Lower exceptional charges meant PZ Cussons’ (PZC) reported pre-tax profit came out slightly ahead of last year's figures, despite a decline in revenue linked to the rapid currency devaluation in Nigeria, against which the group was required to take a £12m exceptional charge. The underlying picture was less rosy, with operating profit and adjusted earnings per share falling at constant currencies.
Aside from the inflationary squeeze on the Nigerian consumer, performance elsewhere in Africa was mixed, with tough trading conditions in Ghana offset by better conditions in Kenya. Overall, African revenue for the group grew 4.7 per cent at fixed currencies.
The picture was similarly mixed across other geographies. Turnover in Asia was flat while operating profit dropped 17.9 per cent. Management said trading conditions in Australia were tough, but began to improve in the second half of the year, while Indonesia saw growth in both revenue and profit. In Europe revenue and operating profit both declined 2 per cent as last year’s poor summer impacted sales of St Tropez fake tan.
Analysts at Numis are forecasting profit before tax and exceptional items of £108m, giving EPS of 18.1p for the full year to the end of May 2018 (from £104m and 16.8p in FY2017).
|PZ CUSSONS (PZC)|
|ORD PRICE:||366p||MARKET VALUE:||£1.57bn|
|TOUCH:||365.4-365.9p||12-MONTH HIGH:||375p||LOW: 292p|
|DIVIDEND YIELD:||2.3%||PE RATIO:||24|
|NET ASSET VALUE:||115p*||NET DEBT:||27%|
|Year to 31 May||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
|*Includes intangible assets of £403m, or 94p a share|
PZ Cussons has been facing challenges in a number of its markets, and at 20 times forecast earnings, we would want a clearer picture of its growth prospects. Hold.
Last IC View: Hold, 306p, 24 Jan 2017