BUILDING BRANDS
FOR LIFEToday and for
future generations
PZ Cussons plc
Annual Report and Financial Statements 2021
PZ CUSSONS IS A BRANDED
CONSUMER GOODS BUSINESS
FOR EVERYONE, FOR LIFE, FOR GOOD.
CONTENTS
Strategic Report
1
2021 Highlights
69 Stakeholder engagement
70 Division of responsibilities
2
6
Introducing our new strategy
71 Governance framework
Chief Executive’s review
73 Nomination Committee report
8 Our business model
10 How we are structured
12 Market overview
14 Strategy in action
20
Creating a dialogue
with our stakeholders
26 Sustainability
39 Covid-19 response
40 Non-financial information
43 Key performance indicators
46 Business review
49 Financial review
54 Risk management
58 Principal risks and uncertainties
Governance
64 Our Board
66 Chair’s introduction
to governance
67 Board leadership and
company purpose
78 Audit & Risk Committee report
86 Remuneration Committee report
110 Report of the Directors
Financial Statements
118 Independent Auditor’s Report
130 Consolidated income statement
131 Consolidated statement
of comprehensive income
132 Consolidated balance sheet
134 Consolidated statement
of changes in equity
135 Consolidated cash flow statement
136 Notes to the consolidated
financial statements
195 Company balance sheet
196 Company statement
of changes in equity
197 Notes to the Company
financial statements
205 Further statutory and
other information
Key reads
2
Our new strategy
Building brands for life. Today and for future generations.
26 Our sustainability journey
At the heart of everything we do.
43 Key performance indicators
How we measure our progress.
See more online at
www.pzcussons.com
PZ Cussons plc Annual Report and Financial Statements 2021 2021 HIGHLIGHTS
01
2.7%
37.6%
Revenue
£603.3m
(2020: £587.2m)
184%
(Loss)/Profit for the year
£(16.6)m
(2020*: £19.7m profit)
Net debt
(excluding lease liabilities)
£30.7m
(2020: £49.2m)
11.0%
Adjusted profit before tax
from continuing operations
£68.6m
(2020*: £61.8m)
245%
7.8%
Profit before tax from
continuing operations
£63.2m
(2020*: £18.3m)
Adjusted basic EPS from
continuing operations
13.12p
(2020*: 12.17p)
5.0%
178%
Dividend per share
6.09p
(2020: 5.80p)
Reported basic EPS from
continuing operations
8.37p
(2020*: 3.01p)
OPERATIONAL HIGHLIGHTS
Strong, broad-based revenue growth
driven by our Must Win Brands
strategy. While reported revenue grew
+2.7%, to £603m, organic revenue growth
(at constant currency) was +7.1% with
each of our core categories of Hygiene,
Baby and Beauty in growth and our
Must Win Brands growing at 11%
(at constant currency).
Operating margins improved, with
adjusted profit before tax ahead of
consensus. While at a statutory level we
reported a loss after tax of £(16.6)m, this
was entirely due to a £(51.6)m loss from
discontinued operations driven by the
disposal of our Nutricima business and
the associated recycling of historical
foreign exchange losses.
Our adjusted profit before tax from
continuing operations, of £68.6m,
represents a strong +11.0% increase versus
the prior year and is ahead of consensus.
The balance sheet continues to
strengthen. Net debt (excluding lease
liabilities) was £30.7m, lower than the
£49.2m at the end of the prior year.
This reduction was driven primarily by
operating cash flow and the Nutricima
disposal proceeds.
A final dividend of 3.42p, making
a total of 6.09p for the full year.
This +5% increase in total dividend
reflects the Board’s confidence in
the Group’s financial resilience and
future growth prospects.
A WORD FROM OUR CHAIR
“In the first year of our
turnaround, I’m delighted with
the progress made by the Group.
The management team has been
considerably strengthened, our new
CFO has joined and we have benefited
from the addition of two new Non
Executive Directors. We have a new
and well-defined strategy in place and
are already delivering against it. We
are prioritising consumers, working
to build our Must Win Brands and
capabilities, and reducing complexity,
all with the clear objective of getting
us back to sustainable, profitable
revenue growth.
Although our statutory accounts
record a loss, driven by historical
non cash FX losses on the disposal
of Nutricima, this year saw strong
and broad-based profitable growth
achieved across the Group's continuing
operations. We have also announced
a major sustainability commitment
to achieve B Corporation status by
2026 - read more on page 27. The
Covid-19 pandemic continues to cause
significant turbulence in our business
but we remained resilient and ensured
that our products were there for our
consumers when needs were greatest.
I believe it’s truly an exciting
time for PZ Cussons and our key
stakeholders. On behalf of the
Board, I wish to thank all our
employees and partners once again
for the dedication and persistence
they have demonstrated during
another demanding year.”
Caroline Silver
Non Executive Chair
*
The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 136.
GovernanceFinancial StatementsStrategic Report 02
INTRODUCING OUR NEW STRATEGY
BUILDING BRANDS
FOR LIFE
Today and for
future generations
BUILDING BRANDS
We build brands that our
consumers trust and love.
FOR LIFE
We have a rich heritage dating
back 130 years with products
that touch and improve
consumers' lives.
TODAY
We act with a sense of urgency
and have already made a fast
start in our turnaround.
FOR FUTURE
GENERATIONS
We are building a sustainable
business for our employees,
shareholders, the environment
and the communities in which we
live and work.
PZ Cussons plc Annual Report and Financial Statements 2021 03
OUR FINANCIAL AMBITION
Our financial ambition is sustainable, profitable revenue growth. This will be achieved by the choices
we have made in our new strategy of 'Building brands for life. Today and for future generations'.
Where to play
We have a clear focus on the leading
brands in our core categories of
Hygiene, Baby and Beauty within
our priority markets.
See our structure on page 10 and our
markets on page 12
Reducing complexity
We are dramatically simplifying
our complex operations and ways
of working.
How to win – the PZ Cussons
Growth Wheel
Adopting the PZ Cussons
Growth Wheel enables us to
build brands in a systematic
and repeatable way.
Learn more about the PZ
Cussons Growth Wheel on page
8 and see the Growth Wheel in
action on pages 14 to 19
Evolving our culture
We have reshaped our purpose and
are reviewing our values, ensuring
each person in the organisation
is clear on their role and engaged
in executing our new strategy.
Learn more about our purpose
on page 29
Developing leaders at all levels
We are unleashing the talent within
the organisation, developing leaders
at all levels.
Our strategy in 10 words
We have summarised the
essence of our strategy into
the following 10 words:
Putting sustainability at the
heart of everything we do
Sustainability has always been
in our DNA; our new strategy
reflects this and we are elevating
sustainability further, making clear
and bold commitments which can be
measured over time.
Read more about our people
on page 28
Building our capabilities
We are developing the skills and
processes required for us to
compete effectively.
See our sustainability section on
pages 26 to 38
See more in our business model
on page 8
• Build Brands
• Serve Consumers
• Reduce Complexity
• Develop People
• Grow Sustainably
See page 4 for some examples
of the progress we have already
made in these areas and our
plans for the near future.
Growth Wheel ShoppabilityConsumabilityAttractivenessMemorabilityGovernanceFinancial StatementsStrategic Report 04
OUR NEW STRATEGY
Our roadmap to
SUSTAINABLE, PROFITABLE
REVENUE GROWTH
OVERVIEW
EXAMPLES OF PROGRESS WE ARE MAKING
This year we have set out a clear
strategy to return to sustainable,
profitable revenue growth.
We will build our trusted and leading
brands in our priority markets. Must
Win Brands will be our priority and
portfolio brands will have clearly
defined roles.
We will put sustainability at the
heart of everything we do, and
have committed to certifying
PZ Cussons plc as a B Corporation
by 2026. We have already made
progress in specific areas of our
sustainability journey, with more
detail set out on page 26 and have
announced the appointment of a
Chief Sustainability Officer who
will guide our sustainability strategy.
Another key part of our strategy is
to dramatically reduce complexity in
our business. We are reviewing our
processes, technology and structures
across the Group, with a particular
focus on Nigeria, to ensure they are
fit for purpose. We have removed
regional management layers and
decentralised our structure to put
the focus back on our local markets.
BUILD
BRANDS
SERVE
CONSUMERS
WHAT WE HAVE ALREADY DONE
WHAT WE HAVE ALREADY DONE
Introduced the PZ Cussons Growth
Wheel to deliver sustainable growth
for our top brands.
Identified and invested in our Must
Win Brands, in media and consumer
campaigns and started the process of
building new commercial capabilities.
WHAT WE WILL DO NEXT
Continue to invest in Must Win
Brand growth and improve return
on investment.
Manage our Portfolio Brands to play
the specific role set for each of them
within our overall business.
Consider potential acquisitions and
disposals to play a role in portfolio
optimisation.
Increased production capacity and
broadened our product offering,
reaching more consumers in more
channels such as e-commerce.
Launched new products to meet
consumer needs and desires across
Carex, Morning Fresh, Cussons
Baby, St.Tropez, Sanctuary Spa
and Original Source.
WHAT WE WILL DO NEXT
Stronger plans on our Must Win
Brands to serve consumers better
in the future. These include:
• UK: Carex is seeking to grow
distribution to broaden its
availability as well as using new
product innovation to address
emerging usage occasions.
• US and UK: St.Tropez is looking to
develop stronger influence activation
plans, building on FY21's success.
• Nigeria: Premier is building
distribution and improving
routes to market to serve
more consumers better.
FURTHER READING
FURTHER READING
See Build Brands in action on
pages 14 to 19
See Serve Consumers in action on
pages 14 to 19
PZ Cussons plc Annual Report and Financial Statements 2021 05
REDUCE
COMPLEXITY
DEVELOP
PEOPLE
GROW
SUSTAINABLY
WHAT WE HAVE ALREADY DONE
WHAT WE HAVE ALREADY DONE
WHAT WE HAVE ALREADY DONE
Removed layers of regional
management to allow our emerging
talent to progress and speed up
decision-making.
Re-established our marketing
capabilities ‘on the ground’ in our
business units, putting them nearer
their commercial colleagues and
closer to our consumers.
WHAT WE WILL DO NEXT
Assess what aspects of
our infrastructure – our processes
and systems – are fit for purpose,
and where we need to adapt, we will.
Rationalise the ‘tail’ of our product
line-up to reduce distraction and cost,
as we prioritise our Must Win Brands.
Dramatically simplify how we do
business in Nigeria.
Reshaped the Executive Leadership
Team ('ELT').
Begun our journey to B Corporation
certification.
Actions toward our Plastic Promise
include increasing our range of
refill alternatives to our plastic
pump dispensers and removing
all plastic from our gift sets on
the Sanctuary Spa range.
Launched a new Original Source ‘I’m
Plant Based’ bottle using 100% post-
consumer recycled material in the UK.
WHAT WE WILL DO NEXT
Develop more detailed B Corporation
action plans.
Renew our plastics commitments
to align with our new focus on
sustainability.
We will be rolling out a new Morning
Fresh bottle that uses 15% less plastic
in every unit.
Increased engagement through our
annual global employee survey and
regular ELT-led Town Halls, sharing
our plans for the future and showing
visible leadership.
Focused on the wellness and
wellbeing of our employees
throughout the pandemic.
Begun re-establishing the disciplines
of talent management, to ensure
we develop our future leaders.
Introduced a ‘Bold Leaders, Bold
Brands’ capability development
programme for our marketing team.
WHAT WE WILL DO NEXT
Review and re-shape our values and
embed our new purpose as part of a
broader effort to evolve the culture
of the Company.
Strengthen our people processes,
with a focus on attracting, retaining
and developing the right talent.
Where we currently have leadership
gaps, we will focus on the acquisition
and development from within of the
talent required in those areas in order
to deliver our strategy, for example in
areas such as environment, social and
governance ('ESG') and to improve
our commercial capabilities.
FURTHER READING
FURTHER READING
See more in Sustainability -
People on page 28
See more in our sustainability
section on pages 26 to 38
GovernanceFinancial StatementsStrategic Report 06
CHIEF EXECUTIVE’S REVIEW
Returning the Group
TO SUSTAINABLE GROWTH
We have dealt with considerable volatility across our categories and markets.
The pandemic has hit each country at different times, triggering varying
levels and durations of lockdown. Demand for hygiene products soared in the
early months of the pandemic and the Beauty category slowed dramatically
as retail stores closed and consumer habits changed. Thanks to the agility
of the organisation and the hard work of our employees, PZ Cussons has
been able to navigate these challenges and has seen broad-based growth
in FY21 across seven of our eight Must Win Brands and all core categories.
Given the limited opportunities to
travel or even spend time in the
office, I have not been able to visit
our markets or meet many of our
valued team members, but I have
been extremely proud of the way our
people have handled the obstacles
of the pandemic, both at work and
at home. Their ability to adapt to
new ways of working and keep our
factories and distribution centres
running safely has been exemplary,
and I would like to extend my
personal thanks to every member
of the team for their dedication and
resilience. I would also like to thank
the Board and ELT for their support
during my first year in the role.
More than 1/3
Marketing investment increase
Returning to sustainable growth
Despite the various impacts of
Covid-19, I am proud to say we have
returned the business to revenue
growth this year and improved
adjusted operating margin, albeit with
a statutory loss driven by historical
non cash FX losses on the disposal
of Nutricima. A reassuring sign of our
progress has been the broad-based
nature of that growth, with all regions
growing and strong growth for many
of our leading brands.
We have successfully managed our
cash position and strengthened our
balance sheet, which enabled us to
maintain strong liquidity while also
allowing for investment in our brands
and in building critical capabilities.
The demand within hygiene has led
to exceptional performance for Carex
and Morning Fresh, as the strength
of our brands meant that consumers
turned to them when their hygiene
needs were greatest. But it is also
a testament to the agility of the
Company that we were able to
respond to this demand so quickly
to ensure availability.
Our growth was not just in Hygiene.
We have also seen growth for Beauty
and Baby, despite the challenges
from Covid-19 in these categories.
With consumers in various levels
of lockdown, we have successfully
activated our brands in response to
emerging consumer habits around
hygiene, wellness and everyday
indulgence.
We are already seeing the benefits
of our strengthened brand-building
plans in the successful St.Tropez and
Ashley Graham collaboration, new
sizes and packs for Carex and plastic-
free gift sets for Sanctuary Spa.
In terms of serving consumers, we
worked with core retail customers
to maintain strong availability as
consumers moved online. We also
ensured that our brands were
available in existing e-commerce
channels and opened our own direct
to consumer sites. This has been
reflected in strong online sales. In
our Beauty business for instance,
we doubled the percentage of our
sales from online channels to nearly
40% by the end of the year.
A WORD FROM OUR
CHIEF EXECUTIVE
“It’s been an exceptional year
for our business. Though the
Covid-19 pandemic caused
unprecedented challenges,
I have been impressed by
how everyone at PZ Cussons
ensured our most trusted
brands were available for
consumers during a time
of great need.”
Jonathan Myers
Chief Executive Officer
FURTHER READING
See more on Building brands
for life on page 2
See our new Strategy in action
on pages 14 to 19
See more on Leaders at all
levels on page 28
See more on Sustainability at the
heart of everything we do on
page 26
PZ Cussons plc Annual Report and Financial Statements 2021
07
Develop products
consumers want
and desire
Brilliant
execution in all
retail channels
t y
b il i
Shopp a
Con
s
u
m
a
b
i
l
i
t
y
Growth Wheel
M
e
m
o
r
a
See the Growth Wheel in action on
pages 14 to 19
Our new strategy – Building Brands For
Life. Today and for future generations
This year, the ELT and the Board have
reassessed our strategy and set out
a new path to sustainable, profitable
revenue growth. The primary drivers
for the new strategy were the needs
to embrace changing consumer
needs and to transform the business
following the underperformance of
recent years.
We have made a fast start, increasing
investment in brand-building by more
than one-third over the year, with
all of the increase behind the Must
Win Brands. This has been achieved
while meeting and exceeding financial
expectations around adjusted profit
before tax from continuing operations.
Doubled
Online Beauty sales as a proportion of
total Beauty sales
Leaders at all levels
Revitalising our leadership is a key
part of delivering our new strategy
and unlocking our full potential
and we have made great progress
in this regard over the past 12
months. We now have a renewed ELT
with a healthy balance of internal
knowledge and external experience,
including the promotion of Steve
Noble to Chief Supply Chain Officer,
and the appointment of a new Chief
Financial Officer, Sarah Pollard, who
has made an excellent start since
coming on board in January.
Build distinctive
brands and strengthen
consumer awareness
b
ility
Just as important to reigniting
our pioneering spirit though is our
determination to encourage and
drive leaders at all levels of the
Group, engaging all employees in the
role they have to play in delivering
the new strategy and investing
in growing their capabilities.
Sustainability at the heart of
everything we do
Having a positive impact on the
world around us has always been
a fundamental part of PZ Cussons’
DNA. Though we have continued
to make progress this year, we know
we can do more.
We are putting sustainability at the
heart of everything we do, making
the needs and requirements of
all our stakeholders central to the
way we do business. The ambitious
journey for the Group to become a
certified B Corporation (see page
27 for more on B Corporations) is a
reflection of our determination and
commitment and is something I’m
particularly excited about working
towards over the coming years.
Outlook
As part of our strategy of 'Building
brands for life. Today and for future
generations', we have set out a bold
path to deliver sustainable growth
over the long-term. We have made
a strong start and achieved our
fastest growth in a decade, but we
are realistic about the job to be done.
Some of the challenges we are dealing
with have been years in the making
and will likely be years in the fixing.
c tiveness
a
r
A t t
Deliver value for
us, our consumers
and retail partners
That said, we are determined to
make progress and realise value
for all stakeholders in our business.
1 billion
Over the course of 2020, Carex
cleaned and sanitised over
one billion hands in the UK
We have also made good progress
building up our governance
capabilities and ensuring that our path
to sustainable growth is delivered in
an ethical and responsible way.
We will continue to navigate the
ongoing impact of the pandemic, as
the world migrates towards whatever
the new normal will be. This year has
demonstrated that the Group has
the agility and resilience required to
navigate such volatile times and we
are looking to sustain our renewed
momentum as we work through FY22
and beyond.
Supporting our people will remain
a priority as we all emerge from
lockdown and move towards new
blended ways of working. On a
personal level, after a year of remote
working and online engagement, I look
forward to being able to visit more of
our employees around the world, as
well as engaging with our consumers
and customers for the first time.
Jonathan Myers
Chief Executive Officer
30 September 2021
INTRODUCING THE PZ CUSSONS GROWTH WHEELCentral to our new brand-building strategy, the PZ Cussons Growth Wheel is our model for bringing our brands to life. By ensuring our brands are delivering against each of the wheel’s four focus areas, we will achieve growth in household penetration, or trial rate, which will drive increased market share and, ultimately, profitable revenue growth.GovernanceFinancial StatementsStrategic Report
08
OUR BUSINESS MODEL
WE BUILD BRANDS
which enables us to create
value for all our stakeholders
WHAT WE DO
We are a branded consumer
goods business.
TRIAL AND LOYALTY
Delight consumers through
the use of our products.
INSIGHT AND
INNOVATION
Obtain insights into current consumer
needs and longer term trends. Through
innovation, use these insights to
continuously develop brands and
products that consumers want and desire.
SALES AND
DISTRIBUTION
Establish customer
partnerships and channels
to deliver our products to
wherever our shoppers shop.
UNDERPINNED BY
OUR PURPOSE,
CULTURE, VALUES,
GOVERNANCE
AND ETHICS
SOURCING AND
MANUFACTURING
Service consumer demand by
sourcing ethically-responsible
raw materials and manufacturing
them into high quality finished
products, either in our own
world class facilities or
through carefully-selected,
trusted third-party
supplier relationships.
ADVERTISING AND
MARKETING
Invest in multi-channel advertising and
marketing campaigns to connect with
consumers and build memorable,
trusted and well-loved brands.
PZ Cussons plc Annual Report and Financial Statements 2021
which enables us to create
value for all our stakeholders
09
OUR COMPETITIVE ADVANTAGE
THE VALUE WE CREATE
Our strength is in being a multi-local rather than
multinational business, with the level of focus,
experience and dedication to our priority markets
that this brings.
Our business model creates shared,
sustainable value for all our stakeholders.
Our brands
High-quality, trusted and
well-loved brands
For consumers
Innovative, high-quality and trusted brands
Our people
Diverse, skilled and passionate
employees. Leaders at all levels
Our infrastructure
World-class manufacturing
and distribution capabilities
in selected geographies
Our stakeholders
Close working relationships
with customers, consumers,
suppliers and communities
Our financials
Strong balance sheet reflecting
our disciplined approach
For customers
Our retail partners and customers
benefit from selling our leading brands
For employees
Engaged teams and relationships,
training and development opportunities
and a supportive culture and values
For investors
A strong balance sheet, refreshed
leadership and a plan to deliver
sustainable, profitable revenue growth
For society
Community and charitable initiatives
linked to our priority markets
For the environment
Sustainability at the heart of what we do.
Sustainable sourcing, our 2023 Palm Oil
Action Plan and reduced carbon emissions,
water use and landfill waste
GovernanceFinancial StatementsStrategic Report
10
PZ Cussons plc
Annual Report and Financial Statements 2021
HOW WE ARE STRUCTURED
PZ CUSSONS IS A BRANDED
CONSUMER GOODS
COMPANY
with more than 130
years of heritage
OUR BRANDS
We have some of the world’s best-loved and
most trusted brands. There are two parts to
our brand portfolio: Must Win Brands and
Portfolio Brands.
Our Must Win Brands have leading positions in our priority markets and are
our priority for investment. Our portfolio brands each have a specifically-
defined role to play within the portfolio.
MUST WIN BRANDS
UK
UK
Nigeria
Nigeria
Australia, Nigeria
Indonesia, Nigeria
UK
US, UK
OUR PRODUCT CATEGORIES
Our new strategy has defined our core categories as Hygiene, Baby and
Beauty, each of which is attractive in terms of future growth and where we
believe we have a right to win. Our other notable category is Electricals, a
successful local business in Nigeria and with a clear strategic role identified
in our overall portfolio.
11
OUR GEOGRAPHIC FOOTPRINT
We operate in both developed and emerging markets, with over
3,000 employees around the world. We divide our business into three
geographic units: Europe & the Americas, Asia Pacific and Africa.
EUROPE & THE AMERICAS
Operations:
The UK is home to our
corporate headquarters
in Manchester as well as
our UK Personal Care and
Beauty businesses, including
a manufacturing centre of
excellence and our fragrance
house, Seven Scent.
ASIA-PACIFIC
Operations:
We have offices and
manufacturing in Indonesia,
Thailand and Australia. We
also have a corporate office
in Singapore which is home
to our global procurement
function.
Priority markets:
Priority markets:
UK
Indonesia
Australia
AFRICA
Operations:
Our largest office and
manufacturing centre is in
Lagos, Nigeria. We have smaller
manufacturing operations in
other parts of Nigeria and Kenya
as well as offices in Kenya and
Ghana. Our joint venture, PZ
Wilmar (Food & Nutrition) and
our subsidiary HPZ (Electricals)
are also located in Nigeria.
Priority markets:
Nigeria
Must Win Brands:
Must Win Brands:
Must Win Brands:
GovernanceFinancial StatementsStrategic Report 12
MARKET OVERVIEW
WE ARE CLEAR WHERE
OUR BRANDS CAN WIN
and are guided by macro
consumer trends
OUR MARKETS
Four main markets represent
the majority of our business
and our priority:
• United Kingdom
• Nigeria
• Indonesia
• Australia
We have years of experience
in these markets, harnessing
our local knowledge and
supporting that with global
know-how and best practice.
Multi-local
Most of our brands are strongest in
their ‘home’ markets, with 90% of
our brands generating most of their
net sales in only one or two markets,
where often they hold market-
leading positions in their categories.
We view our business not as
multinational, but as multi-local, and
our new strategy focuses on the strong
base in these four priority markets.
4
markets account for roughly 90% of our
net sales
90%
of brands generate the majority of their
revenue from only one or two markets
MARKET TRENDS
Shifting consumer trends at
a macro level are guiding how
we maximise the potential of
our brand portfolio.
Importance of hygiene and an
accelerated focus on holistic
health and wellbeing
Trends
Consumer consciousness around
health and wellbeing has grown
over the long-term and, along
with the importance of hygiene,
this has been accelerated by the
Covid-19 pandemic. The focus
on hand hygiene has recently
risen to unprecedented levels.
Consumers also desire products
that use more natural ingredients,
provide convenience by saving
time and effort and offer added
value benefits.
How we are responding
Hygiene, health and wellbeing,
are key elements of our consumer
proposition across our brand
portfolio. Carex is the number
1 brand in handwash and hand
sanitisers in the UK. Our new
relaxation range from Sanctuary Spa
features bespoke wellness products
to help calm, de-stress and improve
sleep and mood, while Cussons Baby
Powder now features Moodscent™,
a patented technology proven to
improve babies’ moods.
PZ Cussons plc Annual Report and Financial Statements 2021 13
Sustainability is a key value
driver for consumer brands
Trends
Emergence of new
channels and customers
Trends
Sustainability continues to grow
in importance for consumers, as
well as for a broader cross-section
of our stakeholders. Consumers
are increasingly conscious of
sustainability concerns across the
entire value chain, with climate
change and plastic waste amongst
the top concerns globally. In
response, action from governments
and NGOs and demands from
customers are accelerating.
How we are responding
We are putting sustainability at the
heart of everything we do, with clear
and ambitious sustainability goals
and defined targets that are also
embedded as part of the incentive
plans for our top management
(see pages 104 and 105). We have
also set out our ambition to become
a certified B Corporation by 2026.
Another impact of the Covid-19
pandemic has been the acceleration
of shoppers diversifying their
spending across multiple channels,
with e-commerce hitting new highs
and the resurgence of the local store.
The retail landscape will continue
to evolve.
How we are responding
The shoppability and attractiveness
segments of the PZ Cussons Growth
Wheel ensure that we are focused on
winning where the shopper shops,
with an attractive value proposition
for consumers and customers alike.
Our Beauty division’s marketing has
been ‘digital first’ and Carex has
broadened distribution to serve
more consumers who are ‘on-the-go’.
See more on these in our strategy in
action case studies on pages 14 to 19.
Emerging markets driving
disruptive growth
Trends
The rise of emerging markets
continues, with many experiencing a
softer economic dip than developed
markets during the pandemic.
Our emerging market consumers
demand excellent quality products
at highly competitive prices.
How we are responding
Our strategy prioritises the emerging
markets of Indonesia and Nigeria
for future growth. We are investing
in our Must Win Brands in these
markets, namely Cussons Baby
in Indonesia and Morning Fresh,
Premier, Joy and Cussons Baby in
Nigeria. Simplifying our operations
in Nigeria is also an important
element of our strategy.
GovernanceFinancial StatementsStrategic Report 14
STRATEGY IN ACTION
CAREX
Protecting the nation
LINK TO 'OUR STRATEGY IN 10 WORDS'
After 25 years of caring for and protecting hands in the UK, Carex grew to
a new level of importance for consumers during the Covid-19 pandemic.
BUILD
BRANDS
SERVE
CONSUMERS
In order to best serve our consumers when they needed us most we increased
production, focus and investment for Carex.
Fastest growing
FMCG brand in
the UK between
November 2019
and 2020*
Half of the UK
bought Carex
during 2020**
PZ Cussons plc Annual Report and Financial Statements 2021 15
Con
s
u
m
a
b
i
l
i
t
y
Carex was the fastest
growing FMCG brand in
Great Britain in 2020*
t y
b il i
Shopp a
Growth Wheel
M
e
m
o
r
a
b
ility
c tiveness
a
r
A t t
Our actions are aligned to the PZ Cussons Growth Wheel and in FY21 included:
CONSUMABILITY
• New and innovative products to
address emerging usage occasions
e.g.:
– Launching new products
including Carex Hand and Surface
Spray and Carex Advanced Hand
Wash, which protects hands for
up to three hours
– Launching refill packs to
reduce plastic use
MEMORABILITY
• Driving awareness through
a new TV campaign called
‘Protecting the nation’
(https://www.youtube.com/
watch?v=0VoRPaXJXP0)
SHOPPABILITY
• Serving consumers better when
‘on-the-go’, via:
– Growing distribution to
broaden availability
– Increasing online presence
This resulted in unprecedented growth for Carex in 2020, according to Kantar*
As the UK’s number one brand across hand hygiene, we have a fantastic platform to continue to address consumer needs
through product innovation and broadening availability as hand hygiene behaviours evolve in the future.
The UK’s number one
hand wash and hand
sanitiser brand***
*
Source: Kantar Worldpanel data, November 2020.
** Source: Kantar Worldpanel data, December 2020.
*** Source: Kantar Worldpanel data, July 2021.
GovernanceFinancial StatementsStrategic Report
16 PZ Cussons plc
Annual Report and Financial Statements 2021
STRATEGY IN ACTION CONTINUED
ST.TROPEZ
You set the tone
LINK TO 'OUR STRATEGY IN 10 WORDS'
BUILD
BRANDS
St.Tropez has a clear mission: to inspire you to glow with
confidence, inside and out, all year round. In February 2021,
we announced Ashley Graham as our new global brand
ambassador to refresh and reinvigorate that mission.
The American supermodel, entrepreneur and
body positivity icon is leading our motivational
'You set the tone' cross-platform campaign,
bringing her positive energy to our brand
and encouraging our consumers to glow
with confidence.
SERVE
CONSUMERS
17
t y
b il i
Shopp a
Con
s
u
m
a
b
i
l
i
t
y
Growth Wheel
M
e
m
o
r
a
b
ility
c tiveness
a
r
A t t
Here’s how the PZ Cussons Growth Wheel is being applied:
CONSUMABILITY
• Investment in our core best-
selling products and best-in-class
innovation, to develop products
consumers want and desire
• Worked with influencer, Ashley
Graham, to develop the Ashley
Graham ultimate Glow Kit
MEMORABILITY
• Digital and social first
communication strategy, with
increased marketing investment
• High-profile celebrity endorsement
is driving awareness, consideration
and conversion and unlocking new
audiences across our markets
SHOPPABILITY
• April 2021 saw our biggest
retail execution, with St.Tropez
occupying the best locations in
stores across the US
• Extra visibility online and in-store
in and out of peak season
The success of the collaboration has already led to record retail sales for St.Tropez in the US.
The new Ashley Graham Ultimate Glow Kit has sold out across the UK and US twice, becoming
a number one selling product in the USA. St.Tropez has also seen considerable success online,
with an increasing number of searches and high consumer engagement with the brand.
The US’s #1 prestige
tanning brand**
#1
PR share
of voice*
1,000+
5-star reviews for
the Ashley Graham
Ultimate Glow Kit
*
For prestige tanning in the UK and US, Feb-March 2021,
according to Emergent ARA reports.
** NPD Group Inc., as at March 2021.
GovernanceFinancial StatementsStrategic Report
18
STRATEGY IN ACTION CONTINUED
PREMIER
Serving more consumers better
LINK TO 'OUR STRATEGY IN 10 WORDS'
BUILD BRANDS
SERVE CONSUMERS
Premier is one of our flagship brands in Africa,
with more than 30 years of heritage in Nigeria
We have strong brand awareness and market leadership in the family care segment. We want to build on that to
deliver sustainable, profitable revenue growth. The Premier brand is central to our plans to return Nigeria to growth.
t y
b il i
Shopp a
Con
s
u
m
a
b
i
l
i
t
y
Growth Wheel
M
e
m
o
r
a
b
ility
c tiveness
a
r
A t t
Here’s how we are making a fast start in our
mission to serve more consumers better:
CONSUMABILITY
• Optimising the product portfolio
using innovation to address
consumer needs and new
usage occasions
MEMORABILITY
• We are building brand equity and
distinctiveness through the use of
influencers in our communications
• Between December 2020 and
April 2021, we reached 36 million
consumers through TV advertising
and 22 million through radio
SHOPPABILITY
• Building distribution by
improving routes to market
• In 2021, we have completed a
direct to consumer sampling
and experiential programme,
reaching 500,000 consumers
across three regions
PZ Cussons plc Annual Report and Financial Statements 2021
19
Half of all households in
Nigeria buy Premier soap*
#1 in social
engagement
for hygiene
category
* Kantar, July 2021.
GovernanceFinancial StatementsStrategic Report 20
CREATING A DIALOGUE WITH OUR STAKEHOLDERS
Our approach to doing business
is founded on the principle of
LINK TO 'OUR STRATEGY
IN 10 WORDS'
GROW
SUSTAINABLY
DEVELOP
PEOPLE
BUILD
BRANDS
CREATING SUSTAINABLE
VALUE FOR ALL
Why we
engage
One of our strengths is the ability to build
close, long-term relationships with our
customer base. Our customers give us their
loyalty and trust and in turn we see them
not just as customers, but as partners.
How we
engage
Our goal is to serve more consumers
and do it better than the competition.
Understanding consumer trends and
shopping habits is crucial to delighting
consumers and helping our portfolio
to win.
We have a strategic partnership
with many of our key customers in
our established markets, including
offering shopper insights, proposing
promotions and products and
assisting with developing strategies.
We listen to consumers to understand
their needs and expectations through
market research, social media, direct
feedback and sales data.
We are one family, working together with
one purpose, towards one ambition. We
have worked hard to create a supportive
environment in which everyone’s
ideas are valued equally. Our compact
size, flat structure and open culture
foster genuinely open communication
between employees across the Company,
regardless of seniority or geography.
We engage with employees regularly
through local and global ‘Town Hall’
meetings, functional webcasts and
leadership events. We also act on
our employees’ views and feedback
through an annual global engagement
survey – see page 29. During Covid-19,
we also held further pulse surveys.
Dariusz Kucz, a Non Executive
Director, is our employee engagement
champion, with a specific mandate
to ensure the Board hears and
understands the employee voice.
What
matters to
them
Both our customers and consumers
are increasingly focused on
environmental sustainability and
transparency in the supply chain.
Our consumers continue to seek
access to our products through
digital channels and this trend
has accelerated throughout the
Covid-19 pandemic.
Over the past year our workforce has
experienced the pandemic differently
in different countries. Some areas of
our workforce have easily adapted to
working remotely while others have
found it challenging to maintain a clear
boundary between their work and
personal space. As the new strategy
has been developed, employees have
been keen to understand how they
and their departments can play their
part in the new strategy.
CUSTOMERS AND CONSUMERSEMPLOYEESPZ Cussons plc Annual Report and Financial Statements 2021 21
We believe that PZ Cussons thrives in the long term when the interests of different stakeholders
are balanced so that they all share in our success.
It is therefore important that we fully understand all stakeholders’ priorities, expectations and concerns.
The Board regards effective
communication with shareholders as
crucial to understanding and meeting
their needs. We meet with them to
discuss business performance, to
understand their investment objectives
and goals and to hear any concerns or
advice they might have to help move the
Company forward.
We work with partners, distributors
and suppliers whose values and ethical
standards align with our own – and who
we know to be diligent, responsible,
honest and fair. We prefer to treat our
supplier relationships as long-term
alliances, working in partnership to create
and sustain robust, lasting and mutually-
beneficial relationships.
Ever since the business was founded
in the 1880s, we have recognised the
importance of developing good relations
with local communities in the vicinity of
our operations. We are committed to
making a positive contribution to society
and to minimising any negative impacts
from our operations and we believe
that investment in our communities also
helps create enthusiastic consumers
and advocates for our brands, as well as
developing loyal employees.
Wherever we operate, we contribute
to local community initiatives, from
helping to build schools or roads in
some of our developing markets, to
donating products or mentoring and
supporting local children to improve
their life chances.
The specialists in our procurement
function are dedicated to the
maintenance of open, dynamic
communication with our supplier
base. Value alignment is a critical
feature of our relationships with
our partners and the Board engages
directly with them through the CEO
and CFO.
The Chair and our Executive Directors
periodically meet with our major
shareholders. The CEO and CFO
personally deliver the Group’s interim
and final results, with presentations,
Q&A sessions and roadshows for our
major shareholders. We also organise
ad-hoc investor events and an Annual
General Meeting to provide an
opportunity for shareholders to meet
the Directors and discuss the year’s
results. We held a capital markets day
for current and prospective investors
in March 2021. Our Board members
and our Company Secretary are
always available to our shareholders
to listen and respond to any concerns
they may have or perspectives they
may wish to share.
Our investors have been engaged
with our new strategy and return
to growth, including the strategy’s
implications for our portfolio brands,
our vision for Nigeria including the
simplification project and our capital
allocation decisions, particularly
regarding re-investment into building
our brands.
Our key suppliers seek stable,
long-term and mutually-beneficial
relationships to remove unnecessary
costs, improve product and service
quality and promote innovation.
The CFO reviews payment practices
and policies and monitors trends
in the Company’s performance,
reporting to the Audit & Risk
Committee.
The Covid-19 pandemic has
exacerbated the financial struggles
endured by many around the
world and further emphasised
the importance of our community
work, particularly activities such as
the support of the NHS in the UK,
Foodbank in Australia and projects
at Ganaka Memorial Girls College
and Chanchaga Leprosy Hospital
in Nigeria.
INVESTORSPARTNERS AND SUPPLIERSCOMMUNITIESGovernanceFinancial StatementsStrategic Report 22
SECTION 172 STATEMENT
Section 172 of the Companies Act 2006 requires a director of a company to act in the way that he or she considers,
in good faith, would most likely promote the success of the company for the benefit of its members as a whole.
In discharging their duty this year, the Directors, both individually and collectively, believe they have given due regard to
the stakeholders and matters set out in s172(1)(a-f) of the Companies Act 2006. How we consider each is set out below.
Principal decisions in FY21
The Board considers these
and many other factors in all
of the decisions it makes, with
important decisions explicitly
framed in the context of the
interests of and implications
for all affected stakeholders.
In FY21, the Board required
that papers tabled to it
include a summary of
stakeholders likely to be
impacted by the matter to be
discussed and any decisions
to be made.
The following demonstrates
how these matters were
considered in three key
decisions taken this year.
a) Long-term consequences
b) Our employees
PZ Cussons has a rich
heritage of over 130 years.
Our strategy is to 'Build
brands for life Today and
for future generations'. In
setting the direction of the
Company, we specifically
consider the legacy we leave
for generations to come.
c) Our business relationships
Our most important
business relationship is with
consumers. We build brands
to serve consumers better
with Hygiene, Baby and
Beauty at our core. We work
closely with partners and
our joint venture partner
and we value our strong
relationships with key
customers and suppliers.
For more on how we engage
with our consumers and
partners see Creating
a dialogue with our
stakeholders on page 20 and
Sustainability – Supply Chain
on page 34.
e) Our reputation
The success of our business
and our products depends
on our reputation with our
consumers, customers and
suppliers as a business with
integrity and dedicated to
its purpose.
We have a diverse workforce spread
across our locations in Africa, Asia,
Australia, America and Europe –
some based in offices, or increasingly
from home and others working in our
factories or directly with customers
and suppliers.
We reviewed the global engagement
survey to understand the views of
our employees and receive regular
reports from the Chief Human
Resources Officer and employee
engagement Non Executive Director.
For more on how we engage with
our employees and consider their
interests, see Creating a dialogue
with our stakeholders on page 20 and
Sustainability – People on page 28.
d) The community and environment
Sustainability is in our DNA. Our
business impacts communities, the
environment and the climate through
our use of land, procurement
activities, carbon emissions and
use of plastic, water and energy.
We consider the environmental
impact of our decisions against
our sustainability goals, which
include our ambition to become
B Corporation certified by 2026.
For more information on how
we measure our environmental
performance, see Sustainability –
Environment on page 30.
f) Acting fairly
We are conscious of the need to
balance the interests of our different
stakeholders fairly, particularly when
they are not aligned.
PZ Cussons plc Annual Report and Financial Statements 2021
Governance
Financial Statements
23
Principal decision 1: Creation of our new strategy
In order to return the business to sustainable growth, we needed to develop a new strategy. The process of developing the
strategy involved understanding, balancing and responding to the interests of numerous stakeholders, as set out below.
In making the decision, we considered:
The long-term effect
PZ Cussons’ revenue declined by nearly one third between FY2013 and FY2019. The
long-term success of the Company and its brands – and all the stakeholders that depend
on it – relies on a new strategy that will deliver sustainable and reliable revenue growth
and continued investment in our brands, supported by an engaged workforce.
Affected stakeholder groups
Customers and consumers
Customers and consumers are at the core of our new strategy. We are focused on building
brands to serve consumers better and following emerging consumer behaviour trends to
develop brands and products that consumers want and desire.
Employees
Employees are vital to the delivery of the new strategy and we considered how the change
in strategy would impact their role, their motivation and their morale. Managing talent
development and local capability building, alongside retaining our supportive culture, is
key to reigniting our pioneering spirit and encouraging employee confidence and support
for the new strategy. We are increasing overall support for our people to drive improved
attrition rates, gender balance, career progression within PZ Cussons and leadership
development. The Board acknowledged that focusing on some brands necessarily means
having less of a focus on other brands and was conscious of the potential impact this could
have on employee motivation.
Investors
Our investors want improved financial performance and a plan for long-term, sustainable
growth of both the top and bottom lines. The strategy needed to deliver this as well as
support share price growth and the dividend returns that many of our shareholders rely on.
Partners and suppliers
The development of the new strategy will ensure ethical sourcing and transparency in our
supply chain. We will work with suppliers to improve standards in key areas, monitoring
reliance and engagement with e-commerce channels to ensure we are not overly-reliant
on any one supplier.
Community
Our decision to aim for B Corporation status by 2026 was based on the idea that long-
term, sustainable growth depends on continuing to benefit broader society and the
communities in which we live and work, both through the products we sell and through
our business practices and culture.
The environmental impact
Sustainability is at the heart of our Board discussions and remains central to our operating
model of 'sustainable growth'. See further detail on our approach to sustainability in the B
Corporation case study on page 25 and the introduction to B Corporation on page 27.
The impact on our reputation
and the need to act fairly
We considered appropriate ways to engage with key stakeholders and to understand their
perspectives and priorities, including respecting the commitments we already made and
our relationships with partners. We held our first capital markets day in nearly a decade to
communicate our plan, engaged with employees in a series of events to explain the new
strategy and understand their perspective and are developing a short-term and long-term
investment case to demonstrate the soundness of our approach.
Strategic Report 24
SECTION 172 STATEMENT CONTINUED
Principal decision 2: Responding to the Covid-19 pandemic
Managing the impact of the pandemic required many changes to our operations and working practices. Delivering the
best result for the Group required holistic decision-making that carefully balanced the needs of numerous stakeholders.
While the pandemic started in the previous financial year, Covid-19 remained a defining feature of the global landscape
in FY21 and we saw the continuation of unprecedented volatility as different parts of the world eased or increased
restrictions in response to changing local conditions.
In responding to the pandemic, we considered:
The long-term effect
Some parts of our business such as Hygiene continued to experience strong demand,
while other sectors, such as Beauty remained under pressure, either from changing
consumer behaviour or disruption to distribution channels arising from lockdown
measures. While we pivoted the business to maximise supply of the products needed to
manage the pandemic, the Board remained aware of the need to maintain the long-term
diversity of the business and to ensure that the business would be able to respond and
continue its success post-pandemic. As a result of these decisions, we saw broad-based
growth across Hygiene and non-Hygiene brands throughout the year.
Affected stakeholder groups
Customers and consumers
The Board considered the needs of our consumers in deciding to focus production
capacity on much needed hygiene products such as hand soap and sanitiser gels and
in increasing distribution through online channels as physical stores remained closed.
Employees
In supporting remote working policies, the Board received regular updates on the morale,
health and wellbeing of employees around the world. Bonuses were paid to some staff
in recognition of their commitment, testing was provided to staff who required it across
Africa and the Company supported the vaccination programme for employees in Indonesia.
Investors
Our investors sought consistent financial performance in line with our disclosed outlook
and accurate, timely and transparent updates on the impact of the pandemic on our
performance and our supply chain.
Partners and suppliers
Supply chains tightened throughout FY21, as raw ingredients for some products became
increasingly in-demand, shipping costs increased and, in some countries, Covid-19
restrictions caused delays in transport. We sought to be dynamic, open and transparent
with our suppliers to ensure an adequate production of products at consistently high
standards.
Community
The Board considered our communities, supporting a significant step-up in charitable
activities focused on sanitiser gel and soap donations to vulnerable groups, gifting
Sanctuary Spa products to key workers in the NHS and other products to struggling
families in Australia and Indonesia.
Increased demand for smaller sized units of handwash and sanitiser gel put upwards
pressure on our plastic use, but our Board continued to support strategic initiatives
aimed at reducing plastics ranging from the removal of plastics in some of our gift set
ranges, the increased use of recycled and recyclable plastic in our 'I'm Plant Based'
launch and increasing the use of refill packs in our liquid soaps business. These and other
environmental initiatives are set out in more detail on page 30.
The environmental impact
The impact on our reputation
and the need to act fairly
The Board was conscious of the need to not just act fairly but to be seen to act as a good
corporate citizen. This informed its choice to make early repayment of the £8m in VAT
relief and to not take part in the furlough or Covid-19 commercial paper programmes.
PZ Cussons plc Annual Report and Financial Statements 2021 Governance
Financial Statements
25
Principal decision 3: Approving the B Corporation ambition
The Board and management recognised that the increasing importance of sustainability and corporate responsibility
required a step-change in the Company’s approach. The new strategy confirmed that sustainability is at the heart of
everything we do and our ambition needed to reflect that but also to set measures which could be clearly monitored against
external benchmarks. In FY20 the Board closed the Good for Business ('G4B') Committee to ensure that sustainability and
environmental matters would be considered at full Board level. This consideration led to the approval of the Company’s
ambition to become a certified B Corporation by 2026 – an ambition we consider stretching but achievable.
In approving the B Corporation ambition, we considered:
The long-term effect
Becoming a B Corporation is fundamentally about ensuring the long-term success of the
Company for all stakeholders and balancing purpose and profit.
Affected stakeholder groups
Customers and consumers
The Board considered the desire of many consumers to purchase products from
companies that proactively consider their broader impact on society and the environment,
recognising that B Corporation status builds credibility, trust and value with consumers.
Employees
Employees increasingly value working at companies that conduct their business in a
way that does not just seek profit but positively impacts employees, communities and
the environment.
Investors
The Board is aware of and supports the increasing focus of investor groups on ESG
performance and targets and believes that B Corporation certification represents
the leading edge of ESG ambitions and will support long-term sustainable growth.
Community
PZ Cussons has long been a partner of the communities in which we live and work
and more details can be seen in the Sustainability – Communities section on page 37.
Our decision to aim for B Corporation status by 2026 was based on the idea that long-
term, sustainable growth depends on continuing to benefit broader society and the
communities in which we live and work, both through the products we sell and through
our business practices and culture.
The environmental impact
Our B Corporation ambitions will underpin our continued focus on specific and
measurable environmental KPIs. We have also appointed a Chief Sustainability Officer
who will lead a review of targets in FY22 under the supervision of an ESG Committee.
The impact on our reputation
and the need to act fairly
The Board believes B Corporation certification is becoming widely recognised by
consumers and broader society as a sign that PZ Cussons acts fairly between stakeholders.
Strategic Report 26
SUSTAINABILITY
PUTTING SUSTAINABILITY
at the heart of everything we do
It’s in the DNA of PZ Cussons to
be a force for positive change.
We think and care about the legacy
we leave for future generations,
a heritage that goes all the way
back to the founding family values
of the business.
Building on our bold stances on
animal testing, palm oil traceability
and our Plastic Promise, we are
elevating sustainability even further.
Doing business sustainably for our
environment and the communities
in which we live and work is crucial
to our strategy of 'Building brands
For life. Today and for future
generations'.
We believe that sustainability
can improve our operations and
ultimately is good for business.
Sustainability focus areas
We are focused on a programme
of constant improvement within
our global operations and continue
to make good progress on a number
of key sustainability projects.
We are committed to broadening
our efforts and setting clear targets
which can be measured over time.
These will build on a number of
already established commitments
for targeted areas of interest and
concern, including:
• 2023 Palm Oil Action Plan –
Sourcing from 100% No
Deforestation/No Peat/No
Exploitation suppliers
• Reductions in water, energy
and waste – Reducing these
by 3% year-on-year
Sustainability governance
Sustainability is at the core of our
new strategy. As such, sustainability
performance is embedded within
strategic performance and there
is ownership and accountability
for these areas across the ELT.
Our Remuneration Policy also has
clearly defined targeted strategic
and sustainability metrics to address
and incentivise the Company’s
ambitions in this area.
As part of our commitment to better
governance, compliance and ethics,
as well as greater transparency, at
the beginning of this financial year,
the Board established an ad-hoc
Ethics & Compliance Committee.
One of the Committee’s projects
was to establish the Company’s
first Code of Ethical Conduct and
supporting policies, which was
launched on 9 April 2021.
With that Project complete, the
Board has considered the future
role of the Ethics & Compliance
Committee and now intends to
establish an ESG Committee. In
line with this commitment, we
have also appointed our first
Chief Sustainability Officer, a role
dedicated to coordinating global
efforts across the Group.
Certified
carbon neutral
head office and UK manufacturing site
28%reduction in our landfill generation
per tonne of finished product
PZ Cussons plc Annual Report and Financial Statements 2021 27
OUR JOURNEY TO B CORPORATION CERTIFICATION
BUILDING ON THE PROGRESS
WE HAVE ALREADY MADE IN
SUSTAINABILITY
our ambition is for PZ Cussons plc to
become a certified B Corporation by 2026
What is a B Corporation?
B Corporations are companies that
have been certified by the non-profit
organisation B Lab to have met
rigorous standards of environmental,
social and governance performance,
accountability and transparency.
Why is it important?
B Corporation is a global movement
of businesses recognising that
we can only truly thrive when we
benefit everyone impacted by our
operations. We see our journey
towards B Corporation certification
as a bold statement of intent and
we would be among the first UK
listed companies to achieve it at a
group-wide level.
Who will it benefit?
B Corporation certification will have
benefits for all of our key stakeholder
groups and for us. The B Corporation
logo is a mark of trust for consumers
looking to buy from companies with
ambitious sustainability policies
and goals. Retailers are responding
to this and already spotlighting B
Corporation brands.
Similarly, it will help us attract
the best talent by improving our
employer proposition and improve
our reputation with communities.
Finally, investors are increasingly
focusing on ESG measures in
determining which companies are
worthy of investment, driven by
a desire to invest sustainably and
responsibly and a recognition that
sustainable companies are providing
better returns on investment.
How do we get there?
We are conducting a series of
assessments (both self-assessments
and facilitated assessments) of a
sample set of our business to give us
a baseline understanding of where
we are now. We will then define an
action plan for the range of initiatives
(Group and local) needed to move us
towards our Group certification goal.
This may mean we seek to certify
some business units first or that we
focus on particular priority areas.
GovernanceFinancial StatementsStrategic Report 28
SUSTAINABILITY CONTINUED
PEOPLE
We have over 3,000 employees around
the world and our people define who we
are as a business
We are assessing our culture and values and realigning our human resource
processes to ensure our employees are incentivised and rewarded with
compelling career paths and that we attract, retain and develop the most
talented and capable people. We are also investing in our people systems
to ensure that we have the data and insight to drive our talent and people
agenda through improved and informed decisions.
Talent – Leaders at all levels
The new strategy provides the clarity
of where we are going and what we
need to deliver to achieve it. It is
therefore critical that each person in
the organisation is clear on their role
and engaged and passionate about
that role in its delivery.
We are setting new standards for
leadership, in order to ensure we
have leaders at all levels. We are
investing in building the future
leadership capability needed to
return the business to sustainable,
profitable revenue growth and
nurture a high-engagement,
high-performance culture. The
discipline of talent management is
scaled across the business, aimed
at defining, finding, nurturing and
moving talent for the benefit of that
talent and PZ Cussons.
We are prioritising investment and
the acquisition of the talent to build
the critical capabilities we need to
successfully drive growth locally.
We are well progressed through
a core development ‘bold leaders
bold brands’ marketing capability
development programme. We are
also delivering the digital talent and
capabilities needed by our brands to
support digital first, multi-channel
approaches across the markets.
Wellbeing
With many of our employees working
under tight safety restrictions in
our factories or still adjusting to
working from home, the wellbeing
of our teams remained of critical
importance throughout the year.
We stepped up our employee
assistance programme across the
Group, with our new communication
and collaboration tool Workplace
from Facebook™ featuring a
wellbeing hub, with guidance, tools
and support to help employees build
and maintain good physical and
mental health during the pandemic.
Global initiatives were
complemented by local programmes
tailored for specific markets and
requirements. For instance, in the
UK and Asia we organised dedicated
sessions with mental wellbeing
practitioners. We’ve also consistently
run physical wellbeing programmes,
with opportunities for walking,
yoga and more encouraged for
all employees.
Looking ahead, we are currently
in the process of developing a
global wellbeing vision statement
and strategy, to articulate our
principles, focus areas and targets
for measuring our success.
PZ Cussons plc Annual Report and Financial Statements 2021 29
Inclusion and diversity
Our multi-local footprint ensures
that we are a diverse business,
but we want to be more proactive
about how we approach diversity
and inclusion. We are in the process
of developing our agenda on
diversity in line with the new Group
strategy, with a new policy and
KPIs to reflect our commitment
to be launched in the coming year.
In the wake of the pandemic,
we have recently finalised our
inclusive working principles, to
encourage all employees to learn
from the past year and to work in
ways that enable them to flourish
and be as effective as possible.
To see the current breakdown
by gender of our employees,
see page 113.
The four principles are:
• Collaboration – Providing
environments and technologies
so our teams can innovate, solve
problems and work on big ideas
together.
• Development and delivery –
Flexible, often virtual, on the
job learning and development
to unleash potential.
• Wellbeing – Supportive
management and programmes
that build energy, positivity
and resilience for enhanced
wellbeing.
• Inclusion – Working
environments will foster
inclusivity and equal
opportunities for all.
See more online at
www.pzcussons.com
Employee engagement
We have brought the new focus
on talent to life for our people and
created a compelling vision of where
we are going through ELT-led Town
Halls. These Town Halls have been
tailored for different markets and
manufacturing sites around the
world, reaching every employee
with consistent but locally-relevant
messages. We believe that our
increased levels of employee
engagement can create excitement
and reignite our pioneering spirit.
See more on how we engage with
our employees on page 20
GLOBAL ENGAGEMENT
SURVEY 2021
Our second annual global
engagement survey took place in
March 2021, building on the pulse
surveys we conducted during the
Covid-19 pandemic.
94% of our employees completed
the survey, up from 90% last
year. Following a renewed senior
management team and a refreshed
set of questions, we do not consider
prior year results to be comparable
to the FY21 engagement survey
results listed below.
Example responses:
I know what I need to do to be
successful in my role
90%
I know how my work contributes
to the goals of PZ Cussons
92%
I am proud to work for PZ Cussons
88%
We hold ourselves and our team
members accountable for results
88%
My manager is a great role model
for employees
68%
At PZ Cussons there is open and
honest two-way communication
56%
REIGNITING OUR CULTURE – DEFINING OUR PURPOSEOur culture is what sets us apart from the competition and makes us unique. We are keen not to lose what makes the organisation special, but recognise the need to build on our rich history and ensure our culture is right today and for the future.Our culture was a key consideration in our strategy review, having been identified as a key enabler. Since the launch of the new strategy, we have been monitoring employee engagement and conducting regular town halls and feedback sessions to ensure our strategy is fully embedded. In addition we reviewed our purpose to align with what our employees told us it means to work at PZ Cussons culminating in the approval in July 2021 of our new company purpose: 'for everyone, for life, for good'. In FY22 we aim to launch a refreshed set of Company values to complement our new purpose. GovernanceFinancial StatementsStrategic Report 30
SUSTAINABILITY CONTINUED
ENVIRONMENT
Reducing our environmental footprint
is a key part of our strategy
We care about how our business may impact the environment, from the way we manufacture products and bring
them to market to the way in which consumers use them.
We have active programmes to measure and disclose data
in respect of our environmental performance across key
areas of focus, including carbon emissions, water usage
and landfill waste, plastic consumption and sustainable
sourcing of palm oil.
We have certified our main operating sites to ISO14001 –
this brings strict compliance with local regulations and
our Group standards. The continuous improvement ('CI')
programme in our factories aligns with ISO14001 and has
been instrumental in driving our performance in reducing
water use, carbon emissions and landfill waste.
FY21 environmental performance
Target
FY21 actual
Comments
Plastic
25% reduction in use of
plastic, expressed in grams
of plastic per kg of finished
product. Target date of
FY25 vs. baseline of FY18.
30% increase vs
FY18 baseline
30% of plastics used will
be from recycled sources.
Target date of FY25.
2.4% packaging
with PCR content
100% of our plastic will
be reusable, recyclable
or compostable. Target
date FY25.
75%
Factors leading to this year's figures include the sale of businesses
in FY21 which had less plastic packaging and a deliberate reduction
in the production of laundry and soap bar items in Nigeria.
Carex hand sanitisers continued to be in high demand during the first
half of FY21 in the UK. Smaller and more portable pack sizes were
more popular during the pandemic, which are double the amount of
plastic per kg of finished product compared to the Group average.
We successfully launched several successful bottle light-weighting
projects and accelerated our Carex refill range in FY21 and will
continue progress in this area in FY22.
This represents an improvement against the prior year (2020: <1%)
due primarily to higher sales volumes of Carex hand sanitisers in the
UK. These contain 30% post-consumer recyclate ('PCR'). FY21 saw the
launch of Original Source I'm Plant Based bottles which are 100% PCR.
The UK and ANZ business continue to lead performance within the
Group. Plans are in place to improve performance in Indonesia
and Nigeria.
3% year-on-year reduction. 23% reduction
Expressed in m3 of water consumed per tonne of finished product.
Driven primarily from our continuing waste reduction initiatives at our
Aba factory in Nigeria that contributed 42% of the absolute reduction.
3% year-on-year reduction. 9% reduction
Expressed in kg of CO2-e per tonne of finished product.
We continue to make energy conservation and the elimination of
energy waste a high priority within our operations.
Expressed in kg of landfill waste generated per tonne of finished
product.
Driven by the processing of different oil types at our edible oils refinery
joint venture in Nigeria.
We have defined our 2023 Action Plan and are continuing to use
Starling satellite data to independently verify compliance.
Water
Carbon
Landfill
3% year-on-year reduction. 28% reduction
Palm Oil 100% of our palm oil will
come from independently
verified, NDPE-compliant
producers.
100% palm oil and palm
kernel oil supplies with
NDPE commitments.
99% palm oil derivative
suppliers with NDPE
commitments.
99% palm oil and PKO is
fully traceable to the mill
98% palm oil derivatives
is fully traceable
PZ Cussons plc Annual Report and Financial Statements 2021 31
Carbon performance
Current reporting year
Comparison reporting year
Global
excl. UK
UK
Total
UK
Global
excl. UK
Total
Energy consumption used to calculate emissions (MWh)
6,054
190,755
196,809 6,496 223,042* 229,538*
Emissions from activities for which the Company own or control
including combustion of fuel & operation of facilities (Scope 1) (tCO2e)
Emissions from purchase of electricity, heat, steam and cooling
purchased for own use (Scope 2 Market Based) (tCO2e)
Emissions from purchase of electricity, heat, steam and cooling
purchased for own use (Scope 2 Location Based) (tCO2e)
0
0
37,977
37,977
477
37,875
38,352
9,649
9,649
0
12,091
12,091
910
9,649
10,559 1,071
12,091
13,162
Total gross Scope 1 & Scope 2 market-based emissions (tCO2e)
0
47,626
47,626
477
49,966
50,443
Intensity ratio tCO2e (gross Scope 1 + 2 market-based) / £100,000 revenue
0.00
26.70
7.89
0.25
11.36
7.97
*
The global excl. UK and total energy consumption figures for 2019–20 were incorrectly reported due to the omission of emissions relating to our
joint venture operation. These energy consumption figures relating to joint venture operations have been corrected for FY20 and included for FY21.
Carbon
All of our factories and locations incorporate energy reduction objectives
into their operational plans, mapping and identifying energy intensive
processes and implementing reduction projects via our CI programme.
Reducing the amount of energy we use reduces carbon emissions but also
reduces our running costs.
During the year we have continued
to implement the energy reduction
programmes we developed during
site audits in recent years. We
have continued to make excellent
progress in reducing our energy use
and carbon emissions, with emissions
down by a further 9% year-on-year
against our internal target of 3%.
In FY19, we moved all of the locations
in our UK Personal Care business
onto 100% renewable tariffs.
During the year our head office and
UK manufacturing site have been
certified to be carbon neutral.
In recent years we have been
focused entirely on our Scope 1
and 2 emissions, but during this
year we have started to broaden
our approach by looking at our
Scope 3 footprint (see definitions
on the following page). We have
conducted an initial Scope 3 exercise
that is helping us to understand our
extended carbon footprint – from
material extraction, manufacture
of raw materials, transport,
manufacture, distribution, consumer
use and disposal at end of life.
From this study we are starting
to understand how to focus our
strategy on the areas of our business
which will bring the greatest benefit.
As we get further we can study
pathways for reduction and set
our policy on climate change.
We have started to work on detailed
product footprinting – starting with
Original Source I'm Plant Based.
This is an innovative product that
uses novel surfactants with a low
carbon footprint and 100% PCR
plastics. The project has been a
useful learning exercise which
we will apply selectively to other
products in our portfolio.
The Group has been a participant in
the Carbon Disclosure Project (CDP)
for over ten years, currently reporting
our Scope 1 and 2 emissions. CDP is
an internationally renowned not-for-
profit organisation which provides
an independent global system
for companies and cities to share
vital environmental information.
This year we were graded as B-, an
improvement versus last year’s C.
The main areas where we lost points
were in our approach to target
setting, our measurement of our
Scope 3 footprint covering our
broader supply base and in risks and
issues. These areas are planned to
be addressed in an updated carbon
strategy which is in development.
During the year we have worked to
better understand our greenhouse
gas footprint due to fugitive
emissions of refrigerant gasses.
By improving our measurement of
losses from air conditioning units
and chillers around the Group, this
year’s reported numbers include
4,990 tCO2e Scope 1 emissions that
were not disclosed in previous years.
We have also identified that the
aftersales operations of our HPZ
subsidiary are not within the scope
of our current measurements. We
plan to rectify this during FY22 and
during the year will commission a
study to independently verify that
our emissions reporting is complete
and in line with the GHG protocol.
Aside from these issues and the
omission of some small offices
which do not have significant energy
consumption we are otherwise
compliant with the Streamlined
Energy and Carbon Reporting
(SECR) guidelines.
GovernanceFinancial StatementsStrategic Report 32
SUSTAINABILITY CONTINUED
Task Force on Climate-related Financial Disclosures (TCFD)
PZ Cussons supports the recommendations published by the Financial Stability Board’s Task Force on Climate-related
Financial Disclosures (TCFD). This series of recommendations is aimed at addressing the financial impact of climate
change on businesses worldwide. Our analysis confirms that we are delivering against recommendations and we expect
to fully comply with the requirements in FY22.
For more information on our Group risk
management practices please see page 54
TCFD
Governance
Disclosure
Reference
Describe the Board's oversight of climate-related risks
and opportunities.
• Annual Report & Accounts 2021
• CDP climate change
CDP Section C1.1b
Describe the management's role in assessing and managing
climate-related risks and opportunities.
• Annual Report & Accounts 2021
• CDP climate change
CDP Section C1.2, C1.2a
Strategy
Describe the climate-related risks and opportunities the
organisation has identified over the short, medium and long term.
• CDP climate change
CDP Section C2.1a,
C2.3, C2.3a. C2.4, C2.4a
Describe the impact of climate-related risks and opportunities
on the organisation’s business, strategy and financial planning.
• CDP climate change
Describe the potential impact of different scenarios, including
a 2C scenario, on the organisation's business, strategy and
financial planning.
• CDP climate change
CDP Section C2.3a,
C2.4a, C3.1, C3.1b
CDP Section C3.1a,
C3.1b
Risk Management
Describe the organisation’s processes for identifying and
assessing climate-related risks.
• CDP climate change
CDP Section C2.1, C2.2,
C2.2a
Describe the organisation's processes for managing climate-
related risks.
• CDP climate change
CDP Section C2.1, C2.2
Describe how processes for identifying, assessing and managing
climate-related risks are integrated into the organisation's overall
risk management.
Metrics and Targets
Disclose metrics and targets used by the organisation to assess
climate-related risks and opportunities in line with its strategy
and risk management process.
• CDP climate change
CDP Section C2.1, C2.2
• CDP climate change
CDP Section C4.2
Disclose Scope 1, Scope 2 and if appropriate Scope 3* greenhouse
gas emissions and the related risks.
• CDP climate change
• Annual Report & Accounts 2021
CDP section C6.1, C6.3,
C6.5
Describe the targets used by the organisation to manage climate-
related risks and opportunities and performance against targets.
• CDP climate change
• Annual Report & Accounts 2021
CDP section C4.1, C4.1a,
C4.1b, C4.2
* Scope 1 emissions are direct greenhouse emissions that occur from sources that are controlled or owned by the Group. Scope 2 emissions are
indirect greenhouse emissions associated with the purchase of electricity, steam, heat or cooling. Scope 3 emissions are the result of activities
not owned or controlled by the Group, but that the Group indirectly impacts in its value chain.
Plastics
One of the most meaningful ways
that PZ Cussons can contribute to
the environment is by reducing the
impact of the packaging materials
that we use.
In 2018 we set out our Plastic
Promise in which we committed
by 2025 to reduce the amount of
plastic that we use per kg of product
by 25%, move to 100% reusable,
recyclable or compostable plastics
and to increase our usage of PCR
to 30% of total plastics use.
We have had an active programme
that is delivering light-weighting
of bottles, has moved significant
volumes of Carex sales from bottles
to refills, is increasing PCR content
and is focusing on the removal
or replacement of difficult to
recycle components.
PZ Cussons plc Annual Report and Financial Statements 2021 Despite this work, since 2018 our
overall plastics usage is down only
slightly (3%), the weight of plastic
per kg of product is up 30%, reusable,
recyclable or compostable content
has increased to 74% and our use of
PCR has increased 12x vs 2018 but is
still at 2.4% of total plastics usage.
Key factors during recent years that
have influenced the numbers are:
• Disposals of businesses which were
lower intensity users of plastics.
• Sales volumes in our low-plastic
intensity Nigerian detergents and
soaps business are significantly
down which has had a significant
effect on Plastic Promise
performance.
• The pandemic has shifted the
product portfolio to smaller high
plastic SKUs such as hand gels.
Despite some excellent individual
projects such as the launch of our
I'm Plant Based line, the removal
of plastics from gift sets and bottle
light-weighting, our performance on
plastics reductions falls short of our
sustainability ambitions. We've also
heard from our shareholders that
they want us to set targets that align
to standardised definitions and focus
on overall reduction in plastics rather
than measures which track plastic
use per kg of product sold. In tandem
with our work on our B Corporation
ambitions and the addition of a Chief
Sustainability Officer we are taking the
opportunity to fully review our plastics
commitments and we look forward
to communicating our new plastics
strategy during the course of FY22.
Palm Oil
In October 2018 we published our
2020 Action Plan, which comprises five
strategic objectives. Within them we
pledge that 100% of our palm oil will
come from independently verified,
NDPE-compliant producers traceable
back to individual mills, with the aim
of achieving this by the end of 2020.
Today, 100% of our palm oil and
palm kernel oil suppliers and 99%
of our palm oil derivative suppliers
have NDPE commitments equivalent
to ours. Additionally, 99% of our
palm oil and 98.1% of our palm oil
derivatives are fully traceable to mill.
With high levels of traceability now
achieved, PZ Cussons is monitoring
its palm oil supply chain using
Starling1 satellite data. This will
continue to be an area of focus.
Our target was always an ambitious
one and we are proud of the
significant progress we have made
towards it. Our commitment to
responsibly source palm oil remains
as strong as ever. Our new 2023
Palm Oil Action Plan has been
developed to ensure we fulfill and
expand our 2020 commitment,
focusing on supplier engagement,
transformation and independent
verification and applying what we
have learnt on our palm oil journey
so far.
We are working with partners like
Earthworm Foundation and continue
to support the Forest Conservation
Fund, with investments in three
conservation projects in Indonesia
which are helping to secure standing
forest, protect biodiversity and
reduce carbon impacts in our supply
chain. Activities in the past six
months have included supporting a
local community in East Kalimantan
to develop and implement their
forest protection protocol for 7,200
hectares of forest, community-led
restoration of degraded forest
areas in West Kalimantan and
support for forest patrols to tackle
illegal logging.
Waste
We aim to reduce the amount of solid
waste sent to landfill year-on-year.
All of our factories and locations
have waste reduction programmes
as part of their operational plans.
The way we do this is to study and
map our landfill waste and then
use a standard waste hierarchy
tool to identify improvement
actions. Actions to reduce waste are
implemented via our CI programme.
The amount of landfill waste
generated per tonne of production
has decreased 29% year-on-year.
This was mainly driven by the use of
different oil feedstocks by our PZ
Wilmar joint venture which reduced
earth bleaching.
33
Water
The Group operates in a number of
environments which experience water
scarcity. Water is also an important
component of many of our products
and manufacturing processes.
Water conservation has therefore
been a key environmental focus for
the Group for some years and we
have reduced our consumption by
millions of tonnes over that period.
Water reduction is driven as part of
our CI programme. Water reduction
objectives are incorporated into the
operational plans of every factory
in the Group. Improvements are
principally achieved through detailed
mapping of water usage and focused
improvements in equipment and
methods. During the last year we
have reduced water consumption by
23% year-on-year. This is principally
driven by improvements in our
Aba site.
See more online at
https://www.originalsource.
co.uk/im-plant-based-range/
I'M PLANT BASEDAs more and more consumers join the natural and sustainable movement, plant-based products across the grocery sector are gaining more and more traction. One of our stand-out innovations in FY21 has been the launch of the 'I'm Plant Based' range from Original Source. Made from biodegradable cleansers, natural plant-based fragrance and packaged in bottles that are 100% recycled and 100% recyclable post-use, 'I'm Plant Based' brings a premier tier to the Original Source brand. Listings in all major retailers are further proof of the 'power of plant' as a platform for future innovation.GovernanceFinancial StatementsStrategic Report 34
SUSTAINABILITY CONTINUED
SUPPLY CHAIN
Our business is enabled by flexible and
customer-oriented supply chain operations
Our supply chain function continues to mature as an agile and competitive
organisation within PZ Cussons. We have developed strong leaders
connected internally through communities of practice and externally
networked to anticipate and respond to the changing market landscape.
Delivering trusted brands
In an increasingly uncertain and
volatile world, brand trust is
absolutely critical and we have
invested consistently in assuring
product quality and consumer
safety across the whole supply
chain. Regular product performance
benchmarking is carried out to
ensure that our product offerings
remain competitive. We have created
a new role, Head of Regulatory
and Consumer Safety, to reinforce
our efforts in these areas. This
builds on the creation of the role of
Head of Technical Services, which
drives the quality agenda, a critical
part of assuring consumer safety
and brand trust.
Preparing for the future
Research and development at
PZ Cussons is rebalancing the
portfolio. By investing more in
external relationships for our
selected platforms, we can ensure
the future innovation portfolio.
Building partnerships with suppliers,
universities and renowned experts,
we aim to bring new perspectives to
nourish our brand innovation agenda.
During FY20, we restructured our
Technical Services department to
be fit for purpose in the modern
environment across our markets.
Key focus areas for technical
services during FY21 included:
• Responding with agility to supply
disruption and spikes in demand
during the pandemic.
• Driving efficiencies through our
CI programme and in the factories
and working cross-functionally
to support our supply base
simplification and resilience
programmes.
• Bringing further impetus to
our existing quality and margin
improvement programmes.
Delivering now
The Covid-19 pandemic created a
new context, with an urgent need
to provide consumers with new
products to help protect themselves.
At the same time, growing consumer
desire for more sustainable products
and for products delivering wellbeing
benefits have provided opportunities
for innovation and leveraging our
research and development strengths.
In the UK, Carex Hand and Surface
Spray provides effective sanitising
power in a convenient spray for
consumers on the go. The Original
Source I'm Plant Based range appeals
to consumers’ desire for greener
products – a unique surfactant blend
provides best in class in shower
performance from plant-based
surfactants, with 100% natural
fragrances. Our Sanctuary Spa
Wellness range is helping move the
brand into new markets and driving
brand growth.
In Australia, we have launched
Morning Fresh dish and hand
as a convenient way to provide
both solutions in the kitchen by
formulating the right surfactant
blend. The recent addition of
Moodscent™ to the Cussons Baby
range in Indonesia is underpinned
by strong expertise in neuroscience
and fragrance technology to bring
a smile to both mum and baby.
PZ Cussons plc Annual Report and Financial Statements 2021 35
Manufacturing
During the year we have continued
to invest in the capability of
our manufacturing sites. Our CI
programme is established and
self-sustaining. Through CI, the site
teams are delivering real incremental
improvements across safety,
quality, delivery, staff morale and
cost. A major area of focus this year
has been on upskilling staff and
supporting CI teams as they grow
in scope and capability.
Our main manufacturing facilities
are accredited to ISO9001 for
quality, ISO14001 for environment
and 18001/45001 for health & safety.
Our factory at Ikorodu, Lagos State,
Nigeria has become the first factory
in Nigeria to be accredited to the
ISO50001 energy management
standard.
Procurement
The procurement environment
during the past year has been very
challenging. The Group function
successfully coordinated cross
regional sourcing to meet increased
demand for input materials for
hygiene products. We successfully
struck a fine balance between supply
resilience and competitiveness.
We also focused on the following
deliverables during the year:
• Successfully maintained supply
continuity in Nigeria during
policy changes from the Central
Bank of Nigeria restricting certain
centralised or global procurement
practices.
• Completed a thorough review
of our supplier risk management
processes to ensure our
suppliers meet our rigorous
ethical standards.
• Continuing development of our
indirect procurement further
improving controls and value
for money.
• 2023 Palm Oil Action Plan
(see page 33) and preparing
to further support the Group’s
sustainability strategy.
• Firming up our programme on next
generation procurement, stepping
up resilience for Must Win Brands,
enhancing compliance and control
and continuing our investment
in capability.
See more online at
www.pzcussons.com
DEMONSTRATING OUR AGILITY IN THE RESPONSE TO COVID-19 Protecting the safety of our employees was the first priority in our response to Covid-19. In addition, development of our supply chain capability ensured an agile response to the Covid-19 pandemic. For example:• Comprehensive and rapid response on people safety and processes in all operations in response to the new risks presented by Covid-19.• Material supply amplification (due to increased demand) in spite of challenges in international sourcing caused by the pandemic.• The effectiveness of our Carex handwash and hand gel against a surrogate coronavirus to Covid-19 was rapidly established.• Manufacturing responded to radically increased demand across key sites, seeing production increase up to four times in handwash manufacture in the UK and 10 times in hand gel manufacture.GovernanceFinancial StatementsStrategic Report 36
SUSTAINABILITY CONTINUED
HEALTH & SAFETY
We are committed to delivering globally
consistent and high standards of health
& safety for all of our people
33%
Reduction in Lost Time Incidents (LTI)
39%
Reduction in injuries
We regard health & safety as a fundamental business responsibility and
the Group’s health & safety performance and its regulatory compliance
are scrutinised by the ELT and the Board.
We are committed to delivering
globally consistent and high
standards of health & safety for
all of our people. Our health &
safety specialists develop, monitor
and implement best practices and
we empower and encourage our
employees to identify and report
hazards or near misses.
All but one of our manufacturing
sites are now accredited to
the internationally recognised
occupational health & safety
management system ISO45001.
In FY21, the LTI frequency rate
reduced by 21% (from 0.05 to 0.04
per 200,000 working hours) and
our accident rate reduced by 21%
(from 1.45 to 1.14 per 200,000
working hours).
2015–16
2016–17
2017–18
2018–19
2019–20
2020–21
Change
from
2011–12
baseline
Change
year-on-
year
Fatalities
LTI/yr (Lost Time Incidents)
LTIFR (Lost Time Incident
Frequency Rate)
AAIFR (All Accident
Incident Frequency Rate)
0
7
0
15
0
13
0
8
0
3
0
2
0
(31)
0
(1)
0.12
0.29
0.26
0.13
0.05
0.04
(0.37)
(0.01)
2.08
3.09
2.17
2.13
1.45
1.14
(0.90)
(0.31)
PZ Cussons plc Annual Report and Financial Statements 2021 37
COMMUNITY
The belief that PZ Cussons should be a
force for positive change dates all the
way back to our founding in the 1880s
We remain committed to helping and supporting the local communities in the vicinity of our factories and
offices, working to improve health and wellbeing through initiatives and donations.
UK
SANCTUARY SPA
SUPPORTING NHS HEROES
Indonesia
ENCOURAGING EDUCATION
AND EXPLORATION
Sanctuary Spa is a long-standing supporter of the NHS.
Building on our regular Christmas donations, we donated
an additional 53,000 products to key NHS workers
and charities this year to recognise their heroics during
the pandemic.
Many emergency services workers have been in desperate
need of rehydrating products to counter the damage that
stringent cleaning and sanitising protocols has on their
skin. Sanctuary Spa products also provide an opportunity
for these incredible women and men to take a well-
deserved moment of pampering and to give them a much
needed morale boost while working under the pressures
of the pandemic.
Donations were made across the UK to The Royal Marsden
Hospital, Cambridgeshire and Peterborough NHS
Foundation Trust, Royal College of Nursing, Manchester
University NHS Foundation Trust, Oxford Health NHS
Foundation Trust Early Intervention Team and Great Ormond
Street Hospital for Children NHS Trust, among many more.
PZ Cussons Indonesia, through the Cussons Baby and
Cussons Kids brands, again held the country’s biggest
children’s event. Cussons Bintang Kecil 9 (Little Star 9) took
place from October 2020 to January 2021 and there were
more than 133,000 participants.
With the theme 'Exploration of the World', events
and competitions aimed to inspire parents about the
importance of encouraging children to explore.
PZ Cussons Indonesia also made donations to support
teaching and learning activities for children who have
experienced hardships during the pandemic. Donations
of over 400m IDR were received and given to our partner,
the Kick Andy Foundation, a charity dedicated to advancing
the education of Indonesian children. This donation
activity has been carried out for four consecutive years
in collaboration with a number of partners who have the
same vision and mission as us, to help and support early
childhood education in Indonesia.
53,000
products donated to key NHS workers
133,000
children participating in Cussons Bintang Kecil (Little Star)
GovernanceFinancial StatementsStrategic Report 38
SUSTAINABILITY CONTINUED
Australia
FIGHTING HUNGER
IN AUSTRALIA
Nigeria
PZ CUSSONS NIGERIA
FOUNDATION
We are a proud national partner of Foodbank, Australia’s
largest food relief organisation. Following the
unprecedented devastation caused by bushfires across
large parts of Australia in early 2020, food insecurity was
only heightened by the pandemic.
In response, Foodbank sourced 48.8 million kgs of food
and groceries in 2020, reaching three million people.
Over the past 12 months, our donations of products across
the baby food, yoghurt and cleaning categories have
helped many local communities impacted by Covid-19,
including the suddenly unemployed, seniors in isolation
and struggling families.
Our contributions in 2020 provided 51,300 meals and
17,200 kgs of non-food items.
The PZ Cussons Nigeria Foundation has been improving
quality of the life across Nigeria since 2007. The foundation
funds and implements projects dedicated to the
development of better transport links and roads, potable
water, sanitation, health and education, with a focus on
sustainable, innovative and replicable solutions.
During the year, the foundation undertook a number
of projects including the construction of chemistry and
biology laboratories at Ganaka Memorial Girls College,
Plateau State. The original structure was completely
dilapidated and unfit for human habitation. This project
now complements the school’s effort to provide a
conducive learning environment for the students and
the promotion of science subjects in the community.
Furthermore, the foundation constructed a shea butter
processing centre for a women's cooperative society in
Niger State and undertook the repair and renovation of
the administration, pharmacy and laboratory buildings
and supply of laboratory equipment at Chanchaga Leprosy
Hospital in Minna, Niger State.
17,200kg
non-food items contributed
Over 100
projects completed since inception
PZ Cussons plc Annual Report and Financial Statements 2021 COVID-19 RESPONSE
39
OUR RESPONSE TO THE COVID PANDEMIC
Covid-19 continued to be a defining feature of FY21 and affected every part of our business.
It has impacted not just the health of our employees and their loved ones, but everything from consumer demand
and changes in the way consumers shop, to more flexible and dynamic ways of working for employees and the
smoothness with which our global supply chain functions.
We are proud of the way that we have adapted to the pandemic and the way in which we have focused on ensuring
that our most trusted brands were available to consumers during a time of great need. As vaccination efforts
around the world continue to move forward, we are looking ahead to navigate the continued volatility and
challenges of FY22 with agility and resilience.
See below how we adapted to Covid-19 throughout the business.
Key reads
How Covid-19 affected our business as a whole
Chief Executive's review
How we supported our employees throughout the pandemic
Sustainability – People
How our supply chain responded to Covid-19
Sustainability – Supply Chain
How we engaged with our communities during the pandemic
Sustainability – Communities
How the Board considered the impact of Covid-19
Section 172 statement
See more online at
www.pzcussons.com
6
28
34
37
24
GovernanceFinancial StatementsStrategic Report 40
NON-FINANCIAL INFORMATION
In order to comply with the non-financial reporting requirements contained
in sections 414CA and 414CB of the Companies Act 2006, a summary of our
relevant policies and outcomes, together with references to where further
information on these matters can be found, is detailed below.
Details of our business model can be found on page 8, our non-financial
KPIs on page 45 and our principal risks on pages 58 to 61. Details of our
employees can be found on pages 28 and 29 and in the report of the directors
on page 110.
Business, governance and ethics
We are committed to compliance
with relevant laws and regulations
in all the countries where we do
business and we do not tolerate
corruption in any part of PZ
Cussons. We operate in a business
environment which is open,
honest and fair with our suppliers,
customers and business partners.
Code of Ethical Conduct
Summary of policy
Our ethical principles require that
we show respect and integrity in our
dealings with all our stakeholders.
The safety of our consumers remains
a top priority for the Group and we
apply standards and protocols that
meet or exceed legal requirements in
order to ensure consumer safety or
to respond to consumer concerns.
The policies and standards which
govern our approach include:
• Code of Ethical Conduct
• Modern Slavery Act Statement
• Supplier Code of Conduct
• Animal Testing Policy
The Code of Ethical Conduct (the ‘Code’) sets out the Company’s statement of
ethical principles and the behaviours expected across the business. It provides
rules and guidance to ensure the Company complies with the UK Bribery Act
and equivalent legislation in other countries. The Code applies to all employees,
contractors, Directors and senior management as well as joint venture partners,
suppliers, agents, consultants and advisors. The Code details the Company’s
zero tolerance of all forms of bribery and corruption and prohibits the payment
of bribes, kickbacks and facilitation payments. It sets out thresholds and
reporting processes for gifts and hospitality and a framework for charitable
and political contributions. The Code also sets out the Company’s position on
animal testing, anti-slavery and forced labour, supply chain due diligence, the
Company’s responsibilities towards its employees, the prevention of financial
crime and the protection of whistleblowers.
The Code is supported by a number of other policies which are set out in detail
in the Audit & Risk Committee Report on page 78.
Modern Slavery Act Statement and Supplier Code of Conduct
Summary of policy
The Company’s Slavery and Human Trafficking Statement sets out our
commitment to integrity of our supply chain, supported by our Supplier Code
of Conduct and procurement policies to ensure that we do not engage directly
or indirectly with slavery or human trafficking. Our Supplier Code of Conduct
incorporates the Modern Slavery Act statement and mirrors our ethical principles
set out in the newly launched Code of Ethical Conduct, requiring our suppliers
to adhere to the same standards to which we hold ourselves. The Company’s
policy is to only contract with suppliers who are willing to adhere to our ethical
principles. Our suppliers confirm compliance with relevant laws and regulatory
standards in all countries in which we operate. Our Procurement Employees’ Code
of Conduct, under the umbrella of the Code of Ethical Conduct, contains guidance
for employees in our procurement function on our values and appropriate
business practices. Suppliers submit to periodic audits and are encouraged to
submit to third-party rating programmes such as SEDEX. We are reviewing and
improving due diligence processes for high-risk suppliers, to ensure we have
reasonable and proportionate checks and properly mitigate supplier risks.
Policy management and embedding
The Code was launched in April 2021 and
replaced the Anti-Bribery and Corruption
Policy which had been introduced the year
before. Online training has been completed
by the Board, the ELT and office-based
workers in all our markets. As the Code
has been recently launched, a review of its
effectiveness has not yet been possible
and the Company has not yet adopted
specific KPIs in relation to it, however we
have already noted positive feedback on
the training and the level of reporting
and questions flowing from it have been
encouraging.
Policy management and embedding
The Company has enhanced the due
diligence process for new suppliers,
requiring adherence to the Supplier Code
of Conduct or additional checks to ensure
equivalence of third-party policies. We have
finalised a revised framework to categorise
suppliers as high, medium or low risk with
a view to deploying a refreshed reasonable
and proportionate due diligence programme.
Work on embedding an operating model
is ongoing. In parallel, we plan to reduce
the number of suppliers we work with
to improve governance and control. The
Company also monitored performance
against our No Deforestation, No Peat, No
Exploitation (NDPE) commitment in relation
to our palm oil business every six months.
PZ Cussons plc Annual Report and Financial Statements 2021 41
Animal Testing Policy
Summary of policy
The Company’s statement against animal
testing is set out in the sustainability section
of our corporate website. We are opposed to
all forms of animal testing in the development
and marketing of our products. We do not test
ingredients on animals nor do we commission
or request any of our suppliers or associates to
test ingredients on animals.
Policy management and embedding
Our Supplier Code of Conduct includes mandatory compliance with
our animal testing principles. We require that suppliers do not conduct
nor ask a third party to conduct any animal testing on ingredients or
finished products. The Company reserves the right to terminate supplier
relationships if our ethical standards are not adhered to. During FY21, the
Company did not maintain any specific KPIs other than in relation to level
of acceptance of our Supplier Code of Conduct as mentioned above.
Sourcing
We recognise that the responsible
sourcing of ingredients and materials
is one of the most effective ways
that PZ Cussons can support our
ESG ambitions and environmental
performance - see page 34.
We are focused on checking value
alignment with suppliers through our
Supplier Code of Conduct. During the
year we have significantly increased
deployment of the Code. We have
greatly improved traceability and
NDPE on palm oil and are broadening
our approach to include paper in
our list of certified sourcing. We
are improving the transparency
of our supply base with planned
improvements to our third-party
risk management framework and
compliance processes on anti-bribery
and corruption and modern slavery.
It is already clear that our
B Corporation journey will extend
our work in our supply base.
Consumer safety
Our mission is to continually improve
our assurance of consumer safety.
The regulatory approach we take
across the whole Group provides
a strong foundation.
With ISO9001 accreditation in our
manufacturing sites providing a strong
basis for continuous improvement
and using ISO10377, the standard
for consumer safety, as a structure
to assess and improve ourselves,
each region has a common method
of working to protect the consumer.
Our culture, our competencies,
the way we design products, the
materials we use and the ways
we manufacture all contribute to
consumer safety as much as the way
we communicate to and support
users of our products.
The 12 pillars of consumer safety
through ISO10377 are regularly
measured, any improvements
required are identified and actioned
to continually improve our assurance
and focus on consumer safety.
The environment
We recognise that business has
an impact on the environment.
As such, we have an obligation to
play a part in conserving the planet’s
precious natural resources and
in safeguarding the environment
for future generations, as well as
ensuring that we limit any negative
impact on our communities and
our customers. We measure and
disclose various data in respect of
our environmental performance
including carbon emissions, water
usage and landfill waste and we are
committed to future disclosure of
information relating to our use of
plastic across the business.
We maintain a number of
environmental, quality and health
and safety policies which govern
our approach, as well as participating
in the Carbon Disclosure Project.
For more information on our
environmental policies, including
a summary of our commitments,
our KPIs and performance, see
page 30.
Community and charity
We are committed to contributing
to positive change in society.
Helping and supporting our local
communities and improving the living
conditions and life chances of our
neighbours are a key feature of how
we do business around the world.
The Code of Ethical Conduct,
discussed above, sets out certain
customary procedures and principles
to ensure that any charitable
donations are made to ethical and
responsible organisations that are
free from political or other conflicts
of interest.
Details of our business model can
be found on page 8
See our non-financial KPIs
on page 45
See our principal risks on
page 58
GovernanceFinancial StatementsStrategic Report
42
PZ Cussons plc Annual Report and Financial Statements 2021 HOW WE MEASURE OUR PROGRESS
43
FINANCIAL
Revenue
£603.3m
Definition
Revenue net of discounts,
rebates and sales taxes
(does not include JV revenue)
Adjusted profit before tax
from continuing operations £m
£68.6m
£603.0m
£587.2m
£603.3m
£63.2m
Profit before tax from
continuing operations £m
£43.6m
£63.2m
Definition
Profit from continuing
operations before tax
after adjusting items3
2019
£18.3m
20202
2021
Why we measure
Important statutory measure
of profit from continuing
operations
2019
2020
2021
Why we measure
Sustainable revenue growth
is a key strategic ambition
£72.3m
£61.8m
£68.6m
2019
2020
2021
Basis of calculation
Definition
Profit from continuing
operations before taxation
and adjusting items3
Why we measure
The key measure of profit
used for internal and external
targets and incentives
Profit before tax from
continuing operations
Adjusting items3
Adjusted profit before tax
from continuing operations
2019
£m
20202
£m
2021
£m
43.6
28.7
18.3
43.5
63.2
5.4
72.31
61.81
68.6
Average net working capital
(NWC) as % of revenue
7.1%
18.9%
17.5%
2019
2020
7.1%
2021
Definition
Monthly average of NWC
(defined as trade receivables
and inventory less trade
payables) as a % of revenue
Why we measure
Indicator of the working capital
(stock, debtors, creditors)
required to support the
sales that we make
Basis of calculation
Average net working capital
Total revenue
2019
£m
114.1
603.0
2020
m
102.5
587.2
2021
£m
42.9
603.3
Average NWC as % of revenue
18.9%
17.5%
7.1%
Net debt (excluding lease
liabilities) £m
£(30.7)m
2019
2020
2021
£(30.7)m
£(49.2)m
£(153.8)m
Basis of calculation
2019
£m
2020
£m
Definition
Cash, short-term deposits and
current asset investments,
less bank overdrafts and
borrowings
Why we measure
Indicator of the overall debt
position of the Company and
a way to evaluate the financial
fitness of the Group
Cash and short-term deposits
51.9
78.7
Overdrafts
Current asset investments
–
0.3
(1.2)
0.3
Borrowings
(206.0)
(127.0)
(118.0)
Net debt
(excluding lease liabilities)
(153.8)
(49.2)
(30.7)
2021
£m
87.0
–
0.3
Adjusted basic EPS
from continuing operations
13.12p
13.58p
12.17p
13.12p
2019
2020
2021
Basis of calculation
Definition
Basic earnings per share from
continuing operations adjusted
for the impact of adjusting items3
Why we measure
A key indicator of value
enhancement to shareholders
Basic earnings per share
Impact of adjusting items3
Adjusted basic earnings
per share
2019
pence
20202
pence
2021
pence
7.75
5.83
3.01
9.16
8.37
4.75
13.58
12.17
13.12
1. Please refer to page 53 for reconciliation of Alternative Performance Measures to statutory results.
2. The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 136.
3. Further details on adjusting items are set out in note 3 on page 152.
GovernanceFinancial StatementsStrategic Report 44
HOW WE MEASURE OUR PROGRESS CONTINUED
FINANCIAL CONTINUED
Basic EPS from
continuing operations
8.37p
7.75p
8.37p
2019
3.01p
2020
2021
(Loss)/Profit for the year
£(16.6)m
£25.4m
£19.7m
2019
2020
2021
£(16.6)m
Definition
Basic earnings per share
from continuing operations
Why we measure
A key indicator of value
enhancement to shareholders
Definition
Profit or loss after tax
from all operations
Why we measure
Measures operating
performance of the Company
Dividend per share
6.09p
Definition
Dividend per share
Adjusted operating margin %
from continuing operations
11.8%
Definition
Operating profit from
continuing operations
before adjusting items3,
as a % of revenue
8.28p
5.80p
6.09p
2019
2020
2021
Basis of calculation
2019
2020
2021
Why we measure
Dividend growth is a key
performance indicator
in terms of tangible
return to shareholders
Dividend payment to
shareholders (£m)
Number of shares (millions)
Dividend per share (pence)
34.6
418
8.28
24.2
418
5.80
25.5
418
6.09
13.0%
11.2%
11.8%
2019
2020
2021
Basis of calculation
Why we measure
Indicator of the return on
sales prior to adjusting items3,
financing and taxation costs
Adjusted3 operating profit
from continuing operations
Revenue
2019
£m
2020
£m
2021
£m
78.5
65.9
71.0
603.0
587.2
603.3
Adjusted operating margin
from continuing operations (%)
13.0%
11.2%
11.8%
133.3%
Free cash flow conversion %
67.7%
70.4%
70.4%
Definition
Cash generated from
operating activities less
capital expenditure as
a % of adjusted EBITDA
2019
2020
2021
Basis of calculation
2019
20202
2021
Why we measure
Free cash flow conversion is
a key performance indicator
in terms of demonstrating
the Group’s ability to convert
earnings into cash
Adjusted EBITDA from
continuing operations1
Free cash flow1
101.6
91.4
68.8
121.8
91.6
64.5
Free cash flow conversion rate
67.7% 133.3%
70.4%
1. Please refer to page 53 for reconciliation of Alternative Performance Measures to statutory results.
2. The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 136.
3. Further details on adjusting items are set out in note 3 on page 152.
PZ Cussons plc Annual Report and Financial Statements 2021 45
STRATEGIC
Must Win Brand
Revenue Growth
11.0%
11.0%
9.5%
1.9%
2019
2020
2021
Basis of calculation
Definition
The growth of revenues
generated from our
Must Win Brands (MWB)
Why we measure
Must Win Brands are key
to our strategic ambition
of sustainable, profitable,
revenue growth
MWB revenue reporting year
MWB revenue prior year
% growth
2019
£m
2020
£m
2021
£m
246.5
241.8
269.8
246.5
299.4
269.8
1.9%
9.5%
11.0%
Gross profit margin from
continuing operations
39.3%
39.5%
39.3%
38.7%
2019
2020
2021
Basis of calculation
2019
2020
2021
Definition
from continuing operations,
gross profit as a percentage
of revenue
Why we measure
Gross profit margin is key
to demonstrating progress
on price / mix growth
Revenue from continuing
operations (£m)
Gross profit from continuing
operation (£m)
Gross profit margin from
continuing operation
603.0
587.2
603.3
238.0
227.0
236.9
39.5%
38.7%
39.3%
Carbon emissions total
absolute tonnes of CO2e
47,755
Definition
Total absolute tonnes of CO2e
61,432
50,401
47,755
2019
2020
2021
Why we measure
To monitor the impact of our
operations on the environment
NON-FINANCIAL
0.13
Health & safety LTIFR
0.04
Definition
Lost Time Incident Frequency
Rate (LTIFR) is the number of
health & safety occurrences
which result in one or more days’
absence from work (excluding
the day of the incident) per
200,000 hours worked
Grams of plastic
per kg finished good
87
Definition
Grams of plastic per kilogram
of finished goods sold
0.06
2019
2020
0.04
2021
Why we measure
To monitor the safety
of our operations
72
76
87
2019
2020
2021
Basis of calculation
2019
2020
2021
Why we measure
To monitor the progress
against our Plastic Promise
commitment to minimise waste
and increase recyclability
Total plastic (metric tonnes)
20,983
20,176
20,012
Total finished goods sold
(metric tonnes)
Grams of plastic per kg
finished good
292,558 263,809
230,675
72
76
87
GovernanceFinancial StatementsStrategic Report 46
BUSINESS REVIEW
BUSINESS REVIEW
GROWTH ACROSS
ALL OF OUR REGIONS
Driven by Must Win Brand performance
Europe & the Americas
4.8%1
Revenue
£216.9m
(2020: £208.0m)
Group percentage
of revenue
36.0%
(2020: 35.4%)
Revenue for Europe & the Americas at £216.9m (2020:
£208.0m) grew by +4.8% versus the prior year, with
adjusted operating profit declining (3.5)% to £52.1m
(2020: £54.3m). Statutory operating profit, of £51.0m,
was +4.1% ahead of the prior year due to adjusting items
in the prior year relating to the Group pension recharge.
Despite the volatility caused by the Covid-19 pandemic, the
UK Personal Care business’ revenue grew +1.0%, driven by
demand for Carex. The Carex brand is the market leader for
both liquid hand wash and hand sanitiser with a 36% share
of the combined category which grew 45%. Carex showed
strong revenue growth versus the prior year driven by strong
product and format innovations and a number of successful
marketing campaigns.
Original Source revenue showed marginal decline in
the year. Although the core Original Source proposition
achieved double-digit growth, this was offset by retailers
delisting some non-core ranges. However, the launch of
the new I'm Plant Based innovation range, a new micro
plastic-free formulation with more eco-friendly packaging,
is addressing the growing consumer trend for more
sustainable products and early signs are encouraging.
Imperial Leather was adversely impacted by the strategic
decision to prioritise Carex manufacturing in the UK,
with the brand declining as a result. However, work is
well underway to significantly reposition the brand to
ensure renewed relevance for our target consumers.
Both the above personal care brands were held back by
softness in the washing and bathing category during the
Covid-19 lockdowns.
We have seen strong performance in our business with
grocery retailers this year. As we continue to invest behind
strategic grocery partnerships, they currently account
for 50% of our total customer base, and where we hold
a 24% share in the UK washing and bathing category. In
e-commerce, we have also had a strong year, growing our
business ahead of the category and gaining market share.
We have focused on our digital shelf, creating mobile-first
imagery, and on ensuring availability as more consumers
moved to shop online during the pandemic. In the impulse
channel, we have recognised the importance of the on-the-
go hygiene occasion as society emerges from lockdown and
have focused on driving innovation and gaining distribution.
Beauty revenue grew significantly this year despite the
challenges of Covid-19, with double-digit growth driven
by strong performances from St.Tropez in the US and
Sanctuary Spa in the UK.
St.Tropez performed very well, particularly in the second
half following the successful Ashley Graham collaboration,
launched in February 2021. After major disruption to
retail channels in the first half, the US market has quickly
recovered and we have delivered double-digit growth.
Sanctuary Spa has also had a very strong year, also
achieving double-digit growth. During the pandemic, its
products have met the at-home consumer indulgence
occasion, including the innovative new wellness collection.
Growth has also resulted from expanding distribution to
more retailers and outlets, enabling more of our consumers
to buy Sanctuary Spa wherever they choose to shop.
Across both brands there has been a deliberate and
successful shift to digital, with digital sales now accounting
for 38.7% of total sales. The growth has been driven by
an increase in digital and social marketing and the launch,
in June 2020, of our direct to consumer websites.
It proved a challenging time for our hair brands, with hair
salons closed for much of the year. However, we have
shifted to online to support our brands where possible
and extended distribution for Charles Worthington.
1 Growths presented at constant currency. See page 48 for comparisons at reported currency.
PZ Cussons plc Annual Report and Financial Statements 2021 Asia Pacific
1.7%1
Revenue
£187.2m
(2020: £185.2m)
Group percentage
of revenue
31.0%
(2020: 31.5%)
Revenue at £187.2m (2020: £185.2m) grew by +1.7%,with
adjusted operating profit at £20.7m (2020: £18.5m), an
increase of 15.0%. Statutory operating profit, of £20.8m,
compares to a loss in the prior year due to the prior year
charge of £(36.6)m related to the impairment of the
five:am and Rafferty’s Garden brands in Australia.
In Indonesia, we maintained steady revenue growth
despite the impact of the Covid-19 pandemic on
consumers and retail channels. Cussons Baby, our Must
Win Brand, remains a market leader. We maintained our
brand investment and successfully relaunched our baby
powder, one of our top three categories.
We are gaining share across a range of categories,
including shampoos, hair lotion and cologne. The
strategy to drive higher margin categories including hair
care and creams continues, contributing to an overall
improved margin for our Baby business, in addition to
price increases and a favourable channel mix. Challenges
in modern trade channels such as department stores
due to Covid-19 restrictions meant the majority of our
growth came from by traditional trade channels, including
corner stores and markets, with expanded distribution
contributing to that success.
47
In Australia and New Zealand, we saw significant growth
in our Homecare portfolio due to increased consumption
of hygiene products, while growth in our Beauty brands
was held back given social lockdown and travel restrictions
but did show solid growth. Our flagship Morning Fresh
brand led the growth with a strengthened market share
position, up to a 45% share in Australia.
This was driven by Revenue Growth Management
initiatives with retailers, new product launches into the
adjacent categories of multi-purpose kitchen sprays and
a 2in1 dish and hand wash product line. It was also back
on TV after four years with a new advertising campaign.
The second half of the year also saw a major restage of
our Radiant laundry detergent brand, moving to a more
competitive promotional mechanic on our core range,
combined with the launch of premium ranges within the
Woolworths account. The Rafferty’s Garden baby food
business continued to grow and gained market share,
fuelled by innovation and expanded product ranging.
In New Zealand, we transitioned to a fully outsourced
distributor model for our homecare, personal care
and baby food categories. We appointed DKSH New
Zealand Limited as our exclusive distributor, bringing
with them a strong track record. The overall transition
to the distributor model has been a success and we
look forward to growing the business with DKSH in the
short- and long-term.
As part of the new strategy to prioritise our Must Win
Brands in the Hygiene, Baby and Beauty categories, and to
reduce complexity, we completed the sale of our five:am
yoghurt business on 4 June 2021.
GovernanceFinancial StatementsStrategic Report 48
BUSINESS REVIEW CONTINUED
Africa
16.2%1
Revenue
£192.6m
(2020: £187.5m)
Group percentage
of revenue
31.9%
(2020: 31.9%)
Revenue at £192.6m (2020: £187.5m) grew by +16.2% versus
the prior year, driven primarily by Nigeria, with an adjusted
operating profit of £10.7m (2020: loss £(7.6)m). Growth was
broad-based, beyond Nigeria, with all markets in growth
driven by strong performance across our Must Win Brands
and improved profitability in our PZ Wilmar joint venture.
Statutory operating profit, of £9.0m, compares to a loss
of £(2.9)m in the prior year. The adjusting items in the year
related to the Nigeria simplification project.
Premier grew revenue, despite the toilet soap category
declining by (6)%. Premier remains the best-selling cooling
sensorial soap and family soap in Nigeria, outperforming
the competition in terms of penetration and distribution
gains.
Revenue (£m)
Europe & the Americas
Asia Pacific
Africa
Central
Adjusted^ operating profit/(loss) (£m)
Europe & the Americas
Asia Pacific
Africa
Central
Operating profit/(loss) (£m)
Europe & the Americas
Asia Pacific
Africa
Central
Joy also grew its revenue, with smaller pack sizes meeting
consumer needs in light of shrinking disposable income
and rising inflation.
Morning Fresh grew significantly in the year and gained
share. A strong trade and consumer promotion strategy
resulted in increased frequency of purchase and
consumer loyalty. Morning Fresh continues to optimise
its distribution, especially in modern trade channels.
Cussons Baby performed very well in Nigeria, growing
versus the prior year despite the shrinking economy,
from brand building initiatives that drive both trial and
increased penetration, plus innovation in the form of a
new gift pack.
Growth across most portfolio brands with Electrical,
Stella and Canoe in Nigeria all in double-digit growth.
Our palm oil joint venture, PZ Wilmar, improved its
profitability versus the prior year primarily due to
increased distribution. Devon King's and Mamador are
the number 1 and number 3 brands in the cooking oil
market respectively.
Aligned to our new strategy, we completed the disposal of
Nutricima, our Nigerian milk business, in September 2020.
Additional simplification initiatives have also been
completed, with the closure of our Coolworld retail
electrical stores in the first half of FY21, and the ongoing
review of the product portfolio, route to market,
organisational design, infrastructure and assets.
2021
216.9
187.2
192.6
6.6
603.3
2021
52.1
20.7
10.7
(12.5)
71.0
2021
51.0
20.8
9.0
(15.2)
65.6
2020
208.0
185.2
187.5
6.5
587.2
Reported
% change
Constant currency
% change
+4.3%
+1.1%
+2.7%
+1.5%
+2.7%
+4.8%
+1.7%
+16.2%
+3.1%
+7.1%
Restated*
2020
Reported
% change
Constant currency
% change
54.3
18.5
(7.6)
0.7
65.9
(4.1)%
+11.9%
+241%
(1886)%
7.7%
(3.5)%
+15.0%
+262%
+2183%
7.6%
Restated*
2020
Reported
% change
Constant currency
% change
49.3
(19.3)
(2.9)
(4.7)
22.4
+3.4%
+208%
+410%
(223)%
+193%
+4.1%
+197%
+475%
(217)%
+222%
^ Adjusting items are detailed in note 3.
* The results for the year ended 31 May 2020 have been restated. Further detail is contained within note 1c.
1
Growths presented at constant currency.
PZ Cussons plc Annual Report and Financial Statements 2021
49
FINANCIAL REVIEW
Operational
• Organic2 revenue growth of +7.1%
(at constant currency), with all
geographic regions and our core
categories of Hygiene, Baby and
Beauty all in growth.
• Must Win Brands revenue grew +11%
(at constant currency), with 7 of the
8 brands in growth. Carex revenue
doubled, reflecting the increased
size of the hand hygiene category in
the UK and our continued market-
leading position. Original Source
in the UK declined only (1)%. On a
two-year cumulative basis, Must
Win Brands revenue grew +21%.
• Portfolio Brands revenue grew
+3% (at constant currency), driven
by growth in Electricals in Nigeria,
partially offset by declines in
Imperial Leather and the, now
disposed of, five:am yoghurt
business.
• Gross margin increased +60bps
to 39.3%, supported by positive
price / mix improvements in each
of our core categories.
• Marketing investment increased
by over 40% versus the prior year,
with all the increase dedicated to
Must Win Brands.
• Adjusted operating margin
increased +60bps to 11.8%.
Financial
• The loss after tax of £(16.6)m,
compared to a profit of £19.7m
in the prior year, is due to a loss
from discontinued operations.
• Loss from discontinued operations
of £(51.6)m was attributable to
the pre-tax loss on disposal of
Nutricima of £(40.7)m (including
the impact of recycling of historical
foreign exchange losses of
£(39.9)m), associated tax expenses
of £(5.2)m, the loss after tax of
Nutricima to the date of disposal
of £(4.8)m and losses of £(0.9)m
associated with the disposal of
Luksja which took place in the
prior year.
• Basic earnings per share, showing
a loss of (3.97)p, reflects the loss
from discontinued operations.
• Profit before tax from continuing
operations of £63.2m, compares to
a profit of £18.3m in the prior year,
explained by the impairments of
the Australian brands five:am and
Rafferty’s Garden in the prior year.
• Adjusted profit before tax from
continuing operations of £68.6m,
up +11.0% versus the prior year
and ahead of consensus, driven
by broad-based revenue growth
and improved operating margin.
• Adjusted basic earnings per
share from continuing operations,
at 13.12p, up +7.8% versus the
prior year.
• The balance sheet continued
to strengthen, with net debt1
excluding lease liabilities of
£30.7m, down further in the fourth
quarter, and lower than the £49.2m
at the same point in the prior year.
• A final dividend of 3.42p, making
a total of 6.09p for the full year.
This +5% increase in total dividend
reflects the Board’s confidence
in the Group’s financial resilience
and future growth prospects.
A WORD FROM OUR CHIEF
FINANCIAL OFFICER
“We returned the business
to revenue growth, with
price /mix improving gross
margin and allowing us to
increase our marketing
investment behind our Must
Win Brands. We also made
progress in refocusing our
portfolio against our strategic
priorities, with the disposal of
both the Nutricima milk and
five:am yoghurt businesses.
The 5% increase in the total
dividend reflects the Board’s
confidence in the Group’s
financial resilience and
future growth prospects.”
Sarah Pollard
Chief Executive Officer
1
2
Please refer to page 43 for definition of
net debt.
Revenue growth on a like-for-like organic
basis, after the impact of acquired and
disposed of brands or businesses, as well
as at constant currency.
GovernanceFinancial StatementsStrategic Report 50
FINANCIAL REVIEW CONTINUED
Europe & the Americas
• Strong demand for Hygiene products has been
complemented by strong revenue growth in our Beauty
brands through the second half of the financial year,
resulting from increased brand investment, successful
activations and improved distribution.
• Revenue growth of +4.8% (at constant currency) was
driven by significant growth in St.Tropez, supported
by the successful Ashley Graham influencer campaign
in the US, and Sanctuary Spa, which has seen strong
e-commerce performance.
• Carex revenue grew strongly versus the prior year,
despite the comparison with strong demand in Q4 of
FY20, with continued demand for both hand sanitiser and
hand wash. Despite increased competitor activity, Carex
remains the UK market leader for both hand sanitiser and
hand wash with a 36% share of the combined category.
• Revenue from Original Source and Imperial leather
declined in the year, due to softness in the washing
and bathing category since the beginning of the
Covid-19 lockdowns and some deliberate production
choices to protect Carex supply.
• Adjusted operating profit, of £52.1m, was (3.5)% below
the prior year (at constant currency) with improved
profitability in Beauty partially offsetting a decline in
UK Personal Care due to increased brand investment,
fuelling strong Carex revenue growth and an increase in
the brands’ spontaneous awareness to 49% (2020: 43%).
• Statutory operating profit, of £51.0m, was +4.1%
ahead of the prior year (at constant currency) due to
adjusting items in the prior year related to the Group
pension recharge.
Asia Pacific
• Revenue growth of +1.7% (at constant currency), across
both the key markets of Indonesia and Australia / New
Zealand.
• All our Must Win Brands grew, including Cussons Baby in
Indonesia and Morning Fresh in Australia / New Zealand.
• Cussons Baby in Indonesia remains a market leader, due
to maintained brand investment and the relaunch of our
baby powder product range.
• Morning Fresh in Australia increased its market share,
was back on TV with a new advertising campaign after
four years and launched new innovations into adjacent
kitchen hygiene categories.
• Adjusted operating profit, of £20.7m, was +15.0% above
the prior year (at constant currency) and ahead of revenue
growth due to a reduction in operating costs driven
by head office restructuring in Indonesia and Australia,
plus switching to a distributor model in New Zealand.
• Statutory operating profit, of £20.8m, compares with
a loss in the prior year due to the prior year charge of
£(36.6)m related to the impairment of the five:am and
Rafferty’s Garden brands in Australia.
• Disposal of the five:am yoghurt brand announced on
7 May 2021 and completed on 4 June 2021.
Africa
• Revenue growth of +16.2% (at constant currency)
with growth across all of Nigeria, Kenya and Ghana.
• All Must Win Brands, namely Morning Fresh, Premier, Joy
and Cussons Baby grew versus the prior year. Morning
Fresh and Joy also increased their market share.
• Revenue growth across most Portfolio Brands with
Electricals, Stella and Canoe in Nigeria all in double
digit growth.
• Adjusted operating profit of £10.7m compares with a
loss of £(7.6)m in the prior year driven by double-digit
revenue growth and an improved operating profit
margin.
• Statutory operating profit of £9.0m compares with a
loss of £(2.9)m in the prior year. The adjusting items
in the year relate to our Nigeria simplification project.
The adjusting items in the prior year primarily related
to accounting for investment properties in Ghana.
• Our Palm Oil joint venture, PZ Wilmar, improved its
profitability versus the prior year primarily due to
increased distribution. Devon King’s and Mamador
are the number 1 and number 3 brands in the cooking
oil market, respectively.
• Disposal of Nutricima, our Nigerian milk business on
28 September 2020, resulting in a post tax loss from
discontinued operations of £(50.7)m.
• Additional simplification initiatives completed, with
the closure of our Coolworld retail electrical stores in
the first half, with the review of the product portfolio,
route to market, organisational design, infrastructure
and non-core assets ongoing.
Central
• Adjusted operating loss of £(12.5)m compares with
a profit of £0.7m in the prior year.
• Statutory operating loss of £(15.2)m, including the
£2.4m non-cash impairment of the investment in
Wilmar PZ International Pte Limited, treated as an
adjusting item.
• The increased costs include investments in resources
and capabilities to develop, deploy and deliver against
our new strategy. These include investments in Revenue
Growth Management and digital and the bolstering of
the Executive Leadership Team.
• Additionally, driving the increased cost, is the
reinstatement of the annual bonus for Group
employees, not paid in recent years due to poor
business performance historically.
• Central costs also includes some global business units
that support local markets, for example our in house
fragrance centre of excellence Seven Scent and our
procurement hub in Singapore. Notably in FY21, certain
restrictions imposed by the Nigerian government and
central bank prevented us fully utilising these internal
services, and as such, they were loss making.
PZ Cussons plc Annual Report and Financial Statements 2021 51
Constant
currency %
change(1)
+7.1%
+7.6%
Financial highlights
Adjusted measures
Year ended
31 May 2021
Restated*
Year ended
31 May 2020
Reported %
change
Revenue from continuing operations
£603.3m
£587.2m
Adjusted(2) operating profit from continuing operations
Adjusted(2) profit before tax from continuing operations
Adjusted(2) basic EPS from continuing operations
£71.0m
£68.6m
13.12p
£65.9m
£61.8m
12.17p
Net debt(3)
Statutory measures
Operating profit from continuing operations
Profit before tax from continuing operations
Profit after tax from continuing operations
(Loss)/Profit after tax from discontinued operations
(Loss)/Profit after tax
Basic (loss)/earnings per share (‘EPS’)
Total dividend per share
£(30.7)m
£(49.2)m
£65.6m
£63.2m
£35.0m
£(51.6)m
£(16.6)m
(3.97)p
6.09p
£22.4m
£18.3m
£8.8m
£10.9m
£19.7m
5.62p
5.80p
+2.7%
+7.7%
+11.0%
+7.8%
+193%
+245%
+298%
(573)%
(184)%
(171)%
5.0%
(1) Revenue growth on a like-for-like organic basis, after the impact of acquired and disposed of brands or businesses, as well as at constant currency.
(2) Adjusting items are detailed in note 3.
(3) Net debt is defined as cash, short-term deposits and current asset investments, less bank overdrafts and borrowings. It does not include IFRS 16 lease
liabilities (refer to page 43 for a definition of net debt).
* The results for the year ended 31 May 2020 have been restated. Further detail is contained within note 1c.
Basis of preparation
The accounting policies applied in our Financial
Statements are explained in full within our FY21 Annual
Report and Financial Statements. The Directors continue
to adopt the going concern basis in preparing the
accounts on the basis that the Group’s strong liquidity
position is sufficient to meet the Group’s forecasted
funding needs, including those modelled in a downside
case. Please see page 56 for further detail.
The discontinued operations presented predominantly
reflect Nutricima Ltd, the assets of which were disposed
of on 28 September 2020. The loss from discontinued
operations of £(51.6)m was attributable to the pre-tax
loss on disposal of Nutricima of £(40.7)m (including the
impact of recycling of historical foreign exchange losses
of £(39.9)m), associated tax expenses of £(5.2)m, the loss
after tax of Nutricima to the date of disposal of £(4.8)m
and losses of £(0.9)m associated with the disposal of
Luksja which took place in the prior year. Further detail
is available in note 28.
On 4 June 2021, PZ Cussons plc completed the sale of the
assets associated with five:am, which was the Group’s
yoghurt business in Australia. On this date, the control
of the assets passed to the acquirer, Barambah Organics.
The results of five:am have not been reported within
discontinued operations as the disposal of five:am does
not represent a disposal of a major line of business or an
exit from a geographic area of operation.
In our Financial Statements we use alternative performance
measures that are not recognised under IFRS. These metrics
are used to allow the readers of the Financial Statements
to obtain a more consistent comparison of the underlying
performance of the Group by adjusting for certain items
which, if included, could distort the understanding of the
Group’s performance and comparability between periods.
The same measures are used by management for planning,
budgeting and reporting purposes and for the internal
assessment of operating performance across the Group.
The adjusted presentation represents a change from the
Group’s previous practice of reporting exceptional items,
and will be adopted on a consistent basis for the purposes
of the half year and full year reporting going forward.
Where relevant, comparative IFRS measures have also
been presented.
Adjusted results are presented before adjusting items
which in the financial year, on a pre-tax basis, include
£(40.7)m costs related to the disposal of Nutricima,
£(3.8)m costs related to Nigeria simplification, £(2.8)m
costs related to Group and regional restructuring, a net
£1.2m impact from classification of five:am assets as held
for sale and £(0.4)m costs related to the disposal of the
Luksja brand in Poland. Further detail is available in note 3.
The adjusted and statutory results for the financial year
are presented with variances to the prior year results and
also as variances between the current and prior period
on a constant currency basis. The constant currency
impact has been derived by retranslating the 2020 results
using 2021 average foreign currency exchange rates. The
translational impact was a £24.1m loss on revenue, a £0.1m
gain on adjusted operating profit before tax and a £(2.0)m
loss on statutory operating profit before tax.
GovernanceFinancial StatementsStrategic Report
52
FINANCIAL REVIEW CONTINUED
As a business we continue to make decisions on a geographic
basis, and the information reviewed by the Chief Operating
Decision Maker is based on a geographic segmentation
of the business. Therefore, the financial performance
discussed below is focused on the performance of the key
regions. Further detail on the segmental performance is
detailed in note 2 to the Financial Statements.
FRC review of 2020 Annual Report and Accounts
and 2021 Interim Financial Information
On 22 April 2021 the Company received a letter from the
Financial Reporting Council (‘FRC’) following a review of
the Company’s FY20 Annual Report and Accounts. The
review conducted by the FRC was part of its ongoing
cyclical review of FTSE listed companies. The review
conducted by the FRC was based solely on the Group’s
published FY20 Annual Report and Accounts and does
not provide any assurance that the Annual Report and
Accounts are correct in all material respects.
The FRC letter noted a number of questions and
observations relating to the Company’s accounts.
The Company responded to the FRC letter undertaking
to restate or correct certain disclosures made in the
Company’s FY20 Annual Report and Accounts and also
to make certain changes to the Company’s accounting
policies for subsequent years in order to further improve
and clarify our financial reporting. The FRC advised the
company that its review had been satisfactorily closed on
13 September 2021. Further detail of the FRC’s review and
the Company’s response can be seen in the Report of the
Audit & Risk Committee on page 81 and in the Financial
Statements in note 1c.
Financial Review
The statutory loss after tax of £(16.6)m (2020: profit
after tax of £19.7m) was driven by the £(51.6)m loss from
discontinued operations which was attributable to the
pre-tax loss on disposal of Nutricima of £(40.7)m (including
the impact of recycling of historical foreign exchange
losses of £(39.9)m), associated tax expenses of £(5.2)m,
the loss after tax of Nutricima to the date of disposal of
£(4.8)m and losses of £(0.9)m associated with the disposal
of Luksja which took place in the prior year. The basic loss
per share of (3.97)p (2020: earnings of 5.62p) is due to this
loss after tax.
Adjusted profit before tax from continuing operations
of £68.6m, was up +11.0% versus the prior year, driven
by broad-based revenue growth and improved operating
margin. Statutory profit before tax from continuing
operations, of £63.2m, up +245% versus the prior year, is
further explained by the impairments of the Australian
brands five:am and Rafferty’s Garden in FY20.
Revenue, at £603.3m, grew +2.7% with all regions and
our core categories of Hygiene, Baby and Beauty all in
growth. On a constant currency basis, revenue growth was
7.1%. Gross margin increased +60bps to 39.3%, supported
by positive price / mix in each of our core categories.
Additionally, marketing investment increased by over
40% on the prior year, with all the increase dedicated to
Must Win Brands.
In Europe & the Americas, adjusted operating profit of
£52.1m was (3.5)% lower than prior year (at constant
currency). Profit growth in the Beauty business partially
offset a decline in profit in the UK personal care business
due to increased brand investment, predominantly
behind Carex fuelling strong growth and an increase in
spontaneous awareness to 49%, from 43% the previous
year. Beauty revenue benefitted from significant growth
in St.Tropez, supported by the successful Ashley Graham
influencer campaign in the US with further strong growth
in Sanctuary Spa.
In Asia Pacific, adjusted operating profit of £20.7m was
+15.0% higher than prior year (at constant currency). This
was stronger than revenue growth due to a reduction in
operating costs driven by regional head office restructuring
within Indonesia and Australia and switching to a distributor
model in New Zealand. Revenue growth of +1.7% with both
key markets of Indonesia and Australia / New Zealand in
growth. Both markets saw brand investment benefit our
key brands with market share gains seen in Cussons Baby
in Indonesia and Morning Fresh in Australia.
Africa adjusted operating profit of £10.7m compares
with a loss of £(7.6)m in the prior year. The improved
profitability was due to strong revenue growth, improved
adjusted operating profit margins and increased
profit from our joint venture, Wilmar, due to increased
distribution. Revenue growth (at constant currency) of
+16.2% with growth across each of Nigeria, Kenya and
Ghana. Additionally, all Must Win Brands in Africa were
in growth versus prior year and each increased their
market share.
Net finance costs of £(2.4)m (2020: £(4.1)m) reduced
compared to the prior year, reflecting higher interest
received on cash balances and lower interest paid on
borrowings due to a reduction in the drawdown on our
revolving credit facility. The balance drawn down at year
end was £118m compared to £127m in the prior year.
Adjusted profit before tax from continuing operations
of £68.6m (2020: £61.8m) reflects the growth in revenue
and improved operating margin and the reduced finance
costs compared to the prior year. The effective tax rate
on adjusted profit was 21.0% (2020: 23.5%). The reduction
in tax rate compared to last year is due to the release of
tax provisions related to tax estimates for items in the
UK and Nigeria.
Adjusted basic earnings per share from continuing
operations was 13.12p (2020: 12.17p) up +7.8% versus
the prior year.
In the year the Group incurred adjusting items which on a
post-tax basis amounted to a net charge of £(65.5)m. The
most significant items were related to the loss on disposal
of Nutricima of £(45.9)m, which has been included in
discontinued operations, and the deferred tax impact
of the UK tax rate change of £(14.2)m, costs relating to
our Nigeria simplification project of £(3.6)m, and costs of
Group and regional restructuring of £(2.3)m, all of which
have been included in continuing operations.
PZ Cussons plc Annual Report and Financial Statements 2021 53
The balance sheet remains strong, with net debt,
(defined as cash, short-term deposits and current asset
investments, less bank overdrafts and borrowings and
excluding lease liabilities) at £30.7m (2020: £49.2m). The
reduction was due to proceeds from operations, plus the
proceeds from the disposal of Nutricima, offset by the
impacts of electing to cease paying for vendor financing
within the UK and Indonesia, the provision of additional
short-term funding to our PZ Wilmar joint venture and
our elective repayment of the UK government Covid-19
VAT deferral scheme. Net assets at 31 May 2021 of
£381.8m (2020: £421.2m). The Group is funded by a £325m
revolving credit facility, committed until 28 November
2023, of which £118m is drawn down as at 31 May 2021
(2020: £127m).
Total free cash flow, defined as cash generated from
operating activities less capital expenditure, was £64.5m
(2020: £121.8m) representing a conversion rate of 70.4%
(2020: 133.3%). This reflects the election to cease paying
for vendor financing within the UK and Indonesia.
The Group’s three UK pension schemes have an aggregate
accounting surplus under IAS19 of £29.1m, after the
restriction due to asset ceiling (2020: £38.4m). The overseas
scheme reported a deficit of £(8.4)m (2020: £(7.7)m).
The Board is recommending a final dividend of 3.42p
(2020: 3.13p) per share making a total of 6.09p (2020: 5.80p)
per share for the year.
Sarah Pollard
Chief Financial Officer
Reconciliation of alternative performance measures to statutory results
Profit before tax from continuing operations
Adjusting items
Adjusted profit before tax from continuing operations
Interest
Depreciation & amortisation
Adjusted EBITDA
Cash generated from operating activities
Less capital expenditure
Free cash flow
Free cash flow conversion rate1
Profit before tax from continuing operations
Adjusting items from continuing operations
Adjusted profit before tax from continuing operations
Operating profit from continuing operations
Adjusting items from continuing operations
Adjusted operating profit from continuing operations
Revenue
Adjusted operating margin from continuing operations
Basic earnings per share from continuing operations
Impact of adjusting items
Adjusted basic earnings per share from continuing operations
Cash & Short term deposits
Overdrafts
Current Asset Investments
Borrowings
Net Debt (excluding lease liabilities)
1 Free cash flow conversion rate is defined as free cash flow as a percentage of adjusted EBITDA.
* The results for the year ended 31 May 2020 have been restated. Further detail is contained within note 1c.
Year ended
31 May 2021
Year ended
31 May 2020*
£63.2m
£5.4m
£68.6m
£2.4m
£20.6m
£91.6m
£73.4m
£(8.9)m
£64.5m
70.4%
£63.2m
£5.4m
£68.6m
£65.6m
£5.4m
£71.0m
£603.3m
11.8%
8.37p
4.75p
13.12p
£87.0m
–
£0.3m
£18.3m
£43.5m
£61.8m
£4.1m
£25.5m
£91.4m
£128.5m
£(6.7)m
£121.8m
133.3%
£18.3m
£43.5m
£61.8m
£22.4m
£43.5m
£65.9m
£587.2m
11.2%
3.01p
9.16p
12.17p
£78.7m
£(1.2)m
£0.3m
£(118.0)m
£(127.0)m
£(30.7)m
£(49.2)m
GovernanceFinancial StatementsStrategic Report 54
RISK MANAGEMENT
Ensuring that we are able to
DELIVER ON OUR STRATEGY
Our approach to risk management
The Group uses a risk management process and common
risk framework to ensure we capture and mitigate
risks that threaten the successful delivery of strategic
objectives. This framework has been renewed during
the year to ensure continuous improvement and to
refresh our processes in line with the new strategy.
The Board has considered and approved the Group’s
new risk management policy.
The risk management process covers initial risk
identification, including emerging risks (as detailed
below), assessment of the gravity of the risk, the
extent to which it can be reduced and planning for and
implementing effective risk mitigation activities. The new
process also assesses target risk level and risk velocity.
The Board periodically reviews the top risks in the
register and has delegated the ongoing review of risk
management to the Audit & Risk Committee (see pages
78 to 85 for further information), which also assesses
the effectiveness of the risk management framework by
receiving analysis of the principal risks from the ELT, along
with proposed actions to manage and mitigate those risks
to a residual level within the Group’s risk appetite.
The Group operates both top-down and bottom-up
approaches to ensure significant strategic and operational
risks are identified. The ELT assesses all principal risks,
including consideration of any internal or external risk
trends which may give rise to new or emerging risks. In
addition, ‘deep dive’ reviews of specific principal risks
are performed to ensure that controls are adequately
resourced and maintain exposure within the defined risk
appetite parameters. Each principal risk is owned by a
member of the ELT.
The process and timetable are replicated at market and
function level and these teams report the outcome of
their risk management process to executives. In this way,
the ELT can satisfy itself that risks are being properly
managed. It also ensures that potential Group-wide risks
are captured and best practice mitigation is shared across
the business. At a business unit and function level each
risk is owned by a senior member of local management.
The Group Internal Audit function provides independent
assurance to both the executive and the Audit & Risk
Committee on the effectiveness of the risk management
framework and internal control systems. In recognition
of the fact that the head of risk and head of Internal
Audit roles are combined, the Audit & Risk Committee
takes specific steps to ensure independence of the Group
Internal Audit function is maintained when necessary.
The Board is committed to adopting a risk profile in line
with our vision and culture. The Group is exposed to a
number of risks as a result of its business activities. In
reviewing these risks, and the opportunities and returns
associated with them, the Board has determined to adopt
a very low risk appetite for risks which may adversely
impact its business opportunities or reputation. These
include areas such as product safety and quality, health
and safety, cyber-security, legal, compliance, climate
change, environmental and regulatory risks. The Group
also has a relatively low risk appetite through our supply
chain and finance functions where we seek to minimise
counter-party credit risk exposure, ensure the resilience of
our supply chain particularly amidst the current period of
volatility, and avoid unhealthy levels of financial leverage
or complex tax planning structures. Comparatively, the
Board has a higher appetite for risks which are associated
with growth and potential higher returns such as our
focus on innovation and new product development, our
involvement in emerging markets and our pioneering spirit
which encourages setting ambitious targets such as our
commitment to become a B Corporation by 2026. Where
the Board has adopted a higher level of risk appetite, we
seek to mitigate our downside exposure whether through
insurance cover, risk mitigation or control processes
internally or natural portfolio hedges such as the diversity
of our brand and product ranges and our avoidance of over-
concentration on a single category or market.
Where the Group works with a joint venture partner, it
applies the same risk management processes. The Group’s
ability to unilaterally enact mitigation processes in relation
to joint venture risks is sometimes constrained by our joint
venture agreements, however, the Group believes our
agreements are sufficiently robust and our partners are
aligned with us in their approach to risk.
Our risk management processes are designed to manage
rather than eliminate risks and provide only reasonable not
absolute assurance against material misstatement or loss.
PZ Cussons plc Annual Report and Financial Statements 2021 55
OUR RISK MANAGEMENT PROCESS
OUR RISK MANAGEMENT FRAMEWORK
Identifying and assessing risk and implementing effective
risk mitigation activities are essential elements of ensuring
that we are able to deliver on our strategy.
T M
N
E
M
E
L
P
M
I
N I T O R
P O R T
E
O
& R
ID
E
N
T
I
F
Y
A
S
S
E
SS
PLAN
Our approach to emerging risk
New and emerging risks are identified in a number of ways:
• Twice a year, the ELT reviews the key strategic objectives
of the business specifically in the context of risk.
• Potential new and emerging risks are reported to the
Board and considered during its bi-annual reviews of
the Group risk register.
• In formulating and evolving the Group risk register,
the ELT and the Board take into account the principal
risks identified by individual regions and business units
to determine whether there are any new risks which
require Group-wide focus and mitigation.
• At its annual strategy session, the Board assesses any
emerging risks (or opportunities) which should be taken
into account when formulating and executing strategy
in the future.
• These processes are informed by regular discussions
with the Group’s network of external advisors including
its lawyers across all relevant territories, accountants
and tax advisors, internal audit partners, insurance
brokers, health and safety advisors, and sustainability
and PR advisors. The Company is also a member of
various trade and industry bodies across the world
and leverages the experience of its peers and external
industry experts.
Board of Directors
Defines policy, sets risk appetite and assesses principal
risks for the Group. Has overall responsibility for sound
risk management and internal controls.
Audit & Risk Committee
Assesses and reviews the effectiveness of the Group’s risk
management framework and internal control systems.
Executive Leadership Team
Ensures that the risk management framework is embedded
and operates throughout the Group. Regularly reviews the
regional and consolidated risk registers and ensures that
mitigation activities are in place.
Group Head of Risk and Internal Audit
Oversees the consistent application of the Group’s
risk management framework.
Regional and Business Unit Management
Ensures that the risk management framework is embedded
at a regional and local level. Regularly reviews the risk
register and ensures that mitigation activities are in place.
Changes to our gross risk profile
We continually assess, on a gross basis (i.e. before we
take any mitigating actions), whether the principal risks
facing the Group are increasing, showing no change or
decreasing compared to the prior year. Those risks that
we believe are currently most prominent or increasing are:
• Pandemic: Covid-19 has demonstrated the risk from
global pandemics and we have maintained an elevated
risk status, while also recognising that Covid-19 is
impacting several of our other risks.
• Consumer, customer and economic trends: we continue
to see consumer fragility in many markets and a trend
of protectionism in both emerging and developed
markets. We have developed our strategy with a focus
on leading brands in priority markets to mitigate the
associated risk and identify opportunities for growth,
but we continue to maintain an elevated risk status.
• IT and information security: partly informed by in-
depth internal audit reviews of information security,
significant activity across the whole of the business is
mitigating the increasing prevalence and sophistication
of cyber security incidents. The risk of disruption to our
operations and/or unauthorised access and misuse of our
sensitive information remains as a result of our systems
being attacked. This continues to be a key area of focus,
elevated recently due to our reliance on IT systems to
support remote working during the Covid-19 pandemic.
• Sustainability and environment: the focus on the
environmental and human safety implications of
climate change and plastic pollution continues to
intensify. While our approach to sustainability offers
opportunities for competitive advantage, the risk of
adverse consumer or customer reaction, increased cost
and regulatory penalties continues to rise. Our ambition
to achieve B Corporation certified status by 2026 is an
indication of our commitment in this area.
GovernanceFinancial StatementsStrategic Report
56
RISK MANAGEMENT CONTINUED
Viability statement
Assessment of prospects
In assessing the prospects of the Group, the Board has
taken account of the following:
• The business model on page 8 and the Group’s
diversified portfolio of products, operations and
customers, which reduce exposure to specific
geographies and markets, as well as large customer/
product combinations, strong product demand,
especially in the current environment, the share of
the market and product penetration our focus brands
have and the resilience and strength of manufacturing
facilities and overall supply chain; and
• The Group’s strong cash generation and its ability
to renew and raise debt facilities in most market
conditions. The Group currently has significant
committed facilities headroom in its existing committed
banking arrangements.
Assessment of viability
In determining the appropriate viability period, the Board
has taken account of the following:
• The financial and strategic planning cycle, which covers
a three-year period. The strategic planning process is
led by the CEO and is fully reviewed by the Board; and
• The investment planning cycle, which covers three
years. The ELT considers, and the Board reviews, likely
customer demand and manufacturing capacity for each
of its key markets. The three-year period reflects the
typical maximum lead time involved in developing new
capacity.
The Board considers that, in assessing the viability of
the Group, its investment and planning horizon of three
years, supported by detailed financial modelling, is the
appropriate period.
Viability has been assessed by considering:
• ‘top down’ sensitivity and stress testing. This included
a recent review by the Audit & Risk Committee of
three-year cash projections which were stress tested
to determine the extent to which trading cash flows
would need to deteriorate before breaching the group’s
facilities. In addition, the financial covenants attached
to the Group’s debt were stress tested; and
• The likelihood and impact of severe but plausible
scenarios in relation to principal risks as described on
pages 58 to 61. These principal risks were assessed both
individually and collectively. While the principal risks
all have the potential to affect future performance,
none of them are considered likely either individually
or collectively to give rise to a trading deterioration of
the magnitude indicated by the stress testing and to
threaten the viability of the business over the three-
year assessment period.
Specific consideration was also given to the risks
associated with the ongoing Covid-19 global pandemic,
particularly in the developing markets, and this was built
into the viability scenario testing.
Top-down headroom
Bank leverage covenant
The ratio of net debt to EBITDA at the end of FY21 of 0.3x
remains substantially below the maximum covenant level
under the Group’s lending facilities, providing significant
headroom. EBITDA would need to fall by more than 87%
before triggering any default in relation to the covenants.
Action could also be taken to conserve cash by reducing
the dividend payment, stopping capital expenditure or
taking other actions to preserve cash. Current committed
debt facilities mature in November 2023, however,
management has held preliminary discussions with the
current banking syndicate and the Board is confident
that renewal of the revolving credit facility will not be
problematic.
PZ Cussons plc Annual Report and Financial Statements 2021 57
Bottom-up scenarios
Each of the principal risks identified on pages 58 to 61 has been assessed for its potential financial impact as part of the
viability assessment. Of these, the most severe but plausible scenarios (or combinations thereof) were identified as follows:
Scenario modelled
Link to principal risks
Mitigation
The ongoing Covid-19 pandemic or other macroeconomic
factors impacting Africa causes the forecast recovery in
Africa to fail to materialise during the entire three-year
viability period. The Nigerian currency, the Naira, also
devalues by 10% in the first year of the viability period
because of these issues.
1. Pandemic / health crisis
2.
Consumer, customer
and economic trends
10. Tax and treasury
The Directors believe that the
mitigations implemented during FY21
will protect the Group, as the scenario
modelled by management is worse than
the experience of FY21, which included
both the effects of the lockdown in
Nigeria due to the pandemic and a
significant devaluation of the Naira.
Recession in the developed markets in which the Group
operates produces a 10% year-on-year decline in revenues.
There is also a one-off impact in the first year of the viability
review, which results in the closure of the Group’s main
production facility for a five week period during peak demand.
Global inflation causes the Group to experience increased
commodity costs in all major markets. Management have
already factored in known and anticipated cost increases
in the base case model, however, this scenario assumes
additional 10% cost increases.
Scenario 4 combines scenarios 1 and 2 above to model
management’s worst case expectation of a recurring global
pandemic affecting results in each of the three years of the
viability period.
1. Pandemic / health crisis
2.
Consumer, customer
and economic trends
9. Supply chain and logistics
The loss of the facility is highly unlikely
to affect the Group’s performance as
there is eight weeks’ inventory on
hand to cover such eventualities.
1. Pandemic / health crisis
2.
Consumer, customer
and economic trends
Supply chain and logistics
9.
Procurement constantly work with
vendors to obtain the best prices.
Known cost increases are already
factored into the budget and forecasts.
1. Pandemic / health crisis
2.
Consumer, customer and
economic trends
9. Supply chain and logistics
10. Tax and treasury
The results of the bottom-up scenario modelling showed
that no individual event or plausible combination of
events would have a financial impact sufficient to
endanger the viability of the Group in the period assessed.
Under this worst case in scenario 4, the net debt/EBITDA
ratio was only exceeded during FY24, however, even in
this scenario there would still be committed facilities
headroom which would be undrawn on committed
banking facilities. As the breach in the scenario modelling
occurs in FY24, further action could still be taken to
conserve cash, including but not limited to reducing the
dividend and capital expenditure. It would, therefore,
be likely that the Group would be able to withstand the
impact of such scenarios occurring over the assessment
period and would continue to operate in accordance with
its bank covenants.
Reverse stress testing
Management have performed reverse stress testing on
the key banking covenants to assess by how much the
performance of the Group would need to deteriorate
for there to be a breach of the covenants. For the key
leverage covenant to be breached EBITDA would need to
fall so significantly, by more than 87%, that the Board do
not believe these scenarios to be plausible. Management
would take mitigating actions to avoid such a decline in
performance long before they would occur.
Viability statement
Based on their assessment of prospects and viability, the
Board has determined that it has a reasonable expectation
that the Group will be able to continue in operation and
meet its liabilities as they fall due over the next three
years to 31 May 2024 in line with the Group’s financial and
strategic time planning horizons.
Going concern
The Group’s business activities, together with the factors
likely to affect its future performance, are set out in
the Financial Review on pages 49 to 53 and its Principal
Risks and Uncertainties on pages 58 to 61. The financial
position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the Financial
Statements and the notes to the Financial Statements
include the Group’s objectives, policies and processes
for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging
activities; and its exposure to credit and liquidity risk. The
Group’s forecasts and projections, taking account of severe
but plausible scenarios for stress testing purposes as a
consequence of the Covid-19 global pandemic from March
2020 onwards and considering the Group’s bank covenant
and liquidity headroom show that the Group would be able
to operate with appropriate liquidity and within its banking
covenants and be able to meet its liabilities as they fall
due. The Board therefore have a reasonable expectation
that the Group has adequate resources to continue
in operational existence for the foreseeable future. It
therefore continues to adopt the going concern basis
of accounting in preparing the Financial Statements.
GovernanceFinancial StatementsStrategic Report 58
PRINCIPAL RISKS AND UNCERTAINTIES
OUR RISK PROFILE
Our assessment of our current gross risk profile
(i.e. before we take any mitigating actions) is presented below:
T
C
A
P
M
I
8
1
3
2
4
9
5
7
6
10
LINK TO STRATEGY
1 Where To Play
LIKELIHOOD (GROSS)
RISKS
1 Pandemic
We have a clear focus on the leading brands in our core
categories within our priority markets.
2 Consumer, customer and economic trends
3 IT and information security
4 Sustainability and environment
5 Legal and regulatory compliance
6 Talent development and retention
7 Business transformation
8 Health & safety
9 Supply chain and logistics
10 Treasury and tax
2 How To Win – the PZ Cussons Growth Wheel
Adopting the PZ Cussons Growth Wheel enables us to build
brands in a systematic and repeatable way.
3 Putting sustainability at the heart of everything we do
We are elevating sustainability, broadening our ESG efforts
and making clear commitments which can be measured
over time.
4 Evolving our culture
We have reshaped our purpose and are reviewing our
values, ensuring each person in the organisation is clear
on their role and engaged in executing our new strategy.
5 Developing leaders at all levels
We have re-established the rhythms and disciplines of
talent management in order to develop leaders at all levels.
6 Building our capabilities
We’re developing the skills and processes required for us to
compete effectively.
7 Reducing complexity
We are dramatically simplifying our complex operations and
ways of working.
PZ Cussons plc Annual Report and Financial Statements 2021
59
Description of risk:
Measures to manage risk:
We continue to take a number of steps to address the risks relating to our people during
Covid-19, including the implementation of further health & safety measures to ensure safe
working for those at work as we move to a more enduring flexible way of working, the provision
of the appropriate facilities to facilitate working from home, and keeping in close contact with
all our people through formal and informal means, including staff surveys and virtual meetings,
to ensure that we support each other through these challenging times.
We have also been able to effectively manage the additional operational risk, increase supply
and launch new products, to meet demand, despite the challenges in international sourcing
due to the pandemic. We continue to explore ways to improve how we work with our suppliers
and customers to ensure that we maintain our response to this risk in an effective manner.
In relation to the wider economic uncertainty, the Group has continued to adopt strict
measures in terms of operational discipline, to manage our cash position effectively. These
include the deferral of capital projects, the simplification of our organisational structures and
an increased focus on working capital.
Although we have lowered the risk profile of this separate pandemic risk due to the vaccine roll
out and the existence of contingency plans, we recognise that pandemic risk will continue to
present itself in many different areas as we move to our new way of working and we maintain
our diligence in this area and have considered these elements in relation to separate risks.
Like all businesses, we continue to operate
under uncertain conditions as a result of
Covid-19 and we continue to maintain a
high-risk awareness in this area, although we
consider that a year on, the risk exposure has
reduced through increased awareness across
the business and the implementation of
action plans across the business in response
to the pandemic.
The continuing presence of Covid-19, present
a number of risks, most importantly to the
health of our employees, both in relation to
the virus itself and also to the mental health
of our people during these uncertain times,
including as we transition to our new ways of
working in response to the pandemic.
There is also the continued risk to the
business through both the wider economic
uncertainty which the pandemic has
generated, as well as the potential impact
on our day-to-day operations through, for
example, the risk of operational disruption,
supply chain risk and negative impact on cash
flow, albeit mitigated by the contingency
plans which we have developed over the
course of the past 18 months.
Description of risk:
Measures to manage risk:
In an environment where consumer
preferences and behaviours are changing
more rapidly and the channels by which our
consumers purchase our products evolve,
there is a risk that we neither meet our
consumers’ needs nor ensure that our
brands are well presented and easily
available to purchase.
This risk was compounded by Covid-19.
Demand for hygiene products, such as
Carex and Morning Fresh, as well as our
wellness and indulgence brands, soared
in the early months of the pandemic, while
the Beauty category slowed dramatically
as retail stores closed and consumer
habits changed at unprecedented pace.
In addition, we operate in a number of
markets that are exposed to elevated
economic, social and political volatility
that can impact our consumers’
purchasing ability.
We continue to actively listen to our consumers via social media, market research and
shopper insights to ensure that our product development pipelines respond rapidly and
meet our consumers’ needs. The primary drivers for the new strategy were the need to
embrace changing consumer needs, including the rapidly changing consumer and shopper
habits caused by the pandemic and the need to transform the business following the
underperformance of recent years.
We continue to focus on maintaining strong relationships with our existing customers and
our new strategy still requires us to develop relationships with new customers, ranging
from centrally managed large ‘modern’ retailers to small ‘traditional’ traders accessed via
distributors in developing countries. Our long-established history of operating in these
markets has allowed us to develop a deep understanding of our consumers and to evolve our
product portfolio accordingly.
This has all fed into the launch of our new strategy, with our focus on the leading brands in our
core categories within our priority markets.
Joint business plans are in place with our key customers, with agreed KPIs that are subject to
regular monitoring and performance reviews.
Our strategy continues to be to operate across a number of both developed and developing
markets and therefore we are able to mitigate, to a degree, regionalised risks. During the year,
we have further evolved our e-commerce channel to ensure we maximise our exposure to new
generations of consumers.
LINK TO STRATEGY
1 Where To Play
2 How To Win – the PZ
3 Putting sustainability at the
heart of everything we do
Cussons Growth Wheel
4 Evolving our culture
5 Developing leaders at all levels
6 Building our capabilities
7 Reducing complexity
IMPACT
Increased
Same
Decreased
RISK 1: PANDEMIC Impact: Link to Strategy: 1, 2, 3, 6RISK 2: CONSUMER, CUSTOMER AND ECONOMIC TRENDS Impact: Link to Strategy: 1, 2, 7GovernanceFinancial StatementsStrategic Report 60
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Description of risk:
Measures to manage risk:
We communicate with our customers
and suppliers electronically and our
manufacturing, sales and distribution
operations are dependent on reliable IT
systems and infrastructure. Prolonged
disruption to these systems could have
a significant negative impact on the
performance of the Group. Additionally,
cyber security threats are becoming
more prevalent and sophisticated in
nature, which could lead to unauthorised
access to our systems and loss of
sensitive information.
A centrally governed IT function continually monitors known and emerging threats that may
impact us. Significant activity has been undertaken across the whole of the business, informed
by the outcome of in-depth externally facilitated reviews of information security and this is
effectively mitigating the increasing prevalence and sophistication of cyber security incidents
which are being seen across all industries. We have continued during the year to further develop
our IT policy suite and rolled out a comprehensive training and awareness programme to ensure
both business and personal information remain protected.
Processes continue to be maintained to ensure that our critical data is backed up and recoverable
and our ongoing investment in upgrades/patches of our systems and the applications we use ensures
their security and reliability. We routinely test our systems to ensure that they remain robust. While
management remains confident that our processes and controls are appropriate to mitigate this
risk, we also recognise the continually increasing sophistication of cyber attacks and the increased
regulatory focus on data security and we have reflected this in an increased risk profile.
Description of risk:
Measures to manage risk:
The need to find more sustainable ways
of doing business is vital. This includes
ensuring the raw materials we need
are responsibly sourced and efficiently
used and that we are a responsible and
integral part of the communities in
which we operate. Failure to do so risks
alienating key stakeholders, including
consumers and customers, who are
increasingly focused on environmental
sustainability and transparency in the
supply chain and damaging the goodwill
in our brands, with consequent limitation
of our ability to grow and create value.
Our ESG activities, in particular, our environment, sourcing and community and charity programmes,
ensure that we understand and take account of the environmental impact of our operations and
that we proactively seek opportunities to align the interests of our key stakeholders and create
value for all. This includes taking account of the human rights of all those working within our
supply chain and in local communities.
We continue to make good progress on a number of key sustainability projects, but we continuously
strive to do more. Actions against our Plastic Promise include increasing our range of refill alternatives
to our plastic pump dispensers and removing all plastic from our gift sets on the Sanctuary Spa.
We are putting sustainability at the heart of everything we do, making the needs and requirements
of all our stakeholders central to the way we do business. It is at the heart of our new strategy. We
recognise the increasing responsibilities of each of us to mitigate these risks and that the demand of
our stakeholders in this area is continuously increasing, hence the increased risk profile. The ambitious
journey for the Group to become a certified B Corporation by 2026 is a reflection of our determination
and commitment. Sustainability performance is embedded within strategic performance.
The Board intends to evolve our current Ethics & Compliance Committee into an ESG Committee.
In line with this, we have also appointed our first Chief Sustainability Officer, a role dedicated to
coordinating global efforts across the Group.
Description of risk:
Measures to manage risk:
We are subject to a wide spectrum of
legislation, regulation and codes of
practice that can vary between the
geographies in which we operate.
Examples include product safety,
competition, anti-bribery and corruption,
health & safety and employment. Failure
to adhere to such laws and regulations
can result in reputational damage, as well
as significant fines and the possibility of
criminal liability.
Our legal, regulatory and safety specialists at both Group and regional level monitor and review the
external legal and regulatory environment to ensure that we remain aware of and up to date with all
relevant laws and legal obligations. They are also supported by a network of external experts who
can be engaged as required. This is particularly important in developing countries where changes
in the law can be sudden and unpredictable. During the year we launched our first Code of ethical
conduct, replacing the anti-bribery and corruption policy, which had been launched the year before.
In addition, we relaunched our confidential global whistle-blower hotline, details of which are widely
communicated and available to all our employees.
As part of management’s ongoing review of risks, and in concert with the establishment of our
new suite of anti-corruption policies and processes, a revised risk assessment was performed
resulting in a re-rating of this risk. Management do not believe that the underlying exposure
has changed since the previous year and that the movement on the register is attributable to a
change in our methodology of assessment
Description of risk:
Measures to manage risk:
We recognise that in order to deliver
sustained growth, we require the
best calibre people. Failure to attract,
develop and retain the correct
combination of appropriately qualified,
experienced and motivated employees
could jeopardise our ability to meet our
strategic objectives.
We are strengthening our human resources processes, with a focus on attracting, retaining and
developing the right talent. We regularly review our reward and recognition programmes. We have
also taken steps to improve the dialogue with our workforce, conducting a global engagement
survey with encouraging scores which we have analysed to develop an appropriate response to
drive further improvement in this area. We also maintain Group-wide social media/communication
tools, as well as hold quarterly global Town Hall meetings.
Attracting key talent in some regions remains a challenge but our global appraisal and employee
management process helps us to identify training requirements and validate succession plans, as
well as identify our future leaders and critical talent that needs to be retained within the business.
Talent development, through our commitment to develop leaders at all levels of our business,
forms a key part of our new strategy.
RISK 5: LEGAL AND REGULATORY COMPLIANCE Impact: Link to Strategy: 3, 6RISK 6: TALENT DEVELOPMENT AND RETENTION Impact: Link to Strategy: 1, 2, 3, 4, 5, 7RISK 4: SUSTAINABILITY AND ENVIRONMENT Impact: Link to Strategy: 1, 3, 6RISK 3: IT AND INFORMATION SECURITY Impact: Link to Strategy: 3, 6PZ Cussons plc Annual Report and Financial Statements 2021 61
Description of risk:
Measures to manage risk:
Dedicated steering committee, often chaired by ELT members, including the CEO and CFO, and
project delivery teams, including ELT members, have been established, who conduct in-depth
analysis of progress and make regular reports to the Board.
During the year we launched our new strategy.
We will continue to strive to find ways to
improve the way our business operates,
leveraging additional efficiencies and business
simplification as we execute the new strategy;
however, there is a risk that failure to execute
these initiatives effectively could result in
under-delivery of the expected benefits and
consequently impact the return we are able
to make to our shareholders. The concept of
reducing complexity is a core element of our
new strategy.
Description of risk:
Measures to manage risk:
The health and safety of everyone who is
impacted by our business is of paramount
importance to us to ensure the wellbeing of
our consumers, employees and visitors. This
encompasses the safety and quality of our
products, the safety of our facilities and offices
and the health and safety of our employees
working from home under our new working
model, including the mental health of our
people as we all adapt to new working model.
A failure in the practices we adopt to ensure
health and safety may result in reputational
damage, significant financial loss from product
recalls and fines from regulators together
with possible criminal liability for the Group.
We have recently launched a new health & safety policy and will seek to review and revise
what we do in this area in the spirit of continuous improvement. We apply robust quality
management standards and systems, rigorously monitoring them throughout all stages of
the supply chain. This applies not only to our own production facilities but to our third-party
manufacturers as well. We will soon be launching our new quality and consumer safety policy
to ensure that our standards in this area are maintained and developed where necessary.
We also maintain a dedicated consumer complaints hotline. Any incidents relating to the safety
of our consumers or quality of our products are actively investigated to ensure that timely
and effective action is taken. The same applies to health and safety incidents across the Group
where we seek to identify, assess and respond to incidents to ensure we continuously improve
our health & safety framework.
Description of risk:
Measures to manage risk:
Our production and distribution facilities
could be severely impacted by adverse
events, such as a failure of a key supplier,
a health & safety incident, or an
environmental failure.
We undertake a rigorous selection process prior to engaging with new third-party suppliers
and perform ongoing audits and performance monitoring to ensure that contracted standards
are being maintained or exceeded. We use multiple suppliers where possible.
Our dedicated Group procurement team has specialist knowledge and understanding of
key raw materials and commodities markets and our systems allow us to review forward
requirements and to obtain value.
Description of risk:
Measures to manage risk:
The international nature of our operations
gives rise to both transaction exchange
rate risk and translation exposure when
the results, assets and liabilities of foreign
subsidiaries are translated into Sterling.
In addition, in the event of tax authority
challenge to a filed tax position in a jurisdiction
in which we operate, there is a risk of an
unplanned charge and resulting cash outflow.
We maintain an established Group treasury function and our Group treasury policy defines
our non-speculative approach to the management of foreign currency exposures.
Transactional currency exposures are managed within prescribed limits with short- to
medium-term forward exchange contracts taken to reduce our exposure to fluctuations.
A Group taxation policy is in place (available on our website), which defines the way in which
we conduct ourselves with respect to our tax affairs.
Our in-house taxation expertise is also complemented by the use of specialist tax consultants
and advisors to ensure compliance with all local and international tax regulations and treaties.
The strategic report was approved by the Board and signed on its behalf by Kevin Massie, Company Secretary, on
30 September 2021.
LINK TO STRATEGY
1 Where To Play
2 How To Win – the PZ
3 Putting sustainability at the
heart of everything we do
Cussons Growth Wheel
4 Evolving our culture
5 Developing leaders at all levels
6 Building our capabilities
7 Reducing complexity
IMPACT
Increased
Same
Decreased
RISK 7: BUSINESS TRANSFORMATION Impact: Link to Strategy: 4, 6, 7RISK 8: HEALTH & SAFETY Impact: Link to Strategy: 1RISK 9: SUPPLY CHAIN AND LOGISTICS Impact: Link to Strategy: 3, 6RISK 10: TREASURY AND TAX Impact: Link to Strategy: 3GovernanceFinancial StatementsStrategic Report 62 PZ Cussons plc
Annual Report and Financial Statements 2021
GOVERNANCE
63
64 Our Board
66 Chair’s introduction to
governance
67 Board leadership and company
purpose
69 Stakeholder engagement
70 Division of responsibilities
71 Governance framework
73 Nomination Committee report
78 Audit & Risk Committee report
86 Remuneration Committee
report
110 Report of the Directors
Strategic ReportFinancial StatementsGovernance 64
OUR BOARD
Jonathan Myers
Chief Executive Officer
Appointed: 2020
Sarah Pollard
Chief Financial Officer
Appointed: 2021
Caroline Silver N
Non Executive Chair
Appointed: 2014
Skills & experience: Sarah joined PZ Cussons
from Nomad Foods, Europe’s leading frozen
food company, where she most recently
served as deputy chief financial officer.
Prior to that, she was CFO for their Birds Eye
business. Sarah is a chartered management
accountant, having qualified with
PricewaterhouseCoopers, and subsequently
working in investment banking, specifically in
mergers and acquisitions at Deutsche Bank.
Prior to Nomad Foods, Sarah held a number
of senior finance positions at Diageo, Tesco
and Unilever. She has worked in commercial,
operational and corporate finance roles
including investor relations and so brings
with her a deep understanding of creating
shareholder value in the consumer goods
sector.
Independent: no
Skills & experience: Caroline Silver joined the
PZ Cussons Board as a Non Executive Director
in 2014, becoming Senior Independent
Director in 2016 and Chair in 2017. She has
worked within the investment banking sector
for over 30 years and was most recently a
partner and managing director at Moelis &
Company. She is a chartered accountant and
has previously held senior corporate finance
and mergers and acquisitions positions at
Morgan Stanley and Merrill Lynch. She has a
wealth of international experience, especially
within African markets.
Independent on appointment: yes
Other appointments:
• Non Executive Director of BUPA
• Non Executive Director of Meggitt Plc
• Non Executive Director of The
Intercontinental Exchange, Inc.
Skills & experience: Jonathan is an experienced
FMCG executive, having worked for a number
of well-known global branded consumers
goods businesses across a range of categories
including beauty, personal care, home care
and food. Prior to joining PZ Cussons on
1 May 2020, he was chief operating officer at
Avon Products Inc, an international beauty
company where he had overall responsibility
for supply chain, marketing, digital, research
and development and IT functions and was a
core member of the executive team delivering
a successful turnaround of the business.
He spent the first 21 years of his career at
Procter & Gamble, where he worked across a
wide range of categories and had extensive
experience in developed and developing
markets across Europe, Asia, South America and
beyond. At Procter & Gamble he progressed to
general manager, oral care and feminine care
for the Greater China Region, before moving to
the Kellogg Company, the worldwide cereal and
snacks group, where he held a number of senior
leadership positions, serving as managing
director, UK and Ireland from 2012 and then also
vice president, European markets, from 2014.
Independent: no
John Nicolson A N
Senior Independent Director
Appointed: 2016
Kirsty Bashforth N R
Non Executive Director
Appointed: 2019
Dariusz Kucz A N R D
Non Executive Director
Appointed: 2018
Skills & experience: John has significant
experience of global consumer goods for
both developed and emerging markets. His
early career in marketing and sales was spent
at ICI, Unilever and Fosters Brewing Group,
then in corporate development and general
management. He was a plc board member at
Scottish & Newcastle plc, and regional president
Americas and executive committee member
at Heineken NV. He has also held the positions
of chairman at Baltika OAO, deputy chairman
at CCU SA, director at United Breweries Ltd
India, non executive director at North American
Breweries, and member of the advisory board
at Edinburgh University Business School.
Independent: yes
Other appointments:
• Non Executive Chairman of A G Barr Plc
• Non Executive Director of Stocks Spirits
Group Plc
Skills & experience: Kirsty is chief people
and communications officer at Diaverum
AB. Prior to this she ran her own consultancy
business QuayFive for four years, advising
CEOs on change, organisational culture
and leadership, having previously held a
number of senior executive positions during
a 24-year career at BP. These included
leading the strategic coordination of bp's
global B2B businesses and as group head
of organisational effectiveness. Kirsty is an
experienced remuneration committee chair
and has assumed this role on the Board from
1 July 2020.
Independent: yes
Other appointments:
• Non Executive Director of Serco Group plc
Skills & experience: Dariusz Kucz joined the
PZ Cussons Board as a Non Executive Director
on 1 May 2018. Until recently, he was chief
top line officer of Haribo, the international
confectionery company, leading its global
commercial operations. He has previously
held senior leadership roles at Danone,
where he led the baby food business in Asia
Pacific, and Wrigley, where he was regional
VP, Central and Eastern Europe. He holds the
position of chairman of the supervisory board
of the University of Economics and Business
in Poznan, the leading university of economics
in Poland.
Independent: yes
PZ Cussons plc Annual Report and Financial Statements 2021 65
Jeremy Townsend A N R
Non Executive Director
Appointed: 2020
Jitesh Sodha A N
Non Executive Director
Appointed: 2021
Valeria Juarez N
Non Executive Director
Appointed: 2021
Skills & experience: Jeremy served as chief
financial officer of Rentokil Initial plc until
August 2020. An experienced FTSE 100
finance director, he was previously group
finance director of Mitchells & Butlers and
held senior finance positions at Sainsbury’s
after starting his career with Ernst & Young.
He is also a former Accounting Council
member of the Financial Reporting Council.
He currently serves as a non executive
director of NHS England and chairs its audit
and risk committee.
Independent: yes
Other appointments:
• Non Executive Director of WM Morrison
Supermarkets plc
Skills & experience: Jitesh Sodha is an
experienced FTSE director and is the chief
financial officer at Spire Healthcare Group plc
which he joined in 2018. He also sits on the
disclosure committee, executive committee
and safety, quality and risk committee at
Spire Healthcare. Jitesh was previously chief
financial officer at De La Rue between 2015
and 2018, and at Greenenergy International,
Mobile Streams, where he led their IPO, and
T-Mobile International UK.
Independent: yes
Other appointments:
• CFO of Spire Healthcare Group plc
Skills & experience: Valeria is the SVP
of digital commerce for Ralph Lauren
International based in London. Over the last
25 years, she has worked across multiple
regions at different companies including
Ralph Lauren, Amazon, Diageo, Boston
Consulting Group and Procter & Gamble. She
is an international business leader with a
focus on digital and business transformation.
She has extensive experience of general
management, digital, strategy, commercial,
innovation and marketing covering fashion,
branded consumer goods and online retailing.
Independent: yes
Gender diversity*
Tenure*
Nationality*
2
2
4
Male
Female
5
7
7
0–3 years
4–7 years
British
Other
* as at the date of this report. For gender diversity figures as at 31 May 2021, see page 75.
Directors’ core areas of expertise
• UK institutional shareholders
• Recent financial experience
• Remuneration experience
• Chair skills
• Mentoring and coaching skills
• Sector experience
Committees
• Retail experience
• Africa experience
• South-East Asia and ANZ experience
• Entrepreneurial experience
• Operational experience
• Strategy
• M&A, strategic partnerships
• M&A integration
• Business transformation
• E-commerce
• Sales and marketing
A
R
Audit & Risk Committee
N
Nomination Committee
D
Director with responsibility for representing
the employee voice and employee engagement
Remuneration Committee
Chair
Strategic ReportFinancial StatementsGovernance 66
CHAIR’S INTRODUCTION TO GOVERNANCE
Alongside the much improved
operational and financial
performance achieved by the
Group this year despite reporting
a statutory loss driven by disposal
accounting, it has been a period
of progress for the Board and our
approach to corporate governance.
Board changes
The Nomination Committee has
been very active again, inducting
our new CEO Jonathan Myers in
his first full year in the role, as well
as appointing Sarah Pollard as our
new Chief Financial Officer and our
new Non Executive Directors, Jitesh
Sodha in July 2021 and Valeria Juarez
in September 2021. I would like to
thank Jonathan for his energy, drive
and ability to effect change while
starting as CEO in a 'virtual' world,
and welcome our newest members
to the Board.
Board skills and succession planning
Prior to these appointments the
Board assessed the balance and
skills needed on the Board with an
externally facilitated Board skills
review, as recommended by the
Board effectiveness review carried
out by Ffion Hague in 2020.
Continuing its work on the succession
needs of the organisation, the
Nomination Committee was also
instrumental in progressing key
appointments to our ELT as part of the
talent review work we began last year.
A new Inclusion and Diversity Policy
was also developed and approved for
all appointments this year.
Caroline Silver
Non Executive Chair
Internal controls
Following the controls review
performed by KPMG, also in
2020, we have been responding
to recommendations by making
improvements to our internal
controls environment. This has
been delivered through several key
personnel appointments, and the
development and embedding of new
or evolved Group policies. Particular
progress has been made to our ethics
and compliance, internal audit and
risk management processes.
While recognising areas of progress,
the Board acknowledges there
remains significant work to be done
to meet our targets and we welcome
the opportunity to continue on this
journey in FY22. We note the recent
discussions around a potential UK
version of the US Sarbanes-Oxley
Act and will align our journey to
these possible new requirements.
During the year, we launched a new
Code of Ethical Conduct, supported
by refreshed policies around topics
including bribery, whistleblowing and
more. This vital document sets out
the ethical principles of the Company
and codifies the behaviours expected
of all employees, agents, contractors
and affiliates.
Much of the work developing and
embedding the new Code of Ethical
Conduct and its related policies
and procedures was overseen and
carried out by our ad-hoc Ethics &
Compliance Committee, established
by the Board. As this Committee’s
work is largely completed and in
order to demonstrate our significant
ongoing investment in furthering our
sustainability agenda, in July 2021 we
commenced the process of evolving
the Ethics & Compliance Committee
into a permanent ESG Committee
during FY22.
Strategy and culture
As introduced at our capital markets
day and discussed throughout this
report, we have a new Group strategy.
The Board played an active role in
supporting, reviewing and challenging
the development of the strategy
during our annual strategy day, as well
as overseeing how the strategy would
be measured internally and externally.
Following the approval of the new
strategy we reviewed our company
purpose resulting in the approval in
July of our new PZ Cussons company
purpose, 'for everyone, for life, for
good'. In the course of FY22 we will
also assess the Company's values to
ensure we have the right culture to
support the new strategy. Our work
in this area has involved employee
engagement surveys and also a broad
working group within the business
involving the ELT and a cross-section
of our workforce to get a ‘bottom-up’
view of what PZ Cussons’ values and
culture are all about. The Board also
received training on how to consider
and assess culture, which was led
by one of our own Non Executive
Directors, Kirsty Bashforth, who
has deep experience in this area.
Outlook
Looking ahead, in FY22 we will be
continuing our focus on internal
controls and risk management.
As part of our ongoing succession
planning, we will also undertake a
full review of Board diversity in line
with our new Board diversity policy.
I am confident that we have the
correct strategy in place, supported
by the right individuals, a commitment
to governance and robust internal
controls, and that we will continue
the progress we have made in
driving performance and operational
improvement throughout FY21.
PZ Cussons plc Annual Report and Financial Statements 2021 BOARD LEADERSHIP AND COMPANY PURPOSE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
As a Company with a premium listing on the London Stock Exchange,
PZ Cussons is required under the Financial Reporting Council (FRC)
Listing Rules to comply with the Code Provisions of the Corporate
Governance Code 2018 issued in July 2018 (the 2018 Code), which is
available on the FRC website (www.frc.org.uk). The principles and
provisions of the 2018 Code have applied throughout the year ended
31 May 2021. The Board considers that it has fully complied with the
2018 Code during the financial year covered by this Annual Report and
Financial Statements.
Details of the way the 2018 Code
has been applied can be found in
the following pages:
Division of responsibilities
Page 70
Composition, succession and
evaluation (Including the
Nomination Committee Report)
Pages 73 to 77
Audit, risk and internal control
(Including the Audit & Risk
Committee Report)
Pages 78 to 85
Remuneration (The Directors’
Remuneration Report)
Pages 86 to 109
Board leadership
The Board’s role is to provide
leadership and set the purpose,
values and standards of the Company
and the Group. PZ Cussons’ business
model and strategy is set out on
pages 8 and 4 of the Strategic
Report and describes the basis upon
which the Company generates and
preserves value over the long term.
How the Board operates
The Board has overall authority for
the management and conduct of
the Group’s business, strategy and
development and is responsible
for ensuring that this aligns with
the Group’s culture. The Board
ensures the maintenance of a
system of internal controls and risk
management (including financial,
operational and compliance
controls) and reviews the overall
effectiveness of the systems in place.
The Board delegates the day-to-
day management of the business
to the Executive Directors and the
ELT. There is a schedule of matters
reserved for the Board’s decision
which forms part of a delegated
authority framework. Matters
for the Board’s decision include
approval of the Group’s strategy
67
and objectives, setting the purpose
and values of the Group, annual
budgets, material agreements and
major capital expenditure. The
schedule is reviewed regularly to
ensure that it is kept up to date with
any regulatory changes and is fit for
purpose. The last review and revision
was undertaken in July 2021.
The Board held seven scheduled
meetings during the year. A rolling
agenda and forward calendar has
been agreed and the agenda for each
meeting is agreed with the Chair and
Executive Directors. Board papers
are circulated to Directors in advance
of the meetings. If a Director cannot
attend a meeting, he or she is able
to consider the papers in advance
of the meeting and will have the
opportunity to discuss them with
the Chair or Chief Executive and to
provide comments.
Conflicts of interest
The Company Secretary keeps a
register of all Directors’ interests.
The register sets out details of
situations where each Director’s
interest may conflict with those of
the Company (situational conflicts).
The register is considered at and
reviewed at each Board meeting
so that the Board may consider
and authorise any new situational
conflicts identified.
Director concerns
Directors have the right to raise
concerns at Board meetings and
can ask for those concerns to be
recorded in the Board minutes.
The Group has also established a
procedure which enables Directors,
in relevant circumstances, to obtain
independent professional advice at
the Company’s expense.
Strategic ReportFinancial StatementsGovernance 68
BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
Board activity during the year
June 2020
July 2020
September 2020
November 2020
January 2021
March 2021
May 2021
• CEO report
& strategy
discussions
• Financial
reporting
matters
• Governance
report, including
approving the
modern slavery
statement
• CEO report
& strategy
discussions
• Health and safety
• Governance
and compliance
• Operational and
financial updates
• Strategy session
follow ups
• 2020 FY
Budget
• Approval of
RNS re financial
reporting and
AGM
• CEO report
& strategy
discussions
• Employee
engagement
and wellbeing
• Investor
relations
• Financial reporting
• Reports from
the Board
Committees
• Board evaluation
report
• Governance review
including updating
the schedule of
matters reserved
for Board decision,
approving an
updated
whistleblowing
policy and a fraud
policy
• CEO and CFO
• CEO and CFO
• CEO and
Report
Report
CFO Report
• Board update
on the impact
on staff of the
pandemic
• Deep Dive
– Beauty
• Reports from
the Board
Committees
• Dividend
discussion
• IT deep dive
• Employee
engagement
update from
the designated
Director
• Health, safety
and wellbeing
• Health, safety
and wellbeing
• Strategy roll out
• People & Talent
• Budget planning
and approach
• Governance and
compliance
• Reports from
the Board
Committees
• Employee
engagement
update from
the designated
Director
• Sustainability
update
• Approval of
the Budget
• Reports from
the Board
Committees
• Employee
engagement
update from
the designated
Director
• Nigeria deep dive
• Personal care
deep dive
• Approved
Non Executive
Director fees
• Investor update
• Evaluation
of the Board,
Chair and Board
Committees.
PZ Cussons plc Annual Report and Financial Statements 2021 69
Annual General Meeting ('AGM')
While in normal circumstances the
AGM is the annual opportunity for
all shareholders to meet with the
Directors and to discuss with them
the Company’s business and strategy,
this was not possible last year due
to the Government’s ‘stay at home’
provisions. A closed AGM was held in
November 2020. However, the Board
ensured that shareholders were
able to ask questions ahead of the
AGM via email. Shareholders were
also given the opportunity to watch
and listen to the AGM on the day
via Zoom. A recording of the AGM is
available on the Company’s website.
This year we hope that there will be
fewer restrictions and that the AGM
can be held as a physical meeting.
The notice of AGM is posted to all
shareholders at least 20 working
days before the meeting. Separate
resolutions are proposed on all
substantive issues and voting is
conducted by a poll. The Board
believes this method of voting is
more democratic than voting via a
show of hands since all shares voted
at the meeting, including proxy votes
submitted in advance of the meeting,
are counted.
For each resolution, shareholders
will have the opportunity to vote for
or against or to withhold their vote.
Following the meeting, the results
of votes lodged will be announced
to the London Stock Exchange and
displayed on the Company’s website.
STAKEHOLDER ENGAGEMENT
Workforce engagement
The Board recognises that employee
engagement is the responsibility of
the whole Board. A designated Non
Executive Director, Dariusz Kucz,
was given responsibility in 2019 for
ensuring that the Board successfully
engages with our workforce. An
engagement agenda was agreed
and as reported last year, a special
session with selected employees in
Indonesia during the Board’s market
visit marked the kick-off of learning
from and listening to employees.
A global employee survey was also
rolled out in February 2020 just
prior to the outbreak of Covid-19.
The initial employee engagement
plans have been adjusted due to
the outbreak of Covid-19, changes
in executive management and the
global HR function liaising with the
designated Non Executive Director.
Digital forums were, however, tested
in the UK as an online engagement
channel and then rolled out to
other markets. Digital forums have
been held with Africa, ANZ and
Group. Feedback from engaging in
this way has highlighted that our
employees have felt supported by
the Company’s pandemic reaction
and open communications during
the pandemic.
A second employee survey was
launched in March 2021 with
some very positive results. See
Sustainability – People on page 28
for further details.
Quarterly Town Hall meetings have
been held during 2021 with very
positive feedback expressed in the
digital forums about the strategy
update and capital markets day.
Our employee engagement
continues to be developed. The
survey outcomes provide a useful
guide for actions planning. The
designated Non Executive reports
on employee engagement at most
Board meetings and the 2021–22
employee engagement plan has been
finalised and was shared with the
Board for final approval. This is an
evolving process which has proved
extremely beneficial to both the
Board and employees. The Board
have agreed that the key areas of
focus of employee engagement over
the next year must continue to be
on health and wellbeing, strategy
and employee survey outcomes
such as culture and communication.
Shareholder engagement
The Chair is responsible for
effective communication with the
shareholders and is available to
meet with investors periodically
throughout the year. The Chair writes
to key investors annually to offer
a meeting without management
present to ensure any concerns or
questions can be raised directly to
the Non Executive Directors. The
CEO and CFO are the Company’s
principal contacts for investors,
analysts, press and other interested
stakeholders. The Board receives
investor feedback reports as part
of the CEO’s report at each Board
meeting, outlining recent dialogue
with investors and the feedback
received. Analyst reports are also
made available to the Board. The
Company provides quarterly trading
updates and a capital markets
day was held in March 2021 which
received a positive reception from
investors who had clear support for
the strategy.
The Chair and Senior Independent
Director are available to shareholders
to discuss governance and strategy
concerns as appropriate and the
Committee Chairs are available at
the AGM for shareholder questions.
Strategic ReportFinancial StatementsGovernance 70
DIVISION OF RESPONSIBILITIES
The responsibilities of the Chair, Chief Executive Officer, Senior Independent Director and Board and Board Committees
are clear and set out in writing.
Role
Responsibilities
Chair of the Board
Caroline Silver
The Chair of the Board is responsible for ensuring overall Board and individual Director effectiveness and for
creating and embedding the right governance framework within the Board. Specific responsibilities include:
• Effective running of the Board including setting the agenda and ensuring that the Board plays a full and
constructive part in the approval of the Group’s strategy and overall commercial objectives
• Ensuring members of the Board receive accurate, timely and clear information
• Reviewing and agreeing training and development for the Board
• Ensuring there is effective communication with the Group’s shareholders and other stakeholders
• Ensuring that the performance of the Board as a whole, its Committees, and individual Directors is
formally evaluated
• Promoting high standards of integrity and corporate governance throughout the Group, particularly at
Board level.
Chief Executive
Officer
Jonathan Myers
The CEO is accountable to the Chair and the Board for providing timely, accurate and clear information
in relation to the Group’s performance and delivery of its strategy and overall commercial objectives.
In addition the CEO is responsible for:
• Developing the Group’s objectives and strategy for approval by the Board, and with regard for the Group’s
shareholders, customers, employees and other stakeholders
• The successful achievement of objectives and execution of the Group’s strategy
• Managing the Group’s risk profile in line with the Company’s risk appetite and ensuring that effective
internal controls are in place
• Ensuring effective communications with shareholders
• Promoting and conducting the affairs of the Group with standards of integrity and corporate governance
that align to the Group’s integrity and purpose
• Advising and making recommendations in respect of management succession planning and to make
recommendations on the terms of employment and remuneration of the ELT
• Ensuring open, honest and transparent dialogue between the Board and the ELT
• Promoting an entrepreneurial and ethical culture which welcomes and supports a diverse workforce
• Championing the Group’s values and behaviours.
Chief Financial Officer
The CFO’s responsibilities include:
Sarah Pollard
•
Implementing the Group’s financial strategy, including balance sheet management and capital allocation
• Supporting the CEO in the delivery of the Company’s strategy and financial performance
• Overseeing financial reporting and internal controls.
Senior Independent
Non Executive
Director
John Nicolson
The Senior Independent Non Executive Director’s responsibilities include:
• Acting as a sounding board for the Chair and serving as intermediary for the other Directors when necessary
• Being available for confidential discussions with other Non Executive Directors
• Evaluating the Chair’s performance as part of the Board’s evaluation process
• Chairing meetings of the Non Executive Directors or other meetings where appropriate
• Being available to shareholders should the occasion occur when there is a need to convey concern
to the Board other than through the Chair or the Chief Executive.
Non Executive
Directors
All of the Non Executive Directors: Jitesh Sodha, Valeria Juarez, Kirsty Bashforth, Jeremy Townsend,
Dariusz Kucz and John Nicolson are responsible for:
• Contributing to the development of the Group’s strategy
• Promoting and supporting the Group’s values and commitment to high standards of corporate
governance
• Reviewing, oversight and constructive challenge to the ELT on the delivery of the Company’s objectives
and strategy.
PZ Cussons plc Annual Report and Financial Statements 2021 71
GOVERNANCE FRAMEWORK
THE BOARD
The Board’s role is to provide leadership and set the purpose, values and standards of the Company and
the Group. The Board has ultimate responsibility for the long-term success and sustainability of the
business. It approves the Group’s long-term objectives and commercial strategy and provides oversight
of the Group’s operations.
See page 67
THE BOARD DELEGATES CERTAIN MATTERS TO ITS
PRINCIPAL COMMITTEES*, WHICH ARE RESPONSIBLE FOR:
Nomination Committee
Ensuring that the structure,
size and composition of
the Board and the ELT
are best suited to deliver
the Company’s strategy
and meet current and
future needs.
See pages 73 to 77
Remuneration Committee
Reviewing and
recommending the
framework and policy
for remuneration of the
Executive Directors and
senior executives.
See pages 86 to 109
Audit & Risk Committee
Reviewing the Group’s
accounting and financial
policies, its disclosure
practices, internal
controls, internal audit
and risk management
and overseeing all
matters associated
with appointment,
terms, remuneration
and performance of the
External Auditor.
See pages 78 to 85
THE EXECUTIVE LEADERSHIP TEAM (ELT)
The Board has delegated responsibility for the delivery of the Group strategy and the day-to-day
operational performance of the business to the Executive Directors who work closely with their wider
ELT to deliver this strategy.
*
In addition to its principal Committees, the Board, from time to time, deals with certain matters in other Committees both formal and ad-hoc.
An Ethics & Compliance Committee was set up to oversee the implementation of certain agreed actions relating to ethics and compliance controls.
For further information see page 82 of the Audit & Risk Committee Report. Terms of reference for each Committee listed above are available on the
Company’s website.
Strategic ReportFinancial StatementsGovernance 72
GOVERNANCE FRAMEWORK CONTINUED
Balance of independence
The Board currently comprises six
independent Non Executive Directors
(excluding the Chair) and two
Executive Directors. The Board is of
the opinion that the Non Executive
Directors remain independent, in
line with the definition set out in
the 2018 Code and are free from any
relationship or circumstances that
could affect, or appear to affect,
their independent judgement.
The Chair was independent on
appointment. Prior to the arrival of
Jonathan Myers on 1 May 2020 the
Chair performed her role as Chair
on an executive basis. This was on
an interim basis whilst waiting for
the arrival of the CEO. The Chair’s
non executive role was resumed on
appointment of the CEO.
Company Secretary
All Directors have access to the
advice of the Company Secretary.
The appointment and remuneration
of the Company Secretary is a matter
for the Board.
Board time commitments
All Directors are required to obtain
permission of the Board in respect
of any proposed appointments to
other listed company boards prior
to committing to them. The Non
Executive Directors are required,
by their letters of appointment, to
devote sufficient time to meet the
expectations of their role as required
by the Board from time to time. The
Board remains satisfied that all of
the Directors spend considerably
more than this amount of time
on Board and Committee activity.
Attendance
Each of the Directors has committed
to attend all scheduled Board and
relevant Committee meetings and
has committed to make every effort
to attend ad-hoc meetings, either
in person or by telephone/video call.
The Non Executive Directors meet
without the Executive Directors
and the Chair present at least once
a year.
Board
attendance
Audit & Risk Committee
attendance
Remuneration Committee
attendance
Nomination Committee
attendance
C Silver
J Myers
S Pollard1
J Nicolson
K Bashforth
D Kucz
H Owers2
J Townsend
T Minick-Scokalo3
7/7
7/7
3/3
7/7
7/7
7/7
3/3
7/7
0/2
5/5
5/5
5/5
0/3
6/6
6/6
2/2
6/6
5/5
5/5
5/5
5/5
2/2
5/5
0/2
1 S Pollard was appointed to the Board as CFO on 4 January 2021.
2 H Owers stepped down from the Board at the AGM on 26 November 2020.
3 T Minick-Scokalo was on an extended leave of absence during 2020 and stepped down from the Board at the AGM on 26 November 2020.
PZ Cussons plc Annual Report and Financial Statements 2021 NOMINATION COMMITTEE REPORT
73
Caroline Silver
Chair
COMMITTEE ROLE
• Regularly review the structure, size and composition of the Board and its
Committees
• Reviewing the leadership and succession needs of the organisation
• Identifying and nominating for approval candidates to fill Board vacancies
• Evaluating the Board’s diversity and balance of skills
• Evaluating the performance of the Board
• Reviewing the time needed to fulfil the roles of Chair, Senior Independent
Director and Non Executive Directors
PRIORITIES FOR 2022
• Continue to review talent and succession plans against the management
objective of driving material improvement in succession planning
• Complete the recruitment and onboarding of new Non Executive Directors
• Conduct a refreshed Board skills assessment and ensure the Directors' skills
are used in a targeted way to support management
• Review continuing efforts to improve Board and senior management
diversity
NOMINATION COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year are set out below:
Committee members
Member since
Current
Caroline Silver: Chair
Kirsty Bashforth
Dariusz Kucz
John Nicolson
Jeremy Townsend
Helen Owers
2014
2019
2018
2016
2020
2012
Retired at the AGM
For attendance at the Nomination Committee, the Board meetings and
other Board Committees please see the full attendance table on page 72.
DEAR SHAREHOLDERS,
On behalf of the Board, and as Chair of
the Nomination Committee, I am pleased
to present the Nomination Committee
Report for the year ended 31 May 2021.
This year the Committee focused on
ensuring the Board has the relevant skills
and balance to support our new strategy.
To assist with this, the Committee carried
out an externally facilitated Board skills
review in September 2020. This then
informed our search for two further Non
Executive Director roles following the
retirement of both Helen Owers and
Tamara Minick-Scokalo at the 2020 AGM.
I was pleased to welcome to the Board
Jitesh Sodha on 1 July 2021 and Valeria
Juarez on 22 September 2021. Jitesh
brings with him strong financial experience
and helps fill a gap we identified in
the concentration of current financial
experience on the Board in a small number
of Non Executive Directors. Valeria has
unique and invaluable experience in
e-commerce and digital innovation. The
processes for the recruitment of Jitesh and
Valeria are described further in the report.
As well as focusing on Board skills,
the Committee has concentrated on
supporting the development of talent
within and below our ELT and ensuring we
have a robust succession pipeline for these
leadership roles. This work is continuing
and we have employed the services of
Norman Broadbent and Korn Ferry to assist.
On 4 January 2021 we welcomed Sarah
Pollard to the Board as Chief Financial
Officer. Sarah has been an excellent
addition to the ELT and the Board and
as well as her financial skills, her breadth
and depth of experience in the consumer
goods sector has already improved internal
information flows to the Board. An outline
of her appointment process is provided
within this report. On appointment Sarah
received an extensive induction into the
business in line with our induction policies.
During the year we also adopted a refreshed
Board Diversity Policy to reconfirm the
Company’s commitment to having a Board
and an ELT that reflects the diversity
of our workforce and consumers in the
countries in which we operate. The policy
is available on the Company’s website.
The Committee will ensure that enhancing
the Board’s skills, succession planning and
diversity remain at the top of the agenda
in the forthcoming year.
Strategic ReportFinancial StatementsGovernance 74
NOMINATION COMMITTEE REPORT CONTINUED
How the Committee operates
The Committee meets a minimum
of twice a year and more frequently
as necessary. During the year the
Committee met five times.
Only members of the Committee
are entitled to attend the meetings.
Other individuals such as the Chief
Executive Officer, Chief Human
Resources Officer and external
advisers may be invited to attend
for all or parts of any meeting as and
when appropriate. The Committee
however ensures that it dedicates
sufficient time to discussions without
advisers present to facilitate candid
exchanges of views by its members
and to ensure the independence
of the Committee is maintained.
The terms of reference were
reviewed and updated during
the year to ensure that they are
compatible with the Corporate
Governance Code 2018 (the 2018
Code) and best practice and are
available on the Company’s website
at www. pzcussons.com.
Activities of the Committee
during the year
Board appointments
During the year the Committee
led the appointment process for
the appointment of new directors
including conducting a Board skills
analysis in September 2020 and
agreeing the skills and experiences
needed to fill Board vacancies and
address any gaps identified by
the Committee. The Chief Human
Resources Officer reported to the
Committee on the progress of
appointments and members of the
Committee conducted interviews of
longlist and shortlist candidates and
recommended preferred candidates
to the Board for approval. During the
year the Committee also approved a
Director Appointment and Induction
Policy. The policy highlights that the
Committee will approve written role
descriptions, including the skills,
knowledge and experience required
or desired for any role, taking due
care to avoid unconscious bias.
The Committee will determine
whether open advertising or the use
of a search consultancy is appropriate
for the potential appointment and
in the event the use of a search
consultancy is considered appropriate,
the Committee will approve the
selection criteria to be used for the
appointment of such consultancy,
having due regard for the importance
of diversity in the conduct of all
director searches and determine
the list of search consultancies to be
invited to submit proposals to the
Committee and determine which
members of the Committee and its
advisors shall review proposals and
attend meetings with the proposed
search consultancies. Following
this the Committee will review the
candidate longlist prepared in respect
of any potential appointment and
agree on a shortlist of candidates.
Appointment of a new
Chief Financial Officer
Russell Reynolds, a global executive
search consultancy, with no other
relationship with the Group other
than executive and non executive
searches, were commissioned to
conduct an external search for a
CFO. Russell Reynolds are accredited
for the FTSE 350 category of the
Enhanced Voluntary Code of Conduct
for Executive Search Firms, which
specifically acknowledges those
firms with a strong track record in
and promotion of gender diversity in
the FTSE 350 companies against the
scope of the Davies Review. As part
of the interview process a number of
the members of the Board, including
the Chair, the Chair of the Audit
& Risk Committee and the CEO,
interviewed a shortlist of candidates,
resulting in the appointment of Sarah
Pollard on 4 January 2021.
Further Non Executive appointments
Following presentations from several
recruitment consultants, Russell
Reynolds were appointed to assist
with the appointment of two further
Non Executive Directors to fill the
vacancies left by Helen Owers and
Tamara Minick-Scokalo who both
retired from the Board at the last
AGM. The Committee discussed
the skillsets needed for both
appointments taking into account
the Board skills review carried out
in September 2020 and the skills of
the departing Directors. A longlist
of candidates was received for each
role and then reduced to a shortlist
prior to interviews with the Chair.
Following this process, Jitesh Sodha
then met with other members of
the Board and was appointed to the
Board on 1 July 2021 and will serve
on the Audit & Risk Committee and
Nomination Committee. Valeria
Juarez met with members of
the Board and was appointed on
22 September 2021. She will initially
serve on the Nomination Committee.
We welcome their perspectives and
look forward to the positive impact
of having additional directors with
such diverse experiences.
ELT succession and appointments
General Counsel and Company
Secretary
Kevin Massie was appointed on
1 June 2020 as General Counsel
and Company Secretary.
UK MD recruitment
During the year the Committee
oversaw the appointment of a new
UK Managing Director. Following a
formal recruitment process Kieran
Hemsworth was appointed with
effect from 4 January 2021.
Chief Supply Chain Officer
During the year the Committee
oversaw the internal appointment
of a new Chief Supply Chain Officer,
Steve Noble with effect from
1 January 2021.
Other ELT appointments
Following the year-end, a Chief
Sustainability Officer, Joanna Gluzman
and Marketing Transformation
Officer, Andrew Geoghegan were
also appointed. They both joined
the ELT on appointment.
Talent and succession planning
The Committee has overseen a
significant talent review over the last
two years leading to a re-shaping
of the ELT with a number of roles
either changed or now held by new
entrants. Individual ELT members
have undertaken rigorous external
assessment to validate capability,
capacity and potential. This has led
to clear development plans.
PZ Cussons plc Annual Report and Financial Statements 2021 75
During the year a full ELT talent
review has been undertaken to
establish the talent and succession
health across the Group. This
identified immediate emergency
cover of roles but highlighted
the need to develop short-term
succession potential in the senior
leadership population. The Company
partnered with Norman Broadbent
plc, an executive search and
development organisation, to obtain
independent views and advice on
further talent development.
Board and Board
Committee membership
During the year we have considered
the composition of each of the Board
Committees to ensure they have the
relevant skills and members.
Changes to the Board Committees
We recommended to the Board that
Kirsty Bashforth be appointed as
Remuneration Committee Chair with
effect from 1 July 2020 following
the retirement of Helen Owers from
the Board at the AGM after serving
nine years. Kirsty is an experienced
Remuneration Chair and has sat as
a member and chaired other listed
remuneration committees so has
the requisite experience required
by provision 32 of the 2018 Code.
Composition and independence
The Nomination Committee is of
the opinion that the Non Executive
Directors in line with the definition
set out in the 2018 Code are free from
any relationship or circumstances that
could affect, or appear to affect, their
independent judgement. The Chair
was independent on appointment
and having performed an executive
role on an interim basis in 2020 to
cover the CEO has now resumed her
Non Executive role. The balance of
Directors (excluding the Chair) was
two Executive Directors and four
independent Non Executive Directors.
The Board complies with the
provisions of the Code that require
that each Director seeks re-election
annually. The existence of a group
of controlling shareholders (see the
Report of the Directors on page
110) and the election or re-election
of independent Directors is subject
to a dual shareholder vote at the
AGM, pursuant to which re-election
or election must be approved by a
majority vote of the shareholders
of the Company and, separately, by
a majority vote of the shareholders
excluding the controlling shareholders.
Diversity policy
The Company is committed to
having a Board and ELT that reflect
the diversity of our workforce and
consumers in the countries in which
we operate. The ELT and Board are
committed to creating an inclusive
work environment which encourages
members from diverse backgrounds
and with diverse perspectives
and skills to collaborate and work
together towards a common
objective. The Board has approved
an Inclusion and Diversity Policy for
Board and ELT appointments which
is available in full on the Company’s
website and is summarised below.
The Company is a signatory to the
30% Club. We believe that gender
diversity is good for our business.
The Company has already achieved
30% female representation on the
Board and is committed to progress
towards achieving 30% female
representation on the ELT.
The Company supports the
recommendations of the Parker
Review and is committed to B.A.M.E
representation on the Board within
the specified timelines.
When evaluating candidates for the
ELT or Board, the Company seeks
to make decisions based on merit
and objective criteria and the needs
of the ELT and Board, having due
regard to the benefits of all types
of diversity, including (without
limitation) diversity of age, gender,
social and ethnic backgrounds,
disability, sexual orientation,
educational and professional
backgrounds and cognitive and
personal strengths.
Where external recruitment agencies
are used, the Company uses agencies
who have signed up to the voluntary
Code of Conduct on gender diversity
and best practice or who can
demonstrate equivalent commitments
to inclusion and diversity.
The Company aims to achieve long
and short lists of candidates that
reflect its diversity commitments.
In respect of Board appointments,
the Company considers candidates
from non-traditional corporate
backgrounds, including from non-
profit organisations, the public
sector and academia and/or without
prior listed board experience.
As at 31 May 2021, the Board
comprised three female and four
male Directors, equivalent to 43%
female representation. Directly
below Board level there were 11 ELT
members, of whom 27% were female
and 73% male. Direct reports of the
ELT were 39% female and 61% male.
Board induction
The Nomination Committee, through
the Company Secretary, oversees
the induction of all Directors. The
purpose of the inductions is to
ensure that all Directors have an
appropriate understanding of the
business of the Company, the duties
of the Board and its members and
the legal and regulatory environment
in which the Company operates.
Directors who are to hold an
executive role undertake additional
induction activities organised by the
Chief Human Resources Officer.
Board skills matrix
As a follow-up to the Board
effectiveness review in 2020 a
Board skills review was undertaken
by Ffion Hague at Independent
Board Evaluation in September
2020. The skills matrix provided
a framework and useful guide to
future recruitment at both Board
level and ELT level to ensure there
was a balance of skills across both
leadership teams and the balance of
skills complemented each other. It
was further recognised that the work
of the Nomination Committee was
important to shape the teams and
meetings should therefore be held as
frequently as the Board meetings to
ensure the succession planning and
talent development work progressed.
Strategic ReportFinancial StatementsGovernance 76
NOMINATION COMMITTEE REPORT CONTINUED
Board and Committee performance evaluation and Board effectiveness reviews
In order to evaluate its own effectiveness, the Board undertakes annual effectiveness reviews using a combination
of externally facilitated and internally run evaluations over a three-year cycle. The cycle of the Board evaluations is
summarised as follows:
YEAR 1
YEAR 2
YEAR 3
Externally facilitated Board
evaluation using interviews
Follow-up on action prepared
in response to the year 1
evaluation using internally
facilitated questionnaires
Continued follow-up on actions
arising from the previous
two years using internally
facilitated questionnaires
Recommendations and progress against the 2020 Board effectiveness review
In 2020 an externally facilitated Board effectiveness review was conducted by Ffion Hague of Independent Board
Evaluation. Ffion Hague and Independent Board Evaluation are independent of the Company and have no relationship
with any of the Directors. The review was undertaken on the basis of interviews conducted with each of the Directors,
the Company Secretary and other frequent participants in Board meetings and observation by the evaluator of meetings
of the Board and each of the principal standing Committees. The recommendations from that review and the progress
made through 2020 and 2021 are set out below:
Recommendation
Progress
Review delegated authorities.
Review and affirm Board objectives for the year ahead and
establish a rolling agenda properly aligned to those objectives
and the strategy of the business.
Commission a culture review, particularly in light of the
significant changes in senior leadership.
Consider the role and scope of the Good4Business committee
for the future and how it aligns with the Company’s broader ESG
plans and strategy.
The Audit & Risk Committee has continued to review internal
financial controls throughout the year. The Board approved a new
set of reserved matters in FY21, however the broader delegation
of authorities below Board remains a priority for FY22.
Board objectives are in place and a rolling agenda was adopted.
The Board and Nomination Committee focused on recruiting and
embedding new senior management in FY21. The Board received
a training session on corporate culture in July 2022 and a review
of company culture is expected to complete in FY22.
The Board stood down this committee in order to bring ESG
matters back to the main Board in light of their importance and
centrality to the Board’s forward agenda. Following the
development of the B Corporation target, the Board intends to
establish an ESG Committee during FY22 and is currently finalising
its remit, scope and membership.
Ask the Company Secretary to facilitate an overall review of
Board administration including induction processes, timeliness,
format and content of Board papers, visibility of the Board’s
forward agenda, Board visits and engagement with the wider
workforce and additional training for Directors including in
relation to legal, regulatory and corporate governance changes.
A new General Counsel and Company Secretary joined the
Company in June 2020 and oversaw a review of the Board’s
reserved matters along with the introduction of standard Board
paper formats, annual agendas and other process improvements.
These improvements were viewed positively in the Board's FY21
evaluation questionnaires.
Working with the Nomination Committee the Board should
review Board and senior leadership succession planning,
which should include external benchmarking where relevant.
To commence this process a Board skills review was undertaken
by Ffion Hague at Independent Board Evaluation. ELT talent
review and succession planning has been a focus at Nomination
Committee meetings and Norman Broadbent plc have been
appointed to develop talent further.
Review risk management processes to ensure fitness for
purpose and alignment to the Company’s strategic objectives.
Refreshed risk management processes have been adopted.
PZ Cussons plc Annual Report and Financial Statements 2021 77
2021 Board and Board Committee effectiveness review
Internally facilitated reviews via questionnaire of the Board, Board Chair, Nomination Committee, Remuneration
Committee and Audit & Risk Committee were used for the Board and Board Committee effectiveness reviews for
2021. The emphasis of the exercise was to follow up on the recommendations of the 2020 evaluation and to establish
priorities for FY22. Separate questionnaires were completed for each of the Board and the Board Committees. The Board
questionnaire was completed by all of the Directors and the Company Secretary. Members of each Board Committee
along with regular attendees at Committee meetings completed the Board Committee questionnaires. Each Committee
considered the results of their evaluations. A separate questionnaire was also completed by all Directors and the
Company Secretary on the performance of the Chair. On the whole, the evaluations were positive and concluded that
good progress had been made by a refreshed Board in a busy and volatile year.
Recommended objectives for FY22 which were adopted by the Board include, in addition to those listed in each
Committee section:
• Complete a review of Company culture to ensure alignment to new strategy and purpose
• Finalise the remit and scope of an ESG Committee to oversee delivery of the Company's sustainability and related goals
• Agree ESG targets and KPIs to align to external reporting goals.
Committee activity during the year
July 2020
September 2020
November 2020
March 2021
May 2021
• ELT recruitment
• Update on Non
• Update on Non
• Update on CFO
recruitment
update
• Board skills matrix
• Talent review and
presentation
succession planning
• Approval of the
Nomination
Committee Report
Executive recruitment
process including skill
set discussion and
consultant
appointment
• Re-appointment
of D Kucz
Executive recruitment
process
• ELT talent review and
succession planning
• Approval of a Director
appointment and
induction policy
• Committee Report
for the Annual
Report planning
• Consideration of the
Committee evaluation
• Approval of terms
of reference
• Review Board Committee
memberships
• Progress on the
appointment of
a new CFO
• Talent development
update
• Update on UK MD
appointment and
recruitment process
• Consideration of
the Committee’s
effectiveness review
Caroline Silver
Nomination Committee Chair
30 September 2021
Strategic ReportFinancial StatementsGovernance 78
AUDIT & RISK COMMITTEE REPORT
DEAR SHAREHOLDERS,
I am pleased to present the
Committee’s report for the financial
year ended 31 May 2021 which sets
out a summary of the work of the
Committee and how it has carried out
its responsibilities during the year.
My tenure as Chair of the Committee
commenced with a Committee meeting
to review the findings of the KPMG report
commissioned by the Board to review the
Company’s internal control environment
following the departure of the former
CEO. As we reported in last year’s
Annual Report and Financial Statements,
the KPMG report did not result in any
findings which led to any material
misstatements, but it did highlight a
number of opportunities for key controls
to be improved or evolved. Over the
course of this year, management have
implemented a number of improvements
aimed at enhancing and evolving those
controls and a key focus area of the
Committee has been overseeing and
supporting management in this journey.
To provide further assurance, Internal
Audit has performed a review of the
management response to the KPMG
report. The Committee was pleased
to note that the review confirmed
improvements made by management in
a number of areas. However, a number
of gaps in the management response
were also identified by Internal Audit,
and the management did not achieve
all of the ambitious targets it had set to
improve internal controls. The Committee
has reviewed a remeditation plan from
management to address these gaps.
This regular focus from the Committee,
recognising the progress made while
supporting management to refocus and
correct course where necessary, helps
ensure continued focus on addressing
the KPMG report findings, with the
support of Internal Audit.
Jeremy Townsend
Audit & Risk Committee Chair
KEY RESPONSIBILITIES
• Monitor the integrity of the Financial Statements and announcements and
review significant financial reporting requirements, issues and judgements
• Recommend the appointment and removal, approve the terms and
remuneration, and assess the independence and performance of the
External Auditor, reviewing the scope, findings, cost effectiveness and
quality of the audit
• Review the adequacy and effectiveness of the Group’s risk management
systems and mitigation programmes
• Review the adequacy and effectiveness of the Group’s systems and
processes for internal financial control
• Review the effectiveness and output of the Group’s Internal Audit function
and programme
• Review the adequacy of the Group’s whistle-blowing arrangements and
procedures for detecting fraud
KEY PRIORITIES IN 2022
• Oversee and assess management's continued progress on internal controls
• Review financial accounting and reporting
AUDIT & RISK COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year are set out below:
Committee members
Member since
Current
Jeremy Townsend: Chair
Dariusz Kucz
John Nicolson
Tamara Minick-Scokalo
2020
2018
2016
2018
Retired at AGM
For attendance at the Audit & Risk Committee, the Board meetings and
other Board Committees please see the full attendance table on page 72.
PZ Cussons plc Annual Report and Financial Statements 2021 79
The Committee also reviewed
a number of other compliance
and related policies such as the
Anti-Fraud Policy and the Risk
Management Policy among others,
and reviewed the Committee’s
terms of reference to ensure
continued alignment with the
2018 UK Corporate Governance
Code and best practice.
We have reviewed the significant
financial reporting matters and
judgements identified by the
finance team and Deloitte through
the external audit process, and
the approach to addressing those
matters is set out in the table on
page 82 of this report.
As reported in the Financial Review
on page 52, the FRC conducted a
periodic review of the Company’s
FY20 Annual Report and Financial
Statements and sought to
understand a number of accounting
decisions and judgements. Following
that review the Company made
certain corrections or clarifications
in our financial reporting as well as
taking the opportunity to clarify and
improve its accounting and reporting
policies, decisions relating to which
can be seen in the 'Response to FRC
review' section on page 81.
Having carried out an externally
facilitated evaluation last year
we used an internally facilitated
questionnaire for the Committee
effectiveness review in 2021.
The results were positive with an
acknowledgement that there had
been improvements in a number of
areas. It was recognised, however,
that the Committee would benefit
from additional financial expertise
in order to avoid over-reliance
on individual members of the
Committee and this has been
addressed through the appointment
of Jitesh Sodha on 1 July 2021 as a
new Non Executive Director. Jitesh
is a seasoned FTSE 250 CFO and will
bring valuable financial expertise
and experience to the Committee.
Our regular programme of meetings
and discussions, supported by our
interactions with the Company’s
management, external auditor
and the quality of the reports
and information provided to us,
enables the Committee members
to effectively discharge our duties
and responsibilities.
This work has been aided by the
continued strengthening of our
management team which included
the addition of a permanent Group
Head of Risk and Internal Audit,
Derek Quirk, the appointment
of our new General Counsel and
Company Secretary, Kevin Massie,
a Deputy Company Secretary and
most recently with the appointment
of our new Chief Financial Officer,
Sarah Pollard.
Key internal controls improvements
during the year include i) the roll
out of a comprehensive Code of
Ethical Conduct that is supported by
a number of other policies, including
a refreshed whistleblowing policy
and process; ii) the launch of a new
Risk Management Framework and
related processes; and iii) a review
and proposed simplification of the
operating model, process design
and SAP framework in the Nigerian
business. These improvements
and fresh approaches have given
the Committee confidence that
we are on the right path to build
a more robust controls culture
within the business. While progress
has been made, the Committee is
aware that it is just the start of the
journey and there is considerable
work to be done to ensure that
i) we continue to improve the
controls environment, ii) that the
improvements already made are fully
embedded within the organisation,
and iii) that we employ sufficient
scrutiny and challenge to ensure
that the management improvement
programme fully responds to
the risks and improvement
opportunities identified by the
KPMG report. The importance of
this controls improvement process
is only heightened by the current
discussions and consultations around
audit reform and regulatory change
including the discussions around the
potential for UK regulation in respect
of internal controls on financial
reporting (UK SOx).
Strategic ReportFinancial StatementsGovernance 80
AUDIT & RISK COMMITTEE REPORT CONTINUED
How the Committee operates
In accordance with the Committee’s
terms of reference the Committee is
required to meet at least three times
a year. The Committee, however,
adopted a revised calendar from
FY20 so that there were four routine
Audit & Risk Committee meetings.
This enables a focus on the full year
and interim results in September
and January and a focus on internal
audit, risk and audit planning in the
remaining meetings. This year the
Committee also held an additional
meeting to receive the KPMG report.
There were therefore a total of five
meetings during the year.
Only members of the Committee
are entitled to attend the meetings.
However, other Directors and other
individuals (including representatives
of external advisers) may be invited
to attend for all or parts of any
meeting as and when appropriate.
The Chief Financial Officer, Group
Head of Risk and Internal Audit
and external audit lead partner
are invited to attend meetings of
the Committee on a regular basis.
During the year the Chair of the
Board, the Chief Executive Officer
and the Group Financial Controller
routinely attend to review specific
risks and mitigating action plans. The
Company Secretary acts as secretary
to the Committee.
Jeremy Townsend, Chair of the
Committee, has held a number of
senior finance director roles. He
served as Chief Financial Officer
of Rentokil Initial Plc, the FTSE 100
commercial pest control and hygiene
services business, until retiring in
August 2020. Jeremy Townsend is
also a former Accounting Council
Member of the Financial Reporting
Council and has been a Non Executive
Director and Chair of the Audit
Committee of Galliford Try plc since
2017; and joined the Board of WM
Morrison Supermarkets plc as a Non
Executive Director and Chair of the
Audit Committee in July 2020. The
experience of the other Committee
members is summarised on pages
64 and 65. The Board considers each
Committee member is independent
and has broad and diverse spread of
commercial and relevant industry
experience, such that the Board is
satisfied that the Committee has the
appropriate skills and experience to
be fully effective and meets the 2018
Code requirement that at least one
member has significant, recent
and relevant financial experience.
Activities during the year
Relationship with the
External Auditors
The Committee has primary
responsibility for managing the
relationship with the external
Auditor, including assessing
their performance, effectiveness
and independence annually and
recommending to the Board their
reappointment or removal.
Following a comprehensive tender
in 2017, Deloitte LLP (Deloitte) were
appointed as the Group’s Auditor so
this is their fourth year of auditing
the Group. We will keep under
review the need for future tenders in
accordance with current regulations
and subject to annual assessment
of the Auditor’s effectiveness and
independence.
Jane Boardman has been lead
partner since Deloitte became the
Company’s auditors for FY18. It is
expected that she will rotate off
the audit following the FY22 audit.
During the year, the members of
the Committee had the opportunity
to meet with representatives from
Deloitte without management
present, to ensure that there were
no issues in the relationship between
management and the external
auditor which it should address.
There were no issues raised in this
regard throughout FY21.
The Committee considers the nature,
scope and results of the external
auditor’s work and reviews, develops
and implements a policy on the
supply of any non-audit services that
are to be provided by the external
auditor. It receives and reviews
reports from the Group’s auditors
relating to the Group’s Annual Report
and Financial Statements and the
external audit process.
In respect of the audit for the
financial year ended 31 May 2021,
Deloitte presented their audit plan
(prepared in consultation with
management) to the Committee. The
Audit plan included an assessment
of audit risks, and robust testing
procedures.
The Committee approved the
implementation of the plan following
discussions with both Deloitte and
management.
Audit and non-audit fees
The Company paid £2.0m in audit
fees for the financial year ended
31 May 2021.
Regarding non-audit services, the
Company has a practice of limiting
Deloitte LLP to working on the audit
or such other matters where their
expertise as the Company’s auditor
makes them the logical choice for
the work. This is to preserve their
independence and objectivity. The
Company did not pay any non-audit
fees to Deloitte for the financial year
ended 31 May 2021. There is therefore
no non-audit fee to audit ratio.
Effectiveness and independence
The Chair of the Committee speaks
regularly to the audit partner to
ascertain if there are any concerns,
to discuss the audit reports and to
ensure that the auditor has received
support and information requested
from management.
In accordance with the guidance
set out in the Financial Reporting
Council’s ‘Practice aid for audit
committees’ the assessment of
the external audit has not been a
separate compliance exercise, or an
annual one-off exercise, but rather
it has formed an integral part of the
Committee’s activities.
This has allowed the Audit &
Risk Committee to form its own
view on audit quality, and on the
effectiveness of the external audit
process, based on the evidence it
has obtained during the year.
PZ Cussons plc Annual Report and Financial Statements 2021 81
Sources of evidence obtained and observations during the year:
By referring to the FRC’s
Practice aid on audit quality.
The Committee has looked to this practice aid for guidance and has ensured that assessment
of the audit is a continuing and integral part of the Committee’s activities.
Observations of, and
interactions with,
the External Auditor.
The Committee has met with the Audit Partner without management and has had an open
dialogue regarding the Committee’s view of Deloitte’s performance and overall working
relationship between the Company and its External Auditor.
The audit plan, the audit
findings and the External
Auditor external report.
The Committee scrutinises these documents and reviews them carefully at meetings and by
doing so the Committee has been able to assess the External Auditor’s ability to explain in clear
terms what work they performed in key areas, and also assess whether the description used
is consistent with what they communicated to the Committee at the audit planning stage.
The Committee has also regularly challenged these reports in the meetings.
Input from those
subject to the audit.
The Committee has requested the insights from the Chief Financial Officer, the Group Head
of Risk and Internal Audit and the Group Financial Controller during the audit process.
Having regard to these matters the Committee has considered the effectiveness of the External Audit Process and
feels that the External Auditor has demonstrated professional scepticism and challenged management’s assumptions
where necessary.
The Audit Committee is satisfied with the scope of Deloitte’s work, and that Deloitte continues to be independent
and objective.
Response to FRC review
As reported in the Financial Review on page 52 the Company received a letter from the FRC on 22 April 2021 setting out
its questions and observations in relation to its review of the Company’s FY20 Annual Report and Financial Statements.
The review conducted by the FRC was based solely on the Company's published FY20 report and financial statements and
does not provide any assurance that the report and financial statements are correct in all material respects. The Company
responded to the FRC letter within the agreed time period and has, as a result of the FRC observations and its own
review, made certain restatements and corrections to the Company’s prior reporting and made additional changes to our
accounting policies for the current and subsequent years. The significant observations made by the FRC and the Company’s
responses are summarised below.
FRC Observation
Company Response
Accounting treatment and related
narrative disclosure for the
Company’s disposal of its Greece
business; the Luksja brand in
Poland; and the Nutricima milk
business in Nigeria.
• Noted FRC observations and reviewed accounting judgements and policies including the
interpretation of IFRS 5.
• Made certain adjustments to the FY20 figures presented in the comparative figures in its FY21
accounts which are summarised in note 1c on page 136.
• Acknowledged an opportunity to improve narrative disclosure on subsequent transactions and
to improve consistency between the front and back sections of the annual report and accounts.
Clarification of the assumptions
used in determining the discount
rates and long-term growth rates
used for the impairment testing
of goodwill and intangible assets
Use of Alternate Performance
Measures and adjustment of
EBITDA for amortisation
Use of exceptional items and the
basis for concluding that these
items were not representative
of the underlying trading of
the Company
• Explained movement in discount rates from year to year related to economic factors and
change in methodology to use a peer group average beta rather than a company specific beta.
• Acknowledged an opportunity to improve narrative disclosure of similar changes in future.
• Made minor corrections in presentation of adjusted EBITDA for FY20 and FY19 in relation to
treatment of amortisation.
• Provided detail on key restructuring projects treated as exceptional items in prior years to
explain the basis for concluding that these items were not representative of the underlying
trading of the Company.
• Acknowledged an opportunity to improve narrative disclosure of these items to enhance the
reader’s understanding of the underlying performance of the Company.
Recycling of Nutricima foreign
exchange reserves on disposal
• Provided further explanation of the accounting treatment of the foreign exchange reserves
on disposal, which is set out in greater detail in note 28 on page 190.
Strategic ReportFinancial StatementsGovernance 82
AUDIT & RISK COMMITTEE REPORT CONTINUED
Key judgements and estimates
The Committee reviewed the external reporting of the Group including the interim review and the Annual Report
and Financial Statements, as well as the matters raised in the letter from the FRC. In assessing the Annual Report
and Financial Statements, the Committee considers the key judgements and estimates. The significant issues and
improvements considered by the Committee in respect of the year ended 31 May 2021 are set out in the table below:
Significant issues
and judgements
Decisions and improvements
Areas of
significant
financial
judgement
The Committee considered a number of areas of significant financial judgement throughout the year, particularly
those referenced within the FRC review letter which is summarised on the previous page. The key areas covered
involved the accounting treatment related to the disposal of Nutricima and particularly the associated recycling
of historical foreign exchange losses; the Group’s decision to move away from presenting exceptional items in
the income statement, instead now identifying specific adjusting items; the treatment of uncertain tax positions
across the Group; and impairment testing of goodwill, intangible assets and tangible assets and associated
discount rates. The Committee accepted the judgements recommended by management having challenged
them and considered alternative options.
Internal controls
The Committee monitored progress against the KPMG report and instructed an internal audit to review the
management response which, among other things, recommended an ongoing assessment of the adequacy and
appropriateness of the management actions recommended by the KPMG report as well as a renewed focus on
embedding controls improvements throughout the Group. The Committee will continue to monitor internal
controls improvements in FY22.
Risk management
The Committee oversaw the adoption of a revised risk management framework led by the new Group Head of
Risk and Internal Audit. This included the standardisation of risk management methodology and registers across
the Group. The Committee plans to focus on assessing key risks and integrating risk management reporting in FY22.
Whistleblowing
Supported and oversaw the roll-out of the new whistleblowing hotline system and the launch of the Code of
Ethical Conduct, facilitated by the Ethics & Compliance Committee.
Internal
audit model
The Committee approved a revised internal audit resource model to better take advantage of the benefits of
developing internal capability while still utilising external expertise where appropriate.
RISK MANAGEMENT AND INTERNAL CONTROLS
Internal control structure
The Board oversees the Group’s risk
management and internal controls
and determines the Group’s risk
appetite. The Board has, however,
delegated responsibility for review of
the risk management methodology,
and the effectiveness of internal
controls, to the Audit & Risk
Committee.
Review of control environment
Following receipt of the KPMG report,
management prepared a detailed
action plan responding to each of the
recommendations made by KPMG
with clear executive ownership and
timelines for each recommendation.
The Audit & Risk Committee
oversees the implementation of
management’s responses to the
KPMG report and receives a report
on progress at each meeting.
Internal Audit now tracks progress
against the target dates agreed and
have carried out a design review
of all management responses to
the KPMG report as well as an
operational review of controls
already established. Actions that
were required included the phased
roll out of a Code of Ethical Conduct
throughout the organisation.
Financial control improvements have
also been progressed including the
further development of a Group-wide
framework of control, balance sheet
account reconciliations controls and
the completion of a management self-
assessment exercise. EY have been
engaged by the Company to review
the Nigerian business’ SAP processes,
and the Committee receives updates
on the progress of this review and
management’s responses to improve
and simplify SAP processes in the
Nigeria business. The Company’s
financial control and reporting
capability has also been improved
through the appointment of a new
assistant financial controller and
a new Group financial controller.
An ad-hoc Ethics & Compliance
Committee was formed to oversee
the implementation of certain
agreed actions relating to ethics
and compliance controls. In particular
the Ethics & Compliance Committee
oversaw the development and roll
out of the Code of Ethical Conduct.
This code provides a framework
document for the PZ Cussons
new ethics and compliance system.
The Code is supported by other
policies that have also been
refreshed including:
• Conflicts of interest policy –
setting expectations for avoidance
of conflicts
• Whistleblowing policy – setting the
expectation of a ‘speak up’ culture
• Gifts and hospitality policy –
establishing the circumstances
for gifts and hospitality
• Inside information and share
dealing policies – ensuring
compliance with Listing and
Market Abuse Regulations rules
PZ Cussons plc Annual Report and Financial Statements 2021 83
• Anti-fraud policy – establishing
a zero tolerance for fraud
• Failure to prevent the facilitation
of tax evasion policy – ensuring
compliance with the duty to
prevent criminal facilitation
of tax evasion
• Risk management policy.
While the Committee notes the
controls improvements made over
the course of FY21, it is also clear
that considerable work remains to
achieve the Company's target level
of internal controls effectiveness,
particularly in light of the recent
discussions surrounding a potential
UK version of the Sarbanes-
Oxley Act. In particular, the
Committee noted Internal Audit
recommendations for additional
challenge and scrutiny to ensure
that the controls improvements
implemented by management are
fully embedded throughout the
organisation and fully responsive
to the underlying controls risks to
which they relate.
Internal audit function
A key source of internal assurance
is delivery of an internal audit
plan, which is designed to help the
organisation achieve its strategic
priorities. The internal audit function
is led by the Group Head of Risk and
Internal Audit, Derek Quirk, who
joined the business in May 2020.
Derek supervises the internal audit
teams based in the Company’s main
markets. There are in-house internal
audit teams in Africa and Asia and
in the UK the function is co-sourced
with the Company’s internal audit
partner, KPMG LLP.
An updated Internal Audit Charter
was adopted in July 2020. The
Internal Audit Charter provides
a framework within which the
Internal Audit function operates
and formalises the arrangements
approved by the Committee for
the Group Internal Audit function
within the Company. The Charter re-
confirms that the Internal Auditing
function is an independent and
objective assurance and consulting
activity that is guided by a philosophy
of adding value to improve the
operations of the Company.
It assists the Company in
accomplishing its objectives
by bringing a systematic and
disciplined approach to evaluate
and improve the effectiveness of
the organisation's governance, risk
management and internal control.
The FY21 Internal Audit Plan was
approved by the Audit & Risk
Committee in May 2020. The Group
Head of Risk and Internal Audit
reports progress against this plan
and highlights significant findings at
the Committee meetings. The Group
Head of Risk and Internal Audit also
has regular meetings with the Audit
& Risk Committee Chair and the CFO.
Whilst the Covid-19 pandemic has
prevented internal audit operational
site visits, the in-house teams, being
resident in-country, have been able
to continue to visit operational units.
Other assessments have been done
remotely, leveraging technology to
assist in the process.
The Committee has assessed
the effectiveness of the internal
audit function as part of its annual
performance evaluation process
and is satisfied that the current
arrangements remain appropriate
and effective for the Company.
Indeed, the Committee is confident
that the new Group Head of Risk
and Internal Audit has assisted the
Committee in building a more robust
controls culture across the Company.
Risk management
While the Board oversees the Group’s
risk management it delegates
responsibility for review of the risk
management methodology and
effectiveness of the risk management
process and the effectiveness of
internal controls to the Audit & Risk
Committee. During the year a renewed
Risk Management Policy has been
adopted to drive a consistent Group-
wide approach to risk determination,
analysis, recording and management
and to ensure that reasonable steps
are taken to mitigate risk. The Policy
reaffirms that the Group recognises
that the management of risk is an
important component of good
management practice and that the
Group has an open and receptive
approach to identifying, discussing
and addressing risk.
The risk policy is underpinned by
a revised framework that outlines
the Group’s underlying approach
to risk management, documents
the roles and responsibilities of
key stakeholders and outlines key
aspects of the risk management
process and identifies the main
reporting procedures.
This risk management process
and risk framework ensures
that we capture and mitigate
risks to the successful delivery
of strategic objectives. The risk
management process covers
initial risk identification, including
emerging risks, assessment of
the gravity of the risk, target risk
and risk velocity, the extent to
which risks can be mitigated and
planning for and implementing
effective risk mitigation activities.
The Group operates both top-
down and bottom-up approaches
to ensure that significant strategic
and operational risks are identified.
The Group Internal Audit function
provides independent assurance
to both management and the
Committee on the effectiveness
of the Group’s risk management
framework and as to whether sound
internal control systems operate to
mitigate these risks. Recognising
that the roles of head of risk and
head of internal audit are combined,
the Committee takes specific steps
to ensure the independence of
the Group internal audit function.
Accordingly, the Committee is
satisfied that the risk management
framework and internal control
systems are effective.
Whistleblowing policy
The Company is required to
maintain, subject to the oversight
by the Audit & Risk Committee, a
mechanism for the confidential
reporting of suspected fraud and
other wrongdoing. The Company
previously maintained a 'speak up'
policy within the framework of its
anti-bribery policy documentation
and engaged the services of an
external provider to operate a
confidential telephone and web-
based reporting system.
Strategic ReportFinancial StatementsGovernance 84
AUDIT & RISK COMMITTEE REPORT CONTINUED
Following the receipt of the KPMG
report the effectiveness of that
system was questioned. The General
Counsel and Company Secretary
reviewed the whistleblowing
systems and recommended that
the Board adopt a new stand-alone
Whistleblowing Policy as part of the
wider work on the Code of Ethical
Conduct. Navex Global, a leading
whistleblowing system provider, was
engaged to provide a new telephone
and web-based reporting system
in October 2020 for use with the
Whistleblowing Policy.
Once approved the Whistleblowing
system and policy was launched to
the workforce. The launch consisted
of internal social media posts with
an awareness contest, intranet posts,
ELT cascades, desktop background
changes to highlight whistleblowing
and posters being placed in
prominent locations around all
offices. The whistleblowing system
is independently monitored by the
internal audit function. The Committee
receives regular whistleblowing
reports and reports on the
effectiveness of the Whistleblowing
policy and reports regularly to the
Board on these matters.
Statement of compliance
The Company confirms that it has
complied with terms of The Statutory
Audit Services for Large Companies
Market Investigation (Mandatory
User of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 ('the
Order') throughout the year. In
addition to requiring mandatory
audit re-tendering at least every ten
years for FTSE 350 companies, the
Order provides that only the Audit
Committee, acting collectively or
through its Chair, and for and on
behalf of the Board is permitted:
• To the extent permissible in law
and regulation, to negotiate and
agree the statutory audit fee and
the scope of the statutory audit
• To initiate and supervise a
competitive tender process
• To make recommendations to
the Directors as to the External
Auditor appointment pursuant
to a competitive tender process
• To influence the appointment of
the audit engagement partner
• To authorise an External Auditor
to provide any non-audit services
to the Group, prior to the
commencement of those non-
audit services.
We undertook an audit tender
in 2017, which resulted in the
appointment of Deloitte LLP. The
Committee has considered Deloitte’s
performance annually as External
Auditor and the Chairs of the Board
and of the Committee met with
Deloitte during the year to assess
the operation of the audit from the
perspective of both parties. As a
result, the Committee recommended
to the Board that Deloitte LLP be
offered for reappointment at the
2021 Annual General Meeting.
The Board is ultimately responsible
for the Group’s system of internal
controls and risk management and
discharges its duties in this area by:
• Holding regular Board meetings
to consider the matters reserved
for its consideration
• Receiving regular management
reports which provide an
assessment of key risks and
controls
• Scheduling regular Board reviews
of strategy including reviews of
the material risks and uncertainties
(including emerging risks) facing
the business
• Ensuring there is a clear
organisational structure with
defined responsibilities and levels
of authority
• Ensuring there are documented
policies and procedures in place
• Seeking assurance from the Group
Internal Audit function
• Reviewing regular reports
containing detailed information
regarding financial performance,
rolling forecasts, actual and
forecast covenant compliance,
cash flows and financial and
non-financial KPIs.
Notwithstanding the Board's
conclusion that the Group's internal
controls processes meet the
required standards, the Audit & Risk
Committee continues to monitor a
number of areas which fall short of
the Company's expectations for our
controls environment.
Fair, balanced and understandable
The Directors are required to
confirm that they consider, taken as
a whole, that the Annual Report is
fair, balanced and understandable
and that it provides the information
necessary for shareholders to
assess the Company’s position
and performance, business model
and strategy.
The Committee has satisfied itself
that the controls over the accuracy
and consistency of information
presented in the Annual Report are
satisfactory, that the information
is presented fairly (including the
calculations and use of alternative
performance measures) and has
confirmed to the Board that the
processes and controls around the
preparation of the Annual Report
are appropriate allowing the
Board to make the 'fair, balanced
and understandable statement'
in the Directors’ Responsibilities
Statement.
Financial reporting
The Company reports to
shareholders on its financial
performance twice a year. During
the 12 months prior to the date of
this report, the Audit Committee
reviewed the interim financial
statements for the six months to
30 November 2020 and the full-year
financial statements and Annual
Report for the year to 31 May
2021. The principal steps taken by
the Audit Committee during the
past 12 months in relation to its
review of the published financial
statements were:
• Review of the 2020 interim
financial statements and 2020
Interim Announcement and
consideration of Deloitte’s
comments on the drafts of
these documents
PZ Cussons plc Annual Report and Financial Statements 2021 85
• Review of plan for preparing
the financial statements and
Annual Report for the year
ending 31 May 2021
• Review of the significant
judgements and estimates
that impact the financial
statements and
• Review of the financial statements
and Annual Report for the
year ending 31 May 2021 and
consideration of Deloitte’s
comments on these documents.
The Audit Committee monitors the
implications of new accounting
standards and other regulatory
developments for the Company’s
financial reporting and regularly
receives technical updates from the
External Auditors. These technical
updates have kept the Committee
informed on the UK Corporate
Reform and the expected timescales,
the Audit Market Reform and the
likely introduction of UK regulation
in respect of internal controls on
financial reporting (UK SOX).
Viability statement and going concern
The Committee has reviewed the
basis for the Company’s Viability
Statement that is drafted with
reference to the financial forecasts
for the next three years. In light of
the significant impact of Covid-19 on
the Global economy, the Committee
placed additional scrutiny on the
assumptions used in the forecasts
to ensure they are appropriate. The
Committee provides advice to the
Board on the Viability Statement.
The Committee ensured sufficient
review was undertaken of
the adequacy of the financial
arrangements and cash flow
forecasts. Accordingly, the
Committee recommended to
the Board that the statement
be approved.
Similarly, and again in light of the
significant impact of Covid-19 on
the Company’s operations, the
Committee placed additional focus
on the appropriateness of adopting
the going concern basis in preparing
the Group’s financial statements
for the year ended 31 May 2021
and satisfied itself that the going
concern basis of presentation of the
financial statements and the related
disclosure is appropriate.
June 2020
July 2020
September 2020
January 2021
May 2021
• Receipt of the
KMPG report
• Update on key
• Update on key
• Update on key
• Update on key
accounting issues
and judgements
accounting issues
and judgements
accounting issues
and judgements
accounting issues
and judgements
• External Auditor Report
• Fair, balance and
• Audit planning
• External Auditor Report
to the Committee
understandable review
• KPMG report
to the Committee
• Review of draft
• Approval of the
progress update
• KPMG report
Committee report in
Annual Report and
Financial Statements
Committee report
• External Auditor Report
to the Committee
• External Auditor
Report to the
Committee
• Review of the litigation
report
• Update on the progress
of internal audit
• Approval of the internal
Audit Charter
• KPMG report progress
update
• Review of Annual Report
and Financial Statements
and announcements
• Approval of the
interim results
announcement
•
Internal audit update
•
Internal audit update
• KPMG report progress
• Risk management
update
framework
• Whistleblowing
update
progress update
• Full-year risk review –
risk management
framework and risk
management policy
•
Internal audit update,
plan and resourcing
model. Approving the
internal audit charter
• Whistleblowing update
• Review the Committee
evaluation report
• Review and amendments
to the Committee terms
of reference
Jeremy Townsend
Audit & Risk Committee Chair
30 September 2021
Strategic ReportFinancial StatementsGovernance 86
REMUNERATION COMMITTEE REPORT
Kirsty Bashforth
Chair of the Remuneration
Committee (from 1 July 2020)
KEY OBJECTIVE OF THE COMMITTEE
In line with its delegation from the Board, the Committee sets the Company’s
Remuneration Policy for approval by shareholders and is responsible for the
terms and conditions of the remuneration of members of the Board and
senior executives.
KEY RESPONSIBILITIES OF THE COMMITTEE
• To set, develop and oversee the implementation of the Directors’
Remuneration Policy for the Executive Directors and senior executives,
having regard for the remuneration principles of the wider organisation
and the relationship between the remuneration of the members of the
Board and the wider workforce.
• To evaluate the performance of and determine specific remuneration
packages for each Executive Director, the Chair, the Company Secretary
and the other senior executives.
• To maintain an active dialogue with stakeholders, ensuring that
shareholders and other advisory bodies’ views are taken into account when
setting the remuneration of senior executives and members of the Board.
Detailed responsibilities are set out in the Committee’s terms of reference,
which can be found on the Company’s website www.pzcussons.com.
PRIORITIES FOR 2022
• Complete a tender for Committee advisor
• Review engagement with the workforce on executive remuneration
• Consider how to encourage equity-based remuneration more widely
through the Company
REMUNERATION COMMITTEE MEMBERSHIP
Committee members
Member since
Current
Kirsty Bashforth: Chair
Dariusz Kucz
Jeremy Townsend
Helen Owers
2019
2018
2020
2012
Retired at the AGM
For attendance at the Remuneration Committee, the Board meetings and
other Board Committees please see the full attendance table on page 72.
DEAR SHAREHOLDERS,
On behalf of the Board, I am pleased
to present our 2021 Remuneration
Committee Report. This report is
divided into three sections:
1) This Remuneration Committee Chair
Statement – providing a summary of
the Committee’s activities throughout
the year and the key decisions that
we made.
2) The Remuneration Policy – the
2021–2023 Policy which was approved
by our shareholders in a binding vote
at the 2020 AGM.
3) The Report on Directors'
Remuneration – a report on
remuneration which details how
the policy was applied throughout
the 2021 financial year and how the
Committee intends to apply the Policy
in the upcoming financial year, which
will be subject to an advisory vote at
our 2021 AGM.
This has been a busy first year as Chair
of the Committee: a new management
team, refreshed strategy, Covid-19 and
the continued increasing criticality of
sustainability providing the backdrop
to remuneration decisions. In such a
changing context, we continue to be
ready to adjust specifics in the policy to
ensure alignment and relevance in being
able to objectively review performance.
Background to remuneration decisions
With Jonathan Myers joining the
Company as CEO just before the start
of this financial year and Sarah Pollard
joining as CFO in January 2021, this year
has seen a re-invigoration and renewal of
the strategic direction for the Company,
laying the foundations for sustainable,
profitable revenue growth. There has
been revenue and profit growth in all
regions, driven by double digit growth in
Must Win Brands. Coupled with increased
strategic investment in our brands, we
have seen revenue grow 2.7% to £603.3m
versus 2020, with adjusted profit before
tax before continuing operations up 11%
year-on-year to £68.6m.
The constant presence of Covid-19
has been considered in-depth by the
Committee when assessing performance
and setting targets. Management
approached the pandemic in a focused
and nuanced manner and the Committee
PZ Cussons plc Annual Report and Financial Statements 2021 87
satisfied itself that the strong
performance of the Company was
attributable to the actions of the
management team and not unduly
aided by events out of its control:
• While Hygiene products saw
unprecedented demand,
management acted fast to ensure
the supply of raw materials and to
divert production capacity to meet
that demand.
• Beauty products experienced
restricted distribution routes
and reduced demand, and the
Committee welcomed the
accelerated move into e-commerce
opportunities to overcome
significant disruption and
capture demand as it returned.
With regards to the Covid-19
experience of the wider workforce
and the context of the wider
market the Committee noted that:
• The Company did not engage in
any Covid-19 related redundancy
programmes nor did it utilise any
voluntary government support
packages in any of its markets
other than UK VAT relief which
applied to all UK businesses and
which was repaid early.
• Significant investments were
made by the Company to ensure
employee wellbeing, including
technology and allowances to
enable and support remote
working, enhanced safety and
sanitation in production facilities,
testing for factory staff in the UK
and Africa, financial support for the
provision of vaccines to employees
in Indonesia, wellness and fitness
offerings and new permanent
flexible working principles.
• All employee bonuses were paid.
• As normal during the pandemic,
and with the exception of a short
delay to the pay review at the
height of the lockdowns, employee
salary reviews and increases were
unaffected.
On this basis, the Committee
determined it would not be
appropriate to apply discretion
to reduce FY21 bonus payments
for the Executive Directors.
Remuneration governance
Throughout the year the Committee
has comprised exclusively
independent Non Executive Directors
in accordance with the 2018 Code.
Helen Owers was Committee Chair
until 1 July 2020 when she stepped
down from the Committee and the
Board, at which point I formally took
over as Committee Chair.
The Committee held six scheduled
meetings during the 2021 financial
year with our activities summarised
in the box on page 72. The Company
Secretary serves as secretary to
the Committee and attends all
meetings. Only members of the
Committee are entitled to attend,
however, the Board Chair, the
Chief Executive Officer, the Chief
Financial Officer, the Chief Human
Resources Officer and the Group
Reward Director attend meetings by
invitation where this is appropriate.
They do not participate in any
discussion regarding their own
remuneration. The Committee’s
remuneration advisors, Korn Ferry,
also attend meetings by invitation
and the details of the Committee’s
relationship with its advisors can be
found on page 108.
Board changes
This year Sarah Pollard was
appointed to the Board as CFO. Her
remuneration was set in line with the
Remuneration Policy on a salary of
£325,000 and a pension contribution
in line with the majority of the UK
workforce at 10% of salary.
She also participates in the annual
bonus and Performance Share Plan
with an opportunity of 125% of salary
under each. Given that she joined part
way through the year, the opportunity
for 2021 was based on her pro-rata
salary since appointment. Sarah also
received compensation totalling
£131,015 on joining the Company
to compensate her for outstanding
shares forfeited on departure from
her former employer. The payment
was of equal value to the shares
forfeit at the time of joining the
Company and she agreed to use
the net proceeds of the payment to
acquire PZ Cussons shares and to hold
these against the Company’s share
ownership guidelines.
Had she remained in employment the
net of tax value of the shares forfeit,
which did not have any performance
conditions, would also have been
retained and so the buyout was a
like-for-like replacement.
Shareholder engagement
The Committee recognises the
importance of understanding the
perspective of shareholders when
taking decisions. We communicate
with our shareholders during both
Remuneration Policy reviews and in
advance of any significant changes
to the implementation of our policy.
While we note that there are a range
of different views among institutional
investors on the most appropriate
pay models and performance metrics,
we will always consider the views
expressed to us and explain why we
take a different approach if we choose
to do so. In relation to our approach
to engagement during 2020, we were
pleased to be recognised for our
pro-active approach by JO Hambro
in a case study included in their 2020
Stewardship Report. The Committee's
discussions on sustainability targets
for the FY22 LTIP and beyond, in
particular, have been informed by
these discussions.
Employee engagement
The Committee seeks to understand
and incorporate the perspective
of the broader workforce to inform
its decisions:
• Board engagement with
Town Halls, digital forums and
engagement surveys takes place
throughout the year (see page 28
for further details).
• During the year, the Committee
Chair and Dariusz Kucz (designated
employee engagement Non
Executive Director) attended
a workforce forum to outline
the approach to executive pay
and its alignment with strategy
and the wider pay policies. The
alignment of pension contributions
for executives with the wider
workforce was welcomed, and the
importance of 'sharing the pain
and the gain' when determining
incentives was reiterated.
Strategic ReportFinancial StatementsGovernance 88
REMUNERATION COMMITTEE REPORT CONTINUED
• The Committee oversaw not just
changes to the executive bonus
plan but also the way this cascaded
into the organisation, for example,
through the application of LTIP
below the Executive Director
level, to ensure greater alignment
between executives and the
broader senior team.
• A share incentive plan which allows
all UK employees to participate in
equity-based remuneration was
approved during FY21 and is set
for launch in FY22.
The Committee reaffirmed that the
changes made to remuneration in
FY21 were appropriate and took
account of employees’ views.
The Committee also agreed, as
a priority for FY22, to consider
additional ways to better encourage
equity-based remuneration through
the wider workforce, building on
foundations laid in FY21.
Remuneration earned during
the year ended 31 May 2021
The key aspects of remuneration
earned during the year are as follows:
Salary
• Jonathan Myers' salary on
appointment as Chief Executive
Officer in May 2020 was £575,000
and this was not subject to review
in FY21.
• Sarah Pollard was appointed as
Chief Financial Officer in January
2021 on a salary of £325,000.
With regard to both Executive
Directors, in line with the
Company’s Remuneration Policy,
the Committee intends to ensure
that base salary levels achieve
market competitive positioning
based on performance and
increased experience in post
over an appropriate period.
Annual bonus payout
• The 2021 annual bonus included
targets primarily relating to
three key financial indicators:
adjusted profit before tax, revenue
growth and net working capital
percentage, with the balance of
the bonus being subject to delivery
against key business objectives.
• Given the strong financial
performance in the year, with
revenue and profit growth across
all regions, 100% of the 80% of
bonus assessed against financial
performance was achieved. The
Committee also assessed the
performance against the key
business objectives which focused
on Organisational Effectiveness
and Strategic Execution and
determined that 100% of the 20%
available was earned. Full details
of the performance assessment
against both the financial and key
business objectives can be found
on page 102.
• As such, overall 100% of the
maximum bonus was earned
by the Chief Executive Officer
and Chief Financial Officer.
The Committee is comfortable
that this is in line with underlying
corporate performance and
shareholder experience over the
year. The outturn is also in line
with the experience of the wider
workforce with maximum bonus
being awarded in a number of
operating units and bonus in line
with target in the majority of others.
• In line with the Policy approved at
the 2020 AGM, one quarter of the
bonus will be deferred into shares
for three years.
Long-term incentives
• Given their recent appointments,
there were no Performance Share
Plan ('PSP') awards vesting to the
current Executive Directors in
respect of performance periods
ending 31 May 2021.
• Jonathan Myers was granted a PSP
award during 2021 over shares to
the value of 150% of salary and
following appointment in January
2021, Sarah Pollard was granted a
PSP award over shares to the value
of 125% of salary, pro-rata for the
period since appointment. These
awards will vest to the extent EPS,
Strategic Revenue Growth and
Sustainability targets are met
over the period to 31 May 2023
with any shares vesting subject
to a two-year holding period.
Wider employee remuneration
context
• Over the course of FY21, the
Committee expanded performance
based elements to pay below
Executive Director level and added
a restricted stock component
below Executive Director level. It
is the Committee’s view that this is
necessary to enable the Company
to compete internationally for
the best executive talent with
restricted stock being a common
form of incentive offered among
companies against which we
compete. Use of stock is considered
to be a powerful tool to enable the
alignment of interests of senior
managers with shareholders and it
will also help retain and motivate
key members of our current and
future leadership teams. The
Committee reviews retention
and recognition restricted stock
awards twice a year. The quantum
of restricted stock awards
granted when compared against
performance shares was adjusted
to reflect the greater certainty of
rewards in line with normal market
practice. These awards were very
well received by recipients. The
Committee received shareholder
approval for the implementation
of employee share purchase plans
in the United Kingdom and other
markets where feasible.
Discretion
• In July 2021, the Committee
agreed to recommend an
approximately 15% increase to the
LTIP award issued to the CEO in
November 2020. The Committee
approved similar enhanced awards
to all other participants in the LTIP
in recognition of performance
under challenging conditions and
to ensure appropriate incentives
and retention following the
considerable changes in the ELT
in a short period. The Committee
further recognised the strong start
made by the CEO and his quick
delivery of a new strategy and
improved business performance.
This increase is subject to
shareholder approval and further
details are set out in the notice
of meeting for the 2021 AGM.
PZ Cussons plc Annual Report and Financial Statements 2021 89
• The range of targets in both the
annual bonus and LTIP are set with
reference to both internal planning
and external market expectations
for the Company’s performance.
Further details of the approach to
remuneration for FY22 are set out
on pages 102 to 105.
Concluding remarks
Our approach to remuneration under
the new policy is focused on providing
clear alignment between strategy,
incentives, stakeholder experience
and the relevant principles of the
2018 Code. It is never a precise science
and requires judgement on wider
contextual issues alongside the strict
outturn calculations, to ensure the
right balance. This year has been an
acute example of this and we have
sought to recognise performance
within that backdrop. I hope our
shareholders agree with our approach
and will support the advisory vote
on the Report on Remuneration
and the resolutions to implement
the enhancement to the FY20 LTIP
award for the CEO at our upcoming
AGM. We welcome your views and
any discussion on the matters set out
within the report.
Kirsty Bashforth
Remuneration Committee Chair
• During the year, the Committee
used its discretion to restate the
strategic target applicable to 20%
of the FY21 long-term incentive
award. The restatement of the
target related to redefining Focus
Brands as Must Win Brands in line
with our strategy. This change
ensures that only those brands
which have a validated growth
wheel within the new strategy
re treated as part of the LTIP.
The Committee tested the impact
of these changes and concluded
that for FY21, this change made
this measure more, rather than
less challenging.
• Any future changes to the
constituent brands within the Must
Win Brand category will take place
annually to ensure alignment with
the budget process, and on an
indexed basis which will ensure
a consistent degree of stretch.
Our approach to remuneration for the
year ending 31 May 2022
The approach to remuneration for
FY22 is largely unchanged other
than reviewing and updating the
performance conditions attached
to the bonus and PSP to ensure
they are fully aligned with strategic
priorities. As such, in FY22:
• Executive Director salaries have
been reviewed to ensure they are
at an appropriate level compared
to peer benchmarks, appropriately
recognise the experience and
performance of the Executive
Directors and align with the
experience of the broader UK
workforce.
• A salary increase of 3% has been
provided to the CEO and the
CFO, each of which was effective
1 September 2021, in line with
the average provided to the UK
workforce.
• The annual bonus and PSP
opportunity for the Chief Executive
Officer will be in line with the
normal Remuneration Policy level
at 150% of salary and 125% for
the Chief Financial Officer which
can be earned for delivery against
challenging targets.
• The specific annual bonus metrics
continue to reflect current
strategic priorities and as such the
bonus will be based on adjusted
profit before tax (40% weighting),
revenue growth (30% weighting),
net working capital (10%
weighting) with the remaining
20% split equally between two
key business objectives. For FY22,
the key business objectives relate,
as they did for FY21, to strategic
execution and to organisational
effectiveness, in equal measure.
• One quarter of any bonus earned
will continue to be required
to be deferred into shares for
three years.
• The metrics and weightings used
for the LTIP for awards to be made
in FY22 will remain in line with
the prior year with adjusted EPS
growth remaining a key measure of
underlying financial performance
and determining the vesting of
60% of the award, with strategic
and sustainability metrics each
determining 20% of the total
PSP vesting.
• The strategic metric is based
on revenue growth from Must
Win Brands and will be based
on absolute targets rather than
being assessed on a relative basis
to provide clearer line of sight for
participants and the sustainability
target will specifically address
and incentivise the Company’s
ambitions in this area over the
coming years. Further details of
the performance metrics are set
out on pages 104.
• As has been the case since 2018,
any shares earned at the end of
the three-year performance period
must be retained for a minimum
of two years (i.e. a minimum
of five years from the date of
grant). In line with the approved
Remuneration Policy, shares
must also be retained until the
minimum shareholding guidelines
are met, including following the
end of service in accordance
with our post-cessation holding
expectations.
Strategic ReportFinancial StatementsGovernance 90
REMUNERATION COMMITTEE REPORT CONTINUED
Committee activities during the year ended 31 May 2021.
July 2020
September 2020
November 2020
January 2021
March 2021
May 2021
• Presentation from
the remuneration
advisor on
governance,
remuneration
trends and the
implications for
the business
• Review of draft
annual bonus
awards for FY20
• Update on post
AGM trends and
regulation from
the remuneration
advisor
• Review of cascade
of non-financial
targets outside
of the Executive
Directors
• Consideration
• Consideration of
of final investor
feedback on
proposed 2020
Remuneration
Policy
salary adjustments
within the ELT
(not Executive
Directors)
• Consideration of
implementation
of Employee Stock
Purchase Plan (SIP)
• Approval of the
grant of the FY21
PSP awards
• Consideration of
AGM voting and
investor feedback
• Consideration of
• Approval of actual
investor feedback
on Remuneration
Policy
annual bonus
awards for FY20
performance
• Approval of
financial targets for
the annual bonus
scheme for FY21
• Approval of PSP
targets for the
FY21 awards
• Approval of
• Review of vesting
of past awards
under the PSP
Employee Stock
Purchase Plan (SIP)
and PSP Rules
• Approval of annual
awards and
performance
targets (in principle)
under the
Performance Share
Plan for FY21
• Approval of 2020
Remuneration
Policy and
Remuneration
Report in respect
of FY20
• Consideration
of share plan
participation
for all employees
• Review of draft
Remuneration
Report in respect
of FY20
• Approval of CFO
remuneration
package
• Interim update
on performance
versus FY21 annual
bonus scheme
• Consideration of
administrative
matters relating to
the operation of
the Company’s
share plans
• Half-year review
of FY21 annual
bonus targets
• Consideration
of disclosure of
Must Win Brands
• Consideration of
administrative
matters relating
to the operation
of the Company’s
share plans
• Approval of
pro-rated
Performance
Share Plan awards
• Presentation from
the remuneration
advisor on
governance,
remuneration
trends and the
implications for
the business
• Consideration
of forecast
performance in
respect of FY21
annual bonus
• Consideration
of provisional
FY22 annual
bonus targets
• Consideration
of Group salary
proposals
• Consideration of
overall Group
remuneration
structure
• Consideration of
provisional FY22
Performance Share
Plan targets
• Consideration of
Committee terms
of reference
• Consideration
of Committee
performance
• Consideration
of Remuneration
Report themes
• Review of Board
Chair’s fee
KB, HO, JT, DK
KB, HO, JT, DK
KB, JT, DK
KB, JT, DK
KB, JT, DK
KB, JT, DK
PZ Cussons plc Annual Report and Financial Statements 2021 91
At a glance summary: how we will implement the policy in FY22
The table below summarises how the Committee intends to implement the Remuneration Policy for the forthcoming
financial year ending 31 May 2022.
Key policy features
Salary
Base salaries are normally reviewed annually
taking into account:
• The scope of the role and the markets in which
PZ Cussons operates.
• The performance and experience of the individual.
• Pay levels in other organisations of a similar size
Salary
Increase
and complexity.
• Pay increases elsewhere in the Group.
FY22 implementation
Link to KPIs
• Salary increases in line with the UK workforce average, effective from
–
1 September 2021
Chief Executive
Officer
£592,250
3%
Chief Financial
Officer
£334,750
3%
Pension/benefits/all-employee share schemes
Executive Directors will receive pension benefits
in line with those generally provided to employees
in the location in which they are based.
Directors receive market competitive benefits
and may participate in all-employee benefit
arrangements.
Annual bonus
Policy maximum of 150% of salary.
Incentive scheme which focuses Directors on
delivery of annual goals and milestones which
are consistent with the Group’s longer-term
strategic aims.
Committee may adjust outturn where bonus
payout does not reflect business performance
or individual contribution.
25% of any bonus earned deferred into shares
for three years.
Recovery and withholding provisions apply.
Long-term incentive plan
Policy maximum of 150% of salary.
Long-term incentive scheme which focuses on
generating sustained shareholder value over the
longer term and aligning the Directors’ interests
with those of the Company’s shareholders.
Performance measures based on financial,
strategic or share price-based metrics measured
over three years.
Committee may adjust level of vesting to ensure
it is reflective of underlying performance
Holding period applies for two years following
vesting (i.e. five years from grant).
Recovery and withholding provisions apply.
Chair and Non Executive Director fees
Fees to reflect the time commitment in preparing
for and attending meetings, the duties and
responsibilities of the role, and the contribution
expected from the Non Executive Directors.
• Chief Executive Officer, J Myers, and Chief Financial Officer, S Pollard,
–
both appointed on pension rate of 10% of salary in line with
UK workforce
• Pension contribution for any new appointment expected to be in line
with that for the employees in the location where they are based.
• Adjusted
profit
before tax
• Revenue
growth
• Net working
capital
percentage
• Strategic
priorities
• Adjusted
basic EPS
• Revenue
growth
• Sustainability
Maximum bonus
Performance metrics:
Chief Executive
Officer
150% of salary
Chief Financial
Officer
125% of salary
• Adjusted profit before tax: 40%
• Revenue growth: 30%
• Net working capital percentage: 10%
• Key Business Objectives: 20%
The Committee considers that the bonus targets are commercially
sensitive and therefore plans to disclose them only on a retrospective
basis in next year’s Directors’ Remuneration Report.
Chief Executive
Officer
Chief Financial
Officer
LTIP award
150% of salary
125% of salary
Performance metrics:
Weighting
Adjusted basic EPS
Revenue growth
from Must Win
Brands
Sustainability
60%
20%
20%
Threshold
target
2%
per annum
2%
per annum
Threshold
vesting
25%
Maximum
target
6%
per annum
6%
per annum
25%
See page 104
The range of targets are set having had regard to both internal planning
and external market expectations for the Company’s future performance.
Fees will be paid in line with the policy as below:
1 Sept
2021
1 Sept
2020
2020–21
increase
Basic fees
Chair*
Non Executive Director
Additional fees
Senior Independent Director
Chair of Audit & Risk or Remuneration Committee
Chair of any other Committee
Director responsible for employee engagement
250,000
55,000
250,000
52,500
10,000
10,000
5,000
5,000
5,000
10,000
5,000
5,000
+0%
+4.8%
+100%
+0%
+0%
+0%
*
The Company Chair does not receive additional fees for chairing other Board Committees.
Strategic ReportFinancial StatementsGovernance Predictability: The Committee
set specific targets for different
levels of performance which are
communicated to the individuals
and disclosed to shareholders.
Proportionality: The annual
bonus and PSP have performance
metrics which are aligned with the
Company’s KPIs and the payouts
reflect achievement against the
targets. The Committee may
reduce payouts under the bonus
and PSP if they are not in line with
underlying performance. Safeguards
are identified to ensure that poor
performance is not rewarded.
Alignment to culture: The Directors’
remuneration arrangements
are cascaded down through the
organisation ensuring that there
are common goals. The Committee
reviews remuneration arrangements
throughout the Company and takes
these into account when setting
Directors’ remuneration.
92
REMUNERATION POLICY
Directors’ Remuneration Policy
This part of the report complies
with the relevant provisions of the
Companies Act 2006 and Schedule
8 of the Large and Medium-sized
Companies and Groups (Accounts
and Reports) Regulations 2008
(as amended). It has also been
prepared taking into account the
2018 UK Corporate Governance
Code and the requirements of
the UKLA Listing Rules.
The policy was approved by
shareholders at the 2020 Annual
General Meeting (AGM) and became
effective from the date of the
AGM on 26 November 2020. The
Remuneration Policy as approved can
be viewed at www.pzcussons.com
and is included on the following
pages, updated for factual changes
where appropriate.
Approach to designing the
Remuneration Policy
The Committee is responsible for
determining, and agreeing with the
Board, the Directors’ Remuneration
Policy, and has oversight of its
implementation. The Committee has
clear terms of reference and works
with management and independent
advisors to develop proposals and
recommendations and exercises
independent judgement when
making decisions. This process is
considered to manage any potential
conflicts of interest.
When considering how to position
the remuneration packages for the
Executive Directors, the Committee
considers market data from UK-
listed companies of a similar size
and complexity. The Committee
also receives and takes into account
information from the Chief Human
Resources Officer on pay and
employment conditions applying to
other Group employees, consistent
with the Group’s general aim of
seeking to reward all employees
fairly according to the nature of
their role, their performance and
market forces.
In designing an appropriate incentive
structure for the Executive Directors
and other senior management, the
Committee seeks to set challenging
performance criteria that are
aligned with the Group’s business
strategy and the generation of
sustained shareholder value. The
Committee is also mindful of
the need to avoid inadvertently
encouraging risky or irresponsible
behaviour, including behaviour that
could raise environmental, social or
governance issues.
The Committee considered the
principles listed in the 2018 UK
Corporate Governance Code
when designing the Directors’
Remuneration Policy and took
these into account in its design
and implementation:
Clarity: Remuneration arrangements
have defined parameters which can
be transparently communicated to
shareholders and other stakeholders.
Simplicity: Remuneration
arrangements for Executive
Directors consist of salary, a fixed
pension contribution in line with the
workforce, participation in the annual
bonus scheme, a portion of which
is deferred into shares, and annual
PSP awards which provide focus
over the longer-term performance.
Unnecessary complexity is avoided
by the Committee in operating the
arrangements. Executive Directors
are also eligible to participate in
the proposed Employee Share
Purchase Plan.
Risk: The remuneration
arrangements are designed to
have a robust link between pay and
performance thereby mitigating
the risk of excessive reward. In
addition, behavioural risks are
considered when setting targets for
performance-related pay and the
arrangements have safeguards to
ensure that pay remains appropriate,
including Committee discretion to
adjust incentive outturns, deferral
of incentive payments in shares,
recovery provisions and share
ownership requirements.
PZ Cussons plc Annual Report and Financial Statements 2021 93
Remuneration framework
The components of Executive Directors’ remuneration are described below:
Element
Purpose and link
to strategy
Operation
Maximum
opportunity
Performance
measures
Fixed remuneration
Base salary
To provide an
appropriate level of
fixed cash income to
recruit and retain talent
through the provision
of competitively
positioned base salaries.
Base salaries are normally reviewed
annually taking into account:
The scope of the role and the markets
in which PZ Cussons operates.
The performance and experience of
the individual.
Pay levels in other organisations
of a similar size and complexity.
Pay increases elsewhere in the Group.
Benefits
Provision for
retirement
Benefits that may be provided
include car benefits, life assurance,
health insurance for the Executive
Director and family, permanent
health cover and personal tax advice.
Executive Directors may also
participate in any all-employee
share or benefits plans on the
same basis as any other employees.
Where relevant, additional benefits
may be offered if considered
appropriate and reasonable by
the Committee, such as assistance
with the costs of relocation.
Participation in a defined
contribution pension plan or
provision of a cash allowance
in lieu of a pension contribution.
Recruitment and
retention of senior
executive talent
through the provision
of a competitively
positioned and
cost-effective
benefits package.
Benefits may also be
provided to assist in the
effective performance
of an Executive
Director’s duties.
Designed to enable an
Executive Director to
generate an income
in retirement and to
provide an overall
remuneration package
that is competitive in
the market.
None, although overall
performance of the
individual is considered
by the Committee
when setting and
reviewing salaries.
Not applicable.
To avoid setting the expectations
of Executive Directors and other
employees, there is no overall
maximum for salary increases
under this policy.
Salary increases are reviewed in
the context of salary increases
across the wider Group.
Any increase in excess of those
elsewhere in the Group would be
considered very carefully by the
Committee. The circumstances in
which higher increases may be
awarded include but are not
limited to:
An increase in the scope and/or
responsibility of a role.
An increase upon promotion to
Executive Director.
Where a salary has fallen
significantly below market
positioning.
The transition over time of a new
Executive Director recruited on
a below market salary to a more
competitive market positioning
as the Executive Director gains
experience in the role.
The maximum opportunity will be
based on the cost of providing the
benefits. This will be set at a level
that the Committee considers
appropriate to provide a sufficient
level of benefit based on
individual circumstances.
Not applicable.
A Company pension contribution
in line with the rate provided to
the wider workforce in the
country the Executive Director
is based.
For the UK this is currently 10% of
base salary in respect of each
financial year into the scheme on
behalf of the Executive Director,
subject to a minimum employee
contribution of 5% of base salary;
or cash allowance of up to 10% of
base salary.
Strategic ReportFinancial StatementsGovernance 94
REMUNERATION POLICY CONTINUED
Element
Purpose and link
to strategy
Operation
Maximum
opportunity
Performance
measures
The maximum annual bonus
opportunity that may be earned
for any year is 150% of base salary.
The current maximum
opportunity for Executive
Director roles is:
• Chief Executive: 150% of salary
• Other Executive Directors: 125%
of salary
Variable remuneration
Annual
bonus
scheme and
deferred
annual
bonuses
Designed to motivate
Executive Directors to
focus on annual goals
and milestones that are
consistent with the
Group’s longer-term
strategic aims.
Measures and targets are set
annually at the beginning of the
relevant financial year and payout
levels are determined by the
Committee after the year end
based on performance against
those targets.
A minimum of 25% of the bonus
earned will be deferred into shares.
The deferral period will be 3 years
(unless the Committee determines
otherwise).
A dividend equivalent may be
payable on deferred shares that vest.
The Committee may apply discretion
to amend the bonus payout should
this not, in the view of the
Committee, reflect underlying
business performance or individual
contribution.
Recovery and withholding provisions
apply to cash and deferred shares.
The performance
measures and targets
are set by the
Committee each year.
The majority of the
annual bonus is based
on challenging financial
targets that are set in
line with the Group’s
KPIs.
In addition, a smaller
element of the annual
bonus may be subject
to achievement against
key business objectives
and/or personally
tailored objectives.
For each financial
objective set, up to 10%
of the relevant part of
the bonus becomes
payable at the
threshold performance
level rising on a
graduated scale to the
maximum performance
level.
The structure and
nature of the strategic
objectives vary, such
that it is not practical to
specify any pre-set
percentage of bonus
that becomes payable
for threshold
performance.
Maximum annual bonus
will only be paid for
achieving significant
financial
outperformance above
the budget set for the
year.
PZ Cussons plc Annual Report and Financial Statements 2021 95
Element
Purpose and link
to strategy
Operation
Maximum
opportunity
Performance
measures
Variable remuneration continued
Performance
Share Plan
(PSP)
Designed to motivate
the Executive Directors
to focus on the
generation of sustained
shareholder value over
the longer term, and to
align their interests with
those of the Group’s
shareholders.
Other aspects
Shareholding
guidelines
Alignment of the
Executive Directors’
interests with those
of the Group’s
shareholders.
Post-
employment
share
ownership
requirements
Ensures there is an
appropriate amount of
‘tail risk’ for Executive
Directors post cessation
of employment.
Award opportunities in respect of
any financial year are limited to
rights over shares with a market
value determined by the
Committee at grant of a maximum
of 150% of base salary.
The current maximum opportunity
for Executive Director roles is:
• Chief Executive: 150% of salary
• Other Executive Directors: 125%
of salary
Awards to Executive
Directors will be subject
to challenging financial,
strategic or share price
related targets
measured over the
performance period.
Financial targets (e.g.
adjusted EPS and/or
shareholder return
measures) will apply
to at least half of the
total award.
Vesting does not take
place until the threshold
performance
requirement is met
as applicable to each
relevant metric), at
which point no more
than 25% vests.
Vesting increases on a
graduated basis from
threshold performance
to the maximum target.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
Annual awards of rights over shares
calculated as a percentage of base
salary. Vesting is subject to the
attainment of predetermined
performance targets measured
over a performance period of at least
three years. The performance period
normally starts at the beginning of
the financial year in which the date
of grant falls.
The Committee may use discretion
to adjust the level of vesting should
it, in the view of the Committee,
not reflect underlying performance.
Dividend equivalent accrue on shares
subject to PSP awards and are paid
on vesting in respect of those shares
that vest.
Award levels and performance
conditions are reviewed before
each award cycle to ensure that
they remain appropriate.
Any shares that vest will normally
be subject to an additional two-year
holding period.
Recovery and withholding provisions
apply to awards granted under the PSP.
Requirement to build up interests
in the Company’s shares worth 200%
of salary.
Executive Directors will be expected
to retain a minimum of half the after
tax number of vested shares from
PSP awards towards the satisfaction
of the guideline.
Executives will be expected to
maintain a minimum shareholding
of 200% of salary for the first year
following ceasing to be a Board
Director and 100% of salary for the
second year, or in either case if lower,
the shareholding on cessation.
Strategic ReportFinancial StatementsGovernance 96
REMUNERATION POLICY CONTINUED
Recovery and withholding provisions
The Committee may, in its discretion, apply malus and/or clawback to annual bonus and PSP awards at any time within
three years of payment in circumstances of a misstatement of results, error in payout calculations or the calculation being
based on incorrect information, misconduct, corporate failure or reputational damage.
Malus may be applied at any time prior to the vesting of any award or payment of any declared bonus, and clawback can
be applied after an award or bonus is paid or vests and where the triggering event occurs at any time prior to the third
anniversary of the date the award or bonus vests/is paid. The clawback may be affected through a withholding of variable
pay, by reducing the size of, or imposing further conditions on, any outstanding or future awards, or by requiring the
individual to return the value of the cash or shares delivered to recover the amount overpaid.
Performance
measures
Not applicable.
Element
Non
Executive
Director
fees
Purpose and link
to strategy
Operation
Maximum
opportunity
To reflect the time
commitment in
preparing for and
attending meetings,
the duties and
responsibilities
of the role and the
contribution expected
from the Non Executive
Directors.
Fees are based on the level of fees paid
to Non Executive Directors serving
on boards of similar sized UK-listed
companies and the time commitment
and contribution expected for the role.
Non Executive Directors receive a basic
fee and an additional fee for further
duties (for example, chairing of a
Committee or Senior Independent
Director responsibilities).
The maximum level of fees payable to the
Non Executive Directors will not exceed
the limit set out in the Company’s Articles
of Association.
Fees are normally reviewed
every year and amended to reflect
market positioning and any change
in responsibilities.
The Committee recommends
the remuneration of the Chair
to the Board.
Fees paid to Non Executive Directors
are determined and approved by the
Board as a whole.
The Non Executive Directors do
not participate in the annual bonus
plan or any of the Group’s share
incentive plans. The Company covers
the costs of attending meetings
and Non Executive Directors may
be reimbursed for any business
expenses incurred (including any
tax due) in fulfilling their roles.
Balance of fixed versus variable remuneration
The Committee believes that an appropriate proportion of the executive remuneration package should be variable
and performance-related in order to encourage and reward superior corporate and individual performance.
The following chart illustrates executive remuneration in specific performance scenarios including a maximum
performance scenario with a 50% increase in share price.
Performance scenarios
£2,811,258
£2,380,008
46%
36%
£1,388,133
16%
37%
£655,008
36%
31%
£374,508
£1,390,133
£1,187,008
34%
44%
£719,820
14%
34%
34%
29%
100%
47%
28%
23%
100%
52%
32%
27%
Below
threshold
Target
Maximum
Maximum
(including share
price growth)
Below
threshold
Target
Maximum
Maximum
(including share
price growth)
J Myers (CEO)
S Pollard (CFO)
Fixed pay
Annual Bonus
Long-term incentive plans
PZ Cussons plc Annual Report and Financial Statements 2021 97
Minimum performance
Target performance
Maximum performance
Maximum performance
including share price growth
Fixed elements
of remuneration
Base salary as at 31 May 2021, an estimate of the value of benefits (£25,000 for J Myers and £16,000 for S Pollard)
and pension contributions at 10% of base salary
Annual bonus
0%
60% of maximum
opportunity
100% of maximum
opportunity
100% of maximum
opportunity
Long-term
incentive plans
0%
J Myers – 60% of 150%
of salary
S Pollard – 60% of 125%
of salary
J Myers – 150% of salary
J Myers – 150% of salary
S Pollard – 125% of salary
S Pollard – 125% of salary
25% of award
100% of award
J Myers – 25% of 150%
of salary
S Pollard – 25% of 125%
of salary
J Myers – 150% of salary
S Pollard – 125% of salary
100% of award with a 50%
increase in share price over
the vesting period
J Myers – 150% of salary
S Pollard – 125% of salary
Recruitment remuneration arrangements
When hiring a new Executive Director, the Committee will set the Executive Director’s ongoing remuneration in a manner
consistent with the Policy detailed in the table above.
To facilitate the hiring of candidates of the appropriate calibre, the Committee may make an award to buy out variable
remuneration arrangements forfeited on leaving a previous employer. In doing so, the Committee will take account of
relevant factors including the form of award, the value forfeit, any performance conditions and the time over which
the award would have vested. The intention of any buy-out would be to compensate in a like-for-like manner as far as
is practicable.
The maximum level of variable pay that may be awarded to new Executive Directors (excluding buy-out arrangements) in
respect of their recruitment will be in line with the maximum level of variable pay that may be awarded under the annual
bonus plan and PSP, i.e. a total face value opportunity of 300% of salary. The Committee will ensure that such awards are
linked to the achievement of appropriate and challenging performance measures and will be forfeited if performance or
continued employment conditions are not met.
Appropriate costs and support will be covered if the recruitment requires relocation of the individual.
Executive Director contracts and loss of office payments
Executive Directors have indefinite service contracts and no Executive Director has a notice period in excess of one year
or a contract containing any provision for predetermined compensation on termination exceeding one year’s salary and
contractual benefits. Details of the current Executive Directors' service contracts are shown below:
Name
J Myers
S Pollard
Date of appointment
1 May 2020
4 Jan 2021
Upon the termination of an Executive Director’s employment, the Committee’s approach to determining any payment for
loss of office will normally be guided by the following principles:
• The Committee shall seek to apply the principle of mitigation where possible, as well as seeking to find an outcome that
is in the best interests of the Company and shareholders as a whole, taking into account the specific circumstances.
• Relevant contractual obligations, as set out above, shall be observed or taken into account.
• The Committee reserves the right to make additional exit payments where such payments are made in good faith to
satisfy an existing legal obligation (or by way of damages for breach of any such obligation) or to settle or compromise
any claim or costs arising in connection with the employment of an Executive Director or its termination, or to make a
modest provision in respect of legal costs and/or outplacement fees.
• The treatment of outstanding variable remuneration shall be as determined by the relevant plan rules, as set out on the
next page.
• Any payments for loss of office shall only be made to the extent that such payments are consistent with this Policy.
Strategic ReportFinancial StatementsGovernance 98
REMUNERATION POLICY CONTINUED
Performance Share Plan
Cessation of directorship/employment within three years of date of grant:
Death
The award will normally vest as soon as practicable following death.
Injury, ill health, disability, sale of the
participant’s employing company or
business out of the Group or any other
reason if the Committee so decides
The Committee will have sole discretion as to the extent to which the award will vest, taking
into account, if the Committee considers it appropriate, time pro-rating and the extent to
which the performance condition has been satisfied.
Awards will be subject to any applicable holding period unless the Committee determines
otherwise.
The award will normally vest on the original vesting date, taking into account the extent to
which the performance conditions have been met. Alternatively, the Committee has the
discretion to allow the award to vest at the time of cessation of directorship/employment
by the Group, taking into account the extent to which the performance conditions have been
met up to that date.
Unless the Committee determines otherwise, the Committee will reduce the award to reflect
the period that has elapsed at the time of cessation.
Any other reason
The award will lapse upon cessation of directorship/employment.
Cessation of directorship/employment after three years of date of grant
(i.e. in respect of shares held for a compulsory holding period):
Death
The award will vest as soon as practicable following death.
Lawful dismissal without
notice by the Company
Any other reason
The award will lapse upon cessation of directorship/employment.
The award will generally be released at the end of the holding period. Alternatively, the
Committee has the discretion to allow the award to be released in part, or in full, at the time
of, or following, cessation of directorship/employment. The extent to which awards are
released in these circumstances will be determined by the Committee taking into account
the performance conditions.
Annual bonus scheme – cash element
The extent to which any annual bonus is paid in respect of the year of departure will be determined by the Committee (in such
proportion of cash and shares as it considers appropriate) taking into account the performance metrics and whether it is appropriate to
time pro-rate the award for the time served during the year.
Annual bonus scheme – deferred share element
Death, injury, disability, redundancy,
retirement, the sale of the participant’s
employing company or business out of
the Group or any other reason if the
Committee so decides
The award will vest on the normal vesting date unless the Committee determines otherwise.
Any other reason
The award will lapse upon cessation of directorship/employment.
Retirement benefits will be received by any Executive Director who is a member of any of the Group’s pension plans in
accordance with the rules of such plan.
PZ Cussons plc Annual Report and Financial Statements 2021 99
Change in control
The rules of the PSP provide that, in the event of a change of control or winding-up of the Company, all awards will vest
early taking into account: i) the extent to which the Committee considers that the performance conditions have been
satisfied at that time and ii) the pro-rating of the awards to reflect the proportion of the performance period that has
elapsed, although the Committee can decide not to pro-rate an award if it regards it as inappropriate to do so in the
particular circumstances. Deferred bonus awards will normally vest in full on a takeover or winding-up of the Company.
In the event of a special dividend, demerger or similar event, the Committee may determine that awards vest on the
same basis. In the event of an internal corporate reorganisation, awards may be replaced by equivalent new awards over
shares in a new holding company. Similarly, in the event of a merger of equals, the Committee may invite participants
to voluntarily exchange their awards that would otherwise vest for equivalent new awards over shares in a new
holding company.
The Committee may in the circumstances referred to above determine to what extent any bonus should be paid in respect
of the financial year in which the relevant event takes place, taking into account the extent to which the Committee
determines the relevant performance metrics have been (or would have been) met.
Statement of consideration of employment conditions elsewhere in the Company
When reviewing and setting Executive Director remuneration, the Committee takes into account the pay and
employment conditions of all employees of the Group. The Group-wide pay review budget is one of the key factors when
reviewing the salaries of the Executive Directors. Although the Group has not carried out a formal employee consultation
regarding Board remuneration, it does comply with local regulations and practices regarding employee consultation
more broadly.
Communication with shareholders
The Committee is committed to an ongoing dialogue with shareholders and seeks the views of significant shareholders
when any major changes are being made to remuneration arrangements.
The Committee takes into account the views of significant shareholders when formulating and implementing the Policy.
Terms and conditions for Non Executive Directors
Non Executive Directors are appointed pursuant to the terms of their appointment letters for an initial period of three
years, normally renewable on a similar basis. Notwithstanding this, all Non Executive Directors are subject to annual re-
election at the Company’s Annual General Meeting and their election is subject to a dual-vote including the votes of only
those shareholders who are not members of the Concert-Party shareholders. The expiry of the letters of appointment
are set out below.
Name
C Silver (Chair)
K Bashforth
D Kucz
J Nicolson
J Sodha
J Townsend
Expiry of term
31-Mar-2023
31-Oct-2022
30-Apr-2024
30-Apr-2022
30-Jun-2024
31-Mar-2023
The letters of appointment of Non Executive Directors and service contracts of Executive Directors are available
for inspection at the Company’s registered office during normal business hours and will be available at the Annual
General Meeting.
Strategic ReportFinancial StatementsGovernance 100
PZ Cussons plc
Annual Report and Financial Statements 2021
REPORT ON DIRECTORS' REMUNERATION
Information contained within the Report on Directors' Remuneration has not been subject to audit unless stated.
Single total figure of remuneration (audited)
The table below sets out in a single figure the total amount of remuneration, including each element, received by each of
the Directors for the year ended 31 May 2021:
Salary/fees1
Benefits2
Bonus3
PSP
Pension4
2021 (£)
2020 (£)
2021 (£)
2020 (£)
2021 (£)
2020 (£)
2021 (£)
2020 (£)
2021 (£)
2020 (£)
Executive Directors
J Myers5
S Pollard6
G Kanellis7
B Leigh8
Subtotal
575,000
47,917
22,508
1,874
862,500
135,417
–
7,092
–
164,734
–
–
404,667
13,820
–
–
15,316
777
–
–
710,417
466,404
29,600
17,967 1,027,234
Non Executive Directors
C Silver (chair)9
250,000
291,667
537
K Bashforth10
D Kucz
T Minick–Scokalo11
J Nicolson
H Owers12
J Townsend13
Subtotal
Total
61,667
57,500
–
62,500
26,679
62,500
30,625
57,500
21,875
62,500
62,500
8,750
–
–
–
–
–
–
4,145
416
4,231
1,917
3,074
2,939
–
520,846
535,417
537
16,722
1,231,263 1,001,821
30,137
34,689 1,027,234
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,500
13,542
–
–
4,792
–
80,933
2,764
71,042
88,489
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71,042
88,489
Executive Directors
J Myers5
S Pollard6
G Kanellis7
B Leigh8
Subtotal
Non Executive Directors
C Silver (chair)9
K Bashforth10
D Kucz
T Minick–Scokalo11
J Nicolson
H Owers12
J Townsend13
Subtotal
Total
Other6
Total fixed
Total variable
Total7
2021 (£)
2020 (£)
2021 (£)
2020 (£)
2021 (£)
2020 (£)
2021 (£)
2020 (£)
–
131,015
–
–
131,015
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
655,008
54,582
862,500
– 1,517,434
54,582
156,050
–
164,734
–
–
500,916
17,361
–
–
–
–
–
451,631
–
–
–
500,916
17,361
811,058
572,859 1,027,234
– 1,969,307
572,859
250,537
295,812
61,667
57,500
–
62,500
26,679
62,500
31,041
61,731
23,792
65,574
65,439
8,750
521,384
552,139
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
250,537
295,811
61,667
57,500
–
62,500
26,679
62,500
31,041
61,731
23,792
65,574
65,439
8,750
–
552,139
131,015
– 1,332,441 1,124,998 1,027,234
– 2,490,690 1,124,998
1
2
3
The amount of salary/fees payable in the period.
Taxable benefits comprise life assurance, healthcare insurance and car allowance. In respect of the Non Executive Directors, certain travel and
accommodation expenses in relation to attending Board meetings are also treated as a taxable benefit.
Details of the performance measures and weightings as well as results achieved under the annual bonus arrangements in place in respect of the year are
shown on pages 102 and 103.
4 J Myers and S Pollard receive salary supplements of 10% of salary in lieu of pension contributions.
5
6
J Myers was appointed Chief Executive Officer with effect from 1 May 2020.
S Pollard was appointed Chief Financial Officer with effect from 4 January 2021. Sarah received compensation totalling £131,015 on joining the Company
to compensate her for outstanding shares forfeited on departure from her former employer. The payment was of equal value to the shares forfeit at
the time of joining the Company and Sarah agreed to use the net proceeds of the payment to acquire PZ Cussons shares and to hold these against the
Company’s share ownership guidelines. Had she remained in employment the net of tax value of the shares forfeit, which did not have any performance
conditions, would also have been retained and so the buy-out was a like-for-like replacement.
101
7
8
9
G Kanellis retired from the Company on 31 January 2020.
B Leigh ceased employment with the Company on 13 June 2019.
C Silver assumed the role of Executive Chair for the period between 31 January 2020 and 30 April 2020 when J Myers commenced his role as Chief
Executive Officer. Details of her pay during this period were included in the 2020 Annual Report and Accounts.
10 Amounts are rounded to the nearest pound sterling.
11 T Minick-Scokalo was on leave for personal health reasons since 1 November 2019 and stepped down from the Board at the 2020 AGM.
12 H Owers stepped down from the Board at the 2020 AGM.
13 J Townsend was appointed to the Board on 1 April 2020.
Individual elements of remuneration
Base salary
Base salaries for individual Executive Directors are reviewed by the Remuneration Committee annually, with increases
taking effect from 1 September. Salaries are set with reference to the scope of the role and the markets in which PZ
Cussons operates, the performance and experience of the individual, pay levels in other organisations of a similar size
and complexity and pay increases elsewhere in the Group.
The Committee determined that J Myers’ and S Pollard’s salaries will be increased by 3% with effect from 1 September 2021
which is in line with the average increase applied to the UK workforce.
J Myers1
S Pollard2
1 J Myers was appointed CEO on 1 May 2020.
2 S Pollard was appointed CFO on 4 January 2021.
FY22
base salary
(£)
FY21
base salary
(£)
592,250
334,750
575,000
325,000
Increase
(%)
3
3
Non Executive Director fees
The current fee structure is as follows and increases the base Non Executive Director fee by £2,500 and Senior Independent
Director fee by £5,000, following five years of no increases to either fee, to reflect benchmarks and in recognition of the
current time commitment of the Directors:
Role
Board Chair
Non Executive Director base fee
Additional fees for Committee Chair
Audit & Risk
Remuneration
Additional fee for Senior Independent Director
Additional fee for Director responsible for employee engagement
FY21/22
change
0%
4.8%
0%
0%
100%
0%
FY22 fee
FY21 fee
£250,000
£250,000
£55,000
£52,500
£10,000
£10,000
£10,000
£5,000
£10,000
£10,000
£5,000
£5,000
Annual bonus for the year ended 31 May 2021
In respect of the year ended 31 May 2021, the Chief Executive Officer, Jonathan Myers, and the Chief Financial Officer,
Sarah Pollard, both participated in the annual bonus scheme.
Under this scheme, the Chief Executive Officer was eligible to earn a cash bonus of up to 150% of base salary and the
Chief Financial Officer 125% of base salary (pro-rata for the period since appointment) with a quarter of any bonus
earned being deferred into Company shares which vest after three years and are subject to recovery and withholding
provisions and continued employment.
For the 2021 financial year, the bonus included challenging financial and strategic targets that were aligned with delivering
against the Board’s approved budget and planning for the year ahead. Following the policy review last year, the bonus
metrics for 2021 were updated with the introduction of revenue growth in place of operating profit contribution to
strengthen the alignment with the strategic priorities. Together these financial targets comprised 80% of the overall
bonus opportunity with strategic objectives focused on organisational effectiveness and strategic execution comprising
the remaining 20% of the bonus opportunity. The targets and the Committee’s assessment of performance against them
are set out on the following page.
Strategic ReportFinancial StatementsGovernance 102
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
Financial targets
The financial targets and our performance against them are set out below:
Metric
Adjusted profit before tax
Revenue growth
Net working capital percentage
Strategic targets
Proportion of
total bonus
Threshold
(10% payout)
Target
(60% payout)
Stretch
(100% payout)
Actual
performance
40%
30%
10%
£53.9m
£59.9m
£62.9m
£68.6m
£506.1m
£562.3m
£590.4m
£603.3m
17.9%
16.4%
15.6%
7.1%
The 2021 strategic objectives related to organisational effectiveness and strategic execution.
Metric
Organisational
effectiveness
Proportion of
total bonus
Milestones
achieved
10%
Complete all planned, ongoing Group optimisation actions to deliver
maximum in-year benefits.
Post strategic review, realign organisation model and deliver additional
operational effectiveness and efficiency activities within defined timelines
and KPIs.
Proportion of
total bonus
payable
40%
30%
10%
Proportion of
total bonus
payable
10%
Strategic execution
10%
Undertake and complete a full strategic review in H1 FY21. Ensure that the
detailed strategy sets out a clear Go-To-Market plan by Category, Brand and OU.
10%
Delivery and execution plans as well as agreed outcomes which are approved
by the Board.
Cascade strategy and commence execution at all levels of the organisation
within defined timelines and KPIs.
Overall 100% of the maximum bonus was earned by the Chief Executive Officer and Chief Financial Officer. The Committee
is comfortable that this is in line with underlying corporate performance and shareholder experience over the year which
included positive share price performance and the payment of dividends. The outturn is also in line with the experience
of the wider workforce with bonuses payable based on the performance achieved against the targets set at the start of
the year with maximum bonus being awarded in a number of operating units and bonus in line with target in the majority
of others. In making the bonus payments, the Committee also considered management's response to the disruption and
challenges that Covid-19 poses and noted that the Company did not receive government furlough support or Covid-19 loans.
One quarter of this amount will be deferred into shares for three years.
Annual bonus for the year ended 31 May 2022
Executive Directors will continue to be eligible to participate in the annual bonus scheme in respect of the year ending
31 May 2022 under the Policy. The annual bonus opportunity for the Chief Executive Officer and Chief Financial Officer
will continue to be 150% and 125% of salary respectively, which can be earned for delivery against challenging targets,
with 60% of maximum payable for on-target performance under the financial metrics.
As for FY21, the specific annual bonus metrics reflect current strategic priorities with adjusted profit before tax aligning
pay with profitability (40% weighting) revenue growth metric driving organic growth (30% weighting) and net working
capital percentage (10% weighting) used to ensure there is a focus on efficient working practices. The remaining
portion being based on key business objectives relating to organisational effectiveness and strategic execution
(10% weighting each).
The Directors consider that the Group’s future targets are matters that are commercially sensitive; they could provide
our competitors with insights into our business plans and expectations and should therefore remain confidential to the
Company at this time (although they will be retrospectively disclosed in next year’s Report on Directors’ Remuneration).
Targets for the FY22 bonus have been set by the Committee to be appropriately demanding but also reflective of current
commercial circumstances, internal planning and market expectations.
Bonuses are payable at the discretion of the Committee and the Committee may apply discretion to amend the bonus
payout should it not, in the view of the Committee, reflect underlying business performance or individual contribution.
PZ Cussons plc Annual Report and Financial Statements 2021 103
A minimum of one quarter of any bonus earned will be required to be deferred into shares for three years.
Awards made under the annual bonus scheme in respect of the year ending 31 May 2021 will be subject to recovery
and withholding provisions that would enable the Committee to recover amounts paid in circumstances of i) a material
misstatement of audited results, ii) employee misconduct associated with the governance or conduct of the business, iii)
an erroneous calculation of a performance condition, iv) reputational damage or v) corporate failure. The ability to apply
these provisions operates for a period of up to three years for awards to Executive Directors and other senior executives.
Long-term incentive plans
Performance Share Plan
Executive Directors and certain senior executives are generally eligible to participate in the PSP, which provides for the
grant of conditional rights to receive nil-cost shares subject to continued employment over a three-year vesting period
and the satisfaction of certain performance criteria established by the Committee. The current version of the PSP, the
PZ Cussons plc Long-Term Incentive Plan 2020 (the ‘LTIP 2020’), was approved by shareholders and adopted at the 2020
Annual General Meeting. PSP awards granted to former Directors in FY18 which were due to vest in FY21 did not meet
their performance criteria and lapsed.
Awards granted in the year ended 31 May 2021 (audited)
As disclosed in last year’s Report on Directors’ Remuneration, and in line with the Company’s Remuneration Policy, during
the year ended 31 May 2021 an award was made to J Myers under the PSP over shares with a value equal to 150% of base
salary. Following her appointment on 4 January 2021, S Pollard was also granted an award over shares worth 125% of
base salary, pro-rated for the period from appointment as set out below:
Scheme
Basis of award
Number of shares1,2
Face value
Percentage vesting
for threshold
performance
Performance period
end date
J Myers
S Pollard
LTIP 2020
150% of salary
375,000
LTIP 2020
125% of salary
70,973
£862,500
£169,271
25%
25%
31-May-2023
31-May-2023
1 J Myers was granted an award over 375,000 shares under the LTIP on 27 November 2020 calculated using the average mid-market closing share price on
26 November 2020 of 230p. S Pollard was granted a pro-rated award over 70,973 shares under the LTIP on 1 February 2021 calculated using the average
mid-market closing share price on 26 January 2021 of 238.5p. The share price used to determine the number of shares subject to the award was in
accordance with the rules of the LTIP 2020.
2 J Myers' award will be increased by 61,046 shares (with a face value of £140,405.8) for a total of 436,046 shares if resolutions 3 and 4 proposed for the
AGM are approved by shareholders. The performance period end date will be 31 May 2023.
The performance metrics were aligned with the business’ mid- to long-term priorities with the introduction of a strategic
revenue metric and a sustainability metric with a 20% weighting each to supplement the EPS growth metric (60% weighting).
Measure
EPS growth
Strategic target
Sustainability target
Weighting
60% weighting
20% weighting
20% weighting
Description
Growth in adjusted EPS
over three-year
performance period
Revenue growth from
Must Win Brands
measured relative
to growth in revenue
from Portfolio Brands1
Threshold target
(25% vesting)
Maximum target
(100% vesting)
1% per annum
5% per annum
2%
6%
Complete a B Impact Assessment facilitated by B Lab on a
representative sample of our portfolio including our UK
business (including UK Beauty) and our Indonesian operating
unit. Based on the results of the B Impact Assessment, agree
with the Board an associated validated action plan including a
long-term externally measured sustainability goal, (which may
or may not include B-Corporation certification) at either Group
or operating Company level, along with year-by-year milestone
targets towards such goal.
Completion of B Impact Assessment and agreement with the
Board on an associated long-term sustainability goal.
Completion of B Impact Assessment, agreement on an
associated long-term sustainability goal, year-by-year milestone
targets with an agreed implementation plan and evidence of
early progress against the agreed action plan.
1
Following the completion of the strategic review Focus Brands were reclassified Must Win Brands. The strategic review also resulted in the change
in categorisation of certain brands and the performance measure has been aligned with these definitions. The Committee have ensured that the
reclassification of brands is no less stretching as detailed in the Chair's introduction to governance on page 66.
Strategic ReportFinancial StatementsGovernance 104
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
The EPS and strategic targets provide a balance between being realistic and meaningful for participants at the lower end
of the range and providing a stretch at the top end of the range. In determining this range the Committee considered
internal planning, the performance of the Company over recent years and the need to return to sustainable, profitable
revenue growth along with market conditions and the uncertainty arising from Covid-19.
In determining the vesting of a PSP award in accordance with these measures, the Committee will also consider the
Company’s return on capital employed across the relevant performance period in determining whether to apply
discretion to alter formulaic outcomes taking into account the overall performance of the business.
In line with the Remuneration Policy, the awards are subject to a two-year holding period on vested shares such that all
shares (other than any shares required to be sold to meet any tax liabilities) will need to be retained for a minimum period
of five years from grant. Recovery provisions also apply to awards made under the PSP which apply for a period of up to
three years from vesting of awards.
Awards to be granted in the year ending 31 May 2022
The Committee intends to make PSP awards to the Chief Executive Officer and Chief Financial Officer during the year
ending 31 May 2022 in line with the Directors’ Remuneration Policy. The award to J Myers and S Pollard will be in respect
of shares equivalent to 150% of salary and 125% of salary respectively.
The awards will vest to the extent performance conditions are met over the three-year performance period. The
performance metrics and their weightings will largely be unchanged from those that applied to the FY21 awards.
Measure
Weighting
Description
EPS growth target
60% weighting
Strategic target
20% weighting
Sustainability targets
20% weighting as set out below
Growth in adjusted EPS over
three-year performance period
Absolute revenue growth
from Must Win Brands
Threshold target (25% vesting)
2% per annum
Maximum target (100% vesting)
6% per annum
2% per annum
6% per annum
The Committee has, however, reviewed its approach to target setting based on updated internal planning, external
expectations for future performance and feedback from major shareholders.
EPS growth target
This review concluded with a decision by the Committee that the definition of EPS performance in the future will be:
• Measured based on adjusted basic EPS from continuing operations measured on a constant currency basis. This will
ensure that any adjustments to EPS are in line with our reporting of adjusted basic EPS (as per page 91) and that
performance is based on continuing operations only so that we achieve consistency when measuring our underlying
performance.
• Measured on a constant currency basis to ensure that there will be a strong link between management performance
and incentive outcomes given the geographic spread of our earnings and the potential for exchange rate volatility in
certain locations (e.g. the Naira in Nigeria).
With regard to the degree of stretch in the EPS targets, the range of growth targets has been increased compared to
the range set last year (2% to 6% per annum growth from 1% to 5% per annum growth). The Committee considers this
to result in targets that are at least as demanding as the range of growth targets that were set for the FY21 awards.
However, notwithstanding the degree of stretch in the targets, the Committee reserves the right to reduce vesting
if testing the targets on a constant currency basis does not reflect the shareholder experience over the performance
period. The Committee also expects to continue to set EPS targets on this basis in future years.
Strategic target
These will be based on revenue growth from Must Win Brands , and measured on an absolute basis (as opposed to
relative to total group revenue growth) in order to provide a more direct line of sight for the participants.
Sustainability targets
The targets have been set based on progress towards the Group’s ambitions to achieve B Corporation certification
and address our priorities with respect to (i) ethical sourcing, (ii) reduction in carbon intensity and (iii) our employees
(each of which will determine the vesting of one-third of the 20% portion of the award based on sustainability).
PZ Cussons plc Annual Report and Financial Statements 2021 105
Following the Company’s first year of work towards its B Corporation target and further consultation with major
shareholders, a full review of the Company’s sustainability targets has commenced, in particular with respect to plastics
as discussed on pages 32 and 33. Furthermore, with the recent appointment of a Chief Sustainability Officer who is
leading this comprehensive review, the Committee anticipates that sustainability measures in any future LTIP awards
will continue to evolve to reflect our longer-term goal of B Corporation accreditation and the conclusions of the current
review work which will include new targets relating to plastics usage.
Ethical sourcing
CDP performance
Employee engagement
Threshold target
(25% payout)
Publish a revised supplier code of conduct aligned to our
recently approved Code of Ethical Conduct and embed it
across the supplier base with at least 90% of suppliers by
value having either signed up to it or demonstrated that they
have in place their own code which meets or exceeds our own.
Improve from
current 'B-' score to a
'B' score by the end
of the performance
period.
Improve the employee
engagement scores to
73% (+1%) by the end of
the performance period.
Adopt and publish a PZ Sustainability Charter setting out our
commitments across key ESG areas and encourage our supply
base to sign up to our charter with at least 60% of our suppliers
by value signing up to our Sustainability Charter by the end of
the performance period.
Maximum target
(100% payout)
In addition to threshold, (1) achieve 99% of suppliers by value
signing up to our Supplier Code of Conduct; and (2) 90% of
our suppliers by value signing up to our Sustainability Charter.
Achieve an 'A/A-'
score by the end of
the performance
period.
Improve the employee
engagement score
across the group to
75% (+3%) by improving
1% each year of the
performance period.
Pro-rata vesting between threshold and maximum targets.
As in previous years, any shares vesting at the end of the three-year performance period will be subject to a two-year
holding period.
Statement of Directors’ shareholding and share interests
The Committee has established share ownership guidelines that require Executive Directors:
• To build up and retain holdings of shares (and/or deferred shares net of tax) worth 200% of salary from time to time.
• Until this share ownership threshold is met, to retain shares with a value equal to 50% of the net gain after tax arising
from the acquisition of shares pursuant to any of the Company’s share incentive plans.
• After ceasing to be a Director, Executive Directors are also required to maintain the lower of: (1) a shareholding of at
least 200% of their base salary for the first year following cessation of their employment, and 100 for the second year;
and (2) their shareholding on cessation.
• As set out in the Remuneration Policy, to defer 25% of any bonus earned into shares for three years.
Interests in shares (audited)
The interests in the Company’s shares of each of the Executive Directors as at 31 May 2021 (together with interests held
by any connected persons) were:
Ordinary shares held
at 31 May 2021
50,000
29,485
Interests in share incentive
schemes that are not
subject to performance
conditions as at
31 May 2021
Interests in share incentive
schemes that are subject to
performance conditions as
at 31 May 20211
–
–
375,000
70,973
Value of shares held
at 31 May 2021 as a
% of base salary
22%
23%
J Myers
S Pollard
1
Includes unvested awards under the Performance Share Plan that remain subject to performance.
During the period, each of the Executive Directors complied with the shareholding requirements set by the Committee
and while they have not yet met the guideline given their recent appointments to the Company and Board, progress
is being made towards achieving the 200% of salary guideline. There have been no changes in the Executive Directors’
interests between 31 May 2021 and the date of this report.
The Non Executive Directors’ shareholdings are disclosed on page 111 within the Report of the Directors.
Strategic ReportFinancial StatementsGovernance 106
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
Performance Share Plan (audited)
The outstanding awards granted to each Director of the Company under the Performance Share Plan are as follows:
Number of
options/
awards at
1 June 2020
Date of
award
Granted/
allocated
in year
Exercised/
vested
in year
Lapsed
in year
Number of
options/
awards at
31 May
2021
Share price
at date of
award
(£)
Share price
at date of
vesting
(£)
Gain
(£)
Vesting/
transfer
date1
J Myers
27-Nov-2020
S Pollard 1-Feb-2021
–
–
375,000
70,973
–
–
–
–
375,000
70,973
2.285
2.480
–
–
–
–
27-Nov-23
1-Feb-24
1 Subject to performance conditions as set out on page 103. Shares vesting under the award are subject to a two-year post vesting holding period.
Deferred bonus awards (audited)
Under the annual bonus, 25% of any payment is deferred into shares for three years. As at 31 May 2021, the Directors did
not have any outstanding deferred bonus awards.
Number of
options/
awards at
1 June 2020
Date of
award1
Granted/
allocated
in year
Exercised/
vested
in year
Lapsed
in year
Number of
options/
awards at
31 May
2021
Share price
at date of
award (£)
Share price
at date of
vesting (£)
J Myers
S Pollard
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Gain
(£)
–
–
Vesting/
transfer
date
–
–
1 Awards ordinarily vest on the third anniversary of grant, conditional only on continued employment.
Pension benefits (audited)
Directors are eligible for membership of the Company’s defined contribution pension arrangements and/or the provision
of cash allowances in lieu of thereof. The contribution for J Myers and S Pollard is set at 10% of salary, in line with the rate
applicable to the wider UK workforce.
Loss of office payments and payments to former Directors (audited)
There were no loss of office or payments to former Directors during the year which have not been disclosed in full in prior
reports.
Limits on shares issued to satisfy share incentive plans
The Company’s share incentive plans may operate over newly issued ordinary shares, treasury shares or ordinary shares
purchased in the market. In relation to all of the Company’s share incentive plans, the Company may not, in any ten-year period,
issue (or grant rights requiring the issue of) more than 10% of the issued ordinary share capital of the Company to satisfy
awards to participants, nor more than 5% of the issued ordinary share capital for executive share plans. In respect of awards
made during the year ended 31 May 2021 under the Company’s share incentive plans, no new ordinary shares were issued.
Performance graph
The graph below illustrates the performance of PZ Cussons plc measured by Total Shareholder Return (TSR) over the
ten- year period to 31 May 2021 against the TSR of a holding of shares in the FTSE 250 Index over the same period, based
on an initial investment of £100. The FTSE 250 Index has been chosen as PZ Cussons plc is a constituent of that index.
PZ Cussons plc TSR vs the FTSE 250 index TSR
Value (£)
FTSE 250 Index
PZ Cussons plc ordinary shares
300
250
200
150
100
50
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
PZ Cussons plc Annual Report and Financial Statements 2021 107
Chief Executive Officer remuneration for previous ten years
2020–21
2019–201
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
2012–13
2011–12
Total remuneration
(£)
Annual bonus % of
maximum opportunity
LTIP % of
maximum opportunity
1,517,434
659,665
802,335
732,077
1,586,330
1,104,601
1,463,325
1,052,912
1,104,089
599,070
100%
n/a
0%
0%
100.0%
47.4%
72.8%
78.0%
69.5%
0%
n/a
n/a
0%
0%
0%
0%
32.5%
0%
0%
0%
1
For 2019–20 the figure for total remuneration represents the pay of A Kanellis from 1 June 2019 to 31 January 2020, the fees paid to C Silver while acting
as Executive Chair from 1 February 2020 through 30 April 2020 and the pay of J Myers since his appointment on 1 May 2020. No bonus was paid to any of
these individuals and the 2017 and 2018 PSP awards lapsed in full.
Relative importance of spend on pay
The table below shows PZ Cussons’ distributions to shareholders and total employee pay expenditure for the financial
years ended 31 May 2020 and 31 May 2021, and the percentage change:
Total employee costs
Dividends paid
Profit before tax and adjusting items1
2021 £m
2020 £m
% change
76.9
25.5
68.6
80.1
24.2
61.8
5.4%
5.4%
11.0%
1 This metric is in line with the Group's profitability KPI, which is set out on page 43.
Change in Directors’ remuneration and for employees
The table below shows the change in annual Director remuneration (defined as salary, taxable benefits and annual bonus),
compared to the change in employee annual remuneration for a comparator group, from FY20 to FY21.
The PZ Cussons (International) Limited employee population was chosen as a suitable comparator group because it
is considered to be the most relevant, due to the UK employment location and the structure of total remuneration (staff are
able to earn an annual bonus as well as receiving a base salary and benefits), and because PZ Cussons plc has no employees
other than the Executive Directors.
UK Employee average
J Myers (CEO)1
S Pollard (CFO)2
C Silver (Chair)3
K Bashforth4
D Kucz
T Minick- Scokalo5
J Nicolson
H Owers6
J Townsend7
Percentage change (FY21 / FY20)
Salary / fees
Benefits
3%
0%
n/a
(14.3)%
17.5%
0.0%
(100.0)%
0.0%
(14.6)%
19%
0.0%
0.1%
n/a
(87.0)%
(100.0)%
(100.0)%
(100.0)%
(100.0)%
(100.0)%
n/a
Bonus
0.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 J Myers joined the Company on 1 May 2020 therefore the percentage change has been annualised based on one month for FY20 versus the full year for
FY21. There was no increase to the annualised salary or benefits between FY20 and FY21.
2 S Pollard joined the Company on 4 January 2021.
3 C Silver assumed the role of CEO on an interim basis and received an additional allowance during this time.
4 K Bashforth joined the Company on 1 November 2019; the change has been annualised based on seven months for FY20 versus the full year for FY21.
5 T Minick-Scokalo was on extended leave for personal reasons and therefore was not paid a fee in FY21.
6 H Owers left the Company at the 2020 AGM and was therefore paid her fee for six months of FY21, which has been annualised as if she had served the
full year.
7 J Townsend joined the Company on 1 April 2020 therefore the percentage change has been annualised based on two months for FY20 verses the full
year for FY21.
Strategic ReportFinancial StatementsGovernance 108
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
CEO to all-employee pay ratio
Method A was used as it was the most appropriate given the data available to complete the analysis. The CEO single
figure is the pay received by J Myers in relation to 2021. In setting remuneration for the CEO, both internal and external
benchmarks are considered, as is the remuneration of the broader workforce. The Committee receives market updates
from their independent advisors which provide context from other listed companies. Executive pay policy for the CEO,
other Directors and senior management is then set to as to be appropriately positioned for the size and scope of the roles
and experience of the individuals.
The ratio is considered to be reflective of the pay, reward and progression policies within the Company’s UK employee
population. Pay levels for roles are set taking into account internal relativities and external benchmarks and promotions are
considered on an annual cycle. The CEO figure used in FY20 was a combination of pay received by A Kanellis for the period
he served as CEO, the fees paid to C Silver while she acted as Executive Chair and the pay received by J Myers for the period
he served as CEO during the year. No incentive payments in respect of the individuals in-role were paid in FY20. The change
in the pay ratio is as a result of these factors and that in FY21 J Myers was awarded the maximum bonus opportunity.
Employee data includes those employed as at 31 May 2021. For any employee who joined after 1 June 2020 and was still
employed at 31 May 2021, remuneration for that employee has been calculated as if the employee had been employed for
the full year. Where there was no identifiable employee at the 25th, 50th or 75th percentile, then the data for the employee
closest to that percentile has been used. If two employees were equally close to the relevant percentile then the employee
with the most representative pay mix was selected. Additionally, where pay includes statutory pay such as maternity,
paternity or sick pay these amounts have been included in the calculation.
CEO pay ratio
Method
CEO Single figure
Upper quartile
Median
Lower quartile
FY20
A
FY21
A
£659,665
£1,517,508
9
13
19
19
29
40
The salary and total pay for the individuals identified at the lower quartile, median and upper quartile positions as at
31 May 2021 are set out below:
2021
Upper quartile individual
Median individual
Lower quartile individual
Salary
Total pay
£61,260
£44,917
£34,169
£79,627
£52,549
£37,949
Consideration by the Directors of matters relating to Directors’ remuneration
The following Directors were members of the Remuneration Committee when matters relating to the Directors’
remuneration for the year were being considered:
• K Bashforth (Chair from 1 July 2020)
• H Owers (Chair until 30 June 2020, member until 2020 AGM when she stepped down from the Board)
• D Kucz
• J Townsend
The Committee was advised in relation to Directors’ remuneration during the year by Korn Ferry who were appointed
by the Committee in 2017 following a competitive tender process. Korn Ferry is a founder member of the Remuneration
Consultants Group and has signed the voluntary Code of Practice for remuneration consultants. During the year, it has
advised the Committee in relation to market data and evolving market practice and with regard to the review of the
Remuneration Policy. The fees paid to Korn Ferry in respect of this work were charged on a time and materials basis and
totalled £57,550 excluding VAT for the year. Korn Ferry also provided PZ Cussons with executive coaching services during
the year. The Committee is satisfied that the advice it has received from Korn Ferry has been objective and independent.
Korn Ferry does not have any other connections with PZ Cussons or any Director of the Company.
PZ Cussons plc Annual Report and Financial Statements 2021 109
During the year, the Committee consulted C Silver (in her capacity as Non Executive Chair) on issues where it felt her
experience and knowledge could benefit its deliberations and she attended meetings by invitation. The Committee also
consulted J Myers as CEO on proposals relating to the remuneration of members of the Group’s senior management team
and he too attended meetings by invitation. The Chief Human Resources Officer also attended meetings by invitation.
The Committee is supported by the Company Secretary who acts as Secretary to the Committee. Invitees are not involved
in any decisions or discussions regarding their own remuneration.
In setting remuneration for Executive Directors and senior managers, both internal and external benchmarks are
considered, as is the remuneration of the broader workforce. The Committee receives market updates from Korn Ferry
which provide context from other listed companies. Executive pay policy is then set to as to be appropriately positioned
for the size and scope of the roles and experience of the individuals.
Statement of shareholder voting
The Committee is directly accountable to shareholders and, in this context, is committed to an open and transparent
dialogue with shareholders on the issue of executive remuneration. During the year, the Committee actively engaged
with shareholders and shareholder representative bodies in respect of the renewal of the Directors’ Remuneration Policy
and how it will be implemented in the 2021 financial year, including the performance conditions to be applied to awards
under the annual bonus and PSP. Feedback was taken into account when agreeing the final proposals.
The Remuneration Committee Chair will be available to answer questions from shareholders regarding remuneration at
the 2021 Annual General Meeting.
The votes cast at the 2020 Annual General Meeting in respect of the approval of the 2020 Report on Directors’
Remuneration and in respect of the approval of the Directors’ Remuneration Policy are shown below:
Advisory vote on the 2020 Report on Directors’ Remuneration (2020 AGM):
Votes for
Votes against
Number
328,247,057
%
99.95
Number
169,193
%
0.05
Votes cast
Votes withheld
328,416,250
788,490
Binding vote on the Directors’ Remuneration Policy (2020 AGM):
Votes for
Votes against
Number
301,319,114
%
91.74%
Number
27,121,924
%
8.26%
Votes cast
Votes withheld
328,441,038
775,302
By order of the Board of Directors
Kirsty Bashforth
Remuneration Committee Chair
30 September 2021
Strategic ReportFinancial StatementsGovernance 110
REPORT OF THE DIRECTORS
The Directors present their report together with the audited consolidated financial statements and the report of the
auditor for the year ended 31 May 2021.
Principal activities
The principal activities of the Group are the manufacture and distribution of soaps, detergents, toiletries, beauty products,
pharmaceuticals, electrical goods, edible oils, fats and spreads and nutritional products. The subsidiary undertakings and
joint ventures principally affecting the profits, liabilities and assets of the Group are listed in note 29 of the Consolidated
Financial Statements.
Results and dividends
A summary of the Group’s results for the year is set out in the Financial Review on pages 49 to 53 of the Strategic Report.
The Directors recommend a final dividend of 3.42p (2020: 3.13p) per ordinary share to be paid on 30 November 2021
to ordinary shareholders on the register at the close of business on 22 October 2021, which, together with the interim
dividend of 2.67p (2020: 2.67p) paid on 1 April 2021, makes a total of 6.09p for the year (2020: 5.80p).
Scope of the reporting in this Annual Report and Financial Statements
The Group’s statement on corporate governance can be found on pages 64 to 109 which is incorporated by reference
and forms part of this Report of the Directors. For the purposes of compliance with DTR 4.1.5 R(2) and DTR 4.1.8 R,
the required content of the Management Report can be found in the Strategic Report and this Report of the Directors,
including the sections of the Annual Report and Financial Statements incorporated by reference.
For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R can be found in the
following locations:
Section
Topic
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
and other employee share schemes
Location
Not applicable
Not applicable
Report on Directors’ Remuneration – pages 100 to 109
Waiver of emoluments by a Director
Report on Directors’ Remuneration
Waiver of future emoluments by a Director
Non pre-emptive issues of equity for cash
Not applicable
Not applicable
Item (7) in relation to major subsidiary undertakings
Not applicable
Parent participation in a placing by a listed subsidiary
Not applicable
Contracts of significance
Not applicable
Provision of services by a controlling shareholder
Not applicable
Shareholder waivers of dividends
ESOT: see note 24 of the Consolidated Financial Statements
Shareholder waivers of future dividends
ESOT: see note 24 of the Consolidated Financial Statements
Agreements with controlling shareholders
Report of the Directors pages 112 and 113
1
2
4
5
6
7
8
9
10
11
12
13
14
All the information referenced above is hereby incorporated by reference into this Report of the Directors.
PZ Cussons plc Annual Report and Financial Statements 2021 111
The Board
The Directors, who served throughout the year and unless stated otherwise were in office up to the date of signing the
financial statements are detailed below:
C Silver
J Myers
K Bashforth
D Kucz
J Nicolson
S Pollard
J Townsend
T Minick-Scokalo
H Owers
Service in the year 31 May 2021
Served throughout the year
Served throughout the year
Served throughout the year
Served throughout the year
Served throughout the year
Appointed 4 January 2021
Served throughout the year
Resigned on 26 November 2020
Resigned on 26 November 2020
J Sodha was appointed to the Company as a Non Executive Director with effect from 1 July 2021. Valeria Juarez was
appointed to the Company as a Non Executive Director with effect from 22 September 2021.
Directors’ interests
The Directors’ and connected persons’ interests in the share capital of the Company at 31 May 2021, together with their
interests at 1 June 2020, or date of appointment if later, are detailed below:
Ordinary shares
Beneficial
C Silver
J Myers
K Bashforth
D Kucz
S Pollard
J Nicolson
J Townsend
J Sodha3
V Juarez4
Total
2021
Number
42,500
50,000
5,000
7,500
29,485
–
10,000
–
–
2020
Number
42,500
–
5,000
7,500
n/a
–
–
n/a
n/a
144,485
55,000
1
The figures in the tables do not include 10,291,149 (2020: 10,731,030) ordinary shares purchased and held by the Employee Share Option Trust (ESOT)
as at 31 May 2021. The ESOT is a discretionary trust under which the class of beneficiaries who may benefit comprises certain employees and former
employees of the Company and its subsidiaries including members of such employees’ and former employees’ immediate families. Some or all of the
shares held in the ESOT may be the subject of awards to Executive Directors of the Company under the PZ Cussons plc Performance Share Plan, details
of which are given in the Report on Directors’ Remuneration. Accordingly, those Executive Directors are included in the class of beneficiaries and are
deemed to have a beneficial interest in all the shares acquired by the ESOT.
2
The figures in the tables do not include conditional share awards granted under the PZ Cussons plc Performance Share Plan or deferred share awards
under the senior executive annual bonus scheme.
3
As at J Sodha’s date of appointment, 1 July 2021. J Sodha purchased 22,200 shares on 2 July 2021.
4 As at V Juarez's date of appointment, 22 September 2021.
No Director had any beneficial interest during the year in shares or debentures of any subsidiary company. Save for their
service contracts or letters of appointment, there were no contracts of significance subsisting during, or at the end of,
the financial year with the Company or any of its subsidiaries in which a Director of the Company was materially interested.
Strategic ReportFinancial StatementsGovernance 112
REPORT OF THE DIRECTORS CONTINUED
Directors’ indemnification and insurance
Indemnities are in force under which the Company has agreed to indemnify the Directors, the Company Secretary and
officers of Group subsidiaries, to the extent permitted by law, against claims from third parties in respect of certain
liabilities arising out of, or in connection with, the execution of their duties. The indemnified individuals are also
indemnified against the cost of defending criminal prosecution or a claim by the Company, its subsidiaries or a regulator
provided that, where the defence is unsuccessful, the indemnified person must repay those defence costs.
The Company purchases and maintains insurance for the Directors and officers of the Company in performing their duties,
as permitted by Section 233 Companies Act 2006. This insurance has been in place during the year and remains in place at
the date of signing this report.
Other substantial interests
The Company had been notified of the following interests amounting to 3% or more of its issued share capital as at the
end of the financial year and at 22 September 2021:
Zochonis Charitable Trust
Sir J B Zochonis Will Trust
Heronbridge Investment Mgt
Majedie Asset management
J B Zochonis Settlement
Lindsell Train Investment Management
Mrs C M Green Settlement
As at 22 September 2021
As at 31 May 2021
Number
of shares
%
Number
of shares
63,019,193
14.70%
63,019,193
49,320,712
11.50%
49,320,712
31,157,024
21,160,944
19,927,130
18,682,474
15,322,741
7.27%
4.94%
4.65%
4.36%
3.57%
31,157,024
21,160,944
19,927,130
18,682,474
15,322,741
%
14.70%
11.50%
7.27%
4.94%
4.65%
4.36%
3.57%
No shares were issued during the year. Further information about the Company’s share capital is given in note 23 of the
Consolidated Financial Statements.
Significant agreements
Relationship Agreement
The Financial Conduct Authority’s Listing Rules require a premium listed company with a controlling shareholder (being
a shareholder who exercises or controls, on their own or together with any person with whom they are acting in concert,
30% or more of the votes able to be cast on all or substantially all matters at a general meeting) to enter into a written and
legally binding agreement that is intended to ensure that the controlling shareholder complies with certain independence
provisions. These independence provisions are undertakings that transactions and arrangements with the controlling
shareholder and/or any of their associates will be conducted at arm’s length and on normal commercial terms; that neither
the controlling shareholder nor any of its associates will take any action that would have the effect of preventing the
listed company from complying with its obligations under the Listing Rules; and that neither the controlling shareholder
nor any of its associates will propose or procure the proposal of a shareholder resolution that is intended or appears to be
intended to circumvent the proper application of the Listing Rules (together, ‘Independence Provisions’).
For the purposes of the Listing Rules, certain shareholders in the Company, principally comprising the founding Zochonis
family, related family groups and trusts under their control are deemed to be controlling shareholders of the Company
(together, the ‘Concert Party’). In light of the significant changes to senior management and the Board over the course
of FY20 and FY21, a consultation was held with the Takeover Panel and certain former executives and other shareholders
along with the Company's employee benefits trust and pension trustees were determined to no longer meet the legal
definition of acting in concert with the core members of the founding Zochonis family. Accordingly, the Takeover Panel
approved the reconstitution of the Concert Party as comprising the core members of the founding Zochonis family
and certain related trusts holding, in the aggregate, approximately 43.89% of the issued share capital of the Company,
compared with 51.03% held by the previously constituted Concert Party. So far as the Company is aware, no current or
former member of the Concert Party has divested of any of their shares following this reconstitution.
As required by the Listing Rules, the Board confirms that the Company entered into a written relationship agreement
with the Concert Party on 17 November 2014 containing the Independence Provisions and a procurement obligation
(the ‘Relationship Agreement’). The Board also confirms that, during the period from 17 November 2014 to 31 May 2021
(being the end of the financial year under review):
PZ Cussons plc Annual Report and Financial Statements 2021 113
• The Company complied with the Independence Provisions in the Relationship Agreement.
• So far as the Company is aware, the Independence Provisions in the Relationship Agreement were complied with by the
Concert Party and its associates.
• So far as the Company is aware, the procurement obligation included in the Relationship Agreement was complied with
by the Concert Party.
Political and charitable contributions
Charitable contributions in the UK during the year amounted to £70,000 (2020: £503,000). No political contributions were
made (2020: £nil).
Research and development
The Group maintains in-house facilities for research and development in the UK, Indonesia, Thailand, Nigeria and
Australia. In addition, research and development is subcontracted to approved external organisations. Currently all such
expenditure is charged against profit in the year in which it is incurred, as it does not meet the criteria for capitalisation
under IAS 38 ‘Intangible Assets’.
Greenhouse Gas Emissions Report
Global greenhouse gas (GHG) emissions data for the year are contained within the Sustainability – environment section
on pages 30 to 33.
Employment of people with disabilities
During the year the Group has maintained its policy of providing equal opportunities for the appropriate employment,
training and development of people with disabilities . If any employees should become disabled during the course of their
employment our policy is to oversee the continuation of their employment and to arrange training for these employees.
Employee information
The Group recognises the benefits of keeping employees informed of the progress of the business and of involving
them in their Company’s performance. The methods of achieving such involvement are different in each company and
country and have been developed over the years by local management working with local employees in ways that suit
their particular needs and environment, with the active encouragement of the parent organisation. Further details on our
engagement with employees can be found in pages 20 and 28 to 29. Employee views are provided to the Board through
updates from the designated Non Executive Director for employee engagement.
Inclusion and diversity
PZ Cussons is an extremely diverse organisation in terms of its ethnic and cultural make-up and this is something that we
continue to promote. We employ many different nationalities including Indian, Chinese, Polish, Indonesian, Singaporean,
Thai, Greek, Australian, Nigerian, Ghanaian, Kenyan, American, Canadian and British. We are clear that we want our
leadership team to reflect the diversity of the markets in which we function and for that reason we are focused on
developing local talent who understand different cultures. We do not employ any person below the local legal working
age and we will not, in any circumstances, employ anyone below the age of 16. During the year a refreshed diversity and
inclusion policy was adopted that reinforced the Company’s commitment to having a Board and an Executive Leadership
Team that reflects the diversity of our workforce and consumers in the countries in which we operate.
Further details on the composition of our global employee population are set out in the table below:
2021
2020
2019
2018
2017
Female employees
Male employees
Female senior managers
Male senior managers
Female Group
Board Directors
Male Group Board Directors
Employees with over
15 years’ service
Employees over 50
No.
832
2,111
51
110
3
4
1,039
408
%
28
72
32
68
43
57
35
14
No.
899
2,461
68
125
4
4
1,168
438
%
27
73
35
65
50
50
35
13
No.
1,064
2,717
77
150
3
5
1,211
424
%
28
72
34
66
38
62
32
11
No.
1,183
3,003
80
147
3
5
1,297
411
%
28
72
35
65
38
62
31
10
No.
1,252
3,523
87
167
3
5
1,289
401
%
26
74
34
66
38
62
27
8
Strategic ReportFinancial StatementsGovernance 114
REPORT OF THE DIRECTORS CONTINUED
Stakeholder engagement
The Directors have had regard to
the need to foster the Company’s
business relationships with suppliers,
customers and others and consider
these relationships and factors in
their decision making. Further details
can be found in the Strategic Report
and our section 172 statement on
page 22.
External Auditor
Deloitte LLP has signified its
willingness to continue in office as
External Auditor to the Company and,
in accordance with section 485 of the
Companies Act 2006, a resolution for
its reappointment will be proposed
at the forthcoming Annual General
Meeting. A statement on the
independence of the External Auditor
is included in the Report of the Audit
& Risk Committee on page 81.
Principal risks and uncertainties
facing the Group
The Group’s business activities,
financial condition and results of
operations could be affected by
a variety of risks or uncertainties.
These are summarised in the
Principal Risks and Uncertainties
section on pages 58 to 61 of the
Strategic Report.
Annual General Meeting
The Company’s 2021 Annual
General Meeting will be held at the
Raddison Blue Hotel Manchester
Airport, Chicago Ave, Manchester,
M90 3RA, United Kingdom at
10:30am on 23 November 2021.
The resolutions that will be proposed
at the 2021 Annual General Meeting
are set out in the separate Notice
of Annual General Meeting, which
accompanies this Annual Report
and Financial Statements.
Share capital
As at 31 May 2021, the Company’s
issued share capital consisted of
428,724,960 ordinary shares of
1p each.
Rights and obligations
attaching to shares
Subject to applicable statutes and
other shareholders’ rights, shares
may be issued with such rights and
restrictions as the Company may
by ordinary resolution decide, or,
if there is no such resolution or
so far as it does not make specific
provision, as the Board may decide.
Restrictions on voting
Unless the Board decides otherwise,
no member shall be entitled to vote
at any meeting in respect of any
shares held by that member if any
call or other sum that is then payable
by that member in respect of that
share remains unpaid.
Powers of Directors
Subject to the Company’s
Memorandum and Articles of
Association, the Companies Acts
and any directions given by special
resolution, the business of the
Company will be managed by the
Board, which may exercise all the
powers of the Company.
Articles of Association
The rules governing the appointment
and replacement of Directors
are contained in the Company’s
Articles of Association. Changes
to the Articles of Association must
be approved by shareholders in
accordance with legislation in force
from time to time.
Purchase of own shares
Pursuant to shareholder approval
given at the 2020 Annual General
Meeting, the Company is authorised
to make market purchases of its own
ordinary shares. The Directors intend
to seek renewal of this authority
at future Annual General Meetings
but not at the 2021 Annual General
Meeting. No shares were purchased
from 1 June 2020 to 31 May 2021
(2020: nil) and no acquisitions were
made by the ESOT (see note 24 of the
Consolidated Financial Statements).
Restrictions on the transfer
of securities
There are no restrictions on
the transfer of securities in the
Company except:
• That certain restrictions may from
time to time be imposed by laws
and regulations (for example,
relating to insider trading).
• Pursuant to the Listing Rules of
the Financial Conduct Authority
whereby certain employees of the
Company require the approval
of the Company to deal in the
Company’s ordinary shares.
Going concern
The Group’s business activities,
together with the factors likely
to affect its future development,
performance and position are set out
in the Strategic Report. The financial
position of the Group and liquidity
position are described within the
Financial Review. In addition, note
6 of the Consolidated Financial
Statements includes policies in
relation to the Group’s financial
instruments and risk management,
and policies for managing credit risk,
liquidity risk, market risk, foreign
exchange risk, price risk, cash flow
and interest rate risk and capital risk.
After making enquiries, the Directors
have a reasonable expectation that
the Company and the Group have
adequate resources to continue in
operational existence for a period
of at least 12 months from the
date of approving the Financial
Statements. Accordingly, they
continue to adopt the going concern
basis in preparing the Annual Report
and Financial Statements. A viability
statement has been prepared and
approved by the Board and this is
set out on page 57.
Events after the balance sheet date
In late September 2021, the Company
was notified of an intention to initiate
arbitration in respect of a breach
of warranty relating to a previous
divestment. Based on the information
received to date the Company
believes that the claim is unlikely to
succeed but that there is not sufficient
information available as yet to
conclude that any outflow is remote.
PZ Cussons plc Annual Report and Financial Statements 2021 115
The Company does not believe that
the potential amount of any award can
be reasonably estimated at present,
given the early stage of the claim.
Additional disclosures
Other information that is relevant
to the Report of the Directors, and
which is incorporated by reference
into this report, can be located as
follows:
• Proposed future developments
for the business are set out on
pages 4 to 13.
• Details of Group subsidiaries
including overseas branches
are set out in note 29 on pages
192 and 193.
• Financial instruments and risk
management are set out in
note note 6 on page 201.
• Trade payables under vendor
financing arrangements are
set out in note 1 on page 147.
Directors’ statement as to disclosure
of information to the External Auditor
In the case of each of the persons who
were Directors of the Company at the
date when this report was approved:
• So far as each of the Directors is
aware, there is no relevant audit
information (as defined by the
Companies Act 2006) of which the
Company’s External Auditor
is unaware.
• Each of the Directors has taken
all the steps that he or she ought
to have taken as Director to make
himself or herself aware of any
relevant audit information and
to establish that the Company’s
External Auditor is aware of that
information.
Statement of Directors’
responsibilities
The Directors are responsible for
preparing the Annual Report, the
Report on Directors’ Remuneration
and the Group and Parent Company
Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare Financial Statements
for each financial year. Under that
law the Directors have elected
to prepare the Group financial
statements in accordance with
international accounting standards
in conformity with the requirements
of the Companies Act 2006 and
International Financial Reporting
Standards adopted pursuant to
Regulation (EC) No 1606/2002 as
it applies in the European Union.
Under company law, the Directors
must not approve the Financial
Statements unless they are satisfied
that they give a true and fair view
of the state of affairs of the Group
and the Parent Company and of
the profit or loss of the Group and
Parent Company for that period.
In preparing these Financial
Statements, the Directors are
required to:
• Select suitable accounting policies
and then apply them consistently.
• Make judgements and accounting
estimates which are reasonable
and prudent.
• State whether applicable IFRSs as
adopted by the European Union
have been followed for the Group
Financial Statements and United
Kingdom Accounting Standards,
comprising FRS 101, have been
followed for the Parent Company
Financial Statements, subject to
any material departures disclosed
and explained in the Group
and Parent Company Financial
Statements respectively.
• Prepare the Financial Statements
on the going concern basis unless
it is inappropriate to presume that
the Group and Parent Company
will continue in business.
The Directors are responsible for
keeping adequate accounting
records that are sufficient to
show and explain the Group and
Company’s transactions and disclose
with reasonable accuracy at any time
the financial position of the Group
and Company and enable them to
ensure that the Financial Statements
and the Report on Directors’
Remuneration comply with the
Companies Act 2006 and, as regards
the Group Financial Statements,
Article 4 of the IAS Regulation.
The Directors are also responsible
for safeguarding the assets of
the Company and the Group and
hence for taking reasonable steps
for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for
the maintenance and integrity
of the Company’s website, www.
pzcussons.com. Legislation in the
United Kingdom governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual
Report and Financial Statements,
taken as a whole, is fair, balanced
and understandable and provides
the information necessary for
shareholders to assess the Group and
Parent Company’s performance and
position, business model and strategy.
Each of the Directors, whose names
and functions are listed on pages 64
and 65 confirm that, to the best of
their knowledge:
• The Company Financial Statements,
which have been prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice (United Kingdom
Accounting Standards, comprising
FRS 101 ‘Reduced Disclosure
Framework’ and applicable law),
give a true and fair view of the
assets, liabilities, financial position
and result of the Company.
• The Group Financial Statements,
which have been prepared in
accordance with IFRSs as adopted
by the European Union, give a
true and fair view of the assets,
liabilities, financial position and
profit of the Group.
• The Report of the Directors
includes a fair review of the
development and performance
of the business and the position
of the Group and Company,
together with a description of the
principal risks and uncertainties
which it faces.
This information is given and should
be interpreted in accordance with
the provision of section 418(2) of the
Companies Act 2006.
By order of the Board of Directors
Kevin M Massie
Group General Counsel
and Company Secretary
30 September 2021
Strategic ReportFinancial StatementsGovernance 116
FINANCIAL
STATEMENTS
PZ Cussons plc Annual Report and Financial Statements 2021 117
118 Independent Auditor’s Report
130 Consolidated income statement
131 Consolidated statement
of comprehensive income
132 Consolidated balance sheet
134 Consolidated statement
of changes in equity
135 Consolidated cash flow
statement
136 Notes to the consolidated
financial statements
195 Company balance sheet
196 Company statement
of changes in equity
197 Notes to the Company
financial statements
205 Further statutory and
other information
Strategic ReportGovernanceFinancial Statements 118
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF PZ CUSSONS PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
1. Opinion
In our opinion:
• the financial statements of PZ Cussons plc (the ‘parent company’) and its subsidiaries (the ‘Group’) give a true and fair
view of the state of the Group’s and of the parent company’s affairs as at 31 May 2021 and of the Group’s loss for the
year then ended;
• the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs)
adopted pursuant to regulation (EC) No 1606/2002 as it applies in the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent company balance sheets;
• the consolidated and parent company statements of changes in equity;
• the consolidated cash flow statement; and
• the related notes 1 to 30 for the consolidated financial statements, and related notes 1 to 10 for the parent company
financial statements.
The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006
and IFRSs adopted pursuant to regulation (EC) No 1606/2002 as it applies in the European Union. The financial reporting
framework that has been applied in the preparation of the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard
as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard were not provided
to the Group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
PZ Cussons plc Annual Report and Financial Statements 2021 119
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Carrying value of Rafferty’s Garden assets;
• Provision for uncertain tax positions; and
• Classification and presentation of adjusting items.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the Group financial statements was £3.2m which was determined on the basis
of 5% of adjusted profit before tax.
Scoping
The scope of our audit covered 94% of revenue, 91% of adjusted profit before tax and 88% of net assets.
Significant changes
in our approach
In the prior year, we included management override of controls as a key audit matter. Given the strengthening
of the Group’s governance structure since the prior year, we did not identify this as a key audit matter in the
current year. Notwithstanding the improvements in governance, there continue to be deficiencies in internal
controls over financial reporting at both the entity level and the process level across the Group, and therefore
we again concluded at the planning stage that it was not appropriate to adopt a controls reliance approach.
In the current year, we have identified provision for uncertain tax positions as a key audit matter as a result of
rapidly developing and ambiguous tax legislation in a number of the Group’s overseas territories; specifically, in
Nigeria and Indonesia; the quantification of potential tax liability exposures and related disclosures require the
application of significant judgement.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and parent company’s ability to continue to adopt the going
concern basis of accounting included:
• Obtaining an understanding of relevant controls related to management’s process for evaluating the Group’s ability to
continue as a going concern, including the identification and evaluation of the relevant business risks and the method,
model and assumptions applied by management;
• Obtaining management’s approved going concern model, including the sensitivities performed, and challenging the
assumptions and sensitivities used with reference to analyst reports, market data and other external information;
• Assessing the appropriateness of the scenario analysis, including the additional stress-testing performed by
management with reference to historical performance and other external data;
• Performing a retrospective review of management’s historical accuracy of forecasting;
• Evaluating the Group’s existing access to sources of financing, including undrawn committed bank facilities, and
analysing management’s actual and forecast covenant positions at the period end date and throughout the going
concern period; and
• Evaluating the appropriateness of management’s disclosures in the financial statements related to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group’s and parent company’s ability to continue as a
going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
Strategic ReportGovernanceFinancial Statements
120
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF PZ CUSSONS PLC
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
5.1 CARRYING VALUE OF RAFFERTY’S GARDEN ASSETS
KEY AUDIT MATTER
DESCRIPTION
As at 31 May 2021, the Group recognised intangible assets of £221.0m (2020: £225.9) as per note 10 of the
financial statements, which includes the Rafferty’s Garden brand that had a carrying value at 31 May 2021
of £23.2m. Rafferty’s Garden is a baby food and nutrition brand operating largely in the Australian market.
The brand is not considered to be one of the Group’s ‘Must Win Brands’ and its financial performance
historically has been mixed. In the year ended 31 May 2020, an impairment charge of £18.9m was recorded
in relation to the brand. The brand is deemed to be of indefinite life and accordingly is not amortised.
Rafferty’s Garden is considered to represent a single cash generating unit (CGU) for the purposes of
impairment testing due to the largely independent cash inflows arising from the brand.
During the year ended 31 May 2021, management performed its annual impairment assessment, as required
by IAS 36. This process involved the preparation of discounted cash flow analysis to support the value in
use of the Rafferty’s Garden CGU, in order to determine the CGU’s recoverable amount. Management’s
discounted cash flow model is particularly sensitive to the assumed discount rate and terminal growth rate.
Management’s value in use model applies a post-tax discount rate to post-tax cash flows, notwithstanding
the requirement of IAS 36 to perform value in use analysis on a pre-tax basis; Instead, an inferred pre-tax
rate is calculated by working backwards from the determined value in use, using forecast pre-tax cash flows
of the CGU, and this inferred pre-tax rate is disclosed in the accounts to meet the requirements of IAS 36.
This post-tax discount rate adjusts for risks specific to the CGU but excludes an allowance for a size premium,
which we consider to be an important element of determining a market participant rate.
Management’s value in use calculation indicated that significant headroom existed in relation to the CGU in
the base case. Management applied its determination of reasonably possible downside sensitivities to the
base case, which resulted in significant headroom still being present. Management therefore concluded
that no impairment was required. Further, management concluded that despite the significant headroom in
the sensitised base case, no reversal of previously recorded impairments was appropriate due to the ongoing
uncertain economic outlook in light of COVID-19, and the relatively recent return to growth for the CGU.
Further detail in relation to management’s impairment considerations has been provided in note 10 to the
financial statements.
The key inputs to management’s model, as noted above, have been identified as a key source of estimation
uncertainty on page 138. This area has also been a key matter for discussion during the year end by the
audit and risk committee, as detailed in its report on pages 78 to 85. Due to the level of judgement in the
key inputs, this gives rise to the possibility of there being a risk of fraud in this area.
PZ Cussons plc Annual Report and Financial Statements 2021 121
HOW THE SCOPE
OF OUR AUDIT
RESPONDED TO THE
KEY AUDIT MATTER
We understood management’s process for identifying indicators of impairment and for performing the
impairment assessment. We obtained an understanding of relevant controls relating to asset impairment
models, the underlying forecasting processes and the impairment reviews performed. We evaluated and
challenged the key assumptions and inputs into the impairment models, which included performing
sensitivity analysis, to evaluate the impact of selecting alternative assumptions. In challenging the
assumptions, we have:
• Considered the appropriateness of the identification of Rafferty’s Garden as a distinct CGU;
• Assessed the discount and terminal growth rates applied. In doing so, we involved our valuation
specialists to challenge management on the reasonableness of the discount rate applied in their model
which is based on a post-tax WACC for comparable companies operating in similar markets as the Group,
and evaluated the growth rates by benchmarking against available market views and analysis;
• Completed a sensitivity analysis by including adjustments to both the underlying cash flows and the
discount rate to include a size premium;
• Reflected a size premium in the discount rate, we performed further sensitivity analysis reflecting, in our
view, reasonably possible downside scenarios in relation to the terminal growth rate and year on year
growth rates used in the base case value in use calculation;
• Understood the extent to which forecasts can be reliably derived by the company; and
• Assessed whether forecast cash flows were consistent with Board-approved forecasts, including how
those forecasts considered the impact of COVID-19 and analysed reasonably possible downside
sensitivities. We evaluated the base case forecasts based on our knowledge of the business and of local
macroeconomic factors.
We tested the integrity of the impairment models and cash flow forecasts for arithmetical accuracy. We
considered the compliance of management’s impairment models with the requirements of IAS 36
‘Impairment of Assets’. We also evaluated the presentation and disclosure of management’s impairment
assessment in the financial statements to assess whether the disclosure is consistent with management’s
methodology and assumptions, and also in line with relevant accounting standards.
KEY OBSERVATIONS
We concur with the conclusions of management that no impairment is required in relation to the carrying
value of Rafferty’s Garden is appropriate. In addition, we concur with management’s conclusion that it is
not appropriate to reverse previously recorded impairment provisions in relation to Rafferty’s Garden,
albeit on a different basis to management’s conclusion, as set out below.
We consider that the use of a post-tax discount rate, applied to post-tax cash flows, in management’s
model is technically not compliant with IAS 36, however it does not in isolation result in different
conclusions in respect of value in use being reached. It is our view, however, that a size premium should be
applied in determining the discount rate for this CGU. When a size premium is applied, the headroom in
management’s base case model reduces significantly, but remains positive, demonstrating that neither
further provision for impairment, nor reversal of previously recorded impairment, is appropriate. We also
concluded that the disclosures made in respect of possible downside scenarios in note 10 are appropriate.
Strategic ReportGovernanceFinancial Statements 122
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF PZ CUSSONS PLC
5.2 PROVISION FOR UNCERTAIN TAX POSITIONS
KEY AUDIT MATTER
DESCRIPTION
HOW THE SCOPE
OF OUR AUDIT
RESPONDED TO THE
KEY AUDIT MATTER
The Group operates in a number of overseas territories, including some with rapidly developing or
ambiguous tax legislation. It also undertakes transactions with complex or subjective tax implications, such
as divestments and intercompany transactions. As at 31 May 2021, there were a number of open tax claims
against the Group in relation to its overseas subsidiaries relating to 2013 and onwards. The claims typically
challenge the deductibility of certain expenses, or, in the case of indirect taxes, the application of VAT
rules. Historically, similar claims, whilst initially very large, have resulted in immaterial cash outflows.
Hence, there is a range of possible outcomes for provisions and contingencies and management is required
to make certain judgements in respect of estimates of tax exposures and contingencies in order to assess
the adequacy of tax provisions and disclosures.
We therefore identified a key audit matter in the current year relating to the quantification of the
potential exposures in Nigeria and Indonesia due to the ongoing material claims made by the authorities
in these territories that require significant judgement to determine the appropriate provisions and
related disclosures.
The accounting policy applied by the Group in relation to the provision for uncertain tax positions is
described on page 131 and the key sources of estimation uncertainty in relation to current tax are described
in Note 1 of the Consolidated Financial Statements, with further disclosures in relation to tax provisions
and contingent liabilities included in Note 7.
With the support of our UK in-house taxation specialists across corporation tax and transfer pricing, and
with input from tax specialists within our overseas component teams, we assessed the appropriateness
of the provision for uncertain tax positions and of the contingent liability disclosure by performing the
following audit procedures:
• Obtained an understanding of the relevant controls relating to provision for uncertain tax positions;
• Assessed management’s policies for recognition and measurement of uncertain tax positions for
compliance with the guidance per IFRIC 23;
• Evaluated the transfer pricing methodology of the Group and associated approach to provisioning;
• Considered evidence such as the actual results from the recent tax authority audits and enquiries,
third-party tax advice where obtained, and our tax specialists’ own knowledge of market practice in
relevant jurisdictions; and
• Assessed the disclosures made by management in Notes 1 and 7 in relation to provisions for uncertain
tax positions and contingent liabilities.
Particular focus was applied to contingent liability disclosure in relation to the Group’s Indonesia component,
where there are a number of material outstanding claims in relation to corporate income tax and VAT. In
addition, we challenged the approach taken to transfer pricing risk in relation to the Nigeria component’s
transactions with the Group’s Singapore procurement hub.
KEY OBSERVATIONS
From our work we concluded that management has applied a consistent approach to estimating provisions
for uncertain tax positions and are satisfied that management’s estimates are appropriately recorded and
tax matters are appropriately disclosed.
PZ Cussons plc Annual Report and Financial Statements 2021 123
5.3 CLASSIFICATION AND PRESENTATION OF ADJUSTING ITEMS
KEY AUDIT MATTER
DESCRIPTION
HOW THE SCOPE
OF OUR AUDIT
RESPONDED TO THE
KEY AUDIT MATTER
In the year to 31 May 2021, the Group recognised pre-tax adjusting items of £51.6m (2020: £34.4m), as
disclosed in note 3 of the financial statements and within the Audit & Risk Committee report on page 82.
In prior periods, management recognised ‘exceptional items’ in the income statement; however in
recognition of the focus by the European Securities and Markets Authority (ESMA) and the Financial
Reporting Council (FRC), the Group has changed its accounting policy to identify adjusting items instead.
The Group adopts a columnar format in the income statement to highlight these adjusting items.
Adjusting items, and amounts derived from them such as adjusted profit measures, are considered to be
non-GAAP measures on the basis that adjusting items are not defined within IFRS. The extent to which
items meet the Group’s definition of adjusting items is a key area of judgement and also represents a risk of
fraudulent financial reporting. In particular, as noted by the ESMA guidelines on alternative performance
measures, it is important to identify all adjusting items to give balance to the recognition of credits and
charges in the consolidated income statement. Management has included disclosure of its policy in respect
of the classification of items as adjusting in note 1.
Management has included projects costs, net profits on the disposal of businesses and brands, impairment
charges and the impact of the UK tax rate change on the Group’s deferred tax provisions in relation to its
capitalised brands (intangible assets). Some of these items are similar in nature to amounts recorded as
exceptional items in previous years, as they relate to multi-year restructuring projects. No COVID-19 related
income or costs have been included as adjusted items. Due to the potential for the classification of these
items to influence the perception of the group’s results, there is an inherent fraud risk in relation to the
appropriateness and competeness of adjusting items.
We have performed the following audit procedures in our response to this key audit matter:
• Obtained an understanding of the relevant controls relating to adjusting items;
• Assessed management’s revised accounting policy on adjusting items in accordance with IAS 8 for any
retrospective application required;
• Substantively tested a sample of the adjusting items recognised in the year to supporting
documentation, such as invoices or sale agreements and worked with tax specialists to assess the impact
of the UK tax rate change;
• Understood the nature of those items recognised and challenged the quantum of these items against
the provisions of IAS 1 ‘Presentation of financial statements’ and the Group’s published definition of
adjusting items; and
• Considered the completeness of adjusting items through our testing of other income and expenses, and
the balance between recognition of credits and charges.
We have reviewed the financial statement disclosures and assessed whether the balance of disclosures is
appropriate when reporting non-GAAP measures throughout the financial statements.
KEY OBSERVATIONS
Overall, we have concluded that the presentation and prominence of items described as adjusting in the
financial statements meet the requirements of the adjusting item accounting policy disclosed in Note 1.
Strategic ReportGovernanceFinancial Statements 124
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF PZ CUSSONS PLC
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£3.2m (2020: £2.9m)
£1.1m (2020: £1.4m)
Basis for
determining
materiality
5% of adjusted pre-tax profit (2020: 4.7% of adjusted
pre-tax profit). The profit before tax figure has been
adjusted for certain items as disclosed in note 3 of the
financial statements.
Parent company materiality was determined on
the basis of 1% of net assets, and then capped
at 35% of Group materiality (2020: 1% of net
assets capped at 50% of Group materiality).
Rationale for the
benchmark applied
We consider an adjusted profit before tax measure to be the
most relevant measure of performance for the primary user
of the accounts, being shareholders. This is the basis on
which management make decisions and monitor performance
as it excludes the impact of significant one-off items as well
as profits and losses relating to acquisitions or disposals of
business or other transactions of similar nature.
This is the holding company and given its less
complex operations, we consider that the users
of the accounts are most interested in the net
assets of the company on the basis that they
will determine the extent to which dividends
can be paid.
Adjusted PBT £64.7m
Group materiality
Adjusted PBT
Group materiality £3.2m
Component materiality range £1.1m to £2.1m
Audit & Risk Committee reporting threshold £0.2m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected
and undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Parent company financial statements
Performance
materiality
60% (2020: 50%) of Group materiality
65% (2020: 50%) of parent company materiality
Basis and rationale
for determining
performance
materiality
Improvements made by the Group in respect of its governance
and certain entity level controls which arose from an
independent review undertaken in prior year, has led to us to
increase the basis of performance materiality from 50% to 60%.
In determining performance materiality for
the parent company, we considered the
following factors:
• our risk assessment, including our
In determining performance materiality, we also considered the
following factors:
understanding of the entity and its
environment; and
• our cumulative experience from prior year audits;
• the level of corrected, uncorrected misstatements and prior
period errors identified in the current year;
• the quality of the control environment and our conclusion,
as noted below, that we were not able to rely on controls as
noted in section 7.2; and
• our risk assessment, including our understanding of the
entity and its environment.
•
low value of profit impacting misstatements
identified in prior periods compared to the
group accounts.
PZ Cussons plc Annual Report and Financial Statements 2021 125
6.3. Error reporting threshold
We agreed with the audit and risk committee that we would report to the Committee all audit differences in excess
of £160,000 (2020: £150,000), as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the audit and risk committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level.
Based on this assessment, we focussed our Group audit scope primarily on the audit work relating to 10 components
which were subjected to full scope audits. Our full scope audits covered components in the UK, Nigeria, Australia, and
Indonesia. We performed specified audit procedures on a further 5 components including Singapore, Ghana and one legal
entity each within the UK and Nigeria, as well as one trading entity within the US. The parent company is located in the UK
and was audited directly by the Group audit team.
As a consequence of the audit scope determined, we achieved coverage of approximately 94% (2020: 87%) of revenue,
91% (2020: 85%) of adjusted profit before tax and 88% (2020: 85%) of net assets, based on full scope audits and specified
audit procedures. Our audit work at each component was executed at levels of materiality applicable to each individual
component, which were lower than Group materiality. Component materiality ranged from £1.1m to £2.1m (2020: £1.0m
to £1.8m).
At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our
conclusion that there were no significant risks of material misstatement of the aggregated financial information of the
remaining components not subject to either full scope audit or audit of specified account balances.
6%
7%
Revenue
9%
10%
1%
12%
Adjusted profit
before tax
Net assets
87%
81%
87%
Full audit scope
Specified audit procedures
Review at group level
7.2. Our consideration of the control environment
We identified that the following key IT systems were relevant to the audit:
• SAP, which is the ERP system used across all components of the Group and is used to record underlying transactions
within the Group;
• Promax, which is used within PZ Cussons UK and PZ Cussons Australia to record underlying transactions in relation to
trade promotional spend undertaken with customers; and
• Oracle FCCS, a consolidation tool which is used to consolidate the Group’s results as part of the financial reporting process.
We involved IT specialists to test the controls related to these IT systems. We assessed the remediation of prior year
IT findings impacting SAP and subsequently concluded, ahead of the year end, that it was not appropriate to rely on IT
controls due to the weaknesses noted in relation to access controls in SAP.
Furthermore, as noted by the Audit and Risk Committee on page 78, the Group’s control environment is undergoing a
programme of improvement and several deficiencies have been identified by the Group’s internal audit function, and
by ourselves in the performance of our audit, which it expects to address in subsequent periods. Therefore, considering
the developing nature of the overall control environment and the findings of the IT audit work, we concluded that a fully
substantive approach was appropriate in all aspects of the audit for the year ended 31 May 2021.
Strategic ReportGovernanceFinancial Statements 126
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF PZ CUSSONS PLC
7.3. Working with other auditors
The Group audit team designed the audit procedures for all relevant significant risks to be addressed by the component
auditors and issued Group referral instructions detailing the nature and form of the reporting required. Due to the
continued disruption to international travel as a result of the global pandemic, our visits to each of the significant finance
function locations which were planned were not able to take place. We had planned to visit components in at least Nigeria
and Indonesia (which would also have included meeting with the Australian component team). Instead, these meetings
were carried out virtually. We also held a number of virtual meetings throughout all phases of the component audit work.
We included all component audit teams in our team briefings, discussed their risk assessment, attended close meetings
by videoconference and reviewed documentation of the findings of their work remotely.
The COVID-19 pandemic had a significant impact on the execution of the FY21 audit, both in the UK and overseas. A
significant portion of the audit was performed remotely as a result of local lockdown restrictions and at various points,
delivery of the audit was impacted by members of Deloitte audit teams and management contracting or being otherwise
exposed to COVID-19.
Given the remote nature of our oversight, the weaknesses in the control environment, and the additional challenges
posed by local lockdowns, particularly in jurisdictions such as Indonesia and Nigeria where audit evidence in some areas
remains largely paper-based and where the COVID-19 vaccination programme is not well progressed, the group audit
team increased the level of interaction with component teams by holding at least weekly calls with each significant
component from the planning stage of the audit through to the completion of those component audits. The group
engagement team reviewed underlying component work on a regular basis and allowed sufficient time to follow up on
any matters identified. These calls were in addition to the planning briefings and audit closing meetings that we would
ordinarily undertake with component teams. To facilitate this oversight, the group team included an additional senior
member of the engagement team with day to day responsibility of oversight of our component teams and their audit
work, under the leadership of the engagement partner. Other senior members of the audit team were also involved in
the oversight of all significant components.
Where there were delays in completing our audit work at component level, we included group and component
management on a number of the calls with component teams.
8. Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to
be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s
ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
PZ Cussons plc Annual Report and Financial Statements 2021 127
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the design of the
Group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
• the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was
approved by the board;
• results of our enquiries of management, internal audit and the audit and risk committee about their own identification
and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures
relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance, including a number of potential instances of non-compliance with laws and regulations which were
identified by management over the course of the year that required further investigation by internal audit and the
group’s compliance and legal functions but did not result in matters of significant concern;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged
fraud; and
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team including significant component audit teams and relevant
internal specialists, including tax, valuations, pensions, forensic and IT specialists regarding how and where fraud might
occur in the financial statements and any potential indicators of fraud.
As a result of our procedures, we considered the opportunities and incentives that may exist within the organisation for
fraud and identified the greatest potential for fraud in the following areas: carrying value of Rafferty’s Garden assets,
classification and presentation of adjusting items and promotional trade spend accruals. In common with all audits under
ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing
on provisions of those laws and regulations that had a direct effect on the determination of material amounts and
disclosures in the financial statements. The key laws and regulations we considered in this context included the UK
Companies Act, the UK Listing Rules, UK and overseas pension regulations, and UK and overseas tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material
penalty. These included the Group’s regulatory solvency requirements, environmental regulations, the regulatory
framework related to the sale of beauty, cosmetic and healthcare products, employment laws and the UK Bribery Act.
Strategic ReportGovernanceFinancial Statements 128
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF PZ CUSSONS PLC
11.2. Audit response to risks identified
As a result of performing the above, we identified carrying value of Rafferty’s Garden assets and classification and
presentation of adjusting items as key audit matters related to the potential risk of fraud. The key audit matters section
of our report explains the matters in more detail and describes the specific procedures we performed in response to
those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
• enquiring of management, the audit and risk committee and both in-house and external legal counsel concerning
actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports, and reviewing
correspondence with HMRC;
• evaluating the processes undertaken by management to assess its control environment in response to the potential
non-compliance with laws and regulations identified;
• in addressing the risk of fraud in promotional trade spend, we reviewed the subsequent settlement of the estimates made
by management, analysed the key trends in the year and tested a sample of agreements that straddled the year end; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the
normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members including internal specialists and significant component audit teams and remained alert to any indications of
fraud or non-compliance with laws and regulations throughout the audit.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in
the course of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 114;
• the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the
period is appropriate set out on page 114;
• the directors’ statement on fair, balanced and understandable set out on page 115;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 55;
• the section of the annual report that describes the review of effectiveness of risk management and internal control
systems set out on page 54; and
• the section describing the work of the audit and risk committee set out on page 78.
PZ Cussons plc Annual Report and Financial Statements 2021 129
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the directors’ remuneration report to be audited is not in agreement
with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the audit and risk committee, we were appointed by the shareholders at the AGM on
27 September 2017 to audit the financial statements for the year ending 31 May 2018 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments of the firm is four years,
covering the years ended 2018 to 2021.
15.2. Consistency of the audit report with the additional report to the audit and risk committee
Our audit opinion is consistent with the additional report to the audit and risk committee we are required to provide in
accordance with ISAs (UK).
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Jane Boardman BSc FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester, UK
30 September 2021
Strategic ReportGovernanceFinancial Statements 130
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 MAY 2021
Year ended 31 May 2021
(Restated)* Year ended 31 May 2020
Business
performance
excluding
adjusting
items
£m
Adjusting
items
(note 3)
£m
Statutory
results for
the year
£m
Business
performance
excluding
adjusting
items
£m
Adjusting
items
(note 3)
£m
Statutory
results for
the year
£m
603.3
(366.4)
236.9
(100.3)
(71.2)
5.6
71.0
1.5
(3.9)
(2.4)
68.6
(14.4)
–
–
–
–
(5.4)
–
(5.4)
–
–
–
(5.4)
(13.8)
603.3
(366.4)
236.9
(100.3)
(76.6)
5.6
65.6
1.5
(3.9)
(2.4)
63.2
(28.2)
587.2
(360.2)
227.0
(91.7)
(72.2)
2.8
65.9
0.9
(5.0)
(4.1)
61.8
(14.5)
–
–
–
–
(43.5)
–
(43.5)
–
–
–
(43.5)
5.0
587.2
(360.2)
227.0
(91.7)
(115.7)
2.8
22.4
0.9
(5.0)
(4.1)
18.3
(9.5)
54.2
(19.2)
35.0
47.3
(38.5)
8.8
Notes
2
13
2
6
7
4
Continuing operations
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administrative expenses
Share of results of joint ventures
Operating profit / (loss)
Finance income
Finance costs
Net finance costs
Profit / (loss) before taxation
Taxation
Profit / (loss) for the year from
continuing operations
Discontinued operations
(Loss) / profit from
discontinued operations
28
(5.3)
(46.3)
(51.6)
Profit / (loss) for the year
48.9
(65.5)
(16.6)
Attributable to:
Owners of the Parent
Non-controlling interests
Basic EPS (p)
Diluted EPS (p)
From continuing operations
Basic EPS (p)
Diluted EPS (p)
9
9
9
9
9
49.6
(0.7)
48.9
11.85
11.84
13.12
13.10
(66.2)
0.7
(65.5)
(15.82)
(15.80)
(4.75)
(4.75)
(16.6)
0.0
(16.6)
(3.97)
(3.96)
8.37
8.35
(2.4)
44.9
48.5
(3.6)
44.9
11.59
11.59
12.17
12.17
13.3
(25.2)
(25.0)
(0.2)
(25.2)
(5.97)
(5.97)
(9.16)
(9.16)
10.9
19.7
23.5
(3.8)
19.7
5.62
5.62
3.01
3.01
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
PZ Cussons plc Annual Report and Financial Statements 2021 131
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MAY 2021
(Loss) / profit for the year
Other comprehensive (expense) / income
Items that will not be reclassified to profit or loss
Re-measurement of post-employment benefit obligations
Deferred tax gain / (loss) on re-measurement of post-employment
benefit obligations
Total items that will not be reclassified to profit or loss
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations
Deferred tax on foreign exchange related to quasi-equity loans
Cash flow hedges – fair value loss in year net of taxation
Cost of hedging reserve
Recycle of foreign exchange equity reserves on disposals
Recycle of equity reserves on disposal of subsidiary
Total items that may be subsequently reclassified to profit or loss
Other comprehensive income / (expense) for the year net of taxation
Total comprehensive (expense) / income for the year
Attributable to:
Owners of the Parent
Non-controlling interests
Notes
22
20
18
18
28
2021
£m
(16.6)
(9.5)
2.4
(7.1)
(31.9)
1.4
(0.6)
0.2
39.9
–
9.0
1.9
(14.7)
(9.7)
(5.0)
(Restated)*
2020
£m
19.7
1.9
(0.4)
1.5
(6.5)
–
(0.4)
0.1
–
(8.6)
(15.4)
(13.9)
5.8
9.8
(4.0)
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Strategic ReportGovernanceFinancial Statements 132
CONSOLIDATED BALANCE SHEET
AT 31 MAY 2021
Assets
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Long-term right-of-use assets
Net investments in joint ventures
Deferred taxation assets
Tax receivable
Retirement benefit surplus
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Current tax receivable
Current asset investments
Cash and short-term deposits
Assets held for sale
Total assets
Equity
Share capital
Capital redemption reserve
Hedging reserve
Currency translation reserve
Other reserve
Retained earnings
Attributable to owners of the parent
Non-controlling interests
Total equity
Notes
31 May 2021
£m
(Restated)*
31 May 2020
£m
10
11
26
13
20
22
14
15
18
16
17
12
23
297.5
91.5
11.7
34.2
5.9
1.7
33.6
476.1
91.1
110.7
1.0
14.2
0.3
87.0
304.3
7.6
311.9
788.0
4.3
0.7
(0.4)
(87.4)
(39.1)
483.7
361.8
20.0
381.8
304.4
112.3
13.7
40.9
15.4
6.9
42.9
536.5
104.6
104.1
0.7
9.6
0.3
78.7
298.0
20.5
318.5
855.0
4.3
0.7
–
(100.5)
(39.0)
530.3
395.8
25.4
421.2
PZ Cussons plc Annual Report and Financial Statements 2021
133
Notes
31 May 2021
£m
(Restated)*
31 May 2020
£m
17,18
26
20
22
17,18
19
26
18
21
12
118.0
0.3
8.7
75.2
12.9
215.1
–
150.9
3.1
0.7
35.2
0.7
190.6
0.5
406.2
788.0
127.0
0.4
10.4
65.6
12.2
215.6
1.2
161.8
3.4
0.9
47.7
3.2
218.2
–
433.8
855.0
Liabilities
Non-current liabilities
Borrowings
Other payables
Long-term lease liability
Deferred taxation liabilities
Retirement & other long-term employee benefit obligations
Current liabilities
Overdrafts
Trade and other payables
Short-term lease liability
Derivative financial liabilities
Current taxation payable
Provisions
Liabilities directly associated with assets held for sale
Total liabilities
Total equity and liabilities
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
The Financial Statements from pages 130 to 204 were approved by the Board of Directors and authorised for issue.
They were signed on its behalf by:
C Silver
30 September 2021
J Myers
Strategic ReportGovernanceFinancial Statements
134
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MAY 2021
Attributable to owners of the Parent
Share
capital
£m
Currency
translation
reserve
£m
Capital
redemption
reserve
£m
Notes
Retained
earnings
£m
Other
reserve
£m
Hedging
reserve
£m
Non-
controlling
interests
£m
Total
£m
4.3
(84.5)
0.7
538.8
(39.0)
0.3
29.2
449.8
At 1 June 2019
Profit for the year (restated)*
Other comprehensive income / (expense):
Re-measurement of
post-employment obligations
Exchange differences on translation
of foreign operations (restated)*
Cash flow hedges – fair value
loss in year net of taxation
Cost of hedging reserve
Sale of subsidiary – recycle
of equity reserves
Deferred tax on re-measurement
of post-employment obligations
Total comprehensive income / (expense)
for the year (restated)*
Transactions with owners:
Ordinary dividends
Non-controlling interests dividend paid
Non-controlling interests forfeited dividend
Total transactions with owners
recognised directly in equity
At 31 May 2020 (restated)*
At 1 June 2020
Loss for the year
Other comprehensive income / (expense):
Re-measurement of
post-employment obligations
Exchange differences on translation
of foreign operations
Cash flow hedges – fair value loss
in year net of taxation
Cost of hedging reserve
Disposals – recycle of equity reserves
Deferred tax on re-measurement
of post-employment obligations
Deferred tax on foreign exchange
related to quasi-equity loans
Total comprehensive income / (expense)
for the year
Transactions with owners:
Ordinary dividends
Non-controlling interests dividend paid
Acquisition of non-controlling interests
Total transactions with owners
recognised directly in equity
22
18
18
20
8
22
18
18
28
20
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6.3)
–
–
(9.7)
–
(16.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23.5
1.9
–
–
–
1.1
(0.4)
26.1
(34.6)
–
–
(34.6)
–
–
–
–
–
–
–
–
–
–
–
–
4.3
4.3
(100.5)
0.7
530.3
(39.0)
(100.5)
0.7
530.3
(39.0)
(16.6)
(9.5)
–
–
–
–
2.4
1.4
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(26.8)
–
–
39.9
–
–
13.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.4)
0.1
–
–
(3.8)
19.7
–
1.9
(0.2)
(6.5)
–
–
–
–
(0.4)
0.1
(8.6)
(0.4)
(0.3)
(4.0)
5.8
–
–
–
–
–
–
–
–
–
(0.6)
0.2
–
–
–
–
(34.6)
(0.3)
0.5
(0.3)
0.5
0.2
(34.4)
25.4
421.2
25.4
421.2
–
–
(16.6)
(9.5)
(5.0)
(31.9)
–
–
–
–
–
(0.6)
0.2
39.9
2.4
1.4
22.3
(0.1)
(0.4)
(5.0)
14.7
(24.3)
–
–
(24.3)
–
–
–
–
–
–
–
–
–
(24.3)
(0.2)
(0.2)
(0.2)
(0.2)
(0.4)
(24.7)
At 31 May 2021
4.3
(87.4)
0.7
483.7
(39.1)
(0.4)
20.0
381.8
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
PZ Cussons plc Annual Report and Financial Statements 2021 135
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 MAY 2021
Cash flows from operating activities
Cash generated from operations
Taxation paid
Interest paid
Net cash generated from operating activities
Cash flows from investing activities
Interest income
Investment income
Notes
25
6
6
Purchase of property, plant and equipment and software
10,11
Proceeds from sale of assets
Cash flow from disposal of companies & businesses
Repayment of loans by joint ventures
Funding provided to joint venture
Net cash generated from investing activities
Cash flows from financing activities
Dividends paid to non–controlling interests
Dividends paid to Company shareholders
Acquisition of non–controlling interests
IFRS 16 finance lease payments
Repayment of loan facility
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rates
Cash and cash equivalents at the end of the year
28
13
8
26
17
17
17
17
2021
£m
73.4
(20.0)
(2.9)
50.5
1.2
0.3
(8.9)
0.1
16.2
3.4
(9.6)
2.7
(0.2)
(24.3)
(1.1)
(4.0)
(9.0)
(38.6)
14.6
77.5
(5.1)
87.0
(Restated)*
2020
£m
128.5
(16.8)
(5.1)
106.6
0.9
–
(6.7)
0.6
44.4
–
(1.5)
37.7
(0.3)
(34.6)
–
(3.2)
(79.0)
(117.1)
27.2
51.9
(1.6)
77.5
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Strategic ReportGovernanceFinancial Statements 136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
General information
PZ Cussons plc is a public limited company registered in England and Wales which is listed on the London Stock Exchange
and is domiciled and incorporated in the UK under the Companies Act 2006. The address of the registered office is given
on page 205. PZ Cussons plc is the parent company and ultimate parent of the Group.
These Financial Statements are presented in Pounds Sterling and have been presented in £m to one decimal place.
Foreign operations are included in accordance with the policies set out in note 1.
For the year ended 31 May 2021 the following subsidiaries of the Company were entitled to exemption from audit under
s479A of the Companies Act 2006 relating to subsidiary companies:
Subsidiary Name
St Tropez Holdings Ltd
PZ Cussons International Finance Ltd
Thermocool Engineering Company Ltd
Bronson Holdings Ltd
Companies House Registration Number
05706646
08589433
09266188
09771991
1. Accounting policies
The Financial Statements have been prepared in accordance with International accounting standards in conformity with
the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRS) adopted pursuant to
Regulation (EC) No 1606 / 2002 as it applies in the European Union.
The preparation of Financial Statements, in conformity with IFRSs, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the Financial Statements and
the reported amounts of revenues and expenses during the reporting year. Although these estimates are based
on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those
estimates. Key sources of estimation uncertainty can be found on page 58.
The Financial Statements have been prepared on a going concern basis and on a historical cost basis except for the
revaluation of certain financial assets and financial liabilities (including derivative instruments and pensions) at fair
value through profit or loss.
The Financial Statements have been prepared using consistent accounting policies except as stated below.
(a) New and amended standards adopted by the Group
In the current year, the Group has not applied any new IFRS standards or amendments to standards as those which were
amended were not relevant to the Group’s policies or statements.
(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been
early adopted by the Group
Certain new accounting standards and interpretations have been published that are not mandatory for the 31 May 2021
reporting year and have not been early adopted by the Group. The Group will undertake an assessment of the impact of
the following new standards and interpretations in due course:
• IFRS 17 ‘Insurance Contracts’;
• Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28;
• Amendments to IFRS 7, IFRS 9 and IAS 39 – Interest Rate Benchmark Reform;
• Amendments to IFRS 3 ‘Business Combinations’;
• Amendments to IAS 1 ‘Presentation of Financial Statements’; and
• Amendments to IAS 8 ‘Accounting policies, changes in accounting estimates and errors’
(c) Restatement due to prior year adjustments
from FY24
date TBC
from FY22
from FY23
from FY24
from FY24
As reported in the Financial Review on page 52, the FRC conducted a periodic review of the Company’s FY20 Annual
Report and Accounts and sought to understand a number of accounting decisions and judgments. Following that review
the Company made certain corrections or clarifications in our financial reporting. These reclassifications were identified
as part of the FRC’s review, with the error related to Ghanaian investment property being identified as part of the
preparation of the current year Financial Statements. These corrections are as follows:
PZ Cussons plc Annual Report and Financial Statements 2021
137
Reclassification between Continuing and Discontinued Operations
Certain amounts reported within ‘continuing operations’ on the face of the Consolidated Income Statement are more
appropriately included within discontinued operations. Specifically, the post-tax loss of discontinued operations was
appropriately reported in the income statement line item ‘Loss from discontinued operations’. However, the post-tax
gains recognised on the disposal of the disposal groups constituting the discontinued operations, totaling £15.0m,
were reported in the ‘Administrative expenses’ and ‘Taxation’ lines within continuing operations, albeit separately
highlighted as exceptional. The impact of this is to increase continuing administrative expenses by £16.4m, decrease
continuing taxation charge by £1.4m and increase the profit from discontinued operations by £15.0m.
Reclassification between Cash Generated from Operating Activities and Investing Activities
In the consolidated cash flow statement, cash proceeds of £9.2m received in relation to the Luksja discontinued
operations were included within operating activities. These should have been adjusted for in ‘Cash generated from
operations’ and then shown in the ‘Cash inflows from investing activities’ section as ‘Cash flow from disposal of
companies and businesses’ (in aggregate with the cash inflows on disposal of Minerva SA, which were presented
appropriately in this line item). The impact of is to reduce cash generated from operations by £9.2m and increase
cash generated from investing activities by £9.2m.
Accounting for Ghanaian Investment Property
In addition, in preparing these Financial Statements, an error was identified relating to the accounting for investment
property in Ghana. The Group’s Ghanaian entity had entered into a historic contract to exchange the rights to develop
28 properties on land that the Group owned in return for eight of the properties, once they had been completed. As
this transaction did not involve cash, the Group had erroneously not recorded any accounting entries in relation to the
recognition of the investment property that was acquired in this exchange of assets, nor was any of the land, which
had an immaterial cost, derecognised in relation to the 20 properties that were retained by the property developer.
We consider that recognition of an asset in relation to this contract prior to title in relation to the properties passing
to the Group is not appropriate as there were delays, of a number of years, in the development of the properties and
a legal dispute over the Group’s ownership of the land, which while ultimately resolved, called into question, until
FY20, the probability of the contract being successfully executed. Therefore, the Group should have applied the
requirements of IAS 40 paragraph 5 and recognised the investment properties on the balance sheet at their fair value,
being the deemed cost under the Group’s cost accounting policy in respect of investment properties, of £5.6m at the
point that title passed to the Group, which was during the year ended 31 May 2020. A corresponding credit to the
income statement of £5.6m should also have been recognised at the point of recognition of the investment properties,
as well as a related deferred tax liability of £1.4m and a corresponding tax charge of £1.4m. These income statement
amounts have been recognised within adjusting items in FY20 as they meet the Group’s definition of adjusting items,
being material and one-off in nature.
Further, during FY20, one of the eight properties held by the Group was sold for proceeds of £0.5m. Since no book
value had been recorded for these properties, the disposal was recorded at the proceeds value against other
investment properties. Subsequently no profit or loss was recognised on disposal. Given the correct accounting
described above, this disposal transaction has been reversed and replaced with the difference between the proceeds
and the revised carrying value of the property, being a loss on disposal of £0.2m. This net loss has been recognised
within operating profit before adjusting items on the basis that it does not meet the Group’s adjusted items policy,
being neither material nor one-off in nature.
Strategic ReportGovernanceFinancial Statements 138
1. Accounting policies continued
All of these adjustments have been recognised as prior year errors in accordance with IAS 8 ‘Accounting policies, changes
in accounting estimates and errors’ with the Financial Statements restated accordingly. The impact of the prior year
adjustments on the affected primary statement line items is shown in the table below:
As
previously
reported
Reclassification
between Continuing
and Discontinued
Operations
31 May 2020 £m
Reclassification
between Cash
Generated from
Operating Activities
and Investing
Activities
Recognition
of investment
property
Disposal of
investment
property
As
restated
Consolidated Income Statement
Continuing Operations
Administrative expenses
(104.7)
Operating profit
Profit before tax
Taxation
Profit / (Loss) from
continuing operations
(Loss) / Profit from
discontinued operations
Profit attributable to
owners of the parent
33.4
29.3
(9.7)
19.6
(4.1)
19.3
Consolidated Cash Flow Statement
Cash generated from operations
137.7
Net cash generated from
operating activities
Cash flow from disposal of
companies & businesses
Net cash generated from
investing activities
Net increase / (decrease) in
cash and cash equivalents
Balance Sheet
Property plant and equipment
Deferred tax liability
Current tax payable
Currency reserves
Retained earnings
Reserves attributable to
owners of the parent
115.8
35.2
28.5
27.2
106.9
(64.4)
(47.8)
(100.6)
526.1
391.5
(16.4)
(16.4)
(16.4)
1.4
(15.0)
15.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9.2)
(9.2)
9.2
9.2
–
–
–
–
–
–
–
5.6
5.6
5.6
(1.4)
4.2
–
4.2
–
–
–
–
–
5.6
(1.4)
–
–
4.2
4.2
(0.2)
(0.2)
(0.2)
0.2
(115.7)
22.4
18.3
(9.5)
–
–
–
–
–
–
–
–
8.8
10.9
23.5
128.5
106.6
44.4
37.7
27.2
(0.2)
112.3
0.2
0.1
0.1
–
(65.6)
(47.7)
(100.5)
530.3
0.1
395.8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021
139
Basis of consolidation
The Consolidated Financial Statements incorporate the Financial Statements of PZ Cussons plc and entities controlled by
PZ Cussons plc (its subsidiaries) made up to 31 May each year. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
The total profits or losses of subsidiaries are included in the Consolidated Income Statement and the interest of non-
controlling interests is stated as the non-controlling interest’s proportion of the fair values of the assets and liabilities
recognised. Comprehensive income attributable to the non-controlling interests is attributed to the non-controlling
interests even if this results in the non-controlling interests recognising a deficit balance.
The interest of non-controlling interests in the acquiree is initially measured at the non-controlling interest’s proportion
of the net fair value of the assets, liabilities and contingent liabilities recognised. Where non-controlling interests are
acquired, the excess of cost over the value of the non-controlling interest acquired is recorded in equity.
Where necessary, the accounts of subsidiaries are adjusted to conform to the Group’s accounting policies. All intra-group
transactions, balances, income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The fair value of consideration of the
acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree’s identifiable
assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 ‘Business combinations’
are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are
classified as held for sale in accordance with IFRS 5 ‘Non-current assets held for sale and discontinued operations’,
which are recognised and measured at the lower of the assets’ previous carrying value and fair value less costs-to-sell.
All acquisition costs are expensed as incurred as adjusting items.
Where acquisitions are achieved in stages, commonly referred to as ‘stepped acquisitions’, and result in control being
obtained by the Group as part of a transaction, the Group reassesses the fair value of its existing interest in joint
ventures as part of determining the fair value of consideration. In determining the fair value of the Group’s existing
interest, reference is given to the fair value of consideration paid to increase the Group’s interest in joint ventures as
well as considering the specific fair values of assets and liabilities transferred to gain control. Any increase or impairment
of the Group’s existing interest will be credited / charged to the Income Statement as an adjusting item.
On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date
of acquisition. Any excess of the fair value of consideration over the fair values of the identifiable net assets acquired
is recognised as goodwill. Any deficit below the fair values of the identifiable net assets acquired (i.e. discount on
acquisition) is credited to the Income Statement in the period of acquisition.
Goodwill
Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity represents the excess of the cost of
acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of
the subsidiary or jointly controlled entity recognised at the date of acquisition. If, after reassessment, the Group’s interest
in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the
business combination, the excess is recognised immediately in the Income Statement.
Goodwill also includes amounts to reflect deferred tax liabilities established in relation to acquisitions in accordance with
IFRS 3 ‘Business combinations’. Goodwill is initially recognised as an asset and is subsequently measured at cost less any
accumulated impairment losses. Goodwill is tested for impairment at least annually.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to
benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested
for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on
the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed
in a subsequent period. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
Strategic ReportGovernanceFinancial Statements 140
1. Accounting policies continued
Interests in joint ventures
Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on
the contractual rights and obligations of each investor. PZ Cussons plc has assessed the nature of its joint arrangements
and determined them to be joint ventures. Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter
to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any
long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable
for goods provided in the normal course of business, net of discounts, trade spend, rebates and sales related taxes but
including interest receivable on sales on extended credit. Sales of goods are recognised when control of goods has been
transferred which is generally on receipt or collection by customers. Should management consider that the criteria for
recognition are not met, revenue is deferred until such time as the consideration has been fully earned.
Trade promotions, which consists primarily of customer pricing allowances, placement / listing fees and promotional
allowances, are governed by agreements with our trade customers (retailers and distributors). Accruals are recognised
under the terms of these agreements, to reflect the expected promotional activity and our historical experience. These
accruals are reported within trade and other payables.
Trade promotions
The Group provides for amounts payable to trade customers for promotional activity. Where a promotional activity spans
across the year end, an accrual is reflected in the Group accounts based on our expectation of customer and consumer
uptake during the promotional period and the extent to which temporary promotional activity has occurred.
Where promotions, rebates or discounts give rise to variable consideration, the Group accounts for this by using the
most likely amount method and this is generally estimated using known facts with a high degree of accuracy. Revenue is
constrained to the extent that variable consideration has been taken into account for the period and that no reversal in
consideration is expected.
Foreign currencies
The individual Financial Statements of each Group entity are prepared in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the Consolidated Financial
Statements, the results and financial position of each entity are presented in Sterling, which is the functional currency
of the Company, and the presentational currency for the Consolidated Financial Statements.
In preparing the Financial Statements of the individual entities, transactions in currencies other than the entity’s
functional currency are recorded at the actual rate of exchange prevailing on the dates of the transactions, or at average
rates of exchange if they represent a suitable approximation to the actual rate. At each balance sheet date, monetary
assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at the balance
sheet date.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities
of the foreign entity and translated at the closing balance sheet rate. Exchange differences are recognised in other
comprehensive income.
Foreign exchange gains and losses arising from the settlement of foreign currency transactions and from the translation
of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing
on the balance sheet date. Income and expense items are translated at the average exchange rates for the year.
Cumulative foreign currency translation differences arising on the translation and consolidation of foreign operations’
Income Statements and balance sheets denominated in foreign currencies are recorded as a separate component of
equity. On disposal of a foreign operation the cumulative translation differences will be transferred to the Income
Statement in the period of the disposal as part of the gain or loss on disposal.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 141
Finance income and costs
Finance income is earned on bank deposits and finance costs are incurred on bank borrowings. Both are recognised in the
Income Statement in the period in which they are incurred.
Government grants
Government grants related to property, plant and equipment are reflected in the balance sheet as deferred income and
credited to the Income Statement over the useful lives of the assets concerned. Government grants relating to income
are reflected in the balance sheet as deferred income and credited to the Income Statement over the period to which the
grant relates.
Research and development
Research and development expenditure is charged against profits in the year in which it is incurred, unless it meets the
criteria for capitalisation set out in IAS 38 ‘Intangible assets’.
Operating profit
Operating profit is the profit of the Group (including share of joint venture profit) before finance income, finance costs
and taxation from continuing operations.
Retirement benefit and similar obligations
The Group operates retirement benefit schemes in the UK and for most overseas countries in which it carries out
business. Those in the UK are defined benefit schemes and defined contribution schemes. Overseas schemes are defined
contribution schemes, with the exception of PZ Cussons Indonesia, who operate a defined benefit scheme. The UK
defined benefit schemes were closed to future accrual on 31 May 2008.
The Group accounts for its defined benefit schemes under IAS 19 ‘Employee Benefits’.
The deficit / surplus of the defined benefit pension schemes is recognised on the balance sheet (with surpluses only
recognised to the extent that the Group has an unconditional right to a refund) and represents the difference between
the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date. A
full actuarial valuation is carried out at least every three years and the defined benefit obligation / surplus is updated
on an annual basis, by independent actuaries, using the projected unit credit method. The present value of the defined
benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality
corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds,
the market rates on government bonds are used.
Pension charges / income recognised in the Income Statement consists of administration charges of the scheme, past
service costs and a cost / income based on the net interest expense / income on net pension scheme liabilities / surpluses.
Net interest is calculated by applying a discount rate to the net defined benefit liability or asset. Past service cost is
recognised in profit or loss when the plan amendment or curtailment occurs, or when the Group recognises related
restructuring costs or termination benefits, if earlier.
Re-measurements comprising actuarial gains and losses, the effect of the asset ceiling and the return on plan assets
(excluding interest) are included directly in the Group’s Statement of Comprehensive Income.
Differences between the actual return on assets and interest income, experience gains and losses and changes in
actuarial assumptions are included directly in the Group’s Statement of Comprehensive Income.
Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered
service entitling them to the contributions.
Other long-term employee benefit obligations relate to provisions for benefit obligations in accordance with local overseas
laws in Thailand and Indonesia. The provision is assessed by an independent actuary using the projected unit credit method,
with actuarial valuations carried out at the end of each annual reporting period. Re-measurement, comprising actuarial
gains and losses, is reflected immediately in the statement of financial position with a charge or credit recognised in
other comprehensive income in the period in which they occur.
Strategic ReportGovernanceFinancial Statements 142
1. Accounting policies continued
Adjusting items
The Group adopts a columnar Income Statement format to highlight significant items within the Group’s results for the year.
Such items are those debits or credits which, in the opinion of the Directors, should be excluded in order to provide a consistent
and comparable alternative view of the performance of the Group’s ongoing business. Generally, this will include those items
that are largely one-off and material in nature as well as income or expenses relating to acquisitions or disposals of businesses
or other transactions of a similar nature. The Directors apply judgement in assessing the particular items, which by virtue of
their magnitude and nature should be disclosed in a separate column of the Income Statement and notes to the Financial
Statements as ‘Adjusting items’.
The Directors believe that the separate disclosure of these items is relevant to an understanding of the Group’s financial
performance by providing a more meaningful basis upon which to analyse underlying business performance and make year-
on-year comparisons. The same measures are used by management for planning, budgeting and reporting purposes and for
the internal assessment of operating performance across the Group. The adjusted presentation represents a change from the
Group’s previous practice of reporting exceptional items and will be adopted on a consistent basis for each of the half-year and
full-year results going forwards.
This change was made recognising the views of European Securities and Markets Authority, the Financial Reporting Council,
and changes in market practice.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the end of the reporting period.
The Group makes provisions for current tax payable based on the Directors’ best estimate of likely tax liabilities that may
arise based on interpretations of current and expected tax legislation. Where tax legislation is not clear or is ambiguous
the Directors make estimates of potential tax exposures that are reviewed and revised as additional information becomes
available.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited to the Income Statement, except when it relates to items charged
or credited directly to equity or other comprehensive income, in which case the deferred tax is also dealt with in equity
or other comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current tax liabilities on a net basis.
The Group continues to believe that it has made adequate provision for the liabilities likely to arise from periods which
are open and not yet agreed by tax authorities. The ultimate liability for such matters may vary from the amounts
provided and is dependent upon the outcome of agreements with relevant tax authorities. In assessing these income
tax uncertainties, management is required to make judgements in the determination of the unit of account and the
evaluation of the circumstances, facts and other relevant information in respect of the tax position taken together with
estimates of amounts that may be required to be paid in ultimate settlement with the tax authorities. As the Group
operates in a multinational tax environment, the nature of the uncertain tax positions is often complex and subject to
change. Original estimates are always refined as additional information becomes known.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 143
Property, plant and equipment
Land and buildings held at the date of transition to IFRS for use in the production or supply of goods or services, or for
administration purposes are stated in the balance sheet at deemed cost at the date of transition to IFRS less accumulated
depreciation and any accumulated impairment losses. All other assets are stated at historical cost less accumulated
depreciation and accumulated impairment losses.
Depreciation is charged so as to write off the cost or valuation of assets, other than land, over their estimated useful
lives, using the straight-line method, on the following basis:
Freehold buildings at rates not less than
2% per annum
Plant and machinery not less than
8% per annum
Fixtures, fittings and vehicles not less than
20% per annum
In the case of major projects, depreciation is provided from the date the project in question is brought into use. Land and
assets in the course of construction are not depreciated.
An asset is de-recognised from the balance sheet when it is sold or retired and no future economic benefits are expected
from that asset. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between
the sales proceeds and the carrying amount of the asset and is recognised in the Income Statement for the year when the
asset is de-recognised.
The assets’ residual values and useful lives are reviewed and adjusted if appropriate at each balance sheet date.
Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. Property, plant and equipment that has been impaired is reviewed for possible
reversal of the impairment at each subsequent balance sheet date.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the value that would have been
determined had an impairment loss not been recognised in prior years. A reversal of an impairment loss is recognised
immediately in profit or loss.
Investment Property
On acquisition, investment property is initially recognised at cost, or deemed cost where no monetary consideration is
exchanged. Investment property is subsequently recognised in the accounts at cost and recorded as a separate line item
within property plant and equipment. Gains or losses on disposal are recognised within administrative expenses in profit
and loss. No depreciation is charged on the basis that it is not considered to be material in any year or cumulatively.
Other intangible assets
An acquired brand is only recognised on the balance sheet where it is supported by a registered trademark, where brand
earnings are separately identifiable and the brand could be sold separately from the rest of the business. Brands acquired
as part of a business combination are recorded in the balance sheet at fair value at the date of acquisition. Trademarks,
patents and purchased brands are recorded at purchase cost. In accordance with IAS 36 'Impairment of assets', as the
brands have indefinite lives they are tested for impairment annually, and more frequently where there is an indication
that the asset may be impaired. Any impairment is recognised immediately in the Income Statement.
The Directors believe that the acquired brands have indefinite lives because, having considered all relevant factors, there
is no foreseeable limit to the period over which the brands are expected to generate net cash inflows for the Group.
Further, the Directors have the intention and the ability to maintain the brands. In forming this conclusion they have not
taken into consideration planned future expenditure in excess of that required to maintain the asset at that standard
of performance. Indefinite life brands are allocated to the cash-generating units to which they relate and are tested
annually for impairment.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss
is recognised immediately as income. Profit or losses on disposal of brands are included within operating profit within
adjusting items.
Strategic ReportGovernanceFinancial Statements
144
1. Accounting policies continued
Software development
Expenditure on research activities is recognised in the Income Statement as an expense as incurred. Expenditure on
development activities directly attributable to the design and testing of identifiable software products and systems
are capitalised if the product or systems meet the following criteria:
• the completion of the development is technically and commercially feasible to complete;
• adequate technical resources are sufficiently available to complete development;
• it can be demonstrated that future economic benefits are probable; and
• the expenditure attributable to the development can be measured reliably.
Development activities involve a plan or design for the production of new or substantially improved products or systems.
Directly attributable costs that are capitalised as part of the software product or system include employee costs. Other
development expenditures that do not meet these criteria as well as ongoing maintenance are recognised as an expense
as incurred. Development costs for software are carried at cost less accumulated amortisation and are amortised on a
straight line basis over their useful lives (not exceeding ten years) at the point at which they come into use.
Leases
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-
of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for
short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (defined as
those less than £5k). For these leases, the Group recognises the lease payments as an operating expense on a straight-
line basis over the term of the lease.
The nature of the Group’s leasing activities is mainly properties, with small elements of equipment and cars. Rental
contracts are typically made for fixed periods of 1 to 12 years but may have extension options as described in (i) below.
(i) Extension and termination options
Extension and termination options are included in a number of property leases across the Group. These terms are used to
maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held
are exercisable only by the Group and not by the respective lessor.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions.
The lease liability is initially measured at the present value of the lease payments, excluding those paid at the
commencement date, discounted by using the Group’s incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• fixed lease payments (including in substance fixed payments), less any lease incentives;
• variable lease payments that depend on an index or rate, initially measured using the index or rate at the
commencement date; and
• payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the
lease.
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset)
whenever:
• the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the
lease liability is measured by discounting the revised lease payments using a revised discount rate.
• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is measured by discounting the revised lease payments using the initial
discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised
discount rate is used).
• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease
liability is measured by discounting the revised lease payments using a revised discount rate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 145
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at
or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated
depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it
is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision
is recognised and measured under IAS 37. The costs are included in the related right-of-use asset, unless those costs are
incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease
transfers the ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to
exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The
depreciation starts at the commencement date of the lease. The Group does not have any leases that include purchase
options or that transfer ownership of the underlying asset.
Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that
triggers those payments occurs and are included in the line ‘Other operating expenses’ in the Income Statement.
For short-term leases (lease term of 12 months or less) and leases of low-value assets, the Group has opted to recognise a
lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within administrative expenses in
the Consolidated Income Statement.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any
lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.
Inventories
Inventories are stated at the lower of cost and estimated net realisable value. Cost comprises direct materials and where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present
location and condition. Cost is calculated based on standard costs based on normal operating conditions with price and
usage variances apportioned using the periodic unit pricing method. Net realisable value represents the estimated selling
price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
Where net realisable value is lower than cost, provision for impairment is made which is charged to cost of sales in the
Income Statement.
Assets held for sale
Non-current assets and groups of assets and liabilities which comprise disposal groups are classified as ‘held for sale’
when their carrying amount will be recoverable principally through a sale transaction rather than through continuing
use. In order to be classified as a ‘held for sale’ asset or disposal group, the sale must be highly probable and the assets
must be available for sale immediately in their present condition. In addition all of the following criteria must also be met:
management is committed to the plan to sell; the assets are being actively marketed; actions required to complete the
plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn;
and a sale has been agreed or is expected to be concluded within 12 months of the balance sheet date.
Immediately prior to classification as held for sale, the value of the assets or groups of assets is re-measured in accordance
with the requirements of IFRS 5. Subsequently, assets and disposal groups classified as held for sale are measured at the
lower of book value or fair value less disposal costs. Assets held for sale are neither depreciated nor amortised.
Discontinued operations
To be classified as a discontinued operation, any disposal group or asset held for sale must have clearly distinguishable
operations or cash flows, as well as meeting any one of the following three criteria. The component must be a separate
major line of business or geographical area of operations; or part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations; or is a subsidiary acquired exclusively with a view to resale. If none
of these three criteria are met, the disposal group or asset held for sale will be classified within continuing operations.
Cash, cash equivalents and bank overdrafts
Cash and short-term deposits in the balance sheet comprise cash and short-term bank deposits with an original maturity
of three months or less.
For the purposes of the Cash Flow Statement, cash and cash equivalents includes cash at bank and in hand plus short-
term deposits less overdrafts. Short-term deposits have a maturity of less than three months from the date of deposit.
Bank overdrafts are repayable on demand and form an integral part of the Group’s cash management.
Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to
the contractual provisions of the instrument.
Strategic ReportGovernanceFinancial Statements 146
1. Accounting policies continued
Derivative financial instruments
The Group’s activities expose it primarily to the financial risks of changes in foreign exchange rates and to fluctuations in
interest rates. The Group uses derivative financial instruments (primarily foreign currency forward contracts) to hedge
its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged
items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group
also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.
The Group designates gross positions and hedge documentation is prepared in accordance with IFRS 9.
The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide
written principles in the use of financial derivatives consistent with the Group’s risk management strategy. The Group
does not use derivative financial instruments for speculative purposes.
Derivative financial instruments are initially measured at fair value at the contract date, and are re-measured to fair
value at subsequent reporting dates. Changes in the fair value of derivative financial instruments that are designated
and effective as hedges of future cash flows are recognised directly in other comprehensive income, and any ineffective
portion is recognised immediately in the Income Statement.
Financial assets
The Group’s financial assets are subsequently measured at either amortised cost or fair value through profit and loss,
depending on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing
them. The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.
(a) Trade receivables
Trade and other receivables are initially measured at transaction price, and subsequently at amortised cost. The
amortised cost for trade and other receivables is generally equivalent to the invoiced amount less allowance for expected
credit losses (‘ECL’). The ECL is based on the difference between the contractual cash flows due in accordance with the
contract and the present value of all the cash flows that the Group expects to receive. The Group has elected to use
the simplified approach in calculating ECL and recognises a loss allowance based on lifetime ECLs at each reporting
date (i.e. the expected credit losses that will result from all possible default events over the expected life of the
financial instrument). The Group has applied the practical expedient to calculate ECLs using a provision matrix based
on the Group’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
Trade receivables are fully impaired and subsequently written off when all possible routes through which amounts can be
recovered have been exhausted. The Group recognises any impairment gain or loss in profit or loss with a corresponding
adjustment to the financial asset’s carrying amount through a loss allowance account.
(b) Loans to joint ventures
The Group’s loans to the joint venture (presented in the balance sheet as part of the ‘net investment in joint ventures’)
was measured initially at fair value and is subsequently measured at fair value through profit or loss. An annual estimate
of the loss allowance is calculated using a lifetime expected credit loss model. The Group assesses the ECL allowance for
the loan from the joint venture as follows:
• Where there has been a significant increase in credit risk since initial recognition – the Group measures ECL based on
lifetime ECLs i.e. all credit losses expected from possible default events over the remaining life of the loan, irrespective
of the timing of the default.
• Where there has not been a significant increase in credit risk since initial recognition – the Group measures the loss
allowance at an amount equal to 12-month ECL i.e. the portion of lifetime ECL that is expected to result from default
events on the loan that are possible within 12 months after the reporting date.
In assessing whether the credit risk has increased significantly on the loan from the joint venture since initial recognition,
the Group compares the risk of a default occurring on the loan at the reporting date with the risk of a default occurring
on the loan at the date of initial recognition. In making this assessment, the Group considers, in particular, the financial
and operational performance of the joint venture, changes to the financial forecasts or increases in credit risk on other
receivables. The Group has determined that the ECL for the loan to the joint venture should be based on lifetime ECLs at
the reporting date and has determined that no provision is required in relation to this loan. Any associated loss allowance
related to loans to joint ventures is recorded in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 147
(c) Unlisted equity investments
The Group’s unlisted equity investments are subsequently measured at fair value through profit or loss with any fair value
gains or losses recognised in profit or loss. Dividends on unlisted equity investments are recognised as other income in
the Income Statement when the right of payment has been established.
Borrowings
Interest-bearing bank loans and overdrafts are initially recorded at fair value, net of direct issue costs, and are
subsequently measured at amortised cost. Finance charges, including premiums payable on settlement or redemption
and direct issue costs, are accounted for on an accruals basis through the Income Statement using the effective interest
method and are added to the carrying amount of the instrument to the extent they are not settled in the year in which
they arise.
Trade payables
Trade payables are initially recognised at fair value, normally being the invoiced amounts, and subsequently measured
amortised cost, using the effective interest rate method. The carrying amount of trade receivables generally equals the
originally invoiced amounts.
Trade payables under vendor financing arrangements
The Group has an arrangement with a bank under which the bank offers vendors the option to receive earlier payment of
accounts payables. Vendors utilising the financing arrangement pay a credit fee to the bank. The Group does not pay any
credit fees and does not provide any additional collateral or guarantee to the bank. Based on the Group’s assessment the
liabilities under the vendor financing arrangement are closely related to operating purchase activities and the financing
arrangement does not lead to any significant change in the nature or function of the liabilities. These liabilities are
therefore classified as accounts payables with separate disclosures in the notes. The credit period does not exceed 12
months and the accounts payables are therefore not discounted. Account payables under vendor financing arrangements
were £2.7m (2020: £4.8m), see note 19.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Investments
Investments (other than interests in joint ventures) are recognised and derecognised on a trade date when a purchase
or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe
established by the market concerned, and are initially measured fair value.
Investments are classified as available for sale. Subsequently, the investments, which represent shares held in two
companies, are measured at cost because those are investments in unquoted equities for which a fair value cannot be
reliably measured. Loans to joint ventures, presented in the balance sheet as ‘investments’ are classified as loans and
receivables and measured at amortised cost.
Share capital
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. Ordinary shares are classified as an equity instrument.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid,
including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to
the Company’s equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently
reissued, any consideration received, net of any directly attributable incremental transaction costs and the related
income tax effects, are included in equity attributable to the Company’s equity holders.
Hedging reserve
The hedging reserve represents the accumulated movements in the Group’s derivative financial instruments that
have been designated as hedging instruments and changes in the fair value for the element of derivatives that are not
designated in a hedge relationship. The reserve includes both the cash flow hedge reserve and the cost of hedging
reserve. Amounts are reclassified to profit or loss when the hedged transaction happens or when the hedged transaction
is no longer expected to occur.
Strategic ReportGovernanceFinancial Statements 148
1. Accounting policies continued
Capital redemption reserve
Amounts in respect of the redemption of certain of the Company’s ordinary shares are recognised in the capital
redemption reserve.
Currency translation reserve
On translation of the Group’s overseas operations and related balances from their local functional currency to the Group’s
presentational currency, foreign exchange differences arise, the cumulative effect of which are recognised in the currency
translation reserve.
Other reserve
Amounts in respect of the Employee Share Option Trust (ESOT) are recognised in the other reserve.
Segmental reporting
Operating segments are identified in a manner consistent with the internal reporting provided to the Chief Operating
Decision Maker (‘CODM’). The CODM, who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Executive Leadership Team (ELT). For reporting purposes, in accordance
with IFRS 8 ‘Operating Segments’, the Board aggregates operating segments with similar economic characteristics and
conditions into reporting segments, which form the basis of the reporting in the Annual Report, with the CODM identifying
four reporting segments being Europe & the Americas, Asia Pacific, Africa and Central. Further detail is included in note 2.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation for a future liability as a result
of a past event, where the amount of the obligation can be estimated reliably and it is probable that the Group will be
required to settle that obligation. The amount recognised as a provision is the Group's best estimate of the likely outflows
required to settle the obligation at the balance sheet date.
(i) Restructuring costs
Provisions for restructuring costs are recognised when the Group has a detailed formal plan for the restructuring and the
plan has either started to be implemented or the main features of the plan has been announced to those affected by it.
The measurement of a restructuring provision includes only the direct expenditure that has been necessarily incurred as a
result of the restructure, and not costs associated with the on-going activities of the entity. Restructuring costs that are
one-off and individually material or costs that relate to programmes linked to the Group's wider transformation strategy
are disclosed separately within adjusting items in the consolidated income statement. Restructuring costs that are
recurring in nature are recorded as an expense within the Income Statement.
(ii) Warranty Provisions
Warranties are provided within the Africa Electricals Division. Warranties are provided from the date of purchase and are
typically 12 months in length. A warranty provision is included in the financial statements, which is calculated on the basis
of historical returns as well as past experiences and industry averages for defective products.
Share based payments
The Group operates a Performance Share Plan for senior executives, which involves equity-settled share based payments.
The awards under the Performance Share Plan are measured at the fair value at the date of grant and are expensed over
the vesting period based on the expected outcome of the performance and service conditions. At each balance sheet
date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the
revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to equity.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s Financial Statements in
the period in which the dividends are approved by the Company’s shareholders. In respect of interim dividends these are
recognised once paid.
Accounting estimates and judgements
The Group’s significant accounting policies under IFRS have been set by management with the approval of the Audit &
Risk Committee. The application of these policies requires management to make assumptions and estimates about future
events. The resulting accounting estimates will, by definition, differ from the actual results. Estimates and judgements
are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Under IFRS an estimate or judgement may be considered critical if it involves matters that are highly uncertain or where
different estimation methods could reasonably have been used, or if changes in the estimate that would have a material
impact on the Group’s results are likely to occur from period to period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 149
Key sources of estimation uncertainty
Pensions
The Group’s UK defined benefit pension schemes are closed to new members and future accruals. Year-end recognition of
the liabilities under these schemes and the return on assets held to fund these liabilities require a number of significant
actuarial assumptions to be made including inflation, discount rate and mortality rates. Small changes in assumptions
can have a significant impact on the expense recorded in the Income Statement and on the pension liability / asset in
the balance sheet. See note 22 for details of key estimates and assumptions applied in valuing the pension schemes.
Current tax
The current tax liabilities / assets directly relates to the actual tax payables / receivables on the Group’s profits and is
determined based on tax laws and regulations that differ across the numerous jurisdictions in which the Group operates.
Assumptions and judgements are made in applying these laws to the taxable profits in any given period in order to
calculate the tax charge for that period.
An estimate is made where the tax liabilities remain to be agreed with the relevant tax authorities in each jurisdiction in
which the Group operates. Due to the uncertainty associated with such tax items there is a possibility that, on conclusion
of open tax matters at a future date, the final outcome may differ significantly. Where the eventual tax paid or reclaimed
is different to the amounts originally estimated, the difference will be charged or credited to the income statement in
the period in which it is determined. Whilst a range of outcomes is reasonably possible, the extent of the range is shown
below for each material liability.
Included within the current tax liability of the Group are two material current tax estimates with carrying values as at
31 May 2021 of £17.1m (2020: £15.3m) and £3.5m (2020: £3.6m). There is a remaining £3.7m made up of a number of
immaterial balances, the largest of which is £2.8m.
The tax estimate of £17.1m has arisen due to a difference in technical standpoint between PZ Cussons plc and a tax
authority on a subjective and complex piece of legislation. This difference of opinion has led to an audit of the associated
tax returns. This potential tax liability has been provided for in full due to the subjectivity of the legislation. It is expected
that the range of possible outcomes could be a liability between £nil and £17.1m.
The tax estimate of £3.5m has arisen due to the risk that a tax authority may challenge the tax residency of a company
not incorporated in that jurisdiction. This risk is based on the argument that the past functions of this entity could
suggest tax residency outside of the incorporation jurisdiction. While the functions of this entity have been altered
to address this risk going forwards, the risks associated with past years remain until such time that the tax status of
this entity has been audited by the relevant authorities. The potential tax liability has been provided in full due to the
subjectivity of the legislation around the tax residency of the entity based on previous functions. It is expected that the
range of possible outcomes could be a liability between £nil and £3.5m.
Within the remaining tax liability of £3.7m, the most significant value is a tax estimate of £2.8m which has arisen due to
the risk that a tax authority may challenge the arm’s length nature of certain intercompany raw material supplies into that
jurisdiction. While the cost of the raw material supplied is in line with that charged by third parties there is a risk that this
may be challenged. The potential tax liability has been provided in full due to the subjectivity of transfer pricing in this
particular geography. It is expected that the range of possible outcomes could be a liability between £nil and £2.8m.
The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect of
certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax
authority or, as appropriate, through a formal legal process. At 31 May 2021 the Group had contingent liabilities of £26m
in respect of such uncertain tax positions (2020 - £29m), which are in relation to claims and assessments in two of our
overseas markets. In these markets there is a history of large claims being received which are considered to have little or
no basis, and ultimately result in immaterial cash outflows, but which take time to conclude. Whilst the Group considers
that there is a low possibility of any material outflow as a result of these claims, they have been disclosed as contingent
liabilities in accordance with IAS37.
Whilst the ultimate liability for such matters may vary from the amounts provided and is dependent upon the outcome of
agreements with the relevant tax authorities, or litigation where appropriate, the Group continues to believe that it has
made appropriate provision for periods which are open and not yet agreed by the tax authorities.
Critical areas of judgement
Foreign exchange rates in Nigeria
The Nigerian foreign exchange regime is such that there are currently two official rates of exchange; the Central Bank of
Nigeria spot rate (‘CBN’), and NAFEX.
After closely monitoring the profile of exchange rates accessed by the Group for settlement of transactions throughout
the year, and observing a trend towards the majority of the Group’s transactions now being settled at NAFEX rates, that
is anticipated to continue, the Group concluded that NAFEX is the most appropriate rate to translate dollar denominated
balances in Nigeria and the results of Nigerian operations as at 31 May 2021.
Strategic ReportGovernanceFinancial Statements 150
1. Accounting policies continued
Assessment of useful lives of acquired brands
The Directors are required to assess whether the useful lives of acquired brands are finite or indefinite. Under IAS 38
‘Intangible assets’, an intangible asset should be regarded as having an indefinite useful life when, based on all of the relevant
factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
In forming their judgement that the acquired brands have indefinite lives, the Directors give consideration to such factors
as their expected usage of the brands, typical product life cycles, the stability of the markets in which the brands are sold, the
competitive positioning of the brands, and the level of marketing and other expenditure required to maintain the brands.
The Directors are also required to apply judgement when assessing whether the brands meet the definition of a cash
generating unit (‘CGU’) under IAS36. With Regards to the Beauty brands, the Directors consider that the Beauty business
can be treated as a single CGU under this definition on the basis that the cash inflows are largely independent from other
assets or groups of assets.
Discontinued operations
The Directors are required to assess whether any disposal group or asset held for sale should be classified as a
discontinued operation within the financial statements. Under IFRS 5, certain conditions must be met. In forming their
judgement related to the disposals of Nutricima and five:am, the Directors considered the materiality of the operations
being disposed of to the Group and the similarity to operations from a strategic and geographical perspective.
In respect of Nutricima, the Directors have classified the disposal group as a discontinued operation. The assets
represented a significant component of the Nutricima entity and following completion of the sale, the entity ceased
to make commercial sales. Nutricima represented a separate major line of business as it was the only PZ Cussons fully
consolidated entity operating in the food and nutrition sector in the Nigerian geography.
In respect of five:am, the Directors have classified the disposal as a continuing operation. five:am does not represent a
disposal of a major line of business or an exit from a geographical area of operation as the Group continues to operate
in the food and nutrition sector in Australia and five:am is not considered a major line of business.
FX recycling
Judgement is applied by the Directors in determining the treatment of exchange differences relating to the disposal of
foreign operations under IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’. On disposal, the cumulative amount
of exchange differences related to the foreign operation recognised in other comprehensive income is reclassified.
Judgement was applied in respect of the sale of assets related to Nutricima, in consideration of whether the partial disposal
was deemed a disposal under paragraph 48 of IAS 21. The Directors considered that as at 31 May 2021, the activities of the
foreign operation had ceased and on this basis judged that there had been a disposal and subsequently all the remaining
foreign exchange differences arising in connection with this foreign operation have been reclassified to profit and loss.
2. Segmental analysis
The segmental information presented in the note is consistent with management reporting provided to the Executive
Leadership Team (ELT), which is the Chief Operating Decision Maker (‘CODM’). The CODM reviews the Group’s internal
reporting in order to assess performance and allocate resources and has determined the operating segments based on
these reports which include an allocation of central revenue and costs as appropriate. The CODM considers the business
from a geographic perspective, with Europe & the Americas, Asia Pacific, Africa and Central being the operating segments.
In accordance with IFRS 8 ‘Operating Segments’, the ELT has identified these reportable segments which aggregate the
Group’s trading entities by geographic location as these entities are considered to have similar economic characteristics.
The number of countries that the Group operates in within these segments is limited to no more than five countries per
segment, which share similar customer bases and encounter comparable micro environmental challenges.
The CODM assesses the performance based on operating profit before any adjusting items. Revenues and operating
profit of the Europe & the Americas and Asia Pacific segments arise from the sale of Hygiene, Beauty and Baby products.
Revenue and operating profit from the Africa segment also arise from the sale of Hygiene, Beauty and Baby products
as well as Electrical products. The Central segment refers to the activities in terms of revenue of our in-house fragrance
house and in terms of cost of expenditure associated with the Global headquarters and above market functions net of
recharges to our regions. The prices between Group companies for intra-group sales of materials, manufactured goods,
and charges for franchise fees and royalties, are carried out on an arm’s length basis.
Reporting used by the CODM to assess performance does contain information about brand specific performance but
global segmentation between the portfolio of brands is not part of the regular internally reported financial information.
In November 2020, the Group made a change to report a ‘Central’ operating segment; this was previously within ‘Europe
& the Americas’. The change was made as a result of the new Chief Operating Decision Maker (‘CODM’) deciding that the
Group’s segmental reporting, and internal reporting, should better reflect the way in which the business is managed and
to more clearly be able to identify and manage the performance of the Europe & the Americas segment separate from
that of the Central activities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 151
Reporting segments
Continuing operations
2021
Gross segment revenue
Inter segment revenue
Revenue
Segmental operating profit before adjusting
items and share of results of joint ventures
Share of results of joint ventures
Segmental operating profit before adjusting items
Adjusting items
Segmental operating profit
Finance income
Finance costs
Profit before taxation
2020 (restated)*
Gross segment revenue
Inter segment revenue
Revenue
Segmental operating profit before adjusting
items and share of results of joint ventures
Share of results of joint ventures
Segmental operating profit before adjusting items
Adjusting items
Segmental operating profit
Finance income
Finance costs
Profit before taxation
Europe & the
Americas
£m
220.9
(4.0)
216.9
52.1
–
52.1
(1.1)
51.0
Europe & the
Americas
£m
211.6
(3.6)
208.0
54.3
–
54.3
(5.0)
49.3
Asia
Pacific
£m
194.5
(7.3)
187.2
20.7
–
20.7
0.1
20.8
Asia
Pacific
£m
194.7
(9.5)
185.2
18.5
–
18.5
(37.8)
(19.3)
Africa
£m
192.6
–
192.6
5.1
5.6
10.7
(1.7)
9.0
Africa
£m
187.5
–
187.5
(10.4)
2.8
(7.6)
4.7
(2.9)
Central
£m
Eliminations
£m
50.9
(44.3)
6.6
(12.5)
–
(12.5)
(2.7)
(15.2)
(55.6)
55.6
–
–
–
–
–
–
Central^
£m
Eliminations
£m
105.9
(99.4)
(112.5)
112.5
6.5
0.7
–
0.7
(5.4)
(4.7)
–
–
–
–
–
–
Total
£m
603.3
–
603.3
65.4
5.6
71.0
(5.4)
65.6
1.5
(3.9)
63.2
Total
£m
587.2
–
587.2
63.1
2.8
65.9
(43.5)
22.4
0.9
(5.0)
18.3
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
^ In the financial statements for the year ended 31 May 2020 'Central' was included within 'Europe & the Americas'.
The Group’s parent company is domiciled in the UK. The split of revenue from external customers and non-current assets
between the UK, Nigeria and rest of the world (other) is:
2021
Revenue
Goodwill and other intangible assets
Property, plant and equipment
Long-term right-of-use assets
Net investment in joint ventures
2020 (Restated)*
Revenue
Goodwill and other intangible assets
Property, plant and equipment
Long-term right-of-use assets
Net investment in joint ventures
UK
£m
197.3
268.9
24.1
7.3
34.2
UK
£m
193.0
271.5
27.0
7.5
40.9
Nigeria
£m
163.6
3.0
42.8
1.2
–
Nigeria
£m
156.5
2.7
55.1
1.6
–
Other
£m
242.4
25.6
24.6
3.2
–
Other
£m
237.7
30.2
30.2
4.6
–
Total
£m
603.3
297.5
91.5
11.7
34.2
Total
£m
587.2
304.4
112.3
13.7
40.9
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Strategic ReportGovernanceFinancial Statements 152
2. Segmental analysis continued
The Group analyses its revenue by the following categories:
Hygiene
Baby
Beauty
Electricals
Other
3. Adjusting items
Year to 31 May 2021
Adjusting items included within continuing operations:
Group and regional restructuring
Impact of classification of five:am assets as held for sale
Nigeria simplification
UK tax rate change – deferred tax impact
Adjusting items included within discontinued operations:
Loss on disposal of Nutricima assets
Disposal of Luksja brand
Total adjusting items
Year to 31 May 2020
Adjusting items included within continuing operations:
Group structure & systems project
Group strategy project
Profit on sale of Greece business
Profit on sale of Luksja brand
Impairment of Australian assets
Gain on exchange of land for investment property
Adjusting items included within discontinued operations:
Group strategy
Profit on sale of Greece business
Profit on sale of Luksja brand
Total adjusting items
2021
£m
322.4
100.0
74.1
79.4
27.4
603.3
2020
£m
321.1
98.3
66.6
76.2
25.0
587.2
Adjusting items
before taxation
£m
Taxation
£m
Adjusting items
after taxation
£m
2.8
(1.2)
3.8
–
5.4
40.7
0.4
41.1
46.5
(0.5)
0.3
(0.2)
14.2
13.8
5.2
–
5.2
19.0
2.3
(0.9)
3.6
14.2
19.2
45.9
0.4
46.3
65.5
Restated*
Adjusting items
before taxation
£m
Restated*
Taxation
£m
Restated*
Adjusting items
after taxation
£m
4.9
3.5
3.1
1.0
36.6
(5.6)
43.5
2.4
(11.0)
(6.1)
(14.7)
28.8
(1.1)
–
–
–
(5.3)
1.4
(5.0)
–
–
1.4
1.4
(3.6)
3.8
3.5
3.1
1.0
31.3
(4.2)
38.5
2.4
(11.0)
(4.7)
(13.3)
25.2
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 153
Explanation of adjusting items
Year to May 2021
Adjusting items – continuing operations
Group and regional restructuring
The Group incurred costs of £2.8m relating to restructuring. These costs are predominantly redundancy costs relating
to a reduction in the organisational model in the Group Head Office and in the Regions. £4.9m of costs related to
restructuring were included within the Group Structure and Systems adjusting item from the prior year. The directors
have considered these costs adjusting in nature on the basis that they relate to one-off restructuring costs and
particularly redundancy.
Impact of classification of five:am assets as held for sale
The Group recognised an impairment reversal credit of £1.5m as a result of revaluing the five:am assets prior to classifying
as held for sale (see notes 10 and 12 for further details). Costs of £0.3m were incurred relating to advisory and legal fees
associated with the sale of the brand. This has been included within continuing operations adjusting items as the sale of
five:am does not represent a disposal of a major line of business or an exit from a geographical area of operation as per
IFRS 5. The directors have considered these costs adjusting in nature on the basis that they relate to the disposal of operations.
Nigeria simplification
The Group incurred £3.8m of costs related to redundancy and restructuring associated with the Nigeria simplification
project, including redundancy costs across the Nigerian businesses (£0.7m), separation costs and the write-down of
assets due to the closure of our Coolworld retail electrical stores in Nigeria (£0.7m), change in ownership of the joint
ventures due to impact of merging PZ Wilmar Ltd and PZ Wilmar Food Ltd (£0.2m) and an impairment charge following
the cessation of trading of Wilmar PZ International Pte Limited (£2.2m). Further activity is expected against this project in
the following financial year ending May 2022 which is expected to include costs related to restructuring as well as income
associated with the disposal of residential property. The Directors have considered these costs adjusting in nature on
the basis that they relate to one-off restructuring costs and particularly redundancy, and write-down of assets and
investments related to restructuring of activities.
UK tax rate change – deferred tax impact
The impact of changes to the enacted corporation tax rates has increased the tax charge by £14.2m. The impact largely
relates to the increase in the corporation tax rate in the UK from 19% to 25% resulting in the revaluation of deferred tax
liabilities of which £8.9m relates to intangible balances held only on consolidation. The directors have considered these
costs adjusting in nature on the basis that they relate to the one-off costs impact of a change in corporation tax change
and are not reflective of the underlying tax position of the Group.
Adjusting items – discontinued operations
Loss of disposal of Nutricima assets
The Group recognised costs of £45.9m relating to the sale of the Nutricima business. This represents the loss on disposal
net of project related costs of £40.7m, which includes the recycling of foreign exchange losses from the currency reserve
of £39.9m related to intercompany loans and assets sold, and attributable tax charge of £5.2m. Further detail is provided
in note 28. A further £5.9m of costs were incurred against this project in the prior year within the Group Strategy project
in adjusting items. The directors have considered these costs adjusting in nature on the basis that they relate to the one-
off costs associated with the disposal of operations.
Disposal of Luksja brand
The Group incurred final costs of £0.4m in relation to the wind up of PZ Cussons Polska legal entity as a result of the
Luksja disposal in the previous financial year. The Directors have considered these costs adjusting in nature on the basis
that they relate to the one-off costs associated with the disposal of operations.
Year to 31 May 2020
Group structure and systems project – continuing
The Group incurred costs of £4.9m relating to the continuation of the project to realign the organisation design to create
a more effective operating model. These mainly consist of restructuring costs relating to reduction in the organisational
model in the Group Head Office and in the Regions.
Group strategy project – continuing and discontinued
The Group incurred costs of £5.9m relating to the planned disposal of the trade and assets of Nutricima. These costs
largely relate to advisory and legal fees and the impairment of the attributable element of the Group’s ERP system.
The costs to sell of £2.4m have been included within discontinued operations as they relate directly to the disposal of
Nutricima which itself has been classified within discontinued operations. The remaining costs, predominantly the ERP
system impairment, have been classified within continuing operations.
Strategic ReportGovernanceFinancial Statements 154
3. Adjusting items continued
Profit on sale of Greece business – continuing and discontinued
The Group recognised income of £7.9m relating to the sale of the Minerva Greece business. This represents the profit on
disposal net of project related costs. The £3.1m loss presented within Continuing Operations relates to the impairment
of the attributable element of the Group's ERP system. More detail is provided in note 28.
Profit on sale of Luksja brand – continuing and discontinued
In February 2020, the Group sold the Luksja Personal Care brand in Poland. Income of £5.1m has been recognised which
represents the profit on disposal net of project related costs. The £1.0m loss presented within Continuing Operations
relates to the impairment of the attributable element of the Group's ERP system. More details is provided in note 28.
Impairment of Australian assets – continuing
The Group performed a review of future growth assumptions in relation to five:am and Rafferty’s Garden in Australia and
concluded that the value-in-use of these cash-generating units was lower than the carrying value and therefore booked
an aggregate impairment charge of £36.6m (£6.7m goodwill, £28.1m other intangible assets and £1.8m property, plant
and equipment) per IAS 36.
Gain on exchange of land for investment property - continuing
In September 2019 the Group acquired a number of residential properties in Ghana in exchange for providing permission
for development of these, and further properties, on land owned by the Group. Management has considered the
requirements of IAS40:27 and recognised the deemed cost of the properties as a gain on exchange in the income
statement. This has been recognised as a prior year adjustment and further detail is available within note 1c.
4. Profit for the year – analysis by nature
Profit for the year has been arrived at after charging / (crediting):
Net foreign exchange losses
Research and development costs
Impairment of property, plant and equipment (note 11)
Depreciation of property, plant and equipment (note 11)
Impairment reversal) / impairment of intangible assets (note 10)
Amortisation of intangible assets (note 10)
Depreciation of right-of-use assets (note 26)
Loss on disposal of assets
Raw and packaging materials and goods purchased for resale (note 14)
Inventory provisions (note 14)
Net trade receivable provision (release) / charge (note 15)
IFRS 16 short-term or low value lease rentals (note 26)
Employee costs (note 5)
Auditor’s remuneration (see below)
2021
£m
16.0
2.1
0.5
11.0
(1.5)
6.3
3.3
8.7
343.3
6.6
(2.7)
0.2
76.9
2.0
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Auditor’s remuneration
A more detailed analysis of Auditor’s remuneration on a worldwide basis is provided below:
Fees payable to the Company’s Auditor for the audit of the Company’s
annual Financial Statements and Consolidation
Fees payable to the Company’s Auditor and their associates for other services to the Group:
– The audit of the Company’s subsidiaries
Total audit fees
Fees payable to the Company’s Auditor and its associates for other services:
– Audit-related assurance services
Total fees
Fees for permitted non-audit services paid to the Company’s Auditor totalled £nil (2020: £22,000).
2021
£m
1.0
1.0
2.0
–
2.0
(Restated*)
2020
£m
2.8
2.4
1.8
15.1
41.1
6.8
3.5
0.5
381.4
7.3
1.6
0.2
80.1
2.1
2020
£m
0.9
1.1
2.0
0.1
2.1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 5. Directors and employees
Employee costs
The average monthly number of employees (including Executive Directors) was as follows:
Production
Selling and distribution
Administration
The costs incurred in respect of the above were as follows:
Wages and salaries
Social security costs
Pension costs
Share-based compensation costs
The pension costs (note 22) consist of:
Defined benefit schemes
Defined contribution schemes
Nigerian gratuity scheme
Other post-employment benefits
155
2021
Number
2020
Number
2,009
744
399
3,152
2021
£m
67.6
3.9
4.6
0.8
76.9
2021
£m
1.6
2.4
0.4
0.1
4.6
2,253
870
448
3,571
2020
£m
73.0
3.7
3.4
–
80.1
2020
£m
–
2.7
0.7
–
3.4
All current Executive Directors are members of the defined contribution scheme.
Directors’ remuneration
The costs incurred in respect of the Directors, who are regarded as the key management personnel, were as follows:
Short-term employee benefits
Post-employment benefits
Total
Additional details are within the Report on Directors’ Remuneration on pages 100 to 109.
2021
£m
2.4
0.1
2.5
2020
£m
1.9
0.1
2.0
Strategic ReportGovernanceFinancial Statements 156
6. Net finance costs
Continuing Operations
Interest receivable on cash deposits
Interest receivable on defined benefit pension scheme
Interest income
Interest payable on bank loans and overdrafts
Interest payable to external third parties
Interest payable on defined benefit pension scheme
Interest expense on lease liabilities
Finance costs related to Revolving Credit Facility
Finance costs
Net finance costs
Discontinued Operations
Interest payable
Net finance costs
7. Taxation
Current tax
UK corporation tax charge for the year
Adjustments in respect of prior years
Double tax relief
Overseas corporation tax charge for the year
Adjustments in respect of prior years
Total current tax charge
Deferred tax
Origination and reversal of temporary timing differences
Adjustments in respect of prior years
Effect of rate change adjustments (including adjusting item of £14.2m (2020: £nil)
Total deferred tax charge
Total tax charge
2021
£m
0.9
0.6
1.5
(1.2)
(0.5)
(0.6)
(1.0)
(0.6)
(3.9)
(2.4)
2021
£m
–
–
2020
£m
0.1
0.8
0.9
(3.0)
(0.3)
(0.6)
(0.5)
(0.6)
(5.0)
(4.1)
2020
£m
(0.1)
(0.1)
Restated*
2021
£m
Restated*
2020
£m
8.5
1.6
(1.0)
9.1
0.9
(0.2)
0.7
9.8
5.1
3.6
14.4
23.1
32.9
7.8
0.1
(0.8)
7.1
10.8
(0.4)
10.4
17.5
(12.4)
0.4
4.9
(7.1)
10.4
*
The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 157
Within the tax charge for the year, £19.0m is classified within adjusting items, of which £19.4m is deferred tax and (£0.4m)
is current tax. Further detail included in note 3.
UK corporation tax is calculated at 19.0% (2020: 19.0%) of the estimated assessable profit for the year. Taxation for other
jurisdictions is calculated at the rates prevailing in the respective jurisdictions. UK deferred tax has been remeasured at
25% following the enactment of UK Finance Act 2021, an impact of £14.2m which has been included in adjusting items.
The Group has chosen to use the UK corporation tax rate for the reconciliation of the charge for the year to the profit
before taxation per the Consolidated Income Statement, as this is where the majority of the Group’s profit is derived.
Profit before tax from continuing operations
(Loss) / profit before tax from discontinued operations
Profit before tax
Tax at the UK Corporation tax rate of 19.0% (2020: 19.0%)
Adjusted for:
Tax effect of expenses that are not deductible / taxable
Tax effect of non-taxable income
Effect of rate changes on deferred taxation (all territories)
Tax effect of share of results of joint ventures
Other taxes suffered
Net adjustment to amount carried in respect of uncertain tax positions
Movements in deferred tax assets not recognised
Adjustments in respect of prior years
Difference in foreign tax rates (non-UK residents)
Tax charge for the year
Tax charge attributable to continuing operations
Tax charge attributable to discontinued operations
Tax charge for the year
2021
£m
63.2
(46.9)
16.3
3.1
15.8
(2.9)
14.4
(1.7)
2.4
(6.8)
8.1
5.0
(4.5)
32.9
28.2
4.7
32.9
(Restated)*
2020
£m
18.3
11.9
30.2
5.7
8.7
(6.8)
4.9
(0.9)
1.3
0.1
0.2
0.1
(2.9)
10.4
9.5
0.9
10.4
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
The main movements in the tax reconciliation from the tax at UK corporation tax rate and the actual tax charge for the
year are explained as follows:
• The effect of items being treated as non-tax deductible has increased the tax charge for the year by £15.8m. This is
due to non-deductible expenditure associated with losses arising on the disposal of the Nutricima business and the
recycling of foreign exchange differences relating to Nutricima Ltd (as described in note 28).
• The effect of items being treated as non-taxable has reduced the tax charge for the year by £2.9m.
• The impact of changes to the enacted corporation tax rates has increased the tax charge by £14.4m. The impact largely
relates to the increase in the corporation tax rate in the UK from to 19% to 25% resulting in the revaluation of deferred
tax liabilities of which £8.9m relates to brand intangible balances held only on consolidation which are not expected to
result in any tax payable in the future.
• Other taxes suffered increase the tax charge for the year by £2.4m. This includes Nigerian minimum tax and
unrelievable withholding taxes incurred on dividends received in the UK.
• PZ Cussons plc is subject to taxation in all of the countries in which it operates. The tax legislation applicable in these
countries is often complex and subject to interpretation both by management and government authorities. These
judgmental interpretations give rise to quantifiable risks which are provided for on the balance sheet. The adjustment
this year reduces the tax charge by £6.8m due to the work performed in the year to reduce the level of risk.
• The Group operates in a number of overseas tax jurisdictions, which have tax rates in excess of the UK rate. The impact
primarily of losses generated in higher tax jurisdictions is a reduction in the tax charge of £4.5m.
Strategic ReportGovernanceFinancial Statements 158
7. Taxation continued
The resulting Income Statement tax charge for the year, combining the results of continuing and discontinued operations,
represents an effective tax rate of 201.8% (2020: 34.4 %). This high effective tax rate is a direct result of the FX recycling
associated with the disposal of Nutricima £(39.9)m which reduced profit but is non-deductible for tax purposes, and the
£14.2m charge associated with UK Corporation tax rate change which is a tax only adjustment, with no associated profit.
Taxation on items taken directly to equity and other comprehensive income was a charge of £3.8m (2020: £3.7m) and
relates to deferred tax on pensions and foreign exchange differences on intercompany loans. Further detail is included
in note 20.
The Group continues to believe that it has made adequate provision for the liabilities likely to arise from periods which are
open and not yet agreed by tax authorities, which totalled £24.3m (2020: £30.1m). The ultimate liability for such matters
may vary from the amounts provided and is dependent upon the outcome of agreements with relevant tax authorities.
In assessing these income tax uncertainties, management is required to make judgements in the determination of the
unit of account, and the evaluation of the circumstances, facts and other relevant information in respect of the tax
position taken together with estimates of amounts that may be required to be paid in ultimate settlement with the tax
authorities. As the Group operates in a multinational tax environment, the nature of the uncertain tax positions is often
complex and subject to change, and necessarily involves a degree of estimation and judgement in respect of certain items
whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or,
as appropriate, through a formal legal process. At 31 May 2021 the Group had contingent liabilities of £26m in respect
of such uncertain tax positions (2020: £29m), which are in relation to claims and assessments in two of our overseas
markets. In these markets there is a history of large claims being received which are considered to have little or no basis,
and ultimately result in immaterial cash outflows, but which take time to conclude. Whilst the Group considers that there
is a low possibility of any material outflow as a result of these claims, they have been disclosed as contingent liabilities
in accordance with IAS37. Original estimates are always refined as additional information becomes known. Further
information on these uncertain tax positions can be found in note 1 under 'Key sources of estimation uncertainty'.
8. Dividends
Amounts recognised as distributions to ordinary shareholders in the year comprise:
Final dividend for the year ended 31 May 2020 of 3.13p (2019: 5.61p) per ordinary share
Interim dividend for the year ended 31 May 2021 of 2.67p (2020: 2.67p) per ordinary share
Proposed final dividend for the year ended 31 May 2021 of 3.42p (2020: 3.13p) per ordinary share
2021
£m
13.1
11.2
24.3
14.3
2020
£m
23.5
11.1
34.6
13.1
The proposed final dividends for the years ended 31 May 2020 and 31 May 2021 were / are subject to approval by
shareholders at the Annual General Meeting and hence have not been included as liabilities in the Financial Statements
at 31 May 2020 and 31 May 2021 respectively.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 159
9. Earnings per share
Earnings per share (EPS) represents the amount of earnings (post-tax profits / losses) attributable to each ordinary share
in issue. Basic EPS is calculated by dividing the earnings (profit after tax in accordance with IFRS) attributable to owners of
the Parent by the weighted average number of ordinary shares that were in issue during the year. Diluted EPS demonstrates
the impact if all outstanding share options that would vest on their future maturity dates if the conditions at the end of the
reporting period were the same as those at the end of the contingency period (such as those to be issued under employee
share schemes – see note 24) were exercised and treated as ordinary shares as at the balance sheet date.
Basic weighted average
Diluted weighted average
2021
Number 000
2020
Number 000
418,402
419,016
418,353
418,353
The difference between the average number of ordinary shares and the basic weighted average number of ordinary
shares represents the shares held by the Employee Share Option Trust, while any difference between the basic and
diluted weighted average number of shares represents the potentially dilutive effect of the Executive Share Option
Schemes and the Performance Share Plan. The average number of shares is reconciled to the basic and diluted weighted
average number of shares below:
2021
Number 000
2020
Number 000
Average number of ordinary shares in issue during the year
Less: weighted average number of shares held by Employee Share Option Trust
Basic weighted average shares in issue during the year
Dilutive effect of share incentive plans
Diluted weighted average shares in issue during the year
Total Earnings Per Share
(Loss) / profit after tax attributable to owners of the Parent
Adjusting items (net of taxation effect)
Adjusted profit after tax
428,725
(10,323)
418,402
614
419,016
2021
£m
(16.6)
66.2
49.6
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Basic (losses) / earnings per share
Adjusting items
Adjusted basic earnings per share
Diluted (losses) / earnings per share
Adjusting items
Adjusted diluted earnings per share
2021
pence
(3.97)
15.82
11.85
(3.96)
15.80
11.84
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
428,725
(10,372)
418,353
–
418,353
(Restated)*
2020
£m
23.5
25.0
48.5
(Restated)*
2020
pence
5.62
5.97
11.59
5.62
5.97
11.59
Strategic ReportGovernanceFinancial Statements 160
9. Earnings per share continued
From continuing operations
Profit attributable to owners of the Parent from continuing operations
Adjusting items (net of taxation effect)
Adjusted profit after tax
2021
£m
35.0
19.9
54.9
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Basic earnings per share
Adjusting items
Adjusted basic earnings per share
Diluted earnings per share
Adjusting items
Adjusted diluted earnings per share
2021
pence
8.37
4.75
13.12
8.35
4.75
13.10
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
From discontinued operations
(Loss) / profit after tax attributable to owners of the Parent from discontinued operations
Adjusting items (net of taxation effect)
Adjusted loss after tax
2021
£m
(51.6)
46.3
(5.3)
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Basic (losses) / earnings per share
Adjusting items
Adjusted basic losses per share
Diluted (losses) / earnings per share
Adjusting items
Adjusted diluted losses per share
2021
pence
(12.33)
11.06
(1.27)
(12.31)
11.05
(1.26)
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
(Restated)*
2020
£m
12.6
38.3
50.9
(Restated)*
2020
pence
3.01
9.16
12.17
3.01
9.16
12.17
(Restated)*
2020
£m
10.9
(13.3)
(2.4)
(Restated)*
2020
pence
2.61
(3.18)
(0.57)
2.61
(3.18)
(0.57)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 161
10. Goodwill and other intangible assets
Cost
At 1 June 2019
Currency retranslation
Additions
Sale of subsidiary
Reclassifications from property, plant and equipment
Reclassified as held for sale (note 12)
At 31 May 2020
Currency retranslation
Additions
Acquisition of non-controlling interest
Disposals
Reclassifications from property, plant and equipment
Reclassified as held for sale (note 12)
Revised analysis between cost and amortisation
of intangible assets & between categories
At 31 May 2021
Accumulated amortisation & impairment
At 1 June 2019
Currency retranslation
Charge for the year
Sale of subsidiary
Impairment loss
At 31 May 2020
Currency retranslation
Charge for the year
Disposals
Impairment reversal
Reclassified as held for sale (note 12)
Revised analysis between cost and amortisation
of intangible assets & between categories
At 31 May 2021
Net book values
At 31 May 2021
At 31 May 2020
Goodwill
£m
Software
£m
Brands
£m
Total
£m
70.4
(0.1)
–
(1.2)
–
–
69.1
(0.1)
–
0.9
(2.9)
–
(21.5)
8.4
53.9
19.4
0.2
–
–
6.7
26.3
0.3
–
(2.9)
–
(21.5)
8.4
10.6
43.3
42.8
60.0
(0.1)
1.7
(1.0)
2.6
–
63.2
(0.8)
2.4
–
(0.8)
1.3
–
0.7
66.0
15.4
–
6.8
(1.0)
6.3
27.5
(0.3)
6.3
(0.7)
–
–
–
32.8
33.2
35.7
286.4
416.8
–
–
(8.9)
–
(9.2)
268.3
0.3
–
–
–
–
(0.2)
1.7
(11.1)
2.6
(9.2)
400.6
(0.6)
2.4
0.9
(3.7)
1.3
(32.8)
(54.3)
(2.6)
233.2
12.8
1.5
–
–
28.1
42.4
–
–
–
(1.5)
(26.8)
(1.9)
12.2
221.0
225.9
6.5
353.1
47.6
1.7
6.8
(1.0)
41.1
96.2
–
6.3
(3.6)
(1.5)
(48.3)
6.5
55.6
297.5
304.4
Transfers from property, plant and equipment mainly represent the capitalised element of software costs relating to IT
network and security improvements.
Revised analysis between cost and amortisation relates to historic impairment losses which had been recorded against
‘Cost’, rather than in ‘Accumulated amortisation & impairment’, and historic currency retranslations which had all been
recorded against ‘Accumulated amortisation & impairment’. In addition, £0.7m of software costs were identified which
had previously been disclosed as ‘Other Brands’.
Amortisation is charged to administrative expenses in the Income Statement.
Strategic ReportGovernanceFinancial Statements 162
10. Goodwill and other intangible assets continued
The impairment reversal in the year related to the reassessment of the recoverable amounts of the relevant assets
associated with the five:am brand immediately before the assets were classified as held for sale. The fair value of
five:am’s brands was £6.0m, compared to the carrying value of £4.5m. As such, in accordance with IAS 36, an impairment
loss of £1.5m has been reversed prior to reclassifying the assets to Assets Held for Sale. Further details of the assets held
for sale classification are available in note 12.
Software includes the ERP system (SAP). The carrying value of this asset as at 31 May 2021 is £28.0m (2020: £29.9m), with
six years of amortisation remaining.
The carrying amounts of software are reviewed at each reporting date to determine whether there is any indication of
impairment.
Goodwill and other intangible assets (excluding software), which include the Group’s acquired brands, all have indefinite
useful lives and are subject to annual impairment testing, or more frequent testing if there are indicators of impairment.
The method used is as follows:
• intangible assets (including goodwill) are allocated to appropriate cash-generating units (CGUs) based on the smallest
identifiable group of assets that generate cash inflows independently in relation to the specific intangible / goodwill.
• the recoverable amounts of the CGUs are determined through value-in-use calculations that use cash flow projections
from approved budgets and plans over a period of five-year which are then extrapolated beyond the five year period
based on estimated long-term growth rates.
As the Group’s brands and goodwill have all arisen from previous business combinations, CGUs have been identified as the
business units acquired, as they represent the smallest group of assets which independently generate cash inflows. This is
the case for all brands and goodwill other than the Beauty division acquired brands where the CGU has been identified as
the overall operating unit.
The table below summarises the allocation of goodwill and brands to each CGU.
Original Source
Beauty division brands
Rafferty’s Garden
Nutricima
five:am
Other1
Total
Reclassified as held for sale:
Nutricima
five:am
Total
Goodwill
2021
£m
Goodwill
2020
£m
–
40.4
–
–
–
2.9
43.3
–
–
43.3
–
40.4
–
–
–
2.4
42.8
–
–
42.8
Brands
2021
£m
9.8
188.2
23.0
–
6.0
–
Brands
2020
£m
9.8
188.2
22.9
9.2
4.3
0.7
227.0
235.1
–
(6.0)
221.0
(9.2)
–
225.9
1 Other includes goodwill arising on the purchase of shares in PZ Cussons Nigeria plc and PZ Cussons Ghana Ltd.
The carrying value of each CGU as used in the value-in-use model may differ to the values disclosed above due to the
inclusion of any non-current assets directly related to driving economic benefit from the brand.
Assumptions in the budgets and plans include future revenue volume / price growth rates, associated future levels of
marketing support, cost base of manufacture and supply and directly associated overheads. These assumptions are based
on historical trends and future market expectations specific to each CGU and the markets and geographies in which each
CGU operates.
Other key assumptions applied in determining value-in-use are:
• growth rates – short-term growth rates are based on the latest approved management forecasts;
• terminal growth rates, using the estimated long-term growth rate applicable for the geographies in which the CGUs
operate; and
• discount rate – the discount rate uses a pre-tax Weighted Average Cost of Capital (‘WACC’) for comparable companies
operating in similar markets and geographies as the Group as the base discount rate, adjusted for risks specific to
each CGU.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 163
The long-term growth rates and discount rates applied in the value-in-use calculations have been set out below:
Original Source
Beauty division brands
Rafferty’s Garden
Pre-tax Discount rate
Long-term growth rate
FY21
7.1%
7.1%
6.9%
FY20
6.8%
6.8%
7.4%
FY21
1.7%
1.7%
3.0%
FY20
0.7%
0.7%
2.3%
The discount rates disclosed above are the pre-tax discount rates applied in the FY21 value-in-use calculations. These
discount rates do not include a size premium. Discount rates have been used which reflect the similar geographic and
product diversification within each CGU’s market and the similar risks associated with each CGU. The changes in the
discount rates from FY20 are driven by an increase in the pre-tax cost of debt, an increase in the risk free rates and a
decrease in the country equity risk premiums. The external sources used for all three measures are consistent year on year.
Long-term growth rates have been set for each CGU based on the GDP forecast long-term growth rates for the territories
in which the CGUs operate, which have been deemed an appropriate proxy for long-term growth. These CGUs operate in
geographies which include the UK, Australia, the USA and central Europe.
Having performed the annual impairment tests, no impairments have been recognised in FY21. In forming this conclusion
the Directors reviewed a sensitivity analysis performed by management, which focused on the reasonably possible
downsides of key assumptions, both individually and in reasonably possible combinations, and considered whether these
reasonably possible downsides give rise to an impairment, with the conclusion that no reasonable possible changes in key
assumptions would cause the recoverable amount of the CGUs to be less than their carrying value.
For the Beauty division brands, sensitivity analysis was performed to assess the impact of a reasonable change in key
assumptions to the headroom of £328.3m. Replicating the impact seen in the business during the Covid-19 pandemic in
the financial year FY20, which would result in lower sales than assumed in our forecast, would see this headroom reduce
to £27.9m.
For Rafferty’s Garden, sensitivity analysis on the headroom of £30.6m was performed and a revenue reduction of ~9%
of plan would result in a reduction in the headroom to £20.0m. The revenue decrease was selected as being reasonably
possible by looking at the revenue trends over the last five years. The sensitivity to changes in the risk free rate was
also analysed by looking back at historic values over the past seven years. If the value were to increase to the highest
seen over this period, the headroom would reduce to £13.6m. Management also considered the impact of both a
revenue reduction and an increase in the risk free rate. This combination of reasonably possible downsides would reduce
headroom to £6.4m.
For Original Source, the Directors do not consider that a reasonable possible change in the assumptions used to calculate
the value in use of intangible assets could result in a significant reduction in headroom such that it would be indicative
of impairment.
Strategic ReportGovernanceFinancial Statements 164
11. Property, plant and equipment
Cost
At 1 June 2019
Currency retranslation
Additions
Disposals
Reclassified as held for sale
Reclassification
Disposal of subsidiary
Reclassification to software within intangible assets
At 31 May 2020
Currency retranslation
Additions
Disposals
Reclassified as held for sale
Reclassification
Reclassification to software within intangible assets
At 31 May 2021
Accumulated depreciation and impairment
At 1 June 2019
Currency retranslation
Charge for the year
Disposals
Reclassified as held for sale
Reclassification
Disposal of subsidiary
Impairment loss
At 31 May 2020
Currency retranslation
Charge for the year
Disposals
Reclassified as held for sale
Impairment loss
At 31 May 2021
Net book values
At 31 May 2021
At 31 May 2020
Land and
buildings
£m
Restated*
Investment
Property
£m
Plant and
machinery
£m
Fixtures,
fittings and
vehicles
£m
Assets in the
course of
construction
£m
120.6
(2.6)
0.4
(0.1)
(6.7)
(4.5)
(12.5)
–
94.6
(9.6)
–
(0.2)
(1.0)
0.1
–
83.9
38.8
(0.6)
1.9
–
(2.1)
(0.8)
(3.3)
0.2
34.1
(2.8)
1.4
(0.1)
(0.3)
0.3
32.6
51.3
60.5
–
–
5.6
(0.7)
–
5.0
–
–
9.9
(1.5)
–
–
–
–
–
191.5
(3.1)
0.2
–
(17.6)
1.8
(39.7)
–
133.1
(15.3)
0.5
(3.3)
(7.7)
5.0
–
8.4
112.3
–
–
–
–
–
0.8
–
–
0.8
(0.1)
0.1
–
–
–
0.8
7.6
9.1
143.4
(2.0)
9.5
–
(14.3)
–
(34.0)
1.6
104.2
(11.4)
6.9
(3.2)
(7.4)
–
89.1
23.2
28.9
54.7
(0.5)
0.1
(0.6)
–
1.6
(2.3)
–
53.0
(2.6)
–
(1.3)
–
0.2
–
49.3
47.0
(0.4)
3.7
(0.6)
–
–
(2.0)
–
47.7
(2.3)
2.6
(1.3)
–
0.2
46.9
2.4
5.3
Total
£m
378.0
(6.5)
10.5
(1.5)
(24.3)
–
(54.5)
(2.6)
299.1
(29.9)
6.5
(4.8)
(8.7)
–
(1.3)
260.9
229.2
(3.0)
15.1
(0.6)
(16.4)
–
(39.3)
1.8
186.8
(16.6)
11.0
(4.6)
(7.7)
0.5
169.4
11.2
(0.3)
4.2
(0.1)
–
(3.9)
–
(2.6)
8.5
(0.9)
6.0
–
–
(5.3)
(1.3)
7.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.0
8.5
91.5
112.3
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustment. Further detail is available in note 1c.
Depreciation is charged to administrative expenses or cost of sales (for plant & machinery) in the Income Statement.
At 31 May 2021, the Group had entered into commitments for the acquisition of property, plant and equipment amounting to
£0.7m (2020: £1.6m). At 31 May 2021, the Group’s share in the capital commitments of the joint ventures was £nil (2020: £nil).
Transfers to software within intangible assets predominantly relate to the software costs of IT network and security
improvements in the year, and predominantly relate to software costs of the Business Planning & Consolidation tool
project in the previous year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021
165
Impairment losses in land & buildings in the year were related to reassessment of the recoverable amounts of the
relevant assets immediately before the assets were classified as held for sale.
Included in the brought forward Land & Buildings balance was £1.0m relating to land and buildings at Ellesmere Port in
one of the Group’s UK entities. This asset is in the process of being sold and as such was reclassified to ‘Assets Held for
Sale’ at 31 May 2021. The fair value of the Ellesmere Port land and buildings was £0.7m, compared to the carrying value
of £1.0m. As such, in accordance with IAS 36, an impairment loss of £0.3m has been recognised prior to reclassifying the
assets to Assets Held for Sale.
Further details of the assets held for sale classification are available in note 12.
The impairment loss of £0.2m in fixtures, fittings and vehicles relates to IT Hardware held at Head Office. The value in use
of the asset was £0.1m compared to the carrying value of £0.3m.
In the prior year, a number of properties in Ghana were acquired by the Group in exchange for development of land
owned by the Group. These properties have been valued at their deemed cost on the basis that no monetary exchange
was made in relation to the acquisition of the properties. In the prior year, one of these properties was sold.
In addition to the recognition of these investment properties in the prior year, £5.0m of other properties have been
re-presented as investment property rather than land and buildings, along with £0.8m of associated depreciation, as this
classification better reflects the nature and use of the underlying assets.
The fair value of the investment properties as at 31 May 2021 is £25.1m.
12. Assets Held For Sale
Disposal group held for sale(a)
Intangible assets (note 10)
Property, plant and equipment (note 11)
Inventory
Employee related accruals
Subtotal
Property, plant and equipment held for sale(b) (note 11)
Total
Current Assets:
Assets held for sale
Current Liabilities:
Liabilities directly associated with assets held for sale
Total
2021
£m
6.0
0.3
0.6
(0.5)
6.4
0.7
7.1
7.6
(0.5)
7.1
2020
£m
9.2
7.9
3.4
–
20.5
–
20.5
20.5
–
20.5
(a) The disposal group relates to the assets, specified liabilities and shares of five:am, the Group’s yoghurt business in Australia.
The assets and liabilities were held in PZ Cussons Australia Pty Ltd, whilst the shares in Five AM Life Pty Ltd were held by PZ
Cussons Beauty Australia (Holdings) Pty Ltd at the point of disposal. The sale of five:am’s trade, assets and shares to Barambah
Organics was announced on 7 May 2021. The disposal is consistent with the Group’s strategy of disposing of non-core brands
and activities. The sale completed on 4 June 2021 and as such the associated assets and liabilities were classified as ‘held for
sale’ at 31 May 2021 in accordance with IFRS 5. The results of five:am are shown as continuing operations on the basis that the
disposal constituted neither a major line of business or an exit from a geographical area of operation.
The disposal group as at 31 May 2020 included certain assets of the Nutricima business. These assets were sold on
28 September 2020. Results of this business are presented within ‘discontinued operations’. See note 28 for further
information on discontinued operations.
(b) The property, plant and equipment held for sale relates to disused land held in the UK. Discussions regarding the
sale of the land began in September 2020. As at 31 May 2021, the sale was nearing completion subject to local authority
planning regulations and as such the land was classified as ‘held for sale’ at 31 May 2021 in accordance with IFRS 5. Prior
to classifying as held for sale, the fair value of the land was assessed in accordance with IAS 16, and an impairment loss of
£0.3m was recognised in the income statement, details of which can be found in note 11.
Strategic ReportGovernanceFinancial Statements 166
13. Net investments in joint ventures
Joint ventures are contractual arrangements over which the Group exercises joint control with partners and where the
parties have rights to the net assets of the arrangement, irrespective of the Group’s shareholding in the entity.
Net investments in joint ventures include the Group’s equity investment in joint ventures, long-term loans issued to joint
ventures and the Group’s share of the joint ventures’ net assets / liabilities.
The table below reconciles the movement in the Group’s net investment in joint ventures in the year:
Long-term loans
issued to joint
ventures
Group’s share of net
(liabilities) / assets
of joint ventures
Net investments in
joint ventures
Carrying value
At 1 June 2019
Increased funding to joint ventures in year
Exchange differences on translation of overseas net liabilities
recognised in equity
Exchange differences on translation of foreign currency loans
classified as ‘permanent as equity’ recognised in equity
Share of result for the year taken to the Income Statement
At 31 May 2020
Increased funding to joint ventures in year
Repayment of loans by joint ventures in year
Impairment of equity investment
Impact of change in JV ownership % during the period
Exchange differences on translation of overseas net liabilities
recognised in equity
Exchange differences on translation of foreign currency loans
classified as ‘permanent as equity’ recognised in equity
Recycling of exchange differences on foreign currency loans due
to repayments in period
Share of result for the year taken to the Income Statement
At 31 May 2021
41.8
1.5
–
1.1
–
44.4
0.1
(3.4)
–
–
–
(5.9)
–
–
35.2
(4.9)
–
0.2
(1.6)
2.8
(3.5)
–
–
(2.2)
(0.2)
0.2
(1.2)
0.3
5.6
(1.0)
36.9
1.5
0.2
(0.5)
2.8
40.9
0.1
(3.4)
(2.2)
(0.2)
0.2
(7.1)
0.3
5.6
34.2
At the start of the period, the Group held investments in three joint ventures as follows:
Joint venture companies
Operation
Incorporated in:
Parent
Company’s
interest
PZ Wilmar Food Limited
Manufacturing
PZ Wilmar Limited
Manufacturing
Wilmar PZ International
Pte Limited
Provision of services to
joint venture companies
Nigeria
Nigeria
Singapore
51%
49%
50%
Registered Office address
45/47 Town Planning Way, Ilupeju, Lagos
45/47 Town Planning Way, Ilupeju, Lagos
56 Neil Road, Singapore
During the period, in October 2020, Wilmar PZ International Pte Ltd ceased to trade. As a result of this, the Group has
impaired its equity investment in this joint venture by £2.2m. This is part of the Nigeria simplification project within
Adjusting Items (note 3).
In March 2021, the assets, liabilities and undertakings of PZ Wilmar Food Ltd were merged with PZ Wilmar Ltd in
consideration for which new PZ Wilmar Ltd shares were issued to increase the Group’s interest in PZ Wilmar Ltd to 50%.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 167
At the end of the period, following these changes, the Group’s investments in joint ventures are as follows:
Joint venture companies
Operation
Incorporated in:
PZ Wilmar Limited
Manufacturing
Nigeria
Wilmar PZ International
Pte Limited
Provision of services to
joint venture companies
Singapore
Parent
Company’s
interest
50%
50%
Registered Office address
45/47 Town Planning Way, Ilupeju, Lagos
56 Neil Road, Singapore
Set out below is the summarised financial information for the Group’s material joint venture, PZ Wilmar Ltd. The
summarised financial information below represents amounts in the joint venture’s financial statements prepared in
accordance with IFRS. The values incorporate the results of PZ Wilmar Food Ltd, which operated as a separate legal
entity prior to the merger into PZ Wilmar Ltd.
PZ Wilmar Ltd
Assets
Non-current assets
Tangible Fixed Assets
Current assets
Cash and cash equivalents
Other current assets
Total assets
Liabilities
Non-current liabilities
Current liabilities
Total liabilities
Net assets/(liabilities)
PZ Wilmar Ltd
Revenues
Profit before tax for the year
Profit after tax
Total comprehensive income
2021
£m
46.5
35.1
50.5
85.6
132.1
(71.7)
(59.1)
(130.8)
1.3
2021
£m
214.4
10.8
8.9
8.9
2020
£m
57.7
19.4
38.2
57.6
115.3
(96.5)
(27.0)
(123.5)
(8.2)
2020
£m
168.6
7.2
2.4
2.4
Group’s share of profit after tax for year was £5.6m (2020: £2.8m). This excludes exchange differences on loans from the
Group which are recognised in other comprehensive income within the Group’s financial statements.
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture
recognised in the consolidated financial statements:
PZ Wilmar Ltd
Net assets / (liabilities) of joint venture
Proportion of Group’s ownership interest in the joint venture
Carrying amount of the Group’s interest in the joint venture
Information of joint ventures that are not individually material:
Wilmar PZ International Pte Ltd
The Group's share of profit after tax from continuing operations
The Group’s share of total comprehensive income / (expense)
Carrying amount of the Group’s interest in the joint venture
2021
£m
1.3
50%
0.7
2021
£m
–
–
(1.7)
2020
£m
(8.2)
49% / 51%
(4.1)
2020
£m
(0.1)
(0.1)
0.6
Strategic ReportGovernanceFinancial Statements 168
13. Net investments in joint ventures continued
The long-term loans issued to joint ventures (PZ Wilmar Ltd) have been assessed for impairment in accordance with
IFRS 9 ‘Financial Instruments’. These loans are considered to be in Stage 1 as the credit risk has not increased significantly
since initial recognition. The loss allowance has been measured using lifetime ECL by assessing the value in use of PZ Wilmar
Ltd, and on this basis, management have concluded that no impairment of these loans is required.
The joint venture has used these funds to invest in assets and establish a business that is now generating profits and cash
inflows. This cash generation has enabled the joint venture to repay some of these loans during the period.
14. Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2021
£m
22.6
5.1
63.4
91.1
2020
£m
17.7
18.6
68.3
104.6
During the year the cost of inventories recognised as an expense, and included in cost of sales, amounted to £343.3m
(2020: £381.4m). This included £6.6m (2020: £7.3m) which was charged to the Income Statement to write down slow
moving and obsolete inventories. Inventories are stated after provisions for impairment of £5.5m (2020: £5.4m).
15. Trade and other receivables
Receivables due within one year
Trade receivables
Less: provision for impairment of trade receivables
Net trade receivables
Amounts owed by joint ventures
Other receivables
Prepayments and accrued income
2021
£m
90.1
(4.1)
86.0
9.5
10.6
4.6
110.7
2020
£m
100.1
(7.9)
92.2
1.6
5.6
4.7
104.1
The Directors consider the carrying amount of trade and other receivables approximates to their fair value due to their
short-term nature.
Provisions are estimated by management based on the expected credit loss model. The creation and release of provisions
for receivables is charged / credited to administrative expenses in the Income Statement. Receivables are written off
when all possible routes through which amounts can be recovered have been exhausted.
Trade receivables consist of a broad cross section of the international customer base for which there is no significant
history of default. The credit risk of customers is assessed at a subsidiary and Group level, taking into account the local
market environment, customers’ financial positions, past experiences and other relevant factors. Individual customer
credit limits are imposed based on these factors. The credit period given on sales is mainly 30 days, but ranges from
14 to 90 days (2020: 14 to 90 days) due to the differing nature of trade receivables in the Group’s geographical segments.
No other receivables have been deemed to be impaired.
The following table shows the age of net trade receivables at the reporting date:
Not past due
Past due 0–90 days
Past due 90–180 days
Past due >180 days
2021
£m
71.3
13.9
0.5
0.3
86.0
2020
£m
73.3
19.4
0.4
(0.9)
92.2
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 169
The following table details the risk profile of trade receivables based on the Group’s provision matrix as at 31 May 2021:
Expected credit
loss rate
Gross Trade
receivables
£m
Lifetime ECL
£m
Specific
Provisions
£m
Total provision
for impairment of
trade receivables
£m
Not past due
Past due 0–30 days
Past due 31–60 days
Past due 61–90 days
Past due 90–180 days
Past due >180 days
Legal proceedings
0.41%
0.0%
16.7%
10.0%
16.7%
47.1%
100.0%
73.1
12.0
1.2
1.0
0.6
1.7
0.5
90.1
0.3
–
0.2
0.1
0.1
0.8
0.5
2.0
Movements in the Group provision for impairment of trade receivables are as follows:
At 1 June
Sale of subsidiary
Increase in provision for receivables impairment
Provision utilised during the year
Provision released during the year
Currency translation
At 31 May
The Group’s net trade receivables are denominated in the following currencies:
Sterling
US Dollar
Nigerian Naira
Euro
Australian Dollar
Indonesian Rupiah
Ghana Cedi
Polish Zloty
Other currencies
16. Current asset investments
Unlisted
1.5
–
–
–
–
0.6
–
2.1
2021
£m
(7.9)
–
(0.2)
0.3
2.9
0.8
(4.1)
2021
£m
32.1
11.0
10.4
0.7
16.3
11.5
1.2
–
2.8
86.0
2021
£m
0.3
0.3
1.8
–
0.2
0.1
0.1
1.4
0.5
4.1
2020
£m
(8.4)
0.4
(3.4)
1.5
1.8
0.2
(7.9)
2020
£m
29.1
8.8
16.1
2.2
13.5
15.5
1.0
1.5
4.5
92.2
2020
£m
0.3
0.3
Strategic ReportGovernanceFinancial Statements 170
17. Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Cash and short-term deposits
Overdrafts
Cash and cash equivalents
Loans due within one year
Loans due in greater than one year
Current asset investments
Net debt excluding lease liabilities
Lease liabilities*
Net debt
1 June 2019
£m
Net cash flow
£m
Foreign exchange
movements
£m
31 May 2020
£m
49.0
2.9
51.9
–
51.9
(2.0)
(204.0)
0.3
(153.8)
28.7
(1.9)
26.8
(1.2)
25.6
2.0
77.0
–
104.6
0.1
(0.1)
–
–
–
–
–
–
–
77.8
0.9
78.7
(1.2)
77.5
–
(127.0)
0.3
(49.2)
(13.7)
(62.9)
*
IFRS 16 was adopted during the period ending 31 May 2020 and the prior period at the time was not restated for the impact, therefore comparative
figures for this period are not included in the table above.
Cash at bank and in hand
Short-term deposits
Cash and short-term deposits
Overdrafts
Cash and cash equivalents
Loans due within one year
Loans due in greater than one year
Current asset investments
Net debt excluding lease liabilities
Lease liabilities
Net debt
1 June 2020
£m
Net cash flow
£m
Foreign exchange
movements
£m
31 May 2021
£m
77.8
0.9
78.7
(1.2)
77.5
–
(127.0)
0.3
(49.2)
(13.7)
(62.9)
6.1
7.3
13.4
1.2
14.6
–
9.0
–
23.6
1.9
25.5
(4.5)
(0.6)
(5.1)
–
(5.1)
–
–
–
(5.1)
–
(5.1)
79.4
7.6
87.0
–
87.0
–
(118.0)
0.3
(30.7)
(11.8)
(42.5)
The effective interest rate on cash and cash equivalents during the year ended 31 May 2021 was 0.7% (2020: 0.9%).
18. Financial Instruments and Risk Management
The Group’s activities expose it to a variety of financial risks, including market risk (including foreign currency risk and
interest rate risk), credit risk and liquidity risk.
The Group’s Treasury function seeks to manage potential adverse effects on the Group’s financial performance, by
coordinating access to domestic and international financial markets and monitoring and managing the financial risks
relating to the operations of the Group.
The Group uses derivative financial instruments to hedge certain risk exposures. The use of financial derivatives is
governed by the Group’s policies approved by the Board of Directors, which provide written principles on foreign
exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and
the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a
continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments,
for speculative purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 171
18.1. Classification of financial instruments
The following table combines information about:
• classes of financial instruments based on their nature and characteristics;
• the carrying amounts of financial instruments; and
• fair values of financial instruments (except financial instruments when carrying amount approximates their fair value).
Financial assets
£m
Total financial assets at fair value
Derivatives designated as hedging instruments
Current asset investments
Debt instruments at amortised cost
Trade and other receivables
Trade receivables from joint ventures
Current loans to Joint Venture
Long-term loans to Joint Venture
Total current
Total non-current
Total
Financial liabilities
£m
2021
2020
1.0
0.3
96.6
1.0
8.5
35.2
107.4
35.2
142.6
0.7
0.3
97.8
1.5
–
44.4
100.3
44.4
144.7
Interest rate
(%)
Maturity
2021
2020
Current interest-bearing loans and borrowings
Unsecured borrowings / overdrafts
1.35
2020
–
1.2
Non-current interest-bearing loans and borrowings
at amortised cost
Senior Revolving Credit Facility
1.28
2023
118.0
127.0
Other financial liabilities Fair Valued through Profit or Loss
Derivatives designated as hedging instruments
Other financial liabilities at amortised cost, other than
interest-bearing loans and borrowings
Trade and other payables
Total current
Total non-current
Total
0.7
0.9
150.9
151.6
118.0
269.6
161.8
163.9
127.0
290.9
18.2. Hedging activities and derivatives
The Group is exposed to certain risks relating to its ongoing business operations. The primary risks managed using
derivative instruments are foreign currency risk and interest rate risk.
The Group’s risk management strategy and how it is applied to manage risk is explained in note 18.4.
Derivatives designated as hedging instruments
The Group only applies cash flow hedge accounting with the following risks:
Foreign currency risk
Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
The foreign currency risk associated with anticipated sales and purchase transactions is hedged out to 12 months.
The Group does not currently make an adjustment to inventories in relation to the basis adjustment as it is not material.
This is reviewed each reporting period and would be adjusted should it become material.
Strategic ReportGovernanceFinancial Statements 172
18. Financial Instruments and Risk Management continued
For the hedges of highly probable forecast sales and purchases, as the critical terms (i.e. the notional amount, life and
underlying) of the foreign exchange forward contracts and their corresponding hedged items are the same, the Group
performs a qualitative assessment of effectiveness and it is expected that the value of the forward contracts and the
value of the corresponding hedged items will systematically change in opposite direction in response to movements in the
underlying exchange rates. This means that there is an economic relationship between the hedging instrument (the foreign
exchange forward derivatives) and the hedged item (highly probable forecast sales and purchases in foreign currency).
The notional of the hedging instrument (the derivative) is consistent with the designated amount of the underlying
exposure, therefore, hedge ratio is 1:1 in all cases. However, potential future rebalancing can be performed if needed.
The main source of hedge ineffectiveness in these hedging relationships is the effect of the counterparty and the Group’s
own credit risk on the fair value of the forward contracts, which is not reflected in the fair value of the hedged item.
Other sources of ineffectiveness arising from these hedging relationships are changes in the settlement date or amount.
However, the Group reviews all hedges on every reporting date to ensure their effectiveness.
The following tables detail the foreign currency forward contracts outstanding at the end of the reporting year.
£m
As at 31 May 2021
Assets
Liabilities
As at 31 May 2020
Assets
Liabilities
Gross Notional
amount
Gross Carrying
amount
Fair Value
Change in fair
value used
for measuring
ineffectiveness
for the year
52.6
(17.7)
43.2
(13.4)
53.2
(18.0)
42.6
(13.1)
1.0
(0.7)
0.7
(0.9)
0.3
0.2
0.8
0.1
As at 31 May 2021, the aggregate amount of gains under foreign exchange forward contracts deferred in the cash flow
hedge reserve relating to these anticipated future purchase transactions is a gain of 0.4m (2020: loss of £0.2m). It is
anticipated that the purchases will take place during the next financial year at which time the amount deferred in equity
will be removed from equity and included in the carrying amount of the raw materials. It is anticipated that the raw
materials will be converted into inventory and sold within 12 months of purchase.
Impact of hedging on equity
Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:
£m
As at 1 June 2019
Changes in fair value of hedging instruments net of taxation
As at 31 May 2020
Changes in fair value of hedging instruments net of taxation
As at 31 May 2021
Interest rate risk
Cash flow
reserve
Cost of hedging
reserve
0.6
(0.4)
0.2
(0.6)
(0.4)
(0.3)
0.1
(0.2)
0.2
–
The Group has exposure to interest rate risk, principally in relation to cash and cash equivalents and fixed and floating
rate debt facilities. The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate
borrowings, and by the use of an interest rate derivative: a cap option.
In December 2018, the Group bought an interest rate cap (+1.25%) and designated it as a hedging instrument in a cash
flow hedge of the GBP debt facility. The main terms of this financial option are £75m notional on 3 month LIBOR floating
to fixed, maturing 21 December 2021.
As at 31 May 2021, the change in fair value since the inception of the derivative has been £0.01m. This change in fair value
can be split between intrinsic value (£nil) and time value (£0.01m).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 173
18.3. Fair values
Set out below is a comparison, by class, of the carrying amounts and fair values of the Group’s financial instruments only
for those groups of financial instruments not accounted for at fair value but at amortised cost, other than those with
carrying amounts that are reasonable approximations of fair values:
£m
Financial assets
Non-listed equity investments
Total
Financial liabilities
Interest-bearing loans and borrowings
Floating rate borrowings
Total
2021
2020
Carrying amount
Fair value
Carrying amount
Fair value
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
(118.0)
(118.0)
(123.4)
(123.4)
(127.0)
(127.0)
(132.9)
(132.9)
Management have assessed that the fair values of cash and short-term deposits, trade and other receivables, trade and
other payables, bank overdrafts approximates to their carrying amounts largely due to the short-term maturities of these
instruments.
The following methods and assumptions were used to estimate the fair values:
• Foreign currency forward contracts: Future cash flows are estimated based on forward exchange rates (from observable
forward exchange rates at the end of the reporting year) and contract forward rates, discounted at a rate that reflects
the credit risk of various counterparties.
• Interest rate cap: the Black-Scholes method is used when estimating fair value of this type of financial option.
Then, fair value is split between intrinsic value and time value in order to properly allocate the changes in fair value.
• Non-listed equity investments income approach – the discounted cash flow method is used to capture the present
value of the expected future economic benefits to be derived from the ownership of these investments.
• Interest-bearing loans and borrowings: measured at amortised cost using the effective interest rate method.
Fair value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable:
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical
assets or liabilities;
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
£m
Financial assets
Non-listed equity investments
Derivatives designated as hedging instruments
Total
Financial liabilities
Derivatives designated as hedging instruments
Total
As at 31 May 2021
Fair value
Level 1
Level 2
Level 3
0.3
1.0
1.3
(0.7)
0.6
–
–
–
–
–
–
1.0
1.0
(0.7)
0.3
0.3
–
0.3
–
0.3
Strategic ReportGovernanceFinancial Statements 174
18. Financial Instruments and Risk Management continued
£m
Financial assets
Non-listed equity investments
Derivatives designated as hedging instruments
Total
Financial liabilities
Derivatives designated as hedging instruments
Total
As at 31 May 2020
Fair value
Level 1
Level 2
Level 3
0.3
0.7
1.0
(0.9)
0.1
–
–
–
–
–
–
0.7
0.7
(0.9)
(0.2)
0.3
–
0.3
–
0.3
There were no transfers between Level 1, 2 and 3 during the current or prior year.
18.4 Financial instruments risk management objectives and policies
The Group is exposed to market risk, credit risk and liquidity risk. The financial risk committee provides assurance to
the Group’s key management personnel that the Group’s financial risk activities are governed by appropriate policies
and procedures and that financial risks are identified, measured and managed in accordance with the Group’s policies
and risk objectives. All derivative activities for risk management purposes are carried out by specialist teams that have
the appropriate skills, experience and supervision. It is the Group’s policy that no trading in derivatives for speculative
purposes may be undertaken. The Board of Directors reviews and agrees policies for managing each of these risks,
which are summarised below.
A. Market risk
Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and
commodity risk. Financial instruments affected by market risk include loans and borrowings, deposits, debt and equity
investments and derivative financial instruments.
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates:
• forward foreign exchange contracts to hedge the exchange rate risk arising on the import and export of goods; and
• interest rate instruments (cap option) to mitigate the risk of rising interest rates.
The sensitivity analyses in the following sections relate to the position as at 31 May in 2021 and 2020.
The sensitivity analyses have been prepared on the basis that the amount of net debt (excluding lease liabilities), the
ratio of fixed to floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign
currencies are all constant and on the basis of the hedge designations in place at 31 May 2021.
The analyses exclude the impact of movements in market variables on: the carrying values of pension and other post-
retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations. Market risk exposures
are measured using sensitivity analysis. There has been no change to the Group’s exposure to market risks or the manner
in which these risks are managed and measured.
(a)(i) Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes
in foreign exchange rates. The Group is exposed to the fluctuations in foreign currency rates resulting from committed
and forecast transactions in foreign currencies, principally in relation to purchases of raw materials. These purchases are
typically denominated in US dollars or Euros.
When a derivative is entered into for the purpose of being a hedge, the Group negotiates the terms of the derivative
to match the terms of the hedged exposure. For hedges of forecast transactions, the derivative covers the period of
exposure from the point the cash flows of the transactions are forecasted up to the point of settlement of the resulting
receivable or payable that is denominated in the foreign currency.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 175
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date are as follows:
£m
Nigerian Naira
US Dollar
Euro
Indonesian Rupiah
Australian Dollar
2021
2020
Assets
Liabilities
–
18.8
0.9
–
–
–
1.5
2.6
–
–
Income
Statement
(61.4)
1.5
–
8.5
6.6
Assets
Liabilities
–
26.5
3.1
–
–
–
6.5
4.0
–
0.2
Income
Statement
(12.6)
3.8
–
9.0
3.4
(a)(ii) Foreign currency sensitivity
This table details the Group’s sensitivity to a 5% increase and decrease in currency units against the relevant foreign
currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally and represents management’s
assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at the year-end for a 5% change in foreign
currency rates. A positive number below indicates an increase in profit and other equity where currency units strengthen
5% against the relevant currency. For a 5% weakening of currency units against the relevant currency, there would be a
comparable impact on the profit and other equity, and the balances below would be negative.
£m
Change
Effect
on profit
before tax
Effect on
Assets
Effect on
Liabilities
Effect
on profit
before tax
Effect on
Assets
Effect on
Liabilities
2021
2020
Nigerian Naira
US Dollar
Euro
Indonesian Rupiah
Australian Dollar
(b)(i) Interest rate risk
+5%
-5%
+5%
-5%
+5%
-5%
+5%
-5%
+5%
-5%
(3.1)
3.1
0.1
(0.1)
–
–
0.4
(0.4)
0.3
(0.3)
–
–
0.9
(0.9)
0.1
(0.1)
–
–
–
–
–
–
0.1
(0.1)
–
–
–
–
–
–
(0.6)
0.6
0.2
(0.2)
–
–
0.5
(0.5)
0.2
(0.2)
–
–
1.3
(1.3)
0.2
(0.2)
–
–
–
–
–
–
0.3
(0.3)
0.2
(0.2)
–
–
–
–
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s
long-term debt obligations with floating interest rates and their related hedging derivatives.
The Group manages cash balances to protect against adverse changes in rates whilst retaining liquidity. Hedging activities
are evaluated regularly to align with interest rate views and defined risk appetite; ensuring the most cost-effective
hedging strategies are applied.
The Group considered it appropriate to enter into an interest rate cap (financial option), in which it agrees to receive,
at specified intervals, the difference between fixed and floating rate interest amounts calculated by reference to an
agreed-upon notional principal amount, when floating rate is above a certain level (strike 1.25%). The Group designated
this cap as a hedging instrument in a cash flow hedge, specifying that the time value of the option is a cost of hedging,
so that any change in this value is allocated in OCI and, does not therefore impact the profit or loss account.
(b)(ii) Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and
non-derivative instruments at the reporting date. For floating rate liabilities, the analysis is prepared assuming the
amount of liability outstanding at reporting date was outstanding for the whole year.
Strategic ReportGovernanceFinancial Statements 176
18. Financial Instruments and Risk Management continued
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans
and borrowings affected, after the impact of hedge accounting. With all other variables held constant, the Group’s profit
before tax is affected through the impact on floating rate borrowings, as follows:
£m
2021
Sterling
Total
2020
Sterling
Total
Increase / decrease
in basis points
Effect on profit
before tax
Effect on
pre-tax equity
+10
–10
+10
–10
(0.1)
0.1
–
(0.1)
0.1
–
–
–
–
–
–
–
The Group’s sensitivity to interest rates has decreased during the current year mainly due to the reduction in variable rate
debt instruments.
B. Credit risk
The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing
activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial
instruments.
The Group has dedicated standards, policies and procedures to control and monitor credit risks. Although the Group
is potentially exposed to credit loss in the event of non-performance by counterparties, such credit risk is controlled
through credit rating and equity price reviews of the counterparties and by limiting the total amount of exposure to any
one party. The maximum exposure to credit risk at the reporting date is the carrying value of each aforementioned class
of receivables.
The Group does not believe it is exposed to any material concentrations of credit risk. An analysis of the international
long-term credit ratings of counterparties where cash and cash equivalents (including overdrafts) are held is as follows:
£m
AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
CCC+
Not rated
Total
31 May 2021
Cash and cash equivalents
and financial derivatives
31 May 2020
Cash and cash equivalents
and financial derivatives
26.1
87.8
1.4
2.9
31.0
–
8.2
157.4
19.7
71.1
4.9
–
33.5
–
5.1
134.3
Trade receivables and contract assets
IFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair value through
profit or loss and contract assets. As required by IFRS 9, the Group uses the simplified approach in calculating ECLs for
trade receivables and contract assets that do not contain a significant financing component. The Group has applied the
practical expedient to calculate ECLs using a provision matrix. The Group has assessed that current and forward looking
information does not affect its customers’ historical default rates and, consequently, the expectation and estimation of
the ECLs has not changed.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 177
C. Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank
overdrafts, bank loans, finance leases and hire purchase contracts. Ultimate responsibility for liquidity risk management
rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the
management of the Group’s short-, medium- and long-terms funding and liquidity management requirements. The Group
manages liquidity risk by maintaining adequate cash and cash equivalents, banking facilities and reserve borrowing
facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial
assets and liabilities. Details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity
risk are set out below.
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on
which the Group can be required to pay. The table includes both interest and principal cash flows. To the extent that
interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the reporting date.
The amounts included in the following table for financial guarantee contracts are the maximum amount the Group could
be forced to settle under the arrangement for the full guaranteed amount if that amount is claimed by the counterparty
to the guarantee. Based on expectations at the end of the reporting year, the Group considers that it is more likely than
not that no amount will be payable under the arrangement. However, this estimate is subject to change depending on
the probability of the counterparty claiming under the guarantee which is a function of the likelihood that the financial
receivables held by the counterparty which are guaranteed suffer credit losses. The contractual maturity is based on the
earliest date on which the Group may be required to pay.
£m
< 3 months
3 to 12 months
1–2 years
2–5 years
Floating interest rate instruments
Trade and other payables
Derivatives
Lease liabilities
–
153.2
16.0
1.0
–
–
10.8
2.9
–
–
0.8
3.7
122.5
–
–
5.4
31 May 2021
£m
< 3 months
3 to 12 months
1–2 years
2–5 years
31 May 2020
Floating interest rate instruments
Trade and other payables
Derivatives
Lease liabilities
Financing facilities
1.1
161.8
0.4
1.0
–
–
0.5
2.5
–
–
–
2.9
133.5
–
–
6.5
Total
122.5
153.2
27.6
13.0
Total
134.6
161.8
0.9
12.9
The Group has access to financing facilities as described below. The Group expects to meet its other obligations from
operating cash flows and proceeds of maturing financial assets.
£m
31 May 2021
31 May 2020
Unsecured bank overdraft facilities & short-term loans,
reviewed annually and payable at call:
– Amount used
– Amount unused
Unsecured bill acceptance facilities, bank guarantees
& other facilities, reviewed annually:
– Amount used
– Amount unused
Unsecured bank loan facilities with maturity dates listed on page 171:
– Amount used
– Amount unused
–
99.0
(33.1)
150.6
(118.0)
207.0
(1.1)
133.7
(50.2)
154.6
(127.0)
198.0
Strategic ReportGovernanceFinancial Statements 178
18. Financial Instruments and Risk Management continued
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while
maximising the return to shareholders through the optimisation of the debt and equity balance. The Group’s overall
strategy remains unchanged from May 2020. The capital structure of the Group consists of net debt and equity of the
Group (comprising issued capital, reserves and retained earnings). The Group is not subject to any externally imposed
capital requirements.
The Group considers Net debt (excluding lease liabilities) to be an important alternative performance measure, on
the basis that this measure forms the basis of the Net debt to EBITDA covenant in relation to the Group’s Revolving
Credit Facility (RCF). The Group had net debt (excluding lease liabilities) positions as at 31 May 2021 and 31 May 2020
respectively, as shown below:
£m
Cash at bank and in hand (see note 17)
Short-term deposits (see note 17)
Bank overdrafts
Cash and cash equivalents (see note 17)
Current asset investments
Non-current interest-bearing loans and borrowings
Net debt (excluding lease liabilities)
IFRS 16 liabilities of £11.8m (2020: £13.7m) have been excluded from this metric.
19. Trade and other payables
Trade payables
of which trade payables under vendor financing arrangements
Other taxation and social security
Other payables
Accruals
31 May 2021
31 May 2020
79.4
7.6
–
87.0
0.3
(118.0)
(30.7)
2021
£m
58.2
2.7
3.3
6.3
83.1
150.9
77.8
0.9
(1.2)
77.5
0.3
(127.0)
(49.2)
2020
£m
77.2
4.8
5.6
5.3
73.7
161.8
Refer to note 18 for more information on financial instruments classified by category / fair value hierarchy level and
management of liquidity risk. The Group has an arrangement with a bank under which the bank offers vendors the option
to receive earlier payment of the Group’s trade payables. Vendors utilising the financing arrangement pay a credit fee to
the bank. The Group does not pay any credit fees and does not provide any additional collateral or guarantee to the bank.
20. Deferred tax
Property,
plant and
equipment
£m
Retirement
benefit
obligations
£m
Revaluation
of property,
plant and
equipment
£m
Unremitted
Earnings
£m
Other
timing
differences
£m
Business
combinations
£m
Accruals and
provisions
£m
Tax
losses
£m
At 1 June 2019
Charge / (Credit) to income
Charge / (Credit) to equity
Currency translation
At 31 May 2020 (restated)*
(Credit) / charge to income
Charge to equity
Currency translation
At 31 May 2021
(11.5)
2.5
1.9
0.1
(7.0)
(3.4)
–
1.0
(9.4)
(3.5)
(1.5)
(0.5)
(0.1)
(5.5)
(2.4)
2.4
(0.2)
(5.7)
(5.7)
(1.2)
–
–
(6.9)
(0.3)
–
1.3
(5.9)
–
–
–
–
–
(1.9)
–
–
(1.9)
(9.5)
(42.6)
1.3
1.8
–
(6.4)
(3.0)
1.4
0.7
(7.3)
5.4
–
0.4
(36.8)
(7.2)
–
(0.2)
(44.2)
Total
£m
(61.7)
7.5
3.6
0.4
6.1
0.4
–
–
5.0
0.6
0.3
–
5.9
6.5
(50.2)
(0.6)
(4.3)
(23.1)
–
(1.5)
3.8
–
(0.9)
3.8
0.2
1.3
(69.3)
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 179
As at 31 May 2021, the deferred tax liability of £7.3m categorised as ‘Other timing differences’ predominantly relates
to brands and goodwill of £6.4m (2020: £4.7m), and unrealised foreign exchange movements of £1.0m (2020: £1.5m).
The current year credit of £3.0m predominantly relates to the revaluation of deferred tax liabilities of £2.1m as a result
of the enactment of the UK corporation tax rate increase and foreign exchange movements of £0.5m.
Unremitted earnings may be liable to overseas withholding taxes if distributed as dividends. A deferred tax liability has
been recognised in respect of unremitted earnings in Indonesia of £1.9m (2020: £0m). No deferred tax liability has been
provided for unremitted earnings of any other Group companies overseas as these are considered indefinitely reinvested
outside the UK. The aggregate amount of temporary differences associated with investments in subsidiaries and joint
ventures for which deferred tax liabilities have not been recognised totalled approximately £12.7m as at 31 May 2021
(2020: £14.2m).
The deferred tax liability of £44.2m categorised as ‘Business Combinations’ relates to intangible assets recognised
on consolidation.
Certain deferred tax assets and liabilities have been offset where we are able to do so in accordance with IAS 12
‘Income taxes’. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
2021
£m
5.9
(75.2)
(69.3)
(Restated)*
2020
£m
15.4
(65.6)
(50.2)
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Deferred income taxes at the balance sheet date have been measured at the tax rate expected to be applicable at the
date the deferred income tax assets and liabilities are realised. For UK deferred income tax, management has performed
an assessment, for all material deferred income tax assets and liabilities, to determine the period over which the deferred
tax assets and liabilities are forecast to be realised. This resulted in a UK deferred income tax rate of 25% being used to
measure all deferred tax balances as at 31 May 2021 (2020: 19.0%).
Deferred income tax assets are recognised for tax losses brought forward to the extent that the realisation of the related
tax benefit through future taxable profits is probable. At the balance sheet date, the Group had £1.3m of recognised
unused tax losses (2020: £6.2m) and £6.1m of unrecognised tax losses (2020: £4.5m) which are not expected to expire or
be disposed of.
21. Provisions
At 1 June 2019
Charged to the Income Statement
Currency retranslation
Used during year
At 31 May 2020
Reclassification to retirement benefits & other long-term employee obligations (note 22)
Released to the Income Statement
Currency retranslation
Used during year
At 31 May 2021
Warranty
provisions
£m
1.6
2.0
(0.1)
(0.3)
3.2
(1.1)
(0.2)
(0.2)
(1.0)
0.7
Provisions as at 31 May 2021 relate to warranty costs in the Africa Electricals division (2020: £0.7m). The majority of provisions
are expected to be utilised in the next 12 months. Previously, long-term employee provisions were also included in this
note. These have been reclassified to note 22 ‘Retirement benefits and other long-term employee obligations’ as these
provisions fall under IAS 19, rather than IAS 37.
Strategic ReportGovernanceFinancial Statements 180
22. Retirement benefits and other long-term employee obligations
The Group operates retirement benefit schemes for most of its UK and overseas subsidiaries. Defined benefit schemes are
in place in the UK and Indonesia, and associated obligations have all been measured in accordance with IAS 19 (revised).
Summary of Group retirement schemes
UK retirement benefits
The UK operates a defined contribution scheme for current employees. The UK’s defined benefit schemes were closed to
future accrual on 31 May 2008. The following four defined benefit schemes are the UK’s main schemes:
• Main staff plan – for all historically eligible UK based staff, excluding PZ Cussons plc Executive Directors
• Directors’ plan – for PZ Cussons plc Executive Directors
• Expatriate plan – for all eligible expatriate staff based outside the UK
• Unfunded plan – unfunded unapproved retirement scheme
Current and past employees within these schemes are provided with defined benefits based on service and final salary.
The assets of the schemes are administered by trustees and are held in trust funds independent of the Group. In relation
to the unfunded plan, the Group made payments during the year to former Directors of £188,388 (2020: £183,636).
Overseas retirement benefits and other long-term employee obligations
Outside of the UK the Group operates a number of defined benefit and defined contribution schemes. Included
within ‘Overseas retirement benefits and similar obligations’ below is predominantly the unfunded retirement benefit
obligations relating to PZ Cussons Indonesia. Other overseas obligations benefits include specific employee related
provisions in accordance with employment law in Indonesia and Thailand. Note that previously, these other obligations
were presented within note 21 ‘Provisions’ but have been reclassified into this note as it is considered the more
appropriate place to classify these balances, as they fall within the scope of IAS 19, rather than IAS 37.
The Nigerian gratuity scheme is a defined contribution scheme that is computed based on the agreement between PZ
Cussons Nigeria plc and staff of PZ Cussons Nigeria plc dated 31 December 2006. The scheme is only applicable to staff
employed before 1 January 2007. The scheme is funded directly using the company’s cash flow and expensed to the
Income Statement appropriately.
Basis of recognition of pension scheme surplus
The trust deeds for the Directors’ and Main staff plan provides the Group with an unconditional right to a refund of
surplus assets assuming the full settlement of plan liabilities in the event of a plan wind-up. Furthermore, in the ordinary
course of business the trustee has no rights to unilaterally wind up, or otherwise augment the benefits due to members
of the scheme. Based on these rights, any net surplus in these two UK schemes are recognised in full.
The trust deed for the Expatriate plan provides the trustees with an unconditional right to wind up the scheme and
distribute the surplus to members; therefore the surplus on the expatriate scheme has not been recognised in the
balance sheet.
Summary of Group defined benefit schemes and similar obligations (as recorded on the balance sheet)
Expatriate plan
Directors’ plan
Main staff plan
Unfunded plan
Other overseas units
Restriction due to asset ceiling
Defined benefit asset / (liability)
per Group accounts
Surplus
£m
53.6
6.7
26.9
–
–
87.2
(53.6)
2021
Deficit
£m
–
–
–
(4.5)
(8.4)
(12.9)
–
Total
£m
53.6
6.7
26.9
(4.5)
(8.4)
74.3
(53.6)
Surplus
£m
61.4
8.0
34.9
–
–
104.3
(61.4)
2020
Deficit
£m
–
–
–
(4.5)
(7.7)
(12.2)
–
Total
£m
61.4
8.0
34.9
(4.5)
(7.7)
92.1
(61.4)
33.6
(12.9)
20.7
42.9
(12.2)
30.7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 181
UK Schemes Risk Review
The UK’s main schemes expose the Group to actuarial risks such as investment risk, interest rate risk and longevity risk.
Risk
Description
Mitigation
Investment
risk
The present value of the defined benefit
plan liability is calculated using a discount
rate (investment return) determined by
direct reference to high quality corporate
bond yields (for IAS 19 purposes) and gilt
yields (for statutory funding and long-term
funding purposes). If the return on Plan
assets is less than these discount rates,
the funding position of the Plans will fall.
As part of the financing of the funded Plans, they invest in assets with
higher return expectations than lower risk bonds that are the best match
for the Plans’ liabilities. To control the resulting investment risk, the
funded Plans invest in diversified portfolios of growth assets with the
balances invested in liability-matching bond assets designed to control
interest rate risk (see below). The split between growth assets and
liability-matching bond assets for each funded Plan is regularly
monitored to ensure investment risk is not excessive given the statutory
funding assumptions and the Plans’ long-term funding objectives.
Interest
risk
A decrease in the corporate bond yield
and / or gilt yield will increase the present
value of the Plan’s liabilities under the
IAS 19 and statutory / long-term funding
bases respectively.
The funded Plans make use of liability driven investment techniques
to protect them against the majority of the interest rate risk inherent
in their liabilities. This is achieved by investing in gilts and investment
grade corporate bonds such that changes in the Plans’ liabilities due
to falling gilt and / or corporate bond yields are offset by similar
movements in the value of the Plans’ overall assets.
Reflecting the funded Plans’ focus on controlling interest risk relative
to their statutory and long-term funding bases, the Plans’ liability-
matching bond portfolios are predominantly invested in gilts, with the
balance invested in investment grade corporate bonds to increase the
expected return on the Plans’ assets in a risk controlled way. In doing
so, the exposures to investment grade corporate bonds also help
mitigate the interest rate risk inherent in the Plans’ IAS 19 liabilities.
Inflation
risk
An increase in inflation results in higher
benefit increases for members, which
results in higher Plan liabilities.
The Plans’ liability-matching bond assets are also designed to hedge the
majority of the inflation rate risk inherent in the Plans’ liabilities. This is
achieved by investing in index-linked gilts.
Longevity
risk
The value of the Plans’ liabilities are
calculated by reference to the best
estimate of the life expectancy of each
Plan’s participants. An increase in life
expectancy of the Plans’ participants
will increase the Plans’ liabilities.
To help control longevity risk all the Plans are closed to future benefit
accrual.
The Plans consider additional approaches to mitigating longevity risk,
for example by buying annuities with an insurance company to cover
the Plans’ liabilities.
The movements in the year are as follows:
At 1 June 2019
Interest (expense) / income and administrative expenses
Contributions paid
Utilised in the year
Re-measurement gains
At 31 May 2020
Reclassification of balance from current provisions
Currency retranslation
Interest (expense) / income and administrative expenses
Contributions paid
Utilised in the year
Past service cost
Re-measurement losses
At 31 May 2021
Overseas retirement
benefits and similar
obligations
£m
UK retirement
benefits
£m
(6.8)
(1.3)
–
0.3
0.1
(7.7)
(1.1)
1.0
(1.7)
–
1.2
–
(0.1)
(8.4)
31.8
0.1
4.7
–
1.8
38.4
–
–
0.1
0.2
–
(0.2)
(9.4)
29.1
Total
£m
25.0
(1.2)
4.7
0.3
1.9
30.7
(1.1)
1.0
(1.6)
0.2
1.2
(0.2)
(9.5)
20.7
Strategic ReportGovernanceFinancial Statements 182
22. Retirement benefits and other long-term employee obligations continued
Funding and contributions by the Group
The Directors’ and Expatriate plans are fully funded. During the year the employer paid £nil (2020: £4.5m) as a contribution
towards the Main plan.
Maturity profile of obligation
The graph below sets out the undiscounted benefit payments that are expected to be paid from the Plans based on the
data underlying the actuarial valuations as at 31 May 2021:
Future benefit payments (funded plans)
)
m
£
(
s
t
n
e
m
y
a
p
t
i
f
e
n
e
b
d
e
t
n
u
o
c
s
i
d
n
U
18
16
14
12
10
8
6
4
2
0
2
2
0
2
4
2
0
2
6
2
0
2
8
2
0
2
0
3
0
2
2
3
0
2
4
3
0
2
6
3
0
2
8
3
0
2
0
4
0
2
2
4
0
2
4
4
0
2
6
4
0
2
8
4
0
2
0
5
0
2
2
5
0
2
4
5
0
2
6
5
0
2
8
5
0
2
0
6
0
2
2
6
0
2
4
6
0
2
6
6
0
2
8
6
0
2
0
7
0
2
2
7
0
2
4
7
0
2
6
7
0
2
8
7
0
2
0
8
0
2
2
8
0
2
4
8
0
2
6
8
0
2
8
8
0
2
Deferred
Pensioner
Overseas retirement benefits and similar obligations measurement and assumptions used
The obligations in the Indonesian post-retirement benefit scheme have been measured in accordance with IAS 19
(revised) and a discount rate of 7.25% (2020: 8.0%) and salary inflation rate of 8.0% (2020: 8.0%) have been used.
The scheme is unfunded and provision for future obligations included in the above table is £7.5m (2020: £7.6m).
UK retirement benefits measurement and assumptions used
The last triennial actuarial valuations of the schemes administered in the UK were performed by independent
professional actuaries at 1 June 2018 using the projected unit method of valuation.
For the purposes of IAS 19 (revised) the actuarial valuation as at 1 June 2018, which was carried out by a qualified
independent actuary, has been updated on an approximate basis to 31 May 2021. There have been no changes in the
valuation methodology adopted for this year’s disclosures compared to the previous year’s disclosures.
The key financial assumptions used by the actuary were as follows:
Rate of increase in retirement benefits in payment
Discount rate
Inflation assumption
2021
3.05%
1.95%
3.20%
2020
2.70%
1.65%
2.75%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021
The mortality assumptions used were as follows:
Weighted average life expectancy on post-retirement
mortality table used to determine benefit obligations
– Member age 65 (current life expectancy)
– Member age 45 (life expectancy at age 65)
Movements in the fair value of plan assets were as follows:
1 June
Interest income
Return of plan assets (excluding interest income)
Employer contribution and direct benefit payment
Administrative expenses
Benefits paid
31 May
The assets in the schemes were:
Equities
Bonds
Property
Cash and cash equivalents
Total fair value of scheme assets
Present value of scheme liabilities
Funded status
Restriction due to asset ceiling
Retirement benefit surplus
Related deferred tax liability
Net retirement benefit surplus
183
2021
Years
2020
Years
23.9
25.5
Assets
2021
£m
439.6
7.1
(12.8)
0.2
(0.6)
(16.7)
416.8
2021
£m
26.7
356.6
6.8
26.7
416.8
(334.1)
82.7
(53.6)
29.1
(5.7)
23.4
23.9
25.5
Assets
2020
£m
410.0
9.5
29.5
4.7
(0.7)
(13.4)
439.6
2020
£m
27.3
387.1
5.9
19.3
439.6
(339.8)
99.8
(61.4)
38.4
(7.3)
31.1
Equities and bond assets are quoted in active markets with all other assets being unquoted.
The UK schemes investment strategy is set by the trustee after taking appropriate advice from its investment consultant.
The trustee's primary objective is to invest the plan's assets in the best interest of the members and beneficiaries. Within
this framework the trustee has agreed a number of objectives to help guide them in their strategic management of the
assets and control of the various investment risks to which the plan is exposed.
Strategic ReportGovernanceFinancial Statements 184
22. Retirement benefits and other long-term employee obligations continued
Reconciliation of asset ceiling
Restriction due to asset ceiling at beginning of year
Interest on asset restriction
Other changes in asset restriction
Restriction due to asset ceiling at end of year
2021
£m
61.4
1.0
(8.8)
53.6
2020
£m
55.9
1.3
4.2
61.4
The movements documented above in relation to the restriction on the asset ceiling for the Expatriate scheme have been
included when reconciling the total assets and obligations of the schemes; however they have been excluded when
reconciling the opening to closing Group balance sheet position, as the surplus on the Expatriate scheme has been
derecognised in the balance sheet.
Movements in the present value of the defined benefit obligations were as follows:
1 June
Interest expense
Past service cost
Re-measurement (loss) / gain due to changes in demographic assumptions
Re-measurement loss due to changes in financial assumptions
Benefits paid
31 May
Plans that are wholly or partly funded
Plans that are wholly unfunded
Obligations
2021
£m
Obligations
2020
£m
(339.8)
(322.2)
(5.5)
(0.2)
(1.1)
(4.3)
16.8
(334.1)
(329.6)
(4.5)
(334.1)
(7.4)
–
0.9
(24.5)
13.4
(339.8)
(335.3)
(4.5)
(339.8)
The net retirement benefit income before taxation recognised in the Income Statement in respect of the defined benefit
schemes is summarised as follows:
Net interest on net defined benefit schemes
Past service cost
Administration expenses paid by the scheme
Net retirement benefit income before taxation
2021
£m
0.6
(0.2)
(0.5)
(0.1)
2020
£m
0.8
–
(0.7)
0.1
The above amounts are recognised in the Group’s Income Statement in arriving at operating profit.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 185
The reconciliation of the opening and closing balance sheet position is as follows:
Retirement benefit surplus at beginning of year
Net pension interest income
Administration expenses paid by the scheme
Past service cost
Contributions and direct benefits paid
Re-measurement (loss) / gain due to changes in demographic assumptions
Re-measurement loss due to changes in financial assumptions
Changes in asset ceiling / onerous liability (excluding interest income)
(Loss) / return on scheme assets (excluding interest income)
Net surplus at end of year
Analysed between:
Retirement benefit surplus
Retirement benefit obligation
2021
£m
38.4
0.6
(0.5)
(0.2)
0.2
(1.1)
(4.3)
8.8
(12.8)
29.1
33.6
(4.5)
29.1
2020
£m
31.8
0.8
(0.7)
–
4.7
0.9
(24.4)
(4.2)
29.5
38.4
42.9
(4.5)
38.4
Re-measurement gains and losses are recognised directly in the Statement of Comprehensive Income.
The sensitivities on the key actuarial assumptions as at the end of the year in relation to the UK schemes were:
Discount rate
Rate of inflation
Rate of mortality
Change in assumption
Decrease of 0.25%
Increase of 0.25%
Change in defined benefit obligation
Increase of 4.1%
Increase of 3.1%
Increase in life expectancy of 1 year
Decrease of 4.1%
The sensitivities on the key actuarial assumptions as at the end of the year in relation to the overseas schemes were:
Discount rate
Salary rate
Decrease of 1.0%
Increase of 1.0%
Increase of 10.0%
Increase of 9.6%
Change in assumption
Change in defined benefit obligation
The sensitivities shown above are approximate. Each sensitivity considers each change in isolation and is calculated using
the same methodology as used for the calculation of the defined benefit obligation at the end of the year. The inflation
sensitivity includes the impact of changes to the assumptions for the revaluation and pension increases. In practice it is
unlikely that the changes would occur in isolation.
During the year ending 31 May 2022 the Group expects to make cash contributions of £nil (2021: £nil) to funded defined
benefit plans.
The amount recognised as an expense in the Consolidated Income Statement in relation to defined contribution schemes
is £2.4m (2020: £2.7m). The amount recognised as an expense in the Consolidated Income Statement in relation to the
Nigerian Gratuity Scheme is £0.4m (2020: £0.7m).
23. Share capital
Allotted, issued and fully paid:
Ordinary Shares of 1p each
Total called up share capital
2021
2020
Number
000
Amount
£m
Number
000
Amount
£m
428,725
428,725
4.3
4.3
428,725
428,725
4.3
4.3
The Company has one class of ordinary shares which carry no right to fixed income.
Strategic ReportGovernanceFinancial Statements 186
24. Share Based Payments
As at 31 May 2021, the Group has two long-term incentive schemes in place – the 2014 Performance Share Plan (‘PSP’)
and the PZ Cussons plc Long-Term Incentive Plan 2020 (the ‘LTIP 2020’) for main Board Executive Directors and certain
key senior members of staff. The LTIP 2020 Plan was agreed at the Annual General Meeting on 26 November 2020. All
awards made in the year ended 31 May 2021 were made from the LTIP 2020 plan. No further awards from the 2014 PSP
will be made, and the final options granted from this scheme have a vesting date ending in the year to 31 May 2023.
The long-term incentive awards are structured so as to align the incentives of relevant Executives with the long-term
performance of the business and to motivate and retain key members of staff. The extent to which the performance
shares awards vest will depend upon the Group’s performance over the three year period following the award date.
The fair value of the award is taken as the share price at the date of grant.
Prior to 31 May 2021, the Group also operated an Executive Share Option Scheme. The final award outstanding in the
scheme vested in the previous financial year, on 13 June 2019, and the scheme ceased to exist after this award.
The Employee Share Option Trust (ESOT) purchases shares to fund the Schemes. As at 31 May 2021, the ESOT held
10,291,149 shares in PZ Cussons plc at a book value of £40.0m (2020: £40.0m). The market value of these shares as at
31 May 2021 was £26.2m (2020: £18.3m).
During the year, the ESOT purchased nil shares (2020: nil). The Trust has waived any entitlement to dividends in respect of
all the shares it holds. The Trust remains in place to act as a vehicle for the issuance of new shares under the PSP scheme.
Performance Shares
Executive Directors and certain senior members of staff are generally eligible to participate in the LTIP 2020 Plan, which
provides for the grant of conditional rights to receive nil-cost shares subject to continued employment over a three-
year vesting period and the satisfaction of certain performance criteria established by the Committee. Details of these
schemes can be found in the Remuneration Committee Report on page 103.
In the current year, 1,088,829 performance shares awards were granted under the LTIP 2020 scheme. Participants’ awards
will vest if certain targets are met, as detailed in the Remuneration Committee Report. The following table illustrates the
movement in options outstanding:
Options outstanding at 1 June 2020
Options issued during the year
Options exercised during the year
Options lapsed during the year
Options outstanding at 31 May 2021
2021
Number
3,084,167
1,088,829
–
(857,681)
3,315,315
The performance share options outstanding as at 31 May 2021 have vesting periods ending in the financial years as follows:
31 May 2022
31 May 2023
31 May 2024
31 May 2025
Restricted Stock
2021
Number
1,172,525
1,068,448
985,200
89,142
The PZ Cussons plc Long-Term Incentive Plan 2020 (the ‘LTIP 2020’) approved at the Annual General Meeting on
26 November 2020 permits a portion of the awards for senior employees, but not Executive Directors, to function like
restricted stock. These share awards will vest in full subject only to continued employment with no performance conditions.
In the current year, 378,039 restricted stock shares awards were granted under the LTIP 2020 scheme.
Options outstanding at 1 June 2020
Options issued during the year
Options exercised during the year
Options lapsed during the year
Options outstanding at 31 May 2021
2021
Number
–
378,039
–
(7,243)
370,796
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 187
The restricted stock options outstanding as at 31 May 2021 have vesting periods ending in the financial years as follows:
31 May 2022
31 May 2023
31 May 2024
Fair value
2021
Number
28,311
28,311
314,174
The fair value of the newly issued equity settled options granted during the year was estimated as at the date of the
grant using the Black-Scholes Model, taking into account the terms and conditions upon which awards were granted.
The fair value of the awards granted in 2020 was £3.4m based on the market price at the date the units were granted.
This cost is allocated over the vesting period.
The total cost allocation for all outstanding units in the period was a charge of £0.8m (2020: £nil).
There were no shares options exercised during the year.
25. Reconciliation of profit before tax to cash generated from operations
Profit before tax from continuing operations
(Loss) / profit before tax from discontinued operations
Profit before tax
Adjustment for net finance costs
Operating profit
Depreciation (note 11 & 26)
Amortisation (note 10)
Impairment of tangible and intangible assets (notes 10 & 11)
Impairment reversal on intangible fixed assets reclassified as held for sale (note 10)
Impairment of equity investment in joint venture (note 13)
Loss on sale of assets
Non-monetary acquisition of investment property (note 11)
Loss / (profit) on disposal of companies & businesses (note 28)
Other recycling of foreign exchange losses
Difference between pension charge and cash contributions
Share of results from joint ventures
Operating cash flows before movements in working capital
Movements in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash generated from operations
2021
£m
63.2
(46.9)
16.3
2.4
18.7
14.3
6.3
0.5
(1.5)
2.2
0.4
–
40.7
0.6
0.5
(5.6)
77.1
2.2
(5.9)
1.3
(1.3)
73.4
(Restated)*
2020
£m
18.3
11.9
30.2
4.1
34.3
18.7
6.8
42.9
–
–
0.3
(5.6)
(22.2)
–
(3.9)
(2.8)
68.5
10.8
39.1
10.4
(0.3)
128.5
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Strategic ReportGovernanceFinancial Statements 188
26. IFRS 16 ‘Leases’
The Group has lease contracts for various items of property, vehicles and other equipment used in its operations. Leases
of property generally have lease terms between 3 and 12 years, while motor vehicles and other equipment generally have
lease terms between 1 and 4 years.
The Group also has certain leases of vehicles with lease terms of 12 months or less and leases of equipment with low-
value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Land & buildings
£m
Cars
£m
Other equipment
£m
As at 1 June 2019
Additions
Depreciation
As at 31 May 2020
Additions
Depreciation
Reclassified as Held for Sale
Currency translation
As at 31 May 2021
9.0
4.8
(2.3)
11.5
1.8
(2.4)
(0.2)
(0.4)
10.3
3.1
–
(1.1)
2.0
0.5
(0.9)
–
(0.4)
1.2
Set out below are the carrying amounts of lease liabilities and the movements during the period:
Lease liability
As at 1 June 2019
Additions
Accretion of interest
Payments
As at 31 May 2020
Additions
Accretion of interest
Payments
Reclassified as Held for Sale
Currency translation
As at 31 May 2021
Current liabilities
Non-current liabilities
Total lease liabilities
The following are the amounts recognised in profit or loss:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term or low-value assets
Total amount recognised in profit or loss
0.3
–
(0.1)
0.2
–
–
–
–
0.2
2021
£m
3.3
1.0
0.2
4.5
Total
£m
12.4
4.8
(3.5)
13.7
2.3
(3.3)
(0.2)
(0.8)
11.7
Total
£m
12.2
4.7
0.5
(3.7)
13.7
1.8
1.0
(4.0)
(0.2)
(0.5)
11.8
3.1
8.7
11.8
2020
£m
3.5
0.5
0.2
4.2
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 189
A maturity analysis of the future lease payments in respect of the Group’s lease liabilities is presented in the table below.
Payments due
Less than one year
Between one and five years
Later than five years
2021
£m
3.1
7.1
1.6
11.8
2020
£m
3.3
8.5
1.9
13.7
27. Related party transactions
PZ Wilmar Limited and PZ Wilmar Food Limited
The following related party transactions were entered into by subsidiary companies during the year under the terms of
a joint venture agreement with Singapore based Wilmar International Limited. As per note 13, the assets, liabilities and
undertakings of PZ Wilmar Food Limited were merged into PZ Wilmar Limited in March 2021 and therefore this has been
reflected in the values given below:
• At 31 May 2021 the outstanding long-term loan balance receivable from PZ Wilmar Limited was £35.2m (2020: £36.1m
PZ Wilmar Limited and £8.3m PZ Wilmar Food Limited). These receivables relate to long-term loan investments that
have been made by both joint venture partners and are presented as part of the Group’s net investment in its joint
venture. These loans are non-interest bearing, repayable following a notice period of 12 months and are not secured.
• At 31 May 2021 the outstanding current loan balance receivable from PZ Wilmar Limited was £8.5m (2020: £nil). These
loans are interest bearing, repayable on demand and not secured. The interest received on this loan in the year was
£0.2m (2020: £nil).
• The value of goods purchased by the Group from PZ Wilmar Limited was £7.1m (2020: £5.9m).
• The value of certain services the Group sourced and then sold to PZ Wilmar Limited was £0.3m (2020: £0.6m). At 31 May
2021 the outstanding trade receivable balance from PZ Wilmar Limited was £1.0m (2020: £1.1m PZ Wilmar Limited and
£nil PZ Wilmar Food Limited).
All trading balances will be settled in cash. There were no provisions for doubtful related party receivables at 31 May 2021
(2020: £nil) and no charge to the Income Statement in respect of doubtful related party receivables (2020: £nil).
Wilmar PZ International Pte Limited
The following related party transactions were entered into by subsidiary companies during the year under the terms of a
joint venture agreement with Singapore based Wilmar International Limited:
• At 31 May 2021 the outstanding other receivable balance from Wilmar PZ International Pte Limited was £nil (2020:
£0.4m). These receivables related to services provided by subsidiary companies to Wilmar PZ International Pte Limited.
PZ Foundation
The PZ Foundation is not a related party within the definition of IAS 24 or the UK Listing Rules. Neither PZ Cussons plc nor
its subsidiaries have effective control or day to day management responsibilities for the PZ Foundation and the Group’s
support is limited to annual donations to support the foundation’s charitable works. Disclosure is made in this section on
a voluntary basis in the interests of transparency. During the year contributions from the UK to PZ Foundation were £nil
(2020: £nil). As at 31 May 2021 there was no outstanding balances with PZ Foundation (2020: £nil).
Strategic ReportGovernanceFinancial Statements 190
28. Discontinued Operations
On 18 March 2020, the Group exchanged contracts for the sale of the assets associated with Nutricima Ltd, which carried
out the Group’s Food & Nutrition operations in Africa. The sale completed on 28 September 2020, on which date control
of the assets passed to the acquirer. The assets included in the sale were land & buildings and plant & machinery of the
Nutricima factory, intellectual property relating to the brands of Nutricima and the inventory holding of Nutricima on the
date of disposal.
Following completion of the sale, Nutricima Ltd ceased to make commercial sales, but final business activities, such as
collection of remaining debtors and settlement of liabilities continued until May 2021.
As at 31 May 2021, the only material balance remaining on the balance sheet of Nutricima Ltd relates to long-term quasi-
equity loans from its parent company, Milk Ventures (UK) Ltd. These loans are predominantly denominated in USD. As the
activities of this foreign operation have now ceased, such that there has been a disposal per the definition in IAS 21.48, all
foreign exchange differences arising in connection with this foreign operation have now been reclassified to the income
statement. This includes the foreign exchange differences arising on translation of these long-term quasi-equity loans,
which for consolidation purposes were historically recorded in other comprehensive income and accumulated in equity
in accordance with IAS 21.32. The accumulated losses in this regard which have now been reclassified to the income
statement within adjusting items totalled £37.5m. In addition, the functional currency of Nutricima Ltd was changed to
USD as the predominant balance remaining in this entity relates to these USD denominated quasi-equity loans. This led
to a further recycling of foreign exchange accumulated gains in Nutricima Ltd of £5.1m, which is also shown as part of the
loss on disposal in adjusting items. The total amount of recycling foreign exchange related to the quasi-equity loans in
Nutricima is therefore £32.4m.
In the prior period, on 28 August 2019, the Group entered into a sale agreement to dispose of Minerva S.A., which carried
out the Group’s Food & Nutrition operations in Greece as part of the Europe & the Americas regional segment. The
disposal was completed on 30 September 2019, on which date control of Minerva S.A. passed to the acquirer.
Additionally in the prior period, on 12 August 2019, the Group entered into an agreement for the sale of the Polish
Personal Care brand Luksja. The sale agreement included the sale of the inventory holding of PZ Polska SA. This disposal
was completed on 28 February 2020, on which date rights to the Luksja brand passed to the acquirer.
Minerva S.A. was disposed of during the financial year to 31 May 2020 and as such there are no results relating to Minerva
S.A. in the PZ Cussons Group accounts for the year to 31 May 2021. The discontinued operations in the year to 31 May
2021 relate solely to Nutricima and Luksja.
The results of the discontinued operations, which have been included in the Consolidated Income Statement, were as
follows:
Revenue
Expenses
Loss before tax
Taxation
Loss after tax incurred to date of disposal
Adjusting items (note 3)
Costs of liquidation following disposal of Luksja
(Loss) / profit on disposal of discontinued operations
(see below)
Attributable tax expenses
Net (loss) / profit attributable to discontinued
operations (attributable to owners of the Company)
Luksja
£m
Nutricima
£m
31 May 2021
£m
(Restated)*
31 May 2020
£m
0.3
(0.3)
–
(0.5)
(0.5)
(0.4)
–
–
(0.4)
(0.9)
2.1
(7.9)
(5.8)
1.0
(4.8)
–
(40.7)
(5.2)
(45.9)
(50.7)
2.4
(8.2)
(5.8)
0.5
(5.3)
(0.4)
(40.7)
(5.2)
(46.3)
(51.6)
45.5
(48.4)
(2.9)
0.5
(2.4)
–
14.7
(1.4)
13.3
10.9
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 Further to the reclassification between continuing and discontinued operations detailed in note 1c, £1.6m of costs
relating to redundancy and liquidation have been reclassified from expenses to profit on disposal of discontinued
operations within the table above.
The breakdown of the loss before tax on disposal of Nutricima is as follows:
Total proceeds (cash)
Assets disposed of:
Property, plant and equipment
Intangible assets
Inventories
Costs of disposal (including £7.5m loss on recycling of historic foreign exchange reserves in relation to assets sold)
Loss on recycling of historical net foreign exchange losses on quasi-equity loans
Loss on disposal, before taxation
191
£m
16.2
(7.1)
(9.2)
(1.8)
(6.4)
(32.4)
(40.7)
Total losses on recycling foreign exchange differences related to Nutricima are £39.9m including an amount related to
intercompany quasi-equity loans of £32.4m, and an amount of £7.5m related to historical exchange reserves in relation
to assets disposed of, which is included in the costs of disposal.
The cash flows that are attributable to the activities of the discontinued operations are as follows:
Net cash (used in) / generated from operating activities
Net cash generated from investing activities
Net cash (used in) financing activities
Net (decrease) / increase in cash and cash equivalents
Luksja
£m
Nutricima
£m
31 May 2021
£m
0.1
0.1
–
0.2
(7.6)
15.9
–
8.3
(7.5)
16.0
–
8.5
(Restated)*
31 May 2020
£m
7.2
51.1
–
58.3
* The results for the year ended 31 May 2020 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
During the year, cash flows associated with Nutricima contributed a net amount of £8.3m of cash to the Group. Nutricima
Ltd used £(7.6)m of cash in operating activities. £15.9m of cash was generated from investing activities, of which £11.9m
was generated by Nutricima Ltd predominantly in relation to the sale of assets, and a further £4.0m was generated by
PZ Cussons Nigeria in relation to the sale of the land at the Nutricima factory.
Strategic ReportGovernanceFinancial Statements 192
29. Subsidiaries, joint ventures and non-current asset investments
Details of the Company’s subsidiaries at 31 May 2021 are as follows:
Company
Operation
Incorporated in:
Parent
Company’s
interest
Proportion
of voting
interest
Registered Office address
Five AM Life Pty Limited
Dormant
Australia
†100%
†100%
PZ Cussons (Holdings) Pty Limited
Holding company
Australia
†100%
†100%
PZ Cussons Australia Pty Limited
Manufacturing
Australia
†100%
†100%
PZ Cussons Beauty Australia
(Holdings) Pty Limited
Holding company
Australia
†100%
†100%
Rafferty’s Garden Pty Limited
Dormant
Australia
†100%
†100%
Rafferty’s Garden USA Corporation Dormant
USA
†100%
†100%
United Laboratories Limited
Dormant
Australia
†100%
†100%
PZ Cussons (New Zealand) Limited
Distribution
Australia
†100%
†100%
Paterson Services (Shanghai)
Limited
Dormant
China
†100%
†100%
Bronson Holdings Limited
Holding company
England
†100%
†100%
Milk Ventures (UK) Limited
Holding company
England
†100%
†100%
PZ Cussons (Holdings) Limited
Holding company
England
*100%
*100%
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
1209 Orange Street, Wilmington, New
Castle County, Delaware, 19801
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
Building A, Level 1, 13–15 Compark
Circuit, Mulgrave, Victoria, 3170
Sunshine World Building, Room 635, No.
2000 Pudong Avenue, Pudong, Shanghai
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
PZ Cussons (International Finance)
Limited
Provision of services
to Group companies
England
†100%
†100%
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
PZ Cussons (International) Limited
Provision of services
to Group companies
England
*100%
*100%
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
PZ Cussons (UK) Limited
Manufacturing
England
†100%
†100%
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
PZ Cussons Beauty LLP
Distribution &
Holding partnership
England
†100%
†100%
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Seven Scent Limited
Manufacturing
England
†100%
†100%
St. Tropez Acquisition Co. Limited
Holding company
England
†100%
†100%
St. Tropez Holdings Limited
Holding company
England
†100%
†100%
Thermocool Engineering
Company Limited
Dormant
England
†100%
†100%
PZ Cussons Ghana Limited
Distribution
Ghana
†100%
†100%
Agecroft Commerce Park, Lamplight
Way, Swinton, Manchester, M27 8UJ
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Plot 27/3–27/7, Sanyo Road, Tema,
PO Box 628
Parnon (Hong Kong) Limited
Provision of services
to Group companies
Hong Kong
†100%
†100%
1/F., Hing Lung Comm. Bldg., 68–74
Bonham Strand, Sheung Wan
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 193
Company
Operation
Incorporated in:
Parent
Company’s
interest
Proportion
of voting
interest
PZ Cussons (Hong Kong) Limited
Dormant
Hong Kong
†100%
†100%
PZ Cussons India PVT Limited
Provision of services
to Group companies
India
†100%
†100%
PT PZ Cussons Indonesia
Manufacturing
Indonesia
†100%
†100%
PZ Cussons (Europe) Limited
Dormant
Ireland
†100%
†100%
Registered Office address
Level 54, Hopewell Centre,
183 Queen’s Road East
1407, Real Tech Park, 14th Floor,
Plot No. 39/2, Sector – 30/A, Vashi,
Navi Mumbai, 400705
RDTX Tower 5th Floor JL Prof Satrio KAV
E IV/6, Mega Kuningan Jakarta Selatan
12940 Indonesia
The Greenway Ardilaun Court,
112–114 St Stephen’s Green, Dublin,
DO2 TD28, Ireland
Cussons and Company Limited
Dormant
Kenya
†100%
†100%
PO Box 48597, 00100 GPO, Nairobi
PZ Cussons East Africa Limited
Manufacturing
Kenya
†100%
†100%
Baba Dogo Road, Ruaraka, Nairobi
Food For Life International Limited
Dormant
Nigeria
†100%
†100%
45/47 Town Planning Way, Ilupeju, Lagos
Harefield Industrial Nigeria Limited Distribution
Nigeria
†99.8%
†99.8%
45/47 Town Planning Way, Ilupeju, Lagos
HPZ Limited1
Manufacturing
Nigeria
†74.98%
†55%
45/47 Town Planning Way, Ilupeju, Lagos
Nutricima Limited
Inactive
Nigeria
†100%
†100%
45/47 Town Planning Way, Ilupeju, Lagos
PZ Coolworld Limited
Retail
Nigeria
†99.9%
†99.9%
45/47 Town Planning Way, Ilupeju, Lagos
PZ Cussons Nigeria plc
Manufacturing
Nigeria
†73%
†73%
45/47 Town Planning Way, Ilupeju, Lagos
Roberts Pharmaceuticals Limited
Dormant
Nigeria
†100%
†100%
45/47 Town Planning Way, Ilupeju, Lagos
PZ Cussons Polska SA w likwidacji
Distribution
Poland
†100%
†100%
Ul. Chocimska 17, 00–791 Warszawa
PZ Cussons Singapore Private
Limited
Provision of services
to Group companies
Singapore
†100%
†100%
61 Robinson Road, #08–02 Robinson
Centre, Singapore
Guardian Holdings Company
Limited2
Provision of services
to Group companies
Thailand
†49%
†49%
35 Moo 4 Tessamphan Road, Banchang,
Muang, Pathumthani 12000
PZ Cussons (Thailand) Limited
Manufacturing
Thailand
†100%
†100%
PZ Cussons Middle East
and South Asia FZE
Distribution
UAE
†100%
†100%
St. Tropez Inc.
Distribution
USA
†100%
†100%
35 Moo 4 Tessamphan Road, Banchang,
Muang, Pathumthani 12000
JAFZA – 14, 14422, PO Box 17233, Jebel
Ali, 17233, Dubai
140 Broadway, 22nd Floor, Suite 2240,
New York
1 HPZ Limited is 74.99% owned by PZ Cussons Nigeria plc and is therefore consolidated.
2 PZ Cussons Holdings consolidates this entity based on de facto control.
* Shares held by the Parent Company.
† Shares held by a subsidiary.
Joint venture companies
Operation
Incorporated in:
Parent
Company’s
interest
Registered Office address
PZ Wilmar Limited
Manufacturing
Nigeria
†50%
45/47 Town Planning Way, Ilupeju, Lagos
Wilmar PZ International
Pte Limited
Provision of services to
joint venture companies
Singapore
†50%
56 Neil Road, Singapore
† Shares held by a subsidiary.
– All subsidiary entities have a year end of 31 May.
Strategic ReportGovernanceFinancial Statements 194
30. Events after the reporting period
On 4 June 2021, PZ Cussons plc completed the sale of the assets associated with five:am, which was the Group’s yoghurt
business in Australia. On this date, the control of the assets passed to the acquirer, Barambah Organics. Proceeds for the
sale were £7.3m and the profit recognised on disposal was £0.9m.
In addition, in the post year end period, foreign exchange reserves of £0.4m charge associated with the brand have been
recycled to the profit and loss account and the related deferred tax liability has been released (£1.8m with associated
foreign exchange reserve of £0.6m).
The results of five:am have not been reported within discontinued operations in the FY21 results as five:am does not
represent a disposal of a major line of business or an exit from a geographic area of operation as per IFRS 5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 COMPANY BALANCE SHEET
Non-current assets
Investments
Debtors – amounts owed by subsidiary companies
Current assets
Debtors
Investments
Cash at bank and in hand
Current liabilities
Net current assets
Total assets less current liabilities
Non-current liabilities
Net assets
Capital and reserves
Called up share capital
Capital redemption reserve
Hedging reserve
Other reserve
Profit and loss account
Total shareholders’ funds
195
Notes
31 May 2021
£m
(Restated)*
31 May 2020
£m
4
5
5
6
7
88.7
89.9
178.6
69.1
0.3
0.5
69.9
(6.0)
63.9
242.5
(118.0)
124.5
4.3
0.7
(0.1)
(40.0)
159.6
124.5
88.7
124.9
213.6
70.4
0.3
0.5
71.2
(4.5)
66.7
280.3
(127.0)
153.3
4.3
0.7
(0.3)
(40.0)
188.6
153.3
*
Non-current amounts owed by subsidiary companies of £124.9m were previously presented within current receivables in 2020. As explained in note 5,
these have been reclassified as non-current receivables as the full loan balances are not expected to be repaid within 12 months.
PZ Cussons plc reported a loss for the financial year ended 31 May 2021 of £4.7m (2020: £21.3m profit).
The Financial Statements from pages 130 to 204 were approved by the Board of Directors and authorised for issue.
They were signed on its behalf by:
C Silver
30 September 2021
J Myers
PZ Cussons plc
Registered number 00019457
Strategic ReportGovernanceFinancial Statements 196
COMPANY STATEMENT OF CHANGES IN EQUITY
At 31 May 2019
At 1 June 2019
Profit for the year
Issue of shares from ESOT
Ordinary dividends
At 31 May 2020
At 1 June 2020
Loss for the year
Cost of hedging reserve
Ordinary dividends
At 31 May 2021
Called
up share
capital
£m
Capital
redemption
reserve
£m
Notes
Hedging
reserve
£m
Other
reserve
£m
Profit
and loss
account
£m
4.3
4.3
–
–
–
4.3
4.3
–
–
–
0.7
0.7
–
–
–
0.7
0.7
–
–
–
4.3
0.7
(0.3)
(0.3)
–
–
–
(0.3)
(0.3)
–
0.2
–
(0.1)
(40.1)
(40.1)
–
0.1
–
(40.0)
(40.0)
–
–
–
(40.0)
201.9
201.9
21.3
–
(34.6)
188.6
188.6
(4.7)
–
(24.3)
159.6
3
3
Total
£m
166.5
166.5
21.3
0.1
(34.6)
153.3
153.3
(4.7)
0.2
(24.3)
124.5
PZ Cussons plc Annual Report and Financial Statements 2021 197
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. Accounting policies
Basis of preparation
The Company financial statements of PZ Cussons plc have been prepared in accordance with Financial Reporting Standard
101, ‘Reduced Disclosure Framework’ (FRS 101). The financial statements have been prepared under the historical cost
convention and in accordance with the Companies Act 2006.
As permitted by Section 408(3) of the Companies Act 2006, the Income Statement of the Parent Company is not
presented with these financial statements. The retained profit of the Parent Company is shown in the Statement of
Changes in Equity. Details of dividends paid are included in note 8 of the Consolidated Financial Statements.
The entity satisfies the criteria of being a qualifying entity as defined in FRS 101. Its financial statements are consolidated
into the Group financial statements of PZ Cussons plc which are included within this Annual Report.
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are
significant to the financial statements are disclosed within the Group financial statements of PZ Cussons plc.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial
statements, in accordance with FRS 101:
• Paragraphs 45(b) and 46 to 52 of IFRS 2, ‘Share based payment’ (details of the number and weighted average exercise
prices of share options, and how the fair value of goods or services received was determined)
• IFRS 7, ‘Financial Instruments: Disclosures’
• Paragraphs 91 to 99 of IFRS 13, ‘Fair value measurement’ (disclosure of valuation techniques and inputs used for fair
value measurement of assets and liabilities)
• Paragraph 38 of IAS 1, ‘Presentation of financial statements’ comparative information requirements in respect of:
(i) paragraph 79(a)(iv) of IAS 1;
(ii) paragraph 73(e) of IAS 16 ‘Property, plant and equipment’;
(iii) paragraph 118(e) of IAS 38 ‘Intangible assets’ (reconciliations between the carrying amount at the beginning and
end of the period)
• The following paragraphs of IAS 1, ‘Presentation of financial statements’:
– 10(d) (statement of cash flows);
– 16 (statement of compliance with all IFRS);
– 38A (requirement for minimum of two primary statements, including cash flow statements);
– 38B-D (additional comparative information);
– 111 (cash flow statement information); and
– 134-136 (capital management disclosures)
• IAS 7, ‘Statement of cash flows’
• Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ (requirement for the
disclosure of information when an entity has not applied a new IFRS that has been issued but is not yet effective)
• Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation)
• The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two
or more members of a group.
(a) New and amended standards adopted by the Group
There are no new accounting standards applicable to the Company for this reporting period.
(b) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early
adopted by the Group
No standards, amendments or interpretations that are not yet effective and have not been early adopted are expected to
have an impact on the Company’s financial statements.
Strategic ReportGovernanceFinancial Statements
198
1. Accounting policies continued
(c) Foreign currencies
Assets and liabilities are translated at exchange rates prevailing at the date of the Company balance sheet. Exchange
gains or losses are recognised in the profit and loss account. The Company’s functional currency is Sterling as this is the
functional currency of the principal operating environment of the Company. The Company financial statements have
been presented in Sterling and have been rounded to £0.1 of a million.
(d) Current tax
The current tax liability / asset directly relates to the actual tax payable / receivable on the Company’s profits and is
determined based on tax laws and regulations in effect at the year-end date. Assumptions and judgments are made in
applying these laws to the taxable profits in any given period in order to calculate the tax charge for that period. Where
the eventual tax paid or reclaimed is different to the amounts originally estimated, the difference will be charged or
credited to the profit and loss account in the period in which it is determined.
(e) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and
is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset is realised. Deferred tax is charged or credited to the Income Statement, except when it relates to items charged
or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current tax liabilities on a net basis.
(f) Financial instruments
Financial assets and financial liabilities are recognised on the Company balance sheet when the Company becomes a party
to the contractual provisions of the instrument.
Financial instruments utilised by the Company during the years ended 31 May 2021 and 31 May 2020, together with
information regarding the methods and assumptions used to calculate fair values, can be summarised as follows:
Current asset investments
In accordance with IFRS 9 ‘Financial instruments’, unlisted investments are held in the Company’s balance sheet at cost
because their fair value cannot be measured reliably due to the lack of quoted market prices.
Current assets and liabilities
Financial instruments included within current assets and liabilities are generally short-term in nature and accordingly their
fair values approximate to their book values.
Classification and measurement of financial instruments
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model. The expected credit loss
model requires the Company to account for expected credit losses and changes in those expected credit losses at each
reporting date to reflect changes in credit risk since initial recognition of the financial assets.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 199
(g) Borrowings
Interest-bearing bank loans and overdrafts are initially recorded at fair value, net of direct issue costs and are
subsequently measured at amortised cost. Finance charges, including premiums payable on settlement or redemption
and direct issue costs, are accounted for on an accruals basis through the Income Statement using the effective interest
method and are added to the carrying amount of the instrument to the extent they are not settled in the year in which
they arise.
(h) Intercompany debtors
Intercompany debtors are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest rate method, less provision for impairment based on an expected credit loss model. A provision
for impairment of intercompany debtors is established when there is objective evidence that the Company will not
be able to collect all amounts due according to the original terms of the debtors and is measured as the difference
between carrying value and present value of estimated future cash flows. Subsequent recoveries of previously impaired
intercompany debtors are recognised as a credit to profit.
(i) Intercompany creditors
Intercompany creditors are not interest bearing, repayable on demand and are initially stated at fair value and
subsequently measured at amortised cost.
(j) Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after
deducting all of its liabilities.
(k) Share capital
The Company is limited by shares and the ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Where the Company purchases the Company’s equity share capital (treasury shares), the consideration paid, including
any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s
equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any
consideration received, net of any directly attributable incremental transaction costs and the related income tax effects,
are included in equity attributable to the Company’s equity holders.
(l) Investments in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. Where equity settled share based
payments are granted to the employees of subsidiary companies, the fair value of the award is treated as a capital
contribution by the Company and the investment in subsidiaries are adjusted to reflect this capital contribution.
The carrying amounts of the Company’s investments are reviewed annually to determine whether there is any indicator
of impairment. If any such indicator exists, the asset’s recoverable amount is estimated. The recoverable amount is the
higher of an asset’s fair value less costs to sell or its value-in-use.
An impairment loss is recognised whenever the carrying amount of the investment, or its cash-generating unit, exceeds
its recoverable amount. Impairment losses are recognised in the profit and loss account.
An impairment loss is reversed when there is an indication that the impairment may no longer exist and there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined if no impairment loss had been recognised.
(m) Borrowing costs
Borrowing costs are not capitalised; they are recognised in profit or loss in the period in which they are incurred.
(n) Own shares held by ESOT
Transactions of the Company-sponsored Employee Share Option Trust (ESOT) are treated as being those of the Company
and are therefore reflected in the Company’s financial statements. In particular, the trust’s purchases and sales of shares
in the Company are debited and credited directly to equity.
(o) Dividend distribution
Dividend distributions to the Company’s shareholders are recognised as a liability in the Company’s Financial Statements
in the period in which the dividends are approved by the Company’s shareholders. In respect of interim dividends these
are recognised once paid.
Strategic ReportGovernanceFinancial Statements 200
1. Accounting policies continued
(p) Share based payments
The Company operates a Performance Share Plan for senior executives, which involves equity-settled share based
payments.
The awards under the Performance Share Plan are measured at the fair value at the date of grant and are expensed over
the period to which the performance relates based on the expected outcome of the vesting conditions. At each balance
sheet date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact
of the revision to original estimates, if any, in the Income Statement, with a corresponding adjustment to equity.
The social security contributions payable in connection with the grant of the share options is considered an integral part
of the grant itself, and the change will be treated as a cash-settled transaction.
(q) Critical accounting policies and key sources of estimation uncertainty
Estimates and accounting judgments are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The preparation of financial statements under IFRS requires management to make assumptions and estimates about
future events. The resulting accounting estimates will, by definition, differ from the actual results.
In the course of preparing the Company’s financial statements, no key source of estimation uncertainty has been
identified. The critical judgements required when preparing the Company’s financial statements are as follows:
Carrying value of investments in subsidiaries
Annually the Directors consider whether there are any indicators of impairment that may suggest that the recoverable
amount of the Company’s investments in subsidiaries is less than their carrying amount. The assessment of impairment
indicators requires management to apply judgment in assessing current and forecast trading performance as well as assessing
the impact of principal risks and uncertainties specific to the investments it holds. Details of the Company’s investments
are set out in note 4 and in the current year the Directors have concluded that no indicators of impairment existed.
2. Directors’ emoluments
Aggregate amount of Directors’ emoluments
Emoluments of the highest paid Director
2021
£m
1.5
0.7
2020
£m
1.7
0.5
For the year ended 31 May 2021 the highest paid Director received Company pension contributions of £0.1m (2020: £nil).
Additional information on Directors’ emoluments, including details of gains or losses made on the exercise of share
options in the year and the Directors’ interests in the Group have been included in the Report on Directors’ Remuneration
on pages 103 to 105.
The Directors are employed by the Company.
3. Dividends
Amounts recognised as distributions to ordinary shareholders in the year comprise:
Final dividend for the year ended 31 May 2020 of 3.13p (2019: 5.61p) per ordinary share
Interim dividend for the year ended 31 May 2021 of 2.67p (2020: 2.67p) per ordinary share
Proposed final dividend for the year ended 31 May 2021 of 3.42p (2020: 3.13p) per ordinary share
2021
£m
13.1
11.2
24.3
14.3
2020
£m
23.5
11.1
34.6
13.1
The proposed final dividends for the years ended 31 May 2020 and 31 May 2021 were / are subject to approval by
shareholders at the Annual General Meeting and hence have not been included as liabilities in the financial statements
at 31 May 2020 and 31 May 2021 respectively.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 201
4. Investments in subsidiaries
Cost at 1 June 2019
Disposals in the year to 31 May 2020
Cost and net book value at 31 May 2020
Cost and net book value at 31 May 2021
Shares
£m
103.3
(14.6)
88.7
88.7
Loans
£m
–
–
–
–
Total
£m
103.3
(14.6)
88.7
88.7
Details of the Company’s direct subsidiaries at 31 May 2021 are shown below. For a full listing of all company subsidiaries
see note 29 in the Group’s consolidated financial statements.
Subsidiary companies
Operation
PZ Cussons (Holdings) Limited
Holding company
Incorporated in:
England
PZ Cussons (International) Limited
Provision of services to Group companies
England
5. Debtors
Non-current – debtors
Amounts owed by Group companies
Current – debtors
Amounts owed by Group companies
Other receivables
Parent
Company’s
interest
Proportion
of voting
interest
100%
100%
100%
100%
2021
£m
(Restated)*
2020
£m
89.9
124.9
65.2
3.9
159.0
67.3
3.1
195.3
*
Non-current amounts owed by subsidiary companies of £124.9m were previously presented within current receivables in 2020. As explained below in this
note, these have been reclassified as non-current receivables as the full loan balances are not expected to be repaid within 12 months.
£155.1m (2020: £192.2m) of amounts owed by Group companies are interest bearing and are based on market rates
of interest. £nil (2020: £nil) of amounts owed by Group companies are non-interest bearing. All of the balances are
unsecured and are repayable on demand.
Following review, it was identified that amounts owed by Group companies of £89.9m (2020: £124.9m) had previously
been presented within current assets in error, but should have been presented in non-current assets. Although amounts
were repayable on demand, there was no expectation that they would be repaid within 12 months and therefore did not
meet the criteria to be classified as current assets. The prior period Company financial statements have been restated to
show these balances within non-current assets.
6. Creditors
Due within one year
Amounts owed to Group companies
Accruals
Due in greater than one year
Bank loans
2021
£m
2020
£m
5.8
0.2
6.0
118.0
118.0
4.1
0.4
4.5
127.0
127.0
£nil (2020: £nil) of amounts owed to Group companies are interest bearing and are based on market rates of interest.
Amounts owed to Group companies are unsecured and have no fixed date of repayment.
Financial instruments and risk management
The Company is exposed to financial risks arising from changes in interest rates. Other financial risks are not
considered significant.
The financial instruments held by the Company do not, either individually or as a class, create a potentially significant
exposure to market, credit, liquidity or cash flow interest rate risk.
Strategic ReportGovernanceFinancial Statements 202
7. Called up share capital
Allotted, called up and fully paid:
Ordinary Shares:
Ordinary Shares of 1p each
Total called up share capital
2021
2020
Number
000
Amount
£m
Number
000
Amount
£m
428,725
428,725
4.3
4.3
428,725
428,725
4.3
4.3
8. Share Based Payments
As at 31 May 2021, the Group has two long-term incentive schemes in place - the 2014 Performance Share Plan (‘PSP’)
and the PZ Cussons plc Long-Term Incentive Plan 2020 (the ‘LTIP 2020’) for main Board Executive Directors and certain
key senior members of staff. The LTIP 2020 was agreed at the Annual General Meeting on 26 November 2020. All awards
made in the year ended 31 May 2021 were made from the LTIP 2020. No further awards from the 2014 PSP will be made,
and the final options granted from this scheme have a vesting date ending in the year to 31 May 2023.
The long-term incentive awards are structured so as to align the incentives of relevant Executives with the long-term
performance of the business and to motivate and retain key members of staff. The extent to which the performance
shares awards vest will depend upon the Group’s performance over the three-year period following the award date.
The fair value of the award is taken as the share price at the date of grant.
Prior to 31 May 2021, the Group also operated an Executive Share Option Scheme. The final award outstanding in the
scheme vested in the previous financial year, on 13 June 2019, and the scheme ceased to exist after this award.
The Employee Share Option Trust (‘ESOT’) purchases shares to fund the Schemes. As at 31 May 2021, the ESOT held
10,291,149 shares in PZ Cussons plc at a book value of £40.0m (2020: £40.0m). The market value of these shares as at
31 May 2021 was £26.2m (2020: £18.3m).
During the year, the ESOT purchased nil shares (2020: nil). The Trust has waived any entitlement to dividends in respect
of all the shares it holds. The Trust remains in place to act as a vehicle for the issuance of new shares under the PSP and
LTIP 2020.
Performance Shares
Executive Directors and certain senior members of staff are generally eligible to participate in the LTIP 2020, which
provides for the grant of conditional rights to receive nil-cost shares subject to continued employment over a three-
year vesting period and the satisfaction of certain performance criteria established by the Committee. Details of these
schemes can be found in the Remuneration Committee Report on page 103.
In the current year, 1,088,829 performance shares awards were granted under the LTIP 2020 scheme. Participants’ awards
will vest if certain targets are met, as detailed in the Remuneration Committee Report. The following table illustrates the
movement in options outstanding:
Options outstanding at 1 June 2020
Options issued during the year
Options exercised during the year
Options lapsed during the year
Options outstanding at 31 May 2021
2021
Number
3,084,167
1,088,829
–
(857,681)
3,315,315
The performance share options outstanding as at 31 May 2021 have vesting periods ending in the financial years as follows:
31 May 2022
31 May 2023
31 May 2024
31 May 2025
2021
Number
1,172,525
1,068,448
985,200
89,142
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 203
Restricted Stock
The PZ Cussons plc Long-Term Incentive Plan 2020 (the ‘LTIP 2020’) approved at the Annual General Meeting on
26 November 2020 permits a portion of the awards for senior employees, but not Executive Directors, to function like
restricted stock. These share awards will vest in full subject only to continued employment with no performance conditions.
In the current year, 378,039 restricted stock shares awards were granted under the LTIP 2020 scheme.
Options outstanding at 1 June 2020
Options issued during the year
Options exercised during the year
Options lapsed during the year
Options outstanding at 31 May 2021
2021
Number
–
378,039
–
(7,243)
370,796
The restricted stock options outstanding as at 31 May 2021 have vesting periods ending in the financial years as follows:
31 May 2022
31 May 2023
31 May 2024
Fair value
2021
Number
28,311
28,311
314,174
The fair value of the newly issued equity settled options granted during the year was estimated as at the date of the
grant using the Black-Scholes Model, taking into account the terms and conditions upon which awards were granted.
The fair value of the awards granted in 2020 was £3.4m based on the market price at the date the units were granted.
This cost is allocated over the vesting period.
The total cost allocation for all outstanding units in the period was a charge of £0.8m (2020: £nil).
There were no share options exercised during the year.
9. Contingent liabilities and guarantees
The Company is one of a group of guarantors, including other group companies, to a borrowing facility relating to
loans provided to certain Group UK entities. The amount borrowed under this agreement at 31 May 2021 was £118.0m
(2020: £127.0m).
10. Events after the reporting period
In late September 2021, the Company was notified of an intention to initiate arbitration in respect of a breach of warranty
relating to a previous divestment. Based on the information received to date the Company believes that the claim is
unlikely to succeed but that there is not sufficient information available as yet to conclude that any outflow is remote.
The Company does not believe that the potential amount of any award can be reasonably estimated at present, given the
early stage of the claim.
Strategic ReportGovernanceFinancial Statements 204
Health & safety
PZ Cussons plc aims to maintain a safe workplace at all locations in which it operates. We continue to ensure that our
business activities are undertaken in a responsible manner and in accordance with all relevant legislation, and that
employees at all levels participate in the development, promotion and maintenance of a safe and healthy working
environment for employees, visitors and the public. The Company employs health & safety specialists and, where
appropriate, provides on-site medical facilities for employees.
The Company continues to monitor and increase standards of health & safety at work through risk assessment, safety
audits, formal incident investigation and training. Our investment in plant and equipment enables us to modernise
designs and operate safer and more efficient processes. Following the outbreak of Covid-19, the Company made
significant modifications to its facilities and ways of working to ensure the safety of our staff. Such measures have
included greater support for remote working, social distancing measures in our facilities, enhanced cleaning procedures,
reduced capacity in our offices, protective screens, testing equipment and the provision of vaccines where appropriate.
Employment and staff development
As a multi-local Group, and particularly bearing in mind our operations in developing countries, we focus resources on
the employment and development of local staff with the intention of assisting both our operations in those countries
and the local community. Employees are involved at all levels of decision-making throughout the Group with effective
communication via regular consultation groups and briefings including Town Halls. Training is vital to ensuring continuous
improvement in performance and over the past year employees of all grades have received training through a wide range
of courses.
The employment policies of the Group embody the principles of equal opportunity, training and development and
rewards appropriate to local markets, and are tailored to meet the needs of its businesses and the areas in which they
operate. This includes procedures to support the Group’s policy that disabled persons shall be considered for appropriate
employment and subsequent training and career development. The Company continues to share valuable experience and
best practice within the Group through employee secondment.
Community and charity
We support a range of charitable causes, both in the UK and overseas, mainly through a UK-based shareholding trust,
with additional contributions made through staff time and gifts in kind. PZ Cussons plc continues to provide assistance
and donations to significant global fundraising initiatives and recognises its responsibility to the communities in which it
operates. We are committed to establishing and maintaining strong relationships with community groups, particularly in
developing markets.
Auditor
Deloitte LLP has signified its willingness to continue in office and a resolution for its re-appointment as External Auditor
will be proposed at the forthcoming Annual General Meeting.
Directors’ report of PZ Cussons plc
For the purposes of section 234 of the Companies Act 2006, the Report of the Directors of PZ Cussons plc for the year
ended 31 May 2021 comprises this page and the information contained in the Report of the Directors on pages 110
to 115.
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUEDPZ Cussons plc Annual Report and Financial Statements 2021 205
FURTHER STATUTORY AND OTHER INFORMATION
Shareholder information and contacts
Annual General Meeting
The Annual General Meeting
will be held at 10.30am Tuesday
23 November 2021 at: Radisson Blu
Hotel Manchester Airport Chicago
Ave, Manchester M90 3RA
Financial calendar
The key dates for PZ Cussons’
financial calendar are available on
our website: www.pzcussons.com
Registered office
Registrars
PZ Cussons plc
Manchester Business Park
3500 Aviator Way
Manchester
M22 5TG
Tel: 0161 435 1000
www.pzcussons.com
Registered number
Company registration number –
00019457
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
www.computershare.com
Company Secretary
Kevin Massie
Disclaimer
The purpose of this document is to provide information to the members of PZ Cussons plc. This document contains certain statements
that are forward-looking statements. These statements appear in a number of places throughout this document and include statements
regarding our intentions, beliefs or current expectations and those of our officers, Directors and employees concerning, among other
things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. By their nature,
these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially
from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this
document and unless otherwise required by the applicable law the Company undertakes no obligation to update or revise these forward-
looking statements. Nothing in this document should be construed as a profit forecast. The Company and its Directors accept no liability
to third parties in respect of this document save as would arise under English law.
This report has been printed in the UK using 100% offshore wind electricity sourced from UK wind. 100% of the inks used are vegetable
oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will
be recycled and the remaining 1% used to generate energy. This document is printed on Nautilus Super White paper. This is a premium
ecological paper with an environmental profile of 100% post-consumer recycled paper with FSC® recycled and EU ecolabel certifications.
The emissions associated with printing this document have been offset using the Climate Partner Carbon Balance Paper schemes.
To find out more about the PZ Cusson scheme it has supported, scan the QR code on this page.
If you have finished reading this report and no longer wish to retain it, please pass it on to other interested readers, or recycle it. Thank you.
This Annual Report is available at www.pzcussons.com
Strategic ReportGovernanceFinancial Statements PZ Cussons plc
Manchester Business Park
3500 Aviator Way
Manchester M22 5TG