PZ Cussons rewards shareholders

PZ Cussons' (PZC) reported metrics line up favourably against the 2020 comparator, although comparisons are somewhat skewed due to the impact of discontinued operations, specifically the loss on disposal of the Nutricima assets. Yet management clearly feels trading is strong enough to justify a 5 per cent increase in the full-year dividend to 6.09p per share. 

An unadjusted net earnings loss of £16.7m, was driven by a pre-tax loss of £41m on the sale of the dairy segment Nutricima in September 2020. Jonathan Myers, group chief executive, was bullish when asked about this. He said “We grew revenue for the first time in seven years and the bottom line for the first time in five years. We are confident in our strategy and its ability to fuel sustainable, profitable revenue growth in the future.” Revenue was up by 7 per cent on a constant currency basis and adjusted profit before tax from continuing operations up by 11 per cent. The African region delivered notable growth, with adjusted operating profit up by £18m to move into profitability. 

The pandemic has been a boon for the group, with consumers getting their wallets out for hygiene products such as hand sanitiser and hand wash. The group’s Carex brand, part of its hygiene division, has benefited from this. It is a UK leader with around 36 per cent of the market. There are reasonable concerns that this could be hit when we emerge from the pandemic and consumer habits change.

This is especially the case as hygiene provides 53 per cent of total revenues, at £322m. Myers is adamant that Carex will remain the market leader and that its position will be maintained and strengthened. He said “We are responding to this is by expanding our convenience distribution to enable consumers to always carry Carex when ‘on-the-go.’”

Shares were down by over 4 per cent as the market chewed over the results. FactSet broker consensus is that EPS will be 12.9p for FY2022 before rising to 13.8p for FY2023.  The net earnings loss (including the discontinued assets) can be viewed as a temporary blip, and the overall growth in sales is encouraging. Investec sees the group as a “good turnaround investment opportunity”. Remains a speculative buy. 

Last IC view: Buy, 264p, 24 Feb 2021