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PZ Cussons sales growth offset by Nigeria turnaround costs

The group has seen surging demand for its soap and hand sanitiser products
PZ Cussons sales growth offset by Nigeria turnaround costs
  • ‘Focus brands’ sales up 22 per cent in six months to November
  • However, the group is facing cost pressures in the second half

Soaring demand for hygiene products during the Covid-19 pandemic has proved a boon for PZ Cussons (PZC). As consumers placed their trust in big-name brands, sales of the group’s ‘focus brands’ – which includes the likes of Carex and Cussons Baby – rose by over a fifth in the six months to 30 November.

Europe and the Americas saw “unprecedented” growth in soap and hand sanitiser sales, pushing revenue from the area up by a third. However, demand is said to be volatile due to increasing competition from newer entrants, particularly on the hand sanitiser front.

Thanks to improved sales across all geographic regions, adjusted pre-tax profit increased by 16 per cent to £35m, offsetting increased investment in marketing and digital capabilities. However, on a statutory basis, pre-tax profit was essentially flat due to costs associated with simplifying its business in Nigeria.

Looking at the second half of its financial year, PZ Cussons has flagged potentially weaker consumer confidence as well as “already evident upward cost pressure”. Even so, it believes it will meet current market expectations for the full year, with Shore Capital anticipating £63.5m of adjusted pre-tax profit for the year to 30 May, up from £62m in 2020.

PZ Cussons should continue to clean-up for the duration of the pandemic but could maintain momentum post-crisis if its multi-year turnaround programme proves successful. A detailed strategy update is due in March, and in the meantime, we retain our ‘speculative buy’ rating.

PZ CUSSONS (PZC)   
ORD PRICE:240pMARKET VALUE:£ 1.03bn
TOUCH:239-241p12-MONTH HIGH:265pLOW: 149p
DIVIDEND YIELD:2.4%PE RATIO:62
NET ASSET VALUE:90p*NET DEBT:7%
Half-year to 30 NovTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2019 (restated)28436.87.552.67
202031336.36.812.67
% change+10-1-10-
Ex-div:11 Feb   
Payment:01 Apr   
*Includes £304m in intangible assets, or 71p a share

Last IC view: Buy, 208p, 23 Sep 2020