Pz Cussons reports 8.9% EBITDA decline in 2020 and almost no change in EBITDA Margin of 9.6%

23 Sep 2020 • About Pz Cussons ($PZC) • By InTwits

Pz Cussons reported FY2020 financial results today. Here are the key drivers of the company's long term financial model:

Pz Cussons is a company in decline: FY2020 revenue growth was -6.3%, 5 years revenue CAGR was -6.4%
Pz Cussons has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.1%. At the same time it's in pair with industry average of 3.6%
CAPEX is quite volatile: £7m in FY2020, £14m in FY2019, £22m in FY2018, £41m in FY2017, £36m in FY2016
The company has potentially unprofitable business model: ROIC is 4.3%
It operates with high leverage: Net Debt/EBITDA is 1.1x while industry average is 0.7x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue decreased on 6.3%. During FY2016-FY2020 Revenue growth bottomed in FY2019 at -15.3%. EBITDA Margin showed almost no change in FY2020. EBITDA Margin declined at -1.0 pp per annum in the last 5 years.

Gross Margin increased slightly on 0.72 pp from 37.9% to 38.7% in FY2020. SG&A as a % of Revenue increased slightly on 1.7 pp from 31.8% to 33.4% in FY2020.

Net Income margin decreased slightly on 0.88 pp from 4.2% to 3.3% in FY2020. Net Income margin declined at -1.3 pp per annum in the last 5 years.

Investments (CAPEX, working capital and M&A)

In FY2020 Pz Cussons had CAPEX/Revenue of 1.1%. Pz Cussons's CAPEX/Revenue decreased on 3.9 pp from 5.0% in FY2017 to 1.1% in FY2020. It's average level of CAPEX/Revenue for the last three years was 2.1%. CAPEX as a % of Revenue declined at -0.91 pp per annum in the last 5 years.

Return on investment

The company operates at low ROIC (4.3%) and ROE (4.7%). ROIC showed almost no change in FY2020. ROE decreased slightly on 1.3 pp from 6.1% to 4.7% in FY2020. ROIC followed a declining trend at -1.6 pp per annum in the last 5 years. ROE declined at -2.6 pp per annum in FY2016-FY2020.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.1x and Debt / EBITDA is 2.5x. Net Debt / EBITDA dropped on 1.3x from 2.5x to 1.1x in FY2020. Debt dropped on 31.1% while cash jumped on 47.1%.

Pz Cussons has no short term refinancing risk: cash is higher than short term debt (1,710.9%).

Valuation and dividends

The company's trades at EV/EBITDA 19.1x and P/E 52.1x.

Management team

The company's CEO Jonathan Myers has spent 10 months with the company.

Financial and operational results

FY ended 31 May 2020

Pz Cussons ($PZC) key annual financial indicators

mln. £	2016	2017	2018	2019	2020	2020/2019
P&L
Revenue	821.2	809.2	739.8	626.6	587.2	-6.3%
Gross Profit	311.1	311.8	262.3	237.7	227.0	-4.5%
SG&A	225.1	225.4	199.2	199.2	196.4	-1.4%
EBITDA	107.8	106.3	87.6	61.6	56.1	-8.9%
Net Income	67.7	62.4	40.3	26.1	19.3	-26.1%
Balance Sheet
Cash	175.1	150.6	102.7	53.5	78.7	47.1%
Short Term Debt	322.5	294.7	268.4	2.0	4.6	130.0%
Long Term Debt	0.0	0.0	0.0	204.0	137.4	-32.6%
Cash flow
Capex	35.5	40.6	22.2	14.1	6.7	-52.5%
Ratios
Revenue growth	0.3%	-1.5%	-8.6%	-15.3%	-6.3%
EBITDA growth	2.6%	-1.4%	-17.6%	-29.7%	-8.9%

Gross Margin	37.9%	38.5%	35.5%	37.9%	38.7%	0.7%
EBITDA Margin	13.1%	13.1%	11.8%	9.8%	9.6%	-0.3%
SG&A, % of revenue	27.4%	27.9%	26.9%	31.8%	33.4%	1.7%
Net Income Margin	8.2%	7.7%	5.4%	4.2%	3.3%	-0.9%
CAPEX, % of revenue	4.3%	5.0%	3.0%	2.3%	1.1%	-1.1%

ROIC	9.8%	9.8%	7.6%	4.8%	4.3%	-0.5%
ROE	14.2%	13.1%	9.1%	6.1%	4.7%	-1.3%
Net Debt/EBITDA	1.4x	1.4x	1.9x	2.5x	1.1x	-1.3x

Peers in Personal Goods

Below you can find Pz Cussons benchmarking vs. other companies in Personal Goods industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Creightons ($CRL)	-	45.6%	13.8%	26.5%	8.6%
Mulberry Group ($MUL)	4.8%	7.9%	0.9%	-2.0%	-
Paternoster Resources ($PRS)	-0.1%	-40.3%	16.9%	-31.9%	-
Median (3 companies)	-1.0%	8.1%	7.4%	-2.0%	8.6%
Pz Cussons ($PZC)	-	-1.5%	-8.6%	-15.3%	-6.3%

Top companies by Gross margin, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Mulberry Group ($MUL)	62.0%	61.6%	63.5%	61.5%	-
Creightons ($CRL)	42.2%	42.5%	40.6%	39.4%	42.2%
Median (2 companies)	23.7%	23.1%	40.6%	50.4%	42.2%
Pz Cussons ($PZC)	37.9%	38.5%	35.5%	37.9%	38.7%

Top companies by EBITDA margin, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Creightons ($CRL)	4.7%	6.1%	6.4%	8.9%	11.1%
Mulberry Group ($MUL)	9.5%	9.8%	8.6%	1.9%	-
Paternoster Resources ($PRS)	53.4%	-159.4%	50.2%	-110.5%	-
Median (3 companies)	8.1%	6.3%	8.7%	1.9%	11.1%
Pz Cussons ($PZC)	13.1%	13.1%	11.8%	9.8%	9.6%

Top companies by CAPEX/Revenue, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Paternoster Resources ($PRS)	102.1%	3.6%	2.6%	34.4%	-
Mulberry Group ($MUL)	3.2%	2.6%	2.8%	5.7%	-
Creightons ($CRL)	3.7%	1.8%	1.8%	2.3%	9.7%
Median (3 companies)	4.0%	2.5%	2.4%	5.7%	9.7%
Pz Cussons ($PZC)	4.3%	5.0%	3.0%	2.3%	1.1%

Top companies by ROIC, %


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Creightons ($CRL)	6.7%	15.5%	14.4%	23.6%	21.8%
Mulberry Group ($MUL)	7.2%	8.5%	8.3%	-5.8%	-
Paternoster Resources ($PRS)	2.3%	-26.4%	3.0%	-22.4%	-
Median (3 companies)	2.7%	3.3%	11.4%	-5.8%	21.8%
Pz Cussons ($PZC)	9.8%	9.8%	7.6%	4.8%	4.3%

Top companies by Net Debt / EBITDA


Top	FY2016	FY2017	FY2018	FY2019	FY2020
Creightons ($CRL)	-0.8x	-1.1x	-0.1x	0.1x	0.2x
Mulberry Group ($MUL)	-0.9x	-1.3x	-1.7x	-3.0x	-
Median (2 companies)	-0.1x	0.1x	0.2x	-1.4x	0.2x
Pz Cussons ($PZC)	1.4x	1.4x	1.9x	2.5x	1.1x

Pz Cussons stock price chart

Pz Cussons financials

mln.	FY2015	FY2016	FY2017

Revenue	819.1	821.2	809.2
EBITDA	105.1	107.8	106.3
Net income	52.400	67.700	62.400
CAPEX	36.500	35.500	40.600
Debt	268.4	322.5	294.7
Cash	110.7	175.1	150.6

About Pz Cussons

PZ Cussons Plc, together with its subsidiaries, manufactures and distributes home care, personal care, electrical, food and nutrition, and beauty products in Europe, North America, Africa, and Asia. It offers personal care products, such as hand wash, gels, wipes, creams, bar soaps, shower gels, bath foams, liquid soaps, scrubs, and ointments under the Carex, Imperial Leather, Luksja, Mum & Me, Original Source, Premier, and Robb brands; and beauty products, including shampoos, conditioners, mousses, hairsprays, spa products, self-tanning, and hair styling products under the Charles Worthington, Fudge, Fudge Urban, Sanctuary Spa, and St. Tropez brands. The company also provides food and nutrition products comprising edible cooking oils, milk and yoghurt based drinks, smoothies, ice teas, and baby food under the Minerva, Horio, Benecol, Yo, Bliss, Nunu, Coast, Mamador, and Rafferty's Garden brands; and home care products consisting of concentrated dishwashing liquids and powders, dishwasher gels, rinse aids, fabric detergents, and laundry soaps under the Zip, Radiant, and Morning Fresh brands. In addition, it offers electrical goods, such as computing and mobile products, televisions, DVD players, home entertainment systems, refrigerators, freezers, air conditioners, generators, inverters, stabilizers, automatic voltage regulators, fans, air coolers, washing machines, water dispensers, water heaters, gas cookers, and microwaves under the Haier Thermocool brand; and baby care products, including powder, cleansing, hair care, skin care, baby accessories, laundry, household, and gifting products under the Cussons Baby brand. Further, PZ Cussons Plc is involved in power generation activities. The company was formerly known as Paterson Zochonis Public Limited Company and changed its name to PZ Cussons Plc in 2002. PZ Cussons Plc was founded in 1879 and is headquartered in Manchester, United Kingdom.