PZ Cussons Plc – Half-year Report ended 30 November 2020

PZ Cussons Plc

INTERIM ANNOUNCEMENT OF RESULTS

FOR THE HALF YEAR TO 30 NOVEMBER 2020

Revenue and profit growth in all Regions; balance sheet strong

PZ Cussons PLC, a leading consumer products group, announces its interim results for the six months ended 30 November 2020.

Adjusted1 results (before exceptional items)	Half year to 30 November 2020	(Restated)* Half year to 30 November 2019	Reported % change	Constant currency  % change2
Revenue from continuing operations	£312.9m	£284.0m	10.2%	14.6%
Adjusted operating profit from continuing operations	£36.4m	£32.2m	13.0%	14.8%
Adjusted profit before tax from continuing operations	£34.9m	£30.0m	16.3%	18.7%
Adjusted profit for the period from continuing operations	£27.0m	£23.2m	16.4%
Adjusted basic earnings per share from continuing operations	6.67p	5.76p	15.8%
Net debt3	(£18.2m)	(£137.7m)
Reported results (IFRS) (after exceptional items)
Revenue from continuing operations	£312.9m	£284.0m	10.2%
Operating profit from continuing operations	£37.8m	£39.0m	(3.1%)
Profit before tax from continuing operations	£36.3m	£36.8m	(1.4%)
Profit for the period from continuing operations	£28.4m	£30.7m	(7.5%)
Basic earnings per share from continuing operations	6.81p	7.55p	(9.8%)
Basic earnings per share from continuing & discontinued operations	3.42p	7.10p	(51.8%)
Interim dividend per share	2.67p	2.67p	–

 

¹ Exceptional items before tax (2020: expense £11.4m – continuing operations £1.4m income, discontinued operations £12.8m expense; 2019: income £6.7m – all continuing operations) are detailed in note 4.

² Constant currency comparison. See page 3 for a definition of constant currency.

³ Net debt, above and hereafter, is defined as cash, short-term deposits and current asset investments, less bank overdrafts and borrowings. It does not include IFRS 16 lease liabilities of £12.1m (2019: £9.9m) (refer to note 11).

* The results for the half year to 30 November 2019 have been restated to reflect discontinued operations and prior year adjustments. Further details are set out in note 16 and 2.

Group Highlights

· Revenue growth of 14.6% with growth in all Regions.

· Focus Brands revenue grew 21.9% driven by Carex, Morning Fresh, Cussons Baby and St Tropez.

· Adjusted operating profit of £36.4m, increased 14.8%, driven by improved performance in all Regions partially offset by increased Central investment in capabilities.

· Growth in adjusted operating margin despite increased investment in marketing and organisational capabilities.

· Adjusted profit before tax of £34.9m, an increase of 18.7% reflecting the increase in adjusted operating profit and a lower interest charge.

· Reported profit before tax of £36.3m, slightly below last year due to the profit on disposal of our Greece business last year, and in this year exceptional costs primarily related to Nigeria.

· Balance sheet continues to strengthen with net debt of £18.2m versus £137.7m last year, with undrawn financing facilities at 30^th November 2020 of £217m.

· Interim dividend maintained in line with last year at 2.67p per share.

· Capital markets day scheduled for 25 March.

Europe & the Americas Highlights

· Unprecedented growth in hand wash and hand sanitiser categories but demand remains volatile and increased competition from new market entrants especially in hand sanitiser.

· Revenue growth of 32.6% driven by Carex, the #1 choice of consumers in both the hand wash and hand sanitiser categories.

· Imperial Leather adversely impacted by the prioritisation of Carex production with re-listing of products late in Q2. Original Source saw growth in its core proposition but declined due to a reduction in promotional activity and the simplification of its portfolio.

· Beauty revenue showed a modest reduction with on-line performance of St Tropez and Sanctuary almost offsetting the decline in the UK high street.

·Adjusted operating profit of £27.3m, 33.2% ahead of last year with growth in both the UK and Beauty. Reported operating profit was £27.2m.

Asia Pacific Highlights

· Revenue increased by 4.2% with growth in key markets of Australia and Indonesia.

· Market share continued to grow in Australia Home Care and in key categories for Cussons Baby in Indonesia.

· Morning Fresh and Cussons Baby delivered improved revenue results and Rafferty's Garden returned to growth.

·Adjusted operating profit of £11.7m grew by 48.1% with both Australia and Indonesia increasing due to higher revenue and improved margins. Reported operating profit was £11.1m 

Africa Highlights

· Revenue grew in Africa by 5.9% driven by growth in all categories across our Nigerian business.

·Electricals, Morning Fresh, Cussons Baby and Premier all increased revenue together along with growth in some of our smaller brands.

·Adjusted operating profit of £2.3m reflected both increased revenue and margin improvement in Nigeria offsetting transactional foreign exchange losses. Reported operating profit was £4.6m.

· Improved operating profit performance in Kenya, Ghana and our joint venture, PZ Wilmar.

· Completion of the disposal of Nutricima, our Nigerian milk business on 28 September.

·Simplification project for Nigeria commenced, with a planned review of portfolio, route to market, organisational design, structure capabilities and assets. First stage completed.

Central

· Higher costs in first half reflects the increased investment in capabilities including digital, marketing and strategy.

Outlook
We saw renewed momentum in our business in the first half of our financial year, with delivery of top and bottom line growth allowing for increased investment in both marketing and organisational capabilities. Initial steps have been taken to turn around the business but these are only the start of a multi-year programme to return to sustainable profit growth.

In the second half we expect continued economic uncertainty associated with COVID-19, the risk of weaker consumer confidence combined with already evident upward cost pressure. Despite these external headwinds we plan to continue to increase investment in our brands.

Assuming no material change to anticipated COVID restrictions or resulting consumer behaviour, we expect to perform in line with the current range of market expectations for this financial year.

Commenting today, Caroline Silver (Chair) said:

“The organisation has been stabilised in the last twelve months with the arrival of Jonathan Myers as CEO and his new management team.

Our fast start to this financial year was maintained with the Group delivering strong growth in revenue and adjusted profit across all Regions, notwithstanding increased investment in marketing and organisational capabilities. 

In the second half of this year, with our recent strategy review moving into execution, we expect further progression in brand building, the continued turnaround of key brands and the implementation of our simplification project in Nigeria. 

The external environment continues to remain very challenging and volatile but we remain focused on developing our strategic plans that will benefit all stakeholders in the longer term.

The Board has declared an interim dividend of 2.67p in line with our last financial year 2020. We are pleased with progress to date and confident in our future plans but remain cautious given the external environment”.

Also commenting today, on the strategy update, Jonathan Myers (CEO) said:

“Our focus in the first half of this year has been to deliver a fast start for the business, with emphasis on profitable revenue growth as well as maintaining our strong balance sheet discipline. We saw this as essential to reset both in terms of organisational pace and agility to adapt to changing consumer and shopper habits.

In parallel, we completed our review of the strategy to become a brand-led and consumer-focused organisation, delivering sustainable profitable growth with hygiene, baby and beauty at our core. We look forward to sharing our plans with you in more detail at a capital markets day on 25 March”.