Last checked at 25 Aug 2009 08:00
25 August 2009
PZ Cussons Plc
Annual Financial Report
PZ Cussons Plc has today submitted copies of the 2009 Annual Report and Accounts, Notice of the 2009 Annual General Meeting, Shareholder Proxy Form and proposed new Articles of Association to the Financial Services Authority. These will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility which is situated at:
The Financial Services Authority 25 The North ColonnadeCanary WharfLondon E14 5HS
The Annual Report and Notice of Annual General Meeting are also available on the Company's website www.pzcussons.com
At the Annual General Meeting on 5 October 2009 it is proposed that the Company adopts new Articles of Association. A summary of the material differences between the current articles of association and the proposed new articles of association is set out in the Notice of the Annual General Meeting. The proposed new Articles of Association are available for inspection during normal business hours at the registered office of the Company and at the offices of Addleshaw Goddard LLP, Milton Gate, 60 Chiswell Street, London, EC1Y 4AG.
A condensed set of PZ Cussons' financial statements and information on important events that have occurred during the financial year and their impact on the financial statements were included in the Company's preliminary results announcement released on 28 July 2009. That information, together with the information set out below, which is extracted from the 2009 Annual Report, constitute the material required by Disclosure and Transparency Rule 6.3.5 which is required to be communicated to the media in unedited full text through a Regulatory Information Service. This announcement is not a substitute for reading the full 2009 Annual Report. Page numbers and cross-references in the extracted information below refer to references in the 2009 Annual Report.
PRINCIPAL RISKS AND UNCERTAINTIES (page 24)
The principal risks facing the Group, which have been considered by the board, are detailed below. The Group's well developed risk management process is detailed in the Corporate Governance section.
| Description of risk | Measures to reduce the risks | |
| The Group conducts a substantial proportion of its operations outside the UK in developing markets which have significant capacity for profitable growth but which also have an increased risk of political and economic instability. | The Group has a diverse geographic portfolio, however, in developing its corporate strategy and in order to help mitigate the risk that could arise in any one particular territory, the Board seeks to maintain an appropriate balance both between developed and developing markets and, within the developing world, between its operations in different territories. In addition, the Group has extensive and long established experience in all key markets and the Board continually monitors those markets to ensure that any specific risks (or opportunities) may be identified and addressed as they arise. | |
| Demand for the Group's products may be adversely impacted by changes in consumer preferences. The increasingly competitive environment and continued growth of discounters could adversely impact the rate of sales growth and profit margins. | Extensive knowledge of the Group's selected markets is a core strategic pillar and the Group actively monitors the needs and aspirations of consumers on a regular and ongoing basis and is continuously developing new products to satisfy them. The Group will continue to invest in selected brands and selected markets in order to drive profitable sales growth and the Board believes that competition is healthy as it encourages and motivates the Group's operations across the world to do their best to serve the interests of consumers and our brands. |
| Description of risk | Measures to reduce the risks | |
| In common with other companies within its sector, the Group's profitability is affected by price and supply fluctuations in raw materials used in the manufacture of its products. Key items, such as oils and fats, packaging materials and energy are subject to fluctuations in price and availability. | The Group takes measures to protect against the short-term impact of these fluctuations and shortfalls; however, failure to recover higher costs or shortfalls in availability could have a negative impact on profits. The Group continually monitors the price and availability of materials against forecast demand to ensure that there are adequate resources to continue in production throughout the world and during the year the Group has further strengthened its raw material forecasting and procurement capabilities. | |
| The international nature of the Group's activities gives rise to both transactional exchange rate risk (with the main exposure relating to US Dollar trade balances) and translation exposure when the results, assets and liabilities of foreign subsidiaries are translated into Sterling. | The Group requires its operating units to hedge their material transaction exposures on sales and purchases conducted in currencies other than their functional currencies. The Group does not actively hedge its translation exposures as these are of an accounting rather than a cash nature; however, the international spread of the Group's operations itself reduces dependence on individual currencies. The Group maintains a centralised treasury function which operates on a non-speculative basis in accordance with policies and procedures approved by the Board of Directors and reviewed during the year by the Board and the Audit Committee. The aim of this function is to mitigate the effects of any adverse movements in exchange rates and interest rates on the Group's financial results. | |
| The Group recognises that in order to deliver sustained strong results it requires the right calibre of people at all levels of the business. In particular, the Group must compete to recruit and retain capable individuals within the business including training them in the skills and competencies which are required to deliver profitable growth. | The Board believes that there is in place an attractive employment proposition across the Group which will continue to attract capable recruits and that key management and personnel are sufficiently well incentivised and challenged in order to retain them as far as possible. | |
| Should the Group fail to meet high product safety, social, environmental and ethical standards in all operations and activities, there is the risk that its corporate reputation could be damaged, leading to the rejection of our products by consumers, damage to brands and diversion of management time into rebuilding our reputation. | Product safety, social, environmental and ethical standards continue to be the cornerstones on which our business is based and during the year the Board has established the Corporate Social Responsibility Committee as a standing sub-committee of the Board with responsibility for the development of policies in respect of each of these focus areas. Should any issues arise in these areas, the Group has processes in place to enable a quick response. |
RELATED PARTY TRANSACTIONS
Notes 31 and 32 to the consolidated financial statements on page 88 details the following related party transactions.
31. Related party transactions
The following related party transactions were entered into by subsidiary companies during the year under the terms of a joint venture agreement with Glanbia Plc:
At 31 May 2009 the outstanding balance receivable from Milk Ventures (UK) Ltd was £23.7 million (2008: £23.2 million). At 31 May 2009 the Group had no outstanding balance payable to Milk Ventures (UK) Ltd (2008: nil).
The Group sourced and then sold fixed assets and raw materials to Nutricima Ltd to the value of £41.8 million (2008: £43.8 million). At 31 May 2008 the amount outstanding from Nutricima Ltd was £3.6 million (2008: £4.4 million).
Nutricima Ltd sold £60.2 million (2008: £43.4 million) of goods to PZ Cussons Nigeria Plc. The amount outstanding from PZ Cussons Nigeria Plc at 31 May 2009 was £1.3 million (2008: £2.7 million).
All trading balances will be settled in cash.
There were no provisions for doubtful related party receivables at 31 May 2009 (2008: nil) and no charges to the income statement in respect of doubtful related party receivables (2008: nil).
32. Subsidiaries and joint ventures
Details of the Company's principal subsidiaries at 31 May 2009 are as follows:
| Company | Operation | Incorporated in | Parent Company's interest | Proportion of voting interest |
| PZ Cussons Australia Pty Ltd | Manufacturing | Australia | †100% | †100% |
| PZ Cussons Middle East and South Asia FZE | Distribution | Dubai | †100% | †100% |
| Charles Worthington Hair & Beauty Ltd | Holding company | England | *100% | *100% |
| FC Ltd | Manufacturing | England | †100% | †100% |
| PZ Cussons (Holdings) Ltd | Holding company | England | *100% | *100% |
| PZ Cussons (International) Ltd | Provision of services to Group companies | England | *100% | *100% |
| PZ Cussons (UK) Ltd | Manufacturing | England | †100% | †100% |
| The Sanctuary Spa Holdings Ltd | Provision of spa services and product distribution | England | †100% | †100% |
| PZ Cussons Ghana Ltd | Manufacturing | Ghana | †90% | †90% |
| Minerva SA | Manufacturing | Greece | *100% | *100% |
| PT PZ Cussons Indonesia | Manufacturing | Indonesia | †100% | †100% |
| PZ Cussons East Africa Ltd | Manufacturing | Kenya | †100% | †100% |
| HPZ Ltd1 | Manufacturing | Nigeria | †48% | †48% |
| PZ Cussons Nigeria Plc | Manufacturing | Nigeria | †64% | †64% |
| Harefield Industrial Nigeria Ltd | Distribution | Nigeria | †100% | †100% |
| PZ Cussons Polska SA | Manufacturing | Poland | †99% | †99% |
| PZ Cussons (Thailand) Ltd | Manufacturing | Thailand | †100% | †100% |
| Joint venture companies | Operation | Incorporated in | Parent Company's interest |
| Milk Ventures (UK) Ltd | Holding company | England | †50% |
| Nutricima Ltd | Manufacturing | Nigeria | †50% |
| Other investments | Operation | Incorporated in | Parent Company's interest |
| Norpalm Ghana Ltd | Manufacturing | Ghana | †31% |
1 HPZ Ltd is 74.99% owned by PZ Cussons Nigeria Plc and is therefore consolidated.
* Shares held by the parent company
† Shares held by a subsidiary
STATEMENT OF DIRECTORS' RESPONSIBILITIES (page 52)
The Directors are responsible for preparing the Annual Report, the Report on Directors' remuneration and the Group and Parent financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates which are reasonable and prudent;
state whether IFRSs as adopted by the European Union and applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent company financial statements respectively; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements and the Report on Directors' remuneration comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website, www.pzcussons.com. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on page 36, confirm that, to the best of their knowledge:
• the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
• the Report of the Directors includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties which it faces.
Name of contact and telephone number for queries:
Sam Plant
Company Secretary, PZ Cussons Plc
(T) (00) 44 (0)161 491 8000
Date: 25 August 2009