Haleon PLC (LSE:HLN, NYSE:HLN) shares fell to close to a three-month low after the consumer health group posted encouraging full-year numbers but analysts said “technical factors” would lead to downgrades for the 2023 forecasts.
Including a maiden dividend, Barclays said the 2022 results overall were in line with City expectations, with organic sales growth of 9% “modestly better” and profit margins “slightly worse”.
Analysts at Jefferies noted that the fourth-quarter was ahead, with disappointing margins resulting in earnings per share being “slightly behind”.
For 2023, HLN management guided confidently for more organic revenue growth in the medium-term 4-6% range, but guidance for “broadly flat” profit margin due to adverse foreign exchange impact, financing (interest expenses) and tax guidance (slightly higher than expected at 23-24%) is “likely to inspire mid-single-digit EPS consensus downgrades”.
With the shares having been strong on the run-in to the results, Jefferies said the “early conversation feels like a two-way pull between the top-line guide and bottom-line technical factors”.
On the plus side, Haleon says it is reducing debt faster than originally expected, net debt was trimmed to below £10bn and now 3.6 times EBITDA, in line with consensus.
Looking at the divisional detail, Barclays noted that pain and respiratory drove fourth-quarter growth, all from price increases.
Oral health organic sales growth was up 5.3%, vitamins, minerals and supplements -0.7%, pain relief up 8.9%, respiratory health 16.2%, and digestive health -3.2%.
By region, North America OSG was 1.6%, EMEA & Latam were up 6.8%, all from price with volumes down due to Russia and a high comparative in respiratory last year, APAC was 8.3% mostly from volume reflecting Covid related demand and lower pricing due to a lower inflationary environment and price controls on certain brands.
Analysts also noted that Haleon settled on almost all its legal cases on PPI reflux medication, with Nexium 24HR and Prevacid 24HR still pending.
The financial impact was included in the results and is “not material to the group's financial position, results of operations or cash flows”, the company said.
Shares fell 4% to 309.6p, the lowest since early December.