REG - PZ CUSSONS PLC - Q3 Trading and update on strategic actions

PZ CussonsAnnouncement

24/04/2024 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:20240424:nRSX7703La&default-theme=true

RNS Number : 7703L  PZ CUSSONS PLC  24 April 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.

 

24 April 2024

 

Trading in line with expectations, profit outlook unchanged and further
reduction in gross debt

Actions underway to maximise shareholder value following a strategic review

 

PZ Cussons plc ("PZ Cussons" or the "Group") today issues a trading update for
its third quarter, ended 2 March 2024, and announces its plan to maximise
shareholder value from a portfolio transformation, following a strategic
review of brands and geographies.

 

Jonathan Myers, Chief Executive Officer, said: "We have made significant
progress in strengthening PZ Cussons in recent years - building brands,
restoring capabilities and re-energising and professionalising the
organisation. Today we are re-iterating our FY24 outlook, having delivered
improved LFL revenue growth in Q3 on an improved volume trend. Nevertheless,
the macro-economic challenges and complexities associated with operating in
Nigeria are significant and there is much more to do to unlock the full
potential of the business.

As such, we have undertaken a strategic review of our brands and geographies
and have embarked on plans to transform our portfolio, refocusing on where the
business can be most competitive. The actions we are taking will crystallise
value for our investors from assets better suited to alternative ownership
structures. This will enable us to invest our resources in the key geographies
and categories in which we can win and generate superior returns. We are
transforming PZ Cussons into a business with stronger brands in a more focused
portfolio, delivering sustainable profitable growth."

PERFORMANCE UPDATE

 Revenue                    Q3 FY24
                            £m     LFL %   Reported %
 Europe & the Americas      48.5   (0.4)%  (1.4)%
 Asia Pacific               42.5   (5.7)%  (10.7)%
 Africa                     35.6   39.6%   (48.0)%
 Group (total) ( 1 )        126.7  6.4%    (23.7)%
 Group (excluding Africa)   91.1   (2.9)%  (6.6)%

 

 1  Group total includes 'Other' revenue of £0.1 million in Q3 (Q3 FY23:
£0.7 million)

 

Group Q3 revenue on a like for like ('LFL') basis grew 6.4%. Revenue at
reported FX rates declined by 23.7% primarily as a result of the devaluation
of the Nigerian Naira, which was on average 60% lower in the quarter compared
to the prior year period. Volume grew 0.2% and compared favourably to the
first half decline of 4.9%, due to improved momentum in our UK brands.
Excluding Africa, LFL revenue declined 2.9%, an improved trend compared to the
H1 decline of 3.9%.

 

Europe & the Americas revenue was broadly flat, with improved trends
compared to H1 and a return to volume growth. The UK washing and bathing
portfolio showed strong revenue growth and continued gains in both value and
volume market share. Original Source and Childs Farm were particularly strong,
each growing revenue double-digits, whilst Carex and Sanctuary Spa grew
single-digits. Against a very strong St. Tropez performance in the comparative
period, Beauty trading was impacted by some US category softness.

 

In Asia Pacific, Australia continued to grow revenue in spite of a strong
comparative period, with particularly strong volume-driven growth in Radiant
following the capsule innovation launch earlier in the year. Overall revenue
in the region declined due to ongoing difficult market conditions for Cussons
Baby in Indonesia, with continued pressure on consumer spending. However, we
returned to growth in March and expect an improved revenue trend overall in Q4
compared to previous quarters, driven in part by our entry into the large
Telon warming oil segment of baby skin care.

 

In Africa we continued to increase prices in the quarter, seeking to offset
significant FX-driven cost inflation. Despite this, we saw an improving volume
trend as a result of ongoing distribution gains and successful marketing
activity. The operational focus remains on improving profitability and
maximising cash generation whilst remaining competitive and navigating
significant volatility in the Naira.

 

Outlook

 

The Group expects to deliver adjusted operating profit in the region of
£55-60 million for FY24. This is unchanged from the guidance provided at the
H1 results in February and assumes no material adverse movements in the Naira
from current levels in the balance of the year ( 2 ).

 

( 2  Current NGN:G)()(BP rate of approximately 1,450 as at 19 April 2024)

 

Cash and balance sheet

 

The Group has made further progress in reducing its financial leverage as a
result of ongoing repatriation of funds from Nigeria to the UK and its ongoing
programme to divest non-trading assets.

 

In the first ten months of this financial year, the Group has repatriated
approximately £35 million of cash from Nigeria and expects to repatriate a
further £15-20 million before the end of May. This improvement has been
underpinned by fiscal policy changes in Nigeria, providing improved access to
US Dollars, and by other operational initiatives enabling our Nigerian
business to be self-funding. Group gross debt has reduced further and is
expected to end FY24 in the £160 to £180 million range, down from £251
million as at the end of FY23. This would result in headroom on our Group
banking facilities being at least £145 million, compared to £73 million as
at the end of FY23.

 

Additionally, as a result of the ongoing programme of operational
simplification, we have identified more non-trading assets to be divested.
These include manufacturing facilities and land no longer required in Thailand
and Indonesia and a number of properties across Africa. Proceeds will be
received throughout FY25 and, combined with continued operational free cash
flow generation, are anticipated to further meaningfully reduce gross debt.

 

PLAN TO MAXIMISE SHAREHOLDER VALUE THROUGH PORTFOLIO TRANSFORMATION

In March 2021 the Group set out a new strategy to return PZ Cussons to
sustainable, profitable growth. Good progress has been made in building back
critical capabilities and strengthening business foundations. Despite this,
shareholder returns have fallen short of our expectations, predominantly due
to macro-economic challenges in Nigeria which, since June 2023, has
experienced the single largest devaluation in the history of its currency.

 

The Board has carried out a strategic review of our brands and geographies
over the past year. It has concluded that in addition to the challenges of its
significant exposure to Nigeria, the Group is too complex for its size, with
financial and human resources spread too thinly to generate consistent
returns. This means its competitive advantages have been constrained in
comparison to those of both larger multinational companies and some focused,
smaller ones.

 

Accordingly, the Board has decided to refocus the PZ Cussons portfolio on
where the business can be most competitive and where it can create most value
for shareholders. As such, we are taking the following actions:

·    St. Tropez - St. Tropez has grown significantly since acquisition,
establishing a leading position in its key premium self-tanning market of the
US. Given the strength of the brand's equity, there remains significant
long-term growth potential in the US and in both new geographies and category
adjacencies. This growth will however be harder to realise under PZ Cussons'
ownership, given the need to allocate resources across our diverse geographic
and category footprint. We therefore plan to realise shareholder value by
initiating a process to sell the brand to an owner better placed to capture
the brand's significant long-term potential.

 

·    Africa - The Group has made significant progress in strengthening and
improving the performance of its sizeable operations in Africa, where it owns
a highly attractive group of assets with leading consumer brands, strong
operational infrastructure and continued growth potential. However, the Board
recognises that this is a complex group of assets and is therefore evaluating
the strategic options both to reduce risk and to maximise shareholder value.

The proceeds from any transactions will initially be used to invest behind
the organic growth of the business and to reduce gross debt further. The Group
will also have the potential and ambition to pursue targeted acquisitions
which are highly complementary to its more focused category and geographic
footprint.

 

Appendix

Given the materiality of the movement in the Nigerian Naira in recent periods,
the rates used in each reporting period are summarised below.

 NGN/GBP                FY22  FY23  Q3 FY23  Q3 FY24
 Rate used for P&L      558   536   556      1,400

 

Movements in currencies compared to Q3 FY23 are summarised below.

                  % of FY23                         Average FX rates
                  revenue                        Q3 FY24             Q3 FY23                   % change
 GBP              27%                            1.00                1.00                      -
 NGN (Nigeria)    35%                            1,400               556                       (60.3)%
 AUD (Australia)  14%                            1.91                1.77                      (7.2)%
 IDR (Indonesia)  11%                            19,736              18,616                    (5.7)%
 USD (USA)        7%                             1.27                1.22                      (4.1)%
 Other            6%                             -                   -                         -
 Total            100%                           -                   -                         -

 

Conference call

PZ Cussons management will host a call for analysts and institutional
investors today at 08:00 UK time.

 

Dial in details are as follows:

United Kingdom (Local): +44 20 3936 2999

United Kingdom (Toll-Free): +44 800 358 1035

Access Code: 328740

 

Contact details

 

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, Charlie Twigg

 Notes to Editors

Unless otherwise stated, all references to revenue growth are on a like for
like ('LFL') basis. See definitions provided in the interim results
announcement for further details. Figures presented in this announcement are
unaudited.

 

About PZ Cussons

 

PZ Cussons is a FTSE250 listed consumer goods business, headquartered in
Manchester, UK. We employ nearly 3,000 people across our operations in Europe,
North America, Asia-Pacific and Africa. Since our founding in 1884, we have
been creating products to delight, care for and nourish consumers. Across our
core categories of Hygiene, Baby and Beauty, our trusted and well-loved brands
include Carex, Childs Farm, Cussons Baby, Imperial Leather, Morning Fresh,
Original Source, Premier, Sanctuary Spa and St. Tropez. Sustainability and the
wellbeing of our employees and communities everywhere are at the heart of our
business model and strategy, and captured by our purpose: For everyone, for
life, for good.

 

Cautionary note regarding forward-looking statements

 

This announcement contains certain forward-looking statements relating to
expected or anticipated results, performance or events. Such statements are
subject to normal risks associated with the uncertainties in our business,
supply chain and consumer demand along with risks associated with
macro-economic, political and social factors in the markets in which we
operate. Whilst we believe that the expectations reflected herein are
reasonable based on the information we have as at the date of this
announcement, actual outcomes may vary significantly owing to factors outside
the control of the 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 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 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  TSTBCGDSLUDDGSX