REG - PZ CUSSONS PLC - PZ Cussons Preliminary Results
26/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230926:nRSZ5993Na&default-theme=true
RNS Number : 5993N PZ CUSSONS PLC 26 September 2023
26 September 2023
RESULTS FOR THE YEAR ENDED 31 MAY 2023
Third year of like for like revenue growth
Continued strategic progress against a challenging external backdrop
Jonathan Myers, Chief Executive Officer, said: "We have delivered a third
consecutive year of like for like revenue growth and increased operating
profit by over 10% since launching our strategy nearly three years ago. We
have achieved these improvements by investing in our brands and capabilities,
serving cost-conscious consumers better with targeted innovation and
productivity initiatives helping us to reduce complexity across the Group.
In FY23 sustained momentum in our ANZ business and the return of the UK
Personal Care business to growth by the end of the year demonstrated our
ability to improve and sustain business unit performance even in a year when
we had to absorb further significant cost inflation.
Group performance in the new financial year has been in line with our
expectations and, with clear near-term priorities, we expect to deliver
another year of LFL revenue and strong constant currency operating profit
growth in FY24. There is more to do as we seek to maximise the company's full
potential, and there are well-documented challenges to be navigated in
Nigeria. However, we continue to believe that we can build a higher growth,
higher margin, simpler and more sustainable business."
£m Adjusted Statutory
unless otherwise stated
2023 2022( 1 (#_ftn1) ) variance 2023 2022(1) variance
Revenue 656.3 592.8 10.7% 656.3 592.8 10.7%
LFL revenue growth 6.1% 2.9% n/a
Operating profit 73.3 67.1 9.2% 59.7 65.8 (9.3)%
Operating margin 11.2% 11.3% (10)bps 9.1% 11.1% (200)bps
Profit before tax 74.1 65.8 12.6% 61.8 64.5 (4.2)%
Basic earnings per share 11.23p 12.57p (10.7)% 8.70p 11.88p (26.8)%
Dividend per share 6.40p 6.40p
See page 14 for definitions of key terms and page 15 for the reconciliation of
Alternative Performance Measures to Statutory Results
All numbers are shown based upon continuing operations, unless otherwise
stated
With the exception of LFL revenue growth, all % changes are shown at actual FX
rates
1 FY22 restated as a result of certain prior year adjustments - see note 1
of the consolidated financial statements for further details
Delivering against the strategy
· Third consecutive year of like-for-like (LFL) revenue growth.
· Majority of Must Win Brands in growth and strong performance in
Portfolio Brands.
· A successful first full year of ownership of Childs Farm with 12%
revenue growth in FY23.
· Continued expansion from the core, with the launch of Morning Fresh into
the auto dishwash market and thegeographic expansion of Original Source and
Imperial Leather( 2 (#_ftn2) ).
· Supply Chain transformation is on track, reducing complexity across the
Group and improving innovation, efficiency and capabilities.
· Further strengthening of the leadership team, including the appointment of
a new Chief People Officer and Chief Information Officer as well as new local
leaders for our Nigerian and Indonesian businesses.
· Intention to buy out the minority shareholding of PZ Cussons Nigeria plc,
and de-list, creating value for Group shareholders and significantly
simplifying and strengthening our future business in Africa.
2 Original Source and Imperial Leather launches took place following the end
of the FY23 financial year
Financial results
· Reported revenue grew 10.7% as a result of LFL revenue growth, the
contribution of Childs Farm, which was acquired in March 2022, and favourable
FX movements.
· Adjusted operating profit margin broadly flat as an 80bps improvement in
gross profit margin funded increased investment in capabilities and offset
cost inflation. Adjusted operating profit margin improved, excluding Childs
Farm.
· Continued profitable revenue growth in Nigeria contributed to the Group's
12.6% growth in adjusted profit before tax but the impact of the resulting tax
charge and increased non-controlling interest led to an adjusted EPS decline
of 10.7%.
· On a statutory basis, the operating margin declined by 200bps and EPS
declined by 26.8%, reflecting a £16.5 million impairment of the Sanctuary Spa
brand, as well as increased investment related to transformation.
· Improved cash generation with free cash flow( 3 (#_ftn3) ) of £69.9
million (FY22: £58.0 million) primarily driven by an improvement in working
capital, resulting in a net adjusted cash position of £5.7 million.
· Increase in gross borrowings to £251.2 million (FY22: £174.0 million)
reflecting the challenges of repatriating cash from Nigeria, where the cash
balance was approximately £200 million.
· Proposed final dividend unchanged versus the prior year, reflecting the
devaluation of the Naira following the year end, which is expected to have a
material adverse impact on the near-term reported financial performance.
3 See page 15 for definitions of key terms
Current trading and outlook
Current trading
FY24 performance to date has been in line with expectations, with modest year
on year growth in LFL revenue and a higher operating profit margin. We have
seen continued good revenue growth in Nigeria and ANZ, a stable performance in
the UK, offset by a further decline in Indonesia.
FY24 Outlook
The macroeconomic environment in Nigeria, including the foreign exchange
market and other fiscal reforms, will be a key determinant of our overall
Group FY24 financial results. We have operational and corporate plans in place
to mitigate these challenges and are already executing a number of these to
improve the performance of the business and to optimise the Group's cash
position.
We expect to deliver a fourth consecutive year of Group LFL revenue growth,
with strong constant currency operating profit growth, benefiting from the
changes already made to strengthen the business as well as a slightly more
benign input cost environment. We therefore expect to deliver adjusted
operating profit within the range of current market expectations( 4 (#_ftn4)
). More details on the translational impact of the recent devaluation are
provided on page 13.
4 Consensus adjusted operating profit range of £61.5 to £68.2 million
based on Bloomberg as at 21 September 2023
Announcement regarding Auditor
As previously announced, the Group has been conducting a tender process for
the role of external auditor for the financial year ending 31 May 2024. The
Group is pleased to confirm that PwC has been selected and their appointment
is expected to be proposed to shareholders at the Annual General Meeting in
November.
For further information please contact:
Investors
Simon Whittington - IR and Corporate Development Director +44 (0) 77
1137 2928
Media
Headland PZCussons@headlandconsultancy.com
+44 (0) 20 3805 4822
Susanna Voyle, Stephen Malthouse, Charlie Twigg
Investor and Analyst webcast and conference call
PZ Cussons' management will host a live webcast for analysts and institutional
investors at 10.30am UKT to present the results and provide the opportunity
for Q&A. The webcast is available via the PZ Cussons corporate website
(www.pzcussons.com) and directly at
www.investis-live.com/pzcussons/65096621673c270c0094bd37/olkkq
For those wishing to ask a question, the dial-in details are as follows:
Dial in: +44 20 4587 0498
Access code: 256066
Notes to Editors
About PZ Cussons
PZ Cussons is a FTSE250 listed consumer goods business headquartered in
Manchester, UK. We employ nearly 3,000 people across our operations in Europe,
North America, Asia-Pacific and Africa. Since our founding in 1884, we have
been creating products to delight, care for and nourish consumers. Across our
core categories of Hygiene, Baby and Beauty, our trusted and well-loved brands
include Carex, Childs Farm, Cussons Baby, Imperial Leather, Morning Fresh,
Original Source, Premier, Sanctuary Spa and St. Tropez. Sustainability and the
wellbeing of our employees and communities everywhere are at the heart of our
business model and strategy and captured by our purpose: For everyone, for
life, for good.
Cautionary note regarding forward-looking statements
This announcement contains certain forward-looking statements relating to
expected or anticipated results, performance or events. Such statements are
subject to normal risks associated with the uncertainties in our business,
supply chain and consumer demand, along with risks associated with
macro-economic, political and social factors in the markets in which we
operate. Whilst we believe that the expectations reflected herein are
reasonable based on the information we have as 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.
This announcement contains inside information for immediate release.
GROUP REVIEW
Introduction from our Chief Executive Officer
We are now approaching three years into our strategy and we have continued to
make good progress. We have sought to regain our focus on the consumer while
re-investing in our brands and building capabilities. We are also being
selective about where we should play and how we can win. In doing so, we have
sought to build a higher growth, higher margin, simpler and more sustainable
business.
It is therefore encouraging that we have delivered a third consecutive year of
LFL revenue growth. Our improved gross profit margin compared to FY22 has
also allowed us to invest in marketing and capabilities while broadly
maintaining the Group's adjusted operating profit margin. This progress has
been achieved whilst responding to the well-documented macroeconomic
challenges - absorbing for example approximately £80 million of inflationary
costs over the last three years whilst continuing to meet the needs of the
cost-conscious consumer. While much remains to be done, we have made good
progress to date.
On behalf of the Board, I would like to thank the PZ Cussons teams worldwide
for their continued energy and tenacity in these challenging conditions and
our suppliers and customers for their valued partnership.
Our strategic progress: Building brands for life. Today and for future
generations.
In March 2021, we set out our new strategy: 'Building brands for life. Today
and for future generations.' We defined where we will play, focusing on the
core categories of Hygiene, Baby and Beauty in our four priority markets of
the UK, ANZ, Indonesia and Nigeria, with a particular focus on our Must Win
Brands, using the 'PZ Cussons Growth Wheel' as our repeatable model for
successful execution. Underpinning this strategy, our growth will be enabled
by strengthening our approach to capabilities, talent and leadership, culture
and sustainability. Running through everything we do is a drive to
dramatically reduce complexity across our business.
Our strategy is built upon attractive market and category fundamentals. Our
revenue is split approximately evenly by developing and developed markets,
allowing us to balance the revenue growth typically seen in faster-growing
markets with the more attractive margin profiles in more established markets.
Our brands are 'locally-loved' in their respective categories - benefitting
from local consumer insight and proximity to customers but supported by our
global capabilities and efficiencies. We see significant potential for
long-term market growth with, for example, a £3.5bn market opportunity( 5
(#_ftn5) )( )in Baby personal care across our largest markets with Nigeria
and Indonesia amongst the largest five markets globally for birth rates.
Across our businesses, we are increasingly adopting a position and mindset of
a 'challenger' - bringing scale to compete against smaller, local players and
bringing agility and strong consumer and customer understanding to compete
against larger players.
5 Estimates based upon Euromonitor data
Our strategic progress in FY23
Throughout the year, we made good progress across the key areas of our
strategy:
#1 Build Brands: investing in our brands to drive awareness and loyalty
Following the acquisition of Childs Farm in March 2022, we have sought to
further strengthen the brand in FY23 and, in March, launched 'SlumberTime' -
an innovative three-part range which has been created using sleep-enhancing
technology to aid the sleep of babies as well as their parents. We have also
started to accelerate international expansion, with a launch in the US on
Amazon, whilst strengthening our existing footprint in markets such as the
Middle East. Childs Farm revenue grew 12% in FY23 and we believe we can triple
the brand's revenue over the next five years.
In February, we launched Morning Fresh, our market-leading hand dishwash brand
in Australia, into the auto dishwash category as we seek to take our existing
brands into new category adjacencies. The auto dishwash segment is around
twice the size of the hand-dishwash segment and is growing significantly
faster. Early signs are promising, with strong feedback from key customers in
Australia.
Original Source was launched into the Spanish market for the first time in
July 2023 with a launch campaign focused on Out of Home and social media
activations. The sector in Spain is worth around £300m( 6 (#_ftn6) ) and is
Europe's third largest bath and shower gel market, signalling the strength and
ambition of the brand to continue to grow.
In Nigeria, we launched 'Joy Black', a consumer-insight-led innovation for the
Beauty soap. Establishing a differentiated position in the soap segment and
with a campaign which speaks to local cultural themes, results have been
strong, with revenue growth in the year of over 20%, a doubling of gross
margin and an 11 percentage point increase in consumer awareness.
There remains more to be done to fully maximise the opportunity for a number
of brands however and to understand the brands' responsiveness to promotional
and marketing activity. We continue, for example, to seek to strengthen
St.Tropez's presence in the UK, where it has underperformed compared to the
US, reflecting the brand's positioning and relative historic levels of
investment. Similarly, we have seen more challenging trading in Sanctuary Spa
where, against a difficult category backdrop, the brand's re-staging, whilst
allowing for improvements in price/mix, has fallen short of our first-year
expectations.
More broadly, we continue to strengthen brand-building capabilities across the
organisation, rolling out 3-year brand plans for each of our markets with a
focus on our Must Win Brands and assessing opportunities for geographic and
category expansion. A number of these, such as the Morning Fresh auto dishwash
launch, have already been enacted. Brand Investment increased in FY23 and we
continue to prioritise spending on the highest-returning brands.
6 Euromonitor
#2 Serve consumers: winning where the consumer shops
In Nigeria, we sought to improve overall distribution and customer service
levels, in turn growing consumer penetration by transforming our
route-to-market capabilities, differentiating by region and channel. We have
increased the number of stores we serve directly by nearly 50% compared to
FY22, with priority stores, benefiting from greater focus and a wider range of
products, increasing from 500 to 3,000.
Elsewhere, given Amazon's increasing importance and previously unexploited
opportunity, we have established a cross-category, multi-functional, dedicated
Amazon 'centre of excellence'. The team is focused on driving optimal online
performance, returns on marketing investment and the longer-term strategy
across commercial, supply chain and marketing. We are using Amazon's vast
amount of data to glean consumer insights to better understand our consumers
and how they engage with our brands online. Online represents 9% of revenue
across the Group and we see an opportunity for this to increase over time.
#3 Reduce complexity: simplifying our operations and portfolio to improve
returns and reduce risk
As part of our initiatives to simplify our operations, we have been executing
a number of transformational supply chain projects. During FY23, these
included outsourcing fragrance supply to third parties, the near-shoring of
our procurement function from Singapore to Manchester, and the closure of our
Thai soap factory with corresponding outsourcing. These projects are now
well-progressed and are anticipated to achieve annualised cost savings in the
region of £2-3 million. Moreover, it is anticipated that overall efficiency
and capability within the supply chain will be improved due to these
initiatives.
In September 2023, we announced our intention to buy out and de-list the
minority shareholding of PZ Cussons Nigeria plc. Should the transaction gain
the necessary approvals, we anticipate that it will significantly simplify and
strengthen our business in Africa.
#4 Develop people: investing in our teams to strengthen capabilities
During the year, we made a number of new appointments to strengthen
organisational capabilities. As with earlier investments, we are focused on
bringing together the best external and internal talent. In keeping with this,
we hired a new Chief People Officer and Chief Information Officer - both with
strong experience from senior positions at consumer goods companies - and were
delighted to promote internal talent to the roles of Managing Director in
Indonesia and Nigeria. For the first time in recent history, Indonesian and
Nigerian nationals are leading their respective businesses.
Our annual engagement survey, in which 96% of employees participated, shows
evidence of the progress we are making to strengthen our organisation and
culture due to the changes and investment in recent years. Overall engagement
is at 73% - slightly ahead of the previous year and benchmark. Particularly
pleasing was the 'motivation to go above and beyond' at 76% - an improvement
on last year's survey and six percentage points above benchmark.
Nevertheless, improvements are still being made in providing clarity and
transparency on reward and benefits and clearer career pathways and
opportunities.
#5 Grow sustainably: acting in the right way for long term growth
We are making good progress towards becoming a more sustainable business and
environmental considerations are increasingly considered hand-in-hand with
commercial considerations, evidenced by our continued strength in refills and
the recent launch of bio-degradable wipes in Indonesia.
Specifically, highlights of progress against the sustainability goals which
were established last year include:
- A reduction in virgin plastics in our packaging by 7.8% (vs. 2021
baseline) - an improvement from 5.1% reduction in FY22.
- A 49% reduction in waste sent to landfill (vs. 2021 baseline) - an
improvement from 20% reduction in FY22.
- An increase in certified or recycled paper to 96% (from 49% in
FY22).
- Achievement of carbon neutrality in all operations outside of
Africa.
However, further work remains to be done in this area, both with respect to
achieving the established targets and fully communicating with stakeholders
the progress we are making( 7 (#_ftn7) ).
7 Further detail, including TCFD required disclosures will be provided in
the FY23 Annual Report and Accounts
Serving the cost-conscious consumer
With consumer inflation rates increasing in many of our markets throughout
FY23, a key focus for our teams has been on better serving the cost-conscious
consumer. This has first and foremost been achieved through targeting
efficiencies across our supply chain, as detailed later, reducing the need to
pass through inflation. We have, however, used innovation and our portfolio to
support the consumer at various price points.
In the UK, for example, recognising the growing importance of the discounter
channel in recent years, we developed and launched a new Portfolio Brand,
Cussons Creations, in June 2022. Set at a value price point, this launch has
allowed us to replace a number of the Imperial Leather SKUs, which played at a
similar price. The launch has been positive, allowing us to grow the combined
revenue of Cussons Creations and Imperial Leather for the first time in recent
history, growing combined market share and distribution points whilst
positioning Imperial Leather as a more premium brand.
In Kenya, we have taken the opportunity to relaunch Flamingo - a Portfolio
brand with a strong heritage targeting the value consumer, which has lacked
attention in recent years. As part of the relaunch, like Imperial Leather, we
have been successful in growing the brand for the first time in several years,
achieving over 50% revenue growth as we have increased both volumes and
pricing whilst maintaining competitive pricing relative to peers.
In Indonesia, the launch of a smaller 55ml pack size of Cussons Baby Hair and
Body Wash has allowed us to reduce the absolute price point, enabling
Indonesian parents to continue to access high-quality bathing products for
their babies despite a significant reduction in disposable income.
Near-term priorities
As we look into FY24, we have established four priorities for the business for
the next 12 months, seeking to balance addressing immediate challenges whilst
setting the business up well for long-term success. The priorities are:
1. Continue to simplify and strengthen our business in Nigeria.
2. Return the UK market to sustainable, profitable growth.
3. Accelerate brand growth in and beyond the core portfolio.
4. Continue to transform organisational capabilities.
In the long term, we are building a higher growth, higher margin, simpler and
more sustainable business. We maintain our LFL revenue growth ambition of
mid-single-digits and our ambition for adjusted operating profit margins in
the mid-teens.
Summary
In summary, we have continued to make good strategic progress, with a third
year of consecutive LFL revenue growth, delivering on expectations despite the
significant external challenges of cost inflation and pressures on consumer
spending. There is more to do as we seek to maximise the company's full
potential, and there are well-documented challenges to be navigated in
Nigeria. However, we continue to believe that we can build a higher growth,
higher margin, simpler and more sustainable business.
FINANCIAL REVIEW
Overview of Group financial performance
We have delivered a solid financial performance in the context of ongoing
external volatility and uncertainty. Input cost inflation remained high for
much of the year, with approximately £80 million of total inflation over the
last three years, and consumer spending remained under pressure in most of our
markets. Against this backdrop, we have managed to broadly maintain our
adjusted operating profit margin in FY23, as higher gross profits were
invested behind strategic capabilities and Brand Investment.
Revenue grew 10.7%. This was driven by LFL revenue growth of 6.1% (£36.9
million), which reflected price/mix growth of 12.1% and volume declines of
6.0%. Childs Farm, which was acquired in March 2022, contributed £10.9
million to revenue growth, and translational FX movements, reflecting a
weakening of sterling against most reporting currencies, contributed £15.7
million. We saw growth in most of our Must Win Brands, with Carex, Sanctuary
Spa and Cussons Baby declining during the year. LFL revenue growth in the
fourth quarter of the year was 6.7%, driven by an 11.2% improvement in
price/mix and a 4.5% decline in volume.
Adjusted operating profit margin declined by 10bps as a combination of
successful innovation, RGM activity and productivity initiatives drove a gross
profit margin increase of 80bps, funding investment in capabilities. Adjusted
EPS declined by 10.7% as 12.6% growth in adjusted profit before tax was more
than offset by an increased tax charge and an increased non-controlling
interest, each reflecting the growth in operating profit in our Nigerian
business. On a statutory basis, the operating margin declined 200bps due to
the increased investment in transformation costs and the impairment of
Sanctuary Spa (see note 3), leading to a decline in EPS from continuing
operations of 26.8%.
Cash flow remained strong, with free cash flow of £69.9 million (FY22: £58.0
million) primarily driven by improved working capital. Our adjusted net cash
was £5.7 million. This includes cash of approximately £200 million within
Nigerian entities which has been built up as a result of the challenges in
repatriating cash outside of the country( 8 (#_ftn8) ). The Board have
recommended a final dividend of 3.73p, which is unchanged on the prior year,
reflecting the material adverse impact the devaluation of the Naira is
expected to have on the near-term reported financial performance.
In preparing the Group financial statements for the year ended 31 May 2023,
management identified prior year adjustments relating to accounting for
impairment on capitalised software in 2020 and the acquisition of Childs Farm.
These adjustments result in a £0.6 million increase in total assets and a
£0.6 million reduction in profit for FY22. Further information on the nature
of these items is provided in note 1.
8 Based on the 31 May 2023 balance sheet NGN/GBP rate of NGN577
Performance by geography
Europe and the Americas (31.4% of FY23 Group revenue)
£m, unless otherwise stated FY23 FY22 Reported growth/ (decline) (%)
Revenue 205.8 193.0 6.6%
LFL revenue growth (0.5)% (12.3)% n/a
Adjusted operating profit 29.3 35.0 (16.3)%
Margin 14.2% 18.1% (390)bps
Operating profit 0.4 22.9 (98.3)%
Margin 0.2% 11.9% (1,170)bps
Revenue grew 6.6%, driven by £10.9 million revenue contribution from the
acquisition of Childs Farm and favourable foreign exchange movements, more
than offsetting a 0.5% LFL decline in revenue, which was driven principally by
a decline in Carex. LFL revenue growth improved materially in the second half
of the year, reflecting price/mix action taken earlier in the year and
improved volume trends in most of the brands.
The UK washing and bathing category - the largest category in Europe and the
Americas - declined in value terms by 3%( 9 (#_ftn9) ) in the year as
consumers sought to reduce spending against high inflation and squeezed
household budgets. Within the category, the hand hygiene and bath segments
were down, while we saw good growth in shower and bar soap.
Reflecting these underlying trends, Sanctuary Spa saw revenue decline as the
re-staging of the brand fell below our expectations. Carex hand sanitiser
volumes fell significantly, but revenue trends improved in the second half of
the year.
We saw very strong, volume-driven revenue growth in Original Source as it took
share in the shower category. This performance was driven by its successful
'360' marketing throughout the year, incorporating digital and out-of-home
activity, building on the success of last year's TV campaign and funded by
increased overall Brand Investment. Following the successful re-staging of
Imperial Leather, together with the launch of our new value brand Cussons
Creations, the two brands combined grew revenue compared to Imperial Leather
alone last year and represents the first year of growth for the brand in a
number of years, with gains in both market share and distribution points.
Total St.Tropez revenue grew strongly, driven by significant share gains in
the US following a launch of the Luxe Serum innovation in February, supported
by our brand ambassador Ashley Graham and which created a wider halo effect
for the brand in the second half of the year. The US also continued to benefit
from the distribution gains made during FY22. Trading in the UK was, however,
more challenging.
Childs Farm revenue grew 12% in the first full year of our ownership. This has
been driven by a renewed focus on the brand proposition, innovation such as
SlumberTime and increased distribution in the UK, which has increased by over
20% since acquisition.
Following a significant decline in the first half of the year, the adjusted
operating profit margin improved in the second half of the year, resulting in
a decline of 390bps for the year as a whole. This reflected the full-period
effect of price/mix actions taken in the first half of the year, lower levels
of cost inflation and more normalised Brand Investment. The margin was also
lower as a result of the contribution of Childs Farm which, reflecting its
investment phase, was slightly loss-making during the year. On a statutory
basis, the operating profit margin declined by 1,170bps primarily as a result
of the Sanctuary Spa impairment.
9 Aggregated IRI and Kantar data for the 52 weeks ended 10 June 2023
Asia Pacific (29.1% of FY23 Group revenue)
£m, unless otherwise stated FY23 FY22 Reported growth/ (decline) (%)
Revenue 190.7 173.8 9.7%
LFL revenue growth (%) 4.4% 3.0% n/a
Adjusted operating profit 27.5 20.9 31.6%
Margin (%) 14.4% 12.0% 240bps
Operating profit 29.6 37.0 (20.0)%
Margin (%) 15.5% 21.3% (580)bps
Revenue grew 9.7% as a result of LFL growth of 4.4% and favourable movements
in foreign exchange. LFL revenue growth was driven by double-digit price/mix
improvements.
In Hygiene, Morning Fresh extended its leadership position in hand dishwash in
Australia with a value market share remaining around 50% due to continued
investment in brand equity and innovation( 10 (#_ftn10) ). During the year,
we launched Morning Fresh into the auto dishwash category and successfully
secured distribution in the two largest grocery retailers which together
comprise approximately 80% of the market. Early market share data has been
favourable and we are building plans for further marketing activity over the
coming months. Radiant, a Portfolio Brand, also increased its market share
with very strong growth in both volume and price/mix, with strong growth from
innovation with a new capsules product.
Rafferty's Garden revenue grew double-digits with price/mix and volume
increases. The brand increased its value market share by nearly two percentage
points in the year, remaining the clear market leader in the category( 11
(#_ftn11) ).
Cussons Baby Indonesia declined as consumers reduced spending on certain
discretionary items, given the squeeze on household budgets resulting from the
government's lifting of fuel subsidies in August 2022. Revenue performance
became more challenging throughout the year as lower consumer demand resulted
in gradual de-stocking. Competition from local players intensified throughout
the year, while we elected to continue our focus on growing the higher margin
baby toiletry sub-categories such as oils, lotions and creams.
The planned reduction in low-margin, by-product sales to third parties reduced
APAC revenue growth by approximately one percentage point.
Adjusted operating margin grew by 240bps, reflecting strong price/mix growth
and careful cost containment across the business. On a statutory basis,
margins declined by 580bps due to the non-recurrence of profit on disposal of
five:am and compensation received from the Australian Competition &
Consumer Commission relating to a historical legal claim.
10 Nielsen data 12 months to 15.06.23
11 Nielsen data 12 months to 15.06.23
Africa (39.1% of FY23 Group revenue)
£m, unless otherwise stated FY23 FY22 Reported growth (%)
Revenue 256.3 222.0 15.5%
LFL revenue growth (%) 13.4% 22.3% n/a
Adjusted operating profit 37.2 22.3 66.8%
Margin (%) 14.5% 10.0% 450bps
Operating profit 48.3 28.6 68.9%
Margin (%) 18.8% 12.9% 590bps
Revenue grew 15.5%, primarily due to LFL growth of 13.4%. LFL revenue was
driven by price/mix improvements of over 20%, with several waves of price
increases throughout the year, reflecting the inflationary environment in
Nigeria and Ghana. FX movements supported overall revenue growth, reflecting
the stronger Naira for most of the year.
Across the Nigerian portfolio, we have continued to benefit from the
transformation of our Route to Market approach in recent years. We have sought
to optimise the SKUs by region and channel, and over the past year have
increased by nearly 50% the number of stores served directly or through our
distributors.
Each of our major brands reported double-digit LFL revenue growth. Premier and
Joy each saw good growth due to innovation, with their 'Black' variants - with
natural, African ingredients and strong links to heritage - performing
particularly well. Flamingo, an important Portfolio Brand in Kenya, also grew
strongly following a re-launch, with revenue up over 50%.
Cussons Baby grew strongly, as we continue to recruit new parents through our
programmes within hospitals, through growth in the rapidly growing baby store
channel and due to several innovations in the wipes portfolio.
Our electricals business revenue grew over 10% on an LFL basis, contributing
revenue of £105.4 million. Gross margins improved as we continued to
prioritise growth in profitability over growth in volumes. As a Portfolio
Brand, we reduced our Brand Investment in the electricals business in the year
and plan to reduce this further in FY24 to fund higher-priority brands in core
categories.
Adjusted operating profit margin grew by 450bps, representing a third
consecutive year of continued profit improvement. This was achieved through
successful price/mix improvements and a continued focus on optimising product
mix despite strong cost inflation. On a statutory basis, the operating profit
margin increased by 590bps due to the gains on property disposals.
Other financial items
Adjusted operating profit
Adjusted operating profit for the Group was £73.3 million, which compares to
£67.1 million in the prior period (as restated). The adjusted operating
profit margin decreased by 10bps to 11.2%. Excluding Childs Farm, the margin
would have improved compared to the prior year.
The gross profit margin increased by 80bps to 39.2%. This reflects the
benefits of productivity initiatives and price/mix improvements, which more
than offset underlying inflation in input costs, as well as an adverse
geographic mix effect, which is the result of our lower margin business in
Africa growing more strongly than the wider Group. Brand Investment increased
in FY23 but decreased as a percentage of revenue by 20bps, reflecting a
planned normalisation of the investment in Carex. Overheads increased by 100ps
as a percentage of revenue as we continue to invest in capabilities. PZ
Wilmar, our joint venture, performed strongly and contributed £7.5 million to
operating profit.
Adjusting items
Adjusting items in the year totalled a net expense of £12.3 million before
tax. This included a net £2.9 million expense associated with our ongoing
transformation programmes and a £16.5 million impairment charge of the
Sanctuary Spa brand offset by a £4.2 million reversal of a prior period
impairment of the Rafferty's Garden brand. See note 3 for further details on
adjusting items.
After accounting for these adjusting items, operating profit decreased 9.3% to
£59.7 million.
Net finance costs
Adjusted net finance income was £0.8 million, compared to a cost of £1.3
million in the prior year, as higher interest income on Naira cash deposits
more than offset an increase in interest payable on largely-UK borrowings.
Within finance income was £1.3 million for the reduction in the deferred
consideration liability for the Childs Farm acquisition, which was classified
as an adjusting item.
Taxation
The tax charge on adjusted profit before tax for the year was £20.1 million,
representing an effective tax rate of 27.1% (FY22: 19.5%). The increase in the
effective tax rate was primarily due to the mix of profits, with Africa and
Australia, each with higher tax rates, growing faster than the wider Group.
The tax charge on statutory profit before tax was £15.4 million.
Profit after tax
Statutory profit for the year from continuing operations was £46.4 million,
compared to £51.4 million in the prior year. Adjusted basic earnings per
share were 11.23p compared to 12.57p in the prior year. This represents a
decline of 10.7% due primarily to the higher tax charge and the increase in
non-controlling interests, each the result of the improved profitability in
Nigeria. Basic earnings per share for continuing operations on a statutory
basis were 8.70p compared to 11.88p.
Balance sheet and cash flow
Adjusted net cash as of 31 May 2023 was £5.7 million (FY22: adjusted net debt
of £9.8 million), including cash and cash equivalents of just over £200
million denominated in Nigerian Naira( 12 (#_ftn12) ). The increase was
driven principally by cash generated from operations of £76.6 million, £14.4
million proceeds received from the disposal of non-core assets in Nigeria,
£11.8 million of interest received on principally Naira-denominated deposits
offset by £29.4 million of dividends paid and a £19.3 million adverse
foreign exchange movement. Net assets of £422.1 million compared to £448.9
million in the prior period as a result of the increase in currency
translation reserve and reduction in retained earnings.
The Group is funded by a £325 million credit facility, which was refinanced
during the year with a term of up to 2028. As at 31 May 2023, the Group had
drawn £125 million of the term loan under the facility and £127 million
under the revolving credit facility, for a total of £252 million. At 31 May
2022, drawings were under the previous credit facility and amounted to £174
million.
Total free cash flow was £69.9 million (FY22: £58.0 million) due to an
improvement in cash generated from operations, driven by higher operating
profit, and reduced working capital.
12 Based on the balance sheet NGN/GBP rate of NGN577
Dividend
In light of the recent devaluation of the Naira, which is expected to
adversely affect the Group's financial results in FY24, the Board is
recommending a final dividend of 3.73 pence which is unchanged on the previous
year. This represents a total dividend for FY23 of 6.40p. Subject to approval
at the AGM, which will be held on 23 November 2023, the final dividend will be
paid on 30 November 2023 to shareholders on the register at the close of
business on 2 November 2023.
Foreign exchange
The general weakening of Sterling against our other currencies resulted in a
£15.7 million uplift to FY23 revenue, as set out below.
% of FY23 revenue Average FX rates Revenue impact (£m)
FY22 FY23
GBP 27% 1.00 1.00 -
NGN 35% 558 536 8.0
AUD 14% 1.84 1.78 2.7
IDR 11% 19,331 18,174 4.7
USD 7% 1.35 1.20 4.2
Other 6% - - (3.9)
Total( 13 (#_ftn13) ) 100% - - 15.7
13 Table shows the impact of translating FY22 revenue at FY23 foreign
exchange rates
Impact of Naira devaluation and FY24 modelling considerations
We made an announcement on 27 June 2023 regarding impact of the Naira
devaluation which took place in June. To provide a further illustration of
this matter, we calculate that if our profits in the year to 31 May 2023 had
been translated to Sterling at the average rate between July and August 2023
as opposed to the average rate for FY23, the Group's adjusted operating profit
would have been £14.7 million lower, as detailed below.
£m, unless otherwise stated At reported FX rates As at July/August average rates( 14 (#_ftn14) ) Difference
Group adjusted operating profit 73.3 58.6 (14.7)
Group cash and equivalents 256.4 174.6 (81.8)
Africa revenue 256.3 153.6 (102.7)
Africa adjusted operating profit 37.2 22.5 (14.7)
14 Tables shows only the translational impact of the devaluation of the
Naira
In addition, the following effects of the devaluation of the Naira are also
expected:
· Group net interest charge in FY24 is likely to be higher, reflecting
lower levels of interest earned in Nigeria.
· The Group's ETR and non-controlling interest in FY24 are, all else
being equal, expected to be lower.
The recently announced offer to buy out our Nigerian entity minorities and
de-list the business there, which is subject to approval by shareholders in
the Nigerian listed entity, is expected to benefit the Group from FY25
onwards. The transaction is expected to provide strategic and operational
benefits, as well as being earnings accretive as a result of the reduction in
the non-controlling interest.
Further guidance on these items will be provided in due course.
GLOSSARY
Term Definition
Adjusted net cash/debt Cash, short-term deposits and current asset investments, less bank overdrafts
and borrowings. Excludes IFRS 16 lease liabilities
B Corp A B Corp is a company that has been certified by the non-profit organisation B
Lab as meeting rigorous standards of environmental, social and governance
performance, accountability and transparency.
Brand Investment An operating cost related to brand marketing (previously 'Media &
Consumer')
EBITDA Earnings before interest, taxes, depreciation and amortisation
Employee wellbeing % score based upon a set of questions within our annual survey of employees
ETR Effective tax rate
Free cash flow Cash generated from operations less capital expenditure
Free cash flow conversion Free cash flow as a % of adjusted EBITDA from continuing operations
Like for like ('LFL') Growth on the prior year at constant currency, excluding the impact of
disposals and acquisitions, and adjusting for the number of reporting days in
the period
Must Win Brands The brands in which we place greater investment and focus. They comprise of
Carex, Childs Farm (acquired in March 2022), Cussons Baby, Joy, Morning Fresh,
Original Source, Premier, Sanctuary Spa and St.Tropez
Portfolio Brands The brands we operate which are not Must Win Brands
PZ Cussons Growth Wheel Our 'repeatable model' for driving commercial execution, comprising
'Consumability', 'Attractiveness', 'Shoppability' and 'Memorability'
Revenue Growth Management ('RGM') Maximising revenue through ensuring optimised price points across customers
and channels and different product sizes
SKUs Stock keeping unit
Through the Line Marketing campaign incorporating both mass reach and targeted activity
ALTERNATIVE PERFORMANCE MEASURES
The Group's business performance is assessed using a number of Alternative
Performance Measures (APMs). These APMs include adjusted profitability
measures where results are presented excluding separately disclosed items
(referred to as adjusting items) as we believe this provides both management
and investors with useful additional information about the Group's performance
and supports a more effective comparison of the Group's financial performance
from one period to the next.
Adjusted profitability measures are reconciled to IFRS results on the face of
the consolidated income statement, with details of adjusting items provided in
note 3 to the consolidated financial statements. Reconciliations between APMs
and IFRS reported results are set out below:
Adjusted operating profit and adjusted operating margin
2023 2022
(restated*)
£m £m
Group
Operating profit from continuing operations 59.7 65.8
exclude: adjusting items 13.6 1.3
Adjusted operating profit 73.3 67.1
Revenue 656.3 592.8
Operating margin 9.1% 11.1%
Adjusted operating margin 11.2% 11.3%
By segment
Europe & the Americas:
Operating profit from continuing operations 0.4 22.9
exclude: adjusting items 28.9 12.1
Adjusted operating profit 29.3 35.0
Revenue 205.8 193.0
Operating margin 0.2% 11.9%
Adjusted operating margin 14.2% 18.1%
Asia Pacific:
Operating profit from continuing operations 29.6 37.0
exclude: adjusting items (2.1) (16.1)
Adjusted operating profit 27.5 20.9
Revenue 190.7 173.8
Operating margin 15.5% 21.3%
Adjusted operating margin 14.4% 12.0%
Africa:
Operating profit from continuing operations 48.3 28.6
exclude: adjusting items (11.1) (6.3)
Adjusted operating profit 37.2 22.3
Revenue 256.3 222.0
Operating margin 18.8% 12.9%
Adjusted operating margin 14.5% 10.0%
Central
Operating loss from continuing operations (18.6) (22.7)
exclude: adjusting items (2.1) 11.6
Adjusted operating loss (20.7) (11.1)
* Certain figures for the year ended 31 May 2022 have been restated.
Refer to note 1 (c) of the Group consolidated financial statements for
details.
Adjusted profit before taxation
2023 2022
(restated*)
£m £m
Profit before taxation from continuing operations 61.8 64.5
exclude: adjusting items 12.3 1.3
Adjusted profit before taxation 74.1 65.8
Adjusted Earnings Before Interest Depreciation and Amortisation ("Adjusted
EBITDA")
2023 2022
(restated*)
£m £m
Profit before taxation from continuing operations 61.8 64.5
(deduct)/add back: net finance (income)/costs (2.1) 1.3
add back: depreciation 12.1 12.8
add back: amortisation 7.0 7.4
add back: impairment and impairment reversal 12.3 9.0
91.1 95.0
exclude: adjusting items** 1.3 (7.7)
Adjusted EBITDA 92.4 87.3
* Certain figures for the year ended 31 May 2022 have been restated.
Refer to note 1 (c) of the Group consolidated financial statements for
details.
** Excludes adjusting items relating to depreciation, amortisation,
impairments and impairment reversals.
Adjusted earnings per share
2023 2022
pence (restated*)
pence
Total
Basic earnings per share 8.70 11.45
exclude: adjusting items 2.53 0.69
Adjusted basic earnings per share 11.23 12.14
Diluted earnings per share 8.67 11.38
exclude: adjusting items 2.52 0.69
Adjusted diluted earnings per share 11.19 12.07
From continuing operations
Basic earnings per share 8.70 11.88
exclude: adjusting items 2.53 0.69
Adjusted basic earnings per share 11.23 12.57
Diluted earnings per share 8.67 11.81
exclude: adjusting items 2.52 0.69
Adjusted diluted earnings per share 11.19 12.50
* Certain figures for the year ended 31 May 2022 have been restated.
Refer to note 1 (c) of the Group consolidated financial statements for
details.
Alternative Performance Measures (continued)
Adjusted net cash/(debt)
At At
31 May 31 May
2023 2022
£m £m
Cash at bank and in hand 127.4 105.8
Short-term deposits 129.0 58.0
Overdrafts - (0.1)
Cash and cash equivalents 256.4 163.7
Current asset investments 0.5 0.5
Non-current borrowings (251.2) (174.0)
Adjusted net cash/(debt) and cash equivalents 5.7 (9.8)
Free cash flow
2023 2022
£m £m
Cash generated from operations 76.6 66.2
deduct: purchase of property, plant and equipment and software (6.7) (8.2)
Free cash flow 69.9 58.0
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MAY 2023
2023 2022 (restated)
Business Business
performance performance
excluding Adjusting excluding Adjusting
adjusting items Statutory adjusting items Statutory
items (note 3) results items (note 3) results
Notes £m £m £m £m £m £m
Continuing operations
Revenue 2 656.3 - 656.3 592.8 - 592.8
Cost of sales (399.0) - (399.0) (365.3) - (365.3)
Gross profit 257.3 - 257.3 227.5 - 227.5
Selling and distribution costs (105.3) - (105.3) (90.3) - (90.3)
Administrative expenses (86.2) (13.6) (99.8) (76.7) (1.3) (78.0)
Share of results of joint ventures 7.5 - 7.5 6.6 - 6.6
Operating profit 2 73.3 (13.6) 59.7 67.1 (1.3) 65.8
Finance income 14.1 1.3 15.4 2.7 - 2.7
Finance costs (13.3) - (13.3) (4.0) - (4.0)
Net finance income/(costs) 0.8 1.3 2.1 (1.3) - (1.3)
Profit before taxation 74.1 (12.3) 61.8 65.8 (1.3) 64.5
Taxation 4 (20.1) 4.7 (15.4) (12.8) (0.3) (13.1)
Profit for the year from continuing operations 54.0 (7.6) 46.4 53.0 (1.6) 51.4
Discontinued operations
Loss from discontinued operations - - - (1.8) - (1.8)
Profit for the year 54.0 (7.6) 46.4 51.2 (1.6) 49.6
Attributable to:
Owners of the Parent 47.0 (10.6) 36.4 50.8 (2.9) 47.9
Non-controlling interests 7.0 3.0 10.0 0.4 1.3 1.7
54.0 (7.6) 46.4 51.2 (1.6) 49.6
Earnings per share for continuing and discontinued operations pence pence pence pence pence pence
Basic earnings per share 6 11.23 (2.53) 8.70 12.14 (0.69) 11.45
Diluted earnings per share 6 11.19 (2.52) 8.67 12.07 (0.69) 11.38
Earnings per share for continuing operations
Basic earnings per share 6 11.23 (2.53) 8.70 12.57 (0.69) 11.88
Diluted earnings per share 6 11.19 (2.52) 8.67 12.50 (0.69) 11.81
Refer to note 1 for details of the prior year restatements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MAY 2023
2023 2022
(restated)
£m £m
Profit for the year 46.4 49.6
Other comprehensive (expense)/income
Items that will not be reclassified subsequently to profit or loss
Remeasurement of retirement and other long-term employee benefit obligations (32.8) 37.4
Deferred tax charge on remeasurement of retirement and other long-term benefit 7.4 (8.4)
obligations
Total items that will not be reclassified to profit or loss (25.4) 29.0
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations (21.7) 21.7
Cash flow hedges - fair value movements net of amounts reclassified 0.4 0.2
Reclassification of exchange differences on repayment of permanent as equity - (2.7)
loans (net of taxation)
Reclassification of reserves on disposals - 0.1
Total items that may be reclassified subsequently to profit or loss (21.3) 19.3
Other comprehensive (expense)/income for the year net of taxation (46.7) 48.3
Total comprehensive (expense)/income for the year (0.3) 97.9
Attributable to:
Owners of the Parent (6.9) 94.3
Non-controlling interests 6.6 3.6
(0.3) 97.9
Refer to note 1 for details of the prior year restatements.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 31 MAY 2023
2023 2022 2021
(restated) (restated)
Notes £m £m £m
Assets
Non-current assets
Goodwill and other intangible assets 7 312.7 333.9 293.6
Property, plant and equipment 74.3 82.9 91.5
Right-of-use assets 12.5 16.9 11.7
Net investments in joint ventures 52.0 45.4 34.2
Deferred tax assets 7.5 4.5 5.9
Current tax receivable - 1.2 1.7
Retirement benefit surplus 38.5 69.3 33.6
497.5 554.1 472.2
Current assets
Inventories 112.9 111.8 91.1
Trade and other receivables 119.1 105.0 110.7
Derivative financial assets 1.0 0.7 1.0
Current tax receivable 1.0 2.6 15.3
Current asset investments 0.5 0.5 0.3
Cash and cash equivalents 8 256.4 163.8 87.0
490.9 384.4 305.4
Assets held for sale - 3.4 7.6
490.9 387.8 313.0
Total assets 988.4 941.9 785.2
Equity
Share capital 4.3 4.3 4.3
Own shares (36.9) (40.0) (40.0)
Capital redemption reserve 0.7 0.7 0.7
Hedging reserve 0.2 (0.2) (0.4)
Currency translation reserve (89.0) (69.2) (87.4)
Retained earnings 511.7 528.5 478.1
Other reserves 4.6 2.9 0.9
Attributable to owners of the Parent 395.6 427.0 356.2
Non-controlling interests 26.5 21.9 18.8
Total equity 422.1 448.9 375.0
Liabilities
Non-current liabilities
Borrowings 8 251.2 174.0 118.0
Other payables 4.1 4.5 0.3
Lease liabilities 11.3 14.0 8.7
Deferred tax liabilities 76.9 91.7 74.2
Retirement and other long-term employee benefit obligations 12.4 13.1 12.9
355.9 297.3 214.1
Current liabilities
Borrowings 8 - 0.1 -
Trade and other payables 182.2 163.9 150.9
Lease liabilities 1.7 2.9 3.1
Derivative financial liabilities 0.5 1.6 0.8
Current taxation payable 25.6 21.6 35.2
Provisions 0.4 5.6 5.6
210.4 195.7 195.6
Liabilities directly associated with assets held for sale - - 0.5
210.4 195.7 196.1
Total liabilities 566.3 493.0 410.2
Total equity and liabilities 988.4 941.9 785.2
Refer to note 1 for details of the prior year restatements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MAY 2023
Attributable to owners of the Parent
Capital Currency Non-
Share Own redemption Hedging translation Retained Other controlling
capital Shares reserve reserve reserve earnings reserves interests Total
Notes £m £m £m £m £m £m £m £m £m
As at 1 June 2021 - as previously reported 4.3 (40.0) 0.7 (0.4) (87.4) 474.6 0.9 18.8 371.5
Effect of prior year adjustments 1 - - - - - 3.5 - - 3.5
As at 1 June 2021 - as restated 4.3 (40.0) 0.7 (0.4) (87.4) 478.1 0.9 18.8 375.0
Profit for the year - as restated - - - - - 47.9 - 1.7 49.6
Other comprehensive income - - - 0.2 18.2 28.0 - 1.9 48.3
Total comprehensive income for the year - - - 0.2 18.2 75.9 - 3.6 97.9
Transactions with owners:
Ordinary dividends 5 - - - - - (25.5) - - (25.5)
Share-based payment expense - - - - - - 2.0 - 2.0
Dividends relating to non-controlling interests - - - - - - - (0.5) (0.5)
Total transactions with owners recognised directly in equity - - - - - (25.5) 2.0 (0.5) (24.0)
As at 31 May 2022 4.3 (40.0) 0.7 (0.2) (69.2) 528.5 2.9 21.9 448.9
As 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
Transfer between reserves 1 - - - - (1.5) 1.5 - - -
Other comprehensive (expense)/income - - - 0.4 (18.3) (25.4) - (3.4) (46.7)
Total comprehensive (expense)/income for the year - - - 0.4 (19.8) 12.5 - 6.6 (0.3)
Transactions with owners:
Ordinary dividends 5 - - - - - (26.8) - - (26.8)
Share-based payment expense - - - - - - 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)
As at 31 May 2023 4.3 (36.9) 0.7 0.2 (89.0) 511.7 4.6 26.5 422.1
Refer to note 1 for details of the prior year restatements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MAY 2023
2023 2022
Notes £m £m
Cash flows from operating activities
Cash generated from operations 9 76.6 66.2
Interest paid (11.8) (3.5)
Taxation paid (15.6) (12.3)
Net cash generated from operating activities 49.2 50.4
Cash flows from investing activities
Interest received 11.8 2.6
Investment income received - 0.1
Purchase of property, plant and equipment and software (6.7) (8.2)
Proceeds from disposal of plant, property and equipment 14.4 18.6
Proceeds from disposal of businesses - 6.4
Acquisition of subsidiary - (33.6)
Loans advanced to joint venture (11.2) (12.6)
Loan repayments from joint venture 11.2 21.0
Net cash generated from/(used in) investing activities 19.5 (5.7)
Cash flows from financing activities
Dividends paid to Company shareholders 5 (26.8) (25.5)
Dividends paid to non-controlling interests (2.6) (0.5)
Proceeds from loans by joint venture - 0.6
Repayment of lease liabilities (2.5) (4.0)
Repayment of loans and borrowings facility 8 (205.0) -
Proceeds from loan and borrowings facility 8 283.0 56.0
Financing fees paid on committed credit facility (2.8) -
Net cash generated from financing activities 43.3 26.6
Net increase in cash and cash equivalents 112.0 71.3
Effect of foreign exchange rates 8 (19.3) 5.4
Cash and cash equivalents at the beginning of the year 8 163.7 87.0
Cash and cash equivalents at the end of the year 8 256.4 163.7
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
General information
The financial information in this announcement does not constitute the Group's
statutory accounts for the year ended 31 May 2023 or 31 May 2022. Statutory
accounts for 31 May 2022 have been delivered to the Registrar of Companies.
The auditors have reported on those accounts; their report was unqualified,
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and did not
contain a statement under section 498(2) or (3) of the Companies Act 2006. The
audit of the statutory accounts for the year ended 31 May 2022 is not yet
complete. These accounts for the year ended 31 May 2023 will be delivered to
the Registrar of Companies following the company's annual general meeting.
1. Accounting policies
While the financial information in this preliminary announcement has been
computed in accordance with IFRS, this announcement does not itself contain
sufficient information to comply with IFRS.
The consolidated financial statements have been prepared in accordance with
international accounting standards in conformity with the requirements of the
Companies Act 2006.
The preparation of financial statements, in conformity with IFRSs, requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting year. Although
these estimates are based on management's best knowledge of the amount, event
or actions, actual results ultimately may differ from those estimates.
The Group's business activities, together with the factors likely to affect
its future development, performance and position will be set out in the
Business Review section of the Strategic Report in the full annual report and
accounts. The financial position of the Group and liquidity position will be
described within the Financial Review section of the Strategic Report in the
full annual report and accounts. In addition, note 17 to the consolidated
financial statements in the full annual report and accounts includes the
Group's objectives and policies for managing its capital; its financial risk
management objectives; its exposures to market risk, credit risk and liquidity
risk; and details of its financial instruments and hedging activities.
After making enquiries, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for a period
of at least 12 months from the date of approving the consolidated financial
statements and that, therefore, it is appropriate to adopt the going concern
basis in preparing the consolidated financial statements for the year ended 31
May 2023.
The consolidated financial statements have been prepared using consistent
accounting policies except as stated below.
(a) New and amended accounting standards adopted by the Group
The following amendments to existing standards have been applied for the first
time in the year ended 31 May 2023:
· Amendments to IAS 16 'Plant, Property & Equipment' - Proceeds
before Intended Use
· Amendments to IFRS 3 'Business Combinations' - Reference to the
Conceptual Framework
· Amendments to IAS 37 'Provisions, Contingent Liabilities and
Contingent Assets' - Onerous Contracts - Costs of Fulfilling a Contract
· Annual Improvements to IFRS Standards 2018-2020
· Amendments to IAS 1 'Presentation of Financial Statements' -
Non-Current Liabilities with Covenants
The adoption of the new accounting standards and interpretations listed above
has not led to any changes to the Group's accounting policies or had any other
material impact on the financial position or performance of the Group.
Corrections of errors
In preparing these consolidated financial statements management identified
errors relating to transactions reported in prior periods. In accordance with
IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' these
errors have been corrected by restatement of previously reported figures as
described below.
Intangible asset impairment - in the year ended 31 May 2020 a number of
businesses were disposed of by the Group, resulting in the recognition of a
£6.3 million impairment charge in relation to capitalised software. The
accounting treatment of these impairments has subsequently been reviewed and
determined to be not in accordance with IAS 36 'Impairment of Assets'. The
effects of correcting for this error are to increase the previously reported
carrying value of intangible assets on the consolidated balance sheet by £4.7
million as at 1 June 2021 with a corresponding increase in the deferred tax
liability of £1.2 million, and to recognise a £0.8 million amortisation
charge within previously reported administrative expenses in the consolidated
income statement for the year ended 31 May 2022, with a corresponding £0.2
million decrease in the taxation charge.
Childs Farm business combination - in March 2022, the Group acquired Childs
Farm. The non-controlling interest of £3.3 million recognised on the business
combination has subsequently been reviewed and determined to be not in
accordance with IFRS 3 'Business Combinations'. The effect of correcting for
this error is to reduce each of the previously reported carrying values of
goodwill and non-controlling interests on the consolidated balance sheet by
£3.3 million as at 31 May 2022. There is no impact on the previously reported
consolidated income statement.
The impact on the consolidated balance sheets and consolidated income
statement of restating previously reported figures for the items described is
set out in the tables below:
As at 31 May 2021
As Intangible
previously reported asset As
£m impairment restated
£m £m
Consolidated balance sheet
Goodwill and other intangible assets 288.9 4.7 293.6
Total assets 780.5 4.7 785.2
Retained earnings (474.6) (3.5) (478.1)
Deferred taxation liabilities (73.0) (1.2) (74.2)
Total equity and liabilities (780.5) (4.7) (785.2)
As at, and for the year ended, 31 May 2022 Childs
As Intangible Farm
previously reported asset business combination As
£m impairment £m restated
£m £m
Consolidated income statement
Administrative expenses (77.2) (0.8) - (78.0)
Profit before taxation 65.3 (0.8) - 64.5
Taxation (13.3) 0.2 - (13.1)
Profit for the year from continuing operations 52.0 (0.6) - 51.4
Profit for the year 50.2 (0.6) - 49.6
Consolidated balance sheet
Goodwill and other intangible assets 333.3 3.9 (3.3) 333.9
Total assets 941.3 3.9 (3.3) 941.9
Retained earnings (525.6) (2.9) - (528.5)
Non-controlling interests (25.2) - 3.3 (21.9)
Deferred taxation liabilities (90.7) (1.0) - (91.7)
Total equity and liabilities (941.3) (3.9) 3.3 (941.9)
2. Segmental analysis
The segmental information presented in this note is consistent with management
reporting provided to the Executive Leadership Team (ELT), which is the Chief
Operating Decision Maker (CODM). The CODM reviews the Group's internal
reporting in order to assess performance and allocate resources and has
determined the operating segments based on these reports which include an
allocation of central revenue and costs as appropriate. The CODM considers the
business from a geographic perspective, with Europe & the Americas, Asia
Pacific, Africa and Central being the operating segments.
In accordance with IFRS 8 'Operating Segments', the ELT has identified these
reportable segments which aggregate the Group's trading entities by geographic
location as these entities are considered to have similar economic
characteristics. The number of countries that the Group operates in within
these segments is limited to no more than five countries per segment, which
share similar customer bases and encounter comparable micro-environmental
challenges.
The CODM assesses the performance based on operating profit before adjusting
items. Revenues and operating profit of the Europe & the Americas and Asia
Pacific segments arise from the sale of Hygiene, Beauty and Baby products.
Revenue and operating profit from the Africa segment also arise from the sale
of Hygiene, Beauty and Baby products as well as Electrical products. The
Central segment comprises the activities of our in-house Fragrance business
and of the costs associated with the Global headquarters and above market
functions, net of recharges to our regions. Intra-Group sales of materials and
manufactured goods, and charges for franchise fees and royalties are carried
out on an arm's length basis.
Reporting used by the CODM to assess performance does contain information
about brand-specific performance but global segmentation between the portfolio
of brands is not part of the regular internally reported financial
information.
(a) Reportable segments
Continuing operations
Europe & the Asia
Americas Pacific Africa Central Eliminations Total
2023 £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/(loss) before adjusting items and share of results 29.3 27.5 29.7 (20.7) - 65.8
of 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 costs (13.3)
Profit before taxation 61.8
Europe & the Asia
Americas Pacific Africa Central Eliminations Total
2022 (restated) £m £m £m £m £m £m
Gross segment revenue 196.3 179.2 222.0 77.3 (82.0) 592.8
Inter-segment revenue (3.3) (5.4) - (73.3) 82.0 -
Revenue 193.0 173.8 222.0 4.0 - 592.8
Segmental operating profit/(loss) before adjusting items and share of results 35.0 20.9 15.7 (11.1) - 60.5
of joint ventures
Share of results of joint ventures - - 6.6 - - 6.6
Segmental operating profit/(loss) before adjusting items 35.0 20.9 22.3 (11.1) - 67.1
Adjusting items (12.1) 16.1 6.3 (11.6) - (1.3)
Segmental operating profit/(loss) 22.9 37.0 28.6 (22.7) - 65.8
Finance income 2.7
Finance costs (4.0)
Profit before taxation 64.5
Refer to note 1 for details of the prior year restatements.
The Group analyses its revenue by the following categories:
2023 2022
£m £m
Hygiene 334.8 305.9
Baby 123.1 103.4
Beauty 85.3 80.9
Electricals 105.4 91.5
Other 7.7 11.1
656.3 592.8
3. Adjusting items
Adjusting items income/(expense), all of which related to continuing
operations, comprised:
2023 2022
£m £m
Nigeria Simplification 6.8 7.8
HR Transformation (0.6) (2.9)
Finance Transformation (5.1) (0.7)
Supply Chain Transformation (4.0) (0.7)
(2.9) 3.5
Transaction-related income/(costs) 0.7 (1.4)
Intangible asset impairment net of impairment reversal (12.3) (3.1)
Impairment reversal of net investment in joint ventures 2.2 -
Reclassification of exchange differences on repayment of permanent as equity - (1.5)
loans
Compensation from Australian Competition & Consumer Commission - 1.5
Profit on disposal of five:am - 0.7
Derecognition of capitalised costs related to cloud computing arrangements - (1.0)
Adjusting items before taxation (12.3) (1.3)
Taxation 4.7 (0.3)
Adjusting items after taxation (7.6) (1.6)
Adjusting items before taxation are classified within:
2023 2022
£m £m
Operating profit (13.6) (1.3)
Finance income 1.3 -
(12.3) (1.3)
4. Taxation
2023 2022
(restated)
£m £m
Current tax
UK corporation tax
- current year (2.2) 2.5
- adjustments in respect of prior years (0.3) (0.5)
- double tax relief (0.5) (1.1)
(3.0) 0.9
Overseas corporation tax
- current year 26.3 12.2
- adjustments in respect of prior years 0.8 (0.5)
27.1 11.7
Total current tax charge 24.1 12.6
Deferred tax
Origination and reversal of temporary timing differences (6.2) (2.7)
Adjustments in respect of prior years (2.3) 3.0
Effect of rate change adjustments (0.2) 0.1
Total deferred tax charge (8.7) 0.4
Total tax charge 15.4 13.0
Analysed as:
Tax on profit before adjusting items 20.1 12.7
Tax on adjusting items (4.7) 0.3
15.4 13.0
Refer to note 1 for details of the prior year restatements.
The effective tax rate in relation to continuing operations for the year was
24.9% (2022: 20.2% as restated). Before adjusting items, the effective tax
rate was 27.1% (2022: 19.5%).
UK corporation tax is calculated at 20.0% (2022: 19.0%) 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 tax charge
for the year to the profit before taxation as this is the seat for the central
management and control of the Group.
2023 2022
(restated)
£m £m
Profit before tax from continuing operations 61.8 64.5
Loss before tax from discontinued operations - (1.7)
Profit before tax 61.8 62.8
Tax at the UK corporation tax rate of 20.0% (2022: 19.0%) 12.4 11.9
Adjusted for:
Effect of non-deductible expenses 2.2 6.6
Effect of non-taxable income (4.9) (10.0)
Effect of rate changes on deferred taxation (all territories) (0.5) -
Tax effect of share of results of joint ventures (2.2) (2.0)
Other taxes suffered outside of the UK 3.2 2.2
Net adjustment to amount carried in respect of uncertain tax positions (0.8) 0.2
Movements in deferred tax assets not recognised (0.6) -
Adjustments in respect of prior years (1.5) (1.2)
Differences in foreign tax rates (non-UK residents) 8.1 5.3
Tax charge for the year 15.4 13.0
Tax charge attributable to continuing operations 15.4 13.1
Tax credit attributable to discontinued operations - (0.1)
Tax charge for the year 15.4 13.0
Refer to note 1 for details of the prior year restatements.
5. Dividends
2023 2022
£m £m
Amounts recognised as distributions to ordinary shareholders in the year
comprise:
Final dividend for the year ended 31 May 2022 of 3.73p (2022: 3.42p) per 15.6 14.3
ordinary share
Interim dividend for the year ended 31 May 2023 of 2.67p (2022: 2.67p) per 11.2 11.2
ordinary share
26.8 25.5
After the balance sheet date, a final dividend for the year ended 31 May 2023
was proposed by the Directors of 3.73p per ordinary share. This results in a
total final proposed dividend of £15.6 million (2022: £15.6 million).
Subject to approval by shareholders at the Annual General Meeting, the
dividend will be paid on 30 November 2023 to the shareholders on the register
on 2 November 2023. The proposed dividend has not been included as a liability
in the consolidated financial statements as at 31 May 2023.
6. 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.
The average number of shares is reconciled to the basic weighted average and
diluted weighted average number of shares as set out below:
2023 2022
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 (10,180) (10,249)
Basic weighted average shares in issue during the year 418,545 418,476
Dilutive effect of share incentive schemes 1,530 2,365
Diluted weighted average shares in issue during the year 420,075 420,841
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.
Earnings per share from continuing and discontinued operations
2023 2022
(restated)
£m £m
Profit after tax attributable to owners of the Parent 36.4 47.9
exclude: adjusting items (net of taxation effect) 10.6 2.9
Adjusted profit after tax 47.0 50.8
2023 2022
(restated)
pence pence
Basic earnings per share 8.70 11.45
exclude: adjusting items 2.53 0.69
Adjusted basic earnings per share 11.23 12.14
Diluted earnings per share 8.67 11.38
exclude: adjusting items 2.52 0.69
Adjusted diluted earnings per share 11.19 12.07
Refer to note 1 for details of the prior year restatements.
Earnings per share from continuing operations
2023 2022
(restated)
£m £m
Profit attributable to owners of the Parent from continuing operations 36.4 49.7
exclude: adjusting items (net of taxation effect) 10.6 2.9
Adjusted profit after tax 47.0 52.6
2023 2022
(restated)
pence pence
Basic earnings per share 8.70 11.88
exclude: adjusting items 2.53 0.69
Adjusted basic earnings per share 11.23 12.57
Diluted earnings per share 8.67 11.81
exclude: adjusting items 2.52 0.69
Adjusted diluted earnings per share 11.19 12.50
Refer to note 1 for details of the prior year restatements.
Earnings per share from discontinued operations
2023 2022
£m £m
Loss after tax attributable to owners of the Parent from discontinued - (1.8)
operations
2023 2022
pence pence
Basic losses per share - (0.43)
Diluted losses per share - (0.43)
7. Goodwill and other intangible assets
Goodwill Software Brands Total
£m £m £m £m
Cost
As at 1 June 2021 53.9 66.0 233.2 353.1
Additions (restated) 13.5 1.4 35.5 50.4
Derecognition of capitalised costs related to cloud computing - (2.2) - (2.2)
Exchange differences 0.8 0.4 1.6 2.8
As at 31 May 2022 68.2 65.6 270.3 404.1
Additions - 2.0 - 2.0
Disposals - (0.5) - (0.5)
Transfer to property, plant and equipment - (0.4) - (0.4)
Exchange differences (1.6) (0.1) (3.1) (4.8)
As at 31 May 2023 66.6 66.6 267.2 400.4
Accumulated amortisation and impairment
As at 1 June 2021 - as reported 10.6 32.8 20.8 64.2
Effect of prior year adjustment - (4.7) - (4.7)
As at 1 June 2021 - as restated 10.6 28.1 20.8 59.5
Amortisation charge (restated) - 7.4 - 7.4
Impairment charge - - 11.6 11.6
Impairment reversal - - (8.5) (8.5)
Derecognition of amortisation related to cloud computing - (1.2) - (1.2)
Exchange differences 0.5 0.3 0.6 1.4
As at 31 May 2022 11.1 34.6 24.5 70.2
Amortisation charge - 7.0 - 7.0
Disposals - (0.5) - (0.5)
Impairment charge - - 16.5 16.5
Impairment reversal - - (4.2) (4.2)
Exchange differences (0.9) - (0.4) (1.3)
As at 31 May 2023 10.2 41.1 36.4 87.7
Net book value
As at 31 May 2023 56.4 25.5 230.8 312.7
As at 31 May 2022 (restated) 57.1 31.0 245.8 333.9
Refer to note 1 for details of the prior year restatements.
Capitalised costs and accumulated amortisation relating to cloud computing
were derecognised in 2021 following the IFRIC agenda decision in April 2021
regarding the treatment of such costs.
Amortisation is charged to administrative expenses in the consolidated income
statement. Cumulative impairment of goodwill as at 31 May 2023 was £10.2
million (2022: £11.1 million) and cumulative impairment of brands as at 31
May 2023 was £36.4 million (2022: £24.5 million).
Software includes the Group's enterprise resource planning system (SAP), and
the carrying value of this asset as at 31 May 2023 is £20.6 million (2022:
£25.3 million as restated), with four 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 (including goodwill
and brands) to appropriate cash-generating units (CGUs) based on the smallest
identifiable group of assets that generate independent cash inflows, and to
estimate the recoverable amounts of the CGUs as the higher of the assets' fair
values less costs of disposal and the value in use. 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 £56.4 million (2022: £57.1 million as restated) comprises £40.4
million (2022: £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 (2022: £13.5 million as restated) on the March 2022
acquisition of Childs Farm and £2.5 million (2022: £3.2 million) in relation
to other acquisitions. 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 2023 (restated) 2022
2022
£m £m £m £m
Charles Worthington 9.6 9.6
Fudge 24.6 24.6
Sanctuary Spa 58.9 75.4
St Tropez 58.4 58.4
Beauty 40.4 151.5 40.4 168.0
Original Source - 9.8 - 9.8
Rafferty's Garden - 34.0 - 32.5
Childs Farm 13.5 35.5 13.5 35.5
other 2.5 - 3.2 -
56.4 230.8 57.1 245.8
In performing the impairment testing, the Group has used the budget and plan
covering the four years ending 31 May 2027 as described in the Long Term
Viability Statement on page 69 and the board approved CGU specific plans for a
fifth year before applying the long term growth rate. Assumptions in the
budgets and plans used for the value in use cash flow projections (for all
brands excluding Childs Farm) 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. Childs Farm
was acquired in March 2022, and on the business combination a fair value for
the brand of £35.5 million was recognised, with goodwill arising of £13.5
million. Management's stated plan is to expand the brand into international
markets, and so specific assumptions on revenue growth along with associated
higher gross margins have been applied. Revenue for Childs Farm is expected to
triple over the five years ending 31 May 2028 reflecting the growth potential
in international markets. The margin growth in international markets compared
to the UK is driven by premium product pricing perception and lower expected
promotional activity in these markets. Management forecasts cash conversion
rates (being the ratio of operating cash flow to operating profit) based on
historical experience.
The other key assumptions applied in determining value in use are the
long-term growth rate beyond the period of the approved budget and plan, and
the discount rate to apply to the cash flow projections, both of which are
determined with reference to the markets and geographies in which the CGU (or
group of CGUs) operates. The long-term growth rates and discount rates applied
in the value in use calculations used in impairment tests were:
Long-term Long-term Pre-tax Pre-tax
growth rate growth rate discount rate discount rate
2023 2022 2023 2022
Charles Worthington 2.0% 1.5% 10.1% 10.1%
Fudge 2.0% 1.5% 10.7% 10.1%
Sanctuary Spa 2.0% 1.5% 10.2% 8.0%
St Tropez 2.0% 1.5% 10.4% 8.0%
Beauty group of CGUs (goodwill assessment) 2.0% 1.5% 10.4% 8.2%
Original Source 2.0% 1.5% 10.5% 8.0%
Rafferty's Garden 2.5% 2.5% 10.6% 10.0%
Childs Farm (brand and goodwill assessment) 2.0% n/a 12.2% n/a
The results of the impairment tests as at 31 May 2023 were as follows:
Sanctuary Spa
For the Sanctuary Spa brand, the recoverable amount of the applicable CGU was
determined to be £63.0 million based on a value in use calculation which,
when compared to a carrying value of £79.5 million (of which the brand
represented £75.4 million), resulted in an impairment charge of £16.5
million. The recoverable amount reflected the challenging UK consumer and
self-care category backdrop as cost-of-living pressures mean consumers are
sensitive to price increases. Management has determined gross margin to be the
key assumption in the forecasts for Sanctuary Spa given the factors noted
above regarding consumer price sensitivity. Sensitivity analysis has been
carried out and a reasonably possible change where gross margin was to decline
by 2.5% within the five year forecast period would increase the impairment
charge by £8.5 million to £25.0 million. Conversely should gross margins
improve by 2.5% the impairment charge would reverse by £8.5 million to £8.0
million.
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 £11.5
million, marginally in excess of the carrying value of £10.6 million (of
which the brand represented £9.6 million). The recoverable amount reflected
slower growth on a strong sales performance in the year ended 31 May 2023
coupled with a recovery in margins after previous inflationary cost increases
were absorbed without passing on to consumers given price sensitivity during
the cost of living crisis.
Management have determined gross margin to be the key assumption in the
forecasts for Charles Worthington given the factors noted above regarding
consumer price sensitivity. Sensitivity analysis has been carried out and a
reasonably possible change where gross margin was to decline by 3.0% within
the five year forecast period would result in an impairment charge of £1.2
million. Conversely should gross margins improve by 3.0% an impairment
reversal of £3.0 million would be recorded. Management determined, therefore,
that due to the marginal headroom in the base case and a potential reasonably
possible downside leading to an impairment charge, that it was not appropriate
to reverse any of the £20.2 million cumulative impairment recorded in prior
years.
Management do not consider a further decline in volumes to be reasonably
possible scenario based on historic experience. However, an increase of 20% in
forecast sales within the five year forecast period would result in a reversal
of £5.4 million being recorded.
Rafferty's Garden
For the Rafferty's Garden brand, the recoverable amount of the applicable CGU
was determined to be £44.6 million based on a value in use calculation which,
when compared to a carrying value of £32.0 million (reflecting brand value of
£29.8 million), resulted in the reversal of a previously recognised
impairment charge of £4.2 million. The increase in the recoverable amount
reflected a change in the current year estimates reflecting the upturn in the
brand's performance. The reversal of the impairment loss has not exceeded the
carrying amount that would have been determined had no impairment loss been
recognised in prior years.
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 and
insignificant risk of changes in value.
Borrowings comprise bank overdrafts and amounts drawn under the Group's
committed credit facility. Bank overdrafts are repayable on demand and form an
integral part of the Group's cash management.
The Group defines its adjusted net debt as cash and cash equivalents net of
borrowings, and net debt as cash and cash equivalents net of borrowings and
lease liabilities.
Movements in cash and cash equivalents, adjusted net debt and net debt were:
Foreign
1 June Net cash exchange 31 May
2022 flow movements Other 2023
£m £m £m £m £m
Cash at bank and in hand 105.8 31.0 (9.4) - 127.4
Short-term deposits 58.0 80.9 (9.9) - 129.0
Cash and cash equivalents reported in the consolidated balance sheet 163.8 111.9 (19.3) - 256.4
Current borrowings - bank overdrafts (0.1) 0.1 - - -
Cash and cash equivalents reported in the consolidated cash flow statement 163.7 112.0 (19.3) - 256.4
Non-current borrowings (174.0) (77.2) - - (251.2)
Current asset investments 0.5 - - - 0.5
Adjusted net cash/(debt) (9.8) 34.8 (19.3) - 5.7
Lease liabilities (16.9) 3.0 - 0.9 (13.0)
Net debt (26.7) 37.8 (19.3) 0.9 (7.3)
As at 31 May 2023, £204.1 million (2022: £113.0 million) of the cash and
cash equivalents was held by the Group's Nigerian subsidiaries. The increase
of this amount during the year was mainly due to the effect of the country's
foreign exchange regime where exchange rate controls impact the ability of
those subsidiaries to access foreign currency in order to settle foreign
currency liabilities. Subsequent to the year end, a policy announcement was
made by the Central Bank of Nigeria to liberalise the foreign exchange regime,
and following this announcement, the Naira exchange rate weakened against
Sterling and USD .
Bank loans and borrowings are amounts drawn under committed facilities. During
the year, the Group agreed a new £325 million committed credit facility which
is available for general corporate purposes. The credit facility incorporates
both a term loan, of up to £125 million, with the balance as a revolving
credit facility (RCF) structure with maturity dates of up to November 2028.
Drawings under the term loan are permitted in GBP, and under the RCF in GBP,
Euros or US Dollar (USD) at interest rates at a margin above SONIA, EURIBOR or
SOFR, as applicable, of 1.30-2.10% dependent on leverage and the attainment of
specified sustainability performance targets. Bank loans and borrowings as at
31 May 2023, which are presented net of £0.8 million of unamortised financing
fees, comprise £125.0 million of term loans which are denominated in GBP at
an interest rate, including margin, of 5.73%, and £127.0 million of
borrowings under the RCF which are denominated in GBP at interest rates,
including margin, at between 5.66-5.78%.
9. Reconciliation of profit before tax to cash generated from operations
2023 2022
(restated)
£m £m
Profit before tax from continuing operations 61.8 64.5
Loss before tax from discontinued operations - (1.7)
Profit before tax 61.8 62.8
Net finance (income)/costs (2.1) 1.3
Operating profit 59.7 64.1
Depreciation 12.1 12.8
Amortisation 7.0 7.4
Impairment of intangible assets and property, plant and equipment 16.5 17.5
Impairment reversal of intangible assets (4.2) (8.5)
Profit on disposal of property, plant and equipment (11.1) (14.0)
Impairment reversal of net investments in joint ventures (2.2) -
Derecognition of capitalised costs related to cloud computing arrangements - 1.0
Reclassification of exchange differences on repayment of permanent as equity - 1.4
loans
Difference between pension charge and cash contributions 0.5 1.1
Profit on disposal of businesses - (1.7)
Share-based payment expense 1.7 1.9
Share of results of joint ventures (7.5) (6.6)
Operating cash flows before movements in working capital 72.5 76.4
Movements in working capital:
Inventories (8.4) (14.5)
Trade and other receivables (13.4) 4.0
Trade and other payables 30.3 0.4
Provisions (4.4) (0.1)
Cash generated from operations 76.6 66.2
Refer to note 1 for details of the prior year restatements.
10. Events after the reporting period
Central Bank of Nigeria announcement
In June 2023, a policy announcement was made by the Central Bank of Nigeria to
liberalise the foreign exchange regime which, as part of a broader suite of
fiscal reforms under the new government, is designed to improve the
longer-term economic prospects for the country and remove some of the
challenges faced by multi-national companies in repatriating funds from
Nigeria. Following this announcement, the Naira exchange rate weakened against
sterling and USD.
Offer to acquire minority-held shares in PZ Cussons Nigeria Plc
On 5 September 2023, the Group announced that it had made an offer to acquire
the 26.73% of issued share capital of PZ Cussons Nigeria Plc held by
minority-held shareholders at a value of ₦21 per share, subject to
prevailing market conditions, equivalent to a total cash consideration payable
of £22.8 million (based on a Naira to GBP rate of 977). Funding for the
transaction is expected to come from existing Naira cash balances. The offer
is subject to the approval of the PZ Cussons Nigeria Plc board, regulatory
approvals and vote of the minority shareholders.
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 26 September 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FELLLXKLEBBQRecent news on PZ Cussons
See all newsREG - PZ CUSSONS PLC - Director/PDMR Shareholding
AnnouncementREG - PZ CUSSONS PLC - Director/PDMR Shareholding
AnnouncementREG - PZ CUSSONS PLC - Director/PDMR Shareholding
AnnouncementREG - PZ CUSSONS PLC - Director/PDMR Shareholding
AnnouncementREG - PZ CUSSONS PLC - Director/PDMR Shareholding
Announcement