GSK plc (GSK) Earnings Call Transcript & Summary

Good morning and good afternoon. I'm Sonya Ghobrial, Head of Investor Relations for GSK Consumer Healthcare. Thank you for joining us today for the GSK Capital Markets Day to introduce you to Haleon. The team and I are looking forward to sharing more information on the company ahead of its demerger from GSK in July this year, after which we'll be operating as a separately listed independent company. We have a full agenda today, featuring a number of our designated executive leadership team as well as the GSK CEO. However, before we start, I'd like to mention a couple of housekeeping details. Our presentations will last for just over 3 hours in total, and there'll be time for 2 short refreshment breaks based at appropriate intervals between these presentations. A copy of today's agenda should be visible on the Investors section of gsk.com. There'll also be a Q&A session at the end of the presentations, ahead of which there'll be a short 5-minute break to allow those who want to dial in to ask questions. I'll be back a bit later to share this number for those who are listening to the event live. Following today's event, all presentations and webcast will be posted on the Investors section of gsk.com on the Consumer Healthcare page. Before we begin, please refer to Slide 2 of our presentation for our cautionary statements. With that, I'd like to hand over to Emma Walmsley, CEO of GSK.

Thank you, Sonya. Hello, everyone, and a very warm welcome to this GSK Capital Markets event. Today marks a significant moment for GSK as we formally introduce you to Haleon, a new company purely dedicated to everyday health. It comes ahead of the most significant corporate change for GSK in 20 years with the demerger of our Consumer Healthcare business planned for July this year. With it, we will create 2 new exceptional companies that will positively impact the health of billions of people around the world. When I took over as CEO of GSK, I set out new priorities and a capital allocation framework to improve our long-term, competitive performance and deliver innovation. We've made substantial progress, significantly improving both our operating performance and our R&D productivity. The steps we've taken with our Consumer Healthcare business, which I joined GSK to shape and build over a decade ago were all designed to accelerate this work. Strong consumer cash flow has supported investments in the GSK pipeline and delivery of shareholder returns, and through progressive strategic M&A and divestment moves, we've created significant shareholder value, building a true world leader in consumer health. This is the work of tens of thousands of GSK people, and their results speak for themselves. We've significantly increased sales to GBP 9.5 billion, more than doubled EBITDA and created a new focused business, 100% dedicated to consumer health with very exciting prospects and which is now ready for independence. The launch of Haleon now crystallizes all of this work and value for GSK shareholders. Through a demerger, we'll unlock the potential of both GSK and Haleon. A new GSK will focus purely on biopharmaceuticals with a new purpose to unite science, talent and technology to get ahead of disease together. And with new ambitions for growth, representing a step change in delivery for GSK and starting this year. Importantly, as a result of the demerger, we'll strengthen GSK's balance sheet with a significant recapitalization, creating new flexibility to invest in growth and innovation. With Haleon, we launched a brand new global company to be listed in London and New York with very compelling prospects. Completely dedicated to consumer health and with an outstanding brand portfolio, it offers a very compelling proposition to bring deep human understanding together with trusted science to deliver better everyday health with humanity. It's a company full of fantastic, talented people and a highly experienced leadership team led by an outstanding CEO, Brian McNamara. It will have a Board with best-in-class international consumer sector experience, as already seen with the appointment of Sir Dave Lewis as Chair Designate. For investors, as a stand-alone company, Haleon will have a highly attractive financial profile of above-market sales growth, sustainable margin expansion and high stable cash generation. And as you'll also see today, Haleon will be a company strongly committed to ESG performance. So for GSK shareholders, we're unlocking value and strengthening prospects, bringing new optionality for investment with 2 new distinctive equity choices. Both of these companies have the opportunity for large scale, positive human health impact, and both of them offer compelling outlooks for growth and attractive returns. With today's event, we aim to show you the value of Haleon and to make the case for investing in what we believe will be a strong, highly successful, growth-oriented company capable of delivering sustainable performance, value and returns to shareholders. It's now my great privilege to hand you over to Brian and his team to share with you the exciting plans and prospects for Haleon. [Presentation]

Welcome, and thank you for joining us today. I'm delighted to be here to take you through our plans for Haleon and the incredible opportunity we have in front of us as we launch this new, exciting, global-leading company that's 100-focused on consumer health. Haleon is led by our purpose, to deliver better everyday health with humanity and is well positioned to play a vital role for people all around the world. And we're in a sector that's really growing and that's more relevant than ever. Today, we'll show you how Haleon's world-class portfolio of brands, attractive global footprint and industry-leading route to market will combine with our competitive capabilities in brand building, innovation in digital, to underpin our confidence in delivering sustainable above-market growth and attractive shareholder returns. Over the medium term, we expect to deliver organic annual sales growth of between 4% and 6%. We expect to deliver sustainable moderate margin expansion in constant currency while we continue to invest in the business. We expect to continue our strong cash generation and cash conversion. And we believe that Haleon offers investors a highly attractive growth profile that is sustainable over the long term, that will allow us to make further investment to fund Haleon's growth and deliver real shareholder value. At the core of our business are 2 very important elements. First, our people. We have 22,000 colleagues at Haleon, and they are led by an outstanding management team. The team has a track record of delivery, and they've done an amazing job delivering revenue and margin growth at the same time, as we've been completing a significant integration and building a world-class portfolio. And they are highly experienced. They combine expertise in Consumer Health and FMCG from working at companies like P&G, Nestlé, Coca-Cola, Unilever, Diageo, Novartis and Pfizer. Today, you'll hear from our Chief Financial Officer, Tobias Hestler; our Chief Marketing Officer, Tamara Rogers; our Head of Research and Development, Franck Riot; our Head of Sustainability, Teri Lyng. And you'll also hear from our region leaders, Lisa Paley, who leads our U.S. and North American business; Filippo Lanzi, who leads our EMEA and Latin American business; and Keith Choy, who leads our Asia Pacific business. Members of the team will be joining for our Q&A panel discussion later today. The second critical element to Haleon is our portfolio of brands. The quality of Haleon's brand portfolio is exceptional. We are category leaders in 5 global categories. I'm talking about power brands such as Sensodyne, Centrum, Panadol, Advil, Voltaren and Otrivin. And we've got iconic local strategic brands such as TUMS, ENO, Flonase and Emergen-C. These brands are trusted and loved by people all over the world, and they are right at the heart of Haleon and our purpose, to deliver better everyday health with humanity. Our purpose drives us to meet the everyday health needs of people in new and better ways, to develop innovations that are meaningful and impactful and to make everyday health more achievable, inclusive and sustainable. It fuels our growth ambition, drives our performance and unites our colleagues with a distinct culture. We are guided by our 3 key behaviors: go beyond, do what matters most and keep it human. We will start life as a new stand-alone company with a strong track record of performance. Over the past 2 years, we have delivered compound organic sales growth of 4.4%. We've generated adjusted operating profit margins of 22.8% in 2021. And at the same time, we've invested in our brands, in R&D and in A&P. Our financial performance reflects our delivery of integration synergies and rigorous cost control. And as I said a minute ago, we have also generated strong cash flow and maintained excellent cash conversion. I'm proud of our track record, and I believe it sets us up well as an independent company. That track record underpins our confidence in the financial outlook we are talking about today. And we have a clear approach to delivering those outlooks by capitalizing on our portfolio, our competitive capabilities and by delivering a strategy to outperform. The portfolio we have today is a result of a targeted strategy to focus on high-quality consumer health care brands. We prioritized investment in brands with leadership positions, scale and potential for future growth opportunities and actively considered divesting brands that have lower growth potential. As a result, we have created a world-class portfolio with annual sales of nearly GBP 10 billion and #1 positions in 5 attractive global categories: therapeutic oral health; vitamins, minerals and supplements; pain relief; respiratory health, which includes cold and flu, allergy and nasal; and digestive health. We have 9 power brands, which currently drive 60% of our sales and account for 80% of our growth. We've got the world's #1 toothpaste for sensitivity, the world's #1 topical analgesic for pain relief. And we've got the world's #1 multivitamin. Complementing these global winners are a strong set of local strategic brands I mentioned earlier, which are iconic in their own markets. We're talking about brands like Fenbid, the #1 OTC systemic pain relief brand in China; Dr. Best, the #1 manual toothbrush in Germany; and Grand-Pa, the #1 pain relief brand in South Africa. The strength of our brands are clearly reflected in our geographic footprint. We have strong leadership positions in all our critical markets, not least being the #1 consumer health care business in the U.S., the biggest consumer health care market in the world. Today, we are also #1 multinational consumer health care business in China with 1/3 of our current sales being generated from emerging markets. Our footprint also reflects leading positions and a major presence in key markets such as India, Latin America, the Middle East and Africa. So we have a strong brand portfolio that's very well positioned in a sector with total sales valued at over GBP 150 billion. The fundamentals for this sector and each category within it are all strong. We believe the global focus on health and wellness is only set to increase with significant demand coming from an aging population and an emerging middle class and from sizable unmet consumer needs. These trends are expected to drive medium-term growth across these categories of 3% to 4%. So with the strength of our portfolio and the opportunities we see for growth that we've reiterated in our outlook, we expect organic sales growth of 4% to 6%. Over the last few years, we've had the opportunity to significantly rescale, reshape and reinvest in the business. We've recruited world-class talent, implemented new processes, adopted new technologies and we've invested in new capabilities to improve our competitiveness. A key focus has been to strengthen what we see as Haleon's competitive advantage, combining deep human understanding with trusted science. We've invested in a suite of proprietary assets to generate deep human understanding, to support brand innovation, enhance our engagement with experts like doctors, dentists and pharmacists and to provide education to consumers. I'm talking about cutting-edge centers for shopper research, consumer knowledge and social listening, all designed to generate and test new insights and identify consumer needs. That way, we can leverage the deep technical and scientific expertise that comes from our 1,400 talented scientists. That combination is providing us with strong ability to develop and launch new brand innovation, and I'm delighted with the progress we have made. In the last 3 years, we have successfully delivered more than 19,000 regulatory approvals. And in the last 12 months, we have been successful in the market with innovations such as Sensodyne Sensitivity & Gum, Centrum Essentials in Brazil and Pronamel Intensive Repair. We see this unique combination of human understanding and trusted science as something that really differentiates Haleon. Our competitiveness is also reinforced by our proven capabilities in brand building, innovation and our compelling route to market. You'll be hearing a lot more about that from Tamara and Franck. At 20% of sales, our A&P spend is competitive. And over the last few years, we have increased the effectiveness of that spend. We have a strong and established presence in all key channels relevant for consumer health. Our relationship with pharmacy and health care professionals is a key differentiator. And we have direct and trusted relationships with more than 3 million health care professionals, together with the largest network and coverage of pharmacies in the world. All of that is underpinned by strong capabilities we have invested in and built in data and digital. I'd now like to set out for you the strategy we will execute to continue to outperform the market and deliver our growth ambitions. Our strategy is designed to leverage our portfolio and our capabilities and has 4 key elements: to generate growth, we will focus on increasing household penetration and capitalizing on new and emerging growth opportunities in channels, geographies and through portfolio expansion. Underpinning these sources of growth will be a strong focus on execution and financial discipline to improve profitability and sustain our reinvestment in solid growth opportunities. And finally, running a responsible business, which is integral to everything we do. Acting responsibly allows us to reduce risk and support performance. I'd now like to talk you through these elements of our growth strategy in more detail. First, increasing penetration growth. We have a strong track record of driving growth and market share through increased household penetration. And we see this as our largest opportunity for the portfolio despite the progress we've already made. We believe this is a significant opportunity to drive further share gain and category growth in all 5 categories we operate in. We'll deliver that through brand innovation and reaching new consumers with Haleon products. For example, nearly 1 in every 3 adults have symptoms of tooth sensitivity, but only 1 in 3 of them uses a sensitivity toothpaste like Sensodyne. Nine out of 10 people use pain relief products, but only 1 in 3 of them use a topical pain relief like Voltaren. In China, where calcium intake is less than 50% of the daily recommended level, only 17% of people take a calcium supplement like Caltrate. So we have a compelling strategy and a proven track record in delivering penetration-led growth. Sensodyne is a great example of what I mean. With Sensodyne, we have demonstrated our clear strategy to focus on therapeutic oral health, targeting the very premium end of the oral health market. Sensodyne surpassed GBP 1 billion of sales in 2016, and it has continued to grow, reaching an 11.6% share of the global toothpaste market in 2021. U.S. penetration reached 26.7%. That's up 5 share points in the last 7 years. That growth is built on a comprehensive approach. We're using a data-driven approach to deliver meaningful and relevant communications to address major penetration barriers such as sensitivity awareness or the need for rapid relief. And we're delivering industry-leading innovations to address consumer needs by providing real sensitivity relief, expert advocacy as the #1 dentist recommended brand for sensitive teeth, and of course, excellent commercial execution. Moving to the second pillar of our strategy, capturing new and emerging opportunities. I'll start with channel expansion. In the consumer health care sector, there is significant opportunity for e-commerce penetration. And that's true across all the categories of our business. In the last 2 years, with the investments we have made, we have seen a twofold increase in e-commerce sales. We currently have leading positions across our key categories with 12% of our sales in the U.S. coming from e-commerce. And in China, our e-commerce is 20%. We're growing ahead of the industry and a clear priority for us is to continue to invest in and increase our portfolio's exposure to e-commerce. By 2025, we expect e-comm to grow to the mid-teens as a percentage of sales. We also have further opportunities for geographic expansion, whether it be through accelerating innovations in key markets like the U.S. and China or rolling out and scaling up brands like Paradontax and Centrum in new or underdeveloped markets. There are also growth markets where we have a scaled position with a small portfolio of brands and a significant opportunity to broaden out that portfolio. We're striking the right balance between markets where we see higher growth and markets with lower but more stable growth. Today, 1/3 of our sales comes from emerging markets. India is a great example, where we're building a strong position in key growth markets for the future. We have an industry-leading route to market with over 4 million distribution points. So we have a fantastic platform to grow a broader portfolio by leveraging the strong position and success we've generated with Sensodyne, we've launched Paradontax 9 months ago, and it's off to a great start. Portfolio expansion is the other major area for new and emerging growth opportunities. 2 areas we are very focused on right now are Rx-to-OTC switches and Naturals. We have executed 4 switches over the last 8 years. That's more than any of our competitors, with the most recent being Voltaren in the U.S. This is a real area of expertise for us. We already have 2 confirmed projects in the pipeline with expected launches in 2025 and 2026. Importantly, our medium-term organic sales growth guidance doesn't include any benefit from Rx-to-OTC switches. Use of naturals is a clear consumer trend that is accelerating. For example, naturals, cold and flu medicines grew more than 1.5x medicated products in the last 6 months, and naturals represent an attractive opportunity. We've already launched 10 innovations in the Naturals segment and have more than 30 projects currently in the pipeline. We are really proud of the progress we've made on execution and financial discipline in recent years. Tobias will show you how we have focused on driving efficiency, effectiveness and agility to make every investment count. We have slimmed down our manufacturing footprint, going from 41 to 24 sites. A key output from that focus on efficiency and agility alongside innovation has been our ability to increase A&P investment to 20% of sales to drive growth. We've been focusing our investment on power brands and increased media spend. We are weighing our investment towards advertising versus promotion, and we've shifted a higher proportion of our media mix to digital. Going forward, we intend to maintain a sharp focus on all 4 areas we've highlighted here. Looking to further prioritize investments in A&P and R&D to support our continued market outperformance. Running a responsible business is an integral part of our strategy. We're deeply committed to tackling environmental and social barriers to everyday health. Terry will talk to you about our commitment to lowering our environmental impact. But to give you context, we have a structurally smaller environmental footprint, which gives us a real competitive advantage, especially with consumers whose purchase choices are increasingly being influenced by the environmental impact of the products they buy. And it gives us an advantage in terms of overall company risk and CapEx requirements. We also believe that we have a compelling opportunity to make a meaningful difference to helping improve health inclusivity. By 2025, we intend to help 50 million people per year gain access to opportunities for better everyday health. Running with a responsible business starts with us, and we are committed to setting ambitious inclusion, equity and diversity targets and building strong corporate governance. That includes appropriate incentivization and rewards for business performance. We'll tell you more about that in due course. So we have a clear approach to delivering our growth ambitions, and we are confident that we can deliver 4% to 6% organic sales growth every year over the medium term. We can deliver that growth from a platform created through refocus, rescale and optimization of the business that has delivered 4.4% compound annual organic sales growth in the last 2 years, and that sales growth is generated from a balance of volume and price. We now look ahead at Haleon as a new stand-alone company. I am really excited about our leading sector position and about the focused business we have built at Haleon. I've been associated with this business for 17 years, and I've never felt better or more excited about the growth opportunity we have in front of us. We are well positioned in growth categories and geographies. I see clear sources of growth to sustainably outperform, to deliver consistently above-market organic annual sales growth through increased penetration of brands and markets. I can also see us capitalizing on new and emerging opportunities in channels, geographies and in our portfolio, all supported by reinvestment in A&P and R&D and our continued strong execution. Taken together, we expect this to translate into accelerated growth driven by higher growth channels, categories and geographies. As I said earlier, we expect e-commerce to grow from 8% of the business today to a mid-teens percentage of the business by 2025. We expect oral health and VMS categories to grow mid- to high single digits and go from 44% of the business today to approaching 50% by 2025. And we expect emerging markets to grow high single digits and go from 32% of the business today to a high 30% of the business in 2025. We expect our organic sales growth to deliver positive operating leverage and to support sustainable moderate margin expansion over the medium term. Again, in constant currency. This will also support planned reinvestment in R&D and A&P. Operating leverage will be further supported by continued programs to deliver cost efficiency in COGS and in SG&A. We are planning no major restructuring. In 2022, we expect to deliver sales growth that's in line with our medium-term outlook. Tobias will take you through the building blocks of the adjusted operating margin later today. Our strong portfolio, coupled with high gross margins and strong markup positions, allows us to invest sustainably behind our brands, and that gives us confidence that we will deliver 4% to 6% organic annual sales growth over the medium term. Alongside this investment in growth, we intend to deliver moderate margin expansion on a constant currency basis as well as generating strong free cash flow. This underpins our disciplined capital allocation. Let me take you through how we think about that. Our clear #1 priority is growth. We are prioritizing reinvestment in the business to drive that growth. With regards to the dividend policy, the initial dividend is expected to be at the lower end of the 30% to 50% payout range. And we will look only at M&A opportunities where our target is really compelling and is a good fit with our company strategy. We plan to target a net debt EBITDA ratio of less than 3x by the end of 2024 and to maintain a strong investment-grade balance sheet. So as you can see, the opportunity for Haleon is compelling. I strongly believe as a new stand-alone company 100% dedicated to consumer health, we can make a meaningful difference to the everyday health of hundreds of millions of people and deliver a sustainable above-category performance with attractive returns to shareholders. We have a clear strategy to do just that, leveraging our terrific portfolio and the platform we have built these last few years to capture the new growth opportunities and delivered improved profitability. As I said a couple of times, we expect to deliver 4% to 6% organic sales growth every year with sustainable moderate margin expansion at constant currency over the medium term. Together with strong cash generation and cash conversion, that gives Haleon the capacity to invest in our future and reward shareholders for their investment. My team and I are strongly committed to achieving what I've described for you today. I hope that you will join us on what I'm convinced will be a rewarding ride. With that, I'll hand it over to Tamara and Franck and look forward to your questions later. Thank you. [Presentation]

Hello, everyone. I'm Tamara Rogers, the Global Chief Marketing Officer.

And I'm Franck Riot, Head of Research and Development.

Today, Franck and I will be talking to you about our world-class portfolio of great brands and the competitive advantage that we've got from combining deep human understanding and trusted science. You will hear about the leading R&D capabilities, which are fueling our innovation. And we'll provide insights into future growth spaces we see for our company. We will showcase some of our highly effective brand building programs enabled by excellent digital capabilities. And lastly, we'll show you the powerful differentiator that is our relationship with the global healthcare professional community. Everything starts with our brands. This portfolio of exceptional brands, as you've heard from Brian earlier, allows us to enjoy leadership positions in our 5 priority categories. Our brands are inherently purposeful. Many have been in existence for over 50 years and demonstrate above all that we're not only in the treatment business, we're in the quality of life business. Voltaren's proposition is not just inflammation and pain relief, it's about rediscovering the joy of movement, the fulfillment that comes from being able to participate in activities with friends and loved ones again, not isolated in an armchair locked in pain. And Sensodyne is not just about sensitivity relief, although it most certainly does that. It's really about enabling consumers to reclaim life's basic pleasures and that first sip of a cold drink quenching your thirst on a hot day without the short sharp shock to the teeth ruining the moment. Brian showed the headroom for growth for 3 of our brands earlier, but it's true across our portfolio, just another 3 examples here. Many of our brands are leaders in their fields, but the data on how many people just don't treat their health issue is surprising. And it's this gap which gives us significant opportunity to recruit and grow penetration. It's our job in marketing and R&D to truly identify the barriers that prevent people from taking action and then act on the why, why people haven't taken what would seem to be the obvious step to make themselves better. We start with deep human understanding. We're 100% focused on consumer health and how it affects us, why we act or why we try and ignore an issue, which can get in the way of taking action, which means that at our heart, we're behavior change specialists. Our deep human understanding is focused on enabling us to mobilize people to change something as fundamental as health behaviors, which is why we've got a very special suite of resources, mostly proprietary, whether it's in-house shopper research facilities, a vast consumer knowledge capability, future trends spotting tools, or the ability to test concepts and claims overnight. Our social listening capability draws real insight from over 70 million posts and our proprietary observatory, so like a library, holds 53,000 documents. Each one of those is a precious finding on concepts or conditions or culture, but all as it relates to health. We use this deep insight to guide us on where and how we can have the biggest impact. Our deep human understanding, combined with trusted science, means we focus on what matters and how we can use innovation to try and solve the unmet everyday health needs for people. This brings us real competitive advantage. Franck, over to you.

Thanks, Tamara. It is that deep human understanding that provides the [ amazing, rich ] springboard for our R&D community as well as our marketing teams. R&D is a powerful growth and innovation engine for the company, a fantastic driving force of trusted science. This is really an end-to-end R&D organization from consumer science to medical and regulatory strategies, including an experienced formulation team designing superior product and solution. We run a global network with 3 centers of excellence combined with local hubs, giving us the best of both worlds, the scale and expertise to deliver breakthrough innovations and the agility to quickly serve the needs of local markets. All the network will be stand-alone to GSK like the majority is today and dedicated to Haleon. Of course, it is the people who make the difference. And we are fortunate to be supported by 1,400 highly skilled scientists with a great mix of both FMCG and pharma experience. Indeed, our R&D organization covers a broad set of expertise and includes dentists, pharmacies, medics as well as engineers, chemists, developer and flavorists. Our state-of-the-art facility and capabilities give us the ability to explore and develop any type of formulation, format and delivery mechanism by our sensory and development labs. We always [ pass ] prototype and [ stress ] new formulation before we move to the factory. Science can sometimes be difficult to explain to consumer and customer even to health care professionals, but our imaging expertise makes the invisible visible. Our world-class regulatory and medical teams embedded across multiple markets have successfully secured over 19,000 regulatory approvals in the last 3 years. Our dedicated Rx-to-OTC switch team has delivered 4 Rx-to-OTC switches in the last 8 years, more than any other company, as Brian mentioned. We've run 66 large-scale clinical studies involving 6,000 consumers in the last 5 years and had 296 publication in high-quality peer-reviewed journals. Our science is comprehensive, highly innovative and externally recognized for being so. And all of this underpinned by consistent and competitive investment. How do we actually go about creating innovation to drive sustainable growth? Well, we have an established innovation strategy designed to capitalize on both current and future everyday health consumer needs. We have a robust pipeline, which includes fast-to-market responsive to near-term trends as well as innovation, which require investment in clinical studies. Our pipeline provides resources for growth in the short, medium and long term. The majority of these resources are focused on growing our core portfolio. It is mainly about strengthening the quality of the experience of our products or creating even more personalized proposition at scale or unlocking local and tailored opportunities. We also have a strong focus on expanding our offering, reflecting new trends like Naturals. And extending our brand beyond their treatment heartland into prevention and maintenance. Rx-to-OTC switch is and will remain a critical focus. And we're also making good headway in the development of digital services. And finally, we have a firm eye on the disruptive new, exploring holistic health and integrated technology solution to better manage overall well-being. Here is a quick flavor of some concepts we brought to the market. [Presentation]

Let me share a few examples to describe our strategy. Growing the portfolio via superior science is one of our top priorities, and we do this across our portfolio. A great example is our Sensodyne Repair & Protect franchise. It was first launched in 2010. In the latest upgrade, Sensodyne Repair & Protect with deep repair was introduced in early 2021, delivering 8% growth versus 2020. From a clear consumer insight enjoying the food with our toothpaste, our scientists understood the root cause of dentin hypersensitivity and what activates the nerves [ is ] the dentinal tubules causing that pain. Our scientists have most recently developed a novel formulation that we have shown through superior science deliver deep dentin tubule occlusion. Let's see how the science behind deep repairs works. [Presentation]

Let's move next to a very different example, Centrum. [ Inside ] an undermet need here is I want what's right for me and my body, not everybody. This has helped us evolve the brand from a single multivitamin pill to the personalization that you see today, which is why we have successfully developed new SKUs for gut health immunity and probiotic proposition in China, gummies and minis in the U.S. and in Australia, a new benefits range, which provides solution for being calm and collected, movement and mobility, and mind and memory. Very importantly, all these innovations are scientifically proven benefits generated through our medical and regulatory expertise, supporting consumer uptake and growth. Now some example of how we expand our portfolio, starting with Rx-to-OTC switch. What I want to highlight here is the specificity of the SKUs in the organization required to win in this complex area. We have the depth and breadth of expertise it takes from a dedicated cross-functional team with experienced regulatory and medical scientists and partnering with a broad ecosystem from Board of Health to retailer and understanding the full consumer experience. Our capabilities and track record here make Haleon a potential partner of choice, and we have a robust pipeline. I've covered our capabilities here, and Lisa will bring this to life later with the example of our most recent successful switch, Voltaren, in the United States. Let's now look at an example of how we expand the offering. Increasing number of consumers want natural solution, but not at the expense of efficacy. For us, green science means leveraging the power of nature to create products that delight consumers looking for a more natural experience, but which are also safe and effective. We have also invested in new technical capabilities and external partnerships to enable more sustainable solution in our green science agenda. So the organic [ T35 ] Volta Natura just launched soothes and cools tense, contracted muscles with the power of 6 plants. Our new Emergen-C range is infused with the natural goodness of plant-based botanicals. And our new range from Sensodyne, Sensodyne Nourish with proven sensitivity protection, natural mint and essential oil is packed in fully recyclable packaging. Clearly, this proposition are highly appealing to current nonuser of the brand. Our green science is a powerful lever of our penetration strategy. And as Brian mentioned, we have landed 10 launches in the last 12 months with over 30 more projects in the pipeline.

Thanks, Franck. Now this is an example of where we are unlocking new growth, moving beyond treatment. Otrivin is moving from a brand that's focused on seasonal decongestion to one that has a relevant role every day, all year around. Nasal congestion impacts sleep, focus and emotions and our energy levels every day of the year, not just for a couple of sniffly weeks. The nose is amazing. It filters 20,000 liters of air daily, and it needs regular care and cleaning to do its job better. That's why Otrivin now has a complete suite of nasal care products, both medicated and nonmedicated for adults and children, covering treatment when suffering, but going beyond to support daily maintenance. A healthy nose helps us breathe better. Otrivin Breathe Clean featured here helps protect you from environmental aggressors like pollen, dust and pollution, clearing, moisturizing and soothing irritated nasal passages to help you breathe well. We are just getting underway. But where we've launched, we're achieving up to 30% share of segments in some markets. Back over to you, Franck, now to cover disruptive new.

We have started exploring new ways of delivering better everyday health, focusing on holistic health and integrity technology. Let me start with the example on the left-hand side, a new Haleon funding venture, [indiscernible] Dental. This is a simple digital first platform providing convenient, flexible, affordable on-demand access to dentists and treatment plans in the U.S. The second example I'd like to share is a new vehicle to open up disruptive new partnerships, new innovation and new growth opportunities. This is what we call NEXT Re/Wire Health Studio, which we launched in October 2021 and will be expanded through 2022. We are working with the next wave of digital health innovators in a truly collaborative way, providing expertise and support. We had over 80 applications in our first cohort, and we have been working with several exciting start-ups on initiative across [indiscernible] for women's everyday wellness and mental resilience. Subjects covered have included microbiome, diagnostic, care plans, personalized products and AI-based virtual consultation. That covers innovation, which is one driver of growth for our brands. But Tamara, there is more to it, right?

Yes, there is, Franck. We understand that our brands are making a difference beyond just treating the issue in all of the categories that we're in. And there's a lot on this chart showing how consumer needs go beyond the physiological. Let's just take pain relief. It's not just pain that we're talking about. It's not just a physiological problem. It also takes a huge emotional, financial and social toll. Our brands really matter. And that's why we build brands with humanity, brands trusted by health care professionals and consumers that will help us deliver above-market growth in the coming years. The Forrester Brand Humanity Index demonstrated how people were 1.6x more likely to buy brands perceived to be acting like people, engaging and persuasive in human ways, not patronizing as many brands do. That's critical in a world where the consumer is in control, curating what they experience. And remember, we set out to change behavior. The logic of a product claim such as 10x faster relief only gets you so far. To drive real behavior change, you've got to go deep and understand the person behind the condition, not just their painful knee but deep into how they live their lives. And we know that to effect lasting behavior change, you need to make somebody feel something to make them want and desire to go and do something very different. Very simply, the more people feel, the more people are inclined to take action and buy. Here's an example of some work that we've done on Voltaren, which illustrates how we inspire people to a better quality of life to change their behavior. This has no functional product demo, but it's one of our most persuasive ads and has delivered a significant increase in ROI versus our previous approach. [Presentation]

Our brand building capabilities significantly strengthened over the last 3 years, and our mindset is focused on continuously learning, adapting and modernizing. First, it's a high-caliber organization with a leadership team having significant FMCG experience, such as P&G and Unilever as well as other consumer health companies and digital agencies. It is ethnically diverse and 67% female. We've co-located R&D and marketing in global hubs, an expert marketing center of excellence team and the very best agency holding companies as partners with in-house expertise where we see advantage, with our cost studio network around the world creating and adapting content against brand briefs based on audience and search data and unlocking production cost savings. In addition, we have a talented, experienced design team integrated with the brand teams and a shopper science lab, which enables us to experiment with retail experiences and provide category management analysis in partnership with retailers. We operate in a digitally enabled world. E-commerce accounted for 8% of Haleon sales in 2021, as Brian mentioned, and we're fast building our capabilities, both people and tools. We've got a range of tools available, including digital assets and product information management. All of our employees are offered advanced training, including our exclusive mini MBA in digital commerce, if eligible, which is accredited and by and done in collaboration with University College London. We were the first consumer health company to bring in-house a Google tech stack, creating direct ownership of audience data and in conjunction with a leading cloud-based audience platform with our media agency called PeopleCloud, this allows us to better identify and connect with growth audiences and have full transparency on performance. This wealth of data, including the patterns we see in search, enables us to create relevant and targeted content and then optimize it dynamically. Globally, PeopleCloud, which we ran in 16 markets, provided a more than 40% higher ROI than our digital channels and over 125% better ROI compared to our traditional channels. Another important partnership is with Google and Picasso Labs. This partnership has resulted in an industry first, an AI tool that scans assets to measure creative effectiveness, enabling us to optimize pre going live. We've achieved up to 34% lift in ad recall and up to 22% gains in purchase intent. Lastly, our proprietary tool, TRGR, pulls in data signals to help efficiency. For example, with seasonal categories tracking weather and search data to signal when we buy media so that we don't waste valuable media spend, only going live when cold or flu or allergies are rising. All of this means we connect with the right person at the right moment with the right message and creative. We invest well behind our brands and disproportionately behind our power brands because we see a strong return on investment. We spend more than 45% of our media on digital, which is a reflection of our audience media consumption habits and our excellent digital capabilities to engage with them where they are. Our bar is set high in terms of the type of marketing we want to do. We compete and frequently win a globally recognized industry awards such as Cannes, the Effie's and IPA, which is the gold standard in effectiveness. We have exceptional, category-leading brands because we believe in the power of brands and the power they have as vehicles for us to help change people's lives for the better. There's perhaps no better example than the work we did on Panadol at the height of COVID to help guide consumers on what they can do. [Presentation]

This ad also brings me nicely to our relationship with health care professionals. During COVID, health care professionals were inundated with questions around how to best handle symptoms, what's safe. We saw that by providing this kind of information, we could contribute to supporting both consumers and the demands on health care professionals' time. This is a great illustration of the type of marketing we do and includes a really special element, advocacy by health care professionals. Dentists, hygienists, pharmacists, GPs, in all likelihood, you might know yours by name, health care professionals are the world's local trusted community influencers. There's approximately 10 million health care professionals globally addressing the conditions that we serve. And collectively, they have the capacity to make an astonishing 52 billion recommendations every year and not paid to do this. They recommend products if they believe that they can complement their first-line treatments and consumers listen. Up to 75% of patients with our conditions consult a health care professional, and the health care professional response has considerable influence on both first time and repeat usage. For example, up to 85% of pharmacist recommendations lead to a purchase. Underpinning all of this is trust. The trust patients have in their health care professionals, the trust health care professionals have in us and our brands. We know that through effective relationships and the trust in our products, health care professionals that we engage with will recommend up to 5x more per week every week. Health care professionals' advocacy is a key priority for us, nurturing and growing the trust in our brands. This is a key differentiator for our company and a capability most consumer companies don't have. We have direct relationships with over 1/3 of these 10 million health care professionals, thanks to the combination of our proprietary field force and strong digital relationships. We also work with key external partners such as the World Dental Federation, the International Association for the Study of Pain and the International Pharmaceutical Federation. Many of our brands are #1 recommended in multiple markets by their respective experts. Recommendation is the gold standard of trust. So you've heard about our brand building and our expert marketing prowess, our capabilities, our digital orientation. But how does all of this come together to create integrated brand programs? I've chosen Sensodyne because you've seen a number of the individual elements today, and this film illustrates how the sum of these parts combine from the consumer's perspective. [Presentation]

And finally, we'll end where we started. We are fortunate to [ work off ] an exceptional portfolio of brands. We have competitive advantage in the combination of deep human understanding and trusted science. Our R&D capabilities are world-class, driving consistent innovation across our categories and a robust and well-balanced pipeline. Health care professional advocacy is a powerful element of our marketing mix, complementing our advanced digital capabilities and supported by a highly experienced team. And with our understanding of new and emerging health needs, we are well positioned for future growth. With that, we'll now pause for a break before Lisa. With you again in 15 minutes. Thank you. [Break]

Welcome back, everyone. I'm Lisa Paley. I'm the head of the North American region. I joined GSK in 2019 during the Pfizer joint venture. And prior to this, worked at J&J and also the former Pfizer Consumer Healthcare business from Warner Lambert. I'm super excited to share how North America is positioned to drive sustainable growth and win in the market. We've created an extraordinary business across the U.S. and Canada, one that has a world-class portfolio of exceptional brands. Brands that are not only staples in the medicine cabinets across both markets, but are trusted by consumers again and again for themselves and for their families. Today, I'll share how the region is positioned to drive growth, drive penetration and outperform through strong execution and in particular, highlighting how we will use our capabilities to create meaningful partnerships with mass retailers, including the large pharmacy chains of the market. North America is a region with attractive fundamentals. The key to success in the region is predictable and consistent growth that creates value over time. As the largest player in the largest market, we have the critical mass to grow penetration and increase access to health care. And as the first 100% consumer health company, we could be more deliberate than our competitors in where we focus our resources, both from a talent and an R&D perspective. The sole focus on consumer health care allows us to make clear choices in developing superior innovation, leveraging the world-class trusted science that we will bring from GSK and linking that with deep human and consumer understanding, providing a competitive advantage. We are one of the largest consumer health care players in the region with sales of GBP 3.5 billion. This represents 37% of revenue. The business is supported by a strong regional manufacturing work and our dedicated R&D center in Richmond, Virginia, which enables us to develop superior innovation, grounded in our trusted science DNA. We have transformed our contract manufacturing network over the recent years to meet the demands of the U.S. and Canadian markets. Our supply chain is predominately locally-sourced. Franck took you through some of the incredible capabilities we have in-house. And with 90% of North American sales in the U.S., the largest market for the company, the examples I present will be focused on the U.S. market. The U.S. represents a GBP 37 billion growth market. And we are the #1 or #2 player across most of our brands. This provides us a compelling opportunity to shape and develop these categories and paves the way to increase access to millions of consumers in the U.S. We delivered a 3% sales CAGR from 2019 to 2021 at constant exchange rates, despite a net COVID drag of around 1 percentage point. Our power brands grew ahead of this with 6% CAGR, consistently gaining share and with further strong performance of local strategic brands, such as Emergen-C and TUMS. Our performance was adversely impacted by some supply constraints, mainly in the first half of 2021, which we have worked hard to address and we expect to return to more normal levels in the current year. These supply challenges did create some margin pressure, which was partly offset by synergy delivery and disciplined resource allocation. The base of 23.5% gives us a good platform from which to grow, and we are confident that we have the right structure in place to continue to deliver margin progression. As Brian has already outlined, the pillars of Haleon strategy is to drive sustainable growth. I'd like to take you through what that means in the region. We'll continue to drive household penetration of our brands, doubling down on segment-leading brands and leveraging our human understanding and consumer insights to drive innovation. We are capitalizing on new and emerging growth opportunities through our superior capabilities in prescription to over-the-counter switches, driving category growth and using data and digital to win with consumers. Finally, through our strong execution, particularly through partnerships with mass retailers, we are winning in the market at driving growth. We still have a lot of room to drive penetration broadening the number of consumers using our brands. Sensodyne is a great example of how we can double down the investment in a power brand to build meaningful and emotional connections with consumers that ultimately drive growth. Although Sensodyne has been providing sensitivity relief for over 50 years, there are still unmet consumer needs. And our brand strategy is two-pronged. First, to continue to seek expert dentists and hygienist endorsements; and second, to ensure a robust science-based innovation pipeline based on deep human understanding to meet these consumer needs. Over the past 5 years, we've successfully delivered on consumers' needs by bringing new innovation to the market each year. Each launch has grown household penetration, attracting new consumers and resulting in a 5-year CAGR of around 9%. Our focused work in omnichannel has also helped us achieve the leading e-commerce position among toothpaste brands in the market. Sensodyne continues to be the #1 dentist-recommended sensitivity toothpaste brand in the U.S., consistently outgrowing the wider toothpaste market and recruiting 3 million new consumers from mainstream toothpaste brands to the premium segment. Emergen-C is another great example where we leverage consumer insights on the need for immunity protection and leverage the immunity health platform to offer new formats and win new customers, resulting in a 2-year sales CAGR of 16%. TUMS is a great example of how we use our capabilities around leveraging our deep human understanding to drive penetration and growth with this iconic U.S. local strategic brand via innovation. TUMS is the leading antacid brand in the U.S. for relieving heartburn. It's been in the market for over 90 years and still continues to grow. Consumer insights uncovered key behaviors and product usage patterns among millennials in the U.S. Their hectic lifestyles resulted in higher incidents of heartburn. And while they were entering the category, they were also looking for more convenient and enjoyable formats. In 2017, we launched our new Chewy platform, that quickly became a blockbuster. Consumers fell in love with this new form, recruiting 3.8 million new consumers to the category. And we achieved a 3-year CAGR of 31%. The impact of Chewy bites was so significant that retailers were asking for custom flavors and packs to be exclusive for their shoppers. We were able to do this for retailers like Target and Walmart. And most TUMS' exclusive SKUs have rapidly become among the top 3 selling SKUs in the category. Our sales and marketing capabilities turn these successful partnerships with retailers into opportunities to improve our execution through that increased visibility. Coming to the second pillar of our strategy, driving growth through new and emerging opportunities. 8 out of the top 10 OTC products in the U.S. were switched from prescription brands. In the last 8 years, GSK has led the industry with 4 successful switches, as Brian noted earlier. He also mentioned that we have 2 of these switches in the pipeline, and we are very excited about these. Switches require specialized capabilities to navigate complex regulatory processes, such as managing a new drug application process with the Federal Drug Administration. As you've heard today, we have the in-house capability to deliver these, providing us with a competitive advantage and the ability to become a partner of choice for future switch opportunities. Our most recent switch was Voltaren, which positively impacted our business and also created an effect across the entire category, which could last for years. In the first calendar year post-switch, we sold approximately 45% more tubes than other prescription brands alone. This illustrates how much more access over-the-counter brands in the U.S. market can have versus a prescription. And this is just the beginning. From here, we'll continue our cycle of continuous innovations to further expand the brand to new households over Voltaren's life cycle. Examples of innovations can be channel packs, new forms or product features. This does not happen in the Rx environment. It's a genuine unlock of a significant growth opportunity when over 45% of your consumers are incremental to the category, as was the case with Voltaren. We've not only launched with excellent execution, but we also launched during a global pandemic. There was a tremendous effort to reach consumers by partnering with medical experts and physicians. These efforts resulted in Voltaren becoming the #2 brand in the topical pain segment and the #1 health care professional-recommended topical brand, all within the first year of launch. We also focused on using data to elevate the consumer experience and also win an omnichannel. We have collected and organized over 60 million consumers data points to establish a solid insight foundation that will unlock creative and execution opportunities to drive growth. Our recent Advil After my Shot campaign, with U.S. celebrity, Anthony Anderson, aimed to recruit these passive acceptive -- acceptors audience so they would feel confident in their COVID-19 vaccine experience, using Advil as their trusted partner for post-vaccine side effect care. By leveraging the right data, we were able to tailor content on the basis of where the consumer was on their COVID vaccination journey and personalize it. We saw brand engagement levels growth of 3x a Facebook standard benchmark, resulting in increased market share for Advil. We also expanded our consumer presence with the launch of a direct-to-consumer platform for ChapStick, allowing consumers to not only purchase the flavors they love directly, but also be able to personalize them. And we partnered on Amazon Direct Fulfillment to better service online orders. As society evolves, we need to engage shoppers in new and exciting ways. Our e-commerce sales today represent 12% of the total sales in the United States, and we see opportunity for growth both in this key channel. Over the past 2 years, we have consolidated our position within the e-commerce segment, doubling our sales in this channel versus where we were pre-COVID. We've obtained leading positions in multiple categories. Specifically, in oral health, the most competitive consumer health category, where we are the #1 brand on Amazon. If we look across our portfolio, our online market shares and 70% of key brands is above our offline market share, proof that we are successfully improving the overall consumer experience and meeting consumers where they want to shop. Building lasting partnerships and relationships with mass retailers is a key element of our market execution strategy. Through our best-in-class launch capabilities, we are a partner of choice for many mass retailers. And our state-of-the-art Shopper Science Lab provides insights and breakthrough ideas to co-create and build meaningful campaigns with our partners. Our category market leadership has enabled higher level strategic partnerships that have delivered impressive results and led us to win both category captaincy and aisle leadership positions. We've achieved industry-leading recognition from the largest customers, competing with companies like P&G, J&J, Bayer and others. Our scale, market position and strong shopper insight-led capability contributes to aisle leadership. At Walmart, the Advil lead aisle brand block initiative drove Walmart's total analgesic sales 1.7x faster than the market. And moving antacids to the lead aisle at CVS has increased total digestive health aisle sales with antacids growing 11% and TUMS growing 15%. By bringing the best of our sales teams together, we have created one first-in-class team that is making step changes in our execution and capabilities. Let me next share a video that shows how our strong partnership with Walgreens in the U.S. has earned us the Vendor and Innovator of the Year Awards. [Presentation]

This work with Walgreens and all of the key retailers that we work with will set us up well for the future and support further growth plans. Advil Dual Action is a great example of how we can deliver flawless execution with our innovation. Advil Dual Action is a first-to-market new drug to relieve acute pain through the combination of 2 ingredients. This was the most innovative launch in 25 years for the OTC oral pain relief category, continuing to build on the legacy of Advil. Our goal was to secure a blockbuster launch on day 1, which we achieved. To maximize the success of the campaign on day 1, we shipped over 120,000 cases and 45,000 displays, double the average amount to approximately 400 retail locations across the U.S. For our expert community, we developed a robust multichannel approach, reaching 89% of relevant health care professionals in primary care. Share of expert recommendations for the total Advil brand reached an all-time high of 17.5% in the third quarter of 2021, up 1.1 points versus a year ago. This speed to market and surround sound campaign made Advil Dual Action a best-in-class launch. As Brian shared earlier, and as Teri will give more color on shortly, running a responsible business is integral to what we do and how we do it. In addition to our environmental sustainability goals, we work closely with our partners to deliver ESG initiatives. For example, we launched a 100% recyclable toothpaste packaging initiative at Walmart in mid-2020. And we're planning a comprehensive inclusion and diversity platform program with Target, focusing on wellness for all and featuring many of our brands. We'll also continue to focus on ensuring that more consumers have access to our exceptional brands, which all serve a real health need. In conclusion, we have a strong business with amazing potential in North America. We have strong core capabilities, category-leading brands and a strategy to drive growth through increased penetration, superior innovation, a laser focus on consumer needs and excellent commercial execution. We have the right people and leadership team to win in this very large and important market. Thank you for your time. I'll now hand you over to Keith.

Thank you, Lisa. I'm Keith Choy, Regional Head of Asia Pacific. And I joined GSK from Pfizer's Consumer Health business in 2019, with 28 years commercial experience in consumer packaged goods and health care industry at Wyeth and Gillette. I'm very excited to share with you today our plans to continue to deliver attractive growth in Asia Pacific, and in particular, to elaborate on the significant digital opportunity in China. Today, I will take you through why Asia Pacific offers an attractive growth opportunity for Haleon. I'll share how our business is strongly positioned to win, given a focused portfolio of exceptional leading brands in the region where we are market leader with a track record of outperformance. Our group strategy Brian shared earlier, we are well positioned to outperform, specifically in the region we're accelerating growth in oral health and in VMS, leveraging leadership in pain relief and with our local brands combined with innovation to drive household penetration. Channel expansion allows us to capture new and emerging growth opportunities through e-commerce and data, particularly in China. Finally, we are confident our continued focus on delivering strong execution and commercial excellence will sustain market outperformance. Asia Pacific is a highly attractive region, with the world's largest population, and provides significant headroom for future growth. This is a key reason why through the Pfizer transaction, we built up a strong market position. And with positive market fundamentals, we will continue to build on this to sustain growth. Our region operates across 5 business units, serving 22 markets with 40% of sales from well-established markets, such as Japan and Australia and a high exposure at 60% of sales to rapidly growing emerging markets, including China, India and Southeast Asia. This sets us up well to sustain future attractive growth. Our markets delivered GBP 2.1 billion of sales in 2021, 22% of Haleon revenue. We have a strong regional network supply ecosystem, with about 80% of our business supplied within our region. We are well positioned in the GBP 56 billion Asia Pacific market and the leader in pain relief, VMS and key brands. Our portfolio of category-leading brands comprising the combination of international power brands as well as local brands are well positioned across to geographies with significant headroom for growth. Importantly, in the last 5 years, we have gained share in the region each year. Strong position in our key growth markets of China and India are great demonstration of why we are well placed for future. Both markets have grown double digits annually on average, over the past 3 years, with attractive fundamentals for future growth. Both markets are also supported by broad local capabilities and expertise, such as a dedicated R&D center of excellence in Switzerland, enabling us to respond with agility to rapidly evolving consumer needs. In both markets, our combination of global power brands and local brands with excellent market positions with a high distribution reach for our diversified route-to-market model and ensure that we are well placed for future growth. We have delivered accelerating sales growth with a CAGR of 8.2% from 2019. In 2021, more than 3/4 was driven by Voltaren reinforcing confidence in ongoing growth. Importantly, this growth has been driven across the portfolio, benefiting from targeted A&P with strategic brands focus. The adverse impact of COVID on cold and flu was more than offset by VMS growth. Finally, as you can see, the 2021 margin is healthy. And expansion over the past 3 years reflects cost control, rightsizing the structure and supply chain utilization. The financial performance sets us up well for continued success. You've already heard about our exceptional brands and competitive capabilities. And I would like to share now how the strategy is applied in practice to drive regional outperformance. I'll share how we apply the group strategy in the market and the delivery choices per region. Let me start with an example of driving household penetration to accelerate growth of oral health in India. We have consistently delivered growth in India with Sensodyne through targeted investment to drive penetration. We have doubled penetration and doubled market share through targeted spend on locally-relevant consumer education, on sensitivity and the effective expert and shopper engagement and net-based innovation. With a high-level urbanization in India and a strong overhead portfolio, from which we can leverage other brands, we are well placed for continued significant growth in the future. Turning to Australia, and another power brand with Panadol. We have continued to drive market share growth in paying relief, solidifying our leadership position in pain, in particular, leveraging our trusted and leading brand credentials and by driving relevance and awareness with consumers, pharmacies and doctors. A good example of business strength as a trusted leader in pain relief was when Panadol Australia took the lead in post-COVID resonation care, launching a campaign and activating a best-in-class sampling program. We reached around 80% of general practitioners and over 90% of pharmacies in the market, truly leveraging the competitive strength and advocacy by health care professionals and building strong relationships for future brand and portfolio initiatives. At the same time, we drove consumer engagement with the Panadol Care campaign, using culturally-relevant communication, which achieved an uplift in brand association of 20% and a 16% increase in purchase intent and strengthening brand equity for the longer term for this long-standing, leading and trusted brand. We are also delivering increased household penetration for intensifying the leadership of our local strategic brands. For the key market, China, where calcium deficiency is higher than 97%, we are positioned to grow our leading local brand culture by extending the brand to a Total Mobility Solution for the Chinese consumer. By doing this, we will solidify our leadership in calcium, while expanding into joint health, given the high penetration headroom. Furthermore, we have recruited new consumers for Caltrate emotionally throughout Award-winning campaign, featuring the inner strength and flexibility of the Chinese women with the local insight, Guqi, which contributed to strong brand growth as well as e-commerce growth, triple that of the market. Leveraging our trusted science innovations, such as the best-selling gender-specific calcium supplement. Caltrate designed for men and women, we are addressing our human understanding of the consumers' need for mass personalization. Moving back to India. ENO is another great example of expanding local brand leadership. And the brand continues to outperform, particularly in the antacid category. ENO is the #1 antacid brand in this category in India with nearly 50% market share. However, it's used to treat only 5 of 10 total acidity occasions. So still a significant headroom for future growth. Through targeted investments, we're expanding brand penetration reach in rural areas for culturally-relevant and targeted communication. Current volume share in these markets is 37%, up 280 bps versus 2019, with the brand also backed by our trusted science credentials, ENO gets to work in 6 seconds. Finally innovation and leveraging our human understanding and trusted science competitive advantage is also driving penetration. With increasing consumer demand of proactive health self-care, Centrum innovation such as specialized formulas for 50-plus men and women are addressing personalization and premiumization. The brand is also entering new adjacency and expanding into key wellness growth areas associated with mind, immunity and digestive health. All of these impact is leading to high incremental sales growth for Centrum. And given category fundamentals and consumers' health care increasing demand, more headroom for growth. We also see significant opportunity via channel expansion for e-commerce and data-driven increased consumer connectivity. In China, our focus is digital, digital and digital. E-commerce in China is booming and e-commerce now contributes 20% of China net sales and is still growing rapidly, with our growth at 41% year-on-year, double the market rate. To capitalize on these digital strengths, we have developed strategic collaborations with key e-retailers. For example, with Alibaba, our digital captaincy status in VMS category enables access to more data in this category, better informing consumer insight-driven marketing campaigns and commercial activities. We are proactive about emerging channels, tackling with agility. In China, for example, we quickly captured growth opportunity in the imaging online to offline O2O services market, established a dedicated O2O collaborate and effortlessly in the market. O2O service platform enable a seamless digital purchase experience for consumers that they can find product information and order medicines for their platforms, and have this delivered typically within leading 30 minutes. We developed a leading O2O market position in a number of our OTC and VMS categories, forming strategic collaborations with leading O2O platforms, such as Meituan and Eleme as part of the Alibaba Group. Alongside strong position on established e-commerce platforms, such as Taobao, we're also actively expanding into social commerce on popular social engagement platforms, such as Daoyi. We recently swapped stores for several of our brands on Daoyi's platform. So consumers can immediately purchase products on this platform and engage with the brand through content and live streaming. Our digital output has 2 key end users, the consumers and the health care professionals recommending our products. Using data and analytics as well as proprietary engagement platforms, we effectively and efficiently reach and converge end users through optimized content. Let me add more color on our digital capabilities, with a few examples in the market, supporting consumers and health care management through innovative digital campaigns such as the Sensodyne TikTok challenge, reaching over 88 million people. The Centrum Taobao partnership, driving 44% of new user growth. And our collaboration with the leading social sports platform, KEEP, supported the 13% consumption growth of Voltaren. Here's a video showing how we are bringing it all together. [Presentation]

Now let's turn to commercial excellence, which is another key driver for growth. Our focus is winning with customers physically, digitally and in increasingly omnichannel way. We achieved this by maximizing net revenue management, by providing excellent customer management, by executing personally in-store, and by maximizing shoppers reach with our go-to-market strategies. Starting with net revenue management. This remains a priority, food pricing, mix, promotional and trades by management. In 2021, net revenue management levers contributed a couple of percent to the region's growth. If the largest component of this last year pricing took them to offset the recent material cost increases and consistent with peer action across the markets. With customer management, we partnered to improve the shopping experience, benefiting us, the retailer and the shopper. In Southeast Asia and Taiwan, we grew share in 90% of the business with key accounts, through improved shopper understanding and improved effectiveness. Our continued investment in AI tools and advanced technologies, such as our Shopper Science Lab and Eye tracking informed our commercial practices to improve the experience of retailers and consumers. Retail execution is paramount. Our oral store is initiative where we define what success looks like on shelf and then measure our execution against that. Looking at key metrics, such as self, key assortment and placement of shelf compliance. In Japan, as an example, this significantly improved our planogram compliance to 94% on oral care enabled by image recognition technology. Finally, our go-to-market strategy ensures we reach as many shoppers as we can in the most efficient and effective way, by covering the right stores at the right time and adapting as routes to market evolve, like O2O channel in China. All these initiatives are building strong capabilities, both now and for the future. We are committed to running a responsible business across all areas of our business. As you can see on the slide, this covers a range of important environmental methods. And some examples are shown here. We have strong ambitions to do more, as Teri will talk about later. In summary, Asia Pacific is a highly attractive region, with high opportunity for future growth. We are confident that our portfolio of exceptional power and local strategic brands, combined with our market leadership, position us to outperform. We have a clear strategy in the region to drive penetration, capture growth from new and emerging opportunities through excellent execution from our talented team. With that, I'll hand over to Filippo. Thank you.

Thank you, Keith. I'm Filippo Lanzi, and I am the Head of the EMEA and LatAm. I'm originally from Italy, but I have lived and worked in many countries around the world in both the FMCG and consumer health care industries working at Novartis, J&J and Nestle. I joined the company in 2015. And since then, I have worked in multiple roles, both in Europe and Asia. I am excited to set out today how we intend to build on our leadership position in EMEA and LatAm and execute on the compelling opportunities for growth. This region offers an attractive and balanced growth profile of both developed and emerging markets, where we are positioned to outperform based on our strategy of driving household penetration, unlocking new and emerging opportunities and strong commercial execution. In particular, our leading position in pharmacy is a competitive advantage, helping us to drive excellent execution in the market. EMEA and LatAm is about scale, diversity and opportunities. The region is home to 44% of the world's population and presents Haleon with significant growth opportunities across this diverse range of markets. We serve about 150 markets, and we represent 41% of the business revenue, around GBP 3.9 billion. 44% of sales come from emerging markets, like Middle East, Africa and Latin America and 56% from developed markets, such as the U.K. and Germany. Our sales are well balanced across our categories, with oral health being the largest, representing 34% of sales, followed by pain relief, representing 28% of sales. We have a fully integrated business with 13 factories, and we are organized into 7 business units, 3 of these are in developed markets and 4 in emerging markets. And I will lean into the example of maximizing the potential of emerging markets later. Given that I'm constrained today, much of the presentation for emerging markets will be focused on the Middle East and Africa, with more limited detail on LatAm. We are well positioned in the GBP 56 billion addressable market for EMEA and LatAm, and the leader in pain relief and respiratory health, with strong positions in oral health and VMS. Importantly, we have category-leading brands in Sensodyne Polident, Centrum, Voltaren and Otrivin. We are well positioned to build on this industry-leading portfolio and generate future growth. Over the past 2 years, we have generated a sales CAGR of 3.9% at constant exchange rates despite a net COVID drag of around 1 percentage point. We have leveraged meaningful net revenue initiatives across our markets to manage net prices and improve mix. Since 2019, we have driven nearly 600 basis points of margin expansions across the region, reaching 24.8 percentage adjusted operating margin in 2021. We have delivered this benefit to the margin through Pfizer synergy delivery, supply chain rationalization and disciplined resource allocation. We have now a solid base and the margin structure to sustain our topline growth. Our strategy to outperform is structured around 3 main priorities: firstly, we will continue to expand therapeutic oral health and increased relevance of OTC brands to drive household penetration; secondly, we will leverage new and emerging opportunities by unlocking VMS growth and maximizing the full potential of emerging markets; and third, we will deliver excellent commercial execution, leveraging our leadership in pharmacy and expanding rapidly in e-commerce, all of this underpinned by our winning culture and by operating as a responsible business. The first example of how we drive successful household penetration is with our leading position in therapeutic oral health. Toothpaste accounts for around half of the oral health care category. And the GBP 5.1 billion toothpaste market is 70% mainstream and 30% therapeutic, with the latter growing around 6x faster. We are well positioned, having 2 of the top 5 toothpaste brands in our portfolio. But beyond this, a key competitive advantage is to have 81% of our portfolio in the fast-growing therapeutic segment, with Sensodyne being the leading brand with 60% market share of this segment and driving about 3/4 of this growth. Sensodyne has delivered a 9% sales CAGR over the last 11 years, with further significant headroom to grow. As nearly 1 in 3 suffers from 2 sensitivity, but only 1 in 3 people in this group treat with a sensitivity toothpaste. Over time, we have developed a proven approach to drive growth and penetration with our insight into consumer needs being at the center of the strategy. Building awareness of the condition of sensitive teeth is a key component of this, and we engage with both consumer and dentists, leveraging our expert network and brand innovation capabilities to offer specialist solutions to satisfy different need states. This powerful model has driven our share as high as 30% in some markets, and we see significant scope for share gains across the region. A second key example of driving household penetration is in pain relief. The pain relief category is large and growing. This is no surprise as pain affects almost everybody, with more than 90% of adults experiencing pain in a given year and more than 70% suffering from muscle and joint pain. Beyond the incidents at the new state level, frequency of sufferance is also very high for certain consumers, with 1 in 3, for instance, suffering back pain every week, and 1 in 5 suffering weekly headaches. Here, we are well positioned with our leading power brands, Voltaren and Panadol to help address the significant unmet needs of customers, delivering a topline of more than GBP 1 billion. Voltaren is the #1 brand in the total OTC market in EMEA and LatAm region and leads the topical pain relief category with a 30% share, while Panadol is the #2 brand in the systemic pain relief category. Looking at Voltaren in more detail. It has been growing at around 5% CAGR over the past 6 years. And still, similarly to Sensodyne, we see significant potential to drive growth. Our approach is to target demographic and need states to drive uptake and penetration. Currently, Voltaren is used in 1 out of 5 occasions of back, neck and muscle pain and by only 1 out of 5 consumers aged between 45 to 70. Driving penetration and growth start by building our distinctiveness, through solution consideration, supported by scientific innovation, expert advocacy and strong point-of-sales activation to help shoppers navigate the category. Focusing on our R&D capabilities, we seek to deliver specialists and safe products for the different manifestations of pain. Here, for example, you can see a specific easy opening solution for the osteoarthritis sufferers. And with the additional advantages of a unique formulation that delivers benefit at the point of pain for a certain duration of time. You also see Volta Natura, a recent launch, which taps into the natural consumer trend. Moving on to the second pillar of our strategy. Here, I will cover our new and emerging opportunities, beginning with VMS. In this large and growing category, we have a big opportunity, thanks to the recent Pfizer integration. While we are #3 overall, our global brand Centrum is already the #1 VMS brand in the region. And we also have very strong local and strategic brands with leadership positions in key markets. Our strategy is to unlock VMS growth by leveraging scale and innovation across markets. Since we integrated the Pfizer portfolio, we have been growing Centrum at an 18% sales CAGR ahead of the market. One key growth opportunity is based on leveraging the scale of our footprint, both in terms of the number of countries we can activate the branding, but also the distribution reach we can give to this franchise. The other growth lever is based on extending the brand across different need states and formats. For example, we are entering the immunity segment and general expansions of our Gummies format. Let me now move to the geographic dimension of the second pillar of the strategy, which is about capitalizing on the potential in emerging markets, where we have further room to grow our business. 4 out of the 7 regional business units are focused on emerging markets, and we have set up extensive supply networks. From a portfolio point of view, we are strongly positioned to win. Firstly, 70% of our sales come from our power brands, where we have proven models and scale advantage. Secondly, we also have local strategic brands with leading positions. For example, GrandPa, pain relief brand in South Africa, is the #1 OTC brand. And ENO is the #1 antacid brand in Brazil. Now let's take a closer look at 1 of these 4 business units, which is Middle East and Africa, which has been consistently delivering double-digit growth over the past 2 years with sales of around GBP 700 million in 2021. We have more than 80% weighted distribution coverage in Middle East and Africa. And we are operating across different channels, growing twice the market. Diving deeper into MEA, we already have leading positions in the categories we operate in. We are #1 in pain relief and respiratory health, and #2 in other health and VMS. To give you a sense of the growth opportunity, we still have 50% of our net sales, driven by 2 brands, Panadol and Sensodyne. Reflecting our strong market positions, we are well placed to both leverage our portfolio and execute strategic initiatives to generate further growth through expanding our brand offering, which is driving growth of Centrum, and through supply chain and go-to-market strategies. Now let's move to the third strategic priority in EMEA and LatAm to drive sustainable growth, which is about excelling in commercial and digital execution across all channels. This is a topic which is close to my heart, and excelling in this requires relentless focus on being brilliant at the basics on one side, but also constantly looking for ways to evolve how we do things on the other. We hold the #1 position in pharmacy, which accounts for 60% of sales in the region and which I will cover separately. The mass market is very important and accounts for 35% of sales. And here, we have a very strong reach with more than 80% weighted distribution. Now e-commerce is a relatively smaller proportion of the region sales, but it's growing at around 30% per year. And its contribution to the overall sales mix in the region varies from 1% to 14%, given the variety of regulatory environments and digital maturity across the countries. We are #1 in digital OTC in Russia. And in the U.K., we have more than 25% market share, growing ahead of the U.K. market. In line with our strategy to win in e-commerce, we've been investing in capabilities across all 7 business units. And we have been supplementing this by our digital accelerator hub, which leverages know-how from third parties and accelerates the scaling of learning from different use cases. Before talking through pharmacy in more details, let me share a short video to show you some of our shopper capabilities, which we apply across channels. [Presentation]

Expanding on our performance in pharmacy. We are around 1.5x the size of our nearest rival in OTC in this channel. We have a number of important competitive strengths here. This includes a dedicated sales force at scale with digitally-enabled account management and in-store execution capabilities. This is key to manage and generate demand by maximizing the point-of-sales potential and by improving shoppers' experience. Additionally, a core element of our integrated pharmacy strategy is distinctive expert engagement. Here, the purpose is to help health care professionals to best serve their own customers through deep understanding of the distinctive science behind our products and their effectiveness in meeting specific patient needs. Health care professionals are engaged face-to-face through our dedicated field forces, but also leveraging digital solutions like our proprietary health app portal and webinars. As in the other regions, we know that running a responsible business is integral to what we do. Here you can see a number of our important initiatives to reduce carbon and CO2 emissions as well as water consumptions in our sites across the region. In addition, we are innovating to create more sustainable products based on renewable materials, such as the first carbon-neutral toothbrush in Germany. You are going to hear a lot more about Haleon ESG initiatives from my colleague, Teri. In summary, Haleon is the leader in the EMEA and LatAm region, with an attractive and balanced growth profile across the different markets in which we operate. We have clear competitive strength, and we are well positioned to execute on the strategy I have outlined today. Personally, I am excited and confident about our prospects. As we drive our business forward from the strong base that we have built up over a number of years, we have the portfolio, the people and the patient to deliver. With that, we will now pause for a break before Teri. We will see you again in 15 minutes. Thank you. [Break]

Welcome back. My name is Teri Lyng, and I'm Head of Sustainability. Prior to this role, I was the Head of Quality for GSK consumer health care. I have over 30 years experience in pharmaceutical and health care companies, with over a decade in consumer health care, in companies such as Wyeth, Merck and Novartis. As Brian has already discussed, our purpose is to deliver better everyday health with humanity. I'm going to take you through our ESG strategy, how it aligns with our purpose and why being a responsible business is truly integral to all we do. The health of the world, socially and environmentally, directly affects the health of the people. Therefore, the focus of our ESG strategy is to play a positive role in tackling the environmental issues and social barriers to better everyday health. People can't truly enjoy better everyday health if their living environment is unhealthy or they're living in a social environment with exclusion or bias. Our purpose and brands bring distinct and meaningful solutions to everyday health, meaning that we are strongly placed to have a positive impact. Our science heritage and extensive quality and compliance experience give us an environmentally strong foundation. And we also have a relatively small carbon and plastic footprint. We are well positioned to make a difference in health inclusivity. Supporting colleagues and communities health and well-being is a clear focus for us. And this includes ambitious targets for inclusion, equity and diversity, all while being committed to building strong corporate governance. Brian has already spoken on our purpose. And this puts us in a strong position to have a positive impact in relation to ESG. The impact our brands have on the environment and in society matters. Consumers are expecting brands to take action on issues they care about, and we have a powerful portfolio of exceptional brands that deliver better Everyday Health. As Brian shared earlier, when compared to our HPC global peers, we have a structurally advantaged position. And our environmental footprint is lower on key carbon metrics for both footprints and intensity. And we have a far lower plastic packaging footprint as well. This means that we can have a dual focus. Continue to mitigate any environmental impact on our operations and focus on positive impacts and opportunities. Our portfolio is made of precisely dosed, small-sized premium products, bought and used over an extended period of time. We are less exposed to agricultural ingredients. So our products have a relatively low resource intensity compared with peers. As a result, we have potentially lower financial exposure to carbon taxation, plastic regulations or taxation and energy costs. Given our experience in a highly regulated industry and our strong trust foundations, we have been taking action to protect the environment for many years. This slide illustrate some examples of progress being made across our 5 priority areas. Firstly, we have reduced carbon use by installing solar power at 12 out of our 24 manufacturing sites. And in 2022, we will reach 100% renewable electricity across our operations. Secondly, we have improved the sustainability of our packaging. In 2021, we launched 40 million recycle-ready toothpaste tubes in Europe. This was part of our ambition to make over 1 billion toothpaste tubes recyclable by 2025. We have increased circularity of our packaging and our key oral health brands in Europe are now in recycled board cartons with around 80% cartons having recycled fiber content. We are also committed to reducing the Virgin Petroleum based plastic used in our packaging. Thirdly, we are focused in trusted ingredients sustainably sourced. Currently, 80% of glycerin, our most material palm oil derivative is RSPO certified. We have also introduced a trust index across all our ingredients. Our final 2 priority areas concern operational waste and water usage at our sites. All our sites are now 0 to waste landfill and our improving waste circularity. In Oak Hill, New York, toothpaste waste is being recycled into cement mix. And in Suzhou, China, product waste is being recycled into [indiscernible] mash to make building bricks. And our manufacturing sites and water-stressed basins, we have reduced our water usage by 29% since 2016, including our site in Cape Town, where we reduced municipal water use by over 50% and expect to achieve wider neutrality by the end of this year. While our environmental footprint is modest compared to peers, we are taking meaningful steps to mitigate our operating environmental impact. On carbon, we're firmly committed to continuing to reduce our footprint. We aim to reduce our net Scope 1 and 2 carbon by 100% and our Scope 3 carbon from source to sale by 42% by 2030. Both of these are aligned with the 1.5-degree pathway set out by the science-based targets initiative. As a stand-alone company, we will set a longer-term 2040 carbon Net Zero goal informed by the latest SPTI guidance. Secondly, on packaging, we will reduce virgin petroleum-based plastic by 1/3 by 2030 with a 10% reduction by 2025. We will also develop solutions for all product packaging to be recyclable or usable by 2030. As we cannot achieve these targets alone, we will work with partners to globally and locally collect, sort and recycle consumer health care packaging at scale by 2030. And thirdly, to ensure we use trusted ingredients that are sustainably sourced, all of our agricultural, forest and marine-derived materials will be sustainably sourced and deforestation free by 2030. Ensuring ingredients in our products consistently have a strong trust profile. I'd like to share a few examples of our sustainability initiatives in our markets. For German consumers, plastic waste is a key concern and the share of eco active shoppers is continuously growing, particularly among the young demographic. At Doctor Best, we introduced a bamboo toothbrush and plastic-free packaging, addressing this and capitalizing on Doctor Best's reputation of scientific expertise and product performance. Our Voltaren innovation incorporated trusted natural ingredients, to appeal to consumers looking for alternative pain therapies, broadening our consumer reach. As part of the Pulpex consortium with Diageo, Unilever and PepsiCo, we are exploring a first-of-its-kind pulp packaging solution. The scalable paper bottle is 100% PET free made from sustainably sourced pulp, meets food safety standards and will be recyclable in standard paper waste streams. Turning to our supply chain and retail partners. We are proud to be participating in action for sustainable derivatives, an industry-led collaboration, aimed at achieving responsible production and sourcing of palm oil derivatives. Our sustainability commitments are also driving strong engagement with our retail partners. Everyday Health is directly impacted by social exclusion. For example, people with disabilities are more than twice as likely to report finding health care provider skills inadequate and nearly 3x more likely to report being denied care. People experiencing discrimination are 2x to 3x less trusting of health care workers and systems. They delay seeking health care and are less likely to follow medical recommendations, educating and empowering people to take more active self-care, can relieve some of the burden on overstretched health care systems by equipping people to manage self treatable conditions themselves and encouraging more preventive care. In our recent study, 8 out of 10 people agreed managing their health is their own responsibility but only 2 out of 10 felt very confident in doing so. When people are more engaged in self-care, they spend more on health care products and services. With the U.S. IRI study in January 2022, showing that those most proactive consumers spend 12.5% more than the average on GSK Consumer Healthcare products. As a world-leading consumer health care company, we want to help overcome the social barriers that continue to put Better Everyday Health out of reach for too many of the world citizens. We aim to empower millions of people a year to be more included in opportunities for better everyday health. We plan to reach 50 million people a year by 2025. We will do this through thought leadership to better understand the drivers of health inclusivity and inform actions on our own and in partnerships on programs and policy to improve health inclusivity. We will do this through educating and empowering self-care, delivering health literacy and education programs directly to individuals and to health care professionals to help people understand how to look after their everyday health and feel confident in doing so. And we will do this through our brands, providing inclusive products, services and resources that help more people to access the care and support they need and purpose into action programs, which tackle specific barriers to Better Everyday Health. As part of thought leadership work on inclusivity, we are partnering with the Economist Intelligence Unit and leading academics at University College London to create the health inclusivity index, which will launch July 2022. It is intended to facilitate meaningful dialogue with key stakeholder groups who share an interest in improving health inclusivity, particularly policymakers, health care providers, external experts and investors as well as the media, consumers and customers. It will be supported by an interactive hub through which users will be able to engage with the findings and analysis. The results will provide insights to inform our own actions and to help identify opportunities for partnerships and wider coalitions of action in the medium to longer term to measurably improve health inclusivity. To educate and empower people to take better self-care, we are providing trusted expert information to consumers and health care professionals. With consumers, our products and brand experiences make it easier to take active control of health, to adopt better health behaviors and importantly, sustain them. We work with dentists, doctors and pharmacists to support consumers with everyday health needs providing tools and insights for trusted advice, raising condition awareness and increasing knowledge for patients. We also work with our retailers. With TESSCO and the Aqua Fresh Shine Break program, we educated children in schools and in-store on improved oral health habits driving a 20% sales uplift ahead of the children's oral health category. We continue to champion the importance of self-care and is a leading member of the Global Self-Care Foundation. We supported the development of the self-care readiness index in collaboration with the WHO. Let's talk about leveraging our brands to have a positive impact on Everyday Health and Otrivin, its purpose goes beyond fulfilling a seasonal need to unblock one's nose. We want to make sure that we are educating people to understand the health impacts of impure air and air pollution and talk about clean breathing. This goes beyond the seasonal need to unblock your nose. And in tandem, creates a business opportunity. We have created programs to raise awareness that air pollution affects almost everyone, such as the air bubble that was seen at [ COP26. ] We have developed expert programs to help pharmacists give easy-to-adopt advice, which includes regular use of Otrivin breathe clean amplified by our partnership with Walgreens Boots Alliance. We are planning category creation pilots with retailers in key markets to drive trial and repeat, tailored to local needs, such as traffic pollution in the U.K. or dust in India. In the U.K., the Otrivin actions to breathe cleaner school program started in November 2021, educating on pollution and working to mitigate this across 27 schools participating and over 1,000 children. A global rollout is planned for 2022. Moving on to Theraflu. Its clear purpose is fighting for a flu safe world, but what if you don't have the resources to recover. We want to make sure that we are educating people to understand what it means to live in a flu safe world. It's impossible to have a flu safe world if people continue to work while sick, we have partnered with the Good Plus Foundation to create the rest and recover Fund, a $150,000 fund to provide $1,000 onetime rest pay micro grants to support people battling the financial and logistical challenges of taking a day to rest and recover when faced with unexpected mild illness. We have launched an awareness campaign to amplify the recovery message whilst driving awareness of the Theraflu mission. This has resulted in a 17% increase in Theraflu brand favorability since the campaign launched and a 7% increase in likelihood for consumers to recommend Theraflu. We are committed to contributing positively to society through our strategic social impact partnerships and the work we do to support our colleagues in the communities we source from. Examples include our partnerships with Smile Train and Forum for the Future. As part of our partnership, Forum for the Future and other partners, including Walgreens Boots Alliance, published a special report at 2021 Climate Week NYC on the inherent link between planetary health and human health. The report includes a call to action for businesses with detailed steps they can take to reduce their own impacts on climate change. Within our supply chain, we are committed to responsible sourcing and supply chain transparency. Our suppliers must comply with all laws and regulations as well as adopt our anti-bribery corruption and human rights principles. We have joined Manufacture 2030, a platform to drive consistency and transparency of supplier sustainability reporting. Collaborations such as Energize, increased access to renewable energy for suppliers in the pharmaceutical sector. We're a member of multiple supplier diversity advocacy organizations, such as WEConnect, leveraging insights and resources to inform the design, effectiveness and performance of our supplier diversity programs. Focusing on our people, we are building on GSK's current IND goals of at least 45% female representation in senior roles by 2025, and at least 30% and 18%, ethnically diverse leaders in our VP and above roles by 2025 in the U.S. and U.K., respectively. Leveraging these strong foundations, to create a truly differentiated and best-in-class inclusion, equity and diversity approach in Helion. We expect to provide an update to these targets in due course. We are committed to equitable and fair pay across the business. And as a U.K. business, we will measure and report our progress transparently on gender pay gap. We are also building strong corporate governance to monitor and control. As outlined by Brian earlier, with the announcement of Sir Dave Lewis as Chairman Designate and further Board and committee appointments underway, you can expect to see transparent reporting and disclosure from us in the future as well as adherence to a robust code of conduct and risk management. Our business performance and responsible business scorecards, are part of regular performance monitoring at the group level and for our 14 business units. As Brian also shared earlier, doing the right thing is fully embedded in our culture. We have ambitious environmental and social goals, intrinsically linked to our purpose to deliver better everyday health with humanity. This purpose is embedded in our operational practices and processes at all levels. And we have a strong and structurally advantaged environmental foundation to make a difference. We are strongly placed to have a positive impact, given our purpose and brands and have a compelling opportunity to make a difference in health inclusivity. We are setting ambitious targets for inclusion, equity and diversity, all while being committed to building strong corporate governance. With that, I would now like to hand over to Tobias.

Thank you, Teri. I'm sure that by now you've been able to get a sense of the group's strengths and why we're excited about the future. I'm Tobias Hestler, CFO Designate of Haleon, and I have over 20 years' experience as a finance professional and CFO in both health care and consumer industries. I joined GSK from Novartis and have been working closely with Brian for a number of years to shape our business. I'm going to take you through our financials and share how the significant change agenda that we've driven over the last few years, supports our confidence in both medium-term outlook and continued market outperformance. Over the past few years, we have built a company strongly positioned for growth. We have reshaped our portfolio through an extensive rationalization program and completed the Pfizer integration to plan. We optimized our operating model, strengthening our go-to-market capabilities and delivered significant efficiencies in a sustainable way, whilst at the same time, continuing to invest in our business and brands for the future. The results of our strategy and execution to date can be seen in our strong financial results. In the medium term, we expect to deliver organic annual sales growth of 4% to 6% and sustainable moderate margin expansion at constant currency. I'll go into these in more detail shortly. All references to forward-looking statements throughout this presentation are provided at CER. Finally, you've already seen our priorities for disciplined capital allocation, which will support delivering strong shareholder returns in the coming years. Our portfolio has been significantly reshaped since 2015 through a deliberate strategy to build a consumer health care company, solely focused on the attractive and relevant consumer health care sector. Through our 2 joint ventures and the targeted divestment program, we have significantly increased scale, while also increasing the share of our business in higher-growth categories, markets and channels. For example, we are focused on power brands, which have higher growth rates than the overall group and which are now just under 60% of our revenues compared with 44% in 2015 and which will be a key driver of growth in years to come. We have built a leadership position in VMS, now 16% of our revenues, which has a higher growth rate than the other categories. We have strengthened our position in key geographies. We are now the market leader in the U.S. and significantly strengthened our position in China. These 2 markets now account for over 40% of our revenue providing a strong route to market platform in key markets for future growth. Finally, our e-commerce business is now 8% of revenue and has doubled over the last 2 years. Delivery of this strategy has fundamentally reshaped our portfolio over this time and has positioned us well to continue to deliver above-market growth. Beyond the reshaping of our portfolio, we've made significant improvements to our footprint and operating model. We've delivered a sustainable increase in our margin to support reinvestment for growth. And we have continued to invest in brands, capabilities and tools. Let me take you through some of this to give you a sense on what we have achieved. Firstly, we've optimized our footprint, reducing the number of manufacturing distribution R&D sites to rightsize our business and provide room for future growth. Secondly, we have significantly improved the efficiency and effectiveness of our A&P spend. We doubled digital media spend over the last 2 years. And as you have heard today, this is now more targeted on driving growth and return on investment. And as a result, in the U.S. and China, most of our A&P spend is now digital with more to come in other markets. We also rebalanced our spend behind our power brands to drive future growth from our biggest opportunities and increased consumer-facing A&P with a strong return on investment from data-driven media spend. Finally, we transformed our operating model and upscaled our capabilities to support stronger execution. We empowered our local markets to innovate, increasing our agility to adapt to changing consumer health care needs. We invested in data and tools to drive improved data-led decision-making and stronger returns on our investments. And we have built specialized tools that enable better execution. For example, our Shopper Science Labs, which you heard about earlier today from Lisa and Filippo. These changes enabled us to deliver a 325 basis points improvement in margin despite increasing A&P investment and adverse currency pressure. Our strategy since 2019 has delivered strong financial results with good momentum for the future. Before I take you through the numbers, a few comments on the basis on which these figures are prepared. Starting with the asset parameter. Our 2019 actuals only include 5 months of contribution from the legacy Pfizer results. As a reminder, we closed this transaction on the 1st of August 2019. The financials also reflect the current Haleon perimeter. And finally, sales growth is provided on a like-for-like basis, showing the underlying historical performance, assuming 12 months of the portfolio in the prior year. I will focus on the results over the last 2 years as this reflects the go-forward business, I will take you through the key line items in more detail shortly but let me draw out the highlights. We delivered a sales CAGR of 4.4% over the last 2 years despite a net negative effect from COVID with a healthy balance of price and volume. Turning to profitability. We have a leading gross margin relative to our peers at 63%, demonstrating the strength of our brands, our optimized manufacturing footprint and constant focus on price and efficiencies to offset inflation. Importantly, this margin is sustainable. We delivered an adjusted operating margin of 22.8% in 2021, which was up 325 basis points. This was achieved whilst investing in our brands and offsetting adverse currency impact. Let me spend a moment sharing how this margin compares to the 2022 outlook, which GSK set out when it announced the Pfizer deal, which was a mid- to high 20s margin for the business as a segment of GSK by the end of 2022. As I mentioned, we ended 2021 with a 22.8% margin. Firstly, the margin ambitions from 2018 were provided at CER using 2017 foreign exchange rates. The impact of adjusting for this using 2021 currency rates would be a margin that was approximately 1% higher. Second, the financials presented today reflect the Haleon parameter and this space is how we will report going forward. If these financials were instead presented on the basis of our business being a segment of GSK, this would result in a 50 basis point increase in our 2021 margin. Third, we disposed of more brands than originally planned. This was the right thing to do, resulting in a more focused portfolio but resulted in an incremental reduction in margin of approximately 70 basis points. Finally, as you know, we almost fully delivered on the original funds of GBP 500 million synergies in 2021, and we will realize around a further GBP 120 million of synergies taking the total to around GBP 600 million. Adjusting for these items, we have delivered against the margin targets set out in 2018, whilst reinvesting 25% of the transaction synergies as planned to drive growth. Moving on to cash flow. We delivered approximately GBP 1.5 billion of underlying free cash flow in both 2020 and 2021. We delivered strong momentum during this period. Despite the impact of the pandemic, the focus on integration of the Pfizer assets, which is now complete and our focus on separation activities, which will be completed later this year. All of this gives us confidence in our ability to both grow our top line and deliver further margin expansion over the medium term. As Brian shared with you earlier, we're focused on delivering sustainable outperformance and attractive shareholder returns. Our approach is reflected in this model. This model's foundation is our scale and strong brand position, which supports attractive gross margins. Alongside operational leverage and efficiency programs, this enables us to invest in our brands in a sustainable and disciplined way for growth. This underpins our confidence to consistently deliver 4% to 6% organic annual sales growth ahead of the market in the medium term. Balancing this investment to support growth, we will deliver sustainable moderate margin expansion. Coupled with strong cash flows and high cash conversion, this creates the capacity to support our disciplined capital allocation priorities, which will prioritize reinvestment in the business, dividends and deleveraging in the near term all underpinned by a commitment to maintaining a strong investment-grade balance sheet from the outset. I will now take you through each element of this framework underpinning the delivery of attractive growth and returns. We delivered a 4.4% sales CAGR over the past 2 years, which represents a solid base for future growth. As we look forward, we expect 4% to 6% organic animal sales growth in the medium term, which we are confident in delivering based on a number of reasons. A large and growing part of our business is in higher growth categories and geographies, which increases our growth profile. We have clear strategic building blocks to drive further growth. As Brian highlighted earlier, by increasing household penetration and capitalizing on new and emerging growth opportunities across channels, geographies and portfolio expansion. As a reminder, we see attractive Rx to OTC switch opportunities but do not need to rely on these to deliver on our sales growth target. Importantly, all of this is underpinned by A&P and R&D investment, which will grow ahead of sales growth. And finally, this is supported by the strong execution across all our markets that Keith, Filippo and Lisa took you through earlier. The annualized organic sales growth of 4.4% between 2019 to 2021 shows that we outperformed the market twofold despite the negative impact from the pandemic and our focus on integration and separation activities. This performance was supported by our reshaped portfolio with greater focus on higher growth brands, categories and regions. We saw a step change in digital revenues, reflecting our new approach. We increased our A&P ahead of the rate of sales growth by approximately 6% per annum in a disciplined and targeted manner to drive growth. We also delivered a healthy balance of both price and volume growth to a period, a trend we have delivered over time and one that we will look to maintain going forward. Over the last 2 years, we delivered very strong performance across the majority of our categories. Our oral health and VMS categories, which combined account for 44% of our sales outperformed the market, and we expect these categories combined to deliver mid- to high single-digit organic growth and to make up around 50% of our sales by 2025. In pain relief, which is 23% of our sales, we outperformed the market, whilst our respiratory category performed in line with the market. Our Digestive Health and Other category grew by nearly 2% with good performance in digestive health, which represents about half of the category. But some drag from the remaining brands, a few of which were adversely impacted by reduced impulse purchases given COVID over the last 2 years. I've mentioned that our sales growth in the 2-year period to 2021 was subject to a net negative impact from the pandemic. The material impacts were in 2 key categories. In VMS, the pandemic produced about 60 basis points tailwind for group level growth. This was mostly in 2020 but VMS showed continued strong performance in 2021, and we expect to continue to grow off this higher base. In contrast, our respiratory category declined, primarily due to a historically weak cold and flu season in Q4 '20 and Q1 '21. We estimate this created about 110 basis points headwind for group level growth over the period. As you saw in our recent Q4 results, we are now seeing a strong recovery in this category as the market returns to growth. On a combined basis, we, therefore, believe that our 4.4% sales growth was subject to a net negative COVID impact of around 50 basis points. That 4.4% sales growth was ahead of the market, which grew around 2%. Turning now to regional performance. You've already heard from Filippo, Keith and Lisa on the regions, we have attractive growth opportunities across all 3, so I won't repeat that here. We will report results on these 3 geographical segments, consistent how we manage and run our business. APAC is and will continue to be key for the group and now accounts for 22% of our global sales, and we expect that share to grow in the future. As you think about our historical performance, I did want to highlight the negative COVID impact experienced in North America and EMEA and LatAm, mainly due to the larger share of the respiratory category in these regions. Although as reported in our Q4 results, we have seen a rebound in the respiratory business. In EMEA and LatAm, we expect good growth in emerging markets, combined with lower but stable growth in Europe, leveraging the leading share in already mature markets with already strong margins. In North America, we expect improved momentum and growth as the reach recovers from the challenges in 2021 from the drag from cold and flu as well as supply challenges. As Filippo and Keith set out earlier, we have good growth opportunities both from penetration and increased portfolio expansion in our emerging markets. And not only do we have strong positions in these markets, but also robust plans in place to fully capture future growth. In aggregate, emerging markets account now for 32% of Haleon revenue. Again, proof of our increased exposure to higher-growth markets, which will be supportive of our growth targets going forward. We expect these markets to continue to grow high single digits. Looking ahead, at the category level, we have clearly defined priorities and plans to capitalize on the growth opportunities we see throughout our portfolio, which are anchored in the strategy Brian took you through. I won't talk through all of the points on this page but let me highlight a few examples for you. In our health, you have seen across all our regions, how we are driving increased penetration and delivering on an unmet consumer and health need with headroom across all of our regions for future growth, particularly in high growth markets like India. In VMS, Flippo has highlighted the strategy for further geographic rollout and focus on Centrum and local strategic VMS brands across EMEA and LatAm and in OTC, we see opportunities for growth right across our categories. This includes leveraging our strong innovation capabilities, including 2 Rx to OTC switches in the pipeline. And finally, on channel expansion, Brian has already laid out our strong performance and significant opportunities for e-commerce penetration. Digital sales now account for 8% of our revenue globally and even higher at 12% in the U.S. and 20% in China. Our e-commerce sales have doubled in just 2 years from GBP 0.4 billion in 2019 to GBP 0.8 billion in 2021. We are growing ahead of the industry, thanks to investment to date. And are focused on delivering outperformance relative to the market in this key growth channel. Stepping back, there are 4 key growth drivers which underpin our medium-term sales outlook, all supporting our expectations in the medium term. First, from a category perspective, oral health and VMS combined should reach about 50% of the business by 2025. And we expect these categories combined to deliver organic sales growth in the mid- to high single digits. Second, from a geographic perspective, given the continued outperformance expected in emerging markets, we expect these markets to continue to grow high single digits and as a result, to be in the high 30s as a percentage of group sales by 2025. As Brian highlighted, from a channel perspective, we expect e-commerce sales to continue to grow strongly. And as a result, the mid-teens as a percentage of group sales by 2025. And from a portfolio expansion perspective, assuming successful trials and approval, we expect the 2 Rx to OTC switches to add an incremental 1% revenue in year growth, each when launched from 2025. In summary, all of this sets us up well for future sustained growth. With that, let's move on to the second part of our model, how we convert sales growth into sustainable moderate margin expansion. As I explained earlier, we have a strong track record of delivering operating margin improvement. Between 2019 and 2021, we expanded our adjusted operating margin by 325 basis points after around 1 percentage point adverse currency impact. Strong operating leverage increased our margin by around 2 percentage points, driven by a healthy balance of price and volume, product mix improvement and cost efficiencies. At the same time, we reinvested over GBP 200 million into A&P with A&P growing at approximately 6% and ahead of our sales growth. We then had a couple of further impacts from our transformation. Synergies of around DKK 500 million contributed 5 percentage points to the margin. And the divestment program to exit growth-dilutive brands, which is now completed, reduced margins by around 2 points. This took us to a 2021 healthy and strong adjusted operating margin of 22.8%. Our investment in growth is enabled by an attractive margin profile. We have an industry-leading gross margin of 63% compared to a peer average of around 51%. More broadly, we have a lean cost base, which is reflected in our 2021 adjusted operating margin of 22.8%. We then optimize these over time with 3 further levers. First, net price and mix optimization, including strategic initiatives such as increased higher-margin power brand penetration in key markets like India or increased focus on trade investment spend to improve our net revenue management. Second, continued manufacturing, supply chain and procurement efficiencies. Here, further improvements in our supply chain are allowing us to optimize our third-party manufacturing network and achieve procurement savings. Third, continued cost discipline across processes, systems and stand-alone costs throughout the business. This framework will allow Haleon to create capacity to reinvest in A&P in a very focused way at a rate faster than sales growth, while still delivering moderate margin expansion. I'm confident that we have the right discipline and focus and the right tools and analytics to support us in our A&P allocation and investment processes to deliver both strong future sales growth and strong returns on this incremental investment spend. We expect moderate margin growth in the medium term. We are very confident that there is no need to change the pace of investment in our brands, which has served us well over the last few years. The news today relates to the cost of running CH as a stand-alone public company. These will be around GBP 175 million to GBP 200 million per annum. Importantly, we have been working hard to mitigate these. And today, we are also announcing increased Pfizer synergies, taking the total to around GBP 600 million. The other dynamics in our 2022 margin are business as usual. Let me give you the key factors for the 2022 margin, which will form the base from which we will continue to deliver moderate margin expansion over the medium term. I'm not going to give you 2022 margin guidance given the regulatory challenges in doing so as part of the upcoming demerger perspectives on the drivers of margin growth. Firstly, we expect to see favorable volume mix benefits in 2022, reflecting continued strong growth and outperformance from our power brands. Secondly, we expect pricing to be more of a benefit in '22, reflecting the annualization of pricing taken in '21 and further net price improvements that are underway. Thirdly, we will continue to achieve further supply chain efficiencies. The final piece will then come from the additional Pfizer synergies, which will add around GBP 120 million in the year. The offsets to these are: first, as you have heard, we will continue to invest in our brands. In fact, we expect to continue to maintain our approach to investing ahead of sales on a targeted basis as seen in recent years. Secondly, as with all companies, we are seeing inflationary pressure and some supply chain impacts. But reflecting the nature of our products and packaging, these pressures are very manageable across our P&L. As a reminder, commodities and commodity-related costs account for less than 10% of our sales base. Finally, we have the stand-alone public company costs, which annually are GBP 175 million to GBP 200 million which are in large part offset by the increased Pfizer synergies, and you should assume this full amount in 2022. So in summary, there is no change to our margin dynamics. We are largely absorbing the stand-alone costs to additional synergies and are well positioned to manage market-wide inflation. We are confident in our ability to manage margins very well, even in more complex environments, and this sets us up strongly for our medium-term moderate margin expansion target. We are confident in our ability to deliver sustainable moderate margin expansion in the medium term whilst continuing to invest in A&P and innovation. We expect to continue to improve our gross margin driven by positive mix, COGS efficiencies and pricing benefits. On A&P, we will continue to reinvest at a rate ahead of sales growth, whilst optimizing spend and delivering efficiencies. We will further our innovation capabilities to realize commercial opportunities based on consumer needs by reinvesting in R&D. And we expect a reduction in the other SG&A ratio, largely driven by economies of scale and further optimization of processes, systems and stand-alone costs over time. Overall, we have a model that we are confident will deliver. Strong and sustainable margins and moderate margin expansion in the medium term, whilst funding investment in A&P and innovation to drive sales growth. Now let's move to the third part of our model and focus on the high cash conversion of the business. Our cash flow is strong providing us with flexibility to support our capital allocation priorities as we look forward as an independent company. We generated approximately EUR 1.5 billion of underlying free cash flow in both 2020 and 2021. Our reported free cash flow includes net proceeds from divestments, totaling EUR 1.1 billion largely in 2020 and EUR 1.3 billion of onetime costs related to integration and separation to date. Both of these items are excluded from the underlying free cash flow metric on this page. Given these programs have already completed or in the case of separation will be largely completed by the end of '22, the underlying cash flow is a better measure of our performance. We have delivered the strong cash flow through strong working capital management and capital allocation discipline. One priority is CapEx at around 3% of sales. We are investing on an ongoing basis to support our manufacturing and R&D footprint while building the capacity to sustain our future growth ambitions. In particular, we have been investing in automation, digitalization and e-commerce capabilities to drive greater efficiency. We expect to sustain a stable level of CapEx at around 3% of sales going forward with no significant upcoming projects anticipated to alter this level of spend. Finally, given we operate in a highly regulated environment, we will continue to ensure that we adhere to strict quality control requirements and regulations. Looking ahead, we expect strong cash generation, underpinned by our attractive sales growth, strong and moderately expanding margins and high cash conversion. We expect our cash tax expense to be around EUR 0.3 billion in 2022, while interest expense is expected to be approximately EUR 0.2 billion in the near term. We will continue to focus on working capital management with more opportunities in inventory management, which we expect will result in a flat working capital profile over time. And given separation will be largely complete by end of 2022, we expect less than GBP 100 million of restructuring spend going forward. We foresee no major restructuring programs. Taken together, these factors will deliver strong free cash flow. We will apply a disciplined approach to capital allocation to drive attractive shareholder returns and a strong balance sheet. We have a very clear set of priorities for capital allocation. Our #1 priority remains investing in the business to drive sustainable growth and attractive returns. Secondly, the initial dividend is expected to be at the lower end of the 30% to 50% payout range and subject to Haleon Board approval. Thirdly, while we are excited about the organic opportunities and growth prospects for our business, we will also look to undertake M&A where it's commercially compelling and consistent with strategy. Importantly, we do not need M&A to deliver on our growth ambitions. Given our strong cash generation, we are very confident that we will be able to delever our balance sheet. Assuming a starting position of up to 4x net debt to EBITDA to below 3x by the end of 2024. Last, but not least, we will sustain a strong investment-grade balance sheet from the outset. Let me now bring this all together in our medium-term outlook. We expect to drive 4% to 6% organic annual sales growth ahead of the market. We expect to deliver sustainable moderate margin expansion each year with high cash flow and stable cash conversion, we expect to delever to below 3x by the end of 2024. As I mentioned earlier, the initial dividend is expected to be at the lower end of the 30% to 50% range, subject to Haleon Board approval. In addition, I would like to set out a few additional considerations for full year 2022. Haleon expects to achieve organic sales growth in the range of 4% to 6% for 2022. Adjusted operating margin is expected to benefit from continued strong operating leverage and pricing in '21. Inflationary cost pressures and supply chain costs are expected to be well accommodated given our gross margin on ongoing supply chain efficiencies. Haleon will continue to drive brand investment ahead of sales growth. Finally, incremental synergies from Pfizer will largely offset new annual costs in 2022 associated with running a stand-alone public limited company. Interest expense will be around GBP 0.2 billion. The estimated tax rate on adjusted profit will be in the range of 22% to 23%. And we will provide further direction on 2022 once a stand-alone company. In conclusion, we are strongly positioned for growth with the business transformed over the last 2 years and fully focused and ready to deliver 4% to 6% organic annual sales growth. We expect to deliver sustainable moderate margin expansion at the same time as investing in the business. Our strong cash generation supports capital allocation priorities, including reinvestment and a dividend whilst also deleveraging our balance sheet. The strong performance that we have delivered since 2019, despite the pandemic and integration and separation activities gives us confidence in our expected delivery in the medium term. I'm proud of what we have achieved today, and I'm excited about the financial prospects for Haleon. I'm looking forward to connecting with you more in the future. With that, I would like to hand back to Brian to wrap up, and we welcome your questions.

Thanks, Tobias. So you can see why I'm excited about the opportunity we have in front of us. Haleon strategy for growth, the strength of our leadership team and our purpose underpin my confidence in our ability to capitalize on that opportunity. And I'd like to close where we started. Haleon is a global leader. And we are 100% focused on consumer health care. We have exceptional category-leading brands. We have an attractive global footprint and I hope you agree after meeting all of us today that we have a first-class leadership team with the skills and determination to capitalize on our fantastic opportunity. We have a strategy to outperform, and we run a responsible business with an inspiring purpose. As we've demonstrated today, we expect to achieve organic annual sales growth of between 4% and 6%, moderate margin expansion, and we plan to deliver attractive returns to our shareholders after continuing to invest in the business. Thank you for your time and interest today. Now let's start our Q&A session. Sonya, over to you.

Thanks, Brian. We'll now be taking a short 5-minute break to allow those listening live who want to dial in and ask questions to do so. The number for this should now be shared on the screen. If you prefer, you can also ask questions via the online link as well. We'll see you all shortly and look forward to taking your questions very soon. [Break]

Welcome back, and welcome to the Q&A portion of our Capital Markets Day. I'm joined by my team who presented today with one exception, Keith Choy, our Head of Asia Pac, broadcasted his presentation from Singapore. So as a result, he's not here with us today. Before we get started, I do want to comment on the shocking and tragic events in Ukraine. Our focus is supporting our people in Ukraine and further safety. We're also involved in initial release efforts and engaged in NGOs like saving the children and in key UN agencies. There's no justification for the invasion and the harm that, that's doing to the people in Ukraine. I personally hope for a quick and peaceful resolution. So let's move on to the Q&A. As Sonya said earlier, the Q&A is going to be over the phone, but also on the online platform. So I see that we already have questions from the online platform. So I'll start there, and I'll move to the phone calls later. So the first question, the business has historically delivered growth below 4.4% CAGR for '19 to '21. How confident are you that you can sustain this higher level of growth in your 4% to 6% medium-term going forward target? Well, first, let me say, I am very confident in the 4% to 6% medium-term target we gave today, along with the other outlooks that we gave. One of the reasons for that confidence is the fact that we grew this business 4.4% over the last 2 years with a net COVID headwind and while we were doing an integration, planning for a separation, all during a pandemic. Now if you look at the historical performance of this business, the last 2 years are the most relevant. Those are the 2 years where we had the portfolio that we will take forward as Haleon. And as Tobias took you through in his presentation, there's been a massive transformation in that portfolio. We've entered the Vitamin, Mineral, Supplement category, which is a faster-growing category and even more relevant with the pandemic and with a leadership position. We significantly increased scale in the 2 largest markets in the world and have leadership positions in U.S. and China. And we've also divested 50 growth-dilutive brands. So starting with that portfolio with what we've outlined today in our competitive capabilities, our clear strategy to drive growth and our sources of growth around penetration, around expansion of channel, geography and portfolio along with our sustainable model, which allows us to invest in growth and invest in A&P and R&D as we move forward makes me extremely confident and I'll speak for my team in delivering that 4% to 6% medium-term outlook going forward. Okay. It looks like we have another question from the platform. You have a great portfolio of power brands. Can you elaborate on the role of local strategic brands play? And is there an ambition to convert them to power brands over time? First, talking about power brands. We have 9 power brands, as you know, 60% of our sales account for 80% of our growth. Now these are brands with significant scale. They're in multiple markets around the world with significant distribution. They have higher gross margins and very strong equities and a right to win. But they are complemented with our local strategic brands that we talked earlier in their own right are iconic and very strong brands and very strong equities. And many of those brands are really driving growth in local markets. In the last year, we had double-digit growth on brands like Tom's in the U.S. or Bactroban in China or Grandpa in South Africa. And we have penetration opportunities across those brands along with the power brands. Now that said, we have no necessarily stated strategy or ambition to increase the number of power brands over time, but we're always looking for opportunities for portfolio expansion and taking brands to additional markets where we see the opportunities arise. Okay? Looks like we have one more question from the platform, and then I'll go to the phone. What will you lose by not being part of GSK? Well, the first thing I would say is, listen, is in the last 7 years, while we were part of GSK, the portfolio transformation that I talked about happened. We're able to do 2 of the largest transactions in the sector in the last 7 years, and that created this portfolio that we're now talking about. So I'd say GSK and now Pfizer have been great owners of this business. That said, I think, this is more about what we can do going forward and not about what we're losing from GSK. This is a great business, and the opportunity in front of us is to create our own distinct consumer-centric and performance-driven culture. It's about even sharpening our focus on growth. We have an opportunity to streamline systems and processes that are more fit for purpose for a consumer company and help drive more agility in our business. And of course, as a business of GBP 10 billion, it's right that we have our own capital allocation priorities going forward. And as we said earlier, our #1 priority for capital allocation is to invest in the business and drive growth. Okay. I think we have a question from the phone.

The first question from the phone is coming from Gian Delmas from UBS.

A couple of questions for me, please. The first one is on the foreign exchange impact you referred to which was one of the factors preventing you from achieving around 25% operating margin last year. So I was wondering, could you shed some light on what seems to be a recurring negative transactional impact coming from FX? And I guess more importantly, going forward, should we moderate continuous FX drag on your margin development? And I've also noted that your medium-term margin guidance is in constant currency, so does it mean that on a reported currency basis, your margins could actually go backwards in certain years? And then my second question is on your geographical split. I mean you are combining EMEA and Latin America. This is a relatively unusual combination. So wondering the rationale behind this. Is it just down to having the strong price-led growth in LatAm, partly compensating for the muted growth in Western Europe or any other reasons behind that? And I guess, if I can squeeze one more in. More for Filippo, if we exclude North America, I guess, a 2019, 2021 CAGR of 1% for your mature market, so do you think you can accelerate your growth in Western Europe? Or is flat to low single digits a realistic ambition there?

Great. Thank you for the question. So what we'll do is, Tobias, maybe you can first address the FX question. And Filippo, I'll come to you for the 2 questions, the EMEA-LatAm and the question on growth. Tobias?

Thank you, Brian. So as you've seen in my presentation, we had a negative currency impact of 1 percentage point between 2019 and 2021. But you've also seen through the strong operating leverage that we've driven through that period that we more than offset those headwinds. Look, going forward, I can't speculate on what currencies are going to do. I think 2021, I think, is a good base for what we expect to happen in 2021. But again, look, with recent events, very hard to predict and what we're going to do going forward is we will give you more guidance on what the currencies are moving. Maybe just if you take a bit of a step back, our biggest foreign currency is the U.S. dollar. That's where -- both from a sales and also from a cost perspective, it's our largest business with local manufacturing also in the region. The second currency is the euro given we have a strong presence in Europe, again, both from a sales and also from a manufacturing base. Then the third one is the Chinese RMB, given China is our second largest business. And also here, I think, a good balance because we manufacture locally and also R&D. And then from a pound sterling point of view, large cost base, but not that much sales. And then the fourth currency is probably the Swiss franc, given we have our categories and also production there. So I think overall, a bit of natural protection. But again, I couldn't speculate what currencies would do into the future.

Okay. Thank you, Tobias. Filippo?

Yes. Thank you, Brian. Let me start by the question about the setup of the region. So we have a balanced region with 44% in developing market and 56% in developed markets. Now I personally see a benefit in having realities like LatAm, Middle East, Africa versus the most mature market. Why is that? For some reason. So first of all, from there is a mutual benefit in leveraging the learnings and the key success factors from both ways because we have countries in different life stages, and therefore, more developing countries can really benefit from the learnings from the more mature ones. But also, if I look into the developing markets, we have a lot of success stories. So if you look at what we have been able to achieve in Middle East, Africa, there are a lot of great learnings that can be scaled up for the benefit of the rest of the region. So I'm very confident that this is a positive setup and there is a mutual benefit, as I said. Now to the second question, which is more about West Europe. So Western Europe is part of our developed market. When you look at the last 3 years, so the CAGR of Western Europe is in low single digit growth. So it's still -- it is in growth. Of course, the dynamic of Western Europe, as you know, are different from developing markets. But what I think is important to note is that we have scale in Western Europe. We have a strong portfolio of brand which are leading a very strong leadership, competitive position and the scale of Western Europe allow us to be competitive in Western Europe. That said, final comment, I still believe Western Europe comes with growth opportunities because when you saw my presentation about Sensodyne, about Voltaren or about VMS, it is clear that the penetration opportunities is still valid in the Western Europe countries. It's not only valid for the most developing ones.

Okay. Thank you, Filippo. We'll stay with another question on the phone, please.

Our next question is coming from Ian Simpson from Barclays.

Brian, two questions from me, please. Firstly, what are distribution and logistics costs as a proportion of sales? Do you book those in COGS or other SG&A? And then secondly, just thinking about Rx to OTC, are you able to give any indication as to what those switches you expect in a few years' time are? Are they currently parent GSK brands or any commentary on category? And sticking with that theme of Rx to OTC switching, Voltaren has clearly gone very well. How much is Voltaren contributed to group organic sales growth in the last 2 years, please?

Great. Thank you. I'm going to go back to Tobias after I answer the other 2 questions. Tobias, if okay, on the distribution costs. So on the Rx to OTC switch, what we laid out is that we have 2 switches in the pipeline. As I said, each one we would think would impact about a point of sales in any given year, and it is not included in our medium-term guidance. We aren't sharing the details of the switches and what they are for competitive reasons, and that's because they are in the public domain, and we want to keep it that way as we work to deliver those switches. And I feel great about our ability to deliver the switches, not only from a commercial perspective, certainly, from an R&D perspective, as Franck took you through our capabilities there. On Voltaren, it was a very successful switch in the U.S., but there's a bit of a dynamic on the incremental sales that were delivered. As part of the deal, the joint venture with Novartis and GSK, what came over was the Rx Voltaren MU Gel product. And we had a licensing deal with Endo, who distributed that. So we did book sales on Voltaren MU GL in the U.S. business in 2019. So when we did the switch, that Rx product came off the market. So the incremental sales driven by that business wasn't fully realized by the business because we lost some revenue from the Rx product. So long story short, if you look at the impact of that switch on our growth rate over the last 2-year CAGR, it's about 20 to 30 basis points to the positive, but the switch was much bigger than that and much more important than that in the marketplace and for our consumers. Tobias?

Yes. Ian, on the distribution logistics cost. So we have the costs, the final step of the logistics chain. So shipping to our customers and retailers are in other SG&A. Those are around 3% of revenue for us. All the costs and logistics to move the product between manufacturing sites or getting active ingredients shipped to us in our manufacturing site, sit in cost of goods sold.

Okay. Thanks, Tobias. We'll take one more question from the phone.

Our next question is coming from Martin Deboo from Jefferies.

Martin Deboo, Jefferies. I think my question is essentially the same as the first one that came online around the upgrade to the growth guidance. But rather than get you to repeat your answer, let me ask it in a different way. If you look at the difference in the buildup of the guidance from what you said at the [ Exane ] Conference last year, it's coming principally from a much higher rate of growth expectation on VMS and somewhat, I think, from a higher rate of growth on oral care. So I just want to push you a bit harder on those, particularly VMS. I sort of heard Tobias' comments on VMS, but you'll appreciate, a, that VMS has probably been a hard category to read through COVID. And secondly, it's a category that's attracting a lot of competitive entry, not least from Unilever and Nestle. So I think the essential question is what drives your confidence in VMS being, a, growth accretive; and b, growth than you thought it was a year ago? And the supplementary on a different topic would be the A&P ratio is notably high, and that's good. But I think given it's an important number, can I just ask, is there anything unusual in your accounting for A&P due to the -- relative to the peer group and high account for the difference? Or is that a good clean number?

Great. Thank you, Martin. So first on the growth outlook and the things that we've said today around channel growth, emerging market growth and then VMS and oral health, which we said mid- to high single-digits. You asked about VMS, Martin, and I'll get there. I just want to comment on oral health first. If you look at the history of our oral health business, we've been able to grow that in the mid to high single-digits and often high single-digits. The last 2 years, it's been mid-single digits. Part of that is because while we continue to see strength in our Sensodyne and Parodontax and toothpaste portfolio, there has been a negative impact on denture care as lockdowns has kept people and consumers from socializing as much. And certainly, that's an older population and with cost pressure. So we saw a drag of growth that we see coming back and we expect to come back. We're very, very confident in our therapeutic oral health care strategy, the brands we have and our ability to drive really good growth there. On VMS, if you look at the dynamics, the last couple of years, last year, the category grew double digits. Let me take that back. 2020, so no longer last year. 2020, the category grew double digits in the low teens, and we grew 19%. So we had a really good year in our VMS portfolio. This year, the category came back to a kind of a low single-digit growth on that base, and we grew mid-single digits. We believe that category will grow 4% to 5% growing forward. It didn't go backwards from the big spike we had last year. And what we see in the data is in 2020 where we have full year data, 22% more people engaged in that category. And this consumer behavior of being more interested in proactively managing their health is real, and we see that across our portfolio, and we also see tremendous opportunity in our immunity brand emergency in the U.S. There is a lot of competition happening in the space. There's no question about it. I think that just reinforces the attractiveness of the space. And many of those competitors we compete with today in oral health, where we compete with big FMCG companies that are very respected and very strong at what they do. So I feel really good about it. And basically, because of our brands, our brand strength, and our ability to drive that growth, and back to some information Filippo gave you earlier is we also see this as a massive opportunity in Middle East, Africa and in other regions to really expand that portfolio geographically. With that, I think, Tobias, I go back to you on the question.

Yes. Martin, on your A&P question. So I mean, health warning first. I think it's always very hard to compare line item accounting across companies because it's very hard to see what goes in there and what doesn't. I think we feel our A&P is at the right level it needs to be. What might be a little bit different from us is, I think, we also have a large expert channel. So we're detailing and promote to experts that might be different than what other companies have. So that's where a difference could be. The vast majority in our A&P spend is media is the spend that goes in front of the consumer. So I think overall, I feel good about that. And also, I think, if I just take a step back, when you think about the model that we laid out. For us, it's about growing A&P ahead of the rate of sales growth. As we've done in the last few years, we've grown A&P at 6% and driven 4.4% sales growth. That's the model we want to drive going forward as well. So we're not looking for to hit a certain A&P level in percent of sales, but continue this model and the growth engine to grow A&P out of sales in order to grow sales at the 4% to 6% outlook that we have given.

Thank you, Tobias. We'll take a question from the platform. The question is, could you share why it is a strength or a weakness to have a stronger presence in pharmacies in Europe, which I understand is a fragmented market versus a more mass market-oriented U.S.? What is the impact on growth, price margin, that would be helpful. Thanks for the question. First of all, Filippo, I'll ask you to comment on that. I would just say, overall, do believe it is a good thing and a strength in our business that we have a pharmacy-driven business in Europe. But Filippo, you want to provide some context?

Yes. Thank you. So definitely, I believe, it is a strength. And the reason is for a couple of reasons for that. First of all, it is a channel which over the last 3 years has been growing despite all the changes in terms of landscape in the different countries. And second, this is also -- and also it's a channel which has been evolving because if you look at our e-commerce business, e-pharmacies is the #1 driver. So it's a channel which is in transformation, which is still relevant because let's not forget that the pharmacist is the first point of care for most of the consumers, not only in Europe but also across the region. So it's a relevant channel. But then if we look at our presence in the channel, so the channel accounts for 60% of our sales. It's our #1 channel. We have a strong scale and footprint. Just to give you some data point, we are 1.6x bigger than the second OTC competitor in the channel. We have reached 85% weighted distribution across the region, not only in Europe. And the reason why we are successful is because I think we have a very effective integrated model, where it's not only about account management or point of sales effectiveness, but it's also about expert engagement, which is something I covered in my presentation. And the 3 things put together, plus the scale plus also the way we have been evolving the approach and how we support pharmacists, and you saw that in the video I presented before, makes us confident that we can still outperform the market and make the channel relevant for the future.

Thank you, Filippo. It looks like we have another question from the platform. What is your M&A strategy going to be? We -- you will start off with a 4x leverage, so you won't have much space to do acquisitions. How much is your budget per year? So first of all, I would start by saying we have a fantastic portfolio. And remember, this is a business that's been created by the 2 largest transactions in the sector in the last 7 years. So I feel great about the portfolio we have and all the outlooks we've given today do not require M&A to do that at all. That said, as Tobias laid out, we have 4x leverage in a plan to get that below 3 by 2024. And within that, we do have some capacity for bolt-on M&A over the next 2 years. But maybe, Tobias, you can provide some additional perspective.

Yes. So thanks, Brian. So maybe -- let me take a step back. And when you look at the cash flows that I presented today, we had around 1.5 billion of cash flow per year. So the cash flow of this business is very strong. It has high cash conversion, and we expect that to continue into the future. And with that, I think that gives me and us as a team the confidence that we can fulfill all the capital allocation priorities, which is investing in the business, paying the dividend, doing bolt-on M&A while meeting the deleveraging targets. And also all across that, maintaining a strong investment-grade balance sheet along the way and from the outset, right at the demerger.

Thanks, Tobias. Let's go back to the phone lines.

Our next question is coming from Tom Sacks from Deutsche Bank.

I wondered if you could just give some indication of the relative gross margins in the different categories. And when you talk about gross margin expansion, going forward, is that mix-related? Or what other impacts are you expecting at the gross margin level, please?

Okay. Thank you for the question. Tobias?

Yes. Thanks for the question, Tom. So from a gross margin perspective, I would say that the categories in aggregate, I think, are broadly similar, but VMS is slightly less, but the others, I think, very, very much comparable. So I don't think there is a major mix impact from the growth forecast we have given by category in our presentations today. We see the mix improvement coming from a shift to power brands. Power brands have been and will be a key driver for growth, and power brands tend to have higher margins also looking at the scale they have for the business. So I think from that perspective, not that much difference. And then also, I think you have to take into account the A&P locations we do. So we tend to look at the business on a brand contribution level, gross margin minus the A&P that we directly invest in the business. And I think that is broadly similar across all of the categories.

Great. Thank you, Tobias. Let's go back to the phone for another question.

Our next question is coming from Chris Pitcher from Redburn.

First question is a bit of a follow-up to the one you just had there. You mentioned the power brands are higher gross margin. And therefore, I would expect from your comments, they would be higher A&P. Does your growth in A&P over the last few years, is that just a function of mix going towards bigger power brands with higher investment? Or actually, have you seen the rate investment increase on your power brands going forward? And then secondly, can you give us some sense of the economics of health care professional advocacy, how that compares with trying to build consumer brand awareness and demand. And as e-commerce increases, its importance? Does that reduce the ability for professional recommendation?

Great. Thank you, Chris. First of all, I'll just comment on the A&P investment. The A&P investment both is a bit of mix, but it's actual more investment in brands in markets. So as we think about brand-market combinations, where the growth opportunities are. Within that, we're very focused on ROI and making sure we get that return. And we've had quite a shift to digital, which we find ROI is higher, but that's -- it's a mix of both. And maybe, Tamara, if you would comment a little bit about what we've seen on improved ROI and how we're doing A&P allocation.

Yes. Sure, Brian. So very clearly, we have, I think, the right level of A&P for our sector. We then make sure we deploy that very strategically. So against our enterprise strategy, looking at our strength and our opportunities and what's happening externally in the market as well as trends. And then we are very focused on improving and always getting attractive ROIs. And we've had quite a significant increase over the last few years around how we use sort of digital data and analytics, the tools that we've got at our disposal. So our marketing teams are able to pretest creator before it goes live. That's had a significant increase in brand recognition and also purchase intent. We've also been using a really good database audience profiling tools. So we have a cloud-based platform called PeopleCloud. We've used that across 16 markets. And as you said, Brian, really increasing our ROI. So we've seen a 40% lift in ROI on our digital work and also 125% lift on our traditional work. So we really have been driving the better use of our investment as we deploy it strategically against our brands.

Thank you, Tamara. Chris, to your other questions on the economics of health care professionals, the economics are very good, and we have clear ROI metrics on it. And just to give you a perspective, we know that 70% of the trial in our oral health comes from a health care professional. And that has a very good return for us. The other thing is our health care professional is -- our health care professional spending is also part of our A&P spend. So that sits in our A&P spend because that's how we think about that. With the shift to e-commerce, we don't see this changing the dynamics of the impact of health care professionals. Consumers are still looking for that recommendation and then they're moving to make a purchase. And where they make that purchase is much less relevant than the recommendation than they get. So we see this continuing to be a strong part of our of our strategy going forward and one that we feel like we're really differentiated in. Okay. One more question from the phone, and we'll go back to the online.

Our next question is coming from Graham Parry from Bank of America.

So firstly, on the 2 OTC switches, where in development are you on those? Have you completed label comprehension or actual use studies there? And then secondly, could you frame the time frame for midterm outlook, the sales or margins and/or margins? So is that to 2026, '25 or perhaps something longer than that? And then on 2022 margins, you laid out all the offsetting factors, and then you can't give any explicit guidance, but you could just help us understand whether those offsetting factors mean you expect margins to be higher or lower in 2022 over the 2021 base.

Okay. Thanks for the question. So on the 2 Rx-OTC switches, there are different stages. What I would say is that we expect, again, if successful, would be 2025 and 2026. So that's the time frame we're looking on our Rx-OTC switches. We're excited about both. As I said, each would be roughly equivalent to about one point of growth on the business, and it is not in our medium term 4% to 6% outlook on guidance. The medium-term guidance is over the next few years, consistent with consumer companies and how consumer companies look at that medium-term guidance. On margin, and I'll turn it to Tobias, I know Tobias took through some building blocks. What I'll just say is there's no change in the margin dynamic of this business as we look forward. And Tobias, maybe you can talk a bit more about how to think about the '22 margin.

Yes, sure. So I mean, as I said, I'm not going to give you a profit forecast for 2022 given the regulatory complexities in doing so, given the demerger process and the prospectus that is coming out. But as Brian said, I think, first of all, operationally, really no change in our margin dynamics. And you've seen over the last 3 years, as I laid out, the 325 basis points improvement in operating margin that we have driven. And as part of that, a 2 percentage point increase in operational level [indiscernible]. And that was driven by investing A&P ahead of the rate of sales growth. And then that then drove our 4.4% sales CAGR. So I think that we see to continue going forward. And so it's really about, I think, the 3 positive drivers are, first of all, it's volume and mix. And you've heard from all my colleagues today on the plans we have in order to drive further volume and mix improvement. And secondly, it's pricing. We've increased prices last year by 2.2%. We expect that number to be higher in 2022, given one, price increases that are underway. And secondly, the full year effect of a number of the price increases we took, particularly in Q4 in the U.S. as Lisa has laid out earlier today as well. And then thirdly, there's further supply chain efficiencies. As just as a reminder, we just integrated last year the Pfizer manufacturing sites and network. So as we've just done that, there is more work to do. And for us, making changes and getting efficiencies in supply chain takes a bit longer given our business is highly regulated. So you would see those -- you would expect to see those improvements over a number of years. And then the 2 offsets against that are the higher -- the cost in the supply chain and the inflationary pressures. And as we said, us investing ahead of the rate of sales growth in both A&P and R&D. So I think that's the ongoing model that we would see going forward, both for next year and longer term. And then what's really new next year are 2 things. One is the incremental cost of running Haleon as a stand-alone public listed company, that is 175 million to 200 million that you need to add -- that will be added to the cost base for 2022. And that is then partially offset by the incremental synergies from Pfizer, which brings 120 million. So overall, I think, continued very comfortable about our operating model and how we drive our margins, both in the short and in the longer term.

Thank you, Tobias. We have another question from the platform. Can you say something about Haleon's culture? And what will it differentiate it from GSK and other consumer companies? So first of all, as I said in my presentation, we define our culture with 3 behaviors: go beyond, which is all about outperforming the competition, performing on the business. So it's a real performance culture. Second is do what matters most, which is all about focus and prioritization and doing the things that matter most for our consumers and customers and to drive growth on the business. And the third is keep it human, and that's all about the consumer centricity that we have as a business and also how we support each other from a culture perspective with our colleagues. So listen, I think, we've had an opportunity over 2 integrations in the last 7 years to each time, step back and say, define the culture that we wanted to create. We did that with the Pfizer integration, and we define the culture we want it to be. And I feel like we've created a distinct culture within GSK for this consumer business. But as we separate, we have another opportunity to accelerate that in those 3 areas, which is all about performance focus and consumer centricity. Okay. I'm trying to see, do we go to the -- let's go to the -- one more from the platform, sorry. What percentage of your sales do you expect to come from innovation annually? What is your year-over-year growth you expect going forward? So first of all, as we outlined and Franck and Tamara talked through, innovation is a key growth driver for us. And we have some great examples of how that drove growth and drove the penetration growth that we need that underpins our growth going forward. And Franck outlined our strategy. But Franck, maybe you can talk a little bit about how do we measure our innovation and how do you feel about the innovation going forward versus what we've done so far to date?

Yes. Thanks, Brian. First of all, let me reinforce something which is very important. We have a competitive investment in R&D, around 3%. And obviously, we measure -- we tried our innovation performance with different KPIs, just to make sure we have some return on investment. And we believe we are competitive and we expect even an increase from going forward with our current pipeline. We have a pipeline which is extremely solid and well balanced between a short- and long-term project and from between simple and complex project. But more importantly is how this innovation fuels the growth of the company. And you have seen today different presentation, some great example of how it has delivered some additional growth. Just 1 or 2 examples. So Lisa share a great example with Sensodyne and our innovation on Sensodyne. So last 5 years help us to gain market share from 17% to 20.5%. That's a great achievement with the innovation, obviously. Another example I shared with you was about Centrum in Australia, it's a new fund benefit platform. This is almost purely incremental. 83% of this innovation is incremental to the core business. So again, they are just a couple of examples which showcases our competitiveness in terms of investment, always combining our deep human understanding and trusted science.

Okay. Thanks, Franck. And maybe one thing I'd add is as we look at the innovation we've been able to do over the last few years and we look at our going-forward pipeline, we see more innovation coming than we've had in the past. We don't disclose our innovation as a percent of sales because it's all about driving growth on the business and obviously making sure that investment comes out, but we feel really good about our pipeline going forward and what we see in the future. We'll go back to the phone lines, please.

Our next question is coming from Celine [indiscernible] from JPM.

Yes. Sorry, the line drop, but I had a follow-up question first on the margin one, which we didn't hear all you said. But my question was 200 basis points of operational excellence over the past 2 years, so 2019 to '21, post reinvestment, that's quite a spectacular level. It's 100 basis points per annum. You said that this will continue. Can you explain how -- what are the drivers behind that? And when you say moderate margin expansion in the midterm, in some consumer goods company, they also use this language, and we interpret that as 10 to 20 basis point margin expansion per annum. Is that what you are aiming at? Then my second question is on the different drivers of growth that you mentioned in terms of category expansion, EM, e-commerce. To which extent those are into new regions or new white space? I'm just wondering whether that means that there's a bit of a step-up needed in investment in order to accelerate share gain if you are building, say, new geographies or if VMS is more competitive?

Thank you for the question. So Tobias, I'll go back to you on the margins and then I'll come back on the -- of the drivers of growth and Filippo, ask you to provide some perspective.

Good. Thanks, Celine. So when you look at the building blocks, so we've driven, as you said, 200 basis points of margin improvement, what we call from operating leverage over 2 years. So approximately 100 basis points each year. So that was driven by the sales growth, by the mix to higher-margin brands and then partially offset by incremental investment that we put into A&P. But I also said, the A&P was only slightly ahead of the rate of sales growth. So it is something we want to accelerate also going forward. So I did not mean to say that it would be 100 basis points going forward in the future. Because ultimately, I want to go back to the model that we laid out, which is driving gross margin expansion and then investing ahead of the rate of sales growth in order to drive ourselves and deliver 4% to 6% organic sales growth. Another driver and the strong driver was very strong cost discipline in the business in addition to the synergies that we have lifted. And here, we see, as Brian laid out earlier as well, some opportunities going forward as well. So after the step-up in costs that we have from running the business independently, there could be some reduction over time as we go there. And then, Celine, on your second question about moderate margin expansion. So we're not going to define for you moderate margin expansion. I think just as a step back, we've driven significant margin expansion over the last few years, I think, to a level where we believe our operating margin is top quartile in the industry. And I think for us, it is clear signal that we don't see the history continue also given that the -- what you've seen in the history, the synergies are running out. So we've delivered those, and I think we really want to move into this new model now that we laid out.

Thank you, Tobias. And on your questions on the drivers of growth and the geographic expansion. What I would say is, in the model that Tobias has shared and we've talked about on a sustainable growth model, all the investment we need to drive that growth is in that model. So any portfolio expansion, geographic expansion is part of the model that you've seen. But maybe Filippo, you can provide some perspective on some of those opportunities. And I know Centrum in Middle East, Africa, for instance, is a big opportunity as we see it.

So Celine, maybe let me pick up 2 examples following what Brian said. So let me start by Middle East/Africa as a geography. So as I have outlined in my presentation, despite having already leadership position in Middle East/Africa, what is interesting is that 50% of our revenues are made by 2 brands, which are Sensodyne and Panadol. So this gives you a sense about what we can do to really leverage the footprint we have, the scale we have in order to gain additional traction from the other brands we already have in the portfolio. Second, Brian alluded to Centrum. So here, so we have inherited the Centrum from the integration with Pfizer, and we have been growing the brand at 18% CAGR in the last years ahead of the market. But most importantly, if you consider that today, 5 markets account for 60% of the Centrum revenue. So it's very much concentrated in few geographies. And the brand is present in one out of 3 of the markets we already operate in, which gives you a sense of why it is important for us to leverage scale and expand and leverage the footprint in order to make sure Centrum is a growth driver for the future. So I hope these 2 examples give you a sense of what we mean by the possibilities behind the geography expansion and the brand expansion.

Thank you, Filippo. We'll go back to the phone for another question.

The next question is coming from Kerry Holford from Berenberg.

A couple of questions for me, please. Firstly, on geography. Can you tell us what proportion of Haleon sales are generated in Russia and Ukraine, where your exposure is there? And secondly, in the context of your plan to grow consumer R&D spend ahead of sales and you aim to increase in returns on that R&D spend that you've highlighted, can you talk about what your consumer R&D returns have been in recent history? How do you measure that in consumer brands and what your hurdle rate is and perhaps how you compare versus the peer group?

Okay. Thank you, Kerry. On Russia-Ukraine, just for some perspective, Russia is roughly 2% of our sales and a similar level of our operating income. Ukraine is significantly smaller than that. And as we said earlier, our big focus for now is supporting our colleagues and employees and their safety in Ukraine. Tobias, do you want to talk a bit about how we think about R&D spend and making sure that we're getting the most out of it?

Out of it, yes. So I mean, first of all, I think also, looking forward, you've heard about the 2 Rx-OTC switches that we have in the pipeline. Those will go into trial phases. So there is money that support the development of those opportunities going forward. I think if I just take a step back, I mean, what we do is, I think, probably very similar, Kerry, what you used to in the pharmaceutical companies. We look at our pipeline. We look at every project, we look at what's the investment needed, what's the risk associated in the portfolio and then have an NPV-driven approach on that. Now what might be a little bit different is for us, I think, we see innovation as a key driver for continued sales growth and also for pricing opportunities. We need to innovate and if we bring new products to the shelf, that means, a, we solve consumer needs that are unmet; but also secondly, we helped our retailers to grow the category. And if we can do that, it gives us also pricing power and pricing ability. And it's a model that we've proven successfully in the past, and particularly when you look at the Sensodyne examples, we've continuously innovated and that has allowed us also to take price on those products. So I think that, I think, is a key driver of if you invest behind the brand that's already there, but make the brand more and more valuable as you continue to build the brand for the future.

Thank you, Tobias. We'll take another question from the phone line.

Our next question is coming from John Ennis from Goldman Sachs.

My first question is on the regional brands. You said that 60% of the portfolio drives 80% of your growth. So I guess the other 40% of sales or the non-power brands are effectively growing at around a 2% run rate in recent years. I guess is this a reasonable expectation going forward? Or can this accelerate? And is portfolio review or consideration to improve the performance there? And then my second question is on Sensodyne. I guess at a high level, why do you think that the sensitive toothpaste category hasn't been more aggressively exploited by other competitors? And on the 10-year CAGR you gave, can you decompose that 10% CAGR between market growth versus share gains and give us a bit of a sense of the shape over the 10-year performance?

Great. First, on what we call local strategic brands and power brands. So what I would say is that we have local strategic brands, and we've talked about some of them like emergency in the U.S. or ENO in Brazil and India. Every brand we have is not necessarily a local strategic brand in the sense that Filippo and his region has many brands that are in pharmacies that have stable growth, very high gross margins, very little investment behind it. So there's brands in the portfolio that play a really key role. But we see a lot of growth opportunity in a lot of those local strategic brands and obviously, across the whole portfolio, everything isn't growing at the rate of power brands, which have grown high single digits and some of our local strategic brands that have been mid-single digits and sometimes double digits. On a portfolio review, as we've said, we have divested 50 growth-dilutive brands in the last 18 months and that gave us the proceeds of GBP 1.1 billion that we've talked about. Listen, we feel good about where the portfolio is at. We feel all the heavy lifting is done. Of course, we're always looking and reviewing to make sure that we're the right owner for these businesses and that to keep value makes more sense than the sale value, and we'll continue to do that and look at it. But we don't see a major sale program or a major portfolio shift that needs to happen. I think all the heavy lifting has been done and the portfolio is in great shape. On Sensodyne, this business has grown at 10% over the last 10 years. And globally, in that time, the category has grown somewhere between 3% and 4%. We've been a key driver of that category growth because we're in therapeutic oral health. And I was going to ask Lisa in a minute to talk a little bit about the success story we have in the U.S. because I think it's a great example and I bring it to life for you. Others have gone after sensitivity, I want to be clear. Our 2 biggest competitors have offerings in sensitivity and they've come after it. I think this is a great example of where our combination of understanding that consumer, that deep human understanding and the science we bring behind it. And Franck talked a bit about what we do in order to really deliver on that sensitivity. That's what we're all about on Sensodyne, and we understand that better than anybody. And I think we've been able to do that. And another piece is really that dentist recommendation that we talked where we are the #1 recommended toothpaste in over 70% of all the markets that we compete in. But Lisa, maybe you can give some perspective on Sensodyne growth over the last 5 years in the U.S. because I think it's a great success story.

Yes. I think in the U.S., over the last 5 years, Sensodyne has grown a strong double digit, about 10%. And we've seen that really work the flywheel that you've heard a lot about today. That is through this regular cadence of innovation -- winning innovation that is actually incremental year upon year. Not easy to do, but it has been a very successful model. It's also about a mix between volume and price. We do continue to invest in the science behind these brands that help you get those professional recommendations, which then help you make the additional claims and convert that to the trial. That's really critical to the life -- long-term life cycle of the brand. And so we see a really effective growth. We compete with 2 of the largest FMCG companies in this category. So it's not that they're not interested, but it is that we are able to puncture our weight, if you will, here in this category and have really owned this segment in the market.

And in the last 7 years in the U.S., that brand has grown over 5 share points and growing share every year. So it really is a combination of net sales growth, but absolute share growth, outgrowing the category and frankly, being a key growth driver of the category. We'll take another question from the phone.

Next up, we have David Haste from Societe General.

So first thing to say, I've helped pay for the event because I did buy the Sensodyne Repair and Protect 50 milliliters tube during the quarter, I saw on the video. So thank you for that. Just to pay for that, I guess, maybe I've got 3 questions, if I can. First online dynamics, the second one on the 4.4% growth and the last one just on the process of the IPO. So on the first one, I think, probably for Lisa, maybe I think you talked about 11 of the 16 brands in the U.S. having a higher market share online than off-line. I just wonder whether you can sort of talk about what the 5 aren't higher on bid market share? And if there's anything specific about those brands that stands out as to why that's a slightly different situation to the other 11 brands? On the 4.4% growth, just a clarification, maybe. Obviously, you're not including in that 4.4%, I think, you said specifically the dropout of the brands that you divested or stop selling. But just so I understand, are you saying that they were still in the base of 4.4% and therefore, now they've all gone, there's a benefit because they were all a drain and therefore, there is a benefit in that dynamic? Or is the 4.4% stripping out all together? And then the last one on the process. Just to clarify, I think, you said July, just to check whether it's July is the date or is it before July, so the latest of July? And then the question was is probably unanswerable or maybe a bit naive, but just in terms of the process, are you still open to trade interest? Or you're just going down this route still or is there a view at GSK that, that whole thing is being explored now and this is the route you're going to go down over the next few months?

Okay. Thank you for the question. Let me -- I'll come to you, Lisa, after I answer the first 2. So to be clear, on the 4.4%, that did exclude the brands divested and under review. And I think when I mentioned that earlier, it was more of looking at the historical performance, why the last 2 years are most relevant. Because in the last 2 years, we've had this portfolio that we're going to take forward as Haleon. As far as the IPO or the demerger date is July and absolutely, July is the date, and we've said that. So there's no plan to do anything earlier. Listen, on the trade interest, what I can say is this team, as you can see today, is 100% focused on the demerger of this business. We believe it is an attractive opportunity with great brands and a fantastic geographic footprint, great capabilities, the right strategy to win and a really strong outlook and a sustainable model to drive growth. So that's where our focus is. Of course, if there's any other interest, the GSK Board would need to do their fiduciary responsibility and look at that, but it's not something that this team is spending any time thinking about is we're really excited about the opportunity in front of us. And Lisa, maybe we'll ask about the 11 of 16 brands, but one piece of perspective on the U.S. business is, as Lisa -- as we've shared in the presentation, our penetration in the U.S. is at 12%. And we look at the penetration in the U.S. across the categories we compete, that's more at 9 -- it's around 9%. So we are actually disproportionately overall winning. Obviously, some are better and there are some brands that aren't as strong. Maybe Lisa, you want to start with some of the brands we would do particularly well and provide additional perspective.

Yes, for certain. So as we mentioned, this is a key part of our core strategy as we elevate the consumers' experience through digital commerce. And we have really won market shares extensively, for example, on paste. And that's a very tough competitive category. So that's some place where we've disproportionately been winning. We also have had very good success with smokers' health category. And likewise, brands like Flonase online, where people are chronically suffering and they like the ability to stock up and to do different things there. So I think we are really pleased with those results. I think what we are also signaling is we remain bullish on our continued growth opportunity here. And what you're poking out a little bit, I think, is where else do you have room to grow, and I think, it will answer part of your question. So if we think about vitamins, it's very proliferated online. And so we continue to have opportunity on Centrum just given the larger number of competitors overall. And so we're taking the appropriate steps to be competitive in that environment online and continue to win. And then the other 2 are maybe less obvious, but cough/cold is an immediate need situation. And so what you need is to be able to get products fairly fast. So as delivery options become available, we think that's another space that opens up and makes that quite attractive for online purchasing as well and some ingredient things that we're managing there. The second and final one that I'll share with you is really around dentures. Brian mentioned a few of the behaviors, but this was primarily an older demographic, and they've had mixed comfort with being able to ship and buy online. They've gotten better during the COVID experiences, and we are working with them to also help make them comfortable on where to buy their purchases.

Thank you, Lisa. We'll go back to a question from the platform. Can you please give more color on working capital as a percent of sales? And how do you expect it may trend? And do you use factoring? Second question separately on ESG. Why is there no net zero target? So Tobias, why don't we start with the first question to you?

Good. Yes. Thanks, Brian. So first of all, on the working capital. So if you take a very strict definition of working capital, which is inventory, accounts receivable, minus payables, then our working capital is less than 10% of revenue. And as I laid out in my presentation, we see more room for improvement, especially on the inventory side, given that we predominantly focused on integrating the business over the last few years. So that's, I think, again, very sort of strict definition of working capital in, what I say, the purest form. And then on factoring, we use it, but we only use it where it has a return given where there's a high risk, and where actually factoring has a positive return, but I think it's a very small part of our receivable management.

Thank you, Tobias. And on ESG, why is there no net zero target, and I'll turn it to Teri in a moment, but again, just as a reminder, our current carbon footprint is significantly lower than many of our peers, as Teri talked in her presentation. And we do have a target for a reduction of that carbon footprint, Scope 1, 2 and 3 by 2030. But Teri, do you want to talk a little bit about our net zero and why we don't have a target today?

Yes. So Brian, just to reiterate, we do have targets for 2030. We have taken a target of reducing 100%, our Scope 1 and 2 carbon footprint and reducing by 42%, our Scope 3 footprint by 2030. And these are very much in line with the 1.5-degree pathway that's been laid out by the Science-Based Targets Initiative. And it's our intention, as soon as we become a stand-alone company, to begin conversations with the group, the Science-Based Targets Initiatives group to begin to define our 2040 net zero goal. Following the COP26 discussions, there was quite a bit of nuance and change brought forward about how one should interpret a net zero carbon target. So we want to make sure once we're a stand-alone entity that we'll have those conversations, and we come out with a target that is appropriate for the nuances that have come forward.

Thank you, Teri. We'll go back to the phones.

Our next question is coming from Keyur Parekh from Goldman Sachs.

3 questions, if I may, please. The first one is for you, Brian. Kind of at a big kind of picture level, it seems like a couple of the other pharma peers are following kind of your footsteps and kind of trying to separate the consumer health businesses. So my question for you would be that as you see the broader strategic landscape kind of for consumer health over the next 3 to 5 years? How do you see opportunity for Haleon to play a much bigger role kind of in that space given how fragmented it is today? So that's kind of question number one. Question number 2 would be kind of for Tobias and which is just trying to get a bit more granularity around outlook for margins. If we were to assume that the starting margins in 2022 is broadly similar to that in '21 with kind of the puts and takes on kind of synergy versus separation cost or onetime costs on that. How comfortable are you with the margin progression that the Glaxo covering analyst had built in for the consumer health businesses? I think those numbers were in kind of 40, 50 basis points per year range. So how comfortable are you with that? And then the third question is, as we looked at kind of your power brands, they are clearly kind of growing now at 60%, 58% of your business contributing to a lot of the growth. Is there anything you can share about the level of profitability associated with those power brands? And consequently, as we see both kind of the top line growth going forward and margin progression, how much lesser of a drag will be the less growing part of your business be?

Okay. Thank you. And Tobias, I'll come to you on the second 2 questions. Keyur, on the question on big picture. So yes, we have seen the announcement that J&J has decided to also separate and become an independent listed company in the U.S. I think it just is a reinforcement of the strategy that GSK has had and certainly a reinforcement of the attractiveness of these assets. And certainly, it is a fragmented category and certainly in OTC and in VMS. And I think as I outlined, as we sit here today, we love the portfolio we have. We don't need to do M&A to do those -- to deliver the commitments that we made today. We do have capacity over the next couple of years to do bolt-on M&A, if attractive and fits with us strategically and accelerates our growth. And I'm not going to predict on what's going to happen in the future and what assets will come up, but certainly, we see ourselves as a business that has proven the ability to do big deals and to integrate businesses. But right now, our focus is on the organic growth, separating this business and delivering on the commitments we've laid out today. Tobias, on the outlook, but also on the power brand mix and margin.

Yes. Good. Thanks, Brian. So first of all, I think, when you look at the margin expansion, I said for '22, I'm not going to give you a profit forecast. And then we said, from '22 on, we said moderate margin expansion on an annual base. And we don't want to define what that margin expansion is because we do not have a margin target in mind. We believe that the margin we have is top quartile of the industry. And I think we've worked hard over the last few years getting to this place, and I feel really proud what we achieved as a team getting to the margin where it is today. So what we want to do going forward is invest in a disciplined way on A&P and R&D ahead of the rate of sales growth. And that, coupled with gross margin increases with all the drivers I mentioned earlier, should allow us, in addition with other SG&A reducing given the scale we have and the optimization opportunities there, a moderate margin expansion in the longer term and I'm very confident we can deliver that. And then I think on the power brand. So I think the power brands ultimately, it's a scale question. So the large power brands have scale. So that means we get the economies of scale in that. I think both from a manufacturing point of view, but also from an A&P point of view, and we're building on these. Again, I think, we take very, very conscious choices to invest in that. If we see growth opportunities, and you heard a lot of them today from all my 3 region colleagues, that we would go and invest even more in that if we get -- if we can drive higher household penetration and other opportunities. So I think from that perspective, growth potential there, but ultimately, all coming back to the model of driving sustainable 4% to 6% annual organic sales growth.

Great. So we have time for 2 more questions. We'll go one more to the phone. We'll take the last one from the platform. So let's go to the phone.

The last question from the line is from Emmanuel Papadakis from Deutsche Bank.

Perhaps I'll take a couple on the e-commerce. So I wonder if you could give us a little more detail on the mix of the [indiscernible] e-commerce channel sales. And what I mean by that is how much, if any, is direct-to-consumer versus third-party platforms? And what's the mix in terms of online retailers like Amazon versus online grocery, pharmacy platforms like Walmart, Walgreens? What's the risk, I guess, I'm asking the concentration or consolidation around things like Amazon? And as part of that, I'd be very keen to understand your perspective on the future risks from private label as a consolidation potentially takes place. And then perhaps if I could, just on the margin outlook, more input inflation cost assumptions that you made beyond '22 in your margin guidance. It sounds like the plans are an even mix pricing and volume to drive that 4% to 6% sales CAGR. So how is that pricing growth per across regions? Is it pretty evenly distributed? Or you're really looking at certain regions to drive pricing?

So thank you for the questions. And Tobias, I'll come to you back on the margin question. But on e-commerce, the mix. So first question was the mix of through customer channels like Amazon or retail or e-commerce sites versus direct-to-consumer. The vast majority of our sales is through customers and third party. We do have some direct-to-consumer businesses, and Lisa talked a bit in her U.S. presentation about Chapstick and the direct-to-consumer business we have there, which is going really well, and it's a platform that we're looking at expanding. But I would say that it's not a key driver of that e-commerce sales that you've seen, but we're going to see how that channel plays out. We've certainly been successful where we have done that work. The other piece is you look across each Amazon versus omnichannel, probably a good place to look at that is in the U.S. business, where it's about 70% coming from Amazon, 30% coming from omnichannel. And frankly, the growth in the omnichannel retailers, the Walmarts and the Walgreens and CVSs and the targets is actually quite fast, and we're doing quite well there. So we're seeing that shift balance out a little more as it goes. And then on private label, listen, we've been competing with private label for 50 years in markets like the U.S. and in the U.K. So it's a dynamic, we will manage online like we manage off-line. And what we find out in competing with private label is, there is a place for private label. There's no question about it. But in health care and where we play brands really matter, trust really matters. And what we say is we can win in a world of private label, if we innovate and we do the right thing on consumer connections, and we deliver the benefits that consumers are really looking for. And then Tobias, maybe the question on inflation and your thoughts on margin.

Yes. So first of all, I think, when you look back on how we've managed inflation, I think, last year, I think, we guided that we would that about 50% of the inflation costs we would mitigate through cost efficiency in the supply chain and the other 50% via pricing. And we've done this successfully as you've seen our gross margin increase already last year, so '21 versus '20. Actually both years, '19 to '20 and '20 to '21 as well. So I think that gives us confidence. And that's also what we were targeting going forward that we mitigate inflationary headwinds through a mix of pricing and efficiencies that we drive in the business. So I think I'm confident we can continue doing that going forward. And then I think, Emmanuel, you also asked about across the regions. I think the contribution from the regions is probably fairly evenly split. Of course, you would expect in emerging market environment where inflation is higher, you would look for a bit more price increase, but I think this is really a country-by-country and then not just a country-by-country, but a product-by-product approach, where we look very, very detailed by, where are we? Are we priced competitively? What opportunities do we have? So I think we don't take a broad-brush approach here, but really do that in a very, very targeted manner across all of our businesses.

Thank you, Tobias. So to the last question, from the platform, how will management be incentivized, short-term and long-term KPIs and weight? And if you can't share, what are the key considerations? Well, as you would imagine that the incentivization is a matter for the new Haleon Board and the new Haleon RemCo. And that's work that's coming, and you would see our RemCo policy, remuneration policy in the prospectus. But what I would say is fully expect that the incentivization for this management team will be very closely linked to all the commitments we've made today on growth, on moderate margin expansion, on cash flow, on deleverage commitments, on ESG commitments. So more to come, and we'll share that when we have it, but that would be the considerations and what you can expect. Okay. Thank you. So listen, I hope after spending 4-plus hours with this group of folks today that you're as excited as we are about the opportunities in front of us. This is an amazing business. It's got an exceptional category -- exceptional portfolio of brands, category-leading positions. We have really strong capabilities that we've built over the last few years. We have a strategy to outperform. We have clear building blocks on how we're going to deliver ultimately our growth outlook, which is 4% to 6% annual organic sales growth, moderate marketing expansion with strong cash conversion and the deleverage commitments we've made. We are super excited about what the future holds for us, and we're looking forward to engaging you a lot more in the coming weeks and months as we lead up to separation. So thank you for your time today.