Welcome to the PZ Cussons Annual Report 2014 This interactive pdf allows you to easily access the information that you want. Use the document controls located at the top of each page to navigate through the report and use the contents to jump straight to the section you require. Search the entire Return to the contents document by keyword. at the beginning of the document. Print a single page Next Page/Previous Page or whole sections. Strategic Review Report of the Directors Accounts 1 Highlights 2014 20 Corporate Social Responsibility 63 Independent Auditors’ Report – Group 2 Chairman’s Statement 35 Board of Directors 67 Consolidated Income Statement 4 At a Glance 37 Report of the Directors 68 Consolidated Statement of Comprehensive Income 6 Business Model 40 Report on Directors’ Remuneration 69 Consolidated Balance Sheet 8 CAN DO Values 57 Report on Corporate Governance 70 Consolidated Statement of 9 Key Performance Indicators 62 Statement of Directors’ Responsibilities Changes In Equity 10 Financial Review 71 Consolidated Cash Flow Statement 12 Business Review Africa 72 Notes to the Consolidated 14 Business Review Asia Financial Statements 16 Business Review Europe 101 Five Year Financial Record 18 Principal Risks and Uncertainties 102 Independent Auditors’ Report – Company 104 Company Balance Sheet 105 Notes to the Company Financial Statements Links 109 Further Statutory and Throughout this report there are links to pages, other sections Other Information and web addresses for additional information. They are recognisable by the red underline simply click to go to the relevant page or web URL www.pzcussons.com PZ Cussons Plc Annual Report and Accounts 2014 Accounts and Report Annual 2014 PZ Cussons Plc Annual Report and Accounts 2014 PZ Cussons is an international Mission We are an entrepreneurial, consumer products group. international company, We develop leading brands in enhancing lives of consumers with quality, selected mature and emerging value and innovation. markets that have potential for future growth. World class supply Vision We are a profitable, growing chain and distribution networks in and dynamic company. Africa, Asia and Europe enable us We are passionate about our to deliver our brands quickly and leading brands. efficiently to local consumers. We drive innovation in everything we do. We have fantastic CAN DO people. We are proud of our unique culture that binds us together. We do well, we do good and we have fun! Strategic Review Report of the Directors Accounts 1 Highlights 2014 20 Corporate Social Responsibility 63 Independent Auditors’ Report – Group 2 Chairman’s Statement 35 Board of Directors 67 Consolidated Income Statement 4 At a Glance 37 Report of the Directors 68 Consolidated Statement of Comprehensive Income 6 Business Model 40 Report on Directors’ Remuneration 69 Consolidated Balance Sheet 8 CAN DO Values 57 Report on Corporate Governance 70 Consolidated Statement of 9 Key Performance Indicators 62 Statement of Directors’ Responsibilities Changes In Equity 10 Financial Review 71 Consolidated Cash Flow Statement 12 Business Review Africa 72 Notes to the Consolidated 14 Business Review Asia Financial Statements 16 Business Review Europe 101 Five Year Financial Record 18 Principal Risks and Uncertainties 102 Independent Auditors’ Report – Company 104 Company Balance Sheet 105 Notes to the Company Financial Statements 109 Further Statutory and Other Information 1 PZ Cussons Plc Annual Report and Accounts 2014 Strategic Review Report of the Directors Accounts Highlights Group Africa Revenue growth in constant • Operating profit growth in Nigeria despite currency of 2% on prior year; increased levels of disruption in the North 2014 in addition to JV revenue of the country increasing by £172 million • Revenue of African Food and Nutrition joint ventures reaches £260 million Operating profit growth of 7% despite the impact of • PZ Wilmar joint venture performing well with refinery operating close to capacity weakening currencies • Good revenue and profitability growth Excluding the impact of exchange achieved in the Nutricima joint venture rates, operating profit would have with Glanbia been 18% higher than prior year Rafferty’s Garden acquisition completed early in the year for Asia £42.2 million in cash • Revenue and profit growth achieved Disposal of Polish Home Care despite the significant impact of brands completed in February weakening currencies for £46.6 million in cash • Underlying performance in key markets Strong balance sheet with only of Australia and Indonesia strong a small net debt position at the • Rafferty’s Garden acquisition marked the end of the year Group’s entry into Food and Nutrition Total dividend increased 5% in Asia year-on-year being the 41st year of consecutive year-on-year increases Europe • Strong performance in UK Washing and Bathing division with all four brands performing well • Major relaunch of Imperial Leather range post year end • St. Tropez demand continues to be boosted by Kate Moss as brand ambassador • Good performance in smaller markets of Poland and Greece Financial Highlights 2014 Reported Results Year ended Year ended (before exceptional items1) 31 May 2014 31 May 2013 % change • Revenue £861.4m £883.2m (2.5%) • Operating profit £116.4m £108.4m 7.4% • Profit before tax £115.0m £107.5m 7.0% • Adjusted basic earnings per share 17.96p 16.62p 8.1% Statutory results • Operating profit £125.1m £95.7m 30.7% • Profit before tax £123.7m £94.8m 30.5% • Basic earnings per share 21.52p 14.75p 45.9% • Total dividend per share 7.76p 7.39p 5.0% • Net (debt)/funds2 (£29.4m) £3.4m 1 Exceptional items, before tax (2014: income of £8.7 million, 2013: costs of £12.7 million), are detailed in note 3 to the financial statements. 2 Net (debt)/funds, above and hereafter, is defined as cash, short-term deposits and current asset investments less borrowings (refer to note 18). 2 PZ Cussons Plc Annual Report and Accounts 2014 Strategic Review Report of the Directors Accounts Chairman’s Statement The Group has delivered a strong set of results with Sterling operating profits 7% ahead of the prior year. This has been achieved despite a significant weakening in currencies which impacted profits by circa £12 million and without which profits would have been 18% higher on prior year. It has been particularly pleasing to see Our overall performance since the progress of the palm oil joint venture the year end has been in line with with Wilmar with the brands Mamador management expectations. and Devon King’s performing well and the refinery operating close to capacity in its James Steel, Senior Independent Director first full year of operation. and Chairman of the Remuneration Committee, will retire from the Board at the During the year we acquired Rafferty’s end of his term of office immediately after Garden and sold our Polish Home Care the 2014 Annual General Meeting on 23 brands as we continue to seek to focus September. He will be succeeded as Senior the business on areas we perceive have Independent Director by John Arnold and as high growth potential and where we can Chairman of the Remuneration Committee add substantial value. The acquisition of by Helen Owers. James has served as a Non- Rafferty’s Garden marked our entry into executive Director since October 2005 and the Asian Food and Nutrition category, a has made a huge contribution to the Board sector we believe is particularly exciting and and the Company over that time. We wish where we are developing plans for further him all the very best for the future. growth. Having disposed of the Polish Home Care brands we are now focussing Sadly, this year has marked the death of on the Personal Care and Beauty business Sir John Zochonis our former Chairman. in that region. Sir John will be sadly missed by all at PZ Cussons and we will proudly continue Our balance sheet remains strong and his legacy by striving to deliver the Group’s we have the appetite to pursue further growth agenda through our commitment investment opportunities which fit our to our CAN DO values. strategic aims. I would also like to take this opportunity The 5% increase in the Group’s dividend to thank all of the Group’s staff for their marks the 41st year of consecutive year-on- continued hard work and dedication which year increases. continues to drive our growth. Your efforts are highly appreciated both by me and by Whilst trading conditions in most markets the Board of Directors. remain challenging, the Group continues to focus on a dynamic and fast brand Richard Harvey renovation and innovation programme and Non-executive Chairman successful delivery of new areas of growth such as Rafferty’s Garden and the Wilmar 29 July 2014 joint venture. These initiatives will help to offset the continuing macro challenges, including foreign exchange volatility and the reduction in profits from Poland as a result of the strategic Home Care brands sale. 3 PZ Cussons Plc Annual Report and Accounts 2014 Strategic Review Report of the Directors Accounts Sir John Zochonis Tribute 1929–2013 We pay tribute to Sir John Sir John, great-nephew of the Group’s Outside of work, Sir John founded the Zochonis, our former Chairman co-founder George Basil Zochonis, joined Zochonis Charitable Trust which has helped the Group in 1953, becoming a Director in numerous charitable causes for over 35 and philanthropist, who passed 1957 and serving as Chairman from 1970 years and received his knighthood in 1997. away in November 2013 at the until his retirement in 1993. age of 84. Sir John is sadly missed by everyone at PZ During his time as Chairman, the Group’s Cussons who had the privilege to know and footprint in Europe, Asia and Africa was work with him.