PZ Cussons Plc announces its final results for the year ended 31 May 2014, with revenue at £861.4 million, down 2.5% from £883.2 million the previously year. However, the company’s revenue growth in constant currency increased 2% on the prior year, in addition to JV revenue increasing by £172 million. Also, operating profit growth as 7% despite the impact of weakening currencies.
Commenting on the results, PZ Cussons chairman Richard Harvey said, “The group has delivered a strong set of results with sterling operating profits 7% ahead of the prior year. This has been achieved despite a significant weakening in currencies, which impacted profits by circa £12 million and without which profits would have been 18% higher on prior year. It has been particularly pleasing to see the progress of the palm oil joint venture with Wilmar, with the brands Mamador and Devon King’s performing well and the refinery operating close to capacity in its first full year of operation. During the year we acquired Rafferty’s Garden and sold our Polish home care brands as we continue to seek to focus the business on areas we perceive have particularly high growth potential and where we can add substantial value. The acquisition of Rafferty’s Garden marked our entry into the Asian food and nutrition category, a sector we believe is particularly exciting and where we are developing plans for further growth. Having disposed of the Polish home care brands, we are now focusing on the personal care and beauty business in that region. Our balance sheet remains strong and we have the appetite to pursue further investment opportunities which fit our strategic aims. The 5% increase in the group's dividend marks the 41st year of consecutive year-on-year increases. Whilst trading conditions in most markets remain challenging, the [company] remains focused on a dynamic and fast brand renovation and innovation program and successful delivery of new areas of growth such as Rafferty's Garden and the Wilmar joint venture. These initiatives will help to offset the continuing macrochallenges, including foreign exchange volatility, and the reduction in profits from Poland as a result of the strategic home care brands sale. Our overall performance since the year end has been in line with management expectations.”
For Africa, revenue for the years was £361.3 million, vs. the previous year’s £362.7 million. In Nigeria, unrest in the north of the country has continued with high levels of disruption at various times during the year. This has made trade difficult in the affected areas as distributors and consumers trade and shop more cautiously. There is currently no indication that the levels of disruption will ease in the short term and politically the country is now focused on the next presidential elections that are scheduled to take place in February 2015. Economically, high interest rates have helped to maintain the stability of the naira to dollar exchange rate although this has resulted in liquidity levels in the market remaining tight. A new central bank governor took office in June 2014 and policies have continued to support the currency as long as foreign exchange reserves are maintained at a sufficient level. In PZ Cussons’ personal care and home care divisions in Nigeria, while volumes were higher year on year, revenue and operating profit were slightly lower as a result of commodity products, such as bulk detergents and laundry soaps, having to trade in an extremely competitive environment.
Competitors have been operating with high levels of promotions in order to maintain share while cheap imports from Asia have also affected market dynamics. Pleasingly, good growth has been achieved in the value add part of the portfolio driven by a significant renovation program across brands such as Premier, Zip, Morning Fresh, Carex and Cussons Baby. This innovation and renovation across the portfolio has helped to maintain or grow the brands' number one or number two positions by market share. While local currency revenue growth in Ghana is ahead of the prior year, profitability has been impacted by a significant weakening of the cedi, which has devalued over 60% in twelve months. Brand shares remain healthy at number one or two positions across all four categories of personal care, home care, electrical, and food and nutrition. Revenue and profitability in Kenya are at similar levels to the previous year.
Asia saw a revenue increase to £184.4 million, up from the previous year’s £174.9 million. In Australia, the underlying performance in the home care and personal care portfolios has been strong, driven by innovative new product launches brought quickly to market. In personal care, the Imperial Leather and Original Source ranges have been extended with new variants, and during the year Cussons Mum & Me was launched into selected distribution channels. Beauty brands Fudge, St Tropez and Sanctuary have performed particularly strongly in the Australian market during the year. In Indonesia, double digit local currency revenue growth has been achieved, albeit at a lower rate than previous years as a result of the slowing macro environment. Results have also been affected on conversion by the significant weakening in the rupiah. Cussons Baby, which accounts for approximately 80% of Indonesian revenue, continues to perform extremely well reinforcing its market leading position. The Imperial Leather range was relaunched during the year with new bar and liquid soap products while Carex also delivered good growth. The brand portfolio also was extended with the launch of Original Source into modern trade distribution channels. Further progress was also made during the year with distribution in other Southeast Asian territories. Performance of the smaller businesses in Thailand and the Middle East were at a similar level to the prior period.
For Europe, revenue was £315.7 million for the year, down from £345.6 the previous year. In the U.K. washing and bathing division, all brands have performed well driven by significant renovation and innovation programs with over 70% of products relaunched or refreshed in the year. This enables category growth plans to be developed with the trade and new product news to be delivered to the consumer. Highlights during the year include the relaunch of the premium Imperial Leather Foamburst shower range with new imagery and fragrances, the extension of the very successful Carex Kids handwash range to four variants, and new Original Source products including the launch of a Skin Quench moisturizing range. A development for the new financial year is the major relaunch post year end of the entire Imperial Leather portfolio with exciting new products and fragrances tiered as Classic, Signature and Indulgence ranges to cater for all price points and consumer needs. The Cussons Mum & Me range, launched two years ago, was refined in the year to focus on the successful top selling products and has been complemented by products for toddlers and young children under the Little Explorers sub-brand. Product portfolios for all brands have been optimized both for the big four supermarkets as well as further increasing distribution in other channels. In the beauty division, while trading conditions in U.K. channels have been challenging, overseas markets have been further developed during the year with new distribution secured in the U.S., Canada and selected European countries. Consumer demand for St Tropez has been boosted in all markets by Kate Moss as brand ambassador, and the portfolios of all brands continue to be refreshed with innovative new products. As part of the division's focus on its product ranges, the Covent Garden spa and the three smaller boutique spas were closed during the year.
For its outlook, while trading conditions in most markets remain challenging, PZ Cussons remains focused on a dynamic and fast brand renovation and innovation program, an ongoing cost reduction program and successful delivery of new areas of growth such as Rafferty's Garden and the Wilmar joint venture. These initiatives will help to offset the continuing macro challenges, including foreign exchange volatility, and the reduction in profits from Poland as a result of the home care brands sale. The group's balance sheet remains strong and well placed to pursue new areas of growth, and the overall performance of the group since the year-end has been in line with management expectations.