Haleon plc (HLN) Cash Flow Statement

The OCF/NI ratio above 1.0 in both reported quarters suggests that net income is well-covered by cash generation, with non-cash charges like D&A providing a buffer. The 2025Q4 ratio of 1.73 was particularly strong, likely aided by favorable working capital movements, but the 2026Q2 ratio, while lower, still reflects solid conversion. This consistency implies that accruals are not inflating earnings, and the gap between net income and operating cash flow remains manageable.

The sequential decline in FCF margin from 2025Q4 to 2026Q2 is typical for a consumer health company, with Q4 benefiting from year-end shipments and lower capex. However, the 2026Q2 margin of 14.0% is still respectable and aligns with the prior year's level, suggesting that the company is maintaining its cash generation capability. Compared to peers like Kenvue (11.9% FCF margin), Haleon's margin appears competitive, though it trails Church & Dwight's 17.9%, implying room for improvement as the company optimizes its cost structure.

The low capex-to-revenue ratio, consistently below 6% in available quarters, suggests that Haleon's asset base is not capital-intensive, typical for a consumer health company with outsourced manufacturing. This allows the company to convert a high proportion of operating cash flow into free cash flow, which is then available for dividends and buybacks. The slight increase in capex in 2025Q4 may reflect investment in growth initiatives, but the overall trend remains modest, supporting the company's ability to maintain its dividend and reduce debt.

The negative working capital change in 2026Q2 indicates a cash outflow, likely due to inventory build-up ahead of the cold and flu season or increased receivables from promotional activity. In contrast, the positive change in 2025Q4 suggests efficient collection and inventory reduction. These swings are typical for a company with seasonal respiratory and allergy products, and they do not necessarily signal deterioration in working capital management. Investors should monitor whether these fluctuations align with revenue patterns, as aggressive shipping could inflate short-term cash flow.

The company is returning substantial cash to shareholders, with dividends and buybacks roughly equal in size, indicating a balanced approach. The buyback activity is notable given the overhang from former parent companies, suggesting management is using cash to support the share price. The low debt-to-equity ratio, if accurate, implies that deleveraging is largely complete, allowing for continued shareholder returns. However, the lack of acquisition activity (net acquisitions near zero) suggests a focus on organic growth and portfolio pruning, consistent with the divestment of non-core brands.