LONDON – PZ Cussons is selling its flagship brand, St. Tropez, as part of a wider restructuring drive aimed at slashing debt and optimizing returns against a difficult backdrop.
The British beauty and personal care company said in its third-quarter trading update Wednesday it plans to sell St. Tropez and other assets as it refocuses the portfolio “on where the business can be most competitive, and where it can create most value for shareholders.”
It said that St. Tropez has grown significantly since it was acquired in 2010 in a deal valued at 62.4 million pounds. It said the brand has established a “leading position” in its key, premium self-tanning market of the U.S.
PZ Cussons added that it will struggle to realize the growth potential at St. Tropez “given the company’s need to allocate resources across its diverse geographic and category footprint.”
The company is also selling a group of infrastructure and assets in Africa with the aim of reducing risk and to maximizing shareholder value.
PZ Cussons said the proceeds from any sale will initially be used to invest behind the organic growth of the business and to reduce gross debt further.
While it may be in divestment mode, the group also said it has the “potential and ambition” to pursue targeted acquisitions which are “highly complementary to its more focused category and geographic footprint.”
Jonathan Myers, CEO, said while the business was stable and growing, it continued to face challenges in one of its key markets, Nigeria.
“The macro-economic challenges and complexities associated with operating in Nigeria are significant, and there is much more to do to unlock the full potential of the business. As such, we have undertaken a strategic review of our brands and geographies and have embarked on plans to transform our portfolio, refocusing on where the business can be most competitive.
“The actions we are taking will crystallize value for our investors from assets better suited to alternative ownership structures. This will enable us to invest our resources in the key geographies and categories in which we can win and generate superior returns. We are transforming PZ Cussons into a business with stronger brands in a more focused portfolio, delivering sustainable profitable growth,” he said.
Despite notching nine consecutive quarters of like-for-like revenue growth and turning around its U.K. personal care business, PZ Cussons had a tough start to the fiscal year. It fell victim to currency devaluation in Nigeria, which represents around 35 percent of revenues, and 22 percent of net assets.
The company has said the volatility had a “material impact” on its earnings and the balance sheet. Nigeria’s soaring inflation has caused further “trading challenges” and forced the company to slash its interim dividend by 44 percent.
While the U.K. personal care business may be on the upswing, PZ Cussons has said there is still work to do on the beauty brands, which have “fallen short of expectations.” Sanctuary Spa was the primary driver of the overall decline in like-for-like revenue in the first half, partly a result of a smaller but more profitable Christmas gifting product portfolio and strong comparatives with the corresponding period last year.
Generally speaking, the company said its more premium brands suffered from “insufficient innovation and unsatisfactory execution.”
In the first six months of fiscal 2024, St.Tropez declined slightly, primarily in the U.S., although the company said it expects improving trends in the second half, with stronger innovation and a refreshed campaign with its brand ambassador, Ashley Graham.
On Wednesday, the company said that group third-quarter revenue on a like-for-like basis grew 6.4 percent. Revenue at reported exchange rates declined by 23.7 percent, primarily as a result of the devaluation of the Nigerian Naira, which was on average 60 percent lower in the quarter compared to the prior year period.
Volume grew 0.2 percent and compared favourably to the first half decline of 4.9 percent, due to improved momentum by the U.K. brands. Excluding Africa, like-for-like revenue declined 2.9 percent, an improved trend compared to the first half decline of 3.9 percent.
Source: WWD