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(Alliance News) - PZ Cussons PLC on Wednesday reported double-digit rises in both interim profit and revenue, and kept dividend unchanged.
However, Victoria Scholar, head of investment at interactive investor, said the update "failed to inspire investors" and so the firm's shares closed down 9.0% at 194.80 pence each on Wednesday in London.
PZ Cussons is a manufacturer of personal care brands such as Imperial Leather, Carex and St Tropez. It is based in Manchester, England. Over the past 12-months, the stock is down 1.7%.
In the six months to December 3, PZ Cussons said its revenue rose 19% to GBP336.9 million from GBP283.7 million a year before.
It explained that this was led by the Childs Farm acquisition, a favourable foreign exchange market, and the "impact of additional reporting days in the period".
On a like-for-like basis, revenue rose 6.1%, but this was propped up by price increases, with sales by volume down 5.4%.
Pretax profit surged 72% to GBP40.5 million from GBP23.5 million, as administrative expenses declined to GBP30.7 million from GBP45.1 million a year earlier.
In Europe and the Americas, revenue was GBP99.5 million, up 4.6% year-on-year, though PZ Cussons saw earnings plunge 48.8% to GBP4.1 million as it faced soaring costs and slumping UK consumer confidence.
"PZ Cussons has been struggling with cost inflation, a weakening consumer and higher net debt in recently. Although it has been raising prices, customers are increasingly price sensitive given the cost-of-living squeeze on household budgets," ii's Victoria Scholar said.
According to the latest British Retail Consortium-KPMG tracker on Tuesday, UK retail sales rose by 4.2% on-year in January while growth slowed markedly from 12% a year earlier.
BRC Chief Executive Helen Dickinson commented: "The coming months will continue to be challenging for retailers and their customers. Consumer confidence remains stubbornly low and looming rises in household bills and mortgages mean discretionary spending will remain weak. With ongoing cost pressures and labour shortages increases in sales don't convert into increases in profits or cash."
Despite the gloomy outlook for the retail sector, Chief Executive Officer Joanathan Myers remained upbeat: "Our first half performance has been in line with expectations and we are reiterating our full year outlook."
Looking ahead, PZ Cussons said it expects to report financial 2023 adjusted pretax profit in line with current market estimates.
Shore Capital left its financial 2023 outlook for the firm broadly unchanged as well, expecting full-year pretax profit at GBP65.7 million and diluted earnings per share at 11.7 pence.
"PZ Cussons is a business we have long admired, with a strong portfolio of brands across its geographies that provide a robust platform from which the business can deliver sustained growth and cash generation over the medium to long term," the capital markets firm said.
"However, short term challenges and constraints remain and we as such we believe a financial 2023 price-earnings ratio of 18.2x and an enterprise value/earnings before interest, tax, depreciation and amortisation multiple of 9.9x leaves the stock fairly value for now."
Shore Capital put PZ Cussons at 'hold'.
By Heather Rydings, Alliance News senior economics reporter
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