Haleon (HLN): Margins Up, Buyback Done — And Growth That Missed Its Own Target Again

Haleon plc (HLN) H1 2026 — H1 2026 = the SIX MONTHS ended 30 June 2026 vs H1 2025 — UK issuers report halves, not quarters. Revenue £5,602M, +2.6% ORGANIC; adjusted operating profit £1,364M, +8.2% CER; adjusted EPS 10.3p, +12.0% — but REPORTED operating profit FELL 2.6%. 1 HLN ADS = 2 ordinary shares, all $ at GBP/USD 1.3487. ADR $9.87. One number did the damage: 2.6% organic growth against Haleon's own 4–6% ambition, and 2.1 of those 2.6 points were PRICE, not volume. Yet gross margin hit 66.5% (+140bps), free cash flow is heading toward £2.0B — a 6.2% yield — and leverage is finally at target. THE CALL: BUY (3/5, CHEAP ENOUGH, SLOW ENOUGH) — base-case value ~$11.29 vs ~$9.87 today. KEY METRICS: - ADS RATIO: 1 HLN ADS = 2 Haleon ORDINARY shares. 8,820,906,422 ÷ 2 = 4,410M ADSs × $9.87 = $43.5B market cap. Every per-share figure Haleon reports must be DOUBLED. One FX rate: GBP/USD 1.3487 - OUR DCF, IN STERLING: £2.0B owner FCF base, +6% 5yrs then +4% 5yrs, 2.25% terminal, 8% discount. EV £44,424M − £7,513M net debt = £36,911M ÷ 8,820.9M shares = 418.4p ×2 = £8.368/ADS at 1.3487 → $11.29. Bear $7.51, bull $14.26 - REVERSE DCF: at $9.87 the price only requires owner FCF to compound at 4.34% a year for five years, then under 3% — below Haleon's worst delivered year - WALL STREET: a 17-analyst LONDON panel averages 417p ×2 = £8.349 ×1.3487 = $11.26, vs our $11.29. Range 325p (Deutsche Bank, Sell) to 512p (Berenberg, Buy); Barclays 475p, Goldman 440p, RBC 370p. Beware screens quoting per-ORDINARY-share targets against the ADR - Revenue £5,602M vs £5,480M: +2.2% reported, +2.6% ORGANIC — 2.1% price, only 0.5% volume/mix. Q2 was better: +3.1%, split 1.7% price / 1.4% volume - Adjusted gross margin 66.5% (+140bps CER); adjusted operating profit £1,364M (+8.2% CER), margin 24.3% vs 22.7%; adjusted EPS 10.3p (+12.0%) = 20.6p per ADS ≈ 27.8c. BUT REPORTED operating profit FELL 2.6% to £1,172M and reported EPS fell 4.5% to 8.5p - CATEGORIES: Oral Health £1,838M +7.3% (33% of revenue); Pain Relief £1,323M +2.1%; Respiratory £850M −4.7% on weak cold & flu; VMS £849M +1.9%; Digestive £490M +2.4% organic, −0.2% reported on FX; Skin £252M +1.6% - REGIONS: North America £1,830M +2.0% organic but −1.1% REPORTED on sterling; EMEA & LatAm £2,416M (43%) +1.9% = 3.0% price vs MINUS 1.1% volume; APAC £1,356M +4.7%, of which 4.9pts was VOLUME - FCF £769M (+£35M) = £1,044M operating cash −£110M PP&E +£21M disposals −£30M intangibles −£8M minorities −£174M interest paid +£26M received. FY2025 £1,913M → FY2026 near £2.0B = 6.2% yield on £32.3B - Net debt £7,513M = 2.5x adjusted EBITDA, and Haleon says 2.5x IS optimal — the deleveraging story is OVER. £457M of the £500M buyback done; dividend 2.4p +9%; shares 8,952M → 8,821M - GUIDANCE: FY2026 organic 3–5% UNCHANGED. Medium-term ambition is 4–6% — FY2025 delivered 3.0%, H1 2026 delivered 2.6%. Two years short - ENGINE vs CATCH: an £800M supply-chain savings programme to 2030 = 50–80bps of gross margin a year, and 73% of the business gained or held share (60% in FY2025). But net capex (£140M, ~2.5% of revenue) is guided to c.4% — ~£170M a year out of FCF What to watch: Bullish: organic growth above 3.5% in the 29 October trading statement, with volume carrying half of it. Bearish: a cut to the 3–5% organic guide, or group volume/mix turning negative beyond Europe. We'd add near ~$8.90 — a 7% FCF yield, just above the $8.70 June low. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.