1106599, 1100961, 1450598, 1450848, 1450689
Strategy Analysis 3
SWOT Ananlysis 4
Trend Analysis 4
Financial Ratio Analysis 5
Financial performance 5
Investors Ratio 5
P/E ratio 5
Working Capital Efficiency 6
Segmental Analysis 6
Narrative Reporting 7
Competitor’s Performance 7
Final Recommendation 9
Reference List 10
PZ Cussons is a well-diversified international consumer products group, focusing on personal, home and baby care, beauty and nutritional products. Within this financial year, they have already met the shareholders’ expectations. In this report, we will analyse the financial performance, strategic management and competitive advantages of PZ Cussons, to conclude whether this is a good investment opportunity.
PZ Cussons’s business model is composed of three strategies: selected categories, selected geographies and flexible supply chains.
Firstly, the firm operates in a wide range of categories where they have profitable opportunities, with continuous diversification, like entering into the food and nutrition industries in Asia, and the disposal of unprofitable brands. They also renovate existing brands throughout portfolios to differentiate their categories: in the UK body care division 70% of the products were relaunched or refreshed (PZ Cussons, 2014, p.16).
Headquartered in the UK, PZ Cussons spread their business to Asia, Africa and other European countries, adjusting their channels to meet local needs. Africa remains the Group’s largest region by contributing £361.3 million revenue, which covers 41% in total. In the electrical division, a high profit was achieved, and African nutrition joint ventures grew to £260 million (PZ Cussons, 2014, p.13). Political and economic disruptions in Nigeria have lead PZ Cussons to a pre-tax profit of £39.7 million for the half-year to end-November, and a decline of 7.9% on the prior year's £43.1 million profit (Peter, 2015).
Significantly, the acquisition of Rafferty’s Garden in Asia has contributed circa £19.6 million and £2.2 million to revenue and operating profit respectively (PZ Cussons, 2015). With respect to the weakened position of the Australian dollar, the Asian operating profit has witnessed a 10% increase, which has overpriced the Rafferty’s Garden’s acquisition. In Europe, four core brands still lead the market with an outstanding relaunch of Imperial Leather, but only resulted in growth of 8% in regional operation profits. One reason may be the sales of the Polish Home care brands caused revenue 24 million lower (PZ Cussons, 2014, p.10).
The last strategy adopted is flexible supply chains. The initial phase of the supply chain optimization project has been completed this year. Although the cost of the project incurred a £2 million exceptional cost this year with a further £20 million in next phase (PZ Cussons, 2014, p.80), the project can improve the flexibility and reduce the overhead cost. The distribution approaches vary over market types. In mature markets, traditional supplier chain is adopted, while in emerging markets, the extensive national wide deposition network is more efficient (PZ Cussons, 2010, p.10).
The table below gives an overview of the strengths, weakness, opportunities and threats facing the company within the industry.
Leading position in market
Understanding local needs
Flexible supplier chain
Investment in R&D
Hard to reduce cost
Risk of unknown market
Nigeria disruption and tight currency exchange risk
Based on the five-year financial performance and KPIs (Appendix 1), the impacts of strategies applied could be revealed. In table 1 (Appendix 2), revenue declined 3% versus last