7 February 2024
This release contains inside information
2024 INTERIM RESULTS
for the six months ended 2 December 2023
Jonathan Myers, Chief Executive Officer, said: “PZ Cussons is a stronger business than when we launched our new strategy, as demonstrated by our ninth consecutive quarter of like for like revenue growth and, on a constant currency basis, double-digit operating profit growth in the first half of the financial year. We have clearly had our challenges but have also delivered a turnaround in our UK Personal Care business and put in place measures to address the underperformance in our Beauty business.
The most significant challenge we have faced by far has been the devaluation of the Nigerian Naira, which is today around 70% weaker than a year ago, representing the biggest drop in the currency’s history. As we set out in September 2023, macroeconomic developments in Nigeria would be the key determinant of the FY24 results. Whilst we continue to make good progress in managing this volatility, the further devaluation in recent weeks will inevitably impact our FY24 results. As a Board, we have taken the prudent step to reduce the interim dividend in light of the devaluation.
As we look ahead we remain confident about the long-term potential for PZ Cussons as we build a higher growth, higher margin, simpler and more sustainable business.”
| £m unless otherwise stated | Adjusted | Statutory | ||||
| H1 FY24 | H1 FY23 | Change | H1 FY24 | H1 FY23 | Change | |
| Revenue | 277.1 | 336.9 | (17.8)% | 277.1 | 336.9 | (17.8)% |
| LFL revenue growth [1] | 2.2% | 6.1% | – | n/a | n/a | n/a |
| Operating profit/(loss) | 30.6 | 33.2 | (7.8)% | (89.7) | 39.2 | n.m. |
| Operating margin | 11.0% | 9.9% | 110bps | (32.4)% | 11.6% | n.m. |
| Profit/(loss) before tax | 26.1 | 34.5 | (24.3)% | (94.2) | 40.5 | n.m. |
| Basic earnings per share | 4.32p | 5.16p | (16.3)% | (10.84)p | 5.90p | n.m. |
| Dividend per share | n/a | n/a | n/a | 1.50p | 2.67p | (43.8)% |
See page 12 for definitions of key terms and page 13 for the reconciliation between Alternative Performance Measures and Statutory results.
‘n.m.‘ represents non-meaningful growth rates.
Numbers are shown based on continuing operations. With the exception of LFL revenue growth, % changes are shown at actual FX rates.
H1 FY24 refers to the 6 months ended 2 December 2023 and H1 FY23 refers to the 6 months ended 3 December 2022.
[1] Like for like revenue growth definition has been updated in H1 FY24 to exclude revenue related to unbranded sales which represented approximately 1% of FY23 revenue. H1 FY23 LFL revenue growth has not been re-presented but would have been 6.6% under the revised definition.
Summary
Naira devaluation
· As indicated in previous announcements, the devaluation of the Nigerian Naira has had a significant impact on our financial results and comparisons to the prior year. The foreign exchange loss in the period was £88.2 million and was wholly the result of the devaluation of the Naira which fell by 51% between 31 May 2023 and 2 December 2023[2]:
o Statutory results show an operating loss of £89.7 million having been materially impacted by these foreign exchange losses.
o Revenue declined by 17.8% (£59.8 million) to £277.1 million of which £52.9 million was attributable to the Naira devaluation.
o Given the material financial impact of the Naira devaluation, the Board has determined it is prudent to reduce the interim dividend by 44% to 1.50p.
[2] From NGN/GBP of 577 as at 31 May 2023 to NGN/GBP of 1,176 as at 2 December 2023. Historic NGN/GBP rates are summarised on page 11.
Performance and strategic progress
· Like for like (LFL) revenue growth was 2.2% driven by price/mix improvements of 7.0% and a 4.8% decline in volume.
· Adjusted operating profit margin increased 110 basis points (bps) with an improvement in each of our three regions driven primarily by an increased gross profit margin.
· Profit before tax declined by 24.3% reflecting an increased interest charge, but the reduction in both the effective tax rate and non-controlling interest as a result of the Naira devaluation resulted in a lower decline in adjusted EPS of 16.3%.
· On a constant currency basis, the financial performance has been more robust with adjusted operating profit growth of 17.2% and EPS growth of 9.0%.
· Strong cash generation with free cash flow of £20.0 million (H1 FY23: £4.2 million) with headroom on banking facilities of £105.0 million (31 May 2023: £73.0 million) and further improvements since the period end.
· Delivery against our FY24 priorities including:
o Improved USD sourcing in Nigeria allowing for cash repatriation and a reduction in the Group’s gross borrowings.
o Turnaround in UK Personal Care performance benefitting from a focus on executional capabilities.
o Strong growth of Childs Farm continuing to deliver on the significant international opportunity with distribution gains in the US and Europe.
o Organisational changes under way to simplify our UK structure and strengthen Group-wide brand-building and growth capabilities, addressing underperformance in Beauty.
Dividend
The Board has reviewed the dividend carefully given the material devaluation of the Naira, particularly as it is difficult to foresee a significant rebound in the value of the currency in current circumstances. Had the exchange rate as at 31 January 2024 been the rate used to translate the FY23 results, FY23 EPS would have been over 30% lower. As a result, the Board has determined that it would not be prudent to pay an unchanged dividend. It has therefore elected to pay an interim dividend of 1.50p with the objective of achieving a cover of approximately two times for FY24.
The dividend will be paid on 4 April 2024 to shareholders on the register at the close of business on 8 March 2024.
FY24 outlook
At our FY23 full year results in September, we noted that the Nigerian macroeconomic environment, and the currency particularly, would be the key determinant of FY24 results. Since then, we have experienced further depreciation of the Naira, with the official rate falling more than 30% since our balance sheet date of 2 December. As a result, we now expect FY24 adjusted operating profit, at reported rates of exchange, to be in the range of £55-60 million[3].
[3] Compares to prevailing consensus operating profit range of £61.5-68.2m as at 21 September 2023