Interim Results

PZ CUSSONS PLC 30 January 2007 30 January 2007 PZ CUSSONS PLC INTERIM ANNOUNCEMENT OF RESULTS FOR THE SIX MONTH PERIOD TO 30 NOVEMBER 2006 HY HY % change 30/11/06 30/11/05 Revenue £279.8m £258.3m +8.3 Operating profit £29.0m £27.0m +7.4 Profit before taxation £30.2m £28.9m +4.5 Earnings per share(1) 4.17p 3.85p +8.3 Interim dividend per share(1) 1.00p 0.93p +7.5 Net funds(2) £35.2m £32.7m +7.6 (1) The comparative figures have been restated following the ten for one share split on 25th September 2006 (2) Net funds, above and hereafter, is defined as cash, short-term deposits and current asset investments less borrowings Highlights • Strong performance in the Group's key markets of UK, Nigeria and Indonesia • The joint venture with Glanbia Plc in Nigeria continues to progress well with strong sales in the first half • The current milk factory in Nigeria is being extended and a second factory is being constructed for the manufacture of further nutritional products • The white goods business, established with Chinese partner Haier,has continued to experience significant growth • Construction of a purpose built liquids factory in North Manchester has begun • Group's net funds position continues to be strong • Outlook for full year remains positive despite the impact of the continued weak dollar Commenting today, Anthony Green, Chairman, said: 'The positive signs experienced in the first half should continue for the remainder of the year despite the impact of the continued weak dollar. The Group's focus remains on growth and margin improvement in selected geographical markets, particularly Nigeria, where the stable economic and political environment ahead of the forthcoming elections provides significant growth opportunities.' For further information please contact: PZ Cussons Plc Graham Calder - Deputy Chairman Tel: 0161 491 8000 Weber Shandwick Financial Terry Garrett / John Moriarty Tel: 0207 067 0700 BUSINESS REVIEW Overview PZ Cussons is pleased to report good trading performance in the first half with profit before taxation increasing by 4.5% to £30.2 million from £28.9 million. The board is recommending an interim dividend increase of 7.5% to 1.00p per share from 0.93p per share. Africa Performance in Nigeria has been strong with sales and profitability up on the same period last year. The soaps and detergents business performed well in the period with the launch of new products such as Elephant Gold detergent, although the market remained competitive with increased levels of supply. Sales of health and beauty products were higher than the same period last year with the launch of Super Robb mentholated rub in the first half. A relaunch of Venus hair relaxer in the second half was the first product launch under the pan-regional project to leverage the strength of our brands across the African territories. The white goods business, established with Chinese partner Haier, has continued to experience significant growth from sales of both the core range of fridges, freezers and air conditioners and from the introduction of other electrical products such as televisions and DVD players. The joint venture with Glanbia Plc continues to progress well with strong sales of the Nunu milk brand in the first half. Significant new product launches in the second half include Coast milk, Nunu flavoured powdered milk and Powerfist powdered energy drinks. As previously announced, the current milk factory is being extended to provide further capacity for the production of powdered and evaporated milk, and a second factory is being constructed for the manufacture of further nutritional products. The Group's share of the cost of both projects is approximately £15 million. Completion of the current factory extension is scheduled for the end of 2007, with the second factory completion targeted for early 2009. Efforts continue to be concentrated on the Nigeria supply chain with lead times for the supply of materials into Nigeria being further reduced, with significant investment made in the nationwide depot network and further supported by the introduction of a dedicated haulage scheme with a new fleet of vehicles to improve supply from factory to depot. The Nigerian currency has been stable against the dollar during the period with continued political and economic stability ahead of the elections later this year. Profitability in Ghana and Kenya is ahead of the same period last year as a result of both growth and margin improvement. As previously announced, a decision was taken to dispose of the Cameroun business due to limited opportunities in that market, and the sale of the business as a going concern has now been completed following the period end. Asia In Australia, the market for branded detergent products has become more competitive, principally as a result of the introduction of private label ranges by the trade. Whilst sales were maintained at last year's level for the comparative period, profitability has been impacted by lower selling prices and additional promotional support costs. The trade environment in the second half is expected to improve and the business's extensive new product development pipeline is being prioritised in order to react appropriately to market developments, whilst cost reduction initiatives are also being accelerated in order to restore margin levels. The Indonesian economy has improved during the first half following the adverse impact on consumer disposable income last year as a result of the withdrawal of government fuel subsidies. This improvement, together with a focus on the core brands, and in particular the baby range, has led to an improvement in profitability over the same period last year. Further launches of new products together with an extension of the brand structure of the baby range are planned for the second half. Significant improvements in the distribution network have also been initiated, including the rationalisation of depot operations in Jakarta. In the other Asian units, Thailand, Malaysia and the Middle East, profitability was maintained at last year's level, for the same comparative period. Europe In the UK, performance has been strong across the brand portfolio. The Imperial Leather range has seen further innovative launches such as the successful introduction of limited edition shower and bath products, with market shares improving across the Imperial Leather portfolio of shower, bath and bar soap products. The Original Source brand, which was completely renovated last year, has been strengthened with the addition of a range of body scrubs, with the brand also being supported by a nationwide television and press campaign. The Carex range has been extended with the introduction of additional variants and a 'Hand Carexperts' campaign was launched both on television and in targeted print publications. The expansion of distribution of the Charles Worthington haircare brand into the nationwide trade is progressing well with strong sales of the core Results products as well as the recently launched Men's and CW Style.com ranges. Construction of the new, purpose built liquids factory in North Manchester has begun, with completion planned for the end of 2008 when the current factory will be closed. Negotiations for the advance sale of the current factory site are in progress. Completion of the sale of the Nottingham site, which is subject to a conditional contract, is expected by the end of 2008. Profitability of the business in Poland continues to improve through good brand renovation of the 'E' detergent and Luksja soap and shower ranges, together with tight cost control across the business. During the period, the head office and warehousing site in Warsaw was sold with completion scheduled for the second half. Following the sale of the liquids and creams factory in Warsaw last year, this further sale completes the disposal of the major Warsaw properties therefore enabling the business to operate from a reduced overhead base and to focus on improving efficiencies at the Wroclaw factory site. Sales in Greece have improved over the same period last year following the rebranding and relaunch of the core Minerva brand. In addition to the olive oil business, expansion of the brand portfolio into butter and spreads is proving successful with the launch of Minerva So Real butter and Minerva Benecol cheese products. Further new product launches are planned for the second half. Group-wide initiatives The long term people development programme is continuing with the objective to improve the quality of management and staff both from within and from external recruitment. Further investment is now planned in group-wide communications following the successful completion of a group virtual private network. A major IT infrastructure review has now been completed and work has begun to upgrade all Group infrastructure over the next two years. Share split The share split approved at the last annual general meeting on the basis of ten shares per one share previously in issue has now been completed. Directors Costas Nicoloulias, regional director Pacific, and Phil Smyth, technical director, will retire from the board on 31st May 2007. The Group technical department has now been integrated with the Group supply chain function and has been headed up by John Pantelireis, supply chain director, from 1st January 2007. Professor John Arnold joined the board on 1st January 2007 as non-executive director and Rod Sellers will retire from the board on 31st May 2007. Outlook The outlook for the full year remains positive despite the impact of the continued weak dollar. The Group's focus remains on growth and margin improvement in selected geographical markets, particularly Nigeria, where the stable economic and political environment ahead of the forthcoming elections provides significant growth opportunities. The Group's balance sheet remains strong with all projects currently being financed from Group net funds. 30th January 2007 CONSOLIDATED INCOME STATEMENT Year to Half-year to Half-year to Before Exceptional 31st May 30th November 30th November exceptional items 2006 2006 2005 items (note 3) Total Note £m £m £m £m £m _________________________________________________________________________ Revenue 279.8 258.3 539.9 - 539.9 Cost of sales (171.7) (154.6) (330.9) 1.0 (329.9) _________________________________________________________________________ Gross profit 108.1 103.7 209.0 1.0 210.0 Selling and distribution expenses (47.8) (45.5) (86.7) (0.7) (87.4) Administrative expenses (31.3) (31.2) (62.0) - (62.0) Other costs - - - (2.7) (2.7) Share of results of joint venture - - (0.1) - (0.1) _________________________________________________________________________ Operating profit 29.0 27.0 60.2 (2.4) 57.8 _________________________________________________________________________ Finance income 1.8 2.3 4.3 - 4.3 Finance costs (0.6) (0.4) (0.9) - (0.9) __________________________________________________________________________ Net finance income 4 1.2 1.9 3.4 - 3.4 __________________________________________________________________________ Profit before taxation 30.2 28.9 63.6 (2.4) 61.2 Taxation 5 (9.0) (8.9) (18.6) - (18.6) ___________________________________________________________________________ Profit for the period 21.2 20.0 45.0 (2.4) 42.6 ___________________________________________________________________________ Attributable to: Equity holders of the parent 17.7 16.4 37.8 (2.4) 35.4 Minority interests 3.5 3.6 7.2 - 7.2 ___________________________________________________________________________ 21.2 20.0 45.0 (2.4) 42.6 ___________________________________________________________________________ Basic EPS (p) 7 4.17 3.85 8.33 Diluted EPS (p) 7 4.13 3.81 8.23 ___________________________________________________________________________ Adjusted basic EPS (p) 7 4.17 3.85 8.90 Adjusted diluted EPS (p) 7 4.13 3.81 8.79 ____________________________________________________________________________ There were no exceptional items in the periods ended 30th November 2006 and 30th November 2005. CONSOLIDATED BALANCE SHEET Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m _____________________________________________ Assets Non-current assets Goodwill and other intangible assets 53.9 54.2 54.0 Property, plant and equipment 137.1 145.1 140.1 Investments in joint ventures - 0.6 - Other investments 0.7 0.6 0.8 Receivables 0.1 0.2 0.1 Non-current assets held for sale 4.6 4.1 1.3 Retirement benefit surplus 23.4 23.0 23.4 _____________________________________________ 219.8 227.8 219.7 _____________________________________________ Current assets Inventories 158.9 155.8 142.7 Receivables and prepayments 105.8 91.5 87.2 Other investments 0.6 20.3 2.2 Cash and short-term deposits 52.3 36.9 65.8 Current taxation receivable 1.4 2.1 2.7 ______________________________________________ 319.0 306.6 300.6 _____________________________________________ Total assets 538.8 534.4 520.3 _____________________________________________ Liabilities Current liabilities Borrowings (16.7) (20.3) (14.0) Trade and other payables (107.6) (97.1) (83.8) Current taxation payable (9.8) (11.1) (13.3) Provisions (1.0) - (1.9) _______________________________________________ (135.1) (128.5) (113.0) _______________________________________________ Non-current liabilities Borrowings (1.0) (4.2) (2.1) Other liabilities (3.6) (5.4) (3.6) Deferred tax liabilities (24.4) (27.6) (24.6) Retirement benefit obligation (30.5) (28.0) (30.5) Provisions (8.8) (12.9) (8.1) _______________________________________________ (68.3) (78.1) (68.9) _______________________________________________ Total liabilities (203.4) (206.6) (181.9) _______________________________________________ Net assets 335.4 327.8 338.4 _______________________________________________ Equity Ordinary share capital 4.3 4.3 4.3 Capital redemption reserve 0.7 0.7 0.7 Revaluation reserve 26.3 28.0 27.3 Other reserve (3.4) (3.5) (2.9) Currency translation reserve (3.0) 12.5 3.3 Special reserve - 7.9 - Retained earnings 265.7 237.4 259.3 ________________________________________________ Equity attributable to equity holders of the parent 290.6 287.3 292.0 Equity minority interest 44.8 40.5 46.4 ________________________________________________ Total equity 335.4 327.8 338.4 ________________________________________________ CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m ________________________________________________ Actuarial losses on defined benefit pension schemes (net of taxation) - - (3.8) Exchange differences on translation of foreign operations (8.8) 9.8 (2.4) Taxation on items taken directly to equity - - 1.8 _________________________________________________ Net income recognised directly in equity (8.8) 9.8 (4.4) Profit for the period 21.2 20.0 42.6 __________________________________________________ 12.4 29.8 38.2 Adoption of IAS 39 - 2.0 2.0 __________________________________________________ Total net income and expense recognised for the period 12.4 31.8 40.2 __________________________________________________ Attributable to: Equity holders of the parent 11.3 25.3 33.2 Minority interests 1.1 6.5 7.0 ___________________________________________________ CONSOLIDATED CASH FLOW STATEMENT Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m ______________________________________________ Operating activities Cash generated from operations (note 8) 25.9 3.0 35.8 Taxation (8.7) (8.6) (18.3) _______________________________________________ Net cash flow from operating activities 17.2 (5.6) 17.5 _______________________________________________ Investing activities Investment income received 2.1 2.6 8.5 Purchase of property, plant and equipment (12.5) (12.0) (25.5) Sale of property, plant and equipment 2.1 1.0 10.2 Purchase of intangible assets - - (0.2) Net cash balances disposed of with subsidiary undertaking - - (0.4) Purchase of non-current asset investments - - (0.3) Sale of current asset investments 1.6 - 14.0 ________________________________________________ Net cash flow from investing activities (6.7) (8.4) 6.3 ________________________________________________ Financing activities Interest paid (0.6) (0.4) (0.9) Preference dividends paid - (0.1) (0.1) Dividends paid to minority shareholders in subsidiary companies (2.9) (1.6) (2.5) Purchase of shares for ESOT (Employee Share Option Trust) (0.5) (3.0) (2.6) Ordinary dividends paid (12.5) (11.3) (15.2) Net increase / (decrease) in short-term borrowings 4.0 10.9 (3.4) Cash received from minority shareholders in respect of rights issue - - 5.3 Repayment of preference share capital - (15.5) (15.5) Loans to joint venture companies (8.7) - - __________________________________________________ Net cash flow from financing activities (21.2) (21.0) (34.9) __________________________________________________ Net decrease in cash and cash equivalents (10.7) (35.0) (11.1) Cash and cash equivalents at the beginning of the period 53.9 65.4 65.4 Effect of foreign exchange rates (0.4) 0.6 (0.4) ___________________________________________________ Cash and cash equivalents at the end of the period 42.8 31.0 53.9 ___________________________________________________ NOTES 1. Basis of preparation These interim financial statements for the period ended 30th November 2006, which are neither audited nor reviewed, have been prepared consistently with International Financial Reporting Standards (IFRS) as adopted for use in the European Union (EU), including International Accounting Standards (IAS) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC). In preparing these interim financial statements the board has not sought to implement the early adoption of IAS 34 'Interim financial reporting'. The interim financial statements for the period ended 30th November 2006 do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information set out in this statement relating to the year ended 31st May 2006 does not constitute statutory accounts for that period. Full audited accounts of the PZ Cussons Group in respect of that financial period in accordance with IFRS, which received an unqualified audit opinion and did not contain a statement under either Section 237(2) or (3) of the Companies Act 1985, have been delivered to the Registrar of Companies. 2. Accounting policies The accounting policies adopted are consistent with those adopted in the preparation of the annual financial statements for the year ended 31st May 2006. The Group has considered all amendments to current standards and interpretations together with all new standards and interpretations and has not identified any significant changes relevant to these accounts. 3. Exceptional items There were no exceptional items in the periods ended 30th November 2006 and 30th November 2005. Year to 31st May 2006 Profit before Profit after Taxation Taxation taxation Note £m £m £m ___________________________________________________________________________________ Exceptional items included within operating profit: ___________________________________________________________________________________ Restructuringof UK operations (i) (6.5) 1.6 (4.9) Restructuring of smaller overseas operations (ii) (3.1) - (3.1) Profit on disposal of property, plant and equipment (iii) 1.9 - 1.9 Income from bad debts previously written off (iv) 5.3 (1.6) 3.7 ___________________________________________________________________________________ Total (2.4) - (2.4) ___________________________________________________________________________________ (i) Restructuring of UK operations A decision was taken in the year ended 31st May 2005 to close the soap manufacturing factory in Nottingham and transfer the production to PZ Cussons Thailand. The exceptional charge before taxation to the consolidated income statement in the year ended 31st May 2006 comprised impairment provisions for plant and machinery of £3.3 million and other associated restructuring costs of £3.2 million. (ii) Restructuring of smaller overseas operations Rationalisation of the Group's smaller operations in the year ended 31st May 2006, being the Cameroun business which was put up for sale and the USA operation which was converted from direct sale to a licence arrangement. (iii) Profit on disposal of property, plant and equipment During the year ended 31st May 2006, the sale of the Group's liquids and creams factory in Warsaw resulted in an exceptional gain on disposal of £1.9 million. (iv) Income from bad debts previously written off Gross income of £5.3 million was recognised in the year ended 31st May 2006 as a result of recoveries from ECGD (Export Credit Guarantee Department) of bad debts written off several years ago, which were recovered as a result of Nigeria's settlement with the Paris Club of creditors. 4. Net finance income Half-year to Half-year to Year to 30th November 2006 30th November 2005 31st May 2006 £m £m £m ____________________________________________________________________________________________ Current asset investment income: Net investment gains - 1.3 2.7 Interest and dividends receivable 1.8 1.0 1.6 ____________________________________________________________________________________________ 1.8 2.3 4.3 Interest payable on bank loans and overdrafts (0.6) (0.4) (0.9) ____________________________________________________________________________________________ 1.2 1.9 3.4 ____________________________________________________________________________________________ 5. Taxation Half-year to Half-year to Year to 30th November2006 30th November 2005 31st May 2006 £m £m £m ____________________________________________________________________________________________ United Kingdom 2.9 3.0 6.3 Overseas 6.1 5.9 12.3 ____________________________________________________________________________________________ 9.0 8.9 18.6 ____________________________________________________________________________________________ 6. Dividends An interim dividend of 1.00p per share for the half-year to 30th November 2006 (2005 - 0.93p*) has been declared totalling £4.2 million (2005 - £3.9 million) payable on 10th April 2007 to ordinary shareholders on the register on 2nd March 2007. The proposed final dividend for the year ended 31st May 2006 of 2.95p* per share, totalling £12.5 million, was approved by shareholders at the annual general meeting of the company and paid on 27th September 2006. * The comparative figures have been restated following the ten for one share split on 25th September 2006. 7. Earnings per share Basic earnings per share and diluted earnings per share are calculated by dividing profit for the period, after payment of any preference dividends, by the following weighted average number of shares in issue: Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005* 2006* _________________________________________________________________________________ Basic weighted average (000) 424,810 423,730 423,750 _________________________________________________________________________________ Diluted weighted average (000) 428,720 428,720 428,720 _________________________________________________________________________________ The difference between the basic and diluted weighted average number of shares represents the dilutive effect of the deferred annual share bonus scheme and the executive share option scheme. The basic and diluted earnings per share for the period are as follows: Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005* 2006* _________________________________________________________________________________ Basic earnings per share: - Adjusted basic earnings per share 4.17p 3.85p 8.90p - Exceptional items - - (0.57)p _________________________________________________________________________________ - Basic earnings per share 4.17p 3.85p 8.33p _________________________________________________________________________________ Diluted earnings per share: - Adjusted diluted earnings per share 4.13p 3.81p 8.79p - Exceptional items - - (0.56)p _________________________________________________________________________________ - Diluted earnings per share 4.13p 3.81p 8.23p _________________________________________________________________________________ * The comparative figures have been restated following the ten for one share split on 25th September 2006. 8. Reconciliation of operating profit to net cash generated from operating activities Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005 2006 £m £m £m _________________________________________________________________________________ Profit before taxation 30.2 28.9 61.2 Adjustment for finance income (1.2) (1.9) (3.4) _________________________________________________________________________________ Operating profit 29.0 27.0 57.8 Depreciation and adjustments on disposals 6.5 7.1 10.1 Impairment of property, plant and equipment - - 3.3 Add back charge for shares purchased for ESOT - 0.6 0.8 _________________________________________________________________________________ Operating cash flows beforemovements in working capital 35.5 34.7 72.0 Movements in working capital: Inventories (21.9) (19.6) (14.0) Receivables (11.9) (20.8) (18.2) Payables 24.0 8.1 (1.9) Provisions 0.2 0.6 (2.1) _________________________________________________________________________________ Cash generated from operations 25.9 3.0 35.8 ________________________________________________________________________________ 9. Reconciliation of movement in consolidated equity Half-year to Half-year to Year to 30th November 30th November 31st May 2006 2005* 2006 £m £m £m _________________________________________________________________________________ Total net income recognised for the period 12.4 29.8 38.2 Ordinary dividends (12.5) (11.3) (15.2) Preference dividends - (0.1) (0.1) Shares purchased for ESOT (0.5) (2.4) (2.6) Shares to be awarded from ESOT - - 0.8 Share-based payments - 0.2 0.4 Minority interest dividend charged (2.4) (2.9) (2.9) Repayment of preference share capital - (15.5) (15.5) Increased investment from minority interest - - 5.3 _________________________________________________________________________________ Net (decrease)/increase in equity for the period (3.0) (2.2) 8.4 Opening equity 338.4 328.0 328.0 Adoption of IAS 39 - 2.0 2.0 _________________________________________________________________________________ Closing equity 335.4 327.8 338.4 _________________________________________________________________________________ Attributable to: Equity shareholders of the parent 290.6 287.3 292.0 Minority interests 44.8 40.5 46.4 _________________________________________________________________________________ * £7.6 million which related to the repayment of the preference share capital, previously reported in the consolidated statement of recognised income and expense for the period ended 30th November 2005, has now been included in the reconciliation of movement in consolidated equity for that period within the £15.5 million repayment of preference share capital, as this more fairly reflects the substance of the transaction. This information is provided by RNS The company news service from the London Stock Exchange

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