Haleon benefits from brand recognition

Consumer health powerhouse Haleon (HLN) has been demerged from its former parent GSK (GSK) for more than six months now – and it has a decent set of full-year results to show for it. 

Chief executive Brian McNamara said revenue growth was “well balanced between volume and price, with two-thirds of the business gaining or holding share”. But with the shares down over 4 per cent within a few hours of the results announcement, it would appear markets are more concerned with the portion of the business that underperformed. 

In percentage terms, revenue growth was highest in the respiratory health division, which benefited from a strong cold and flu season. Covid-19 lockdowns meant that these viruses didn't circulate as normal in 2021 – and Haleon’s over-the-counter remedies therefore failed to sell as normal.

Oral health remains the strongest of the company’s businesses, bringing in almost £3bn in revenue last year. Management said that sales were double the growth rate of the overall market – mainly thanks to continued market share gains for its Sensodyne and Parodontax toothpastes.  

Looking forward, Haleon said it is anticipating revenue growth of 4-6 per cent in the current financial year, although operating profit margins are expected to be broadly flat due to adverse foreign exchange impacts. 

Like others in the consumer healthcare space, Haleon has worked to offset the impact of inflation by increasing the prices of its products. Increases in freight and commodity costs nonetheless resulted in its adjusted gross profit margin falling by 50 basis points to 62.4 per cent. 

Haleon has the advantage of owning some of the most recognisable brands in consumer healthcare – but it had the misfortune of coming to market during a highly turbulent time. We’ll stay on the sidelines until macro conditions normalise. Hold. 

Last IC view: Hold, 270p, 20 September 2022