PZ Cussons plc Interim Results for Half-Year to 30th November 2021

9 February 2022

Interim Announcement Of Results For The Half Year To 30 November 2021

Like for like revenue growth in q2 and margins maintained

Despite significant cost inflation

PZ Cussons plc (“PZ Cussons” or the “Group”) today issues Interim Results for the half year ended 30 November 2021.

(1)  Like for like revenue growth adjusts for constant currency and excludes the impact of continuing operations disposals (five:am)

(2)  Adjusted profit measures reflect the statutory profit equivalents as adjusted only for the removal of adjusting items, which are detailed in note 4

(3)  Net debt is defined as cash, short-term deposits & current asset investments, less bank overdrafts & borrowings, but excludes IFRS16 lease liabilities (note 11)

* The results for the half year to 30 November 2020 have been restated to reflect the prior year adjustments and accounting treatment amendments in the full year accounts for FY21. Further details are set out in note 2.

Commenting today, Jonathan Myers (CEO) said:

“We have seen continued progress against both our new strategy and our pursuit of sustainable, profitable revenue growth. The Q1 revenue decline was driven primarily by Carex lapping unprecedented demand for Hygiene products at the peak of the COVID-19 pandemic in the prior year. The business returned to revenue growth in Q2 with our core Baby and Beauty categories growing revenue in the first half overall. Revenue from Must Win Brands, excluding Carex, grew +10% and the overall business showed strong underlying momentum when comparing the results to the equivalent period two years ago. Continued Price / Mix improvements helped strengthen gross margin in the first half of the year, allowing us to increase Media & Consumer investment behind our brands and maintain our operating margin. These results demonstrate our ability to use the strength of our brands to protect margins in the face of cost headwinds.

Beyond our financial performance, we made continued progress against our strategy: Building brands for life. Today and for future generations. We have introduced new talent as we continue to strengthen our Executive Leadership Team and rolled out a new set of values to underpin our drive to build a stronger performance culture. At the same time we remain on track to simplify our Nigeria operations, realising value through the sale of some of our residential properties, and we are strengthening our sustainability plans on our path to B-Corp certification. The disposals of our Food & Nutrition businesses, the Nutricima milk business in Nigeria in FY21 and the five:am yoghurt business in Australia in FY22 demonstrate our determination to optimise our portfolio, explaining the temporary complexity in our alternative performance measures.

The Board has approved an interim dividend, maintained in line with the prior year, of 2.67p, reflecting our confidence in the underlying business momentum but also recognising that challenges remain for the second half. Commodity and freight costs show no sign of abating in the near term and we continue to anticipate cost pressures into FY23. Our focus is on both protecting our margins but also continuing to invest in the business, to secure future growth and build the capabilities we need to deliver against our strategy.”

Financial Highlights

Alternative performance measures
Unless otherwise stated, in the following section, all references to revenue are in line with the alternative performance measure for revenue above; that is, on a like for like basis which adjusts for constant currency and excludes the impact of continuing operations disposals (five:am). See page 4 for a quantification of the impact of constant currency and disposals. All other metrics are not adjusted for constant currency or disposals.

Gross margin is defined as gross profit divided by statutory revenue. Adjusted operating margin is defined as adjusted operating profit from continuing operations divided by statutory revenue. Must Win Brands are defined on page 10 of our Annual Report and Financial Statements 2021.

See page 6 for a reconciliation of alternative performance measures by segment.

• A return to mid-single digit revenue growth in Q2, following the Q1 decline, limited first half revenue decline to -2%. First half revenue is up +13%when comparing to the equivalent period two years ago
• H1 revenue was up in both our core categories of Beauty (+21%) and Baby (+1%). Hygiene was down -12% but, excluding Carex, grew +6%. Carex declined against the peak of the COVID-19 pandemic but has gained significant share in a now larger UK hand hygiene category
• H1 revenue decline in Europe was offset by strong growth in Africa, in conjunction with improved profitability. Asia revenue held flat, despite COVID-19 restrictions in Indonesia, as we targeted the higher margin Baby sub-categories
• Revenue from Must Win Brands declined -11%. Excluding Carex, they grew +10% in aggregate, with each of the brands in growth
• Despite significant commodity, freight cost and FX headwinds, gross margin increased +40bps. Price / Mix improvements and continued strong Beauty momentum together more than offset the cost pressures
• After increased brand investment, adjusted operating margin was maintained in line with the prior period, at 11.6%
• Adjusted profit before tax from continuing operations of £32.0m was -8% lower, reflecting the normalised demand in the UK hand hygiene category and the impact of the five:am disposal, partially offset by a lower interest charge
• Adjusted basic earnings per share from continuing operations of 5.64 pence was -15% lower than the prior period, reflecting the decline in adjusted profit before tax from continuing operations and a higher share of profit owed to minority interests
• The balance sheet continues to strengthen with net debt⁽³⁾ of £(10.5)m versus £(30.7)m at the start of the FY22 financial year, with undrawn financing facilities at 30 November 2021 of £219m

Statutory measures

• Revenue decline of -9% versus the prior period is predominantly due to the disposal of the non-core five:am yoghurt business in Australia and normalised demand for hand hygiene products in the UK
• Profit before tax from continuing operations of £35.1m was +8% higher than the prior period, largely as a result of the net income from adjusting items in this period compared to a net charge in the prior period
• Adjusting items in the period were a net income before tax of £3.1m predominantly driven by the profit on disposal of residential properties in Nigeria as part of the Nigeria Simplification project
• The loss from discontinued operations in the period (£0.7m) relates to the historical disposal of Minerva and in the prior period (£10.7m) is primarily related tothe disposal of the loss-making non-core Nutricima business in Nigeria
• Profit after tax of £27.9m is nearly double the prior period (£14.2m) largely due to the impact of discontinued operations

The Board has approved an interim dividend, maintained in line with the prior year, of 2.67p. This reflects our confidence in the underlying business momentum but also recognises that we, like other consumer goods companies, continue to navigate uncertainty in the still volatile inflationary environment.

Outlook

Despite the backdrop of a volatile inflationary environment, with cost pressures accelerating, we expect to deliver adjusted profit before tax from continuing operations for FY22 within the current range of consensus estimates. Revenue Growth Management and cost mitigation initiatives are enabling us to continue to invest in the business for the long term.