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Haleon (LSE: HLN) shares are in the spotlight this morning as the consumer healthcare company has just posted its results for the six-month period ended 30 June 2023.
Here, I’m going to unpack the H1 results. I’ll also provide my view on the FTSE 100 stock now.
Haleon’s H1 results
Today’s results are pretty good, to my mind.
For the period, revenue was up 10.6% year on year to £5.7bn. Organic growth was 10.4% (versus the consensus forecast of 8.2%), with 7.5% coming from price increases and 2.9% coming from volume/mix.
As for earnings, diluted earnings per share (EPS) on a reported basis were up 32.1% to 7.4p while adjusted diluted EPS fell 8.3% to 8.5p.
On the back of this solid performance, the company declared an interim dividend of 1.8p (nil for H1 last year as the company was still part of GSK).
Encouragingly, Haleon raised its guidance for full-year revenue. It now expects organic revenue growth of 7-8%. Previously, it said it was expecting growth “towards the upper end of the 4-6% range”.
“Our strategy is delivering, demonstrated with the strength of our results, and we remain confident that Haleon is well positioned for the rest of the year, as well as over the longer term,” commented CEO Brian McNamara.
Worth buying?
Are Haleon shares worth buying considering these H1 results?
Potentially.
This is a company with strong competitive advantages due its well-known, trusted brands (Sensodyne, Panadol, Advil, Voltaren, etc). These brands give the company pricing power.
And the valuation seems reasonable. At today’s share price, Haleon sports a forward-looking price-to-earnings (P/E) ratio of around 18.5. That’s above the UK market average but not particularly high for a robust consumer health company.
Additionally, there’s a growing dividend. For 2023, analysts expect a total payout of 5.7p per share. That translates to a yield of about 1.7% at the current share price.
On the downside, debt is a little high. At 30 June, net debt stood at £9,525m, representing 3.4 times adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) for the last 12 months.
This leverage is not a huge problem, given the dependable nature of Haleon’s sales and earnings. However, I’d like to see it come down.
Another issue is the fact that both GSK and Pfizer – which still owns a lot of Haleon shares – are expected to sell down their holdings in the near future (GSK offloaded a large amount of stock earlier this year). This could potentially put downward pressure on the share price.
My take
Weighing everything up, I think there’s a lot to like about Haleon shares. I believe they could play a role in a diversified portfolio.
Having said that, there are a few other UK shares I would buy before investing in the consumer healthcare company.
