PZ Cussons a 'buy' after solid first half, says Investec

PZ Cussons has achieved a “solid” first half given the challenges, according to Investec.

The consumer goods company reported a 0.2% dip in reported revenue to £385.9m in the first half due to foreign exchange headwinds. Pre-tax profit fell 3.7% on a reported basis to £42.1m.

The maker of Imperial Leather soap said if currency effects were stripped out, revenues would have been 9.6% higher and profit up 2.1 %.

The company said a strong performance in Europe was driven by the UK washing and bathing division with a continuous innovation pipeline and the launch of a new range of Carex bodywash products. The Europe beauty division was also boosted by a new in shower gradual tan lotion from St Tropez and a new range of Sanctuary products.

However, Europe’s success was offset by a difficult trading environment in Nigeria and the impact of weaker currencies in Asia and Africa.

“Given the challenges, PZ Cussons has produced a solid 1H result which shows that the diversification in recent years into Beauty and Food is helping to counter the volatility from emerging markets,” said Investec analyst Nicola Mallard.

“The key risk to the immediate outlook remains a further devaluation of the naira which would generate further margin attrition in this region. We make no changes to forecasts today, but remain watchful of the situation.”

Investec kept its ‘buy’ rating on the stock but cut its target price to 312p from 327p.

Shares fell 9.8% to 246.80p at 1054 GMT.