GSK spinoff Haleon’s shares fall as earnings miss miscasts and health giant’s margins squeezed by higher costs
- Earnings per share of 4.2p on sales of around £3bn is just shy of forecasting
- Margins were squeezed by 90 basis points to 23.1%, it says due to high cost inflation
Haleon’s first-quarter earnings fell short of analyst expectations as the consumer healthcare giant’s margins were squeezed by higher costs.
The GSK spin-off – behind brands such as Sensodyne toothpaste and Panadol paracetamol – posted earnings per share of 4.2p on sales of around £3bn for the three months to 31 March.
Haleon pinned the performance, which is similar to analyst forecasts of 5.24 pence per share on revenue of £2.9 billion, to ‘cost inflation and incremental stand-alone costs’.
The effect was to squeeze adjusted operating profit margins for the first quarter by 90 basis points compared to the same time last year to 23.1 percent, which Haleon also blamed on “adverse transactional exchange rates.”
Haleon is behind brands such as Sensodyne toothpaste and Panadol paracetamol
Interactive Investor’s Victoria Scholar says Haleon raised prices to offset inflation, but it was “insufficient to prevent a bottom line miss.”
However, Haleon’s reported revenues grew 13.7 percent during the period, with the company posting solid growth in all categories except its vitamins, minerals and supplements business.
This translated into strong performance in all regions, with Europe, the Middle East and Africa, Latin America and Asia Pacific posting double-digit growth.
As a result, reported operating profit rose 34.5 per cent to £627 million, “due to a major reduction in separation and admission costs,” Haleon said.
Brian McNamara, CEO of Haleon, said: ‘The new year is off to a good start, and I’m extremely pleased that we delivered a healthy balance of positive volume mix and price in the first quarter; a demonstration of the strength of the brand portfolio combined with exceptional execution in all our markets.
“Our strategy is delivering strong growth and our performance in the first quarter reinforces my confidence in our ability to deliver. Strong innovation and a continued focus on cost discipline support this confidence.’
Haleon reaffirmed that full-year sales are “towards the upper end” of its target range of 4 to 6 percent.
Haleon Shares fell nearly 4 percent to 338.9p in early trading, making them the biggest faller on the FTSE 100.
They have continued to rise by 5.4 percent since the start of 2023.
Scholar added: “Since the spin-off last summer, the stock has had a rocky start, bottoming out in September last year, but the stock has progressed well over the past few months, rising nearly 30 percent over the past six months. months.’
“But the disappointing earnings are weighing on the stocks today.
Also weighing in on stocks, market analyst at City Index Joshua Warner noted that pharma giant Pfizer plans to unburden its 32 percent stake in Haleon in efforts to “raise cash to pay down debt and increase shareholder returns.”
He added: “Pfizer chief finance officer Dave Denton told the Financial Times it will launch a ‘slow and methodical’ sale of Haleon shares within months to ensure it doesn’t undercut the company’s valuation.”