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PZ Cussons looks to streamline affairs

The personal products producer is looking to build on its most profitable brands and locales
July 23, 2019

PZ Cussons (PZC) has decided to rationalise its Nigerian interests and hive off non-core brands as it does not envisage any significant near-term economic improvement in its key markets.

IC TIP: Sell at 227p

A deteriorating macroeconomic backdrop in Nigeria, as highlighted by the personal products group at the time of its half-year release, is still in evidence, leading to an adjusted operating loss of £1m for its African operations, as sales declined and costs increased due to port access issues in Lagos. Earnings were also held in check due to a £22m post-tax impairment of its five:am organic food brand in Australia and Nutricima milk and yoghurt drinks in Nigeria.

The African operations remain a bugbear for the group, with performance across its other locales somewhat mixed. Profitability in the UK was constrained due to increased marketing spend, while the Asia Pacific region delivered a 13.7 per cent constant-currency increase in adjusted operating profit to £20.4m, even though sales have tailed off in its Middle East markets.

Bloomberg consensus is for cash profit of £104m for the May 2020 year-end, leading to EPS of 12.8p, rising to £108.5m and 13.3p in FY2021.

PZ CUSSONS (PZC)   
ORD PRICE:227pMARKET VALUE:£973m
TOUCH:227-228p12-MONTH HIGH:244pLOW: 175p
DIVIDEND YIELD:3.6%PE RATIO:36
NET ASSET VALUE:99p*NET DEBT:36%
Year to 31 MayTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201581984.012.58.00
201682183.716.28.11
201780986.514.98.28
2018 (restated)74059.29.68.28
201968937.06.28.28
% change-7-38-35-
Ex-div:08 Aug   
Payment:03 Oct   
*Includes intangible assets of £369m, or 86p a share