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Beauty group PZ Cussons has delivered ‘resliant’ financial performances in the fact of significant inflationary headwinds, with profits ahead of expectations as it minimised margin dilution.
Total revenues for the year to 31 May were down 1.7% to £592.8m as adverse currency movements and the disposal of its non-core and low-margin yoghurt business hit top-line growth.
Like for likes revenues were up 2.9%, driven by strong price/mix movements as volumes suffered a modest decline due to normalisation of demand in the UK hand hygiene category impacting Carex.
Overall revenues from ‘must win brands’ declined by 4.8% reflecting the drop in Carex, although each of the other seven brands in the category saw revenue growth.
Childs Farm, acquired in March 2022, is “progressing well”, with a number of operational improvements already made.
The group also saw improvement in like for like revenue momentum throughout the year, with Q4 LFL growth of 7.1%, driven by strong price/mix growth and limited volume impact.
Adjusted Profit before tax of £66.6m was down 2.9% but ahead of consensus expectations, with pricing and productivity initiatives largely offsetting cost inflation of around £40m.
The decline in adjusted operating profit margin was limited to 30bps, due to these pricing and cost initiatives were executed throughout the year.
On a statutory basis, profit before tax declined by 8.7% due to the reduction in revenue and a brand impairment.
So far in the new financial year, PZ Cussons has posted LFL revenue growth of 6.7% led primarily by continued price/mix improvements. Performance continues to be driven by Africa and APAC, with particularly strong growth in Morning Fresh in Australia and Premier in Nigeria.
In Europe and Americas, Sanctuary Spa and Original Source grew strongly, but this was more than offset by the decline in the hand hygiene category impacting Carex, while St. Tropez also declined as a result of very challenging comparatives.
Overall, it expects to deliver 2023 results in line with current consensus estimates.
Longer term, it believes the strategic investments and decisions it has taken will build towards a “higher growth, higher margin, simpler and more sustainable business”.
Specifically, the group is increasing its LFL revenue growth ambition to mid-single digit growth (compared to low-mid single digit growth previously) and maintaining its ambition for adjusted operating profit margins in the mid-teens.
CEO Jonathan Myers commented: “PZ Cussons has delivered a resilient performance over the past year, against the backdrop of challenging conditions in our markets. We have achieved this through our strategy to invest in our brands, focusing on the core categories of Hygiene, Baby and Beauty, while significantly raising the bar on the way we operate.
“We are reporting a second year of strategic progress, with revenue and operating profit both higher than two years ago. We have made good progress in addressing the legacy issues in our business and are now moving from Turnaround to Transformation.
“While there is plenty more to do and the external environment remains challenging, we have made a good start to the current financial year and continue to see significant long term opportunities ahead as we build towards a higher growth, higher margin, simpler and more sustainable business.”
Shares are up 0.1% this morning to 195.4p.
Morning update
The FTSE 100 has started the day down 0.3% at 7,213.3pts ahead of the Bank of England’s expected interest hike this morning.
Early risers include Virgin Wines, up 7.2% to 52p, Hotel Chocolat, up 2.9% to 142p and Devro, up 2.7% to 179.8p.
Fallers include Naked Wines, down 4.4% to 87p, Deliveroo, down 3.7% to 86.1p and Science in Sport, down 3.5% to 24.6p.
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