PZ Cussons : Interim Statement for the half year 30 November 2016

24 January 2017 INTERIM ANNOUNCEMENT OF RESULTS FOR THE HALF YEAR TO 30 NOVEMBER 2016

PZ Cussons Plc, a leading consumer products group, announces its unaudited interim results for the six months ended 30 November 2016.

Reported results (before exceptional items1)	Half year to 30 November 2016	Half year to 30 November 2015	Reported % change	Constant currency % change3	Like for like % change4
Revenue2	£378.2m	£385.9m	(2.0%)	(2.6%)	(2.6%)
Operating profit	£41.8m	£45.2m	(7.5%)	(8.4%)	(8.4%)
Profit before tax	£40.2m	£42.1m	(4.5%)	(5.5%)	(5.5%)
Adjusted basic earnings per share	6.50p	7.28p	(10.7%)
Statutory results (after exceptional items1)
Operating profit	£26.5m	£43.1m	(38.5%)
Profit before tax	£24.9m	£40.0m	(37.8%)
Basic earnings per share	4.59p	6.75p	(32.0%)
Interim dividend per share	2.67p	2.61p	2.3%
Net debt5	(£191.3m)	(£191.0m)

1 Exceptional items before tax (2016: costs £15.3m; 2015: costs £2.1m) are detailed in note 4.

2 Excludes joint ventures revenue of £85.6m (2015: £90.5m).

3 Constant currency comparison (2015 results retranslated at 2016 exchange rates).

4 Like for like comparison after adjusting 2015 for constant currency and 2016 for the impact of acquisitions and disposals made in the current and prior period.

5 Net debt, above and hereafter, is defined as cash, short-term deposits and current asset investments, less bank overdrafts and borrowings (refer to note 11).

HIGHLIGHTS

Group

• Sterling profits only slightly lower at profit before tax and exceptionals of £40.2m (prior period £42.1m) despite a challenging macro environment particularly in the Group's largest market of Nigeria

• Brand shares maintained or growing in all the Group's major markets and categories

• Strong balance sheet with net debt at 1.5 x EBITDA

• Interim dividend increased 2.3% at 2.67p per share Africa

• Liquidity in Nigeria remains poor with the exchange rate continuing to weaken on both interbank and secondary markets

• Group's diverse brand portfolio working well with product offerings at all price points catering for a consumer under significant inflationary pressure

  Asia

• Tough trading conditions in Australia across all categories with new product launches planned for the second half of the year to improve performance

• Good growth across the portfolio in Indonesia with significant brand initiatives planned for the second half of the year including a relaunch of the Cussons Kids range and a new range of Imperial Leather products

  Europe

• Robust performance in the UK Washing and Bathing division with new product launches ensuring great shelf presence in a challenging trading environment

• Following a poor summer, performance in the Beauty division has been good for the remainder of the period with new product launches including an extension of the Sanctuary range planned for the second half of the year

Commenting today, Caroline Silver (Chair) said:

"In this first half of the 2017 financial year, the Group has faced a backdrop full of challenges across most of the markets where we operate. This was by no means unexpected and so, despite this, the results presented today reflect a solid performance with revenue and profit only slightly lower than the previous period.

The strength and breadth of the Group's product portfolio has allowed us to hold or grow the share of our brands in our main markets and product categories. We intend to reinforce this in the second half of the financial year with a number of major launches and relaunches taking place. Our ability to be agile and nimble is a core strength and a differentiator against our larger competitors.

In Nigeria, consumers are faced with an almost doubling of costs for everything they have to buy and in this environment they turn strongly to brands that they know, love and trust. Our diverse range of well established products across multiple categories are well price positioned with good availability across the country.

The balance sheet remains strong, with net debt at 1.5 x EBITDA giving us the flexibility to take advantage of new investment opportunities as and when they arise.

We remain on track to deliver our full year expectations. In this context, the Board has increased the interim dividend by 2.3% to 2.67p per share."

Press Enquiries PZ Cussons Brandon Leigh (Chief Financial Officer) Instinctif Tim Linacre / Guy Scarborough

On 24 January c/o Instinctif on 020 7457 2020

After 24 January to Brandon Leigh on 0161 435 1236

Conference Call

The management team will host a conference call at 9.30am on 24 January 2017 for analysts and investors, to provide an overview of the interim results and a Q&A facility. An investor presentation will be published on the Group's website in advance of this. Dial in details for the conference call are as follows:

Telephone UK: 0800 694 0257 Telephone International: [phone] Conference ID: 50709872

The conference call will be available 'on demand' through the PZ Cussons website http://www.pzcussons.com/en_int/investor

Basis of preparation

In our financial statements we use performance metrics that are not recognised under IFRS. These performance metrics are used to help the readers of our financial statements understand business performance.

Reported results, also termed adjusted, are presented before exceptional items which in the current period include certain foreign exchange losses in Nigeria and restructuring costs.

The reported results for the current period are presented with variances to reported prior period results and also as variances between the current and prior period on a constant currency basis. The constant currency impact has been derived by retranslating the 2015 result using 2016 foreign currency exchange rates. The favourable translational impact on revenue and operating profit was £2.3m and £0.5m respectively and this is due to the strength of the US Dollar, Australian Dollar and Indonesian Rupiah against Sterling which offsets the impact of the weaker Nigerian Naira. As there were no acquisitions and disposals in the current or prior period the like for like impact equals the constant currency impact.

Business Review Group Overview

The Group delivered a solid set of results with revenue and profits only slightly lower than the comparative period despite challenging macro conditions and a significant period on period devaluation of the Naira affecting the Group's largest market Nigeria.

Importantly, brand shares have either been held or grown in all the Group's main markets and categories, and a significant new product pipeline continues to play a key role in delivering growth through innovation to the consumer.

Following the completion last year of the Group's three year project to implement a new operating model and the successful go live of the new SAP enabled IT system in Asia, SAP has now also successfully gone live across all African operations during the period. Business benefits are already being realised and remaining markets will go live by July 2017.

Regional overview

Africa's results have mainly been affected by the translation impact of an approximate 40% devaluation of the Naira to US Dollar on the interbank market, as well as a further weakening on the secondary market which is causing a transactional impact through higher costs. Successive changes to relative pricing over the past twelve months have been necessary to mitigate these higher costs resulting in lower volumes being sold at higher prices. Constant currency revenues have been able to be maintained as flat versus the prior period despite the very challenging trading conditions and successful implementation of mitigating actions have resulted in higher profits, albeit for the seasonally lower first half.

Asia's reported revenue growth is driven by the translation benefit of a stronger Australian Dollar and Indonesian Rupiah. Constant currency revenue growth in Indonesia has been offset by lower revenue in Australia where trading conditions across all categories have been tough and have also resulted in lower profitability. Additional brand costs in the first half in Indonesia have also been incurred ahead of significant product launches which are taking place in the second half.

Constant currency revenues in Europe were lower principally due to the Beauty division being affected by the lower UK performance of St Tropez as a result of the poor summer. Overall profits for the region were broadly flat due to a robust performance by the Washing and Bathing division as well as by the smaller markets of Poland and Greece.

Financial position - overview

Net debt at 30 November 2016 was broadly flat on the prior period at £191.3m (2015: £191.0m). The key elements that affect the Group's net debt position are operating cashflows, working capital movements and capital expenditure, with net debt typically peaking around the middle of the financial year due to seasonal factors. During the period, there was an overall inflow of working capital of £2.3m. Capital expenditure was £16.9m with a large component being the final year cost of the SAP implementation project which is scheduled to complete by July 2017. Overall, the Group's balance sheet remains strong with net debt at 1.5 x EBITDA.

Revenue1(£m)	2016	2015	Reported % change	Constant currency % change2	Like for like % change3
Africa	135.7	157.8	(14.0%)	0.4%	0.4%
Asia	107.9	91.3	18.2%	(1.4%)	(1.4%)
Europe	134.6	136.8	(1.6%)	(6.3%)	(6.3%)
378.2	385.9	(2.0%)	(2.6%)	(2.6%)

Regional reviews Performance by region

Operating profit before exceptional items4(£m)	2016	2015	Reported % change	Constant currency % change2	Like for like % change3
Africa	11.6	10.6	9.4%	29.9%	29.9%
Asia	3.7	7.8	(52.6%)	(60.4%)	(60.4%)
Europe	26.5	26.8	(1.1%)	(3.2%)	(3.2%)
41.8	45.2	(7.5%)	(8.4%)	(8.4%)

1 Excludes joint ventures revenue of £85.6m (2015: £90.5m).

2 Constant currency comparison (2015 results retranslated at 2016 exchange rates).

3 Like for like comparison after adjusting 2015 for constant currency and 2016 for the impact of acquisitions and disposals made in the current and prior period.

4 Exceptional items before tax (2016: costs £15.3m; 2015: costs £2.1m) are detailed in note 4.

Africa

In Nigeria, low oil prices have contributed to an environment of reduced income for the country leading to continued pressure on the currency. The introduction of a new flexible exchange rate regime in June 2016 led to a 40% devaluation of the Naira to US Dollar on the interbank market, with the exchange rate weakening from approximately 200 to 280 Naira to US Dollar (having weakened from 160 to 200 in 2015). However, liquidity has remained poor causing the interbank rate to weaken further to approximately 310, whilst the majority of liquidity only remains available on the secondary market at rates significantly higher. All businesses in the Nigerian market are therefore changing pricing and sizing of products to reflect both their blended actual cost as well as future replacement costs.

PZ Cussons remains well placed to deal with these challenges with strong local brands, local manufacturing for all products and an extensive distribution network. The Nigerian consumer is under significant inflationary pressure with most of their staple purchases, both local and imported, doubling in cost over the last twelve months. The consumer's preference is therefore to buy trusted local brands and PZ Cussons is able to tailor sizes to key price points to ensure consumer needs are met. In addition, we have prioritised the reduced currency availability towards purchases of materials for our key brands and faster moving product lines.

All business units across Personal Care, Home Care, Electricals and Food and Nutrition have performed relatively well in this challenging trading environment with market shares either held or grown, although volumes in all categories are lower as a result of changes to relative pricing. Constant currency revenues have been maintained versus the prior period and successful implementation of mitigating actions has resulted in higher profits, albeit for the seasonally lower first half.

In addition, all African businesses went live on the Group's new SAP enabled IT system in November 2016 and this is already providing business benefits through better and more consistent information.

Overall profitability for the smaller African businesses in Ghana and Kenya was ahead of the prior period.

Asia

In Australia, tough trading conditions have continued across all categories with higher levels of promotions required to maintain volumes. Therefore, whilst market shares have been maintained, there have been lower levels of profitability in the first half. New product launches and margin improvement initiatives are planned for the remainder of the year in order to improve profitability across our portfolio.

In Indonesia, good revenue growth has continued across the brand portfolio with Cussons Baby maintaining its number one share of the babycare market. Additional brand investment has been incurred in the first half ahead of significant brand initiatives planned for the second half targeting growth in the non-babycare portfolio. This includes a relaunch of the Cussons Kids range and a new range of Imperial Leather products.

Overall profitability for the smaller Asian businesses in Thailand and the Middle East was ahead of the prior period.

Europe

In the UK, performance in the Washing and Bathing division has been robust with new product launches under Imperial Leather, Carex and Original Source ensuring great shelf presence in a challenging trading environment. Ongoing renovation of the portfolio continues to be critical in ensuring new product news is delivered to both the retailer and the consumer. A particular highlight in the period has been the continued growth of the Carex Fun Editions range of handwash products for children which has seen the recent addition of a Love Hearts variant.

In the Beauty division, whilst a poor summer adversely affected sales of St Tropez in the UK, performance across the brand portfolio was good for the remainder of the period. New product launches are planned for the remainder of the year across all brands of Sanctuary, St Tropez, Fudge and Charles Worthington. In particular, an extension of the Sanctuary range will take place to broaden both the portfolio and the targeted consumer base. The US market also continues to play an important role in the growth of the division with St Tropez being the key driver.

Overall profitability for the smaller European businesses in Poland and Greece was ahead of the prior period.