MIDAS SHARE TIPS: Here’s a remedy to perk up your portfolio – Haleon

In 2016, a group of more than 2,000 American men and women, aged 65 and over, agreed to take part in a trial to see whether vitamin pills could make their brains work better.

Over three years, half the volunteers took Centrum Silver, a supplement for the over-50s, and half took a placebo. The results were conclusive. Centrum Silver helped senior citizens to remember more, solve problems faster and reason better.

Released late last year, the news was particularly welcome to HALEON, the consumer health group, which split off from drugs giant GSK in the summer of 2022. Haleon focuses on what might be called the serious side of everyday health. 

Its over-the-counter remedies span pain relief, such as Panadol and Voltaren, cold and flu medication such as Day Nurse, Night Nurse and Otrivin, Tums for indigestion, even Nicorette gum for smokers and ChapStick for sufferers of dry lips. It also makes Polident for dentures and Sensodyne for sensitive teeth, the world’s second biggest toothpaste brand after Colgate.

Then there are the supplements, including Caltrate, a calcium tablet, and Centrum, whose vitamin blends offer to help insomnia, sore muscles, eyesight and a whole lot more besides.

Haleon is one of a kind – the only listed business exclusively devoted to consumer health. The shares have been a lacklustre performer since demerging from GSK and are now £3.30, a price which reflects neither current performance nor future prospects.

Looking ahead, the stock should pick up as the business proves its mettle, free from its pharmaceutical parent.

Haleon is big. Valued on the stock market at almost £30 billion, the group has 23,000 employees and its products are sold all over the world. Some brands are global, including Sensodyne, Panadol and the nasal spray Otrivin. Some are more popular in certain parts of the world than others. Caltrate, for example, used to be handed out for free in China because calcium deficiency is such a big issue there and even now the government runs programmes encouraging citizens to take it.

Many brands go under different names in different places. Corsodyl mouthwash here is known as Parodontax in most other countries. Ibuprofen drug Advil is big in America but less known here.

Across the business though, Haleon prides itself on taking a therapeutic approach to healthcare – making stuff designed to help users feel stronger and healthier than they otherwise would. Chief executive Brian McNamara spends around £300 million every year – 3 per cent of sales – on research and development, not just making sure that Haleon’s wares do what they say on the tin but also ensuring that the company stays up to date with trends and tastes.

This can mean new formulations, chewable medication as opposed to pills, new blends, toothpaste that helps bleeding gums as well as reducing sensitivity, and recyclable packaging rather than heavy tins.

The company also works hard on its relationships with dentists and pharmacists so they recommend Haleon products to their patients. Most are sold in supermarkets too but professional recommendations can give Haleon’s goods an edge. And in many parts of the world, including continental Europe, even headache pills are only sold by chemists.

Haleon reports its first full-year figures as an independent business next month but McNamara has already told investors that trading in the first nine months of last year was better than expected. Analysts expect a 15 per cent increase in turnover to £10.9 billion for 2022, with profits up 5 per cent to £2.3 billion and a dividend of 3p, doubling to 6p this year.

Some followers worry that Haleon will be hit by the cost-of-living crisis, with consumers turning to cheaper alternatives, such as supermarkets’ own brands of medicine. Evidence to date suggests otherwise and sales were little affected in past downturns. When it comes to health, consumers are often prepared to pay up, particularly if they are buying for unwell children or elderly parents. And many of us are remarkably loyal to the brands we grew up with. Tums, for instance, was launched more than 60 years ago and is still going strong.

Economic worries aside, Haleon shares have also been blighted by a lawsuit relating to Zantac, the GSK antacid drug, with fears that the legal action might affect Haleon. In December last year, however, a US judge dismissed thousands of cases, citing lack of evidence.

Midas verdict: Across the world, consumers are spending more on their health, as populations age and emerging markets grow richer. Haleon is well placed to benefit with a stable of famous brands, trusted from Beijing to Birmingham. At £3.30 the shares are a buy and the dividend offers a bit of extra income too.

Traded on: Main market Ticker: HLN Contact: haleon.com or 01932 822 000