20-F: Haleon Reports Strong 2025 Performance, Outperforms Market

Haleon plc delivered competitive performance in 2025 with 3.0% organic revenue growth and 10.5% organic operating profit growth, driven by productivity gains and strategic acquisitions.

Summary

• Organic revenue grew 3.0% to 11.030 billion GBP (reported -1.8%).
• Adjusted operating profit increased 1.0% to 2.526 billion GBP (organic growth of 10.5%).
• Adjusted operating profit margin increased 60bps to 22.9% (160bps organically).
• Diluted earnings per share increased 17.8% to 18.5p; Adjusted diluted earnings per share increased 5.0% to 18.8p.
• Free cash flow was 1.913 billion GBP, up 194 million GBP on a like-for-like basis.
• Net debt/adjusted EBITDA reduced to 2.6x (from 2.8x in 2024).
• Returned 1.1 billion GBP to shareholders through dividends and a 500 million GBP share buyback.
• Acquired the remaining 12% stake in the TSKF joint venture in China.
• Launched 'Win as One' strategy focusing on consistent growth, productivity, and agile culture.
• Achieved a 55% reduction in net Scope 1 and 2 carbon emissions versus the 2020 baseline.
• Reduced virgin petroleum-based plastic by 9% versus the 2022 baseline, exceeding the 2025 goal.
• Achieved 80% recycle-ready product packaging by 2025.
• Achieved Alliance for Water Stewardship (AWS) core certification across all manufacturing sites by 2025.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a solid performance, with strong underlying profitability and cash flow generation, and excellent progress on ESG targets, despite revenue growth being slightly below internal medium-term expectations due to market headwinds. The strategic acquisitions and operating model evolution position the company for future growth.

Positives

• Strong organic operating profit growth of 10.5% (reported 9.3%).
• Significant improvement in adjusted gross profit margin, up 220bps at constant currency (reported 350bps).
• Robust free cash flow of 1.913 billion GBP, up 194 million GBP like-for-like.
• Reduced net debt/adjusted EBITDA to 2.6x, in line with medium-term guidance.
• Returned substantial value to shareholders: 1.1 billion GBP through dividends and a 500 million GBP share buyback.
• Successful acquisition of the remaining 12% stake in the TSKF joint venture in China, advancing strategic position in a key growth market.
• Outperformed global categories in a challenging market, with 60% of brands growing or maintaining market share.
• Achieved a 55% reduction in net Scope 1 and 2 carbon emissions versus the 2020 baseline, exceeding the PSP target of 48% reduction.
• Exceeded the 2025 goal for reducing virgin petroleum-based plastic, achieving a 9% reduction versus the 2022 baseline.
• Met the 2025 goal for recycle-ready product packaging (80% across portfolio).
• Achieved Alliance for Water Stewardship (AWS) core certification across all manufacturing sites by 2025.
• Increased sustainably-sourced key materials to 90% in the 2025 reporting period.
• Strong employee engagement at 82%.
• Proposed total dividend of 7.1p per ordinary share, up 7.6% year-on-year.

Negatives

• Reported revenue declined 1.8% to 11.030 billion GBP (organic growth of 3.0% was below medium-term expectations).
• Organic growth was held back by a weakening consumer environment and lower levels of cold and flu, particularly in Q4.
• North America revenue declined (4.4)% reported, (0.4)% organically, impacted by weak US consumer confidence and lower cold/flu incidence.
• Respiratory Health reported revenue declined (11.7)% (organic decline of (1.9)%) due to a weak cold and flu season and divestment impact.
• Smokers Health declined double digit.
• Vitamins, Minerals & Supplements declined low-single digit in North America due to weak market conditions and increased competitor promotions.
• Nexium was reclassified from an indefinite to a definite life brand due to challenging market conditions.
• A small impairment charge of 7 million GBP was recorded for smaller indefinite life brands due to sales and volume decline.
• The risk of water stress is considered low, but 0.4% of annual revenue from owned sites could be impacted by 2050 under a No Policy (4C) scenario.
• Wheat and corn sourcing could be affected by climate change, with wheat experiencing a approximately 37% yield decline between 2023 and 2050 under a No Policy (4C) scenario.
• Indirect Scope 3 emissions account for the majority of exposure to carbon costs, with limited ability to influence these costs passed on by suppliers.

Risks

• The Group operates in a highly competitive market, facing increasing competition from various players, which could harm brand loyalty and market share.
• The Group's ability to execute and achieve its marketing and sales strategy and objectives is subject to challenges, including identifying and offering competitively priced products and innovating successfully.
• The Group's business results are impacted by its ability to manage disruptions in the global supply chain, including regulatory issues, environmental events, logistics constraints, labor disputes, and cyber security failures.
• Increasing dependence on key retail customers, changes in their policies, and the emergence of alternative retail channels could negatively affect the Group's business.
• The Group may not be able to develop and commercialize new products effectively, leading to decreased market share and increased R&D costs.
• Failure to retain key talent or attract new talent, especially in senior management, could materially and adversely affect the Group's business.
• Damage to the Group's reputation from negative publicity, social media, litigation, or issues with third-party partners could harm brands and market share.
• Failure to respond effectively to challenges raised by climate change and other sustainability and ESG matters could result in increased costs, supply chain disruption, and reputational damage.
• The Group may not be able to sufficiently protect its intellectual property rights or avoid claims of infringement on the intellectual property rights of others.
• The Group 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 impact operations, customers, and consumers.
• The Group relies on third parties in many aspects of its business, increasing financial, reputational, operational, and legal risks.
• The Group may not successfully acquire and integrate other businesses, license rights to technologies or products, form and manage alliances, or divest businesses.
• The Group has significant debt service obligations, increasing its vulnerability to economic downturns and limiting financial flexibility.
• Goodwill and indefinite life intangible assets are a material component of the Group's balance sheet and may be subject to impairments.
• The Group's business is subject to legal and regulatory risks in all the markets in which it operates, including competition law and anti-bribery regulations.
• The Group faces risks relating to the regulation and perception of the ingredients it uses in its products, potentially leading to formulation adjustments or increased costs.
• The Group's business is subject to market fluctuations and general economic conditions, including inflationary pressures and increases in interest rates.
• Risks related to litigation, disputes, and regulatory investigations could result in significant financial liabilities.
• The Group faces risks associated with significant international operations, including exchange rate risks, political instability, and trade restrictions.
• 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 regional and local conflicts, leading to disruptions and financial consequences.
• Failure to comply with regulation regarding the use of personal data could result in significant fines and reputational harm.
• The Group is exposed to risks relating to fluctuations in currency exchange rates and related hedging activities, which may be ineffective.
• Determinations made by the Group with respect to the application of tax law may result in challenges from or disputes with tax authorities.
• Changes in the tax systems of the countries in which the Group operates could adversely affect the Group's financial condition.
• The Group has indemnification obligations in favor of the GSK Group and the Pfizer Group, which could be significant, particularly concerning Zantac litigation and tax matters.

Future Outlook

For 2026, Haleon expects organic revenue growth of 3-5% and high single-digit adjusted operating profit growth at constant currency. The company maintains its medium-term guidance for organic revenue growth of 4-6% and aims to operate with leverage of approximately 2.5x net debt/adjusted EBITDA. An additional 500 million GBP has been allocated to share buybacks in 2026. The new operating model is anticipated to generate annualised gross cost savings of approximately 175-200 million GBP over the next two years, with a higher proportion of one-time costs in 2026. The 2030 goal for packaging recyclability will be revisited to align with evolving industry standards.

Management Comments

• "Haleon delivered a competitive performance in 2025, outperforming our global categories in a challenging market."
• "We improved our gross margin significantly through the ongoing transformation of our supply chain, allowing us to invest in strengthening our brands while delivering higher profits."
• "The final Pfizer sell-down in March 2025 was an important milestone for us as a standalone business and reflects our significant progress since listing."
• "We have delevered to 2.6x net debt / adjusted EBITDA, enabling us to return substantial value to our shareholders."
• "Our strategic position in China, our second-largest market and a key source of long-term growth, was advanced through the acquisition of the remaining 12% stake in our TSKF joint venture."
• "2025 was an important year for Haleon. We made good progress against our three strategic priorities: delivering competitive growth in a challenging environment; unlocking productivity gains and embedding an agile; performance-focused culture."
• "We aim to unlock 800 million GBP in gross supply chain savings over the next five years through optimising our supply chain, allowing us to deliver operating leverage more consistently to the bottom line."
• "I remain confident in our ability to deliver on our medium-term guidance."
• "We delivered strong financial results, in line with our value creation framework."
• "Working capital continues to be an area where we see further optimisation opportunity."
• "I am confident that Haleon is well positioned to continue to create value for all our stakeholders."

Industry Context

StockSavvy.ai notes that Haleon operates in an attractive global consumer health sector valued at approximately 200 billion GBP, benefiting from macro trends like health and wellness focus, aging populations, and a growing middle class in emerging markets. The sector is competitive, with recent significant M&A activities (Opella, Kenvue, Kimberly-Clark, Procter & Gamble, Reckitt), but Haleon differentiates itself through its purpose, Win as One strategy, consumer understanding, trusted science, and pharmacy channel expertise. The shift towards self-care and online channels, coupled with increasing regulatory scrutiny on health claims and ESG, presents both challenges and opportunities for market leaders like Haleon.

Comparison to Industry Standards

• Haleon is the global #1 player in Vitamins, Minerals & Supplements (VMS) and Sensitivity toothpaste (with Sensodyne).
• Haleon is the #2 player in Gum Health toothpaste (with parodontax) and the #1 player in Denture Care (with Corega/Polident/Poligrip).
• Haleon is the #1 manufacturer in the global Digestive Health category, driven by its leading position in Antacids.
• Haleon's 2025 organic revenue growth of 3.0% is below its medium-term guidance of 4-6%, indicating a slight underperformance relative to its own stated ambitions, though it outperformed the broader market.
• The reduction in net debt/adjusted EBITDA to 2.6x is in line with its medium-term target of approximately 2.5x, demonstrating strong financial management compared to its own benchmarks.
• Achieving a 55% reduction in net Scope 1 and 2 carbon emissions versus the 2020 baseline exceeds the PSP target of 48% reduction, showcasing strong performance against internal ESG benchmarks.
• Exceeding the 2025 goal for reducing virgin petroleum-based plastic (9% reduction versus 10% target) and meeting the 80% recycle-ready packaging goal demonstrates strong performance against internal sustainability targets.

Management Changes

Corporate Governance

Legal Proceedings

• GSK and/or Pfizer have been named as defendants in personal injury lawsuits, as well as economic injury and medical monitoring class actions, filed in the US involving Zantac. The Group is not a party to any Zantac claims and has never marketed Zantac in any form in the US or Canada. The Group has rejected notices of potential claims for indemnification relating to OTC Zantac from GSK and Pfizer.
• The Group is party to civil proceedings in Germany brought by or on behalf of retailers against the Group and other manufacturers of branded drugstore products, alleging that information exchange within a German trademark association working group from 2004 to 2006 led to higher purchase prices.

Related Party Transactions

• Pfizer Inc. ceased to be a related party of the Group under IAS 24 after October 3, 2024, following a reduction in its voting rights to 15%.
• Any amounts owed from GSK as of December 31, 2024, in relation to arrangements set up with GSK before the demerger activities, were settled during the period ended December 31, 2025.
• The Pfizer Relationship Agreement terminated automatically on January 17, 2025, when Pfizer ceased to hold at least 10% of Haleon's ordinary shares.
• No new related party transactions that have or could have materially affected the financial position or performance of the Group occurred for the period ended December 31, 2025.

Stakeholder Impact

• Shareholders: Strong financial performance, significant capital returns (1.1 billion GBP in 2025), proposed dividend increase (7.6% YoY), and share buybacks aim to generate industry-leading shareholder returns.
• Employees: Focus on building an agile, performance-focused culture, high employee engagement (82%), development programs, and a new operating model to drive growth and agility. Wellbeing initiatives and commitment to inclusion and belonging.
• Consumers: Strategy to reach 1 billion more consumers by 2030, focusing on health literacy, access to affordable products, and tackling bias/prejudice. Innovation-led premiumization and expanding reach in emerging markets.
• Customers (retailers, pharmacies): Strong channel mix, innovation, and brands help outperform the market. Partnership programs and category insights provided to enhance offerings.
• Suppliers: Engagement through sustainability forums and training programs to reduce carbon footprint and promote sustainable sourcing. Supplier Code of Conduct sets ethical and environmental expectations.
• Creditors: Reduced net debt/adjusted EBITDA to 2.6x, maintaining a strong investment-grade credit rating (S&P: BBB+, Moody's: A3).

Next Steps

• Implement new operating model by mid-2026.
• Update segmental disclosures in half-year reporting due to the new operating model.
• Allocate 500 million GBP to share buybacks in 2026.
• Continue to drive growth, productivity, and culture change agenda.
• Build capabilities in innovation, marketing, R&D, information, data analytics, and customer excellence.
• Maintain strong corporate governance and uphold robust ethical standards.
• Revisit 2030 goal to make all packaging recyclable or reusable to align with latest industry developments.
• Invest in projects to become water neutral at the Nairobi, Kenya site by the end of 2029 (starting 2026).
• Annual General Meeting (AGM) on April 29, 2026, to approve the final dividend.

Key Dates

Recommendation

Haleon demonstrated solid operational execution in 2025, outperforming the market in a challenging environment and making significant progress on strategic and ESG initiatives. The strong cash flow generation and disciplined capital allocation, including debt reduction and shareholder returns, are positive. However, organic revenue growth was slightly below medium-term guidance, and market headwinds persist. The new operating model and continued focus on productivity are expected to drive future growth, but the benefits are yet to fully materialize. Given the mixed performance against internal revenue targets and ongoing market uncertainties, a 'hold' recommendation is appropriate for investors to observe the impact of the strategic changes and market conditions on future performance.

Keywords

Consumer Healthcare, OTC, Vitamins Minerals Supplements, Pain Relief, Respiratory Health, Digestive Health, Therapeutic Skin Health, SEC Filing, Financial Results, Share Buyback, Debt Reduction, ESG, Sustainability, Supply Chain, Innovation, Market Share, Global Health, Corporate Governance, Risk Management, Haleon