PZ Cussons posts drop in FY profit but says things are looking up

Imperial Leather maker PZ Cussons reported a drop in pre-tax profit for the year to the end of May but sounded a more optimistic note on its future prospects.

Profit for the period was down 5.3% to £103m as revenue rose just 0.3% to £821.2m. Profit was below consensus expectations of £823.2m but revenue was ahead of estimates of £101.83m.

Chairman Richard Harvey said: “These are a steady set of results, with a strong performance in Europe offsetting a very difficult trading environment in Nigeria and the impact of weaker currencies in both Asia and Africa.

“Despite these challenging trading conditions, to end the year on a constant currency basis with revenue growth of 5.9% and operating profit broadly flat is a creditable performance.”

The company said it booked exceptional charges of £6.5m related to foreign exchange losses in Nigeria as US dollar shortages led to higher-rate settlements on the secondary market than official exchange rates.

PZ Cussons explained that while the official exchange rate remained stable against the US dollar during the year, low oil prices contributed to an environment of tight liquidity with foreign exchange restrictions imposed for certain items.

The market saw relative pricing being adjusted firstly at the beginning of the financial year to adjust for the 25% devaluation of the Naira that took place during the second half of the previous financial year, and more recently during the second half of the financial year to reflect the higher cost of the Naira on the secondary market, the company said.

As far as Brexit is concerned, PZ Cussons said that while it is still early days, the UK’s decision to leave the European Union is unlikely to have a significant near-term impact on the group, although it will be monitoring the situation on an ongoing basis.

The company said its performance since the year end has been in line with expectations, with liquidity in Nigeria beginning to improve.