7 February 2024

This release contains inside information

2024 INTERIM RESULTS

for the six months ended 2 December 2023

 

Jonathan Myers, Chief Executive Officer, said: "PZ Cussons is a stronger business than when we launched our new strategy, as demonstrated by our ninth consecutive quarter of like for like revenue growth and, on a constant currency basis, double-digit operating profit growth in the first half of the financial year. We have clearly had our challenges but have also delivered a turnaround in our UK Personal Care business and put in place measures to address the underperformance in our Beauty business.

 

The most significant challenge we have faced by far has been the devaluation of the Nigerian Naira, which is today around 70% weaker than a year ago, representing the biggest drop in the currency's history. As we set out in September 2023, macroeconomic developments in Nigeria would be the key determinant of the FY24 results. Whilst we continue to make good progress in managing this volatility, the further devaluation in recent weeks will inevitably impact our FY24 results. As a Board, we have taken the prudent step to reduce the interim dividend in light of the devaluation.

 

As we look ahead we remain confident about the long-term potential for PZ Cussons as we build a higher growth, higher margin, simpler and more sustainable business."

 

£m unless otherwise stated	Adjusted			Statutory
	H1 FY24	H1 FY23	Change	H1 FY24	H1 FY23	Change
Revenue	277.1	336.9	(17.8)%	277.1	336.9	(17.8)%
LFL revenue growth [1]	2.2%	6.1%	-	n/a	n/a	n/a
Operating profit/(loss)	30.6	33.2	(7.8)%	(89.7)	39.2	n.m.
Operating margin	11.0%	9.9%	110bps	(32.4)%	11.6%	n.m.
Profit/(loss) before tax	26.1	34.5	(24.3)%	(94.2)	40.5	n.m.
Basic earnings per share	4.32p	5.16p	(16.3)%	(10.84)p	5.90p	n.m.
Dividend per share	n/a	n/a	n/a	1.50p	2.67p	(43.8)%

See page 12 for definitions of key terms and page 13 for the reconciliation between Alternative Performance Measures and Statutory results.

'n.m.' represents non-meaningful growth rates.

Numbers are shown based on continuing operations. With the exception of LFL revenue growth, % changes are shown at actual FX rates.

H1 FY24 refers to the 6 months ended 2 December 2023 and H1 FY23 refers to the 6 months ended 3 December 2022.

[1] Like for like revenue growth definition has been updated in H1 FY24 to exclude revenue related to unbranded sales which represented approximately 1% of FY23 revenue. H1 FY23 LFL revenue growth has not been re-presented but would have been 6.6% under the revised definition. 

Summary

Naira devaluation

 

·   As indicated in previous announcements, the devaluation of the Nigerian Naira has had a significant impact on our financial results and comparisons to the prior year. The foreign exchange loss in the period was £88.2 million and was wholly the result of the devaluation of the Naira which fell by 51% between 31 May 2023 and 2 December 2023^[2]:

o Statutory results show an operating loss of £89.7 million having been materially impacted by these foreign exchange losses.  

o Revenue declined by 17.8% (£59.8 million) to £277.1 million of which £52.9 million was attributable to the Naira devaluation.

o Given the material financial impact of the Naira devaluation, the Board has determined it is prudent to reduce the interim dividend by 44% to 1.50p.

[2] From NGN/GBP of 577 as at 31 May 2023 to NGN/GBP of 1,176 as at 2 December 2023. Historic NGN/GBP rates are summarised on page 11.

Performance and strategic progress

 

·   Like for like (LFL) revenue growth was 2.2% driven by price/mix improvements of 7.0% and a 4.8% decline in volume.

·  Adjusted operating profit margin increased 110 basis points (bps) with an improvement in each of our three regions driven primarily by an increased gross profit margin.

·   Profit before tax declined by 24.3% reflecting an increased interest charge, but the reduction in both the effective tax rate and non-controlling interest as a result of the Naira devaluation resulted in a lower decline in adjusted EPS of 16.3%.

·  On a constant currency basis, the financial performance has been more robust with adjusted operating profit growth of 17.2% and EPS growth of 9.0%.

·  Strong cash generation with free cash flow of £20.0 million (H1 FY23: £4.2 million) with headroom on banking facilities of £105.0 million (31 May 2023: £73.0 million) and further improvements since the period end.

·   Delivery against our FY24 priorities including:

o  Improved USD sourcing in Nigeria allowing for cash repatriation and a reduction in the Group's gross borrowings. 

o  Turnaround in UK Personal Care performance benefitting from a focus on executional capabilities.

o  Strong growth of Childs Farm continuing to deliver on the significant international opportunity with distribution gains in the US and Europe.

o  Organisational changes under way to simplify our UK structure and strengthen Group-wide brand-building and growth capabilities, addressing underperformance in Beauty.

Dividend

 

The Board has reviewed the dividend carefully given the material devaluation of the Naira, particularly as it is difficult to foresee a significant rebound in the value of the currency in current circumstances. Had the exchange rate as at 31 January 2024 been the rate used to translate the FY23 results, FY23 EPS would have been over 30% lower. As a result, the Board has determined that it would not be prudent to pay an unchanged dividend.  It has therefore elected to pay an interim dividend of 1.50p with the objective of achieving a cover of approximately two times for FY24.    

The dividend will be paid on 4 April 2024 to shareholders on the register at the close of business on 8 March 2024.

FY24 outlook

 

At our FY23 full year results in September, we noted that the Nigerian macroeconomic environment, and the currency particularly, would be the key determinant of FY24 results. Since then, we have experienced further depreciation of the Naira, with the official rate falling more than 30% since our balance sheet date of 2 December. As a result, we now expect FY24 adjusted operating profit, at reported rates of exchange, to be in the range of £55-60 million^[3].

[3] Compares to prevailing consensus operating profit range of £61.5-68.2m as at 21 September 2023

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 and Charlie Twigg

 

Investor and Analyst conference call

PZ Cussons' management will host a presentation for analysts and institutional investors at 9.00 am UK time to present the results and provide the opportunity for Q&A. The event will be held at:

 

Deutsche Numis UK

45 Gresham Street

London

EC2V 7BF

 

A webcast of the presentation is available at the link below and will also be available via our corporate website: www.pzcussons.com.

 

Audience Webcast link:

https://www.investis-live.com/pzcussons/65ae81394f87571200b92b11/jges

 

Dial in: +44 20 3936 2999

Access code: 938419

 

Notes to Editors

 

About PZ Cussons

PZ Cussons is a FTSE 250 listed consumer goods business headquartered in Manchester, UK. We employ over 2,600 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 macroeconomic, 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.

 

GROUP REVIEW

Introduction from our Chief Executive Officer

 

It was nearly three years ago that we launched our new strategy and we are, overall, making good progress as we build brands to better serve consumers. In doing so, we will ultimately transform the Group creating value for all stakeholders. The business has now delivered nine consecutive quarters of LFL revenue growth and adjusted operating profit for the first half of the year is up 17% on a constant currency basis.

 

Particularly encouraging in the first six months of the year has been the turnaround of the UK Personal Care business which has delivered growth in market share, revenue and profitability. This follows an extended period of volatility driven by Covid, cost inflation and cost of living pressures. Carex exited the first half of the year in growth and each of our UK Personal Care brands grew volumes in the second quarter.

 

Offsetting this in the first half of the year has been the devaluation of the Nigerian Naira. Given the scale of Nigeria within our business - representing 35% of revenue and 22% of net assets in FY23 - this has had a material impact on our earnings and our balance sheet. In addition, it has created trading challenges in the market itself given its inflationary impacts with inflation now at a 30-year high of 29% ^[4].

 

We are continuing to navigate these challenges effectively with both operational and corporate interventions. However, given the size of our business in Nigeria and the ongoing macroeconomic uncertainty, we believe the prudent course of action is to reduce our interim dividend by 44%. Longer-term, we will continue to simplify and strengthen our business in Nigeria in order to capture the longer-term opportunities that the market offers.

 

Elsewhere, we also know we have much more to do. The performance of our Beauty brands, even after allowing for some intentional volume reductions to protect margin, has fallen short of our expectations in recent months and we have already taken action to address this. Trading in Indonesia has been soft in the half largely due to pressures on the consumer, however we remain confident in the long-term prospects for the market and are confident that our innovation plans will support a return to growth over the coming months. Meanwhile, we see good progress in the UK as noted above and continued solid growth from Australia as Morning Fresh continues its expansion 'beyond the sink'.

[4] Source: 28.9% based on Central Bank of Nigeria, December 2023.

 

Our strategic progress: Building brands for life. Today and for future generations.

 

In the first half of the year, we have made good progress against our strategy which is centred around five choices: Build Brands, Serve Consumers, Reduce Complexity, Develop People and Grow Sustainably. For FY24 specifically, we have established four clear priorities for the business focusing on the most urgent activity whilst investing resources into longer-term opportunities.

 

#1: Further simplifying and strengthening Nigeria

We have continued to improve our sourcing of US Dollars and, as previously noted, our local business expects to be able to continue to meet its needs for the foreign currency required for day-to-day operations thereby eliminating further lending from the Group's holding companies. Furthermore, we repatriated £13 million by the end of November and are working to repatriate further cash by the end of the financial year.

 

Our transaction to de-list and buy out minority shareholders in Nigeria will, once complete, further simplify and strengthen our business in Nigeria. We continue to target completion by the end of the financial year although this is subject to a number of local approvals.

 

#2: Returning the UK to sustainable, profitable growth

Our UK Personal Care business, comprising primarily Carex, Imperial Leather, Cussons Creations and Original Source, has seen a turnaround in performance in H1 FY24, with increased market share, revenue and profitability. This is the result of a strengthened leadership team and a more determined focus on building back several core executional capabilities. Looking ahead, there remains significant opportunity to regain previous levels of profitability in UK Personal Care and, as described below, we see opportunity to improve performance of our other UK brands which have previously been managed as part of our Beauty organisation.

 

#3: Driving further expansion from the core

Childs Farm continues to grow strongly and we have recently gained further distribution in key German retailers. Our US launch is on track with Amazon sales increasing rapidly. We expect to secure new listings in premium regional retailers before the end of this financial year.

 

Our recent launch of Imperial Leather in Thailand continues to go well benefitting from significant local influencer coverage and broader social media activity. 

 

The launch of Morning Fresh into the Australian auto dishwash market has contributed positively to our revenue in the period, as part of the brand's longer-term ambition of growing 'beyond the sink'. The auto dishwash market is broadly double the size of the hand dishwash market and is growing at approximately twice the rate.

 

Following its launch in July 2023, Original Source in Spain continues to build momentum in a highly competitive market. The launch campaign has been strong, achieving good social media coverage and consumer engagement. We expect to reach over 1,500 listing points over the coming months and have secured listings with Carrefour amongst others. The sector in Spain is worth around £300m ^[5] and is Europe's third largest bath and shower gel market, signalling the strength and ambition of the brand to continue to grow.

^{[5] Euromonitor}

 

#4: Continuing to transform capabilities 

As part of our continued efforts to transform the capabilities of the Group, we have made a fundamental change to our organisational structure as we reorganise and simplify our UK business while strengthening our overall Group brand-building and innovation capabilities. These measures are designed to address the recent under-performance of our Beauty business and to accelerate growth more widely around the Group.

 

Firstly, we have appointed one leader across the combined UK business compared to the previously-separate Personal Care and Beauty approach. These business units have historically had two leadership, two commercial and two support teams, resulting in significant duplication of effort. The change will drive significantly greater scale and faster decision-making, with one team and one 'face to the customer' as we share best practice and pool our understanding of customers, consumers and the categories.'

 

Secondly, we are strengthening further our brand-building capabilities, particularly behind our brands with the most growth potential. We have created a dedicated team under Paul Yocum, previously Managing Director of Business Development, in the new role of Chief Growth and Marketing Officer. Over the coming months, we will increase our resourcing of brand strategy and planning, consumer insights, innovation and marketing capability. In doing so, we will continue to look to drive the leverage benefits from centralising certain activities while retaining the local insights our multi-local portfolio footprint can provide. The team will also be responsible for overseeing our growth markets including the US business.

 

Separately, we continue to invest behind the tools employed by our teams. During the period we have brought much of our Revenue Growth Management (RGM) activity in-house, using latest Microsoft cloud applications to drive analytics and generate insights. Currently live in the UK, this will ultimately be extended internationally and is expected to result in a more cost-effective, faster and more effective RGM capability.

 

Summary

 

I would like to thank my PZ Cussons colleagues across the world for their hard work in recent months. We are focused on creating further value from our portfolio of brands and continuing to execute our FY24 priorities. We remain optimistic about the longer-term potential for PZ Cussons as we build a higher growth, higher margin, simpler and more sustainable business.

 

FINANCIAL REVIEW

Overview of Group financial performance

Our reported financial performance has been materially impacted by the devaluation of the Naira, with the currency having halved in value since June 2023 (see table on page 11 for historic rates used in financial statements). Revenue has declined by 17.8% (£59.8 million) of which £52.9 million relates to the reduction in the value of the Naira. We are reporting a statutory operating loss of £89.7 million primarily due to the £88.2m foreign exchange loss primarily caused by an increase in the value of USD denominated liabilities in our Nigerian subsidiaries and FX losses on the settlement of these liabilities. This compares to an operating profit of £39.2 million in the comparative period.

 

However, if we look at the financial performance on a constant currency basis, adjusted operating profit grew by 17.2%. The 110bps increase in adjusted operating profit margin reflects growth in each of our regions and is driven primarily by an improved gross profit margin.

 

There was a 24.3% decline in profit before tax, however adjusted earnings per share (EPS) declined by a smaller amount (16.3%) due to a lower effective tax rate of 20.3%, reflecting a statutory loss in our Nigerian business and a reduction in the Sterling value of the non-controlling interests in Nigeria. On a statutory basis, EPS was (10.84)p (H1 FY23: 5.90p).

 

Our net debt as at the end of H1 FY24 of £96.7 million is equivalent to 1.1x last twelve months (LTM) EBITDA. This compares to a net cash position of £5.7 million as at 31 May 2023. This results from the significant reduction in the value of our large Naira denominated cash balance when translated into Sterling. The Board considers it prudent to reduce the interim dividend to 1.50p in response to the adverse impact of the Naira devaluation on our ongoing earnings and its effect on our balance sheet.

 

Performance by geography

Europe and the Americas

 

£m unless otherwise stated	H1 FY24	H1 FY23	Growth/ (decline)
Revenue	97.2	99.5	(2.3)%
LFL revenue growth (%)	(1.9)%	(6.0)%	-
Adjusted operating profit	12.4	9.5	30.5%
Margin (%)	12.8%	9.5%	330bps
Operating (loss)/profit	(16.6)	4.1	n.m.
Margin (%)	(17.1)%	4.1%	n.m.

 

Revenue declined 1.9% on a LFL basis, with strong growth in our UK Personal Care business and Childs Farm offset by a decline in a number of our Beauty brands particularly Sanctuary Spa.

 

Our UK Personal Care business - primarily Carex, Original Source, Imperial Leather and Cussons Creations - has delivered a significant improvement in performance. We have seen market share gains for the portfolio as a whole for the first time in a number of years. Original Source and Cussons Creations have been particularly successful. Having launched less than two years ago to address the UK's cost of living crisis, Cussons Creations has rapidly established itself as a notable brand in the washing and bathing category, while Original Source continues to benefit from strong marketing activity behind its unique proposition. Carex returned to revenue growth in the second quarter of FY24 and we expect positive momentum to be maintained in the second half of the year. Childs Farm continues to grow strongly benefitting from previous distribution gains, new listings announced in Germany and strong momentum in the US with Amazon.

 

Sanctuary Spa was the primary driver of the overall decline in LFL revenue. This was partly a result of a smaller but more profitable Christmas gifting product portfolio and compares to a strong performance in the comparative period. Nevertheless, the performance fell below our expectations due to insufficient innovation and unsatisfactory execution. St.Tropez declined slightly, primarily in one key US customer, although we expect improving trends in H2 - the seasonally more important period - with stronger innovation and a refreshed campaign with our brand ambassador, Ashley Graham. 

 

Adjusted operating profit margin increased by 330bps to 12.8%. This improvement was driven by the annualisation of price increases taken in the second half of FY23 and successful RGM activity resulting in an improved gross profit margin. On a statutory basis, operating loss was £16.6 million principally reflecting the £24.4 million impairment of the book value of Sanctuary Spa.

 

Asia Pacific

 

£m unless otherwise stated	H1 FY24	H1 FY23	Growth / (decline)
Revenue	88.8	102.2	(13.1)%
LFL revenue growth (%)[6]	(6.0)%	7.5%	-
Adjusted operating profit	15.7	15.4	1.9%
Margin (%)	17.7%	15.1%	260bps
Operating profit	14.8	15.1	(2.0)%
Margin (%)	16.7%	14.8%	190bps

 

Revenue declined 13.1% due to a decline in LFL revenue and unfavourable FX driven by a depreciation in the Indonesian Rupiah and Australian Dollar. On a LFL basis, revenue declined 6.0% with continued growth in ANZ offset by a decline in Indonesia. 

 

Cussons Baby Indonesia declined in the first half of the year due to ongoing category softness and a reduction in distributor stock levels which had increased during FY23. Reflecting the long-term attractiveness of the market, competition has remained strong, with increasing promotional intensity, particularly in the wipes category. Our focus remains on growing higher margin segments such as oils, lotions and creams. We have also recently launched Cussons Baby into the warming oil segment. The segment is estimated to be used by over 80% of Indonesian mothers offering a significant opportunity for Cussons Baby to strengthen its leading market position in baby toiletries.

 

Growth in ANZ was led by Radiant, a portfolio brand, which grew double-digits. Radiant is now the third largest brand in the laundry market, with improved margins driven by the successful launch of laundry capsules alongside the existing powder and liquid products. Morning Fresh has continued to grow strongly, maintaining its nearly 50% market share and benefitting during the period from the contribution of the auto dishwash range which launched in the second half of FY23. Rafferty's Garden declined slightly which was principally due to the exiting of some legacy SKUs.

 

Adjusted operating margin grew by 260bps due to strong growth in the ANZ gross profit margin and reduced costs in Indonesia. On a statutory basis, operating profit was £14.8 million with £0.9 million adjusting items related to simplification and transformation projects as we transform our supply chain footprint.

[6] Like for like revenue growth definition has been updated in H1 FY24 to exclude revenue related to unbranded sales which represented approximately 1% of FY23 revenue. H1 FY23 LFL revenue growth has not been re-presented but would have been 9.1% under the revised definition. 

Africa

 

£m unless otherwise stated	H1 FY24	H1 FY23	Growth / (decline)
Revenue	90.8	133.2	(31.8)%
LFL revenue growth (%)	17.4%	15.6%	-
Adjusted operating profit	13.7	15.8	(13.3)%
Margin (%)	15.1%	11.9%	320bps
Operating (loss)/profit	(62.7)	27.5	n.m.
Margin (%)	(69.1)%	20.6%	n.m.

 

LFL revenue growth of 17.4% was driven by further price/mix improvements with twelve rounds of price increases in Nigeria since the beginning of FY24. On a reported basis, revenue declined by 31.8% due to the Naira being approximately 44% lower on average during H1 FY24 compared to the prior year.

 

In Nigeria, Premier and Morning Fresh revenue grew very strongly as consumers continued to maintain spending in non-discretionary segments such as soaps and home care. Cussons Baby and Stella also grew very strongly, despite being more discretionary, as we used a combination of distribution and marketing to drive growth in both price and volume. In Cussons Baby, we have seen significant volume growth due to our hospital educational programmes for new mothers. At the same time, Stella - a long-lasting moisturising jelly - has benefitted from ongoing work to extend the typical purchase period beyond the dry season, known as Harmattan season, which occurs between November and January.

 

Across the Nigerian business, we have increased prices significantly in response to the devaluation of the Naira and corresponding increase in input costs. Although these increases have increased the premium at which our brands are priced compared to competitors, market positions have so far been largely maintained given the strength of our brands.

 

Against this inflationary backdrop, we have sought to mitigate the decline in volumes, ensuring our products are front of mind for consumers at the point of purchase. This has been achieved through the continued increase in the number of stores served directly - to around 120,000 today from 97,000 as at the end of FY23 - as well as increasing the number of 'priority' stores which attract greater commercial focus and a wider range of products.

 

Electricals revenue was £34.3 million and grew 17% on a constant currency basis as we continue to prioritise growth in price and mix, focusing on higher margin product segments and SKUs.

 

Adjusted operating margin grew by 320bps. Alongside successive price increases, improving product mix and good overall cost control, this increase also represents an improvement in profitability of our PZ Wilmar Joint Venture, where adjusted operating profit increased by £4.1 million to £7.8 million due to strong growth in volume and pricing. On a statutory basis, the operating loss was £62.7 million primarily reflecting the increase in the value of USD denominated liabilities in our Nigerian subsidiaries and FX losses on the settlement of these liabilities.

 

Other financial items

Adjusted operating profit

Adjusted operating profit for the Group was £30.6 million which compares to £33.2 million in the prior period. Adjusted operating profit margins increased by 110bps to 11.0%. Each of our three regions contributed to the growth in margin, primarily driven by higher gross profit margins and a strong performance in our PZ Wilmar Joint Venture. This was partly offset by increased central costs due to continued investment in central capabilities, and an unfavourable FX impact.

 

Adjusting items

Adjusting items in the period totalled £120.3 million before tax. This related primarily to a £88.2 million foreign exchange loss arising from the devaluation of the Nigerian Naira. A charge of £24.4 million was incurred due to the impairment of Sanctuary Spa, while a charge of £5.5 million relates to costs associated with the ongoing transformation of the business including simplification activity in Nigeria.

 

After accounting for these adjusting items, the operating loss for the Group was £(89.7) million compared to an operating profit of £39.2 million in the prior period.

 

Net finance expense/(income)

Net finance expense in the period was £4.5 million compared to a net finance income of £1.3 million in the prior period. This was driven mainly by lower interest income due to the reduction in the Sterling value of our Naira cash balances. It was also modestly impacted by an increased interest charge due to higher levels of Group gross debt and a higher borrowing rate compared to the prior year.

 

Statutory loss before tax was £(94.2) million, £134.7 million lower than the prior period while adjusted profit before tax was £26.1 million which was £8.4 million lower than the prior period.

 

Taxation

The tax credit in the period for continuing operations was £27.2 million compared to a tax charge of £9.2 million in the prior period. The effective tax rate (ETR) on adjusted profit before tax decreased to 20.3% (26.6% in the prior period) primarily due to statutory losses on our Nigeria business.

 

Loss for the period

Loss for the period from continuing operations was £(67.0) million which compared to a profit of £31.3 million in the prior period. Basic (loss)/earnings per share was (10.84)p compared to 5.90p in the prior period. Adjusted basic earnings per share was 4.32p which compares to 5.16p in the prior period.

 

Balance sheet and cash flow

Net debt as at 2 December 2023 was £96.7 million compared to net cash of £5.7 million at 31 May 2023. The increase in net debt is wholly attributable to the devaluation of the Naira which significantly reduced the Sterling value of our Naira cash balance. As shown in the table below, the impact of exchange rate changes had there been no change in Group cash or gross debt during the half year would have changed our balance sheet from net cash of £5.7 million to net debt of £100.2 million. During the half year, both gross debt and cash showed reductions leaving the net debt position £3.5 million better as a result of management actions. 

 

 

£m	31 May 2023		2 December 2023
	As reported in FY23 financial statements	Current rates [7]
Total cash	256.4	150.5	128.1
of which Naira	201.1	98.5	77.4
Gross debt	(251.2)	(251.2)	(225.3)
Other	0.5	0.5	0.5
Net cash/(debt)	5.7	(100.2)	(96.7)
Balance sheet NGN/GBP rates:	577	1,176	1,176

^{[7] Rates as of 2 December 2023}

Total free cash flow was £20.0 million (H1 FY23: £4.2 million). The increase reflects primarily an improvement in net working capital as a result of the devaluation.

 

Net assets were £271.5 million compared to £422.1 million at 31 May 2023. The reduction was mainly due to the devaluation of the Naira and represented the FX losses on the translation of Naira denominated assets and liabilities which went through either operating loss or equity.

 

During the year ended 31 May 2023 in the normal course of business, 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 and revolving credit facility (RCF) structure, with maturity dates of up to November 2028. As at 2 December 2023, headroom on this facility was £105.0 million compared to £73.0 million as at 31 May 2023 and £93.0 million as at 3 December 2022.

Foreign exchange

The general appreciation of Sterling against our other currencies resulted in a £64.3 million reduction to FY23 revenue as set out below.

 

	% of FY23	Average FX rates			Revenue impact
	revenue	H1 FY24	H1 FY23	% change	(£m)
GBP	27%	1.00	1.00	-	-
NGN (Nigeria)	35%	915	509	(44)%	(52.9)
AUD (Australia)	14%	1.92	1.74	(9)%	(4.3)
IDR (Indonesia)	11%	19,161	17,780	(7)%	(3.1)
USD (USA)	7%	1.25	1.18	(6)%	(0.9)
Other	6%	-	-	-	(3.1)
Total[8]	100%	-	-	-	(64.3)

 

^[8] Table shows the impact of translating H1 FY23 revenue at H1 FY24 foreign exchange rates.

 

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

 

NGN/GBP	FY22	H1 FY23	FY23	H1 FY24	As at 31 January 2024
Rate used for P&L	558	509	536	915	n/a
Rate used for balance sheet	530	546	577	1,176	1,852

 

Glossary

 

Term	Definition
APM	Alternative performance measure.
Brand Investment	An operating cost related to brand marketing (previously 'Media & Consumer').
EBITDA	Earnings before interest, taxes, depreciation and amortisation.
Employee well-being	% 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) revenue growth	Growth on the prior year at constant currency, excluding unbranded sales and 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: Carex, Childs Farm (acquired in March 2022), Cussons Baby, Joy, Morning Fresh, Original Source, Premier, Sanctuary Spa and St.Tropez.
Net debt	Cash, short-term deposits and current asset investments, less bank overdrafts and borrowings. Excludes IFRS 16 lease liabilities.
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', 'Shopability' and 'Memorability'.
Revenue Growth Management (RGM)	Maximising revenue through ensuring optimised price points across customers and channels and across 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 trading performance from one period to the next.

Adjusted Consolidated Income Statement

	Unaudited Half year to 2 December 2023			Unaudited Half year to 3 December 2022
	Business performance excluding adjusting items	Adjusting items	Statutory results for the half year	Business performance excluding adjusting items	Adjusting items	Statutory results for the half year
	£m	£m	£m	£m	£m	£m
Revenue	277.1	-	277.1	336.9	-	336.9
Cost of sales	(167.8)	(72.2)	(240.0)	(215.6)	-	(215.6)
Gross profit	109.3	(72.2)	37.1	121.3	-	121.3
Selling and distribution expense	(44.5)	-	(44.5)	(55.1)	-	(55.1)
Administrative expense	(42.0)	(45.9)	(87.9)	(36.7)	6.0	(30.7)
Share of results of joint venture	7.8	(2.2)	5.6	3.7	-	3.7
Operating profit/(loss)	30.6	(120.3)	(89.7)	33.2	6.0	39.2
Finance income	8.3	-	8.3	4.9	-	4.9
Finance expense	(12.8)	-	(12.8)	(3.6)	-	(3.6)
Net finance income/(expense)	(4.5)	-	(4.5)	1.3	-	1.3
Profit/(loss) before taxation	26.1	(120.3)	(94.2)	34.5	6.0	40.5
Taxation	(5.3)	32.5	27.2	(9.1)	(0.1)	(9.2)
Profit/(loss) for the period	20.8	(87.8)	(67.0)	25.4	5.9	31.3
Attributable to:
Owners of the Parent	18.1	(63.5)	(45.4)	21.6	3.1	24.7
Non-controlling interests	2.7	(24.3)	(21.6)	3.8	2.8	6.6
	20.8	(87.8)	(67.0)	25.4	5.9	31.3

Details of adjusting items are provided in Note 4 to the condensed consolidated interim financial statements. Reconciliations from IFRS reported results to APMs are set out below.

Alternative Performance Measures (continued)

Adjusted operating profit and adjusted operating margin

		Half year to 2 December 2023	Half year to 3 December  2022
		£m	£m
Group
Operating (loss)/profit from continuing operations		(89.7)	39.2
exclude: adjusting items		120.3	(6.0)
Adjusted operating profit		30.6	33.2
Revenue		277.1	336.9
Operating margin		(32.4)%	11.6%
Adjusted operating margin		11.0%	9.9%
By segment
Europe & the Americas:
Operating (loss)/profit from continuing operations		(16.6)	4.1
exclude: adjusting items		29.0	5.4
Adjusted operating profit		12.4	9.5
Revenue		97.2	99.5
Operating margin		(17.1)%	4.1%
Adjusted operating margin		12.8%	9.5%
Asia Pacific:
Operating profit from continuing operations		14.8	15.1
exclude: adjusting items		0.9	0.3
Adjusted operating profit		15.7	15.4
Revenue		88.8	102.2
Operating margin		16.7%	14.8%
Adjusted operating margin		17.7%	15.1%
Africa:
Operating (loss)/profit from continuing operations		(62.7)	27.5
exclude: adjusting items		76.4	(11.7)
Adjusted operating profit		13.7	15.8
Revenue		90.8	133.2
Operating margin		(69.1)%	20.6%
Adjusted operating margin		15.1%	11.9%
Central:
Operating loss from continuing operations		(25.2)	(7.5)
exclude: adjusting items		14.0	-
Adjusted operating loss		(11.2)	(7.5)

Alternative Performance Measures (continued)

Adjusted share of results of joint venture

		Half year to 2 December 2023	Half year to 3 December  2022
		£m	£m
Share of results of joint venture		5.6	3.7
Exclude: adjusting items		2.2	-
Adjusted share of results of joint venture		7.8	3.7

 

 

Adjusted profit before taxation

		Half year to 2 December 2023	Half year to 3 December  2022
		£m	£m
(Loss)/profit before taxation from continuing operations		(94.2)	40.5
Exclude: adjusting items		120.3	(6.0)
Adjusted profit before taxation		26.1	34.5

 

 

Adjusted Earnings Before Interest Depreciation and Amortisation (Adjusted EBITDA)

 

		Half year to 2 December 2023	Half year to 3 December  2022
		£m	£m
(Loss)/profit before taxation from continuing operations		(94.2)	40.5
Add back/(deduct): net finance expense/(income)		4.5	(1.3)
Add back: depreciation		5.5	5.2
Add back: amortisation		3.6	3.1
Add back: impairment and impairment reversal		24.4	0.1
		(56.2)	47.6
Exclude: adjusting items*		95.9	(6.1)
Adjusted EBITDA		39.7	41.5

* Excludes adjusting items relating to impairment.

Alternative Performance Measures (continued)

 

Adjusted earnings per share

		Half year to 2 December 2023 pence	Half year to 3 December 2022 pence
Basic (loss)/earnings per share		(10.84)	5.90
Exclude: adjusting items		15.16	(0.74)
Adjusted basic earnings per share		4.32	5.16

 

 

Free cash flow

		Half year to 2 December 2023	Half year to 3 December 2022
		£m	£m
Cash generated from operations		22.4	7.0
Deduct: purchase of property, plant and equipment and software		(2.4)	(2.8)
Free cash flow		20.0	4.2

CONDENSED CONSOLIDATED INCOME STATEMENT

		Unaudited Half year to 2 December 2023	Unaudited Half year to 3 December 2022	Audited Year to 31 May 2023
	Notes	£m	£m	£m
Revenue	3	277.1	336.9	656.3
Cost of sales		(240.0)	(215.6)	(399.0)
Gross profit		37.1	121.3	257.3
Selling and distribution expense		(44.5)	(55.1)	(105.3)
Administrative expense		(87.9)	(30.7)	(99.8)
Share of results of joint venture		5.6	3.7	7.5
Operating (loss)/profit	3	(89.7)	39.2	59.7
Finance income		8.3	4.9	15.4
Finance expense		(12.8)	(3.6)	(13.3)
Net finance (expense)/income		(4.5)	1.3	2.1
(Loss)/profit before taxation		(94.2)	40.5	61.8
Taxation	7	27.2	(9.2)	(15.4)
(Loss)/profit for the period/year1		(67.0)	31.3	46.4
Attributable to:
Owners of the Parent		(45.4)	24.7	36.4
Non-controlling interests		(21.6)	6.6	10.0
		(67.0)	31.3	46.4
(Loss)/earnings per ordinary share1
Basic (p)		(10.84)	5.90	8.70
Diluted (p)2		(10.84)	5.84	8.67
1 Wholly derived from continuing operations.     2 In the half year ended 2 December 2023, the basic and diluted loss per share are equal as a result of the Group incurring a loss for the period.

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		Unaudited Half year to  2 December 2023	Unaudited Half year to 3 December 2022	Audited Year to 31 May  2023
	Notes	£m	£m	£m
(Loss)/profit for the period/year		(67.0)	31.3	46.4
Other comprehensive (expense)/income:
Items that will not be reclassified to income statement:
Re-measurement loss on net retirement benefit obligations		(5.2)	(33.2)	(32.8)
Taxation on other comprehensive income		1.3	8.1	7.4
Total items that will not be reclassified to income statement		(3.9)	(25.1)	(25.4)
Items that may be subsequently reclassified to income statement:
Exchange differences on translation of foreign operations		(64.1)	(10.6)	(21.7)
Cash flow hedges - fair value movements net of amounts reclassified	12	(0.9)	0.3	0.4
Total items that may be subsequently reclassified to income statement		(65.0)	(10.3)	(21.3)
Other comprehensive expense for the period/year		(68.9)	(35.4)	(46.7)
Total comprehensive expense for the period/year		(135.9)	(4.1)	(0.3)
Attributable to:
Owners of the Parent		(100.3)	(9.7)	(6.9)
Non-controlling interests		(35.6)	5.6	6.6
		(135.9)	(4.1)	(0.3)

CONDENSED CONSOLIDATED BALANCE SHEET

		Unaudited 2 December 2023	Unaudited 3 December 2022*	Audited 31 May  2023
	Notes	£m	£m	£m
Assets
Non-current assets
Goodwill and other intangible assets	5	284.7	331.2	312.7
Property, plant and equipment		55.1	77.0	74.3
Right-of-use assets		11.6	14.2	12.5
Net investments in joint venture		44.5	49.0	52.0
Deferred taxation assets		26.0	4.0	7.5
Retirement benefit surplus		34.2	36.4	38.5
		456.1	511.8	497.5
Current assets
Inventories		91.5	130.9	112.9
Trade and other receivables		96.5	127.5	119.1
Derivative financial assets	12	1.7	3.9	1.0
Current tax receivable		1.5	2.5	1.0
Current asset investments	10	0.5	0.5	0.5
Cash and cash equivalents	10	128.1	195.8	256.4
		319.8	461.1	490.9
Assets held for sale		1.2	1.6	-
		321.0	462.7	490.9
Total assets		777.1	974.5	988.4
Equity and liabilities
Equity
Share capital		4.3	4.3	4.3
Own shares		(35.0)	(40.0)	(36.9)
Capital redemption reserve		0.7	0.7	0.7
Hedging reserve		(0.7)	0.1	0.2
Currency translation reserve		(139.1)	(78.8)	(89.0)
Retained earnings		444.9	512.5	511.7
Other reserves		5.5	4.1	4.6
Attributable to owners of the Parent		280.6	402.9	395.6
Non-controlling interests		(9.1)	27.5	26.5
Total equity		271.5	430.4	422.1
Liabilities
Non-current liabilities
Borrowings	10	219.0	232.0	251.2
Other payables		3.5	5.2	4.1
Lease liabilities		10.6	11.9	11.3
Deferred taxation liabilities		56.4	82.6	76.9
Retirement and other long-term employee benefit obligations		12.0	11.9	12.4
		301.5	343.6	355.9
Current liabilities
Borrowings	10	6.3	-	-
Trade and other payables		178.4	175.2	182.2
Lease liabilities	10	2.5	2.1	1.7
Derivative financial liabilities	12	0.4	0.5	0.5
Current taxation payable		15.8	21.2	25.6
Provisions		0.7	1.5	0.4
		204.1	200.5	210.4
Total liabilities		505.6	544.1	566.3
Total equity and liabilities		777.1	974.5	988.4

* 3 December 2022 has been restated in line with the restatements disclosed in the 2023 Annual Report and Accounts. See Note 1 for details.