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LONDON (Alliance News) - PZ Cussons PLC on Tuesday reported a slight decline in profit in its recently ended financial year, although revenue grew and the soap and shampoo company said its performance in the new financial year has been in line with expectations so far.
PZ Cussons, which makes brands including Carex handwash and Charles Worthington hair products, said pretax profit in the year ended May 31 slipped to GBP83.7 million from GBP84.0 million the year before, despite revenue rising to GBP821.2 million from GBP819.1 million.
Profit was hit by a rise in cost of sales that outpaced the rise in revenue, as revenue was boosted by a strong performance in Europe offsetting difficult trading in Africa and weaker currencies in both Africa and Asia. Cost of sales rose by GBP17 million, compared to the increase of just over GBP2 million in revenue.
Weaker exchange rates for the Nigerian naira, Indonesian rupiah and Australian dollar hit revenue by GBP43.4 million, PZ Cussons said, and operating profit by GBP3.9 million.
In Europe, the washing and bathing division performed particularly well in the UK, PZ Cussons said, with new product launches across the Imperial Leather, Carex and Original Source brands. It also saw a strong performance in the beauty division, driven by St Tropez's in-shower gradual tan lotion and new range of Sanctuary products, while the smaller markets of Poland and Greece also made a solid contribution, PZ Cussons said.
Revenue in Europe grew by 4.8% to GBP275.8 million, while operating profit rose by 6.6%.
Africa suffered from tight liquidity caused by low oil prices and restricted foreign exchange availability in Nigeria, despite the official exchange rate remaining stable against the US dollar. Liquidity is beginning to improve post year-end, although the introduction of a new flexible exchange rate will result in a 40% devaluation of the naira, PZ Cussons said. Aside from the currency issues, which also hit the smaller markets of Ghana and Kenya, the company said all business units sold relatively well in Africa.
Revenue in Africa rose by 0.1% to GBP357.2 million, while operating profit fell by 23%. Nigeria accounts for a quarter of group profit.
Meanwhile in Asia, PZ Cussons saw continued growth in Indonesia in both baby care and non-baby care portfolios, despite slower GDP growth and the weaker exchange rate, while a good performance in Australia across personal care, beauty and food & nutrition offset more difficult trading conditions in home care. Thailand performed well but revenue and profit were lower year-on-year in the Middle East.
Revenue in Asia, including Australia, declined by 5.5% to GBP188.2 million, as operating profit fell by 3.0%.
PZ Cussons will pay a total dividend of 8.11 pence, up from 8.00p the year before.
"Performance since the year-end has been in line with expectations with liquidity in Nigeria beginning to improve. The group's focus on its values, robust long-term strategy and innovative product pipeline, provides a strong platform for future sustainable growth," Chairman Richard Harvey said in a statement.
"Underlying growth in revenue and operating profit is expected to be delivered in all regions of Europe, Asia and Africa over the coming year, although there will be an impact on translation to sterling of the Nigerian results following the introduction of the new flexible exchange rate regime post year-end. Whilst it is very early days since the vote to leave the EU, our initial assessment is that Brexit is unlikely to have a significant near-term impact on the group, although we will be monitoring this on an ongoing basis," the company said.
Investec said PZ Cussons produced a "solid" full-year result given that it has "encountered some of the most challenging conditions in Nigeria". Pretax profit before exceptional items of GBP103 million came in ahead of Investec's GBP100.4 million forecast.
Shares in PZ Cussons were trading up 13% at 325.25 pence on Tuesday afternoon.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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