26 September 2023
RESULTS FOR THE YEAR ENDED 31 MAY 2023
Third year of like for like revenue growth
Continued strategic progress against a challenging external backdrop
Jonathan Myers, Chief Executive Officer, said: “We have delivered a third consecutive year of like for like revenue growth and increased operating profit by over 10% since launching our strategy nearly three years ago. We have achieved these improvements by investing in our brands and capabilities, serving cost-conscious consumers better with targeted innovation and productivity initiatives helping us to reduce complexity across the Group.
In FY23 sustained momentum in our ANZ business and the return of the UK Personal Care business to growth by the end of the year demonstrated our ability to improve and sustain business unit performance even in a year when we had to absorb further significant cost inflation.
Group performance in the new financial year has been in line with our expectations and, with clear near-term priorities, we expect to deliver another year of LFL revenue and strong constant currency operating profit growth in FY24. There is more to do as we seek to maximise the company’s full potential, and there are well-documented challenges to be navigated in Nigeria. However, we continue to believe that we can build a higher growth, higher margin, simpler and more sustainable business.”
| £munless otherwise stated | Adjusted | Statutory | ||||
| 2023 | 2022[1] | variance | 2023 | 20221 | variance | |
| Revenue | 656.3 | 592.8 | 10.7% | 656.3 | 592.8 | 10.7% |
| LFL revenue growth | 6.1% | 2.9% | n/a | |||
| Operating profit | 73.3 | 67.1 | 9.2% | 59.7 | 65.8 | (9.3)% |
| Operating margin | 11.2% | 11.3% | (10)bps | 9.1% | 11.1% | (200)bps |
| Profit before tax | 74.1 | 65.8 | 12.6% | 61.8 | 64.5 | (4.2)% |
| Basic earnings per share | 11.23p | 12.57p | (10.7)% | 8.70p | 11.88p | (26.8)% |
| Dividend per share | 6.40p | 6.40p | ||||
See page 14 for definitions of key terms and page 15 for the reconciliation of Alternative Performance Measures to Statutory Results
All numbers are shown based upon continuing operations, unless otherwise stated
With the exception of LFL revenue growth, all % changes are shown at actual FX rates
[1] FY22 restated as a result of certain prior year adjustments – see note 1 of the consolidated financial statements for further details
Delivering against the strategy
· Third consecutive year of like-for-like (LFL) revenue growth.
· Majority of Must Win Brands in growth and strong performance in Portfolio Brands.
· A successful first full year of ownership of Childs Farm with 12% revenue growth in FY23.
· Continued expansion from the core, with the launch of Morning Fresh into the auto dishwash market and thegeographic expansion of Original Source and Imperial Leather[2].
· Supply Chain transformation is on track, reducing complexity across the Group and improving innovation, efficiency and capabilities.
· Further strengthening of the leadership team, including the appointment of a new Chief People Officer and Chief Information Officer as well as new local leaders for our Nigerian and Indonesian businesses.
· Intention to buy out the minority shareholding of PZ Cussons Nigeria plc, and de-list, creating value for Group shareholders and significantly simplifying and strengthening our future business in Africa.
[2] Original Source and Imperial Leather launches took place following the end of the FY23 financial year
Financial results
· Reported revenue grew 10.7% as a result of LFL revenue growth, the contribution of Childs Farm, which was acquired in March 2022, and favourable FX movements.
· Adjusted operating profit margin broadly flat as an 80bps improvement in gross profit margin funded increased investment in capabilities and offset cost inflation. Adjusted operating profit margin improved, excluding Childs Farm.
· Continued profitable revenue growth in Nigeria contributed to the Group’s 12.6% growth in adjusted profit before tax but the impact of the resulting tax charge and increased non-controlling interest led to an adjusted EPS decline of 10.7%.
· On a statutory basis, the operating margin declined by 200bps and EPS declined by 26.8%, reflecting a £16.5 million impairment of the Sanctuary Spa brand, as well as increased investment related to transformation.
· Improved cash generation with free cash flow[3] of £69.9 million (FY22: £58.0 million) primarily driven by an improvement in working capital, resulting in a net adjusted cash position of £5.7 million.
· Increase in gross borrowings to £251.2 million (FY22: £174.0 million) reflecting the challenges of repatriating cash from Nigeria, where the cash balance was approximately £200 million.
· Proposed final dividend unchanged versus the prior year, reflecting the devaluation of the Naira following the year end, which is expected to have a material adverse impact on the near-term reported financial performance.
[3] See page 15 for definitions of key terms
Current trading and outlook
Current trading
FY24 performance to date has been in line with expectations, with modest year on year growth in LFL revenue and a higher operating profit margin. We have seen continued good revenue growth in Nigeria and ANZ, a stable performance in the UK, offset by a further decline in Indonesia.
FY24 Outlook
The macroeconomic environment in Nigeria, including the foreign exchange market and other fiscal reforms, will be a key determinant of our overall Group FY24 financial results. We have operational and corporate plans in place to mitigate these challenges and are already executing a number of these to improve the performance of the business and to optimise the Group’s cash position.
We expect to deliver a fourth consecutive year of Group LFL revenue growth, with strong constant currency operating profit growth, benefiting from the changes already made to strengthen the business as well as a slightly more benign input cost environment. We therefore expect to deliver adjusted operating profit within the range of current market expectations[4]. More details on the translational impact of the recent devaluation are provided on page 13.
[4] Consensus adjusted operating profit range of £61.5 to £68.2 million based on Bloomberg as at 21 September 2023
Announcement regarding Auditor
As previously announced, the Group has been conducting a tender process for the role of external auditor for the financial year ending 31 May 2024. The Group is pleased to confirm that PwC has been selected and their appointment is expected to be proposed to shareholders at the Annual General Meeting in November.
For further information please contact:
Investors
Simon Whittington – IR and Corporate Development Director +44 (0) 77 1137 2928
Media
Headland PZCussons@headlandconsultancy.com +44 (0) 20 3805 4822
Susanna Voyle, Stephen Malthouse, Charlie Twigg
Investor and Analyst webcast and conference call
PZ Cussons’ management will host a live webcast for analysts and institutional investors at 10.30am UKT to present the results and provide the opportunity for Q&A. The webcast is available via the PZ Cussons corporate website (www.pzcussons.com) and directly at www.investis-live.com/pzcussons/65096621673c270c0094bd37/olkkq
For those wishing to ask a question, the dial-in details are as follows:
Dial in: +44 20 4587 0498
Access code: 256066