Haleon posts double-digit sales growth in strong first half as GSK’s consumer division calms concerns over US heartburn-related litigation.
- First interim results as an independent business reveal strong growth
- Haleon buoyed by strong performance in big brands like Panadol and Theraflu
- Firm says not responsible for claims related to US litigation over heartburn drugs
Haleon has posted double-digit revenue growth in its first interim results as an independently listed company.
The group, which became the UK’s largest stock listing in a decade when it was spun off from pharmaceutical giant GlaxoSmithKline in July, posted a 13.4% rise in revenue to £5.19bn in the six months to on June 30, as adjusted operating profit increased 12.2%. at £1.19 billion.
Haleon also told investors that he believes he is not responsible for claims arising from US litigation over heartburn drug Zantac, which has hit drug stocks significantly in recent months amid allegations of that the compound contains a probable carcinogen.
The group became the UK’s largest stock listing in a decade when it was spun off from pharmaceutical giant GlaxoSmithKline in July.
It has formally rejected GSK’s and Pfizer’s claims for damages in connection with the litigation “on the basis that the scope of the damages set forth in the joint venture agreement only covers their consumer healthcare business as it was carried out when formed the joint venture in 2018.”
Shares of Haleon reacted positively to the Zantac update, rising 1.4 percent to 262.9 pence in early trading, after taking a beating in recent weeks over concerns about its possible culpability.
Steve Clayton, fund manager at HL Select, said: “The litigation around Zantac, which GSK and Pfizer previously commercialized, is a distraction, but Haleon never commercialized this product and we don’t see any significant financial costs other than those of defending the litigation, being incurred by Haleon as a result.’
The group attributed its excellent first-half numbers to ‘strong power brand performance’, with big-name drugs such as Panadol, Theraflu, Otrivin, Advil and Centrum performing particularly well.
This allowed it to increase its adjusted operating profit margin by 90 basis points from last year’s levels, while adjusted earnings per share rose 21.5 percent to 9.6 pence.
Free cash flow meanwhile grew from £364m last year to £553m over the period.
Brian McNamara. Haleon’s boss highlighted the market share held in most of the business, “showing that continued investment is driving 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 independent cost absorption for the business.
“Strong free cash flow generation supports confidence in our ability to rapidly reduce leverage in the coming years.”
Haleon left its full-year operating margin and revenue guidance unchanged, with organic growth expected at 6-8 percent, but warned that positive momentum would continue at a slower pace in the third quarter amid macroeconomic challenges. and uncertainties.
Victoria Scholar, chief investment officer at Interactive Investor, said: “Today’s earnings package is largely upbeat with strong revenue and earnings growth in the first half, lifting shares towards the top of the FTSE 100.” .
“Although a more challenging economic environment lies ahead, some of this pain will be offset by a heavy cold and flu season for Haleon, which will boost demand for some of its products.
“As a seller of mostly consumer staples, Haleon appears to be relatively well positioned to navigate an economic downturn.
‘The biggest risk is if the consumer switches from branded products like Panadol, Advil and Aquafresh to cheaper unbranded rivals. The uncertainty around Zantac remains another problem for stocks.