- Progress with planned portfolio reshape
- Positive start to new year
- Naira devaluation wipes out profits
Consumer goods group PZ Cussons (PZC) insisted the ‘favourable trends’ seen in last year’s second half have continued into its new financial year as the FTSE 250 firm assured investors it is on track with plans to refocus its portfolio following a strategic review.
Unfortunately, shares in the Manchester-based maker of Morning Fresh, Carex and Imperial Leather cheapened 7% to 96p as last year’s 70% devaluation of the Nigerian naira dragged it into the red.
Long-suffering shareholders’ patience was also tested by the added sting of a 44% drop in the indebted company’s annual dividend to 3.6p.
Devaluation of the Nigerian currency had a massive impact on results for the year to May 2024, with PZ Cussons swinging from statutory pre-tax profits of £61.8 million to a £95.9 million loss as sales fell 19.6% to £527.9 million.
On an adjusted basis, taxable profits plunged 39.7% to £44.7 million as reduced operating profits combined with a higher interest bill, although PZ Cussons has made strides with reducing its debt pile.
STRATEGIC STRIDES
The company eked out 4.4% like-for-like sales growth as price hikes and product mix improvements compensated for a 2.4% decline in volume, with growth driven primarily by Nigeria as PZ Cussons offset cost inflation with pricing initiatives.
Positives for shareholders to latch on to included a strong UK sales performance, with double-digit growth in Original Source, Imperial Leather and Childs Farm.
Management also called out a return to growth for the Carex brand, not to mention a fourth quarter return to volume-led sales growth in populous Indonesia.
OUT OF AFRICA?
PZ Cussons’ plans to sell the St. Tropez brand are progressing and it has received a number of expressions of interest for its African business, which could lead to a full or partial sale.
To recap, plans to de-list and buy out minority shareholders of the Nigerian-listed business were paused during the year, partly as a result of the group’s broader portfolio transformation plans announced in April.
The aim of these actions is to refocus PZ Cussons, which CEO Jonathan Myers says remains ‘too complex for its size’, on a strong portfolio of ‘locally-loved’ brands able to out-compete rival offerings.
The Sanctuary Spa-to-Original Source supplier flagged a positive start to full year 2025, with like-for-like growth of 4.7% driven by strong growth in both its Africa and Europe and Americas regions.
PZ Cussons guided towards full year 2025 operating profits in the £47 million to £53 million range.
However, partly due to accounting changes related to preparing the African unit for sale, the company faces even greater sensitivity to the naira in the current financial year, which is clearly making investors nervous.
Myers insisted the board remains ‘confident in the long-term potential for PZ Cussons as a business with stronger brands in a more focused portfolio, delivering sustainable, profitable growth.’
Russ Mould, investment director at AJ Bell, said: ‘Having been at the helm since 2020, Jonathan Myers will be under pressure to deliver meaningful change and soon, with the divestment of the St. Tropez tanning brand in progress.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
