Interim Results
PZ CUSSONS PLC
30 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 +8.3
Operating profit £29.0m £27.0m +7.4
Profit before taxation £30.2m £28.9m +4.5
Earnings per share(1) 4.17p 3.85p +8.3
Interim dividend per share(1) 1.00p 0.93p +7.5
Net 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 the
remainder of the year despite the impact of the continued weak dollar. The
Group's focus remains on growth and margin improvement in selected geographical
markets, particularly Nigeria, where the stable economic and political
environment ahead of the forthcoming elections provides significant growth
opportunities.'
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 with
profit 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 per
share from 0.93p per share.
Africa
Performance in Nigeria has been strong with sales and profitability up on the
same period last year. The soaps and detergents business performed well in the
period with the launch of new products such as Elephant Gold detergent, although
the market remained competitive with increased levels of supply. Sales of health
and beauty products were higher than the same period last year with the launch
of Super Robb mentholated rub in the first half. A relaunch of Venus hair
relaxer in the second half was the first product launch under the pan-regional
project to leverage the strength of our brands across the African territories.
The white goods business, established with Chinese partner Haier, has continued
to experience significant growth from sales of both the core range of fridges,
freezers and air conditioners and from the introduction of other electrical
products such as televisions and DVD players.
The joint venture with Glanbia Plc continues to progress well with strong sales
of the Nunu milk brand in the first half. Significant new product launches in
the second half include Coast milk, Nunu flavoured powdered milk and Powerfist
powdered energy drinks.
As previously announced, the current milk factory is being extended to provide
further capacity for the production of powdered and evaporated milk, and a
second factory is being constructed for the manufacture of further nutritional
products. The Group's share of the cost of both projects is approximately £15
million. Completion of the current factory extension is scheduled for the end of
2007, with the second factory completion targeted for early 2009.
Efforts continue to be concentrated on the Nigeria supply chain with lead times
for the supply of materials into Nigeria being further reduced, with significant
investment made in the nationwide depot network and further supported by the
introduction of a dedicated haulage scheme with a new fleet of vehicles to
improve supply from factory to depot.
The Nigerian currency has been stable against the dollar during the period with
continued political and economic stability ahead of the elections later this
year.
Profitability in Ghana and Kenya is ahead of the same period last year as a
result of both growth and margin improvement.
As previously announced, a decision was taken to dispose of the Cameroun
business due to limited opportunities in that market, and the sale of the
business as a going concern has now been completed following the period end.
Asia
In Australia, the market for branded detergent products has become more
competitive, principally as a result of the introduction of private label ranges
by the trade. Whilst sales were maintained at last year's level for the
comparative period, profitability has been impacted by lower selling prices and
additional promotional support costs. The trade environment in the second half
is expected to improve and the business's extensive new product development
pipeline is being prioritised in order to react appropriately to market
developments, whilst cost reduction initiatives are also being accelerated in
order to restore margin levels.
The Indonesian economy has improved during the first half following the adverse
impact on consumer disposable income last year as a result of the withdrawal of
government fuel subsidies. This improvement, together with a focus on the core
brands, and in particular the baby range, has led to an improvement in
profitability over the same period last year. Further launches of new products
together with an extension of the brand structure of the baby range are planned
for the second half. Significant improvements in the distribution network have
also been initiated, including the rationalisation of depot operations in
Jakarta.
In the other Asian units, Thailand, Malaysia and the Middle East, profitability
was maintained at last year's level, for the same comparative period.
Europe
In the UK, performance has been strong across the brand portfolio. The Imperial
Leather range has seen further innovative launches such as the successful
introduction of limited edition shower and bath products, with market shares
improving across the Imperial Leather portfolio of shower, bath and bar soap
products. The Original Source brand, which was completely renovated last year,
has been strengthened with the addition of a range of body scrubs, with the
brand also being supported by a nationwide television and press campaign. The
Carex range has been extended with the introduction of additional variants and a
'Hand Carexperts' campaign was launched both on television and in targeted print
publications. The expansion of distribution of the Charles Worthington haircare
brand into the nationwide trade is progressing well with strong sales of the
core Results products as well as the recently launched Men's and CW Style.com
ranges.
Construction of the new, purpose built liquids factory in North Manchester has
begun, with completion planned for the end of 2008 when the current factory will
be closed. Negotiations for the advance sale of the current factory site are in
progress. Completion of the sale of the Nottingham site, which is subject to a
conditional contract, is expected by the end of 2008.
Profitability of the business in Poland continues to improve through good brand
renovation of the 'E' detergent and Luksja soap and shower ranges, together with
tight cost control across the business. During the period, the head office and
warehousing site in Warsaw was sold with completion scheduled for the second
half. Following the sale of the liquids and creams factory in Warsaw last year,
this further sale completes the disposal of the major Warsaw properties
therefore enabling the business to operate from a reduced overhead base and to
focus on improving efficiencies at the Wroclaw factory site.
Sales in Greece have improved over the same period last year following the
rebranding and relaunch of the core Minerva brand. In addition to the olive oil
business, expansion of the brand portfolio into butter and spreads is proving
successful with the launch of Minerva So Real butter and Minerva Benecol cheese
products. Further new product launches are planned for the second half.
Group-wide initiatives
The long term people development programme is continuing with the objective to
improve the quality of management and staff both from within and from external
recruitment.
Further investment is now planned in group-wide communications following the
successful completion of a group virtual private network. A major IT
infrastructure review has now been completed and work has begun to upgrade all
Group infrastructure over the next two years.
Share split
The share split approved at the last annual general meeting on the basis of ten
shares per one share previously in issue has now been completed.
Directors
Costas Nicoloulias, regional director Pacific, and Phil Smyth, technical
director, will retire from the board on 31st May 2007. The Group technical
department has now been integrated with the Group supply chain function and has
been headed up by John Pantelireis, supply chain director, from 1st January
2007.
Professor John Arnold joined the board on 1st January 2007 as non-executive
director 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 the
continued weak dollar.
The Group's focus remains on growth and margin improvement in selected
geographical markets, particularly Nigeria, where the stable economic and
political environment ahead of the forthcoming elections provides significant
growth opportunities.
The Group's balance sheet remains strong with all projects currently being
financed 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 - 539.9
Cost 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 distribution
expenses (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 - 4.3
Finance 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) 61.2
Taxation 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) 35.4
Minority 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 8.33
Diluted EPS (p) 7 4.13 3.81 8.23
___________________________________________________________________________
Adjusted basic EPS (p) 7 4.17 3.85 8.90
Adjusted 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
_____________________________________________
Assets
Non-current assets
Goodwill and other intangible
assets 53.9 54.2 54.0
Property, plant and equipment 137.1 145.1 140.1
Investments in joint ventures - 0.6 -
Other investments 0.7 0.6 0.8
Receivables 0.1 0.2 0.1
Non-current assets held for sale 4.6 4.1 1.3
Retirement benefit surplus 23.4 23.0 23.4
_____________________________________________
219.8 227.8 219.7
_____________________________________________
Current assets
Inventories 158.9 155.8 142.7
Receivables and prepayments 105.8 91.5 87.2
Other investments 0.6 20.3 2.2
Cash and short-term deposits 52.3 36.9 65.8
Current taxation receivable 1.4 2.1 2.7
______________________________________________
319.0 306.6 300.6
_____________________________________________
Total assets 538.8 534.4 520.3
_____________________________________________
Liabilities
Current liabilities
Borrowings (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 liabilities
Borrowings (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
_______________________________________________
Equity
Ordinary share capital 4.3 4.3 4.3
Capital redemption reserve 0.7 0.7 0.7
Revaluation reserve 26.3 28.0 27.3
Other reserve (3.4) (3.5) (2.9)
Currency translation reserve (3.0) 12.5 3.3
Special 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 defined
benefit pension schemes (net of
taxation) - - (3.8)
Exchange differences on
translation of foreign operations (8.8) 9.8 (2.4)
Taxation on items taken
directly to equity - - 1.8
_________________________________________________
Net income recognised directly
in equity (8.8) 9.8 (4.4)
Profit for the period 21.2 20.0 42.6
__________________________________________________
12.4 29.8 38.2
Adoption of IAS 39 - 2.0 2.0
__________________________________________________
Total net income and expense
recognised for the period 12.4 31.8 40.2
__________________________________________________
Attributable to:
Equity holders of the parent 11.3 25.3 33.2
Minority 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 activities
Cash generated from operations
(note 8) 25.9 3.0 35.8
Taxation (8.7) (8.6) (18.3)
_______________________________________________
Net cash flow from operating
activities 17.2 (5.6) 17.5
_______________________________________________
Investing activities
Investment income received 2.1 2.6 8.5
Purchase of property, plant and
equipment (12.5) (12.0) (25.5)
Sale of property, plant and
equipment 2.1 1.0 10.2
Purchase of intangible assets - - (0.2)
Net cash balances disposed of with
subsidiary undertaking - - (0.4)
Purchase of non-current asset
investments - - (0.3)
Sale of current asset investments 1.6 - 14.0
________________________________________________
Net cash flow from investing
activities (6.7) (8.4) 6.3
________________________________________________
Financing activities
Interest paid (0.6) (0.4) (0.9)
Preference dividends paid - (0.1) (0.1)
Dividends paid to minority
shareholders in subsidiary
companies (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) in
short-term borrowings 4.0 10.9 (3.4)
Cash received from minority
shareholders in respect of rights
issue - - 5.3
Repayment of preference share
capital - (15.5) (15.5)
Loans to joint venture companies (8.7) - -
__________________________________________________
Net cash flow from financing
activities (21.2) (21.0) (34.9)
__________________________________________________
Net decrease in cash and cash
equivalents (10.7) (35.0) (11.1)
Cash and cash equivalents at the
beginning of the period 53.9 65.4 65.4
Effect of foreign exchange rates (0.4) 0.6 (0.4)
___________________________________________________
Cash and cash equivalents at the
end 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 with
International Financial Reporting Standards (IFRS) as adopted for use in the
European Union (EU), including International Accounting Standards (IAS) and
interpretations issued by the International Financial Reporting Interpretations
Committee (IFRIC).
In preparing these interim financial statements the board has not sought to
implement the early adoption of IAS 34 'Interim financial reporting'.
The interim financial statements for the period ended 30th November 2006 do not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985.
The financial information set out in this statement relating to the year ended
31st May 2006 does not constitute statutory accounts for that period. Full
audited accounts of the PZ Cussons Group in respect of that financial period in
accordance with IFRS, which received an unqualified audit opinion and did not
contain a statement under either Section 237(2) or (3) of the Companies Act
1985, have been delivered to the Registrar of Companies.
2. Accounting policies
The accounting policies adopted are consistent with those adopted in the
preparation of the annual financial statements for the year ended 31st May 2006.
The Group has considered all amendments to current standards and interpretations
together with all new standards and interpretations and has not identified any
significant changes relevant to these accounts.
3. Exceptional items
There were no exceptional items in the periods ended 30th November 2006 and 30th
November 2005.
Year to 31st May 2006
Profit before Profit after
Taxation Taxation taxation
Note £m £m £m
___________________________________________________________________________________
Exceptional items included within
operating profit:
___________________________________________________________________________________
Restructuringof UK operations (i) (6.5) 1.6 (4.9)
Restructuring of smaller overseas
operations (ii) (3.1) - (3.1)
Profit on disposal of property,
plant and equipment (iii) 1.9 - 1.9
Income from bad debts previously
written off (iv) 5.3 (1.6) 3.7
___________________________________________________________________________________
Total (2.4) - (2.4)
___________________________________________________________________________________
(i) Restructuring of UK operations
A decision was taken in the year ended 31st May 2005 to close the soap
manufacturing factory in Nottingham and transfer the production to PZ Cussons
Thailand. The exceptional charge before taxation to the consolidated income
statement in the year ended 31st May 2006 comprised impairment provisions for
plant and machinery of £3.3 million and other associated restructuring costs of
£3.2 million.
(ii) Restructuring of smaller overseas operations
Rationalisation of the Group's smaller operations in the year ended 31st May
2006, being the Cameroun business which was put up for sale and the USA
operation which was converted from direct sale to a licence arrangement.
(iii) Profit on disposal of property, plant and equipment
During the year ended 31st May 2006, the sale of the Group's liquids and creams
factory in Warsaw resulted in an exceptional gain on disposal of £1.9 million.
(iv) Income from bad debts previously written off
Gross income of £5.3 million was recognised in the year ended 31st May 2006 as a
result of recoveries from ECGD (Export Credit Guarantee Department) of bad debts
written off several years ago, which were recovered as a result of Nigeria's
settlement 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 2.7
Interest and dividends receivable 1.8 1.0 1.6
____________________________________________________________________________________________
1.8 2.3 4.3
Interest payable on bank loans and
overdrafts (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 6.3
Overseas 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 March
2007. The proposed final dividend for the year ended 31st May 2006 of 2.95p* per
share, totalling £12.5 million, was approved by shareholders at the annual
general meeting of the company and paid on 27th September 2006.
* The comparative figures have been restated following the ten for one share
split on 25th September 2006.
7. Earnings per share
Basic earnings per share and diluted earnings per share are calculated by
dividing profit for the period, after payment of any preference dividends, by
the 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 shares
represents the dilutive effect of the deferred annual share bonus scheme and the
executive 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 share
split 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 61.2
Adjustment for finance income (1.2) (1.9) (3.4)
_________________________________________________________________________________
Operating profit 29.0 27.0 57.8
Depreciation and adjustments on
disposals 6.5 7.1 10.1
Impairment of property, plant
and equipment - - 3.3
Add back charge for shares
purchased for ESOT - 0.6 0.8
_________________________________________________________________________________
Operating cash flows beforemovements
in working capital 35.5 34.7 72.0
Movements 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 for
the period 12.4 29.8 38.2
Ordinary 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 - - 0.8
Share-based payments - 0.2 0.4
Minority interest dividend
charged (2.4) (2.9) (2.9)
Repayment of preference share
capital - (15.5) (15.5)
Increased investment from
minority interest - - 5.3
_________________________________________________________________________________
Net (decrease)/increase in
equity for the period (3.0) (2.2) 8.4
Opening equity 338.4 328.0 328.0
Adoption of IAS 39 - 2.0 2.0
_________________________________________________________________________________
Closing equity 335.4 327.8 338.4
_________________________________________________________________________________
Attributable to:
Equity shareholders of the parent 290.6 287.3 292.0
Minority 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 and
expense for the period ended 30th November 2005, has now been included in the
reconciliation of movement in consolidated equity for that period within the
£15.5 million repayment of preference share capital, as this more fairly
reflects the substance of the transaction.
This information is provided by RNS
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