Haleon Upgrades Full-Year Sales Forecasts As Recent Trading Impresses

Consumer healthcare colossus Haleon dropped on Wednesday despite upgrading its sales guidance following strong first-half trading.

At 326.5p per share Haleon’s share price was 1.1% lower in cautious midweek business.

The FTSE 100 business said that revenues leapt 10.6% between January and June, to £5.7 billion. On an organic basis sales increased 10.4%, driven by a price/mix improvement of 7.5%.

Physical sales continued to rise despite price hikes, with volumes/mix rising 2.9% year on year.

As a consequence, adjusted operating profit increased 8.9% at constant currencies, to £1.2 billion. This was despite a 40-basis-point decline in adjusted operating profit margin over the period, to 22.2%.

Profit before tax rose 11.1% in the first half, to £960 million. The company declared an interim dividend of 1.8p per share.

Sales Forecasts Raised

Haleon, which was spun out of pharmaceuticals giant GSK
GSK
in July 2022, said that sales of its so-called Power Brands leapt by double-digit percentages in the six months to June.

On an organic, sales across its premier product portfolio — which includes the likes of Sensodyne toothpaste and Panadol painkillers — jumped 10.4% year on year.

More than half (55%) of the company’s business either gained or maintained market share in the first half, it noted.

Haleon said it now expects organic revenues to grow between 7% and 8% in 2022. That’s up from the firm’s advice back in May that sales would rise “towards the upper end of the 4% to 6% range.”

Adjusted operating profit is tipped to increase between 9% and 11% at stable exchange rates in 2023.

“Very Pleased”

Chief executive Brian McNamara said that “one year from listing, we are very pleased with Haleon’s first half results. We delivered double digit organic revenue growth, with both price and positive volume mix.”

He noted that “encouragingly this trend was consistent across the first and second quarters,” while “our growth was also broad based across regions and categories.”

McNamara added that “whilst we continue to expect a challenging environment given further pressure on consumer spending and global geopolitical and macroeconomic uncertainties, we remain confident in the resilience of Haleon’s incredible portfolio of category leading brands.”

“Squeaky Clean”

Adam Vettese, analyst at eToro, said that “Haleon has posted a squeaky-clean set of numbers this morning, one year on from being spun out of GSK.”

He commented that “this is a familiar story in the past year for major name-brand consumer staples firms” thanks to their strong pricing power. “Inflation has been passed on with no real dent to demand for firms like Haleon,” Vettese noted.

Derren Nathan, head of equities at Hargreaves Lansdown, said that “there’s no denying the strong execution so far at Haleon,” which has in turn created the company’s high valuation. The healthcare giant currently trades on a forward price-to-earnings (P/E) ratio of 20.4 times.

However, he cautioned that “with a relatively low yield compared to the competition, and the prospect of continuing sell downs from Pfizer
PFE
and GSK, Haleon needs to keep delivering if it’s to convince investors it’s a better buy than its peers.”