PZ Cussons to offload fake tan brand St Tropez and mulls Africa exit
PZ Cussons is to sell off its St Tropez fake tan brand product line as it admitted it doesn’t have the resources to build the brand in the US, and is still struggling in Nigeria where its business is “too complex for its size, with financial and human resources spread too thinly to generate consistent returns”.
The company said in a statement to the stock market this morning that it still expects to make £55-60 million of profit in 2024 but that “challenges and complexities” in Nigeria are “significant” enough to warrant a wholesale review.
Jonathan Myers
Jonathan Myers, Chief Executive Officer, said: “As such, we have undertaken a strategic review of our brands and geographies and have embarked on plans to transform our portfolio, refocusing on where the business can be most competitive. The actions we are taking will crystallise value for our investors from assets better suited to alternative ownership structures.”
The first brand to go will be fake tan product St. Tropez, the company said, which they have “grown significantly” since buying it in 2010 from private equity owner LDC for £62.5m in cash.
At the time the business was recording sales of £20m a year, but has since grown in the US.
“Given the strength of the brand’s equity, there remains significant long-term growth potential in the US and in both new geographies and category adjacencies. This growth will however be harder to realise under PZ Cussons’ ownership, given the need to allocate resources across our diverse geographic and category footprint,” Myers said.
He added: “We therefore plan to realise shareholder value by initiating a process to sell the brand to an owner better placed to capture the brand’s significant long-term potential.”
But the Manchester-headquartered soap and body products group also indicated it is reviewing its operations in Africa.
It admitted in a statement that it faced both economic and operational challenges: “Shareholder returns have fallen short of our expectations, predominantly due to macro-economic challenges in Nigeria which, since June 2023, has experienced the single largest devaluation in the history of its currency.
“The Board has carried out a strategic review of our brands and geographies over the past year. It has concluded that in addition to the challenges of its significant exposure to Nigeria, the Group is too complex for its size, with financial and human resources spread too thinly to generate consistent returns. This means its competitive advantages have been constrained in comparison to those of both larger multinational companies and some focused, smaller ones.”
The proceeds from any sales will be used to invest in the organic growth of the business and to reduce gross debt further.
However, the company also said it still has the potential and ambition to pursue targeted acquisitions which are highly complementary to its more focused category and geographic footprint.
