Haleon reported first-quarter revenue of £2.9bn, reflecting organic growth of 2.2% (2.3% expected). Growth was driven by a 2.4% increase in prices, partly offset by a 0.2% drop in volume and mix.
Divisional performance was mixed. Respiratory Health posted the biggest decline of 3.4%, held back by a weak cold & flu season. Oral Health grew at the fastest pace, up 8.3%, helped by innovation-led premiumisation and geographic expansion.
The group completed around 36% of its £500mn share buyback for the year and invested £65mn in a new Oral Health manufacturing facility in China.
Full-year guidance has been reiterated, with organic revenue growth of 3-5% expected. Underlying operating profit growth is expected to land in the high-single digits.
The shares were down 3.4% in early trading.
Our view
Haleon’s first quarter sales came in a little shy of expectations, held back by lower seasonal demand for cold & flu remedies. Full-year guidance remains intact, but growth will need to accelerate through the rest of 2026 to achieve this, and markets reacted cautiously following the announcement. Better growth in the United States will be the key to meeting these targets. There’s a focussed commercial plan in place but there’s also a lot to deliver.
Haleon’s broad financial footprint means it's not overly exposed to one geography. Outside of the US, growth is still holding firm, with the Asia Pacific region leading the way. We’re supportive of the growing focus on emerging markets.
For now, improving profitability provides the company with the firepower to support its well-recognised brands. These include several household names such as Sensodyne toothpaste, Otrivin nasal spray, Panadol painkillers, and Centrum multivitamins. Continued investment in innovation and marketing is, in our view, essential to maintaining Haleon's leading brand positions. But that may also dilute the bottom-line benefits of ongoing efforts to improve gross margins.
Customers tend to happily stomach a higher price when it comes to medicines they trust. But sluggish volume growth suggests Haleon may not have much room to raise prices further in the current environment.
We're impressed with Haleon's delivery of new and improved products, which we view as key to growing market share and maintaining brand loyalty. Successful innovations of note include the introduction of new delivery systems for painkiller Voltaren (patches) and the Otrivin decongestant (nasal mist).
Tariff risks remain something to be mindful of, but the direct risks are likely to be mitigated through local production in the US and limited sourcing from China.
Despite progress on debt levels and shareholder distributions, the dividend is still lagging most of the peer group. The strong commercial focus and efforts to improve cash generation should help net debt soon reach its target of 2.5 times underlying cash profit, without compromising the new buyback. However, there are no guarantees.
Haleon’s strong commercial focus and efforts to grow its reach in emerging markets mean it’s well placed to deliver sustainable growth over the longer term. At the current valuation, we see room for upside if it can deliver on guidance. However, recent sales growth has been underwhelming and given the challenging macroeconomic backdrop, further disappointments can’t be ruled out.
Haleon key facts
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This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
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