Cussons to sell St Tropez and review African business

Manchester consumer products company PZ Cussons — maker of Carex and Imperial Leather — published a trading update for its third quarter ended March 2, 2024, and announced its plan “to maximise shareholder value from a portfolio transformation, following a strategic review of brands and geographies.”

Cussons said it is “too complex for its size” as it unveiled plans to sell off its St Tropez self-tanning brand and said it is reviewing its African operations amid ongoing issues in Nigeria.

Cussons said group Q3 revenue grew 6.4% on a like for like basis, but at reported FX rates revenue declined by 23.7% “primarily as a result of the devaluation of the Nigerian Naira, which was on average 60% lower in the quarter compared to the prior year period.”

The group said it expects to deliver adjusted operating profit in the region of £55 million to £60 million for FY24. This is unchanged from the guidance provided at the H1 results in February.

“In March 2021 the group set out a new strategy to return PZ Cussons to sustainable, profitable growth,” said the firm.

“Good progress has been made in building back critical capabilities and strengthening business foundations.

“Despite this, shareholder returns have fallen short of ourexpectations, predominantly due to macro-economic challenges in Nigeria which, since June 2023, has experienced the single largest devaluation in the history of its currency.

“The board has carried out a strategic review of our brands and geographies over the past year.

“It has concluded that in addition to the challenges of its significant exposure to Nigeria, the group is too complex for its size, with financial and human resources spread too thinly to generate consistent returns.

“This means its competitive advantages have been constrained in comparison to those of both larger multinational companies and some focused, smaller ones.

“Accordingly, the board has decided to refocus the PZ Cussons portfolio on where the business can be most competitive and where it can create most value for shareholders. As such, we are taking the following actions …

“St. Tropez has grown significantly since acquisition, establishing a leading position in its key premium self-tanning market of the US.

“Given the strength of the brand’s equity, there remains significant long-term growth potential in the US and in both new geographies and category adjacencies.

“This growth will however be harder to realise under PZ Cussons’ ownership, given the need to allocate resources across our diverse geographic and category footprint.

“We therefore plan to realise shareholder value by initiating a process to sell the brand to an owner better placed to capture the brand’s significant long-term potential.”

On Africa, Cussons said: “The group has made significant progress in strengthening and improving the performance of its sizeable operations in Africa, where it owns a highly attractive group of assets with leading consumer brands, strong operational infrastructure and continued growth potential.

“However, the board recognises that this is a complex group of assets and is therefore evaluating the strategic options both to reduce risk and to maximise shareholder value …”

The firm added: “The proceeds from any transactions will initially be used to invest behind the organic growth of the business and to reduce gross debt further.

“The group will also have the potential and ambition to pursue targeted acquisitions which are highly complementary to its more focused category and geographic footprint.”

PZ Cussons CEO Jonathan Myers said: “We have made significant progress in strengthening PZ Cussons in recent years – building brands, restoring capabilities and re-energising and professionalising the organisation.

“Today we are re-iterating our FY24 outlook, having delivered improved LFL revenue growth in Q3 on an improved volume trend.

“Nevertheless, the macro-economic challenges and complexities associated with operating in Nigeria are significant and there is much more to do to unlock the full potential of the business.

“As such, we have undertaken a strategic review of our brands and geographies and have embarked on plans to transform our portfolio, refocusing on where the business can be most competitive.

“The actions we are taking will crystallise value for our investors from assets better suited to alternative ownership structures.

“This will enable us to invest our resources in the key geographies and categories in which we can win and generate superior returns.

“We are transforming PZ Cussons into a business with stronger brands in a more focused portfolio, delivering sustainable profitable growth.”