the continuation of operations and/or sales in Russia, including a determination by the Group to discontinue all sales in Russia.

 

   

As of the date of this prospectus, the Russian government has indicated it has drawn up plans to seize the assets of western companies leaving Russia. While the scope of such measures is not presently clear, if the Group ceased its activities and/or suspended its operations in Russia and did not resume its presence in Russia within a certain period of time, there is a risk the Russian government could (i) nationalise the Group’s assets located in Russia, (ii) allow the Group’s patents and trade marks to be used within Russia without the Group’s consent and/or (iii) introduce restrictions on, or impose unfavourable terms in respect of, payments made from Russia or relating to assets in Russia.

In addition to the specific implications for the Group’s operations in Russia and Ukraine, the Group may be affected by broader impacts on the global geopolitical and economic environment, including (but not limited to) changes in commodity, freight, logistics and input costs.

The situation remains highly uncertain and there may be additional risks to the Group arising out of or relating to the Russian invasion of Ukraine, and the escalating military conflict in the region, which could also have a material adverse effect on the Group’s business.

Failure to comply with regulation regarding the use of personal data could lead to significant fines and regulatory action against the Group

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

 

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data could be wrongfully appropriated, lost, disclosed, retained, stolen or processed in breach of data protection laws. In addition, increased regulatory restrictions on the use of cookies may materially and adversely affect the Group’s marketing practices as well as the cost efficiency of such strategies. Failure to operate effective data collection controls could potentially lead to regulatory censure, fines, reputational and financial costs.

Regulation (EU) No 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation), as amended (the “EU GDPR” or “GDPR”) (and the GDPR as it forms part of retained EU law in the UK, as defined in the EU (Withdrawal) Act 2018) (“UK GDPR”)), as well as the increased data protection regulation in other jurisdictions, such as the Personal Information Protection Law 2021 in China, the Federal Law No. 152-FZ on Personal Data in Russia, and the California Consumer Privacy Act of 2018 in California, USA, introduced the potential for significant new levels of fines for non-compliance based on turnover. The Group will continue to review and develop existing processes to ensure that customer personal data is processed in compliance with applicable requirements, and it 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.

Failure to comply, or the costs of complying, with environmental and health and safety regulations could materially and adversely affect the Group’s operations

The Group is subject to regulation relating to the protection of the environment and health and safety, including regulations governing air emission, effluent discharge, and the use, generation, manufacture, storage, handling and disposal of certain materials. We believe that the Group is in compliance in all material respects with all such laws, rules, regulations and policies applicable to the Group. However, there can be no assurance that the Group will not be required to incur significant costs to comply with such environmental and health and safety laws and regulations in the future. Additionally, failure to manage environmental, health and safety and sustainability risks could lead to significant harm to people, the environment and communities in which the Group operates, fines, failure to meet stakeholder expectations and regulatory requirements, litigation or regulatory action and damage to the Group’s reputation and could materially and adversely affect the Group’s financial results. Additionally, working conditions in global supply chains are subject to increased scrutiny and growing regulatory and legislative requirements, including for companies to evidence their human rights due diligence assessments.

Failure to comply with such requirements could result in sanctions, including injunctions, fines, civil liability and exclusion from public procurement being imposed on the Group.

In addition, most product, component and raw material supply chains present a number of potential reputational risks relating to: labour standards; health, safety and environmental standards; raw material sourcing; and the social, ethical and environmental performance of third party manufacturers and other suppliers. The Group mandates minimum requirements regarding these issues, in line with international guidelines, for the Group’s own manufacturing sites, third party manufacturers and suppliers. If it is perceived that the Group is not respecting or advancing the economic and social progress and safety of the local communities it works in, the Group’s reputation could be damaged, which could have a negative impact on the Group’s “social licence to operate”, the Group’s ability to secure new resources and labour and the Group’s financial performance.

The Group is exposed to risks relating to fluctuations in currency exchange rates and related hedging activities, which could negatively impact the Group’s financial condition and prospects

As further described at “—The Group faces risks associated with significant international operations, which could negatively impact the Group’s business” above, the Group operates internationally and holds assets, incurs liabilities, generates sales and pays expenses in a variety of currencies other than Pounds Sterling (the currency in which it reports its financial results). The most significant foreign currency exposures are to the USD, Euro,

 

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Swiss Franc and Chinese Renminbi, including $8,669 million of USD-denominated debt and €2,331 million of Euro denominated debt incurred by the Group as at 30 June 2022. The Group’s operations outside the United Kingdom generated 96.6 per cent. of revenue in FY 2021.

Fluctuations in exchange rates for foreign currencies have reduced and could continue to reduce the Pounds Sterling value of sales, earnings and cash flows the Group receives from markets outside the United Kingdom, increase its supply costs (as measured in Pounds 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, there are risks associated with the use of hedging instruments (including derivative financial instruments). While limiting to some degree the Group’s risk from fluctuations in currency exchange, 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 in respect of counterparties to 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 Group has a significant exposure to business operations which are subject to taxation across multiple jurisdictions. The worldwide nature of the Group’s operations means that intellectual property, R&D and manufacturing operations are centred in a number of locations. A consequence of this is that the Group’s cross-border supply routes, which are necessary to ensure supplies of healthcare products into numerous end markets, can be subject to complex tax laws and can result in conflicting claims from tax authorities as to the profits to be taxed in individual countries. 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) and many tax regimes—domestically as well as cross-border— are increasingly complex (such that the proper interpretation and application of tax laws is not always clear). This means that the Group may be subject to domestic and cross-border tax authority disputes (potentially including disputes between tax authorities), including with respect to the actions taken, or to be taken, in connection with Separation, 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 30 June 2022, the Group had recognised provisions of £175 million in respect of uncertain tax positions.

The Company is a foreign private issuer and, as a result, it is not subject to US proxy rules and is subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a US domestic public company

The Company is a “foreign private issuer,” as such term is defined under the U.S. Securities Exchange Act of 1934 (the “Exchange Act”). As a foreign private issuer under the Exchange Act, the Company is exempt from certain provisions of the Exchange Act that are applicable to US domestic public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorisations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public

 

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reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information. In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while US domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year and US domestic issuers that are large accelerated filers are required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, which is intended to prevent issuers from making selective disclosures of material information. As a result of all of the above, you may not have the same protections afforded to shareholders of a company that is not a foreign private issuer.

In addition, as a foreign private issuer, the Company will also be entitled to rely on exceptions from certain corporate governance requirements of the NYSE. As a result, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.

If the Company loses its foreign private issuer status in the future, it may incur significant additional expenses which could have a material adverse effect on the Group’s business, prospects, results of operations and financial condition

The Company is a “foreign private issuer,” as such term is defined under the Exchange Act, and, therefore, the Company is not required to comply with all the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. See “—The Company is a foreign private issuer and, as a result, it is not subject to US proxy rules and is subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a US domestic public company.” Under the Exchange Act, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to the Company on 30 June 2023.

In the future, the Company would lose its foreign private issuer status if a majority of its shares are owned by US residents and: (i) a majority of its directors or executive officers are US citizens or residents; (ii) more than 50 per cent. of its assets are located in the USA; or (iii) its business is administered principally in the USA. As of 31 December 2021, 37 per cent. of the Group’s assets were located in the USA. The regulatory and compliance costs to the Company under US securities laws as a US domestic issuer may be significantly more than costs the Company incurs as a foreign private issuer. If the Company is not a foreign private issuer, it would be required to file periodic reports and registration statements on US domestic issuer forms with the SEC, which are more detailed and extensive in certain respects than the forms available to a foreign private issuer. The Company would also have to mandatorily comply with US federal proxy requirements, and its executive officers, directors and principal shareholders would become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. Further, the Company would be required under current SEC rules to prepare its financial statements in accordance with US generally accepted accounting principles and modify certain of its policies to comply with corporate governance practices associated with US domestic issuers. In addition, the Company may lose its ability to rely upon exemptions from certain corporate governance requirements on US stock exchanges that are available to foreign private issuers. Such transition and modifications would involve additional costs and may divert management’s attention from other business concerns, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Risks Relating to Separation

The Group may fail to realise any or all of the anticipated benefits of Separation

The extent to which the anticipated benefits of Separation, including, among others, the creation of a standalone public company with a leadership team with independent control of its strategy and capital allocation decisions

 

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and the maximisation of shareholder value, may be realised, is subject to a number of factors, including many which are outside of the Group’s control. There can be no guarantee that the anticipated benefits of Separation will be realised in full or in part, or as to the timing when any such benefits may be realised. Failure to realise the anticipated benefit of Separation, in full or in part, or in a timely manner, could result in a delay in the execution of the strategic objectives of the Group and/or have a disruptive effect on the Group’s management and employees. This could in turn have a material adverse effect on the Group’s business, results of operations, financial condition and prospects.

The Company will incur new costs in its transition to a standalone public company and its management team will be required to devote substantial time to new compliance matters

As a standalone public company, the Company has incurred, and will incur, additional legal, accounting, financing and other expenses, including the costs of recruiting and retaining non-executive directors, costs resulting from public company reporting obligations and the rules and regulations regarding corporate governance practices, including the listing requirements of the FCA, the LSE and the NYSE. There can be no assurance that, under a changed Board structure and ownership, and in an environment where it is subject to greater scrutiny and disclosure requirements, the Group will be able to manage its operations in the same manner as it had done as part of the GSK Group (see also “—Following Separation, the Company operates as an independent publicly listed company and the Group could fail to meet the challenges involved in operating successfully as a standalone business”).

In particular, the Group is subject to increased regulatory obligations as a result of being listed, and its management team will need to devote a substantial amount of time to ensure that the Group complies with all of these requirements. The implementation of new policies and procedures across the Group could require significant time and energy that would otherwise be devoted to the business’ operating activities and strategy. In addition, the reporting requirements, rules and regulations will increase the Group’s legal and financial compliance costs and make some activities more time-consuming and costly.

The Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as regulations subsequently adopted by the SEC and the NYSE, have imposed various requirements on public companies, including rules regarding corporate governance practices. Sarbanes-Oxley requires, among other things, that the Group maintain and periodically evaluate its internal controls over financial reporting and disclosure controls and procedures. The Group and its management team will have to perform system and process evaluation and testing of the Group’s internal controls over financial reporting to allow management and the Group’s reporting accountants to report on the effectiveness of the Group’s internal controls over financial reporting, as required by section 404 of Sarbanes-Oxley.

Prior to the Separation, the Group previously tested its internal controls over financial reporting on a regular basis, in accordance with the financial reporting practices and policies of the GSK Group. However, doing so as a standalone entity may require the Group’s management team and other employees to devote a substantial amount of time to comply with these requirements and also increase the Group’s legal and financial compliance costs. In particular, compliance with section 404 of Sarbanes-Oxley after Separation will require additional expenses and management efforts.

Following Separation, the Company operates as an independent publicly listed company and the Group could fail to meet the challenges involved in operating successfully as a standalone business

Following Separation, the Company operates as an independent publicly listed company.

The Group’s operations have historically benefited from certain GSK central office resources, including, among other things, access to its larger finance and treasury, corporate secretariat, legal, procurement, information

 

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technology, investor relations and human resources teams. The Group has also benefited from negotiated arrangements with third-party suppliers, distributors, licensors, lessors, other business partners and/or counterparties as part of the larger GSK Group. It cannot be assured that the Group will be able to maintain such arrangements or replace them on similar terms.

Following Separation, the Group has taken on additional responsibility for these activities and, in preparation, it has enhanced its standalone arrangements in a wide range of areas, including finance and treasury, corporate secretariat and investor relations. Further, the Group will continue to have access to certain resources of the GSK Group under the terms of the Transition Services Agreement (see “—For a period following Separation, the Company will be reliant on the GSK Group for the provision of certain services and any disruption to such services could be costly and materially and adversely affect the Group’s business, results of operations, financial conditions and prospects” below).

However, there remains a risk that the Group could suffer operational difficulties without access to the support and services from GSK following Separation, which could have a material adverse effect on the Group’s business. These challenges include: (i) demonstrating to interested parties that Separation will not result in adverse changes in standards of business and impairment of relationships with consumers, customers, regulators or employees; (ii) retaining key personnel; (iii) distraction of management; (iv) difficulty in marketing and communicating effectively the capabilities of the Group as a standalone business; and (v) successfully negotiating the rebranding exercise such that consumers accept the new branding under the Company name.

Furthermore, there remains a risk that operating as an independent group may reduce the Group’s flexibility to deal with unexpected events and require additional resources.

In addition, there is a risk that the actual costs of the standalone arrangements could be higher than expected, that there could be unanticipated dis-synergies and/or that the Group will need to further invest in new services and functions. These risks, individually or together, could have a material adverse effect on the Group’s business, financial condition, results of operations and prospects.

For a period following Separation, the Company will be reliant on the GSK Group for the provision of certain services and any disruption to such services could be costly and materially and adversely affect the Group’s business, results of operations, financial conditions and prospects

In connection with the Demerger and Separation, GSK and the Company entered into a Transition Services Agreement. Services to be procured by the Group under the Transition Services Agreement include certain information services, back office services and distribution services for a transitional period as required by the Group. The majority of services will be provided for a fixed period of not more than 12 months, and certain services may be extended subject to certain conditions. As the Group does not currently have the capabilities to provide these services internally, on a standalone basis, without third-party support, the Transition Services Agreement provides contractual protections for the continued provision of these services during the relevant transitional period, absent which the Group would need to procure these services from other third-party providers. As a result, any significant disruption or other issues in the services provided by the GSK Group under the Transition Services Agreement, even if they give rise to a contractual claim, may cause operational difficulties that could negatively impact the Group’s performance and results of operations.

Following the transitional periods set out in the Transition Services Agreement, the Group will be required to provide these services internally or obtain these services from a third-party provider. If the Group does not effectively develop and implement these capabilities, or it is unable to source further arrangements from third-party providers, its business, results of operations, financial condition and prospects could be materially and adversely affected.

 

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The Group has indemnification obligations in favour of the GSK Group and the Pfizer Group, which could be significant and have a material adverse effect on the financial condition, results of operations and/or prospects of the Group

GSK, Pfizer and CH JVCo, entered into the Pfizer SAPA on 19 December 2018 pursuant to which GSK, Pfizer and CH JVCo 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 GSK Group, the Pfizer Group and the Group. Among other provisions, the Group is required to indemnify the GSK Group and the Pfizer Group in respect of “Purchaser Liabilities” and “Assumed Liabilities.” The Company is also required to guarantee such indemnity obligations of the Group which may include liabilities related to OTC Zantac. Certain members of the GSK Group and the Pfizer Group are party to certain proceedings relating to the detection of N-Nitroso-dimethylamine in Zantac (ranitidine) products. The Pfizer Group and the GSK Group 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. Haleon has also notified the GSK Group and the Pfizer Group that it rejects their requests for indemnification on the basis that the scope of the indemnities set out in the Pfizer SAPA only covers their consumer healthcare businesses as conducted when the JV was formed in 2018. At that time, neither the GSK Group nor the Pfizer Group marketed OTC Zantac in the US or Canada. 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) that the Group may have to the GSK Group and/or the Pfizer Group under the claimed indemnities.

Pursuant to certain other agreements entered into between the GSK Group and the Group in connection with Separation, including the Asset Transfer Framework Agreement, the GSK Group and the Group have provided certain cross indemnities in relation to certain businesses, assets, liabilities and employees transferring from the GSK Group to the Group, as well as from the Group to the GSK Group. For example, these include certain manufacturing sites in Argentina and Brazil to be transferred from the GSK Group to the Group following Separation. Among other requirements, the Group is required to indemnify the GSK Group in respect of certain losses resulting from or arising out of past, present or future ownership, operation, use or conduct of certain aspects of such assets and/or businesses transferring from the GSK Group to the Group.

In addition, GSK, Pfizer, Haleon, CH JVCo and GSKCHH have entered into a tax covenant (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).

Such indemnities survived completion of the Demerger and Separation. If any amounts payable by the Group under the 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.

GSK and Pfizer may compete with the Group

GSK and Pfizer will not be restricted from competing with the Group in the consumer healthcare business, including as a result of acquiring a company that operates a consumer healthcare business. Due to the significant resources of GSK and Pfizer, including brand recognition, financial resources and know-how resulting from the previous management of the Group’s business, GSK and Pfizer could have a significant competitive advantage over the Group should they decide to engage in the type of business the Group conducts, which may materially and adversely affect the Group’s business, results of operations and financial condition.

 

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The Company’s status as a non-US corporation for US federal income tax purposes could be affected by a potential change in law

Corporations such as the Company that are organised outside the United States are generally treated as non-US corporations for US federal income tax purposes. However, section 7874 of the Code and the Treasury regulations thereunder can cause a corporation organised outside the United States to be treated as a US corporation for US federal income tax purposes if (i) the corporation (the “Acquiring Non-US Corporation”) directly or indirectly acquires substantially all of the properties of a US corporation (the “Acquired US Corporation”), (ii) the shareholders of the Acquired US Corporation are treated as holding at least 80% of the shares of the Acquiring Non-US Corporation after the acquisition by reason of holding shares in the Acquired US Corporation (adjusting, for this purpose, for certain transactions such as certain contributions and distributions and for certain fact patterns) and (iii) certain other requirements are met.

A corporation that is treated as a US corporation as a result of the application of these rules generally is subject to US federal income tax on its worldwide income, and dividends it pays to shareholders that are not US Holders (as defined below in “Taxation—United States Federal Income Tax Considerations”) are subject to US withholding taxes, among other adverse consequences. Because such a corporation would be a dual resident for tax purposes, these taxes may apply in addition to (and not instead of) the taxes imposed by the jurisdiction in which such corporation is otherwise resident, and there may be other adverse tax consequences of being dual resident for tax purposes (such as restrictions on use of certain reliefs). In addition, even if the Acquiring Non-US Corporation is not treated as a US corporation under the test described above, in certain circumstances section 7874 can instead cause the Acquiring Non-US Corporation to be subject to different adverse US federal income tax consequences (including the unavailability of the preferential rate applicable to “qualified dividends” discussed below in “Taxation—United States Federal Income Tax Considerations”).

The rules for determining whether a transaction is subject to section 7874 are complex and subject to varying interpretations and potential legislative and regulatory changes. The Company believes that under current law the Company should be treated as a non-US corporation (and should not be subject to the other adverse consequences of section 7874 as described above). However, several proposals to significantly expand the scope of section 7874 have been advanced over the years, including by the Biden administration and most recently in December 2021 as part of the US Senate’s consideration of the Build Back Better Act, which was not enacted into law. Accordingly, it is possible that such a proposal will be enacted (possibly with retroactive effect), and there can be no assurance that section 7874 and the Treasury regulations thereunder will not be amended in a way that could cause the Company, as a result of Separation, either to be treated as a US corporation or to be subject to the other adverse consequences of section 7874 as described above.

The Tax Covenant will restrict the Company’s ability to engage in certain transactions

As discussed above, the Company entered into the Tax Covenant on 1 June 2022, effective from the time of the Demerger. The Tax Covenant imposes certain restrictions on the Company, including certain restrictions with respect to actions following completion of the Demerger that could cause Separation to fail to qualify for its intended US federal income tax treatment. The restrictions primarily require the Company to maintain the corporate structure of certain parts of the Group as it was immediately prior to the Demerger. For example, there are restrictions on liquidating certain subsidiaries of the Company, or issuing or redeeming shares in those subsidiaries. In addition, there are restrictions on some intra-group disposals as well as certain non-ordinary course of business transactions. As a result of these restrictions (some of which could be in place for at least two years), the Company’s ability to engage in certain transactions, such as the disposition of certain assets and certain repurchases of its stock, may be limited (although the Group will nonetheless be entitled to take actions which would otherwise be restricted if the Company first (i) obtains the consent of (or, in certain instances, if it consults with) GSK or Pfizer (as applicable) or, in some cases, (ii) obtains an opinion from an appropriately qualified adviser or a ruling from the IRS regarding the tax consequences of the proposed actions which, in either

 

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case, is reasonably satisfactory to GSK or Pfizer (as applicable)). 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.

Risks Relating to the Ordinary Shares and ADSs

An active trading market for the Ordinary Shares and the ADSs may not develop or be sustained

Prior to admission to trading, there was no public trading market for the Ordinary Shares and the ADSs. The Ordinary Shares were admitted to the premium listing segment of the Official List of the FCA and admitted to trading on the main market for listed securities of the LSE on 18 July 2022, and the ADSs began regular-way trading on the NYSE on 22 July 2022. However, the Company can give no assurance that an active trading market for the Ordinary Shares and the ADSs will be sustained. If an active trading market is not sustained, the liquidity and trading price of the Ordinary Shares and the ADSs could be materially and adversely affected.

The Pfizer Group retained a significant interest in the Company immediately after Separation and its interests may differ from those of the other holders of the Ordinary Shares and the ADSs

The Pfizer Group retained a significant interest in the Company immediately after Separation, including 32 per cent. of the Ordinary Shares (including interests in Ordinary Shares held indirectly through holdings of ADSs) and thus of the voting rights of the Company. As a result, the Pfizer Group 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, the Pfizer Group 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 per cent. or more of the 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 continues to hold less than 20 per cent. but at least 10 per cent. of the Ordinary Shares in issue. As at the date of this prospectus, the Pfizer Group has nominated Bryan Supran and John Young, who became directors on UK Admission. In exercising its voting rights, the Pfizer Group may be motivated by interests that differ from those of the other holders of the Ordinary Shares and the ADSs and the interests of the Pfizer Group could conflict with or differ from the Company’s interests. The Company entered into an agreement to regulate its relationship with the Pfizer Group following Separation and, in particular, to help ensure that the Company will be capable of operating and making decisions for the benefit of Haleon Shareholders as a whole and independently of the Pfizer Group following Separation (the “Pfizer Relationship Agreement”). Notwithstanding the Pfizer Relationship Agreement, the concentration of ownership in the Pfizer Group may have the effect of delaying, deferring or preventing a change of control of the Company or impeding a merger, takeover or other business combination which may otherwise be favourable for the Company or the Group. This in turn could have a material adverse effect on the trading price of the Ordinary Shares and the ADSs.

So long as the Pfizer Group continues to own, whether directly or indirectly, a significant amount of the equity of the Company, the Pfizer Group will continue to be able to substantially influence the Group’s ability to enter into any corporate transactions.

There can be no assurance that dividends will be paid to holders of Ordinary Shares and ADSs

The Company may determine not to pay dividends. If it determines that it will pay dividends, there can be no assurance that it will be able to pay dividends in the future. Under English company law, a company can only pay dividends to the extent that it has distributable reserves and cash available for this purpose. As a holding company, the Company’s ability to pay dividends in the future will be affected by a number of factors, including

 

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having sufficient distributable reserves (see also “—The Group’s leverage and debt service obligations could materially adversely affect its business, financial condition or results of operations” above) and its ability to receive sufficient dividends from subsidiaries.

The ability of companies within the Group to pay dividends and the Company’s ability to receive distributions from its investments in other entities are subject to restrictions, including, but not limited to, the existence of sufficient distributable reserves and cash. Any of the foregoing could have a material adverse effect on the market price of the Ordinary Shares and the ADSs.

The market price of the Ordinary Shares and the ADSs may fluctuate

Holders of the Ordinary Shares and the ADSs should be aware that the value of an investment in the Group may fluctuate and could be highly volatile. The price at which Ordinary Shares and ADSs may be quoted and the price which investors may realise for their Ordinary Shares and ADSs will be influenced by a large number of factors, some specific to the Group and its operations, and some which may affect the Group’s industry as a whole, other comparable companies or publicly traded companies as a whole.

The sentiments of the public market regarding Separation will be one such factor. Following the recent admission of the Ordinary Shares and the ADSs to trading, there may be a period of relatively high-volume trading in the Ordinary Shares and the ADSs as the Company’s shareholder register finds its natural composition. For example, the Ordinary Shares and the ADSs may become less attractive to certain classes of existing investors. The Company is unable to predict whether substantial amounts of the Ordinary Shares and the ADSs will be sold in the open market. Sales of a substantial number of the Ordinary Shares and the ADSs in the public market, or the perception that these sales might occur, could depress the market price of the Ordinary Shares and the ADSs. See also “—Future sales of Ordinary Shares and ADSs, or the perception such sales might occur, could depress the market price of the Ordinary Shares and the ADSs” below.

This potential factor, together with other factors including actual or anticipated fluctuations in the financial performance of the Group and its competitors, market fluctuations and/or factors generally affecting consumers could lead to the market price of the Ordinary Shares and the ADSs fluctuating.

Future sales of Ordinary Shares and ADSs, or the perception such sales might occur, could depress the market price of the Ordinary Shares and the ADSs

Immediately following Separation, GSK held 5.44 per cent. of the Company’s issued share capital and Pfizer held 32 per cent. of the Company’s share capital. Furthermore, as part of certain arrangements pursuant to which GSK will provide additional support to the UK Pension Schemes (as defined below), the SLPs (being Scottish limited partnerships controlled by GSK and set up to provide a funding mechanism pursuant to which GSK will provide additional funding for GSK’s UK Pension Schemes) in aggregate held 7.5 per cent. of the total issued share capital of the Company.

The Ordinary Shares owned by GSK, Pfizer and the SLPs are subject to certain lock-up restrictions. Following the expiration of the applicable lock-up period, or the waiver of such lock-up restrictions, GSK, Pfizer and the SLPs will be able to sell their respective Ordinary Shares. During the period immediately prior to expiration of, and following the periods of sales restrictions provided for by these lock-up arrangements, the market price for the Ordinary Shares and the ADSs may fall in anticipation of a sale of Ordinary Shares. The perception that such sales could occur may also materially and adversely affect the market price of the Ordinary Shares and the ADSs. This may make it more difficult for holders of the Ordinary Shares and ADSs to sell the Ordinary Shares and the ADSs, respectively, at a time and price that they deem appropriate, and could also impede the Company’s ability to issue equity securities in the future.

 

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The Company may decide to offer additional Ordinary Shares (including in the form of ADSs) in the future, diluting the interests of existing holders of Ordinary Shares and ADSs and potentially materially and adversely affecting the market price of Ordinary Shares and ADSs

Other than pursuant to employee share plans, the Company has no current plans for an offer of shares (including in the form of ADSs). However, if the Company decides to offer additional Ordinary Shares (including in the form of ADSs) or other securities convertible into Ordinary Shares in the future, including as consideration for any acquisitions, this could dilute the interests of existing holders of the Ordinary Shares and the ADSs and/or have an adverse impact on the market price of Ordinary Shares and ADSs, as could the public perception that such an offering may occur.

Holders of the Ordinary Shares and the ADSs may not be able to exercise pre-emption rights or participate in certain future issues of Ordinary Shares

In the case of a future allotment of new Ordinary Shares for cash, existing Haleon Shareholders have certain statutory pre-emption rights, unless those rights are disapplied by a special resolution of the Haleon Shareholders at a general meeting. An issue of new Ordinary Shares not for cash or when pre-emption rights have been disapplied could dilute the interests of the then-existing Haleon Shareholders.

Securities laws of certain jurisdictions may restrict the Company’s ability to allow participation by Haleon Shareholders in future offerings. In particular, shareholders in the USA and holders of the ADSs may not be entitled to exercise these rights, unless either the Ordinary Shares, the ADSs and any other securities that are offered and sold are registered under the Securities Act of 1933, as amended (the “Securities Act”), or the Ordinary Shares, the ADSs and such other securities are offered pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company cannot assure prospective investors it will register any such offers or sales under the Securities Act, that any exemption from the securities law requirements would be available to enable US or other Haleon Shareholders or holders of the ADSs to exercise their pre-emption rights or, if available, that the Company will utilise any such exemption.

The ability of holders of the Ordinary Shares and the ADSs outside the UK to bring actions or enforce judgments against the Company or the Directors may be limited

The ability of holders of the Ordinary Shares and the ADSs outside the UK to bring an action against the Company may be limited under law. The Company is a public limited company incorporated in England and Wales. The rights of holders of the Ordinary Shares are governed by English law and by the articles of association of the Company from time to time (“Articles of Association”). The rights of holders of the ADSs are governed by the Deposit Agreement. See “—Holders of the ADSs are not treated as holders of the Ordinary Shares” below. The rights of holders of the Ordinary Shares differ from the rights of shareholders in typical US corporations and some other non-UK companies. In particular, English law currently limits significantly the circumstances under which the shareholders of English companies may bring derivative actions. Under English law, in most cases, only the Company may be the proper plaintiff for the purposes of maintaining proceedings in respect of wrongful acts committed against it and, generally, neither an individual shareholder, nor any group of shareholders, has any right of action in such circumstances. English law does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders in a US company. In addition, it may not be possible for holders of the Ordinary Shares and the ADSs outside the UK to enforce any judgments in civil or commercial matters or any judgments in securities laws of countries other than the UK against some or all of the Directors or executive officers of the Company who are resident in the UK or countries other than those in which judgment is made.

 

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Haleon Shareholders outside the UK may be subject to exchange rate risk

The Ordinary Shares are, and any dividends to be paid in respect of them will be, denominated in Pounds Sterling. An investment in Ordinary Shares by an investor whose principal currency is not Pounds Sterling exposes the investor to foreign currency exchange rate risk. Any depreciation of Pounds Sterling in relation to such foreign currency will reduce the value of the investment in the Ordinary Shares or any dividends in foreign currency terms.

Holders of the ADSs are not treated as holders of the Ordinary Shares

Holders of the ADSs are not treated as holders of the Ordinary Shares, unless they withdraw the Ordinary Shares underlying such ADSs in accordance with the Deposit Agreement and applicable laws and regulations. The Depositary is the holder of the Ordinary Shares underlying the ADSs. Holders of the ADSs therefore do not have any rights as holders of the Ordinary Shares, other than the rights that they have pursuant to the Deposit Agreement. See “Description of Securities—American Depositary Shares.

Holders of the ADSs will not have the same voting rights as the holders of the Ordinary Shares and may not receive voting materials in time to be able to exercise their right to vote

Except as described in this prospectus and the Deposit Agreement, holders of the ADSs will not be able to exercise voting rights attaching to the Ordinary Shares represented by the ADSs. Under the terms of the Deposit Agreement, the Depositary irrevocably appoints each holder of ADSs on the voting record date fixed by the Depositary in respect of any meeting at which holders of the Ordinary Shares are entitled to vote as its proxy to attend, vote and speak at the relevant meeting in respect of the Ordinary Shares represented by their ADSs. Accordingly, holders of the ADSs may (i) attend, vote and speak at a meeting of Haleon Shareholders as the proxy of the Depositary, (ii) appoint any other person as the substitute proxy or (iii) renounce the proxy initially provided by the Depositary and instruct the Depositary to vote the Ordinary Shares underlying their ADSs (see “Description of Securities—American Depositary Shares—Voting”). Otherwise, holders of the ADSs will not be able to exercise their right to vote unless they withdraw the Ordinary Shares underlying ADSs to vote them in person or by proxy in accordance with applicable laws and regulations and the Articles of Association. Even so, holders of ADSs may not know about a meeting far enough in advance to withdraw those Ordinary Shares.

As soon as practicable after receipt of notice of any meeting at which Haleon Shareholders are entitled to vote, or of solicitation of consents or proxies from Haleon Shareholders, the Depositary shall fix the voting record date in respect of such meeting or solicitation. The Depositary or, if the Company so determines, the Company shall, distribute to the holders of ADSs on such voting record date, among other things, such information as is contained in such notice of meeting or in the solicitation materials and a statement as to the manner in which holders of ADSs may exercise their right to vote.

We cannot guarantee that holders of ADSs will receive the voting materials with sufficient time to enable such holders to instruct the Depositary to vote the Ordinary Shares underlying their ADSs or for the holders of ADSs to arrange to attend, vote and/or speak at the relevant meeting.

A shareholder is only entitled to participate in, and vote at, the meeting of shareholders, provided that it holds the Ordinary Shares as of the record date set for such meeting and otherwise complies with our Articles of Association. In addition, the Depositary’s liability to holders of ADSs for failing to execute voting instructions or for the manner of executing voting instructions is limited by the Deposit Agreement. As a result, holders of ADSs may not be able to exercise their right to give voting instructions or to vote in person or by proxy and they may not have any recourse against the Depositary or us if their Ordinary Shares are not voted as they have requested or if the Ordinary Shares underlying their ADSs cannot be voted.

 

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Holders of the ADSs may be subject to limitations on the transfer of their ADSs and the withdrawal of the underlying Ordinary Shares

ADSs are transferable on the books of the Depositary. However, the Depositary may close its books at any time or from time to time when it deems expedient. The Depositary may refuse to deliver, transfer or register transfers of ADSs generally when the Company’s books or the books of the Depositary are closed, or at any time if the Company or the Depositary think it is advisable to do so because of any requirement of law, government or governmental body, or under any provision of the Deposit Agreement, or for any other reason, subject to the right of holders of ADS to cancel their ADSs and withdraw the underlying Ordinary Shares. Temporary delays in the cancellation of ADSs and withdrawal of the underlying Ordinary Shares may arise because the Depositary has closed its transfer books or the Company has closed its transfer books in connection with voting at a shareholders’ meeting or the payment of a dividend on Ordinary Shares. In addition, holders of ADSs may not be able to cancel their ADSs and withdraw the underlying Ordinary Shares when they owe money for fees, taxes and similar charges and when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or to the withdrawal of Ordinary Shares or other deposited securities. See “Description of the Securities—American Depositary Shares.”

Holders of the ADSs may not receive distributions on the underlying Ordinary Shares or any value for them if it is illegal or impractical to make them available to holders of the ADSs

The Depositary has agreed to pay to holders of ADSs any cash dividends or other distributions it or the custodian receives on the Ordinary Shares or other deposited securities after deducting its fees and expenses.

Holders of ADSs will receive these distributions in proportion to the number of the Ordinary Shares that the respective ADSs represent. However, in accordance with the limitations set forth in the Deposit Agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. The Company has no obligation to take any other action to permit distribution on the ADSs, the Ordinary Shares, rights or anything else to holders of the ADSs. This means that holders of ADSs may not receive the distributions the Company makes on the Ordinary Shares or any value from them if it is unlawful or impractical to make them available to holders of ADSs. These restrictions may have an adverse effect on the value of the ADSs.

Holders of ADSs may not be entitled to a jury trial with respect to claims arising under the Deposit Agreement, which could result in less favourable outcomes to the plaintiff(s) in any such action

The Deposit Agreement provides that, to the fullest extent permitted by law, holders of ADSs irrevocably waive the right to a jury trial with respect to any claim that they may have against us or the Depositary arising out of or relating to the Ordinary Shares, the ADSs or the Deposit Agreement, including any claim under the United States federal securities laws.

If we or the Depositary oppose a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the Deposit Agreement and the ADSs. It is advisable that you consult your legal counsel regarding the jury waiver provision before entering into the Deposit Agreement.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the Depositary in connection with matters arising under the Deposit Agreement or the ADSs, including claims under federal securities laws,

 

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you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the Depositary. If a lawsuit is brought against us or the Depositary under the Deposit Agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favourable to the plaintiff(s) in any such action.

Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the Deposit Agreement with a jury trial. No condition, stipulation or provision of the Deposit Agreement or the ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the Depositary of compliance with any substantive provision of the United States federal securities laws and the rules and regulations promulgated thereunder.

Forum selection provisions in the Deposit Agreement could limit the ability of holders of ADSs to obtain a favorable judicial forum for disputes with the Company and the Depositary

The Deposit Agreement provides that, by holding or owning an ADR or ADS or an interest therein, holders and beneficial owners each irrevocably agree that any legal suit, action or proceeding against or involving the Depositary and/or the Company brought by holders or beneficial owners, arising out of or based upon the Deposit Agreement, the ADSs, the ADRs or the transactions contemplated therein or thereby, including, without limitation, claims under the Securities Act, may be only instituted in the United States District Court for the Southern District of New York (or in the state courts of New York County in New York if either (i) the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute or (ii) the designation of the United States District Court for the Southern District of New York as the exclusive forum for any particular dispute is, or becomes, invalid, illegal or unenforceable). The enforceability of similar federal court choice of forum provisions has been challenged in legal proceedings in the United States, and it is possible that a court could find this type of provision to be inapplicable, unenforceable, or inconsistent with other documents that are relevant to the filing of such lawsuits. If a court were to find the federal choice of forum provision contained in the Deposit Agreement to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. If upheld, the forum selection clause in the Deposit Agreement, may limit the ability of holders of ADSs to bring a claim against the Company and/or the Depositary in their preferred judicial forum, and this limitation may discourage such lawsuits. In addition, the Securities Act provides that both federal and state courts have jurisdiction over suits brought to enforce any duty or liability under the Securities Act or the rules and regulations thereunder. Accepting or consent to this forum selection provision does not constitute a waiver by a holder of ADSs of compliance with federal securities laws and the rules and regulations thereunder. A holder of ADSs may not waive compliance with federal securities laws and the rules and regulations thereunder.

 

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. Forward-looking statements give the Group’s current expectations or forecasts of future events. In particular, these include statements relating to future actions, prospective products or product approvals, 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. You should not place undue reliance on these statements as no assurance can be given that any particular expectation or forecast will be met. Nor can there be any guarantee that the Company will be able to realise any of the potential strategic benefits or opportunities as a result of Separation. In addition, in the future we, and others on our behalf, may make statements that constitute forward-looking statements and, except as may be required by applicable legal or regulatory obligations, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking statements may include, without limitation, statements relating to the following:

 

   

our plans, objectives and goals;

 

   

our future economic performance and prospects;

 

   

the potential effect on our future performance of certain contingencies; and

 

   

assumptions underlying any such statements.

You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Words such as “believes,” “anticipates,” “expects,” “intends,” “estimates,” “plans,” “will,” “projects,” and “targets” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance are intended to identify forward-looking statements but these are not the exclusive means of identifying such statements.

Forward looking statements are subject to assumptions, inherent risks and uncertainties, many of which relate to factors that are beyond our control or precise estimate. We caution you that a number of important factors could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Some of the factors that could cause actual results or events to differ from current expectations include the following:

 

   

domestic and global economic and business conditions, including inflation and deflation;

 

   

geopolitical developments;

 

   

risks relating to fluctuations in currency exchange rates and related hedging activities;

 

   

failure to manage disruptions in the supply chain, including due to environmental events, widespread health emergencies (such as COVID-19), strikes, cybersecurity failures, industrial accidents and global shipping, logistics, transport and warehousing constraints;

 

   

failure to realise any or all of the anticipated benefits of Separation;

 

   

significant product innovations, technical advances or the intensification of price competition by our competitors, and any failure on our part to adequately respond to any such price competition or to develop commercially successful products or to deliver additional uses for existing products, including after significant resources have been invested;

 

   

changes in consumers’ discretionary spending on consumer healthcare products and any consequent changes in retailers purchasing stocks of consumer healthcare products;

 

   

failure to adapt to changes in consumer preferences, purchasing patterns and market dynamics;

 

   

increasing awareness of the environmental impact of products and ingredients in our products;

 

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changes in, and any failure to comply with, applicable law and regulation governing the consumer healthcare industries and affecting the cost of product development and the time required to reach the market and the uncertainty of successfully doing so;

 

   

the outcome of, or provisions made for or costs incurred in relation to, litigation and government investigations, including those with respect to product liability, antitrust matters, the use of certain ingredients in manufacturing of our products and sales and marketing;

 

   

failure to appropriately collect, review or report human safety information and to act on any relevant findings in a timely manner;

 

   

failure to ensure appropriate controls and governance of quality in product development;

 

   

failure to comply with good manufacturing or good distribution practice regulations in commercial or clinical trials, manufacturing and distribution activities;

 

   

failure to comply with the terms of our product licences and supporting regulatory activities;

 

   

failure to deliver a continuous supply of compliant finished product;

 

   

inability to respond effectively to a crisis incident in a timely manner to recover and sustain critical operations;

 

   

failure to successfully acquire and integrate other businesses, licence rights to technologies or products, form and manage alliances, or divest businesses;

 

   

failure to report accurate financial information in compliance with accounting standards and applicable legislation;

 

   

failure to comply with current tax law, or incurring significant losses due to treasury activities;

 

   

failure to comply with applicable and international anti-bribery and corruption legislation;

 

   

failure to comply with pricing and antitrust regulations in commercial practices, including trade channel activities and tendering for business;

 

   

failure to obtain, maintain and enforce sufficient intellectual property rights to protect our business;

 

   

failure to control releases of substances harmful to the environment in both the short and long term, leading to incidents which could disrupt our R&D and supply activities, harm employees, and harm the communities and the local environment in which we operate;

 

   

failure in the management of physical climate and environmental risks, current and future regulatory requirements for environmental policies and taxes, and delivery and performance of management environmental objectives;

 

   

failure to collect, secure, use and destroy personal information in accordance with data privacy laws, which can lead to harm to individuals, including financial harm, stress and prejudice, and to us, including fines and operational, financial and reputational harm;

 

   

unauthorised disclosure, theft, unavailability or corruption of our information or key information systems, which may lead to harm to our workforce and customers, disruption to our business and/or the loss of commercial or strategic advantage, damage to our reputation or regulatory sanctions; and

 

   

new and possibly increasing levels of price controls, pricing pressures or price restrictions with respect to our products in various markets.

We caution you that the foregoing list of important factors is not exhaustive. When evaluating forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, as well as the risk factors relating to our business, industry and Separation that are set out in the section “Risk Factors” of this prospectus.

 

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USE OF PROCEEDS

All of the Ordinary Shares and ADSs offered by the selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from such sales. We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “Plan of Distribution”.

 

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DIVIDEND POLICY

The Company expects to adopt a dividend policy, which will reflect the long-term earnings and cash flow potential of the Group, consistent with maintaining sufficient financial flexibility and meeting the Group’s capital allocation priorities. The initial dividend is expected to be at the lower end of a 30 to 50 per cent. pay-out ratio, subject to Board approval. The Company expects to pay a dividend to its shareholders in relation to the second half of 2022 in 2023, subject to Board approval and following approval of the Company’s FY 2022 results.

 

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CAPITALISATION

The following table sets forth the Group’s consolidated capitalisation as at 30 June 2022 on an actual basis and on an as adjusted basis to illustrate the effects of: (1) additional borrowings under the Term Loan Facility to fund the Pre-Demerger Dividend, (2) the Pre-Demerger Dividend, the Balancing Dividend and the Sweep-Up Dividend (each as defined in “Business—The Demerger and Further Preparatory Steps—Pre-Separation dividends”), (3) the issuance of Non-Voting Preference Shares and (4) the net settlement of related party loans prior to Separation, in each case, on the capitalisation of the Group as if these transactions had taken place on 30 June 2022. The “As Adjusted” information below is for illustrative purposes only and therefore does not represent the Group’s actual capitalisation as at that date.

Financial information set forth in the “Actual” column was derived from the Group’s Interim Financial Statements. This information should be read in conjunction with information included elsewhere in this prospectus, including the Interim Financial Statemets, the Financial Statements, “Presentation of Financial and Other Information,” “Key Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

£m

   Note      Actual     As
Adjusted
 

Share capital

                     1       1  

Share premium

        70       70  

Other reserves

        (11,553     (11,553

Retained earnings

     1        38,377       27,295  
     

 

 

   

 

 

 

Shareholders’ equity

        26,895       15,813  

Non-controlling interests

        104       104  

Total equity

        26,999       15,917  
     

 

 

   

 

 

 

Short-term borrowings

       

Lease Liabilities

        32       32  
     

 

 

   

 

 

 

Total Secured

        32       32  

Bank loan and overdrafts

        300       300  

Loan amounts owing to related parties

     2,6        3       —    
     

 

 

   

 

 

 

Total Unsecured

        303       300  

Total short-term borrowings and loan amounts owing to related parties

        335       332  

Long-term borrowings

       

Lease Liabilities

        99       99  

Total Secured

        99       99  

£300,000,000 2.875 per cent. notes due 2028

     3,6        299       299  

£400,000,000 3.375 per cent. notes due 2038

     3,6        398       398  

€850,000,000 1.250 per cent. notes due 2026

     3,6        704       704  

€750,000,000 1.750 per cent. notes due 2030

     3,6        642       642  

€750,000,000 2.125 per cent. notes due 2034

     3,6        638       638  

$700,000,000 3.024 per cent. callable notes due 2024

     3,6        577       577  

$300,000,000 floating rate callable notes due 2024

     3,6        248       248  

$2,000,000,000 3.375 per cent. notes due 2027

     3,6        1,643       1,643  

$1,000,000,000 3.375 per cent. notes due 2029

     3,6        817       817  

$2,000,000,000 3.625 per cent. notes due 2032

     3,6        1,642       1,642  

$1,000,000,000 4.000 per cent. notes due 2052

     3,6        799       799  

$1,750,000,000 3.125 per cent. notes due 2025

     3,6        1,412       1,412  

Term Loan Facility

     4,6        —         1,490  

Non-Voting Preference Shares

     5        —         25  

Total Unsecured

        9,819       11,334  

Total long-term borrowings

        9,918       11,433  

Total borrowings

        10,253       11,765  

Total capitalisation

     7        37,252       27,682  

 

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(1)

Retained earnings in the “As adjusted” column reflects the following adjustments:

   

An adjustment to reflect the payment of the Pre-Demerger Dividend to GSK and Pfizer of £10,401 million.

   

An adjustment of £78 million comprised of a non-cash dividend of £25 million to Pfizer through the issuance of Non-Voting Preference Shares and the Balancing Dividend of £53 million in cash to GSK.

   

An adjustment to reflect the payment of the Sweep-Up Dividend to a subsidiary of each of GSK and Pfizer of £603 million.

(2)

Loan amounts owing to related parties were fully settled against outstanding loan amounts owing from related parties as part of Separation. As a result, this adjustment reflects a remaining nil balance of loan amounts owing to related parties.

(3)

Unsecured long-term borrowings include the net proceeds from the issuance of the Pre-Separation Programme Notes and the Pre-Separation USD Notes (the “Pre-Separation Notes”). Long-term borrowings reflect the proceeds received from the Pre-Separation Notes, less transaction costs of £34 million incurred which are capitalised and will be amortised over the term of each note. The net proceeds received from the issuance of the Pre-Separation Notes were used to fund payment of the Pre-Demerger Dividend.

(4)

The amount in the “As adjusted” column in relation to Term Loan Facility reflects £1,490 million of borrowings drawn down (net of £4 million transaction costs) from the Term Loan Facility required to fund the payment of the Pre-Demerger Dividend based on requirements defined in the Pfizer SHA.

(5)

The amount in the “As adjusted” column in relation to Non-Voting Preference Shares includes an adjustment to reflect the issuance of £25 million in Non-Voting Preference Shares to Pfizer as a non-cash dividend.

(6)

Had the Pre-Separation Notes been issued, additional borrowings under the Term Loan Facility been raised, and loan amounts owing to and owed from related parties been settled on 1 January 2021, net finance costs would have been £305 million, the income tax charge would have been £131 million, and profit after tax would have been £1,202 million, resulting in a basic and diluted earnings per share of 115,341p, for the year ended 31 December 2021.

(7)

Total capitalisation is the sum of total equity and total borrowings.

 

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BUSINESS

General Corporate Information

The Company was incorporated and registered in England and Wales under the Companies Act as a private company limited by shares on 20 October 2021 under the name DRVW 2022 Limited with registered number 13691224. The Company was re-registered as a public limited company (DRVW 2022 plc) on 23 February 2022 and changed its name to Haleon plc on 28 February 2022. The principal legislation under which the Company operates is the Companies Act and regulations made thereunder.

Following Separation, the principal activity of the Company is to act as the ultimate holding company of the Group.

The Company is domiciled in England and Wales with its registered and head office at Building 5, First Floor, The Heights, Weybridge, Surrey, KT13 0NY, United Kingdom. The telephone number of the Company’s registered office is +44 1932 822000 and its website is www.haleon.com. The information on the Company’s website does not form part of this prospectus.

Evolution of the Group

The Group has been transformed since 2012 through progressive strategic M&A and divestments to create a world leader in consumer healthcare.

The Group’s scale has 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, reaching revenue of £9.5 billion in FY 2021. In addition, the Group’s focus has been sharpened since 2012 through the progressive divestment of the GSK Group’s Nutritionals businesses (including Lucozade, Ribena and Horlicks) and the divestment by the Group of non-strategic OTC brands including its recent programme of divestments of non-strategic and growth-dilutive brands (with aggregate net proceeds from divested brands of £1.1 billion and examples of divested brands including Breathe Right, Physiogel and Venoruton) during the period from FY 2019 to FY 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 as set out below.

The key M&A milestones since 2012 in the Group’s business are summarised below:

 

 

LOGO

 

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Legacy GSK consumer healthcare business

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 healthcare products dating back to the 18th century, when its founding companies in Britain, the USA and Germany sold herbal products, laxatives, vitamins and soaps.

The Group sold a range of leading OTC brands (including Panadol, Fenbid, Tums and ENO) across Respiratory Health, Pain Relief, Digestive Health, Skin Health and Smokers’ Health, together with a strong portfolio of Oral Health brands (including Sensodyne, Polident and parodontax).

Geographically, GSK’s 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.

Joint venture with Novartis

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 (the “GSK/Novartis JV”). Novartis’ business provided the GSK Group with a meaningful incremental presence in OTC, including several major brands, notably Voltaren,3 Theraflu, Excedrin and Otrivin. 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. Geographically, Novartis’ presence in Central and Eastern Europe combined with GSK’s strength in these and other emerging markets presented multiple new growth opportunities across the combined portfolio.

In June 2018, GSK acquired Novartis’ shareholding in the GSK/Novartis JV for $13 billion, enabling GSK to take full operational and strategic control of the business.

Joint venture with Pfizer

On 31 July 2019, the GSK Group completed a transaction with Pfizer to combine substantially all of the GSK Group’s and Pfizer Group’s respective consumer healthcare businesses into a new world-leading consumer healthcare joint venture (as further described in “Material Contracts— Pfizer Stock and Asset Purchase Agreement”).

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 USA, 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 (key brands: Centrum, Caltrate and Emergen-C), as well as a leading presence in the US pain relief market through the acquisition of Advil, complementing the Group’s existing Pain Relief portfolio under the Panadol, Voltaren, Fenbid and Excedrin brands. Until the completion of the Demerger and the Share Exchanges, as applicable, GSK owned 68 per cent. of the ordinary shares in CH JVCo, being the entity through which both GSK and Pfizer held their equity interests in the joint venture, with Pfizer holding the remaining 32 per cent. of the ordinary shares in CH JVCo. The legacy Pfizer business has now been fully integrated into the Group.

 

3 

Voltaren is a Novartis brand licensed to the Group exclusively for OTC products.

 

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Divestment of OTC and skin care non-core brands

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 £1.1 billion of net proceeds. These disposals have further focused the business on higher-growth categories, markets and channels and thereby enhanced the growth profile of the Group.

Transformation of the Group

The transactions summarised above have acted as a catalyst for a much broader transformation of the Group, which is summarised below.

Portfolio reshaped, well positioned for growth

The portfolio changes since 2015 have resulted in a group that has been repositioned towards higher, above-market growth. The share of sales driven from the Group’s nine large-scale multinational power brands: Panadol, Voltaren, Advil, Otrivin, Theraflu, Sensodyne, Polident, parodontax and Centrum (collectively, the

“Power Brands”), which together have higher revenue growth rates than the overall Group (and generally have higher gross margins), has increased from 44 per cent. in 2015 to 58 per cent. in FY 2021 and the 2019-2021 divestment programme has eliminated a significant drag on overall growth.4 The Pfizer Transaction provided the Group with a significantly greater presence in higher-growth categories, notably building a leadership position in VMS which has a higher growth rate than other categories5 and represented 16 per cent. of Group revenue in FY 2021 compared to 1 per cent. in 2015. Similarly, investments made in digital commerce have meaningfully increased the Group’s presence in the high growth e-commerce / digital channel, which grew from less than 1 per cent. of revenue in 2015 to 8 per cent. of revenue in 2021. The Group is also well-positioned in key geographies following the Novartis and Pfizer transactions. The Group has leading positions in the world’s top two OTC /VMS markets with OTC /VMS market leadership in the USA (first in 2021 compared to fourth in 2015) and the leading OTC / VMS multinational position in China (second overall in 2021 compared to fourteenth in 2015). These two markets accounted for over 40 per cent. of Group revenue in FY 2021 and its leading presence in these two markets provides the Group with a strong platform for future growth.

Optimised operating model, lean cost base and capabilities improved

Since 2015, the Group has made significant improvements to its footprint and operating model, thereby delivering a sustainable increase in operating profit margin to support reinvestment in brands, capabilities and tools to support growth.

The Group has significantly reduced its manufacturing site footprint. The 41 sites inherited from the legacy Novartis, Pfizer and GSK consumer healthcare businesses since 2015 have been reduced to 24 in 2022. Similarly, warehousing and distribution centres have been reduced from over 200 inherited to approximately 90 in 2022 and R&D sites have been consolidated from nine inherited to four in 2022.

In parallel, the Group has significantly improved the efficiency and effectiveness of its advertising and promotion spend. In particular, the Group doubled its digital media spend between FY 2019 and FY 2021, with enhanced targeting and a focus on return on investment. Digital media spend represented approximately 50 per cent. of total media expenditure in FY 2021 and in the USA and China in particular, most of the Group’s advertising and

 

4 

Over 90 per cent. of the sales of OTC and skincare brands divested had negative growth based on compound revenue growth on a CER basis over the two years prior to divestment for brands divested in 2019 and three years for brands divested in 2020 or 2021.

5 

Source: Nicholas Hall Consumer Healthcare 2017-21 sales growth at manufacturer’s selling prices.

 

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promotion spend is now digital with more to come in other markets. The Group has also rebalanced the spend behind its Power Brands to drive future growth from its biggest opportunities, and increased consumer facing advertising and promotion.

Finally, the Group has evolved its operating model and enhanced its capabilities to support stronger execution. Local markets have been increasingly empowered to innovate, improving the Group’s agility to adapt to changing local needs. Significant investments have been made in data and tools to drive improved data-led decision-making and stronger returns on the Group’s investments. In addition, specialised tools have been built that enable better execution, including, for example the Group’s shopper science lab which enable commercial teams to experiment with retail experiences and provide category management analysis in partnership with retailers in each of the Group’s regions.

Delivering momentum while investing for growth

The Group’s strategy since 2019 has delivered strong financial results with good momentum for the future, despite a net negative effect from the COVID-19 pandemic and the focus on integration of the Pfizer assets and separation activities.

Since FY 2019, the Group’s revenue has increased by 12.6 per cent. to £9.5 billion in FY 2021. This reflects the incorporation of the Pfizer business (only 5 months was included in FY 2019 as the transaction closed on 31 July 2019) and underlying business growth, partially offset by divestments and adverse foreign exchange movements. The Group’s organic revenue growth exceeded 2019-2021 market growth, with 2.8 per cent. organic revenue growth in FY 20206 and 3.8 per cent. organic revenue growth in FY 2021. The Group’s FY 2020 organic revenue growth does not, however, fully reflect the FY 2019 to FY 2020 growth of the current brand portfolio as it excludes the January to July revenue for the legacy Pfizer brands in FY 2019 and FY 2020 and the figures also include growth-dilutive brands which no longer form part of the Group’s portfolio.

In terms of profitability, the Group delivered a robust gross profit margin of 62 per cent. and Adjusted gross profit margin at 63 per cent. in FY 2021, demonstrating the strength of its brands, its optimised manufacturing footprint, and continued focus on price, cost of goods sold and efficiencies to offset inflation. We believe this margin is sustainable. In addition, the Group has almost fully delivered on the £500 million synergies projected at the time of the Pfizer Transaction in 2019 and expects to realise around a further £120 million of synergies in 2022, taking the total to around £600 million. Overall, the Group delivered an operating profit margin of 17.2 per cent. and Adjusted operating profit margin of 22.8 per cent. in FY 2021, an increase of 6.6 percentage points and 3.3 percentage points, respectively, since FY 2019 despite adverse currency impacts. Over the same period, the Group reinvested a share of operating cost savings into advertising and promotion spend on brands to support future growth. Finally, in terms of cash flow, the Group delivered £1.4 billion net cash inflow from operating activities in both FY 2020 and FY 2021 driven by the underlying profitability of the business, a disciplined approach to working capital (including a reduction in inventory and debtor days) and stable capital expenditure.

 

6 

The FY 2020 growth rate calculated on an organic basis was negatively impacted by uneven consumer buying patterns in FY 2020 during the COVID-19 pandemic which overlapped with the first twelve months following the Pfizer Transaction. Specifically, the calculation of organic revenue in FY 2020 excludes revenue attributable to the brands acquired as part of the Pfizer Transaction in the period 1 January 2020 to 31 July 2020 (see “Presentation of Financial and Other Information—Adjusted Results and other non-IFRS financial measures”) and includes revenue attributable to these brands for the period 1 August 2020 to 31 December 2020. Revenue during the former period was high driven by accelerated consumer purchases at the beginning of the COVID-19 pandemic. Revenue during the latter period was negatively impacted by a reduction in consumer inventories (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). The calculation also includes revenue up to the point of sale for low growth divested brands, which no longer form part of the Group’s portfolio.

 

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Preparing for a standalone Group with distinctive purpose and culture

On 19 December 2018, the GSK Group announced its intention to separate the Group into a standalone business within three years of the acquisition of the Pfizer consumer health business (which ultimately closed on 31 July 2019). Since then, the Group commenced a broad range of initiatives to ensure that the Group is able to operate independently of GSK and Pfizer. As part of this separation process, the Group has also implemented a number of further initiatives to create a distinct business which are already driving increased organisational agility and a more focused culture premised on performance and purpose.

The Demerger and Further Preparatory Steps

On 18 July 2022, the GSK Group completed the separation of the Consumer Healthcare Business by way of a demerger of the predominant part of the GSK Group’s holding in the Group. Pursuant to the Demerger, holders of GSK Shares and holders of GSK ADSs at the Record Time received Ordinary Shares and ADSs, respectively.

Pursuant to the Demerger and subsequent Share Exchanges described below, the Company came to own the entire issued share capital and other equity interests of each of GSKCHH and PFCHH which, together, own the entire issued share capital of CH JVCo.

Ownership of the Group

Immediately prior to the Demerger, the ownership of the Group was as follows:

 

 

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The share capital of CH JVCo consisted of: (i) 680,000 JVCo A Ordinary Shares of £1 each; (ii) 300,000 non-voting JVCo Preference Shares of £1 each; and (iii) 320,000 JVCo B Ordinary Shares of £1 each. The JVCo A Ordinary Shares and JVCo B Ordinary Shares each carry one vote per share. Holders of the JVCo Preference Shares are entitled to 0.01 per cent. of the aggregate amount of any dividends declared by CH JVCo, and are not entitled to any proportion of the assets of CH JVCo available for distribution to shareholders on a return of capital on a winding-up of CH JVCo (excluding any intra-group re-organisation on a solvent basis). All JVCo A Ordinary Shares and JVCo Preference Shares were held by GSKCHH prior to Separation. All JVCo B Ordinary Shares were held by PFCHH, which was a wholly owned subsidiary of Pfizer prior to Separation.

 

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Accordingly, immediately prior to the Demerger, the share capital of CH JVCo was held as follows:

 

Shareholder

   Class    Number of shares    Voting rights    Nominal Value
GSKCHH    JVCo A Ordinary Shares    680,000    68 per cent.    75.38 per cent
   JVCo Preference Shares    300,000    N/A   
PFCHH    JVCo B Ordinary Shares    320,000    32 per cent.    24.62 per cent

The share capital of GSKCHH was comprised of three classes of shares: (i) GSKCHH A Ordinary Shares; (ii) GSKCHH B Ordinary Shares; and (iii) GSKCHH C Ordinary Shares. Immediately prior to the Demerger, all of the GSKCHH A Ordinary Shares and GSKCHH B Ordinary Shares were held by GSK. As part of certain arrangements to fund GSK’s UK pension benefit obligations, on 25 March 2022, GSK transferred its entire holding of GSKCHH C Ordinary Shares to the SLPs.

Pfizer has informed the Company that it intends to exit its position in the Company in a disciplined fashion, with an objective of maximising value for Pfizer shareholders.

Demerger

The Demerger was implemented by GSK declaring an interim dividend in specie satisfied by: (i) the transfer by GSK of the GSKCHH A Ordinary Shares to the Company in return for (ii) the issuance of Ordinary Shares by the Company to holders of GSK Shares who were registered on the register of members of GSK at the Record Time (including the GSK ADS Custodian as a holder of GSK Shares) on the basis of one Ordinary Share for each GSK Share held by such holders of GSK Shares at the Record Time, save that the number of Ordinary Shares to allotted and issued to each of the four initial shareholders of the Company was reduced by the number of Ordinary Shares already held by them at the Record Time. In connection with the Demerger, each holder of GSK ADSs as of the Record Time was entitled to receive one newly-issued ADS for each GSK ADS held by such holder of GSK ADSs as of the Record Time.

The Ordinary Shares commenced trading on a standalone basis on the main market of the LSE at market open on 18 July 2022. The ADSs commenced “regular-way” trading on a standalone basis on the NYSE at market open on 22 July 2022.

We may use a specialist firm to make a market in the ADSs on the NYSE to facilitate sufficient liquidity and maintain an orderly market in ADSs throughout normal NYSE trading hours.

Share Exchanges

Shortly following completion of the Demerger, the Share Exchanges occurred, under which the Company came to own the entire issued share capital and other equity interests of GSKCHH and PFCHH, which together own the entire issued share capital of CH JVCo. The purpose of the Share Exchanges was to rationalise the Company’s shareholder structure such that all persons with an interest in the Group do so through holding shares in the Company, as listed parent company, and not further down the Group structure. Accordingly:

 

   

GSK transferred its entire shareholding of GSKCHH B Ordinary Shares, representing an 8.01 per cent. stake in the ordinary share capital of GSKCHH, to the Company in exchange for 502,727,073 Ordinary Shares. The number of Ordinary Shares held by GSK at UK Admission represented 5.44 per cent. of the total issued share capital of the Company;

 

   

each of the SLPs transferred their respective holdings of GSKCHH C Ordinary Shares, representing 11.03 per cent. in aggregate of the ordinary share capital of GSKCHH, to the Company in consideration for 692,593,037 Ordinary Shares (including interests in Ordinary Shares held indirectly through holdings of ADSs), representing 7.5 per cent. (in aggregate and to the nearest whole Ordinary Share) of the total issued share capital of the Company at UK Admission; and

 

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Pfizer transferred its entire holding in PFCHH to the Company in consideration for (i) 2,955,063,626 new Ordinary Shares, representing 32 per cent. of the total issued share capital of the Company (to the nearest whole Ordinary Share) at UK Admission and (ii) 25 million Non-Voting Preference Shares, together, the “Share Exchanges.”

Immediately following the Pfizer Share Exchange described in the third bullet above, Pfizer sold its entire holding in the Non-Voting Preference Shares to one or more third party investor(s) (the “NVPS Sale”).

Since the Demerger, the Share Exchanges and the NVPS Sale, the ordinary share capital of the Company is held as described in “Description of Securities—Share Capital of the Company—Issued share capital of the Company.”

Pre-Separation dividends

Prior to Separation, the Group paid certain dividends to GSKCHH and/or PFCHH. These dividends included:

 

   

a cash dividend of £53 million paid by the Group to GSKCHH in connection with the issuance of the Non-Voting Preference Shares to Pfizer (the “Balancing Dividend”);

 

   

a cash dividend of £10,401 million paid by the Group to GSKCHH and PFCHH, equal to the pre-separation debt proceeds of the Group (meaning the amounts received by members of the Group on repayment of the Notes Proceeds Loans together with any amounts drawn by members of the Group under any additional borrowings (including, but not limited to, the Term Loan Facility) as at the date of the Pre-Demerger Dividend) (“Pre-Separation Debt Proceeds”) less £300 million (the “Pre-Demerger Dividend”); and

 

   

following the payment of the Balancing Dividend and the Pre-Demerger Dividend, a cash dividend of £603 million paid by the Group to GSKCHH and PFCHH, in accordance with the contractual arrangements for the Demerger which, in summary, required all readily available cash in excess of £300 million plus an additional £63 million, to be paid to GSKCHH and PFCHH prior to Separation (the “Sweep-up Dividend”).

Prior to the Pre-Separation Dividends, the Group continued to pay its ordinary course, quarterly dividends to GSKCHH and PFCHH in accordance with the terms of the Pfizer SHA (including, a dividend paid in respect of the Group’s financial performance for Q1 2022).

Pre-Separation bond issuances

As part of the preparation for the Demerger, on 16 March 2022, the EMTN Issuers established the Programme pursuant to which the EMTN Issuers may issue notes from time to time. As at the date of this prospectus, the EMTN Issuers have issued the Pre-Separation Programme Notes under the Programme: £300,000,000 2.875 per cent. notes due 29 October 2028, £400,000,000 3.375 per cent. notes due 29 March 2038, €850,000,000 1.250 per cent. notes due 29 March 2026, €750,000,000 1.750 per cent. notes due 29 March 2030 and €750,000,000 2.125 per cent. notes due 29 March 2034.

In addition, on 24 March 2022, the US Issuer and the UK Issuer issued the Pre-Separation USD Notes: the US Issuer issued $700,000,000 3.024 per cent. callable fixed rate senior notes due 2024, $300,000,000 callable floating rate senior notes due 2024, $2,000,000,000 3.375 per cent. fixed rate senior notes due 2027, $1,000,000,000 3.375 per cent. fixed rate senior notes due 2029, $2,000,000,000 3.625 per cent. fixed rate senior notes due 2032 and $1,000,000,000 4.000 per cent. fixed rate senior notes due 2052 and the UK Issuer issued $1,750,000,000 3.125 per cent. notes due 2025 in each case, pursuant to a private placement to institutional investors in the USA and outside the USA.

 

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The payment of all amounts owing in respect of: (i) notes issued under the Programme (including the Pre-Separation Programme Notes); and (ii) the Pre-Separation USD Notes is, as at the date of this prospectus, guaranteed by Haleon. Following completion of the GSK Share Exchange, the guarantee provided by GSK ceased to be effective and the guarantee provided by the Company came into full force and effect. Further details of the terms and conditions governing the notes issued under the Programme and the Pre-Separation USD Notes can be found in “Management’s Discussion And Analysis of Financial Condition And Results Of Operations— Liquidity and Capital Resources—Capital Resources and Indebtedness”.

The net proceeds of the Pre-Separation Programme Notes and the Pre-Separation USD Notes have been made available to GlaxoSmithKline Consumer Healthcare Finance Limited in order to fund the making of the Notes Proceeds Loans pursuant to the Notes Proceeds Loan Agreements. As such:

 

   

on 24 March 2022, GlaxoSmithKline Consumer Healthcare Finance Limited made a loan of £4,465,197,183.55 to GlaxoSmithKline Finance plc and a loan of £2,101,269,262.85 to Pfizer Service Company Ireland Unlimited Company; and

 

   

on 29 March 2022, GlaxoSmithKline Consumer Healthcare Finance Limited made a loan of £1,798,139,950.68 to GlaxoSmithKline Finance plc and a loan of £846,183,506.20 to Pfizer Service Company Ireland Unlimited Company (together, the “Notes Proceeds Loans”) pursuant to certain upstream loan agreements as amended from time to time (the “Notes Proceeds Loans Agreements”).

The terms of the Notes Proceeds Loan Agreements required, among other things, that the Notes Proceeds Loans were repaid in full to GlaxoSmithKline Consumer Healthcare Finance Limited on 13 July 2022. Following repayment of the Notes Proceeds Loans, the amounts received by GlaxoSmithKline Consumer Healthcare Finance Limited were made available to CH JVCo in order to fund a portion of the Pre-Demerger Dividend.

The Group’s asset perimeter

On 1 June 2022, GSK, GSKCHH and CH JVCo entered into the Asset Transfer Framework Agreement, which sets out the framework for transferring certain businesses, assets, liabilities and employees that were excluded from the original perimeter of the GSK/Pfizer JV as contemplated in the Pfizer SAPA and others that were included in the original perimeter of the GSK/Pfizer JV but had not yet legally transferred or to record the transfer of “wrong pocket” assets under the Pfizer SAPA, in each case from the GSK Group to the Group (where a “wrong pocket” asset or liability is one that parties have identified as incorrectly being transferred, or not transferred, to the other party in line with the principles of the Pfizer SAPA) (see also “Material Contracts—Pfizer Stock and Asset Purchase Agreement”).

The Asset Transfer Framework Agreement also sets out the framework for transferring certain businesses, assets, liabilities and employees from the Group to the GSK Group to record the transfer of “wrong pocket” assets under the Pfizer SAPA, and to remove assets from the Group that do not relate to the Consumer Healthcare Business, in each case from the Group to the GSK Group. For further information on the Asset Transfer Framework Agreement, please see “Material Contracts—Asset Transfer Framework Agreement”.

Capital Expenditures and Divestures

See “Management’s Discussion And Analysis of Financial Condition And Results Of Operations—Capital Expenditure.”

Public Information

See “Where you can find more information.”

 

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BUSINESS OVERVIEW

This section should be read in conjunction with the section entitled “Presentation of Financial and Other Information—Market and Industry Data” for further information on the use of market and industry data in this prospectus.

Key highlights

We believe that the Group is an exceptional business: a business with significant global scale and reach with leading market share positions, differentiated by its 100 per cent. focus on consumer healthcare and driven by its purpose of delivering better everyday health with humanity. Its leading brands are built on science, innovation and human understanding and are trusted by millions of consumers globally.

The Group is a world leader in consumer healthcare and is the leading business by sales in OTC, VMS and Therapeutic Oral Health.7 The Group’s portfolio of category-leading brands includes the world’s number one Toothpaste for sensitivity,8 the world’s leading Multivitamin, the world’s leading Topical Pain Relief brand, the world’s leading Denture Care brand and a broad range of other large-scale, well-known consumer healthcare brands with a leading global or regional presence.

The Group operates in a market that was worth over £160 billion in 2021 and is more relevant than ever following the COVID-19 pandemic. Consumers are increasingly conscious of their health and, supported by greater digital resources, are willing to take greater ownership of treatment and prevention. This trend is further accelerated in emerging markets by a growing middle-class population with a greater willingness to pay for OTC and wellness products. In addition, an ageing population across many countries, drives greater demand for many of the products in the Group’s categories; for example, the requirements for arthrit