Haleon posts double-digit sales growth in bumper first half
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Haleon posts double-digit sales growth in the first half of the year as GSK consumer spin-out calms concerns over US heartburn lawsuits
- First interim results as an independent company show strong growth
- Haleon boosted by strong performance from major brands such as Panadol and Theraflu
- The company says it will not be liable for claims related to US lawsuits over heartburn drugs
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Haleon has posted double-digit revenue growth in its first interim results as an independent publicly traded company.
The group, which became the UK’s largest IPO in a decade when it split from pharmaceutical giant GlaxoSmithKline in July, saw revenues rise 13.4 percent in the six months to 30 June to £5.19 billion, while the adjusted operating profit increased by 12.2 percent. to £1.19 billion.
Haleon also told investors it believes it is not liable for claims arising from US lawsuits over Zantac against heartburn, which has significantly hit pharmaceutical stocks in recent months amid allegations that the compound contains a likely carcinogen.
The group became the UK’s largest IPO in a decade when it split from pharmaceutical giant GlaxoSmithKline in July
It formally rejected GSK’s and Pfizer’s claims for indemnification in relation to lawsuits “on the grounds that the scope of the compensations set forth in the joint venture agreement relates only to their consumer health care activities such as carried out when the JV was established in 2018′.
Haleon Shares reacted positively to the Zantac update, rising 1.4 percent in early trading to 262.9 pence, after taking a beating in recent weeks over concerns over possible debt.
Steve Clayton, fund manager at HL Select, said: “Procedures around Zantac, which was previously marketed by GSK and Pfizer, is a distraction, but Haleon itself has never marketed this product and we see no significant financial costs, except that of defending the lawsuits, which Haleon has incurred as a result.”
The group attributed its record first half results to “strong brand performance,” with big names like Panadol, Theraflu, Otrivin, Advil and Centrum doing particularly well.
This allowed it to grow its adjusted operating profit margin by 90 basis points from last year, while adjusted earnings per share rose 21.5 percent to 9.6 pence.
Meanwhile, free cash flow grew from £364 million last year to £553 million over the period.
Brian McNamara. Haleon boss, emphasized that market share in most of the company was maintained, “demonstrating that continued investments drive sustainable growth, even in difficult market conditions.”
He added: “I am also pleased that we achieved margin expansion in the first half, despite significant cost inflation and absorption of standalone costs to the business.
“Strong free cash flow generation supports confidence in our ability to rapidly deleverage in the coming years.”
Haleon left its operating margin and revenue guidance unchanged for the full year, with expectations of organic growth of 6 to 8 percent, but warned positive momentum in the third quarter would continue at a slower pace amid macroeconomic challenges and uncertainties.
Victoria Scholar, head of investments at Interactive Investor, said: “Today’s results are largely optimistic with strong growth in first half sales and earnings, pushing the stock to the top of the FTSE 100.
“While a more challenging economic environment lies ahead, some of this pain will be offset by a strong cold and flu season for Haleon, which will boost demand for some of its products.
As a seller of primarily consumer goods, Haleon appears to be relatively well positioned to weather an economic downturn.
The biggest risk is if consumers instead trade from branded products such as Panadol, Advil and Aquafresh to cheaper unbranded rivals. Uncertainty around Zantac remains an overhang for the shares.’