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PZ Cussons has delivered a “robust” performance in the first half as its transformation continued, but the group suffered a decline in volumes and saw margins come under pressure as demand for Carex continued to fall.
Revenues in the six months ended 3 December 2022 jumped 18.8% to £336.9m thanks to the contribution of skincare brand Childs Farm, which the group acquired last March, favourable currency translation and additional reporting days in the period compared to a year ago.
Like-for-like sales increased by 6.1%, but this was driven by price increases as volumes declined 5.4%.
Softening demand for Carex accounted for a large part of the volume decline as UK consumers used less hand sanitiser than during the pandemic. However, sales of the brand remain 20% higher than pre-Covid levels.
Like-for-like revenues of PZ Cussons’ ‘Must Win Brands’ – which include Carez, St Tropez, Sanctuary Spa, Premier, Joy, Cussons Baby, Morning Fresh and Original Source – increased 2.2% (6.7% excluding Carex).
Adjusted operating profits at the group rose 0.9% in the half to £33.2m, while adjusted pre-tax profits increased 7.8% year on year to £34.5m.
However, adjusted operating margins declined by 170 basis points as sales of higher margins brands such as Carex and St Tropez fell and lower-margin brands in Africa and Australia performed better.
PZ Cussons said cost inflation remained high in the period, but expected this to moderate in the second half of the year.
CEO Jonathan Myers said: “Despite the continued challenging macro environment, we have delivered another quarter of like-for-like revenue growth.
“Our first-half performance has been in line with expectations and we are reiterating our full-year outlook. This is thanks to work we have done to make PZ Cussons a more resilient business and our focus on building stronger brands.”
He added: “Overall, while there remains more to do in our transformation and near-term headwinds to navigate in some of our markets, we are confident about the opportunities ahead of us.
“We are working to build a higher growth, higher margin, simpler and more sustainable business.”
Shares in the group sank 5.8% to 201.5p as markets opened this morning.
Morning update
Cellular Goods has this morning revealed that its proposed acquisition of CBD player Cannaray has collapsed.
The £18.6m merger was revealed in September, with Cannaray and its brands Cannaray CBD and Love CBD to be listed on the London Stock Exchange as a result.
However, this morning, Cellular Goods issued a short statement declaring it had “terminated negotiations in relation to the transaction”.
“The board concluded that, as a result of changes in the deal itself, it was not in the best interests of shareholders to proceed,” the statement to the LSE added.
“In parallel with the transaction, the company has been proactively reviewing its product range, proposition, financials, strategy and opportunities. Its focus will continue to be to develop and expand the company’s business model and to position the company for long-term growth.”
Shares in Cellular Goods plummeted 15.8% to 0.6p this morning as a result.
Ingredients specialist Tate & Lyle has outlined a new five-year framework and three new business segments ahead of a capital markets event for investors today.
The group updated its organic revenue growth target to 4% to 6% a year for the five years ended 31 March 2028, with EBITDA growth of 7% to 9%.
It also unveiled a new target to deliver $100m of cumulative productivity benefits.
Reflecting the group’s new shape, it is adopting a simplified disclosure framework, moving to three segments: Food & Beverage Solutions, Sucralose and Primary Products Europe.
CEO Nick Hampton said: “Over the last five years, Tate & Lyle has been transformed into a growth-focused speciality food and beverage solutions business.
“A global leader in sweetening, mouthfeel and fortification, Tate & Lyle creates high-value speciality ingredients and solutions that meet growing global demand for healthier and tastier food and drink.
“At today’s event we look forward to outlining the large and attractive markets we operate in, our portfolio of highly functional speciality ingredients that directly address growing consumer trends, our scientific and solutions capabilities, how we work with customers, and our purpose-driven approach fueling our new focus on ‘Science, Solutions, Society’.”
The FTSE 100 hit a fresh record high this morning, rising 0.6% to 7,912.60pts.
Tate & Lyle is up 2.6% to 799.2p on the back of its new plans, while other risers include HelloFresh, up 3% to €23.55, and Deliveroo, up 2.3% to 89.5p.
Alongside PZ Cussons, early fallers include DS Smith, down 2.4% to 355.8p, and Naked Wines, down 1.6% to 121p.
Yesterday in the City
The FTSE 100 bounced back 0.3% to 7,863.29pts as a jump for BP shares following bumper profits helped London’s blue-chip index.
Risers in fmcg included Science in Sport, up 6.1% to 14p, Virgin Wines UK, up 1.9% to 55p, McBride, up 1.6% to 24.1p, and Nichols, up 1.1% to 1,010.8p.
AG Barr, Britvic and Coca-Cola HBC were among the fallers, down 1.8% to 543p, 1% to 780p and 1.7% to 1,931.5p respectively.
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