Haleon posts double-digit sales growth in bumper first half

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 market listing in a decade when it spun off from pharma giant GlaxoSmithKline in July, saw revenues jump 13.4 per cent to £5.19billion in the six months to 30 June as adjusted operating profits jumped 12.2 per cent to £1.19billion.

Haleon also told investors it believes it is not liable for claims arising from US litigation over heartburn drug Zantac, which has hit pharma shares significantly in recent months amid allegations the compound contains a probable carcinogen.

It has formally rejected GSK and Pfizer requests for indemnification in relation to litigation ‘on the basis that the scope of the indemnities set out in the joint venture agreement only covers their consumer healthcare businesses as conducted when the JV was formed in 2018’.

Haleon shares reacted positively to the Zantac update, rising 1.4 per cent to 262.9p in early trading, having taken a beating in recent weeks over concerns about its potential culpability.

Steve Clayton, fund manager at HL Select, said: ‘Litigation surrounding Zantac, which was previously marketed by GSK and Pfizer is a distraction, but Haleon itself never marketed this product and we do not see significant financial costs, other than those of defending the litigation, being incurred by Haleon as a result.’

The group credited its bumper first-half numbers to ‘strong power brand performance’, with big name drugs like Panadol, Theraflu, Otrivin, Advil and Centrum doing particularly well.

This enabled it to grow its adjusted operating profit margin by 90 basis points on last year’s levels, while adjusted earnings per share rose 21.5 per cent to 9.6p.

Meanwhile free cash flow grew from £364million last year to £553million over the period.

Brian McNamara. Haleon boss, highlighted maintained market share across most of the business, ‘demonstrating that continued investment is driving sustainable growth, even in difficult market conditions’.

He added: ‘I am also pleased that we delivered margin expansion in the first half despite significant cost inflation and absorption of standalone costs for the business. 

‘Strong free cash flow generation underpins confidence in our ability to de-lever quickly over the coming years.’

Haleon left its full-year operating margin and revenue guidance unchanged, with expectations of organic growth of 6 to 8 per cent, but warned that positive momentum would continue at a slower pace in the third quarter amid macroeconomic challenges and uncertainties.

Victoria Scholar, head of investment at Interactive Investor, said: ‘Today’s set of results are largely upbeat with strong top and bottom-line growth in the first half, lifting shares towards the top of the FTSE 100. 

‘Although a more challenging economic backdrop lies ahead, some of this pain will be offset by a strong cold and flu season for Haleon, boosting demand for some of its products. 

‘As a seller of mostly consumer staples, Haleon looks set to be relatively well positioned to navigate an economic downturn. 

‘The biggest risk is if consumer trade down from branded products like Panadol, Advil and Aquafresh to cheaper unbranded rivals instead. Uncertainty around Zantac remains another overhang for the shares.’