Alongside a third-quarter trading update, PZ Cussons has revealed that it is planning to sell its St. Tropez self-tanning brand as part of a wider reorganisation that will allow it to invest in the business and pay down debt.
Whilst moves in recent years to strengthen the maker of Imperial Leather and Carex have yielded positive results, the British business has been hammered by large currency swings, with the firm’s exposure to Nigeria’s Naira proving to be particularly challenging.
Having undertaken a strategic review of its brands and geographies, PZ Cussons said today that it has embarked on plans to “transform our portfolio, refocusing on where the business can be most competitive”.
The group stated that the St. Tropez had grown significantly since its acquisition in 2010 for £62m. However, it noted that growth had become harder to realise given the need to allocate resources across its large geographic and category footprint. “We therefore plan to realise shareholder value by initiating a process to sell the brand to an owner better placed to capture the brand’s significant long-term potential,” PZ Cussons said.
The group added that it was also looking at strategic options to reduce risk from its troubled operations in Africa, which could include a change in ownership.
Chief Executive Jonathan Myers said: “The actions we are taking will crystallise value for our investors from assets better suited to alternative ownership structures. This will enable us to invest our resources in the key geographies and categories in which we can win and generate superior returns.
“We are transforming PZ Cussons into a business with stronger brands in a more focused portfolio, delivering sustainable profitable growth.”
During its third quarter, group revenues grew 6.4% on a like-for-like basis. However, on a reported basis, they declined by 23.7%, primarily as a result of the devaluation of the Nigerian Naira, which is now 60% lower compared to the prior year period. Volumes grew 0.2%, compared to the first half decline of 4.9%, driven by improved momentum in its UK brands.
In PZ Cussons’ Europe & the Americas unit, like-for-like revenue edged down 0.4%, but this was an improvement on the first half and came after the return to volume growth. Its UK washing and bathing portfolio showed “strong revenue growth” and continued gains in both value and volume market share. PZ Cussons noted that its Original Source and Childs Farm brands were particularly strong, each growing revenue double-digits, whilst Carex and Sanctuary Spa grew single-digits. Against a strong St. Tropez performance in the comparative period, Beauty trading was said to have been impacted by some US category softness.
In the Asia Pacific, PZ Cussons saw like-for-like sales fall 5.7% after growth in Australia was offset by difficult market conditions in Indonesia
In Africa, sales jumped 39.6% as the group continued to increase prices to offset “significant” currency-driven cost inflation.
PZ Cussons reiterated its full-year outlook after the improvement in like-for-like revenues. The group expects to deliver annual adjusted operating profit in the region of £55-60m, assuming there are no further “adverse movements” in the Naira.
