Personal care giant PZ Cussons has said that a 'very disappointing' performance in its Africa division has impacted its full-year performance, with the business seeing a 2.6% decline in revenue at constant currency levels.
The business, which produces brands such as Carex and Imperial Leather, posted sales of £689.4 million (€766.1 million) for the full year to 31 May, which was down from £739.8 million the previous year.
Adjusted operating profit was down 9.7% to £76.5 million (€85 million), while the business saw an improvement in net debt, to £152.2 million, due to a 'stronger focus' on cash management, it said.
Divisional Performance
PZ Cussons' Europe & The Americas division posted a 'solid adjusted operating profit performance', the company said, although profits were down 6.2% to £57.1 million, due to increased marketing investment.
In the UK, the business saw a 'solid revenue and market share performance' for its personal care brands, however Greece was down due to a 'weaker performance' for its food and nutrition brands.
Asia Pacific, meanwhile saw operating profit rise by 13.7% to £20.4 million, largely driven by Indonesia and Australia, however in the Middle East, revenues were lower, the company said.
In Africa, the group posted an operating loss of £1.0 million, reflecting lower revenue in its personal and home care categories, as well as increased operating costs due to port access issues in Lagos, Nigeria, one of its key markets.
Mixed Results
"The Group's results for the year were mixed," commented chairperson Caroline Silver. "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."
Silver added that the group does not expect short term economic conditions to improve greatly, adding that the group has announced a new growth strategy, built around the message '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," she said. "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."
PZ Cussons said that it expects current economic conditions in key markets to remain challenging while the business is returning to profitable growth.
Analyst Viewpoint
Commenting on its performance, analyst Russ Mould of 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’."
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
