Preliminary Results

Preliminary Results
Year Ended 31st May
2013
Introduction
Richard Harvey
Chairman
Highlights
 Return to profitable growth with 16% increase in operating profits to
£108.4m
 Post year-end acquisition of Australian baby food brand Rafferty's
Garden for £42.2m
 Wilmar JV palm oil refinery commissioned and new consumer brand
launching Q1 FY14
 Sale of the Polish Home Care brands for £46.6m expected to be
completed shortly
 Supply chain optimisation project announced last year almost
complete
 Group structure and systems project under way to optimise the
Group’s organisation design and IT systems
Financials
Brandon Leigh
CFO
Profit, EPS and Dividend Growth
120.0
18.0
16.0
110.0
14.0
100.0
10.0
80.0
8.0
£'M
90.0
6.0
70.0
4.0
60.0
2.0
50.0
0.0
2006
2007
Operating profit
2008
2009
2010
Earnings per share
2011
2012
Dividend per share
2013
PENCE
12.0
Financial Highlights – Year to 31 May 2013
Year to
31 May 2013
Year to
31 May 2012
Reported
Growth %
Constant
Currency %
Revenue
£883.2m
£858.9m
+ 3%
+ 4%
Operating profit1
£108.4m
£93.4m
+ 16%
+ 17%
Profit before tax1
£107.5m
£92.3m
+ 16%
+ 17%
Effective tax
rate1
26.5%
27.0%
Earnings per
share1
16.62p
14.74p
+ 13%
+ 14%
Dividend per
share
7.39p
6.717p
+ 10%
Net funds/(debt)
£3.4m
(£17.9m)
Notes:
1 Before exceptional items
Regional Summary
Reported Constant
Growth % Currency %
2013
2012
AFRICA
362.7
362.2
0%
0%
ASIA
174.9
161.6
8%
10%
EUROPE
345.6
335.1
3%
4%
TOTAL
883.2
858.9
3%
4%
NET REVENUE
OPERATING PROFIT
AFRICA
37.4
33.5
12%
12%
ASIA
18.4
8.8
109%
116%
EUROPE
52.6
51.1
3%
3%
TOTAL
108.4
93.4
16%
17%
Notes:
Prior periods have been adjusted to include Beauty Division Australia results in Asia, where previously in Europe
Europe segment includes Beauty Division US results
H1 / H2 Summary
2013 – H1
2012 – H1
Reported Constant
Growth % Currency %
2013 – H2
2012 – H2
Reported Constant
Growth % Currency %
NET REVENUE
156.9
162.7
-4%
-3%
205.8
199.5
3%
2%
85.3
76.8
11%
14%
89.6
84.8
6%
7%
EUROPE
172.6
174.5
-1%
2%
173.0
160.6
8%
7%
TOTAL
414.8
414.0
0%
3%
468.4
444.9
5%
5%
13.0
13.7
-5%
-5%
24.4
19.8
23%
23%
8.8
2.1
319%
350%
9.6
6.7
43%
45%
EUROPE
23.5
24.3
-3%
-2%
29.1
26.8
9%
8%
TOTAL
45.3
40.1
13%
15%
63.1
53.3
18%
18%
AFRICA
ASIA
OPERATING PROFIT
AFRICA
ASIA
Notes:
Prior periods have been adjusted to include Beauty Division Australia results in Asia, where previously in Europe
Europe segment includes Beauty Division US results
Operating Margin
H1 2013 H1 2012 Variance
H2 2013
H2 2012 Variance
FY 2013
FY 2012
Variance
8.3%
8.4%
(0.1pp)
11.9%
9.9%
2.0pp
10.3%
9.2%
1.1pp
ASIA
10.3%
2.7%
7.6pp
10.7%
7.9%
2.8pp
10.5%
5.4%
5.1pp
EUROPE
13.6%
13.9%
(0.3pp)
16.8%
16.7%
0.1pp
15.2%
15.2%
0.0pp
TOTAL
10.9%
9.7%
1.2pp
13.5%
12.0%
1.5pp
12.3%
10.9%
1.4pp
AFRICA
Notes:
Prior periods have been adjusted to include Beauty Division Australia results in Asia, where previously in Europe
Europe segment includes Beauty Division US results
Regional Summary
Africa
- Revenues increased despite on-going unrest in northern Nigeria
- Improved operating profit from margin improvement initiatives and lower raw material costs
- Planned post period launch of new consumer brand as part of Wilmar JV
Asia
- Continued double digit revenue growth in Indonesia - growth in both babycare and Personal Care
portfolios
- Wider distribution achieved in Philippines, Myanmar and Vietnam
- Return to profitability in Australia following successful restructuring
Europe
- Increased UK Washing and Bathing division profitability driven by new product launches despite
tough trading conditions
- Strong performance in the Beauty division with expansion into new markets
- Polish business performing well in both Personal Care and Home Care
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Net Funds/(Debt) Statement
Year to
31 May 2013
Year to
31 May 2012
Cash from operations
125.6
72.8
Defined benefit pension scheme contributions
(6.4)
(15.3)
Returns on investments & servicing of finance1
(18.3)
(8.1)
Taxation
(16.1)
(21.6)
Capital expenditure
(22.1)
(16.6)
Investment in joint ventures
(5.2)
(16.8)
Acquisition of minority interest
(9.5)
(8.6)
-
(26.3)
(29.3)
(28.8)
18.7
(69.3)
(17.9)
51.8
Exchange difference
2.6
(0.4)
Closing net funds/(debt)
3.4
(17.9)
Acquisitions
Equity dividends paid
Net increase/(decrease) in funds
Opening net (debt)/funds
Notes:
1 Consists of (2013/2012): Interest received (£2.7m/£2.5m), interest paid (£3.6m/£3.6m), MI dividends paid (£2.4m/£4.2m), ESOT share
purchase (£15.0m/£2.8m)
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Raw Material Prices
2,550
SLES
LAB
Tallow
2,050
CPO
US$ MT
1,550
1,050
550
50
May 07
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May 08
May 09
May 10
PZ Cussons Ltd. PowerPoint Presentation
May 11
May 12
May 13
Net Working Capital as % of Sales
60%
50%
40%
%
30%
20%
10%
Nov 06
May 07
Nov 07
May 08
Nov-08
May-09
Nov-09
May-10
Nov-10
May-11
Nov-11
May-12
Nov-12
(10%)
Africa
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Asia
PZ Cussons Ltd. PowerPoint Presentation
Europe
Group
May-13
Financial Summary
- 16.1% increase in operating profits driven by:
 2.8% revenue growth
 Australian profitability return
 Margin improvement initiatives and lower raw material costs
- Improvement despite significant challenges and internal investments:
 Fragile consumer sentiment in Europe
 Higher Indonesian wage inflation
 Continuing unrest in northern Nigeria
 Investment in Wilmar JV and Mum & Me brand
- Strong balance sheet with small net funds
- Nigerian subsidiary holding increased from 68.8% to 70.4% at a cost of
£9.5m
- Dividend growth of 10% year on year
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Business Review
Alex Kanellis
CEO
Supply Chain Optimisation
– Project is now almost complete and is to
budget
– Closure of Australia and Ghana
manufacturing facilities in addition to
optimisation projects in Africa and Asia
– Reduction of overhead footprint from
manufacturing activities
– Already benefiting margins in the current
financial year
Group Structure and Systems Project
– More effective group operating model
structured around three core principles:
 Independent supply chain global structure
 Category focused approach to brand
development and innovation
 Commercial teams focused on geographic
markets
– Key benefits will be more efficient structure to
enable faster decision making and speed to
market
– Project to be completed by end 31 May 2016.
Cash cost of £40m over 3 year period (£10m
structure, £30m systems)
AFRICA
Africa – Nigeria Macro Overview
Three macro factors affected the trading environment
during the year:
– Fuel subsidy removal ‘hangover’ from previous fiscal
year continued to affect consumer disposable income
– Worst flooding in decades
– Social unrest in the north of the country disrupted trade
and transport routes
Resulting impact was flat revenue against prior year with
increased profits due to margin improvement projects and
lower raw material costs
Interest rates were maintained at high levels affecting
liquidity to the trade
Naira to dollar exchange rate was stable with foreign
exchange reserves preserved
Africa Family Care – HPC
– Maintenance or growth of leading market shares
through brand innovation and renovation and
development of new distribution points
– Market leader in bar soaps with Premier, Joy and
Imperial Leather brands
– Other leading brands include Zip detergent, Robb
Medicaments and Morning Fresh dishwash
– Market leader in babycare with Nigerian baby and
Cussons baby
Africa Electricals
– Electricals joint venture with Haier
– ‘Haier Thermocool’ brand enters its 40th
anniversary year
– Maintained the number one market share
position in refrigerators and freezers
– New market leader in growing washing machine
category
– Coolworld has 6 showrooms in Nigeria and 5 in
Ghana
Africa Food and Nutrition
PZ Wilmar JV
– Refinery commissioned to time and
budget. Monthly increases in production
levels
– New consumer brand launching Q1 FY14
Nutricima
– Revenue lower due to northern customer
base
– Breakeven profit position for year
– Focus is now being placed on rationalising
the product portfolio and improving
distribution
ASIA
Asia Overview
Australia
– Back to profitability after closure of local
production and sourcing from PZ
Indonesia/Thailand or from 3rd parties
– Focus on two main brands of Morning
Fresh (dish care) and Radiant (fabric care)
– Growth in the Personal Care portfolio after
new product launches under Imperial
Leather and Original Source
Smaller Asian markets
Profitability in Thailand and the Middle East
slightly ahead of the prior year
Asia Overview
Indonesia
– Another year of double digit revenue growth
– Profit increase in UK £ despite;
•
•
10% weakening in the rupiah to dollar exchange rate
Significant increase in wage inflation
– Cussons Baby maintains its number one position,
holding over 40% market share
– Focus on non-babycare brands with Imperial Leather
and Cussons Kids performing well
– Initiation of distribution into Philippines, Vietnam and
Myanmar
Asia Overview
Acquisition of Australian baby food
brand Rafferty's Garden
- The entire issued share capital of
Rafferty's Garden Pty Ltd acquired for
£42.2m
- Leading premium nutritious baby food
brand with approximately 40% share of
the wet baby food market, as well as
growing shares in the infant dry and
snacks market
- Opportunity for expansion to Indonesia,
Thailand and other SE Asia markets
through our babycare expertise and
distribution network
Europe
Europe Overview
UK – Washing & Bathing
– Strength and innovation of brands has ensured
performance achievement without deep price
promotions
– On-going programme of new product development:
 Imperial Leather - re-launched with a best ever shower
formulation
 Original Source - successful limited edition ranges
 Carex - launch of three children variants
– Cussons Mum & Me, launched at start of year, has
seen sales rates building monthly. Will be extended
by ‘Little Explorers’ range in current year
Europe Overview
Poland
– Performance remains strong
– Home Care and Personal Care revenue and
profitability ahead of the prior year
– Contracts have been exchanged for the sale of the
Home Care brands for £46.6m
– Future focus on the Personal Care portfolio of
Luksja, Carex and Original Source
Greece
– Revenue lower due to the macroeconomic
environment
– Profitably trading across range of edible oils,
cheeses and spreads
Beauty
Beauty Overview
– Growth has been achieved in existing markets
through new product launches, e.g. Sanctuary
Active Reverse, Charles Worthington
– New distribution points and overseas markets
expansion into Poland, Germany and Canada
– Leading brands with celebrity endorsements:
–St Tropez - Kate Moss as the brand’s new face and
body
–Sanctuary - Darcey Bussell continuing the role of
brand ambassador
–Charles Worthington - Alice Eve as the face of the
brand
– New look fudge.com website which is ecommerce enabled
– Three boutique spas in Richmond, Cambridge
and Bristol, to be closed as part of the division's
focus on its product ranges
Summary and Outlook
Alex Kanellis
Group CEO
Summary and Outlook
– Continued revenue growth through brand innovation and renovation in all
markets
– New areas of growth include Wilmar joint venture and Rafferty's Garden
– Nigerian market remains fragile and developed markets continue to be tough
– Group structure and systems project will optimise the organisation design and
include IT investment
– Strong balance sheet – well placed to pursue growth opportunities
– 40th anniversary of consecutive year on year dividend increases
– Overall performance since the year end is in line with expectations
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