REG - PZ CUSSONS PLC - 2024 Full Year Results
18/09/2024 07:15
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RNS Number : 6629E PZ CUSSONS PLC 18 September 2024
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation. Upon the publication of this announcement via a
Regulatory Information Service, this inside information is now considered to
be in the public domain.
18 September 2024
RESULTS FOR THE YEAR ENDED 31 MAY 2024
Progress on strategic priorities and portfolio transformation
Continued business momentum despite macro-economic challenges in Nigeria
Jonathan Myers, Chief Executive Officer, said: "Over the last twelve months,
we have made continued operational progress and delivered against the
strategic priorities set out at the start of the year, against the backdrop of
macro-economic challenges. At the same time, we have taken the important first
steps to transform our business and maximise shareholder value, by refocusing
our portfolio on where we can be most competitive.
"The period was marked by a 70% devaluation of the Nigerian Naira, which has
had significant implications on our reported financials. We have worked hard
to mitigate the impact of this on the Group, while continuing to serve
Nigerian consumers who are facing unprecedented inflation and economic
difficulties. Elsewhere, we significantly improved trading in our UK Personal
Care business as we returned Carex to growth, maintained our momentum in ANZ,
delivered a return to volume-led revenue growth in Indonesia in Q4 and led
Childs Farm to a year of profitable, double-digit revenue growth.
"The favourable trends of the second half of FY24 have continued into the new
financial year. We are progressing with our plans to sell St. Tropez and have
received a number of expressions of interest for our African business,
recognising the potential of our brands and people, which could lead to a
partial or full sale.
"Against this backdrop, we remain confident in the long-term potential for PZ
Cussons as a business with stronger brands in a more focused portfolio,
delivering sustainable, profitable growth."
£m Adjusted Statutory
unless otherwise stated
2024 2023 variance 2024 2023 variance
Revenue 527.9 656.3 (19.6)% 527.9 656.3 (19.6)%
LFL revenue growth 4.4% 6.1%
Operating profit 58.3 73.3 (20.5)% (83.7) 59.7 n.m.
Operating margin 11.0% 11.2% (20)bps (15.9)% 9.1% n.m.
Profit before tax 44.7 74.1 (39.7)% (95.9) 61.8 n.m.
Basic earnings per share 8.02p 11.23p (28.6)% (13.60)p 8.70p n.m.
Dividend per share 3.60p 6.40p (43.8)%
See page 14 for definitions of key terms and page 15 for the reconciliation
between Alternative Performance Measures and Statutory results.
'n.m.' represents non-meaningful growth rates.
With the exception of LFL revenue growth, % changes are shown at actual FX
rates.
Summary
Financial results
· As indicated in previous announcements, the devaluation of the Nigerian
Naira during FY24 has had a significant impact on PZ Cussons' financial
results. The value of the Naira versus Sterling was, on average, 57% lower
during FY24 compared to FY23, contributing to a year-on-year reduction in
revenue, earnings and cash ( 1 ).
· Like-for-like ('LFL') revenue growth was 4.4%, driven by price/mix
improvements of 6.8% and a 2.4% decline in volume. This was driven primarily
by growth in Nigeria, as we offset cost inflation with pricing. Excluding
Africa, LFL revenue declined 2.6%. For the Group as a whole, revenue fell by
19.6% on a reported basis.
· Revenue trends improved across each region throughout the year, with
growth in both Group revenue and volume in Q4.
· Profit before tax declined by 39.7%, reflecting the reduction in
operating profit and increased interest charges. EPS declined by 28.6% as the
decline in PBT was partly offset by a reduced effective tax rate.
· Gross debt reduced significantly, from £251 million as at 31 May
2023 to £167 million as at 31 May 2024, reflecting the repatriation of c.£50
million of cash from Nigeria and free cash flow generation elsewhere.
( 1 ) The Naira was 70% lower between 31 May 2023 and 31 May 2024 and was 57%
lower on average for the financial year as a whole. All comparisons are made
to Sterling unless otherwise stated.
Delivering against the strategy
· Delivery against our four stated FY24 strategic priorities:
1. Simplifying and strengthening Nigeria: addressing funding challenges with
improved US Dollar sourcing, enabling cash repatriation and reduced Group
gross borrowings, with revenue growth driven by pricing and continued
increases in the number of customers served directly.
2. UK growth: strong revenue performance in our largest market with
double-digit growth in Original Source, Imperial Leather and Childs Farm, and
a return to growth of Carex for the full year.
3. Expansion from the core: initial in-store launch of Childs Farm in the
US and continued growth in Germany, with further expansion in the UK,
including the launch in Marks & Spencer in August 2024.
4. Transforming capabilities: strengthened organisation with a simplified
UK structure and improved Group-wide brand-building and digital capabilities.
Portfolio transformation
Following our announcement in April 2024, we are on track with our plans to
maximise shareholder value following a strategic review of brands and
geographies:
· St. Tropez: Plans to dispose of the St. Tropez business are
progressing.
· Africa: The Board has received a number of expressions of interest in
the Africa business and it is possible that this could lead to a partial or
full sale.
The intent of these actions is to refocus on where the business can be most
competitive. Further updates will be provided as appropriate.
Dividend
The Board announces its intention to declare an interim dividend of 2.10p per
share, down 44% compared to last year's final dividend of 3.73p. This
represents a full year dividend of 3.60p which is also down 44%, reflecting
the impact of the Naira devaluation on earnings per share while maintaining an
earnings cover of approximately two times ( 2 ).
The dividend will be paid on 4 December 2024 to shareholders on the register
at the close of business on 1 November 2024.
( 2 ) Reference is made to an Interim, rather than Final, dividend due to the
Distributable Reserves in the relevant Company being negative as at 31 May
2024. The Group has subsequently reversed this position and future dividend
payments will not be affected.
FY25 outlook
Current trading
The FY25 financial year has started positively, with Group LFL revenue growth
of 4.7% driven by strong growth in both our Africa and Europe and Americas
regions, partly offset by adverse phasing of shipping in Asia.
Operating profit guidance
Guidance has been provided to separate the impact of the Naira uncertainty on
the Group's results. Assuming that the average FX rates in Q1 FY25 prevail for
the balance of the year, the Group expects to deliver operating profit in the
range of £47-53 million ( 3 ). Based on these exchange rates, FY24 operating
profit would have been approximately £40 million.
Movements in the Naira are expected to be a key determinant of the Group's
reported FY25 result. Such movements impact the translation of local currency
earnings when reported in Sterling, as well as the foreign exchange
re-valuation of intra-group liabilities. The operating profit sensitivity
related to the latter has increased in FY25 due to necessary accounting
changes brought about by the increased likelihood of the repayment of
inter-company loans following the receipt of expressions of interest relating
to our African business. We will provide an analysis of the impact of the
revaluation of these liabilities on our earnings in future financial results.
( 3 ) Historic and current FX rates are provided on page 13.
For further information please contact:
Investors
Simon Whittington - IR and Corporate Development Director +44 (0) 77
1137 2928
Media
Headland PZCussons@headlandconsultancy.com
(mailto:PZCussons@headlandconsultancy.com)
+44 (0) 20 3805 4822
Susanna Voyle, Stephen Malthouse and Charlie Twigg
Investor and Analyst conference call
PZ Cussons' management will host a presentation for analysts and institutional
investors at 9.00 am UK time to present the results and provide the
opportunity for Q&A. The event will be held at:
Deutsche Numis UK
45 Gresham Street
London
EC2V 7BF
A webcast of the presentation is available at the link below and will also be
available via our corporate website: www.pzcussons.com
(http://www.pzcussons.com) .
Audience Webcast link:
https://www.investis-live.com/pzcussons/66cf23de58fb260c0062b9cb/fesx
(https://www.investis-live.com/pzcussons/66cf23de58fb260c0062b9cb/fesx)
Dial in: +44 20 3936 2999 / +44 800 358 1035
Access code: 265662
Notes to Editors
About PZ Cussons
PZ Cussons is a FTSE 250 listed consumer goods business headquartered in
Manchester, UK. We employ over 2,600 people across our operations in Europe,
North America, Asia-Pacific and Africa. Since our founding in 1884, we have
been creating products to delight, care for and nourish consumers. Across our
core categories of Hygiene, Baby and Beauty, our trusted and well-loved brands
include Carex, Childs Farm, Cussons Baby, Imperial Leather, Morning Fresh,
Original Source, Premier, Sanctuary Spa and St. Tropez. Sustainability and the
wellbeing of our employees and communities everywhere are at the heart of our
business model and strategy, and captured by our purpose: For everyone, for
life, for good.
Cautionary note regarding forward-looking statements
This announcement contains certain forward-looking statements relating to
expected or anticipated results, performance or events. Such statements are
subject to normal risks associated with the uncertainties in our business,
supply chain and consumer demand, along with risks associated with
macroeconomic, political and social factors in the markets in which we
operate. Whilst we believe that the expectations reflected herein are
reasonable based on the information we have as of the date of this
announcement, actual outcomes may vary significantly owing to factors outside
the control of the PZ Cussons Group, such as cost of materials or demand for
our products, or within our control such as our investment decisions,
allocation of resources or changes to our plans or strategy. The PZ Cussons
Group expressly disclaims any obligation to revise forward-looking statements
made in this or other announcements to reflect changes in our expectations or
circumstances. No reliance may be placed on the forward-looking statements
contained within this announcement.
Introduction from our Chief Executive Officer
Four years ago, we embarked upon a multi-year journey to transform PZ Cussons
- a company with inherently strong brands, excellent people and attractive
underlying markets and categories. We defined our strategy by focusing on the
core categories of Hygiene, Baby and Beauty in our four priority markets: the
UK, ANZ, Indonesia, and Nigeria. We have been prioritising spending on those
brands where we see the greatest opportunity for return on investment: our
Must Win Brands. Underpinning this strategy, our growth is enabled by
strengthening our capabilities, talent, leadership, culture, and our approach
to sustainability. Running through everything we do is a drive to reduce
complexity across our business. As such, we have summarised our strategy
around five choices: Build Brands, Serve Consumers, Reduce Complexity, Develop
People and Grow Sustainably.
Over this time, we have come a long way. We have strengthened our brands,
re-energised and professionalised the organisation, and raised the bar on
performance. Nevertheless, our FY24 reported results fell short of our initial
expectations, primarily due to the macroeconomic developments in Nigeria
which, as we indicated last year, would significantly affect our results. The
70% currency devaluation ( 4 ) over the course of the financial year has,
therefore, caused a significant impact not only on our local business but also
on the profitability and financial position of the Group.
Against this backdrop, our efforts have been focused on our strategic
priorities for FY24, which are detailed below. We have, therefore, sought to
address our challenges and opportunities head-on. In particular, we have made
good progress in strengthening and simplifying our operations in Nigeria to
the point where the business no longer relies on lending from the Group to
provide it with US Dollars. There is now minimal surplus cash in Nigeria
following the repatriation of cash to the UK.
As we announced in April 2024, there is much more to do to deliver a
transformation of PZ Cussons and unlock the full potential of the business.
Despite the progress already made in reducing complexity - both in terms of
our portfolio footprint and operations - the Group remains too complex for its
size. Resource is spread too thinly to generate consistently high returns and
we cannot always fully benefit from competitive advantages where we have them.
There is a significant opportunity for the Group to out-compete both larger
multinational players and smaller local players by concentrating on a strong
portfolio of locally-loved brands with operations focused in markets where we
can leverage our existing infrastructure, such as manufacturing or commercial
capabilities. However, there is only so much that can be achieved within the
framework of our existing portfolio, which spans multiple markets and
categories. To this end, the disposal of St. Tropez is progressing and we are
now considering a partial or full sale of our African business, having
received expressions of interest from a number of parties.
We remain confident in the long-term potential for PZ Cussons as a business
with stronger brands in a more focused portfolio, delivering sustainable,
profitable growth.
On behalf of the Board, I would like to thank the PZ Cussons teams for their
continued energy and tenacity amidst challenging conditions and our suppliers
and customers for their valued partnership.
( 4 ) Reference to devaluation is based upon May 31 2023 to May 31 2024.
Delivering against FY24 strategic priorities
Throughout the year, we made good progress across the year's strategic
priorities:
#1: Further simplifying and strengthening Nigeria
A major focus for the Group throughout the year has been foreign exchange and
cash management activity in Nigeria. We have reduced our requirements for
foreign currency whilst expanding and diversifying our access to US Dollars so
we can repatriate cash from Nigeria and repay UK borrowings. In doing so, we
have been able to reduce gross borrowings and limit the impact of further
currency devaluation. Specifically, we have repatriated approximately £50
million over the course of the year, resulting in minimal surplus cash in
Nigeria as at the end of the year. Critically, the business will effectively
be self-funding going forward, with little reliance on Group lending.
We have been focused on strengthening the operations of the Nigerian business,
and given the number of competitors exiting the market, there have been
opportunities for market share gains.
In addition, during the year, we identified more non-trading assets in Nigeria
to be divested. We expect these assets to be sold during the course of FY25
and proceeds will be repatriated to the UK and used to reduce gross debt
further.
Our plans to de-list and buy out minority shareholders of our Nigerian-listed
entity were paused during the year, in part as a result of the Group's broader
portfolio transformation plans, announced in April 2024.
#2: Returning the UK to sustainable, profitable growth
Our UK Personal Care business has performed very strongly in FY24 with
double-digit revenue growth and a significant margin improvement. This
performance is the result of a strengthened leadership team and a more
determined focus on building back core executional capabilities. We are more
disciplined now in focusing on the right brands, in the right sizes, in the
right channels at the right prices. We have seen particular success with
Original Source - growing revenue by over 20% and reaching its highest-ever
levels of household penetration. There has been successful Revenue Growth
Management ('RGM') activity across the portfolio, and continued success with
the re-staging of Imperial Leather and the launch of Cussons Creations. Carex
also returned to growth for the year as a whole, supported by its successful
collaboration with the Gruffalo and the launch of the one-litre refill packs.
Looking ahead, there remains further opportunity to regain previous
profitability levels in our UK Personal Care business and we are working to
improve the performance of our other UK brands, such as Sanctuary Spa, Charles
Worthington, and Fudge, which have previously been managed as part of our
Beauty business unit.
#3: Driving further expansion from the core
We have had continued success with Childs Farm during the year, which reported
its second year of double-digit revenue growth. In addition, we have seen
further growth in distribution, with successful international launches in the
year. In the US, we continued to build our position with Amazon, and in August
2024, we launched the brand in Wegmans, a premium grocery chain, through its
online and in-store offerings. In Germany, the brand was launched via dm - a
major retailer - and our Sleep Mist product became the number one online SKU
within the category in dm.
Original Source in Spain continues to develop, and during the year we extended
our distribution in one of the largest hypermarkets in Spain, Carrefour.
#4: Continuing to transform capabilities
We continue to strengthen the business's capabilities to support our growth
plans. During the year, we made a significant change to simplify our
organisational structure, allowing us to strengthen our UK businesses while
improving brand-building capabilities and strengthening growth plans across
the Group.
Firstly, having previously operated as two separate business units, with two
leadership, two commercial and two support teams, we have made good progress
in combining our UK Personal Care and Beauty businesses. With one combined
leadership team and one 'face to the customer', we anticipate benefits from
greater scale and faster, more efficient decision-making. We have already seen
some benefits emerge as we combine shelving space at key retailers and
leverage the UK Personal Care commercial execution with Beauty influencer and
digital media expertise.
Secondly, we have taken further steps to strengthen brand-building team
capabilities under Paul Yocum, previously Managing Director of Business
Development, in the new role of Chief Growth and Marketing Officer. The
organisational changes will lead to greater consolidation of central R&D
and innovation resources which will allow us to evaluate opportunities more
effectively and provide better support to our Business Units. This will
enable us to leverage the benefits of centralising certain activities while
retaining the local insights our multi-local portfolio footprint can provide.
Growing sustainably
We are making good progress towards becoming a more sustainable business. Key
achievements in FY24 included:
· a 42.8% reduction compared to baseline in scopes 1 and 2 carbon
emissions (FY23 0.3% reduction);
· a 9.2% reduction in virgin plastic compared to baseline (FY23:
-7.8%); and
· 85.6% of packaging is now recyclable, reusable or compostable (FY23:
84.4%).
We have decided to strengthen our commitment to sustainability by joining the
UN Global Compact, the largest corporate sustainability initiative in the
world. By becoming a participant, we have committed to aligning our strategy
and operations with the UN's Ten Principles for human rights, labour,
environment, and anti-corruption. We will also commit to submitting an annual
Communication on Progress report.
FY25 priorities
FY25 is set to be a year of significant change for PZ Cussons. We are
specifically focused on three priorities to support our transformation:
1. drive our businesses in the UK, ANZ and Indonesia;
2. strengthen our brand-building capabilities and embed our new
operating model; and
3. deliver the portfolio transformation to maximise shareholder value.
Overview of Group financial performance
Our FY24 financial performance has been defined by the material adverse impact
of the devaluation of the Nigerian Naira, which first took place in June 2023.
It has significantly impacted the trading of our Nigeria business and has
caused a deterioration in the Group's balance sheet. A key focus for the Group
throughout the year has therefore been in mitigating any further impact
through strengthening the operations of the Nigerian business with a focus on
profitability and repatriating cash to the UK - reducing exposure to further
devaluation and allowing us to repay gross borrowings. At the same time, we
continued to invest across the business to ensure delivery against our
strategy.
Revenue declined by 19.6%, impacted by the Naira devaluation. LFL revenue
growth was 4.4%, which reflected price/mix growth of 6.8% and a volume decline
of 2.4%.
Adjusted operating profit declined by £15.0 million at reported FX rates.
Adjusted EPS declined by 28.6% - lower than the 39.7% decline in adjusted
profit before tax due to a reduction in the Effective Tax Rate and a lower
non-controlling interest. On a statutory basis, the operating loss was £83.7
million primarily due to the foreign exchange loss of £107.5 million, which
arose primarily on the translation and settlement of USD-denominated
liabilities in our Nigerian subsidiaries following the Naira devaluation.
Free cash flow was £41.6 million, which was lower than the prior year's
£69.9 million due principally to lower operating profit and a working capital
outflow. Our net debt was £115.3 million, which represents a material change
from the £5.7 million net cash position in the prior year, driven largely by
the £139.9 million reduction in the value of cash held in Nigeria due to the
devaluation.
Performance by geography
Europe and the Americas (38.0% of FY24 Group revenue)
£m unless otherwise stated FY24 FY23 Growth / (decline)
Revenue 200.7 205.8 (2.5)%
LFL revenue growth (%) (1.9)% (0.5)% n/a
Adjusted operating profit 32.6 29.3 11.3%
Margin (%) 16.2% 14.2% 200bps
Operating profit 0.7 0.4 75.0%
Margin (%) 0.3% 0.2% 10bps
Revenue declined by 1.9% on a like-for-like basis due to the decline in our
Beauty brands, partly offset by strong growth in our UK Personal Care
business. Price/mix growth was 0.2%, and volume declined by 2.1%.
Our UK Personal Care business, consisting primarily of Carex, Original Source,
and Imperial Leather has delivered double-digit revenue growth. The UK washing
and bathing category grew 6% in value terms as consumers began to increase
spending following a period of cost-of-living challenges. Our market share
grew 140bps in volume terms with improvements in all sub-categories ( 5 ) and
was unchanged on a value basis. Carex returned to growth for the year as a
whole and delivered improving trends throughout the year, supported by its
successful collaboration with the Gruffalo and the launch of one-litre refill
packs. Original Source revenue grew by over 20% due to strong campaign
activity and increased listings, with distribution points growing by 12%. We
have seen continued success of the Imperial Leather relaunch, which began in
FY22 and which was supported by the launch of Cussons Creations at a value
price point, with the brands together growing double-digits in FY24. Cussons
Creations was one of the fastest-growing brands in the Washing and Bathing
category. Imperial Leather maintained its market share with improved
packaging, which provided increased in-store prominence.
In our legacy Beauty business unit, which consists primarily of St. Tropez,
Sanctuary Spa, Fudge, and Charles Worthington, revenue declined by
double-digits. This decline was primarily driven by St. Tropez, where we
experienced de-stocking from a major customer and slower trading in the US,
driven by overall softer consumer sentiment and poor weather. Sanctuary Spa's
revenue declined in the first half of the year, reflecting the decision to
reduce the Christmas gifting product portfolio to protect profitability.
However, it saw good revenue growth in the second half of the year.
Childs Farm reported a second full year of double-digit revenue growth under
our ownership. This growth was driven by continued strong commercial
execution, with a 5% increase in distribution points, and ongoing brand
strengthening with awareness improving and a near doubling of social media
followers over the past two years. Together, these elements have resulted in
market share gains.
Despite the reduction in revenue, adjusted operating profit and margin
improved. At 19.5%, the H2 FY24 adjusted operating profit margin is the
highest since the Covid-19 peak in FY21 and was achieved despite a softer
performance from our higher-margin brands such as St. Tropez. This improvement
in adjusted operating margin was primarily driven by our UK Personal Care
business following the strong RGM and cost initiatives throughout the year.
Childs Farm recorded positive adjusted operating profit, primarily due to
improved adjusted gross profit margin. On a statutory basis, operating profit
was £0.7 million, which includes investment in transformation projects and
the impairment of Sanctuary Spa in the first half of the year.
( 5 ) Source for market growth and share figures: IRI All Outlets plus Kantar
Discounters MAT to 8th June 2024.
Asia Pacific (33.2% of FY24 Group revenue)
£m unless otherwise stated FY24 FY23 Growth / (decline)
Revenue 175.2 190.7 (8.1)%
LFL revenue growth (%) (3.4)% 4.4% n/a
Adjusted operating profit 28.0 27.5 1.8%
Margin (%) 16.0% 14.4% 160bps
Operating profit 27.0 29.6 (8.8)%
Margin (%) 15.4% 15.5% (10)bps
Revenue declined 8.1% due to a decline in LFL revenue and unfavourable FX,
driven by a depreciation in the Indonesian Rupiah and Australian Dollar. On a
LFL basis, revenue declined 3.4% with consistent growth in ANZ offset by a
decline in Indonesia.
Cussons Baby in Indonesia declined slightly, reflecting softer consumer
sentiment and a reduction in distributor stock levels throughout much of the
year. The business returned to revenue and market share growth in Q4, however,
and distributor stock at the end of the year had returned to normal levels.
Despite some loss of market share for the year as a whole, Cussons Baby
retained #1 or #2 positions in most of the sub-categories in which it plays.
The launch of Cussons Baby into the warming oil segment, a category estimated
to be used by over 80% of Indonesian mothers, has gone well. We continue to
see meaningful revenue growth opportunities with this innovation.
ANZ delivered continued solid growth. This was led by Radiant, up
double-digits, resulting in it becoming the third largest brand in the laundry
market (up from sixth previously). Growth came through both volume and
price/mix, driven by the successful launch of capsules alongside the existing
powder and liquid products. Morning Fresh also performed well, maintaining its
nearly 50% category share. The FY23 launch of the Morning Fresh auto dishwash
range also contributed to revenue, although its performance has been softer
than initially anticipated due to a strong competitor response. Our long-term
ambition to leverage the significant brand equity of Morning Fresh to extend
'beyond the sink' is unchanged. Rafferty's Garden revenue slightly declined
but market share was stable.
Despite the decline in revenue, adjusted operating margin grew by 160bps. This
was principally due to a further significant improvement in profitability in
ANZ, where new product innovation has been highly accretive to margins, and
reduced freight costs. Profitability was also improved due to the reduction in
cost associated with our wider manufacturing operations in Asia, albeit offset
by the challenging trading in Indonesia. On a statutory basis, margins
declined by 10bps.
Africa (28.7% of FY24 Group revenue)
£m unless otherwise stated FY24 FY23 Growth / (decline)
Revenue 151.7 256.3 (40.8)%
LFL revenue growth (%) 26.5% 13.4% n/a
Adjusted operating profit 30.3 37.2 (18.5)%
Margin (%) 20.0% 14.5% 550bps
Operating profit (50.7) 48.3 n.m.
Margin (%) (33.4)% 18.8% (5,220)bps
The results should be seen in light of the Naira devaluation throughout this
year. This devaluation has created high inflation levels, and we have needed
to carry out nearly 30 rounds of price increases during the year. This has
been a key driver of the 26.5% LFL revenue growth. Volumes declined by 4.7% in
FY24, but this trend improved throughout the year. On a reported basis,
revenue declined by 40.8% due to the Naira being 57% lower in FY24 compared to
the prior year.
The continued transformation of our route-to-market has been a major driver of
revenue growth in our Nigerian business and has helped to limit the decline in
volumes. Firstly, we have continued to increase the availability of our
products through expanding the number of stores served directly as opposed to
via wholesalers. We serve approximately 151,000 stores today - over 50% higher
than at the end of FY23 and more than double the number of two years ago.
Secondly, we have also continued to increase the number of 'priority' stores -
those which attract greater commercial focus and are typically supplied with a
wider range of products. Thirdly, the productivity of our existing
distribution has increased with vans and bikes reaching more customer and
consumer locations. Our sales per van have more than doubled, partly due to
this increased efficiency.
As a result of the improved distribution, the market shares of our key
Nigerian brands have remained largely unchanged despite the significant price
increases. Morning Fresh, however, has seen some share loss due to its pricing
relative to competitor products.
Revenue in our electricals business grew over 20% on a LFL basis, contributing
revenue of £56.6 million. Gross margins declined as price increases did not
fully offset the increased costs resulting from the devaluation of the Naira.
Compared to the rest of our Nigerian business, the electricals business sees
greater input costs denominated in US Dollars.
The PZ Wilmar joint venture contributed £10.7 million (FY23: £7.5 million)
to adjusted operating profit. Compared to the prior year, this improvement
reflects continued strong commercial execution.
Adjusted operating profit margin grew by 550bps. Profit however included a
£8.9 million credit from some intra-Group debt forgiveness, with the loss
being recorded in our Central segment. Excluding this, Africa adjusted
operating profit margin declined by 40bps. On a statutory basis, we reported
an operating loss of £50.7 million, reflecting the increased value of trade
and loan liabilities denominated in US Dollars.
Other financial items
Adjusted operating profit
Adjusted operating profit for the Group was £58.3 million, which compares to
£73.3 million in the prior year. The adjusted operating profit margin
decreased by 20bps to 11.0%.
Adjusted gross profit margin increased by 60bps to 39.8%. This increase
primarily reflects the strong underlying improvement in the Europe and
Americas segment. There was also a favourable currency mix effect as Africa,
with lower margins, represented a smaller proportion of revenue compared to
the prior year as a result of the Naira devaluation. Marketing investment was
reduced slightly in FY24, mainly due to a reduction in allocation to our
UK-based Beauty brands. Central costs increased by £11.9 million compared to
the prior year, but included a £8.9 million cost related to the cancellation
of a debt previously attributable to our Africa region. PZ Wilmar, our cooking
oils joint venture with Wilmar International, performed strongly and
contributed £10.7 million to operating profit (FY23: £7.5 million).
Adjusting items
Adjusting items in the year totalled a net expense of £140.6 million before
tax. This related primarily to a £107.5 million foreign exchange loss arising
from the devaluation of the Nigerian Naira. A charge of £24.4 million was
incurred due to the impairment of the Sanctuary Spa brand in the first half of
the year, and costs of £10.1 million were incurred on simplification and
transformation projects. See Note 3 for further details on adjusting items.
The devaluation of the Nigerian Naira has had a significant impact on our
financial results and comparisons to the prior year. The foreign exchange loss
of £107.5 million primarily arose from the translation and settlement of
USD-denominated liabilities in our Nigerian subsidiaries and is wholly the
result of the devaluation of the Naira, which fell by 70% from 31 May 2023 to
31 May 2024. See further details on the Naira rates used in our financial
statements in the table on page 13.
After accounting for adjusting items, the Group's statutory operating loss was
£83.7 million, compared to a statutory operating profit of £59.7 million in
the prior year.
Net finance costs
Adjusted net finance expense was £13.4 million, compared to income of £0.8
million in the prior year. This was the result of cash balances in Naira,
which earn a significantly higher rate of interest than that paid on our
sterling-denominated gross borrowings, being significantly lower as a result
of the devaluation.
Taxation
On an adjusted basis, the effective tax rate was 14.5% (FY23: 27.1%)
reflecting the underlying cash tax impact to Group. The year-on-year reduction
was primarily due to a change in the tax regime operating in Nigeria whereby,
for loss-making businesses, tax is assessed on the basis of revenue rather
than profitability, together with the tax deductibility of realised FX impacts
arising as a result of the cash repatriation from Nigeria to the UK.
On a reported basis, the tax credit for the year was £24.1 million compared
to a tax charge of £15.4 million in the prior year. The effective tax rate
for the year is 25.0% (2023: 24.9%).
Earnings per share
Adjusted basic earnings per share was 8.02p compared to 11.23p in the prior
year. The statutory loss for the year was £71.8 million, compared to a profit
of £46.4 million in the prior year. Basic loss per share on a statutory basis
was 13.60p compared to basic earnings per share of 8.70p in the prior year.
Balance sheet and cash flow
As at 31 May 2024, cash and cash equivalents were £51.3 million (FY23:
£256.4 million). The decrease was driven principally by a £139.9 million
reduction in the value of cash held in Nigeria due to the devaluation and the
repayment of gross debt. The reduction in net assets from £422.1 million to
£235.2 million is primarily the result of losses relating to the devaluation
of the Naira and a £24.4 million impairment of the Sanctuary Spa brand,
partly offset by the Group's underlying net profit.
The Group has a £325 million committed credit facility available for general
corporate purposes. The credit facility incorporates a term loan of up to
£125 million, with the balance as a revolving credit facility ('RCF')
structure with maturity dates up to November 2028. As at 31 May 2024, this
facility was £161.0 million drawn (FY23: £252.0 million).
Free cash flow was £41.6 million. This was lower than the prior year's £69.9
million due principally to lower operating profit and a working capital
outflow.
£m unless otherwise stated FY24 FY23
Adjusted EBITDA 75.9 92.4
Cash flow impact of adjusting items (12.1) (14.6)
Working capital movements ( 6 ) (9.4) 4.1
Capex (6.1) (6.7)
Share of JV results (10.7) (7.5)
Other 4.0 2.2
Free cash flow 41.6 69.9
Dividend
The Board announces its intention to declare an interim dividend of 2.1p per
share, down 44% compared to last year's final dividend of 3.73p. This
represents a full year dividend of 3.6p which is also down 44%, reflecting the
impact of the Naira devaluation on earnings per share while maintaining an
earnings cover of approximately two times.
The dividend will be paid on 4 December 2024 to shareholders on the register
at the close of business on 1 November 2024.
Foreign exchange: impact on FY24 results
The devaluation of the Naira resulted in a £130.6 million adverse impact on
year-on-year revenue in FY24 when translated into Sterling. Outside of
Nigeria, the general strengthening of Sterling against other currencies
resulted in a £19.3 million reduction in FY24 revenue compared to FY23.
% of FY24 Average FX rates Revenue impact (£m)
revenue
FY23 FY24
GBP 34% 1.0 1.0 -
NGN 24% 536.3 1,256.7 (130.6)
AUD 17% 1.8 1.9 (6.7)
IDR 12% 18,174.2 19,549.7 (5.3)
USD 6% 1.2 1.3 (1.9)
Other 7% - - (5.4)
Total( 7 ) 100% - - (149.9)
Foreign exchange: impact on future results
Given the materiality of the movement in the Nigerian Naira in recent periods,
the rates used in recent reporting periods are summarised below. The currency
devalued by 70% from 31 May 2023 to 31 May 2024, and was on average 57% lower
for the financial year as a whole. The Naira has continued to weaken in FY25.
NGN/GBP FY22 FY23 FY24 Q1 FY25( 8 )
Rate used for P&L 558 536 1,256 1,979
Rate used for balance sheet 530 577 1,893 2,100
( 6 ) Working capital movements of £9.4 million reflect £94.7 million inflow
per cash flow statement, adjusted for £104.1 million FX losses arising on
Nigerian Naira devaluation.
( 7 ) Table shows the impact of translating FY23 revenue at FY24 foreign
exchange rates.
( 8 ) P&L rate represents average rates between 1 June and 31 August (Q1
FY25) and balance sheet rate is as at 31 August.
APM Alternative performance measure.
BEST values Our PZ Cussons values (Bold, Energetic, Striving and Together).
Brand Investment An operating cost related to brand marketing (previously 'Media &
Consumer').
EBITDA Earnings before interest, taxes, depreciation and amortisation.
Employee well-being % score based upon a set of questions within our annual survey of employees.
EPS Earnings per share.
ETR Effective tax rate.
ExCo Executive Committee
Family Care Refers to our Hygiene, Baby and Beauty brands in Nigeria and Africa.
Free cash flow Cash generated from operations less capital expenditure.
Free cash flow conversion Free cash flow as a % of adjusted EBITDA from continuing operations.
Like for like ('LFL') revenue growth Growth on the prior year at constant currency, excluding unbranded sales and
the impact of disposals and acquisitions, and adjusting for the number of
reporting days in the period.
Must Win Brands The brands in which we place greater investment and focus. They comprise:
Carex, Childs Farm (acquired in March 2022), Cussons Baby, Joy, Morning Fresh,
Original Source, Premier, Sanctuary Spa and St. Tropez.
Net debt Cash, short-term deposits and current asset investments, less bank overdrafts
and borrowings. Excludes IFRS 16 lease liabilities.
Personal Care Refers to our UK business unit operating our Hygiene brands such as Carex,
Original Source and Imperial Leather.
Portfolio Brands The brands we operate which are not Must Win Brands.
PZ Cussons Growth Wheel Our 'repeatable model' for driving commercial execution, comprising
'Consumability', 'Attractiveness', 'Shopability' and 'Memorability'.
Revenue Growth Management ('RGM') Maximising revenue through ensuring optimised price points across customers
and channels and across different product sizes.
SKUs Stock keeping unit.
Through the Line Marketing campaign incorporating both mass reach and targeted activity.
Alternative Performance Measures
2024 2023
Business performance excluding adjusting items Statutory results Business performance excluding adjusting items Statutory results
Adjusting Adjusting
items items
£m £m £m £m £m £m
Revenue 527.9 - 527.9 656.3 - 656.3
Cost of sales (317.8) (79.0) (396.8) (399.0) - (399.0)
Gross profit 210.1 (79.0) 131.1 257.3 - 257.3
Selling and distribution expense (82.8) - (82.8) (105.3) - (105.3)
Administrative expense (79.7) (59.6) (139.3) (86.2) (13.6) (99.8)
Share of results of joint venture 10.7 (3.4) 7.3 7.5 - 7.5
Operating profit/(loss) 58.3 (142.0) (83.7) 73.3 (13.6) 59.7
Finance income 10.8 1.4 12.2 14.1 1.3 15.4
Finance expense (24.2) - (24.2) (13.3) - (13.3)
Net finance (expense)/income (13.4) 1.4 (12.0) 0.8 1.3 2.1
Net monetary loss arising from (0.2) - (0.2) - - -
hyperinflationary economies
Profit/(loss) before taxation 44.7 (140.6) (95.9) 74.1 (12.3) 61.8
Taxation (6.5) 30.6 24.1 (20.1) 4.7 (15.4)
Profit/(loss) for the period 38.2 (110.0) (71.8) 54.0 (7.6) 46.4
Attributable to:
Owners of the Parent 33.6 (90.6) (57.0) 47.0 (10.6) 36.4
Non-controlling interests 4.6 (19.4) (14.8) 7.0 3.0 10.0
38.2 (110.0) (71.8) 54.0 (7.6) 46.4
The Group's business performance is assessed using a number of Alternative
Performance Measures ('APMs'). These APMs include adjusted profitability
measures where results are presented excluding separately disclosed items
(referred to as adjusting items) as we believe this provides both management
and investors with useful additional information about the Group's performance
and supports a more effective comparison of the Group's trading performance
from one period to the next. Like for like ('LFL') revenue growth represents
the growth on the prior year, adjusting for constant currency and excluding
the impact of disposals and acquisitions.
Adjusted Consolidated Income Statement
Details of adjusting items are provided in Note 3 to the condensed
consolidated financial statements. Reconciliations from IFRS reported results
to APMs are set out below.
Alternative Performance Measures (continued)
Adjusted operating profit and adjusted operating margin
2024
2023
£m £m
Group
Operating (loss)/profit from continuing operations (83.7) 59.7
Exclude: adjusting items 142.0 13.6
Adjusted operating profit 58.3 73.3
Revenue 527.9 656.3
Operating margin -15.9% 9.1%
Adjusted operating margin 11.0% 11.2%
By segment
Europe & the Americas:
Operating (loss)/profit from continuing operations 0.7 0.4
Exclude: adjusting items 31.9 28.9
Adjusted operating profit 32.6 29.3
Revenue 200.7 205.8
Operating margin 0.3% 0.2%
Adjusted operating margin 16.2% 14.2%
Asia Pacific:
Operating profit from continuing operations 27.0 29.6
Exclude: adjusting items 1.0 (2.1)
Adjusted operating profit 28.0 27.5
Revenue 175.2 190.7
Operating margin 15.4% 15.5%
Adjusted operating margin 16.0% 14.4%
Africa:
Operating (loss)/profit from continuing operations (50.7) 48.3
Exclude: adjusting items 81.0 (11.1)
Adjusted operating profit 30.3 37.2
Revenue 151.7 256.3
Operating margin -33.4% 18.8%
Adjusted operating margin 20.0% 14.5%
Central:
Operating loss from continuing operations (60.7) (18.6)
Exclude: adjusting items 28.1 (2.1)
Adjusted operating loss (32.6) (20.7)
Alternative Performance Measures (continued)
Adjusted gross profit
2024 2023
£m £m
Gross profit 131.1 257.3
Exclude: adjusting items 79.0 -
Adjusted gross profit 210.1 257.3
Revenue 527.9 656.3
Gross margin 24.8% 39.2%
Adjusted gross margin 39.8% 39.2%
Adjusted share of results of joint venture
2024 2023
£m £m
Share of results of joint venture 7.3 7.5
Exclude: adjusting items 3.4 -
Adjusted share of results of joint venture 10.7 7.5
Adjusted profit before taxation
2024 2023
£m £m
(Loss)/profit before taxation from continuing operations (95.9) 61.8
Exclude: adjusting items 140.6 12.3
Adjusted profit before taxation 44.7 74.1
Adjusted Earnings Before Interest Depreciation and Amortisation (Adjusted
EBITDA)
2024 2023
£m £m
(Loss)/profit before taxation from continuing operations (95.9) 61.8
Add back/(deduct): net finance expense/(income) 12.0 (2.1)
Add back: depreciation 10.2 12.1
Add back: amortisation 7.1 7.0
Add back: impairment and impairment reversal 24.9 12.3
(41.7) 91.1
Exclude: adjusting items* 117.6 1.3
Adjusted EBITDA 75.9 92.4
* Excludes adjusting items relating to impairment.
Alternative Performance Measures (continued)
Adjusted earnings per share
2024 2023
£m £m
(Loss)/profit after tax attributable to owners of the Parent (57.0) 36.4
Exclude: adjusting items (net of taxation effect) 90.6 10.6
Adjusted profit after taxation 33.6 47.0
2024 2023
pence pence
Basic (loss)/earnings per share (13.60) 8.70
Exclude: adjusting items 21.62 2.53
Adjusted basic earnings per share 8.02 11.23
Diluted (loss)/earnings per share(1) (13.60) 8.67
Exclude: adjusting items(2) 21.60 2.52
Adjusted diluted earnings per share 8.00 11.19
( )
(1 In 2024, the basic and diluted loss per share are equal as a result of the
Group incurring a loss for the year.)
(2 In 2024, this includes an adjustment of 0.03 pence per share arising from
bringing the diluted loss per share in line with the basic loss per share as
outlined above).)
Free cash flow
2024 2023
£m £m
Cash generated from operations 47.7 76.6
Deduct: purchase of property, plant and equipment and software (6.1) (6.7)
Free cash flow 41.6 69.9
CONDENSED CONSOLIDATED INCOME STATEMENT
2024 2023
Notes £m £m
Revenue 527.9 656.3
Cost of sales (396.8) (399.0)
Gross profit 131.1 257.3
Selling and distribution expense (82.8) (105.3)
Administrative expense (139.3) (99.8)
Share of results of joint venture 7.3 7.5
Operating (loss)/profit (83.7) 59.7
Finance income 12.2 15.4
Finance expense (24.2) (13.3)
Net finance (expense)/income (12.0) 2.1
Net monetary loss arising from hyperinflationary economies(3) (0.2) -
(Loss)/profit before taxation (95.9) 61.8
Taxation 4 24.1 (15.4)
(Loss)/profit for the year(1) (71.8) 46.4
Attributable to:
Owners of the Parent (57.0) 36.4
Non-controlling interests (14.8) 10.0
(71.8) 46.4
(Loss)/earnings per ordinary share(1)
Basic (p) 6 (13.60) 8.70
Diluted (p)(2) 6 (13.60) 8.67
(1) Wholly derived from continuing operations.
(2) In 2024, the basic and diluted loss per share are equal as a result of the
Group incurring a loss for the year.
(3) Represents the hyperinflation impact in relation to Ghana.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2024 2023
Notes £m £m
(Loss)/profit for the year (71.8) 46.4
Other comprehensive (expense)/income:
Items that will not be reclassified to income statement:
Re-measurement loss on net retirement benefit obligations (6.8) (32.8)
Taxation on other comprehensive income 1.7 7.4
Total items that will not be reclassified to income statement (5.1) (25.4)
Items that may be subsequently reclassified to income statement:
Exchange differences on translation of foreign operations(1) (69.4) (19.6)
Share of other comprehensive expense of joint venture accounted for using the (20.0) (2.1)
equity method
Cash flow hedges - fair value movements net of amounts reclassified (0.6) 0.4
Total items that may be subsequently reclassified to income statement (90.0) (21.3)
Other comprehensive expense for the year (95.1) (46.7)
Total comprehensive expense for the year (166.9) (0.3)
Attributable to:
Owners of the Parent (133.3) (6.9)
Non-controlling interests (33.6) 6.6
(166.9) (0.3)
(1) Includes a hyperinflation adjustment of £4.3 million (2023: £nil) in
relation to Ghana, net of £1.3m deferred taxation.
CONDENSED CONSOLIDATED BALANCE SHEET
2024 2023
Notes £m £m
Assets
Non-current assets
Goodwill and other intangible assets 7 279.3 312.7
Property, plant and equipment 42.8 67.9
Investment properties 6.6 6.4
Right-of-use assets 10.2 12.5
Net investments in joint venture - 52.0
Trade and other receivables 32.1 -
Deferred taxation assets 22.2 7.5
Current tax receivable 0.6 -
Retirement benefit surplus 32.1 38.5
425.9 497.5
Current assets
Inventories 68.5 112.9
Trade and other receivables 99.0 119.1
Derivative financial assets - 1.0
Current tax receivable 0.2 1.0
Current asset investments - 0.5
Cash and cash equivalents 8 51.3 256.4
219.0 490.9
Assets held for sale 4.7 -
223.7 490.9
Total assets 649.6 988.4
Equity and liabilities
Equity
Share capital 4.3 4.3
Own shares (34.5) (36.9)
Capital redemption reserve 0.7 0.7
Hedging reserve (0.4) 0.2
Currency translation reserve (159.6) (89.0)
Retained earnings 425.3 511.7
Other reserves 6.5 4.6
Attributable to owners of the Parent 242.3 395.6
Non-controlling interests (7.1) 26.5
Total equity 235.2 422.1
Liabilities
Non-current liabilities
Borrowings 8 160.3 251.2
Other payables 2.6 4.1
Lease liabilities 9.7 11.3
Deferred taxation liabilities 39.8 76.9
Retirement and other long-term employee benefit obligations 12.2 12.4
224.6 355.9
Current liabilities
Borrowings 8 6.3 -
Trade and other payables 158.7 182.2
Lease liabilities 2.4 1.7
Derivative financial liabilities 0.5 0.5
Current taxation payable 21.7 25.6
Provisions 0.2 0.4
189.8 210.4
Total liabilities 414.4 566.3
Total equity and liabilities 649.6 988.4
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Parent
Capital Currency Non-
Share Own redemption Hedging translation Retained Other controlling Total
capital shares reserve Reserve(1) Reserve(2) Earnings Reserves(3) Interests4 equity
£m £m £m £m £m £m £m £m £m
At 1 June 2022 4.3 (40.0) 0.7 (0.2) (69.2) 528.5 2.9 21.9 448.9
Profit for the year - - - - - 36.4 - 10.0 46.4
Transfers between reserves - - - - (1.5) 1.5 - - -
Other comprehensive income/(expense) for the year - - - 0.4 (18.3) (25.4) - (3.4) (46.7)
Total comprehensive income/(expense) for the year - - - 0.4 (19.8) 12.5 - 6.6 (0.3)
Transactions with owners:
Ordinary dividends - - - - - (26.8) - - (26.8)
Share-based payments - - - - - - 1.7 - 1.7
Shares issued from ESOT - 3.1 - - - (2.5) - - 0.6
Dividends relating to non-controlling interests, net of forfeitures - - - - - - - (2.0) (2.0)
Total transactions with owners recognised directly in equity - 3.1 - - - (29.3) 1.7 (2.0) (26.5)
At 31 May 2023 4.3 (36.9) 0.7 0.2 (89.0) 511.7 4.6 26.5 422.1
At 1 June 2023 4.3 (36.9) 0.7 0.2 (89.0) 511.7 4.6 26.5 422.1
Loss for the year - - - - - (57.0) - (14.8) (71.8)
Other comprehensive expense for the year - - - (0.6) (70.6) (5.1) - (18.8) (95.1)
Total comprehensive expense for the year - - - (0.6) (70.6) (62.1) - (33.6) (166.9)
Transactions with owners:
Ordinary dividends - - - - - (21.9) - - (21.9)
Share-based payments - - - - - - 1.9 - 1.9
Shares issued from ESOT - 2.4 - - - (2.4) - - -
Total transactions with owners recognised directly in equity - 2.4 - - - (24.3) 1.9 - (20.0)
At 31 May 2024 4.3 (34.5) 0.7 (0.4) (159.6) 425.3 6.5 (7.1) 235.2
(1) Reserve relates to
continuing hedges.
(2) Includes a hyperinflation adjustment in FY24 of £4.3 million in relation
to Ghana.
(3) Other reserves relate to the Group's share-based payment scheme.
(4) Refer to Note 28 for more
details.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
2024 2023
Notes £m £m
Cash flows from operating activities
Cash generated from operations 9 47.7 76.6
Interest paid (21.5) (11.8)
Taxation paid (13.3) (15.6)
Net cash generated from/(used in) operating activities 12.9 49.2
Cash flows from investing activities
Interest received 9.0 11.8
Purchase of property, plant and equipment and software (6.1) (6.7)
Proceeds from disposal of property, plant and equipment 0.8 14.4
Loans advanced to joint venture (4.0) (11.2)
Loans repaid by joint venture 12.7 11.2
Net cash generated from investing activities 12.4 19.5
Cash flows from financing activities
Dividends paid to Company shareholders 8 (21.9) (26.8)
Dividends paid to non-controlling interests - (2.6)
Repayment of lease liabilities (2.4) (2.5)
Repayment of borrowings 10 (206.0) (205.0)
Proceeds from borrowings 10 121.4 283.0
Financing fees paid on committed credit facility (0.8) (2.8)
Net cash (used in)/generated from financing activities (109.7) 43.3
Net increase in cash and cash equivalents 10 (84.4) 112.0
Effect of foreign exchange rates 10 (120.7) (19.3)
Cash and cash equivalents at the beginning of the period/year 10 256.4 163.7
Cash and cash equivalents at the end of the period/year 10 51.3 256.4
1. Basis of preparation
PZ Cussons plc (the 'Company') is a public limited company incorporated in
England and Wales. In these condensed consolidated financial statements
(financial statements), 'Group' means the Company and all its subsidiaries.
The financial information herein has been prepared on the basis of the
accounting policies as set out in the Annual Report and Accounts of the Group
for the year ended 31 May 2024. The Group has prepared its accounts in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial Reporting
Standards (IFRSs) adopted by the UK (UK-adopted International Accounting
Standards) and IFRSs, as issued by the IASB, including interpretations issued
by the IFRS Interpretations Committee. IFRS as adopted by the UK differs in
certain respects from IFRS as issued by the IASB. The differences have no
impact on the Group's consolidated financial statements for the years
presented.
The preparation of 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 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 2023 which are
described in Note 1(d) of the 2023 Annual Report and Accounts with the
addition of deferred taxation assets:
Deferred taxation assets
Deferred taxation is provided on temporary differences between the carrying
amounts of assets and liabilities recognised for financial reporting purposes
and the amounts used for taxation purposes, on an undiscounted basis. The
amount of deferred taxation provided is based on the expected manner of
realisation or settlement of the carrying amounts of assets and liabilities,
using tax rates enacted or substantively enacted at the financial year-end
date.
A deferred taxation asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can be
utilised. Deferred taxation assets are recognised for unused tax losses to the
extent that it is probable that future taxable profits will be available
against which they can be used. At 31 May 2024, the Group recorded a deferred
taxation asset of £36.8 million (2023: £3.6 million) on recognised but
unused tax losses; the increase being largely due to FX losses arising as a
result of the Nigerian Naira devaluation. The Group has concluded that the
deferred taxation assets will be recoverable as it is probable that the
related taxation benefit will be realised in the foreseeable future.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Strategic
Report. The financial position of the Group, liquidity position and
available borrowing facilities are described within the Financial Review. In
addition, note 19 of the Consolidated Financial Statements includes policies
in relation to the Group's financial instruments and risk management and
policies for managing credit risk, liquidity risk, market risk, foreign
exchange risk, price risk, cash flow and interest rate risk and capital risk.
The Group meets its funding requirements through internal cash generation and
borrowings. Borrowings are amounts drawn under both committed and uncommitted
borrowing facilities. The Group has a £325.0 million committed credit
facility which is available for general corporate purposes. As at 31 May 2024,
the Group had headroom on the committed facility of £164.0 million and net
debt of £115.3 million comprising cash of £51.3 million and borrowings of
£166.6 million.
In assessing going concern, the Group has prepared both base case and severe
but plausible cash flow forecasts for a period of 18 months until the end of
November 2026 (the "going concern review period"), which is at least 12 months
from the date of approval of the financial statements. The Group's base case
forecasts are based on the Board-approved budget and the first year of the
current five-year plan, and indicate forecasted continued compliance with its
banking covenants and sufficient liquidity throughout the going concern review
period.
The Directors have considered a severe but plausible downside scenario
(excluding the uncertainty regarding the Nigerian Naira) which models the
following assumptions:
· 5% reduction in Group revenue; and
· Group gross margin decline of 200bps.
This downside scenario also shows both continued compliance with its banking
covenants and sufficient liquidity throughout the going concern review period.
However, over the past year there have been significant fluctuations in the
Naira exchange rate which, due to the size of the Group's operations in
Nigeria, needs to be considered as part of our going concern assessment. The
Directors have therefore considered an additional severe but plausible
downside Naira exchange rate scenario to stress test the Group's financial
forecasts, using a Naira exchange rate decline of greater than 10% from the
rate as at the start of September 2024. This unmitigated downside scenario
shows a potential breach of the interest cover financial covenant as at 29
November 2024 which if management mitigation actions proved insufficient,
would result in the Group needing to negotiate a waiver of its interest cover
covenant to ensure the business meets its borrowing facility obligations over
the going concern review period as the committed credit facility may become
repayable on demand. The Directors are satisfied that this unmitigated
downside scenario does not potentially breach any of the Group's other
financial covenants.
Management consider there to be significant and feasible mitigations in place.
These include both short-term and structural cost reductions, as well as the
potential disposal of non-core, non-operating assets. Although management
acknowledges that certain of these mitigations are outside their control in
the very short term, a number of these mitigating actions are already
underway.
The Group is currently engaged in a process to sell its St Tropez brand and is
exploring potential transactions that could lead to a partial or full sale of
its Africa business, having received a number of expressions of interest. A
partial or full sale of the Group's Africa business could materially reduce
the Group's exposure to fluctuations in the Naira exchange rate. The Board has
committed to using any proceeds from these transactions to first reduce gross
borrowings, and consequently the level of the Group's net interest cost.
After reviewing the current liquidity position, financial forecasts, stress
testing of potential risks and considering the uncertainties described above,
and based on the current funding facilities, the Directors expect the Group to
have the financial resources to continue to operate the business for the
foreseeable future. For these reasons, the Directors continue to adopt the
going concern basis of accounting in preparing the Group financial statements.
However, should management mitigations prove insufficient, the impact of
Naira exchange rate volatility on forecast interest cover covenant compliance
represents a material uncertainty that may cast significant doubt upon the
Group's ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the Group were unable to
continue as a going concern.
The principal risks which the Group is exposed to will be disclosed in the
Group's 2024 Annual Report and Accounts. These are: IT and information
security; talent development and retention; macroeconomic and financial
volatility including foreign exchange; consumer and customer trends; legal and
regulatory compliance; business transformation; geopolitical instability;
consumer safety; sustainability and the environment; and supply chain and
logistics.
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.
The financial information contained in this document does not constitute
statutory financial statements as defined in sections 434 and 435 of the
Companies Act 2006 for the years ended 31 May 2024 or 2023 but is derived from
these accounts. Full audited statutory accounts of the Group in respect of the
year ended 31 May 2023 have been delivered to the Registrar of Companies and
those for 2024 will follow in due course. The report of the auditors on those
statutory accounts was unqualified and did not contain a statement under
section 498 of the Companies Act 2006.
New and amended accounting standards adopted by the Group
The following amended standards and interpretations were adopted by the Group
during the year ending 31 May 2024:
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes)
· Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2)
· Definition of Accounting Estimates (Amendments to IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors)
· IFRS 17 Insurance Contracts
These amended standards and interpretations have not had a significant impact
on the consolidated Financial Statements.
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendment to IAS 12 narrows the scope of the initial recognition
exemption to exclude transactions that give rise to equal and offsetting
temporary differences such as leases.
The Group previously accounted for deferred taxation on leases where the
deferred taxation asset or liability was recognised on a net basis. Following
the amendments, the Group has recognised a separate deferred taxation asset in
relation to its lease liabilities and a deferred taxation liability in
relation to its right-of-use assets. However, there is no impact on the
balance sheet because the balances qualify for offset under paragraph 74 of
IAS 12. There was also no impact on the opening retained earnings as at 1 June
2023 as a result of the change.
The policy for recognising and measuring income taxes is consistent with that
applied in the comparative years except for the changes outlined above as a
result of the Group's adoption of the amendments to IAS 12.
On 23 May 2023, the International Accounting Standards Board issued
International Tax Reform Pillar Two Model Rules - Amendments to IAS 12. The
Group has applied the mandatory temporary exception to the accounting for
deferred taxation arising from the jurisdictional implementation of the Pillar
Two rules set out therein.
New accounting standards and interpretations in issue but not yet effective
The following new and amended standards are effective for annual periods
beginning on or after 1 January 2024. The Group has not early
adopted the new or amended standards, where applicable, in preparing these
consolidated Financial Statements.
· Classification of Liabilities as Current or Non-current
(Amendments to IAS 1 Presentation of financial statements)
· Lease Liability in a Sale and Leaseback (Amendments to IFRS 16
Leases)
· Supplier financing arrangements (Amendments to IAS 7 Statement of
cash flows and IFRS 7 Financial instruments)
· Lack of exchangeability (Amendments to IAS 21 The effects of
changes in foreign exchange rates)
· IFRS 18 Presentation and Disclosure in Financial Statements
· Amendment to IFRS 9 and IFRS 7 (Classification and Measurement of
Financial Instruments)
These amendments are not expected to have a material impact on the Group in
the current or future reporting periods, except for the amendments of IAS 21
which may have a material impact on the financial position or performance of
the Group, but this impact cannot currently be estimated reliably due to the
uncertainty linked to the Nigerian Naira.
Presentation changes
The following changes have been made to the presentation of the Group's
consolidated financial statements:
· Investment properties are reported separately on the face of the
balance sheet and in the notes rather than being reported as part of Property,
plant and equipment.
· Share of other comprehensive income of joint venture presented
separately on the face of the Statement of Other Comprehensive Income.
These are presentation changes and have no impact on the accounting policies
adopted by the Group.
2. Segmental analysis
The segmental information presented in this note is consistent with management
reporting provided to the Executive Committee (ExCo) (formerly 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. The CODM considers the business from a geographic perspective,
with Europe & the Americas, Asia Pacific and Africa being the operating
segments. In accordance with IFRS 8 Operating Segments, the ExCo has
identified these as the reportable segments.
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 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.
Central includes expenditure associated with the global headquarters and above
market functions net of recharges to our regions and our in-house fragrance
house revenue.
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
2024 Europe Asia
& the Americas Pacific Africa Central Elimin-ations Total
£m £m £m £m £m £m
Gross segment revenue 204.1 179.2 151.7 34.2 (41.3) 527.9
Inter segment revenue (3.4) (4.0) - (33.9) 41.3 -
Revenue 200.7 175.2 151.7 0.3 - 527.9
Segmental operating profit/(loss) before adjusting items and share of results 32.6 28.0 19.6 (32.6) - 47.6
of joint ventures
Share of results of joint ventures - - 10.7 - - 10.7
Segmental operating profit/(loss) before adjusting items 32.6 28.0 30.3 (32.6) - 58.3
Adjusting Items (31.9) (1.0) (81.0) (28.1) - (142.0)
Segmental operating (loss)/profit 0.7 27.0 (50.7) (60.7) - (83.7)
Finance income 12.2
Finance expense (24.2)
Net monetary loss arising from hyperinflationary economies (0.2)
Loss before taxation (95.9)
2. Segmental analysis (continued)
2023 Europe Asia
& the Americas Pacific Africa Central Elimin-ations Total
£m £m £m £m £m £m
Gross segment revenue 210.2 197.8 256.3 74.0 (82.0) 656.3
Inter segment revenue (4.4) (7.1) - (70.5) 82.0 -
Revenue 205.8 190.7 256.3 3.5 - 656.3
Segmental operating profit before adjusting items and share of results of 29.3 27.5 29.7 (20.7) - 65.8
joint ventures
Share of results of joint ventures - - 7.5 - - 7.5
Segmental operating profit/(loss) before adjusting items 29.3 27.5 37.2 (20.7) - 73.3
Adjusting Items (28.9) 2.1 11.1 2.1 - (13.6)
Segmental operating profit/(loss) 0.4 29.6 48.3 (18.6) - 59.7
Finance income 15.4
Finance expense (13.3)
Profit before taxation 61.8
The Group analyses its net revenue by the following categories:
2024 2023
£m £m
Hygiene 289.1 334.8
Baby 106.9 123.1
Beauty 68.3 85.3
Electricals 56.6 105.4
Other 7.0 7.7
527.9 656.3
3. Adjusting items
Adjusting items expense/(income), all of which are within continuing
operations, comprise:
2024 2023
£m £m
Simplification and transformation(1) 10.1 2.9
Acquisition and disposal-related items(2) (1.4) (0.7)
Impairment charge (net of impairment reversal)(1) 24.4 10.1
Foreign exchange losses arising on Nigerian Naira devaluation(3) 104.1 -
Foreign exchange losses arising on Naira devaluation on joint venture(4) 3.4 -
Adjusting items before taxation 140.6 12.3
Taxation (30.6) (4.7)
Adjusting items after taxation 110.0 7.6
(
)
( )
(1) Included in administrative expense in the Consolidated Income Statement.
(2 ) Included in finance income in the Consolidated Income Statement.
(3 ) £79.0 million is included in cost of sales and £25.1 million is
included in administrative expense in the Consolidated Income Statement. The
amount in administrative expense includes charges of £0.2 million and £1.4
million relating to the de-designation of permanent as equity loans to a joint
venture and fellow subsidiary undertakings respectively.
(4 ) Included in share of results of joint venture in the Consolidated
Income Statement. This amount includes a credit of £1.2 million relating to
the de-designation of permanent as equity loans payable by a joint venture
undertaking to the Group.
Simplification and transformation
For the year ended 31 May 2024, these costs primarily relate to the following
projects which commenced in 2022: three-year finance transformation project,
HR simplification project and supply chain transformation project which are
due to be completed in 2025. In 2023, the profit on disposal of properties in
Nigeria was partially offset by costs relating to the three-year finance
transformation project, the HR simplification project and supply chain
transformation project.
Acquisition and disposal-related items
For the year ended 31 May 2024 and 31 May 2023, the income relates to the
Childs Farm acquisition.
Impairment charge (net of impairment reversal)
The current year charge relates to the impairment of the Sanctuary Spa brand
(Note 7). In the prior year the impairment charge, net of reversal, comprises
a £16.5 million impairment of the Sanctuary Spa brand, a £4.2 million
reversal of a prior period impairment of the Rafferty's Garden brand and a
reversal of a £2.2 million previously recognised impairment in the Group's
investment in joint venture Wilmar PZ International Pte. Limited, which was
dissolved in May 2023.
Foreign exchange losses arising on Nigerian Naira devaluation (including on
joint venture)
For the year ended 31 May 2024, this primarily relates to realised and
unrealised foreign exchange losses resulting from the Nigerian Naira
devaluation during the financial year on USD denominated liabilities which
existed at 31 May 2023. The closing NGN/GBP rate at reporting date was 1,893
(2023: 577), and the average NGN/GBP for the current year was 1,257 (2023:
536).
4. Taxation
2024 2023
£m £m
Current taxation
UK corporation tax
- current year 5.2 (2.2)
- adjustments in respect of prior years 3.5 (0.3)
- double taxation relief - (0.5)
8.7 (3.0)
Overseas corporation tax
- current year 11.6 26.3
- adjustments in respect of prior years (0.8) 0.8
10.8 27.1
Total current taxation charge 19.5 24.1
Deferred tax
Origination and reversal of temporary timing differences (38.0) (6.2)
Adjustments in respect of prior years (6.4) (2.3)
Effect of rate change adjustments 0.8 (0.2)
Total deferred taxation credit (43.6) (8.7)
Total taxation (credit)/charge (24.1) 15.4
Analysed as:
Taxation on (loss)/profit before adjusting items 6.5 20.1
Taxation on adjusting items (30.6) (4.7)
(24.1) 15.4
The effective tax rate in relation to continuing operations for the year is
25.0% (2023: 24.9%). Before adjusting items, the effective tax rate was 14.5%
(2023: 27.1%), primarily due to the impact of the minimum tax regime in
Nigeria as a result of the recognised statutory operating losses, and the tax
deductibility of realised foreign exchange impacts arising as a result of the
cash repatriation from Nigeria to the UK.
UK corporation tax is calculated at 25.0% (2023: 20.0%) of the estimated
assessable profit for the year. Taxation for other jurisdictions is calculated
at the rates prevailing in the respective jurisdictions. The Group has chosen
to use the UK corporation tax rate for the reconciliation of the taxation
charge for the year to the loss before taxation as this is the seat for the
central management and control of the Group.
2024 2023
£m £m
(Loss)/profit before tax (95.9) 61.8
Tax at the UK corporation tax rate of 25% (2023: 20%) (24.0) 12.4
Adjusted for:
Effect of non-deductible expenses 6.4 2.2
Effect of non-taxable income (3.7) (4.9)
Effect of rate changes on deferred taxation (all territories) 0.8 (0.5)
Taxation effect of share of results of joint ventures (2.4) (2.2)
Other taxes suffered outside of the UK 2.1 3.2
Net adjustment to amount carried in respect of uncertain tax positions 2.4 (0.8)
Movements in deferred taxation assets not recognised 1.7 (0.6)
Adjustments in respect of prior years (3.7) (1.5)
Differences in overseas rates (3.7) 8.1
Tax (credit)/charge for the year (24.1) 15.4
5. Dividends
2024 2023
£m £m
Amounts recognised as distributions to ordinary shareholders in the year
comprise:
Final dividend for the year ended 31 May 2023 of 3.73p (2022: 3.73p) per 15.6 15.6
ordinary share
Interim dividend for the year ended 31 May 2024 of 1.50p (2023: 2.67p) per 6.3 11.2
ordinary share
21.9 26.8
After the balance sheet date, the Board announced its intention to declare an
interim dividend of 2.10p per share, down 44% compared to last year's final
dividend of 3.73p. This represents a full year dividend of 3.60p which is also
down 44%, reflecting the impact of the Naira devaluation on earnings per share
while maintaining an earnings cover of approximately two times. This results
in a total dividend of £8.8 million (2023: £15.6 million). The dividend will
be paid on 4 December 2024 to the shareholders on the register on 1 November
2024. The proposed dividend has not been included as a liability in the
consolidated financial statements as at 31 May 2024.
6. (Loss)/earnings per share
Earnings per share (EPS) represents the amount of earnings attributable to
each ordinary share in issue. Basic EPS is calculated by dividing the earnings
(profit after tax attributable to owners of the Parent) by the weighted
average number of ordinary shares in issue during the year, excluding own
shares owned by employee trusts.
For diluted EPS, the weighted average number of ordinary shares in issue is
adjusted to assume conversion of all dilutive potential ordinary shares. The
Group's dilutive potential ordinary shares relate to awards granted under the
Group's share incentive schemes. For the year ended 31 May 2024, the basic and
diluted EPS are equal as a result of the Group incurring a loss for the year.
The average number of shares is reconciled to the basic weighted average and
diluted weighted average number of shares as set out below:
2024 2023
number number
000 000
Average number of ordinary shares in issue during the year 428,725 428,725
Less: weighted average number of shares held by employee trusts (9,693) (10,180)
Basic weighted average shares in issue during the year 419,032 418,545
Dilutive effect of share incentive schemes 1,064 1,530
Diluted weighted average shares in issue during the year 420,096 420,075
An adjusted EPS measure is provided which calculates EPS excluding adjusting
items from profits attributable to owners of the Parent. The Directors believe
that the separate disclosure of adjusting items is relevant to an
understanding of the Group's financial performance, and excluding such items
provides a more meaningful basis upon which to analyse underlying business
performance and make year-on-year comparisons.
7. Goodwill and other intangible assets
Goodwill Software Brands Total
£m £m £m £m
Cost
At 1 June 2022 68.2 65.6 270.3 404.1
Additions - 2.0 - 2.0
Disposals - (0.5) - (0.5)
Transfers to property, plant and equipment - (0.4) - (0.4)
Exchange differences (1.6) (0.1) (3.1) (4.8)
At 31 May 2023 66.6 66.6 267.2 400.4
Additions - 0.4 - 0.4
Exchange differences - (1.5) - (1.5)
At 31 May 2024 66.6 65.5 267.2 399.3
Accumulated amortisation and impairment
At 1 June 2022 11.1 34.6 24.5 70.2
Amortisation charge - 7.0 - 7.0
Impairment charge - - 16.5 16.5
Impairment reversal - - (4.2) (4.2)
Exchange differences (0.9) - (0.4) (1.3)
At 31 May 2023 10.2 41.1 36.4 87.7
Amortisation charge - 7.1 - 7.1
Impairment charge - - 24.4 24.4
Exchange differences 1.7 (1.0) 0.1 0.8
At 31 May 2024 11.9 47.2 60.9 120.0
Net book value
At 31 May 2024 54.7 18.3 206.3 279.3
At 31 May 2023 56.4 25.5 230.8 312.7
Amortisation and impairment are charged to administrative expense in the
Consolidated Income Statement. Cumulative impairment of goodwill as at 31 May
2024 was £10.2 million (2023: £10.2 million) and cumulative impairment of
brands as at 31 May 2024 was £60.9 million (2023: £36.4 million).
Software includes the Group's enterprise resource planning system (SAP), which
is internally developed, and the carrying value of this asset as at 31 May
2024 is £13.7 million (2023: £20.6 million), with three years of
amortisation remaining.
Other than software, intangible assets comprise goodwill and brands. 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 (which the Group carries out at the
year-end date), or more frequently if there are indicators of impairment.
The method used for impairment testing is to allocate assets 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 the assets' fair values less costs of
disposal and the value-in-use. Impairment testing is a two-step approach
commencing with the testing of brands with an indefinite useful life. Each
brand is considered its own CGU for this purpose. The second step is to test
goodwill for impairment. For the purposes of this test, goodwill acquired
is allocated to the CGUs or groups of CGU expected to benefit from the
synergies of the business combination. For this purpose goodwill related to
each of the beauty brands is aggregated together into the Beauty CGU as this
is manner in which the core assets are used to generate cash flows and is the
lowest level at which goodwill is monitored by management.
Value-in-use is determined using cash flow projections from approved budgets
and plans which are then extrapolated 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.
Goodwill of £54.7 million (2023: £56.4 million) comprises £40.4 million
(2023: £40.4 million) in relation to the acquisitions of the Group's Beauty
brands (Charles Worthington, Fudge, Sanctuary Spa and St.Tropez), £13.5
million (2023: £13.5 million) in relation to the acquisition of Childs Farm
and £0.8 million (2023: £2.5 million) in relation to other acquisitions. The
movement in other goodwill in the current year relates to exchange
differences. Goodwill for the Beauty brands is assessed at the Group of CGUs
comprising these brands (see table below) as this represents the lowest level
at which goodwill is monitored by management.
The carrying value of goodwill and each brand is set out in the table below.
For the impairment testing of brands, each brand is allocated to a single CGU.
For the impairment testing of goodwill, Childs Farm goodwill is allocated to
the same CGU as the brand and, as noted above, Beauty goodwill is allocated to
the Group of CGUs comprising the Beauty brands:
Goodwill Brands Goodwill Brands
2023
2024 2024
2023
£m
£m £m £m
Charles Worthington 9.6 9.6
Fudge 24.6 24.6
Sanctuary Spa 34.5 58.9
St. Tropez 58.4 58.4
Beauty 40.4 127.1 40.4 151.5
Original Source - 9.8 - 9.8
Rafferty's Garden - 33.9 - 33.9
Childs Farm 13.5 35.5 13.5 35.5
Other 0.8 - 2.5 -
54.7 206.3 56.4 230.8
In performing the impairment testing, the Group used the five-year plan ending
31 May 2029. Assumptions in the budgets and plans used for the value in use
cash flow projections include future revenue volume and price growth rates,
associated future levels of marketing support, the cost base of manufacture
and supply and directly associated overheads. These assumptions are based on
historical trends and future market expectations specific to each CGU and the
markets and geographies in which each CGU operates.
The key assumptions applied in determining value-in-use are the long-term
growth rate and the discount rate, both of which are determined with reference
to the markets and geographies in which the CGU (or group of CGUs) operates,
and revenue growth and gross margin.
The compound annual growth rates, long-term growth rates and discount rates
applied in the value in use calculations used in impairment tests were:
CAGR(1) CAGR(1) Long-term Long-term Pre-tax Pre-tax
2024 2023 growth rate growth rate discount rate discount rate
2024 2023 2024 2023
Charles Worthington 6.1% 3.4% 2.0% 2.0% 11.5% 10.1%
Fudge 2.3% 6.8% 2.0% 2.0% 11.7% 10.7%
Sanctuary Spa 2.8% 3.0% 2.0% 2.0% 11.5% 10.2%
St. Tropez 3.3% 3.5% 2.0% 2.0% 12.0% 10.4%
Beauty group of CGUs (goodwill assessment) 3.2% 3.9% 2.0% 2.0% 11.6% 10.4%
Original Source 9.9% 3.2% 2.0% 2.0% 11.6% 10.5%
Rafferty's Garden 4.5% 4.1% 2.5% 2.5% 11.8% 10.6%
Childs Farm (brand and goodwill assessment) 19.6% 27.5% 2.0% 2.0% 11.7% 12.2%
(1) CAGR refers to the compound annual revenue growth rate over the five-year
plan period.
The results of the impairment tests as at 31 May 2024 were as follows:
Sanctuary Spa
In the year ended 31 May 2024, there was an impairment charge of £24.4
million (2023: £16.5 million) relating to the Sanctuary Spa brand, charged to
administrative expense in the Consolidated Income Statement and included in
the Europe & the Americas segment. The recoverable amount reflected the
cost-of-living pressures and their impact on price sensitive beauty products.
The recoverable amount of the CGU was determined to be £40.4 million based on
a value-in-use calculation, which when compared to a carrying value of £64.8
million (of which the brand represented £58.9 million) resulted in an
impairment charge of £24.4 million. The long-term growth rate and discount
rate used in the value in use calculations were 2.0% and 11.5% respectively.
Management has determined gross margin and compound annual revenue growth rate
to be the key assumptions in the forecasts for Sanctuary Spa. Sensitivity
analysis has been carried out in the year ended 31 May 2024 and a reasonably
possible change of 250bps decline in gross margin within the five-year
forecast period would increase the impairment charge by £7.6 million, a
200bps decline in the annual revenue growth rate over the five-year plan
period, which results in a five-year compound annual revenue growth rate of
0.8%, would increase the impairment charge by £8.4 million and a 100bps
increase in the discount rate would increase the impairment charge by £4.9
million. A reduction of 0.1% in compound annual revenue growth rate over the
five-year plan would result in zero headroom. The same impact would be caused
by a decline of 0.1% in gross margin or an increase of 0.1% in discount rate.
7. Goodwill and other intangible assets (continued)
Charles Worthington
For the Charles Worthington brand, the recoverable amount of the applicable
CGU which was based on a value in use calculation was determined to be £11.8
million which is in excess of the carrying value of £10.9 million (of which
the brand represented £9.6 million).
Management have determined gross margin and compound annual revenue growth
rate to be the key assumptions in the forecasts for Charles Worthington.
Sensitivity analysis has been carried out in the year ended 31 May 2024 and a
reasonably possible change of 250bps decline in gross margin within the
five-year forecast period would result in an impairment charge of
£1.1million, a 200bps decline in annual revenue growth rate within the
five-year forecast period, which results in a five-year compound annual
revenue growth rate of 4.1%, would result in an impairment charge of £1.5
million and a 100bps increase in the discount rate would result in an
impairment charge of £0.7 million. A reduction of 0.7% in compound annual
revenue growth rate over the five-year plan would result in zero headroom. The
same impact would be caused by a decline of 1.2% in gross margin or an
increase of 0.6% in discount rate.
Rafferty's Garden
For the Rafferty's Garden brand, the recoverable amount of the applicable CGU
based on a value-in-use calculation was determined to be £38.4 million,
exceeding the carrying value of £34.9 million (of which the brand represented
£33.9 million). The recoverable amount reflected expected growth from new
product development and recovery in gross margin arising from cost savings in
raw materials. Historical impairment charges were fully reversed in the prior
year.
Management has determined gross margin and compound annual revenue growth rate
to be the key assumptions in the forecasts for Rafferty's Garden. Sensitivity
analysis has been carried out in the year ended 31 May 2024 and a a reasonably
possible change of 250bps decline in gross margin within the five-year
forecast period would result in an impairment charge of £7.2million, a 200bps
decline in annual revenue growth rate within the five-year forecast period,
which results in a five-year compound annual revenue growth rate of 2.5%,
would result in an impairment charge of £5.5 million and a 100bps increase in
the discount rate would result in an impairment charge of £2.5 million. A
reduction of 0.7% in compound annual revenue growth rate over the five-year
plan would result in zero headroom. The same impact would be caused by a
decline of 0.8% in gross margin or an increase of 0.5% in discount rate.
Other CGUs
For the remaining CGUs, the recoverable amounts of the respective applicable
CGUs, which were determined based on value in use calculations, exceeded the
carrying values. Sensitivity analysis on the value in use calculations did not
identify potential impairment in relation to a reasonably possible downside in
the assumptions used for the projections.
8. Cash and cash equivalents and net debt
Cash and cash equivalents include cash at bank and in hand, short-term
deposits and other highly liquid investments with original maturities of three
months or less which are readily convertible into known amounts of cash with
insignificant risk of changes in value.
Borrowings comprise bank overdrafts, short-term uncommitted loans and amounts
drawn under the Group's committed credit facility. Bank overdrafts are
repayable on demand and form a part of the Group's cash management activities.
Further details on the Group's committed credit facility are provided in Note
19. The Group defines net debt as cash and cash equivalents net of borrowings,
and net debt including lease liabilities as cash and cash equivalents net of
borrowings and lease liabilities.
Group net debt comprises the following:
1 June 2023 Net cash flow Foreign Other(1) 31 May 2024
£m £m exchange £m £m
movements
£m
Cash at bank and in hand 127.4 (22.7) (55.3) - 49.4
Short term deposits 129.0 (61.7) (65.4) - 1.9
Cash and cash equivalents 256.4 (84.4) (120.7) - 51.3
Current asset investments 0.5 (0.5) - - -
Current borrowings - (6.4) 0.1 - (6.3)
Non-current borrowings (251.2) 91.0 - (0.1) (160.3)
Net cash/(debt) 5.7 (0.3) (120.6) (0.1) (115.3)
Lease liabilities (13.0) 2.9 0.2 (2.2) (12.1)
Net debt including lease liabilities (7.3) 2.6 (120.4) (2.3) (127.4)
(1) Other includes lease additions and an increase in the lease liability
arising from the unwinding of interest element.
At 31 May 2024, the Group had restricted cash of £0.7 million (2023: £0.7
million).
At 31 May 2024, £20.0 million (2023: £204.1 million) of the cash and cash
equivalents was held by the Group's Nigerian subsidiaries. At 31 May 2024, the
Sterling equivalent of Nigerian Naira cash balances are materially reduced,
both as a result of the devaluation of the Nigerian Naira occurring during
FY24 and the successful cash repatriation from Nigeria to the UK.
Borrowings are amounts drawn under both committed and uncommitted borrowing
facilities. The Group has a £325.0 million committed credit facility which is
available for general corporate purposes. The credit facility incorporates
both a term loan, of up to £125.0 million, with the balance as a revolving
credit facility (RCF) structure. Entered into in November 2022, the term loan
is a two-year facility and the RCF a four-year facility, with both facilities
retaining two, one-year extension options, the first of which was executed in
October 2023. Drawings under the term loan are permitted in GBP, and under the
RCF in GBP, Euros or USD, at interest rates at a margin of 1.30-2.10% above
SONIA, EURIBOR or SOFR, dependent on leverage and the attainment of specified
sustainability performance targets.
Non-current borrowings as at 31 May 2024 are presented net of £0.7 million
(2023: £0.8 million) of unamortised financing fees. As at 31 May 2024, this
facility was £161.0 million drawn (2023: £252.0 million).
Borrowings as at 31 May 2024, which are presented net of £0.7 million (2023:
£0.8 million) of unamortised financing fees, comprise £125.0 million (2023:
£125.0 million) of term loans which are denominated in GBP at an interest
rate of 6.79% (2023: 5.73%), and £36.0 million (2023: £127.0 million) of
borrowings under the RCF which are denominated in GBP at interest rates at
between 6.78%-6.79% (2023: 5.66%-5.78%).
In addition, the Group retains other unsecured and uncommitted facilities that
are primarily used for trade-related activities in Nigeria where ordinary
trading activities are required to be supported by letters of credit (or
similar). As at 31 May 2024, these amounted to £161.6 million (2023: £199.8
million) of which £40.3 million, or 25% were utilised (2023: £93.3 million
or 47%). The utilisation amount has decreased during the reporting period as a
result of the improvement in access to foreign currency which in turn has
facilitated the settlement of USD liabilities. As at the reporting date, there
were no bank overdrafts (2023: £nil).
9. Reconciliation of (loss)/profit before taxation to cash generated from
operations
2024
2023
£m £m
(Loss)/profit before taxation (95.9) 61.8
Net finance expense/(income) and net monetary loss arising from 12.2 (2.1)
hyperinflationary economies
Operating (loss)/profit (83.7) 59.7
Depreciation 10.2 12.1
Amortisation 7.1 7.0
Impairment of tangible and intangible assets 24.4 16.5
Impairment reversal of intangible assets - (4.2)
Impairment reversal of net investments in joint venture - (2.2)
Impairment of current asset investment 0.5 -
Profit on sale of assets (1.8) (11.1)
Difference between pension charge and cash contributions 1.7 0.5
Share-based payments 1.9 1.7
Share of results of joint venture (7.3) (7.5)
Operating cash flows before movements in working capital (47.0) 72.5
Movements in working capital:
Inventories 2.3 (8.4)
Trade and other receivables 15.3 (13.4)
Trade and other payables 77.5 30.3
Provisions (0.4) (4.4)
Cash generated from operations 47.7 76.6
10. Post balance sheet events
There are no material post balance sheet events.
11. Directors' confirmations
Each of the Directors confirm that, to the best of their knowledge:
· The Group financial statements within the full Annual Report and
Accounts, which have been prepared in accordance with UK-adopted international
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group and
· The Strategic Report within the full Annual Report and Accounts
includes a fair review of the development and performance of the business and
the position of the Group, together with a description of the principal risks
and uncertainties that it faces.
Approved by the Board of Directors on 18 September 2024
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