Final Results
PZ CUSSONS PLC
07 September 2004
7th September 2004
PZ CUSSONS PLC
PRELIMINARY ANNOUNCEMENT
Highlights
•Pre tax profits increased by 17.3% to £60.0m from £51.2m, reflecting:
•Improvement in investment performance to net income of £4.7m from net
losses of £3.5m
•Net exceptional profits of £1.2m (2003 - Nil)
•Pre exceptional operating profits remained fairly static at £54.1m from
£54.7m, reflecting:
•An increase in pension charges of £3.5m, largely in the UK
•A drop in property sales profits of £2.8m, largely in the African
region
•A significant decline in the value of the dollar which impacted on
profit translation and in reduced margins, particularly in Africa
•Diluted earnings per share increased by 29.4% to 92.09p from 71.18p and
basic earnings per share, before exceptional items, increased by 19.4% to
85.87p from 71.90p
•Net funds increased to £85.2m from £72.1m
•Dividend increase for year proposed of 10.3% to 32.00p from 29.00p
Performance by region
Turnover (£m) Operating profit before
exceptional items(1) (£m)
2004 2003 2004 2003
Europe 213.9 204.0 24.7 24.2
Africa 149.2 145.3 19.3 22.8
Asia 125.4 116.6 10.1 7.7
------- ------- ------- --------
Total 488.5 465.9 54.1 54.7
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(1) Exceptional items are detailed in note 2
The focus on increasing operating margins and pursuing growth in all units
remains and considerable progress has been achieved in the year when allowing
for the following factors:
• Sterling has strengthened against the dollar and the naira, resulting,
on translation, in a reduction in turnover of £19m and profits of £2.1m,
largely in the African region. In addition operating margins, particularly in
Africa, have suffered from the currency effect from the resultant increased
cost of imported raw materials
• In 2003, property sales profits of £2.8m were realised largely in the
African region
• Pension costs have increased by £3.5m in the year, largely in the UK as
a result of the latest actuarial valuation of the funds at 1st June 2003.
PZ CUSSONS PLC
Europe
Turnover and profitability continued to improve in the UK with the main brands
of Imperial Leather, Carex, Original Source and Morning Fresh performing well.
With the increasing focus on the personal care brands a decision was made in
February 2004 to sell the 1001 brand to the American group WD40. This sale
resulted in a net exceptional profit of £5.9m. During the year the UK warehouse
operations were closed with distribution being outsourced. This change resulted
in an exceptional charge of £1.2m. The purchase of the Charles Worthington range
on 1st July 2004 will significantly strengthen the UK portfolio of leading
personal care brands.
Poland achieved growth in the year and operating losses were reduced. This
improvement in performance resulted from the focus of the new management team
and the successful relaunches of the major brands, in particular the detergent
'E' and the personal wash brands, Luksja and Erica.
In January 2004 a new distributor was appointed in Russia, who has extensive
coverage throughout the country and the capability to improve export sales from
Poland.
In Greece sales of the olive oil brands Minerva and Horio grew, however
profitability suffered in the second half of the year from large increases in
olive oil raw material costs as a result of the bad harvest in 2003.
Africa
Sales in Nigeria have increased by 18% however operating profits remained
relatively static with margin difficulties arising in particular from the fall
in the naira and the dollar, which significantly increased the imported cost of
raw materials. The naira and dollar have been relatively stable since the year
end.
Considerable progress has been achieved in working capital control with a major
improvement in financial and manufacturing systems, resulting from the
availability of new satellite communications in the country and a major
investment by the local management. Stocks have fallen by £15.6m and interest
charges by £1.2m and therefore pre tax profits have increased by 16%. Progress
has continued in improving the capacities and the efficiencies in the factories
giving potential to expand sales.
The construction of the milk factory which is being built in a joint venture
with Glanbia Plc is progressing well and it is expected to be in full production
by the summer of 2005.
Ghana, Kenya and Cameroun continued to make a good contribution to the regional
results.
Asia
Overall turnover and profitability have increased in the region with Australia
performing particularly strongly.
During the year, a decision was made to close the soap manufacturing plant in
Australia and transfer the production to Indonesia. This will free space at the
Melbourne site to cope with the growth planned and also improve margins in the
personal care sector where greater focus is intended to balance the successful
dishwash and detergent brands, Morning Fresh and Radiant.
The rapid rate of growth achieved in recent years in Indonesia and Thailand has
currently moderated as distribution coverage has now reached planned levels.
There are plans to grow further by expanding the brand ranges, in particular
Cussons Baby and Cussons Kids, with new product developments. Margins have
suffered in both units with the rise in palm oil prices.
Turnover and profitability have improved in the Middle East but China has
continued to perform poorly.
PZ CUSSONS PLC
Investments
The investment portfolio performed strongly in the year with realised profits of
£3.2m, compared to losses of £3.6m in 2003.
Dividend
The board is recommending a dividend increase of 10.3% for the year.
Post balance sheet event
On 1st July 2004, the group purchased the Charles Worthington haircare business
as part of its strategy of strengthening and growing its personal care business.
The initial consideration was £25m with further cash consideration over 5 years
of between £5m and £12m dependent on future sales performance.
Outlook
The recent investments in the UK in the Charles Worthington and Original Source
brands and in Nigeria in the white goods, feminine hygiene and milk factories,
form a solid foundation for PZ Cussons to expand over the next few years. The
group maintains a strong balance sheet with adequate funds to finance further
opportunities for growth. The focus continues to be to improve operating
profitability and to pursue growth in all units, in particular the UK, Nigeria
and Indonesia.
Consolidated profit and loss account for the year to 31st May 2004
Before Exceptional
exceptional items Total Total
items (note 2) 2004 2003
Notes £000 £000 £000 £000
-------------------------------------------------------------------------------
Turnover 1 488,545 - 488,545 465,878
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Operating profit 2 54,094 (4,741) 49,353 54,691
Profit on disposal of
intangible fixed assets 2 - 5,943 5,943 -
Net investment income /
interest payable 4,693 - 4,693 (3,541)
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Profit on ordinary activities
before taxation 1 58,787 1,202 59,989 51,150
Taxation on profit on
ordinary activities (19,477) 1,259 (18,218) (16,839)
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Profit on ordinary
activities after taxation 39,310 2,461 41,771 34,311
Equity minority interests (4,034) 542 (3,492) (3,758)
-------------------------------------------------------------------------------
Profit for the financial year 35,276 3,003 38,279 30,553
Preference dividends (770) - (770) (770)
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Profit attributable to
ordinary capital 34,506 3,003 37,509 29,783
Ordinary dividends (12,872) - (12,872) (11,559)
-------------------------------------------------------------------------------
Profit for the financial
year retained 21,634 3,003 24,637 18,224
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Basic earnings per ordinary share 85.87p 7.48p 93.35p 71.90p
Diluted earnings per ordinary share 92.09p 71.18p
Dividend for the year per
ordinary share 32.00p 29.00p
The results for both years arise from continuing operations.
Balance sheets as at 31st May 2004
The group Parent company
2004 2003 2004 2003
£000 £000 £000 £000
-------------------------------------------------------------------------------
Fixed assets
Intangible assets 9,728 10,261 - -
Goodwill - 933 - -
Negative goodwill - (2,258) - -
-------------------------------------------------------------------------------
- (1,325) - -
Tangible assets 146,657 149,933 - -
Investments:
Subsidiary companies - - 90,266 112,740
Interests in joint ventures:
--------------------------------------------
Share of gross assets 1,708 - - -
Share of gross liabilities (1,689) - - -
--------------------------------------------
Share of net assets 19 - - -
Other investments 1,546 209 970 209
--------------------------------------------
1,565 209 970 209
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157,950 159,078 91,236 112,949
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Current assets
Stocks 112,586 122,515 - -
Debtors falling due within
one year 65,703 60,387 46,739 55,292
Debtors falling due after one
year 5,568 6,254 1,170 1,520
Investments 80,339 69,663 42,883 33,954
Cash at bank and in hand 13,088 17,690 - 3
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277,284 276,509 90,792 90,769
Creditors - amounts falling
due within one year (101,327) (114,257) (60,419) (69,791)
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Net current assets 175,957 162,252 30,373 20,978
-------------------------------------------------------------------------------
Total assets less current
liabilities 333,907 321,330 121,609 133,927
Creditors - amounts falling
due after one year (15,891) (16,531) (7,156) (7,774)
Provisions for liabilities
and charges (11,193) (15,520) (76) -
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Net assets 306,823 289,279 114,377 126,153
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Capital and reserves
Equity ordinary share capital 4,073 4,073 4,073 4,073
Non-equity preference share capital 7,898 7,898 7,898 7,898
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Total called up share capital 11,971 11,971 11,971 11,971
Reserves attributable to equity
interests:
Capital redemption reserve 671 671 671 671
Revaluation reserve 41,732 33,460 - -
Profit and loss account 214,140 205,158 101,735 113,511
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Total shareholders' funds 268,514 251,260 114,377 126,153
Equity minority interests 38,309 38,019 - -
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306,823 289,279 114,377 126,153
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Group cash flow statement for the year to 31st May 2004
2003
2004 Restated
£000 £000
-------------------------------------------------------------------------------
Cash flow from operating activities 52,336 46,668
Returns on investments and servicing of finance 965 (6,425)
Taxation (15,647) (15,911)
Capital expenditure and financial investment (10,000) (25,699)
Acquisitions and disposals (100) -
Equity dividends paid (11,910) (11,105)
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Cash inflow / (outflow) before use of liquid
resources and financing 15,644 (12,472)
Management of liquid resources (13,579) 34,141
Financing 1,831 (19,174)
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Increase in cash in the period 3,896 2,495
-------------------------------------------------------------------------------
The 2004 cashflow statement and notes have reported for the first time the
charge for shares purchased for the ESOT and the associated cashflows. The
comparatives have been restated accordingly to give a consistent classification
with the current year.
Reconciliation of net cash flow to movement in net funds
2004 2003
£000 £000
-------------------------------------------------------------------------------
Increase in cash in the period 3,896 2,495
Cash (inflow) / outflow from financing (1,831) 1,390
Cash outflow / (inflow) from management of liquid resources 13,579 (34,141)
-------------------------------------------------------------------------------
Change in net funds resulting from cash flows 15,644 (30,256)
Currency retranslation (2,575) (1,047)
-------------------------------------------------------------------------------
Movement in net funds in the period 13,069 (31,303)
Opening net funds 72,107 103,410
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Closing net funds 85,176 72,107
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Group cash flow statement continued
Analysis of net funds
At 31st May Cash Exchange At 31st May
2003 flow difference 2004
£000 £000 £000 £000
-------------------------------------------------------------------------------
Cash in hand and at bank 17,690 (3,437) (1,165) 13,088
Overdrafts (13,010) 7,333 1,178 (4,499)
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3,896
Loans due within one year (2,236) (1,831) 315 (3,752)
Deposits 55,222 12,105 (2,281) 65,046
Other current asset investments 14,441 1,474 (622) 15,293
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13,579
-------------------------------------------------------------------------------
72,107 15,644 (2,575) 85,176
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Statement of total recognised gains and losses
2004 2003
£000 £000
-------------------------------------------------------------------------------
Profit for the financial year 38,279 30,553
Currency retranslation (20,085) (10,507)
Surplus on revaluation 12,702 -
-------------------------------------------------------------------------------
Total recognised gains and losses for the year 30,896 20,046
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NOTES
1 Segmental reporting
Third party Profit before
turnover taxation
2004 2003 2004 2003
£000 £000 £000 £000
-------------------------------------------------------------------------------
Geographical areas - by origin
Europe 213,878 204,019 24,681 24,183
Africa 149,195 145,294 19,325 22,763
Asia 125,472 116,565 10,088 7,745
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488,545 465,878 54,094 54,691
Investment income 6,561 (317)
Interest payable (1,868) (3,224)
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58,787 51,150
Exceptional items (note 2) 1,202 -
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59,989 51,150
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2 Exceptional items
Profit
before Minority Retained
taxation Taxation interest profit
Exceptional item Effect on: £000 £000 £000 £000
-------------------------------------------------------------------------------
Included within operating
profit:
Closure of Australian soap
manufacturing plant (i) (3,012) 903 - (2,109)
Impairment of China fixed
assets and goodwill (ii) (2,662) - 542 (2,120)
Restructuring of UK
warehouse operations (iii) (1,185) 356 - (829)
Write back of Nigeria
negative goodwill (iv) 2,118 - - 2,118
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Sub-total (4,741) 1,259 542 (2,940)
-------------------------------------------------------------------------------
Below operating profit:
Sale of 1001 brand (v) 5,943 - - 5,943
-------------------------------------------------------------------------------
Sub-total 5,943 - - 5,943
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Total 1,202 1,259 542 3,003
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(i) Closure of Australian soap manufacturing plant
During the year, a decision was taken to close the soap manufacturing plant in
Australia and transfer the production to PZ Cussons Indonesia. The charge of
£3,012,000 comprises impairment provisions in respect of plant and machinery
calculated based on the estimated net realisable value of the assets, together
with provisions for redundancy and other associated closure costs.
(ii) Impairment of China fixed assets and goodwill
A review of the China business and its future cashflows was performed and a net
present value calculated using a discount rate of 10% with the conclusion being
that the value of plant and machinery and goodwill is impaired and that
an impairment provision of £2,662,000 to zero value is required.
2 Exceptional items continued
(iii) Restructuring of UK warehouse operations
During the year, the warehouse operations of the UK business were closed and
the distribution was outsourced to a third party, resulting in a total
exceptional charge of £1,185,000.
(iv) Write back of Nigeria negative goodwill
During the year, the company reviewed the continuing negative goodwill
balance against the performance of the related acquisition in Nigeria. The
directors have concluded that the benefit of this has been obtained since May
2001. As it is not possible to allocate the amount accurately across prior
years, and indeed such allocation would not be material in the context of the
business, the total amount of £2,118,000 has been written back in the year as
exceptional.
(v) Sale of 1001 brand
During the year, the 1001 brand was sold at a profit of £5,943,000.
3 AGM and dividend
The board is recommending a final dividend of 23.95p per share which,
together with the interim dividend of 8.05p gives a total distribution of
32.00p, an increase of 10.3% over the total of 29.00p last year.
The date of the annual general meeting has been fixed for Monday 1st November
2004 and dividend warrants in respect of the proposed final dividend, subject
to shareholders' approval, will be posted on that day to members on the
register at 5.00 pm on 1st October 2004.
4 Basis of accounts
The 2004 results are an abridged version of the statutory accounts for the
year ended 31st May 2004 which have been approved by the board of directors
and which carry an unqualified audit report. The 2003 results are an abridged
version of the statutory accounts for the year ended 31st May 2003 which
carry an unqualified audit report and which have been filed with the Registrar
of Companies. Neither accounts contain a statement in respect of s.237(2) or
(3) of the Companies Act 1985.
Enquiries 7th September 2004
PZ Cussons Plc
0161 491 8000 Graham Calder
(Between 9.00 am and 5.15 pm) Finance Director
Weber Shandwick Square Mile
0207 067 0700 Terry Garrett/Sarah Richardson
This information is provided by RNS
The company news service from the London Stock Exchange