REG - PZ CUSSONS PLC - 2023 Interim Results
08/02/2023 07:00
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RNS Number : 2307P PZ CUSSONS PLC 08 February 2023
8 February 2023
2023 INTERIM RESULTS
for the half year ended 3 December 2022
Continued profitable like for like revenue growth
FY23 outlook reiterated despite the challenging macro environment
Jonathan Myers, Chief Executive Officer, said: "Despite the continued
challenging macro environment, we have delivered another quarter of like for
like revenue growth. Our first half performance has been in line with
expectations and we are reiterating our full year outlook. This is thanks to
work we have done to make PZ Cussons a more resilient business and our focus
on building stronger brands. For example, in the UK, our new brand Cussons
Creations is serving cost-conscious shoppers and the re-launched Sanctuary Spa
is for consumers looking to treat themselves at home with an everyday
indulgence. Overall, while there remains more to do in our transformation and
near-term headwinds to navigate in some of our markets, we are confident about
the opportunities ahead of us. We are working to build a higher growth, higher
margin, simpler and more sustainable business."
Adjusted Statutory
H1 FY23 H1 FY22 H1 FY23 H1 FY22
Revenue £336.9m £283.7m 18.8% £336.9m £283.7m 18.8%
LFL revenue growth 6.1% (2.0)% -
Operating profit £33.2m £32.9m 0.9% £39.2m £24.4m 60.7%
Operating margin 9.9% 11.6% (170)bps 11.6% 8.6% 300bps
Profit before tax £34.5m £32.0m 7.8% £40.5m £23.5m 72.3%
Basic earnings per share 5.16p 5.64p (8.5)% 5.90p 4.23p 39.5%
Dividend per share 2.67p 2.67p 0.0%
See page 9 for definitions of key terms and pages 10 to 12 for the
reconciliation between Alternative Performance Measures and Statutory Results.
Numbers are shown based on continuing operations, unless otherwise stated.
With the exception of LFL revenue growth, % changes are shown at actual FX
rates.
Unless otherwise stated H1 FY23 refers to the 6 months ended 3 December 2022
and H1 FY22 refers to the 6 months ended 27 November 2021.
Revenue growth of 18.8% includes approximately three percentage points
contribution due to an additional six reporting days in the period, compared
to H1 FY22.
Group Summary
· Like for like ('LFL') revenue growth of 6.1%, driven by price/mix
improvements, with limited volume declines
· Must Win Brands ('MWBs') LFL revenue increased 2.2% (6.7% growth
excluding Carex), with the large majority of the brands in good growth
· Reported revenue grew 18.8%, driven by the contribution of the Childs
Farm acquisition, favourable FX and the impact of additional reporting days in
the period
· Adjusted operating profit margin decline of 170bps in line with
expectations, driven primarily by adverse geographic mix, with cost mitigation
and Revenue Growth Management largely offsetting underlying inflation. On
track for margin improvement in H2
· Adjusted EPS declined 8.5% as growth in adjusted profit before tax of
7.8% was more than offset by a higher tax charge and the increase in minority
interests as a result of the improved profitability in Africa; on a statutory
basis, EPS increased 39.5% to 5.90p
· Balance sheet remains strong with a new £325 million credit facility
agreed, incorporating ESG-linked KPIs
· Interim dividend of 2.67p, unchanged from H1 FY22
· Continued progress against 'Building brands for life' strategy,
including:
o A doubling of investment in MWBs compared to H1 FY20, including recent
marketing campaigns for Original Source, Sanctuary Spa and Portfolio Brand
Imperial Leather's first TV campaign in seven years
o Ongoing simplification of our Nigerian operations, with over £30 million
of cumulative proceeds now achieved from the sale of residential properties
and an improved ERP infrastructure
o Childs Farm continues to perform well with the ongoing integration into our
own operations and new international listings recently secured
o Further growth in sustainability-led packaging, including 200% growth in
Sanctuary Spa refill sales which also offer better value to the consumer
o Incremental investment to prepare selected MWBs for entries into new
markets and adjacencies
· FY23 outlook and long-term ambition is unchanged from that provided at
the FY22 Results in September 2022
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 conference call
PZ Cussons' management will host an audio webcast for analysts and
institutional investors at 9.00am GMT on 8 February 2023. The webcast is
available at the link below and will also be available via our corporate
website, www.pzcussons.com.
https://www.investis-live.com/pzcussons/63bff148aba36a0c0018e275/fewq
(https://www.investis-live.com/pzcussons/63bff148aba36a0c0018e275/fewq)
Notes to Editors
About PZ Cussons
PZ Cussons is a FTSE250 listed consumer goods business, headquartered in
Manchester, UK. We employ nearly 3,000 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
macro-economic, 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 at 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.
Group Review
Introduction from our Chief Executive Officer
Our performance in the first half of the year has continued to be impacted by
a challenging macro environment, with ongoing high cost inflation and reduced
consumer confidence. We have nevertheless delivered a robust financial
performance with continued LFL revenue growth and our expectations for the
full year are unchanged. Our teams have been working hard to ensure we
continue to offer the best possible value for consumers and I would like to
thank each of them for their efforts and support.
We continue to make good progress against our strategy. We have refocused on
the consumer, raising the bar on how we approach marketing and innovation. We
are investing more to build stronger brands, with a particular focus on our
MWBs where Brand Investment in the first half of the year is double that of H1
FY20 - just prior to the launch of the strategy. Finally, we are continuing to
remove the complexities that have historically constrained our growth.
There is undoubtedly more to do, but significant strategic progress has been
made over the last two years to address our legacy issues and ensure the
business is well positioned to navigate the near-term headwinds as we continue
to move from Turnaround to Transformation.
Our strategic progress: Building brands for life. Today and for future
generations.
In the first half of the year, we have continued to make good headway,
focusing on the core categories of Hygiene, Baby and Beauty in our four
priority markets of the UK, Australia, Indonesia and Nigeria.
Build Brands
Our primary strategic focus is on building memorable, trusted and well-loved
brands. In the UK, Sanctuary Spa, one of our MWBs, was relaunched in the
period with new packaging and product ranges, such as shower oils and scrubs,
demonstrating the value offered to consumers seeking to maintain their
everyday indulgences in the face of the cost of living crisis. Supported by a
significant increase in Brand Investment, results have been positive, with
household penetration increasing by a third and the brand is well placed to
deliver a third consecutive year of strong revenue growth.
Elsewhere, our continued focus on investing behind MWBs in Nigeria has
resulted in Brand Investment double the level of two years ago, in part funded
by a more than 20% reduction in Portfolio Brand investment as we shift our
resources behind our strategic priorities. This is driving significant
improvement in financial and operational performance in Africa with LFL
revenue growth of 15.6% and a further improved margin.
Serve Consumers
We need to win wherever the shopper shops and we are working to ensure we have
the right route to market strategy for all our brands, whether through
increasing our presence within the discounter channel or strengthening
relationships with the larger grocers. We are also reaching a wider range of
consumers through innovation, with the development of Cussons Creations
providing an everyday value offering for the cost-conscious shopper.
Building on the earlier success of the Rafferty's Garden online offering where
market share continues to be ahead of traditional routes to market, the
Australian team has recently launched a Direct-to-Consumer website for Childs
Farm, following the move to integrate previous third party distribution into
our own operations. Elsewhere, St.Tropez had its best 'Holiday Week' ever in
North America driven by targeted promotional programmes and strong online
activity through closer relationships with Amazon. In the UK, Sanctuary Spa
sales grew over 70% as part of Amazon's Prime Day event.
Reduce Complexity
Nigeria continues to be a major part of our focus to reduce complexity across
the Group. We are simplifying our operations with further residential property
sales, generating £13.5 million of proceeds in the period, bringing
cumulative proceeds to over £30 million. We see further opportunities to
unlock additional value over time and have also re-engineered our ERP system
(SAP) to improve financial controls and drive process efficiencies.
We have continued to evolve our supply chain footprint. In the period we
relocated our procurement function to improve operational performance and made
the strategic decision to outsource product fragrance development and supply.
Over the medium term we will continue to reconfigure our supply chain into a
simplified, lean and agile function to support future profitable growth.
Develop People
Our people strategy remains a critical enabler of our business, building a
high engagement, high performance culture. In October we hosted our first
'Future Ready Summit' which brought together senior leaders from across the
Group to shape our business priorities and plans. The Workday HR system will
bring considerable benefits to employees and managers whilst driving
efficiencies in process and insight to drive our talent agenda.
Recognising the cost of living challenges many of our employees are facing, we
have been working hard to support wherever we can, including vouchers in
Indonesia, one-off payments in Nigeria and Ghana and appreciation days in the
UK and Australia.
Grow Sustainably
Our investment in sustainability is driven by wanting to be at the forefront
of responding to evolving consumer behaviour and ensuring that our products
serve them well. In the UK, we have reformulated Imperial Leather bottles and
Sanctuary Spa jars to include 30% post-consumer recycled resin whilst also
launching an Original Source 'bottle for life' made of aluminium and offering
better value to consumers. Sanctuary Spa refills have grown nearly 200% over
the past year, reflecting not only consumers' desire to purchase more
sustainably, but also the better value given the lower levels of plastic
usage. Demonstrating our commitment to embed our new sustainability framework
"Better For All" into all parts of our business, we agreed a new and
innovative £325 million credit facility which incorporates ESG-linked KPIs.
FY23 Outlook
As previously guided, we expect a stronger operating margin performance in the
second half of the year driven by improved trends in our Europe and Americas
business, more benign cost inflation and the full impact of price increases
implemented part way through the first half. We remain mindful of significant
macro-economic uncertainty, including the continued depreciation of the
Nigerian naira, but expect to report FY23 adjusted profit before tax in line
with current market estimates.
We now expect an effective tax rate ('ETR') on adjusted profit before tax for
FY23 of 26-27% (22-24% previously) primarily as a result of the geographic mix
of profits. We expect a net interest charge for FY23 of approximately £2
million (versus previous expectations of £4 million).
Our long-term ambition of LFL revenue growth of mid-single digits and adjusted
operating profit margins in the mid-teens is unchanged.
Financial Review
Overview of Group financial performance
We have delivered a robust financial performance, in line with our
expectations, despite the impact of inflationary pressures and the softening
of the wider macro-economic environment and consumer confidence. Revenue
increased 18.8% reflecting LFL revenue growth of 6.1%, the positive
contribution of the Childs Farm acquisition and favourable FX movements. An
additional six reporting days in the period added approximately three
percentage points to revenue growth and is excluded from the LFL calculation.
LFL revenue was driven mainly by price/mix improvements of 11.4%. Volumes
declined 5.4%, of which nearly three percentage points were attributable to
our Nigerian Electricals business, where we are intentionally driving price
and margin, rather than volume, and to Carex where category demand has
continued to normalise post-Covid. Excluding the impact of foreign exchange
movements, revenue growth was 8.1%.
The 170bps decline in adjusted operating profit margin was primarily driven by
adverse geographic revenue mix as we saw declines in the higher gross margin
brands of Carex and St.Tropez, but very strong growth in Africa and Australia
where our brands typically have lower margins. Cost inflation remained high in
the period, although this is expected to moderate in the second half of the
year, based on the current market outlook. We have increased our Brand
Investment during the period and have also been investing in future white
space opportunities such as expansion into new geographies and category
adjacencies. Adjusted EPS declined by 8.5% as a result of the reduction in
adjusted operating margin, together with a higher tax rate and the impact of a
higher minority interest charge associated with the strength of our Nigerian
business. On a statutory basis, EPS increased 39.5% to 5.90p.
Our balance sheet remains strong, with adjusted net debt of £35.7 million.
Adjusted net debt has increased since the year end as adverse FX movements,
loans we elected to advance to PZ Wilmar Limited, one of our joint ventures in
Nigeria, and the payment of the final FY22 dividend have more than offset free
cash flow of £4.2 million (H1 FY22: £20.3 million) and proceeds from the
disposal of residential properties in Nigeria. The Board has approved an
unchanged interim dividend of 2.67p (H1 FY22: 2.67p).
Performance by geography
Europe and the Americas
H1 FY23 Reported growth/ (decline)
Revenue £99.5m 4.6%
LFL revenue growth (6.0)% n/a
Adjusted operating profit £9.5m (51.5)%
Margin 9.5% (1110)bps
Operating profit £4.1m (48.8)%
Revenue declined 6.0% on a LFL basis, primarily reflecting the continued
post-Covid normalisation of Carex, a strong comparable period for our Beauty
brands and against the context of an 8.3% decline in the UK washing and
bathing category in the period. The reported revenue increase of 4.6% includes
the benefit of the Childs Farm acquisition, which completed in March 2022.
Childs Farm continues to perform well, benefiting from recently agreed new
international listings and we will soon launch the first new product
development under our ownership.
The UK hand hygiene category declined during the period, driven largely by a
50% reduction in the hand sanitiser category as concerns related to Covid have
continued to soften. Despite a reduction in revenue during the period, Carex
remains approximately 20% higher than pre-Covid levels and has continued to
see strong performance of refills.
Original Source grew as a result of successful marketing during the period,
helping it to become the third largest shower brand in the UK, up from fifth
previously. After a number of years of revenue decline, Imperial Leather was
relaunched with its first TV campaign in seven years, reconnecting with the
brand's heritage and appeal to consumers as they seek an everyday indulgence.
To enable Imperial Leather's premiumisation, we launched our new Portfolio
Brand Cussons Creations in June 2022 for the more cost-conscious consumer,
recognising the importance of the discounter retail channel in recent years.
The response to this approach has been positive, allowing us to both improve
profitability and better serve consumers. The two brands combined have seen
higher sales than the previous Imperial Leather offering.
Our Beauty business saw a decline on last year's particularly strong
performance from St.Tropez which benefited from the Ashley Graham campaign and
a strong post-Covid rebound. Revenue nevertheless remains significantly higher
than two years ago. Sanctuary Spa grew strongly following its 'Self Care
Counts' re-staging and marketing campaign, with UK household penetration
increasing by a third compared to two years ago. It grew particularly well on
key trading occasions, seeing double and triple-digit growth during Prime Day
and Black Friday respectively and continues to expand its shower range such as
oils and scrubs.
Adjusted operating profit margin declined to 9.5%, from 20.6%. This was driven
by pressures from cost inflation and the reduction in consumer confidence in
the UK, the revenue decline in Carex and St.Tropez, as well as incremental
investment in the business to strengthen our portfolio and drive future
growth. We expect margins to improve significantly in H2 due to improved
trends in Carex and St.Tropez, the full period effect of price increases
implemented during H1 and more favourable cost phasing. On a statutory basis,
operating profit declined by £3.9 million.
Asia Pacific
H1 FY23 Reported growth/ (decline)
Revenue £102.2m 21.1%
LFL revenue growth 7.5% n/a
Adjusted operating profit £15.4m 41.3%
Margin 15.1% 220bps
Operating profit £15.1m 18.0%
Revenue increased 21.1% as a result of strong LFL growth and favourable FX. On
a LFL basis, revenue grew 7.5% driven by very strong growth in ANZ as a result
of successful Revenue Growth Management activity and share gains, offset by a
softer performance in Indonesia.
Cussons Baby Indonesia declined slightly in the first half due to the
softening of category growth during the period given the increasing levels of
consumer cost inflation. Competition in certain categories also remain
challenging and our focus continues to be growing the higher margin baby
toiletry sub-categories such as oils, lotions and creams.
In our Hygiene category, Morning Fresh continued to perform well, maintaining
market share despite pricing initiatives. Revenue was up strongly driven by
marketing campaigns in Q1 and Q2 and the growth of refills with our Bottle for
Life offering. Radiant gained market share, driven by new product development.
Rafferty's Garden continued its strong performance, growing price and volume
ahead of the category, and with a further acceleration in online sales.
Rafferty's Garden remains the clear market leader, representing almost a third
of the baby food category in Australia.
Imperial Leather performed very strongly driven by our increased focus on
expanding our brands outside of their primary markets.
Adjusted operating margin grew by 220bps as strong revenue growth and margin
initiatives more than offset cost inflation. Statutory operating profit grew
by £2.3 million.
Africa
H1 FY23 Reported growth/ (decline)
Revenue £133.2m 30.3%
LFL revenue growth 15.6% n/a
Adjusted operating profit £15.8m 88.1%
Margin 11.9% 370bps
Operating profit £27.5m 172.3%
LFL revenue growth of 15.6% was driven by further distribution gains and
improvements in price/mix, with multiple price increases during the financial
year. All major brands, including the Portfolio Brands Stella and Canoe,
reported double digit LFL revenue growth. Volumes declined only slightly,
demonstrating the strength of our brands and improved distribution. On a
reported basis, revenue grew by 30.3% driven by favourable FX movements.
In our Hygiene business, Premier saw very strong growth as it continues to
lead its category, while we also relaunched our Flamingo value soap bar with a
new proposition and packaging, targeting the more cost-conscious consumer.
Morning Fresh maintained its market-leading position in the dishwash category
in Nigeria despite significant price increases. Imperial Leather in Kenya grew
strongly, benefiting from new product launches.
Cussons Baby grew strongly, with growth in both price/mix and volume.
Revenue in our Electricals business continued to grow strongly, due to a
series of price increases to offset cost inflation and contributed revenue of
£52.7 million in the period. Gross margins improved as we continue to
prioritise improving the profitability of the business over gaining volume
share.
Adjusted operating margin grew by 370bps. Against a backdrop of very strong
cost inflation, this was achieved through successive price increases,
improving efficiencies, as well as a focus on driving the higher margin parts
of our portfolio. On a statutory basis, operating profit increased by £17.4
million reflecting the profit on further property disposals in Nigeria.
Other financial items
Operating profit
Adjusted operating profit for the Group was £33.2 million, which compares to
£32.9 million in the prior period. Adjusted operating profit margins declined
by 170bps to 9.9%. This was driven primarily by a 270bps reduction in the
gross profit margin which reflects an adverse geographic mix of profits.
Overheads reduced by 50bps as we continue to seek opportunities for
productivity gains. Brand Investment grew versus the prior year in absolute
terms but decreased by 30bps as a percentage of revenue. PZ Wilmar, our Palm
Oil joint venture, reduced the Group's operating margin by 30bps as its profit
declined following the very strong performance of H1 FY22. Finally, we
recognised 50bps of FX and other gains. Operating profit increased 60.7% to
£39.2 million.
Adjusting items
Adjusting items in the period totalled net income of £6.0 million before tax.
This included a net income of £10.9 million from our Nigeria simplification
project mainly relating to £11.7 million from the profit on the disposal of
residential properties. Other adjusting items mainly related to costs
associated with ongoing transformation programmes and included £3.1 million
for the Finance Transformation programme and £1.1 million for the Supply
Chain Transformation programme. See note 4 for further details on adjusting
items.
After accounting for these adjusting items, operating profit for the Group was
£39.2 million which was £14.8 million higher than the prior period.
Net finance income/(costs)
Net finance income in the period was £1.3 million, compared to a cost of
£0.9 million in the prior period. This was driven by several factors,
including higher income on cash deposits, the impact of higher discount rates
on pension interest income and accounting treatment for the RCF refinancing.
Profit before tax was £40.5 million, £17.0 million higher than the prior
period. Adjusted profit before tax was £34.5 million which was £2.5 million
higher than the prior period.
Taxation
The tax charge in the period for continuing operations was £9.2 million
compared to £3.6 million in the prior period. The effective tax rate ('ETR')
on adjusted profit before tax increased to 26.6% (21.6% in the prior period)
primarily due to the change in the geographic mix of profits across the Group.
Profit after tax
Profit for the period from continuing operations was £31.3 million, which
compared to £19.9 million in the prior period. Basic earnings per share was
5.90p, compared to 4.23p in the prior period. Adjusted basic earnings per
share was 5.16p, which compares to 5.64p in the prior period. This 8.5%
reduction is a result of the decline in adjusted operating margin, together
with a higher tax rate and the impact of a higher minority interest charge
associated with the growth in our Nigerian business.
The loss from discontinued operations in the prior period was £0.7 million
and related to settlement of legal claims relating to Minerva, a Greek
subsidiary which was disposed of in September 2019.
Profit for the period was £31.3 million compared to £19.2 million in the
prior period (which included the £0.7 million loss from discontinued
operations described above).
Balance sheet and cash flow
Adjusted net debt as at 3 December 2022 was £35.7 million which compared to
£9.8 million at 31 May 2022. This increase is due to cash outflows related to
the payment of the final FY22 dividend and loans we elected to advance to PZ
Wilmar Limited, one of our joint ventures in Nigeria, which more than offset
the proceeds from the disposal of residential properties in Nigeria and cash
generated from operations.
Total free cash flow was £4.2 million which included a net working capital
outflow as a result of seasonality of trading which increases stock and
receivables, and a decision made to secure raw materials in Nigeria ahead of
future price increases.
Net assets were £430.8 million which compared to £449.3 million at 31 May
2022. The reduction was mainly due to the remeasurement of pension schemes,
currency exchange differences on translation of foreign operations and the
FY22 final dividend partially offset by the profit for the year.
During the period, the Group agreed a new £325 million committed credit
facility incorporating both a term loan and revolving credit facility ('RCF')
structure, with maturity dates of up to November 2028. This replaced the
previous £325 million RCF facility which was due to expire in November 2023.
The facility, which was agreed on attractive commercial terms, includes a
pricing structure linked to the Group's new sustainability framework.
Dividend
The Board has approved an interim dividend maintained in line with that of
previous years of 2.67p. The dividend will be paid on 6 April 2023 to
shareholders on the register at the close of business on 10 March 2023.
Glossary
Term Definition
Adjusted net debt Cash, short-term deposits and current asset investments, less bank overdrafts
and borrowings. Excludes IFRS 16 lease liabilities
B Corp A B Corp is a company that has been certified by the non-profit organisation B
Lab as meeting rigorous standards of environmental, social and governance
performance, accountability and transparency.
Brand Investment An operating cost related to brand marketing (previously 'Media &
Consumer')
EBITDA Earnings before interest, taxes, depreciation and amortization
Employee wellbeing % score based upon a set of questions within our annual survey of employees
ETR Effective tax rate
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') Growth on the prior year at constant currency, excluding 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
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', 'Shoppability' 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
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.
Adjusted profitability measures are reconciled to IFRS results on the face of
the condensed consolidated income statement with details of adjusting items
provided in note 4 to the condensed consolidated financial statements.
Reconciliations between APMs and IFRS reported results are set out below:
Adjusted operating profit and adjusted operating margin
Half year to (restated*) Year to
3 December 2022 Half year to 31 May
27 November 2021 2022
£m £m £m
Group
Operating profit from continuing operations 39.2 24.4 66.6
exclude: adjusting items (6.0) 8.5 1.3
Adjusted operating profit 33.2 32.9 67.9
Revenue 336.9 283.7 592.8
Operating margin 11.6% 8.6% 11.2%
Adjusted operating margin 9.9% 11.6% 11.5%
By segment
Europe & the Americas:
Operating profit from continuing operations 4.1 8.0 22.9
exclude: adjusting items 5.4 11.6 12.1
Adjusted operating profit 9.5 19.6 35.0
Revenue 99.5 95.1 193.0
Operating margin 4.1% 8.4% 11.9%
Adjusted operating margin 9.5% 20.6% 18.1
Asia Pacific:
Operating profit from continuing operations 15.1 12.8 37.0
exclude: adjusting items 0.3 (1.9) (16.1)
Adjusted operating profit 15.4 10.9 20.9
Revenue 102.2 84.4 173.8
Operating margin 14.8% 15.2% 21.3%
Adjusted operating margin 15.1% 12.9% 12.0%
Africa:
Operating profit from continuing operations 27.5 10.1 28.6
exclude: adjusting items (11.7) (1.7) (6.3)
Adjusted operating profit 15.8 8.4 22.3
Revenue 133.2 102.2 222.0
Operating margin 20.6% 9.9% 12.9%
Adjusted operating margin 11.9% 8.2% 10.0%
Central
Operating loss from continuing operations (7.5) (6.5) (21.9)
exclude: adjusting items - 0.5 11.6
Adjusted operating loss (7.5) (6.0) (10.3)
* See note 2 to the condensed consolidated financial statements.
Alternative Performance Measures (continued)
Adjusted profit before taxation
Half year to (restated*) Year to
3 December 2022 Half year to 31 May
27 November 2021 2022
£m £m £m
Profit before taxation from continuing operations 40.5 23.5 65.3
exclude: adjusting items (6.0) 8.5 1.3
Adjusted profit before taxation 34.5 32.0 66.6
* See note 2 to the condensed consolidated financial statements.
Adjusted Earnings Before Interest Depreciation and Amortisation ("Adjusted
EBITDA")
Half year to (restated*) Year to
3 December 2022 Half year to 31 May
27 November 2021 2022
£m £m £m
Profit before taxation from continuing operations 40.5 23.5 65.3
(deduct)/add back: net finance (income)/costs (1.3) 0.9 1.3
add back: depreciation 5.2 6.3 12.8
add back: amortisation 3.1 3.4 6.6
add back: impairment and impairment reversal 0.1 18.0 9.0
47.6 52.1 95.0
exclude: adjusting items** (6.1) (10.5) (7.7)
Adjusted EBITDA 41.5 41.6 87.3
* See note 2 to the condensed consolidated financial statements.
** Excludes adjusting items relating to depreciation, amortisation,
impairments and impairment reversals.
Adjusted earnings per share
Half year to (restated*) Year to
3 December 2022 Half year to 31 May
pence 27 November 2022
2021 pence
pence
Total
Basic earnings per share 5.90 4.06 11.59
exclude: adjusting items (0.74) 1.41 0.69
Adjusted basic earnings per share 5.16 5.47 12.28
Diluted earnings per share 5.84 4.04 11.52
exclude: adjusting items (0.73) 1.40 0.69
Adjusted diluted earnings per share 5.11 5.44 12.21
From continuing operations
Basic earnings per share 5.90 4.23 12.02
exclude: adjusting items (0.74) 1.41 0.69
Adjusted basic earnings per share 5.16 5.64 12.71
Diluted earnings per share 5.84 4.21 11.95
exclude: adjusting items (0.73) 1.40 0.69
Adjusted diluted earnings per share 5.11 5.61 12.64
* See note 2 to the condensed consolidated financial statements.
Alternative Performance Measures (continued)
Adjusted net debt
At (restated*) At
3 December 2022 At 1 June
27 November 2022
2021
£m £m £m
Cash at bank and in hand 118.6 107.9 105.8
Short-term deposits 77.2 1.7 58.0
Overdrafts - (0.1) (0.1)
Cash and cash equivalents 195.8 109.5 163.7
Current asset investments 0.5 0.3 0.5
Non-current borrowings (232.0) (106.0) (174.0)
Adjusted net (debt)/cash and cash equivalents (35.7) 3.8 (9.8)
* See note 2 to the condensed consolidated financial statements.
Free cash flow
Half year to Half year to Year to
3 December 2022 27 November 2021 31 May
2022
£m £m £m
Cash generated from operations 7.0 25.0 66.2
deduct: purchase of property, plant and equipment and software (2.8) (4.7) (8.2)
Free cash flow 4.2 20.3 58.0
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May 2022
27 November 2021
Business performance excluding adjusting items Statutory results for the half year Business performance excluding adjusting items Statutory results for the half year Business performance excluding adjusting items Statutory results for the full year
Adjusting items Adjusting items Adjusting items
(note 4) (note 4) (note 4)
Notes £m £m £m £m £m £m £m £m £m
Continuing operations
Revenue 3 336.9 - 336.9 283.7 - 283.7 592.8 - 592.8
Cost of sales (215.6) - (215.6) (173.8) - (173.8) (365.3) - (365.3)
Gross profit 121.3 - 121.3 109.9 - 109.9 227.5 - 227.5
Selling and distribution costs (55.1) - (55.1) (44.5) - (44.5) (90.3) - (90.3)
Administrative expenses (36.7) 6.0 (30.7) (36.6) (8.5) (45.1) (75.9) (1.3) (77.2)
Share of results of joint ventures 3.7 - 3.7 4.1 - 4.1 6.6 - 6.6
Operating profit 3 33.2 6.0 39.2 32.9 (8.5) 24.4 67.9 (1.3) 66.6
Finance income 4.9 - 4.9 0.7 - 0.7 2.7 - 2.7
Finance costs (3.6) - (3.6) (1.6) - (1.6) (4.0) - (4.0)
Net finance income/(costs) 5 1.3 - 1.3 (0.9) - (0.9) (1.3) - (1.3)
Profit before taxation 34.5 6.0 40.5 32.0 (8.5) 23.5 66.6 (1.3) 65.3
Taxation 7 (9.1) (0.1) (9.2) (6.9) 3.3 (3.6) (13.0) (0.3) (13.3)
Profit for the period/year from continuing operations
25.4 5.9 31.3 25.1 (5.2) 19.9 53.6 (1.6) 52.0
Discontinued operations
Loss from discontinued operations - - - (0.7) - (0.7) (1.8) - (1.8)
Profit for the period/year 25.4 5.9 31.3 24.4 (5.2) 19.2 51.8 (1.6) 50.2
Attributable to:
Owners of the Parent 21.6 3.1 24.7 22.9 (5.9) 17.0 51.4 (2.9) 48.5
Non-controlling interests 3.8 2.8 6.6 1.5 0.7 2.2 0.4 1.3 1.7
25.4 5.9 31.3 24.4 (5.2) 19.2 51.8 (1.6) 50.2
From continuing operations:
Basic EPS (pence) 9 5.16 0.74 5.90 5.64 (1.41) 4.23 12.71 (0.69) 12.02
Diluted EPS (pence) 9 5.11 0.73 5.84 5.61 (1.40) 4.21 12.64 (0.69) 11.95
From continuing and discontinued operations:
Basic EPS (pence) 9 5.16 0.74 5.90 5.47 (1.41) 4.06 12.28 (0.69) 11.59
Diluted EPS (pence) 9 5.11 0.73 5.84 5.44 (1.40) 4.04 12.21 (0.69) 11.52
* Results for the half year to 27 November 2021 have been restated.
Further details are set out in note 2.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May
27 November 2022
2021
Notes £m £m £m
Profit for the period/year 31.3 19.2 50.2
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss
Re-measurement (loss)/gain on post-employment obligations 12 (33.2) 11.8 37.4
Deferred tax credit/(charge) on re-measurement of post-employment benefit 8.1 (2.2) (8.4)
obligations
Total items that will not be reclassified to profit or loss (25.1) 9.6 29.0
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations (10.6) 7.7 21.7
Cash flow hedges - net movement in period/year 0.3 0.7 0.2
Cost of hedging reserve - 0.1 -
Recycle of foreign exchange equity reserves on repayment of quasi-equity loans - 1.5 (1.4)
Deferred tax on repayment of quasi-equity loans - - (1.3)
Recycle of foreign exchange equity reserves on disposals - (0.2) (0.2)
Recycle of equity reserves on disposal of subsidiary - 0.3 0.3
Total items that may be subsequently reclassified to profit or loss (10.3) 10.1 19.3
Other comprehensive (expense)/income for the period/year (35.4) 19.7 48.3
Total comprehensive (expense)/income for the period/year (4.1) 38.9 98.5
Attributable to:
Owners of the Parent (9.7) 35.4 94.9
Non-controlling interests 5.6 3.5 3.6
(4.1) 38.9 98.5
* Results for the half year to 27 November 2021 have been
restated. Further details are set out in note 2.
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited (restated*) Audited
3 December 2022 Unaudited 31 May
27 November 2021 2022
Notes £m £m £m
Assets
Non-current assets
Goodwill and other intangible assets 6 330.6 273.6 333.3
Property, plant and equipment 6 77.0 85.3 82.9
Right-of-use assets 15 14.2 11.3 16.9
Net investments in joint ventures 49.0 40.7 45.4
Deferred taxation assets 4.0 5.9 4.5
Tax receivable - 1.7 1.2
Retirement benefit surplus 12 36.4 45.9 69.3
511.2 464.4 553.5
Current assets
Inventories 130.9 109.2 111.8
Trade and other receivables 127.5 130.1 105.0
Derivative financial assets 13 3.9 1.2 0.7
Current tax receivable 2.5 15.5 2.6
Current asset investments 11 0.5 0.3 0.5
Cash and short-term deposits 11 195.8 109.6 163.8
461.1 365.9 384.4
Assets held for sale 1.6 0.7 3.4
462.7 366.6 387.8
Total assets 973.9 831.0 941.3
Equity and liabilities
Equity
Share capital 4.3 4.3 4.3
Capital redemption reserve 0.7 0.7 0.7
Hedging reserve 0.1 0.4 (0.2)
Currency translation reserve (78.8) (79.7) (69.2)
Other reserves (35.9) (37.1) (37.1)
Retained earnings 509.6 487.2 525.6
Attributable to owners of the Parent 400.0 375.8 424.1
Non-controlling interests 30.8 22.3 25.2
Total equity 430.8 398.1 449.3
Liabilities
Non-current liabilities
Borrowings 11 232.0 106.0 174.0
Other payables 5.2 0.5 4.5
Lease liabilities 15 11.9 7.5 14.0
Deferred taxation liabilities 81.6 71.0 90.7
Retirement and other long-term employee benefit obligations 12 11.9 14.0 13.1
342.6 199.0 296.3
Current liabilities
Borrowings 11 - 0.1 0.1
Trade and other payables 175.2 171.4 163.9
Lease liabilities 15 2.1 3.7 2.9
Dividends payable - 14.3 -
Derivative financial liabilities 13 0.5 1.1 1.6
Current taxation payable 21.2 37.6 21.6
Provisions 1.5 5.7 5.6
200.5 233.9 195.7
Total liabilities 543.1 432.9 492.0
Total equity and liabilities 973.9 831.0 941.3
* Results for the half year to 27 November 2021 have been
restated. Further details are set out in note 2.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Parent
Capital Currency Non
Share redemption Hedging translation Other Retained controlling Total
capital reserve reserve reserve reserves Earnings Total interests equity
£m £m £m £m £m £m £m £m £m
At 1 June 2021 (as reported in 27 November 2021 financial statements) 4.3 0.7 (0.4) (87.4) (39.1) 483.7 361.8 20.0 381.8
Prior year adjustments (note 2) - - - - - (9.1) (9.1) (1.2) (10.3)
At 1 June 2021 (as restated and reported in the 31 May 2022 financial 4.3 0.7 (0.4) (87.4) (39.1) 474.6 352.7 18.8 371.5
statements)
Profit for the period (as previously reported) - - - - - 25.7 25.7 2.2 27.9
Prior period adjustment (note 2) - - - - - (8.7) (8.7) - (8.7)
Profit for the period (as restated) - - - - - 17.0 17.0 2.2 19.2
Other comprehensive income for the period - - 0.8 7.7 - 9.9 18.4 1.3 19.7
Total comprehensive income for the period (as restated) - - 0.8 7.7 - 26.9 35.4 3.5 38.9
Transactions with owners:
Ordinary dividends - - - - - (14.3) (14.3) - (14.3)
Share-based payments - - - - 2.0 - 2.0 - 2.0
Total transactions with owners recognised directly in equity - - - - 2.0 (14.3) (12.3) - (12.3)
At 27 November 2021 (restated)* 4.3 0.7 0.4 (79.7) (37.1) 487.2 375.8 22.3 398.1
At 1 June 2021 (as restated and reported in the 31 May 2022 financial 4.3 0.7 (0.4) (87.4) (39.1) 474.6 352.7 18.8 371.5
statements)
Profit for the year - - - - - 48.5 48.5 1.7 50.2
Other comprehensive income for the year - - 0.2 18.2 - 28.0 46.4 1.9 48.3
Total comprehensive income for the year - - 0.2 18.2 - 76.5 94.9 3.6 98.5
Transactions with owners:
Ordinary dividends - - - - - (25.5) (25.5) - (25.5)
Share-based payments - - - - 2.0 - 2.0 - 2.0
Non-controlling interests dividend paid - - - - - - - (0.5) (0.5)
Sale of non-controlling interests - - - - - - - 3.3 3.3
Total transactions with owners recognised directly in equity - - - - 2.0 (25.5) (23.5) 2.8 (20.7)
At 31 May 2022 4.3 0.7 (0.2) (69.2) (37.1) 525.6 424.1 25.2 449.3
At 1 June 2022 4.3 0.7 (0.2) (69.2) (37.1) 525.6 424.1 25.2 449.3
Profit for the period - - - - - 24.7 24.7 6.6 31.3
Other comprehensive (expense)/income for the period - - 0.3 (9.6) - (25.1) (34.4) (1.0) (35.4)
Total comprehensive (expense)/income for the period - - 0.3 (9.6) - (0.4) (9.7) 5.6 (4.1)
Transactions with owners:
Ordinary dividends - - - - - (15.6) (15.6) - (15.6)
Share-based payments - - - - 1.2 - 1.2 - 1.2
Total transactions with owners recognised directly in equity - - - - 1.2 (15.6) (14.4) - (14.4)
At 3 December 2022 4.3 0.7 0.1 (78.8) (35.9) 509.6 400.0 30.8 430.8
* Results for the half year to 27 November 2021 have been restated. Further
details are set out in note 2.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May
27 November 2021 2022
Notes £m £m £m
Cash flows from operating activities
Cash generated from operations 10 7.0 25.0 66.2
Taxation paid (8.4) (5.9) (12.3)
Interest paid (3.4) (1.4) (3.5)
Net cash (used in)/generated from operating activities (4.8) 17.7 50.4
Cash flows from investing activities
Interest received 4.9 0.7 2.6
Investment income - - 0.1
Purchase of property, plant and equipment and software (2.8) (4.7) (8.2)
Proceeds from sale of property, plant and equipment 13.5 12.6 18.6
Cash flow from disposal of businesses - 6.4 7.2
Resolution of purchase price from disposal of company - - (0.8)
Acquisition of subsidiary - - (33.6)
Loans (advanced to)/repaid by joint ventures (11.4) 1.8 8.4
Net cash generated from/(used in) investing activities 4.2 16.8 (5.7)
Cash flows from financing activities
Dividends paid to non-controlling interests (0.2) - (0.5)
Dividends paid to Company shareholders 8 (15.6) - (25.5)
Proceeds from loans by joint ventures - - 0.6
Repayment of lease liabilities 15 (1.6) (1.9) (4.0)
Proceeds from loan facility 11 263.0 - 56.0
Repayment of loan facility 11 (205.0) (12.0) -
Net cash generated from/(used in) financing activities 40.6 (13.9) 26.6
Net increase in cash and cash equivalents 11 40.0 20.6 71.3
Effect of foreign exchange rates 11 (7.9) 1.9 5.4
Cash and cash equivalents at the beginning of the period/year 11 163.7 87.0 87.0
Cash and cash equivalents at the end of the period/year 11 195.8 109.5 163.7
* Results for the half year to 27 November 2021 have been restated. Further
details are set out in note 2.
Notes to the condensed consolidated financial statements
1. Basis of preparation
The Company is a public limited company incorporated and domiciled in England.
It has a primary listing on the London Stock Exchange. The address of its
registered office is shown on page 36.
The Group reports results as at the Saturday closest to 30 November. The
comparative interim reporting date was previously shown as being 30 November
2021 but has now been more accurately labelled as being 27 November 2021.
Aside from the restatements described in note 2, the results and position of
the Group previously presented remain unchanged, since the amounts previously
presented were at 27 November 2021. Unless otherwise stated H1 FY23 refers to
the period from 1 June 2022 to 3 December 2022 and H1 FY22 refers to the
period from 1 June 2021 to 27 November 2021. These condensed consolidated
interim financial statements for the half year ended 3 December 2022, which
have been reviewed, not audited, have been prepared in accordance with the
Disclosure and Transparency Rules ("DTR") of the Financial Conduct Authority
and in accordance with IAS 34 'Interim Financial Reporting' as adopted by the
UK. The condensed consolidated interim financial statements should be read in
conjunction with the annual financial statements for the year ended 31 May
2022 which have been prepared in accordance with UK-adopted International
Accounting Standards ("IAS") as issued by the International Accounting
Standards Board ("IASB") and interpretations issued by the International
Financial Reporting Standard Interpretations Committee ("IFRIC").
The condensed consolidated interim financial statements for the half year
ended 3 December 2022 do not constitute statutory accounts within the meaning
of section 434 of the Companies Act 2006.
The financial information set out in this statement relating to the year ended
31 May 2022 does not constitute statutory accounts for that year. Full audited
statutory accounts of the Group in respect of that financial year were
approved by the Board of Directors on 28 September 2022 and have been
delivered to the Registrar of Companies. The report of the auditors on these
statutory accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain a statement under section 498 of the Companies
Act 2006.
These condensed consolidated interim financial statements were approved for
issue on 7 February 2023.
Judgements and estimates
The preparation of condensed consolidated interim financial statements
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expense. Actual results may differ from these
estimates.
In preparing these condensed consolidated interim financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the annual consolidated financial statements for the year
ended 31 May 2022 which are described in note 1(d) of the 2022 Annual Report
and Financial Statements with the addition of the following:
Assessment of impairment of goodwill and other indefinite life assets -
Goodwill and brands have all arisen from previous business combinations and
all have indefinite useful lives and, in accordance with IAS 36 'Impairment of
Assets', are subject to annual impairment testing at the year end date, or
more frequent testing if there are indicators of impairment. The method used
for impairment testing is to allocate assets (including goodwill and brands)
to appropriate cash-generating units (CGUs) based on the smallest identifiable
group of assets that generate independent cash inflows, and to estimate the
recoverable amounts of the CGUs as the higher of an asset's fair value less
costs of disposal and its value in use. Value in use is determined using cash
flow projections from approved budgets and plans over a period of five years
which are then extrapolated beyond the five-year period based on estimated
long-term growth rates applicable to the markets and geographies in which the
CGUs operate. The cash flow projections are discounted based on a pre-tax
weighted average cost of capital for comparable companies operating in similar
markets and geographies as the Group adjusted for risks specific to the
particular CGU. During the period, management considered whether there were
any indicators of impairment or impairment reversal which would require a
detailed impairment test to be performed, and concluded that there was an
indicator of impairment in relation to the carrying value of each of the
brands within the Sanctuary Spa CGU and the Childs Farm CGU. As a result, an
impairment test was performed for each CGU, and the estimates used in the
tests are described and set out in note 6.
2. Accounting policies
Going concern basis
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Business
Review. The financial position of the Group and liquidity position are also
described within the Financial Position section of that review.
After making enquiries and having considered the availability of resources,
the Directors consider it appropriate to continue to adopt the going concern
basis in preparing the condensed consolidated interim financial statements.
The accounting policies are consistent with those of the annual financial
statements for the year ended 31 May 2022. Taxes on income in the interim
periods are accrued using the tax rate that would be applicable to the
expected total annual profit or loss before taxation.
The Group has not applied any new standards and amendments in the reporting
period commencing 1 June 2022. Certain new accounting standards and
interpretations have been published that are not mandatory for the current
reporting period and the Group has chosen not to early adopt any of these
where early adoption is permitted. The Group will undertake an assessment of
the impact of these new standards and interpretations in due course.
Restatements
As set out in the 2022 Annual Report and Financial Statements, during the year
ended 31 May 2022 management identified a number of errors relating to prior
periods. Accordingly, prior year adjustments were made which are summarised
below and for which further details are provided in note 1(c) of the 2022
Annual Report and Financial Statements.
Intangible asset impairment
Management reviewed the evidence supporting the Group's judgements around cash
generating units ("CGU") identification and concluded that the Charles
Worthington business should always have been treated as a separate CGU.
Following this determination, management performed an impairment review over
the identifiable assets and liabilities of the Charles Worthington CGU at each
of 31 May 2020 and 31 May 2021. These reviews identified that the carrying
value of the brand within intangible assets should be impaired by £16.9
million at 31 May 2020 (with a related £3.2 million deferred tax credit), and
that £8.3 million of this impairment had reversed at 31 May 2021 (with a
related £1.1 million deferred tax charge).
For the interim financial statements ended 27 November 2021 as at that point,
management had not concluded that the Charles Worthington business should
always have been treated as a separate CGU. If management had done so, it
would have identified an indicator of impairment and subsequently carried out
a full impairment test in line with IAS 36; this would have resulted in an
impairment charge of £11.6 million (with a related £2.9 million deferred tax
credit). This impairment charge has already been recorded within the financial
statements for the year ended 31 May 2022 as the impairment tests were carried
out at that time in relation to the change in the judgements around CGUs.
Indirect tax liability
Management identified an indirect tax liability of a subsidiary which should
have previously been recognised in the financial statements. In line with IAS
37 'Provisions, Contingent Liabilities and Contingent Assets', management
considered it appropriate to recognise a provision of £4.9 million at 31 May
2021 in relation to this liability, with a corresponding current tax
receivable of £1.1 million recognised as a portion of the liability is tax
deductible. A resulting reduction in retained earnings and non-controlling
interest was made for the net value of £3.8 million. The non-controlling
interest in this net adjustment was £1.2 million.
Dividend
Management identified that the liability at 27 November 2021 for the final
dividend totalling £14.3 million for the year ended 31 May 2021 had been
incorrectly derecognised in advance of receipt of the cash by the shareholders
on 30 November 2021. Therefore at 27 November 2021, cash of £14.3 million has
now been recorded, together with a liability to shareholders of the same
amount.
2. Accounting policies (continued)
Restatements (continued)
The impacts of these prior year adjustments on the previously reported
condensed consolidated balance sheet, condensed consolidated income statement
and condensed consolidated cash flow statement at and for the half year ended
27 November 2021 is set out in the following table. The impact on the
consolidated balance sheet at 31 May 2021 was reported in the 2022 Annual
Report and Financial Statements.
relating to prior to 1 June 2021 relating to half year ended
27 November 2021
As previously reported Charles Worthington impairment and reversal Indirect tax liability Total Charles Worthington impairment Dividend As
restated
£m FY20 FY21 £m £m £m £m £m
£m £m
Consolidated balance sheet
Goodwill and other intangible assets 293.8 (16.9) 8.3 - (8.6) (11.6) - 273.6
Current tax receivable 14.4 - - 1.1 1.1 - - 15.5
Retained earnings 505.0 (13.7) 7.2 (2.6) (9.1) (8.7) - 487.2
Non-controlling interests 23.5 - - (1.2) (1.2) - - 22.3
Deferred taxation liabilities (76.0) 3.2 (1.1) - 2.1 2.9 - (71.0)
Provisions (0.8) - - (4.9) (4.9) - - (5.7)
Dividends payable - - - - - - (14.3) (14.3)
Cash and short-term deposits 95.3 - - - - - 14.3 109.6
Consolidated income statement
Administrative expenses (33.5) - - - - (11.6) - (45.1)
Operating profit 36.0 - - - - (11.6) - 24.4
Profit before taxation 35.1 - - - - (11.6) - 23.5
Taxation (6.5) - - - - 2.9 - (3.6)
Profit for the period from continuing operations 28.6 - - - - (8.7) - 19.9
Profit for the period 27.9 - - - - (8.7) - 19.2
Attributable to:
Owners of the Parent 25.7 - - - - (8.7) - 17.0
Earnings per share - basic:
- total 6.14 - - - - (2.08) - 4.06
- continuing operations 6.31 - - - - (2.08) - 4.23
Earnings per share - diluted:
- total 6.11 - - - - (2.07) - 4.04
- continuing operations 6.28 - - - - (2.07) - 4.21
Consolidated cash flow statement
Dividends paid to Company shareholders (14.3) - - - - - 14.3 -
Net cash used financing activities (28.2) - - - - - 14.3 (13.9)
Net increase in cash and cash equivalents 6.3 - - - - - 14.3 20.6
Cash and cash equivalents at the end of the period 95.2 - - - - - 14.3 109.5
3. Segmental analysis
The segmental information presented in this note is consistent with management
reporting provided to the Executive Leadership Team ("ELT"), which is the
Chief Operating Decision Maker ("CODM"). The CODM reviews the Group's internal
reporting in order to assess performance and allocate resources and has
determined the operating segments based on these reports which include an
allocation of central revenue and costs as appropriate. The CODM considers the
business from a geographic perspective, with Europe & the Americas, Asia
Pacific, Africa and Central being the operating segments.
In accordance with IFRS 8 'Operating Segments', the ELT has identified these
reportable segments which aggregate the Group's trading entities by geographic
location as these entities are considered to have similar economic
characteristics. The number of countries that the Group operates in within
these segments is limited to no more than five countries per segment, which
share similar customer bases and encounter comparable micro environmental
challenges.
The CODM assesses the performance based on operating profit before any
adjusting items. Revenues and operating profit of the Europe & the
Americas and Asia Pacific segments arise from the sale of Hygiene, Beauty and
Baby products. Revenue and operating profit from the Africa segment also arise
from the sale of Hygiene, Beauty and Baby products as well as Electrical
products. The Central segment refers to the activities in terms of revenue of
our in-house fragrance house and in terms of cost of expenditure associated
with the Global headquarters and above market functions net of recharges to
our regions. The prices between Group companies for intra-group sales of
materials, manufactured goods, and charges for franchise fees and royalties,
are on an arm's length basis.
Reporting used by the CODM to assess performance does contain information
about brand specific performance, however global segmentation between the
portfolio of brands is not part of the regular internally reported financial
information.
Business segments
Half year to 3 December 2022 Europe & Asia Elimin-ations
the Americas Pacific Africa Central £m Total
£m £m £m £m £m
Gross segment revenue 101.9 105.7 133.2 44.9 (48.8) 336.9
Inter segment revenue (2.4) (3.5) - (42.9) 48.8 -
Revenue 99.5 102.2 133.2 2.0 - 336.9
Segmental operating profit before adjusting items and share of results of 9.5 15.4 12.1 - 29.5
joint ventures
(7.5)
Share of results of joint ventures - - 3.7 - - 3.7
Segmental operating profit before adjusting items 9.5 15.4 15.8 (7.5) - 33.2
Adjusting Items (5.4) (0.3) 11.7 - - 6.0
Segmental operating profit 4.1 15.1 27.5 (7.5) - 39.2
Finance income 4.9
Finance cost (3.6)
Profit before taxation 40.5
Half year to 27 November 2021 Europe & Asia Elimin-ations
(restated - see note 2) the Americas Pacific Africa Central £m Total
£m £m £m £m £m
Gross segment revenue 97.0 86.8 102.2 40.5 (42.8) 283.7
Inter segment revenue (1.9) (2.4) - (38.5) 42.8 -
Revenue 95.1 84.4 102.2 2.0 - 283.7
Segmental operating profit before adjusting items and share of results of 19.6 10.9 4.3 - 28.8
joint ventures
(6.0)
Share of results of joint ventures - - 4.1 - - 4.1
Segmental operating profit before adjusting items 19.6 10.9 8.4 (6.0) - 32.9
Adjusting Items (11.6) 1.9 1.7 (0.5) - (8.5)
Segmental operating profit 8.0 12.8 10.1 (6.5) - 24.4
Finance income 0.7
Finance cost (1.6)
Profit before taxation 23.5
3. Segmental analysis (continued)
Year to 31 May 2022 Europe & Asia Elimin-ations
the Americas Pacific Africa Central £m Total
£m £m £m £m £m
Gross segment revenue 196.3 179.2 222.0 77.3 (82.0) 592.8
Inter segment revenue (3.3) (5.4) - (73.3) 82.0 -
Revenue 193.0 173.8 222.0 4.0 - 592.8
Segmental operating profit before adjusting items and share of results of 35.0 20.9 15.7 - 61.3
joint ventures
(10.3)
Share of results of joint ventures - - 6.6 - - 6.6
Segmental operating profit before adjusting items 35.0 20.9 22.3 (10.3) - 67.9
Adjusting Items (12.1) 16.1 6.3 (11.6) - (1.3)
Segmental operating profit 22.9 37.0 28.6 (21.9) - 66.6
Finance income 2.7
Finance cost (4.0)
Profit before taxation 65.3
The Group analyses its net revenue by the following categories:
Unaudited Unaudited Audited
Half year to Half year to Year to
3 December 2022 27 November 2021 31 May
2022
£m £m £m
Hygiene 174.0 147.4 305.9
Baby 66.1 50.1 103.4
Beauty 40.2 38.6 80.9
Electricals 52.7 42.8 91.5
Other 3.9 4.8 11.1
336.9 283.7 592.8
4. Adjusting items
Adjusting items income/(expense), all of which were within continuing
operations, comprised:
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May
£m 27 November 2021 2022
£m £m
Nigeria Simplification 10.9 3.8 7.8
HR Transformation (0.5) - (2.9)
Finance Transformation (3.1) - (0.7)
Supply Chain Transformation (1.1) - (0.7)
Childs Farm acquisition (0.2) - (1.4)
Compensation from Australian Competition & Consumer Commission - 1.5 1.5
Profit on disposal of five:am - 0.8 0.7
Derecognition of capitalized costs related to cloud computing arrangements - (1.5) (1.0)
Intangible asset impairment net of impairment reversal - (11.6) (3.1)
Recycling of foreign exchange on quasi-equity loans - (1.5) (1.5)
Adjusting items before taxation 6.0 (8.5) (1.3)
Taxation (0.1) 3.3 (0.3)
Adjusting items after taxation 5.9 (5.2) (1.6)
* See note 2.
4. Adjusting items (continued)
A description of the principal adjusting items is provided below:
Nigeria Simplification - in the half year to 3 December 2022, comprises £11.7
million from the profit on disposal of a number of residential properties
(half year to 27 November 2021: £11.2 million profit; year to 31 May 2022:
£15.9 million profit), and other costs of £0.8 million (half year to 27
November 2021: £7.4 million; year to 31 May 2022: £8.1 million profit)
which, in the period, relate to consultancy costs related to the
simplification programme.
HR Transformation - the programme centres around investment in a new people
system designed to enhance ways of working, build organisational capability
and underpin our new culture, reduce organisational risk and embed better
controls and drive process efficiency. This two-year programme of change is
split into two phases, the latter being delivered in the current financial
year, which will enable PZ Cussons to transform and realise all the benefits.
The programme is expected to complete within this financial year with total
expected costs in the year of approximately £1 million.
Finance Transformation - this project is a three-year programme of change
covering investment in a future finance operating model and improving
capability, processes and controls. As well as ensuring we are ready for
compliance deadlines with future corporate reform in Nigeria and the UK (ICFR
or "UK SOx" as part of the proposed BEIS corporate reform), it will also
improve the overall control environment at PZC, with the right set of
processes and systems and a strengthened financial control team. It will
deliver an optimal Finance Shared Service Centre footprint, and address the
legacy finance process and systems issues associated with our SAP ERP system.
Total costs of approximately £9 million are expected to be incurred in this
financial year, and the total programme is expected to incur up to a further
£5 million in the following financial year.
Supply Chain Transformation - this multi-year programme is designed to respond
to the longer-term business strategy of the organisation, its objectives being
to align and improve supply chain capabilities and drive activities that will
dramatically reduce business complexity. It focuses on leading brands for
priority markets and outsourcing manufacturing that is no longer economically
viable. It enhances capabilities where there is scale and strategic advantage
in terms of formulation or manufacturing or where there are geographical
benefits. Total costs of approximately £5 million are expected to be incurred
in this financial year with a total programme spend, including capital
expenditure, of approximately £25 million over the 5 year programme
lifecycle.
Childs Farm Acquisition - in March 2022, in the previous financial year, the
Group acquired Childs Farm. Related to the acquisition, the Group has incurred
legal and advisory fees which were reported in the previous financial year and
has additionally further incurred costs related to the integration of the
business into the Group. Total costs of approximately £0.5 million are
expected to be incurred in this financial year.
The following items relate solely to the previous financial year:
Compensation from Australian Competition & Consumer Commission - being a
receipt in the prior period from the Australian Competition & Consumer
Commission as compensation towards legal costs incurred by the Group in a
successful defence of a legal case related to competition in the laundry
market in Australia dating from 2008-2009.
Profit on disposal of five:am - on 4 June 2021, the Group completed the sale
of the assets associated with five:am, which was the Group's yoghurt business
in Australia, for £7.2 million. The £0.8 million pre-tax profit recognised
on disposal was net of £0.4 million of accumulated foreign exchange losses
recycled from equity. On a post-tax basis the profit was £2.5 million which
included the release of a £1.2 million deferred tax liability in relation to
the disposed brand.
Derecognition of capitalised costs related to cloud computing arrangements -
following the April 2021 IFRIC agenda decision in relation to this matter, the
Group reviewed its costs capitalised in respect of cloud computing
arrangements and determined that they did not meet the criteria for
capitalisation, and accordingly derecognised and expensed these.
Intangible asset impairment net of impairment reversal - comprises an £11.6
million impairment of the Charles Worthington brand and an £8.5 million
reversal of a prior period impairment of the Rafferty's Garden brand, the
latter resulting from a review of future growth assumptions used in the annual
impairment test.
5. Net finance income/(costs)
Unaudited Unaudited Audited
Half year to Half year to Year to
3 December 2022 27 November 2021 31 May
2022
£m £m £m
Interest receivable on cash deposits 3.4 0.3 1.7
Interest receivable on loans to joint ventures 0.4 0.2 0.4
Interest receivable on defined benefit pension scheme 1.1 0.2 0.6
Finance income 4.9 0.7 2.7
Interest payable on bank loans and overdrafts (3.0) (0.9) (2.5)
Interest payable to external third parties (0.2) (0.2) -
Interest payable on defined benefit pension scheme - - (0.6)
Interest expense on lease liabilities (0.2) (0.2) (0.5)
Amortisation of financing fees (0.2) (0.3) (0.4)
Finance costs (3.6) (1.6) (4.0)
Net finance income/(costs) 1.3 (0.9) (1.3)
6. Goodwill and other intangibles assets and property, plant and
equipment
(restated*) Property,
Goodwill and other plant and equipment
intangible
assets
£m £m
At 1 June 2021 288.9 91.5
Additions 1.3 3.4
Disposals - (1.5)
Transfer between asset classification 0.1 (0.1)
Depreciation - (4.6)
Amortisation (3.4) -
Impairment (11.6) (6.4)
Derecognition of capitalised costs related to cloud computing arrangements (1.5) -
(note 4)
Currency retranslation (0.2) 3.0
At 27 November 2021 273.6 85.3
At 1 June 2022 333.3 82.9
Additions 1.1 1.7
Disposals - (1.2)
Transfers between asset classification (0.6) 0.6
Depreciation - (3.8)
Amortisation (3.1) -
Impairment (0.1) -
Currency retranslation - (3.2)
At 3 December 2022 330.6 77.0
* See note 2.
Goodwill and other intangible assets comprise goodwill of £60.3 million (31
May 2022: £60.4 million), software of £24.5 million (31 May 2022: £27.1
million), the majority of which relates to the implementation and associated
costs of the SAP project, and brands of £245.8 million (31 May 2022: £245.8
million).
6. Goodwill and other intangibles assets and property, plant and
equipment (continued)
Goodwill and brands have all arisen from previous business combinations and
all have indefinite useful lives and, in accordance with IAS 36 'Impairment of
Assets', are subject to annual impairment testing at the year end date, or
more frequent testing if there are indicators of impairment. The method used
for impairment testing is to allocate assets (including goodwill and brands)
to appropriate cash-generating units (CGUs) based on the smallest identifiable
group of assets that generate independent cash inflows, and to estimate the
recoverable amounts of the CGUs as the higher of an asset's fair value less
costs of disposal and its value in use. Value in use is determined using cash
flow projections from approved budgets and plans over a period of five years
which are then extrapolated beyond the five-year period based on estimated
long-term growth rates applicable to the markets and geographies in which the
CGUs operate. The cash flow projections are discounted based on a pre-tax
weighted average cost of capital for comparable companies operating in similar
markets and geographies as the Group adjusted for risks specific to the
particular CGU.
The Group considered whether there were any indicators of impairment or
impairment reversal during the period which would require a detailed
impairment test to be performed, and management concluded that there was an
indicator of impairment in relation to the carrying value of each of the
brands within the Sanctuary Spa CGU and the Childs Farm CGU. The significant
decline in the washing and bathing category exacerbated by the recent onset of
the cost of living crisis was determined to be the indicator of impairment in
each case, and in addition for Sanctuary Spa, the impact of adverse foreign
currency exchange rates on margins was also determined to be a factor.. As a
result, an impairment test was performed for each CGU using management's best
estimate of future performance and using the board approved five year plan.
For the Sanctuary Spa CGU, where the carrying value of the brand at period end
was £75.4 million. The key assumptions used in the projections covering the
five year period of the approved budgets and plans related to revenue and
gross margin growth, and beyond this period, assumed an annual long-term
growth rate of 2.0%. A 9.7% pre-tax discount rate was applied to the
projections. The value in use amount exceeded the carrying amount of the CGU,
and further, management did not identify any reasonable possible changes in
the key assumptions which would cause the carrying amount to exceed its
recoverable amount. Management therefore concluded that no impairment was
required at the balance sheet date.
For the Childs Farm CGU, where the carrying value of the brand at period end
was £35.5 million and the allocated goodwill was £16.8 million. For the year
ended 31 May 2022 the recoverable amount was determined on the basis of fair
value less costs of disposal due to the proximity of the acquisition to the
year end. For the impairment test for this period, the recoverable amount was
calculated as the value of use using cash flow projections. The key
assumptions used in the projections covering the five year period of the
approved budgets and plans related to revenue growth in the UK and new
international markets and improving cost to revenue ratios for overheads and
marketing costs, and beyond this period, assumed an annual long-term growth
rate of 2.0%. A 10.0% pre-tax discount rate was applied. The revenue growth
recognises that this brand is highly complementary to the Group's strategic
focus and will benefit from leveraging the Group's brand building capabilities
to improve its UK leadership position while seeking to also capture its
significant international potential. The value in use amount exceeded the
carrying amount of the CGU, and further, management did not identify any
reasonable possible changes in the key assumptions which would cause the
carrying amount to exceed its recoverable amount. Management therefore
concluded that no impairment was required at the balance sheet date.
Capital commitments
At 3 December 2022, the Group had entered into commitments for the acquisition
of property, plant and equipment amounting to £0.9 million (27 November 2021:
£1 million). At 3 December 2022, the Group's share in the capital commitments
of joint ventures was £nil (27 November 2021: £nil).
7. Taxation
The taxation expense in relation to continuing operations was:
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May
27 November 2021 2022
£m £m £m
United Kingdom (0.2) (0.2) 1.5
Overseas 9.4 3.8 11.8
9.2 3.6 13.3
* See note 2.
Income tax expense is recognised based on management's best estimate of the
annual effective tax rate ("ETR") expected for the full financial year. The
estimated annual ETR for the year to 31 May 2023 is 22.7% (half year to 27
November 2021: actual ETR including discontinued operations 15.8%; year to 31
May 2022: actual ETR including discontinued operations 20.8%). On an adjusted
basis, the estimated annual ETR is 26.6% (half year to 27 November 2021:
21.6%; year to 31 May 2022: actual ETR 19.5%).
The calculation of the Group's total tax charge necessarily involves a degree
of estimation and judgement in respect of certain items whose tax treatment
cannot be finally determined until resolution has been reached with the
relevant tax authority or, as appropriate, through a formal legal process. At
3 December 2022, the Group had a provision of £26.5 million and contingent
liabilities of £8.7 million in respect of such uncertain tax positions (31
May 2022: £31.0 million and £8.9 million respectively), which are in
relation to claims and assessments. Some of these assessments take place in
overseas markets where there is a history of large claims being received, but
which are considered to have little or no basis, and ultimately result in
immaterial cash outflows. In relation to the contingent liabilities, whilst
the Group considers that there is a low possibility of any material outflow as
a result of these claims, they have been disclosed as such in accordance with
IAS 37 'Provisions, Contingent Liabilities and Contingent Assets'.
8. Dividends
An interim dividend of 2.67p per share for the half year to 3 December 2022
(2021: 2.67p) has been declared totalling £11.2 million (2021: £11.2
million) and is payable on 6 April 2023 to shareholders on the register at the
close of business on 10 March 2023. This interim dividend has not been
recognised in this half yearly report as it was declared after the end of the
reporting period.
The proposed final dividend for the year ended 31 May 2022 of 3.73p per share,
totalling £15.6 million, was approved by shareholders at the Annual General
Meeting of the Company and paid on 30 November 2022.
9. Earnings per share
Basic earnings per share and diluted earnings per share are calculated by
dividing profit for the period attributable to owners of the Parent by the
following weighted average number of shares in issue:
Unaudited Unaudited Audited
3 December 2022 27 November 31 May
Number 2021 2022
000
Number Number
000
000
Basic weighted average 418,577 418,456 418,476
Diluted weighted average 423,008 420,456 420,841
9. Earnings per share (continued)
The difference between the average number of Ordinary Shares and the basic
weighted average number of Ordinary Shares represents the shares held by the
Employee Share Option Trust, whilst the difference between the basic and
diluted weighted average number of shares represents the dilutive effect of
the Deferred Annual Share Bonus Scheme, Executive Share Option Schemes and the
Performance Share Plan (together the 'share incentive plans'). The average
number of shares is reconciled to the basic and diluted weighted average
number of shares below:
Unaudited Unaudited Audited
3 December 2022 27 November 31 May
Number 2021 2022
000
Number Number
000
000
Average number of ordinary shares in issue during the period/year 428,725 428,725 428,725
less: weighted average number of shares held by Employee Share Option Trust (10,148) (10,269) (10,249)
Basic weighted average number of shares in issue during the period/year 418,577 418,456 418,476
Dilutive effect of share incentive plans 4,431 2,000 2,365
Diluted weighted average number of shares in issue during the period/year 423,008 420,456 420,841
Total earnings per share
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May
£m 27 November 2022
2021 £m
£m
Profit after tax attributable to owners of the Parent 24.7 17.0 48.5
Adjusting items after taxation, attributable to owners of the Parent (3.1) 5.9 2.9
Adjusted profit after tax attributable to owners of the Parent 21.6 22.9 51.4
pence pence pence
Basic earnings per share 5.90 4.06 11.59
Impact of adjusting items (0.74) 1.41 0.69
Adjusted basic earnings per share 5.16 5.47 12.28
Diluted earnings per share 5.84 4.04 11.52
Impact of adjusting items (0.73) 1.40 0.69
Adjusted diluted earnings per share 5.11 5.44 12.21
* See note 2.
From continuing operations
Unaudited (restated*) Audited
Half year to Unaudited Year to
3 December 2022 Half year to 31 May
£m 27 November 2022
2021 £m
£m
Profit after tax from continuing operations attributable to owners of the 24.7 17.7 50.3
Parent
Adjusting items after taxation, attributable to owners of the Parent (3.1) 5.9 2.9
Adjusted profit after tax attributable to owners of the Parent 21.6 23.6 53.2
pence pence pence
Basic earnings per share 5.90 4.23 12.02
Impact of adjusting items (0.74) 1.41 0.69
Adjusted basic earnings per share 5.16 5.64 12.71
Diluted earnings per share 5.84 4.21 11.95
Impact of adjusting items (0.73) 1.40 0.69
Adjusted diluted earnings per share 5.11 5.61 12.64
* See note 2.
9. Earnings per share (continued)
From discontinued operations
Unaudited Unaudited Audited
Half year to Half year to Year to
3 December 2022 27 November 31 May
£m 2021 2022
£m £m
Loss after tax from discontinued operations attributable to owners of the - (0.7) (1.8)
Parent
Adjusting items after taxation, attributable to owners of the Parent - - -
Adjusted loss after tax attributable to owners of the Parent - (0.7) (1.8)
pence pence pence
Basic loss per share - (0.17) (0.43)
Impact of adjusting items - - -
Adjusted basic loss per share - (0.17) (0.43)
Diluted loss per share - (0.17) (0.43)
Impact of adjusting items - - -
Adjusted diluted loss per share - (0.17) (0.43)
10. Reconciliation of profit before taxation to cash generated from
operations
Unaudited (restated*) Audited
Half year to Unaudited Half year to Year to
3 December 2022 27 November 2021 31 May
2022
£m £m £m
Profit before taxation from continuing operations 40.5 23.5 65.3
Loss before taxation from discontinued operations - (0.7) (1.7)
Profit before taxation 40.5 22.8 63.6
(Deduct)/add back: net finance (income)/costs (note 5) (1.3) 0.9 1.3
Operating profit 39.2 23.7 64.9
Depreciation (notes 6 and 15) 5.2 6.3 12.8
Amortisation (note 6) 3.1 3.4 6.6
Impairment of tangible and intangible assets 0.1 18.0 17.5
Impairment reversal on intangible assets reclassified as held for sale - - (8.5)
Profit on sale of assets (11.7) (11.1) (14.0)
Profit on disposal of businesses - (1.7) (1.7)
Derecognition of capitalised costs related to cloud computing arrangements - 1.5 1.0
Other recycling of foreign exchange losses - 1.5 1.4
Difference between pension charge and cash contributions (0.3) 0.1 1.1
Share-based payment charges 1.2 2.0 1.9
Share of results from joint ventures (3.7) (4.1) (6.6)
Operating cash flows before movements in working capital 33.1 39.6 76.4
Movements in working capital:
Inventories (23.5) (14.8) (14.5)
Trade and other receivables (13.9) (16.6) 4.0
Trade and other payables 15.8 16.8 0.4
Provisions (4.5) - (0.1)
Cash generated from operations 7.0 25.0 66.2
* See note 2.
11. Net debt reconciliation
Group net debt, which is an alternative performance measure, comprises the
following:
Audited Unaudited Unaudited Unaudited Unaudited
At 1 June 2022 Cash flow Foreign exchange Other* At 3 December 2022
movements
£m £m £m £m £m
Cash at bank and in hand 105.8 17.5 (4.7) - 118.6
Short term deposits 58.0 22.4 (3.2) - 77.2
Overdrafts (0.1) 0.1 - - -
Cash and cash equivalents 163.7 40.0 (7.9) - 195.8
Current asset investments 0.5 - - - 0.5
Non-current borrowings (174.0) (58.0) - - (232.0)
Adjusted net debt (9.8) (18.0) (7.9) - (35.7)
Lease liabilities (16.9) 1.6 - 1.3 (14.0)
Net debt (26.7) (16.4) (7.9) 1.3 (49.7)
* Other includes the derecognition of lease liabilities offset by
lease addition and an increase in the lease liability arising from the
unwinding of the interest element.
During the period the Group agreed a new £325 million committed credit
facility which is available for general corporate purposes. The credit
facility incorporates both a term loan and revolving credit facility ("RCF")
structure, with maturity dates of up to November 2028, and replaced the
previous £325 million RCF facility which was due to expire in November 2023.
At 3 December 2022, this facility was £232 million drawn (31 May 2022: £174
million).
In addition, the Group retains other unsecured and uncommitted facilities that
are primarily used for trade related activities. At 3 December 2022, these
amounted to £267 million (31 May 2022: £252.3 million) of which £69.1
million, or 25.9% were utilised (31 May 2022: £53.8 million or 21.3%).
Overdrafts do not form part of the Group's main borrowing facility and only
arise as part of the Group's banking arrangements with key banking partners.
12. Retirement benefits
The Group operates retirement benefit schemes for its UK and certain overseas
subsidiaries. These obligations have been measured in accordance with IAS 19
'Employee Benefits (revised)' and are as follows:
Unaudited Unaudited Audited
3 December 2022 27 November 2021 31 May
2022
£m £m £m
UK schemes in surplus 83.9 104.4 128.1
Restriction due to asset ceiling (47.5) (58.5) (58.8)
36.4 45.9 69.3
UK schemes in deficit (3.1) (4.7) (3.5)
Net UK position 33.3 41.2 65.8
Overseas schemes (8.8) (9.3) (9.6)
24.5 31.9 56.2
The Group has four main defined benefit schemes which are based and
administered in the UK and are closed to future accrual and new entrants.
12. Retirement benefits (continued)
The key financial assumptions (applicable to all UK schemes) applied in the
actuarial review of the pension schemes have been reviewed in the preparation
of these interim condensed consolidated financial statements and amended to
reflect changes in market conditions where appropriate from those applied at
31 May 2022. The key assumptions applied were:
Unaudited Unaudited Audited
Half year to Half year to Year to
3 December 2022 27 November 2021 31 May
2022
% per annum % per annum % per
annum
Rate of increase in retirement benefits in payment 2.80% 3.35% 2.75%
Discount rate 4.45% 1.60% 3.50%
Inflation assumption (RPI) 2.95% 3.50% 3.15%
The movement in the retirement benefit net surplus during the period for the
UK schemes is as follows:
Unaudited Unaudited
3 December 2022 27 November 2021
£m £m
At 1 June 65.8 29.1
Net pension interest income 1.1 0.2
Administration expenses paid by the schemes (0.5) -
Employer direct benefit payments 0.1 0.1
Remeasurement gain/(loss) due to changes in assumptions and 17.4 (28.5)
experience adjustments
(Loss)/gain on scheme assets (excluding interest income) (62.9) 44.6
Changes in asset ceiling 12.3 (4.3)
At end of period 33.3 41.2
13. Financial risk management and financial instruments
The Group's operations expose it to a variety of financial risks including
foreign currency risk, credit risk, liquidity risk and interest rate risk. The
Group's treasury policy addresses issues of liquidity, funding and investment
as well as currency, credit, liquidity and interest rate risks.
The condensed consolidated interim financial statements do not include all the
financial risk management information and disclosures required in the annual
financial statements. This information and related disclosures are presented
in the Group's annual financial statements at 31 May 2022. There have been no
significant changes to risk management policies or processes since the year
end.
The Group holds a number of financial instruments that are held at fair value
within the condensed consolidated interim financial statements. In deriving
the fair value, the derivative financial instruments are classified as level
1, level 2 or level 3 dependent on the valuation method applied in determining
their fair value.
The different levels are defined as follows:
Level
1 Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
2 Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (prices) or indirectly (derived
from prices).
3 Inputs for the assets and liabilities that are not based on observable market
data (unobservable inputs).
13. Financial risk management and financial instruments (continued)
The financial instruments held at fair value by the Group relate to foreign
currency forward contracts used as derivatives for hedging. For both the half
years ended 3 December 2022 and 27 November 2021, and the year ended 31 May
2022 the assets and liabilities arising from foreign currency forward
contracts have been classified as level 2. The fair value of these instruments
at each of the period ends was:
Unaudited Unaudited Audited
At At At
3 December 2022 27 November 2021 31 May
2022
£m £m £m
Assets
Foreign currency forward contracts 3.9 1.2 0.7
Liabilities
Foreign currency forward contracts 0.5 1.1 1.6
There have been no transfers between level 1 and 2 in any period.
The fair value of the following financial assets and liabilities approximates
to their carrying amount:
· Trade receivables and other receivables
· Cash and cash equivalents
· Trade and other payables
· Borrowings
14. Related party disclosures
PZ Wilmar Limited
Certain Group subsidiary companies enter into related party transactions with
PZ Wilmar Limited, a joint venture interest which was set up under the terms
of a joint venture agreement with Wilmar International Limited. Set out below
are details of related party transactions during the period with PZ Wilmar
Limited as well as balances at 3 December 2022:
- During the period, interest bearing loans amounting to £11.4 million
were advanced to the PZ Wilmar Limited. These loans are repayable on demand
and not secured. At 3 December 2022, the outstanding loan balance receivable
in relation to these interest bearing loans was £11.0 million (31 May 2022:
£nil; 27 November 2021: £7.2 million).
- At 3 December 2022, outstanding non-interest bearing loans receivable
from PZ Wilmar Limited amounted to £40.6 million (31 May 2022: 39.6 million;
27 November 2021: £37.5 million). These receivables relate to long term loan
investments that have been made by both joint venture partners and are
presented as part of the Group's net investment in its joint venture. These
loans are repayable following a notice period of 12 months and are not
secured.
- At 3 December 2022, the outstanding trade receivable balance due from
PZ Wilmar Limited was £1.3 million (31 May 2022: £1.7 million; 27 November
2021: £2.2 million).
All trading balances are settled in cash. There were no provisions for
doubtful related party receivables at 3 December 2022 (31 May 2022: £nil; 27
November 2021: £nil) and no charge to the income statement in respect of
doubtful related party receivables (half year to 27 November 2021: £nil).
15. IFRS 16 'Leases'
The Group has lease contracts for various items of property, motor vehicles
and other equipment used in its operations. Leases of property generally have
lease terms between 3 and 12 years, while motor vehicles and other equipment
generally have lease terms between 1 and 4 years.
The Group also has certain leases of vehicles with lease terms of 12 months or
less and leases of equipment with low-value. The Group applies the 'short-term
lease' and 'lease of low-value assets' recognition exemptions for these
leases.
Set out below are the carrying amounts of right-of-use assets recognised and
the movements during the period:
Land & buildings Motor vehicles Other equipment Total
£m £m £m £m
At 1 June 2022 13.6 2.3 1.0 16.9
Additions 0.7 - - 0.7
Depreciation (1.2) (0.1) (0.1) (1.4)
Derecognition of right-of-use assets (1.6) - (0.3) (1.9)
Currency translation - (0.1) - (0.1)
At 3 December 2022 11.5 2.1 0.6 14.2
Set out below are the carrying amounts of lease liabilities and the movements
during the period:
Lease liability £m
At 1 June 2022 16.9
Additions 0.7
Accretion of interest 0.2
Payments (1.6)
Derecognition of lease liability (2.2)
At 3 December 2022 14.0
Classified as:
Current liabilities 2.1
Non-current liabilities 11.9
Total lease liabilities 14.0
The following are the amounts recognised in profit or loss:
Unaudited Unaudited
Half year to Half year to
3 December 2022 27 November 2021
£m
£m
Depreciation expense of right-of-use assets 1.4 1.7
Interest expense on lease liabilities 0.2 0.2
Expense relating to short-term or low-value assets 0.1 0.1
Total amount recognised in profit or loss 1.7 2.0
16. Seasonality
Certain business units have a degree of seasonality with the biggest factors
being the weather and Christmas. However, no individual reporting segment is
seasonal as a whole and therefore no further analysis is provided.
17. Principal risks and uncertainties
PZ Cussons has over 130 years of trading history with a long standing
tradition of sustainable growth in our key regions of Europe, Africa and Asia.
Our in-depth local understanding, strong brand position and robust
infrastructure within these markets, allied to a strong Group balance sheet,
enable us to withstand short to medium-term political and financial
instabilities that may adversely impact the Group.
The Group's risk management framework is explained on page 84 of our 2022
Annual Report and Financial Statements which is available on our website at
www.pzcussons.com (http://www.pzcussons.com) . The Board assumes overall
accountability for the management of risk whilst the Audit & Risk
Committee continues to monitor and review the effectiveness of the Group's
risk management and internal control systems. The Executive Leadership Team
ensures that the risk management framework is embedded and operates throughout
the Group and regularly reviews both the regional and consolidated risk
registers, verifying appropriate mitigation activities are operating
effectively.
The identified principal risks are considered unchanged from those outlined on
pages 86 to 93 of our 2022 Annual Report and Financial Statements. These are:
consumer, customer and economic trends; talent retention and development; IT
and information security; sustainability and environment; business
transformation; health & safety; supply chain and logistics; legal and
regulatory compliance; financial controls (treasury and tax); and pandemic.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that these condensed consolidated interim financial
statements have been prepared in accordance with UK-adopted International
Accounting Standard 34, 'Interim Financial Reporting', and that the interim
management report includes a fair review of the information required by DTR
4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first half year and their impact on the condensed set of financial statements,
and a description of the principal risks and uncertainties for the remaining
period of the financial year; and
· material related-party transactions in the first half year and
any material changes in the related-party transactions described in the last
annual report.
The Directors of PZ Cussons plc are listed on page 36. A list of current
Directors is maintained on the PZ Cussons plc website.
By order of the Board
Mr K Massie
Company Secretary
7 February 2023
INDEPENDENT REVIEW REPORT TO PZ CUSSONS PLC
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 3
December 2022 which comprises the condensed consolidated income statement, the
condensed consolidated statement of other comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated statement of changes in
equity, the condensed consolidated cash flow statement and related notes 1 to
17.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 3 December 2022 is not prepared, in
all material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, UK
8 February 2023
Directors
Chair
C Silver *
Chief Executive
J Myers
Chief Financial Officer
S Pollard
D Tyler *
K Bashforth *
V Juarez *
D Kucz *
J Nicolson *
J Sodha *
J Townsend *
* Non-executive
Company Secretary
K Massie
Registered Office
Manchester Business Park
3500 Aviator Way
Manchester
M22 5TG
Registered number
Company registered number 00019457
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Website
www.pzcussons.com (http://www.pzcussons.com)
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