18 September 2024
RESULTS FOR THE YEAR ENDED 31 MAY 2024
Progress on strategic priorities and portfolio transformation
Continued business momentum despite macro-economic challenges in Nigeria
Jonathan Myers, Chief Executive Officer, 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. 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.”
| £munless otherwise stated | Adjusted | Statutory | ||||
| 2024 | 2023 | variance | 2024 | 2023 | variance | |
| Revenue | 527.9 | 656.3 | (19.6)% | 527.9 | 656.3 | (19.6)% |
| LFL revenue growth | 4.4% | 6.1% | ||||
| Operating profit | 58.3 | 73.3 | (20.5)% | (83.7) | 59.7 | n.m. |
| Operating margin | 11.0% | 11.2% | (20)bps | (15.9)% | 9.1% | n.m. |
| Profit before tax | 44.7 | 74.1 | (39.7)% | (95.9) | 61.8 | n.m. |
| Basic earnings per share | 8.02p | 11.23p | (28.6)% | (13.60)p | 8.70p | n.m. |
| Dividend per share | 3.60p | 6.40p | (43.8)% | |||
See page 14 for definitions of key terms and page 15 for the reconciliation between Alternative Performance Measures and Statutory results.
‘n.m.‘ represents non-meaningful growth rates.
With the exception of LFL revenue growth, % changes are shown at actual FX rates.
Summary
Financial results
· As indicated in previous announcements, the devaluation of the Nigerian Naira during FY24 has had a significant impact on PZ Cussons’ financial results. The value of the Naira versus Sterling was, on average, 57% lower during FY24 compared to FY23, contributing to a year-on-year reduction in revenue, earnings and cash [1].
· Like-for-like (‘LFL’) revenue growth was 4.4%, driven by price/mix improvements of 6.8% and a 2.4% decline in volume. This was driven primarily by growth in Nigeria, as we offset cost inflation with pricing. Excluding Africa, LFL revenue declined 2.6%. For the Group as a whole, revenue fell by 19.6% on a reported basis.
· Revenue trends improved across each region throughout the year, with growth in both Group revenue and volume in Q4.
· Profit before tax declined by 39.7%, reflecting the reduction in operating profit and increased interest charges. EPS declined by 28.6% as the decline in PBT was partly offset by a reduced effective tax rate.
· Gross debt reduced significantly, from £251 million as at 31 May 2023 to £167 million as at 31 May 2024, reflecting the repatriation of c.£50 million of cash from Nigeria and free cash flow generation elsewhere.
[1] The Naira was 70% lower between 31 May 2023 and 31 May 2024 and was 57% lower on average for the financial year as a whole. All comparisons are made to Sterling unless otherwise stated.
Delivering against the strategy
· Delivery against our four stated FY24 strategic priorities:
1. Simplifying and strengthening Nigeria: addressing funding challenges with improved US Dollar sourcing, enabling cash repatriation and reduced Group gross borrowings, with revenue growth driven by pricing and continued increases in the number of customers served directly.
2. UK growth: strong revenue performance in our largest market with double-digit growth in Original Source, Imperial Leather and Childs Farm, and a return to growth of Carex for the full year.
3. Expansion from the core: initial in-store launch of Childs Farm in the US and continued growth in Germany, with further expansion in the UK, including the launch in Marks & Spencer in August 2024.
4. Transforming capabilities: strengthened organisation with a simplified UK structure and improved Group-wide brand-building and digital capabilities.
Portfolio transformation
Following our announcement in April 2024, we are on track with our plans to maximise shareholder value following a strategic review of brands and geographies:
· St. Tropez: Plans to dispose of the St. Tropez business are progressing.
· Africa: 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. Further updates will be provided as appropriate.
Dividend
The Board announces its intention to declare an interim dividend of 2.10p per share, down 44% compared to last year’s final dividend of 3.73p. This represents a full year dividend of 3.60p which is also down 44%, reflecting the impact of the Naira devaluation on earnings per share while maintaining an earnings cover of approximately two times [2].
The dividend will be paid on 4 December 2024 to shareholders on the register at the close of business on 1 November 2024.
[2] Reference is made to an Interim, rather than Final, dividend due to the Distributable Reserves in the relevant Company being negative as at 31 May 2024. The Group has subsequently reversed this position and future dividend payments will not be affected.
FY25 outlook
Current trading
The FY25 financial year has started positively, with Group LFL revenue growth of 4.7% driven by strong growth in both our Africa and Europe and Americas regions, partly offset by adverse phasing of shipping in Asia.
Operating profit guidance
Guidance has been provided to separate the impact of the Naira uncertainty on the Group’s results. Assuming that the average FX rates in Q1 FY25 prevail for the balance of the year, the Group expects to deliver operating profit in the range of £47-53 million [3]. Based on these exchange rates, FY24 operating profit would have been approximately £40 million.
Movements in the Naira are expected to be a key determinant of the Group’s reported FY25 result. Such movements impact the translation of local currency earnings when reported in Sterling, as well as the foreign exchange re-valuation of intra-group liabilities. The operating profit sensitivity related to the latter has increased in FY25 due to necessary accounting changes brought about by the increased likelihood of the repayment of inter-company loans following the receipt of expressions of interest relating to our African business. We will provide an analysis of the impact of the revaluation of these liabilities on our earnings in future financial results.