On PZ Cussons (PZC) back in late January I concluded that below 220p or so I would be considering buying the ‘manufacturer of personal healthcare products and consumer goods. It operates worldwide, especially in Africa and Commonwealth nations’. Guess what share price it briefly recently fell below? It has taken a bit of a while to get its full year numbers to the end of May out, but the 8-11% year-on-year rise in adjusted PBT / basic EPS is no disaster given various impacts of the world of COVID-19 (initially positive and then more challenging). But there are generally issues with ‘adjusted’ numbers, hence I was not too surprised to see a ‘structured loss after tax of £16.6 million due to historical FX on disposal of loss-making Nutricima’ (a Nigerian dairy business). Still with just under £31 million of net debt, a c. x14 historic EV:EBIT multiple and a near 3% dividend yield (raised by 5% year-on-year) is no shocker.
Dividends are pretty equally split between Europe/US, Asia and Africa sales exposure, although inevitably the first of these with a 24% adjusted margin is the main profit generator. Unsurprisingly, given recent challenges, the Africa focused business has the lowest margins at the moment but at least the combination of a 16% year-on-year sales rise and a 5%+ margin advance dellivered some improvement. Even in a company where price/mix multiples in its beauty sector is far more important than baby and or hygiene related sales, medium-term sales advances will happen much more for it in the EM and not the DM part of the world. All it needs to do is get the other side of the COVID-19 challenges and assume general progress for capitalists in Nigeria and related and it will do fine (naturally assuming Nutricima mark 2 does not happen).
I don’t really think the Q1 update, also released, said anything overly worrying. As noted the world of early COVID-19 comparisons causes a few issues, hence why one-year LFL’s were down 9% but the two-year statistic was up 13%. Still, chat about a 20% increase in the focus on ‘Must Win Brands’ and net debt levels further falling to £23 million were not a disaster. At least it anticipates a ‘return to total business revenue growth from Q2’. No surprise though that there is a bit of inflation apparent with an ‘estimated COGS inflation of 9-10% in FY22’. Thanks the high raw material (palm oils, oleochemicals and resins) and freight (China) costs. And it can talk about price increases in the UK, Australia, Indonesia and Nigeria, with the latter two being ‘across all leading brands’. Pull it all together and guidance is for ‘low to mid single-digit revenue growth and adjusted PBT within current range of expectations’. So not that exciting but not that dire either. Brands such as Carex, St Tropez, Cussons Baby and Morning Fresh are known by many around the world.
Certainly a FTSE-250 name which is not widely owned with Zochonis Charitable Trust / John Basil Zochonis controlling over 25% of the stock. After all the current company was formed in 1975, when Paterson Zochonis took over Cussons Group Ltd from the Cussons family who founded Cussons in 1884. Whilst the company - like many others at the moment - is facing inflation / distribution challenges, at least it has a sensible range of products and, give it a few years, profit in its significant west Africa exposure will help more than hinder. Sub 220p a share still strikes me as interesting for a starter position. In the days of COVID-19 max fear it went back to c.180p and certainly that would be more like a doubling up position. A bad day Buy.
Filed under: PZ Cussons, Tern, Seraphine, Argo Blockchain, Union Jack Oil, Wildcat Petroleum
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