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Handwash maker cleans up as pandemic boosts demand

Written by on 26/01/2021

Despite being a member of the FTSE 250 for nearly two decades, PZ Cussons is not exactly a household name.

Yet every household in the land will have bought its products at some point.

These include Carex handwash, Charles Worthington hair care products, Original Source shower gel and Imperial Leather soap.

Cussons Imperial Leather soap.
Image: Imperial Leather is among the company’s brands

With a portfolio like that, it is hardly surprising that the Manchester-based business has been a winner during COVID-19.

It today reported a 16.3% rise in half year pre-tax profits, on an adjusted basis, to £34.9m on the back of a 10.2% rise in sales during the period to £312.9m.

Sales were up in all parts of the world apart from Africa, where they fell very modestly, but this was entirely due to currency translation factors – chiefly from the Nigerian naira to the US dollar.

Profits, meanwhile, were up in all geographic territories.

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In Europe and the Americas, for example, sales were up by almost a third.

The 136-year old company noted: “As a result of the COVID-19 pandemic, there has been unprecedented growth in the hand wash and especially the hand sanitiser categories in the UK.

As uncertainty over Coronavirus continues Boots sells out of handwash at Victoria Station in London
Image: Some handwash shelves were bare early on during the pandemic

“However, demand continues to remain volatile and difficult to predict.

“We also see an increase in competition with new market entrants, especially in hand sanitiser.”

It said that the COVID-19 pandemic had seen consumers “favour tried and trusted brands such as Carex”, which has more than 37% of the hand wash market and more than 27% of the hand sanitiser market.

It was not all unalloyed good news: the Imperial Leather brand in Europe and the Americas suffered due to a need to prioritise production of Carex while, in the UK, sales of beauty products – including the Sanctuary Spa range and the Charles Worthington and Urban Fudge haircare brands – were hit by the malaise on the high street.

Costs were up, partly reflecting higher investment in digital and marketing, while reported pre-tax profits, at £36.3m, were actually slightly lower than a year earlier – when results were flattered by a profit on the sale of the company’s Greek business.

There were also exceptional costs this year due to a reorganisation in Nigeria.

Not that PZ Cussons would necessarily concede recent strong performance is down to the pandemic.

Illustrative image of PZ Cussons Original Source Shower Gel. (Newscast Limited via AP Images) 8/4/2009
Image: Original Source is another PZ Cussons brand Pic: AP

Jonathan Myers, the chief executive, suggested sales growth had also been driven by marketing spend being increased by a third.

Mr Myers, a former Kelloggs and Avon executive who joined the company in May last year during the lockdown, admitted he had not even met some of his leadership team face-to-face yet due to COVID restrictions but insisted the company had responded with “pace and agility” to the pandemic.

The question is where PZ Cussons, founded by Scotsman George Paterson and Greek entrepreneur George Zochonis from a trading post in Freetown, Sierra Leone, goes from here.

It had, prior to the pandemic, suffered from several years of sluggish growth due partly to a lack of marketing as the City fretted about the levels of debt the business was carrying.

The debt issue has largely been addressed – net debt has fallen to £18.2m from £137.7m a year ago – and Mr Myers said the balance sheet would now help PZ Cussons get through the crisis.

But he said that, in the near term, there was a good deal of uncertainty: “We are dealing with two main unknowns beyond the usual cycle of business activity – namely Brexit and COVID-19.”

He said that, so far, Brexit had only caused minimal disruption and that “so far the transition has been manageable”.

Mr Myers, who said the company saw “no need to rush out and buy” other assets, said there was still a lot of work to be done in terms of making the business more efficient.

Illustrative image of PZ Cussons Imperial Leather Shower Gel. (Newscast Limited via AP Images) 21/4/09
Image: Carex was prioritised over Imperial Leather during a period of high demand last year Pic: AP

A strategic announcement on 25 March is expected to highlight the company’s plans to build on its strongest brands in the “hygiene, baby and beauty” categories and, over time, expanding those to reach new consumers.

It is also expected to place a greater emphasis on sustainability than the company has hitherto shown.

A simplification of the company is expected too, and Mr Myers also promised “cultural change”.

One question in particular is what lies in store for Imperial Leather – which became part of the company when the old Paterson Zochonis bought Cussons Group in 1975 – and particularly after the way it was regarded as less of a priority than Carex last year.

Mr Myers said: “Imperial Leather is obviously an important brand for us with an amazing history but, in the grips of the early weeks of the pandemic, we had to make some calls on what would be our priority in order to meet frankly unprecedented consumer demand – you’ll remember many empty shelves of many of our competitor’s products.

“Carex was the brand that had the best protection credentials and so when it came to real squeezes in terms of bottles and in particular, pumps, we prioritised Carex over Imperial Leather.

Stock photo ID:614718416
Upload date:November 07, 2016
Image: Carex has more than 37% of the handwash market

“It was very much our own choice based around being able to access and procure reliable sources of supply when everyone around the world was doing it.

“We’re back in great shape now and producing all the different lines.

“We have great hopes for Imperial Leather – [but] I would say it’s one of the brands that needs more work than some of the others in terms of really defining the consumer proposition.

“We know it has a very loyal user base and we want to unlock new target consumers in the future.

“That will involve getting into the market with a fresh brand proposition.”

In these culturally-sensitive times, with much attention being paid to Britain’s colonial past, one wonders whether that fresh proposition might involve a change of name for this famous and storied old brand.

 Sky News

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