Cussons launches strategic review as profits fall by 37.5%
Manchester based PZ Cussons said it is launching a major strategic review as it continues to struggle with tough market conditions.
The soap and personal healthcare products firm saw revenues fall by 6.8% to £689.4m.
Operating profit was down by 32.6% to £43.7m and profit before tax fell 37.5% to £37m.
The company said there was a moderate decline in revenue of 2.6% at constant currency – driven by weak economic conditions in Africa.
Reported profit before tax fell to £37m, largely driven by the non-cash impairment of intangible assets.
The impairment is for five:am in Australia and Nutricima in Nigeria.
A new strategy to deliver increased focus and scale has been launched accelerating the group’s return to profitable growth.
The firm said that the current economic conditions in key markets will remain challenging.
The new strategy increases resources and investment behind key categories and brands in those geographies that have scale to drive a sustainable improvement in group performance.
Chair Caroline Silver said: “The group’s results for the year were mixed. A combination of solid performances in Europe & the Americas, with strong growth in the Beauty business unit and Asia Pacific, compared with very disappointing results in Africa.
“As we anticipated at the half year, the adjusted profit before tax of £69.8m reflects the negative impact of the extremely tough macroeconomic conditions in Nigeria, which has historically been a key profit driver.
“We cannot rely upon short term economic conditions improving markedly in our key markets and are therefore taking action to reposition the group to return to profitable growth. We have today announced a new strategy, built around Focus, Scale and Accelerate.
“Our resources and investment will be prioritised behind key categories and brands in only those geographies offering the clearest opportunities in order to return the group to sustainable, profitable growth. Our cost base will be tightly managed and we will act at pace. The results from this will not be immediate, but we expect 2019/20 to be an important transitional year.
“With good free cash flow and confidence in our new strategy, the board is recommending a final dividend of 5.61p (2018: 5.61p) per share, making a total of 8.28p (2018: 8.28p) per share for the year in line with prior year. The overall dividend remains approximately 1.5 times covered by adjusted earnings per share. Subject to approval at the AGM, the final dividend will be paid on 3 October 2019 to shareholders on the register at the close of business on 9 August 2019.”
Russ Mould, investment director at Manchester investment platform AJ Bell, said: “The company behind brands such as Imperial Leather really needs to scrub up for its shareholders.
“Consumer goods firm PZ Cussons already delivered a hefty profit warning to get the market in a lather in January, but if investors thought all the bad news was out of the way they need to think again.
“Again it is the long-running Nigerian soap opera which is creating all the drama.
“Having contributed heavily to a near-40% fall in full-year profit, the ongoing troubles faced by its business in the country are likely to weigh on performance in the 12 months to 31 May 2020.
“The dreaded word ‘transitional’ is being applied to the year, but the company is at least taking action – with a plan to pull back from some non-core brands and geographies in order to return to sustainable growth. And chief executive Caroline Silver suggests she will not waste time, pledging to ‘act at pace’.
“Net debt is declining so there is less danger of a fall in earnings raising question marks over the company’s financial position. Elsewhere, a maintained dividend offers at least a modest indication of confidence in its future prospects.”
