haleon-prospectus.pdf

This document comprises a prospectus for the purposes of Article 6 of Regulation (EU) 2017/1129 (as it forms part of retained

European Union (“EU”) law as defined in the European Union (Withdrawal) Act 2018) (the “Prospectus Regulation”), relating to

Haleon plc (the “Company” and together with its subsidiaries, the “Group”) and has been approved by the Financial Conduct

Authority of the United Kingdom (“FCA”), as competent authority under the Prospectus Regulation, in accordance with section

87A of the Financial Services and Markets Act 2000 of England and Wales, as amended (“FSMA”), and prepared and made

available to the public in accordance with the Prospectus Regulation Rules of the FCA made under section 73A of FSMA (the

“Prospectus Regulation Rules”). The FCA only approves this Prospectus as meeting the standards of completeness,

comprehensibility and consistency imposed by the Prospectus Regulation and such approval should not be considered as an

endorsement of the issuer that is, or the quality of the securities that are, the subject of this Prospectus. Investors should make

their own assessment as to the suitability of investing in the securities. This Prospectus is not an offer or invitation to the public to

subscribe for or purchase fully paid ordinary shares in the capital of the Company (“Haleon Shares”) but is issued solely in

connection with the admission of Haleon Shares to the premium listing segment of the Official List of the FCA and to the London

Stock Exchange’s main market for listed securities (“Admission”). It is proposed that Admission will take place shortly following

the Demerger and, unless the context requires otherwise, this Prospectus has been prepared on the assumption that the

Demerger Resolution will be passed at the GSK General Meeting and that the Demerger will become effective as proposed.

Application will be made to the FCA for all Haleon Shares to be admitted to the premium listing segment of the Official List of the

FCA and to the London Stock Exchange for Haleon Shares to be admitted to trading on the London Stock Exchange’s main

market for listed securities. It is expected that Admission will become effective, and that dealings in Haleon Shares will

commence on the London Stock Exchange, at 8.00 a.m. on 18 July 2022 (International Security Identification Number:

GB00BMX86B70).

This Prospectus is issued solely in connection with Admission. This Prospectus does not constitute or form part of an

offer or invitation to sell or issue, or any solicitation of an offer to purchase or subscribe for, any securities by any

person. No offer of Haleon Shares is being made in any jurisdiction.

This Prospectus should be read in its entirety. In particular, investors should take account of the section entitled “Risk Factors”

which contains a discussion of certain risks relating to the business of the Company. Investors should not solely rely on the

information summarised in the section entitled “Summary”.

(incorporated in England and Wales under the Companies Act 2006 with registered number 13691224)

Introduction to the premium listing segment of the Official List and

admission to trading on the main market of the London Stock Exchange

Joint Sponsors

Citigroup Global Markets Limited

Goldman Sachs International

Merrill Lynch International

Citigroup Global Markets Limited (“Citi”), which is authorised by the Prudential Regulation Authority and regulated in the United

Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively for the Company and

no one else in connection with Admission and the Demerger and it will not regard any other person (whether or not a recipient of

this Prospectus) as a client in relation to Admission or the Demerger and will not be responsible to anyone other than the

Company for providing the protections afforded to its clients or for providing advice in relation to Admission or the Demerger or

any other transaction, matter, or arrangement referred to in this Prospectus.

Apart from the responsibilities and liabilities, if any, which may be imposed on Citi by FSMA or the regulatory regime established

thereunder or under the regulatory regime of any other applicable jurisdiction where exclusion of liability under the relevant

regulatory regime would be illegal, void or unenforceable, neither Citi nor any of its affiliates accepts any responsibility

whatsoever for the contents of this Prospectus including its accuracy, completeness and verification or for any other statement

made or purported to be made by it, or on its behalf, in connection with the Company or its subsidiaries, Haleon Shares or

Admission or the Demerger. Citi and its affiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and

any liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise be found to have

in respect of this Prospectus or any such statement. No representation or warranty, express or implied, is made by Citi or any of

its affiliates as to the accuracy, completeness, verification or sufficiency of the information set out in this Prospectus, and nothing

in this Prospectus will be relied upon as a promise or representation in this respect, whether or not to the past or future.

Goldman Sachs International (“Goldman Sachs”), which is authorised by the Prudential Regulation Authority and regulated in

the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively for the

Company and no one else in connection with Admission and the Demerger and it will not regard any other person (whether or

not a recipient of this Prospectus) as a client in relation to Admission or the Demerger and will not be responsible to anyone

other than the Company for providing the protections afforded to its clients or for providing advice in relation to Admission or the

Demerger or any other transaction, matter, or arrangement referred to in this Prospectus.

Apart from the responsibilities and liabilities, if any, which may be imposed on Goldman Sachs by FSMA or the regulatory regime

established thereunder or under the regulatory regime of any other applicable jurisdiction where exclusion of liability under the

relevant regulatory regime would be illegal, void or unenforceable, neither Goldman Sachs nor any of its affiliates accepts any

responsibility whatsoever for the contents of this Prospectus including its accuracy, completeness and verification or for any

other statement made or purported to be made by it, or on its behalf, in connection with the Company or its subsidiaries, Haleon

Shares or Admission or the Demerger. Goldman Sachs and its affiliates accordingly disclaim, to the fullest extent permitted by

applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might

otherwise be found to have in respect of this Prospectus or any such statement. No representation or warranty, express or

implied, is made by Goldman Sachs or any of its affiliates as to the accuracy, completeness, verification or sufficiency of the

information set out in this Prospectus, and nothing in this Prospectus will be relied upon as a promise or representation in this

respect, whether or not to the past or future.

Merrill Lynch International (“BofA Securities”), which is authorised by the Prudential Regulation Authority and regulated in the

United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority, is acting exclusively for the

Company and no one else in connection with Admission and the Demerger and it will not regard any other person (whether or

not a recipient of this Prospectus) as a client in relation to Admission or the Demerger and will not be responsible to anyone

other than the Company for providing the protections afforded to its clients or for providing advice in relation to Admission or the

Demerger or any other transaction, matter, or arrangement referred to in this Prospectus.

Apart from the responsibilities and liabilities, if any, which may be imposed on BofA Securities by FSMA or the regulatory regime

established thereunder or under the regulatory regime of any other applicable jurisdiction where exclusion of liability under the

relevant regulatory regime would be illegal, void or unenforceable, neither BofA Securities nor any of its affiliates accepts any

responsibility whatsoever for the contents of this Prospectus including its accuracy, completeness and verification or for any

other statement made or purported to be made by it, or on its behalf, in connection with the Company or its subsidiaries, Haleon

Shares or Admission or the Demerger. BofA Securities and its affiliates accordingly disclaim, to the fullest extent permitted by

applicable law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which they might

otherwise be found to have in respect of this Prospectus or any such statement. No representation or warranty, express or

implied, is made by BofA Securities or any of its affiliates as to the accuracy, completeness, verification or sufficiency of the

information set out in this Prospectus, and nothing in this Prospectus will be relied upon as a promise or representation in this

respect, whether or not to the past or future.

The distribution of this Prospectus in certain jurisdictions may be restricted by law and therefore persons into whose possession

this Prospectus comes should inform themselves about and observe any such restrictions in relation to Haleon Shares or this

Prospectus, including those in the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation

of the securities laws of any such jurisdiction. Except in the United Kingdom, no action has been taken or will be taken in any

jurisdiction that would permit possession or distribution of this Prospectus in any country or jurisdiction where action for that

purpose is required. Accordingly, this Prospectus may not be distributed or published in any jurisdiction where to do so would

breach any securities laws or regulations of any such jurisdiction or give rise to an obligation to obtain any consent, approval or

permission, or to make any application, filing or registration. Failure to comply with these restrictions may constitute a violation of

the securities laws or regulations of such jurisdictions.

Australia

This document and the offer of Haleon Shares are only made available in Australia to persons to whom an offer of securities can

be made without disclosure in accordance with applicable exemptions under the Australian Corporations Act 2001 (Cth) as

modified by ASIC Instrument 22-0413 (the “Corporations Act”). This document is not a prospectus, product disclosure

statement or any other formal “disclosure document” for the purposes of Australian law and is not required to, and does not,

contain all the information which would be required in a “disclosure document” under Australian law. This document has not been

and will not be lodged or registered with the Australian Securities & Investments Commission or the Australian Securities

Exchange and the Company is not subject to the continuous disclosure requirements that apply in Australia.

Nothing in this document should be construed as legal, business or tax advice nor as financial product advice for the purposes of

Chapter 7 of the Corporations Act. Australia resident shareholders should be aware that the offer of Haleon Shares for resale in

Australia within 12 months of their issue may, under section 707(3) of the Corporations Act, require disclosure to investors under

Part 6D.2 of the Corporations Act if none of the exemptions in section 708 of the Corporations Act apply to the re-sale.

Canada

The Haleon Shares to be delivered to Shareholders resident in Canada have not been qualified for distribution to the public in

Canada and may not be resold in Canada except pursuant to a prospectus filed with the relevant Canadian securities regulatory

authorities, or under an exemption from the prospectus requirements of applicable Canadian securities laws. No securities

commission in Canada has reviewed this document or the merits of the Demerger. Haleon is not a reporting issuer in any

province or territory of Canada and the Haleon Shares are not listed on any stock exchange in Canada, and there is currently no

public market for the Haleon Shares in Canada. Shareholders resident in Canada should consult their own advisors prior to any

resale of the Haleon Shares they receive in connection with the Demerger.

China

This document does not constitute a public offer of the Haleon Shares, whether by sale or subscription, in the People’s Republic

of China (the “PRC”). The Haleon Shares are not being offered or sold directly or indirectly in the PRC to or for the benefits of

legal or natural persons of the PRC.

Further, no legal or natural persons of the PRC may directly or indirectly purchase any of the Haleon Shares or any beneficial

interest therein without obtaining all prior PRC’s governmental approvals that are required, whether statutorily or otherwise.

Persons who come into possession of this document are required by the Company and its representatives to observe these

restrictions.

Hong Kong

The contents of this document have not been reviewed or approved by any regulatory authority in Hong Kong. You are advised

to exercise caution in relation to the delivery of the Haleon Shares. If you are in any doubt about any of the contents of this

document, you should obtain independent professional advice.

The Haleon Shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute

an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws

of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of

Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a

“prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of

Hong Kong), and no advertisement, invitation or document relating to the Haleon Shares may be issued or may be in the

possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the

contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of

Hong Kong) other than with respect to Haleon Shares which are or are intended to be disposed of only to persons outside Hong

Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong

Kong) and any rules made thereunder.

This document is confidential to the person to whom it is addressed and no person to whom a copy of this document is issued

may issue, circulate, distribute, publish, reproduce or disclose (in whole or in part) this document to any other person in Hong

Kong without the consent of GSK.

New Zealand

The Haleon Shares are not being offered to the public within New Zealand. In New Zealand, the Haleon Shares are being issued

only to existing security holders of GSK with registered addresses in New Zealand in reliance on the Financial Markets Conduct

(Haleon plc) Exemption Notice 2022.

This document has been prepared in compliance with the laws of the United Kingdom. This document is not a product disclosure

statement under the Financial Markets Conduct Act 2013 (the “FMC Act”) or other similar offering or disclosure document under

New Zealand law and has not been registered, filed with, or approved by any New Zealand regulatory authority or under or in

accordance with the FMC Act or any other relevant law in New Zealand. It does not contain all the information that a product

disclosure document, under New Zealand law, is required to contain.

Singapore

The offer of the Haleon Shares is made only to and directed at, and the Haleon Shares are only available to, persons in

Singapore who are existing Shareholders of the Company.

This document has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this document

and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Haleon

Shares may not be circulated or distributed, nor may the Haleon Shares be offered or sold, or be made the subject of an

invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than: (i) to existing

Shareholders of the Company under Section 273(1)(cd)(i) of the Securities and Futures Act, 2001 of Singapore (the “SFA”); or

(ii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Switzerland

This document does not constitute a prospectus pursuant to the Swiss Financial Services Act (“FinSA”). No application has or

will be made to admit the shares to trading on any trading venue (exchange or multilateral trading facility) in Switzerland. This

document is distributed in Switzerland only relying on the exemption of article 37(1)(e) FinSA provided for demergers and only

together with the GSK Shareholder Circular.

The Company intends to file with the U.S. Securities and Exchange Commission (the “SEC”) a registration statement on Form

20-F (the “Form 20-F”) under the U.S. Securities Exchange Act of 1934, as amended (the “US Exchange Act”), with respect to

the American depositary shares each representing 2 Haleon Shares (the “Haleon ADSs”). This Prospectus does not contain all

the information included in the Form 20-F. For further information with respect to the Haleon ADSs, please refer to the Form

20-F. The Company also intends to make an application to the New York Stock Exchange (the “NYSE”) for the Haleon ADSs to

be admitted to listing and trading on the NYSE.

This Prospectus is dated 1 June 2022.

TABLE OF CONTENTS

SUMMARY 5

EXPECTED TIMETABLE OF PRINCIPAL EVENTS 16

RISK FACTORS 17

PRESENTATION OF FINANCIAL AND OTHER INFORMATION 46

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS 57

PART I KEY HIGHLIGHTS AND DEVELOPMENT OF THE GROUP 59

PART II MARKET OVERVIEW 65

PART III BUSINESS OVERVIEW 71

PART IV OVERVIEW OF THE DEMERGER AND SEPARATION 115

PART V DIRECTORS, SENIOR MANAGERS, CORPORATE GOVERNANCE AND

REMUNERATION

120

PART VI SELECTED FINANCIAL INFORMATION 131

PART VII OPERATING AND FINANCIAL REVIEW 147

PART VIII CAPITALISATION AND INDEBTEDNESS 208

PART IX UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP 210

PART X REGULATORY OVERVIEW 218

PART XI TAXATION 235

PART XII ADDITIONAL INFORMATION 242

SCHEDULE I DEFINITIONS AND GLOSSARY 320

SCHEDULE II HISTORICAL FINANCIAL INFORMATION OF GLAXOSMITHKLINE

CONSUMER HEALTHCARE HOLDINGS (NO.2) LIMITED

334

SCHEDULE III PFIZER HISTORICAL FINANCIAL INFORMATION 422

SUMMARY

1. INTRODUCTION AND WARNINGS

1.1 Details of the issuer

The issuer is Haleon plc (the “Company”), a public limited company incorporated in England

and Wales with registered number 13691224.

The Company’s registered and head office is at 980 Great West Road, Brentford, Middlesex TW8

9GS, United Kingdom. The telephone number of the Company’s registered office is

+44 (0)20 8047 5000 and the legal entity identifier of the Company is 549300PSB3WWEODCUP19.

1.2 Details of the securities

On Admission, the Haleon Shares will be registered with an ISIN of GB00BMX86B70 and

SEDOL of BMX86B7. It is expected that the Haleon Shares will be traded on the main market

for listed securities of the London Stock Exchange under the ticker symbol “HLN”.

1.3 Identity and contact details of the competent authority approving this Prospectus

This Prospectus has been approved by the FCA, as competent authority, with its head office at

12 Endeavour Square, London E20 1JN and telephone number: +44 (0)20 7066 1000, in

accordance with the Prospectus Regulation.

This Prospectus was approved by the FCA on 1 June 2022.

1.4 Warnings

This summary has been prepared in accordance with Article 7 of the Prospectus Regulation

and should be read as an introduction to this Prospectus. Any decision to invest in the Haleon

Shares should be based on consideration of the Prospectus as a whole by the investor. Any

investor could lose all or part of their invested capital and, where any investor’s liability is not

limited to the amount of the investment, it could lose more than the invested capital.

Civil liability attaches only to those persons who have tabled the summary, including any

translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read

together with the other parts of the Prospectus or if it does not provide, when read together

with the other parts of the Prospectus, key information in order to aid investors when

considering whether to invest in the Haleon Shares.

2. KEY INFORMATION ON THE ISSUER

2.1 Who is the issuer of the securities?

The Company was incorporated in England and Wales on 20 October 2021 as DRVW 2022

Limited with registered number 13691224. DRVW 2022 Limited 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 Company is domiciled in England and Wales and its legal entity

identifier is 549300PSB3WWEODCUP19.

(A) Principal activity

Following the Demerger, the principal activity of the Company will be to act as the ultimate

holding company of the Group. The principal legislation under which the Company operates is

the Companies Act and regulations made thereunder.

(B) Major shareholders

The Company was incorporated in anticipation of the Demerger, and is not a member of the

GSK Group. As at the date of this Prospectus, the entire issued share capital of the Company

is held and controlled by David Redfern, Adam Walker, Victoria Whyte and Subesh Williams,

who each hold four fully paid ordinary shares of £1.25 in the capital of the Company.

As at the Latest Practicable Date, and so far as is known to the Company by virtue of the

notifications made to GSK plc pursuant to the Companies Act, the Market Abuse Regulation

and/or the Disclosure Guidance and Transparency Rules, as a result of the Demerger and the

Share Exchanges, the following will, on Admission, be directly or indirectly interested in

3 per cent. or more of the Company’s issued share capital:

Name of shareholder Percentage of total voting rights

Pfizer 32

GSK Up to 6

SLP1* 4.74

BlackRock, Inc.** 3.60

* The other SLPs, being SLP2 and SLP3, will each have a less than 3 per cent. holding in the

Company on Admission so are not included in this table.

**BlackRock, Inc. is included in this table on the basis of its major shareholding in GSK of 6.40

per cent. (as at the date of notification to GSK).

The Executive Directors of the Company are:

Director Position

Brian McNamara Chief Executive Officer

Tobias Hestler Chief Financial Officer

(D) Statutory auditor

The auditor of GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited since the date

of its incorporation has been Deloitte, whose registered office is at 1 New Street Square,

London, EC4A 3HQ. Deloitte is registered to carry out audit work in the United Kingdom by the

Institute of Chartered Accountants in England and Wales. Deloitte has audited the statutory

consolidated annual accounts of GlaxoSmithKline Consumer Healthcare Holdings (No.2)

Limited as at and for the years ended 31 December 2021, 2020 and 2019.

The Company was incorporated on 20 October 2021. On 3 February 2022, the Company

appointed Deloitte as its UK statutory auditor for the year ending 31 December 2022.

In connection with the Company’s registration of securities under the U.S. Securities Exchange

Act of 1934, on 24 March 2022, the Company appointed KPMG LLP to audit the Company’s

financial statements for the year ending 31 December 2022 under the rules of the SEC and

U.S. Public Company Accounting Oversight Board (PCAOB).

The Company expects to conduct an audit tender process for the audit of the Company’s

financial statements for the year ending 31 December 2023, which would be subject to

shareholder approval at the Company’s 2023 annual general meeting.

2.2 What is the key financial information regarding the issuer?

Selected historical key financial information

The tables below set out selected key financial information for the Group for the financial years

ended 31 December 2021, 2020 and 2019 and for the three months ended 31 March 2022 and

31 March 2021:

Unaudited consolidated income statement

For the three months ended 31 March 2022 and 31 March 2021 2022 2021

£m £m

Revenue 2,627 2,306

Cost of sales (1,014) (904)

Gross Profit 1,613 1,402

Selling, general and administration (1,086) (1,009)

Research and development (64) (54)

Other operating income 3 9

Operating profit 466 348

Finance income 76

Finance expense (8) (4)

Net finance (costs)/income (1) 2

Profit before tax 465 350

Income tax (108) (101)

Profit after tax for the quarter 357 249

Profit attributable to shareholders 343 233

Profit attributable to non-controlling interests 14 16

Basic earnings per share (pence)

34,300 23,300

Diluted earnings per share (pence)

34,300 23,300

The number of shares in issue above is not representative of the number of shares in issue

in the future. For further detail, please see Note 15 of Schedule II (Historical Financial

Information of GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited).

Consolidated balance sheet

As at 31 March 2022 and 31 March 2021 31 March 2022 31 December 2021

£m

(unaudited)

£m

(audited)

Non-current assets

Property, plant and equipment 1,587 1,563

Right of use assets 100 99

Intangible assets 27,692 27,195

Deferred tax assets 314 312

Post-employment benefit assets 11 11

Derivative financial instruments 8 12

Other non-current assets 13 8

Total non-current assets 29,725 29,200

Current assets

Inventories 986 951

Trade and other receivables 2,415 2,207

Loan amounts owing from related parties 11,330 1,508

Cash and cash equivalents and liquid investments 383 414

Derivative financial instruments 18 5

Current tax recoverable 166 166

Total current assets 15,298 5,251

Total assets 45,023 34,451

Current liabilities

Short-term borrowings (80) (79)

Trade and other payables (3,142) (3,002)

Loan amounts owing to related parties (1,461) (825)

Derivative financial instruments (15) (18)

Current tax payable (242) (202)

Short-term provisions (86) (112)

Total current liabilities (5,026) (4,238)

Non-current liabilities

Long-term borrowings (9,363) (87)

Deferred tax liabilities (3,472) (3,357)

Pensions and other post-employment benefits (256) (253)

Derivative financial instruments (21) (1)

Other provisions (30) (27)

Other non-current liabilities (6) (8)

Total non-current liabilities (13,148) (3,733)

Total liabilities (18,174) (7,971)

Net assets 26,849 26,480

Equity

Share capital 11

Other reserves (11,502) (11,632)

Retained earnings 38,211 37,986

Shareholders’ equity 26,710 26,355

Non-controlling interests 139 125

Total equity 26,849 26,480

Consolidated income statement

For the years ended 31 December 2021, 31 December 2020 and 31 December 2019

£m 2021 2020 2019

Revenue 9,545 9,892 8,480

Cost of sales (3,595) (3,982) (3,678)

Gross Profit 5,950 5,910 4,802

Selling, general and administration (4,086) (4,220) (3,596)

Research and development (257) (304) (292)

Other operating income/(expense) 31 212 (17)

Operating profit 1,638 1,598 897

Finance income 17 20 24

Finance expense (19) (27) (35)

Net finance costs (2) (7) (11)

Profit before tax 1,636 1,591 886

Income tax (197) (410) (199)

Profit after tax 1,439 1,181 687

Profit attributable to shareholders 1,390 1,145 655

Profit attributable to non-controlling interests 49 36 32

Consolidated balance sheet

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 years ended 31 December 2021, 31 December 2020 and 31 December 2019

£m 2021 2020 2019

Cash flow from operating activities

Profit after tax 1,439 1,181 687

Adjustments reconciling profit after tax to cash generated from

operations 227 780 408

Cash generated from operations 1,666 1,961 1,095

Taxation paid (310) (554) (309)

Net cash inflow from operating activities 1,356 1,407 786

Net cash (outflow)/inflow from investing activities (33) 1,030 291

Net cash (outflow) from financing activities (1,236) (2,437) (925)

Increase in cash and bank overdrafts 87 - 152

Cash and bank overdrafts at the beginning of the year 323 329 191

Exchange adjustments (5) (6) (14)

Increase in cash and bank overdrafts 87 - 152

Cash and cash equivalents at end of year 405 323 329

(A) Selected pro forma key financial information

This Prospectus presents certain pro forma financial information for the Group to illustrate the

impact of the Notes Proceeds Loans, the receipt of related party loans, additional borrowings

and the payment of the Pre-Separation Dividends (together, the “Pro Forma Transactions”)

on the net assets of the Group as if the Pro Forma Transactions had taken place on 31 March

2022.

The unaudited pro forma statement of net assets of the Group has been prepared on the basis

of the unaudited interim financial information of the Group as at 31 March 2022, the date to

which the latest unaudited financial information in relation to the Group was prepared. The

unaudited pro forma statement of net assets of the Group has been prepared in accordance

with Annex 20 of the PR Regulation and pursuant to Listing Rule 13.3.3R in a manner

consistent with the accounting policies of the Company.

Because of its nature, the unaudited pro forma statement of net assets addresses a

hypothetical situation and, therefore, does not represent the Group’s actual financial position or

results. It may not, therefore, give a true picture of the Group’s financial position or results nor

is it indicative of the results that may, or may not, be expected to be achieved in the future. The

pro forma statement of net assets has been prepared for illustrative purposes only and in

accordance with Annex 20 of the PR Regulation.

Unaudited pro forma Statement of Net Assets

Pro forma adjustments related to the

Transactions

Group Net

Assets at 31

March 2022

Receipt of

Notes

Proceeds

Loans and

related party

loans

Additional

borrowings

Pre-Separation

Dividends

Transaction

costs

Unaudited

pro forma at

31 March

2022

£m

(Note 1)

£m

(Note 2)

£m

(Note 3)

£m

(Note 4)

£m

(Note 5)

£m

(Note 6)

Non-current Assets

Property, plant and equipment 1,587 - - - - 1,587

Right of use assets 100 - - - - 100

Intangible assets 27,692 - - - - 27,692

Deferred tax assets 314 - - - - 314

Post-employment benefit assets 11 - - - - 11

Derivative financial instruments 8 8

Other non-current assets 13 - - - - 13

Total non-current assets 29,725 - - - - 29,725

Current assets -

Inventories 986 - - - - 986

Trade and other receivables 2,415 - - - - 2,415

Loan amounts owing from related parties 11,330 (11,330) - - - -

Cash and cash equivalents and liquid

investments

383 9,869 1,435 (11,039) (84) 564

Derivative financial instruments 18 - - - - 18

Current tax recoverable 166 -

--166

Total current assets 15,298 (1,461) 1,435 (11,039) (84) 4,149

Total assets 45,023 (1,461) 1,435 (11,039) (84) 33,874

Current liabilities

Short-term borrowings (80) - - - - (80)

Trade and other payables (3,142) - - - - (3,142)

Loan amounts owing to related parties (1,461) 1,461 - - - -

Derivative financial instruments (15) - - - - (15)

Current tax payable (242) - - - - (242)

Short-term provisions (86) - - - - (86)

Total current liabilities (5,026) 1,461 - - - (3,565)

Non-current liabilities

Long-term borrowings (9,363) - (1,435) (25) - (10,823)

Deferred tax liabilities (3,472) - - - (3,472)

Pensions and other post-employment

benefits

(256) - - - (256)

Derivative financial instruments (21) (21)

Other provisions (30) - - - (30)

Other non-current liabilities (6) - - -

(6)

Total non-current liabilities (13,148) - (1,435) (25) - (14,608)

Total liabilities (18,174) 1,461 (1,435) (25) - (18,173)

Net assets 26,849 - -

(11,064) (84) 15,701

Notes

(1) The net assets of the Group as at 31 March 2022 have been extracted without material adjustment from the consolidation schedules

used to prepare the Interim Financial Information for the Group for the three months ended 31 March 2022 set out in Part VI (Selected

Financial Information).

(2) This adjustment reflects the receipt of the Notes Proceeds Loans and related party loans. Under the terms of the Notes Proceeds Loan

Agreements, the Notes Proceeds Loans will be repaid in full upon notice that the Demerger Resolution has been approved by GSK and

Pfizer.

Notes £m

Receipt of loan amounts owing from related parties a 11,330

Payment of loan amounts owing to related parties b

(1,461)

Total 9,869

a. Receipt of loan amounts owing from related parties includes Notes Proceeds Loans of £9,210 million and loan amounts

owing from GSK as part of the Group’s banking arrangements of £2,120 million.

b. Payment of loan amounts owing to related parties includes loan amounts owing to GSK as part of the Group’s banking

arrangements of £1,461 million.

(3) Additional borrowings to fund the payment of the Pre-Demerger Dividend, including, but not limited to, the Term Loan Facility. See also

paragraph 7.4 of Part VII (Operating and Financial Review).

(4) The Pre-Separation Dividends include the Balancing Dividend, Pre-Demerger Dividend, and the Sweep-up Dividend.

Notes £m

Balancing Dividend a 53

Pre-Demerger Dividend b 10,345

Sweep-up Dividend c 641

Pre-Separation Dividends 11,039

a. The Balancing Dividend reflects the cash dividend of £53 million to be paid by the Group to GSKCHH prior to Separation

in connection with the £25 million of Non-Voting Preference Shares issued to Pfizer recognised in long-term borrowings.

b. The Pre-Demerger Dividend reflects the cash dividend of £10,345 million to be paid by the Group to GSKCHH and

PFCHH ahead of Separation, in accordance with the terms of the Pfizer SHA, which, in summary, requires an amount

equal to the Pre-Separation Debt Proceeds of the Group less £300 million to be paid to GSKCHH and PFCHH prior to

Separation.

£m

Pre-Separation Debt Proceeds 10,645

Less £300m (300)

Pre-Demerger Dividend 10,345

c. The Sweep-up Dividend reflects the cash dividend of £641 million to be paid by the Group to GSKCHH and PFCHH, in

accordance with the terms of the Pfizer SHA which, in summary, requires all readily available cash in excess of

£300 million to be paid to GSKCHH and PFCHH prior to Separation. The actual amount paid is subject to, amongst other

things, additional cash flow generated by, or additional investments made by, or dividends paid in the ordinary course of

business by the Group up until the point of Separation. As such, the actual amount of the Sweep-up Dividend may

therefore differ from the amount referred to above.

£m

Cash and cash equivalents and liquid investments as of 31 March 2022 383

Receipt of Notes Proceeds Loans and related party loans 9,869

Additional borrowings 1,435

Payment of Pre-Demerger Dividend (10,345)

Transaction costs (84)

Balancing Dividend (53)

Less trapped cash* (264)

Less £300m (300)

Sweep-up Dividend 641

* Cash and cash equivalents that are in jurisdictions that have absolute cross-border restrictions on transfers of cash between

members of the Group.

(5) Transaction costs comprise charges for services relating to the Transactions. The Group expects to incur a cumulative total

£117 million of transaction costs in relation to the Transactions. The Group has incurred £33 million of transaction related costs as of

31 March 2022. Therefore, a transaction cost adjustment of £84 million has been made.

(6) The Pro Forma Financial Information does not reflect any changes in the trading results or financial position of the Group since

31 March 2022. None of the adjustments are expected to have a continuing effect on the Group.

(7) On a pro forma basis, net debt of the Group as at 31 March 2022 would have been £10,349 million.

Group net debt

at 31 March

2022

Pro forma

adjustments

Notes

Unaudited pro forma

at 31 March 2022

£m £m £m

Short-term borrowings 80 80

Long-term borrowings 9,363 1,460 a 10,823

Derivative financial liabilities 36 36

Cash and cash equivalents and liquid

investments

(383) (181) b (564)

Derivative financial assets

(26) (26)

Net debt 9,070 1,279 10,349

a. Additional borrowings to fund the payment of the Pre-Demerger Dividend, including, but not limited to, the Term Loan

Facility. See also paragraph 7.4 of Part VII (Operating and Financial Review).

b. Receipt of Notes Proceeds Loans and related party loans of £9,869 million, additional borrowings of £1,435 million,

payment of Pre-Separation Dividends of £11,039 million and the payment of Transaction costs of £84 million.

2.3 What are the key risks that are specific to the issuer?

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.

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’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.

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

Separation.

3. KEY INFORMATION ON THE SECURITIES

3.1 What are the main features of the securities?

(A) Type, class and ISIN of the securities

The Haleon Shares are fully paid ordinary shares in the capital of the Company with a nominal

value of £1.25 each (to be reduced to 1 pence following the Capital Reduction).

On Admission, the Haleon Shares will be registered with an ISIN of GB00BMX86B70 and

SEDOL of BMX86B7. It is expected that the Haleon Shares will be traded on the main market

for listed securities of the London Stock Exchange under the ticker symbol “HLN”.

(B) Currency of the securities

The Haleon Shares are and, on Admission will be, denominated in Pounds Sterling.

Immediately following completion of the Demerger, the number of Haleon Shares in issue will

be equal to the number of GSK Shares in issue at the Shareholder Record Time. As at the

Latest Practicable Date, there were 5,084,048,734 GSK Shares in issue (excluding ordinary

shares held in treasury).

Shortly after completion of the Demerger, the following share-for-share exchanges will occur:

(i) GSK will transfer its entire holding of GSKCHH B Ordinary Shares,

representing an 8.01 per cent. stake in GSKCHH’s ordinary share capital, to

the Company in exchange for 502,868,434 Haleon Shares, less a number of

Haleon Shares that is equal to the number of Excess GSK Shares. As at the

Latest Practicable Date, the number of Haleon Shares expected to be held by

GSK at Admission is expected to represent up to 6 per cent. of the total issued

share capital of the Company;

(ii) the SLPs (being certain Scottish limited partnerships set up to provide a

funding mechanism pursuant to which GSK will provide additional funding for

GSK’s UK Pension Schemes) will transfer their respective holdings of

GSKCHH C Ordinary Shares, representing 11.03 per cent. (in aggregate) of

GSKCHH’s ordinary share capital, to the Company in exchange for such

number of new Haleon Shares as is required so that, on Admission, the SLPs

will together hold Haleon Shares representing 7.5 per cent. (in aggregate and

to the nearest whole Haleon Share) of the total issued share capital of the

Company; and

(iii) Pfizer will transfer its entire holding in PFCHH to the Company in exchange for:

(a) 25 million Non-Voting Preference Shares; and (b) such number of Haleon

Shares as will result in Pfizer holding, on Admission, Haleon Shares

representing 32 per cent. of the total issued share capital of the Company (to

the nearest whole Haleon Share). Pfizer will sell its entire holding in the

Non-Voting Preference Shares to one or more third party investor(s)

immediately following the share-for-share exchange with the Company

described in this paragraph 3.1(C)(iii).

Therefore, it is expected that the Company will have 9,234,573,831 Haleon Shares in issue on

Admission. The Haleon Shares have a nominal value of £1.25 each (to be reduced to 1 pence

following the Capital Reduction) and will be fully paid.

The Non-Voting Preference Shares have a nominal value of £1 each and will be fully paid. The

Non-Voting Preference Shares will not be listed on the London Stock Exchange or any other

exchanges.

(D) Rights attaching to the securities

All Haleon Shares will rank pari passu with all other Haleon Shares in all respects, there being

no conversion or exchange rights attaching thereto, and all Haleon Shares will have equal

rights to participate in capital, dividend and profit distributions by the Company.

Subject to the provisions of the Companies Act, any equity securities issued by the Company

for cash must first be offered to the holders of Haleon Shares in proportion to their holdings of

Haleon Shares. The Companies Act and Listing Rules allow for the disapplication of

pre-emption rights which may be waived by a special resolution of the Haleon Shareholders,

whether generally or specifically, for a maximum period not exceeding five years.

On a show of hands every Haleon Shareholder who is present in person and every person

holding a valid proxy shall have one vote and on a poll every Haleon Shareholder present in

person or by proxy shall have one vote per Haleon Share.

(E) Rank of securities in the event of insolvency

The Haleon Shares do not carry any rights with respect to capital to participate in a distribution

(including on a winding-up) other than those that exist as a matter of law. The Haleon Shares

will rank pari passu with all other Haleon Shares in all respects.

The Haleon Shares will rank behind the Non-Voting Preference Shares in the event of the

insolvency of the Company as the Non-Voting Preference Shares carry preferential rights to

participate in a distribution of capital in the event of an insolvency (including on a winding-up)

up to an amount equal to their nominal value plus accrued dividend and any arrears or

deficiency in amount of the cumulative dividend.

(F) Description of restrictions on free transferability of the securities

Holders of Haleon Shares who the Company believes are or may be Designated Persons are

not permitted to dispose of their Haleon Shares or any legal or beneficial interest in any of

them without the prior written consent of the Company. The Haleon Shares are otherwise

freely transferable and there are no restrictions on transfer.

(G) Dividend policy

Following the Demerger, the Company will 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 Haleon Shareholders in relation to the second half

of 2022 in H1 2023, subject to Board approval and following approval of the Company’s FY

2022 results.

3.2 Where will the securities be traded?

Application will be made for all the Haleon Shares to be admitted to the premium listing

segment of the Official List of the FCA and to trading on the LSE’s main market for listed

securities. Application will also be made to the NYSE for American depositary shares each

representing 2 Haleon Shares (the “Haleon ADSs”) to be admitted to listing and trading on the

NYSE. No application has been made or is currently intended to be made for Haleon Shares to

be admitted to listing or trading on any other exchange.

3.3 What are the key risks that are specific to the securities?

There is no existing market for the Haleon Shares and an active trading market for the Haleon

Shares may not develop or be sustained.

The Pfizer Group will retain a significant interest in the Company following Admission and its

interests may differ from those of the other Haleon Shareholders.

There can be no assurance that dividends will be paid on Haleon Shares.

4. KEY INFORMATION ON THE ADMISSION TO TRADING ON A REGULATED MARKET

4.1 Why is this Prospectus being produced?

This Prospectus does not constitute an offer or invitation to any person to subscribe for or

purchase any shares in the Company. It has been produced in connection with the application

to be made to the FCA for the Haleon Shares to be admitted to the premium listing segment of

the Official List and to the LSE for the Haleon Shares to be admitted to trading on its main

market for listed securities. It is expected that Admission will become effective and that

dealings in the Haleon Shares will commence on the LSE by no later than 8.00 a.m. (London

time) on 18 July 2022.

Application will also be made to the NYSE for the Haleon ADSs to be admitted to listing and

trading on the NYSE.

No application has been made for admission of Haleon Shares to trading on any other stock

exchange (nor is it the current intention of the Company to make any such application in

future).

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The times and dates set out in the timetables below and throughout this Prospectus that fall after the

date of publication of this Prospectus are indicative only and based on the Company’s current

expectations and may be subject to change without further notice.

Event Time and date

(1)

ADS Holder Voting Record Time for determining entitlement to

attend and vote at the GSK General Meeting

(2)

5 p.m. New York City time on

27 May 2022

Publication of the GSK Shareholder Circular and this Prospectus

1 June 2022

Latest time and date for receipt of Forms of Directions

(2)

2.30 p.m. on 30 June 2022

Latest time and date for receipt by Depositary of Voting

Instruction Cards from ADS Holders on the ADR Register

12 p.m. New York City time on

30 June 2022

Latest time and date for receipt of Proxy Forms, CREST Proxy

Instruction and electronic proxy appointments

(2)

2.30 p.m. on 4 July 2022

Shareholder Voting Record Time for determining entitlement

to attend and vote at the General Meeting

6.30 p.m. on 4 July 2022

(3)

GSK General Meeting 2.30 p.m. on 6 July 2022

Announcement of the results of the GSK General Meeting 6 July 2022

(after the GSK General Meeting)

Closing of the GSK ADS issuance and cancellation books

(4)

8 a.m. New York City time on

14 July 2022

Latest time and date for transfers of GSK Shares to be

registered on the Register at the Shareholder Record Time

6 p.m. on 15 July 2022

Shareholder Record Time for determining the entitlement to

the Demerger Dividend

6 p.m. on 15 July 2022

ADS Holder Record Time for determining the entitlement to

the Demerger Dividend

5 p.m. New York City time on

15 July 2022

Demerger Dividend to Qualifying GSK Shareholders After 6 p.m. on 15 July 2022

Completion of Share Exchanges 17 July 2022

Admission and commencement of dealings in Haleon Shares

on the LSE

8 a.m. on 18 July 2022

CREST accounts credited in respect of Haleon Shares in

uncertificated form

As soon as practicable after 8 a.m.

on 18 July 2022

Admission and commencement of dealings in Haleon ADSs

on the NYSE

9.30 a.m. New York City

time on 22 July 2022

Opening of the GSK ADS issuance and cancellation books

(4)

8 a.m. New York City time on

25 July 2022

Latest date for despatch of definitive share certificates (where

applicable) for Haleon Shares in certificated form to Qualifying

GSK Shareholders on the Register

By 1 August 2022

Latest date for despatch of opening statement for Haleon CSN

(5)

By 1 August 2022

Notes

(1) Unless otherwise indicated, all references to time in this timetable are to UK time.

(2) If you hold GSK Shares or GSK ADSs via a bank, broker or nominee you should contact your respective bank, broker or

nominee service provider for further information on the appropriate dates and times relevant for your particular holding.

(3) If the GSK General Meeting is adjourned for any reason, the Shareholder Voting Record Time for the adjourned meeting

will be 2.30 p.m. UK time on the date that is two business days before the date set for the adjourned meeting. The

Depositary will inform ADS Holders of any change to the ADS Holder Voting Record Time.

(4) The Depositary will suspend the issuance and cancellation of GSK ADSs from 14 July 2022 until 25 July 2022. This means

that during this time, you will not be able to convert your GSK ADSs into GSK Shares, surrender your GSK ADSs and

receive underlying GSK Shares, or deposit your GSK Shares and receive GSK ADSs. However, the closing of the issuance

and cancellation books does not impact trading, and you may continue to trade your GSK ADSs during this period.

(5) Subject to the timing of the Capital Reduction.

RISK FACTORS

The risks and uncertainties relating to the Haleon Shares, 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 light of Admission.

The risks and uncertainties relating to the Haleon Shares, the Group’s business and the industry in

which it operates summarised in the part of this Prospectus headed “Summary” are the risks that the

Directors believe to be the most essential to an assessment of Haleon Shares. However, as the risks

which the Group faces relate to events and depend on circumstances that may or may not occur in the

future, you should consider not only the information on the key risks summarised in the part of this

Prospectus headed “Summary” but also, among other things, the risks and uncertainties described

below.

The risks and uncertainties described below represent those the Directors consider to be material as at

the date of this Prospectus. However, these risks and uncertainties are not the only ones facing the

Group. Additional risks and uncertainties not presently known to the Directors, or that the Directors

currently consider to be immaterial, may individually or cumulatively also materially and adversely

affect the business, results of operations, financial condition and/or prospects of the Group. If any or a

combination of these risks actually occurs, the business, results of operations, financial condition and/

or prospects of the Group could be materially and adversely affected. In such case, the market price of

Haleon Shares could decline. You should carefully consider the information in this Prospectus in light

of your personal circumstances.

1. RISKS RELATING TO THE GROUP’S BUSINESS AND INDUSTRY

1.1 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.

1.2 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 paragraph 1.8 of Risk Factors below).

1.3 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 that 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;

• raw material and product quality or safety issues (on which see further risk factor 1.10

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 (on which see further risk factor 2.7 below) 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 into,

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.

1.4 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.

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.

1.5 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 EMA, the NMPA and other regulatory bodies in the countries in which the Group

has business operations, including in relation to 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-license products.

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.

1.6 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 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.

1.7 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 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

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.

1.8 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 and other sustainability matters 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 environmental or social impacts. Areas of

focus relevant to the Group’s business include, among others, responsible sourcing and

deforestation, human and labour rights, 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

has been linked to sustainability issues and therefore attracts scrutiny. If new or additional legal

and regulatory 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 net 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.

1.9 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 IP 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 IP 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.

The Directors 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

licensed, and may license 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-licensed from licensors. The Group’s

licences to such intellectual property rights may not provide exclusive or unrestricted rights in

all fields of use and in all territories in which the Group may wish to develop or commercialise

its products in the future 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 licensed intellectual property. In addition, the Group may not have

full control over the maintenance, protection, enforcement or use of the intellectual property

rights in-licensed 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 licensed 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 licensed intellectual property, financial obligations of the Group to the licensor,

and other interpretation-related issues. The agreements under which the Group licenses

intellectual property rights from others are complex, and the provisions of such agreements

may be susceptible to multiple interpretations. The resolution of any contract interpretation

disagreement that may arise could narrow what the Directors believe to be the scope of the

Group’s rights to the intellectual property being licensed, or increase what the Directors 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.

1.10 The Group may incur liabilities or be forced to recall products as a result of real or

perceived product quality or other product-related issues

Failure to comply with good manufacturing or good distribution practices and regulations, as

well as other regulations in relation to product quality, throughout the Group’s in-house and

contract manufacturing supply and distribution chains could lead to product supply

interruptions, product recalls or withdrawals, litigation and/or regulatory enforcement action and

fines from regulators, 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 (on which see further risk factor 2.4 below).

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.

1.11 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 also paragraph 2.7 of Risk Factors below). While the Group

has implemented systems, monitoring and training to prevent cyber-attacks and other cyber

incidents from being successful, the Group cannot guarantee that its security efforts will

prevent 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.

1.12 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 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.

1.13 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 APAC in FY 2020;

• 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, 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.

1.14 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 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.

1.15 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.

1.16 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 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.

1.17 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 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 the Latest Practicable Date, the Group has 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

pursuant to 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 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 GSK Consumer

Healthcare Capital UK plc pursuant to a private placement to institutional investors in the

USA and outside the USA;

• £nil under the Term Loan Facility (noting the Term Loan Facility is expected to be drawn on

or prior to the date of the Pre-Demerger Dividend); and

• £nil and $nil of RCF Loans.

Following payment of the Pre-Demerger Dividend, an amount equal to the Pre-Separation Debt

Proceeds less £300 million will have been distributed out of the Group, with no recourse, to

GSK and Pfizer and none of the Group’s debt will continue 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 the Latest Practicable Date. 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 current debt levels, the risks that it now

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.

1.18 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. 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 currently hedges 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 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.

1.19 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 £26.45 billion as of 31 December 2021, 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 the Directors have concluded that the Group’s goodwill and indefinite-life

intangible assets are not impaired, future events could cause the Directors 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.

2. RISKS RELATING TO CHANGES IN LAW AND THE POLITICAL AND ECONOMIC

ENVIRONMENT, REGULATION AND LEGISLATION

2.1 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 response to

geopolitical events (see also paragraph 2.7 of Risk Factors below). 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.

2.2 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. 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.

2.3 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 of economic conditions; (v) retailers’

perception of consumer spending habits; (vi) technological change; (vii) exposure to possibly

adverse governmental or regulatory actions in countries where the Group operates or conducts

business; (viii) levels of volatility in global markets; (ix) exposure to the effects of economic

sanctions or other restrictive economic measures as a result of the Group’s global presence;

and (x) any change or development in global, national or regional economic and political

conditions.

For example, the Group is exposed to inflationary pressures and commodity prices, which

generally affect the Group through their impact on payroll and supply costs (including freight).

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.

2.4 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 has certain indemnification obligations to the

GSK Group and the Pfizer Group in respect of “Purchaser Liabilities” and “Assumed Liabilities”

(each as defined in the Pfizer SAPA), which may include liabilities related to OTC Zantac (see

paragraph 3.5 of Risk Factors below). 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 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 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 31 December 2021, the Group had £14 million of provisions for legal disputes

and other matters, including amounts relating to legal and administrative proceedings.

2.5 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 UK. 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 in paragraph

2.10 of Risk Factors 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 (on which see also paragraph 2.7 of Risk Factors below),

geopolitical events (such as 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;

• 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.

2.6 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.

2.7 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 GSK Board

overseeing and monitoring key risks. The Board 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. 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. Although the Group does not consider that its

business in Russia and Ukraine constitutes a material part of the Group’s business, 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.

• 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 and 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. For further details on similar

risks facing the Group, please also see paragraph 1.7 of Risk Factors.

• 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 and adverse impact on the Group’s business.

2.8 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

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.

The EU GDPR and the UK GDPR, as well as the increased data protection regulation in other

jurisdictions, such as the Personal Information Protection Law 2021, Cybersecurity Law 2016

and Data Security Law 2021 in China (each of which has a significant impact on the processing

of data 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, to the extent that they are applicable, 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.

2.9 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. The Directors

believe that it 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.

2.10 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 in paragraph 2.5 of Risk Factors 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

Group’s operations outside the UK 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 UK, 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.

2.11 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 and

adverse effect on the Group’s business, results of operations and financial condition. At

31 December 2021, the Group had recognised provisions of £150 million in respect of

uncertain tax positions.

2.12 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 USA 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 per cent. 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 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”).

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.

2.13 If the Company loses its foreign private issuer status in the USA 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” in the USA, as such term is defined under the US

Exchange Act, and, therefore, the Company is not required to comply with all the periodic

disclosure and current reporting requirements of the US Exchange Act and related rules and

regulations. Under the US 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 2022.

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 Securities and Exchange Commission (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 US 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.

3. RISKS RELATING TO THE DEMERGER AND SEPARATION

3.1 The Group may fail to realise any or all of the anticipated benefits of the Demerger and

Separation

The extent to which the anticipated benefits of the Demerger and 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 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 the Demerger

and 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 benefits of the Demerger and 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.

3.2 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 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 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 has done as part of the

GSK Group (see also paragraph 3.3 of Risk Factors below).

In particular, the Group will be 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.

The Group currently tests 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.

3.3 Following the Demerger and Separation, the Company will need to operate as an

independent publicly listed company and the Group could fail to meet the challenges

involved in operating successfully as a standalone business

Following the Demerger and Separation, the Company will need to operate 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 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 the Demerger and Separation, the Group will take 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 paragraph 3.4 of Risk Factors below).

However, there remains a risk that the Group could suffer operational difficulties without

access to the support and services from GSK following the Demerger and Separation, which

could have a material adverse effect on the Group’s business. These challenges include:

(i) demonstrating to interested parties that the Demerger and 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.

3.4 For a period following the Demerger and 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.

3.5 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, CH JVCo 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 CH JVCo 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. While Pfizer and GSK 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, it is not possible, at this stage, to meaningfully

assess 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 relevant 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, CH JVCo is required to indemnify GSK in respect of 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, on or around the date of this Prospectus, GSK, Pfizer, the Company, CH JVCo and

GSKCHH entered into the Tax Covenant, which is to be 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 the Company (and vice

versa).

Such indemnities will survive 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.

3.6 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 or around the date of this

Prospectus, which is to be 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

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.

3.7 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.

4. RISKS RELATING TO THE HALEON SHARES

4.1 There is no existing market for the Haleon Shares and an active trading market for the

Haleon Shares may not develop or be sustained

Prior to Admission, there has been no public trading market for the Haleon Shares.

Although the Company intends to apply to the FCA for admission to the premium listing

segment of the Official List and intends to apply t o the LSE for admission to trading on its

main market for listed securities, the Company can give no assurance that an active

trading market for the Haleon Shares will develop or, if developed, could be sustained

following the closing of the Demerger and Separation. If an active trading market is not

developed or maintained, the liquidity and trading price of the Haleon Shares could be

materially and adversely affected.

4.2 The Pfizer Group will retain a significant interest in the Company following Admission

and its interests may differ from those of the other Haleon Shareholders

The Pfizer Group will retain a significant interest in the Company following Admission, including

32 per cent. of the Haleon Shares and thus of the voting rights of the Company. As a result, the

Pfizer Group will possess 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

Haleon 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 Haleon Shares in issue. As at the date of this Prospectus, the Pfizer Group

has nominated Bryan Supran and John Young, who will become directors on Admission. In

exercising its voting rights, the Pfizer Group may be motivated by interests that differ from

those of the other Haleon Shareholders and the interests of the Pfizer Group could conflict with

or differ from the Company’s interests. The Company has entered into the Pfizer Relationship

Agreement to regulate its relationship with the Pfizer Group following Admission 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 Admission. 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 Haleon Shares.

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.

4.3 There can be no assurance that dividends will be paid on Haleon Shares

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 UK

company law, a company can only pay cash 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 having sufficient

distributable reserves 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 impact on the market price of the Haleon Shares.

4.4 The market price of the Haleon Shares may fluctuate

Haleon Shareholders should be aware that the value of an investment in the Group may

fluctuate and could be highly volatile. The price at which Haleon Shares may be quoted and

the price which investors may realise for their Haleon Shares 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 the Demerger and Separation will be one such

factor. Following Admission of the Haleon Shares, there may be a period of relatively high-

volume trading in the Haleon Shares as the Company’s shareholder register finds its natural

composition. For example, the Haleon Shares may become less attractive to certain classes of

existing investors. The Company is unable to predict whether substantial amounts of the

Haleon Shares will be sold in the open market following Admission. Sales of a substantial

number of the Haleon Shares in the public market after Admission, or the perception that these

sales might occur, could depress the market price of the Haleon Shares. See also paragraph

4.5 of Risk Factors 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 Haleon Shares fluctuating.

4.5 Future sales of Haleon Shares, or the perception such sales might occur, could depress

the market price of the Haleon Shares

Following Admission, GSK will hold up to 6 per cent. of the Company’s issued share capital

and Pfizer will hold 32 per cent. of the Company’s share capital. Furthermore, as part of certain

arrangements pursuant to which GSK will provide additional support to GSK’s UK Pension

Schemes, 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) will in aggregate hold 7.5 per cent. of the total issued share capital of

the Company.

The Haleon 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 Haleon

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 Haleon

Shares may fall in anticipation of a sale of Haleon Shares. The perception that such sales

could occur may also materially and adversely affect the market price of the Haleon Shares.

This may make it more difficult for Haleon Shareholders to sell the Haleon Shares at a time

and price that they deem appropriate, and could also impede the Company’s ability to issue

equity securities in the future.

4.6 The Company may decide to offer additional Haleon Shares in the future, diluting the

interests of existing Haleon Shareholders and potentially materially and adversely

affecting the market price of Haleon Shares

Other than in connection with Admission or pursuant to employee share plans, the Company

has no current plans for an offer of shares. However, if the Company decides to offer additional

Haleon Shares or other securities convertible into Haleon Shares in the future, including as

consideration for any acquisitions, this could dilute the interests of existing Haleon

Shareholders and/or have an adverse impact on the market price of Haleon Shares as could

the public perception that an offering may occur.

4.7 Haleon Shareholders may not be able to exercise pre-emption rights or participate in

certain future issues of Haleon Shares and Overseas Shareholders may not be able to

participate in future issues of Haleon Shares

In the case of a future allotment of new Haleon 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 Haleon 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 may not be

entitled to exercise these rights, unless either the Haleon Shares and any other securities that

are offered and sold are registered under the US Securities Act, or the Haleon Shares and

such other securities are offered pursuant to an exemption from, or in a transaction not subject

to, the registration requirements of the US Securities Act. The Company cannot assure

prospective investors it will register any such offers or sales under the US Securities Act, that

any exemption from such overseas securities law requirements would be available to enable

US or other Haleon Shareholders to exercise their pre-emption rights or, if available, that the

Company will utilise any such exemption.

4.8 The ability of Overseas Shareholders to bring actions or enforce judgments against the

Company or the Directors may be limited

The ability of an Overseas Shareholder 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 Haleon Shares are governed by English law and by the Articles of

Association. These rights 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 an Overseas Shareholder 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.

4.9 Overseas Shareholders may be subject to exchange rate risk

The Haleon Shares are, and any dividends to be paid in respect of them will be, denominated

in Pounds Sterling. An investment in Haleon 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 Haleon Shares or any dividends in foreign currency terms.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

1. GENERAL

The contents of this Prospectus are not to be construed as legal, business or tax advice.

Recipients of this Prospectus should consult their own lawyer, financial adviser or tax adviser

for legal, financial or tax advice, as appropriate. Furthermore, the Company and the Directors

accept no responsibility for the accuracy or completeness of any information reported by the

press or other media, or the fairness or appropriateness of any forecasts, views or opinions

expressed by the press or other media regarding the Demerger and Separation, Admission,

GSK plc or the Group. The Company and the Directors make no representation as to the

appropriateness, accuracy, completeness or reliability of any such information or publication.

Unless otherwise stated, no representation or warranty, express or implied, is made and no

responsibility or liability is accepted by any person other than the Company and the Directors,

as to the accuracy, completeness, verification or sufficiency of, the information contained

herein, and nothing in this Prospectus is, or may be relied upon as, a promise or representation

by any of the Company’s advisers (including the Joint Sponsors) or any of their respective

affiliates in this respect, as to the past or future, and any of the Company’s advisers or their

respective affiliates, directors, officers, employees or advisers accordingly disclaim, to the

fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or

otherwise which they might otherwise be found to have in respect of this document or any such

statement.

When considering what action you should take, you should seek your own independent

financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund

manager or other independent financial adviser authorised under FSMA if you are in the United

Kingdom or, if not, from another appropriately authorised independent financial adviser.

Without prejudice to any obligation of the Company to publish a supplementary prospectus

pursuant to section 87G of FSMA and PR 3.4.1 of the Prospectus Regulation Rules, neither

the publication of this Prospectus nor any distribution of Haleon Shares shall, under any

circumstances, create any implication that there has been no change in the business or affairs

of the Group taken as a whole since the date of this Prospectus or that the information

contained herein is correct as of any time subsequent to its date.

No person has been authorised to give any information or to make any representation in

connection with Admission other than the information and representations contained in this

Prospectus and, if any other information or representations is or are given or made, such

information or representations must not be relied upon as having been authorised by or on

behalf of the Company, the Directors or the Joint Sponsors.

Recipients of this Prospectus may not reproduce or distribute this Prospectus, in whole or in

part, and may not disclose any of the contents of this Prospectus or use any information herein

for any purpose other than considering Admission. Such recipients of this Prospectus agree to

the foregoing by accepting delivery of this Prospectus.

This Prospectus is not intended to provide the basis of any credit or other evaluation and

should not be considered as a recommendation by any of the Company, the Directors, any of

the Company’s advisers (including the Joint Sponsors) or any of their affiliates or

representatives regarding the securities of the Company.

This Prospectus has been approved by the FCA in accordance with section 87A of FSMA.

Admission to trading on the LSE’s main market for listed securities constitutes admission to

trading on a regulated market.

2. NO INCORPORATION OF WEBSITE INFORMATION

The contents of the Company’s website, 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.

3. FORWARD-LOOKING STATEMENTS

Certain statements in this Prospectus relate to the future, including forward-looking statements

relating to the Group’s financial position and strategy. Forward-looking statements give the

Group’s current expectations or forecasts of future events. In some cases, these forward-

looking statements can be identified by the use of forward-looking terminology, including

(without limitation) the terms “intend”, “aim”, “project”, “anticipate”, “estimate”, “plan”, “believe”,

“expect”, “may”, “should”, “will”, “continue” or other similar words. These statements discuss

future expectations concerning the Group’s results of operations or financial condition, or

provide other forward-looking statements. 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. Any forward-looking statements

made by or on behalf of the Group speak only as of the date they are made and are based

upon the knowledge and information available to the Directors on the date of this Prospectus.

These forward-looking statements are not guarantees or predictions of future performance,

may be based on a number of assumptions (which may or may not themselves prove to be

correct) and, by their nature, involve known and unknown risks, uncertainties and other factors,

including the risk factors set out in the section entitled “Risk Factors”, many of which are

beyond the Group’s control, and which may cause the actual results to differ materially from

those expressed in the statements contained in this Prospectus. The Group’s actual results of

operations, financial condition and the development of the business sectors in which the Group

operates may differ materially from those expressed or implied in any forward-looking

statement contained in this Prospectus due to certain factors including, but not limited to,

domestic and global economic and business conditions, market-related risks pertaining to the

consumer healthcare industry as a whole, the policies and actions of regulatory authorities,

geopolitical developments, market developments, the impact of competition, technological

development, inflation, deflation, foreign currency exchange rates, the timing, impact and other

uncertainties of any future acquisitions, combinations or divestments within relevant industries,

as well as the impact of tax and other legislation and other regulations in the jurisdictions in

which the Group operates. In addition, even if the Group’s actual results of operations, financial

condition and the development of the business sectors in which it operates are consistent with

the forward-looking statements contained in this Prospectus, those results or developments

may not be indicative of results or developments in subsequent periods. Recipients of this

Prospectus are cautioned not to put undue reliance on forward-looking statements.

Other than as required by English law, none of the Company, its officers, advisers or any other

person gives any representation, assurance or guarantee that the occurrence of the events

expressed or implied in any forward-looking statements in this Prospectus will actually occur, in

part or in whole, and undertakes no obligation to update any forward-looking statements,

whether as a result of new information, future events or otherwise.

Additionally, statements of the intentions of the Board and/or Directors reflect the present

intentions of the Board and/or Directors, respectively, as at the date of this Prospectus and

may be subject to change as the composition of the Board alters, or as circumstances require.

Forward-looking statements contained in this Prospectus speak only as of the date of this

Prospectus. The Company, the Directors and the Company’s advisers expressly disclaim any

obligation or undertaking to update these forward-looking statements contained in the

document to reflect any change in their expectations or any change in events, conditions, or

circumstances on which such statements are based unless required to do so by applicable law,

the Prospectus Regulation Rules, the Listing Rules, the Disclosure Guidance and

Transparency Rules or the Market Abuse Regulation. The reader should, however, consult any

additional disclosures that the Group may make in any documents which it publishes and/or

files with the SEC. All readers, wherever located, should take note of these disclosures. The

statements above related to forward-looking statements should not be construed as a

qualification of the working capital statement contained in paragraph 17 of Part XII (Additional

Information).

4. 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 the

Directors’ 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 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 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.

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. The

Group has not independently verified any of the data obtained from third-party sources

(whether identified in this Prospectus by source or used as a basis for the Directors’ beliefs and

estimates), or any of the assumptions underlying such data. Similarly, internal surveys, industry

forecasts and market research, which the Company believes to be reliable, have not been

independently verified.

5. TRADE MARKS, TRADE NAMES AND TRADE DRESS

This Prospectus includes trade marks, trade names and trade dress of other companies. Use

or display by the Group of other parties’ trade marks, trade names or 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, 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 the Group will not assert its rights

to these brands to the fullest extent permitted by law.

6. PRESENTATION OF FINANCIAL INFORMATION

6.1 Overview

The Company has a complex financial history for the purposes of Article 18(3) of the

Prospectus Regulation. To comply with the requirements of the Prospectus Regulation, the

following historical financial information is presented in this Prospectus:

• consolidated financial information of the Group for the financial years ended 31 December

2021, 31 December 2020 and 31 December 2019; and

• combined historical financial information of the Pfizer Contributed CH Business for the

seven months ended 31 July 2019.

6.2 Historical Financial Information

The Group’s Historical Financial Information included in Schedule II (Historical Financial

Information of GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited) has been

prepared in accordance with the requirements of the Prospectus Regulation (including the

requirements regarding issuers with complex financial histories), the Listing Rules and the

basis of preparation included in Note 1 of Schedule II (Historical Financial Information of

GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited). The basis of preparation

describes the extent to which the Historical Financial Information has been prepared in

accordance with IFRS. The accounting policies applied and stated in the Historical Financial

Information are set out in Note 2 of Schedule II (Historical Financial Information of

GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited).

On 31 July 2019, the Group completed a transaction with Pfizer to combine substantially all of

GSK and Pfizer’s respective consumer healthcare businesses into a new world-leading

consumer healthcare joint venture (the “Pfizer Transaction”, as further described in paragraph

2.3 of Part I (Key Highlights and Development of the Group)). Since the completion of the

Pfizer Transaction, GSK has owned 68 per cent. of the ordinary shares in CH JVCo, being the

entity through which both GSK and Pfizer hold their equity interests in the joint venture and the

current holding company of the Group’s business, with Pfizer holding the remaining 32 per

cent. of the equity interest. The Pfizer Contributed CH Business was consolidated within the

Group’s financial statements from 1 August 2019.

Unless otherwise stated in this Prospectus, financial information relating to the Group has been

extracted without material adjustment from Schedule II (Historical Financial Information of

GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited).

6.3 Comparison of Historical Financial Information and Interim Financial Information to GSK

Segment Financials

Whilst a part of the GSK Group, a significant majority of the Group has historically been

reported as an operating segment under IFRS 8 in GSK’s annual report and interim financial

reporting (the “Consumer Healthcare Segment”). The Historical Financial Information and the

Interim Financial Information have been prepared to reflect the legal perimeter of the Group in

connection with the anticipated Demerger and Separation of the Company from the GSK

Group and therefore differ both in purpose and basis of preparation to the Consumer

Healthcare Segment as presented historically in GSK’s financial reporting. As a result, whilst

the two sets of financial information are similar, they are not the same because of certain

differences in accounting and disclosure under IFRS.

These differences primarily include:

(A) the inclusion in the Consumer Healthcare Segment of certain distribution and local

commercial activities performed by a limited number of other GSK Group entities in

relation to consumer healthcare products;

(B) the basis of allocation of certain cost-sharing and royalty agreements as attributed by a

limited number of other GSK Group entities for the purposes of the Consumer

Healthcare Segment;

certain other markets in the Consumer Healthcare Segment; and

(D) the sale of ThermaCare products until their disposal in 2020 which have been excluded

from the Consumer Healthcare Segment (but included in the Historical Financial

Information).

6.4 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.

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 Part VII (Operating and Financial Review).

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 licensed products, inspection costs, freight

charges, costs to operate equipment and depreciation

and amortisation.

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.

The Directors consider 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. The Directors 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 Prospectus 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. The Directors 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.

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 in paragraph 5.2 of Part VI

(Selected Financial Information)), 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, the Directors

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 Admission costs, and

Disposals and others, in each case net of the impact of

taxes (where applicable) (collectively, the “Adjusting

Items”, which are defined at paragraph 5.2 of Part VI

(Selected Financial Information)).

The Directors 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 paragraph 4.2 of

Part VI (Selected Financial Information).

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.

2021 2020 2019

Average rates:

USD/£ 1.38 1.29 1.28

Euro/£ 1.16 1.13 1.14

Swiss Franc/£ 1.25 1.21 1.27

CNY/£ 8.86 8.91 8.82

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.

The Directors believe free cash flow is meaningful to

investors because it is the measure of the funds

generated by the Group available for distribution of

dividends, repayment of debt or to fund the Group’s

strategic initiatives, including acquisitions. The purpose

of presenting free cash flow is to indicate the ongoing

cash generation within the control of the Group after

taking account of the necessary cash expenditures for

maintaining the capital and operating structure of the

Group (in the form of payments of interest, corporate

taxation and capital expenditure).

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 the Directors 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 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.

The Directors 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 the

Directors 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 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 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 Directors believe 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.

For a reconciliation of the closest measures prepared in accordance with IFRS to the

applicable non-IFRS measures, see paragraph 5 of Part VI (Selected Financial Information).

6.5 Currency presentation

The Group’s financial information is presented in Pounds Sterling. The abbreviations ‘£m’ or

‘£million’ represent millions of Pounds Sterling, and references to ‘pence’ and ‘p’ represent

pence in Pounds Sterling.

6.6 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.

7. Pfizer’s interest in the Group

As at the date of this Prospectus, Pfizer’s 32 per cent. interest in the Group is held by PFCHH,

which holds all of the JVCo B Ordinary Shares, representing 32 per cent. of the voting rights

and 24.62 per cent. of the nominal value of CH JVCo. PFCHH is a direct wholly owned

subsidiary of Anacor and both are wholly owned subsidiaries of Pfizer. Prior to the Demerger,

Pfizer intends to undertake an intragroup reorganisation resulting in Pfizer becoming the direct

sole owner of PFCHH.

Accordingly, except where otherwise stated, references in this Prospectus, including in the

structure charts in Part IV (Overview of the Demerger and Separation), to the ownership of, or

transfer to the Company (pursuant to the terms of the Pfizer Exchange Agreement), of PFCHH

by Pfizer and to the issuance of Haleon Shares and Non-Voting Preference Shares to Pfizer

assume that this reorganisation takes place prior to the Demerger as expected. However, in

the event that the PFCHH Transfer is not completed by the time of completion of the

Demerger, then Anacor shall be the entity holding the ownership interests in PFCHH that are to

be transferred to the Company pursuant to the Pfizer Exchange Agreement and, in

consideration of such transfer, the Company shall issue Haleon Shares and Non-Voting

Preference Shares to Anacor.

In addition, references in this Prospectus to Pfizer’s or Anacor’s interest in 32 per cent. of the

Haleon Shares include both Haleon Shares and Haleon ADSs in respect of such Haleon

Shares.

Pfizer will continue to own its 32 per cent. ownership interest in the Company following

Separation. 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.

8. DEFINITIONS

Certain terms used in this Prospectus, including all capitalised terms and certain technical and

other terms, are defined and explained in Schedule I (Definitions and Glossary).

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

Directors Sir Dave Lewis

Brian McNamara

Tobias Hestler

Manvinder Singh (Vindi) Banga*

Marie-Anne Aymerich*

Tracy Clarke*

Dame Vivienne Cox*

Asmita Dubey*

Deirdre Mahlan*

Bryan Supran*

John Young*

(*those persons who will become directors of the Company on

Admission)

Company Secretary Amanda Mellor

Registered office 980 Great West Road

Brentford

Middlesex TW8 9GS

United Kingdom

Joint Sponsors Citigroup Global Markets Limited

Citigroup Centre

Canada Square

Canary Wharf

London E14 5LB

United Kingdom

Goldman Sachs International

Plumtree Court

25 Shoe Lane

London EC4A 4AU

United Kingdom

Merrill Lynch International

2 King Edward Street

London EC1A 1HQ

United Kingdom

Reporting accountants

and auditor

Deloitte LLP

1 New Street Square

London EC4A 3HQ

United Kingdom

Legal advisers to the

Company (as to English

law)

Slaughter and May

One Bunhill Row

London EC1Y 8YY

United Kingdom

Legal advisers to the

Company (as to US

law)

Cleary Gottlieb Steen & Hamilton LLP

2 London Wall Place

London EC2Y 5AU

United Kingdom

Legal advisers to the

Joint Sponsors

Ashurst LLP

London Fruit & Wool Exchange

1 Duval Square

London E1 6PW

United Kingdom

Registrar Equiniti Limited

Aspect House

Spencer Road

Lancing, BN99 6DA

United Kingdom

PART I

KEY HIGHLIGHTS AND DEVELOPMENT OF THE GROUP

1. Key highlights

The Directors 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, in VMS and Therapeutic Oral Health.

The Group’s portfolio of category-leading brands

includes the world’s number one Toothpaste for sensitivity,

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 arthritis pain relief and for

Denture Care products are linked with age. Similarly, governments, facing pressure on

healthcare spending driven by an ageing population, have adopted policy measures designed

to increase the use of OTC drugs (which are not generally reimbursed by governments)

relative to prescription drugs (typically reimbursed). The Directors expect these trends to

continue. Underpinned by these and other favourable market factors, the Directors anticipate

typical annual market growth of between 3 and 4 per cent. over the medium-term.

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. This includes OTC/VMS market leadership in the USA and the leading OTC/VMS

multinational position in the higher growth markets of China and India.

The Group’s scale and brand portfolio is complemented by its well-developed capabilities in

trusted science and human understanding. The Group has a longstanding in-house scientific

capability deriving from its pharmaceutical heritage, which allows it to both innovate and build

trust through constructive engagement with the scientific community. The Group’s scientific

capabilities are combined with a deep understanding of the health needs of its consumers,

supported by consumer insights and broad engagement with healthcare professionals.

Significantly, the Group engages directly with approximately one third of the approximately

10 million healthcare professionals relevant to its categories. The power of this combination is

illustrated by the double-digit growth of Sensodyne over the past decade, which has been

driven by increasing public awareness of tooth sensitivity as a treatable condition, consumer-

centric scientific innovation and the generation of evidence-based claims to support expert

recommendations.

See paragraph 1 (Market and Industry Data)ofPresentation of Financial and Other Information for further information on the

use of market and industry data in this Prospectus.

Source: Therapeutic Oral Health ranking is based on Group analysis of third party data from Nielsen, IRI, Intage, IQVIA

Consumption Sales Data (2021-2022). Therapeutic Oral Health is defined as Therapeutic Toothpaste and Total Dental

Appliance Care.

Group analysis of 2020 third party market data.

The Group has been transformed through the synergistic combination of three leading

consumer healthcare businesses since 2015, alongside a targeted programme to optimise its

operating model, cost base and capabilities for the future. An extensive programme of

divestments has sharpened the focus of the business through the divestment of growth-dilutive

brands and those outside of the Group’s core categories. In addition, the extensive scientific

and consumer products experience of its legacy businesses has been significantly enhanced

by targeted investment in commercial and scientific capabilities, technologies and facilities,

most notably in the digital sphere. The separation of the Group from GSK now offers a number

of further intangible benefits, including increased management focus, an infrastructure and

organisational design more closely aligned to consumer healthcare requirements, capital

allocation priorities tailored to the needs of the business and management incentives which

can be focused on the specific priorities of the Group.

Despite the net negative impact of the COVID-19 pandemic, the business delivered above-

market organic revenue growth in both FY 2020 and FY 2021 whilst successfully integrating

the Pfizer consumer healthcare business which became part of the Group on 31 July 2019.

Over the period FY 2019 to FY 2021, the Group also achieved a meaningful improvement in

Adjusted operating profit margin driven by the delivery of integration synergies and operational

efficiencies, while still increasing investment in its brands and capabilities. This was achieved in

spite of adverse currency movements and the dilutive impact of divestments. Building on this

base, the Group has a clear and focused strategy which the Directors believe will drive

sustainable above-market growth and attractive shareholder returns based on four key pillars:

• Driving portfolio growth by increasing household penetration. While the Group’s

category-leading brands touch millions of consumers around the world, there remains

significant headroom for further penetration

across the portfolio. The Group has a clear

strategy for driving penetration-led growth with the consumer as its focus and which it plans

to accelerate and apply across its broader portfolio.

• Capitalising on new and emerging growth opportunities. The Group plans to build on

its significant recent growth in e-commerce, leveraging its rapidly developing capabilities in

this area. Additionally, the Group’s brand portfolio, extensive scale and powerful

route-to-market provide the opportunity to expand brands into new markets where it has the

reach and scale to succeed. Similarly, the greater size of the combined legacy GSK and

Pfizer consumer healthcare businesses in certain markets (relative to the legacy GSK and

Pfizer businesses alone) continues to offer the opportunity to scale up key brands which

previously lacked local distribution scale. Further opportunities exist in Rx-to-OTC switches

in the USA, an area where the Group has led the market over the last decade, and in

accelerating consumer trends such as the growth of the Naturals segment (as defined

below), where multiple launches are already underway with more planned.

• Performance underpinned by strong execution and financial discipline. The Group is

focused on first class commercial execution, increasingly supported by digital tools. In

addition, it has a strong culture of financial discipline and continuous improvement. This

combination has allowed it to deliver meaningful margin improvements since FY 2019,

whilst increasing investment in its brands. The Group’s strategy is to build on this track

record, maintaining its focus on commercial execution, business optimisation and cost

control, thereby enabling it to deliver sustainable moderate margin expansion while

continuing to invest for future growth.

• Running a responsible business. Running a responsible business is integral to the

Group’s purpose of delivering better everyday health with humanity and it believes it is well

placed to have a positive impact. Its environmental, social and governance (“ESG”) goals

focus on tackling the environmental and social barriers to everyday health and driving

health inclusivity through the promotion and delivery of sustainable solutions.

Penetration is the proportion of a population (in a defined geographic market or product category) that has purchased the

relevant category, brand or product at least once in the stated period.

The Directors expect the Group’s strategy to deliver medium-term annual organic revenue

growth of 4 to 6 per cent. combined with sustainable moderate margin expansion on a constant

currency basis, whilst supporting continued investment for growth in the business. In turn, the

Directors expect this anticipated growth to deliver attractive shareholder returns underpinned

by strong cash generation and an initial dividend which is expected to be at the lower end of a

30 to 50 per cent. pay-out ratio (subject to Board approval). The Group proposes to maintain a

strong investment grade balance sheet with a target net debt to Adjusted EBITDA ratio of less

than 3x by the end of 2024.

The listing of the Company is the culmination of a seven year journey since the merger of the

legacy GSK and Novartis consumer healthcare businesses to create a global leader in

consumer healthcare. The Group’s world-class portfolio of brands, attractive geographic

footprint and strong capabilities leave it well positioned to benefit from favourable underlying

sector fundamentals.

2. 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)

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 (see paragraph 2.5

Transformation of the Group).

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

Divest

Non-strategic

OTC

Exit of

beverages:

Lucozade and

Ribena to

Suntory

with Pfizer

Non-strategic and growth dilutive

assets disposals, £1.1bn proceeds

2012

2013

2015 2017

2019 2021

2014

2016

2018 2020

with Novartis

Full buy out of

Novartis from JV

for $13bn

Exit non strategic

categories, Horlicks

to Unilever

Divest

2022JV formation

JV formation

Significant divestment programme

Buy out

2.1 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, the GSK consumer healthcare business had a strong presence in

higher-growth emerging markets in the Middle East, Africa and Asia, which complemented its

businesses in Europe and North America.

2.2 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 (as

further described in paragraph 15.1 of Part XII (Additional Information)). Novartis’ business

provided GSK with a meaningful incremental presence in OTC, including several major brands,

notably Voltaren,

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 (as further described

in paragraph 15.1 of Part XII (Additional Information)).

2.3 Joint venture with Pfizer

On 31 July 2019, GSK completed a transaction with Pfizer to combine substantially all of GSK

and Pfizer’s respective consumer healthcare businesses into a new world-leading consumer

healthcare joint venture (as further described in paragraph 15.2 of Part XII (Additional

Information)).

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. Since completion, GSK has owned 68 per cent. of the ordinary shares in

GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited (the entity through which both

GSK and Pfizer hold their equity interests in the joint venture and the current holding company

of the Group’s business) 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.

2.4 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.

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

2.5 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.

1. 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 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 2019-21 divestment

programme has eliminated a significant drag on overall growth.

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 categories

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.

2. 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 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

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.

Source: Nicholas Hall Consumer Healthcare 2017-21 sales growth at MSP.

execution, including, for example, the Group’s shopper science labs, 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.

3. 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 2020

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 of 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. The Directors 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.

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 above)

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 also paragraphs 2.1, 2.14 and 5.1

of Operating and Financial Review). 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.

PART II

MARKET OVERVIEW

1. Consumer Healthcare: a £160+ billion market

The global consumer healthcare market is one of the largest, most resilient and fastest-growing

across the FMCG sectors. However, unlike other standard FMCG markets, its definition varies

across competitors and common industry data sources. OTC/VMS is a major part of the

market, a primary focus of the Group’s key competitors and is currently valued at over

£135 billion. In addition to OTC/VMS, many peer companies compete in adjacent consumer

healthcare markets. For example, the Group and two of its largest consumer healthcare peers

compete in Oral Health, currently valued at £25 billion globally.

Therefore, the Group’s definition of the consumer healthcare market comprises: OTC/VMS and

Oral Health, which have an aggregate global market size of over £160 billion.

Further

information on the Group’s categories is set out in paragraph 3 of this Part II (Market Overview)

below.

Consumer Healthcare Market

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

2017

OTC Vitamins, Minerals & Supplements Oral Health

2018 2019 2020 2021

2017-2021 £bn

The Group’s largest single market is the USA, which is the number one consumer healthcare

market globally with £41 billion in consumer sales in 2021, representing approximately 27 per

cent. of the global market. The Group also has strong presence across Europe and China, as

well as in many other higher-growth markets, in particular China, which present an attractive

opportunity to increase household penetration of the consumer healthcare category.

2. Key market drivers

The market fundamentals shaping future growth in the consumer healthcare market, which

current expectations suggest could grow at a rate of 3-4 per cent. per annum over the medium-

term, include the five key drivers below.

Increased consumer focus on health and wellness

In the period prior to the COVID-19 pandemic, global consumers were increasingly taking a

more active role in self-management of their health and wellbeing. Since the outbreak of the

See paragraph 4 (Market and Industry Data)ofPresentation of Financial and Other Information for further information on the

use of market and industry data in this Prospectus.

Total 2021 market size of £161 billion based on Group analysis of third party market data.

pandemic, personal healthcare has become even more relevant and this trend has

accelerated. 2020 customer research found that 42 per cent. of consumers try to make

wellness a priority in their day-to-day life, and 79 per cent. think wellness is important. 71 per

cent. of those consumers place a higher priority on their health than they did two to three years

ago, and 70 per cent. anticipate health growing in their list of priorities looking forward.

This

represents an important driver in the growth of self-care and underpins favourable trends for

the sector as a whole.

Ageing populations

The proportion of people aged 65 years and over is expected to increase from 9.3 per cent. of

the global population in 2020 to 16.0 per cent., or approximately one in six people globally, in

2050.

This change in demographics brings with it increased need for self-care and

preventative care.

Emerging middle class

The emerging middle class in higher-growth economies has been a long term growth driver for

the consumer healthcare market as greater buying power has led to greater per capita usage.

Emerging and higher-growth economies continue to represent a sizeable growth opportunity

for the industry: per capita usage for combined OTC/VMS products in the USA was £110 per

capita in 2021; and Western European OTC/VMS usage per capita was £53 in the same

period.

By comparison, per capita usage in higher-growth markets, including China (2021

OTC/VMS of £22 per capita), Central and Eastern Europe (2021 OTC/VMS of £29 per capita),

India (2021 OTC/VMS of £2 per capita) and Latin America (2021 OTC/VMS of £13 per

capita),

is still relatively low, which presents an attractive opportunity to increase household

penetration of the consumer healthcare category.

Growing self-care in the face of increasing pressure on public health systems

Prior to the COVID-19 pandemic, pressure on public health had been rising over the long term.

In 2018, global spending on health reached $8.3 trillion, or 10 per cent. of global GDP, growing

slightly below GDP for the first time in five years. The COVID-19 pandemic has had, and is

continuing to have, a significant adverse impact on health systems globally, and the aftermath

of the pandemic may be accompanied by a potentially deep global economic crisis which could

have a long-lasting impact on future health financing.

As such, the consumer healthcare

market, and more specifically the ability to help consumers to self-care in general, represents a

major opportunity to reduce the current significant burden on public health.

Sizeable unmet consumer needs

Competition in the consumer healthcare market is partly driven by innovation designed to meet

unmet consumer needs. Through targeted innovation to address emerging trends – such as

the growing demand for natural ingredients, as well as premiumisation (where consumers

switch their purchases to premium alternatives), increased consumer interest in personalised

products, and emerging technologies that allow consumers to more directly manage their own

health – the Directors believe there is a sizeable opportunity for further growth.

Source: McKinsey & Company, The Future of Wellness H1 2021 Report. Based on consumer research in Brazil, China, Germany,

Japan, the US and the UK.

Source: UN Population Facts, October 2020.

Source: Nicholas Hall’s DB6 Consumer Healthcare Database at manufacturer’s selling prices.

Source: WHO, 2020.

3. The key market categories for the Group

OTC/VMS

Within the consumer healthcare market, OTC is distinct in that it is defined primarily by its

regulatory status (see also Part X (Regulatory Overview) for further information on relevant

regulations). OTC medicines are readily available to consumers in retail distribution channels

(including pharmacies) without the need for a doctor’s prescription. OTC comprises several

categories defined by specific consumer needs and competition is at the category level.

The Group’s OTC business is focused on three of the largest categories: Respiratory Health

(£23 billion market), Pain Relief (£16 billion market) and Digestive Health and Other (£44 billion

market). In Digestive Health and Other, the Group has a significant presence in Digestive

Health (£15 billion market), Skin Health (OTC Dermatologicals only, £17 billion market) and

Smokers’ Health (£1.3 billion market of the broader £13 billion Lifestyle OTC market). Current

expectations suggest that the OTC sector could grow by approximately 2 to 3 per cent. per

annum over the medium-term.

In contrast to the broader FMCG marketplace, OTC is highly regulated, with a regulatory

environment that differs by country and respective regulator. Most OTC innovations and

consumer benefit claims must pass a rigorous approval process including pharmaceutical-like

clinical testing. Distribution is also heavily regulated: in many countries, OTC medicines are

typically available only via the pharmacy channel, although the USA, Australia and UK, where

mass market distribution is permitted, are notable exceptions. While the associated regulatory

environment tends to lead to a slower innovation cycle versus typical FMCG, it provides a

significant competitive advantage to businesses such as the Group with strong scientific

capabilities and strong pharmacy and retail channel execution infrastructure and capabilities.

Competition in OTC is characterised by scientific innovation designed to fulfil unmet consumer

needs and is supported by FMCG consumer branding and marketing. Innovations can include

improved efficacy, new product formats, innovative packaging, and new consumer benefit

claims. Historically, the Rx-to-OTC switch, through which a medicine or class of medicines

previously only available via prescription is made readily available to retail consumers, has

been a significant growth driver. Switches take a relatively long time and require specific

capabilities and expertise, including scientific and regulatory resources, the ability to manage

clinical trials, and the ability to actively engage with key opinion leaders and regulators.

Respiratory Health comprises several sub-categories. The Group is the market leader in global

Respiratory Health with a global number two position (excluding traditional Chinese Medicine)

in the largest sub-category, Seasonal Cold and Flu, the number one position in Topical

Decongestants and the number four position in Allergy Care.

Pain Relief can be further segmented into Systemic Pain Relief (where the medicine is

ingested) and Topical Pain Relief (where the medicine is applied to the skin). The Group is the

global market leader in Pain Relief overall as well as in both of these sub-categories.

Digestive Health comprises a range of treatments to support healthy functioning of the

gastrointestinal tract including, amongst others: Antacids, Laxatives, and fibre products. The

Group is the market leader in Digestive Health globally, due to strong leadership in immediate

relief antacids in both developed and emerging markets.

Skin Health is highly fragmented, with multiple subcategories. The largest of these are Wound

Healers (the Group is number three globally), Antiseptics and Disinfectants, Anti-itch (number

four globally), Acne Remedies, General Antifungals (number three globally), Feminine Intimate

Care and Lip Care (number two globally). Additionally, the Group holds a global leadership

position in OTC Cold Sore Treatments.

Group’s projection for medium term (3 – 5 year) market growth rates based on analysis of third party data. Projection is based

on the Group’s current brand / market footprint.

Smokers’ Health, in which the Group holds the global number two position,

is one of several

sub-categories comprising the Lifestyle OTC category.

VMS is a £52 billion market and is broad-based, highly fragmented and aligned to multiple

specific consumer benefits. While it forms part of the broader OTC/VMS market, it is also

adjacent to the broader Nutrition market and, as a result, different competitors may take

different views of the market (Nutrition, Dietary Supplements, etc.). The current expectation is

that the VMS sector could grow by 4 - 5 per cent. per annum over the medium-term.

The

Group competes in VMS products usually intended to supplement a consumer’s diet,

containing one or more dietary ingredients (including vitamins, minerals, herbs or other

botanicals, amino acids, and other supplements). Formats can include pills, powders, food-like

forms (e.g. gummies), capsules, tablets, or liquids. The Group holds global number one

positions in three of the five largest VMS sub-categories: Multivitamins, Vitamin C Supplements

and Calcium Supplements. Unlike OTC medicines, VMS products are generally regulated in

the same way as foods by relevant government authorities (see also paragraph 4 of Part X

(Regulatory Overview)), and products within this category are distributed across a wide range

of consumer channels, including pharmacy, mass and specialty retail, and e-commerce. The

less complex VMS regulatory environment allows for a more rapid innovation cycle. However,

the comparatively limited constraints and barriers to entry enable smaller or local players to

enter and compete within this growing category.

Oral Health

The £25 billion Oral Health market is the most representative of a “true” FMCG category within

the Group’s consumer healthcare portfolio, albeit one that often requires differentiating

scientific capabilities to successfully compete for market share. The Group holds the global

number three market share position in Oral Health overall and the number one position in the

Therapeutic Oral Health sub-category.

The Group also has leading positions in Toothpaste

(number two in a £13 billion market) and Denture Care (number one in a £915 million market).

Other major sub-categories include Toothbrushes, Mouthwash, and Whitening. The current

expectation is that the Oral Health sector could grow by approximately 3 to 4 per cent. per

annum over the medium-term.

Regulation in relation to innovation, consumer benefit claims, and distribution is generally less

complex in the Oral Health market when compared to the OTC market, although some

products in the Group’s portfolio are classified as medicines and medical devices, particularly

in Therapeutic Oral Health and Denture Care. Therefore, innovation cycles are typically shorter

and outperforming the market requires differentiation and strong consumer marketing

capabilities combined with a high degree of agility. Distribution is relatively widespread, with

most Oral Health brands readily available to consumers across all major distribution channels

(including e-commerce).

4. Other key themes impacting the consumer healthcare market

Competitive environment

Competitive dynamics: The consumer healthcare market is highly competitive, with brands

differentiating themselves through scientific claims, consumer-driven innovation (including new

product development and claims), premiumisation and distinguished branding. Competition

also leverages traditional FMCG capabilities including consumer and channel marketing.

Note the Group’s US Nicorette trade mark, under which the CH Group’s US Smokers’ Health business is commercialised, is

licensed from Johnson & Johnson.

Group’s projection for medium term (3 – 5 year) market growth rates based on analysis of third party data. Projection is based

on the Group’s current brand / market footprint.

Therapeutic Oral Health ranking is based on Group analysis of third party data from (Nielsen, IRI, Intage, IQVIA Consumption

Sales Data (2021-2022). Therapeutic Oral Health is defined as Therapeutic Toothpaste and Total Dental Appliance Care.

Group’s projection for medium term (3 – 5 year) market growth rates based on analysis of third party data. Projection is based

on the Group’s current brand / market footprint.

Market consolidation: The OTC/VMS market is highly fragmented, with the top five players

holding a combined global share of 17 per cent. in 2021. Smaller competitors are also highly

regionalised, slowing the pace of consolidation. In contrast, Oral Health is highly consolidated

with the five largest competitors holding 61 per cent. of the market in 2021.

Major competitors: The Group’s competitors fall into four major groups: consumer healthcare

businesses within large pharmaceutical companies; FMCG companies with businesses in

overlapping or adjacent categories; local competitors in specific markets (particularly in China);

and retailer private label companies in the USA, UK, and Australia.

Regional dynamics: The Group’s two most significant markets are the USA and China. These

markets had aggregate market revenue of £41 billion and £35 billion

respectively in 2021. In

the USA, the Group holds the number one position in OTC/VMS and the number four position

in Oral Health, with a number three position in Toothpaste and the leading position in Denture

Care. In China, the Group holds the number two position in OTC/VMS (the number one

multinational) and is among the top ten in Oral Health.

Retail and distribution

OTC distribution is heavily weighted to the pharmacy channel globally (68 per cent. of global

revenue), with approximately 25 per cent. in other retail (primarily mass market in the USA and

UK and hospitals in China) and 7 per cent. of revenue in e-commerce. By contrast, VMS has a

greater weighting in e-commerce, with 30 per cent. in e-commerce, 28 per cent. in other retail

and 42 per cent. in pharmacy. Oral Health distribution closely mirrors the broader FMCG

space, with 55 per cent. of 2021 revenue in mass/grocery, 22 per cent. in pharmacy, and

12 per cent. in e-commerce. A further 11 per cent. of Oral Health distribution comes from other

much smaller channels, such as convenience.

Pharmacy channel: Pharmacy is the primary distribution channel for both OTC and VMS,

comprising 68 per cent. and 42 per cent. respectively of distribution globally. The Western

European pharmacy channel is both fragmented and highly regulated: Germany, France and

Spain do not permit corporate ownership of pharmacies and, as a result, market participants

must have the capabilities and infrastructure required to partner effectively with a large number

of individual store owners. While Italy is similarly regulated, corporate ownership of pharmacies

is permitted. The UK operates a parallel model, with mass market sales for some OTC/VMS

products permitted, while other OTC products are confined to the traditional pharmacy. Similar

to Western Europe, the bulk of Central and Eastern Europe operate on a pharmacy-regulated

model, with some corporate ownership permitted. This is also the predominant model in Latin

America and Asia. China also follows a primarily pharmacy model with a significant portion of

OTC medicines distributed through in-hospital pharmacies. In North America, the pharmacy

channel primarily consists of large drug store chains (for example, CVS, Walgreens). These

chains share many similarities with the mass/grocery channel (see below).

Mass/grocery: Mass sales of OTC medicines are widely permitted in the USA and permitted for

most OTC/VMS products in the UK and Australia. As a result, competition in these markets

requires strong FMCG-based customer marketing capabilities, including category management

and collaborative planning with major retailers; and the scale necessary to partner with the

world’s largest retailers. Notably, mass market retailers are both a distribution channel and

direct competition in the form of private label, making the ability to compete with private label

via differentiating innovation and strong brand loyalty critical to success in the mass market.

E-commerce: Online consumer healthcare sales have consistently grown at double digit rates

since 2018 and this trend was accelerated by the pandemic in 2020 and 2021 across all

Sales of traditional medicines are included where they are packaged and positioned alongside registered OTCs.

Source: Euromonitor Passport 2021 consumer sales at manufacturers’ selling prices. Mass/grocery as per Euromonitor’s Grocery

Retailers definition, pharmacy & drugstores as per Euromonitor’s Health and Beauty Specialist Retailers, e-commerce as per

Euromonitor’s e-commerce definitions.

regions. Online revenues are most significant to the Group in the USA and China, with

Germany and the UK leading online revenues in Europe. While this trend could be viewed as

disruptive to the traditional status quo and distribution, the resulting increased consumer

availability also represents an opportunity to drive a longer-term increase in both penetration

and category growth. Increasing market share in this evolving segment is dependent on having

the right capabilities to capitalise on this trend, as well as having invested sufficiently to equip

the business to adapt to fulfilling consumer needs in this channel.

PART III

BUSINESS OVERVIEW

1. Strengths

The Group is one of the world’s leading consumer healthcare businesses with an exceptional

portfolio of brands across its key categories and a strong footprint across the world’s largest

and fastest growing OTC/VMS and Oral Health markets.

The Group is further distinguished by leading consumer healthcare-focused scientific

capabilities, a well-developed organisational understanding of human health behaviours, strong

capabilities in brand building, innovation and digital commerce and a powerful route-to-market.

The Directors believe these represent important competitive strengths, which will support

sustainable above-market medium-term growth and attractive shareholder returns.

1.1 Exceptional portfolio of category-leading brands

The Group’s business is built on an exceptional and focused portfolio of trusted

consumer healthcare brands in attractive categories which provide meaningful

opportunities for growth.

The Group is a global leader in the consumer healthcare market with number one global

category positions in Therapeutic Oral Health,

VMS, Pain Relief, Respiratory Health and

Digestive Health. Across these key categories, the Group has an exceptional portfolio of

trusted brands with category-leading positions at a global or local level, including four out of the

world’s top ten OTC/VMS brands by revenue.

The Group’s leading brands

Oral Health

Market

Rank

Power brands

Local strategic

brands

VMS Pain Relief Respiratory Health

Digestive Health

& Other

£2.7bn sales 2021 £1.5bn sales 2021 £2.2bn sales 2021 £1.1bn sales 2021

£2.0bn sales 2021

The Group’s portfolio includes nine large-scale multinational Power Brands: Panadol, Voltaren,

Advil, Otrivin, Theraflu, Sensodyne, Polident, parodontax and Centrum, which represented

58 per cent. of revenue in FY 2021. Of these nine brands, Voltaren, Advil, Otrivin, Sensodyne,

Polident and Centrum are the number one or number two brand in their respective

See paragraph 1 (Market and Industry Data)ofPresentation of Financial and Other Information for further information on the

use of market and industry data in this Prospectus.

Group analysis of third party data from (Nielsen, IRI, Intage, IQVIA Consumption Sales Data (2021-2022). Therapeutic Oral

Health is defined as Therapeutic Toothpaste and Total Dental Appliance Care.

Excluding traditional Chinese medicine.

sub-categories globally.

In addition, Panadol is the leading Systemic Pain Relief brand

outside of the USA, Theraflu has a strong regional European and North American presence in

Systemic Cold and Flu and parodontax is amongst the world’s fastest growing global

Toothpaste brands.

The Power Brands are complemented by local strategic brands, which have scale and

leadership positions in key markets. These include, among others, Fenbid (the number two

Systemic Pain Relief brand in China), Emergen-C (the number one immunity VMS brand in the

USA), Grand-Pa (the number one Pain Relief brand in South Africa), Dr.BEST (the leading

Manual Toothbrush brand in Germany), ENO (the number one Digestive Health brand in Brazil

and India) and Tums (the leading Heartburn brand in the USA).

The combination of the Power Brands and local strategic brands provides the Group with a

focused, complementary and trusted portfolio which offers scale advantages, meaningful

opportunities for growth and positions the Group well to maximise the return on innovation,

advertising and promotion.

1.2 Attractive geographic footprint with strong presence in large and higher-growth markets

The Group has an extensive footprint across the global consumer healthcare market

and a leading position in the large US and Chinese markets. The Group’s revenue is

well-balanced between developed and emerging markets.

The Group has market-leading scale in the world’s consumer healthcare markets, including a

commercial presence in over 170 markets and a number one or two OTC/VMS position in

countries representing over 70 per cent. of the global OTC/VMS market by value in 2021.

The Group holds a leadership position in key scale and growth markets. This includes

leadership in the approximately £37 billion US OTC/VMS market (the largest market,

representing over 27 per cent. of the total OTC/VMS market) and regional leadership in the

approximately £31 billion European OTC/VMS market (approximately 23 per cent. of the total

OTC/VMS market). The Group also holds the leading multinational (“MNC”) position in the key

OTC/VMS growth markets of China and India (in both cases the Group is number two overall),

together with market leadership in the Asia Pacific region and in the Middle East and Africa

(“MEA”), (together, representing 44 per cent. of the total OTC/VMS market). In China, the

Group is currently the number one multinational consumer healthcare business.

Global rankings: Sensodyne #1 Sensitive Toothpaste (ZS 2021), Polident #1 Denture Care (Euromonitor 2021), Centrum #1

VMS, Voltaren #1 Topical Pain Relief, Otrivin #1 Topical Decongestant, Advil #2 Systemic Pain Relief (Nicholas Hall 2021).

parodontax is amongst the fastest growing global Toothpaste brands based on Group analysis of Euromonitor Passport data

(2021).

Source: Nicholas Hall’s DB6 Consumer Healthcare (OTC/VMS) Database (other than with respect to Dr. BEST); Euromonitor

Passport Database with respect to Dr. BEST.

The following chart shows the Group’s combined market ranking in OTC and VMS.

The Group’s scale in OTC/VMS is reinforced through its leadership position in Therapeutic Oral

Health

and overall number three position in Oral Health.

The Group benefits from a balance of revenue between developed and emerging markets with

approximately one third of the Group’s revenue delivered from emerging markets in FY 2021.

The Directors expect emerging markets in aggregate to grow ahead of developed markets over

the medium-term driven by rising incomes and health awareness.

1.3 Human understanding and trusted science, exclusively focused on consumer health

The Group has leading scientific capabilities focused exclusively on consumer

healthcare combined with well-developed human understanding generated through

dedicated in-house expertise and a range of proprietary consumer insight tools. The

Directors believe that the combination of human understanding and trusted science

drives better innovation and meaningful and positive engagement with both consumers

and experts.

Given the Group’s pharmaceutical heritage, trusted science is firmly embedded in the Group’s

culture and approach, and the Directors believe it possesses scientific capabilities that

differentiate it from other FMCG companies. The Group has a dedicated consumer healthcare

R&D organisation with a multidisciplinary talent pool of approximately 1,400 highly skilled

scientists and a strong network of external partnerships. This is further supported by high

quality R&D facilities which provide a range of capabilities, including fast prototyping, imaging,

product chemistry, microbiology, stability analysis and scale-up and technical transfer.

Since 2017, the Group has conducted nearly 70 clinical studies involving approximately 6,000

participants and has a strong track record of peer-reviewed journal publications and patent

applications. In addition, through its regulatory organisation which has a direct presence across

approximately 60 markets, it has completed approximately 19,000 regulatory applications and

approvals since 2019 in support of both new launches and the continuation of existing

products.

The Group’s focus on trusted science and the generation of evidence-based claims supported

by scientific research is also critical to the Group’s ability to engage with experts and

healthcare professionals with whom it is widely recognised as a partner of choice. Trust is

fundamental to these relationships and is embedded in the Group’s culture.

Source: Nicholas Hall’s DB6 Consumer Healthcare (OTC/VMS) Database, 2021 Store and E-commerce sales.

Group analysis of third party data from (Nielsen, IRI, Intage, IQVIA Consumption Sales Data (2021-2022). Therapeutic Oral

Health is defined as Therapeutic Toothpaste and Total Dental Appliance Care.

Alongside its scientific strengths, the Group has developed a range of capabilities focused on

understanding the health needs of its consumers and the barriers to treatment, and has

invested heavily in consumer insights, data analytics and a range of digital tools. These include

in-house shopper research facilities which enable sophisticated testing of consumer responses

to different retail scenarios, future trend spotting capabilities, and highly developed sensory

labs to source consumer feedback on the taste, texture and smell of the Group’s products. Its

social listening capability draws insights from over 70 million posts a year and its proprietary

‘Observatory’ library holds 53,000 findings on concepts, conditions or culture, as they relate to

health. The Group’s extensive expert engagement generates further insights, including early

visibility of unmet consumer needs.

The Directors believe the synthesis of trusted science and human understanding provides the

Group with competitive advantages in product development and commercialisation. The

Group’s consumer understanding supports the identification and development of products

addressing real consumer needs. Through its scientific capabilities, the Group is able to

develop innovative products which address these needs with claims backed by science and

supporting expert recommendation, which is a key driver of consumer healthcare performance.

In parallel, the Group’s consumer understanding supports product messaging which appeals to

consumers on an emotional level, as well as allowing the Group to target products and product

messaging to the relevant consumer audiences.

1.4 Strong brand building, innovation and digital capabilities combined with a leading

route-to-market

The Group has well-proven capabilities in building brands and campaigns that resonate

with consumers and in delivering innovation to meet consumer healthcare needs

together with the ability to reach across all key channels for consumer healthcare

products, including e-commerce.

The Group has a track record of building trusted and enduring brands across different

geographies and consumer populations and seeks to build real and personal connections in its

communications with consumers, underpinned by its trusted science. This means making a link

to the broader context of consumers’ needs, not merely focusing on functional benefits. One

example is the successful 2020 launch of Voltaren Arthritis Pain in the USA, following its

successful switch from prescription status. The promotional campaign focused on the brand’s

ability to restore the joy of movement to sufferers of arthritis pain, building upon the strong

functional claims of the product but focusing on the human impact of pain relief. The launch

was supported by an innovative website, tailored to the needs of arthritis sufferers with voice

search functionality, large tap targets, scalable font sizes, and the ability to view hands-free

content via videos and head-gesture-scrolling. In its first year of sales, the launch outperformed

any competitive OTC launch in the US Pain Relief market since 2011

and drove more than

80 per cent. of Topical Pain Relief category growth in the US market in the year of launch.

The Group’s commercial organisation is supported by innovative facilities and tools including

its shopper science labs, the Group’s own in-house content production studio, “CaST”, and

proprietary artificial intelligence tools which support dynamic content and media optimisation.

The foundations of the Group’s business lie in addressing real everyday health needs and

thereby delivering penetration and growth. The Group has demonstrable capabilities in the

delivery of innovation based on human insights to address consumer needs. For example, in

North America, the Group launched Tums Chewy Bites in 2017 having identified that

millennials, whilst having high rates of heartburn, were reluctant to treat the condition due to

negative perceptions of the product taste and perceived lack of relevance to them. The

colourful and fruit-flavoured chewy bites format addressed this perception whilst providing

Source: IRI Consumption Data from Market Advantage and Xlerate, FY2011-FY2021.

Source: Group analysis based on external data (IRI Market Advantage, Consumption Data).

convenience, a characteristic highly valued by this group. Building on the launch in 2017, the

Group has continued to innovate through products with new flavours and sensory properties

(for example, Chewy Bites Cooling Sensation), as well as products treating both heartburn and

bloating. Continued innovation brought 3.8 million new consumers into the category in the

USA

and drove US Tums Chewy 3 year compound consumer sales growth of 31 per cent. to

November 2021.

In addition to its marketing and innovation capabilities, the Group has a strong and established

presence in all key channels relevant for consumer healthcare and a scale which allows it to

effectively engage with retail partners of all sizes, buying groups, distributors, pharmacy chains

and individual pharmacies. In Europe, where the Group’s products are primarily sold through

small-scale pharmacies, this supports the Group’s number one ranking in the pharmacy

channel and, in key European markets, country average weighted distribution

levels in

pharmacy for the Group’s Power Brands of between 70 and 98 per cent. In mass market retail,

the Group is ranked second and has weighted distribution in key European markets for its

Power Brands of between 76 and 94 per cent.

In the mass channel in the USA and

elsewhere, the Group benefits from strategic partnerships with large retailers, supported by its

state-of-the-art shopper science labs which facilitate joint business planning.

The Group has also invested significantly in building local e-commerce capabilities and

strengthening strategic partnerships with global and local leaders. Alongside its digital

marketing capabilities, this has enabled the Group to more than double its e-commerce sales

between FY 2019 and FY 2021.

A key part of the Group’s global reach is also its ability to engage with experts and healthcare

professionals who play a significant part in product recommendation. For example, in OTC/

VMS, 85 per cent. of pharmacist recommendations lead to a purchase, and in Oral Health,

studies have shown that dentist recommendations have a significant influence over oral health

behaviours. As a result of its reach and focus on trusted science, many of the Group’s leading

brands across the portfolio are the number one recommended in their categories by experts in

the Group’s major markets.

2. Strategy

The Group has a clear and focused strategy to drive sustainable above-market growth and

attractive returns, guided by its purpose of delivering better everyday health with humanity.

This strategy is built on four pillars: growing the portfolio by driving household penetration,

capitalising on new and emerging growth opportunities, strong execution and financial

discipline and running a responsible business.

Source: IRI National Consumer Panel Data, FY2016-FY2021.

Source: IRI point of sale data, multi-outlet (MULO) + convenience + ecommerce Nov 2021.

Weighted distribution is the percentage of points of sale where a product is available, assigning to each point of sale, a weight

proportional to its sales.

Based on Group analysis of distribution data for the Group’s Power Brands (excluding Advil which is primarily a North American

brand) in a cross section of European markets, including Poland, Germany, Great Britain, Italy and Spain.

Based on surveys of healthcare professionals carried out in 2020 by Ipsos across 30 markets in the OTC and/or Oral Health

categories. In the majority of cases, the Group’s brands covered emerged as the brand recommended most often to patients by

the healthcare professionals surveyed.

2.1 Drive portfolio growth by increasing household penetration

The Directors believe there is significant opportunity for further penetration of its

brands across its categories. The Group has a clear and proven approach to driving

penetration growth.

Penetration in some of the Group’s key categories is still relatively low, and the Directors

expect to deliver significant continued growth from the Group’s current portfolio. In Oral Health,

nearly 1 in 3 adults have experienced sensitive teeth, but only 1 in 3 of those experiencing

sensitivity use a sensitivity toothpaste like Sensodyne.

In Pain Relief, 9 out of 10 people

suffer from pain, but only 1 in 3 of them immediately treat their pain.

In China, where calcium

intake is less than 50 per cent. of the daily recommended level

only approximately 17 per

cent. of people take a calcium supplement like Caltrate.

The Group has a clear and proven approach to driving penetration growth which utilises its key

capabilities in human understanding, trusted science, innovation and marketing, supported by

strong commercial execution. This can be illustrated by the successful growth of Sensodyne,

which delivered over 10 per cent. compound revenue growth between FY 2011 and FY 2021.

The Group’s strategy for Sensodyne incorporates the building of condition awareness and

relevance. Many sufferers of tooth sensitivity do not recognise it as a health condition and one

which can be treated. The Group’s communications address all sensitivity sufferers, using a

data-driven approach to tailor relevant messages for different target audiences across

channels.

Product innovation based on consumer insights has been a key driver of Sensodyne’s growth.

The Sensodyne product range has expanded well beyond the original formulation to offer a

range of benefits in response to different consumer needs. The range now includes, amongst

others, Sensodyne Rapid Relief offering pain relief within 60 seconds; Sensodyne Pronamel

which protects teeth against acid erosion; Sensodyne Repair and Protect which repairs,

strengthens and protects sensitive teeth; and, more recently, Sensodyne Sensitivity and Gum,

which has a clinically proven dual action formula for sensitive teeth and gum problems.

In addition, expert advocacy has been a core strength of Sensodyne which is the number one

dentist-recommended brand for sensitive teeth in 24 of 30 markets tracked.

Dental

recommendation has been built on the foundation of the Group’s trusted science with science -

backed claims developed by the Group and a large expert field force combined with

Healthpartner, the Group’s website for healthcare professionals ensuring awareness of the

benefits of Sensodyne products.

Finally, the Group’s commercial execution, both online and in-store, ensures that Sensodyne

has high levels of visibility and the right assortment of packs to support commercial

opportunities.

Source: Oral Health Population Data – IPSOS Incidence Study Calculations 2015: figures are averages.

Source: Edelman Intelligence, GP14, 2020, 19 markets, 19,000 respondents.

Source: Chinese Center for Disease Control and Prevention (2021).

Source: Penetration data from Kantar (2020).

Source: Group analysis based on Ipsos data from expert performance tracking study 2019-2020.

The Group is applying the same approach as on Sensodyne across other brands and markets.

For example, the Group’s parodontax messaging focuses on raising consumer awareness of

gum disease with many sufferers of bleeding gums unaware that this is a sign of gum disease

with the long-term risk of tooth loss. This has been supported by science-based product claims

(“parodontax is a toothpaste that is clinically proven to help reduce bleeding gums”) and

innovation of a range of different products focusing on different consumer needs including gum

health, whitening, gum repair and complete protection.

2.2 Capitalise on new and emerging growth opportunities

The Group plans to leverage its growing capabilities in e-commerce and expand its key

brands across leading markets. It will continue to pursue Rx-to-OTC switches in the

USA and capitalise on accelerating consumer trends.

Channel expansion: e-commerce

Over recent years, partly driven by the COVID-19 pandemic, there has been a significant

consumer shift to e-commerce with market compound e-commerce growth of approximately

24 per cent. per annum between 2018 and 2021.

The Directors expect this momentum to

continue.

As a result of the investments made in digital capabilities and strategic partnerships with

leading e-commerce companies, the Directors consider the Group to be well positioned to

capitalise on e-commerce growth. This is grounded in the Group’s strong recent performance.

Since 2019, the Group has delivered above-market growth in e-commerce sales, which have

grown from 4 per cent. of revenue in FY 2019 to 8 per cent. in FY 2021 (constituting growth of

over £0.4 billion in digital revenue). Significantly, the Group holds strong positions in more

developed e-commerce markets, such as China and the USA. In China, e-commerce revenue

represented 20 per cent. of FY 2021 revenue with FY 2020 to FY 2021 growth of over 40 per

cent. In the USA, e-commerce revenue represented 12 per cent. of FY 2021 revenue and with

FY 2020 to FY 2021 growth of over 35 per cent. E-commerce growth is a clear priority and an

area where the Group aims to build on the investments it has already made.

Geographic expansion

The Directors believe that the Group’s brand portfolio and powerful route-to-market capabilities

offer multiple opportunities to expand its brands beyond their existing geographies.

For example, in India and in many MEA markets, the business has a consistent performance

track record and strong route-to-market with 4 million distribution points in India and 80 per

cent. weighted distribution across MEA. The Group has experienced double digit growth in

MEA over the last two years and strong double digit growth in India over the last five years. In

each case, however, the majority of revenue currently comes from a small number of brands.

In FY 2021, over 75 per cent. of revenue in India was accounted for by ENO and Sensodyne

and over 48 per cent. of revenue in MEA was derived from Panadol and Sensodyne. The

Directors believe there is significant opportunity to leverage local capabilities to expand other

brands in the portfolio into these and other markets.

The Directors believe that its leading portfolio includes a number of brands which are well-

positioned for geographic expansion. For example, poor gum health, a common condition

worldwide, offers opportunity for the expansion of parodontax into additional markets through

application of the same growth model as Sensodyne. The brand was launched in India in the

second quarter of 2021 and has delivered strong initial performance.

Additionally, Centrum, although present in over 70 markets, is highly concentrated

geographically with approximately two thirds of revenue in FY 2021 coming from five markets.

The Directors see an opportunity to grow the brand within its existing footprint by leveraging

Source: Group analysis based on market data sourced from Nicholas Hall and Euromonitor.

the Group’s scale and route-to-market. This is supported by recent experience in the EMEA

and LatAm region with approximately 14 per cent. Centrum revenue growth in this region in FY

2021 compared to FY 2020.

Portfolio expansion: Rx-to-OTC switches

The Group continues to pursue Rx-to-OTC switches which have historically been a key source

of innovation and growth in OTC, especially in the USA. The Group has a strong track record

of switching both GSK and non-GSK products driven by a long-standing dedicated in-house

team and has implemented four Rx-to-OTC switches in the USA since 2014. This includes the

most recent switch of Voltaren Arthritis Pain in 2020, which drove 80 per cent. of market

revenue growth in the Topical Pain Relief category in the USA in 2020. The Group currently

has two active switch projects in its pipeline with expected launches (if successful and

approved) in 2025 and 2026 and is exploring further opportunities both within and outside of its

key categories.

Portfolio expansion: emerging consumer trends including Naturals

The Group intends to continue to capitalise on accelerating consumer trends, for example, the

growing consumer trend for natural products. Consumer healthcare products that are

non-medicated, ‘free from’ particular ingredients, or that include plant-based, herbal or other

naturally occurring ingredients (“Naturals”) are increasingly popular, especially amongst

younger consumers, with growth exceeding the market average. Consumers are increasingly

looking for natural products across disease prevention, treatment and recovery and the

Directors believe this trend will continue.

The Group sees an opportunity to expand its Naturals offering across relevant portfolios and

has launched 10 Naturals innovations since the beginning of FY 2021, including launches such

as Voltanatura, Centrum Whole Food, Sensodyne Nourish and Tums Naturals. 25 further

Naturals products are in the pipeline.

2.3 Underpin performance with strong execution and financial discipline

The Group will continue to focus on driving efficiency, effectiveness and agility to make

every investment count.

The Group has made significant progress in recent years in driving efficiency effectiveness

across its operations. Over the last seven years, the Group has optimised the manufacturing

footprint inherited from the legacy GSK, Novartis and Pfizer consumer healthcare businesses

from 41 sites to 24, whilst restructuring its supply chain such that manufacturing is increasingly

co-located in the same region as the end consumer (80 per cent. of product supply sourced

within the same region). This allows the Group to manufacture at scale, whilst retaining the

cost and responsiveness benefits of local sourcing. In the same period, the Group has more

than halved its number of distribution centres and has reduced its contract manufacturers from

approximately 250 inherited from the legacy GSK, Novartis and Pfizer businesses to

approximately 180 in 2022, thereby gaining scale benefits and reducing management costs.

Similarly, between 2019 and 2021, the Group’s marketing organisation reduced its creative

media and production agencies from 200 to 56 and the organisation has continued to optimise

how advertising and promotion spend is deployed with an increased focus on digital (doubling

between FY 2019 and FY 2021 to almost half of advertising and promotion spend in FY 2021).

Investments in AI tools such as People-Cloud and consumer data have significantly increased

the efficiency of this expenditure. In 2021, the Group was able to deliver a 185 per cent. return

on data-driven media spend.

Data-driven media spend is digital media spend targeting new consumers identified by data-driven consumer segmentation. These

consumers are served with media and messages relevant to their specific profiles. The 185 per cent. return refers to incremental

revenue generated relative to digital media expenditure.

In terms of in-market commercial execution, the Group has empowered its local markets to

innovate, increasing the Group’s agility in adapting to changing consumer healthcare needs.

800 R&D and category roles have been moved or re-aligned to local markets for 2022 and in

the USA, for example, approximately 68 per cent. of 2022 innovation projects are expected to

be locally managed. The Group has also built specialised tools that enable better local

commercial execution. For example, the Group’s sales teams across EMEA and LatAm are

supported by a customer relationship management system which ensures sales representative

calls are efficient and effective. Through this system, representatives are able to complete their

commercial activities, capture instore excellence key performance indicators, and deliver

category and product training and education. The Group is also now utilising image recognition

and machine learning across many retail stores in order to ascertain distribution and visibility

metrics that can then drive improvements with the objective of optimising sales. Similarly, the

Group’s shopper science labs inform its commercial practices to improve the experience of

retailers and consumers.

A sharp focus on net revenue management has been a further lever through which the Group

has sought to optimise its margins, including strategic initiatives such as increased penetration

of Power Brands in key markets such as India (typically Power Brands have higher margins

than the Group as a whole) and increased focus on improving returns on trade investment

spend. These initiatives have positively impacted margins and supported approximately 2.2 per

cent. price growth in 2021 (excluding divested brands and at CER), complementing an

approximately 1.8 per cent. growth in volumes (excluding divested brands).

The Group’s strategy of efficient commercial execution and cost discipline allows it to deliver

moderate operating profit margin expansion whilst reinvesting a share of cost savings delivered

in future growth through targeted investment in advertising and promotion, and innovation. This

in turn supports delivery of increased growth and growth in free cash flow creating further

operating leverage and efficiencies.

Between FY 2019 and FY 2021, the Group successfully increased operating profit margin and

Adjusted operating profit margin by 6.6 percentage points and 3.3 percentage points,

respectively, despite an adverse foreign exchange movement and an adverse impact from

divestment of growth-dilutive brands which received limited advertising and promotion support.

Over the same period, the Group reinvested a share of operating cost savings into advertising

and promotion spend on brands to support future growth.

The Group has additionally delivered net cash inflow from operating activities of £3.5 billion

and free cash flow of £3.8 billion, in each case across the period FY 2019-2021. Healthy cash

flows from operations have been strongly supported by a sharp focus on working capital

discipline and stable capital investment.

The Group is a business with strong operating profit margin (FY 2021: operating profit margin

of 17.2 per cent. and Adjusted operating profit margin of 22.8 per cent.) with above-market

growth supported by robust investment in its brands (FY 2021: advertising and promotion

expenditure as a percentage of revenue of 20.3 per cent., R&D costs as a percentage of

revenue of 2.7 per cent. and Adjusted R&D costs as a percentage of revenue of 2.6 per cent.).

The Group’s strategy is to maintain its sharp focus on business optimisation and cost control

whilst reinvesting a share of savings for future growth. This includes the delivery of the

remaining synergies from the integration of the Pfizer consumer healthcare business, other

ongoing projects in net revenue management and manufacturing and further operational costs

savings.

2.4 Run a responsible business

The Group’s responsible business agenda is intrinsically linked to its sector focus and

its purpose of delivering better everyday health with humanity. The Group has a

structurally advantaged environmental footprint in its sector and is strongly positioned

to advance health inclusivity. The Group is committed to building strong corporate

governance across the business.

Running a responsible business is intrinsically linked to the Group’s purpose and integral to

how the organisation operates. The Group recognises that the health of the world’s

environment affects the health of people and is committed to tackling the environmental and

social barriers to everyday health. The Group’s brands have clear and positive roles to play in

protecting and improving everyday health and doing so in inclusive and responsible ways.

The Group has a relatively small environmental footprint in terms of carbon intensity (2020

Carbon intensity scope 1-3 0.2kg CO2e/£ of revenue) and plastic packaging (2020 plastic

packaging footprint of approximately 50,000 tonnes). This is driven by the nature of its product

portfolio, a significant part of which is made up of precisely-dosed, small-sized premium

products which are bought and typically used over an extended period of time and which

therefore utilise less energy for manufacturing and plastic for packaging per £ of revenue. A

further structural advantage is that the Group’s products are less exposed to agricultural

ingredients which require high resource intensity in manufacturing. Such structural advantages

provide the Group with a strong foundation in terms of reduced risk exposure and the required

capital expenditure to further advance its environmental and social agenda. In addition, the

Group has a lower financial exposure to carbon taxation, plastic regulations or taxation, and

rising energy costs.

The Group’s environmental focus is to tackle the barriers to everyday health, focusing on

carbon footprint and climate change, sustainable healthcare packaging, and using trusted

ingredients that are sustainably sourced. The Group’s targets include: 100 per cent. reduction

in scope 1 & 2 (internal operational) carbon emissions by 2030 (versus its 2020 baseline);

42 per cent. reduction in scope 3 (from source to sale) by 2030; and 100 per cent. recyclable or

reusable packaging by 2030 versus its 2020 baseline (where quality, safety and regulations

permit, given the strict regulation of packaging requirements for certain healthcare products).

As a standalone business, the Group will set a longer-term carbon net zero goal informed by

the latest Science Based Targets initiative (“SBTi”) guidance.

The Group has a track record of delivering against these targets: 100 per cent. of electricity

used by the Group comes from renewable sources; renewable electricity generation has been

implemented at 12 out of its 24 manufacturing sites; and new solutions are being developed to

support delivery of a significant reduction in the use of virgin petroleum-based plastic. These

include sustainably-sourced Pulpex pulp-based packaging alternatives; new bamboo and

biobased plastic toothbrushes; and recycle-ready toothpaste tubes on track to reach one billion

tubes using recyclable plastic by 2025 (in line with Group’s target for all packaging to be

recyclable or reusable by 2030).

The Group sees health inclusivity or a lack of it as a critical factor for everyday health and

believes its leading global position in the consumer healthcare market offers it the opportunity

to make a meaningful positive impact in this area. The Group has set a target to help 50 million

people per annum by 2025 to gain access to opportunities for better everyday health

irrespective of their age, physical and mental capabilities, gender, ethnicity or sexual

orientation. The Group has identified a range of different programmes to achieve this. Across

its brand portfolio the Group will seek to provide inclusive products, services and resources

that help more people to access the care and support they need. The Group will continue to

focus on educating consumers and empowering self-care, supporting health literacy and

educational programmes for individuals and healthcare professionals. Finally, the Group will

SBTi is a collaboration between the United Nations, the World Resources Institute, the World Wide Fund for Nature and CDP, an

environmental reporting charity. SBTi provides companies with accreditation of science-based climate targets. SBTi however,

does not accept separate targets for business divisions within a wider company and therefore the Group will seek SBTi

accreditation post demerger from GSK.

utilise its reach, resources and expertise to cooperate with other experienced partners in the

field of healthcare and inclusivity. One such example is its partnership with the Economist

Intelligence Unit and leading academics to create the Health Inclusivity Index which is

expected to launch in July 2022 to facilitate dialogue with and among key stakeholder groups

and to identify opportunities and actions.

Within its own organisation, the Group is committed to inclusion, equality and diversity. This will

include, but not be limited to, the setting of ambitious targets on female and ethnic minority

representation in leadership roles.

The Group has a robust operational governance structure and is committed to building strong

corporate governance practices across its business.

3. Financial outlook and dividend policy

The Directors believe that the Group offers a compelling growth outlook supporting attractive

shareholder returns. Over the medium-term, the Directors expect the Group to deliver above-

market annual organic revenue growth of 4 to 6 per cent., alongside sustainable moderate

margin expansion and strong cash generation and conversion. The Group’s strong cash flow

supports its capital allocation priorities which are geared to investment in growth, a strong

investment grade balance sheet and an initial dividend which is expected to be at the lower

end of a 30 to 50 per cent. pay-out ratio, subject to Board approval.

Medium-term outlook

The Directors expect to deliver 4 to 6 per cent. annual organic revenue growth over the

medium-term, ahead of expected medium-term annual growth in the Group’s end markets of

approximately 3 to 4 per cent.

The Group grew ahead of the market in both 2020 and 2021, delivering organic revenue

growth of 2.8 per cent. in FY 2020

and of 3.8 per cent. in FY 2021. The growth of both the

Group’s business and the overall consumer healthcare market was adversely impacted by the

COVID-19 pandemic over this period.

The Directors expect the COVID-19 headwind to diminish from 2022 onwards and project

annual market growth of 3 to 4 per cent. in the medium-term. The Directors expect the Group

to deliver an acceleration of its organic revenue growth to 4 to 6 per cent. annually over the

medium-term with this above-market revenue growth driven by the Group’s strategy and

underpinned by its scale, exceptional brand portfolio and well-developed capabilities.

Sustainable moderate expansion in operating profit margin

The period FY 2019 to FY 2021 was characterised by a strong uplift in Adjusted operating

profit margin from 19.5 per cent. in FY 2019 to 22.8 per cent. in FY 2021, driven by the

integration benefits from the combination with the Pfizer consumer healthcare business,

coupled with operating leverage from revenue growth and efficient cost management in spite of

headwinds from currency rate movements and divestments. Over the same period, the Group

reinvested over £200 million of cost savings in A&P to support accelerated revenue growth.

Although the Directors expect the Group to incur incremental costs in order to operate as a

standalone business (see Separation and standalone costs below), the Directors expect the

Group’s projection for medium term (3 – 5 year) market growth rates based on analysis of third party data. Projection is based

on the Group’s current brand / market footprint.

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 paragraph 6.3 of Presentation of Financial and Other Information), which made a significant

contribution to the Group’s revenue in the VMS and Pain Relief categories during the period, with the effect that the overall

growth of the Group from 2019 to 2020 was reduced on an organic basis.

Group to deliver sustainable, moderate expansion in Adjusted operating profit margin over the

medium-term, assuming constant exchange rates. This reflects the benefits of net price and

product mix optimisation, efficiencies in the supply chain and continued cost discipline, offset in

part by reinvestment in innovation and A&P to drive growth.

Separation and Admission costs, Restructuring costs and standalone operating costs

The Directors expect the Group to incur Separation and Admission costs of approximately

£0.4 billion between FY 2022 and FY 2024, most of which are expected to be incurred in FY

2022. These include Admission costs of up to £0.1 billion. In addition, the Directors expect the

Group to incur Restructuring costs of approximately £0.2 billion between FY 2022 and FY 2024

in connection with projects to support further efficiencies in its operations. The Directors do not

currently anticipate any further significant restructuring programmes beyond this. Both

Restructuring costs and Separation and Admission costs are treated as an Adjusting Item for

the purpose of calculating Adjusted operating profit.

The Directors also expect the Group to incur recurring standalone operating costs of

approximately £175-200 million per annum from 2022 onwards to provide the capabilities to

operate successfully as a standalone UK public listed company, including in technology and

infrastructure, and in corporate support functions.

Strong cash conversion

The Group delivered £3.8 billion free cash flow over the period 2019 to 2021 driven by a sharp

focus on working capital discipline and stable capital investment of approximately 3 per cent. of

revenue per annum.

Over the medium-term, the Directors expect the Group to deliver strong free cash flow

conversion, enabled by the Group’s robust capital base with stable capex, a sharp focus on

working capital, and cost and cash discipline.

Disciplined capital allocation

The Group will apply a disciplined approach to capital allocation. The Group’s first capital

allocation priority will be focused re-investment to drive sustainable revenue growth and

attractive returns. Second, the Group will pursue 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 (see Dividend Policy

below). Third, the Group will pursue selective “bolt-on” acquisitions where the opportunities are

commercially compelling and consistent with the Group’s strategy. The Group’s capital

allocation priorities will be delivered in the context of maintaining an investment grade balance

sheet with a target net debt to Adjusted EBITDA ratio of less than 3x by the end of 2024.

Considerations for 2022

The Directors expect the Group to achieve organic revenue growth in the range of 4 to 6 per

cent. for FY 2022.

The Adjusted operating profit margin in FY 2022 is expected to benefit from the following:

• favourable volume mix benefits, reflecting continued strong growth and outperformance

from its Power Brands;

• the annualisation of pricing action taken in 2021 and further planned pricing;

• further supply chain efficiencies; and

• additional cost synergies resulting from the completed integration of the Pfizer

consumer healthcare portfolio of approximately £600 million (£100 million higher than

previously announced) with approximately £120 million expected to be delivered in FY

2022.

In addition, there are several factors which are expected to have a negative impact on the

Adjusted operating profit margin in FY 2022:

• the Group will continue to invest in its brands, maintaining its approach of investing in

A&P ahead of revenue growth on a targeted basis;

• inflationary cost pressures affecting the cost of commodity-related inputs, salaries and

wages and other activities performed by the Group, although the Directors believe a

range of possible mitigating actions are available to the Group; and

• the 2022 margin will reflect a full year of the new annual costs associated with running

the Company as a standalone public company of £175-200 million.

These revenue and margin expectations for FY 2022 assume no major unforeseen

macroeconomic or geopolitical developments arise after the publication of this Prospectus.

Dividend policy

Following the Demerger, the Company will 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 Shareholders in relation to the second half of 2022

in H1 2023, subject to Board approval and following approval of the Company’s FY 2022

results.

4. Categories and brands

The Group operates across five categories. These are (i) Oral Health; (ii) VMS; (iii) Pain Relief;

(iv) Respiratory Health; and (v) Digestive Health and Other.

FY 2021 Revenue Split by Product Category

Respiratory Health

VMS

Digesve Health and Other

Pain Relief

Oral Health

29%

23%

20%

16%

12%

0% 5% 10% 15% 20% 25% 30%

The Group is the global market leader in OTC/VMS (which includes Pain Relief, Respiratory

Health, Digestive Health and VMS), as well as the third ranked player in Oral Health.

The Group has a portfolio of established consumer brands with strong brand equities at a

national, regional and global level. Following a progressive rationalisation and focusing of the

Group’s portfolio, 58 per cent. of the Group’s 2021 revenue was accounted for by the nine

Power Brands: Panadol, Voltaren, Advil, Otrivin, Theraflu, Sensodyne, Polident, parodontax

and Centrum. These are large-scale brands that drive the greatest growth for the Group with

market-leading positions, an attractive geographic footprint and long-term growth potential.

The world’s leading Sensitivity Toothpaste (and no.2

overall Toothpaste).

The world’s leading Denture Care brand.

Among the world’s fastest growing global Toothpaste

brands.

The world’s leading Topical Pain Relief brand.

The world’s no. 2 Systemic Pain Relief brand.

The leading Systemic Pain Relief brand outside the US.

Europe’s no. 2 Systemic Cold and Flu brand.

North America’s no. 3 Systemic Cold and Flu brand.

The world’s leading Nasal Decongestant brand.

The world’s leading Multivitamin.

Additionally, the Group has a range of local strategic brands which have scale and leadership

positions in key markets and contribute significantly to the Group’s business, particularly in the

USA and China.

The Group’s leading brands are detailed by category below.

4.1 Oral Health

The Group has one of the world’s leading Oral Health businesses, with operations in over 120

markets and a nearly 100-year track record in successful innovation and manufacture of quality

Oral Health products. The Group specialises in Therapeutic Oral Health, where it is the global

market leader,

providing therapeutic solutions to consumers for the prevention and treatment

of specific oral health conditions including sensitivity, acid erosion, gum disease, denture care

parodontax is among the world’s fastest growing global Toothpaste brands based on Group analysis Euromonitor Passport data

(2021).

Source: Group analysis of third party data from (Nielsen, IRI, Intage, IQVIA Consumption Sales Data (2021-2022). Therapeutic

Oral Health is defined as Therapeutic Toothpaste and Total Dental Appliance Care.

and dry mouth. This focus both allows the Group to leverage its leading capabilities in scientific

research, expert engagement and human understanding and allows it to focus on some of the

fastest growing premium oral health segments. This approach has enabled the Group to

command a price premium over the market and grow ahead of the global Toothpaste market

every year since 2015.

The Group operates in a highly competitive Oral Health market, estimated to be worth

£25 billion worldwide. The Group focuses primarily on Toothpaste and Denture Care, although

it also has a significant presence in the Mouthwash and Manual Toothbrush markets (including

its leading Manual Toothbrush brand in Germany, Dr.BEST). In Toothpaste, the Group is one

of a small number of global players and it is ranked second in the market worldwide. In Denture

Care it is the market leader.

In FY 2021, the Group generated revenue of £2.724 billion across its Oral Health portfolio.

Sensodyne

Sensodyne is the number two Toothpaste brand globally and the number one dentist-

recommended Toothpaste worldwide for sensitivity. Its purpose is to “help humanity reclaim

life’s small pleasures without the restrictions of sensitive teeth” and, since its launch in 1961, it

has become the brand most associated by consumers with the care of sensitive teeth across

virtually all of its key markets.

Tooth sensitivity is a common condition with nearly one third of the global population

experiencing symptoms, nevertheless only one third of sufferers purchase a sensitivity

toothpaste, thereby offering the opportunity for significant penetration-led growth.

The

combination of growing consumer awareness, recommendations of sensitivity toothpastes by

dental experts, favourable demographics and rising incomes in higher-growth economies,

provides an opportunity for the Group to leverage Sensodyne’s brand recognition and

innovation capability.

Building on its long history of innovation and pioneering science, Sensodyne has moved

beyond a primary focus on sensitivity-related conditions to encompass other oral health

conditions. These include innovative products developed in response to a range of identified

consumer needs, such as speed of relief and whitening. For the former, the Group first

launched Sensodyne Rapid Relief in 2010 offering fast pain relief from sensitivity within 60

seconds. An improved, clinically proven formulation providing rapid relief combined with the

additional benefit of long-lasting protection was launched in 2017. For the latter, the Group has

launched tailored whitening variants of Sensodyne Repair and Protect, a product that can

repair sensitive areas of teeth to relieve dentine hypersensitivity. These have increased

penetration with sensitivity sufferers who also want the benefit of whitening.

The Group continues to enhance Sensodyne’s product mix, (which also includes mouthwashes

and toothbrushes) and increase value through premiumisation. Most recently, Sensodyne

Nourish was launched, which is formulated with a bio-active mineral to nourish and strengthen

teeth, and is blended with natural mint and essential oils. The range is vegan-friendly with a

recycle-ready tube, cap and carton.

The brand has continued to outperform the global toothpaste market, reflecting underlying

brand strength, successful innovation and strong consumer uptake in traditional retail and

e-commerce channels.

Growth rates for both Toothpaste market size and the Group performance calculated in Retail Value RSP, GBP Million, fixed

2021 exchange rates.

Source: Oral Health Population Data – IPSOS Incidence Study Calculations 2015.

Polident

The Group is the global market leader in Denture Care (fixatives and cleansers) with

leadership positions in eight of the top ten Denture Care markets. Its denture care products are

sold under three major brands – Polident, Corega and Poligrip (“Poli/Corega”) – across

approximately 60 countries. Poli/Corega is the leading Denture Care brand family, operating in

both cleansers and fixatives at a global scale, and is highly recommended by dentists.

The Group has a deep human understanding of the profound impact and burden that wearing a

denture can have on people’s lives. Poli/Corega’s purpose is to lighten the load for all dental

appliance wearers, providing solutions that give people the confidence to live life without

worrying about their dentures or appliance, granting them the security to eat, speak, kiss and

smile freely. Polident denture cleansers have a low-abrasive formula and help keep dentures

clean and fresh, killing 99.99 per cent. of odour-causing bacteria in lab tests. Polident denture

fixatives provide strong hold, food seal and comfort. The Poli/Corega range includes products

for denture wearers who wear either full or partial dentures, as well as for people with

appliances including mouthguards and retainers.

The Group continues to innovate and develop new product offerings under the Poli/Corega

brand family. In the USA, Poligrip Max Seal was developed as a fixative with a precision nozzle

to help block out food particles. Poligrip Cushion and Comfort utilises Adaptagrip technology

and forms a unique gel layer which acts as a cushion to help provide gum comfort. Polident

ProGuard and Retainer has been launched in the USA as a fast and easy-to-use cleanser in

both tablet and foam form, and is compatible with materials often used for removable dental

appliances.

parodontax family

parodontax is among the world’s fastest growing global Toothpaste brands

and the largest

gum health brand (outside of China). parodontax is dedicated to winning the fight against the

devastating progression of gum disease and, alongside its sister brands, Corsodyl and

Chlorhexamed (together, the “parodontax family”), it offers a range of specialist gum care

products, which are designed for people looking to keep their gums healthy. While the Group

has successfully built a sizeable presence in certain markets, including the USA, the

parodontax family is yet to be introduced in many others which offer the potential for

geographic expansion.

There are 2.5 billion people globally who suffer from gum disease, with an incidence of one in

three people spitting blood when they brush their teeth (a sign of gum disease).

parodontax

has a distinctive brand equity which seeks to de-normalise bleeding gums and thereby help

address the world’s sixth largest disease. Developed in 1937, parodontax has a long heritage

in Europe in the prevention of gum disease. parodontax Original, in most markets outside of

the USA, is formulated with sodium bicarbonate to help break down plaque, making it easier to

remove, and it is clinically proven to be four times more effective at targeting the cause of

bleeding gums compared to regular toothpaste. In the US, stannous fluoride is used as the

active ingredient, making parodontax toothpaste three times more effective than a sodium

monofluorophosphate toothpaste at removing plaque bacteria.

The parodontax family product range also includes mouthwash, toothbrushes, gel and spray.

Corsodyl Intensive Treatment is used to treat the one third of gum sufferers who have

persistent bleeding gums. Corsodyl Treatment mouthwash contains 0.2 per cent.

chlorhexidine, which starts to kill the bacteria that cause plaque within 30 seconds; it also

forms a protective antibacterial layer over the teeth and gums to prevent plaque build-up for up

to 12 hours. The Group continues to expand its product range under parodontax. In response

to growing consumer demand for natural ingredient based products, parodontax Herbal

Source: Group analysis of Euromonitor Passport data (2021).

Source: Oral Health Population Data – IPSOS Incidence Study Calculations 2015.

toothpaste was launched in 2019 and rolled out across key EMEA markets in 2020. In Q1

2021, in the USA, the Group launched parodontax Active Gum Repair Toothpaste, a

formulation designed to help reverse early signs of gum damage by killing plaque bacteria at

the gum line.

Other Oral Health brands

The Group also has a number of locally important brands, which complement the Power

Brands above. For example, Dr.BEST is the leading Manual Toothbrush brand in Germany.

Reflective of its ambition to become the most sustainable toothbrush manufacturer globally, in

2021 the Group launched its first externally certified climate neutral toothbrush, Dr.BEST

GreenClean, which features a handle made from renewable cellulose and wood-based

bioplastic bristles made of 100 per cent. renewable castor oil and 100 per cent. plastic-free

packaging.

4.2 VMS

The Group is the global market leader in the VMS category, owning three of the top 20 global

brands: Centrum, Caltrate and Emergen-C, which together delivered revenue of £1.3 billion in

FY 2021. Importantly, approximately 54 per cent. of the Group’s VMS portfolio revenue in FY

2021 was in the key markets of the USA and China, which are expected to account for

approximately 72 per cent. of total VMS market growth between 2021 and 2026.

Consumers around the world are taking an increasingly proactive approach to managing their

own health. The Group’s vision is to empower consumers to do this by providing solutions to

help them achieve their holistic wellness goals. With its market leadership, recognised brands,

innovation capabilities and scientifically supported claims, the Group is well positioned to

support consumers on this journey.

In addition to the favourable market dynamics and geographic reach of its business, the Group

has identified a number of key opportunities to grow its VMS portfolio, including increasing the

penetration of the Group’s VMS brands across digital channels. Since the formation of the

GSK/Pfizer JV, which incorporated the Group’s leading VMS brands, the Group has made

meaningful investments in its digital capabilities, which are now beginning to favourably impact

performance. In FY 2021, the Group generated revenue of £1.501 billion across its VMS

portfolio.

Centrum

Centrum is the world’s number one selling multivitamin brand, offering a wide variety of

formulations that support energy, immunity and metabolism, as well as eye, heart, bone and

brain health. Launched in the USA in 1978, Centrum has built on decades of research and

innovation and its purpose is to “build every body from the inside out”. Centrum is now

available in over 50 markets and is the best-selling multivitamin brand in over 25 markets. It is

the most clinically studied multivitamin in the world.

Centrum multivitamin products are designed to help adults and children meet their diverse

nutritional needs and contain a variety of essential nutrients. They are devised with formulas

which take into account the latest dietary guidelines, scientific research, and recommended

dietary allowances from the US National Academy of Sciences and other regional/country

specific nutrition bodies. Exemplary of its long history of innovation, Centrum was the first

major brand to add many key nutrients to its products, such as beta-carotene in 1988, lutein in

1999 and lycopene in 2003.

Centrum has continued to innovate by introducing products which target the distinct needs of

consumers. For example, the Centrum Benefit Blends range was launched in eight variants in

Australia in 2021. Available in the form of tablets or capsules to meet differing consumer

preferences. Centrum Benefit Blends supplements are tailored to deliver specific health

benefits, for example, to support immune function or to reduce tiredness and fatigue. A further

example is Centrum Minis which were launched in the USA in 2020 in order to address the

consumer need for smaller pills which are easier to swallow.

As part of its growth strategy, the Group aims to maximise the reach of the Centrum brand by

targeting wellness-focused consumers. In the USA, such consumers constitute 25 per cent. of

consumers in the VMS market. The Group continues to develop its innovation and

communication eco-system to support these consumers on their healthcare journey, including

through engagement with social and healthcare influencers. The sustainable eco-system

combines new product and content innovation with proactive data insights to deliver an

increasingly frictionless, personalised experience for consumers.

Other VMS brands

In addition to Centrum, a number of other locally important brands also provide the Group with

leading positions in key markets. Two of these brands, Emergen-C and Caltrate, are

highlighted below.

In the USA, Emergen-C leads the Vitamin C Supplement market. Its purpose is to “fortify

immune health to help consumers emerge their best”. Starting as a niche vitamin dietary

supplement drink (sold as an effervescent powder), Emergen-C has since demonstrated

strong, consistent growth by expanding its penetration with more diverse consumer segments,

increasing year-round usage and delivering innovation such as the gummy format and the

botanicals line made from natural, plant-based ingredients.

Caltrate is a leading brand for bone and joint supplements and the Group’s largest brand in

China. In China, Caltrate, with its efficient high-volume calcium formula, is the second ranked

Calcium Supplement brand and the fifth largest VMS brand overall. Caltrate is focused on

providing support for strong bones and healthy and active movement. It has a wide range of

products containing bone-essential nutrients such as calcium and vitamin D3 in the form of

tablets, gummies and chewable tablets, with dedicated offerings for pregnant women, children

and the elderly. The brand has a longstanding equity in bone health and a core consumer base

of females over 45. However, since 2018, Caltrate has successfully expanded into joint health

with its Caltrate Gluco range offering products that contain nutrients such as glucosamine and

undenatured type II collagen (UC II). Caltrate has also successfully expanded its consumer

base beyond females and into younger age groups.

4.3 Pain Relief

The Group is the global market leader in OTC pain relief, leading in both topical (creams and

gels) and systemic (ingested products) pain relief with a portfolio of well-known and trusted

products to relieve pain and reduce inflammation. Its global Power Brands, Panadol, Voltaren

and Advil, as well as its other market-leading brands, including, among others, Fenbid,

Excedrin and Grand-Pa, bring comfort and ease to millions through clinically proven

therapeutic benefits, helping people manage their symptoms so that they can enjoy life to the

full. Pain Relief is a focused category, with the Group’s top five brands accounting for 95 per

cent. of the Group’s total Pain Relief category revenue in FY 2021. In FY 2021, the Group

generated revenue of £2.237 billion across its Pain Relief portfolio.

Voltaren

Voltaren is dedicated to restoring the “joy of movement” for body pain sufferers worldwide and

is the number one OTC Topical Pain Relief brand and the third largest OTC brand globally.

The brand has a global footprint with sales in over 87 countries, including the USA where there

was a successful Rx-to-OTC switch of Voltaren products in 2020. Voltaren and its active

ingredient enjoy high levels of recommendation by health care professionals and medical

associations worldwide, such as the American College of Rheumatology and the European

League against Rheumatism.

Voltaren operates under multiple different brand names around the world, including Iodex (India), Voltadol (Italy, Spain) Voltarol

(United Kingdom, Ireland, Norway) and Cataflam (Brazil).

Voltaren is primarily sold as a topical gel and it offers a range of other products across different

markets, including patches, pills and liquid capsules. Most products contain diclofenac, a

powerful nonsteroidal anti-inflammatory drug (“NSAID”) recommended for the treatment of

osteoarthritis, musculoskeletal disorders, soft-tissue injuries and acute or chronic pain. The

Voltaren range has been expanded through continual innovation and includes a wide range of

formulations for different consumer needs; for example, Voltaren 12 Hour Emulgel provides

consumers with an extended release formulation. Voltaren 12 Hour Emulgel has been

formulated for optimal absorption from skin to the site of pain and is also the only clinically

proven formulation to achieve deep penetration. It provides up to 12 hours of pain relief and the

active ingredient diclofenac reduces inflammation directly at the source.

The Group continues to respond to consumer needs under the Voltaren brand based on

insights generated from both consumers themselves and from the feedback of healthcare

professionals. The US launch of Voltaren Arthritis Pain was the first switch of a prescription-

strength OTC NSAID topical gel for arthritis pain, helping the nearly 30 million people in the

USA with osteoarthritis. This product followed the global launch of a new easy-open cap for

Voltaren products to cater for the ageing consumer – an inclusive innovation that won the

prestigious Drum Award for Packaging. In 2021, the Group introduced Voltanatura, an organic

plant-based gel for soothing tense, contracted muscles.

Advil

Advil is the number two Pain Relief brand in North America and the fourth largest OTC brand

globally. The brand is dedicated to helping people “reclaim life’s possibilities” and for over 35

years, consumers and doctors have trusted Advil to deliver powerful relief from various kinds of

acute pain, including headache, muscle ache, backache, minor arthritis, other joint pain and

menstrual cramps, as well as the aches and pains of the common cold. Advil, which is

ibuprofen-based and effective at relieving pain and fever, is the number one doctor-

recommended NSAID among OTC adult Pain Relief brands in the USA.

The Advil product range includes tablets, caplets, gel caplets, liquid-filled capsules,

suspensions and children’s drops to address a broad range of pain relief needs. Advil PM

combines the number one selling ibuprofen brand with the number one selling sleep medicine

(diphenhydramine) to help relieve night time pain and sleeplessness. In 2017, the Group

introduced Advil Liqui-Gels Minis for consumers who find capsules difficult to swallow,

providing the concentrated power of Advil in a capsule that is 33 per cent. smaller than the

standard Liqui-Gels. The Group also sells Advil Migraine, which is clinically proven to relieve

migraine pain and related symptoms, and Children’s Advil, for effective fever reduction,

providing up to 8 hours of relief in one dose.

In 2020, the Group launched the first ingredient innovation in the US OTC Systemic Pain Relief

category in 25 years. Advil Dual Action is the first and only FDA-approved pain relief

medication to combine the top two doctor-recommended and most widely used OTC pain

relievers, acetaminophen (paracetamol) and ibuprofen, into a single pill. The Group’s research

shows that consumers want to take as few medicines as possible, yet many use both ibuprofen

and acetaminophen – which work in different ways – when treating their pain. Advil Dual Action

allows consumers to take a lower daily dose of each medication in a single product that is

scientifically proven to provide greater efficacy than the individual components, providing

powerful, 8-hour relief.

As part of the Group’s work to achieve greater sustainability, in 2021 Advil announced it was

using a first-of-its-kind technology for OTC medicines which decreases the amount of plastic

resin required to mould and craft 80 million Advil bottles by 20 per cent. This innovation is

expected to reduce the amount of plastic in the environment by nearly 227 tonnes by 2022

alone.

Panadol

Panadol has a global footprint covering over 90 countries and it is the number one systemic

pain reliever outside of the USA and the sixth largest OTC brand globally. Panadol offers

leading paracetamol-based products that provide fast and effective pain relief from headache,

joint pain, fever and cold symptoms.

Panadol’s purpose is to “bring freedom from pain so the human spirit can shine” and, with a

track record of over 65 years in delivering innovative, high-quality and efficacious products, and

a reputation for being effective but gentle, it has established itself as the most trusted pain

relief brand in many of the Group’s markets.

Panadol’s expanding product range is designed to satisfy diverse and evolving consumer

needs, with products also dedicated to night pain and period pain. During the COVID-19

pandemic, the Group built additional capacity to respond to the growing demand for Panadol to

help treat the symptoms of pain and fever associated with COVID-19, including a highly

successful post-vaccine programme, which won gold in Nicholas Hall’s APAC Marketing

Awards. Unlike standard paracetamol tablets, Panadol Advance ranges contain innovative

Optizorb technology. This allows the tablets to disperse up to five times faster compared to

ordinary paracetamol tablets, enabling rapid relief and helping consumers enjoy life to the full

again.

Other Pain Relief brands

The Group’s global Power Brands are augmented by a number of locally important brands

which provide market-leading positions in key markets. Three of these are highlighted below.

Excedrin is a leading Systemic Pain Relief brand in the USA (ranked fifth overall) focused on

the relief of headaches and migraines, and has been providing trusted, fast headache and

migraine relief to US consumers for over 60 years. Excedrin’s purpose is to deliver fast relief

for different types of headaches, with consumers having the choice between Excedrin Extra

Strength, Excedrin Migraine, Excedrin Tension Headache and Excedrin PM Headache. The

research-backed effectiveness of Excedrin’s products makes the brand a trusted leader in

head pain relief, with Excedrin Migraine being the number one neurologist-recommended OTC

migraine treatment approved by the FDA.

Fenbid is the number two Systemic Pain Relief brand in China and the market-leading Pain

Relief brand in China outside of traditional Chinese medicine. Its purpose is to “enable

consumers to move forward and leave their pain behind”. Fenbid provides solutions and

formulations that are backed by science, including its popular 12-hour sustained release

formula.

Grand-Pa is the number one Pain Relief brand and largest OTC brand in South Africa. Used by

families for over 100 years, Grand-Pa’s purpose is to “liberate people to keep moving their

communities forward”, by providing fast and effective relief for different types of pain, driven by

formats that deliver fast absorption. Grand-Pa’s headache powder provides symptomatic relief

from mild to moderate pain and fever. In 2021, supported by consumer-tested concepts, the

Group modernised the Grand-Pa brand with the introduction of stick packs, which use sleek

design packaging for ease of consumption on the go.

4.4 Respiratory Health

The Group is the global market leader in Respiratory Health. Respiratory Health is a more

fragmented category, with local needs and consumer preferences in treating respiratory

ailments far more diversified compared to other consumer healthcare categories. The Group’s

portfolio is accordingly positioned, with a larger number of brands catering to local needs. Key

areas of the category where the Group competes include the £5.6 billion seasonal cold and flu

market, the £1.9 billion Topical Nasal Decongestants market and the £3.9 billion Allergy Care

market.

The Group’s focused approach to the Respiratory Health category is highlighted below through

its Power Brands, Otrivin and Theraflu, as well as through examples of its other locally

important brands, such as Flonase, Robitussin and Contac. In FY 2021, the Group generated

revenue of £1.132 billion across its Respiratory Health portfolio.

Unlike the Group’s other categories, seasonality has a significant impact on Respiratory Health

revenue. See paragraph 2.8 of Part VII (Operating and Financial Review) for a discussion of

seasonality in relation to the Group’s Respiratory Health portfolio.

Otrivin

Otrivin is the number one Topical Nasal Decongestant brand worldwide, with a presence in

over 40 markets and exists to “release the wonders of breathing well”. Otrivin provides

consumers with a complete suite of nasal care products, including both medicated and

non-medicated nasal sprays for adults and children. The medicated sprays, such as the

Medicated Complete Nasal Care Triple Action Nasal Spray, are designed to rapidly relieve the

symptoms of nasal congestion and rhinorrhoea and provide long-lasting benefits. This is

achieved using the active ingredients xylometazoline and ipratropium, which unblock the nose

within minutes, and lasts 6-8 hours, for better breathing. For consumers who prefer a

non-medicated solution, Otrivin Naturals uses seawater and sea salt solutions to cleanse away

excess mucus, gently restoring nasal function.

In 2021, the Group launched the Otrivin BreatheClean range in response to growing consumer

concerns about the impact of environmental pollution on breathing. Otrivin BreatheClean

contains isotonic seawater that helps to remove the trapped particulate pollution by washing it

away. The range was successfully launched in India and Poland in December 2020 and is

contributing to strong growth for the brand across both markets.

Theraflu

Theraflu is one of the world’s leading brands in the seasonal cold and flu market, operating in

over 50 markets with over 50 years of history and innovation. Its purpose is rooted in “fighting

for a flu-safe world”, with products that deliver effective relief from cold and flu symptoms. The

Theraflu range, consisting of syrups, hot liquid powders, caplets and capsules, provides

products in multiple forms to meet consumer as well as market preferences.

The leading format in the Theraflu product range is its Hot Liquid Powders. Available in a range

of flavours and drawing on extensive flu expertise, Theraflu provides symptomatic relief from

cold and flu.

Other Respiratory Health brands

The Group’s global Respiratory Health Power Brands are augmented by a number of locally

important brands, which provide the Group with leading positions in key markets. Three of

these, Flonase, Robitussin and Contac, are highlighted below.

Flonase is a leading allergy remedy in the USA with a presence across multiple other markets.

Its purpose is to deliver allergy relief that lasts. Flonase nasal sprays provide 24-hour all-in-one

non-drowsy allergy relief, targeting sneezing, runny nose, itchy and watery eyes plus nasal

congestion, which most allergy pills are unable to treat. The Flonase range consists of the

Flonase Allergy Relief Nasal Spray, an OTC medicine which incorporates fluticasone

propionate, the number one prescribed allergy medicine, and the Flonase Sensimist Allergy

Relief, made with MistPro Technology that creates a fine, gentle mist that is scent free.

Otrivin operates under multiple different brand names around the world, including Rinazina (Italy), Rhinomer (Spain),

ProRhinel (France) and Vibrocil (Portugal).

Theraflu operates under multiple different brand names around the world, including NeoCitran (Canada and Switzerland).

Robitussin is a leading US cough remedy (ranked second in the US) with a history of over 70

years and a purpose to “deliver cough and other cold symptom relief solutions consumers can

count on”. It has a portfolio of products that provide effective relief for multiple needs. The

product range includes both medicated and 100 per cent. natural, drug-free remedies for both

adults and children, available in a variety of formats. Robitussin is also available across

multiple markets outside the USA.

Contac is a well-known cold and flu brand in China. It has a range of Respiratory Health

products known for their strong efficacy, including multi-symptom cold and flu medicines, nasal

decongestion sprays and topical decongestion products.

4.5 Digestive Health and Other

Digestive Health

The Group is the market leader in the global Digestive Health market with a portfolio of trusted,

leading brands focused on key markets, in particular the USA (ranked first), India (ranked first)

and Brazil (ranked second), each of which are in the top ten markets for Digestive Health

products globally. The Group’s key brands are described below.

In FY 2021, the Group generated revenue of £1.951 billion across its Digestive Health and

Other portfolio.

Tums

Tums is the leading OTC Heartburn Treatment in the USA with a range of products for the fast

and effective treatment of heartburn and acid indigestion. Its purpose is to enable consumers

to “fight back against heartburn fast”. To maintain its position as the market leader, the

90-year-old brand continues to reinvent itself through innovation and creative communications.

Tums offers a varied portfolio of products in order to attract different consumer groups and

broaden its utility. For example, Tums Chewy Bites, an antacid with a tasty outer shell and soft

centre, aims to provide an enjoyable taste experience, attracting young category entrants,

whereas Tums Naturals is an antacid containing no artificial flavours or dyes, appealing to

health-conscious consumers seeking a more natural solution to their medicinal needs.

ENO

ENO is the number one OTC Heartburn Treatment in India and Brazil, with a range of antacid

products (powders, liquids and tablets) that provide temporary relief from the symptoms of

heartburn and gastric discomfort. ENO’s purpose is to “free appetite for life” for people

suffering from acid reflux or heartburn, through delivery of smart solutions to aid healthier

digestion. ENO powder is notable for its speed of relief as it begins to work in six seconds post-

consumption. In India, it is the Group’s single most distributed consumer healthcare brand, with

presence in over four million outlets. In Brazil, despite the challenges faced during the

COVID-19 pandemic, the brand continued to increase its market share in 2020. This growth

was partly driven by the launch of new products with innovative flavours and formats, such as

ENO in liquid format.

The Group also sells a broad range of other Digestive Health products, particularly in the USA,

where in addition to Tums its portfolio includes Nexium, Gas-X and Benefiber, among other

brands.

Nexium is the leading PPI heartburn treatment in the USA (ranked third in Heartburn overall)

and the number one choice for doctors for their own heartburn.

Nexium24HR is an effective

Among primary care physicians who use a branded OTC proton pump inhibitor (Report by FRC, A Lieberman Company,

September 2020).

treatment for frequent heartburn. It works by blocking acid directly at the source to provide

consumers with 24-hour protection, and potentially preventing heartburn before it even starts.

As a long-acting treatment the brand complements the Group’s Tums portfolio, which is an

effective treatment for occasional heartburn, and its antacid formulation provides consumers

with fast-acting relief. The Group holds worldwide OTC rights to Nexium (excluding Brazil)

under an agreement with AstraZeneca, which involved an Rx-to-OTC switch for the brand in

2014.

Gas-X and Benefiber broaden the Group’s Digestive Health portfolio beyond heartburn relief.

Gas-X is the number one Antiflatulent brand in the USA and Benefiber is a leading laxative in

the USA (ranked fourth).

Other

The Group focuses on certain sub-categories in Skin Health, including Lip Care, Haemorrhoid

Treatments and Wound Healers. In each of these sub-categories, the Group has leading

positions in key markets as illustrated by some of its locally important brands including:

ChapStick, the number two Lip Care brand in the USA; Bactroban, the leading Wound Healers

brand in China; Preparation H, the market-leading haemorrhoid treatment in the USA; and

Zovirax and Abreva, the world’s two leading Cold Sore Treatments. Further important Skin

Health brands include the Lamisil antifungal brand and Fenistil, a treatment for skin irritations.

The Group also has leading positions in Smokers’ Health through brands such as Nicorette,

the leading brand in the USA, and Nicotinell, the number two brand globally.

5. Global reach

Overview

As one of the world’s leading consumer healthcare businesses, the Group has a broad global

reach with a number 1 or number 2 OTC/VMS presence in countries which represented over

70 per cent. of the world’s OTC/VMS markets by value in 2021.

The Group’s commercial organisation leverages the benefits of its global scale whilst

maintaining accountability and agility at a local level. A global commercial organisation

provides global brand management and marketing, insights and analytics, and digital

commerce capabilities, where centralised expertise, scale and consistency provide value.

Commercial execution is driven by business units at a local level structured into three regions:

(i) North America; (ii) EMEA and LatAm; and (iii) APAC. See Part VII (Operating and Financial

Review) for a discussion of revenue for each region in FY 2021, FY 2020 and FY 2019.

The Group is the leading OTC/VMS business across all three regions, as well as one of the

leading businesses in Oral Health, on the basis of sales to consumers in FY 2021.

Group ranking by region

Region

North America

EMEA and LatAm

APAC

Overall

OTC/VMS

Oral Health

Overall Therapeutic

North America

The North America region includes the USA, Canada and Puerto Rico, and is home to 5 per cent.

of the world’s population and 27 per cent. of global GDP.

The region is distinguished by a well-

developed consumer healthcare market with a significant presence of mass retail and large drug

store chains. Key market trends include a growing consumer interest in wellness products and

alleviating healthcare issues, increased product personalisation to meet specific needs, and a

growing e-commerce market, partially driven by the impact of the COVID-19 pandemic.

The North America region delivered £3.5 billion in revenue in FY 2021, representing 37 per

cent. of the Group’s total revenue. Approximately 4,600 people

work in the North America

region and the business is supported by five manufacturing sites, which work closely with the

commercial organisation to support consumer needs.

The Group is the market leader in North America in OTC/VMS benefitting from a 7.6 per cent.

market share, with leadership in Digestive Health and leading positions across Pain Relief

(ranked second), Respiratory Health (ranked fifth), Skin Health (ranked second) and VMS

(ranked third). It is ranked within the top four companies in Oral Health (ranked third equal

)

with a top three ranking in Toothpaste and leadership in Denture Care.

Group analysis based on third party data from Nielsen, IRI, Intage, IQVIA, Consumption Sales Data (2021-2022). Therapeutic

Oral Health is defined as Therapeutic Toothpaste and Total Dental Appliance Care.

The Group is ranked 3rd in Oral Health in North America by Euromonitor in 2021 but the difference with the 4th ranked player

is within the margin of error.

The Group is tanked 4th Oral Health in Asia Pacific+Australasia combined by Euromonitor in 2021 but the difference with the

5th ranked player is within the margin of error.

Source: World Bank (2020).

Full-time equivalent employees and agency staff as at 31 March 2022 (rounded to the nearest 100).

The Group is ranked 3rd in Oral Health in North America by Euromonitor in 2021 but the difference with the 4th ranked player

is within the margin of error.

The Group has an extensive portfolio of brands in the region, including four of the top 20 OTC/

VMS brands in the USA and a number of category-leading positions in the region, some of

which are highlighted below.

No. 1 Therapeutic Toothpaste

No. 3 Toothpaste overall

No. 1 Vitamin C Supplement

No. 2 OTC Systemic Analgesic

No. 1 OTC Heartburn

Treatment

No. 1 OTC Topical Analgesic

No. 1 PPI

Heartburn

Treatment

No. 1 Multivitamin

No. 1 Smokers’ Health

treatment

Consistent with its scale, the Group has broad distribution capability with over 245,000 points

of distribution in the USA across all channels, including mass retailers, pharmacies, clubs, food

and convenience stores and digital commerce. While the Group maintains relationships with a

variety of significant retailers across its key markets, sales attributable to its top five largest

retailers accounted for 60 per cent. of the Group’s revenue in the North American market in

2021 reflecting the concentrated retailer landscape in the USA. Nevertheless, the Group’s

revenue is relatively balanced across key customers, with no customer accounting for more

than 25 per cent. of the Group’s revenue in the region in 2021.

The Group is a partner of choice among its top ten customers in North America. The Group

has dedicated multifunctional top customer and channels teams in the region that cover sales,

category development, consumer engagement, supply and finance.

Close partnerships are supported by the Group’s two shopper science labs in New Jersey and

Arkansas and through its consumer insights platforms, which enable the Group to conduct

joint-business planning with key retailers. The Group’s strategic partnership with Walgreens in

the Pain Relief category supported the training of 75,000 in-store retail team members in the

delivery of empathetic fit-for-purpose treatment for pain sufferers based on insights derived

from the Group’s shopper science lab. A similar partnership seeks to upskill the store sales

teams in the VMS category based on the Group’s science and insights generated in the

shopper science lab. The Group has been recognised by several leading retailers since 2019,

including Walmart, Walgreens and CVS with awards including “Supplier of the Year”.

In the USA, the Group has invested heavily in digital commerce capabilities and marketing

support and has significantly grown e-commerce sales since FY 2019, for example, having

achieved market-leading positions on Amazon in Toothpaste and in Topical Pain with Voltaren.

Increased first-party data in the USA is facilitating the generation of insights that are leveraged

back into the business. The Group has also made progress towards improving its customer

experiences, including launching its first direct-to-consumer online store for ChapStick in the

USA in 2020.

EMEA and LatAm

The EMEA and LatAm region is managed as a segment within the Group’s structure. This is a

large and diverse region, which is home to 44 per cent. of the world’s population and 37 per

cent. of global GDP.

Covering approximately 150 markets, the region is managed under

seven business units: Northern Europe, Southern Europe, Central and Eastern Europe

(including the Commonwealth of Independent States), Russia, DACH (Germany, Austria and

Switzerland), Middle East and Africa and LatAm (Brazil, Colombia, Wider LatAm).

Source: Group analysis based on Euromonitor Passport (2021).

Proton pump inhibitor, a class of drug which reduces acid production by the stomach and has a longer duration of action than

traditional antacids.

Source: World Bank (2020).

The EMEA and LatAm regions delivered £3.9 billion of revenue in FY 2021, representing

41 per cent. of the Group’s revenue. Approximately 12,300 people

work in the EMEA and

LatAm regions and the business is supported by 13 regional manufacturing sites located

across the region, enabling local innovation and closer response to consumer demands.

LatAm

(Brazil, Colombia,

Wider LatAm)

Middle East and

Africa (MEA)

Russia

Southern Europe

(Italy, Spain,

Portugal)

Northern Europe

(GB&I, France,

Benelux, Nordics

)

DACH

(Germany, Austria,

Switzerland)

Central & Eastern

Europe (CEE)

The Group is the largest consumer healthcare business across EMEA and LatAm with leading

positions across multiple categories, including Pain Relief (ranked first), Respiratory Health

(ranked first), VMS (ranked third) and Oral Health (ranked third).

Overall

Brazil

Germany

Italy

South

Africa

In many EMEA and LatAm markets, OTC products are exclusively sold through the pharmacy

channel. Nevertheless, mass market retail is significant for Oral Health and VMS products and,

in certain markets for OTC products, notably in the UK, Netherlands and Mexico. Overall the

pharmacy channel represented approximately 60 per cent. of revenue in the region in FY 2021,

Full-time equivalent employees and agency staff as at 31 March 2022 (rounded to the nearest 100).

Sensodyne is ranked second across EMEA and LatAm. Within this, Sensodyne is ranked second in toothpaste in EMEA and

third in LatAm.

mass market retail represented approximately 35 per cent. in FY 2021 and e-commerce made

up the remaining approximately 5 per cent.

Given the importance of independent pharmacies and pharmacy chains in EMEA and LatAm,

the Group maintains a large, dedicated sales force. The sales force provides account

management, and drives excellence in store execution and expert advocacy on the Group’s

brands. In mass market retail, the Group has a weighted distribution level of over 80 per cent.

and is ranked second by share of sales. E-commerce is a relatively smaller proportion of the

region’s sales, but growing at around 23 per cent. per year and its contribution to the overall

sales mix in the region varies from 1 per cent. to 15 per cent. given the variety of regulatory

environments and digital maturity across the countries.

As in North America, the Group supports its customers to improve their category performance,

leveraging its shopper science and advanced technologies to support ranging, merchandising

and space planning. For example, it uses Dragonfly AI to replicate the human eye and

understand what grabs shoppers’ attention, as well as augmented and virtual reality to present

new concepts for point of sale both instore and on line. The Group is also using image-

recognition technology to track distribution and the visibility of key products, across the points of

sale. This enables the Group to collect insights to deliver efficient in-store execution of its brands.

APAC

APAC is a large, diverse and higher-growth region, home to 51 per cent. of the world’s population

and 36 per cent. of global GDP.

The region is split across five business units serving 22 markets

incorporating both well-established markets such as Japan, South Korea and Australia, as well as

rapidly growing markets including China, India and South East Asia. The region is distinguished by

a rapidly emerging middle class fuelling a demand for increased self-care and product

premiumisation, together with high levels of e-commerce in key markets, most notably China.

Asia Pacific region

Source: Group analysis based on external data (Nielsen).

Source: World Bank (2020).

APAC markets delivered £2.1 billion of revenue in FY 2021, representing 22 per cent. of the

Group’s revenue. Approximately 5,900 people

work in the APAC region and the Group’s R&D

centre in Suzhou, China develops new products for the region based on local needs and

insights and collaborates with the six regional manufacturing sites to facilitate their introduction.

The Group is the market leader in the APAC region in OTC/VMS, with leading positions in Pain

Relief (ranked first) and VMS (ranked second). In Oral Health, the Group holds the leadership

position in Denture Care and Sensitivity Toothpaste (among the top five in Toothpaste overall).

This has been achieved through a highly focused portfolio in which nine brands

with market

leadership positions accounted for 84 per cent. of total APAC revenue in FY 2021.

Overall

Australia

India

China

Japan

Taiwan

The Group’s business in APAC is supported by broad local capabilities and expertise which

provide it with the agility to respond to evolving consumer needs across the dynamic markets

of the region. In addition to local commercial execution, the region’s employees also support

R&D, marketing strategy and manufacturing. The Group’s R&D centre in Suzhou, China

develops new products for the region based on local needs and insights and collaborates with

the six regional manufacturing sites to facilitate their introduction. Through a strong regional

supply network, approximately 80 per cent. of the Group’s business in APAC is supplied within

the APAC region.

In recognition of the diverse retailer and regulatory market landscape within APAC, the Group

takes a varied approach to its distribution strategy across the region, which variously consists

of direct sales to retailers, indirect sales made through distributors, or a combination of both

methods depending on the channel dynamic of the given market and the scale of the Group’s

operations. In India, the Group’s products are distributed by Hindustan Unilever Ltd.

The sales force within APAC is also deployed according to the structure of the relevant market.

Centralised buying functions are managed by centralised account management in more

Full-time equivalent employees and agency staff as at 31 March 2022 (rounded to the nearest 100).

Sensodyne (#1 sensitive Toothpaste brand in APAC), Caltrate (#2 Calcium Supplement in APAC), Centrum (#1 Multivitamin in

APAC), Panadol (# 1 systemic analgesic in APAC), Polident (#1 Denture care brand in APAC), Voltaren (#3 Topical Analgesic

in APAC and leading pain brand outside traditional Chinese medicine (“TCM”)), ENO (#1 number one Digestive Health brand in

India), Fenbid (#2 Systemic Pain Relief brand in China and leading Pain Relief brand outside of TCM), Bactroban (#1 wound

healer in APAC).

Source: Group analysis based on third party data from Nielsen, IRI, Intage, IQVIA Consumption Sales Data (2021-2022).

Sensodyne is ranked 1st in toothpaste in Japan by Euromonitor in 2021 but the difference with the 2nd ranked player is within

the margin of error.

developed markets, whereas smaller, independent customers are managed by territory

managers and sales representatives. The Group’s sales force in APAC consists of

approximately 2,500 employees who are further supported by distributor sales representatives

in certain markets. These teams are supported by the Group’s shopper science lab in

Singapore, which enables category management partnerships with key retail partners.

The APAC region leads the world in digital commerce with 61 per cent. of global retail

e-commerce sales in 2020 (according to eMarketer, May 2021). The Group has invested

heavily in this area. Through the prioritisation of digital programmes in APAC, e-commerce

revenue grew by 36.3 per cent. in FY 2021.

One such programme in China is based on the latest developments in the online-to-offline

(“O2O”) services market. O2O services enable a seamless digital purchase experience for the

consumer by combining physical retail pharmacy locations for sourcing and platform courier

teams for collection and delivery. These services enable consumers to find product information

and order medicines through O2O platforms and receive at home or to office delivery, typically

within 30 minutes. The Group identified the potential for O2O services and established a

dedicated O2O team to establish strategic collaborations with leading O2O platforms such as

Meituan and Eleme (part of the Alibaba group).

The Group has established flagship e-commerce brand-specific stores run on Alibaba’s T-mall

platforms and collaborates with online health and consultation platforms such as We-Doctor

and JD Health to enable consumer access to online advice, educational content, brand content

and on some platforms also direct product purchase.

The Group has also developed strategic collaborations with the Alibaba group where its Digital

Captaincy status in the VMS category enables access to a greater degree of data granularity

better informing its planning and commercial execution capability.

Besides its strong position on established e-commerce platforms such as T-mall, the Group is

also actively expanding into social commerce

on popular social engagement platforms such

as Douyin. The Group has recently established stores for several of its brands on Douyin’s

platform so that consumers can immediately purchase products on the platform whilst

engaging with the brand through content and livestreaming.

The Group has also established an in-house audience management platform that collates data

to provide a single source of information on consumers and healthcare professionals in order

to deliver personalised experiences. This enables richer and better targeted consumer

engagement to meet consumers’ healthcare needs more effectively through CRM and

marketing programmes.

6. Engagement with Consumers

As a leading consumer healthcare business, the Group has broad capabilities in marketing,

expert marketing, design, and consumer and business insights and analytics. These

capabilities are complemented by a strong and growing capability in digital commerce.

Selling products via e-commerce through social media.

Marketing

The Group has a clear and differentiated purpose to deliver better everyday health with

humanity and this drives the way the Group develops and commercialises its products. The

Directors believe the Group has a competitive advantage in everyday health with its human

understanding, combined with its trusted science. The Group’s brands are purposeful, founded

in science and focused, not only on care, but on quality of life, empathy and inclusion.

Restoring the joy of movementHelping humanity reclaim

life’s small pleasures

Lightening the load for all

appliance wearers

Releasing the wonders of

breathing well

Championing confidence from

the gums up

Freedom from pain so the

human spirit can shine

Fighting for a flu-safe world

Building every body

from the inside out

Reclaim life’s possibilities

By putting brand purpose at the centre of highly integrated campaigns, which are aligned

across commercial, expert, marketing and R&D, the Group’s human-centric brands help to

deliver more emotional connections and relatable consumer-centric experiences to support

better health outcomes.

For example, Voltaren’s purpose is to restore the joy of movement for body pain sufferers

worldwide:

A number of the Group’s campaigns are enduringly famous, reflected in and recognised by the

wide range of global and national marketing awards the Group has received. Sensodyne’s

famous dentist testimonial advertising was launched in 2005 and continues to offer authentic

dentist recommendation to consumers across the world. Over 5,000 dentists have offered to

recommend Sensodyne in the media, reflecting the significant numbers who do so every day.

100

Newer campaigns have also received considerable acclaim. For example, Theraflu’s “roll up

your sleeves” campaign and #FightingFluTogether to better meet the needs of underserved

communities drove reappraisal of the brand and improved social sentiment scores for Theraflu.

The Group prioritises marketing with a positive social or environmental impact and incorporates

social and sustainability goals aligned with brand purpose within its marketing strategies. For

example, Otrivin’s brand purpose is to “release the wonders of breathing well”. Accordingly,

Otrivin aims to raise awareness of the impact of air pollution on health reflecting growing

consumer concerns. In 2021, Otrivin partnered with a European biotech company to build a

playground that actively purifies the air as more children play in it. This is particularly pertinent

given that 93 per cent. of the world’s children play in spaces with unacceptable levels of air

quality. This installation featured at COP26 and drove significant levels of earned media.

Historically, the Group has achieved multiple successes for its marketing campaigns, including

design, creative impact, effectiveness and digital. This includes high-profile Gold and Grand

Prix awards at Cannes Lions, the Institute of Practitioners in Advertising, the Effies, Red Dot

and D&AD.

The Group continues to evolve its marketing operations and in 2021 it opened its pioneering

in-house content studio, CaST. CaST provides end-to-end content production, allowing the

Group to be agile and cost-effective in its content development, delivered via in-house subject

matter experts and underpinned by technology. This production model also helps the Group to

advance its creative effectiveness through dynamic creative optimisation (“DCO”). Since 2021,

CaST has delivered nearly 30 DCO campaigns across 13 markets, with 90 per cent. of these

delivering performance improvements against benchmarks (e.g. cost per click, cost per

completed view and ‘viewability’). The marketing function also continues to embrace

technology, such as artificial intelligence (“ AI”) and in 2020, Sensodyne launched Trio, the

world’s first machine learning and AI-enabled mobile experience which assesses people’s risk

of having tooth sensitivity. Trio is designed to give users personalised treatment advice and a

sample product or coupon, based on a picture of a user’s mouth and a short questionnaire

filled out by the user. Trio has been launched as a pilot across multiple markets, including

some of Sensodyne’s fastest growth markets, such as China and India. Additionally, the Group

utilises an industry-leading AI tool designed in partnership with Google and Picasso Labs –

Creative X – which scans over 20,000 video assets in 56 markets and provides

recommendations for creative improvements following YouTube best practices.

Commercial insights and analytics

Achieving a deep understanding of consumers, shoppers, experts and retailers is pivotal to the

mission of the Group.

The Group benefits from investments in in-house research facilities to solicit live shopper

feedback. This is used to improve pack designs, point of sale materials and shelf layouts,

including research tools to reach shoppers in their own homes, which the Group utilised

extensively during the COVID-19 pandemic.

101

In addition, the Group’s shopper science labs provide real-life and digital store environments

across all retail channels to recreate shopping scenarios to understand shopping behaviour, so

that it can tailor and personalise category and brand execution. This is supported by its centre

of excellence for shopper psychology, shopping insights and category management.

The Group uses its observatory tool to provide marketers, R&D and other teams across the

organisation with direct access to the full breadth and depth of its knowledge base and to

support their collaboration. This tool encompasses over 8,000 insight and analytics projects,

nearly 1,000 tested concepts, over 20 specialist subject libraries, and links to over 30 other

dashboards and research sources. It is updated in real time and new insights are added nearly

every day.

Consumer insight and understanding are further built through a number of complementary

marketing initiatives. For example, by partnering externally with InSites Consulting, the Group

has developed an extensive toolset to provide enhanced consumer insight. This has been

supported by more traditional large-scale key audience survey data and qualitative interview

information.

By enabling on-demand engagement with almost “any audience anywhere” via established

external partnerships to provide insight globally, the marketing organisation has flexibility to

identify and utilise the optimal market research approaches to identify commercial

opportunities, while taking into consideration commercial objectives, target audiences and

timing requirements.

The Group uses an extensive toolset to spot emerging consumer trends with disruptive

potential in order to help it shape the future of everyday health. Its toolset is designed to

discover and frame trends impacting health and wellness, to monitor their expression over time

and to prioritise those that will rise and endure. The Group’s proprietary and comprehensive

global trends framework monitors forces of change, trend territories and over 20 trends which

have the highest adoption and disruption potential. Combined with tools to monitor fresh trend

signals from search, social and in-market competitor activity, this enables the Group to identify

and react to global and local innovation opportunities, thereby driving incremental sales.

Digital capability

Deep human understanding attained through the Group’s data partnerships and insights

process is enhanced by digital capability. The Group was an early adopter of the Tech Stack

(Google), creating direct ownership of and access to audience data. Additionally, the Group

uses Publicis’ PeopleCloud (cloud-based marketing platform) to leverage relevant data sets to

better identify and connect with its growth audiences. The Group has systematically applied a

data-driven approach to marketing via PeopleCloud across its markets, which enables it to

target similar customers and continuously learn and grow its customer base. By responsibly

balancing privacy and personalisation, the Group is able to build long-term relevant

relationships with consumers across all of its brands.

Marketing campaigns are planned via digital-first connection planning, generating and placing

content made relevant for events, seasons, formats, cultural occasions and even weather

patterns. One of the Group’s advancements in predictive marketing is a proprietary tool called

TRGR, or Trigger. This pulls in data signals that help pinpoint where and when the Group’s

audiences are more or less receptive to its messages. It employs a set of bespoke and

customised business rules to provide dynamically personalised content designed to drive the

Group’s visibility in key moments, while delivering improved cost efficiency and stronger

performance. Digital media spend has reached approximately 50 per cent. of media spend,

fuelled by robust return on investment metrics from marketing effectiveness tools.

More broadly, the Group has increased its investment in digital capability across the business

to improve overall speed and efficiency. Data, a key enabler for growth, is a particular area of

focus as it allows the Group to better understand its consumers and customers. In 2020, a

dedicated data team of data scientists, innovation specialists, user experience designers and

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data apprentices was set up to build the data strategy and governance processes in readiness

for a future standalone business. The team is also focused on building data literacy across the

business to enable it to extract the most value from its data, which will accelerate the Group’s

digital transformation and support more effective decision making.

As part of the recent transformation of the business, the Group places significant focus on

enhancing the digital capability and literacy of all of its people. In 2020, it launched the Digital

Commerce Academy, an online learning platform with training modules, playbooks, planning

frameworks and other resources to help embed core digital commerce learnings and

behaviours. Since launch in August 2020, more than 5,600 employees across over 84

countries have completed training through the platform as of March 2022. The academy

complements the digital accelerator programme, which rolled out in 2020 in the EMEA region,

following a successful launch in APAC in 2019. The programme is designed to drive sales

through digital commerce and promote a digital-first culture by integrating external digital

experts within teams. Building on this, in 2021, the Group announced a partnership with

University College London to create an industry first, exclusive digital commerce mini-MBA,

which is available for all of the Group’s employees. As a university-level educational

certification, the programme represents a first for the consumer industry.

The acceleration of investments into digital infrastructure and media channels has created a

more efficient, transparent and connected path to consumers. The Group has re-balanced its

digital investment to reflect consumer changes, while the increased use of digital channels has

also enabled it to analyse data to a greater degree, delivering key consumer insights and

enabling the targeting of specific audiences and consumer needs that previously may not have

been addressed.

The Group has begun to see significant success where it has made investments in digital. In

the 2020 launch of Voltaren in the USA, e-commerce formed a key pillar of the successful

brand launch. Two billion media impressions were earned through traditional TV and online

video advertisements. Similarly, during the Advil Dual Action launch, 588 million YouTube

impressions were made.

Notably, the Group’s first US website for Voltaren, VoltarenGel.com, was recognised by the

Arthritis Foundation as the world’s first arthritis-friendly website and obtained Gold Distinction

in the 13

Annual Shorty Awards. Among other features, the website implemented accessibility

features such as voice search and scalable font sizes to account for the possibility that users

might have arthritis in their hands that would make it difficult to navigate a website.

Overall, the Group’s e-commerce revenue grew from 4 per cent. of overall revenue in 2019 to

8 per cent. in 2021 and the Group expects e-commerce growth to continue.

7. Engagement with Experts

Overview

The ability to engage appropriately with experts within the healthcare community is a key driver

of the Group’s performance. The Group’s capabilities in expert engagement are one of its key

strengths and it is widely recognised as a partner of choice by healthcare professionals.

There are approximately 10 million healthcare professionals globally addressing the conditions

the Group serves and collectively they have the capacity to make an astonishing 52 billion

recommendations every year. Importantly, consumers take these expert recommendations

seriously and often act upon them. For example, 85 per cent. of pharmacist recommendations

lead to a purchase.

The Group has a dedicated approach to building relationships with experts, healthcare

professionals and external leaders based on trusted advice, recommendations and trial of its

products. This is supported by its purpose to “deliver better everyday health with humanity” and

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is sustained by the knowledge that expert engagement has a direct impact on everyday health

behaviours. The Group is differentiated by its commitment to trusted science and strict policies

on scientific engagement, both of which provide a strong foundation for its engagement with

the healthcare community.

Nurturing genuine relationships with the scientific and healthcare community also generates

significant benefits for the Group which go beyond the direct generation of sales through expert

recommendations. Expert engagement generates insights that inform product design and

support clear communication of product benefits to consumer populations. It also helps to

ensure that the Group has early visibility on unmet category needs.

Expert field force

The Group maintains a large, dedicated consumer healthcare expert field force that engages

with doctors, dentists, pharmacists and other healthcare professionals across all of its key

markets and has a reputation that scores positively in terms of service. The Group’s research

indicates that the field force’s “called-on” experts make more recommendations per week than

experts that are not called on and this has a direct impact on product performance.

Digital

In addition to its expert field force, the Group engages with a broad group of healthcare

professionals through its digital tools. The Group has dedicated digital channels for experts in

38 markets and has a specialist digital team that engages with experts and healthcare

professionals via a dedicated portal, webinars, personalised learning, email marketing, social

media, searches and paid media channels.

Conferences and events

The Directors believe that one of the most effective ways of ensuring that consumers and

patients feel heard and reassured is by respecting, valuing and supporting the experts that

care for them. As a result, it runs a number of above brand and audience-led initiatives that

support the wellbeing, professional development and, where appropriate, business acumen of

expert audiences.

In addition, the Group has a presence at all major healthcare professional conferences, which

are growing in reach with the addition of virtual capabilities. The Group also presents

symposiums on topics relevant to its products and categories and publishes in peer-reviewed

publications globally.

Partnerships and initiatives

The Group also engages with experts across a range of global and regional initiatives which

are relevant to its brands and categories. These allow the Group to build trust with the

healthcare community and they also provide useful insights to support future innovation and

increase engagement for the Group and its products.

The Group recently partnered with the International Federation of Pharmacists (“FIP”) to

commission research amongst their four million professional members on the impact of air

pollution on respiratory health. FIP is the global federation of national associations of

pharmacists and pharmaceutical scientists and it has 146 member organisations worldwide.

The partnership has resulted in pioneering research on the impact of air pollution on respiratory

health and a thorough understanding of the barriers that exist to optimal self-care, including

health literacy.

In a similar way, the Group’s partnership with world-leading scientific experts and Smile Train,

a non-profit organisation providing corrective surgery for children with cleft lips and palates, led

to the first comprehensive cleft care guidelines that helped provide the evidence for the

inclusion of orofacial clefts as a priority issue in the WHO resolution and resulting Global Oral

Health Strategy.

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8. R&D

The Group’s dedicated consumer healthcare R&D organisation has a track record of

successful innovation and the generation of product claims supported by scientifically robust

clinical evidence. It also has a critical role in supporting the compliance of the Group’s existing

and new products with varied, complex and moving regulatory requirements in over 170

markets in which the Group operates. It is differentiated by its global reach, broad capabilities,

its leading position in Rx-to-OTC switches and its ability to combine cutting edge science with

deep consumer understanding.

Capabilities

The Group’s R&D organisation’s multidisciplinary talent pool of approximately 1,400 highly

skilled scientists combines OTC and FMCG experience and represents a wide range of

scientific disciplines including scientists, medics, dentists, nutritionists, formulators, engineers,

regulatory professionals and flavour scientists. The Group’s category-level marketing and R&D

teams lead the strategic agenda of the Power Brands and drive and execute at scale the

Group’s innovation pipeline. Local marketing and R&D teams drive the growth and innovation

agenda of the local strategic brands and execute local market-relevant innovations for the

Power Brands. This organisational setup maximises speed of implementation and tailors for

consumer specificities. See also paragraphs 5 and 9 of this Part III ( Business Overview).

The Group has three state-of-the-art R&D centres in Richmond, Virginia, USA (OTC/VMS),

Weybridge, UK (Oral Health), and Suzhou, China (all categories in the Chinese market) providing

it with a broad range of in-house scientific capabilities. Among other capabilities, these sites

possess: (i) fast prototyping and pilot scale equipment for early stage development; (ii) imaging

capability with high specification instrumentation; and (iii) analytical chemistry, product chemistry,

sensory, packaging, process engineering, microbiology and stability capabilities. The R&D

centres also support scale-up and technical transfers to manufacturing and provide end-to-end

support for small-scale manufacturing. These capabilities are augmented by further consumer-

centric capabilities, including consumer behavioural facilities and sensory and flavour science

laboratories. In addition, the Group has embedded innovation resources which support local

business units and enable the Group to recruit R&D talent globally to develop products closer to

its consumers and tailor innovation for local consumer needs.

The Directors believe that the ability to support its products and claims with trusted science is

critical to its relationship with consumers and healthcare professionals. In support of this, the

Group has dedicated capabilities to support both clinical trials and real world studies of its

products and innovations. The Group has conducted over 65 clinical studies involving over

6,000 participants over the last five years, whilst the successful Rx-to-OTC switch of Voltaren

in the USA in 2020 was supported using data in markets where Voltaren is already an OTC

medicine. The R&D function’s expertise is also reflected in its track record of publications,

peer-reviewed journal contributions and patents, including 296 publications and over 70 priority

patent applications filed within the five years to end of 2021.

The Group’s R&D organisation places the understanding of the consumer at the heart of its

innovation processes and draws on its dedicated in-house sensory and flavour science labs

and consumer and shopper facilities to design products with the consumer in mind. The

Group’s R&D scientists regularly connect with consumers via digital channels to obtain early

feedback on innovation and the Group also monitors e-commerce reviews and utilises data-

driven tools to better understand trends, unmet needs and areas of opportunity. Advanced

visualisation techniques enable the Group to translate scientific benefits to consumers in an

accessible manner.

The Group also maintains world class regulatory and medical teams who are embedded

across multiple markets in each region. This enables the Group to rapidly launch innovations,

maintain compliance on existing products, and engage in and enhance the self-care regulatory

landscape – a capability which is a barrier for other smaller players. To illustrate this point, the

Group has completed over 19,000 regulatory applications and approvals around the world in

the last three years.

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The Group augments its internal capabilities through dedicated business development and

external innovation teams that scout and in-license leading technologies. Innovation is further

supported by a large external ecosystem including established suppliers and contract

manufacturing organisations. Over 30 per cent. of the Group’s pipeline originates from external

partnerships.

Rx-to-OTC switches

The Group has an enduring and world-leading capability in Rx-to-OTC switches. The switch of

prescription products to OTC status is a key source of innovation and growth in OTC and

requires expertise in medical, regulatory and commercial matters. The Group has a

differentiated switch and direct-to-OTC consumer capability with a proven track record, having

successfully completed four switches (Nexium, Flonase, Sensimist and Voltaren) in the USA in

the last eight years, more than twice as many as any other business. The Group’s capabilities

in switches are long-standing, with the Group and its predecessors having switched 19

products since 1990. Additionally, the Group successfully completed one new drug application

in 2020 (Advil Dual Action). These capabilities are a key differentiator and the Group has a

long-standing dedicated in-house team composed of R&D and commercial experts, with a

track record of switching both GSK and non-GSK products.

Going forward, the Directors expect new switch opportunities to be increasingly supported by

digital technology to increase product awareness and availability, to enable better self-care and

to deepen direct relationships with consumers.

Selected innovations

The Contac product range includes a tablet that gives effective relief of seven cold and flu

symptoms. In China, to address the Ministry of Health’s policy restricting pseudoephedrine-

containing OTC medicines, the Group was able to in-license appropriate technology and use

its scientific and market expertise to overcome significant regulatory and technical challenges

to launch the Contac Revive innovation in August 2021.

In 2021, the Group upgraded its core Sensodyne Repair & Protect franchise with the launch of

Sensodyne Repair & Protect Deep Repair. The Group leveraged a previously acquired novel

technology, NovaMin, which was based on findings from bone implant technology. This

enables a deep and targeted occlusion of dentine tubules, in turn helping to reduce dentine

hypersensitivity.

A further recent innovation in Oral Health is the launch of Sensodyne Complete Protection in

January 2022, where the Group has created a formulation which offers all-round oral care

benefits, such as cavity protection and enamel strengthening, while still providing Sensodyne’s

clinically proven sensitivity protection.

In February 2021, the Group launched its Centrum Probiotics range in China. The R&D

function developed the products using certified probiotic strains imported from Denmark. The

launch was the Group’s first major move to expand Centrum beyond being a purely multi-

vitamin and minerals brand, and was achieved within seven months from project initiation,

reflecting the Group’s agile R&D capabilities.

In 2020, the FDA approved Advil Dual Action with acetaminophen as an OTC product for pain

relief. The exclusive formula, launched in September 2020, is the first FDA-approved OTC

combination of ibuprofen and acetaminophen in the USA.

Across 2019 and 2020, the Group upgraded its Voltaren franchise across Europe with the

introduction of two award-winning packaging solutions (with the one launched in 2019 already

patented, and a patent application pending for the one launched in 2020). Detailed consumer

work highlighted that convenience and ease of opening were key trial barriers. A “no mess”

applicator removed the need for direct product contact with hands. Additionally, observing the

target arthritis group’s use of the original product led to the introduction of the arthritis friendly

“easy open” cap.

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As part of its wider sustainability strategy, the Group has committed to developing solutions for

all of its packaging to be fully recyclable or reusable by 2030 (where quality, safety and

regulations permit). Within Oral Health, extensive stability and quality testing is underway to

ensure that all of the one-billion-plus toothpaste tubes produced by the Group each year are

made recyclable (first wave launched in July 2021 for Sensodyne Pronamel in Europe). The

Group is also redesigning its toothpaste caps with ergonomic upgrades to reduce plastic use

by more than 10 per cent. The Dr.BEST bamboo toothbrush (launched in 2020) and the

Dr.BEST first climate-neutral toothbrush made from renewable resources (launched in 2021)

are further recent innovations highlighting the Group’s sustainability strategy.

For further information on the Group’s R&D-driven innovations, see paragraph 4 of this Part III

(Business Overview) above.

9. Quality and supply chain

Overview

The Group operates a supply chain which combines a network of 24 in-house dedicated

consumer healthcare manufacturing sites with a number of third-party contract manufacturing

organisations (“CMOs”). The Group derives important commercial and competitive benefits from

the large historical investments it has made in its footprint, infrastructure, quality control systems

and people. It benefits both from the economies of scale from its large multi-region manufacturing

sites and from its ability to manufacture with agility and scale on a regional level, close to its

consumers. In addition, the quality and supply chain organisation’s track record in consistently

meeting the rigorous compliance requirements of national regulatory bodies, demonstrated via

successful quality inspection outcomes, is the result of investment, expertise and a cultural

commitment to quality which are difficult to replicate. See paragraph 2.7 of Part VII (Operating

and Financial Review) for a discussion of the key factors impacting the Group’s supply chain.

Group Internal Supply Network

Scale manufacturing at a local level

As one of the largest consumer healthcare companies in the world, the Group is able to deliver

the cost benefits of scale manufacturing both at multi-region supply sites such as Dungarvan

and Nyon, and through regionally focused sites close to its customers such as Suzhou and

Oak Hill.

The manufacturing sites in Argentina and Brazil will be transferred to the Group following Separation. See paragraph 15.4 of

Part XII (Additional Information) for further information.

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Every year, the Group supplies more than 3.5 billion consumer packs globally, including

approximately 1.7 billion tubes of toothpaste, approximately 55 billion individual tablets and

high volumes of liquid doses, gels and creams. Approximately 70 per cent. of consumer packs

are sourced internally within the Group, with the remainder through a network of CMOs.

The Group’s ability to manufacture locally at scale is illustrated by some of the Group’s key

sites:

Levice, Slovakia Supply of the Group’s full portfolio of toothpaste at competitive cost

across EMEA at a volume in excess of 600 million tubes annually.

Dungarvan, Ireland Supply of up to six billion tablets of Panadol annually in addition to the

full range of denture cleansers and fixatives.

Nyon, Switzerland Supply of more than 200 million units of the Power Brands Voltaren

and Otrivin.

Guayama, Puerto

Rico

Supply of all Advil, Centrum and Emergen-C products for North America.

The production of Emergen-C was consolidated into Guayama as part of

the Group’s ongoing supply chain efficiency programme following

completion of the Pfizer Transaction to add further scale leverage.

Suzhou, China Dedicated China supply site combining agility for new product

introduction and manufacture at scale for key local products. The

recent addition of a second facility was designed to support growth

and expansion of the VMS product range.

The Group’s manufacturing footprint is well aligned geographically with its key markets around

the world. This allows products to be regionally sourced and more easily tailored to local needs

whilst also reducing the costs and risks associated with single-sourced global manufacturing.

For example, the six in-region manufacturing sites in APAC supply 82 per cent. of the region’s

products and work closely together with the Suzhou R&D organisation to facilitate the rapid

introduction of innovative region-specific products. The geographically aligned sourcing of

products also provides a natural currency hedge, helping to mitigate the impact of foreign

exchange movements.

Complementary mix of internal and external supply

The Group’s supply chain includes approximately 180 external CMOs which supply

approximately 30 per cent. of its consumer packs. While the Group has consolidated its CMO

network in recent years as part of its ongoing supply chain efficiency programme, it has many

ongoing long-established relationships with high quality and trusted CMOs. These relationships

allow the Group to access specialist dose forms, for example, in sprays and patches, while

supporting the Group’s agility in meeting changing consumer demands and providing

innovation and responsive new product introduction in all geographies.

Fully invested systems infrastructure

In support of the internal and external network of manufacturing sites, the Group maintains a

robust and up-to-date systems infrastructure including a single SAP enterprise resource

planning system at 22 of its 24 internal sites, separate from that of the GSK Group and

covering demand forecasting, supply planning, new product introduction and artwork

management. These investments enable seamless interaction across the supply chain whether

production is sourced internally or externally from CMOs.

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Ongoing synergy delivery from the integration of the Novartis and Pfizer consumer healthcare

businesses

The Group continues to benefit from the scale advantages arising from the combination of both

the Novartis and Pfizer consumer healthcare businesses with GSK’s consumer healthcare

business. Over the past six years, the network rationalisation programme has reduced the

Group’s internal network from 41 sites inherited from the legacy GSK Group, Novartis and

Pfizer businesses to 24 and the Group’s supply network continues to deliver significant

synergies from the integration of the six legacy Pfizer sites and CMO network. In FY 2021 over

£90m cost of sales synergies were delivered with additional synergies projected in 2022.

Robust quality and compliance

The Group’s supply chain infrastructure is distinguished by high quality standards and rigorous

compliance procedures which are applied both to internal sites and the Group’s CMO partners.

These allow consumers, healthcare professionals and regulators to be confident in the Group’s

products.

The effectiveness of the Group’s quality management systems is validated by ongoing strong

performance in external regulator audits. The Group’s supply chain is subject to multiple

regulatory inspections every year by national medical regulatory bodies including the FDA and

MHRA. Since 2019, there have been more than 200 inspections by national regulatory bodies

with a 99.5 per cent. success rate across the internal supply network.

The Group has continued to invest to sustain this strong quality and compliance record in order

to keep ahead of evolving regulatory requirements. Recent investments include an updated

quality management system, enabling enhanced end-to-end compliance capability and

efficiency and electronic batch records deployment into key internal manufacturing sites.

Efficient and customer-oriented warehousing and logistics network

Following the integration of both the Pfizer and Novartis consumer healthcare businesses, the

Group’s warehousing and logistics network has been reviewed and optimised to meet

efficiency and customer service requirements for the combined portfolio and channel mix.

In markets with well-developed infrastructure and established third-party OTC distribution

capabilities, for example in North America and Western Europe, the Group operates through

large-scale distribution centres. In Europe, to further leverage scale and to enable efficient

inventory and service management, the Group operates warehouses covering multiple

markets, often in conjunction with multi-language packs. Typically, distribution centres are

operated with expert third parties in order to leverage scale, expertise and technology

platforms. In all cases, distribution centres, whether in house or third-party, must comply with

the Group’s rigorous quality compliance standards and are subject to the Group’s audit

process.

Ensuring supply continuity

The Group benefits from a comprehensive risk management programme which applies across

all of its sites to minimise potential disruption of supply to customers and patients. This is

supported by independent risk assessment of each manufacturing site. The Group continues to

drive down risk in its sites with a robust risk management approach and a strong

environmental, health and safety risk reduction programme. Supply continuity is also supported

by the Group’s history of strong relations with its site-based employees and union

representatives – presently, fewer than 50 per cent. of the Group’s sites are unionised.

The Group sources from approximately 2,500 direct material suppliers in approximately 65

countries. While, in broad terms, packaging supply and raw material supply takes place at a

local or regional level, the sourcing and supply of active pharmaceutical ingredients and

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excipients is typically at a global level. To assist the mitigation of packaging and raw material

sourcing risks, the Group operates a dual-sourcing programme, which prioritises critical items

where risk is highest and revenue dependency is significant. As of 31 December 2021,

75-80 per cent. of the Group’s materials supply by spend was sourced from more than one

supplier and it expects this to increase to 85-90 per cent. by the end of 2023. Where dual

sourcing is not expedient or feasible, for example with unique specification materials (such as

supplier IP-owned flavours, or bespoke/IP-owned packaging applications), the Group mitigates

risk through holding higher inventories and sourcing from multiple production sites owned by

the same supplier.

Enabling the Group’s sustainability agenda

The supply network plays a key part in the delivery of the Group’s ambitious sustainability

goals with a number of key initiatives.

To support the global efforts to mitigate the impacts of climate change, the Group has

implemented renewable electricity generation at 12 of its 24 internal sites and is aiming to

reduce its net Scope 1 and 2 carbon emissions by 100 per cent. by 2030 (versus its 2020

baseline).

The Group’s supply network is also implementing a broad range of other environmental and

sustainability initiatives. For example, the Group achieved Zero Waste to Landfill certification

across its network in 2021 and expects to achieve sustainable sourcing of palm oil in 2025. From

a product perspective, the introduction of 100 per cent. recyclable toothpaste tubes and carbon-

neutral plastic-free toothbrushes has commenced in Europe and the Group is working towards

the implementation of pioneering recycling solutions for tubes and blister packs by 2030.

10. Intellectual Property

10.1 Trade marks

The Group’s meaningful and distinctive brands are of central importance to its business.

Accordingly, the Group employs a global trade mark strategy to ensure that it has extensive

and geographically wide-reaching trade mark coverage to protect their reputation and goodwill.

As of 1 March 2022, the Group owns 30,368 trade mark registrations and applications in

multiple jurisdictions worldwide. These are managed centrally at Group level in order to ensure

robust portfolio management and consistency.

The Group’s Power Brands have the most extensive level of trade mark coverage, with rights

filed to cover relevant word marks and logos in all major markets. Local strategic brands in the

Group’s key markets have coverage in their relevant markets. There is also substantial

coverage for the Group’s other leading brands worldwide. Along with the comprehensive

worldwide coverage, the Group has particularly extensive trade mark protection for its products

in the USA and China, both being key markets for the Group.

The Group has adopted the trade mark HALEON as its corporate name. Prior to adoption,

extensive brand clearance work was carried out in all key markets across the full range of

goods and services that the Group operates in, and anticipates operating in, and clearance in

such key markets was obtained. Trade mark applications have been filed in all countries in

which the Group operates.

The Group has worldwide exclusive, royalty-free and sub-licensable licences for certain OTC

products from both Novartis (including Voltaren and Lamisil) and GSK (including Flixonase,

Bactroban and Zovirax). These licences to the shared brands are perpetual, subject to material

breach by or insolvency of the relevant member of the Group, and exclusive in relation to

consumer healthcare products, subject to customary exclusions.

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Additionally, the Group licenses certain brands to and from third parties, including Nexium

(OTC only), which is a worldwide in-licence from AstraZeneca (excluding Brazil); Nicorette,

which is a US in-licence from Johnson & Johnson; and Nicoderm, which is a US in-licence from

Sanofi.

The TSK&F Joint Venture in China markets several of the Group’s OTC brands locally

(including Contac, Fenbid and Bactroban). The main trade marks for the marketed products

are generally owned by, or licensed to (from GSK or Novartis as shared brands), the Group

and licensed to the TSK&F Joint Venture.

The Group routinely monitors the trade mark activities of competitors and takes timely legal

action to appropriately enforce its trade mark rights against infringing third parties and ensure

that the Group’s brand reputation, goodwill and value are protected. This action is employed

through infringement litigation in courts, enforcement actions at national intellectual property

authorities or by direct negotiations.

10.2 Patents

The Group employs a global patent strategy that endeavours to protect the Group’s R&D

innovations and commercial products and strengthen the Group’s competitive position in the

global consumer healthcare market. The Group currently has, as of 1 March 2022,

approximately 1,500 granted patents and approximately 300 patent applications globally,

including patents and patent applications relating to many of the Group’s Power Brands.

Patents in consumer healthcare play a vital, but different, role than patents in other health-

oriented fields such as pharmaceuticals and vaccines. Consumer health-based patents rarely,

if ever, solely cover a new active pharmaceutical compound by itself, because nearly all

consumer health-based products use well-known, established active pharmaceutical

compounds whose original patents have long since expired. Instead, consumer health-based

patents focus on all aspects of a product itself, such as the formulation, method of

manufacturing, delivery device, packaging, method of treatment, and design. Through careful

evaluation of the different unique features of each consumer healthcare product, the Group’s

products are often protected by multiple patents covering a variety of distinct features of the

product. This results in less reliance on individual patents for a product’s commercial success,

and the inability to obtain patent protection for one feature of the product can often be offset by

patent protection of a different feature. Consequently, the Group does not consider any single

patent to be critical to its overall financial health and success.

The Group’s global patent portfolio provides a number of competitive advantages in the

consumer healthcare industry. The Group’s diversified approach of patenting multiple features

of a product make the market entry of competitors with copy products difficult. Moreover, many

of the Group’s patents cover technology closely related to the Group’s products, creating a

further buffer of patent protection. Particularly during the early stages of new product launches,

patent protection delays competitor entry into the marketplace and provides a competitive

advantage of time for exclusive development of brand goodwill and market share prior to later

entry of competing products. The existence of granted patent rights also enables the Group to

advertise, promote, and mark its products as being patented. This supports the Group’s

marketing campaigns, builds endorsements from healthcare professionals and increases

consumer awareness of innovative technology being used in the Group’s products. Further,

some of the Group’s US patents, including certain patents covering some Advil products, cover

products which qualify for listing in the US FDA Orange Book, which provides statutory

exclusivity periods.

In addition to mitigating patent infringement risks, including through the active use of Freedom

to Operate clearances early in the R&D process to assess potential liabilities presented by

competitor patents, the Group’s global patent strategy invests resources in offensively

enforcing patent rights. The Group routinely monitors the activities of competitors and takes

timely legal action to assert the Group’s patent rights when appropriate. This allows the Group

to retain the competitive advantages provided by the patent portfolio and to protect market

share by seeking legal remedies, such as injunctions or monetary damages, to deter, prevent,

or delay competitor entry.

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The Group’s patent portfolio further generates value to the Group through the licensing of

patents to outside parties covering technology that is not of commercial value to the Group.

The patent portfolio can also be utilised as leverage during business negotiations, facilitating

the creation of cross-licensing arrangements with competitors in lieu of litigation.

The Group in-licenses certain third-party patents that support the Group’s business goals,

including patents from companies with technical expertise in particular areas that the Group

seeks to commercialise. The Group also partners with third parties to accelerate, develop, and/

or commercialise new products in a cost-effective manner by utilising the knowledge of

external experts in a particular field.

10.3 Designs and other IP

In addition to the Group’s large patent and trade mark portfolios, the Group further strengthens

brand value through protection of distinct brand designs, such as packaging designs. As of

1 March 2022, the Group has 1,057 granted and pending designs which are managed centrally

at Group level. There is also copyright and unregistered intellectual property protection for pack

designs and unregistered brands to the extent available in a given country.

10.4 Domains

As of 1 March 2022, the Group owns 5,815 domain names, which are managed centrally at

Group level. Domain names for the Group’s corporate names have also been reserved,

including “Haleon.com” and “Haleon.cn”.

11. Environmental, social and governance

The Group’s purpose is to deliver everyday health with humanity and this informs the Group’s

relationships with all of its stakeholders as well its approach to stewardship of natural

resources. The Group has ambitious goals in relation to health inclusivity, its environmental

impact, and supporting the communities where it operates together with a commitment to

robust corporate governance practices across its business so as to enable it to maximise its

positive impact on society.

The Group’s ESG strategy is led centrally by a core team of experts with representation on the

management team and with a track record of ESG programme delivery in the consumer goods

and healthcare industries. Central strategy and coordination is complemented at a business

unit level by the incorporation of ESG objectives into the Group’s operational and performance

targets, ensuring that ESG is integral to how it manages its business and drives value creation

for all of its stakeholders.

Tackling environmental issues impacting everyday health

The Group’s commitments to a healthy environment can be seen in four areas in particular:

(i) carbon and climate change; (ii) sustainable healthcare packaging; (iii) trusted ingredients,

sustainably sourced; and (iv) operational waste and water. The commitments are brought to life

through product innovations.

With respect to carbon and climate change, the Group understands the impacts of fossil fuel

emissions and a warming planet on human health, whether it be through the impacts of

extreme weather events, the exposure of new regions to climate-driven infectious diseases or

the direct risks posed by air pollution to respiratory and cardiovascular health. Building on the

steps already taken while part of the GSK Group, the Group is taking a robust approach to

addressing its carbon footprint.

To support the global efforts to mitigate the impacts of climate change, the Group has

implemented renewable electricity generation at 12 of its 24 internal sites and is aiming to

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reduce its carbon net Scope 1 and 2 carbon emissions by 100 per cent. by 2030 (versus its

2020 baseline). The Group intends to self-generate renewable electricity or purchase

renewable energy certificates to cover the Group’s total electricity usage by the end of 2022. In

addition, the Group aims to reduce its Scope 3 emissions by 42 per cent. from source to sale

by 2030 (versus its 2020 baseline). This level of carbon emissions reduction is aligned to the

Intergovernmental Panel on Climate Change 1.5

C pathway. Following Separation, the Group

intends to seek formal accreditation of its carbon commitments by the SBTi. The Group will

also set a long-term carbon net zero goal informed by the latest SBTi guidance.

In packaging, the Group aims to develop solutions for all of its product packaging to be recycle-

ready by 2025 and to be fully recyclable or reusable by 2030 where quality, safety and

regulations permit. The Group aims to reduce its use of virgin petroleum-based plastic by

10 per cent. by 2025 and one-third by 2030 versus its 2020 baseline. The Group will work with

partners to drive global and local initiatives to collect, sort and recycle consumer healthcare

packaging at scale by 2030.

The Group looks to leverage external partnerships to achieve its environmental goals. It is part

of the Pulpex partner consortium with Diageo, Unilever and PepsiCo, which looks at

introducing first-in-class pulp packaging made from sustainably sourced pulp. The Group is

further exploring the design and piloting of Pulpex bottles across several key brands: in its Oral

Health and OTC/VMS portfolios, including its global Power Brand Centrum.

The Group aims for all of its agricultural, forest and marine derived materials to be sustainably

sourced and deforestation free by 2030. In 2020 the Group’s sites that were its largest users of

glycerine, its most material palm oil derivative, achieved Roundtable on Sustainable Palm Oil

mass balance certification. As a next step in continuously improving the Group’s sourcing of

sustainable palm oil, it is progressing towards buying physically certified palm oil derivatives.

From 2022, the Group is providing funding towards several projects with ASD (Action for

Sustainable Derivatives) to drive positive impact on the ground by improving the livelihoods of

smallholders and providing support to increase the availability of sustainable sourced palm oil.

With respect to operational waste and water, the Group aims for all of its sites to achieve the

Alliance for Water Stewardship (“AWS”) Standard

by 2025, with all sites in water-stressed

basins to be water-neutral by 2030. One achievement in this area is at the Cape Town site,

which is located in a high-stress water basin. Here, the Group has reduced its water

consumption by over 50 per cent. since 2010 and the site is on track to become the first water-

neutral site across the manufacturing network by the end of 2022.

The Group aims for all of its manufacturing sites to achieve TRUE certification by 2030.

Additionally, the Group has been implementing its sustainability agenda through its product

innovations. The carbon-neutral Dr.BEST Green Clean toothbrush is an example of

sustainable innovation. It begins with renewable raw material sourcing from sustainable forests

and bio-composite material from the woodwork industry for the handle, has bristles made from

100 per cent. castor oil, and has plastic-free packaging.

To better understand the brush’s improved carbon footprint, the Group engaged with specialist

consultancy firm, Climate Partner, which found the footprint was reduced by more than

50 per cent. when compared with the standard Dr.BEST toothbrush. The remaining footprint is

Roundtable on Sustainable Palm Oil (“RSPO”) is a not for profit organisation with over 4000 members, dedicated to developing

and implementing global standards for sustainable palm oil. The RSPO has developed a set of environmental and social criteria

which companies must comply with in order to produce Certified Sustainable Palm Oil. When they are properly applied, these

criteria can help to minimise the negative impact of palm oil cultivation on the environment and communities in palm oil

producing regions.

AWS is a global alliance between businesses, NGOs and the public sector promoting good water stewardship. The AWS

Standard is a globally applicable framework for major water users to understand their water use and impacts, and to work

collaboratively and transparently for sustainable water management.

TRUE is the first zero waste certification programme dedicated to measuring, improving and recognising zero waste

performance by encouraging the adoption of sustainable materials management and reduction practices which contribute to

positive environmental, health and economic outcomes.

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offset through a community-based Climate Partner project in Madagascar. The Group is

working on further innovation to reduce the carbon footprint even further with the ultimate goal

of reducing it to zero.

Inclusivity

Health inclusivity is fundamental to the Group’s purpose to deliver everyday health with

humanity, as everyday health is impacted by social exclusion and as bias and stigma prevent

people from accessing better everyday health. The Group is taking a leading position in

educating and empowering people to achieve better self-care and to provide accessible,

affordable health care solutions through its products.

The Group aims to empower millions of people a year to be more included in opportunities for

better everyday health, empowering 50 million people a year by 2025. It aims to achieve this in

three key ways: (i) driving change through its brands; (ii) empowering self-care; and

(iii) investing in thought leadership and research. The Group’s social impact from such

activities will be measured according to the nature of the activity. For example, the Group

developed an inclusive easy-to-open cap for Voltarol pain relief gel and will count the number

of potential arthritis sufferers rather than the total number of purchases in its reporting.

The Group is collaborating with The Economist Group to develop an index to promote

awareness of health inclusivity and ongoing and productive dialogue with policymakers and

healthcare professionals. The programme assesses the state of health inclusivity in 40

countries across four to five indicators (increasing to 80 countries in later phases), with the

data being made available to consumers and stakeholders though an interactive index hub.

The index will be hosted on The Economist website in an interactive hub to enable open

access so that stakeholders can use the data to perform their own analyses. In the first year,

this output will be used to raise awareness and build further understanding of the drivers of

health inclusivity. It is intended to facilitate meaningful dialogue with and among key

stakeholder groups who share an interest in improving health inclusivity, particularly investors,

policymakers, healthcare professionals and external experts, as well as the media, consumers

and customers. The outputs will equip the Group with insights to inform its own actions and

help identify opportunities for partnerships and wider coalitions of action in the medium to

longer term to drive health inclusivity.

The Group has also seen the synergistic benefits of its inclusivity focus in driving preference

and growth among retailers in multiple markets. For example, the US Tums “Bring Diversity to

the Table” campaign run at Walmart in 2020, which donated culinary and nutrition scholarships

with the Thurgood Marshall College fund, was awarded incremental displays in over 3,300

Walmart stores during the competitive holiday period and helped to deliver an increase in

revenue for the Tums brand.

Corporate governance

The Group strives for best-in-class corporate governance, which can be illustrated in three

areas. First, at a Board level, the Chair and Directors have been selected based upon the

capabilities, experience, diversity and regulatory requirements for a consumer healthcare

company. The Directors have a commitment to transparent reporting and disclosure and are

subject to a robust code of conduct.

Second, Board-level governance and committees have been established to ensure alignment

with all requirements of the UK Corporate Governance Code (see paragraph 3 of Part V

(Directors, Senior Managers, Corporate Governance and Remuneration)).

Third, the Group’s internal and external operational governance links in directly to Board-level

governance, enabling rapid escalation and visibility. This includes a focus on key performance

indicators, principal risks, supplier code of conduct and quality requirements, internal employee

training and the use of responsibility scorecards to promote the right behaviours.

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PART IV

OVERVIEW OF THE DEMERGER AND SEPARATION

1. The Demerger and further preparatory steps

On 23 June 2021, GSK announced its intention to effect the separation of the Consumer

Healthcare Business by way of a demerger of at least 80 per cent. of GSK’s 68 per cent.

holding in the Group. The Demerger is conditional on, amongst other things, the approval of

GSK Shareholders at the GSK General Meeting, the receipt of certain mandatory

governmental/regulatory approvals in India, Japan and South Korea, and the approval of the

Demerger Dividend by the GSK Board.

Pursuant to the proposed Demerger, GSK Shareholders who are registered on the Register at

the Shareholder Record Time will be entitled to receive one Haleon Share for each GSK Share

held by them at the Shareholder Record Time. GSK Shareholders will continue to own their

GSK Shares unless they sell or transfer them in the usual course.

1.1 Overview of the Demerger and Share Exchanges

Pursuant to the proposed Demerger and subsequent Share Exchanges described below, the

Company will come to own the entire issued share capital of each of GSKCHH and PFCHH

which, together, own the entire issued share capital of CH JVCo, the current parent company

of the Group.

Current structure of the Group

At present, the structure of the Group is as follows:

The share capital of CH JVCo consists 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 are held by GSKCHH. All

JVCo B Ordinary Shares are held by PFCHH, which is a wholly owned subsidiary of Pfizer.

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Accordingly, the share capital of CH JVCo is held as follows:

Shareholder Class Voting rights Nominal

Value

GSKCHH JVCo A Ordinary Shares 68 per cent. 75.38 per cent.

JVCo Preference Shares N/A

PFCHH JVCo B Ordinary Shares 32 per cent. 24.62 per cent.

The share capital of GSKCHH is comprised of three classes of shares: (i) GSKCHH A Ordinary

Shares; (ii) GSKCHH B Ordinary Shares; and (iii) GSKCHH C Ordinary Shares. At present, all

of the GSKCHH A Ordinary Shares and GSKCHH B Ordinary Shares are 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 (being Scottish

Limited Partnerships controlled by GSK).

Demerger

The Demerger will be implemented by GSK declaring an interim dividend in specie to be

satisfied by: (i) the transfer by GSK of the GSKCHH A Ordinary Shares to the Company, in

return for (ii) the issuance of Haleon Shares by the Company to GSK Shareholders who are

registered on the Register at the Shareholder Record Time on the basis of one Haleon Share

for each GSK Share held by such GSK Shareholders at the Shareholder Record Time, save

that the number of Haleon Shares to be allotted and issued to each of the four initial

shareholders of the Company (each of whom is a GSK Shareholder) will be reduced by the

number of Haleon Shares already held by them at the Shareholder Record Time. GSK

Shareholders will continue to own their GSK Shares unless they sell or transfer them in the

usual course.

Share Exchanges

Shortly following completion of the Demerger, a series of share-for-share exchanges will occur,

under which the Company will come to own the entire issued share capital of GSKCHH and

PFCHH, which together own the entire issued share capital of CH JVCo. The purpose of the

share-for-share exchanges is 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:

(A) GSK will transfer 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 for

502,868,434 Haleon Shares, less a number of Haleon Shares that is equal to the number

of Excess GSK Shares.

As at the Latest Practicable Date, the number of Haleon

Shares expected to be held by GSK at Admission is expected to represent up to 6 per

cent. of the total issued share capital of the Company (the “GSK Share Exchange”);

(B) each of the SLPs will transfer 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 such number of new Haleon Shares as is required so

that, on Admission, the SLPs will together hold Haleon Shares representing 7.5 per cent.

(in aggregate and to the nearest whole Haleon Share) of the total issued share capital of

the Company; and

To the extent any shares are issued by GSK (e.g. in respect of GSK employee share options) between the Latest Practicable

Date and the Shareholder Record Time, this would affect the post-Separation shareholdings in the Company. In summary, the

effect of any such issuance would be that: (i) the total number of Haleon Shares issued to Shareholders under the Demerger

would increase by the number of GSK Excess Shares; and (ii) there would be a corresponding reduction in the total number of

Haleon Shares issued to GSK under the GSK Share Exchange.

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(i) such number of new Haleon Shares as is required so that, on Admission, Pfizer will

hold Haleon Shares representing 32 per cent. of the total issued share capital of the

Company (to the nearest whole Haleon Share); and (ii) 25 million Non-Voting Preference

Shares (the “Pfizer Share Exchange”),

together, the “ Share Exchanges”.

Immediately following the Pfizer Share Exchange, Pfizer will sell its entire holding in the

Non-Voting Preference Shares to one or more third party investor(s) (the “NVPS Sale”).

Through the Demerger, the Share Exchanges and the NVPS Sale, the ordinary share capital of

the Company will be held as follows:

Shareholder Class Voting rights Nominal Value

GSK Shareholders Ordinary At least 54.5 per cent. At least 54.5 per cent.

Pfizer Ordinary 32 per cent. 32 per cent.

SLPs (Scottish partnerships

controlled by GSK)

Ordinary 7.5 per cent. 7.5 per cent.

GSK Ordinary Up to 6 per cent. Up to 6 per cent.

1.2 Pre-Separation Dividends

Prior to Separation, the Group will pay certain dividends to GSKCHH and/or PFCHH. These

dividends will include:

(A) a cash dividend to be paid by the Group to GSKCHH in connection with the issuance of

the Non-Voting Preference Shares to Pfizer (the “Balancing Dividend”);

(B) a cash dividend to be paid by the Group to GSKCHH and PFCHH, in accordance with the

terms of the Pfizer SHA, which, in summary, requires an amount equal to the

Pre-Separation Debt Proceeds of the Group less £300 million to be paid to GSKCHH and

PFCHH prior to Separation (the “Pre-Demerger Dividend”); and

dividend to be paid by the Group to GSKCHH and PFCHH, in accordance with the terms

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of the Pfizer SHA which, in summary, requires all readily available cash in excess of

£300 million to be paid to GSKCHH and PFCHH prior to Separation (the “Sweep-up

Dividend”),

(together, the “Pre-Separation Dividends”).

The minimum cash amount of £300 million in the calculation of the Sweep-Up Dividend reflects

the base cash amount required under the Pfizer SHA. The recipients of the Pre-Separation

Dividends reflect the current structure of the Group, as set out above.

Prior to the Pre-Separation Dividends, the Group will continue to pay its ordinary course,

quarterly dividends to GSKCHH and PFCHH in accordance with the terms of the Pfizer SHA

(including, a dividend to be paid in respect of the Group’s financial performance for Q1 2022).

1.3 Pre-Separation bond issuances

As part of the preparation for the Demerger, on 16 March 2022, GSK Consumer Healthcare

Capital UK plc and GSK Consumer Healthcare Capital NL B.V. acting as issuers (the “EMTN

Issuers”) established a £10,000,000,000 Euro Medium Term Note Programme (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 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 (together, the “Pre-Separation Programme Notes”).

In addition, on 24 March 2022, GSK Consumer Healthcare Capital US LLC (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 GSK Consumer Healthcare Capital UK plc

issued $1,750,000,000 3.125 per cent. fixed rate senior notes due 2025 (the “Pre-Separation

USD Notes”) in each case, pursuant to a private placement to institutional investors in the USA

and outside the USA.

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 GSK (see paragraph 15.13 of Part XII (Additional

Information) for further information). Following completion of the GSK Share Exchange, the

guarantee provided by GSK will cease to be effective and a guarantee provided by the

Company will come 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 at paragraph 15.13 of Part XII (Additional Information).

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 certain upstream loans to wholly-owned subsidiaries of GSK and Pfizer.

As such:

(A) 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

(B) 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 Loan Agreements”).

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The terms of the Notes Proceeds Loan Agreements require, among other things, that the

Notes Proceeds Loans will be repaid in full to GlaxoSmithKline Consumer Healthcare Finance

Limited on 13 July 2022 or such other date as agreed between the parties in writing. Following

repayment of the Notes Proceeds Loans, the amounts received by GlaxoSmithKline Consumer

Healthcare Finance Limited will be made available to CH JVCo in order to fund a portion of the

Pre-Demerger Dividend.

1.4 The Group’s asset perimeter

On or around the date of this Prospectus, 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 paragraph 15.2 of Part XII (Additional Information)).

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

paragraph 15.4 of Part XII (Additional Information).

1.5 Further information

The GSK Shareholder Circular also contains detailed information about how the Demerger and

other related steps will be effected. GSK Shareholders should only rely on the information in

the GSK Shareholder Circular.

Further information regarding the continuing relationships between the Company, GSK and

Pfizer following the Separation is set out at paragraph 15.10 of Part XII (Additional

Information).

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PART V

DIRECTORS, SENIOR MANAGERS, CORPORATE GOVERNANCE AND REMUNERATION

1. DIRECTORS

The Directors and their principal functions within the Company, together with a brief description

of their management experience and expertise and principal business activities outside the

Company, are set out below. The business address of each of the Directors (in such capacity)

is 980 Great West Road, Brentford, Middlesex, TW8 9GS, United Kingdom.

Name Position Age

Sir Dave Lewis Non-Executive Chair 57

Brian McNamara Chief Executive Officer 56

Tobias Hestler Chief Financial Officer 50

Manvinder Singh (Vindi)

Banga*

Senior Independent

Non-Executive Director

Marie-Anne Aymerich* Non-Executive Director 56

Tracy Clarke* Non-Executive Director 55

Dame Vivienne Cox* Non-Executive Director 63

Asmita Dubey* Non-Executive Director 48

Deirdre Mahlan* Non-Executive Director 59

Bryan Supran* Non-Executive Director

(Pfizer nominee)

John Young* Non-Executive Director

(Pfizer nominee)

*indicates those persons who will become directors on Admission.

The management experience and expertise of each of the Directors is set out below.

Dave Lewis

Dave Lewis served as Group Chief Executive Officer of Tesco plc, a multinational grocery and

general merchandise retailer, from 2014 until September 2020.

Prior to joining Tesco, he served in a variety of management positions with Unilever plc, a

global consumer products company, from 1987 to 2014, including a variety of leadership roles

in Europe, Asia and the Americas, including as President, Personal Care from 2011 to 2014;

President, Americas from 2010 to 2011; and Chair, United Kingdom and Ireland from 2007 to

2010.

Dave has served on the Pepsico Inc. board since November 2020 and as Chair of Xlinks since

September 2021. He was appointed to serve as Co-Chair of the UK government’s Supply

Chain Advisory Group in October 2021. He previously served on the Sky plc board from 2012

to 2016.

Dave also serves on the boards of several non-profit and charitable organisations, including as

Chair of World Wildlife Fund - UK and as a trustee of Leverhulme Trust, a UK charitable

foundation. He was also Chair of Champions 12.3, a UN programme seeking to add

momentum to the achievement of the UN Sustainable Development Target 12.3 by 2030, and

Co-Chair of the Consumer, Retail and Life Sciences Business Council, which was established

to advise the Prime Minister of the United Kingdom.

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In recognition of his contribution to business and the food industry in the United Kingdom, Dave

was knighted by Her Majesty Queen Elizabeth II in the 2021 New Year’s Honours List.

Brian McNamara

Brian was appointed Chief Executive Officer designate of the Company in July 2021, having

been Chief Executive Officer of the consumer healthcare division since 2016, where he

focused on shaping a strategy for growth that puts purpose at its heart. He leads approximately

23,000 people across more than 100 countries, who are working every day to deliver better

everyday health with humanity.

Prior to joining GSK, initially as Head of Europe and the Americas in 2015, Brian spent over a

decade at Novartis in senior leadership roles in the OTC division. He began his career at

Procter & Gamble, where over a 16-year tenure, he gained extensive experience in product

supply, brand marketing, and customer leadership.

Brian is a board member of the Consumer Goods Forum. He has previously served as a board

member and Chairman of the Global Self Care Federation and was an active member of the

board of trustees for Treloar’s – a trust providing support and independence education for

young people with physical disabilities.

Tobias Hestler

Tobias was appointed Chief Financial Officer designate of the Company in December 2021,

having been Chief Financial Officer of the consumer healthcare division since 2017.

Prior to joining GSK, Tobias was the Chief Financial Officer at Sandoz – Novartis’ generics

division. In 2010, he was named Chief Financial Officer for the former Novartis consumer

health division, a position that evolved into Tobias’ role as Chief Financial Officer for the

Novartis OTC division. Earlier in his career he held both local and global finance leadership

roles at Novartis in the USA, Germany and Switzerland, for example as Global Head of

Finance for the animal health business, Global Controller for Sandoz and Chief Financial

Officer for Hexal.

Manvinder Singh (Vindi) Banga

Vindi is currently Senior Independent Director at GSK. He has been Chairman of UK

Government Investments Limited (UKGI) since September 2021.

Prior to joining GSK, Vindi spent 33 years at Unilever plc in various roles, his last role was

President of the Global Foods, Home and Personal Care businesses, and a member of the

Unilever Executive Board. Vindi sat on the Prime Minister of India’s Council of Trade & Industry

from 2004 to 2014 and was on the Board of Governors of the Indian Institute of Management

(IIM), Ahmedabad.

Prior non-executive roles include Non-Executive Director of the Confederation of British

Industry (CBI) and Thomson Reuters Corp, Chairman of the Supervisory Board of Mauser

Group, Chairman of Kalle GmbH, Senior Independent Director of Marks & Spencer Group plc,

and Chair, Exec Committee, Diversey Inc. Vindi also holds a number of external appointments,

for example as Partner at Clayton Dubilier & Rice, Non-Executive Director at The Economist

Newspaper Limited, Member of Hakluyt International Advisory Board, Board Member of the

International Chamber of Commerce UK, Member of the Governing Board of the Indian School

of Business, Hyderabad, and Chair of the Board of Trustees at Marie Curie.

Marie-Anne Aymerich

Marie-Anne Aymerich has led a successful 30 plus year career in the consumer and luxury

sectors, growing businesses and shaping brands through innovation and creativity. Most

recently, Marie-Anne was Executive Vice President of the worldwide Oral Care category at

Unilever, where she developed new brands including Zendium and Regenerate. Prior to that,

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Marie-Anne was General Manager of the Dior Perfume and Beauty business at LVMH where

she was responsible for strategy, equity, innovation, advertising, and digital. Before joining

LVMH, Marie-Anne was Marketing Director of the Home and Personal Care business at

Unilever. In addition to her executive career, Marie-Anne has been a Non-Executive Director of

Pierre Fabre since 2019.

Tracy Clarke

Tracy is currently Non-Executive Director and Chair of Remuneration at TP ICAP plc, Starling

Bank and the All England Netball Association. She is also Chair of a start-up called

SchoolOnline and Advisor and Non-Executive Director at Acin Ltd.

Tracy has extensive experience in international banking and financial services and in commercial

and leadership roles having held a range of senior executive positions over 30 years at Standard

Chartered Bank, where her last role was Private Bank CEO and Regional CEO, Europe &

Americas. During her time at Standard Chartered she served as a director of Standard Chartered

Bank UK, a Non-Executive Director of Standard Chartered First Bank in Korea, director of Zodia

Holdings Limited and Zodia Custody Ltd. She also chaired the Supervisory Board of Standard

Chartered Bank AG and Standard Chartered Yatirim Bankasi Turk A.S.

Prior non-executive roles include Chair of the Remuneration Committees of Sky plc and Eaga

plc and Non-Executive Director and Remuneration Committee member of Inmarsat plc. Tracy

has also served on the boards of the China Britain Business Council and TheCityUK.

Dame Vivienne Cox

Vivienne is currently an independent Non-Executive Director, and Workforce Engagement

Director at GSK.

Prior to joining GSK Vivienne worked at BP plc for 28 years, in Britain and Continental Europe

in various posts, including Executive Vice President and Chief Executive of BP’s gas, power

and renewable business and its alternative energy unit. Vivienne was previously a

Non-Executive Director of BG Group plc and Rio Tinto plc, the Senior Independent Director of

Pearson plc, Chairman of the Supervisory Board of Vallourec and the Lead Independent

Director at the UK Government’s Department for International Development.

Vivienne holds a number of external appointments, including Chair of Victrex plc,

Non-Executive Director of Stena AB, Vice President of the Energy Institute, Advisory Board

Member of Montrose Associates and Chair of the Rosalind Franklin Institute.

Asmita Dubey

Asmita Dubey has 25 years of experience working in consumer businesses. She has worked at

L’Ore´al since 2013 and is currently Chief Digital and Marketing Officer and a member of the

L’Ore´al Executive Committee. Asmita brings extensive expertise of marketing in the digital age

and is leading L’Ore´ al on a digital transformation journey to evolve the marketing models,

adopt new data-driven solutions, and accelerate emerging business models for the largest

beauty company in the world. Asmita also brings strong experience working in China where

she strengthened L’Ore´al’s digital footprint in the region, built L’Ore´ al’s first joint-business

partnerships with Alibaba and Tencent and established a broader start-up ecosystem. In

addition to her executive career, Asmita served on GSK’s Digital Advisory Board for two years.

Deirdre Mahlan

Deirdre is Chair of the Audit Committee at Experian plc, Non-Executive Director at Kimberly-

Clark Corporation and Chair of the Audit Committee of The Duckhorn Portfolio, Inc.

Deirdre has deep finance and consumer product experience and is a qualified accountant. She

has held a number of senior finance and general management roles over her 27 year career at

Diageo, including President of Diageo North America, Chief Financial Officer, Deputy Chief

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Financial Officer, Head of Tax and Treasury at Diageo plc, Senior Vice President, Chief Financial

Officer at Diageo North America, and Vice President of Finance at Diageo Guinness USA. She

has also held various senior finance roles in Joseph Seagram and Sons, Inc. and PwC.

Bryan Supran

Bryan’s career as a leading corporate and transactional attorney spans more than 25 years,

including 17 years at Pfizer and Wyeth. Since 2015, Bryan has served as Senior Vice

President & Deputy General Counsel of Pfizer, a role that includes counselling management

and the Board of Directors on strategic initiatives and business development transactions, such

as Pfizer’s COVID-19 vaccine collaboration with BioNTech, successful split-off of its animal

health business as Zoetis, and joint venture with GSK to create a premier global consumer

healthcare business that has become Haleon. Bryan’s role also has included leadership of

Pfizer’s intellectual property and international legal teams, as well as legal support for Pfizer’s

R&D and manufacturing organizations. Previously, Bryan practiced law at Ropes & Gray LLP

in Boston and New York, where he helped establish the firm’s life sciences practice.

John Young

John has had an extensive career at Pfizer over 34 years and is currently Senior Adviser to the

CEO of Pfizer. In his previous role as Chief Business Officer he played an important role in

cultivating the collaborations that led to the successful development and delivery of the

Pfizer-BioNTech COVID-19 vaccine. John has led many large-scale transformations, including

the closing of the joint venture with GSK to create a premier global consumer healthcare

business in 2019. John has extensive healthcare, commercial and international experience.

2. SENIOR MANAGERS

In addition to the Directors, the current members of the senior executive team with

responsibility for day-to-day management of the Group’s business are set out below. The

business address of each of the Senior Managers (in such capacity) is 980 Great West Road,

Brentford, Middlesex TW8 9GS, United Kingdom.

Name Position Age

Dana Bolden Head of Corporate Affairs 55

Keith Choy Head of Asia Pacific 54

Bart Derde Head of Quality and Supply Chain 53

Amy Landucci Head of Digital and Technology 48

Filippo Lanzi Head of EMEA and LatAm 49

Jooyong Lee Head of Strategy and Office of the CEO 45

Teri Lyng Head of Transformation and Sustainability 60

Mairéad Nayager Chief Human Resources Officer 47

Lisa Paley Head of US and North America 56

Franck Riot Head of R&D 55

Tamara Rogers Chief Marketing Officer 53

Bjarne P Tellmann General Counsel 55

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The management experience and expertise of each of the Senior Managers is set out below.

Dana Bolden

Dana joined GSK consumer healthcare as Head of Corporate Affairs in January 2021. He is

responsible for corporate communications, government affairs and responsible business

engagement.

Previously, Dana was Chief Communications Officer at Corteva Agriscience and prior to this,

he worked for The Coca-Cola Company, having started his career at global PR consultancy,

Cohn and Wolfe.

Dana is accredited by the Public Relations Society of America and is an active member of the

Arthur W. Page Society, the world’s leading professional association for senior public relations

and corporate communications executives and educators.

Keith Choy

Keith was appointed Region Head of Asia Pacific for GSK consumer healthcare in 2019.

Before joining GSK, Keith was the President for international markets of Pfizer’s consumer

healthcare business. He previously served as the Regional President of APAC for Pfizer

consumer healthcare and before that as China General Manager, where he oversaw significant

sales growth in the China OTC category. Across his 28 years of commercial experience in the

consumer-packaged goods and healthcare industries, Keith has also held various roles of

sales, brand marketing, and general management in Wyeth, Gillette and Joyco (acquired by

Wrigley Company).

He was awarded the Internationalist of the Year for 2017.

Bart Derde

Bart was appointed Head of Quality and Supply Chain for GSK consumer healthcare in 2018.

Prior to joining GSK, Bart spent 14 years at Reckitt where he was Head of Quality, Safety

Sustainability and Compliance as well as Head of Global Operations for Reckitt Health and

held various other roles in the global health supply chain.

Prior to joining Reckitt, Bart worked at Unilever for over a decade in a number of roles across

manufacturing, procurement, planning and strategic projects in the UK and the Netherlands.

Amy Landucci

Amy was appointed Chief Digital and Technology Officer for GSK consumer healthcare in

2021.

Prior to joining GSK in 2017, as Chief Information Officer for consumer healthcare, Amy spent

over a decade at Novartis, where she was most recently the Global Head of Digital Medicines.

She was responsible for defining and delivering the “beyond the pill” strategy and solutions to

accelerate Novartis’ entrance into digital medicines. Prior to this role, Amy was Chief

Information Officer for the Novartis OTC division.

Amy previously served on the board of directors for Healthy Women, the leading independent,

non-profit health information source for women in the USA with a mission to educate and

empower women to make informed health choices for themselves and their families.

Filippo Lanzi

Filippo was appointed Head of EMEA and LatAm in 2021, having previously served as EMEA

Lead from 2019 to 2021.

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Having joined GSK consumer healthcare in 2012, he previously served in various roles across

Central, Eastern and Southern Europe before leading the APAC business.

Prior to that role, he was the Operating Unit Head in Italy and Greece for Novartis’ OTC

business. Previously, Filippo spent five years at Johnson & Johnson, managing the diabetes

division in Italy and then as Head of Mediterranean Cluster for the Ethicon/Endo franchise.

Before Johnson & Johnson, he spent a decade with Nestlé, holding various roles across

marketing, sales and finance.

Jooyong Lee

Jooyong Lee joined GSK consumer healthcare as Head of Strategy and Office of the Chief

Executive Officer in March 2019.

Previously at Diageo, Jooyong oversaw market strategy across all global markets with

particular focus on emerging markets across Asia, Africa and Latin America, and drove key

corporate strategic initiatives to unlock new sources of growth. Prior to this role, Jooyong was

Vice President of Strategy for InterContinental Hotels Group overseeing the Asia, Middle East

and Africa growth strategy, based in Singapore.

Jooyong is a former management consultant with McKinsey & Company, having started her

career at Procter & Gamble.

Teri Lyng

Teri was appointed as Head of Transformation and Sustainability at GSK consumer healthcare

in 2019 and has been responsible for the development and execution of the ESG strategy, as

well as the integration of the joint venture with Pfizer’s consumer healthcare business and the

preparation and operational readiness of the formal separation from GSK.

Previously, Teri led the quality function for GSK consumer healthcare and before that held

similar roles in the OTC division at Novartis and the consumer health divisions of both Wyeth

and Merck.

Mairéad Nayager

Mairéad was appointed as Chief Human Resources Officer in March 2022 and will be

responsible for developing global talent capabilities pre- and post-formal separation from GSK.

Previously, Mairéad was Chief Human Resources Officer at Diageo for over seven years, having

already held a number of HR executive roles across a number of Diageo’s regional businesses

over the previous decade. At Diageo she played a pivotal role in successfully leading the

business through multiple business transformations, developing and delivering a dynamic

performance culture and spearheading Diageo’s plans to help create a more inclusive world.

Prior to joining Diageo, Mairéad spent three years at the Irish Business and Employers’

Confederation where she represented companies across various sectors in industrial relations.

Lisa Paley

Lisa has led the North America region for GSK consumer healthcare since 2021, having

previously been General Manager, USA and Puerto Rico.

She joined GSK in 2019 from Pfizer’s consumer healthcare business, where she had been

President of North America, responsible for the US, Puerto Rico and Canadian markets. In her

decade at Pfizer, Lisa had senior roles in sales strategy; was General Manager of Puerto

Rico & Caribbean; and was the US Chief Customer Officer and leader of Global E-Commerce.

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Previously, Lisa worked at Johnson & Johnson as a Vice President in US Sales and also spent

18 years with the Pfizer consumer healthcare business where she held positions of increasing

responsibility in sales, customer development, sales strategy, operations, category

management & insights and general management.

She is a former Certified Public Accountant and worked for Deloitte.

Lisa is a board member of several US industry association boards including CHPA Executive

Committee, NACDS Retail Advisory Board, and the WE Board.

Franck Riot

Franck was appointed Head of Global R&D for GSK consumer healthcare in 2019. Previously,

Franck was Vice President of Research and Innovation at Danone for the essential dairy and

plant-based world-wide business unit from 2017 to 2019.

Franck began his career as an R&D engineer in the beauty and personal care sector, then

spent 14 years at Danone, with progressively larger R&D roles in Europe. He left Danone for

six years to run the global R&D organisation for IGLO (owned by private equity firm Permira),

which was sold to Nomad Foods. Franck was part of the Nomad Foods team that then took the

company public in 2015, after which he returned to Danone to run research and innovation for

the newly created essential dairy and plant-based world-wide business unit after the acquisition

of the world leading plant-based food company WhiteWave in 2017.

Tamara Rogers

Tamara was appointed Chief Marketing Officer for GSK consumer healthcare in 2019, having

previously served as Region Head for EMEA.

Prior to joining GSK, Tamara spent 25 years at Unilever, having joined as a Management

Trainee in the UK. She held significant leadership positions such as EVP Region Head

Personal Care for Unilever North America and prior to that, EVP Global Deodorants Category.

Tamara has nearly 30 years of experience in FMCG with numerous commercial roles across

marketing, advertising, customer development and general management, in local, regional and

global capacities. Her experience includes the development of business growth strategies,

strategic portfolio management, innovation development, brand building, design, customer

development and trade marketing. Her responsibilities have also included media, consumer

business insights & analytics, marketing and digital commerce capability.

Tamara is a board member of the Global Self-Care Federation, which exists to create a

healthier world through better self-care.

Bjarne P Tellmann

Bjarne was appointed General Counsel of GSK consumer healthcare in 2020.

Prior to his role at GSK, Bjarne was Chief Legal Officer, General Counsel and member of the

executive team at Pearson, where he led the company’s legal, compliance, and company

secretary functions. He previously worked in numerous locations across Europe, Asia and the

USA in senior executive capacities with Coca-Cola, most recently as Associate General

Counsel of The Coca-Cola Company. He has also held positions at Kimberly-Clark, and the

law firms of Sullivan & Cromwell LLP and White & Case LLP.

Bjarne serves as a Non-Executive Director on the board and audit committee of Mowi ASA, the

world’s leading seafood company and the largest producer of Atlantic salmon. He previously

sat on the boards of Coca-Cola West Co.,Ltd., Coca-Cola Erfrischungsgetränke AG and Hire

an Esquire, Inc.

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3. THE BOARD AND CORPORATE GOVERNANCE

3.1 The Board

The Board is responsible for leading and controlling the Group and has overall authority for the

management and conduct of the Group’s business and its strategy and development.

3.2 Compliance with corporate governance requirements

(A) Compliance with UK Corporate Governance Code

From Admission, the UK Corporate Governance Code will apply to the Group and the

Group will comply, and intends to continue to comply, with the UK Corporate

Governance Code.

(B) Board and Committee independence

The UK Corporate Governance Code recommends that at least half the board of

directors of a UK listed company (excluding the chair) should comprise ‘independent’

non-executive directors, being individuals determined by the Board to be independent

in character and judgement and free from relationships or circumstances which may

affect, or could appear to affect, the directors’ judgement. It also recommends that a

UK listed company should establish remuneration and audit committees of

independent non-executive directors, each comprising at least three members, as well

as a nomination committee, the majority of members of which should be independent

non-executive directors.

From Admission, the Board will comprise eleven members: two executive Directors

and nine non-executive Directors. The Board considers Dave Lewis, Manvinder Singh

(Vindi) Banga, Tracy Clarke, Dame Vivienne Cox, Deirdre Mahlan, Asmita Dubey and

Marie-Anne Aymerich to be independent for the purposes of the UK Corporate

Governance Code. The Board does not consider Bryan Supran and John Young to be

independent as they are representatives of Pfizer, a significant shareholder.

The Board therefore considers that the Company complies with the relevant

requirements of the UK Corporate Governance Code in relation to the balance of

executive and independent non-executive Directors on the Board and with the

requirements for the composition of the Company’s Audit & Risk Committee,

Remuneration Committee and Nomination Committee.

The UK Corporate Governance Code also recommends that the board of directors of a

UK listed company should appoint one of its independent non-executive directors to be

the senior independent non-executive director. The senior independent non-executive

director should provide a sounding board for the chair and serve as an intermediary for

the other directors and shareholders. He or she should be available to shareholders if

they have concerns that the normal channels of chair, chief executive officer or other

executive directors have failed to resolve or for which such channel of communication

is inappropriate. Manvinder Singh (Vindi) Banga has been appointed as the Company’s

Senior Independent Non-Executive Director subject to Admission.

(D) Workforce Engagement Director

The UK Corporate Governance Code requires that the Board understands the views of the

Company’s other key stakeholders, including its workforce. To facilitate effective

engagement with the Company’s workforce, the UK Corporate Governance Code

recommends that a listed company adopt one or a combination of: (a) a director appointed

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from the workforce; (b) a formal workforce advisory panel; or (c) a designated

non-executive director. Dame Vivienne Cox has been appointed as the Company’s

dedicated non-executive workforce engagement director subject to Admission.

(E) Re-election

The UK Corporate Governance Code recommends that all directors of UK listed

companies should be subject to annual re-election. The Directors therefore intend to

put themselves up for election at the Company’s next annual general meeting

(expected to be held in the second quarter of 2023). It is also intended that the

Directors will continue to put themselves up for annual re-election voluntarily at each

further annual general meeting of the Company. In addition, prior to recommending

their re-election to Haleon Shareholders, the Board intends to carry out an annual

re-assessment of the ongoing independence of each of the non-executive Directors

and to make an appropriate statement disclosing their status in the Company’s annual

report.

3.3 Board committees

The Board has established a number of committees, whose terms of reference are

documented formally and updated as necessary. If the need should arise, the Board may set

up additional committees as appropriate.

(A) Audit & Risk Committee

The Audit & Risk Committee will be chaired by Deirdre Mahlan and its other members

will be Manvinder Singh (Vindi) Banga, Tracy Clarke and Dame Vivienne Cox. The

Audit & Risk Committee will meet at least four times a year, and otherwise as the

Audit & Risk Committee’s role and responsibilities require. The external auditors or a

member of the Audit & Risk Committee may also request a meeting if they consider

that one is necessary.

The Audit & Risk Committee’s terms of reference state that the Audit & Risk Committee

must comprise a minimum of three members all of which must be independent

non-executive directors of the Company. Appointments to the Audit & Risk Committee

will be made by the Board, on recommendation by the Nominations & Governance

Committee. The Chair, from time to time, is not eligible to be a member. At least one

member of the Audit & Risk Committee shall have recent and relevant financial

experience and the committee as a whole will be financially literate and have

competence relevant to the sector in which the Company operates. At least annually

the Board shall consider whether to designate one or more of the Audit & Risk

Committee as “Audit Committee financial experts” in accordance with US federal

securities laws and regulations.

The responsibilities of the Audit & Risk Committee include but are not limited to:

(i) receiving and reviewing reports from the Company’s external auditors, monitoring

their effectiveness and independence and making recommendations to the Board in

respect of their remuneration, appointment and dismissal; (ii) monitoring and reviewing

internal audit activities, reports and findings; (iii) reviewing the financial statements of

the Company; and (iv) reviewing, on behalf of the Board, the effectiveness of the

Group’s system of internal financial controls and internal control systems.

The Chief Financial Officer, General Counsel, Group Financial Controller, Head of

Audit & Assurance, Chief Compliance Officer, and a representative of the external

auditors shall be invited to attend meetings on a regular basis, although the Audit &

Risk Committee may meet without any executives of the Company being present. The

Chair, Chief Executive Officer and others may be invited to attend for all or part of any

meeting, as and when appropriate. The Audit & Risk Committee will also meet

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separately at least once a year with the Group’s external auditors, the Head of Audit &

Assurance and the Chief Compliance Officer without the executive directors and other

management present.

The Audit & Risk Committee will prepare a report describing the work of the Audit & Risk

Committee to be included in the Company’s annual report. Among other matters, the report

will include an explanation of how auditor objectivity and independence is safeguarded

where the external auditor provides non-audit services. The chair of the Audit & Risk

Committee will be available at annual general meetings of the Company to make a

statement on the Audit & Risk Committee’s activities and to respond to questions from

Haleon Shareholders on matters within the Audit & Risk Committee’s area of responsibility.

(B) Remuneration Committee

The Remuneration Committee will be chaired by Tracy Clarke, and its other members

will be Manvinder Singh (Vindi) Banga, Dame Vivienne Cox and Deidre Mahlan. The

Remuneration Committee will meet at least four times a year, and otherwise as the

Remuneration Committee’s role and responsibilities require. A member of the

Remuneration Committee may also request a meeting if they consider that one is

necessary.

The Remuneration Committee’s terms of reference state that the Remuneration

Committee must comprise at least three independent non-executive directors.

Appointments to the Remuneration Committee will be made by the Board, on

recommendation by the Nominations & Governance Committee in consultation with the

chair of the Remuneration Committee.

The chair of the Remuneration Committee is appointed by the Board. In accordance

with the UK Corporate Governance Code, the chair should have served on a

remuneration committee for at least 12 months. On Admission, Tracy Clarke will satisfy

this provision of the UK Corporate Governance Code, having served as Chair of the

Remuneration Committees of Sky plc and Eaga plc and as a member of the

Remuneration Committee of Inmarsat plc.

The responsibilities of the Remuneration Committee include but are not limited to

determining the policy for Directors’ remuneration and within this setting remuneration

packages for the Chair, executive directors, senior management and the company

secretary and such other executives as required, in accordance with the UK Corporate

Governance Code.

Only members of the Remuneration Committee have the right to attend Remuneration

Committee meetings. The Chair, the Chief Executive Officer, the Chief HR Officer,

Head of Reward, external advisors and others, as appropriate, may attend meetings at

the invitation of the Committee, except when issues regarding their own remuneration

are discussed.

The Remuneration Committee will also prepare a report describing the activities of the

Remuneration Committee to be included in the Company’s annual report. The chair of

the Remuneration Committee will be available at annual general meetings of the

Company to respond to questions from Haleon Shareholders on the Remuneration

Committee’s activities.

The Nominations & Governance Committee will be chaired by Dave Lewis, and its other

members will be Manvinder Singh (Vindi) Banga, Tracy Clarke and Deidre Mahlan. The

Nominations & Governance Committee will meet at least two times a year, and otherwise

as the Nominations & Governance Committee’s role and responsibilities require.

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The Nominations & Governance Committee’s terms of reference state that the

Nominations & Governance Committee must comprise at least three members, the

majority of whom must be independent non-executive directors. The Chair is appointed

by the Board and should be either the Chair of the Board or a member of the

Nominations & Governance Committee. The Chair of the Board may not chair the

Nominations & Governance Committee when it is dealing with the appointment of his

or her successor or performance. Appointments to the Nominations & Governance

Committee will be made by the Board.

The responsibilities of the Nominations & Governance Committee include but are not

limited to: (i) reviewing the structure, size and composition, including the skills,

knowledge, experience and diversity (including of gender, social and ethnic

backgrounds and cognitive and personal strengths) of the Board and its Committees

and making recommendations to the Board with regard to any changes; (ii) identifying

and nominating for approval candidates to fill any vacancies on the Board and its

Committees; and (iii) ensuring plans are in place for orderly succession of the Board

and its Committees.

The Nominations & Governance Committee will also prepare a report describing the work

of the Nominations & Governance Committee to be included in the Company’s annual

report. The chair of the Nominations & Governance Committee will be available at annual

general meetings of the Company to respond to questions from Haleon Shareholders on

matters within the Nominations & Governance Committee’s area of responsibility.

4. CONTROLLING SHAREHOLDER

Pfizer is expected to be the beneficial owner of 32 per cent. of the issued Haleon Shares

immediately following Admission (to the nearest whole Haleon Share).

The Company has entered into a relationship agreement with Pfizer (the “ Pfizer Relationship

Agreement”).

The principal purpose of the Pfizer Relationship Agreement is to regulate the continuing

relationship between the Company and the Pfizer Group after Admission, including ensuring

that the Company is capable at all times of carrying on its business independently from Pfizer

as a controlling shareholder (as defined in Appendix I to the Listing Rules) and any of Pfizer’s

associates (as defined in Appendix I to the Listing Rules). A description of the terms of the

Pfizer Relationship Agreement is given in paragraph 15.10 of Part XII (Additional Information).

5. LOCK-UP ARRANGEMENTS

Pursuant to a lock-up deed entered into on or around the date of this Prospectus between

GSK, Pfizer, the SLPs (together, the “Shareholder Parties”), Citi and Morgan Stanley (the

“Lock-up Deed”), the Haleon Shares are subject to certain lock-up arrangements on

customary terms. In particular, subject to certain exceptions, the Lock-Up Deed prohibits the

offer, sale, lending, pledging or other disposal of Haleon Shares and ADSs in respect of such

Haleon Shares by the Shareholder Parties (and requires each of the Shareholder Parties to

further procure that each member of its corporate group likewise abides by the same

restrictions) for a period commencing on completion of the Share Exchanges and ending on

the day after the earlier of: (i) 10 November 2022; and (ii) the date of the first announcement by

Haleon of a quarterly trading update for a quarterly period ending after 30 June 2022. The

Lock-up Deed provides that the lock-up may be released during such period (which shall apply

pro rata to the Pfizer Group, on the one hand, and the GSK Group (including the SLPs), on the

other hand, in accordance with their relative ownership of Haleon Shares as of the date of the

release) upon the mutual written agreement of Citi and Morgan Stanley.

6. REMUNERATION AND PENSION BENEFITS

Details regarding remuneration of Directors are set out in paragraph 9 of Part XII (Additional

Information).

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PART VI

SELECTED FINANCIAL INFORMATION

The selected consolidated historical financial information relating to the Group set out below has been

extracted, without material adjustment, from Schedule II (Historical Financial Information of

GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited). The selected non-IFRS financial

information and operating information relating to the Group set out below has been calculated 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 Part VII (Operating and Financial

Review).

1. Consolidated income statement

For the years ended 31 December 2021, 31 December 2020 and 31 December 2019.

£m 2021 2020 2019

Revenue 9,545 9,892 8,480

Cost of sales (3,595) (3,982) (3,678)

Gross Profit 5,950 5,910 4,802

Selling, general and administration (4,086) (4,220) (3,596)

Research and development (257) (304) (292)

Other operating income/(expense) 31 212 (17)

Operating profit 1,638 1,598 897

Finance income 17 20 24

Finance expense (19) (27) (35)

Net finance costs (2) (7) (11)

Profit before tax 1,636 1,591 886

Income tax (197) (410) (199)

Profit after tax 1,439 1,181 687

Profit attributable to shareholders 1,390 1,145 655

Profit attributable to non-controlling interests 49 36 32

2. Consolidated balance sheet

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

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3. Consolidated cash flow statement

For the years ended 31 December 2021, 31 December 2020 and 31 December 2019.

£m 2021 2020 2019

Cash flow from operating activities

Profit after tax 1,439 1,181 687

Adjustments reconciling profit after tax to cash generated from

operations 227 780 408

Cash generated from operations 1,666 1,961 1,095

Taxation paid (310) (554) (309)

Net cash inflow from operating activities 1,356 1,407 786

Net cash (outflow)/inflow from investing activities (33) 1,030 291

Net cash (outflow) from financing activities (1,236) (2,437) (925)

Increase in cash and bank overdrafts 87 - 152

Cash and bank overdrafts at the beginning of the year 323 329 191

Exchange adjustments (5) (6) (14)

Increase in cash and bank overdrafts 87 - 152

Cash and cash equivalents at end of year 405 323 329

4. Q1 2022 Interim Financial Information

The unaudited consolidated income statement for the three months ended 31 March 2022 and

31 March 2021 and the unaudited consolidated balance sheet as at 31 March 2022 have been

extracted without material adjustment from the Company’s consolidation schedules (the

“Interim Financial Information”). The Interim Financial Information has been prepared on a

basis consistent with Historical Financial Information set out in Schedule II (Historical Financial

Information of GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited). The Interim

Financial Information as of and for the three months ended 31 March 2022 and 31 March 2021

are neither audited nor reviewed by an accountant. The audited consolidated balance sheet as

at 31 December 2021 has been extracted without material adjustment from the Historical

Financial Information for the period ended 31 December 2021 set out in Schedule II (Historical

Financial Information of GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited). This

Interim Financial Information should be read in conjunction with the Historical Financial

Information included elsewhere in this document.

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4.1 Unaudited consolidated income statement

For the three months ended 31 March 2022 and 31 March 2021.

2022 2021

£m £m

Revenue 2,627 2,306

Cost of sales (1,014) (904)

Gross Profit 1,613 1,402

Selling, general and administration (1,086) (1,009)

Research and development (64) (54)

Other operating income 3 9

Operating profit 466 348

Finance income 7 6

Finance expense (8) (4)

Net finance (costs)/income (1) 2

Profit before tax 465 350

Income tax (108) (101)

Profit after tax for the quarter 357 249

Profit attributable to shareholders 343 233

Profit attributable to non-controlling interests 14 16

Basic earnings per share (pence)

34,300 23,300

Diluted earnings per share (pence)

34,300 23,300

Note

The number of shares in issue above is not representative of the number of shares in issue in the

future. For further detail, please see Note 15 of Schedule II (Historical Financial Information of

GlaxoSmithKline Consumer Healthcare Holdings (No.2) Limited).

133

4.2 Consolidated balance sheet

As at 31 March 2022 and 31 December 2021.

31 March

2022

31 December

2021

£m

(unaudited)

£m

(audited)

Non-current assets

Property, plant and equipment 1,587 1,563

Right of use assets 100 99

Intangible assets 27,692 27,195

Deferred tax assets 314 312

Post-employment benefit assets 11 11

Derivative financial instruments 8 12

Other non-current assets 13 8

Total non-current assets 29,725 29,200

Current assets

Inventories 986 951

Trade and other receivables 2,415 2,207

Loan amounts owing from related parties 11,330 1,508

Cash and cash equivalents and liquid investments 383 414

Derivative financial instruments 18 5

Current tax recoverable 166 166

Total current assets 15,298 5,251

Total assets 45,023 34,451

Current liabilities

Short-term borrowings (80) (79)

Trade and other payables (3,142) (3,002)

Loan amounts owing to related parties (1,461) (825)

Derivative financial instruments (15) (18)

Current tax payable (242) (202)

Short-term provisions (86) (112)

Total current liabilities (5,026) (4,238)

Non-current liabilities

Long-term borrowings (9,363) (87)

Deferred tax liabilities (3,472) (3,357)

Pensions and other post-employment benefits (256) (253)

Derivative financial instruments (21) (1)

Other provisions (30) (27)

Other non-current liabilities (6) (8)

Total non-current liabilities (13,148) (3,733)

Total liabilities (18,174) (7,971)

Net assets 26,849 26,480

Equity

Share capital 11

Other reserves (11,502) (11,632)

Retained earnings 38,211 37,986

Shareholders’ equity 26,710 26,355

Non-controlling interests 139 125

Total equity 26,849 26,480

134

5. Non-IFRS financial measures

5.1 Adjusted Results

The following tables set out a reconciliation between IFRS and Adjusted Results.

Q1 2022 Adjusted Results

£m

IFRS

Result

Net Amortisation

and Impairment

of Intangible

Assets

Restructuring

Costs

Transaction

Related Costs

Separation and

Admission

Costs

Disposal

and others

Adjusted

Results

Revenue 2,627 - - - - - 2,627

Cost of Sales (1,014) 28 1 - - - (985)

Selling, general

and admin (1,086) - 14 - 127 - (945)

Research and

development (64) - (2) - - - (66)

Other operating

income 3 - - - - (3) -

Operating Profit 466 28 13 - 127 (3) 631

Operating Profit

Margin % 17.7% 24.0%

Finance income 7 - - - - - 7

Finance expense (8) - - - - - (8)

Profit before tax 465 28 13 - 127 (3) 630

Income tax (108) 1 (3) - (24) (5) (139)

Tax rate % 23.2% 22.1%

Profit after tax for

the quarter 357 29 10 - 103 (8) 491

135

Q1 2021 Adjusted Results

£m

IFRS

Result

Net Amortisation

and Impairment

of Intangible

Assets

Restructuring

Costs

Transaction

Related Costs

Separation and

Admission

Costs

Disposal

and others

Adjusted

Results

Revenue 2,306 - - - - - 2,306

Cost of Sales (904) 11 14 - - - (879)

Selling, general

and admin (1,009) - 32 - 34 50 (893)

Research and

development (54) - 2 - - - (52)

Other operating

income 9 - - - - (9) -

Operating Profit 348 11 48 - 34 41 482

Operating Profit

Margin % 15.1% 20.9%

Finance income 6 - - - - - 6

Finance expense (4) - - - - - (4)

Profit before tax 350 11 48 - 34 41 484

Income tax (101) (2) (10) (7) - (120)

Tax rate % 29% 25%

Profit after tax for

the quarter 249 9 38 - 27 41 364

136

2021 Adjusted Results

£m

IFRS

Result

Net Amortisation

and Impairment

of Intangible

Asset

Restructuring

Costs

Transaction

Related Costs

Separation and

Admission

Costs

Disposals

and others

Adjusted

Results

Revenue 9,545 - - - - - 9,545

Cost of Sales (3,595) 8 44 - - - (3,543)

Gross Profit 5,950 8 44 - - - 6,002

Gross Profit

Margin % 62.3% 62.9%

Selling, general

and admin (4,086) - 150 - 278 76 (3,582)

Research and

development (257) 8 1 - - - (248)

Other operating

income 31 - - - - (31) -

Operating

Profit 1,638 16 195 - 278 45 2,172

Operating Profit

Margin % 17.2% 22.8%

Finance income 17 - - - - - 17

Finance

expense (19) - - - - - (19)

Profit before

tax 1,636 16 195 - 278 45 2,170

Income tax (197) 8 (36) - (47) (197) (469)

Tax rate % 12.0% 21.6%

Profit after tax 1,439 24 159 - 231 (152) 1,701

Profit for the

year attributable

to:

Shareholders of

the Group 1,390 24 159 - 231 (152) 1,652

Non-controlling

interests 49 - - - - - 49

Basic earnings

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

Weighted

average number

of shares

(Basic) 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

137

2020 Adjusted Results

£m

IFRS

Result

Net Amortisation

and Impairment

of Intangible

Asset

Restructuring

Costs

Transaction

Related Costs

Separation and

Admission

Costs

Disposals

and others

Adjusted

Results

Revenue 9,892 - - - - - 9,892

Cost of Sales (3,982) 81 89 91 - 2 (3,719)

Gross Profit 5,910 81 89 91 - 2 6,173

Gross Profit

Margin % 59.7% 62.4%

Selling, general

and admin (4,220) - 314 - 66 21 (3,819)

Research and

development (304) 16 8 - - - (280)

Other operating

income 212 - - - - (212) -

Operating

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

Operating Profit

Margin % 16.2% 21.0%

Finance income 20 - - - - - 20

Finance

expense (27) - - - - - (27)

Profit before

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

Income tax (410) (19) (90) (20) (13) 69 (483)

Tax rate % 25.8% 23.4%

Profit after tax 1,181 78 321 71 53 (120) 1,584

Profit for the

year attributable

to:

Shareholders of

the Group 1,145 78 319 71 53 (120) 1,546

Non-controlling

interests 36 - 2 - - - 38

Basic earnings

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

Weighted

average number

of shares (Basic) 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

138

2019 Adjusted Results

£m

IFRS

Result

Net Amortisation

and Impairment

of Intangible

Assets

Restructuring

Costs

Transaction

Related Costs

Separation and

Admission

Costs

Disposals

and others

Adjusted

Results

Revenue 8,480 - - - - - 8,480

Cost of Sales (3,678) 36 69 366 - - (3,207)

Gross Profit 4,802 36 69 366 - - 5,273

Gross Profit

Margin % 56.6% 62.2%

Selling, general

and admin (3,596) - 236 - - 8 (3,352)

Research and

development (292) - 25 - - - (267)

Other operating

expense (17) - - - - 17 -

Operating

Profit 897 36 330 366 - 25 1,654

Operating Profit

Margin % 10.6% 19.5%

Finance income 24 - - - - - 24

Finance

expense (35) - - - - - (35)

Profit before

tax 886 36 330 366 - 25 1,643

Income tax (199) (5) (59) (81) - (21) (365)

Tax rate % 22.5% 22.2%

Profit after tax 687 31 271 285 - 4 1,278

Profit for the

year attributable

to:

Shareholders of

the Group 655 31 271 285 - 4 1,246

Non-controlling

interests 32 - - - - - 32

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

139

5.2 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.

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 from time to time

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, 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 the Demerger, Separation, Admission, and

registration of Haleon Shares represented by Haleon ADSs and of Haleon ADSs under the US

Exchange Act and listing of Haleon ADSs on the NYSE. 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.

140

5.3 Organic revenue growth

The following tables reconcile reported revenue growth for the three months ended 31 March 2022

and 31 March 2021 to organic revenue growth for the same period by geographical segment and

by product category.

Geographic Segments

£m APAC EMEA/LatAm N America Total

Q1 2022 vs Q1 2021 (%)

Revenue Growth 15.8% 8.0% 20.1% 13.9%

Organic Adjustments

0.2% 2.0% 0.8% 1.2%

of which:

Effect of Acquisitions - - - -

Effect of Divestments - 1.1% 0.5% 0.6%

Effect of MSAs 0.2% 0.9% 0.3% 0.6%

Effect of Exchange Rates (0.8)% 4.5% (3.6)% 0.5%

Organic Revenue Growth 15.2% 14.5% 17.3% 15.6%

Product Categories

£m

Oral

Health VMS

Pain

Relief

Respiratory

Health

Digestive

Health and

Other Total

Q1 2022 vs Q1 2021 (%)

Revenue Growth 5.7% 16.4% 18.0% 51.0% 0.6% 13.9%

Organic Adjustments

- 0.1% 0.3% - 4.8% 1.2%

of which:

Effect of Acquisitions - - - - - -

Effect of Divestments - - 0.3% - 2.5% 0.6%

Effect of MSAs - 0.1% - - 2.3% 0.6%

Effect of Exchange Rates 2.2% (1.6)% 0.6% 1.9% (1.1)% 0.5%

Organic Revenue Growth 7.9% 14.9% 18.9% 52.9% 4.3% 15.6%

Note

1. As defined in paragraph 6.4 of Presentation of Financial and Other Information.

141

The following tables reconcile reported revenue growth 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

2021 vs 2020 (%)

Revenue Growth 4.3% (4.5%) (6.7%) (3.5%)

Organic Adjustments

2.0% 3.4% 2.4% 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%

2020 vs 2019 (%)

Revenue Growth 20.7% 4.1% 31.2% 16.7%

Organic Adjustments

(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%

Note

1. As defined in paragraph 6.4 of Presentation of Financial and Other Information.

142

Product Categories

£m

Oral

Health VMS

Pain

Relief

Respiratory

Health

Digestive

Health

and

Other Total

2021 vs 2020 (%)

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

Organic Adjustments

- 0.3% 0.3% 6.4% 7.6% 2.7%

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 Growth 4.4% 4.2% 6.5% (1.8%) 3.1% 3.8%

2020 vs 2019 (%)

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

Organic Adjustments

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

Notes

1. As defined in paragraph 6.4 of Presentation of Financial and Other Information.

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

paragraphs 2.1, 2.14 and 6.1 of Part VII (Operating and Financial Review)).

143

5.4 Adjusted EBITDA

The reconciliation between profit after tax and Adjusted EBITDA for the years ended

31 December 2021, 31 December 2020 and 31 December 2019 is provided below.

£m 2021 2020 2019

Profit after tax 1,439 1,181 687

Add Back: Income Tax 197 410 199

Less: Finance Income (17) (20) (24)

Add Back: Finance Expense 19 27 35

Operating Profit 1,638 1,598 897

Net Amortisation and Impairment of Intangible Assets 16 97 36

Restructuring Costs 195 411 330

Transaction Related Costs - 91 366

Separation and Admission Costs 278 66 -

Disposals and Others 45 (189) 25

Adjusted Operating Profit 2,172 2,074 1,654

Add Back: Depreciation of property, plant and equipment 139 167 167

Add Back: Depreciation of right-of-use assets 35 48 31

Add Back: Amortisation – of software intangible assets 54 40 35

Add Back: Impairment of property, plant and equipment rights of use

assets and computer software net of impairment reversals 13 22 (3)

Adjusted EBITDA 2,413 2,351 1,884

5.5 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 is provided below.

£m 2021 2020 2019

Net cash inflow from operating activities 1,356 1,407 786

Purchase of property, plant and equipment (228) (222) (190)

Proceeds from sale of property, plant, and equipment 12 6 51

Purchase of intangible assets (70) (96) (53)

Proceeds from sale of intangible assets 137 924 120

Distributions to non-controlling interests (35) (31) (28)

Interest paid (15) (19) (29)

Interest received 16 19 24

Free cash flow 1,173 1,988 681

5.6 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 is provided below.

£m 2021 2020 2019

Free cash flow 1,173 1,988 681

Profit after tax 1,439 1,181 687

Free cash flow conversion 82% 168% 99%

144

5.7 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 is provided below.

£m 2021 2020 2019

Short-term borrowings (79) (82) (64)

Long-term borrowings (87) (105) (121)

Derivative financial liabilities (19) (25) (2)

Cash and cash equivalents and liquid investments 414 334 340

Derivative financial assets 17 6 12

Net debt

246 128 165

Note

1. The sum of the Group’s cash and cash equivalents and liquid investments and derivative

financial assets were greater than the sum of its short-term borrowings, long-term borrowings

and derivative financial liabilities in the period 2019-2021 (a net cash position). ‘Net debt’ is

defined differently to ‘indebtedness’ referenced in Part VII – Operating and Financial Review.

6. Other selected financial and operating information

6.1 Regional performance

The tables below set out the Group’s regional revenue and operating profit 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

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%

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 items

(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 of Schedule II (Historical Financial Information of GlaxoSmithKline

Consumer Healthcare Holdings (No.2) Limited).

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

145

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 paragraphs 2.1, 2.14 and 6.1 of Part VII (Operating and Financial Review)).

3. Reconciling items for these purposes are the Adjusting Items, which are defined at paragraph

5.2 of this Part VI (Selected Financial Information) above. A reconciliation between IFRS and

Adjusted Results is included at paragraph 5.1 of this Part VI (Selected Financial Information)

above.

6.2 Revenue by product category

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%

146

PART VII

OPERATING AND FINANCIAL REVIEW

This Part VII (Operating and Financial Review) should be read in conjunction with the section entitled

“Presentation of Financial and Other Information”, as well as Part II (Market Overview), Part III

(Business Overview) and Schedule II (Historical Financial Information of GlaxoSmithKline Consumer

Healthcare Holdings (No.2) Limited), including accompanying notes. Unless otherwise indicated, the

financial information contained in this Part VII (Operating and Financial Review) is extracted from the

financial information set out in the Historical Financial Information.

The following discussion of the Group’s results of operations and financial condition contains certain

forward-looking statements. The Group’s actual results could differ materially from those discussed in

these forward-looking statements. Factors that could cause or contribute to such differences include

those discussed elsewhere in this Prospectus, particularly in the section entitled “Risk Factors”. The

Group does not undertake any obligation to revise or publicly release the results of any revision to

these forward-looking statements.

1. 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’s international presence is organised into three geographic regions, which are the

Group’s reporting segments: North America, EMEA and LatAm and APAC. Each geographic

region consists of a number of countries, clusters of countries and markets.

North America

The North America region consists of the USA, Canada and Puerto Rico. As at 31 March 2022,

approximately 4,600 personnel

were engaged in the Group’s operations in North America.

North America represented 36.9 per cent. of the Group’s revenue for FY 2021. Revenue

attributable to North America fell by 6.7 per cent. at AER and 1.3 per cent. at CER from FY

2020 to FY 2021. Organic revenue growth in North America was 1.3 per cent. for this period,

as compared to 0.7 per cent. for the period FY 2019 to FY 2020.

EMEA and LatAm

The diverse EMEA and LatAm region is divided into seven business units: Northern Europe,

Southern Europe, Central and Eastern Europe (including the Commonwealth of Independent

States), Russia, DACH (Germany, Austria and Switzerland), Middle East and Africa and LatAm

(Brazil, Colombia and Wider LatAm). As at 31 March 2022, approximately 12,300 personnel

were engaged in the Group’s operations in EMEA and LatAm.

EMEA and LatAm accounted for 40.6 per cent. of the Group’s revenue for FY 2021. Revenue

attributable to EMEA and LatAm fell by 4.5 per cent. at AER and remained flat at CER from FY

2020 to FY 2021. Organic revenue growth in EMEA and LatAm was 3.5 per cent. for this

period, as compared to 3.1 per cent. for the period FY 2019 to FY 2020.

Full-time equivalent employees and agency staff (rounded to the nearest 100).

147

APAC

The APAC region covers the Asia Pacific markets and is divided into five business units:

Greater China, Australia and New Zealand, Indian Sub-Continent, North Asia (Japan and

South Korea) and South East Asia and Taiwan. As at 31 March 2022, approximately 5,900

personnel

were engaged in the Group’s operations in APAC.

APAC contributed 22.5 per cent. of the Group’s revenue for FY 2021. Revenue attributable to

APAC grew by 4.3 per cent. at AER and 7.1 per cent. at CER from FY 2020 to FY 2021.

Organic revenue growth in APAC was 9.1 per cent. for this period, as compared to 5.7 per

cent. for the period FY 2019 to FY 2020.

2. Key factors affecting the Group’s results of operations and financial position

The Group’s results of operations and financial condition are affected by a variety of factors, a

number of which are outside the control of the Group. Set out below is a discussion of the most

significant factors that have affected the Group’s financial results during the periods under

review and which the Directors currently expect to affect its financial results in the future.

Factors other than those presented below could also have a significant impact on the Group’s

results of operations and financial condition in the future.

2.1 Impact of macroeconomic factors and market trends on discretionary consumer

spending

The Group’s business is impacted by fluctuations in demand for the Group’s products as a

result of changes in discretionary consumer spending.

Demand for the Group’s products is generally impacted by macroeconomic conditions which

affect disposable income of consumers and discretionary consumer spending. The prevailing

global economic climate, inflation, levels of employment, disposable income, salaries, wage

rates, interest rates, geopolitical and political uncertainty, fiscal policy (particularly on public

healthcare), taxation, consumer confidence, consumer perception of economic conditions and

global pandemics, are all factors that affect the Group’s business. For example, in FY 2020,

the COVID-19 pandemic had a significant impact on the Group’s operations (see paragraph

2.14 of this Part VII (Operating and Financial Review) below). In addition, Russia’s invasion of

Ukraine has had an adverse effect on the global geopolitical and economic environment,

although the broader economic consequences of the invasion are currently difficult to predict

(see paragraph 3 of this Part VII (Operating and Financial Review) below).

Demand is also influenced by evolving consumer tastes and trends in discretionary consumer

spending on consumer healthcare products. Trends evidenced during the periods under review

include an increasing focus on self-management of health and wellbeing, an ageing population,

an increasing demand for natural products (consumer healthcare products that are

non-medicated, ‘free from’ particular ingredients, or that include plant-based, herbal or other

naturally occurring ingredients), premiumisation (where consumers switch their purchases to

premium alternatives) and the countervailing trend toward “private-label” products (brands sold

exclusively by a particular retailer, which are typically sold at lower prices than branded

products), sustainability, and the convergence of digital and healthcare.

The Group benefits from the increasing consumer focus on health and wellbeing, with the most

pronounced impact in the Pain Relief and VMS categories. Further, increased demand for

Full-time equivalent employees and agency staff (rounded to the nearest 100).

148

preventative and therapeutic products associated with an ageing population has a positive

impact on the Group’s Pain Relief and Oral Health categories. In the periods under review, the

Group’s results were impacted by premiumisation trends. For example, in FY 2020, this trend

adversely impacted sales of Aquafresh, the Group’s everyday toothpaste brand, whereas

Sensodyne, as a premium brand, benefited from the trend. Revenue in FY 2020 and FY 2021

was also affected by a number of “private-label” product launches; for example, such launches

resulted in reduced demand in the USA for Abreva in FY 2020 and Voltaren in FY 2021.

The success of the Group depends on its ability to navigate and respond to changes in

discretionary consumer spending. In turn, this ability is contingent on a number of factors,

including competitive and market dynamics, brand strength, product offering, innovation and

pricing (see paragraphs 2.2, 2.3, and 2.4 of this Part VII (Operating and Financial Review)

below and paragraph 1.2 of Risk Factors).

2.2 Competition in the consumer healthcare market

The Group’s operating and financial performance is affected by competition in the geographic

regions and product categories in which it operates. The Group faces competition from

companies that produce and sell competing products in an industry that is experiencing

consolidation. Consumer preference for branded, generic or private label products sold by

competitors adversely impacts the Group’s financial performance.

The Group’s competitors, which differ within individual geographic markets, include large-scale

retailers, smaller high-growth companies (which often operate on a regional basis and offer

aggressive competition), multinational corporations moving into or expanding their presence in

the consumer healthcare market, and “private-label” products sold by retailers (principally in

the US market) (see paragraph 1.4 of Risk Factors). While the convergence of digital

commerce and health aids the prospects for consumer healthcare market size growth, the

Group faces considerable competition from e-commerce retailers and large-scale retailers with

expansive digital operations.

Competitive factors impacting the Group’s business include market dynamics and evolving

consumer preferences, brand image, a diversified product portfolio, new product innovations

and product development, pricing that is attractive to consumers, and cost inputs (see

paragraphs 2.1, 2.3, 2.4 and 2.10 of this Part VII (Operating and Financial Review)). Other

competitive factors include supply chain (procurement, manufacturing and distribution) (see

paragraph 2.7 of this Part VII (Operating and Financial Review) below), the management of

sales and marketing activities, and access to cash for investment in the Group’s business (see

paragraph 2.11 of this Part VII (Operating and Financial Review) below).

2.3 Brand and product portfolio

The Group’s success is driven, to a large extent, by the strength of its brands and its ability to

leverage its diversified portfolio to drive increased sales, profits and cash generation. The

Group invests in R&D and marketing activities in order to maintain the long-term health of its

brands and products and grow value, with investment allocation varying year-to-year across

the portfolio.

The Group’s product portfolio is split among five categories: Oral Health, Pain Relief, VMS,

Respiratory Health and Digestive Health and Other. The Group’s largest category by revenue

is Oral Health, which accounted for 28.5 per cent. of the Group’s revenue in FY 2021. The Pain

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Relief and Digestive Health and Other categories also significantly contribute to revenue,

respectively contributing 23.4 per cent. and 20.4 per cent. of revenue in FY 2021. VMS and

Respiratory Health respectively accounted for 15.7 per cent. and 11.9 per cent. of revenue in

FY 2021. Operating profit margin also varies across the Group’s portfolio.

The Group’s sales volumes and profits depends in part on the Group’s ability to identify and

offer products at prices that appeal to changing consumer needs and preferences. Through net

revenue management, the Group analyses pricing, discounting and promotional initiatives

across the regions in which it operates in order to optimise sales volumes and revenue and

support revenue growth and margin expansion. Pricing and discounting of the Group’s

products is influenced by a number of factors, including competitive and market dynamics

(including competitive pricing behaviours), brand recognition and brand loyalty, innovation and

marketing activities, supply chain (procurement, manufacturing and distribution), regulation and

other cost inputs (see paragraphs 2.1, 2.2, 2.3, 2.4, 2.7, 2.10 and 2.16 of this Part VII

(Operating and Financial Review)). Price increases contribute to revenue growth and cash

generation and support operating profit margin. Conversely, discounting dilutes operating profit

margin and impacts revenue growth and cash generation. During the periods under review, a

number of price increases and discounting initiatives affected the Group’s financial

performance.

The Group’s Power Brands benefit from strong brand recognition and loyalty among

consumers. While maintaining this recognition and loyalty requires greater investment in

advertising and promotion relative to the rest of the portfolio, the Power Brands have higher

gross margins. The Power Brands also typically account for the majority of the Group’s

revenue and have the highest growth. Accordingly, the Power Brands contribute significantly to

revenue growth. The Group’s local strategic brands also benefit from strong brand recognition

and loyalty among consumers. As a result, the profitability of local strategic brands is typically

comparable to the profitability of the Power Brands, and a number of the local strategic brands

in particular contribute significantly to revenue across the regions (for example, Tums,

Emergen-C, Flonase and Excedrin in the US, Caltrate and Fenbid in China and Dr. Best in

Germany). Investment in and growth rates of local strategic brands vary. Other brands in the

Group’s portfolio typically have lower levels of investment and have lower gross margins, but

these brands support overall profitability and consolidate the Group’s competitive position in

the geographic regions and categories in which it operates. The Group’s results may fluctuate

from year to year depending on the proportion of sales volume represented by higher-margin

brands.

The Group relies on its ability to leverage brand recognition and consumer loyalty in

responding to changing consumer trends and unmet consumer needs. Further, the success of

new product launches depends in part on the strength of the Group’s existing brands. In the

periods under review, a number of products were launched under the Group’s Power Brands

and local strategic brands (see paragraph 4 of Part III (Business Overview)). These launches

contributed significantly to growth in FY 2020 and FY 2021.

Competitive pressures from companies that produce and sell competing branded, generic and

“private-label” products affect consumer preference for the Group’s brands and products, which

in turn impacts the Group’s operating and financial performance (see paragraphs 2.1 and 2.2

of this Part VII (Operating and Financial Review) above).

The Group’s performance is also influenced by consumer perception of its brands and

products. In FY 2020, negative media coverage impacted consumer perception of the efficacy

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of ibuprofen products in treating the symptoms of COVID-19, which adversely impacted sales

of Advil (an ibuprofen-based product) in FY 2020. The impact of this on the Group’s overall

performance during this period was more than mitigated by growth in Panadol (a paracetamol-

based product), illustrating that the Group’s diversified and balanced portfolio of products can

provide a certain level of protection against negative consumer trends and adverse

macroeconomic factors. However, the Group’s reliance on the strength of its brands to drive

revenue, operating profit margin and cash generation makes it vulnerable to reputational

damage and changes in consumer perception.

The Group actively manages its portfolio. In the periods under review, the brands acquired as

part of the Pfizer Transaction made an important contribution to the Group’s geographic

presence, revenue and operating profit margin (see paragraph 2.12 of this Part VII (Operating

and Financial Review) below). Alongside the acquisition of the Pfizer brands, the Group

continued to optimise and rationalise its portfolio by divesting a number of lower-growth brands

with limited synergies with the rest of the portfolio (see paragraph 2.13 of this Part VII

(Operating and Financial Review) below). The Group will continue to assess further brand

acquisitions and disposals in the context of its strategy and capital allocation priorities (see

paragraph 2 of Part III (Business Overview)).

2.4 Innovation

The development and introduction of new products to the Group’s portfolio contributes to

revenue growth and cash generation and supports operating profit margins. Product

development also supports portfolio diversification, which helps to minimise the effect of

negative consumer trends and adverse market cycles (see paragraph 2.3 of this Part VII

(Operating and Financial Review) above). The Group typically incurs incremental R&D costs in

the period prior to the launch of a new product, with advertising and promotion costs generally

incurred in connection with the launch and in subsequent periods. Investment in advertising

and promotion impacts visibility of the product in the market, which in turn influences the

success of a new product. Revenue growth attributable to a newly launched product is typically

higher in the period immediately following launch, reflecting peak consumer interest, following

which sales of the product begin to stabilise and the impact of market factors (such as

competition from competitors) on revenue becomes more pronounced.

Throughout the periods under review, the Group continued to develop and diversify its product

portfolio. As a consequence, the Group benefited from a number of product launches,

particularly in relation to the Power Brands and local strategic brands. For example, in APAC,

Caltrate revenue growth in the periods under review was partly driven by new product

development and launches, such as the launch of a range of Caltrate calcium supplements

with gender specific positioning.

The switch of prescription products to OTC status (see paragraph 8 of Part III (Business

Overview)) forms part of the Group’s innovation strategy. The process for such switches is

highly regulated and requires significant organisational resource and expenditure over a

number of years. This includes expenditure to support clinical studies, label comprehension (in

order to ensure that consumers understand the product and any side effects) and consumer

studies.

Following approval by the regulator, the Group typically incurs advertising and promotion costs

in connection with the launch of an Rx-to-OTC switch product and in subsequent periods. Any

failure to develop and commercialise new products in a timely fashion may decrease revenue

and/or increase R&D costs (see paragraph 1.5 of Risk Factors). The Group may face

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competition from similar “private-label” products following launch of an Rx-to-OTC switch

product, which may negatively impact revenue growth attributable to the product. Typically, the

launch of similar “private-label” products following an Rx-to-OTC switch results in a steep

short-term reduction in the revenue growth attributable to the product followed by a return to

growth albeit not at the same level as prior to the private label launch.

In FY 2020 the Group successfully completed the Rx-to-OTC switch of Voltaren in the USA,

which was a key driver for growth in North America that year. In FY 2021, Voltaren revenue

was adversely impacted by reduced demand in the USA resulting from increased competition

from “private-label” products and the stabilisation of revenue streams following launch. The

FDA approval in 2020 (and the subsequent launch in H2 2020) of Advil Dual Action as an OTC

product contributed to revenue growth in the second half of FY 2020. The Group increased

marketing investments in order to support these launches.

2.5 Expansion of e-commerce and digital capabilities

Growing the Group’s e-commerce sales has been and will continue to be a key focus for the

Group. Revenue from e-commerce has grown from approximately 4 per cent. of total revenue

in FY 2019 to around 8 per cent. of total revenue in FY 2021. The majority of the Group’s

e-commerce sales are generated on third party platforms (e.g. Amazon, Alibaba), as opposed

to platforms hosted by the Group.

During the periods under review, the Group also increased its investment in digital media and

digital capabilities across the business, including in relation to advertising and promotion, R&D

and supply chain. For example, in the context of advertising and promotion, digital media

advertising accounted for approximately half of the Group’s total media spend in FY 2021. The

Group also invested in a range of digital tools and training programmes in order to enhance its

digital capability and support growth of the business in an increasingly digital world.

2.6 Geographic market presence

The Group has a strong global footprint and is focused on growth across the markets in which

it already operates. The Group serves approximately 170 markets, with 36.9 per cent. of the

Group’s revenue in FY 2021 generated in North America, 40.6 per cent. in EMEA and LatAm,

and 22.5 per cent. in APAC. Adjusted operating profit margin across the geographic regions

varies. In FY 2021, Adjusted operating profit margin was 23.5 per cent., 24.8 per cent., and

21.5 per cent. in North America, EMEA and LatAm and APAC, respectively. This variation is

ultimately driven by a number of factors, including sales volume of higher margin brands,

supply chain (procurement, manufacturing and distribution) and competitive dynamics, together

with required investment in R&D and marketing activities and other cost inputs.

North America

The North America region accounted for 36.9 per cent. (£3,525 million) of Group revenue in FY

2021. The region includes the Group’s largest single market, the USA, which accounted for

89.0 per cent. (£3,138 million) of revenue in North America and 32.9 per cent. of Group

revenue in FY 2021.

During the periods under review, the majority of the Group’s revenue in North America was

attributable to the Oral Health, Pain Relief and Digestive Health and Other categories. The

strength of brands such as Sensodyne, Tums and Flonase was a key driver of growth during

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these periods. The Pfizer Transaction provided the Group with meaningful incremental scale in

North America, and brands acquired as part of the Pfizer Transaction (including Centrum and

Emergen-C) have also contributed significantly to Group revenue since it completed.

EMEA and LatAm

The EMEA and LatAm region was the largest contributor to Group revenue in FY 2021,

accounting for 40.6 per cent. (£3,877 million) of Group revenue. The region is equally split

between emerging and developed markets

with emerging markets making up four of the

seven business units (Central and Eastern Europe, Russia, Middle East and Africa and

LatAm).

During the periods under review, the majority of the Group’s revenue in EMEA and LatAm was

attributable to the Oral Health and Pain Relief categories. The strength of brands such as

Sensodyne, parodontax, Panadol and Voltaren was a key driver of growth during these

periods.

APAC

The APAC region accounted for 22.5 per cent. (£2,143 million) of the Group’s revenue in FY

2021. China is the largest market in APAC, accounting for 37.4 per cent. (£801 million) of

revenue in APAC and 8.4 per cent. of Group revenue in FY 2021.

During the periods under review, the majority of the Group’s revenue in APAC was attributable

to the Oral Health, VMS and Pain Relief categories. The strength of brands such as

Sensodyne, Panadol and Voltaren, as well as brands acquired as part of the Pfizer

Transaction, such as Centrum and Caltrate, was a key driver of revenue during these periods.

2.7 Supply chain

The Group relies on global supply chains and manufacturing and distribution operations which

are complex and subject to increasing regulatory requirements. The Group is exposed to a

number of factors that affect the sourcing, manufacturing, supply and pricing of the Group’s

products on a short-term basis, including macroeconomic events. In particular, the Group has

experienced and may continue to experience delays in deliveries due to supply chain

interruptions caused by the COVID-19 pandemic. For example, recent lockdowns in China

have had an impact on delivery of the Group’s products and resources required for the

manufacture of the Group’s products to and from China. Further, the Group has been exposed

to increases in commodity and oil prices following Russia’s invasion of Ukraine (see also

paragraph 3 below). 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. The Group may also be limited in its ability to pass on these price increases in the prices

it charges for its products. Competitive factors relating to the distribution of the Group’s

products also influence the Group’s performance. See also paragraph 1.3 of Risk Factors.

The Group prioritises reliability of supply to ensure its customers and consumers receive the

Group’s products. The Group is exposed to factors that may affect its ability to provide this

reliable supply from time to time. These factors include interruptions in supply from the Group’s

Classification of developed and emerging markets sourced from The International Monetary Fund DataMapper 2022.

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own facilities or from third party facilities. Examples include issues at certain of the Group’s

own facilities affecting Advil supply in FY 2019 and FY 2021, Excedrin supply in FY 2019 and

FY 2020 and Preparation H supply in FY 2021.

The Group also manages its supply chain with a focus on supply continuity. For example,

where feasible, the Group aims to manage packaging and raw material sourcing risks through

dual sourcing (where key inputs are sourced from more than one location in order to limit the

risk of supply chain disruption). As of 31 December 2021, 75-80 per cent. of the Group’s

materials supply by spend was sourced from more than one supplier and it expects this to

increase to 85-90 per cent. by the end of 2023. The Group also runs capacity planning

processes in order to proactively identify pressures on supply chain capacity and conducts

assessments in order to assist management in determining the appropriate levels of

investment in facilities and equipment.

The Group has manufacturing sites located around the world. However, where possible, the

Group seeks to bring the manufacturing of its products within the region of sale. As a result,

more than 80 per cent. of the Group’s products are sourced in the region in which they are

sold. Not only does this enable the Group to respond more efficiently to the needs of

consumers, but it also forms part of the Group’s natural hedging strategy (see paragraph 2.15

of this Part VII (Operating and Financial Review)).

2.8 Inflationary pressures and commodity prices

The Group is exposed to inflationary pressures and commodity prices, which generally affect

the Group through their impact on payroll and supply costs (including freight). For example,

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. While

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. Where possible, the Group aims to manage its exposure to this

risk primarily through forward buying of commodities.

2.9 Seasonality

Revenue and cash flow in Respiratory Health is typically driven by seasonal demand for certain

of the Group’s products, including its cough, cold and flu, allergy and decongestant products.

The impact of seasonality on revenue in the Respiratory Health category is largely the same

across the Group’s geographic regions. However, as Respiratory Health revenue accounts for

a larger percentage of total revenue in North America and EMEA and LatAm, the impact of

seasonality is greater in these regions than in APAC. For example, FY 2021 Respiratory Health

revenue accounted for 11.9 per cent. and 14.2 per cent. of total revenue in North America and

EMEA and LatAm, respectively, and 7.6 per cent. of total revenue in APAC.

Sales in countries in the Northern Hemisphere typically peak from September through to

March, driven mainly by consumers purchasing products to self-medicate against cold and flu

symptoms. Most of the seasonality impact is experienced in the Northern Hemisphere, where

the Group’s operations are concentrated. Because of the timing of these seasonal peaks, the

Group’s first and fourth quarter results tend to show significantly more revenue in the

Respiratory Health category compared to its second and third quarter results, although this

trend was less pronounced in FY 2021, when 53.2 per cent. of the Group’s sales in Respiratory

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Health occurred in the first and fourth quarters. It follows that the Group’s results for the first

and fourth quarters of each year may not necessarily be indicative of the results that may be

expected for a full financial year.

The Group incurs significant additional expenses in advance of and during September through

to Q1 of the following financial year in anticipation of higher sales during that period, including

costs of additional inventory and marketing. Further, the Group’s cash flow is affected by this

seasonality, with the Group experiencing lower cash flow during the second and third quarters

of the financial year due to increases in seasonal inventory and lower sales during this period,

in preparation for increased sales during the fourth quarter of the financial year and the first

quarter of the following financial year.

Although the Group’s SG&A and R&D costs, including personnel costs and administrative

costs, are more evenly distributed during the financial year, these costs are exposed to some

variations. Cash flows in these areas also experience some variation. For example, employee

bonus payments are accrued throughout the year but settled in March.

The seasonality effect of cold and flu season was impacted by the COVID-19 pandemic. This

had a material adverse effect on revenue in the Respiratory Health category in the period

1 August 2020 to and including the first half of FY 2021, reflecting the historically weak cold

and flu season driven by government restrictions in response to the COVID-19 pandemic (see

paragraph 2.14 of this Part VII (Operating and Financial Review) below). However, revenue in

Respiratory Health recovered during the second half of FY 2021, with Respiratory Health

revenue returning to levels broadly consistent with the corresponding period in FY 2019

towards the end of the year.

During the period FY 2019 to FY 2020, the seasonality impact was more pronounced on an

organic revenue growth basis. This is because organic revenue for the period FY 2019 to FY

2020 excludes revenue attributable to brands acquired as part of the Pfizer Transaction (such

as Robitussin) in respect of the period 1 January 2020 to 31 July 2020, which significantly

contributed to Group revenue in the period. Organic revenue for the period FY 2019 to FY

2020 includes revenue attributable to brands acquired as part of the Pfizer Transaction in

respect of the period 1 August 2020 to 31 December 2020; however, this period was

significantly affected by the impact of the COVID-19 pandemic, including in relation to the

seasonality effect of cold and flu season (as described above).

The Group is also impacted by the allergy season, the severity of which varies from year to

year across the geographic regions in which the Group operates depending on a number of

factors, including the weather and the intensity, timing and length of pollen season. A stronger

allergy season tends to result in higher revenue attributable to the Group’s Topical

Decongestant and Allergy Care products. For example, a stronger allergy season in Q2 2021

relative to the prior year comparator was a key driver for revenue growth in Flonase.

2.10 Commercial execution and financial discipline

The Group’s cost inputs are influenced by a number of factors, including competitive and

market dynamics, commercial capabilities, innovation and marketing activities, supply chain

(including procurement, manufacturing and distribution), acquisitions and divestments, and

seasonality. As an innovation-led business, R&D activities account for a significant proportion

of the Group’s costs. Further, the continued strength of the Group’s brands is contingent on a

competitive level of expenditure on advertising and promotion.

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The Group seeks to drive the disciplined and efficient use of resources in order to provide

funding for brand growth and innovation, while delivering sustainable margin expansion and

cash generation (see paragraph 2.11 of this Part VII (Operating and Financial Review) below).

Following the transactions with Novartis and Pfizer (see paragraphs 2.2 and 2.3 of Part I (Key

Highlights and Development of the Group )), the Group has continued to implement a number

of initiatives to drive sustainable manufacturing and supply chain efficiency improvements

including:

• Streamlining of the Group’s manufacturing and supply footprint from 41 manufacturing

sites (inherited by the Group through arrangements as part of the GSK Group and the

transactions with Novartis and Pfizer) to 24 in 2021.

• Reducing the number of contract manufacturing partners from more than 250 (inherited by

the Group through arrangements as part of the GSK Group and the transactions with

Novartis and Pfizer) to approximately 180 in 2022.

• Streamlining and refreshing of the Group’s distribution centre footprint from more than 200

in 2015 (inherited by the Group through arrangements as part of the GSK Group and the

transactions with Novartis and Pfizer) to approximately 90 in 2021.

• Implementing ongoing initiatives to drive value from third-party expenditure and offset

headwinds from inflation in input prices and commodities, including forward buying, value

engineering and new supplier introduction, as well as initiatives to ensure continuity of

supply from the Group’s third party partners through programmes such as the approval of

alternate suppliers for critical materials.

• Implementing ongoing initiatives to drive site productivity and/or security of supply,

including dual sourcing and localisation of Power Brands such as Voltaren, Sensodyne and

Centrum.

The Group has also sought to drive effective and efficient use of resources in the research,

development, advertising and promotion of its brands, as well as the administration of the

Group’s operations, through initiatives including:

• Cost synergies generated by the Pfizer Transaction (see paragraph 2.12 of this Part VII

(Operating and Financial Review) below).

• De-duplication of R&D functions, localisation of R&D roles and projects and rationalisation

of the Group’s R&D footprint from 9 sites in 2015 (inherited by the Group through

arrangements as part of the GSK Group and the transactions with Novartis and Pfizer) to 4

sites in 2021.

• Rationalisation of creative production and media agencies from greater than 200 in 2019 to

an expected total of 56 by the end of 2022.

• Optimisation of e-commerce strength through increased investment in digital media (see

paragraph 2.5 of this Part VII (Operating and Financial Review)), as well as strengthening

execution in other channels, such as retail and pharmacy. For example, in the pharmacy

channel, where engagement with pharmacy and healthcare professionals is a core tenet of

the Group’s strategy, the Group has expanded its digital capabilities in order to support

these relationships and expand reach (e.g. the proprietary Healthpartner portal and

webinars).

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• Ongoing non-manufacturing procurement initiatives leveraging the Group’s global scale

and strategic supplier relationships, as well as targeted efforts to maximise the

effectiveness of its investment in media and the efficiency of its support functions.

During the periods under review, costs incurred in connection with the delivery of synergies

arising out of the transaction with Novartis and the Pfizer Transaction were reflected as

Restructuring costs and are treated as an Adjusting Item for the purposes of Adjusted

operating profit. Other costs incurred in connection with the initiatives referred to in this

paragraph were not excluded from Adjusted operating profit.

2.11 Cash generation

The Group took a number of steps in the periods under review to drive cash generation from its

operations, including:

• tight management of receivables, inventory and payables;

• disciplined capital expenditure, with strategic investment focused on supply chain and

digital capabilities. This was reflected in a small increase in capital expenditure as a

percentage of revenue to 3.1 per cent. in FY 2021 from 2.9 per cent. in FY 2019; and

• the receipt of proceeds from the divestment of a number of the Group’s non-core brands

(see paragraph 2.13 of this Part VII (Operating and Financial Review) below).

2.12 Pfizer Transaction

The Pfizer Transaction completed on 31 July 2019 (see paragraph 2.3 of Part I (Key Highlights

and Development of the Group)). The Group’s results of operations and financial position have

been affected in the periods under review, and will continue to be affected, as a consequence

of the Pfizer Transaction, including steps taken in connection with and following the

transaction. For example, in FY 2022 the Directors expect the Group to continue to benefit

from synergies arising in connection with the Pfizer Transaction.

The Group’s revenue in FY 2020 was £9,892 million. The Group’s revenue in FY 2019

(including the revenue of the Pfizer Contributed CH Business from 1 August 2019, when it was

consolidated) was £8,480 million. Revenue of the Pfizer Contributed CH Business for the

seven months to 31 July 2019 was £1,523 million. From FY 2019 to FY 2020, the Group’s

revenue increased by 16.7 per cent. (£1,412 million) at AER. The increase was primarily driven

by the inclusion of the full year of revenue of the Pfizer Contributed CH Business in FY 2020,

compared to five months of revenue in FY 2019, together with other factors (see paragraph

6.1(A) of this Part VII (Operating and Financial Review) below). The impact of the Pfizer

Transaction therefore limits the comparability of the financial information of the Group for FY

2019 and FY 2020.

In the periods under review, the Group has achieved cost synergies as a consequence of the

Pfizer Transaction. In particular, the Group has adopted a leaner structure to drive cost savings

across a number of areas of the Group’s business, including the supply chain network, logistics

and infrastructure, advertising and marketing, sales and distribution and functional support (see

paragraph 2.10 of this Part VII (Operating and Financial Review) above). On 19 December

2018, GSK announced that the Pfizer Transaction was expected to realise annual cost savings

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of £0.5 billion by 2022 for expected total cash costs of £0.9 billion and non-cash charges of

£0.3 billion. The Group has realised substantial cost synergies and expects to exceed this

target to realise a total of £0.6 billion of annual cost savings. The total cash costs are expected

to be £0.7 billion and non-cash charges are expected to be £0.1 billion, plus additional capital

expenditure of £0.2 billion. Up to 25 per cent. of the cost savings are intended to be reinvested

in the business to support innovation and other growth opportunities.

Restructuring costs and Transaction-related costs incurred by the Group during the period FY

2019 to FY 2021 were largely as a consequence of the Pfizer Transaction. Restructuring costs

were primarily attributable to steps taken in connection with the integration of the Pfizer

Contributed CH Business. Restructuring costs and Transaction-related costs are treated as

Adjusting Items for the purposes of Adjusted operating profit. Integration and restructuring

related to the Pfizer Transaction was substantially completed by the end of FY 2021, and the

Directors expect the final charges to occur in FY 2022.

2.13 Divestments

As part of the Group’s strategy in the periods under review, the Group made a number of

divestments in order to bring greater focus to its portfolio of brands. Divestments have a

negative impact on revenue growth year-on-year. Operating profit margin is also affected as a

result of gains and/or losses arising from divestments, together with costs incurred in

connection with the divestments. These costs are treated as an Adjusting Item for the purposes

of Adjusted operating profit.

The Group’s programme of disposals realised £1.1 billion in proceeds net of costs and taxes

from FY 2019 to FY 2021. The disposal programme had a negative impact on the Group’s

operating profit margin as the Group no longer received the associated revenue following the

divestments, but due to the relatively low investment in these brands and the lack of dedicated

resources supporting them, the majority of the costs previously attributed to these brands

remained following their disposal.

The sale of ThermaCare and related manufacturing sites, which completed in Q1 2020, was a

key divestment in the context of the Group’s operations and was made in connection with

certain regulatory conditions imposed on the Group as a result of the Pfizer Transaction.

Following the sale, restrictions on the integration of the Pfizer Contributed CH Business were

lifted. Other disposals included brands in the Group’s Skin Health portfolio.

The Group continues to actively manage its portfolio (see paragraph 2.3 of this Part VII

(Operating and Financial Review) above).

2.14 Impact of COVID-19

The COVID-19 pandemic and the implementation of associated responsive measures by

governments in the jurisdictions in which the Group operates affected the Group’s performance

in FY 2020 and FY 2021.

Widespread consumer stockpiling in Q1 2020 resulted in an increase in revenue across all of

the Group’s categories in North America and EMEA. Stockpiling was followed by falls in

demand, driven by consumers using up stockpiled supplies, together with fewer consumer

visits to pharmacies and retail outlets during government-imposed lockdowns. This negatively

impacted revenue in Q2 to Q4 of FY 2020, with the largest impact in Q2. Lockdowns also

impacted the market for Denture Care products at certain points during FY 2020 and FY 2021,

given the reduced incidence of social occasions.

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The performance of the Group’s Respiratory Health category in FY 2020 and the first half of

2021 was materially adversely affected by the COVID-19 pandemic. Revenue in Respiratory

Health is typically driven by seasonal demand for certain of the Group’s products (see

paragraph 2.9 of this Part VII (Operating and Financial Review) above). However, Government

measures imposed in response to COVID-19, such as the widespread use of face masks and

implementation of lockdowns, social distancing measures and improved hygiene practices,

lead to a significant reduction in the number of respiratory illnesses, such as the common cold

and flu, in the Group’s key geographic markets. The introduction of specific restrictions on the

sale of cough and cold medicines in China further depressed the Group’s revenue (see

paragraph 2.16 of this Part VII (Operating and Financial Review) below). Respiratory Health

revenue consequently decreased by 1.5 per cent. at AER and increased by 0.5 per cent. at

CER from FY 2019 to FY 2020. Whilst revenue grew at CER due to the inclusion of full year

revenue of the brands acquired as part of the Pfizer Transaction (including Robitussin), the

category experienced negative organic revenue growth of 6.3 per cent. in FY 2020. In FY

2021, while Respiratory Health revenue continued to be adversely impacted in the first half of

the year, revenue recovered in the second half, as restrictions began to ease and seasonal

virus levels began to return to more normalised levels of respiratory illnesses.

The COVID-19 pandemic caused a surge in demand for certain OTC and VMS products, as

consumers became concerned with bolstering their immune systems and treating the

symptoms of COVID-19 and side effects of COVID-19 vaccinations. In particular, in FY 2020

and FY 2021, an increase in demand for Panadol (a paracetamol-based product) led to growth

in the Group’s Pain Relief category. This growth in Panadol revenue may also have been

attributable to negative media coverage regarding the use of ibuprofen products in treating the

symptoms of COVID-19, which adversely impacted sales of Advil (an ibuprofen-based product)

during FY 2020. In the VMS category, the increasing trend towards self-management of health

and wellbeing, which was accelerated by the COVID-19 pandemic, contributed to increased

demand for Centrum and Emergen-C during FY 2020 and FY 2021.

Among its far-reaching impacts, COVID-19 has also accelerated the convergence of the digital

environment and health, including the rapid expansion of e-commerce for consumer healthcare

products. Sales of the Group’s products through the online channel grew from around 4 per

cent. of revenue in FY 2019 to around 8 per cent. of revenue in FY 2021. In the periods under

review, the Group continued investment in the Group’s e-commerce platforms, including in

relation to digital content for online retailer platforms, the direct-to-consumer channel in the

USA (e.g., personalised Chapstick), and tools to measure the performance of the Group’s

“digital shelf” (e.g., presence of imagery, quality of content and shelf availability).

Costs associated with the Group’s supply chain were also impacted by the COVID-19

pandemic, with increased costs in relation to freight and staffing. Increased staffing costs were

driven by increased demand for the Group’s products, the purchase of additional personal

protective equipment, and changes to staff shift patterns in order to accommodate social

distancing requirements. Further, the Group’s shipping costs increased as a result of the global

macroeconomic impact of the COVID-19 pandemic.

2.15 Foreign exchange

The Group operates internationally and holds assets, incurs liabilities, generates sales and

pays expenses in a variety of currencies other than Pounds Sterling, which is the currency in

which it reports its consolidated financial results. As a result, the Group’s results of operations

are affected by exchange rate fluctuations between Pounds Sterling and other currencies in

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which it conducts and will continue to conduct transactions, including US Dollar, Euro, Swiss

Franc and Chinese Renminbi. For example, the impact of movements in foreign currencies

against Pounds Sterling had a negative effect on the Group’s results of operations in FY 2021,

with a £443 million unfavourable revenue impact driven primarily by the depreciation of a

number of currencies, including the US Dollar, certain currencies in Latin America, the

Japanese Yen, the Turkish Lira, the Euro and the Russian Ruble, in each case against Pounds

Sterling during that period. As discussed in paragraph 3 of this Part VII (Operating and

Financial Review) below, Russia’s invasion of Ukraine has had an adverse effect on the value

of the Russian Ruble, which may negatively impact the Group’s operations in Russia, as

revenue from products sold in Russia are incurred in Russian Rubles, while costs associated

with those products are denominated in other currencies, such as Euro or US Dollars.

In order to reduce foreign currency translation exposure, the Group seeks to denominate

borrowings in the currencies of its principal assets and cash flows. The Group manages foreign

currency transactional exposure by selectively hedging exposure arising on external and

internal trade flows. The Group also adopts a natural hedging strategy and, to the extent

reasonably possible, seeks to align the currency of inflows and outflows to minimise foreign

exchange exposure. In certain cases (such as the purchase of some manufacturing inputs or

some export sales made to distributors in markets where the Group does not have an entity

presence) transactional foreign exchange exposure exists (see paragraph 2.9 of Risk Factors).

2.16 Regulation

The consumer healthcare market is heavily regulated by governments and other regulatory

bodies in the countries in which the Group operates. Within the consumer healthcare market,

the OTC segment tends to be subject to greater regulation, including in relation to pricing.

The Group expends significant resources within SG&A to support compliance with a broad and

varied range of regulatory requirements, including pharmacovigilance obligations, maintenance

of product registrations and compliance with rigorous quality standards. The Group is also

subject to periodic requirements to assess and address new potential risks to consumers, such

as the recent requirement imposed by a number of regulators to assess nitrosamine levels in

OTC medicines. Failure to comply with regulations could lead to supply interruptions, product

recalls and/or regulatory enforcement action and fines from regulators. See paragraph 2.1 of

Risk Factors.

Changes to the laws and regulations to which the Group and its operations are subject,

whether as a result of new or more stringent requirements, or more stringent interpretations of

existing requirements, can also impose significant compliance costs and impact the way in

which the Group conducts its business. For example, in China, in early 2020, certain local

authorities introduced temporary restrictions on the sale of certain cough and cold medicines in

an attempt to prevent patients from self-medicating against COVID-19 at home, which limited

sales of Contac (nasal decongestant tablets that also relieve pain and reduce a fever) and

Fenbid (ibuprofen-based pain relief medicine) by the Group in 2020. These restrictions had an

adverse impact on the Group’s revenue in FY 2020 and FY 2021. Similar restrictions may be

imposed in the future, depending on the development of the COVID-19 pandemic.

The Group has also been impacted, and expects to continue to be impacted, by recent reforms

regarding government price management of drugs in China (see paragraph 9 of Part X

(Regulatory Overview)). The nationwide volume-based procurement program, which was

introduced in 2018, has negatively impacted revenue in respect of Fenbid sold in the country

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through the state-owned hospital channel, and other brands may be brought within the scope

of this initiative in future. In order to mitigate the impact, the Group is seeking to increase sales

through retail and e-commerce channels.

2.17 Separation and future restructuring

The Group has taken a number of actions in preparation for Separation, including to ensure

that the Group has the necessary infrastructure to operate as an independent publicly listed

company. These actions include the establishment of independent IT infrastructure and

independent corporate functions and governance of the Group, including building key

technology infrastructure and capability within corporate functions to support a publicly-listed

group.

During FY 2020 and FY 2021, the Group incurred costs in connection with preparation for

Separation of £66 million and £278 million, respectively. The Directors expect the Group to

incur Separation and Admission costs of approximately £0.4 billion between 2022 and 2024

(including Admission costs of up to £0.1 billion), most of which are expected to be incurred in

2022.

Following Separation, the Group expects to incur Restructuring costs of approximately

£0.2 billion between 2022 and 2024 in connection with projects to support further efficiencies in

its operations. The Directors do not currently anticipate further significant restructuring

programmes. Restructuring costs are treated as an Adjusting Item for the purpose of

calculating Adjusted operating profit.

The Directors also expect the Group to incur recurring operating costs of approximately

£175 million to £200 million per annum from 2022 onwards to provide the capabilities to

operate successfully as a standalone UK public listed company following Separation, including

in technology and infrastructure, and in corporate functions.

The Group has historically benefited from negotiated arrangements with third-party suppliers,

distributors, licensors, lessors, other business partners and/or counterparties as part of the

larger GSK Group. While certain of these arrangements will change as a result of Separation,

the cost impact is not expected to be material.

The Group has entered into a Transition Services Agreement with the GSK Group in

connection with Separation. The Transition Services Agreement is short-term and limited in

scope (see paragraph 15.14 of Part XII (Additional Information)). Additionally, the Group has

entered into Manufacturing and Supply Agreements with the GSK Group, which are also

limited in scope (see paragraph 15.15 of Part XII (Additional Information)).

3. Recent developments

The Group is monitoring the effects of Russia’s invasion of Ukraine, with the GSK Board

overseeing and monitoring key risks. The Board will assume oversight and management of

these risks after Separation. The Group’s operations and presence in these markets is limited

and Russia and Ukraine accounted for less than 3 per cent. of each of the Group’s revenue

and Adjusted operating profit in FY 2021. The Group has no manufacturing operations in these

markets and imports products sold there. Since the start of the conflict, the Group has been

constantly evaluating its activities in Russia and has stopped advertising and promotional

activity in Russia. The Group is prioritising supply of OTC medicines and reducing its oral

health products, ensuring the Group continues to meet basic consumer health needs. The

Group is no longer importing food supplements and vitamins into Russia.

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There is a significant risk to disruption of the Group’s operations in Russia and Ukraine.

• Despite the limited scope of the Group’s activities in Russia and the Group’s focus on

meeting consumers’ everyday health needs, there may be certain reputational risks

associated with the Group’s presence in the Russian market.