- Organic growth and operating profit guidance raised
- First half growth led by flu and pain medicines
- 55% of Haleon’s business gained or maintained market share
Consumer health giant Haleon (HLN) raised its full-year organic sales growth and operating profit guidance following a strong first-half performance driven by a reassuring combination of price increases and volume growth.
The FTSE 100 company saw strong sales of toothpaste and painkillers in the period, maintaining market share momentum had improved in recent months, and said debt was coming down too, so why were the shares down 2.2% to 322.8p on Wednesday?
The issue seems to be the cautious outlook statement, which talks of a ‘challenging environment given further pressure on consumer spending and global geopolitical and macroeconomic uncertainties’.
IN RUDE HEALTH
Spun out of drugs giant GSK (GSK) a year ago and chaired by respected former Tesco (TSCO) boss Dave Lewis, Haleon is the consumer health colossus behind household-name headache tablet and toothpaste brands such as Panadol, Sensodyne and Advil.
Sales in the half to 30 June rose 10.6% to £5.74 billion, with organic growth of 10.4% driven by price increases of 7.5%. Encouragingly, volume growth was in positive territory at 2.9%, demonstrating Haleon’s pricing power, while adjusted operating profit perked up 8.9% to £1.27 billion.
Haleon is now guiding towards full year organic revenue growth of 7% to 8%, having previously seen growth ‘towards the upper end of the 4% to 6% range’, while adjusted operating profit growth guidance has been upgraded to a 9% to 11% range.
POWERING AHEAD
The group reported 10.1% organic growth from its ‘Power Brands’, with standout performances coming from over-the-counter products including Sensodyne and Panadol as well as its denture care portfolio and Otrivin nasal spray.
‘Local Growth’ brands outperformed, with sales shooting up 14.1%, supported by the strong growth of pain relief brand Fenbid and cold and flu treatment Contac following the end of Covid lockdowns in China.
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Haleon closed the half with net debt of around £9.5 billion, down from £10.7 billion at the time of the demerger in July 2022, thanks to strong cash generation and earnings growth in the intervening period.
And the group has agreed to sell its Lamisil skin cream brand to Karo Healthcare for £235 million in a disposal which will simplify its portfolio and allow the company to reallocate resources to drive growth in its core brands.
‘The proceeds from the disposal will be used to pay down debt,’ explained Haleon, ‘underpinning our confidence to de-lever to net debt/adjusted EBITDA below 3x during 2024’.
WHAT DID THE CEO SAY?
Chief executive Brian McNamara said his charge ‘delivered double digit organic revenue growth, with both price and positive volume mix. Encouragingly this trend was consistent across the first and second quarters.’
McNamara added: ‘Our growth was also broad-based across regions and categories. Performance in the first half also remained competitive with circa 55% of our business gaining or maintaining share, reiterating the resilience of the brand portfolio.’
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