Africa weakness dents PZ Cussons profit

Imperial Leather maker PZ Cussons posted a drop in full-year profit on Tuesday as solid performances in Asia Pacific, Europe and the Americas were offset by weakness in Africa.

In the year to the end of May 2019, adjusted pre-tax profit fell 12.9% to £69.8m on revenue of £689.4m, down 6.8% on the year. The total dividend per share was maintained at 8.28p.

The company attributed the drop in revenue to the personal care and home care categories in Nigeria and the food and nutrition category in Europe and the Americas. "This was due to economic volatility leading to the value brands being squeezed reflecting lower consumer confidence, price reductions and down-trading," it said.

In its key markets of the UK, Indonesia and the US, revenues grew across personal care and beauty, with a "solid" performance by core brands.

The African business recognised an adjusted operating loss of £1m amid lower revenues in the personal care and home care categories in Nigeria, with continued, albeit reduced, losses in the Nutricima drinks brand and increased costs, including the additional expense due to issues at the Lagos port.

PZ Cussons said this obscured a good performance by the electricals category, which saw growth in both revenue and profit.

The company also said on Tuesday that it was reviewing the growth potential of some of its non-core brands as it aims for a more streamlined business with a much greater proportion of group earnings coming from personal care and beauty.

Chief executive Caroline Silver said the results were "mixed".

"A combination of solid performances in Europe & the Americas, with strong growth in the beauty business unit and Asia Pacific, compared with very disappointing results in Africa. As we anticipated at the half year, the adjusted profit before tax of £69.8m reflects the negative impact of the extremely tough macroeconomic conditions in Nigeria, which has historically been a key profit driver.

"We cannot rely upon short term economic conditions improving markedly in our key markets and are therefore taking action to reposition the group to return to profitable growth. We have today announced a new strategy, built around Focus, Scale and Accelerate.

"Our resources and investment will be prioritised behind key categories and brands in only those geographies offering the clearest opportunities in order to return the group to sustainable, profitable growth. Our cost base will be tightly managed and we will act at pace. The results from this will not be immediate, but we expect 2019/20 to be an important transitional year."

At 0925 BST, the shares were down 0.7% at 225.50p.

Russ Mould, investment director at AJ Bell, said: "Again it is the long-running Nigerian soap opera which is creating all the drama. Having contributed heavily to a near-40% fall in full-year profit, the ongoing troubles faced by its business in the country are likely to weigh on performance in the 12 months to 31 May 2020.

"The dreaded word ‘transitional’ is being applied to the year but the company is at least taking action - with a plan to pull back from some non-core brands and geographies in order to return to sustainable growth. And chief executive Caroline Silver suggests she will not waste time, pledging to ‘act at pace’."