- Strong start to 2023 for GSK spin-out
- Organic growth guidance upgraded
- Respiratory health sales surge due to bad cold and flu season
Shares in Haleon (HLN) traded 2.1% higher at 351p after the consumer health colossus said it now expects organic revenue growth for 2023 to be towards the upper end of the 4% to 6% guidance range given in March.
This follows a strong start to the year from the FTSE 100-listed supplier of trusted headache tablet and toothpaste brands such as Panadol, Sensodyne and Advil, which was spun out of GSK (GSK) and listed on the London and New York stock exchanges last summer.
First quarter organic sales growth of 9.9% reflected a reassuring combination of price increases and volume growth, confirming Haleon is not suffering from the trading down effect caused by the cost-of-living squeeze.
£3 BILLION QUARTER
Group revenue rose 13.7% year-on-year in the first quarter to March 2023 to the best part of £3 billion as Haleon delivered growth across its respiratory health, pain relief, oral health and digestive health and other divisions.
The Brentford-based group’s respiratory health revenue proved particularly strong, surging 33% higher on an organic basis thanks to a continued strong cold and flu season and re-stocking in the Europe, Middle East & Africa, Latin America and North America regions given ‘particularly low’ inventory levels at the end of last year.
The only division to post a drop in organic sales was vitamins, minerals & supplements (VMS), largely due to the strong comparative for the Emergen-C brand in the US during the Omicron wave in the first quarter of 2022, although sales of Centrum were up in high single digits.
By geography, Haleon generated double-digit reported revenue growth across all regions, with Asia Pacific boosted by strength in China, particularly in pain relief as lockdowns ended, combined with high Covid-19 and cold and flu incidence.
Guided by CEO Brian McNamara, Haleon kept the rest of its full year 2023 outlook unchanged.
As Shares outlined here, Haleon looks well-placed to capitalise on a growing global focus on health and wellness coming out of the pandemic as well as the ageing global population, the burgeoning emerging markets middle classes and sizeable unmet consumer needs as public health authorities face increasing pressures.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, pointed out that companies like Haleon have faced a customer loyalty test over the past year as the cost-of-living crisis has ‘forced many people to reconsider their spending habits, often trading down from well-known brands to cheaper alternatives offered by supermarkets’.
Mould added: ‘Haleon’s empire was built around its headache and toothpaste brands and in normal economic conditions one could expect it to clean up as consumers flock to “big brand” names.
‘Yet we’re not living in normal economic times and so consumer brand giants have not been able to sit back and wait for the cash to roll in.
‘For some products like food and cleaning items, trading down from big brands to supermarket own-label items is an easy decision. However, working in Haleon’s favour is that fact a lot of consumers seeking relief from pain will stick with the brands they trust, believing they offer a superior product. That might explain why Haleon has done well over the past quarter.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Martin Gamble) own shares in AJ Bell.
