The Haleon (LSE: HLN) share price spiked up 3% in early morning trading following the release of the company’s 2024 first-half results. The news adds extra fuel to a month of growth for the stock, which climbed 10% in July.
Haleon is a Weybridge-based healthcare company behind top-name brands like Sensodyne, Panadol, and Advil. It was created in July 2022 when pharma giant GSK demerged its consumer healthcare business. It started trading on the London Stock Exchange the same day, with GSK shareholders receiving equivalent shares at a 1:1 ratio.
Since listing, the share price has traded relatively sideways in a tight range between 308p and 352p. This morning’s results spiked it to a new all-time high of 360p, although it’s now a little lower than that.
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Solid results
This morning’s results revealed an adjusted operating profit of £1.29bn, up 11% from the previous year. This was fuelled by lower cost inflation and savings from the closure of its Maidenhead branch.
Net debt stands at £8.4bn with free cash flow up to £831m from £369m in H1 2023. Despite its debt rising significantly since listing, the company still has sufficient reserves to cover interest payments by 6.3 times.
Although revenue declined 8% to £5.69bn, the firm stated it’s on track to deliver on full-year organic revenue growth guidance. Overall, the results appear to have been met with a positive reaction from shareholders.
On announcing the results, Haleon CEO Brian McNamara said: “Haleon reported a good first half, with solid organic revenue growth and strong organic operating profit growth, demonstrating that our strategy is delivering.”
He also noted market share performance, with “69% of the business gaining or maintaining share.”
Along with the results, the company announced a £135m share buyback programme.
US product launch
Today’s statement provided additional guidance on the rollout of Eroxon, the first topical erectile dysfunction treatment approved for over-the-counter sale by the US Food & Drug Administration (FDA). Haleon is working in partnership with Futura Medical to get the product to market.
The announcement outlined the company’s belief that the product addresses “a significant unmet consumer need” and will be “available in-market before the end of this year.”
UK-based Futura expects to enjoy further success from the collaboration. When the partnership was announced in July last year, Futura shares climbed 12% on the news.
My thoughts
Haleon has been fairly quiet since listing, with sparse news and little action from its share price. This is the first set of results that have prompted a significant price jump, positioning the company well for future growth.
But growth comes at a cost. With a price-to-earnings (P/E) ratio of 29.5, it’s well above the market average of 16.7. GSK, by comparison, has a P/E ratio of only 13.8. It’s also undervalued by 67% based on future cash flow estimates, whereas Haleon is overvalued by 14%.
While I’m impressed by the results, I’m not tempted enough to buy the shares today. At the moment, my portfolio is already heavily weighted to several health and pharmaceutical stocks in the UK and abroad. However, I’ve added it to my watchlist, alongside GSK.
