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PZ Cussons takes action as Nigerian troubles expected to persist

“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”

Nigeria is a key market for PZ Cussons

PZ Cussons PLC (LON:PZC) will sell off non-core brands and simplify its Nigerian business as part of a new a new strategy launched after annual profits fell sharply and tough economic conditions are expected to persist in Africa.

Having warned of a sharp deterioration in its key market of Nigeria at the time of half-year results in January, the FTSE 250 maker of Imperial Leather soap and St Tropez fake tan confirmed on Tuesday that its Africa business made an adjusted operating loss of £1mln as revenue dropped and costs increased due to port access issues in Lagos.

READ: Soap maker PZ Cussons slides as Nigerian troubles set to wipe £10mln from full-year profits

For the group as a whole, revenue of £689.4mln for the year to 31 May was down 7% on the previous year and reported profit before tax fell 38% to £37.0mln.

Adjusted pre-tax profit fell 13% to £69.8mln, in line with guidance given at the profit warning, which excluded non-cash impairments of intangible assets for the five:am organic food brand in Australia and Nutricima milk and yoghurt drinks in Nigeria.

Chair Caroline Silver felt it was a “mixed” set of results, with solid performances in Europe and the Americas, with strong growth in the beauty business unit and Asia Pacific, compared with disappointing results in Africa reflecting the negative impact of the tough macroeconomic conditions in Nigeria.

Nigerian challenges continue

“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," she said, announcing a new "focus, scale and accelerate" strategy.

"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."

Investment will be focused on core personal care and beauty brands in geographies that can scale growth, with simplification of Nigerian activities ready for the market recovery, plus disposal of non-core brands and activities.

The cost base will be “tightly managed” and results “will not be immediate, but we expect 2019/20 to be an important transitional year”.

Broker Shore Capital said the “transitional year” will result in a downgrading of its previous PBT forecasts of £78.0mln by circa 10%. 

But analysts were pleased by a fall in net debt of around £13mln to £152mln and said Africa performing better than feared, but that Europe was weaker than expected.

A final dividend of 5.61p per share made for a total of 8.28p in line with the prior year.

Cussons shares fell more than 4% in early trading on Tuesday but by mid morning were flattish at 225.55p.

-- Adds broker comment and share price --

Quick facts: PZ Cussons

Price: 200 GBX

Market: LSE
Market Cap: £857.45 m

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