PZC Pz Cussons Plc

 

This announcement contains inside information for the purposes of the UK Market Abuse Regulation. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

 

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."

 

£m unless 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.

 

^[3] Historic and current FX rates are provided on page 13.

 

 

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 and Charlie Twigg

 

Investor and Analyst conference call

PZ Cussons' management will host a presentation for analysts and institutional investors at 9.00 am UK time to present the results and provide the opportunity for Q&A. The event will be held at:

 

Deutsche Numis UK

45 Gresham Street

London

EC2V 7BF

 

A webcast of the presentation is available at the link below and will also be available via our corporate website: www.pzcussons.com.

 

Audience Webcast link:

https://www.investis-live.com/pzcussons/66cf23de58fb260c0062b9cb/fesx

Dial in: +44 20 3936 2999 / +44 800 358 1035

Access code: 265662

 

Notes to Editors

 

About PZ Cussons

PZ Cussons is a FTSE 250 listed consumer goods business headquartered in Manchester, UK. We employ over 2,600 people across our operations in Europe, North America, Asia-Pacific and Africa. Since our founding in 1884, we have been creating products to delight, care for and nourish consumers. Across our core categories of Hygiene, Baby and Beauty, our trusted and well-loved brands include Carex, Childs Farm, Cussons Baby, Imperial Leather, Morning Fresh, Original Source, Premier, Sanctuary Spa and St. Tropez. Sustainability and the wellbeing of our employees and communities everywhere are at the heart of our business model and strategy, and captured by our purpose: For everyone, for life, for good.

 

Cautionary note regarding forward-looking statements

This announcement contains certain forward-looking statements relating to expected or anticipated results, performance or events. Such statements are subject to normal risks associated with the uncertainties in our business, supply chain and consumer demand, along with risks associated with macroeconomic, political and social factors in the markets in which we operate. Whilst we believe that the expectations reflected herein are reasonable based on the information we have as of the date of this announcement, actual outcomes may vary significantly owing to factors outside the control of the PZ Cussons Group, such as cost of materials or demand for our products, or within our control such as our investment decisions, allocation of resources or changes to our plans or strategy. The PZ Cussons Group expressly disclaims any obligation to revise forward-looking statements made in this or other announcements to reflect changes in our expectations or circumstances. No reliance may be placed on the forward-looking statements contained within this announcement.

 

 

Introduction from our Chief Executive Officer

 

Four years ago, we embarked upon a multi-year journey to transform PZ Cussons - a company with inherently strong brands, excellent people and attractive underlying markets and categories. We defined our strategy by focusing on the core categories of Hygiene, Baby and Beauty in our four priority markets: the UK, ANZ, Indonesia, and Nigeria. We have been prioritising spending on those brands where we see the greatest opportunity for return on investment: our Must Win Brands. Underpinning this strategy, our growth is enabled by strengthening our capabilities, talent, leadership, culture, and our approach to sustainability. Running through everything we do is a drive to reduce complexity across our business. As such, we have summarised our strategy around five choices: Build Brands, Serve Consumers, Reduce Complexity, Develop People and Grow Sustainably.

 

Over this time, we have come a long way. We have strengthened our brands, re-energised and professionalised the organisation, and raised the bar on performance. Nevertheless, our FY24 reported results fell short of our initial expectations, primarily due to the macroeconomic developments in Nigeria which, as we indicated last year, would significantly affect our results. The 70% currency devaluation ^[4] over the course of the financial year has, therefore, caused a significant impact not only on our local business but also on the profitability and financial position of the Group.

 

Against this backdrop, our efforts have been focused on our strategic priorities for FY24, which are detailed below. We have, therefore, sought to address our challenges and opportunities head-on. In particular, we have made good progress in strengthening and simplifying our operations in Nigeria to the point where the business no longer relies on lending from the Group to provide it with US Dollars. There is now minimal surplus cash in Nigeria following the repatriation of cash to the UK.

 

As we announced in April 2024, there is much more to do to deliver a transformation of PZ Cussons and unlock the full potential of the business. Despite the progress already made in reducing complexity - both in terms of our portfolio footprint and operations - the Group remains too complex for its size. Resource is spread too thinly to generate consistently high returns and we cannot always fully benefit from competitive advantages where we have them. There is a significant opportunity for the Group to out-compete both larger multinational players and smaller local players by concentrating on a strong portfolio of locally-loved brands with operations focused in markets where we can leverage our existing infrastructure, such as manufacturing or commercial capabilities. However, there is only so much that can be achieved within the framework of our existing portfolio, which spans multiple markets and categories. To this end, the disposal of St. Tropez is progressing and we are now considering a partial or full sale of our African business, having received expressions of interest from a number of parties.

 

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.

 

On behalf of the Board, I would like to thank the PZ Cussons teams for their continued energy and tenacity amidst challenging conditions and our suppliers and customers for their valued partnership. 

 

^[4] Reference to devaluation is based upon May 31 2023 to May 31 2024. 

 

Delivering against FY24 strategic priorities

 

Throughout the year, we made good progress across the year's strategic priorities:

 

#1: Further simplifying and strengthening Nigeria

 

A major focus for the Group throughout the year has been foreign exchange and cash management activity in Nigeria. We have reduced our requirements for foreign currency whilst expanding and diversifying our access to US Dollars so we can repatriate cash from Nigeria and repay UK borrowings. In doing so, we have been able to reduce gross borrowings and limit the impact of further currency devaluation. Specifically, we have repatriated approximately £50 million over the course of the year, resulting in minimal surplus cash in Nigeria as at the end of the year. Critically, the business will effectively be self-funding going forward, with little reliance on Group lending.

 

We have been focused on strengthening the operations of the Nigerian business, and given the number of competitors exiting the market, there have been opportunities for market share gains.

 

In addition, during the year, we identified more non-trading assets in Nigeria to be divested. We expect these assets to be sold during the course of FY25 and proceeds will be repatriated to the UK and used to reduce gross debt further.

 

Our plans to de-list and buy out minority shareholders of our Nigerian-listed entity were paused during the year, in part as a result of the Group's broader portfolio transformation plans, announced in April 2024.

 

#2: Returning the UK to sustainable, profitable growth

 

Our UK Personal Care business has performed very strongly in FY24 with double-digit revenue growth and a significant margin improvement. This performance is the result of a strengthened leadership team and a more determined focus on building back core executional capabilities. We are more disciplined now in focusing on the right brands, in the right sizes, in the right channels at the right prices. We have seen particular success with Original Source - growing revenue by over 20% and reaching its highest-ever levels of household penetration. There has been successful Revenue Growth Management ('RGM') activity across the portfolio, and continued success with the re-staging of Imperial Leather and the launch of Cussons Creations. Carex also returned to growth for the year as a whole, supported by its successful collaboration with the Gruffalo and the launch of the one-litre refill packs.

 

Looking ahead, there remains further opportunity to regain previous profitability levels in our UK Personal Care business and we are working to improve the performance of our other UK brands, such as Sanctuary Spa, Charles Worthington, and Fudge, which have previously been managed as part of our Beauty business unit.

 

#3: Driving further expansion from the core

 

We have had continued success with Childs Farm during the year, which reported its second year of double-digit revenue growth. In addition, we have seen further growth in distribution, with successful international launches in the year. In the US, we continued to build our position with Amazon, and in August 2024, we launched the brand in Wegmans, a premium grocery chain, through its online and in-store offerings. In Germany, the brand was launched via dm - a major retailer - and our Sleep Mist product became the number one online SKU within the category in dm.

 

Original Source in Spain continues to develop, and during the year we extended our distribution in one of the largest hypermarkets in Spain, Carrefour.

 

#4: Continuing to transform capabilities  

 

We continue to strengthen the business's capabilities to support our growth plans. During the year, we made a significant change to simplify our organisational structure, allowing us to strengthen our UK businesses while improving brand-building capabilities and strengthening growth plans across the Group.

 

Firstly, having previously operated as two separate business units, with two leadership, two commercial and two support teams, we have made good progress in combining our UK Personal Care and Beauty businesses. With one combined leadership team and one 'face to the customer', we anticipate benefits from greater scale and faster, more efficient decision-making. We have already seen some benefits emerge as we combine shelving space at key retailers and leverage the UK Personal Care commercial execution with Beauty influencer and digital media expertise. 

 

Secondly, we have taken further steps to strengthen brand-building team capabilities under Paul Yocum, previously Managing Director of Business Development, in the new role of Chief Growth and Marketing Officer. The organisational changes will lead to greater consolidation of central R&D and innovation resources which will allow us to evaluate opportunities more effectively and provide better support to our Business Units. This will enable us to leverage the benefits of centralising certain activities while retaining the local insights our multi-local portfolio footprint can provide.

 

 

Growing sustainably

 

We are making good progress towards becoming a more sustainable business. Key achievements in FY24 included:

 

·    a 42.8% reduction compared to baseline in scopes 1 and 2 carbon emissions (FY23 0.3% reduction);

·    a 9.2% reduction in virgin plastic compared to baseline (FY23: -7.8%); and

·    85.6% of packaging is now recyclable, reusable or compostable (FY23: 84.4%).

 

We have decided to strengthen our commitment to sustainability by joining the UN Global Compact, the largest corporate sustainability initiative in the world. By becoming a participant, we have committed to aligning our strategy and operations with the UN's Ten Principles for human rights, labour, environment, and anti-corruption. We will also commit to submitting an annual Communication on Progress report.

 

FY25 priorities

 

FY25 is set to be a year of significant change for PZ Cussons. We are specifically focused on three priorities to support our transformation:

 

1.    drive our businesses in the UK, ANZ and Indonesia;

2.    strengthen our brand-building capabilities and embed our new operating model; and

3.    deliver the portfolio transformation to maximise shareholder value.

 

 

 

 

 

 

 

 

 

Overview of Group financial performance

 

Our FY24 financial performance has been defined by the material adverse impact of the devaluation of the Nigerian Naira, which first took place in June 2023. It has significantly impacted the trading of our Nigeria business and has caused a deterioration in the Group's balance sheet. A key focus for the Group throughout the year has therefore been in mitigating any further impact through strengthening the operations of the Nigerian business with a focus on profitability and repatriating cash to the UK - reducing exposure to further devaluation and allowing us to repay gross borrowings. At the same time, we continued to invest across the business to ensure delivery against our strategy.   

 

Revenue declined by 19.6%, impacted by the Naira devaluation. LFL revenue growth was 4.4%, which reflected price/mix growth of 6.8% and a volume decline of 2.4%.

 

Adjusted operating profit declined by £15.0 million at reported FX rates. Adjusted EPS declined by 28.6% - lower than the 39.7% decline in adjusted profit before tax due to a reduction in the Effective Tax Rate and a lower non-controlling interest. On a statutory basis, the operating loss was £83.7 million primarily due to the foreign exchange loss of £107.5 million, which arose primarily on the translation and settlement of USD-denominated liabilities in our Nigerian subsidiaries following the Naira devaluation.

 

Free cash flow was £41.6 million, which was lower than the prior year's £69.9 million due principally to lower operating profit and a working capital outflow. Our net debt was £115.3 million, which represents a material change from the £5.7 million net cash position in the prior year, driven largely by the £139.9 million reduction in the value of cash held in Nigeria due to the devaluation.

 

Performance by geography

 

Europe and the Americas (38.0% of FY24 Group revenue)

 

£m unless otherwise stated	FY24	FY23	Growth / (decline)
Revenue	200.7	205.8	(2.5)%
LFL revenue growth (%)	(1.9)%	(0.5)%	n/a
Adjusted operating profit	32.6	29.3	11.3%
Margin (%)	16.2%	14.2%	200bps
Operating profit	0.7	0.4	75.0%
Margin (%)	0.3%	0.2%	10bps

 

Revenue declined by 1.9% on a like-for-like basis due to the decline in our Beauty brands, partly offset by strong growth in our UK Personal Care business. Price/mix growth was 0.2%, and volume declined by 2.1%.

 

Our UK Personal Care business, consisting primarily of Carex, Original Source, and Imperial Leather has delivered double-digit revenue growth. The UK washing and bathing category grew 6% in value terms as consumers began to increase spending following a period of cost-of-living challenges. Our market share grew 140bps in volume terms with improvements in all sub-categories ^[5] and was unchanged on a value basis. Carex returned to growth for the year as a whole and delivered improving trends throughout the year, supported by its successful collaboration with the Gruffalo and the launch of one-litre refill packs. Original Source revenue grew by over 20% due to strong campaign activity and increased listings, with distribution points growing by 12%. We have seen continued success of the Imperial Leather relaunch, which began in FY22 and which was supported by the launch of Cussons Creations at a value price point, with the brands together growing double-digits in FY24. Cussons Creations was one of the fastest-growing brands in the Washing and Bathing category. Imperial Leather maintained its market share with improved packaging, which provided increased in-store prominence.

 

In our legacy Beauty business unit, which consists primarily of St. Tropez, Sanctuary Spa, Fudge, and Charles Worthington, revenue declined by double-digits. This decline was primarily driven by St. Tropez, where we experienced de-stocking from a major customer and slower trading in the US, driven by overall softer consumer sentiment and poor weather. Sanctuary Spa's revenue declined in the first half of the year, reflecting the decision to reduce the Christmas gifting product portfolio to protect profitability. However, it saw good revenue growth in the second half of the year.

 

Childs Farm reported a second full year of double-digit revenue growth under our ownership. This growth was driven by continued strong commercial execution, with a 5% increase in distribution points, and ongoing brand strengthening with awareness improving and a near doubling of social media followers over the past two years. Together, these elements have resulted in market share gains.  

 

Despite the reduction in revenue, adjusted operating profit and margin improved. At 19.5%, the H2 FY24 adjusted operating profit margin is the highest since the Covid-19 peak in FY21 and was achieved despite a softer performance from our higher-margin brands such as St. Tropez. This improvement in adjusted operating margin was primarily driven by our UK Personal Care business following the strong RGM and cost initiatives throughout the year. Childs Farm recorded positive adjusted operating profit, primarily due to improved adjusted gross profit margin. On a statutory basis, operating profit was £0.7 million, which includes investment in transformation projects and the impairment of Sanctuary Spa in the first half of the year.

 

^[5] Source for market growth and share figures: IRI All Outlets plus Kantar Discounters MAT to 8th June 2024.

 

Asia Pacific (33.2% of FY24 Group revenue)

 

£m unless otherwise stated	FY24	FY23	Growth / (decline)
Revenue	175.2	190.7	(8.1)%
LFL revenue growth (%)	(3.4)%	4.4%	n/a
Adjusted operating profit	28.0	27.5	1.8%
Margin (%)	16.0%	14.4%	160bps
Operating profit	27.0	29.6	(8.8)%
Margin (%)	15.4%	15.5%	(10)bps

 

 

Revenue declined 8.1% due to a decline in LFL revenue and unfavourable FX, driven by a depreciation in the Indonesian Rupiah and Australian Dollar. On a LFL basis, revenue declined 3.4% with consistent growth in ANZ offset by a decline in Indonesia. 

 

Cussons Baby in Indonesia declined slightly, reflecting softer consumer sentiment and a reduction in distributor stock levels throughout much of the year. The business returned to revenue and market share growth in Q4, however, and distributor stock at the end of the year had returned to normal levels. Despite some loss of market share for the year as a whole, Cussons Baby retained #1 or #2 positions in most of the sub-categories in which it plays. The launch of Cussons Baby into the warming oil segment, a category estimated to be used by over 80% of Indonesian mothers, has gone well. We continue to see meaningful revenue growth opportunities with this innovation.

 

ANZ delivered continued solid growth. This was led by Radiant, up double-digits, resulting in it becoming the third largest brand in the laundry market (up from sixth previously). Growth came through both volume and price/mix, driven by the successful launch of capsules alongside the existing powder and liquid products. Morning Fresh also performed well, maintaining its nearly 50% category share. The FY23 launch of the Morning Fresh auto dishwash range also contributed to revenue, although its performance has been softer than initially anticipated due to a strong competitor response. Our long-term ambition to leverage the significant brand equity of Morning Fresh to extend 'beyond the sink' is unchanged. Rafferty's Garden revenue slightly declined but market share was stable.

 

Despite the decline in revenue, adjusted operating margin grew by 160bps. This was principally due to a further significant improvement in profitability in ANZ, where new product innovation has been highly accretive to margins, and reduced freight costs. Profitability was also improved due to the reduction in cost associated with our wider manufacturing operations in Asia, albeit offset by the challenging trading in Indonesia. On a statutory basis, margins declined by 10bps.  

 

 

 

Africa (28.7% of FY24 Group revenue)

 

 

£m unless otherwise stated	FY24	FY23	Growth / (decline)
Revenue	151.7	256.3	(40.8)%
LFL revenue growth (%)	26.5%	13.4%	n/a
Adjusted operating profit	30.3	37.2	(18.5)%
Margin (%)	20.0%	14.5%	550bps
Operating profit	(50.7)	48.3	n.m.
Margin (%)	(33.4)%	18.8%	(5,220)bps

 

The results should be seen in light of the Naira devaluation throughout this year. This devaluation has created high inflation levels, and we have needed to carry out nearly 30 rounds of price increases during the year. This has been a key driver of the 26.5% LFL revenue growth. Volumes declined by 4.7% in FY24, but this trend improved throughout the year. On a reported basis, revenue declined by 40.8% due to the Naira being 57% lower in FY24 compared to the prior year.

 

The continued transformation of our route-to-market has been a major driver of revenue growth in our Nigerian business and has helped to limit the decline in volumes. Firstly, we have continued to increase the availability of our products through expanding the number of stores served directly as opposed to via wholesalers. We serve approximately 151,000 stores today - over 50% higher than at the end of FY23 and more than double the number of two years ago. Secondly, we have also continued to increase the number of 'priority' stores - those which attract greater commercial focus and are typically supplied with a wider range of products. Thirdly, the productivity of our existing distribution has increased with vans and bikes reaching more customer and consumer locations. Our sales per van have more than doubled, partly due to this increased efficiency.

 

As a result of the improved distribution, the market shares of our key Nigerian brands have remained largely unchanged despite the significant price increases. Morning Fresh, however, has seen some share loss due to its pricing relative to competitor products.

 

Revenue in our electricals business grew over 20% on a LFL basis, contributing revenue of £56.6 million. Gross margins declined as price increases did not fully offset the increased costs resulting from the devaluation of the Naira. Compared to the rest of our Nigerian business, the electricals business sees greater input costs denominated in US Dollars. 

 

The PZ Wilmar joint venture contributed £10.7 million (FY23: £7.5 million) to adjusted operating profit. Compared to the prior year, this improvement reflects continued strong commercial execution. 

 

Adjusted operating profit margin grew by 550bps. Profit however included a £8.9 million credit from some intra-Group debt forgiveness, with the loss being recorded in our Central segment. Excluding this, Africa adjusted operating profit margin declined by 40bps. On a statutory basis, we reported an operating loss of £50.7 million, reflecting the increased value of trade and loan liabilities denominated in US Dollars.

 

 

 

 

Other financial items

 

Adjusted operating profit

 

Adjusted operating profit for the Group was £58.3 million, which compares to £73.3 million in the prior year. The adjusted operating profit margin decreased by 20bps to 11.0%.

 

Adjusted gross profit margin increased by 60bps to 39.8%. This increase primarily reflects the strong underlying improvement in the Europe and Americas segment. There was also a favourable currency mix effect as Africa, with lower margins, represented a smaller proportion of revenue compared to the prior year as a result of the Naira devaluation. Marketing investment was reduced slightly in FY24, mainly due to a reduction in allocation to our UK-based Beauty brands. Central costs increased by £11.9 million compared to the prior year, but included a £8.9 million cost related to the cancellation of a debt previously attributable to our Africa region. PZ Wilmar, our cooking oils joint venture with Wilmar International, performed strongly and contributed £10.7 million to operating profit (FY23: £7.5 million).

 

Adjusting items

 

Adjusting items in the year totalled a net expense of £140.6 million before tax. This related primarily to a £107.5 million foreign exchange loss arising from the devaluation of the Nigerian Naira. A charge of £24.4 million was incurred due to the impairment of the Sanctuary Spa brand in the first half of the year, and costs of £10.1 million were incurred on simplification and transformation projects. See Note 3 for further details on adjusting items.

 

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 of £107.5 million primarily arose from the translation and settlement of USD-denominated liabilities in our Nigerian subsidiaries and is wholly the result of the devaluation of the Naira, which fell by 70% from 31 May 2023 to 31 May 2024. See further details on the Naira rates used in our financial statements in the table on page 13.

 

After accounting for adjusting items, the Group's statutory operating loss was £83.7 million, compared to a statutory operating profit of £59.7 million in the prior year.

 

Net finance costs

 

Adjusted net finance expense was £13.4 million, compared to income of £0.8 million in the prior year. This was the result of cash balances in Naira, which earn a significantly higher rate of interest than that paid on our sterling-denominated gross borrowings, being significantly lower as a result of the devaluation.

 

Taxation

 

On an adjusted basis, the effective tax rate was 14.5% (FY23: 27.1%) reflecting the underlying cash tax impact to Group. The year-on-year reduction was primarily due to a change in the tax regime operating in Nigeria whereby, for loss-making businesses, tax is assessed on the basis of revenue rather than profitability, together with the tax deductibility of realised FX impacts arising as a result of the cash repatriation from Nigeria to the UK.

 

On a reported basis, the tax credit for the year was £24.1 million compared to a tax charge of £15.4 million in the prior year. The effective tax rate for the year is 25.0% (2023: 24.9%).

 

Earnings per share

 

Adjusted basic earnings per share was 8.02p compared to 11.23p in the prior year. The statutory loss for the year was £71.8 million, compared to a profit of £46.4 million in the prior year. Basic loss per share on a statutory basis was 13.60p compared to basic earnings per share of 8.70p in the prior year.

 

 

Balance sheet and cash flow

 

As at 31 May 2024, cash and cash equivalents were £51.3 million (FY23: £256.4 million). The decrease was driven principally by a £139.9 million reduction in the value of cash held in Nigeria due to the devaluation and the repayment of gross debt. The reduction in net assets from £422.1 million to £235.2 million is primarily the result of losses relating to the devaluation of the Naira and a £24.4 million impairment of the Sanctuary Spa brand, partly offset by the Group's underlying net profit.

 

The Group has a £325 million committed credit facility available for general corporate purposes. The credit facility incorporates a term loan of up to £125 million, with the balance as a revolving credit facility ('RCF') structure with maturity dates up to November 2028. As at 31 May 2024, this facility was £161.0 million drawn (FY23: £252.0 million).

 

Free cash flow was £41.6 million. This was lower than the prior year's £69.9 million due principally to lower operating profit and a working capital outflow.  

 

£m unless otherwise stated		FY24	FY23
Adjusted EBITDA		75.9	92.4
Cash flow impact of adjusting items		(12.1)	(14.6)
Working capital movements [6]		(9.4)	4.1
Capex		(6.1)	(6.7)
Share of JV results		(10.7)	(7.5)
Other		4.0	2.2
Free cash flow		41.6	69.9

 

Dividend

 

The Board announces its intention to declare an interim dividend of 2.1p per share, down 44% compared to last year's final dividend of 3.73p. This represents a full year dividend of 3.6p 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.             

 

The dividend will be paid on 4 December 2024 to shareholders on the register at the close of business on 1 November 2024.

Foreign exchange: impact on FY24 results

 

The devaluation of the Naira resulted in a £130.6 million adverse impact on year-on-year revenue in FY24 when translated into Sterling. Outside of Nigeria, the general strengthening of Sterling against other currencies resulted in a £19.3 million reduction in FY24 revenue compared to FY23.

 

	% of FY24 revenue	Average FX rates		Revenue impact (£m)
		FY23	FY24
GBP	34%	1.0	1.0	-
NGN	24%	536.3	1,256.7	(130.6)
AUD	17%	1.8	1.9	(6.7)
IDR	12%	18,174.2	19,549.7	(5.3)
USD	6%	1.2	1.3	(1.9)
Other	7%	-	-	(5.4)
Total[7]	100%	-	-	(149.9)

 

 

Foreign exchange: impact on future results

 

Given the materiality of the movement in the Nigerian Naira in recent periods, the rates used in recent reporting periods are summarised below. The currency devalued by 70% from 31 May 2023 to 31 May 2024, and was on average 57% lower for the financial year as a whole. The Naira has continued to weaken in FY25.

 

NGN/GBP	FY22	FY23	FY24	Q1 FY25[8]
Rate used for P&L	558	536	1,256	1,979
Rate used for balance sheet	530	577	1,893	2,100

 

^[6] Working capital movements of £9.4 million reflect £94.7 million inflow per cash flow statement, adjusted for £104.1 million FX losses arising on Nigerian Naira devaluation.

^[7] Table shows the impact of translating FY23 revenue at FY24 foreign exchange rates.

^[8] P&L rate represents average rates between 1 June and 31 August (Q1 FY25) and balance sheet rate is as at 31 August.

 

 

APM	Alternative performance measure.
BEST values	Our PZ Cussons values (Bold, Energetic, Striving and Together).
Brand Investment	An operating cost related to brand marketing (previously 'Media & Consumer').
EBITDA	Earnings before interest, taxes, depreciation and amortisation.
Employee well-being	% score based upon a set of questions within our annual survey of employees.
EPS	Earnings per share.
ETR	Effective tax rate.
ExCo	Executive Committee
Family Care	Refers to our Hygiene, Baby and Beauty brands in Nigeria and Africa.
Free cash flow	Cash generated from operations less capital expenditure.
Free cash flow conversion	Free cash flow as a % of adjusted EBITDA from continuing operations.
Like for like ('LFL') revenue growth	Growth on the prior year at constant currency, excluding unbranded sales and the impact of disposals and acquisitions, and adjusting for the number of reporting days in the period.
Must Win Brands	The brands in which we place greater investment and focus. They comprise: Carex, Childs Farm (acquired in March 2022), Cussons Baby, Joy, Morning Fresh, Original Source, Premier, Sanctuary Spa and St. Tropez.
Net debt	Cash, short-term deposits and current asset investments, less bank overdrafts and borrowings. Excludes IFRS 16 lease liabilities.
Personal Care	Refers to our UK business unit operating our Hygiene brands such as Carex, Original Source and Imperial Leather.
Portfolio Brands	The brands we operate which are not Must Win Brands.
PZ Cussons Growth Wheel	Our 'repeatable model' for driving commercial execution, comprising 'Consumability', 'Attractiveness', 'Shopability' and 'Memorability'.
Revenue Growth Management ('RGM')	Maximising revenue through ensuring optimised price points across customers and channels and across different product sizes.
SKUs	Stock keeping unit.
Through the Line	Marketing campaign incorporating both mass reach and targeted activity.

 

 

Alternative Performance Measures

	2024			2023
	Business performance excluding adjusting items	Adjusting items	Statutory results	Business performance excluding adjusting items	Adjusting items	Statutory results
	£m	£m	£m	£m	£m	£m
Revenue	527.9	-	527.9	656.3	-	656.3
Cost of sales	(317.8)	(79.0)	(396.8)	(399.0)	-	(399.0)
Gross profit	210.1	(79.0)	131.1	257.3	-	257.3
Selling and distribution expense	(82.8)	-	(82.8)	(105.3)	-	(105.3)
Administrative expense	(79.7)	(59.6)	(139.3)	(86.2)	(13.6)	(99.8)
Share of results of joint venture	10.7	(3.4)	7.3	7.5	-	7.5
Operating profit/(loss)	58.3	(142.0)	(83.7)	73.3	(13.6)	59.7
Finance income	10.8	1.4	12.2	14.1	1.3	15.4
Finance expense	(24.2)	-	(24.2)	(13.3)	-	(13.3)
Net finance (expense)/income	(13.4)	1.4	(12.0)	0.8	1.3	2.1
Net monetary loss arising from hyperinflationary economies	(0.2)	-	(0.2)	-	-	-
Profit/(loss) before taxation	44.7	(140.6)	(95.9)	74.1	(12.3)	61.8
Taxation	(6.5)	30.6	24.1	(20.1)	4.7	(15.4)
Profit/(loss) for the period	38.2	(110.0)	(71.8)	54.0	(7.6)	46.4
Attributable to:
Owners of the Parent	33.6	(90.6)	(57.0)	47.0	(10.6)	36.4
Non-controlling interests	4.6	(19.4)	(14.8)	7.0	3.0	10.0
	38.2	(110.0)	(71.8)	54.0	(7.6)	46.4

The Group's business performance is assessed using a number of Alternative Performance Measures ('APMs'). These APMs include adjusted profitability measures where results are presented excluding separately disclosed items (referred to as adjusting items) as we believe this provides both management and investors with useful additional information about the Group's performance and supports a more effective comparison of the Group's trading performance from one period to the next. Like for like ('LFL') revenue growth represents the growth on the prior year, adjusting for constant currency and excluding the impact of disposals and acquisitions.

Adjusted Consolidated Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Details of adjusting items are provided in Note 3 to the condensed consolidated financial statements. Reconciliations from IFRS reported results to APMs are set out below.

 

 

 

 

Alternative Performance Measures (continued)

Adjusted operating profit and adjusted operating margin

		2024	2023
		£m	£m
Group
Operating (loss)/profit from continuing operations		(83.7)	59.7
Exclude: adjusting items		142.0	13.6
Adjusted operating profit		58.3	73.3
Revenue		527.9	656.3
Operating margin		-15.9%	9.1%
Adjusted operating margin		11.0%	11.2%
By segment
Europe & the Americas:
Operating (loss)/profit from continuing operations		0.7	0.4
Exclude: adjusting items		31.9	28.9
Adjusted operating profit		32.6	29.3
Revenue		200.7	205.8
Operating margin		0.3%	0.2%
Adjusted operating margin		16.2%	14.2%
Asia Pacific:
Operating profit from continuing operations		27.0	29.6
Exclude: adjusting items		1.0	(2.1)
Adjusted operating profit		28.0	27.5
Revenue		175.2	190.7
Operating margin		15.4%	15.5%
Adjusted operating margin		16.0%	14.4%
Africa:
Operating (loss)/profit from continuing operations		(50.7)	48.3
Exclude: adjusting items		81.0	(11.1)
Adjusted operating profit		30.3	37.2
Revenue		151.7	256.3
Operating margin		-33.4%	18.8%
Adjusted operating margin		20.0%	14.5%
Central:
Operating loss from continuing operations		(60.7)	(18.6)
Exclude: adjusting items		28.1	(2.1)
Adjusted operating loss		(32.6)	(20.7)

 

Alternative Performance Measures (continued)

Adjusted gross profit

		2024	2023
		£m	£m
Gross profit		131.1	257.3
Exclude: adjusting items		79.0	-
Adjusted gross profit		210.1	257.3
Revenue		527.9	656.3
Gross margin		24.8%	39.2%
Adjusted gross margin		39.8%	39.2%

 

 

Adjusted share of results of joint venture

		2024	2023
		£m	£m
Share of results of joint venture		7.3	7.5
Exclude: adjusting items		3.4	-
Adjusted share of results of joint venture		10.7	7.5

 

 

Adjusted profit before taxation

		2024	2023
		£m	£m
(Loss)/profit before taxation from continuing operations		(95.9)	61.8
Exclude: adjusting items		140.6	12.3
Adjusted profit before taxation		44.7	74.1

 

 

Adjusted Earnings Before Interest Depreciation and Amortisation (Adjusted EBITDA)

 

		2024	2023
		£m	£m
(Loss)/profit before taxation from continuing operations		(95.9)	61.8
Add back/(deduct): net finance expense/(income)		12.0	(2.1)
Add back: depreciation		10.2	12.1
Add back: amortisation		7.1	7.0
Add back: impairment and impairment reversal		24.9	12.3
		(41.7)	91.1
Exclude: adjusting items*		117.6	1.3
Adjusted EBITDA		75.9	92.4

 

* Excludes adjusting items relating to impairment.

 

 

 

Alternative Performance Measures (continued)

 

Adjusted earnings per share

	2024	2023
	£m	£m
(Loss)/profit after tax attributable to owners of the Parent	(57.0)	36.4
Exclude: adjusting items (net of taxation effect)	90.6	10.6
Adjusted profit after taxation	33.6	47.0

 

	2024	2023
	pence	pence
Basic (loss)/earnings per share	(13.60)	8.70
Exclude: adjusting items	21.62	2.53
Adjusted basic earnings per share	8.02	11.23
Diluted (loss)/earnings per share1	(13.60)	8.67
Exclude: adjusting items2	21.60	2.52
Adjusted diluted earnings per share	8.00	11.19

 

^{1 In 2024, the basic and diluted loss per share are equal as a result of the Group incurring a loss for the year.}

^{2 In 2024, this includes an adjustment of 0.03 pence per share arising from bringing the diluted loss per share in line with the basic loss per share as outlined above).}

 

Free cash flow

		2024	2023
		£m	£m
Cash generated from operations		47.7	76.6
Deduct: purchase of property, plant and equipment and software		(6.1)	(6.7)
Free cash flow		41.6	69.9

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

		2024	2023
	Notes	£m	£m
Revenue		527.9	656.3
Cost of sales		(396.8)	(399.0)
Gross profit		131.1	257.3
Selling and distribution expense		(82.8)	(105.3)
Administrative expense		(139.3)	(99.8)
Share of results of joint venture		7.3	7.5
Operating (loss)/profit		(83.7)	59.7
Finance income		12.2	15.4
Finance expense		(24.2)	(13.3)
Net finance (expense)/income		(12.0)	2.1
Net monetary loss arising from hyperinflationary economies3		(0.2)	-
(Loss)/profit before taxation		(95.9)	61.8
Taxation	4	24.1	(15.4)
(Loss)/profit for the year1		(71.8)	46.4
Attributable to:
Owners of the Parent		(57.0)	36.4
Non-controlling interests		(14.8)	10.0
		(71.8)	46.4
(Loss)/earnings per ordinary share1
Basic (p)	6	(13.60)	8.70
Diluted (p)2	6	(13.60)	8.67

¹ Wholly derived from continuing operations.

² In 2024, the basic and diluted loss per share are equal as a result of the Group incurring a loss for the year.

³ Represents the hyperinflation impact in relation to Ghana.

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		2024	2023
	Notes	£m	£m
(Loss)/profit for the year		(71.8)	46.4
Other comprehensive (expense)/income:
Items that will not be reclassified to income statement:
Re-measurement loss on net retirement benefit obligations		(6.8)	(32.8)
Taxation on other comprehensive income		1.7	7.4
Total items that will not be reclassified to income statement		(5.1)	(25.4)
Items that may be subsequently reclassified to income statement:
Exchange differences on translation of foreign operations1		(69.4)	(19.6)
Share of other comprehensive expense of joint venture accounted for using the equity method		(20.0)	(2.1)
Cash flow hedges - fair value movements net of amounts reclassified		(0.6)	0.4
Total items that may be subsequently reclassified to income statement		(90.0)	(21.3)
Other comprehensive expense for the year		(95.1)	(46.7)
Total comprehensive expense for the year		(166.9)	(0.3)
Attributable to:
Owners of the Parent		(133.3)	(6.9)
Non-controlling interests		(33.6)	6.6
		(166.9)	(0.3)

¹ Includes a hyperinflation adjustment of £4.3 million (2023: £nil) in relation to Ghana, net of £1.3m deferred taxation.

CONDENSED CONSOLIDATED BALANCE SHEET

		2024	2023
	Notes	£m	£m
Assets
Non-current assets
Goodwill and other intangible assets	7	279.3	312.7
Property, plant and equipment		42.8	67.9
Investment properties		6.6	6.4
Right-of-use assets		10.2	12.5
Net investments in joint venture		-	52.0
Trade and other receivables		32.1	-
Deferred taxation assets		22.2	7.5
Current tax receivable		0.6	-
Retirement benefit surplus		32.1	38.5
		425.9	497.5
Current assets
Inventories		68.5	112.9
Trade and other receivables		99.0	119.1
Derivative financial assets		-	1.0
Current tax receivable		0.2	1.0
Current asset investments		-	0.5
Cash and cash equivalents	8	51.3	256.4
		219.0	490.9
Assets held for sale		4.7	-
		223.7	490.9
Total assets		649.6	988.4
Equity and liabilities
Equity
Share capital		4.3	4.3
Own shares		(34.5)	(36.9)
Capital redemption reserve		0.7	0.7
Hedging reserve		(0.4)	0.2
Currency translation reserve		(159.6)	(89.0)
Retained earnings		425.3	511.7
Other reserves		6.5	4.6
Attributable to owners of the Parent		242.3	395.6
Non-controlling interests		(7.1)	26.5
Total equity		235.2	422.1
Liabilities
Non-current liabilities
Borrowings	8	160.3	251.2
Other payables		2.6	4.1
Lease liabilities		9.7	11.3
Deferred taxation liabilities		39.8	76.9
Retirement and other long-term employee benefit obligations		12.2	12.4
		224.6	355.9
Current liabilities
Borrowings	8	6.3	-
Trade and other payables		158.7	182.2
Lease liabilities		2.4	1.7
Derivative financial liabilities		0.5	0.5
Current taxation payable		21.7	25.6
Provisions		0.2	0.4
		189.8	210.4
Total liabilities		414.4	566.3
Total equity and liabilities		649.6	988.4