Haleon (HLNLN; Baa1 Pos, BBB S) {HLN LN Equity} (split from GSK in '22)

The parent of brands including Sensodyne & Panadol has reported in-line 1Q results. Its kept FY23 guidance for +4-6% growth unch (analyst already there) but has indicated pricing will do more of the legwork. Volume was weak but its saying some of this is on messy 1Q comparables. We see Moody's staying on pos. outlook for now. € curve screens fair-to-tad cheap on 30/34s.

• Revenues at £2.9b at organic +2% driven by pricing (+5%) while volume fell -2%. Gross/reported was -2.2% on -4.6% FX and -0.6% M&A headwinds. Adj. EBIT at £707m (+12.8%) on margin of 24.2% up 220bps - gross on FX/M&A headwinds was at £655 (+4.5%) with still 140bp margin improvement to 22.4%.
• Falls in Pain relief & respiratory health on tough yoy comps. It says NA weakness (-3.3%) was on +4.5% price and -7.8% in volume with similar segments to above driving weakness.
• It says noise on yoy comps will fade in Q1 for all outside of China (it had 2nd COVID wave in 2Q23). The strong EMEA & LATAM (+8.6%) results were nearly entirely on price (+7.5%) which co says will also fade through the year.
• Net it says vs. the 85% price driven growth in '23, '24 should be a "stepping stone" towards more 50/50 price/volume balance. FY Guidance unch at organic +4-6% growth (c4.6%) & for EBIT margin expansion.
• Leverage was at 3x (from 4x on demerger) - target was 2.5x. It has a £500m buyback programme for this year, £325m done YTD. Dividend is expected to be £575m this year - at top end of new 35% payout ratio. The equity pay-outs combined with the $700 line it redeemed should net most of FCF this year. No more maturities this year leaves supply unlikely. Heavy '25 maturities in loans & $ lines.