PZ Cussons rises on back of in-line results

The personal goods company performed well after releasing an interim report confirming solid performance, good cash flow, and relatively positive outlook for its leading Nigeria market

Eleanor Whitehead, 5 October, 2009 | 12:31PM
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Personal goods company PZ Cussons rose in Monday morning trade after reporting its performance over the first four months of the financial year is in line with the board’s expectations.

Shares in PZ Cussons had risen 1.2% by 11.00 am, up 3p at 250.5p, as the FTSE 250 index rose 0.5%, or 41.6 points, to 8,941.6.

In pre-opening deals, the company announced that a robust business model has generated solid performance and strong cash flow, keeping the group in a strong financial position. The interim management statement indicated that profitability has increased year-on-year, with success in the UK perpetuated by the launching of products. The outlook for Nigeria, the group’s largest market, also looked optimistic, PZ Cussons said, with the country achieving positive GDP growth in a relatively stable political environment and Project Unity, the group’s £39 million investment in Nigeria's wider supply chain capability, remaining on schedule.

Shore Capital analyst Darren Shirley commented that cash generation, a key feature in PZ Cusson’s investment case, has clearly benefited from a focus on working capital, with net cash expected to increase throughout the year. Shirley indicated that today’s statement signals potential for impending upgrades, but currently keeps his forecasts unchanged, while retaining a Buy recommendation.

Numis Securities struck a slightly more cautious note, suggesting that the stock is fully valued. Despite PZ Cussons’ organic sales growth, analyst Nicolas Ceron indicated that he was disappointed by the group’s failure to gain market share. The broker added that whilst performance has been strong in Nigeria, the arrival of a new Central Bank governor has initiated increased controls and a tightening of liquidity in the country’s banking sector--a development that could impact upon short-term consumer demand. Numis has, nonetheless, increased its target price to 230p in a reflection of “market rerating,” upgrading their rating to Hold from Reduce.

PZ Cussons said it remains “cautiously optimistic for the full year outturn despite the global economic picture remaining uncertain.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
PZ Cussons PLC101.80 GBX0.79

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