REG - PZ CUSSONS PLC - Half Yearly Report - Part 1
Released: 26/01/2010
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PZ CUSSONS PLC
26 January 2010
26 January 2010
INTERIM ANNOUNCEMENT OF RESULTS
FOR THE HALF YEAR TO 30 NOVEMBER 2009
PZ Cussons Plc, a leading consumer products group in personal care and household products, announces its interim results
for the six months ended 30 November 2009.
Results (before exceptional items1) Half-year to 30 November 2009 Half-year to 30 November 2008 (restated3) Change
Revenue £369.9m £367.2m +0.7%
Operating profit £44.9m £39.0m +15.1%
Profit before taxation £44.7m £36.9m +21.1%
Adjusted basic earnings per share 6.74p 5.25p +28.4%
Statutory results
Operating profit £44.9m £36.9m +21.7%
Profit before taxation £44.7m £34.8m +28.4%
Basic earnings per share 6.74p 4.90p +37.6%
Interim dividend per share 1.930p 1.185p +62.9%
Net funds / (debt)2 £25.5m (£40.8m)
1 Exceptional items are detailed in note 4.
2 Net funds / (debt), above and hereafter, are defined as cash, short-term deposits, current asset investments less
borrowings.
3 Refer to note 5.
HIGHLIGHTS
Group
*
Strong trading performance delivered 15% increase in operating profit
*
Operating margins improved despite revenue being flat after currency impact
*
Diverse geographical spread of operations continues to provide platform for growth through difficult economic climate
*
Strong cash generation during the period funding the major capital investment programme
*
Healthy balance sheet with a net funds position maintained at the period end
*
Interim dividend increased to 1.930p per share from 1.185p per share reflecting an underlying increase of 10% and a
rebalancing of the interim / final payout ratio in line with normal practice
Africa
*
Operating profit in Africa increased despite currency impact and a short-term liquidity squeeze in Nigeria which affected
revenue and profitability in the second quarter
*
Nutrition joint venture returned to profitability and new UHT factory commissioned
*
£39m investment programme in supply chain facilities in Nigeria on track for completion later in the calendar year
Asia
*
Increase in Asia operating profit following strong performance in Australia, Indonesia and The Middle East
Europe
*
Significant increase in Europe operating profits driven in particular by strong performance in the UK and Poland
*
UK brand portfolio benefiting from continued new product development from the integrated site at Agecroft, Manchester
*
The Sanctuary delivered year on year growth which continued post period end, with strong performance in Christmas gifts
Commenting today, Anthony Green (Chairman) said:
"The Group has delivered a strong performance in the first half despite the economic environment remaining fragile.
Investment in both our brand portfolio and our supply chain facilities has enabled us to deliver continued profitable
growth in the short term as well as laying the foundations for longer term growth in all three regions in which we operate.
We continue our focus on people and our talent management programme is ensuring that we have both the number and calibre of
people needed to deliver our ambitious growth plans.
Importantly, our balance sheet remains strong with continued cash generation. We are in the final year of our major capital
investment programme at the end of which our supply chain facilities in our key markets of UK and Nigeria will have been
upgraded to world class standards.
Overall performance since the period end has been in line with management expectations. We remain cautiously optimistic for
the full year outturn and well placed to pursue further investment opportunities."
Press Enquiries
PZ Cussons Brandon Leigh (Finance Director)
Hogarth John Olsen, Sarah MacLeod
On 26 and 27 January c/o Hogarth on 020 7357 9477. Thereafter to Brandon Leigh on 0161 491 8000.
An analysts' presentation will be held on 26 January 2010 at 9.30am at the offices of Panmure Gordon, Moorgate Hall, 155
Moorgate, London, EC2M 6XB.
Overview
PZ Cussons Plc is pleased to report that profit before tax and exceptional items rose 21.1% to £44.7 million (30 November
2008: £36.9 million) on revenue up 0.7% to £369.9 million (30 November 2008: £367.2 million). After exceptional items,
reported profit before tax increased by 28.4% to £44.7 million (30 November 2008: £34.8 million). There were no exceptional
items in the six month period to 30 November 2009 (30 November 2008: charge of £2.1 million). Basic earnings per share were
6.74p (30 November 2008: 4.90p). Adjusted for exceptional items, basic earnings per share rose 28.4% to 6.74p (30 November
2008: 5.25p).
As at 30 November 2009 the Group had net funds of £25.5 million (30 November 2008: net debt of £40.8 million).
The Board is recommending a dividend increase of 62.9% for the period with an interim dividend of 1.930p per share (30
November 2008: 1.185p) to be paid on 1 April 2010 to shareholders on the register at the close of business on 26 February
2010. This represents both an underlying increase of 10% versus the prior period and a rebalancing of the interim / final
payout ratio in line with normal practice.
Financial performance - overview
The Group has delivered a strong performance in the first half despite continued global economic uncertainty. Performance
in Europe and Asia has been particularly strong, driven by consistent execution of brand strategy in market supported by a
strong pipeline of brand renovation and innovation.
In Africa, a tightening of banking controls in Nigeria led to a temporary lack of liquidity in the market in the second
quarter which affected sales, particularly of goods in the higher value electrical goods category. In addition, a weakening
of the Naira has resulted in an adverse currency impact. Despite this liquidity and currency impact, and with the Nutricima
joint venture returning to profitability, operating profits in Africa increased versus the same period last year.
Overall exchange rate impact for the Group in the period resulted in a reduction in revenue and profitability of circa £12m
and £1.1m respectively. Revenue, period on period, was flat, due to both the adverse currency impact and the impact in
Nigeria of the liquidity squeeze.
During the period, in addition to delivery of operating profits in absolute terms, internal focus has also been put on
improving percentage margins.
Financial Position - overview
The Group's balance sheet remains healthy and, following a return to a net funds position of £23.2m at the end of the last
financial year, a net funds position has been maintained at this period end of £25.5m. Cash generated from operations was
strong in the period at £51.5m (2008: £37.3m) with a continued focus on minimising working capital levels. Cash generation
continues to fund the capital investment programme which has entered the last year of major organic spend with the majority
of final outlay on the main Nigeria project to be paid this financial year.
Major projects
In Nigeria, Project Unity, which is the £39 million investment in the manufacturing and broader supply chain facilities, is
on track for completion later in the calendar year. So far the following stages of the project have been completed:
relocation and upgrade of personal care manufacturing operations from the Ilupeju site to the Ikorodu site, installation of
new soap finishing and packing equipment at the factory in Aba and, during the period, the commissioning of the new
national distribution centre at Ikorodu. The final part of the investment is the major upgrade of the detergent production
equipment also at the Ikorodu site.
Regional reviews
Performance by region
Revenue (£m) Operating profit before exceptional items (£m)
2009 2008 2009 2008
Africa 141.2 158.3 13.8 13.3
Asia 80.0 63.1 6.1 4.9
Europe 148.7 145.8 25.0 20.8
Total 369.9 367.2 44.9 39.0
Africa
In Nigeria, the political environment remains stable albeit fragile following the recent long absence of the President who
has been undergoing medical treatment overseas. The elections in Nigeria are currently scheduled for spring 2011 and the
Group currently expects business growth to continue relatively unaffected throughout the process as it has done through
previous periods of political uncertainty. Economically, the Nigerian economy experienced a liquidity squeeze in the second
quarter following a strengthening of controls in the banking sector. These reforms are viewed as positive for the long term
economic health of the financial system and liquidity is now beginning to return to the market post period end. The
weakening of the Naira versus the US dollar has stabilised with oil prices having risen again, and positive GDP growth has
continued.
Performance in Nigeria was strong in the first quarter followed by a weaker second quarter. Overall, and with the Nutrition
joint venture returning to profitability, this has resulted in operating profits in Nigeria being higher than the
comparative period despite the negative currency impact as a result of a 16% weakening of the Naira. The Group's holding in
its listed Nigerian subsidiary has been increased further from 64% to 65.3% during the period at a cost of £3.4m.
In Personal Care and Home Care, growth continues to be driven by renovation of the core brands in haircare, skincare,
babycare, medicaments and fabric care. In Personal Care, brands performing particularly well are Premier and Joy soaps with
sales significantly ahead of the prior period, and in Home Care, Zip white detergent powder and Rex bulk detergent have
performed well.
In Electricals, the HPZ joint venture with Haier experienced growth in the first quarter but slowed in the second quarter
as a result of the liquidity squeeze. Harefield, the subsidiary incorporated last year to sell products in adjacent
categories, has seen continued growth throughout both quarters with sales of fuel powered generators performing
particularly well. Overall growth in Harefield has therefore helped to offset lower sales in HPZ.
The Nutrition joint venture returned to profitability in the period following the losses incurred last year as a result of
high milk prices. The business has continued to gain momentum with the Nunu brand performing particularly well. The new UHT
factory was commissioned at the beginning of the period and initial sales of these products are encouraging.
Ghana and Kenya have continued to perform well with profitability ahead of the same period last year.
Asia
In Australia, revenue and profitability were ahead of the same period last year as a result of good execution of brand
strategy in market. In laundry detergents, the Radiant and Duo brands are performing particularly well, and Morning Fresh
has further extended its number one position in the dishwashing category.
Revenue and profitability in Indonesia is also ahead of the same period last year due to growth of both the core Cussons
Baby range and also the premium Cussons First Years range which was launched last year. As a result, the number one
position of the Cussons Baby brand has been extended further. During the period, Carex was launched into the Indonesian
market to capitalise on the current heightened awareness of hand hygiene.
Growth in the region was also contributed by the Middle East with revenue and profitability ahead of the prior period.
Europe
In the UK, performance has been strong despite a challenging trade environment with high levels of competitive promotional
activity. The integrated site at Agecroft is ensuring continued speed to market of a high number of new products with our
market share of the washing and bathing category increasing further. Imperial Leather continues to be the largest brand in
the UK portfolio with emphasis in the period on ensuring delivery of great products at the right price in store. Carex
sales are significantly ahead of the prior period with consumer awareness of hand hygiene remaining high following the
swine flu outbreak. Carex support activity has included nationwide poster campaigns as well as a 'Hands Up For Hygiene'
campaign run in schools and online. The Charles Worthington haircare brand has maintained its number two position in the
competitive professional haircare category and has launched in the period an innovative new range of high performance
styling products called 'Front Row'. The Original Source brand has experienced strong growth in the period with a growing
loyal consumer base supported in particular by association with high performance sports events. Production of Original
Source is currently being brought in-house at Agecroft with the addition of a new fifth line dedicated to produce this
specialised range.
The Sanctuary, purchased in January 2008, has continued to perform well, with sales of gifts in the important Christmas
trading period post period end ahead of last year. The brand range was extended in the period with new body care, skincare
and home products including a number of more premium products. The spa at Covent Garden has also performed well with
visitor numbers close to the capacity of 64,000 per year. Two smaller high street spas, in Richmond and Cambridge, are
being developed as part of a 'City Spa' concept to extend the reach of the spa and the brand to consumers.
Revenue and profitability in Poland are ahead of the same period last year with good growth of 'E' laundry powder and
fabric conditioner and 'Luksja' bar soap, liquid soap and shower gels. UK innovation on personal wash has successfully been
transferred to a number of the Polish products. Export sales in particular have been ahead of the prior period due to
favourable exchange rates. Towards the end of the period Carex has also been launched into the Polish market in both
handwash and hand gel formats.
In Greece, whilst the olive oil market has been competitive in the first half, excellent progress has been made in growing
the cheese and butter businesses acquired last year in order to expand the Minerva brand into higher margin categories.
Taxation
The effective tax rate before exceptional items was 29.3% (30 November 2008: 29.0%).
Group
Richard Harvey joined the board on 1 January 2010 as Non Executive Director and Chairman elect. Richard will take over as
Non Executive Chairman on 1 July 2010 when Anthony Green, Executive Chairman, retires from the board. Graham Calder, Deputy
Chairman, will retire from the board on 31 March 2010.
The Group's new Head Office at Manchester Business Park by Manchester Airport will open in April and will provide an
innovative setting for the future.
Principal risks and uncertainties facing the Group
Our principal risks and uncertainties for the remaining six months of the financial year are explained in more detail in
note 17 and remain as stated on pages 24 and 25 of our 2009 Annual Report which is available on our website at
www.pzcussons.com.
Outlook
The outlook for the full year remains positive with strong performance in Europe and Asia expected to offset any continued
impact in Nigeria of adverse exchange rates and the tightening of liquidity in the market.
The completion of the Group's major capital investment programme will lay the foundations for further profitable growth in
all our regions.
The balance sheet remains strong with a net funds position and a continued focus on minimising working capital levels.
Overall performance since the period end has been in line with expectations and we remain cautiously optimistic for the
full year outturn.
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited (restated) Audited (restated)
30 November 2009 30 November 2008 31 May 2009
Note £m £m £m
Assets
Non-current assets
Goodwill and other intangible assets 7 160.4 151.4 157.6
Property, plant and equipment 7 211.8 215.2 200.8
Other investments 0.6 0.8 0.6
Net investment in joint venture 19.2 28.0 19.0
Receivables 1.9 0.8 1.6
Retirement benefit surplus 13 27.2 15.8 20.6
421.1 412.0 400.2
Current assets
Inventories 171.9 219.8 154.6
Trade and other receivables 129.5 141.0 113.7
Other investments 0.3 0.3 0.3
Cash and short-term deposits 83.8 41.4 84.2
Current taxation receivable 1.4 3.0 0.8
386.9 405.5 353.6
Total assets 808.0 817.5 753.8
Equity
Ordinary share capital 4.3 4.3 4.3
Capital redemption reserve 0.7 0.7 0.7
Currency translation reserve 28.9 45.6 20.4
Hedging reserve (0.2) (1.1) 0.3
Retained earnings 360.3 335.1 364.2
Equity attributable to equity holders of the company 394.0 384.6 389.9
Equity minority interest 55.8 73.8 59.9
Total equity 449.8 458.4 449.8
Liabilities
Non-current liabilities
Borrowings 37.4 52.4 44.9
Other liabilities 1.1 2.1 1.0
Deferred tax liabilities 41.5 42.6 47.2
Retirement benefit obligations 13 55.2 42.0 29.6
135.2 139.1 122.7
Current liabilities
Borrowings 21.2 30.1 16.4
Trade and other payables 171.0 173.2 140.8
Current income tax liabilities 27.2 15.5 20.3
Provisions for other liabilities and charges 3.6 1.2 3.8
223.0 220.0 181.3
Total liabilities 358.2 359.1 304.0
Total equity and liabilities 808.0 817.5 753.8
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited (restated) Audited (restated)
Half-year to 30 November 2009 Half-year to 30 November 2008 Year to 31 May 2009
Total Before exceptional items Exceptional items Total Before Exceptional Total
(note 4) exceptional items items
(note 4)
Note £m £m £m £m £m £m £m
Continuing operations
Revenue 3 369.9 367.2 - 367.2 781.8 - 781.8
Cost of sales (216.8) (227.9) - (227.9) (486.7) (3.3) (490.0)
Gross profit 153.1 139.3 - 139.3 295.1 (3.3) 291.8
Selling and distribution costs (64.5) (62.8) - (62.8) (123.3) - (123.3)
Administrative expenses (44.5) (36.2) (2.1) (38.3) (77.1) (1.1) (78.2)
Share of results of joint venture 0.8 (1.3) - (1.3) (4.1) - (4.1)
Operating profit 3 44.9 39.0 (2.1) 36.9 90.6 (4.4) 86.2
Finance income 0.9 1.3 - 1.3 3.7 - 3.7
Finance costs (1.1) (3.4) - (3.4) (5.5) - (5.5)
Net finance costs 6 (0.2) (2.1) - (2.1) (1.8) - (1.8)
Profit before taxation 44.7 36.9 (2.1) 34.8 88.8 (4.4) 84.4
Taxation 8 (13.1) (10.7) 0.6 (10.1) (25.2) 1.2 (24.0)
Profit for the period 31.6 26.2 (1.5) 24.7 63.6 (3.2) 60.4
Attributable to:
Equity holders of the company 28.8 22.4 (1.5) 20.9 52.8 (3.2) 49.6
Minority interests 2.8 3.8 - 3.8 10.8 - 10.8
31.6 26.2 (1.5) 24.7 63.6 (3.2) 60.4
Basic EPS (p) 10 6.74 4.90 11.64
Diluted EPS (p) 10 6.67 4.88 11.56
Adjusted basic EPS (p) 10 6.74 5.25 12.39
Adjusted diluted EPS (p) 10 6.67 5.23 12.31
Adjusted basic EPS (p)
10
6.74
5.25
12.39
Adjusted diluted EPS (p)
10
6.67
5.23
12.31
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Half-year to 30 November 2009 Half-year to 30 November 2008 Year to31 May 2009
£m £m £m
Profit for the period 31.6 24.7 60.4
Other comprehensive income
Actuarial (losses) / gains on defined benefit pension schemes (19.1) 4.0 19.1
Exchange differences on translation of foreign operations 6.5 46.5 (3.8)
Cash flow hedges - fair value (loss) / gain in period (0.7) (1.5) 0.6
Taxation on items taken directly to equity 5.5 (1.2) (5.6)
Other comprehensive (expense) / income for the period net of tax (7.8) 47.8 10.3
Total comprehensive income for the period 23.8 72.5 70.7
Attributable to:
Equity holders of the company 23.0 50.8 61.1
Minority interests 0.8 21.7 9.6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the company
Currency Capital
Share translation redemption Retained Hedging Minority
capital reserve reserve earnings reserve interests Total
£m £m £m £m £m £m £m
At 1 June 2008 4.3 23.0 0.7 320.7 - 57.2 405.9
Profit for the period - - - 20.9 - 3.8 24.7
Actuarial gains on defined benefit pension schemes - - - 4.0 - - 4.0
Currency translation differences - 22.6 - 6.0 - 17.9 46.5
Cash flow hedges - fair value losses in period - - - - (1.5) - (1.5)
Taxation on items taken directly to equity - - - (1.6) 0.4 - (1.2)
Total comprehensive income/(expense) for the period - 22.6 - 29.3 (1.1) 21.7 72.5
Transactions with owners:
Ordinary dividends - - - (15.5) - - (15.5)
Share based payments charge - - - 0.6 - - 0.6
Minority interest dividend paid - - - - - (5.1) (5.1)
At 30 November 2008 4.3 45.6 0.7 335.1 (1.1) 73.8 458.4
At 1 June 2008 4.3 23.0 0.7 320.7 - 57.2 405.9
Profit for the period - - - 49.6 - 10.8 60.4
Actuarial gains on defined benefit pension schemes - - - 19.1 - - 19.1
Currency translation differences - (2.6) - - - (1.2) (3.8)
Cash flow hedges - fair value gains in year - - - - 0.6 - 0.6
Taxation on items taken directly to equity - - - (5.3) (0.3) - (5.6)
Total comprehensive income/(expense) for the period - (2.6) - 63.4 0.3 9.6 70.7
Transactions with owners:
Ordinary dividends - - - (20.5) - - (20.5)
Acquisition of shares for ESOT - - - (0.7) - - (0.7)
Share based payments charge - - - 1.3 - - 1.3
Acquisition of minority interest - - - - - (3.7) (3.7)
Minority interest dividend paid - - - - - (3.2) (3.2)
At 31 May 2009 4.3 20.4 0.7 364.2 0.3 59.9 449.8
At 1 June 2009 4.3 20.4 0.7 364.2 0.3 59.9 449.8
Profit for the period - - - 28.8 - 2.8 31.6
Actuarial losses on defined benefit pension schemes - - - (19.1) - - (19.1)
Currency translation differences - 8.5 - - - (2.0) 6.5
Cash flow hedges - fair value losses in period - - - - (0.7) - (0.7)
Taxation on items taken directly to equity - - - 5.3 0.2 - 5.5
Total comprehensive income/(expense) for the period - 8.5 - 15.0 (0.5) 0.8 23.8
Transactions with owners:
Ordinary dividends - - - (17.5) - - (17.5)
Acquisition of shares for ESOT - - - (2.5) - - (2.5)
Share based payments charge - - - 1.1 - - 1.1
Acquisition of minority interest - - - - - (1.8) (1.8)
Minority interest dividend paid - - - - - (3.1) (3.1)
At 30 November 2009 4.3 28.9 0.7 360.3 (0.2) 55.8 449.8
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Half-year to 30 November 2009 Half-year to 30 November 2008 Year to31 May 2009
£m £m £m
Operating activities
Cash generated from operations (note 11) 51.5 37.3 145.2
Taxation (6.2) (5.9) (16.7)
Net cash flow from operating activities 45.3 31.4 128.5
Cash flows from investing activities
Investment income received (note 6) 0.9 1.3 3.7
Purchase of property, plant and equipment (18.1) (22.9) (46.0)
Proceeds on sale of property, plant and equipment 0.3 0.8 4.1
Proceeds on sale of intangible assets - 4.3 4.3
Acquisition of intangible assets - - (3.6)
Acquisition of minority interest (note 14) (3.4) - (5.2)
Loans granted to joint ventures - (0.5) (0.5)
Acquisition of subsidiary (note 14) (0.8) - -
Net cash flow from investing activities (21.1) (17.0) (43.2)
Cash flows from financing activities
Interest paid (note 6) (1.1) (3.4) (5.5)
Dividends paid to minority interests (3.0) (2.0) (2.3)
Purchase of shares for Employee Share Option Trust (2.5) - (0.7)
Dividends paid to company shareholders (note 9) (17.5) (15.5) (20.5)
Net decrease in borrowings (7.5) (4.6) (10.5)
Net cash flow from financing activities (31.6) (25.5) (39.5)
Net (decrease) / increase in cash and cash equivalents (7.4) (11.1) 45.8
Cash and cash equivalents at the beginning of the period (note 12) 82.8 38.1 38.1
Effect of foreign exchange rates (note 12) 2.2 (2.0) (1.1)
Cash and cash equivalents at the end of the period (note 12) 77.6 25.0 82.8
NOTES
1. Basis of preparation
These condensed interim financial statements for the six months ended 30 November 2009, which have been reviewed but not
audited, have been prepared in accordance with the Disclosure and Transparency Rules (DTR) of the Financial Services
Authority and in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union (EU). The condensed
consolidated interim financial statements should be read in conjunction with the annual financial statements for the year
ended 31 May 2009 which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted
for use in the EU, including International Accounting Standards (IAS) and interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC).
The interim financial statements for the period ended 30 November 2009 do not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006.
The financial information set out in this statement relating to the year ended 31 May 2009 does not constitute statutory
accounts for that period. Full audited accounts of the Group in respect of that financial period were approved by the Board
of Directors on 28 July 2009 and have been delivered to the Registrar of Companies. The report of the auditors on these
accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under section 498
of the Companies Act 2006.
2. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 May
2009, as described in those annual financial statements, with the exception of the change in the accounting treatment for
revenue arising on the sale of Nutricima Ltd joint venture products as explained in note 5.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual
earnings.
The following new standards, amendments to standards and interpretations have been adopted for the financial year ending 31
May 2010:
*
IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009. IFRS 8 replaces IAS 14 and
aligns segment reporting with the requirements of the US standard SFAS 131, 'Disclosures about segments of an enterprise
and related information'. The new standard requires a 'management approach', under which segment information is presented
on the same basis as that used for internal reporting purposes. The Group has assessed the requirements of IFRS 8 and
concluded that no change in segment information is required.
*
IAS 1 (revised), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009.
The Group has applied IAS 1 (amended) from 1 June 2009.
*
IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'. The
interpretation clarifies the limitations on recognising defined benefit pension surpluses (and the related deferred tax
liabilities) in the balance sheet and may also require recognition of an additional liability for any committed future
contributions. The Group has applied IFRIC 14 from 1 June 2009.
*
IAS 23 (amendment) 'Borrowing costs'; IAS 32 (amendment) 'Financial instruments: presentation and consequential amendments
to IAS 1 'Presentation of financial statements'; IFRS 2 (amendment) 'Share-based payment transactions'; and IFRIC 13,
'Customer loyalty programmes' also came into effect and were adopted by the Group for the year ending 31 May 2010 but had
no impact on the Group financial statements.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the
financial year ending 31 May 2010 and have not been early adopted:
*
IFRS 3 (amendment), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial
statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures' are effective prospectively to
business combinations for which the acquisition date is on or after the beginning of the first annual reporting period
beginning on or after 1 July 2009. This is applicable to the Group from 1 June 2010. Management is assessing the impact of
the new requirements regarding acquisition accounting, consolidation and joint ventures on the Group.
*
IFRS 9 'Financial instruments: classification and measurement' is effective for accounting periods beginning on or after 1
January 2013. Management are assessing the impact of the new requirements on the Group.
*
IAS 39 (amendments) 'Eligible hedged items', IFRIC 16 'Hedges of net investment in a foreign operation' and IFRIC 17
'Distributions of non cash assets to owner' are effective for annual periods beginning on or after 1 July 2009. These
standards and interpretation changes are either not currently applicable to the Group or will have no material effect.
3. Segmental analysis
The Group has three geographic sectors which are based on the location of customers and they comprise of Africa, Asia and
Europe. The Group has three main business sectors, being: toiletries and household products; food and nutrition; and
electrical goods.
Geographic segments (unaudited)
Half-year to 30 November 2009 Africa£m Asia£m Europe£m Eliminations£m Total £m
Total gross segment revenue 141.2 95.3 228.2 (94.8) 369.9
Inter segment revenue - (15.3) (79.5) 94.8 -
Revenue 141.2 80.0 148.7 - 369.9
Segmental operating profit before share of results of joint venture 13.0 6.1 25.0 - 44.1
Share of results of joint venture 0.8 - - - 0.8
Segmental operating profit 13.8 6.1 25.0 - 44.9
Half-year to 30 November 2008 (restated) Africa£m Asia£m Europe£m Eliminations£m Total £m
Total gross segment revenue 158.3 81.4 266.2 (138.7) 367.2
Inter segment revenue - (18.3) (120.4) 138.7 -
Revenue 158.3 63.1 145.8 - 367.2
Segmental operating profit before exceptional items and share of results of joint venture 14.6 4.9 20.8 - 40.3
Share of results of joint venture (1.3) - - - (1.3)
Segmental operating profit before exceptional items 13.3 4.9 20.8 - 39.0
Exceptional items (note 4) - - (2.1) - (2.1)
Segmental operating profit 13.3 4.9 18.7 - 36.9
Total assets Africa£m Asia£m Europe£m Tax and cash £m Total £m
30 November 2009 245.7 103.1 374.0 85.2 808.0
30 November 2008 297.6 99.2 376.3 44.4 817.5
31 May 2009 217.8 74.3 376.7 85.0 753.8
Business segments
The following table provides an analysis of the Group's revenue by business segment.
Unaudited Unaudited (restated)
Half-year to 30 November 2009 Half-year to 30 November 2008
£m £m
Toiletries and household 286.6 281.0
Food and nutrition 36.1 34.6
Electrical goods 45.5 49.8
Distribution fees 1.7 1.8
Revenue 369.9 367.2
4. Exceptional items
Restructuring of UK operations
A significant restructuring of the UK business, associated with the relocation of manufacturing from the previous site,
made up of redundancy and other associated restructuring costs resulted in an exceptional charge of £2.1 million in the six
months to 30 November 2008 and an exceptional charge of £4.4 million in the year ended 31 May 2009.
5. Prior year adjustment
During the six month period to 30 November 2009 the accounting treatment for the revenue arising from the sale of the
Nutricima joint venture products through another Group subsidiary has been changed. In prior periods the sales (and
corresponding cost of sales) relating to Nutricima Ltd (the operating entity within the Group's nutritional foods joint
venture) products distributed through PZ Cussons Nigeria Plc (a subsidiary of the Group) have been recognised as revenue
(and cost of sales) in the Group's income statement. Following a review of the distribution agreement conditions and the
respective risks/rewards assumed by the two entities, PZ Cussons Nigeria Plc is deemed to be acting as an agent rather a
principal (in accordance with IAS 18). Consequently the Group should only recognise the distribution fee income (received
from Nutricima Ltd) and the related distribution costs in the consolidated income statement rather than the gross sales and
cost of sales values for the product being distributed. Furthermore, inventory relating to Nutricima products, held for
sale by PZ Cussons Nigeria Plc, that had previously been consolidated in the Group's balance sheet is now accounted for as
inventory within the joint venture. Importantly, there is no impact on the historic or future profitability or net assets
of the Group.
The effect of this change in the half year to 30 November 2008 is to reduce revenue and cost of sales by £28.4 million,
increase revenue and selling and distribution costs by £1.8 million, reduce inventories by £7.2 million, reduce amounts
owed to joint ventures by £4.5 million and increase the amount due from joint ventures by £2.7 million. The effect of this
change in the year to 31 May 2009 is to reduce revenue and cost of sales by £60.1 million, increase revenue and selling and
distribution costs by £3.8 million, reduce inventories by £3.7 million, reduce amounts owed to joint ventures by £1.3
million and increase the amount due from joint ventures by £2.4 million.
6. Net finance (costs) / income
Unaudited Unaudited Audited
Half-year to 30 November 2009 Half-year to 30 November 2008 Year to31 May 2009
£m £m £m
Net investment gains 0.1 - 0.4
Interest and dividends receivable 0.8 1.3 3.3
0.9 1.3 3.7
Interest payable on bank loans and overdrafts (1.1) (3.4) (5.5)
(0.2) (2.1) (1.8)
7. Property, plant and equipment and intangible assets
Property, plant and equipment Intangible assets
£m £m
Opening net book amount as at 1 June 2008 180.0 152.2
Additions 24.1 -
Disposals (0.5) -
Depreciation and amortisation (8.7) -
Currency retranslation 20.3 (0.8)
Closing net book amount as at 30 November 2008 215.2 151.4
Opening net book amount as at 1 June 2009 200.8 157.6
Additions 18.2 -
Acquisitions (Note 14) 0.5 1.8
Disposals (0.1) -
Depreciation and amortisation (9.0) -
Currency retranslation 1.4 1.0
Closing net book amount as at 30 November 2009 211.8 160.4
At 30 November 2009, the Group had entered into commitments for the acquisition of property, plant and equipment amounting
to £17.2 million. At 30 November 2008, the Group had entered into capital commitments of £23.9 million.
8. Taxation
Unaudited Unaudited Audited
Half-year to 30 November 2009 Half-year to 30 November 2008 Year to31 May 2009
£m £m £m
United Kingdom 7.1 4.2 6.8
Overseas 6.0 5.9 17.2
13.1 10.1 24.0
Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate
expected for the full financial year. The estimated average annual tax rate to be used for the year ending 31 May 2010 is
29% (the estimated tax rate for the half-year ending 30 November 2008 was 29%).
9. Dividends
An interim dividend of 1.930p per share for the half-year to 30 November
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