Haleon PLC says positive momentum continuing, albeit at slower rate

Haleon PLC (LSE:HLN, NYSE:HLN) reported a 22% increase in profits in its first set of results after being spun out of GSK, while adding that positive momentum seen in the first half has slowed very slightly in the third quarter.

The FTSE 100-listed consumer healthcare group said it still maintained its guidance for full-year organic sales growth of 6-8% and that the business is “well positioned to navigate the current macro-economic challenges including rising inflation and the potential impact this may have on consumer behaviour in the future”.

Having already revealed that revenue in the first six months of the year was up 13.4% to £5.2bn, the interim results revealed that operating profit increased to £900mln, with margin up 1.2 percentages points to 17.3%. Adjusted operating margin was up 0.9 points to 23.0%.

The cost of separating from GSK and listing on the London and New York stock exchanges are now anticipated to be approximately £0.5bn and split 80% this year and the remainder in the next two financial years, having been expected to come to £0.4bn.

Statutory profit before tax came to £864mln, up 17.4%.

Net debt as of 18 July stood at £10.7bn, with £750m of £1.5bn term loan recently repaid.

With free cash flow having swelled to £553mln from £364mln a year ago, chief executive Brian McNamara said this strong cash flow generation “underpins confidence in our ability to de-lever quickly over the coming years”.

He also hailed the balance of price and volume/mix in Haleon’s revenue growth, which he said reflected brand strength across the portfolio, and that margin expansion was delivered despite significant cost inflation and absorption of standalone costs for the business.

“Furthermore, we gained or maintained share in most of our business, demonstrating that continued investment is driving sustainable growth, even in difficult market conditions.

Full-year revenue and adjusted operating margin guidance remained unchanged from the trading update in July, with all medium-term guidance reiterated too, namely annual organic revenue growth of 4-6%, sustainable moderate adjusted operating margin expansion at constant currencies, a ratio of net debt to adjusted EBITDA below three times by the end of 2024 and an initial dividend expected to be at the lower end of 30-50% pay-out range, subject to board approval.

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