Imperial Leather soap-to-St Tropez self-tan maker PZ Cussons (PZC) cheapened 0.5p to 226.5p on poor results for the year to May 2019 revealing a 13% adjusted pre-tax profits reverse to £69.8m.
This was slightly below previous guidance of £70m and reflected adverse currency movements and losses in Nigeria, where the consumer products company warned macroeconomic conditions are ‘extremely tough’.
And while the personal and home care products play held the total dividend at 8.28p, drawing confidence from strong cash generation, it also cautioned 2020 will be a ‘transitional year’ of increased investment behind ‘key categories and brands in those geographies that have scale’ in order to accelerate a return to profitable growth.
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Revenue weakened 6.8% to £689.4m last year amid weak economic conditions in Africa, which were partially offset by solid showings in Asia-Pacific and Europe and the Americas.
Reported pre-tax profit slumped 37.5% to £37m after non-cash write-downs of the five:am business in Australia and the Nutricima operation in Nigeria.
PZ Cussons explained that sales in Nigeria were impacted by ‘adverse economic conditions leading to contraction in the market, down-trading and increased price competition as well as delays in supply of raw materials due to additional port charges in Lagos’.
PZ Cussons said it is reviewing the growth potential of some of its non-core brands and will ultimately focus more on higher margin personal care and beauty categories whilst streamlining its activities in troubled Nigeria.
Russ Mould, investment director at AJ Bell, commented: ‘The company behind brands such as Imperial Leather really needs to scrub up for its shareholders.
‘Consumer goods firm PZ Cussons already delivered a hefty profit warning to get the market in a lather in January but if investors thought all the bad news was out of the way they need to think again.
‘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.’
Mould added: ‘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”.
‘Net debt is declining so there is less danger of a fall in earnings raising question marks over the company’s financial position. Elsewhere, a maintained dividend offers at least a modest indication of confidence in its future prospects.’
