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He haleon (LSE: HLN) share price rose 6% today (February 29) after the FTSE 100 The firm published its annual results for 2023.
This was the consumer healthcare giant's first full year of profit since spinning off GSK in July 2022.
What was good about the report to drive the stock higher today? Let's delve into.
A solid year
In 2023, Haleon's revenue rose 4% to £11.3bn from £10.8bn a year earlier. Adjusted operating profit in constant currency grew faster, rising 10.4% to £2.5bn, representing a slightly higher operating margin of 22%.
However, adjusted diluted earnings per share (EPS) actually fell 6% to 17.3p. Management said this was largely due to the annualization of interest costs and adverse exchange rate movements.
Meanwhile, net debt was £8.6bn at the end of December. This represents a reduction of more than £2bn since its spin-off from GSK. So this is encouraging.
Additionally, he recently got rid of his Lamisil antifungal business and agreed to sell its lipstick lip balm brand for $510 million.
All in all, I'd say it's stable here. The company will never be successful due to the maturity of the industry and its brands. But there are reliable revenues and profits, and a £500m share buyback has been launched to supplement the modest dividend yielding 1.8%.
To establish objectives
The reason for the share price jump today is likely related to stronger-than-expected guidance.
For 2024, the company said it expects organic growth of between 4% and 6%. This is a wider range than the 4.4% analysts expected.
Looking to the medium term, it also targets annual organic revenue growth of 4% to 6%.
And it wants to reduce its net debt/adjusted EBITDA from 3x today to around 2.5x. A lower ratio suggests that the company will be better positioned to manage its debt obligations.
A defensive action with strong marks
The company has a broad global portfolio of brands that covers the entire consumer healthcare spectrum. there is Panadol pain relief, Sensodyne toothpaste and Center multivitamins.
Diversification of products and geography is a reason to consider investing. And the constant nature of the demand for mouthwashes, flu remedies and all that makes it a defensive action. Therefore, it could play an important stabilizing role within a diversified portfolio.
However, speaking personally, consumer healthcare is probably an area where I don't show much brand loyalty. I do it for my tea bags and sneakers, but not so much for toothpaste and painkillers. Call me nice, but I usually opt for the ones on sale!
Of course, the company now generates more than £11bn in revenue a year. Clearly, there is a strong sense of loyalty among many other consumers. But this question comes back to my mind when I consider whether I should invest.
Additionally, management said it hopes that “challengingThe operating environment will be maintained this year. Could consumers, feeling the pressure, start switching to cheaper brands? It's a posibility.
Finally, the stock is trading at a price-earnings multiple of 19. Unfortunately, I don't see much value at that price, especially when there are so many cheap UK stocks out there today.
Ultimately, I prefer to focus on other FTSE 100 stocks that aren't showing faster growth or have bigger dividends.
