Excluding COVID, the margin improvement was significant at 580 basis points at CER, due to two main reasons: First, underlying margin benefits contributed 410 basis points driven largely by sales growth, favourable product mix and SG&A leverage, partly offset by the impact from the loss of Gardasil royalties and secondly, the Zejula royalty dispute contributed 170 basis points of margin improvement in the quarter. Including COVID-solutions, there was 460 basis points improvement, driven by similar factors. Next slide, please. Cash generated from operations was £1.1 billion, representing an improvement of £0.8 billion over Q1 last year. This was driven by core operating profit and favourable working capital, with the latter benefiting from higher receivables’ collections, particularly in the U.S. vaccines business.
Free cash flow was £289 million in the quarter, relative to an outflow last year, and therefore improving year-on-year by £978 million. Next slide, please. Slide 20 shares our net debt position since 31 December last year and how we’ve actively deployed capital in the business in line with our framework. Net debt was broadly stable compared to the end of 2023 at £15 billion. This included further monetisation of our stake in Haleon and the completion of the acquisition of Aiolos Bio in the quarter. With our end 2023 net debt to core EBITDA ratio of 1.5x and expected cash generation, we have a strong balance sheet to support continued investment in future growth, including through BD, as we look to deploy funds to enhance growth and deliver attractive shareholder returns.
Now, with that, I’ll now turn to our full-year expectations. Next slide, please. Turning to guidance, there is no change to our sales range of 5% to 7%, but we are increasingly confident of the full-year being towards the upper part of the range. We are upgrading our operating profit guidance to 9% to 11%, reflecting the strong start to the year and benefits from the Zejula patent dispute in the first quarter. We also expect royalty income to be slightly higher, between £550 million to £600 million in 2024. These benefits also flow through to our earnings per share, now upgraded to 8% to 10% for the year. I also wanted to give some colour on anticipated phasing throughout the year, starting with sales. Continued execution of the successful launches of Arexvy, Ojjaara and Jemperli lifecycle innovation have contributed 5 percentage points of growth in Q1 and will continue to benefit Q2.
However, we will annualize their launches, including the initial channel inventory build in Arexvy, in the second half. This year is also the start of our agreement with Zhifei for Shingrix in China. As Luke said, we had earlier than expected sales in Q1, but still expect the majority of 2024 Shingrix sales to be in Q2. Taking these factors together, we therefore expect sales growth will be significantly higher in H1 relative to H2. And turning to the operating profit dynamics, we continue to expect SG&A to increase in the low single-digit percentage range and for R&D to increase broadly in-line with sales for the year. As a result, driven by the sales phasing, operating profit growth will also be significantly higher in H1 given the operating leverage.
In summary, whilst it is still early in the year, we have made an excellent start to 2024 and are confident in delivering the full-year guidance and longer-term outlook. Turning to Slide 22. Lastly our IR roadmap, which shares our progress towards major milestones and value unlock opportunities, it’s clear that we have had a very positive start to the year, with a number of important pipeline events delivered, as Emma mentioned. The main milestones expected in the next two months are the U.S. FDA approval of Arexvy in adults aged 50 to 59, the phase III data readout of depemokimab in severe asthma with an eosinophilic phenotype, and the presentation of Blenrep data at ASCO in June. Turning to R&D milestones, many of the successes since Q4 have been within Oncology, and we look forward to our Meet the Management event in June to share a deeper review with you.
I will now hand back to Emma to conclude.
Emma Walmsley: Thanks, Julie. So, to summarize. GSK continues to deliver on its commitments and perform to a new standard. Our excellent performance in Q1 provides us with clear momentum, we are pleased to be upgrading guidance and expect to deliver another year of meaningful growth in sales and earnings in 2024, as we continue to focus on prevention and changing the course of disease for millions of people. This all bodes well, but it is still early in the year and we remain very focused on delivering on our commitments and more at continued pace for patients, for shareholders and for our people. Combining science, technology and talent to get ahead of disease together. With that, I will now open up the call for the Q&A with the team.
A – Nick Stone: Thanks, Emma. We will take our first question from Mark Purcell at Morgan Stanley. So Mark, over to you. Please.
Emma Walmsley: Hi, Mark.
Mark Purcell: Yes, good morning, good afternoon everyone. Thanks for taking my questions. So two questions on Shingrix. Could you help us understand the contribution we might expect from Zhifei for the full-year 2024 and then going back to your point of ex-U.S. penetration being less than 5% versus 37% in the U.S. Could you help us understand if there were any leading indicator countries which we could think about in terms of the broader ex-U.S. penetration increasing or other vaccines that could be proxies for how high the ex-U.S. penetration could go? And then the second one on Nucala COPD, there has been some discussion around Dupixent and the potential of delays. The PDUFA Sanofi as trades label breadth for time into the market, so could you help us understand the breadth of the MATINEE trial in terms of the patient population you are addressing?
I think you got broncholytic and emphysemic patients in there and it’s a broad eosinophilic phenotype as well so it would be helpful to understand the relative breadth of your label and target population? Thank you.
Emma Walmsley: Great, thanks, Mark. We will come first to Luke on the prospects of Zhifei expansion on Shingrix and then we will come, Tony, to you on COPD.
Luke Miels: Sure, Mark, so I am pleased to say it’s falling very much in line with the strategy that we have been outlining over the last few years, so with the contract with Zhifei, we have – it’s around £400 million with the contract. As we have said before, we are somewhat limited with supply into China this year, so £400 million is the number that you should use and then £800 million next year and then £1.2 million. The intent of course is to run that relationship significantly beyond the initial three years. Encouraging start. We are now in the field as of April with Zhifei and their point of vaccination expansion is very encouraging, so good news there. In terms of analogues, I think in markets like Europe and Japan it is very much about reimbursement penetration, so I think the UK is a good analogue.
