Pz Cussons Regulatory News (PZC)

30 Jan 2007 07:01

PZ CUSSONS PLC30 January 2007 30 January 2007 PZ CUSSONS PLC INTERIM ANNOUNCEMENT OF RESULTS FOR THE SIX MONTH PERIOD TO 30 NOVEMBER 2006 HY HY % change 30/11/06 30/11/05 Revenue £279.8m £258.3m +8.3Operating profit £29.0m £27.0m +7.4Profit before taxation £30.2m £28.9m +4.5Earnings per share(1) 4.17p 3.85p +8.3Interim dividend per share(1) 1.00p 0.93p +7.5Net funds(2) £35.2m £32.7m +7.6 (1) The comparative figures have been restated following the ten for one share split on 25th September 2006(2) Net funds, above and hereafter, is defined as cash, short-term deposits and current asset investments less borrowings Highlights • Strong performance in the Group's key markets of UK, Nigeria and Indonesia • The joint venture with Glanbia Plc in Nigeria continues to progress well with strong sales in the first half • The current milk factory in Nigeria is being extended and a second factory is being constructed for the manufacture of further nutritional products • The white goods business, established with Chinese partner Haier,has continued to experience significant growth • Construction of a purpose built liquids factory in North Manchester has begun • Group's net funds position continues to be strong • Outlook for full year remains positive despite the impact of the continued weak dollar Commenting today, Anthony Green, Chairman, said: "The positive signs experienced in the first half should continue for theremainder of the year despite the impact of the continued weak dollar. TheGroup's focus remains on growth and margin improvement in selected geographicalmarkets, particularly Nigeria, where the stable economic and politicalenvironment ahead of the forthcoming elections provides significant growthopportunities." For further information please contact: PZ Cussons Plc Graham Calder - Deputy Chairman Tel: 0161 491 8000 Weber Shandwick Financial Terry Garrett / John Moriarty Tel: 0207 067 0700 BUSINESS REVIEW Overview PZ Cussons is pleased to report good trading performance in the first half withprofit before taxation increasing by 4.5% to £30.2 million from £28.9 million.The board is recommending an interim dividend increase of 7.5% to 1.00p pershare from 0.93p per share. Africa Performance in Nigeria has been strong with sales and profitability up on thesame period last year. The soaps and detergents business performed well in theperiod with the launch of new products such as Elephant Gold detergent, althoughthe market remained competitive with increased levels of supply. Sales of healthand beauty products were higher than the same period last year with the launchof Super Robb mentholated rub in the first half. A relaunch of Venus hairrelaxer in the second half was the first product launch under the pan-regionalproject to leverage the strength of our brands across the African territories.The white goods business, established with Chinese partner Haier, has continuedto experience significant growth from sales of both the core range of fridges,freezers and air conditioners and from the introduction of other electricalproducts such as televisions and DVD players. The joint venture with Glanbia Plc continues to progress well with strong salesof the Nunu milk brand in the first half. Significant new product launches inthe second half include Coast milk, Nunu flavoured powdered milk and Powerfistpowdered energy drinks. As previously announced, the current milk factory is being extended to providefurther capacity for the production of powdered and evaporated milk, and asecond factory is being constructed for the manufacture of further nutritionalproducts. The Group's share of the cost of both projects is approximately £15million. Completion of the current factory extension is scheduled for the end of2007, with the second factory completion targeted for early 2009. Efforts continue to be concentrated on the Nigeria supply chain with lead timesfor the supply of materials into Nigeria being further reduced, with significantinvestment made in the nationwide depot network and further supported by theintroduction of a dedicated haulage scheme with a new fleet of vehicles toimprove supply from factory to depot. The Nigerian currency has been stable against the dollar during the period withcontinued political and economic stability ahead of the elections later thisyear. Profitability in Ghana and Kenya is ahead of the same period last year as aresult of both growth and margin improvement. As previously announced, a decision was taken to dispose of the Camerounbusiness due to limited opportunities in that market, and the sale of thebusiness as a going concern has now been completed following the period end. Asia In Australia, the market for branded detergent products has become morecompetitive, principally as a result of the introduction of private label rangesby the trade. Whilst sales were maintained at last year's level for thecomparative period, profitability has been impacted by lower selling prices andadditional promotional support costs. The trade environment in the second halfis expected to improve and the business's extensive new product developmentpipeline is being prioritised in order to react appropriately to marketdevelopments, whilst cost reduction initiatives are also being accelerated inorder to restore margin levels. The Indonesian economy has improved during the first half following the adverseimpact on consumer disposable income last year as a result of the withdrawal ofgovernment fuel subsidies. This improvement, together with a focus on the corebrands, and in particular the baby range, has led to an improvement inprofitability over the same period last year. Further launches of new productstogether with an extension of the brand structure of the baby range are plannedfor the second half. Significant improvements in the distribution network havealso been initiated, including the rationalisation of depot operations inJakarta. In the other Asian units, Thailand, Malaysia and the Middle East, profitabilitywas maintained at last year's level, for the same comparative period. Europe In the UK, performance has been strong across the brand portfolio. The ImperialLeather range has seen further innovative launches such as the successfulintroduction of limited edition shower and bath products, with market sharesimproving across the Imperial Leather portfolio of shower, bath and bar soapproducts. The Original Source brand, which was completely renovated last year,has been strengthened with the addition of a range of body scrubs, with thebrand also being supported by a nationwide television and press campaign. TheCarex range has been extended with the introduction of additional variants and a'Hand Carexperts' campaign was launched both on television and in targeted printpublications. The expansion of distribution of the Charles Worthington haircarebrand into the nationwide trade is progressing well with strong sales of thecore Results products as well as the recently launched Men's and CW Style.comranges. Construction of the new, purpose built liquids factory in North Manchester hasbegun, with completion planned for the end of 2008 when the current factory willbe closed. Negotiations for the advance sale of the current factory site are inprogress. Completion of the sale of the Nottingham site, which is subject to aconditional contract, is expected by the end of 2008. Profitability of the business in Poland continues to improve through good brandrenovation of the 'E' detergent and Luksja soap and shower ranges, together withtight cost control across the business. During the period, the head office andwarehousing site in Warsaw was sold with completion scheduled for the secondhalf. Following the sale of the liquids and creams factory in Warsaw last year,this further sale completes the disposal of the major Warsaw propertiestherefore enabling the business to operate from a reduced overhead base and tofocus on improving efficiencies at the Wroclaw factory site. Sales in Greece have improved over the same period last year following therebranding and relaunch of the core Minerva brand. In addition to the olive oilbusiness, expansion of the brand portfolio into butter and spreads is provingsuccessful with the launch of Minerva So Real butter and Minerva Benecol cheeseproducts. Further new product launches are planned for the second half. Group-wide initiatives The long term people development programme is continuing with the objective toimprove the quality of management and staff both from within and from externalrecruitment. Further investment is now planned in group-wide communications following thesuccessful completion of a group virtual private network. A major ITinfrastructure review has now been completed and work has begun to upgrade allGroup infrastructure over the next two years. Share split The share split approved at the last annual general meeting on the basis of tenshares per one share previously in issue has now been completed. Directors Costas Nicoloulias, regional director Pacific, and Phil Smyth, technicaldirector, will retire from the board on 31st May 2007. The Group technicaldepartment has now been integrated with the Group supply chain function and hasbeen headed up by John Pantelireis, supply chain director, from 1st January2007. Professor John Arnold joined the board on 1st January 2007 as non-executivedirector and Rod Sellers will retire from the board on 31st May 2007. Outlook The outlook for the full year remains positive despite the impact of thecontinued weak dollar. The Group's focus remains on growth and margin improvement in selectedgeographical markets, particularly Nigeria, where the stable economic andpolitical environment ahead of the forthcoming elections provides significantgrowth opportunities. The Group's balance sheet remains strong with all projects currently beingfinanced from Group net funds. 30th January 2007 CONSOLIDATED INCOME STATEMENT Year to Half-year to Half-year to Before Exceptional 31st May 30th November 30th November exceptional items 2006 2006 2005 items (note 3) Total Note £m £m £m £m £m _________________________________________________________________________ Revenue 279.8 258.3 539.9 - 539.9Cost of sales (171.7) (154.6) (330.9) 1.0 (329.9) _________________________________________________________________________ Gross profit 108.1 103.7 209.0 1.0 210.0 Selling and distributionexpenses (47.8) (45.5) (86.7) (0.7) (87.4) Administrative expenses (31.3) (31.2) (62.0) - (62.0)Other costs - - - (2.7) (2.7) Share of results of joint venture - - (0.1) - (0.1) _________________________________________________________________________Operating profit 29.0 27.0 60.2 (2.4) 57.8 _________________________________________________________________________ Finance income 1.8 2.3 4.3 - 4.3Finance costs (0.6) (0.4) (0.9) - (0.9) __________________________________________________________________________Net finance income 4 1.2 1.9 3.4 - 3.4 __________________________________________________________________________ Profit before taxation 30.2 28.9 63.6 (2.4) 61.2Taxation 5 (9.0) (8.9) (18.6) - (18.6) ___________________________________________________________________________Profit for the period 21.2 20.0 45.0 (2.4) 42.6 ___________________________________________________________________________Attributable to:Equity holders of the parent 17.7 16.4 37.8 (2.4) 35.4Minority interests 3.5 3.6 7.2 - 7.2 ___________________________________________________________________________ 21.2 20.0 45.0 (2.4) 42.6 ___________________________________________________________________________ Basic EPS (p) 7 4.17 3.85 8.33Diluted EPS (p) 7 4.13 3.81 8.23 ___________________________________________________________________________Adjusted basic EPS (p) 7 4.17 3.85 8.90Adjusted diluted EPS (p) 7 4.13 3.81 8.79 ____________________________________________________________________________ There were no exceptional items in the periods ended 30th November 2006 and 30th November 2005. CONSOLIDATED BALANCE SHEET Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m _____________________________________________AssetsNon-current assetsGoodwill and other intangibleassets 53.9 54.2 54.0Property, plant and equipment 137.1 145.1 140.1Investments in joint ventures - 0.6 -Other investments 0.7 0.6 0.8Receivables 0.1 0.2 0.1Non-current assets held for sale 4.6 4.1 1.3Retirement benefit surplus 23.4 23.0 23.4 _____________________________________________ 219.8 227.8 219.7 _____________________________________________ Current assetsInventories 158.9 155.8 142.7Receivables and prepayments 105.8 91.5 87.2Other investments 0.6 20.3 2.2Cash and short-term deposits 52.3 36.9 65.8Current taxation receivable 1.4 2.1 2.7 ______________________________________________ 319.0 306.6 300.6 _____________________________________________Total assets 538.8 534.4 520.3 _____________________________________________LiabilitiesCurrent liabilitiesBorrowings (16.7) (20.3) (14.0)Trade and other payables (107.6) (97.1) (83.8)Current taxation payable (9.8) (11.1) (13.3)Provisions (1.0) - (1.9) _______________________________________________ (135.1) (128.5) (113.0) _______________________________________________Non-current liabilitiesBorrowings (1.0) (4.2) (2.1)Other liabilities (3.6) (5.4) (3.6)Deferred tax liabilities (24.4) (27.6) (24.6)Retirement benefit obligation (30.5) (28.0) (30.5)Provisions (8.8) (12.9) (8.1) _______________________________________________ (68.3) (78.1) (68.9) _______________________________________________Total liabilities (203.4) (206.6) (181.9) _______________________________________________Net assets 335.4 327.8 338.4 _______________________________________________EquityOrdinary share capital 4.3 4.3 4.3Capital redemption reserve 0.7 0.7 0.7Revaluation reserve 26.3 28.0 27.3Other reserve (3.4) (3.5) (2.9)Currency translation reserve (3.0) 12.5 3.3Special reserve - 7.9 -Retained earnings 265.7 237.4 259.3 ________________________________________________Equity attributable to equity holders of the parent 290.6 287.3 292.0 Equity minority interest 44.8 40.5 46.4 ________________________________________________Total equity 335.4 327.8 338.4 ________________________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m ________________________________________________Actuarial losses on definedbenefit pension schemes (net of taxation) - - (3.8)Exchange differences ontranslation of foreign operations (8.8) 9.8 (2.4)Taxation on items takendirectly to equity - - 1.8 _________________________________________________Net income recognised directlyin equity (8.8) 9.8 (4.4)Profit for the period 21.2 20.0 42.6 __________________________________________________ 12.4 29.8 38.2Adoption of IAS 39 - 2.0 2.0 __________________________________________________Total net income and expenserecognised for the period 12.4 31.8 40.2 __________________________________________________Attributable to:Equity holders of the parent 11.3 25.3 33.2Minority interests 1.1 6.5 7.0 ___________________________________________________ CONSOLIDATED CASH FLOW STATEMENT Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m ______________________________________________Operating activitiesCash generated from operations(note 8) 25.9 3.0 35.8Taxation (8.7) (8.6) (18.3) _______________________________________________Net cash flow from operatingactivities 17.2 (5.6) 17.5 _______________________________________________ Investing activitiesInvestment income received 2.1 2.6 8.5Purchase of property, plant andequipment (12.5) (12.0) (25.5)Sale of property, plant andequipment 2.1 1.0 10.2Purchase of intangible assets - - (0.2)Net cash balances disposed of withsubsidiary undertaking - - (0.4)Purchase of non-current assetinvestments - - (0.3)Sale of current asset investments 1.6 - 14.0 ________________________________________________Net cash flow from investingactivities (6.7) (8.4) 6.3 ________________________________________________ Financing activitiesInterest paid (0.6) (0.4) (0.9)Preference dividends paid - (0.1) (0.1)Dividends paid to minorityshareholders in subsidiarycompanies (2.9) (1.6) (2.5)Purchase of shares for ESOT(Employee Share Option Trust) (0.5) (3.0) (2.6)Ordinary dividends paid (12.5) (11.3) (15.2)Net increase / (decrease) inshort-term borrowings 4.0 10.9 (3.4)Cash received from minorityshareholders in respect of rightsissue - - 5.3Repayment of preference sharecapital - (15.5) (15.5)Loans to joint venture companies (8.7) - - __________________________________________________Net cash flow from financingactivities (21.2) (21.0) (34.9) __________________________________________________Net decrease in cash and cashequivalents (10.7) (35.0) (11.1)Cash and cash equivalents at thebeginning of the period 53.9 65.4 65.4Effect of foreign exchange rates (0.4) 0.6 (0.4) ___________________________________________________Cash and cash equivalents at theend of the period 42.8 31.0 53.9 ___________________________________________________ NOTES 1. Basis of preparation These interim financial statements for the period ended 30th November 2006,which are neither audited nor reviewed, have been prepared consistently withInternational Financial Reporting Standards (IFRS) as adopted for use in theEuropean Union (EU), including International Accounting Standards (IAS) andinterpretations issued by the International Financial Reporting InterpretationsCommittee (IFRIC). In preparing these interim financial statements the board has not sought toimplement the early adoption of IAS 34 'Interim financial reporting'. The interim financial statements for the period ended 30th November 2006 do notconstitute statutory accounts within the meaning of Section 240 of the CompaniesAct 1985. The financial information set out in this statement relating to the year ended31st May 2006 does not constitute statutory accounts for that period. Fullaudited accounts of the PZ Cussons Group in respect of that financial period inaccordance with IFRS, which received an unqualified audit opinion and did notcontain a statement under either Section 237(2) or (3) of the Companies Act1985, have been delivered to the Registrar of Companies. 2. Accounting policies The accounting policies adopted are consistent with those adopted in thepreparation of the annual financial statements for the year ended 31st May 2006. The Group has considered all amendments to current standards and interpretationstogether with all new standards and interpretations and has not identified anysignificant changes relevant to these accounts. 3. Exceptional items There were no exceptional items in the periods ended 30th November 2006 and 30thNovember 2005. Year to 31st May 2006 Profit before Profit after Taxation Taxation taxation Note £m £m £m___________________________________________________________________________________Exceptional items included withinoperating profit: ___________________________________________________________________________________Restructuringof UK operations (i) (6.5) 1.6 (4.9)Restructuring of smaller overseasoperations (ii) (3.1) - (3.1)Profit on disposal of property,plant and equipment (iii) 1.9 - 1.9Income from bad debts previouslywritten off (iv) 5.3 (1.6) 3.7___________________________________________________________________________________Total (2.4) - (2.4)___________________________________________________________________________________ (i) Restructuring of UK operationsA decision was taken in the year ended 31st May 2005 to close the soapmanufacturing factory in Nottingham and transfer the production to PZ CussonsThailand. The exceptional charge before taxation to the consolidated incomestatement in the year ended 31st May 2006 comprised impairment provisions forplant and machinery of £3.3 million and other associated restructuring costs of£3.2 million. (ii) Restructuring of smaller overseas operationsRationalisation of the Group's smaller operations in the year ended 31st May2006, being the Cameroun business which was put up for sale and the USAoperation which was converted from direct sale to a licence arrangement. (iii) Profit on disposal of property, plant and equipmentDuring the year ended 31st May 2006, the sale of the Group's liquids and creamsfactory in Warsaw resulted in an exceptional gain on disposal of £1.9 million. (iv) Income from bad debts previously written offGross income of £5.3 million was recognised in the year ended 31st May 2006 as aresult of recoveries from ECGD (Export Credit Guarantee Department) of bad debtswritten off several years ago, which were recovered as a result of Nigeria'ssettlement with the Paris Club of creditors. 4. Net finance income Half-year to Half-year to Year to 30th November 2006 30th November 2005 31st May 2006 £m £m £m____________________________________________________________________________________________Current asset investment income:Net investment gains - 1.3 2.7Interest and dividends receivable 1.8 1.0 1.6____________________________________________________________________________________________ 1.8 2.3 4.3Interest payable on bank loans andoverdrafts (0.6) (0.4) (0.9)____________________________________________________________________________________________ 1.2 1.9 3.4____________________________________________________________________________________________ 5. Taxation Half-year to Half-year to Year to 30th November2006 30th November 2005 31st May 2006 £m £m £m____________________________________________________________________________________________United Kingdom 2.9 3.0 6.3Overseas 6.1 5.9 12.3____________________________________________________________________________________________ 9.0 8.9 18.6____________________________________________________________________________________________ 6. Dividends An interim dividend of 1.00p per share for the half-year to 30th November 2006(2005 - 0.93p*) has been declared totalling £4.2 million (2005 - £3.9 million)payable on 10th April 2007 to ordinary shareholders on the register on 2nd March2007. The proposed final dividend for the year ended 31st May 2006 of 2.95p* pershare, totalling £12.5 million, was approved by shareholders at the annualgeneral meeting of the company and paid on 27th September 2006. * The comparative figures have been restated following the ten for one sharesplit on 25th September 2006. 7. Earnings per share Basic earnings per share and diluted earnings per share are calculated bydividing profit for the period, after payment of any preference dividends, bythe following weighted average number of shares in issue: Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005* 2006*_________________________________________________________________________________Basic weighted average (000) 424,810 423,730 423,750_________________________________________________________________________________Diluted weighted average (000) 428,720 428,720 428,720_________________________________________________________________________________ The difference between the basic and diluted weighted average number of sharesrepresents the dilutive effect of the deferred annual share bonus scheme and theexecutive share option scheme. The basic and diluted earnings per share for the period are as follows: Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005* 2006*_________________________________________________________________________________Basic earnings per share:- Adjusted basic earnings per share 4.17p 3.85p 8.90p- Exceptional items - - (0.57)p_________________________________________________________________________________ - Basic earnings per share 4.17p 3.85p 8.33p_________________________________________________________________________________ Diluted earnings per share:- Adjusted diluted earnings per share 4.13p 3.81p 8.79p- Exceptional items - - (0.56)p_________________________________________________________________________________ - Diluted earnings per share 4.13p 3.81p 8.23p_________________________________________________________________________________ * The comparative figures have been restated following the ten for one sharesplit on 25th September 2006. 8. Reconciliation of operating profit to net cash generated from operating activities Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m_________________________________________________________________________________Profit before taxation 30.2 28.9 61.2Adjustment for finance income (1.2) (1.9) (3.4)_________________________________________________________________________________Operating profit 29.0 27.0 57.8Depreciation and adjustments ondisposals 6.5 7.1 10.1Impairment of property, plantand equipment - - 3.3Add back charge for sharespurchased for ESOT - 0.6 0.8_________________________________________________________________________________Operating cash flows beforemovements in working capital 35.5 34.7 72.0Movements in working capital:Inventories (21.9) (19.6) (14.0)Receivables (11.9) (20.8) (18.2)Payables 24.0 8.1 (1.9)Provisions 0.2 0.6 (2.1)_________________________________________________________________________________Cash generated from operations 25.9 3.0 35.8________________________________________________________________________________ 9. Reconciliation of movement in consolidated equity Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005* 2006 £m £m £m_________________________________________________________________________________Total net income recognised forthe period 12.4 29.8 38.2Ordinary dividends (12.5) (11.3) (15.2)Preference dividends - (0.1) (0.1)Shares purchased for ESOT (0.5) (2.4) (2.6)Shares to be awarded from ESOT - - 0.8Share-based payments - 0.2 0.4Minority interest dividendcharged (2.4) (2.9) (2.9)Repayment of preference sharecapital - (15.5) (15.5)Increased investment fromminority interest - - 5.3_________________________________________________________________________________Net (decrease)/increase inequity for the period (3.0) (2.2) 8.4Opening equity 338.4 328.0 328.0Adoption of IAS 39 - 2.0 2.0_________________________________________________________________________________Closing equity 335.4 327.8 338.4_________________________________________________________________________________ Attributable to:Equity shareholders of the parent 290.6 287.3 292.0Minority interests 44.8 40.5 46.4_________________________________________________________________________________ * £7.6 million which related to the repayment of the preference share capital,previously reported in the consolidated statement of recognised income andexpense for the period ended 30th November 2005, has now been included in thereconciliation of movement in consolidated equity for that period within the£15.5 million repayment of preference share capital, as this more fairlyreflects the substance of the transaction. 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