PZ Cussons posts big pre-tax loss after shock of Naira devaluation

Manchester-based soap manufacturing group, PZ Cussons, has seen annual revenues slide and profits fall off a cliff due to the devaluation of the Nigerian Naira.

The consumer products group, which includes the Carex brand in its portfolio, reported a statutory 19.6% fall in revenue of £527.9m for the 2024 fiscal year.

It suffered a £95.9m statutory pre-tax loss, compared with a £61.8m pre-tax profit the previous year.

The group said the devaluation of the Naira has had a significant impact on its results. The value of the Naira versus Sterling was, on average, 57% lower during FY24 compared with FY23, contributing to a year-on-year reduction in revenue, earnings and cash.

The board has declared a full year dividend of 3.60p per share, 44% down on 2023, reflecting the impact of the Naira devaluation on earnings per share while maintaining an earnings cover of approximately two times.

Gross debt reduced significantly, from £251m as at May 31, 2023, to £167m as at May 31, 2024, reflecting the repatriation of c.£50m of cash from Nigeria and free cash flow generation elsewhere.

Following an announcement in April 2024, the group said it is on track with its plans to maximise shareholder value following a strategic review of brands and geographies.

Plans to dispose of the St Tropez business are progressing, and the board has received a number of expressions of interest in the Africa business and it is possible that this could lead to a partial or full sale.

The intent of these actions is to refocus on where the business can be most competitive.

The group said FY25 has started positively, with group like for like revenue growth of 4.7% driven by strong growth in both the Africa and Europe and Americas regions, partly offset by adverse phasing of shipping in Asia.

Chief executive, Jonathan Myers, said: “Over the last twelve months, we have made continued operational progress and delivered against the strategic priorities set out at the start of the year, against the backdrop of macro-economic challenges. At the same time, we have taken the important first steps to transform our business and maximise shareholder value, by refocusing our portfolio on where we can be most competitive.

“The period was marked by a 70% devaluation of the Nigerian Naira, which has had significant implications on our reported financials. We have worked hard to mitigate the impact of this on the group, while continuing to serve Nigerian consumers who are facing unprecedented inflation and economic difficulties.”

He added: “Elsewhere, we significantly improved trading in our UK Personal Care business as we returned Carex to growth, maintained our momentum in ANZ, delivered a return to volume-led revenue growth in Indonesia in Q4 and led Childs Farm to a year of profitable, double-digit revenue growth.

“The favourable trends of the second half of FY24 have continued into the new financial year. We are progressing with our plans to sell St Tropez and have received a number of expressions of interest for our African business, recognising the potential of our brands and people, which could lead to a partial or full sale.

“Against this backdrop, we remain confident in the long term potential for PZ Cussons as a business with stronger brands in a more focused portfolio, delivering sustainable, profitable growth.”

The group also announced today that John Nicolson, Non-Executive Director and Senior Independent Director, has decided to retire and will not stand for re-election at the Annual General Meeting on November 21, 2024.

John was appointed as a Non-Executive Director in May 2016 and his nine-year term would have otherwise expired in April 2025.

Following his retirement, Vivek Ahuja will be appointed Senior Independent Director.

David Tyler, Chair of the board, said: “On behalf of the board, I would like to express my gratitude to John. He has been a Director for eight and a half years and our Senior Independent Director for nearly all of that time.

“His wisdom and courtesy have made their mark to great effect around the board table over the years and the company has benefited from his long experience at international and fast-moving consumer goods companies. We wish John all the best for the future.”

Russ Mould, AJ Bell

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “PZ Cussons continues to be dogged by currency issues in Nigeria, bringing fresh urgency to the company’s plans to exit its African division.

“The current situation of having its results consistently marred by the devaluation of the Naira feels unsustainable with the shares trading near 12-month lows. Shareholders also have to deal with the added sting of a big drop in the dividend, which won’t do anything for their patience. 

“The scale of the impact of foreign exchange headwinds is illustrated by the fact the company eked out like-for-like revenue growth at constant currency compared with a headline 20% drop. Though notably this was driven by increased pricing as volumes declined.”

He added: “There were some signs of progress in the background, with the company reducing its debt pile, and it did see volume growth in the fourth quarter. 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.

“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.”