PZ Cussons plc Annual Report and Financial Statements 2022
FOR EVERYONE,
FOR LIFE,
FOR GOOD.
PZ Cussons plc / Annual Report and Financial Statements 2022
PZ CUSSONS IS A
BRANDED CONSUMER
GOODS BUSINESS
FOR EVERYONE,
FOR LIFE,
FOR GOOD.
OVERVIEW
02 A word from our Chair
03
04
06
Financial highlights
2022: Year in review
PZ Cussons at a glance
– Our brands
– Our business model
Read our report online
www.pzcussons.com/investors/
STRATEGIC REPORT
12
Chief Executive’s review
16 Our story and purpose
18 Our values
20 Our markets
24 Our strategy
30
38
40
44
64
Strategy in action
Creating a dialogue with our stakeholders
Section 172(1) statement
Sustainability
TCFD Report
72 Non-financial and sustainability information statement
73
Key performance indicators
78 Business review
82
84
86
Financial review
Risk management
Principal risks and uncertainties
Overview / Contents
01
06
PZ Cussons at a Glance
12
Chief Executive
Officer’s Review
GOVERNANCE
96 Our Board
98
Chair’s introduction to governance
100 Board leadership and Company purpose
104 Governance framework
106 Nomination Committee report
110 Audit & Risk Committee report
116 ESG Committee report
118 Remuneration Committee report
124 Remuneration Policy
132 Report on Directors’ remuneration
144 Report of the Directors
44
Better for All:
ESG at PZ Cussons
FINANCIAL STATEMENTS
152
Independent Auditor’s Report
166 Consolidated income statement
167 Consolidated statement of comprehensive income
168 Consolidated balance sheet
170 Consolidated statement of changes in equity
171 Consolidated cash flow statement
172 Notes to the consolidated financial statements
236 Company balance sheet
237 Company statement of changes in equity
238 Notes to the Company financial statements
152
Independent
Auditor’s Report
ADDITIONAL INFORMATION
246 Glossary
247 Further statutory and other information
02
PZ Cussons plc / Annual Report and Financial Statements 2022
A WORD FROM OUR CHAIR
IT’S AN EXCITING TIME AS WE MOVE FROM
TURNAROUND TO TRANSFORMATION.
We have continued to develop our business
throughout 2022, making significant strategic
progress. Our strengthened leadership team brings
experience of global consumer goods businesses,
emerging markets and different sectors. This is
complemented by significant PZ Cussons’ ‘know-
how’ who have built their careers here and know
our brands and markets intimately.
We were delighted to welcome our first Chief
Sustainability Officer – a new role for PZ Cussons –
who will be instrumental as we work towards our
B-Corporation ambitions. We have recently published
new sustainability targets, which are realistic and
reflective of the size and complexity of our business.
We have also established an ESG Committee of the
Board ensuring the right level of Board engagement
in this important topic.
We have welcomed two Non-Executive Directors to
the Board during the year, and I am pleased with the
broader progress that has been made with regards
to Board governance.
I am particularly proud of the new ‘BEST Values’
which our teams have defined: to be Bold, Energetic,
Striving and to work Together – underpinning our
drive to build a stronger performance culture.
These new values build on the work we did last year
in redefining our purpose. The organisation has
taken a real step forward in its mindset, reigniting
its pioneering spirit.
FY22 also saw the announcement of our acquisition
of Childs Farm, our first acquisition since 2014,
reflecting the renewed confidence that arises from
our firmer operational foundations. The Childs Farm
acquisition also marked an important step on our
journey from the turnaround of our core business
to our broader business transformation.
Our strategic progress is also reflected in our financial
results. Although FY22 was a challenging year for us
and many of our peers, we have delivered a second
year of like-for-like revenue growth, and a further
reduction in adjusted net debt. More importantly
perhaps, we have seen improvements in the consistency
of performance throughout the year, which has been
a focus for both the Board and our management team.
As we look into FY23, the Board will continue to
track progress on the turnaround of our core business
and also look to accelerate our broader transformation
into a simpler and more sustainable business with
improved revenue growth and profitability. FY23
will undoubtedly be a challenging year with continued
macro-economic uncertainty, cost of living challenges
and inflation. Our Board is confident in the Group’s
ability to meet these challenges and to seize
opportunities where they may present.
On behalf of the Board, I wish to thank all our employees
for their continued drive and commitment, and our
shareholders, customers and other key stakeholders
for their ongoing support and partnership.
Caroline Silver
Non-Executive Chair
See our Governance section / Pages 96–149
Overview / A word from our Chair
03
FINANCIAL HIGHLIGHTS
WE HAVE DELIVERED A RESILIENT PERFORMANCE OVER THE PAST YEAR,
AGAINST THE BACKDROP OF CHALLENGING CONDITIONS IN OUR MARKETS.
2022
2021
2020
£592.8m
£603.3m
£587.2m
Revenue
£592.8m
(2021: £603.3m)
2022
2.9%
2021
7.1%
(2.4)% 2022
LFL revenue growth1
2.9%
(2021: 7.1%)
2022
2021
2020
11.5%
11.8%
11.2%
Adjusted operating
profit margin2
11.5%
(2021: 11.8%)
2022
2021*
11.2%
11.2%
2022 £9.8m
2021
£30.7m
2020
3.8%
2020
£49.2m
2022
2021
2020
6.40p
6.09p
5.80p
Statutory operating
profit margin
12.7%
(2021*: 11.2%)
Adjusted net debt1
Dividend per share
£9.8m
(2021: £30.7m)
6.40p
(2021: 6.09p)
2022
2021
2020
12.71p
13.12p
12.17p
Adjusted basic earnings per share
from continuing operations2
12.71p
(2021: 13.12p)
2022
2021*
2020 5.59p
12.02p
10.09p
Statutory earnings per share
12.02p
(2021*: 10.09p)
1
Definitions of key terms are provided in the Glossary on page 246.
2 Further details on adjusting items are set out in note 3 on page 188.
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
The key financial metrics we focus on have evolved from FY21 as we refine the linkage between our strategy and financial performance, and reflect feedback
from stakeholders. In particular, we have included like-for-like revenue growth and focused more on operating profits.
See our key performance indicators / Page 73
04
PZ Cussons plc / Annual Report and Financial Statements 2022
2022: YEAR IN REVIEW
JUNE
2021
five:am disposal
We sold our five:am yoghurt business in
Australia, marking our exit from the
adult nutrition business.
See our Financial review / Page 82
DEC
2021
Launch
of Values
We refreshed our
PZ Cussons Values
with a global campaign
incorporating local
involvement across
our business units.
See more on our Purpose and Values /
Pages 16-19
FY
2022
AUGUST – SEPTEMBER 2021
Executive
Leadership Team
We have continued to strengthen our Executive
Leadership Team, with a number of external
appointments as well as internal promotions.
Overview / Year in review
05
Manchester Head
Office re-launch
After several months spent working
from home during the pandemic,
our teams were reunited in a newly
refurbished Head Office.
JAN
2022
MAR
2022
Acquisition of
Childs Farm
We welcomed Childs Farm, a leading
UK brand in baby and child personal
care, to the PZ Cussons family as a
Must Win Brand.
Read more about the acquisition
of Childs Farm / Page 25
FY
2022
Like-for-like revenue growth
+7.1%
Q2
Q3
Q4
Q1
APR
2022
FY
2022
People
Transformation
We launched Workday, our new
people management system that
is enabling us to standardise and
streamline global processes, with the
single sourcing of data in real time
accessible any time and anywhere.
FY 2022
Sale of non-core
assets
As part of our drive to simplify our
business and operations, we sold a
number of residential properties in
Nigeria, with total gross proceeds of
£18.4m
Positive momentum
in trading
Following an exceptionally strong performance in
FY21, we have seen quarterly like-for-like revenue
growth improve throughout FY22, with growth for
the year as a whole of:
+2.9%
06
PZ Cussons plc / Annual Report and Financial Statements 2022
PZ CUSSONS AT A GLANCE
PZ CUSSONS IS A
BRANDED CONSUMER
GOODS BUSINESS.
With nearly 140 years of heritage, we employ
nearly 3,000 people across our operations in
Europe, North America, Asia Pacific and Africa.
Since our founding in 1884, we have been
creating products to delight, care for and nourish
consumers. We are building on these foundations
with our strategy and business transformation,
as we look to the future.
Our 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.
We operate across 3 geographic regions, with
4 priority markets: the UK, Indonesia, Australia
and New Zealand (‘ANZ’) and Nigeria.
FINANCIALS AT A GLANCE
Revenue
£592.8m
LFL revenue growth
Adjusted operating profit
Operating profit
2.9%
£67.9m
£66.6m
EUROPE &
THE AMERICAS
Revenue
£193.0m
ASIA PACIFIC
AFRICA
Revenue
£173.8m
Revenue
£222.0m
Adjusted operating profit
Adjusted operating profit
Adjusted operating profit
£35.0m
Operating profit
£22.9m
Priority market:
£20.9m
Operating profit
£37.0m
Priority markets:
£22.3m
Operating profit
£28.6m
Priority market:
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.
Operations:
We have offices in Indonesia,
Australia and Thailand, with
manufacturing facilities in
Indonesia and Thailand.
Operations:
Our largest office and
manufacturing centre is in Lagos,
Nigeria with smaller operations
in other parts of Nigeria, Kenya
and Ghana. Our joint venture,
PZ Wilmar and our Electricals
business are also located in
Nigeria.
Overview / At a glance
07
OUR BRANDS
BUILDING BRANDS FOR LIFE
TODAY AND FOR FUTURE
GENERATIONS.
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 focus for investment,
while our Portfolio Brands each have an important
role to play within the broader portfolio.
C AT EGORIES:
PORTFOLIO
BRANDS
MUST
WIN
BRANDS
OTHER 17 %
B
E
A
U
T
Y
1
4
%
PORTFOLIO
BRANDS
BABY 17%
H
Y
G
I
E
N
E
5
2
%
Portfolio Brands also includes Devon King’s and Mamador which are not included in PZ Cussons Group revenue as they form part of the PZ Wilmar Joint Venture and are
therefore equity accounted.
Percentages on chart represent % of FY22 Group revenue
08
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR BUSINESS MODEL
WE BUILD BRANDS WHICH
ENABLES US TO CREATE
VALUE FOR ALL OUR
STAKEHOLDERS.
OUR COMPETITIVE ADVANTAGE
WHAT WE DO
Our strength is in being a multi-local rather
than multi-national business, with the level
of focus, experience and dedication to our
priority markets that this brings.
We are a branded consumer
goods business.
Our brands
High-quality, trusted and
well-loved 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
TRIAL AND LOYALTY
Delight consumers through
the use of our products.
SALES AND DISTRIBUTION
Establish customer partnerships and channels
to deliver our products to wherever our
shoppers shop.
ADVERTISING AND MARKETING
Invest in multi-channel advertising and
marketing campaigns to connect with
consumers and build memorable, trusted
and well-loved brands.
Overview / Our business model
09
THE VALUE WE CREATE
Our business model creates shared,
sustainable value for all our stakeholders.
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.
For consumers
Innovative, high-quality
and trusted brands
For customers
Our retail partners and
customers benefit from
selling our leading brands
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.
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
ALL UNDERPINNED BY OUR
PURPOSE, CULTURE, VALUES,
GOVERNANCE AND ETHICS
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
10
PZ Cussons plc / Annual Report and Financial Statements 2022
INTRODUCING OUR VALUES
At PZ Cussons, we
aspire to be our BEST
BOLD
ENERGETIC
STRIVING
TOGETHER
Our ‘BEST’ Values are introduced in more detail on page 18 and
are individually referenced throughout this report.
AS INDIVIDUALS WE ARE
BOLD
FEARLESS, PIONEERING
AND PASSIONATE, OPEN
AND HONEST, TRUE TO
OURSELVES AND PROUD
OF WHO WE ARE
Strategic Report / Introducing our BEST values
11
T
R
O
P
E
R
C
I
G
E
T
A
R
T
S
12 Chief Executive’s review
16 Our story and purpose
18 Our values
20 Our markets
24 Our strategy
30 Strategy in action
38 Creating a dialogue with our
stakeholders
40 Section 172(1) statement
44 Sustainability
64 TCFD Report
72 Non-financial and sustainability
information statement
73 Key performance indicators
78 Business review
82 Financial review
84 Risk management
86 Principal risks and uncertainties
Our BOLD value in action:
WE ENGAGE WITH COURAGE
AND AUTHENTICITY
• accountability and integrity
in all we do
• reaching out and connecting,
sharing views, taking feedback
• speaking up and making a
difference
12
PZ Cussons plc / Annual Report and Financial Statements 2022
CHIEF EXECUTIVE’S REVIEW
RETURNING
THE GROUP TO
SUSTAINABLE
GROWTH.
It has been just over two years since I joined PZ Cussons, and I am proud of the progress that our
teams have made. We have established and embarked upon our new strategy with determination
and pace, refreshing our values and establishing our corporate purpose, and have made a number
of significant organisational and portfolio changes. Crucially now, alongside the delivery of a more
consistent financial performance, we have also raised our gaze, setting our sights on long-term
opportunities to ensure we can continue to create value for our stakeholders for years to come.
Our performance during FY22 was
heavily impacted by the significant
effects of input cost inflation and
the resulting impact on consumer
spending, consistent with others
operating in our sector. Within this
context, we are pleased to be able to
report a second year of good progress,
with revenue and operating profit
both higher than two years ago, prior
to the launch of our new strategy.
As Covid-19 restrictions eased, we
were finally able to travel to visit our
markets, meeting customers, partners
and consumers around the world.
I also met many of our colleagues in
person for the first time and, on behalf
of the Board, I would like to thank the
PZ Cussons team for their continued
hard work and dedication.
Our response to the ongoing
macro challenges
Along with the wider consumer
goods industry, we have experienced
a number of challenges, with supply
chains still fragile from Covid-19
being further impacted by the war
in Ukraine. We have seen record
levels of inflation across a number
of raw materials and spikes in the
cost of freight and other logistics.
As expected, a further consequence
in recent months has been a squeeze
on household budgets in various
parts of the world.
Whilst we primarily operate in
categories that are non-discretionary,
we are working hard to ensure we
continue to offer the best possible
value for consumers. To that end, and
given the challenging backdrop for
input costs, our response has been
focused on three areas:
• Working hard to reduce costs that
the consumer does not see or
value such as optimising logistics,
maximising procurement savings
and reducing overheads;
• Revenue Growth Management
activity such as optimising trade
investment, and managing our
portfolio of product formats, their
pricing and associated promotional
activity and channel mix; and
• Investing in the business to achieve
long-term savings, particularly in
our supply chain. During the year we
began the process of re-locating our
procurement function to improve
performance, and over the medium
term we will reconfigure our supply
chain to maximise efficiency.
Our strategic progress: Building
brands for life. Today and for future
generations.
In March 2021, we set out our new
strategy: ‘Building brands for life.
Today and for future generations.’
We have defined where we will play;
focusing on the core categories of
Hygiene, Baby and Beauty, in our
four priority markets of the UK, ANZ,
Indonesia and Nigeria, with a particular
focus on our Must Win Brands, using
the ‘PZ Cussons Growth Wheel’ as our
repeatable model for execution.
Strategic Report / Chief Executive’s review
13
VISITING COLLEAGUES AND CUSTOMERS AGAIN
As travel restrictions eased following
the Covid-19 pandemic, we were
able to visit our teams, customers
and other stakeholders around the
world once again. For a number of
our colleagues who have joined the
business during lock-down, this was
an opportunity to meet in person for
the first time.
INCREASED BRAND INVESTMENT
BEAUTY ONLINE % OF REVENUE:
+69%
(VS. FY20, MUST WIN BRANDS)
>30%
NEARLY 3/4
OF PLASTICS USAGE IS NOW
RECYCLABLE, RE-USABLE
OR COMPOSTABLE
Underpinning this strategy, our growth
will be enabled by strengthening our
approach to capabilities, talent and
leadership, culture and sustainability.
Running through everything we do is a
drive to dramatically reduce complexity
across our business.
Our long-term opportunities
We see significant potential for long
term growth, in both our existing
four priority markets, and beyond,
including the US where we have a
strong Beauty business.
In Nigeria and Indonesia, Cussons Baby
is a leading brand in Baby personal care,
and these two markets are expected
to grow by c.11% a year between
2021 to 20261. This in part reflects the
strong birth rates, with approximately
12 million babies born annually in
Nigeria and Indonesia combined,
making the markets the third and fifth
fastest growing markets globally on
this basis.
More broadly in Nigeria, the population
is anticipated to reach 400 million
by 20502, making it the third most
populous country in the world. With a
number of leading brand positions, and
a strong understanding of the market,
we are well placed to benefit from
longer term growth.
Elsewhere, while the markets of
Australia and the UK are more
developed, there remain significant
opportunities to maximise the
potential of our brands, growing
penetration of existing categories and
expanding into further adjacencies
where our brands have a right to
win. Morning Fresh and Carex, our
largest brands in these two markets
respectively, are clear leaders of their
categories, and have further increased
their market shares during the year.
Both have capacity for further product
expansion over time, leveraging their
existing brand equity.
“The good progress already made in addressing our legacy
issues has strengthened the foundations of our business,
from which we can now begin to transform.”
Jonathan Myers
Chief Executive Officer
More broadly, we see opportunity to
grow our brands outside of their home
markets through the use of our own
distribution networks as well as that
of third-party distributors. Imperial
Leather already generates around
40% of its revenue outside of the UK,
where it grew revenue nearly 30% in
part due to innovation-driven share
gains in Kenya. Carex was re-launched
in Nigeria during the year and is quickly
establishing itself as an important
player in the hand hygiene category.
Looking further out, we see exciting
opportunities for the expansion of
Childs Farm, and are well progressed
with plans here, having already made
a number of operational changes
following the acquisition in March 2022.
FURTHER READING
See more on Building brands
for life / Page 24
See our new Strategy in action /
Page 30
See more on Leaders at all levels /
Page 28
See more on Sustainability / Page 44
1 PZ Cussons estimates based upon Euromonitor. Category defined as ‘Baby and Child-specific Products’. Growth rate cited represents the two markets combined
2 Statista
14
PZ Cussons plc / Annual Report and Financial Statements 2022
CHIEF EXECUTIVE’S REVIEW CONTINUED
“PZ Cussons has delivered a resilient performance over the past
year, against the backdrop of challenging conditions in our markets.
We have achieved this through our strategy to invest in our brands,
focusing on the core categories of Hygiene, Baby and Beauty, while
significantly raising the bar on the way we operate.”
Jonathan Myers
Chief Executive Officer
Our Beauty brands also benefit from
structural tailwinds, with strong
category performance driven by
growth in online sales and increasing
demand for ‘self-care’ products. Over
30% of Beauty revenue was generated
online in FY22 as we strengthen our
offerings with key partners.
Our ability to capture these
opportunities stems from our unique
positioning as a ‘multi-local’ player.
We have the centralised support
and know-how to expand our brands
internationally, but we are also agile
in our decision-making, and adept
at forging strong relationships
with our local customers. Finally,
sustainability is an increasingly
important consideration for both
consumers and our customers, and
we believe that our competitiveness
will strengthen, over time, as our
businesses successively attain B Corp
accreditation: clear evidence to our
stakeholders of our products reaching
the highest standards.
Our Strategic Progress in FY22
Throughout the year, we made good
progress across the key areas of our
strategy:
Build Brands
Our primary strategic focus has been
on building brands, investing in their
long-term equity to drive awareness
and consumer loyalty. There have
been a number of major campaigns
focused upon our Must Win Brands,
including Carex, Original Source,
Premier, and Sanctuary Spa, across
TV and digital media, with several
returning to TV commercials for
the first time in a number of years.
Overall, our Brand Investment in
Must Win Brands is up nearly 70%
compared to FY20. This has been
funded by a reduction in investment
in Portfolio brands, as well as
improved efficiency of the spend.
Carex’s ‘Life’s a Handful’ campaign
for example saw double the typical
return on investment, as measured by
revenue per £ of marketing spend.
We also welcomed Childs Farm to our
stable of Must Win Brands, following
the acquisition of the business in
March 2022. Childs Farm is a leader
in baby and child personal care in the
UK and is highly complementary to
our strategic focus behind the core
categories of Baby and Hygiene.
We see opportunities to leverage
our brand building capabilities to
strengthen its position in the UK
market and to unlock potential
internationally.
Serve Consumers
Serving consumers is about winning
where the shopper shops. To that end,
we have for example driven significant
share gains in e-commerce. In
Australia, our dedicated e-commerce
team has sought to replicate their
in-store market share strength online,
working to enrich our data, improving
our ‘virtual shelf’ and optimising
activation and promotions. As a result,
we have seen our online share for
Rafferty’s Garden overtake our offline
share. Also in Australia, an expanded
product portfolio has allowed for
increased listings of Morning Fresh,
resulting in increased share of shelf
and, ultimately, greater overall
market share.
In Nigeria, we have been transforming
our route-to-market capabilities,
differentiating by region and channel,
to improve overall distribution and
customer service levels, in turn
growing consumer penetration. We
have more than doubled the numbers
of grocery stores in which we are
present over the last year and have
significantly improved key metrics of
distribution efficiency.
Reduce Complexity
Reducing complexity helps reduce risk
in our business, and allows our teams to
focus their time, efforts, and resources
on driving the business forward.
A major part of our overall focus has
been in Nigeria where, in addition
to route-to-market improvements,
including the consolidation of
suppliers and distribution centres,
we are simplifying our portfolio with
the sale of residential properties.
A project to improve the efficiency
of our usage of our SAP system is
underway, and we expect to begin to
see the benefits of this from FY23.
For further information on our Nigeria
Simplification project, see note 3 of
the financial statements
In the UK, we have consolidated
our marketing agencies from over
70 to fewer than 20 and as part of
the successful relaunch of Imperial
Leather we have significantly reduced
the number of SKUs, improving supply
chain efficiency and profitability.
Develop People
Through the course of FY22 we
created a number of new leadership
roles, including Chief Marketing
Transformation Officer, Managing
Director – New Business Development
and Chief Sustainability Officer. These,
and other leadership roles, have been
filled by both hiring individuals from
leading consumer goods companies,
allowing us to incorporate strong,
relevant industry experience, as well
as internal promotions.
During the year, informed by a group
of employee ‘culture ambassadors’,
internal focus groups and our annual
engagement survey, we refreshed
our corporate values, and distilled
our culture and ways of working,
now and in the future, into four BEST
values: Bold, Energetic, Striving and
Together.
Strategic Report / Chief Executive’s review
15
Childs Farm
We were also pleased that Childs Farm became
a B Corp in July 2022, which is an outstanding
achievement for the entire Childs Farm team,
and something the broader business will now
learn from as we continue to pursue B Corp
certification for each of our business units.
These initiatives have been well
received by employees and we
will continue to embed them
throughout FY23.
Grow Sustainably
Our investment in sustainability
is driven in large part by growing
consumer demand for greener
products which presents clear
commercial opportunities for us.
More sustainable products have been
a feature of our performance in FY22.
In particular, refill pouches that allow
consumers to refill bottles and which
typically lead to a reduction in plastic
of at least 75%, have been rolled out
across a number of brands. These
include Morning Fresh in Australia,
and Carex and Charles Worthington
in the UK. In the case of Carex,
our refill products now represent
approximately 10% of the value sales
of the liquid hand wash category in
the UK, making sales of refills alone
larger than our closest competitor.
Overall, 74.4% of our plastic is now
recyclable, re-usable, or compostable.
We were also pleased that Childs Farm
became B Corp certified in July 2022,
which is an outstanding achievement
for the entire Childs Farm team, and
something the broader business will
now learn from as we continue to
pursue B Corp certification for each of
our business units.
There is more that we need to do to
strengthen the business, but we have
made good progress in addressing
our legacy issues. Our focus now
turns to the future opportunities we
see, as we move from Turnaround to
Transformation.
Outlook
Notwithstanding the significant
challenges related to cost inflation and
consumer spending, which will remain
uncertain over the coming months, we
expect to deliver FY23 results in line
with current consensus estimates.
Reflecting FY22 comparatives, and the
phasing of cost inflation and forward
purchasing cover, we expect that the
adjusted operating profit margin will
be weighted towards H2. We expect
to make investments of approximately
£20 million over FY22-25 which will
support the continuing transformation
of the business and will be in part
funded by further disposals of non-
core assets. We expect these to be
accounted for as adjusting items.
Longer term, the actions we have
been taking and the investments we
will continue to make, will build a
higher growth, higher margin, simpler
and more sustainable business.
Specifically, we are increasing our
LFL revenue growth ambition to
mid-single digit growth (compared to
low-mid single digit growth previously)
and maintaining our ambition for
adjusted operating profit margins in
the mid-teens.
‘Better for All’: our ESG framework
We recognise that issues such as
climate change, plastic pollution and
inequality pose potential risks to
our business, and that we must take
action, both in mitigating their effects,
as well as reducing our contribution
to these issues. Accordingly, in
September 2021 we welcomed our
first Chief Sustainability Officer to the
Company. Since then, we have been
focusing on ensuring that the way
in which we manage, monitor and
improve our environmental, social
and governance (ESG) impacts aligns
to our purpose and delivers better
results for everyone.
Specifically, we have three focus areas
which align to our corporate purpose:
‘For Everyone’ (our impact on people),
‘For Life’ (our environmental impact),
and ‘For Good’ (how we behave as
a business).
We will announce our new
sustainability goals, based upon
this framework, in more detail in our
Sustainability Report on page 44. The
goals are intended to be stretching
enough that we can demonstrate
real progress to our partners and
stakeholders, but also to reflect where
we are today, and the progress we
have already made in many of these
areas. Key environmental goals will
include:
• Net zero emissions by 2045, with
carbon neutrality in operations
by 2025;
• Packaging sustainability: A one third
reduction in virgin plastics by 2030,
and ensuring packaging is 100%
recyclable, refillable or compostable
by 2030; and
• 30% reduction in water intensity
by 2030.
Summary
In summary, we have had a
second year of strategic progress,
addressing our legacy issues and
delivering a more consistent financial
performance. There is undoubtedly
more to be done however as we
move from Turnaround to
Transformation and we remain
excited to build towards a higher
growth, higher margin, simpler and
more sustainable business.
Jonathan Myers
Chief Executive Officer
28 September 2022
16
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR STORY AND PURPOSE
At PZ Cussons we enjoy a rich heritage
dating back over nearly 140 years. Our story
is one of strong growth, built on family values
that have guided generations, as the Company
has expanded around the world, to do the
right thing.
PZ Cussons began in Sierra Leone, West Africa,
in 1884, when founders George Paterson and
George Zochonis began trading commodities
with the UK. Nearly a century later, in 1975,
the firm they founded acquired the equally
illustrious Cussons Group, creating the
PZ Cussons we know today.
We believe in our Purpose
Over all those years we’ve grown to become
an international consumer goods group –
home to some of the world’s best loved and
most trusted brands. The bold spirit, pioneering
energy and entrepreneurship of our founders,
combined with strong beliefs about how best
to do business and a love of learning, are still
at the very core of who we are.
PZ Cussons products have found a place in
millions of households for generations. It’s a
legacy that makes us both humble and proud.
We champion the wellbeing of our consumers: people, families
and communities everywhere.
We protect the vitality of life, prevent harm and eliminate waste.
When? Now and for generations to come.
Why? Because we strive always to uphold the highest standards.
And because it’s the right thing to do.
Strategic Report / Our story and purpose
17
Our duty now is to build on these firm foundations,
to ensure PZ Cussons is fit for the 2020s and beyond.
Our world faces challenges that our founders could
never have imagined, but which we must rise together
to meet if we’re to leave a better business – and planet
– for those that come after.
That’s why we work together with communities,
investors and our supply chain to continually improve
environmental standards and ethical performance,
to prevent harm, protect life and eliminate waste.
Because it’s the right thing to do, and because it’s
what the consumers of tomorrow will choose.
We know that delighting consumers is fundamental
to this. Everywhere our products and brands touch
people’s lives, from the USA to Europe, Africa to
Asia Pacific, we strive to understand, to support,
to empower. We know that to grow sustainably,
we must strive to be a force for positive change.
EVERYWHEREGENERATIONSDO THE RIGHT THINGWELLBEING 18
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR VALUES
THIS YEAR WE REDEFINED OUR VALUES
IN DISCUSSION WITH – AND FOR –
EVERYONE WORKING AT PZ CUSSONS.
We are clear that our culture is a
critical enabler of our PZ Cussons
purpose and strategy and employee
engagement is a priority.
With support from a group of employee ‘culture ambassadors’
and via focus groups, our annual engagement survey and team
discussions across our business, we distilled our culture and
ways of working, now and in the future, into four BEST values:
PZ Cussons people aspire to be our BEST
AS INDIVIDUALS WE ARE
IN OUR TEAMS WE ARE
AS A BUSINESS WE ARE
OUR SHARED CULTURE BRINGS US
BOLD
ENERGETIC
STRIVING
TOGETHER
FEARLESS, PIONEERING AND
PASSIONATE, OPEN AND HONEST,
TRUE TO OURSELVES AND PROUD
OF WHO WE ARE
DYNAMIC AND PROACTIVE,
CAPABLE AND FLEXIBLE,
EMBRACING CHANGE AND
MOVING FAST INTO THE FUTURE
RAISING THE BAR, PUSHING
PERFORMANCE, AIMING HIGH
AND ACHIEVING MORE
ONE FAMILY, MANY VOICES;
SUPPORTED, INCLUDED, RESPECTFUL,
EMPOWERED, AND WITH JOY IN WHAT
WE DO
See our Values in action / Bold, page 11,
Energetic, page 95, Striving, page 151
and Together, page 244
Read more about our Board’s involvement in the
development of our Values / Page 99
Strategic Report / Our values
19
BEST GLOBAL LAUNCH EVENT 2021
All employees were invited to join the
conversation. We ran a global launch event
and multi-channel communication campaign
spearheaded by our Executive Leadership
Team with support from the Board.
Our ‘leaders at all levels’ management
development programme also launched in
sequence and set the tone for what was to
follow, with the campaign closely aligned to
strategic updates in our bimonthly global
Town Halls.
PZ Cussons business units were then
empowered to bring our BEST values to life
in their own way, and our teams created
huge energy locally with their storytelling
activities and campaigns and continue to
do so. Even the most light-hearted activity
contributed to ensuring that everyone
joined the conversation and understands
the part they play in setting the right
culture at PZ Cussons.
Results are in: Global Engagement Survey 2022
We maintained our overall ‘employee engagement score’ at 72% despite the ongoing
challenges posed by the Covid-19 pandemic. Thanks to sustained effort from all of our
teams, we also made big gains in questions relating to accountability and commitment,
for example 88% of respondents agreed that we hold ourselves and our team members
accountable for results (+9 benchmark) and 74% of respondents said they believe action
will take place as a result of the global engagement survey (+15 benchmark).
Participation
rate
93%
I understand what I am
responsible for and what
is expected of me
I know how my work
contributes to the goals
of PZ Cussons
I am aware of our
BEST values
94%
93%
92%
Survey run by Culture Amp. Benchmark Consumer Goods and Services 2022.
93% participation rate (2,515 out of 2,699 employees globally).
Watch our Values video /
www.pzcussons.com/careers-home/
20
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR MARKETS
OUR PORTFOLIO
IS BALANCED
ACROSS DEVELOPED
AND EMERGING
MARKETS
WITH FOUR PRIORITY MARKETS
REPRESENTING THE MAJORITY
OF OUR BUSINESS
Our priority markets are:
UK Nigeria Indonesia ANZ
THESE FOUR PRIORITY MARKETS ARE HOME TO MOST OF OUR MUST WIN BRANDS,
WHILE ST. TROPEZ IS THE LEADING PREMIUM TANNING BRAND IN THE US.
We have many years of experience operating in these markets. We seek to
harness our local knowledge and customer relationships as we compete
against global competitors, while leveraging our global capabilities,
efficiencies and best practice as we compete against domestic operators.
MULTI-LOCAL
Most of our brands are considered
‘local heroes’: they are often leaders in
their respective categories, and generate
the majority of their revenue in their
‘home’ market.
We view our business not as multi-national,
but as multi-local, and our strategy focuses
on the strong base in these four priority
markets.
Strategic Report / Our markets
21
Focus on: The Baby Category in Indonesia and Nigeria
NIGERIA AND INDONESIA ARE AMONG
THE MOST ATTRACTIVE BABY MARKETS
IN THE WORLD, RANKING 3RD AND 5TH
RESPECTIVELY FOR THE NUMBER OF
ANNUAL BIRTHS.
Combined, there are 12 million babies born
annually in the two markets, which is nearly
three times the amount born in the US. The
Baby personal care category is expected to grow
7.6% over the period 2021–2026 in Nigeria, and
11.9% in Indonesia, driven by a combination of
population growth and increased wealth.
We are well-placed to take advantage of these
attractive market trends, with leading positions
through our Cussons Baby brand.
Nigeria and Indonesia markets
in numbers
3rd & 5th
Ranked globally for annual births
+12m
Babies born a year in total across Nigeria
and Indonesia
Indonesia total Baby market forecast
to be worth
>£500m
in 2026
Nigeria expected to reach a population of
400m
by 2050, making it the world’s third most
populous country after China and India
Sources:
Population and birth rates data from Statista and
worldpopulationview.com
Market size and growth rates are PZ Cussons estimates
based upon Euromonitor data.
7.6%
CAGR
2021–2026 market
growth in Baby
personal care
category
11.9%
CAGR
2021–2026 market
growth in Baby
personal care
category
Global births (m) and birth rates (%)
India
China
26.3m
1.9%
17.5m
1.2%
Nigeria
7.6m
3.5%
Pakistan
5.0m
1.2%
Indonesia
4.4m
1.6%
US
UK
4.2m
1.2%
0.8m
1.2%
22
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR MARKETS
OUR STRATEGY IS CENTRED AROUND
THREE CATEGORIES: HYGIENE, BABY
AND BEAUTY, EACH WITH ATTRACTIVE
UNDERLYING DRIVERS.
Consumer awareness of the link between
hygiene, wellness and health has grown
over the long-term and has accelerated
as a result of the Covid-19 pandemic.
In particular, aspects of hand hygiene
have risen in importance, driving
consumer demand for ‘on the go’
hand sanitisers, for example.
The global market for Baby personal care
products is attractive. In some markets
this is driven by strong birth rate growth,
and in others by growing wealth and
improved awareness of the products
available, creating opportunities for
premiumisation.
The Beauty market has been impacted
by Covid-19-related lockdowns since
the beginning of 2020, but has for many
years enjoyed a number of favourable
underlying trends. These include the
increased importance many consumers
place on physical appearance in an age of
social media and digital photography, as
well as the growth in disposable income,
particularly among women, who are
typically the primary consumers of
Beauty products.
Addressing the short-term market challenges
WHILE WE SEE STRONG UNDERLYING, STRUCTURAL TRENDS SUPPORTING OUR BUSINESSES, WE, ALONG WITH THE WIDER
CONSUMER GOODS INDUSTRY, HAVE EXPERIENCED A NUMBER OF CHALLENGES OVER THE LAST YEAR.
Supply chains have been difficult for many months,
with a combination of Covid-19 and, as it relates to
the UK, Brexit, typically considered to be key drivers
of the delays and increased costs in transporting
goods around the world. Added to this, the war in
Ukraine has put further pressure on global supply
of commodities and other ingredients.
The knock-on impact of these increases in global prices
is being felt by the consumer. In the UK, for example,
consumers are experiencing a significant increase in
energy prices, as well as other non-discretionary items
such as their mortgage rates and food costs.
WE HAVE BEEN FOCUSED ON THREE PRIMARY ACTIONS TO ADDRESS THESE CHALLENGES
Removing costs that the
consumer doesn’t value
through activities such
as logistics optimisation,
procurement, or reducing
back office inefficiencies.
Investing to make cost savings
for the long term, such as
improving the efficiency of
our factories.
Driving revenue growth
management such as
optimising trade terms,
and ensuring our portfolio
of product formats, and
their prices, are appropriate.
HYGIENEBABYBEAUTY Strategic Report / Our markets
23
Macro drivers
OUR STRATEGY IS INFORMED BY A NUMBER OF SIGNIFICANT CONSUMER AND MACRO-ECONOMIC TRENDS WHICH IMPACT
ACROSS CATEGORIES.
We continue to see long-term
potential in many emerging
markets. Nigeria is, for example,
a market where the population
is expected to double by 2050,
making it the world’s third most
populous country after China
and India.
Our geographic footprint, with
approximately half our revenue
derived from emerging markets,
and the strength of our brands
in these markets, leaves us well-
placed to benefit from these
opportunities.
Across the world, consumers are
demanding ever higher standards
of the brands they purchase, and
of the companies which own those
brands. Consumers increasingly
seek reassurance that the
ingredients used in products are
ethically sourced, free from harsh
chemicals or those that are bad for
the environment, and to know that
products have not been tested on
animals. They are also more alert
to the type of packaging being
used, with virgin plastic replaced by
recycled or recyclable materials.
We are working hard to address
the demands as evidenced by
our sustainability targets,
as well as our commitments
to B Corp certification.
Across a number of our markets,
we are seeing changes to the
way in which shoppers shop. The
pandemic, for example, drove a
significant number of consumers
to purchase online, and we are also
witnessing a shift in channels in
both Nigeria and Indonesia, where
consumers are moving towards
supermarkets and modern retail,
away from the legacy of markets
and traditional trade.
These shifts provide opportunities.
In 2022, we have continued to
increase our revenue from online,
with Beauty online revenue now
over 30% of total Beauty revenue.
We have also begun to execute a
significant change in our route to
market approach in Nigeria.
For more work on our sustainability / Pages 44-71
SUSTAINABILITYEMERGING MARKET CONSUMPTION CHANNEL DISRUPTION – WIN WHERE THE SHOPPER SHOPS 24
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR STRATEGY
WE ARE BUILDING BRANDS TO SERVE
CONSUMERS BETTER, WITH HYGIENE,
BABY AND BEAUTY AT OUR CORE.
OVERVIEW
In March 2021, we set out our new
strategy: ‘Building brands for life.
Today and for future generations.’
We have defined where we
will play, focusing on the core
categories of Hygiene, Baby
and Beauty, in our four priority
markets of the UK, ANZ, Indonesia
and Nigeria, with a particular focus
on our Must Win Brands, using the
PZ Cussons Growth Wheel as our
repeatable model for execution.
Underpinning this strategy,
our growth will be enabled by
strengthening our approach to
sustainability, culture, leadership
and capabilities. Running through
everything we do is a drive to
dramatically reduce complexity
across our business.
WHERE TO PLAY
HOW TO WIN
t y
Shopp a b il i
Growth Wheel
M
e
m
o
r
a
bility
a
r
A t t
Con
s
u
m
a
b
i
l
i
t
y
s
c tivenes
FOCUS ON
LEADING BRANDS
IN PRIORITY
MARKETS
OUR PROGRESS
Our journey is centred around three phases:
TURNAROUND
Fixing the core of
the business
TRANSFORMATION
Building capabilities and
growing from the core
UNLOCK FULL POTENTIAL
Expanding from the core and
growing sustainably
Our strategy can be summarised in 10 words:
BUILD
BRANDS
SERVE
CONSUMERS
REDUCE
COMPLEXITY
DEVELOP
PEOPLE
GROW
SUSTAINABLY
AMBITION OF MID-SINGLE-DIGIT REVENUE GROWTH AND MID-TEENS MARGINSDRAMATICALLY REDUCE COMPLEXITY AND ENABLE TRANSFORMATIONSUSTAINABILITYLEADERSHIPCULTURECAPABILITIES
Strategic Report / Our strategy
25
BUILD
BRANDS
Following strong growth driven by the Covid-19
pandemic, we have sought to strengthen Carex’s
leadership position, appealing to both the functional
and emotional aspects of the consumer purchase
process. Functionally, New Product Development
has been centred around the ‘2 hour protection’
innovation, clearly highlighting Carex’s advantages
compared to its competitors.
This is particularly important in a category with
strong private label prevalence. At the same time,
we have appealed to the emotional side, with a new
‘Through the Line’ (seeking both consumer reach
and targeted conversion) marketing campaign:
‘Life’s a handful’. This campaign, which was carefully
integrated across both TV and digital, has driven
strong awareness, with improved Top of Mind
awareness and Consideration scores.
BUILDING THE
CHILDS FARM
BRAND
In March 2022, we acquired Childs Farm a leader in
baby and child personal care in the UK. Product lines
include bath and shower, skincare and haircare, and
are all anchored in a natural proposition and suitable
for sensitive skin. We have taken a 92% stake in
the company, with the founder, Joanna Jensen,
continuing as a shareholder and a
champion of the brand.
Childs Farm has grown rapidly since it started
trading in 2011, at highly attractive gross margins,
and has established very strong sustainability
credentials, through its cruelty-free and vegan
products. In July 2022, Childs Farm was awarded
B Corp certification.
The Childs Farm brand is highly complementary
to our core categories of Baby and Hygiene, and
we will, over time, leverage our brand-building
capabilities to improve its UK leadership position,
while also seeking to capture its significant
international potential.
We are making good progress incorporating the
brand in to PZ Cussons, and over time we expect
to see benefits through shared costs and expertise,
particularly in areas of digital, marketing, supply
chain and support functions.
26
PZ Cussons plc / Annual Report and Financial Statements 2022
SERVE
CONSUMERS
SERVING CONSUMERS BETTER
MEANS WINNING WHERE
THE SHOPPER SHOPS.
To that end, we have driven significant share gains in
e-commerce. In Australia, our dedicated e-commerce
team have sought to replicate their in-store market
share strength, online. We have worked to enrich our
data, with virtual shelf basics, optimising activation and
promotions. In the case of Rafferty’s Garden, one of our
larger portfolio brands, online share is now ahead of the
offline business, while Morning Fresh and Radiant have
similarly seen a step-change in share.
Rafferty’s Garden has also better served consumers
through expanding its product range, which now
includes new wet food pouch flavours and snack
products, and a bread sticks collaboration with
one of Australia’s most iconic brands, Vegemite.
% Market Share
35
31.6
31.6
33
31
29
27
34.2
32.4
+1.8
33.0
31.3
Nov
Dec
Jan
Feb Mar
Apr May
Jun
Jul
In-store
Online
Sources:
Market share data from Nielsen and IRI
Strategic Report / Our strategy
27
REDUCE
COMPLEXITY
ACROSS THE BUSINESS, WE HAVE SOUGHT TO
SIMPLIFY MANY OF OUR OPERATIONS.
Reducing complexity helps reduce risk and improve
resilience in our business, and allows our teams to
focus their time, efforts and resources on driving
the business forward.
In the UK, we have consolidated our marketing
agencies from over 70, to fewer than 20. While
aggregated marketing spend is broadly unchanged,
working with fewer agencies in this way allows them
to partner with us more efficiently, helping drive
better returns on our marketing expenditure.
Across our IT infrastructure, we have decommissioned
over 60 servers which had become redundant resulting
in significant cost and energy savings.
We have also begun the work to move towards a
UK-based shared service model for procurement. This
will significantly enhance our purchasing capabilities,
while at the same time reducing complexity in our
processes and operations. Over time, we see further
opportunity for ‘near-shoring’ of certain activities.
The simplification of our Nigeria business has been
a major component for our broader drive to reduce
complexity. For more information on this, see below.
Nigeria simplification
A major area of focus has been the simplification
of our business in Nigeria where there is currently
unnecessary complexity, given its scale. Greater
simplification will improve our business processes,
allowing our teams to focus on what they do best,
while also reducing risk and delivering efficiencies.
We have already made good progress in
simplifying our business:
• During the year we realised gross proceeds
of £18.4 million through the sale of
residential properties.
• We consolidated our supplier base,
approximately halving the total number
of suppliers serving us.
£18.4m
Gross proceeds
from the sale of Nigerian
residential properties
26 to 3
Reduction
in Distribution
Centres in Nigeria
• We reduced the number of distribution centres
from 26 to 3, allowing us to improve working
capital, and improved delivery times and
customer service rates.
• We merged together a number of legal entities,
reducing administrative burden.
Looking ahead, we see further opportunities to
simplify, and unlock value from this important part
of the PZ Cussons business. A project to improve
the efficiency of our usage of SAP is underway,
and we expect to begin to see benefits to our
processes from FY23.
Read more / Page 190
28
PZ Cussons plc / Annual Report and Financial Statements 2022
DEVELOP
PEOPLE
WE HAVE CONTINUED TO STRENGTHEN
OUR LEADERSHIP TEAM.
Through the course of FY22 we successfully recruited
for a number of newly created roles, including Chief
Marketing Transformation Officer, Managing Director
New Business Development, and Chief Sustainability
Officer. There has also been significant change below
the Executive Leadership level, with a number of
Group functions such as Finance, Legal, Governance
and Compliance and HR significantly strengthened.
In addition, we have also sought to promote from
within, including the appointment of new Managing
Directors in our ANZ and UK businesses.
A key part of our turnaround has been to ensure
we have the right processes and systems in place to
support us in the development of our people and
in creating high-performing teams. Focus in 2022
has centred on the launch of a new people system:
Workday. This platform gives us the ability to access
transparent and accurate people data and insights,
in real-time, to better support our teams, while
providing for simplified, standardised, global
HR processes.
During the year, building on our renewed Purpose,
we established new Corporate Values: ‘BEST’.
Read more about these and how our teams arrived at
these Values / Pages 18-19
Talent – Leaders at all levels
At the heart of our talent strategy is disciplined
talent management across all parts of PZ Cussons,
aimed at defining, finding, nurturing and moving
talent for the benefit of our people and our business.
Founded on our Workday system, we have launched
Performance Goals and Feedback to support our
move to a high-performance culture.
We continue to invest in building the future
leadership capability needed to return the business
to sustainable, profitable revenue growth and
nurture a high-engagement, high-performance
culture. In FY22 we delivered two leadership
programmes for leaders in all our businesses and
at all levels: Purposeful Leadership (tied to the
launch of our purpose and values), and Our BEST
Performance (focused on the fundamentals of
great performance management). The programme
will continue in FY23. In addition to this, our
Non-Executive Directors support our leadership
programme by each mentoring high potential
colleagues in the business.
Strategic Report / Our strategy
29
GROW
SUSTAINABLY
GROWING WITH SUSTAINABILITY IN MIND
IS KEY TO OUR PLANS, AND WE ARE PROUD
TO BE MAKING GOOD PROGRESS TOWARDS
B CORP CERTIFICATION.
It is important that as a business we grow sustainably.
This work is becoming a business imperative, and
brands’ sustainability credentials are, in many parts
of the world, increasingly important to the consumer
proposition and indeed the corporate brand.
We are therefore pleased to be making good
progress in this regard, driving improvements in
packaging, using better ingredients, and encouraging
consumers to purchase more sustainable products
and formats such as refills. Carex refills for example
now represents approximately 10% of the value sales
of the Liquid Hand Wash category in the UK, with over
3 million shoppers using the product. This means that
Carex refills alone are larger than the next biggest
competitor in the category. Each pack has around 85%
less plastic, equating to around 625 tonnes saved a
year. Overall across the Group, 74.4% of our plastic is
now recyclable, re-usable, or compostable. Elsewhere,
St. Tropez has also driven a number of initiatives. Its
Self Tan Mousse packaging for example now includes
30% Post Consumer Recycled (PCR) resin, and it is
the first beauty brand to include 40% PCR in its
non-aerosol foamer pumps.
Read more about our progress in this important area, as well
as our new sustainability targets, in our expanded ESG and
TCFD report / Page 44
30
PZ Cussons plc / Annual Report and Financial Statements 2022
STRATEGY IN ACTION
Shoppability
t y
Shopp a b il i
Con
s
u
m
a
b
i
l
i
t
y
Growth Wheel
M
e
m
o
r
a
c tiveness
a
r
t
A t
bility
SHOPPABILITY MEANS:
Win where
the shopper
shops
Multi-channel
distribution
Market-leading
execution in
store
Accelerate
e-commerce
Strategic Report / Strategy in action
31
Expanded into >300 more stores
across the US, including Ulta in
Target and Sephora in Kohls
Improved share of shelf
Best-in-class within homecare
aisle and digital shelves
Outstanding execution
of major promotions
Growth in customers
and distribution points
through removal of
exclusivity arrangements
32
PZ Cussons plc / Annual Report and Financial Statements 2022
STRATEGY IN ACTION
Consumability
t y
Shopp a b il i
Con
s
u
m
a
b
i
l
i
t
y
M
e
m
o
r
a
bility
Growth Wheel
c tiveness
a
r
t
A t
CONSUMABILITY MEANS:
Assortment
covers target
consumers
and trends
Innovation
breaks down
barriers to
trial
Product range
delivers on
usage needs
and occasions
Launch of ‘I’m Plant Based’,
capturing growing trend
towards sustainability and
natural ingredients
Read more about Original Source on our website /
www.pzcussons.com/investornews
Healthy and Happy Bathing with
Strategic Report / Strategy in action
33
The first Baby liquid
soap from Cussons
Baby, with new formula
which is clinically tested
and safe for baby.
Specially formulated to
cleanse and nourish baby
skin completely. Fragrance
innovations “Moodscents”
which helps to stimulate
positive moods for baby.
34
PZ Cussons plc / Annual Report and Financial Statements 2022
STRATEGY IN ACTION
Attractiveness
t y
Shopp a b il i
Con
s
u
m
a
b
i
l
i
t
y
M
e
m
o
r
a
bility
Growth Wheel
c tiveness
a
r
t
A t
ATTRACTIVENESS MEANS:
Competitive
offering for
consumers
Revenue
Growth
Management
Value
created with
customers and
distributors
Good,
Better,
Best portfolios
Multiple pricing increases
throughout the year
Product mix shift towards
medicated soaps
Read more about Premier on our website /
www.pzcussons.com/investornews
Strategic Report / Strategy in action
35
Portfolio re-alignment to
strengthen price differentiation
across the range, from Instant
Glow to Luxe
36
PZ Cussons plc / Annual Report and Financial Statements 2022
STRATEGY IN ACTION
Memorability
t y
Shopp a b il i
Con
s
u
m
a
b
i
l
i
t
y
M
e
m
o
r
a
bility
Growth Wheel
c tiveness
a
r
t
A t
MEMORABILITY MEANS:
Digital first
Effective
activation
Consistent
execution
Distinctive and
purpose-led
Competitive
levels of
investment
Strategic Report / Strategy in action
37
Step-change in online market
share through increased
digital investment and focus
Read more about Rafferty’s Garden on our website /
www.pzcussons.com/investornews
‘Through the line’
marketing campaign
Read more about Carex on our website /
www.pzcussons.com/investornews
38
PZ Cussons plc / Annual Report and Financial Statements 2022
CREATING A DIALOGUE WITH OUR STAKEHOLDERS
OUR APPROACH TO DOING
BUSINESS IS FOUNDED ON
THE PRINCIPLE OF CREATING
SUSTAINABLE VALUE FOR ALL.
Link to 'our strategy in
10 words'
BUILD
BRANDS
DEVELOP
PEOPLE
GROW
SUSTAINABLY
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.
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 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.
HOW WE
ENGAGE
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 regularly review market data from
reliable third party sources to identify
and respond to changing consumer
habits so we can ‘win where the
shopper shops’.
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.
With the recent trend of inflation
and cost of living challenges, our
customers and consumers are also
extremely focused on value and so we
are doing what we can to keep costs
in check while also delivering excellent
performance from our products.
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 52.
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.
For more information on the
activities of our engagement champion
– see workforce engagement on
page 102.
The annual global engagement survey
allows us to understand the core areas
that matter to them – strategy, purpose
and values, safety and wellbeing, and
careers and learning. We have also
continued to adapt to new ways of
working as a result of the Covid-19
pandemic, and look to understand
how different working arrangements
impact our employees.
See our Strategy / Pages 24–29CUSTOMERS AND CONSUMERSEMPLOYEES Strategic Report / Creating a dialogue with our stakeholders
39
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 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 partnerships, working with them
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 where we operate.
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 engaged employees.
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. 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.
During the year, we appointed an
Investor Relations Director to further
strengthen our engagement with the
investment community.
Our investors have been focused on
how our updated strategy has been
performing across the business.
Investors continue to engage with us
on our capital allocation decisions, and
also on our approach to Environmental,
Social and Governance (ESG).
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.
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.
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 twice
yearly, reporting to the Audit & Risk
Committee.
Our communities are focused on our
ESG strategy, in particular on the
environmental impact of our products
(packaging and formulation) and our
carbon emissions.
Many of our communities also continue
to be concerned about the cost of living
and living standards as we come out
of the Covid-19 pandemic and manage
rising energy prices. We continue to
support the Foodbank in Australia, and
The PZ Cussons Nigeria Foundation
supported with the construction of a
computing centre for a school in
Agbor Delta State.
INVESTORSDISTRIBUTORS AND SUPPLIERSCOMMUNITIES 40
PZ Cussons plc / Annual Report and Financial Statements 2022
SECTION 172(1) STATEMENT
SECTION 172 STATEMENT
Section 172(1) 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.
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.
f) Acting fairly
We are conscious of the need
to balance the interests of
our different stakeholders
fairly, particularly when they
are not aligned.
Principal decisions in FY22
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 FY22, the Board
continued to receive papers
that included 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
PZ Cussons has a rich heritage
of nearly 140 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.
This was a key focus when we
set our new purpose which has
longevity and sustainability at
its core.
b) Our employees
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 our designated
employee engagement
Non-Executive Director.
Our Directors travel to our
markets when possible and
hold dedicated employee
engagement sessions on
such trips.
For more on how we engage
with our employees and
consider their interests, see
Creating a dialogue with our
stakeholders on page 38
and Sustainability – People
on page 50.
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
partners 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 38 and Sustainability –
Supply Chain on page 69.
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 have set ourselves
challenging sustainability
goals which include our
B-Corporation ambitions. We
established an ESG Committee
of the Board, and appointed
a Chief Sustainability Officer
to our Executive Leadership
Team, to ensure that our
decisions are taken with due
care for our sustainability
goals.
For more information on how
we measure our environmental
performance, see Sustainability
– For life on pages 56–71.
Strategic Report / Section 172(1) statement
41
Principal decision 1: Launching our BEST Values
Having refreshed our corporate strategy and purpose in FY21, in FY22 the Board worked with our
management team to develop a refreshed set of values to aid us on our return to sustainable profitable
revenue growth. Our ‘BEST’ values were developed internally and given careful consideration, balancing
and responding to the interests of numerous stakeholders, as set out below.
In making the decision, we considered:
The long-term
effect
Our values support our purpose and both reflect and influence our corporate culture which impacts
everything from employee engagement, ability to recruit talent at all levels, how our customers,
suppliers and consumers perceive our business, and how our shareholders relate to us. Our previous
‘CANDO’ values served the Company well for many years and the Board was very conscious of the need
to develop a refreshed set of values that would support us for the long term. The values of the Company
need to endure beyond a 3–5 year financial plan and must be flexible enough to maintain their relevance
through a range of different business priorities and macro-economic shifts. Our BEST values reflect this
and serve as an important underpin for our purpose, ‘for everyone, for life, for good’, and our strategy of
‘Building Brands For Life, today and for future generations’ both of which specifically contemplate our
desire to be an enduring part of our consumers’ lives.
Affected
stakeholder
groups
Customers and consumers
Customers and consumers are at the core of our strategy and our values reflect this commitment. Our
values focus on maintaining integrity and accountability, driving innovation, reacting with agility to changing
consumer needs and leading with ambition and an entrepreneurial attitude. All of this is with the goal of
strengthening our bonds with customers and ensuring our consumer is at the centre of everything we do.
Employees
Our business depends on our employees. Not only did the Board consider employees in developing our
values, we ensured they were at the heart of the process. The values were developed internally, led
by a team of our current and future leaders and very much reflect the voice of the employees and what
resonates with them about our strategy and what it means to work at PZ Cussons. In addition to being
developed by our employees, our BEST values were then communicated and embedded throughout
the Company by employees acting as culture ambassadors. What was important was that the values be
launched locally in each market in an authentic way that ensured they would weave into our everyday
employee experience. Through a combination of central communications, executive and Board-led
messages and local contests and celebrations, our BEST values are being embedded in the organisation.
Investors
Our investors want improved financial performance and a plan for long-term, sustainable growth of
both the top and bottom lines. Our BEST values focus on being entrepreneurial, innovative, challenging
the status quo and raising the bar on performance.
Distributors and suppliers
Our BEST values place a premium on acting with accountability and integrity, both internally and with
our distributors, suppliers and other stakeholders. With our distributors, we will focus on moving at pace
to respond to challenges and build better partnerships.
Community
In our values we are BOLD and we set ambitious targets, including in areas like sustainability where our
B-Corporation target 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. We are also TOGETHER,
honouring our family heritage and the importance we place on driving positive change in our communities.
The environmental
impact
Sustainability is at the heart of our strategy and purpose and this shines through in our BEST values,
which focus on leading innovation to adapt to a changing world and leaving a legacy we can all be
proud of. See further detail on our approach to sustainability on page 44.
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 engaged with investors and employees in a series of events to explain our BEST values
and understand their perspective.
42
PZ Cussons plc / Annual Report and Financial Statements 2022
SECTION 172(1) STATEMENT CONTINUED
Principal decision 2: Formation of ESG Committee
Recognising the importance of ESG across the whole Group and its governance, the Board established
the ESG Committee in January 2022 to oversee the Company’s ESG strategy and performance targets.
The Committee monitors performance against the ESG goals and how PZ Cussons considers, engages
with, reports to, and maintains its reputation with key stakeholders.
In forming the ESG Committee, we considered:
The long-term effect
Affected stakeholder groups
The environmental impact
Our purpose is: for everyone, for life, for good. This applies to everything we do
and the importance of doing the right thing for the business and the world around
us. As part of our strategy we want to ensure we leave the world better than we
found it.
Customers and consumers
Many of our customers increasingly understand the impact they have on the
environment and take a greater interest in how our products are made and sold.
We want to make sure that our customers are well-informed and able to consume
our products responsibly.
Employees
We have nearly 3,000 employees around the world and our people define who we
are as a business. We want our employees to believe in our purpose and live our
values. Having an ESG Committee with an effective engagement approach will
ensure our teams remain aligned.
Investors
Many investors are creating portfolios for those companies that have a strong
ESG strategy. Having clear targets and reporting against these targets helps to
demonstrate the importance we place on ESG.
Distributors and suppliers
As part of our carbon reduction targets, we need to look at our extended carbon
footprint from material extraction, manufacture of raw materials, transport,
manufacture, distribution, consumer use and disposal at end of life. This allows us
to identify pathways for carbon reduction as part of our long-term ambitions to be
carbon neutral across the entire Group.
Community
We are committed to achieving positive social change and ensuring that we
address the specific needs of the communities where we operate. Minimising
our impact on the environment is crucial to the long-term sustainability of our
communities.
A successful ESG framework and strategy will have a positive impact on the
environment – on the atmosphere through our carbon emissions and air quality
impacts; on the earth through the sourcing decisions we make and the way we
manage waste and packaging; and on the oceans through our use of water and
the impact of our products.
The impact on our reputation
and the need to act fairly
Forming the ESG Committee demonstrates our commitment to our purpose, and
enhances our reputation as a business that understands the importance of doing
the right thing.
Strategic Report / Section 172(1) statement
43
Principal decision 3: Acquisition of Childs Farm
FY22 marked our first significant acquisition since our new management team was formed. We were
excited to add an excellent new brand to our Must Win Brands and also to welcome some great new
members to our team who will help us build towards delivering our strategy.
In deciding whether to acquire Childs Farm, we considered:
The long-term effect
Affected stakeholder groups
As we announced at the time of the transaction, Childs Farm holds significant
promise for expansion and is only expected to be profit accretive from FY24. It has
a strong market following in its home market in the UK but has significant room
for growth through greater market penetration, innovation and new product
development and possible international expansion. Childs Farm also had excellent
sustainability credentials and was well on the journey towards B Corp certification
at the time of the acquisition, and successfully achieved B Corp status in July 2022.
Funding for the acquisition was also offset by proceeds from the sale of legacy
residential properties in Nigeria which reflected the Board’s commitment to
investment for growth and longevity.
Customers and consumers
One of the main reasons the Board was interested in the Childs Farm acquisition
was their focus on the consumer. Founded by Joanna Jensen in specific response
to the skin care needs of her own children, the brand has a history of being loved
and trusted by parents. The Childs Farm team also had great relationships with key
customers in the UK which were complementary to our existing business, and in
some cases will help us learn and improve going forward.
Employees
The Board considered employees in two ways when considering the Childs Farm
acquisition. Firstly, it reviewed the team at Childs Farm and concluded that we would
not just be buying a brand, but adding a team that brought some valued capabilities.
When acquiring Childs Farm we did not make any redundancies or exits a condition
of the transaction and we have engaged many of the Childs Farm team across
our wider portfolio where they are really adding value. For our existing teams, we
were conscious that the sustainability credentials of Childs Farm would be a strong
demonstration to our employees of our commitments in this area.
Investors
The Board naturally considered growth and profitability, and correspondingly,
investor returns, when determining to make the acquisition. We strongly believe in
the significant growth potential in the Childs Farm brand and the attractive returns
it can generate for investors. Childs Farm sustainability credentials also fit squarely
where our investors are leading us.
Community
Childs Farm has long been active in the communities in which it operates and shares
core values with PZ Cussons in this regard. Ranging from donations to the NHS which
aligned with similar activities of our Carex brand to their support of environmental
groups such as Surfers Against Sewage, Childs Farm shared our commitment to
having a positive impact on the communities in which we live and work.
The environmental impact
Apart from the prospect of adding sustainable, profitable revenue growth,
environmental credentials were a strong driver of our acquisition of Childs Farm.
We saw Childs Farm as a leader and innovator in plastic reduction and recycling.
The impact on our reputation
and the need to act fairly
The Board considered that the acquisition of Childs Farm would enhance our
reputation and demonstrate the strength of our commitment to our strategy
and our values.
44
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY
BETTER FOR ALL
ESG AT PZ CUSSONS
OUR ESG FRAMEWORK, BETTER FOR ALL,
ALIGNS TO OUR NEW PURPOSE:
FOR EVERYONE, FOR LIFE, FOR GOOD.
In September 2021 we welcomed our first Chief
Sustainability Officer. In the past few months we
have focused on ensuring that the way in which we
manage, monitor and improve our environmental,
social and governance (ESG) impacts aligns to our
purpose and delivers better results for everyone.
This meant developing a new way of understanding
our impacts, informed by what our stakeholders tell
us matters, setting new targets and developing new
governance structures.
We have created a shared ESG ambition for the business
that reflects local market needs and context as well as
addressing stakeholder expectations. This ambition is
informed by an analysis of our material and important
ESG issues as communicated to us by our different
stakeholder groups.
Our ESG framework, Better For All, aligns to our new
purpose: for everyone, for life, for good. Our purpose
sets out why we are here, and what we do, and our
ESG strategy will help make sure that everyone,
whatever their role in the business, understands
how they can help us to achieve it.
In 2021, we set out our ambition to certify our
businesses as B Corps by 2026. We are proud that Childs
Farm, a subsidiary of PZ Cussons, is the first of our
businesses to achieve B Corp certification, receiving this
in July 2022. Our ESG strategy will provide operational
focus and guide the business on where our efforts and
investment should be focused to help us achieve this
goal. The KPIs we set as part of the strategy will support
our B Corp certification journey and allow us to make
meaningful progress across the different dimensions
of our ESG strategy over the next five years. The B Corp
framework informs our strategy, and certification will
provide a valuable signal to stakeholders that we are
focused on the right outcomes.
We have set new ESG targets for the business and will
set more in FY23 as we continue to build our strategy.
These are designed to be stretching enough that we
can demonstrate real progress to our partners and
stakeholders, but also to reflect where we are today,
and the progress we have already made in many of
these areas.
Strategic Report / Sustainability report
45
Better For All
FOR EVERYONE
FOR LIFE
FOR GOOD
Read more / Pages 46–71
Improving consumer
awareness of responsible
consumption
In the UK, both our
Carex and Original Source
products have seen
packaging innovation
to encourage more
responsible usage
by consumers.
Read more / Pages 49 & 57
The United Nations Sustainable Development Goals
The 17 UN Sustainable Development Goals (SDGs), and the targets associated with them, offer a blueprint for
achieving a more peaceful and prosperous world by 2030. To deliver the SDGs, businesses must focus their
efforts where their actual and potential impact is greatest. In line with this, we have identified the SDGs where
we can have the greatest impact as a business, and the specific targets aligned to these goals that are most
relevant to us and our activities. This report shows our progress towards these goals and what we are doing
both by ourselves and in partnership with others to achieve them.
Goal 3. Good Health and Wellbeing:
Ensure healthy lives and promote wellbeing
for all at all ages
Goal 13. Climate Change:
Take urgent action to combat climate change
and its impacts
Goal 4. Quality Education:
Ensure inclusive and equitable quality education
and promote lifelong learning for all
Goal 14. Life Below Water:
Conserve and sustainably use the oceans, seas
and marine resources for sustainable development
Goal 8. Decent Work and Economic Growth:
Promote sustained, inclusive and sustainable
economic growth, full and productive
employment and decent work for all
Goal 12. Responsible Consumption
and Production:
Ensure sustainable consumption and production
patterns
Goal 15. Life on Land:
Protect, restore and promote sustainable use of
terrestrial ecosystems, sustainably manage forests,
combat desertification, halt and reverse land
degradation and halt biodiversity loss
Goal 17. Partnerships for the Goals:
Strengthen the means of implementation and revitalise
the Global Partnership for Sustainable Development
46
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
MANAGING OUR ESG IMPACT:
OUR ESG FRAMEWORK
Better for all is our new ESG framework. This sets out how we will manage
and report on our different social and environmental impacts.
We have three focus areas which align to our corporate purpose, supported by new KPIs that we
have set. These are highlighted and discussed in the pages that follow.
FOR EVERYONE
Our impacts on people:
Through our products,
our employees and the
communities we serve.
This addresses our impact on
people, through the products we
sell, our employees’ safety and
wellbeing and the communities
that we serve.
For more information / Page 49
FOR LIFE
Our environmental impacts:
On the atmosphere, the earth
and the oceans.
This addresses our environmental
impacts: on the atmosphere
through our carbon emissions and
air quality impacts; on the earth
through the sourcing decisions
we make and the way we manage
waste and packaging; and on the
oceans through our use of water
and the impact of our products.
For more information /
Page 56
Better
for all
Our behaviours as a business:
How we buy, sell and operate through our value chain for future
resilience and growth.
FOR GOOD
This addresses how we behave as a business and the decisions we make,
including the way we market and sell our products, our management of
our supply chain, ESG and corporate governance.
For more information / Page 68
Strategic Report / Sustainability report
47
MATERIALITY
In FY22, we commissioned a materiality review to explore and understand our most important
social and environmental impacts and to understand how our different stakeholder groups –
customers, consumers, suppliers, employees, and investors – viewed these.
Materiality is an important part of engaging
with our stakeholders and ensuring that their
concerns are reflected in our approach to
sustainability, the issues we focus on and the
goals that we set. The materiality review also
helped us to define KPIs that will enable us to
deliver the optimum social and environmental
impact for our global and local stakeholders.
We conducted interviews with different
stakeholders, and used these, together with an
extensive review of sustainability frameworks
and the competitor landscape, to develop a list
of our most important social and environmental
issues. We then distributed a short survey asking
respondents to rank and prioritise these issues.
We received 4,389 responses to the survey from
across our geographic areas of operation.
Although there were some differences between
the countries where we operate, stakeholders
consistently identified product quality and
safety, the need to keep data safe, and ethics and
integrity as important. These are foundational
elements of our strategy and core to how we
operate as a business. The environmental impact
of our products, particularly packaging and
formulation, and our carbon emissions, were also
identified as priorities, while our use of natural
resources and impact on biodiversity is becoming
increasingly important.
The insights from the materiality analysis have
informed our ESG strategy and targets, and will
continue to shape our activities at a global and
country level.
Materiality Matrix
Key
Issue will have greater importance
and impact in near future
e
c
n
a
t
r
o
p
m
i
r
e
d
l
o
h
e
k
a
t
S
Animal testing
(PZ Cussons Beauty)
Water use (Africa)
Human rights in
our supply chain
Health & Safety
Advertising that is honest and
promotes positive messages
Supporting local
communities
Waste
Fair, supportive
and responsible
employer
Diversity, equality
and inclusion
Water use
Animal testing
Product quality
and safety
Keeping customer and
employee data safe
Ethics, integrity
and compliance
Environmental impact of
our products, packaging
and formulation
The amount of energy we use
and our carbon emissions
Use of natural resources
(biodiversity)
Low priority
Medium priority
High priority
Impact on the business
48
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
MANAGING OUR ESG IMPACT:
OUR GOVERNANCE
Responsibility for ESG sits at the Board level. The Executive Leadership
Team is responsible for approving the strategy, and monitoring our progress
towards our ESG KPIs.
ESG Committee
(Board)
Must Win Driver Steering Committee
Oversight of the transformation scope
Approval body for investments
Executive Leadership Team (‘ELT’)
Approval of direction of travel
Approval and monitoring of corporate KPIs
Sustainability Steering Committee
Oversight of the Group and market plans and progress
towards achievement of corporate and market KPIs
Sustainability Team
Putting in place the building blocks to achieve sustainability
objectives and B Corp certification
In FY22, we established our Sustainability Steering
Committee, which meets monthly, and reports to
the ELT. The Committee’s role is to monitor progress
towards our goals and oversee the communication
of this progress to internal and external audiences.
The Committee oversees the delivery of the different
components of the ESG strategy at a central and
market level and ensures that plans are in place
at a business unit and global level to support the
achievement of our KPIs. The Committee is chaired
by the Chief Sustainability Officer, and includes senior
leaders from HR, R&D, supply chain, marketing,
finance and a sustainability leader from each of
our business units.
In FY23, and beyond, it will also review data collected
on a quarterly basis tracking progress towards
our ESG KPIs. We are expanding cross-functional
participation and sharing practice within and across
our business units and local teams are responsible
for ensuring that each country develops appropriate
plans and activities to help us achieve our KPIs.
In January 2022, the Board also established the
ESG Committee, to approve our ESG strategy and any
related publicly reported measures and performance
targets. The Committee monitors performance
against the ESG goals and how PZ Cussons considers,
engages with, reports to, and maintains its reputation
with key stakeholders. The Committee is attended
by the whole Board and chaired by the Chair of the
Board. Additional information is set out in the
ESG Committee report on page 116.
Strategic Report / Sustainability report
49
OUR ESG FRAMEWORK
FOR EVERYONE
We are committed to providing high-quality and
safe products to our consumers and customers
and we regard quality and consumer safety as a
fundamental business responsibility.
Aligning to the SDGs
Our products
Product quality and consumer safety are absolutely
critical to building brands that consumers trust and
use for the long term.
We focus on creating products that deliver functional and
wellbeing benefits to our consumers and that meet the
growing consumer desire for more sustainable products.
We have invested consistently in assuring product quality
and consumer safety throughout our value chain. We
apply robust management systems and the latest science
to ensure that our products are safe for consumers and
consistently deliver the functionality that consumers
demand.
Our main manufacturing sites are accredited to
ISO9001 for quality.
We use ISO10377, the standard for consumer safety,
to assess and improve our performance and we measure
ourselves regularly against the 12 pillars of the standard.
OUR AMBITION
Inspire responsible consumption
and disposal by adapting our pack
communication so consumers make
informed choices
CASE STUDY
Improving consumer awareness of
responsible consumption
In the UK, we are using refill pouches for Carex products
to encourage consumers to refill and reuse their plastic
pump bottles at home. In FY22 we commissioned a
new manufacturing line to allow us to manufacture
these ourselves. The refills have clear messaging for
consumers on the packaging highlighting how much
plastic they save by buying a refill rather than a new
pump bottle.
We have also included a visible ‘snip to recycle’ dotted
line on the pouches showing consumers where and
how to cut the pack to remove the plastic spout,
which makes the refill fully recyclable at selected
supermarkets.
Read more about refill packs on our website /
www.pzcussons.com/investornews
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SUSTAINABILITY CONTINUED
FOR EVERYONE CONTINUED
CASE STUDY
The EcoBeauty Score Consortium
In FY22 we joined other personal care and cosmetics
companies as founding members of the EcoBeauty Score
Consortium, an industry-wide coalition that seeks to help
consumers make sustainable choices through providing
environmental impact assessments and scores in a way
that is clear, transparent and easy to understand.
This meets growing consumer demand for
information about the products they buy and the
impacts of formula, packaging and usage. From
2023 onwards, we and other members will begin
to publish this information to support consumer
in their purchasing choices.
Our people
We have nearly 3,000 employees around the world and our people define who we are as a business.
Our employees, management and Board have worked
together to define our purpose – ‘For everyone, for life,
for good’ and capture our BEST values – Bold, Energetic,
Striving and Together. These values have been launched
across the business and we are bringing them to life
through our people processes, focusing on creating a
high-engagement culture, releasing high performance
and growing compelling career paths to attract,
retain and develop the most talented and capable
people. We have launched Workday as a world-class,
single people system to underpin this transformation.
Read more about our Values / Page 18
Health and safety
We are committed to delivering globally consistent and
high standards of health and safety for all of our people.
The ELT and Board scrutinise our performance and
compliance with regulations in the countries where we
operate, supported by health and safety specialists who
monitor our operations. Health and safety is everyone’s
responsibility and we encourage employees to identify
and report hazards or near misses.
In FY22, all our manufacturing operations were accredited
to ISO45001. Our continuous improvement (CI) programme
in our factories aligns with ISO45001 and has been
instrumental in improving our performance through the
early identification of the leading health and safety issues,
allowing us to address hazards before they escalate into
actual incidents. We also launched a new initiative focused
on improving safety by challenging the unconscious or
learned behaviours that contribute to workplace accidents.
In FY22, we improved our AAIFR performance by 4% (from
1.14 to 1.09 per 200,000 working hours). Unfortunately
we had 2 additional LTIs vs FY21 and as a consequence we
have initiated a behaviour focused programme as that was
identified as the root cause of this increase.
2016-17
2017-18
2018-19
2019-20
2020-21
2021-22
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
15
0
13
0
8
0
3
0
2
0
4
0
(29)
0
+2
0.29
0.26
0.13
0.05
0.04
0.08
(0.33)
+0.04
3.09
2.17
2.13
1.45
1.14
1.09
(0.95)
(0.05)
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51
Wellbeing
As Covid-related safety restrictions began to relax globally
during FY22, the wellbeing of our employees remained
central to our approach. With the easing of restrictions,
we are now starting to see a transition to true hybrid
ways of working.
Our markets have proactively led a wide range of health
and wellbeing activities relevant to their markets and
people. While ensuring end market flexibility, the plan is
to establish a Global Wellbeing vision and framework that
will ensure there is a level of consistency across the markets
and prevent any teams or individuals from feeling excluded.
The wellbeing of our people is currently measured
through our annual global engagement survey and we
are pleased that this is an area where we continue to
observe improvement.
CASE STUDY
Supporting hybrid working and
wellbeing in Australia
In Australia, we encouraged the transition to
hybrid working with the release of our hybrid
working playbook which provides guidance
for managers and employees to ensure the
safety and wellbeing of all our colleagues
and provides support with effective ways of
remote working and face-to-face collaboration.
We also offered all our colleagues the
opportunity to be accredited in mental health
first aid, through a training programme that
develops mental health skills. Employees were
also given additional paid leave to recognise
their efforts during lockdown.
CASE STUDY
Supporting employee health and
wellbeing in Kenya
Over the course of FY22, our Kenyan
business has run a number of initiatives
to support and improve employee health
and wellbeing. We ran a programme in
partnership with Metropolitan Hospital
on Covid-19 and vaccination awareness,
and provided vaccine appointments, which
led to a 100% vaccination rate among
participating employees. We also partnered
with Aga Khan hospital to provide an
employee wellness day, providing medical
checks and nutritional advice. Employees
are also supported through an
in-house mental health awareness
programme.
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SUSTAINABILITY CONTINUED
FOR EVERYONE CONTINUED
Global engagement survey
In FY22 we conducted our second employee
engagement survey, building on what we had learned
in previous years. 93% of our employees responded,
and our engagement scores remained stable at
72% whilst our wellbeing score improved to a very
encouraging 80%.
Our identified areas of focus for improvement
going forward are around total reward and its
communication and how we can further enhance
employee recognition.
Wellbeing
Company confidence
Work
Culture
Leadership and management
Learning
% favourable score
FY21
78%
77%
75%
70%
68%
54%
FY22
80%
77%
77%
74%
72%
63%
Culture and purpose
Our culture is what sets us apart from the competition
and makes us unique. We are keen to not lose what makes
our organisation special, recognising the need to build on
our rich history and ensure our culture is right today and
for the future.
We launched our new strategy in March 2021 and this was
supported by a new Company purpose – ‘for everyone, for
life, for good’. In FY22 we launched a new set of corporate
values to support this purpose.
For more information on our Values / Page 18
Diversity
Our multi-local footprint ensures that we are a diverse
business by nature, but we recognise that a diverse
workforce needs an inclusive environment to flourish.
Out of the learnings from our recent engagement survey
we are continuously evolving our process of managing
diversity and culture of inclusion, aligned with the local
nuances where we operate.
As new hybrid ways of working become established, we
remain committed to our Inclusive Working principles of
collaboration, development and delivery, wellbeing and
inclusion. This enables employees to work in ways that allow
them to be productive and effective while also thriving.
Strategic Report / Sustainability report
53
Communities
We are committed to achieving positive social change and ensuring that we address the specific needs of the communities
where we operate. Our Code of Ethical Conduct sets out the procedures and principles that ensure that any charitable
donations are made to organisations that are free from political affiliations or conflicts of interest. In FY22, in response to
the unfolding humanitarian crisis in Ukraine, we donated 200,000 units of product including Carex hand gel and hand wash,
Morning Fresh dish liquid and Original Source soap products to two local Polish charities assisting Ukrainian people
and refugees.
CASE STUDY
Australia: Support for Foodbank Australia
Our partnership with Foodbank Australia is now in its fifth year.
Foodbank supports the 1 in 6 Australians who do not have enough
to eat, the 1.2 million children who go hungry each year and the
1.3 million people who now struggle to meet their food needs as
a result of the pandemic’s impact on their livelihoods.
We provide donations, a purchase programme and volunteering.
Our Rafferty’s Garden brand has donated over 38,000 meals and
over 20,000 kilos of Morning Fresh and Radiant products have also
been donated. These donations go to areas affected by fires and
flooding – a growing problem in the region – and to alleviate
food insecurity.
CASE STUDY
Nigeria: Cussons Baby Cares Campaign
In Nigeria, Cussons Baby has partnered with hospitals to help new
and expecting mothers learn more about caring for babies and
children. The programme is designed to help them feel confident
about parenthood and in particular looking after their babies’
health and hygiene.
We provided product samples and education materials, and work
in partnership with healthcare providers in hospitals, including
nurses and midwives. We reached 412,000 mothers through our
hospital programme and through the use of digital tools we were
able to reach 10.2 million mothers across the country.
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SUSTAINABILITY CONTINUED
FOR EVERYONE CONTINUED
We focus on creating products that
deliver functional and wellbeing benefits
to our consumers and that meet the
growing consumer desire for more
sustainable products.
CASE STUDY
Indonesia: Back to School programme
In Indonesia, the PZ Cussons team have
developed a programme focused on
supporting children to prepare for the return
to school, as schools reopen after the
pandemic. The programme is designed to
teach them about personal hygiene, including
the importance of handwashing, and to
educate them on the responsible disposal
of plastic waste, and how to use less of it.
The programme runs in 26 schools, and has
reached 12,500 children so far.
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CASE STUDY
Beauty: Hestia partnership
Our Beauty business has an ongoing
partnership with Hestia, a UK charity that
supports adults and children in crisis and
which runs domestic abuse prevention
work across the country.
We provide products and donations
to Hestia, which support activities and
charities for children during the school
holidays and animal therapy in Hestia
refuges. We also provide opportunities
for employees to fundraise and volunteer
for Hestia at a variety of different events.
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PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
OUR ESG FRAMEWORK
FOR LIFE
We address all our environmental impacts with our purpose
in mind. This means minimising our impact on the earth
and oceans through: managing air quality and reducing our
carbon emissions, the sourcing decisions we make, the way
we manage packaging, waste and our water use.
Aligning to the SDGs
We measure, report and manage our performance in the
areas that we know are most important to the business,
and where we have the biggest impact, including
carbon emissions, water usage and landfill waste, plastic
consumption and the sustainable sourcing of palm oil
and paper.
All of our operating sites comply with local regulations
and our Group standards. In addition to this our main
operating sites are certified to ISO14001, with our site
in Kenya planning to achieve certification in FY23.
We operate a continuous improvement (CI) programme
in our factories which reduces our water use, carbon
emissions and landfill waste.
In FY22 we conducted a review of our environmental
targets as part of our broader review of our ESG strategy.
We also revised our supplier code of conduct to make
sure it includes all the principles we want our suppliers
to adhere to and developed a new sustainability charter
that stipulates the principles we will follow in our own
operations. This year, we are reporting progress against
our previous goals for the last time, and presenting our
new environmental KPIs.
Plastic and packaging
In FY22 we reviewed our packaging commitments. These were developed in 2018 and set targets for 2025 around
plastic reduction, increasing the amount of post-consumer recycled plastic (PCR) and moving towards 100% renewable,
compostable or recyclable packaging. While we have made good progress in areas such as light weighting and moving
to flexible formats, a combination of business factors meant that the targets we had set were not going to be achievable
in the light of our new business strategy. We therefore have reviewed our plastic commitment taking into account our
current portfolio and future plans and have set long-term targets that we feel are stretching but achievable.
More on the next page.
Previous target
FY22 actual
Comments
Packaging
25% reduction in use
of plastic based on g/
kg of finished product.
Target date of FY25 vs
baseline of 2018.
30% of plastics will be
from recycled sources.
Target date of FY25.
100% of plastic
reusable, recyclable
or compostable.
Target date of FY25.
24% increase
vs baseline
The main reasons for the rise in reported plastic intensity were:
• The disposal of businesses that used less plastic packaging per kg of product
• Changes in product mix, particularly as a result of Covid-19, which saw a shift towards
smaller pack sizes that use proportionately more packaging per weight of product,
and a reduction in sales in our low-plastic intensity businesses in Nigeria.
2.6%
packaging
with PCR
content
74.4%
This is a further small improvement versus the previous year (2.4% in FY21). In common
with many other businesses in our sector, the price and availability of PCR plastics in
our market – especially those in Africa – is slowing down our adoption of PCR in our
packaging.
Our UK and Australian businesses are performing well. We are working to increase the
recyclability of our packaging on a component level and as new technologies enter the
market such as recyclable pumps and flexible packaging we will be able to improve our
performance further.
Strategic Report / Sustainability report
57
Following our review, we have established new targets
which reflect our portfolio and business strategy and our
desire to move away from plastic and explore opportunities
beyond plastic. We will continue to review these and will
report against them annually. These goals are subject to
periodic adjustment to reflect acquisitions, disposals or
other significant changes in our business and we reserve
the right to re-state them if this is required.
During the year we have worked to make our plastics
governance and reporting more robust. Further updates
are planned during FY23 in which we will update our
databases to track all packaging materials including papers,
plastics, metals and glass. During the year we have also
set up systems to manage the new UK plastics tax and
are working towards compliance with the Extended
Producer Responsibility regulations.
3 million UK shoppers
now refill their
Carex bottles,
which is 10%
of all liquid
hand soap sold
NEW TARGETS
Reduce virgin plastic
in our packaging by
one third by 2030
from a 2021 baseline
Ensure 100%
recyclable, refillable
or compostable
packaging by 2030
Use 100% certified
or recycled paper
by 2025
In Australia and New Zealand, we have launched a series
of product offers that provide consumers greater choice
in reducing their plastic footprint, including a refillable
aluminium ‘bottle for life’ for Morning Fresh, and Morning
Fresh refills which use 70% less plastic compared to
2x 400ml bottles. We redesigned our core Morning Fresh
range to use a new bottle that uses 13% less plastic, which
will save over 150 tonnes of plastic a year, and launched a
new laundry liquid refill for Radiant which uses 60% less
plastic compared to a 2L bottle. We also launched a new
Morning Fresh sub-range called Clean & Green. Clean &
Green is our first offer with both 100% biodegradable
actives and a bottle made from 100% recycled materials.
In the UK, Carex continues to lead the hand wash category
in terms of sustainability – three million UK shoppers now
refill their Carex bottles, which is 10% of all liquid hand
soap sold. This initiative has saved 22 million pump bottles
from disposal, which equates to a reduction in plastic of
625 tonnes. This approach is also being adopted for other
brands, including Original Source and Imperial Leather.
In early FY23, we launched a reusable aluminium bottle for
Original Source, sold with shower gel refill pouches that
use 85% less packaging than the equivalent bottles.
58
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
FOR LIFE CONTINUED
Plastic and packaging continued
In Indonesia, we developed a paper tray for Cussons Baby
gift boxes, which resulted in the removal of 175 tonnes
of PVC. We also reduced excess plastic packaging in the
wrappers of Cussons Baby Wipes which reduced plastic
usage by 13 tonnes, and were able to remove a further
eight tonnes of plastic by changing the dimensions of
our stand up pouches.
In Kenya, changes to our product packaging saved around
17 tonnes of plastic while elimination of shrink wrapping
saved a further 25 tonnes of plastic.
In Nigeria, we introduced a lightweight bottle for our
Morning Fresh and Camel brands, which resulted in a
reduction of 48 tonnes of plastic, and we are trialling a
monolayer film for Premier Care Natural soap wrappers
which, if successful, will result in plastic savings of around
29 tonnes.
Within our Beauty division, our St. Tropez Self Tan Mousse
packaging now includes 30% PCR resin, some of which is
sourced from Prevented Ocean Plastic (POP). We plan to
extend this to our other beauty brands over the next few
years. We are also helping lead the way on more sustainable
pumps by including 40% PCR in our non-aerosol foamer
pumps, and planning to change to a single material pump
by 2025, which will mean the whole pack is fully recyclable.
90% of our PET bottles and 50% of our tubes now include
a minimum of 30% PCR, and we expect to reach 100%
by 2025. We have also made progress in reducing plastic,
including a 60% reduction in our re-launched Sanctuary Spa
jar components, resulting in a reduction in plastic usage of
17 tonnes per annum. For Charles Worthington Shampoo
and Conditioner Takeaways, we have moved from plastic
bottles to stand up pouches, which has resulted in a 75%
plastic reduction, while St. Tropez’s Grad Tan tube range
achieved a 25% reduction.
Strategic Report / Sustainability report
59
CASE STUDY
Childs Farm: sustainable
personal care solutions
Childs Farm uses naturally originating
ingredients to produce skincare and toiletries
for babies and children. We acquired Childs Farm
in March 2022, in part because we admire the
way in which they do business and see a strong
fit with our own approach to sustainability.
Childs Farm uses a number of innovative
packaging solutions built on the principles of
reduce, reuse and recycle. Childs Farm uses
bottles made using 100% Prevented Ocean
Plastic (POP) which uses discarded plastic
bottles picked up by plastic collectors in areas
at risk of ocean plastic pollution. These are used
to provide certified traceable recycled plastic,
which also supports local communities and
economies. By using POP we reduce harm to
marine life and ecosystems, provide support to
local communities and economies, and reduce
greenhouse gases by 80% compared to virgin
plastic. Childs Farm also uses an innovative new
metal-free pump, meaning that the pump can
be recycled, unlike most pumps.
Over the past year, Childs Farm has reduced
its carbon footprint by nearly 19%, reflecting
efficiencies in the frequency and size of
deliveries to retailers, changing the way
products are packaged and improving the
way in which units are stored and shipped,
so that we can reduce shipping and storage
volumes and costs.
Read more about
Childs Farm on our website /
www.pzcussons.com/
investornews
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PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
FOR LIFE CONTINUED
Carbon and climate
Reducing carbon emissions is a priority for our business.
Through our continuous improvement programme in our
factories, we continue to incorporate energy reduction
initiatives across our sites. In FY22, we reduced our energy
consumption by 15% and our emissions by 17% per tonne
of production, compared to our target of a 3% year-on-year
reduction.
To deliver these improvements, we have implemented a
number of initiatives including:
• improved utility plant operating practices, ensuring that
steam is only used when required, leading to boiler gas
consumption savings of 5%
• better maintenance practices that have led to a 36%
reduction in the consumption of refrigerants
• downsizing and installation of variable speed drives on
borehole pumps in Nigeria
• energy reduction at our joint venture edible oil refinery
in Nigeria with the commissioning of a new, more
efficient and reliable chiller
• engaging with security to shut off out of hours electricity
supplies to offices in Indonesia
8% of our energy is now purchased on renewable tariffs.
The Group absolute carbon footprint increased marginally
during FY22 vs FY21 due to restrictions in the supply of
natural gas in Nigeria which meant we had to switch to
diesel for significant periods and the increased demand on
sites where we generate electricity, also in Nigeria. We have
measured our Scope 1 and 2 emissions (direct emissions
associated with our operations and the energy we purchase)
for several years. We are working on plans to reduce these
in line with science-based targets by 2030, as set out in our
new target.
We continue to build our understanding of the footprints of
our individual products so that we can apply the learnings to
other products. To this end we have joined the EcoBeauty
Score Consortium which aims to develop an industry-wide
environmental impact assessment and scoring system for
cosmetics products, as mentioned on page 50.
We continue to participate in the Carbon Disclosure
Project (CDP), reporting on our Scope 1 and 2 emissions.
In FY21, we were graded as B- for the second year in a
row. The main areas where we lost points were on climate
risks and opportunities management, verification of our
Scope 1 and 2 emissions, setting science-based targets and
improving our understanding of our Scope 3 footprint.
TARGETS
Net zero emissions by 2045
across Scope 1, 2 and 3
Carbon neutral in our
operations by 2025
Scope 1 and 2 emissions reductions
aligned with SBTi1 methodology
(from 2021 baseline) by 2030
Scope 3 targets calculated,
validated and agreed by 2023
1 Science Based Targets initiative
Strategic Report / Sustainability report
61
FY22
Current reporting year4
FY21
Previous reporting year1, 2, 3, 4
UK
Global
Total
UK
Global
Total
Energy consumption used to calculate emissions (MWh)
6,203
195,614
201,817
6,209
187,218
193,427
Emissions from activities for which the Company owns or
controls including combustion 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)
Total gross Scope1 + Scope 2 market-based emissions
(tCO2e)
Net Scope 1 & Scope 2 market-based emissions after
applying purchase of carbon compensation (tCO2e)
Intensity ratio tCO2e (net Scope 1 + 2 market-based)
/£100,000 revenue
Intensity ratio kgCO2e (net Scope 1 + 2 market-based)
/Tonne of production
1,141
42,397
43,539
785
40,324
41,110
0
6,340
6,340
0
7,874
7,874
708
6,340
7,048
804
7,874
8,678
1,141
48,738
49,879
785
48,198
48,984
0
48,738
48,738
0
48,198
48,198
0.68
11.53
8.46
0.18
27.02
8.12
21
113
103
14
139
121
1. Previous year data restated in line with the recommendations made from our external GHG inventory verification.
2. Manufacturing divestments in Australia and Nigeria have necessitated re-statement of our previous year data to ensure like-for-like comparisons with
current reporting year.
3. Emissions from activities for which the Company owns or controls including combustion of fuel & operation of facilities (Scope 1) (tCO2e).
4. Information assured and verified by Verco Advisory Services Limited.
We follow the UK Government environmental reporting
guidance including the Streamlined Energy & Carbon
Reporting (SECR) requirements. In addition, we have
also used the GHG Protocol Corporate Accounting and
Reporting Standard Revised Edition. Our emissions are
calculated using the UK Government GHG Conversion
Factors for Company Reporting 2021 & 2022 and the
IEA 2019 factors for overseas electricity.
Our operations in the UK, Australia and New Zealand
are now carbon neutral. We have done this through a
combination of increasing energy efficiency, moving to
renewable electricity and purchases of carbon offsets.
In FY22 we set ambitious new carbon reduction targets
for the business, reflecting our ongoing commitment to
addressing the climate crisis through our operations. In
FY22 we built on the work done in the previous year and
conducted a comprehensive Scope 3 measurement, looking
at our extended carbon footprint – from material extraction,
manufacture of raw materials, transport, manufacture,
distribution, consumer use and disposal at end of life. This
is allowing us to identify pathways for carbon reduction and
determine how we will achieve our ambition to be carbon
neutral by 2025 and net zero by 2045.
By the end of FY23 we aim to have calculated, validated and
set Scope 3 reduction targets for the business, which we will
publish in the FY23 Annual Report.
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SUSTAINABILITY CONTINUED
FOR LIFE CONTINUED
Carbon and climate continued
Waste
Previous target
FY22 actual
Comments
3% year-on-year reduction in waste to landfill.
22% reduction
Expressed in kg of landfill waste generated
per tonne of finished product.
In FY22 we reduced our landfill waste per tonne of
production by 22% and also reduced our absolute amount
of landfill waste by 4%. We aim to reduce the amount
of solid waste sent to landfill year-on-year, and all our
factories and locations have waste reduction programmes
in place. We study and map our landfill waste and then use
a standard waste hierarchy tool to identify improvement
actions, which are implemented via our CI programme.
Water
NEW TARGET
By 2030, we aim to send zero waste
to landfill, in those countries where
appropriate infrastructure exists
Previous target
FY22 actual
Comments
3% year-on-year reduction.
25% reduction
Expressed in m3 of water consumed per tonne of finished product.
In FY22 we reduced our water consumption per tonne of
finished product by 25% and also reduced absolute water
consumption by 8% against FY21.
In some of our markets, water is a scarce resource. We
also use significant volumes of water in our product
manufacturing. Reducing the amount of water we use is
important, and we do this through our CI programme.
NEW TARGET
By 2030 we want to have reduced
our water intensity by 30% from
our FY21 baseline
We intend to make a Water submission
to the Carbon Disclosure Project (CDP)
for FY23, with a view to full graded
submission annually thereafter
Water intensity is defined as the water use per tonne of production net of
formulation water.
Case study
Water effluent treatment in Kenya
Our Kenyan business installed an effluent treatment plant that treats all effluent
which is then reused for irrigation and in wash rooms, the first of its kind in Kenya.
This has resulted in a 20% reduction in water consumption, and no liquid discharge
from our manufacturing site into the municipal sewer system.
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63
Biodiversity
We purchase and source raw materials that, in some cases,
impact on biodiversity and forests. Our most significant
purchases are paper-based materials and palm oil. Paper
and cardboard are used in shipping cartons, pallet layer
boards and some primary packaging and labelling.
In FY22 we made a commitment to use 100% certified or
recycled paper by 2025, from a current level of 49%.
Reaching our palm oil target means using producers that
do not contribute to deforestation, peat or exploitation
(NDPE). We maintain our commitment to 100% NDPE
compliant producers. Data on our performance is available
in the reports published twice a year on our website.
We continue to monitor our performance using Starling
satellite data. Our 2023 Palm Oil Action Plan focuses on
supplier engagement, transformation and independent
verification.
We continue to work with partners including Earthworm
Foundation to support the Forest Conservation Fund with
investment in conservation projects in Indonesia which are
helping to secure standing forest, protect biodiversity and
reduce carbon impacts in our supply chain.
NEW TARGETS
We have made a Forestry submission
to the Carbon Disclosure Project for
the first time for FY22 with a view to
submitting annually thereafter
We are renewing our commitment
that 100% of our palm oil will come
from independently verified, NDPE
compliant producers by 2023
100% of our paper will be certified
or recycled by 2025
Read more about Palm Oil Targets on our website /
https://www.pzcussons.com/wp-content/
uploads/2022/07/Palm-Oil-Action-Plan_July2022_v2.pdf
Palm oil*
99% of our crude palm oil and
palm kernel oil is supplied by
direct suppliers with NDPE
commitments aligned with ours.
98% of palm oil derivatives
are supplied by suppliers
with NDPE commitments
aligned with ours.
99.6% of the CPO/PKO
we use is fully traceable
to mill.
93% of the derivatives
we use are fully
traceable to mill.
Case study
Supporting the Mului tribe in Indonesia
The Mului community in Borneo, Indonesia, has been
fighting for the right to manage its lands and protect it
from mining and logging corporations for decades. Since
2020, PZ Cussons has worked in partnership with the Forest
Conservation Fund to support the Mului people to protect
the 7,200 hectares of pristine rainforest where they live and
help them develop forest-friendly businesses to ensure a
thriving future for them. In 2022, the vice governor of the
province delivered the tribe their certificate of land title,
which proves their formal rights to manage their ancestral
lands. At the ceremony marking the award, we provided
personal care products to the village to celebrate the event.
Photograph of Pak Zidak, leader of the Mului people. © Forest Conservation Fund
* (All above from Palm Oil Action Plan July 2022.)
64
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
FOR LIFE CONTINUED
TASKFORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
PZ Cussons supports the recommendations of the Financial Stability Board’s Task Force
on Climate-related Financial Disclosures (TCFD) that businesses address and report on
the financial impact of climate change on their business.
Introduction
At PZ Cussons, we recognise that climate change requires us to act. We need to ensure we protect and prepare
ourselves as a business, as well as reduce our own contribution to global greenhouse gas emissions. To achieve
this, we understand it is key that our internal and external stakeholders understand the potential risks and
opportunities that climate change presents for our operations and strategy, and how we are managing this.
In this context, and in accordance with UK regulatory
requirements, we support the recommendations of the
Task Force on Climate-related Financial Disclosures (TCFD).
This section outlines our progress to date and our planned
activities for FY23.
3)
4)
The Board has approved this TCFD statement and considers
it to comply with all the recommendations and requirements
set out in the relevant regulations, save for quantification
of the financial impact and targets which are currently in
development within the Company as we evolve our tools and
metrics to report against these requirements. We anticipate
reporting against these matters in our next TCFD statement
to be included in our FY23 annual report and accounts.
Climate risk governance
Sustainability is a key pillar of PZ Cussons’ strategy. At the
end of FY21 the Company had announced our ambition
to certify all our businesses as B Corps by 2026. A Chief
Sustainability Officer was appointed in September 2021 to
have overall leadership of the delivery of this strategy under
the supervision of the Board. During FY22 we conducted a
materiality assessment and climate change was identified
as a key component in our sustainability strategy.
The sustainability strategy is overseen by an ESG Committee
comprising of the Board with the following responsibilities:
1)
2)
Reviewing, approving and discussing PZ Cussons’
sustainability strategy, goals and implementation
plans, including the plans to achieve a B Corp
certification by 2026.
Through the Remuneration Committee, to establish
a link between ESG outcomes and the LTIP (Senior
Management Long-Term Incentive Plan) – the ESG
component of the LTIP is 20% and is aligned to our
sustainability goals.
Through the Audit & Risk Committee to review and
approve reporting plans.
The Executive accountable to the Committee is the
Chief Sustainability Officer who is a member of the
Executive Leadership Team and reports directly to the
Chief Executive Officer.
Management of climate-related risks is handled as
part of our Group-wide risk management process and
through the TCFD reporting process. All Company risks
are reviewed by the Board at least once per year.
Scenario analysis
Scenarios and approach
We have identified climate change as a key business risk.
To better understand the potential impacts, we have
conducted a scenario analysis. PZ Cussons used three
scenarios to stress test the resilience of its business.
Transition risks will be assessed against a Low Carbon
World Scenario (<2ºC), which represents the most ambitious
outcome for transition to a low carbon economy. As a
result, policy, technology, market and reputational risks
would be most significant.
Transition risks were identified by considering possible
risks and opportunities for PZ Cussons in the short and
medium term resulting from changes expected under Low
Carbon World-aligned scenarios and assumptions. Sources
included the International Energy Agency (IEA), the Network
for Greening the Financial System (NGFS), the Shared Socio-
economic Pathways (SSP) and the Intergovernmental Panel
on Climate Change (IPCC). Potential metrics to assess each
risk have been identified.
We believe that the mitigation plans that are in place will
provide business and organisational resilience to these
short-medium term risks.
Strategic Report / Sustainability report
65
Physical risks were tested against a Low Carbon World (<2ºC), Intermediate (~3ºC) and Hot House World (4ºC+) scenarios.
Chronic and acute physical risks are most significant under a Hot House World scenario, which represents a worst-case
scenario for climate change.
Physical risks were assessed by modelling the exposure of PZ Cussons’ facilities across manufacturing, storage and
distribution operations globally using widely recognised modelling tools in the insurance industry employing climate data.
We also assessed the risk to selected global key suppliers of raw and packaging materials and finished goods. Exposure
was assessed for a range of acute and chronic climate risks under RCP2.6 (<2ºC) and RCP8.5 (4ºC) against short-, medium-
and long-term time horizons. We are now mapping the detail of these physical risks, the resilience of the organisation and
putting in place mitigation plans which will be disclosed in FY23.
Identification of risks and mitigations
We have subsequently engaged subject matter experts (both internal and external) to examine and start to quantify the
identified transition and physical risks and put in place mitigating actions. These risks will then be managed through our
Company risk management system. The climate risks and opportunities considered are as follows:
Physical risk
Chronic
Drought stress, heat stress, precipitation stress, fire and weather
Acute
Flood (including river, coastal and sea level rise), windstorm (including
extratropical and tropical cyclone)
Transition risk
Policy & Legal
Pricing of GHG emissions, mandates and regs on PZ products, enhanced emissions
reporting obligations, building code requirements and climate change litigation
Technology
Cost to transition to lower emissions technology
Market
Changing consumer preferences, increased cost of raw materials and cost of capital
Reputation
Employee risk and investment risk
As an example of the planning to date, we include below a selection of our most material risks, their descriptions and status
of mitigation planning. We are still in the process of assessing the financial impact of those risks and setting metrics and
targets against them. These will be disclosed in our FY23.
Risk Name
Risk Description
PZ Mitigation Plan
Mandates and
regulations on
our products
Pricing of GHG
emissions
There is a risk of increasing regulatory pressure
regarding the sustainability of materials used in
the manufacturing of products. This includes the
possibility of introduction of carbon footprint
labelling, extended producer responsibility (EPR),
plastic tax or bans on single-use plastics.
This could be relevant to the Group as soon
as the FY25 time horizon.
Short/Medium-term risk
Carbon pricing already exists in some of the
jurisdictions PZ Cussons operates in, including the
EU and UK. Under both a 1.5ºC and 2ºC scenario,
pricing of GHG emissions is expected to increase,
which could impact PZ Cussons’ direct operating
costs.
Short/Medium-term risk
We monitor regulatory developments and work
with the wider industry to prepare. This year
we joined the EcoBeauty Score Consortium,
which seeks to develop an industry-wide and
standardised carbon-labelling methodology. We
also updated our plastic packaging to include
at least 30% PCR material in markets where
plastic tax exists. We continue to develop our
preparedness for the likely increased regulation
in this space.
In our sustainability strategy we are setting
ambitious targets to reduce GHG emissions
throughout our value chain, reducing our
vulnerability to possible future carbon taxes
and voluntary offset markets. We also monitor
government policies and climate change actions
and take necessary steps to minimise the impact
on our business.
66
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
FOR LIFE CONTINUED
TASKFORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Risk Name
Risk Description
PZ Mitigation Plan
Enhanced
emissions
reporting
obligations
Emission reporting obligations are changing all
over the world. Inadequate processes, systems and
tracking could make adjusting to these changes in
any geography difficult.
PZ Cussons may have to increase its spending on
emissions reporting and assurance in the upcoming
years. In particular, the advancement of Scope
3 reporting and Net Zero transition plans would
require further investment.
Short-term risk
There may be costs associated with upgrading
buildings and manufacturing sites to meet more
stringent building codes and guidelines. For
example, in the UK, all new buildings are expected
to have an EPC rating of B by 2030.
Short/Medium-term risk
Costs to transition to lower emissions technology
include upgrading manufacturing sites, switching
to or supplying infrastructure for electric vehicles,
and sourcing lower emission utilities – particularly
for processing recycled materials. Depending on the
impact and urgency of these new technologies, PZ
Cussons may have to plan capital investments in its
infrastructure to implement these technologies and
alternative energy sources to its current utilities.
Medium-term risk
Water, forests, plastics and other resources will be
affected by both physical and transition climate
change risks. PZ Cussons could see the geographies
and communities it operates in affected by changes.
The costs suppliers face may carry over across PZ
Cussons’ supply chain. The impact on PZ Cussons will
depend on its ability to pass costs to the consumer.
Building code
requirements
Cost to
transition to
lower emissions
technology
Increased cost or
non-availability
of raw materials
Short/Medium-term risk
Subject matter experts have been identified and
given responsibility for this within the existing
Group talent pool. This group is being supported
by external consultant resources as required to
meet our business requirements.
PZ Cussons will ensure compliance with all
building regulations, especially those that
improve the energy efficiency of our assets that
will also result in lower operational costs.
Together with our suppliers, we will review our
supply chain to phase out our reliance on fossil
fuels in line with our sustainability strategy.
We will work with our sustainability partners to
understand and develop cost-effective paths
towards reducing our climate impact.
The Group has a strong focus on innovation
which is driven through our responsible sourcing
and design for cost. Our consumers and the
environment are at the heart of everything
we do so we always strive to ensure our costs
and formulas are competitive to mitigate cost
and sustainable impacts for our customer and
consumers. Our strategic procurement teams
aim to create a resilient sourcing programme
that considers our suppliers and communities
while ensuring we have compliance across
our global supply base. We are committed to
reducing our virgin plastic usage, sourcing palm
from suppliers with NDPE commitments and
only use certified paper(s) for our packaging.
Strategic Report / Sustainability report
67
Risk Name
Risk Description
PZ Mitigation Plan
Cost of capital
As credit ratings begin to incorporate climate
change considerations, there is a risk of volatility
in the cost and availability of capital.
Employee risk
Investment risk
Short/Medium-term risk
As employees become increasingly concerned with
climate change issues, negative publicity around
failure to deliver on targets or failing to effectively
incorporate climate change considerations into
decision-making could make it difficult for PZ Cussons
to attract and retain the best talent. This risk could
increase as the millennial generation, which is
typically more concerned with sustainability issues,
make up a higher percentage of the workforce.
Short-term risk
Failure to meet publicly stated sustainability goals
(e.g. science-based targets, sustainability KPI
targets or B Corp certification) and failure to meet
disclosure requirements, poses a risk to PZ Cussons’
revenue and investment streams as customers
and investors increasingly expect high levels of
sustainability performance from organisations.
Medium/Long-term risk
We have put in place a comprehensive
sustainability framework with stretching and
ambitious long-term goals and have action
plans, including budgeting, to deliver those
goals.
PZ Cussons is striving to professionalise
sustainability as a key strategic function within
the organisation to drive the sustainability
agenda. This agenda includes a set of long-
term environmental, social and governance
goals; including our ambition to achieve B Corp
certification by 2026 across all markets.
Our sustainability plans are ambitious, yet
achievable. We believe that meeting the stated
goals will allow us to meet the evolving needs
of consumers, while addressing other factors
impacting our financial performance, such as
changes in regulation.
Acute/Chronic
Physical risks resulting from climate change can be
event driven (acute, e.g. hurricanes and flooding)
or longer-term shifts (chronic, e.g. sustained heat
stress) in climate patterns. Physical risks may have
financial implications for PZ, such as direct damage
to assets and indirect impacts from supply chain
disruption.
PZ will analyse a variety of locations which are
key to the business covering important parts
of the value chain, our internal operations and
important customer markets and use scenario
analysis and climate modelling to better
understand the range of physical risks that the
Company is exposed to.
Long-term risk
68
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
OUR ESG FRAMEWORK
FOR GOOD
We behave ethically as a business, through the
decisions we make, the way we market and sell
our products, and through our corporate and
ESG governance processes.
Aligning to the SDGs
Business, governance and ethics
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 / Page 8
Our non-financial KPIs on / Page 76
Our principal risks on / Pages 86 to 93
Details of our employees / Page 28 and
in the Report of the Directors / Page 147
We operate in a business environment which is open,
honest and fair with our suppliers, customers and
business partners, and we do not tolerate corruption.
Our ethical principles require that we show respect and
integrity in our dealings with all our stakeholders.
The policies and standards which govern our
approach include:
• Code of Ethical Conduct
• Modern Slavery Act Statement
• Supplier Code of Conduct
• Animal Testing Policy
Code of Ethical Conduct
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 advisers. 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 whistle-blowers. The Code is supported by a number of other
policies which are set out in detail in the Audit & Risk Committee
report on page 110.
Having successfully launched the Code and our online
e-learning modules in FY21, we conducted an annual Code of
Ethical Conduct (COEC) confirmation which was completed
by 1,284 (all graded) employees, which far exceeded the
initial target set by the Board. The confirmation sought
feedback on the level of embeddedness of our Code and
how well it was understood across our business. There
is a good level of awareness of the COEC and procedure
to make whistle-blowing reports, a level of mistrust was
raised on the confidentiality of issues raised. This will now
be addressed through information campaign and face-
to-face training sessions. In addition, the Board and all
employees were required to complete an Anti-Bribery and
Corruption (ABC) training module which was hosted through
Trace International. The Board and all graded employees
completed the training which far exceeded the initial target.
A process is also now in place that all new joiners confirm
they have read the COEC and are required to complete the
ABC training within their first month. Additional face-to-face
training on the COEC was also conducted in high-risk markets
by the Head of Ethics & Compliance.
Strategic Report / Sustainability report
69
Supplier relations
Modern Slavery Act and Supplier Code of Conduct
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 (SCOC) 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. The Procurement Code of
Conduct was superseded by Supplier Code
of Conduct. Suppliers are subject 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.
The Company has enhanced the due diligence process for new suppliers,
requiring adherence to the SCOC 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. Good progress
has already been made on removing dormant suppliers. 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.
Following a third party review the Company contracted Dow Jones and
implemented a third-party risk centre platform to conduct due diligence on
all new suppliers. This has seen 95% of all new suppliers passing through
the platform and all high-risk suppliers being issued with a questionnaire
requiring further detailed information before being considered for approval or
rejection. An enhancement to the platform was added to require all vendors
to sign their agreement to abide by the SCOC. An updated SCOC was issued in
April 2022 and a programme to retrospectively conduct due diligence checks
on all other active suppliers was launched and is progressing well. We have
also made good progress in requiring all high-value vendors to agree to the
SCOC or demonstrate they maintain an equivalent code within their business.
Recent actions include a thorough review of our supplier risk management
processes to ensure our suppliers meet our rigorous ethical standards and
continuing development of our indirect procurement to further improve
controls and value for money.
We plan to update and refresh our Human Rights Policy by the end of 2022.
70
PZ Cussons plc / Annual Report and Financial Statements 2022
SUSTAINABILITY CONTINUED
FOR GOOD CONTINUED
Animal testing
At PZ Cussons we are passionately against animal testing.
We do not test finished products or ingredients on animals, and do
not permit our suppliers or any third parties to test on our behalf.
Our suppliers will have to accept those terms to work with us.
We will not sell our products, directly or indirectly, in any manner
which would require them to be tested on animals prior to
reaching our consumers.
Our approach to animal testing is available on our website /
Code of Ethical Conduct:
https://www.pzcussons.com/wp-content/uploads/2021/04/Code-of-Ethical-Conduct-V12-English.pdf
Supplier Code of Conduct:
https://www.pzcussons.com/wp-content/uploads/2022/07/Supplier-Code-of-Conduct-Final-April-2022.pdf
Strategic Report / Sustainability report
71
B Corp certification
B Corp certification will have benefits for the business and
for our stakeholders. Retailers increasingly look to purchase
brands that have achieved this standard, and it is a mark of
trust for consumers looking to buy from companies with
demonstrated sustainability credentials.
In order to achieve our B Corp ambitions we will need to
conduct baseline assessments of each of our businesses
and commit to improvement programmes in collaboration
with B Labs, who manage the certification process. In FY22,
we measured our baseline and set a roadmap towards
certification for our UK business, our Beauty business
and our businesses in Asia.
Each of our businesses has established initial improvement
plans and are working towards refining and implementing
them. Childs Farm, which we acquired in FY22, was the
first of our businesses to achieve B Corp certification in
July 2022.
TARGET
Achieve B Corp certification
on all of our businesses
by 2026
What is a B Corp?
A B Corp is a company that has been certified by the non-profit organisation B Lab as meeting rigorous standards of
environmental, social and governance performance, accountability and transparency. To become a certified B Corp,
a company must:
• Demonstrate high social and environmental performance by achieving a B Impact Assessment score of 80 or
above and passing a risk review. Multi-national corporations must also meet baseline requirement standards
• Make a legal commitment by changing its corporate governance structure to be accountable to all stakeholders,
not just shareholders, and achieve benefit corporation status if available in its jurisdiction
• Exhibit transparency by allowing information about its performance measured against B Lab’s standards to be
publicly available on their B Corp profile on B Lab’s website.
72
PZ Cussons plc / Annual Report and Financial Statements 2022
NON-FINANCIAL AND SUSTAINABILITY
INFORMATION STATEMENT
Sections 414CA and 414CB of the Companies Act
2006 require us to disclose certain information
to allow readers to understand our development,
performance and position and the impact of
our activities. These are set out below, with
references to further disclosure throughout
this report as appropriate.
CA Ref
Disclosure
Group approach (including policies and due diligence)
A1
Climate-related financial
disclosures
1(a)
Environment
Employees
Society
Human rights
1(b)
1(c)
1(d)
1(e)
2(a)
2(d)
2(e)
Our TCFD disclosures can be found on pages 64 to 67.
Our sustainability framework and governance can be found on
pages 46 to 48.
Our ESG Committee has terms of reference which are approved by
the Board and will be reviewed annually.
Our environmental performance, policies and due diligence activities are
set out on pages 56 to 63. We measure a number of metrics to reflect our
environmental impact, including carbon emissions, water usage, landfill
waste, plastic consumption and sustainable sourcing of palm oil.
Our employee engagement policies and practices are set out on pages
50 to 52.
We are proud of the contributions we are able to make to the
communities in which we operate, as further detailed on pages 53 to 55.
See page 63, which sets out our policies and due diligence to ensure the
integrity of our supply chain.
Anti-corruption and anti-
bribery
We have zero tolerance for corruption or bribery and this is set out in our
Code of Ethical Conduct, which is further explained on page 68.
Business model
Details of our business model can be found on page 8.
Principal risks
Our principal risks are set out on pages 86 to 93 and our approach to
risk management is set out on pages 84 and 85.
Non-financial key
performance indicators
Our primary non-financial key performance indicators are set out
on page 76.
Strategic Report / Key performance indicators
73
KEY PERFORMANCE INDICATORS
HOW WE MEASURE
OUR PERFORMANCE.
FINANCIAL
Revenue £m
£592.8m
Definition
Revenue net of discounts, rebates
and sales taxes (does not include
JV revenue)
£587.2m
£603.3m
£592.8
2020
2021
2022
Why we measure
Sustainable revenue growth is a
key strategic ambition
LFL revenue growth %
2.9%
Definition
Like-for-like (LFL) growth adjusts
for constant currency and
excludes the impact of disposals
and acquisitions
7.1%
2.9%
2021
2022
2020
(2.4)%
Why we measure
To provide an alternative measure
on which to evaluate business
performance, excluding the
impact of foreign currency
movements and M&A
Profit before tax from
continuing operations £m
£65.3m
Definition
Profit from continuing
operations before tax
£71.5m
£65.3m
Adjusted profit before tax
from continuing operations £m
£61.8m
£68.6m
£66.6m
£18.3m
2020
2021*
2022
£66.6m
2020
2021*
2022
Why we measure
Important statutory measure of
profit from continuing operations
Definition
Profit from continuing operations
before taxation and adjusting
items
Why we measure
The key measure of profit used for
internal and external targets and
incentives
Average net working capital
(NWC) as % of revenue
17.5%
Adjusted net debt £m
8.1%
7.1%
2021
8.1%
2022
2020
£9.8m
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
Definition
Cash, short-term deposits and
current asset investments, less
bank overdrafts and borrowings
£49.2m
£30.7m
2020
2021
£9.8m
2022
Why we measure
Indicator of the overall debt
position of the Company and a way
to evaluate the financial strength
of the Group
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
The key financial metrics we focus on have evolved from FY21 as we refine the linkage between our strategy and financial performance, and reflect feedback from
stakeholders. In particular, we have included like-for-like revenue growth and focused more on operating profits.
74
PZ Cussons plc / Annual Report and Financial Statements 2022
KEY PERFORMANCE INDICATORS CONTINUED
“We have delivered a resilient
financial performance in the context
of significant cost headwinds and
the knock-on impact that inflationary
pressures have started to have on
consumer spending.”
Sarah Pollard
Chief Financial Officer
FINANCIAL CONTINUED
Adjusted basic earnings
per share from continuing
operations
12.71p
Definition
Basic earnings per share from
continuing operations adjusted for
the impact of adjusting items3
12.17p
13.12p
12.71p
2020
2021
2022
Basic earnings per share
from continuing operations
12.02p
12.02p
10.09p
5.59p
2020
2021*
2022
Why we measure
A key indicator of value
enhancement to shareholders
Definition
Basic earnings per share from
continuing operations
Why we measure
A key indicator of value
enhancement to shareholders
Adjusted operating margin %
from continuing operations
11.5%
11.2%
11.8%
11.5%
2020
2021
2022
Free cash flow
conversion %
66.4%
Definition
Operating profit from continuing
operations before adjusting items3,
as a % of revenue
Why we measure
Indicator of the return on sales
prior to adjusting items3, financing
and taxation costs
Definition
Cash generated from operating
activities less capital expenditure
as a % of adjusted EBITDA
133.3%
70.3%
66.4%
2020
2021
2022
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
Statutory operating margin %
from continuing operations
11.2%
Definition
Operating profit from continuing
operations as a % of revenue
12.2%
11.2%
3.8%
2020
2021
2022
Why we measure
Indicator of the return on sales
prior to financing and taxation
costs
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
Definitions of key terms are provided in the Glossary on page 246.
Strategic Report / Key performance indicators
75
Basic EPS from
continuing operations
12.71p
Grams of plastic
per kg of our
finished product
83
Must Win Brand
Revenue Growth
(4.8)%
Employee
wellbeing
80%
£50.2m
5.80p
6.09p
6.40p
Profit / (Loss) for the year
£19.7m
Total dividend per share
£50.2m
2020
£(9.4)m
2022
2021*
Definition
Profit or loss after tax from
all operations
Why we measure
Measures operating performance
of the Company
6.40p
Definition
Dividend per share
2020
2021
2022
Why we measure
Dividend growth is a key
performance indicator in terms of
tangible return to shareholders
STRATEGIC
Must Win Brand
revenue growth / (decline)
(4.8)%
9.5%
11.0%
2020
2021
Gross profit margin %
from continuing operations
38.7%
39.3%
38.4%
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
Definition
From continuing operations, gross
profit as a percentage of revenue
2020
2021
2022
Why we measure
Gross profit margin is key
to demonstrating progress
on price/mix growth
2022
(4.8)%
38.4%
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
76
PZ Cussons plc / Annual Report and Financial Statements 2022
KEY PERFORMANCE INDICATORS CONTINUED
NON-FINANCIAL
Health & safety
LTIFR
0.08
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
0.06
0.04
2020
2021
2022
Why we measure
To monitor the safety of
our operations
0.08
Carbon emissions total absolute
tonnes of CO2e
50,401
47,7551
49,879
49,879
Definition
Total absolute tonnes of
Scope 1 & 2 CO2e
2020
2021
2022
Why we measure
To monitor the impact of our
operations on the environment
Grams of plastic
per kg finished good
83
Definition
Grams of plastic per kilogram
of finished goods sold
76
87
83
2020
2021
2022
Why we measure
To monitor the progress against
our Plastic Promise commitment
to minimise waste and increase
recyclability
Employee wellbeing
80%
78%
80%
20212
2022
Definition
Based upon a set of questions
within our annual survey of
employees
Why we measure
To monitor the wellbeing of
our employees who are a key
stakeholder for the business
Adjusted profit before tax from continuing operations
Average net working capital (NWC) as % of revenue
Basis of calculation
Profit before tax from
continuing operations
Adjusting items3
2020
£m
2021*
£m
2022
£m
18.3
43.5
71.5
(2.9)
65.3
1.3
Adjusted profit before tax
from continuing operations
61.8
68.6
66.6
Basis of calculation
Average net working
capital
Total revenue
Average NWC as %
of revenue
2020
£m
2021
£m
2022
£m
102.5
587.2
42.9
48.3
603.3
592.8
17.5%
7.1%
8.1%
Please refer to page 83 for reconciliation of Alternative Performance Measures to
statutory results.
1
FY 2021 restated in line with the recommendations made from our external GHG inventory verification.
2 Measurement began in FY21.
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
Definitions of key terms are provided in the Glossary on page 246.
Strategic Report / Key performance indicators
77
Adjusted net debt
Must Win Brand (MWB) revenue growth
Basis of calculation
Cash and short-term deposits
Overdrafts
Current asset investments
78.7
(1.2)
0.3
2020
£m
2021
£m
2022
£m
Basis of calculation
87.0
163.8
MWB revenue reporting year
2020
£m
269.8
246.5
2021
£m
2022
£m
299.4
281.4
269.8
295.7
0.0
0.3
(0.1)
0.5
MWB revenue prior year
Revenue growth / (decline)
9.5% 11.0%
(4.8%)
Borrowings
(127.0)
(118.0)
(174.0)
Adjusted net debt
(49.2)
(30.7)
(9.8)
Adjusted basic EPS from continuing operations
Gross profit margin % from continuing operations
Basis of calculation
2020
pence
2021*
pence
2022
pence
Basic earnings per share
5.59p
10.09p
12.02p
Impact of adjusting items2
6.57p
3.03p
0.69p
Adjusted basic earnings
per share
12.17p
13.12p
12.71p
Basis of calculation
Revenue from
continuing operations
Gross profit from
continuing operations
2020
£m
2021
£m
2022
£m
587.2
603.3
592.8
227.0
236.9
227.5
Gross profit margin from
continuing operations
38.7% 39.3% 38.4%
Adjusted operating margin % from continuing operations
Statutory Operating margin % from continuing operations
Basis of calculation
Adjusted2 operating profit from
continuing operations
Revenue
Adjusted operating margin
from continuing operations
2020
£m
2021*
£m
2022
£m
65.9
71.0
67.9
587.2
603.3
592.8
11.2% 11.8% 11.5%
Basis of calculation
Statutory operating profit
2020
£m
22.4
2021*
£m
2022
£m
73.9
66.6
Revenue
587.2
603.3
592.8
Statutory operating
margin % from continuing
operations
3.8% 12.2% 11.2%
Free cash flow conversion rate
Grams of plastic per kg finished good
2020
£m
2021
£m
2022
£m
Basis of calculation
2020
MT
2021
MT
2022
MT
Basis of calculation
Adjusted EBITDA from
continuing operations1
Free cash flow1
91.4
121.8
91.7
64.5
87.3
58.0
Free cash flow conversion
rate
133.3% 70.3% 66.4%
Total plastic (metric tonnes)
20,176
20,012
17,477
Total finished goods sold
(metric tonnes)
Grams of plastic per kg
finished good
263,809 230,675 211,386
76
87
83
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
1. Please refer to page 83 for reconciliation of Alternative Performance Measures to statutory results.
2. Further details on adjusting items are set out in note 3 on page 188.
The information contained on this page is intended to assist the reader in reconciling between IFRS measures and the alternative performance measures (APMs) used
within the preceding pages of this report.
78
PZ Cussons plc / Annual Report and Financial Statements 2022
BUSINESS REVIEW
GROUP
PERFORMANCE
OVERVIEW OF GROUP FINANCIAL PERFORMANCE
We have delivered a resilient financial performance in the context of
significant cost headwinds and the knock-on impact that inflationary
pressures have started to have on consumer spending.
Revenue declined 1.7%, reflecting good LFL revenue
growth of 2.9% and the acquisition of Childs Farm, offset
by adverse FX movements and the disposal of our non-core
and low-margin yoghurt business. LFL revenue growth
was driven mainly by strong price/mix improvements.
Volume declines were modest and were driven primarily
by the normalisation of demand in the UK hand hygiene
category impacting Carex. Revenue from our Must Win
Brands declined by 4.8% as a result of the decline in Carex,
although each of our other seven existing Must Win Brands
saw growth in revenue.
The decline in adjusted operating profit margin was limited
to 30bps, as a number of pricing and cost initiatives were
successfully executed throughout the year. These largely
offset an increase in cost inflation of approximately
£40 million compared to the prior year which is equivalent
to a c.11% increase in cost of sales. Adjusted EPS declined by
3.1% as a result of the reduction in adjusted operating profit.
Statutory EPS grew 19.1% due to a one-off tax charge in the
prior period (relating to a remeasurement of the deferred tax
balances following a rate change).
Our cash flow remained strong, with free cash flow of
£58.0 million (FY21: £64.5 million), and our adjusted
net debt reduced to £9.8 million (FY21: £30.7 million)
representing leverage of 0.1x adjusted net debt/adjusted
EBITDA. Reflecting this strong cash flow generation
the Board have recommended a final dividend of 3.73p
(FY21: 3.42p).
In preparing the Group financial statements for the year
ended 31 May 2022, prior year adjustments were identified
relating to tax liabilities and impairment of intangible
assets. Further information on the nature of these items
is provided in note 1c.
Strategic Report / Business review
79
PERFORMANCE BY GEOGRAPHY
Europe and the Americas
(11.0)%
FY22 Revenue
£193.0m
(2021: £216.9m)
Group percentage
of revenue
32.6%
(2021: 36.0%)
Revenue declined 12.3% on a LFL basis, driven by the decline
in Carex revenue which continues to face tough pandemic-
driven comparatives and which more than offset strong
growth elsewhere in the portfolio. Excluding the decline in
Carex, Europe and the Americas revenue grew mid-single
digits. The statutory revenue decline of 11.0% is after
accounting for a part-year contribution from Childs Farm, the
acquisition of which completed on 21 March 2022.
The UK hand hygiene category, which comprises liquid
handwash and hand sanitiser, declined approximately
40% during the year as the household penetration gains
made during the pandemic were not fully sustained
once lockdowns ended and the prevalence of Covid-19
diminished. Carex outperformed the market however,
growing share by 2 percentage points, resulting in revenue
in Q4 of FY22 ahead of Q2 of FY20 - the period just prior to
the outbreak of Covid-19. These gains have been driven in
part by a successful ‘Through the Line’ marketing campaign.
‘Life’s a Handful’ demonstrated the functional strengths
of the product, in particular the two-hour protection
technology, as well as making the emotional connection
to the brand, recognising the role Carex can play in the
everyday lives of our consumers.
Original Source and Imperial Leather both outperformed
the broader UK washing and bathing category, in part
reflecting their product portfolio mix, with strong offerings
in the shower segment. Original Source grew as a result of a
product reformulation and a successful marketing campaign
– both on TV and on social media – with strong messaging
targeted towards Gen Z consumers, as well as the ‘I’m
Plant Based’ innovation which launched in the first half of
the year. Imperial Leather revenue declined slightly during
the year, ahead of its re-launch in June 2022, although the
brand gained some share in soap segments.
Our Beauty business saw continued good growth, due to
brand investment and expansion of distribution. St. Tropez
revenue grew overall driven by the ongoing recovery
following the pandemic and continued online growth. The
brand strengthened its leading position in the US prestige
tanning category, expanding across 300 new Target and
Kohl’s stores, which more than offset the temporary supply
chain disruptions experienced in the second half of the year.
Sanctuary Spa grew double-digits, as share gains driven by
brand investments, aligning with the broader consumer
trend of ‘self-care’, and good momentum across all retailers
more than offset a slight contraction in the category.
Charles Worthington and Fudge each grew strongly, also
benefitting from distribution expansion.
Adjusted operating margin declined by 590bps as actions
to mitigate cost increases were insufficient to offset
the full extent of the normalisation of Carex revenue.
On a statutory basis, operating profit margin declined
by 1550bps as a result of an impairment of the Charles
Worthington brand (see note 3 for further details).
Europe and the Americas
(32.6% of FY22 Group revenue)
Reported
growth/
(decline) (%)
2022
Revenue (£m)
£193.0m
(11.0)%
LFL revenue growth (%)
(12.3)%
n/a
Adjusted operating profit (£m)
£35.0m
(32.8)%
Margin (%)
18.1%
(590)bps
Operating profit (£m)
£22.9m
(61.4)%
80
PZ Cussons plc / Annual Report and Financial Statements 2022
BUSINESS REVIEW CONTINUED
PERFORMANCE BY GEOGRAPHY CONTINUED
Asia Pacific
(7.2)%
FY22 Revenue
£173.8m
(2021: £187.2m)
Group percentage
of revenue
29.3%
(2021: 31.0%)
Revenue declined 7.2% reflecting the disposal of our
non-core and low-margin yoghurt business, five:am, which
completed in June 2021. On a LFL basis, revenue grew 3.0%.
In our Hygiene category, Morning Fresh continued to grow
well. This was driven by increased retailer ranging and
online presence, as well as strong market campaigns across
TV and digital. In addition, we have benefitted from good
innovations, with new formats including the refill pouches,
Bottle for Life and the ‘Clean and Green’ range which each
launched in the second half of the year. Market share grew
by 230bps to 47.9%, making Morning Fresh larger than
the next four competitors, combined. Elsewhere, Imperial
Leather grew double-digits, mainly driven by continued
growth in our Asia distributor markets.
Following a strong year in FY21, revenue in Cussons
Baby Indonesia declined slightly as Covid-19 restrictions
significantly disrupted retail channels, particularly in the
first half of the year. Performance improved in the second
half of the year, with better pricing and sales mix and
continued growth in e-commerce. Our focus continues
to be on growing the higher margin baby toiletry sub-
categories such as oils, lotions and creams.
Rafferty’s Garden returned to very strong growth in the
second half of the year as it recovered from temporary
supply disruption and gained additional listings with retailers.
This included new wet food pouch flavours and snack
products, including a collaboration with one of Australia’s
most iconic brands, Vegemite. In addition, we have driven a
step-change in the performance of our e-commerce business,
and Rafferty’s Garden has seen a significant improvement
in online share, which is now ahead of the offline business.
Overall, the brand remains the clear market leader in baby
food in Australia, with a market share of 30.3%, representing
a slight improvement on the previous year.
Adjusted operating margin grew by 90bps driven by early
and decisive actions to mitigate cost increases through both
pricing and productivity initiatives, including localising the
supply for some of our Rafferty’s Garden snack lines. On
a statutory basis, margins grew by 1020bps as operating
profit included the profit on disposal of five:am and
compensation received from the Australian Competition &
Consumer Commission relating to an historical legal claim.
Asia Pacific
(29.3% of FY22 Group revenue)
Reported
growth/
(decline) (%)
2022
Revenue (£m)
£173.8m
(7.2)%
LFL revenue growth (%)
3.0%
Adjusted operating profit (£m)
£20.9m
Margin (%)
Operating profit (£m)
12.0%
£37.0m
n/a
1.0%
90bps
77.9%
Strategic Report / Business review
81
Africa
15.3%
FY22 Revenue
£222.0m
(2021: £192.6m)
Group percentage
of revenue
37.4%
(2021: 31.9%)
LFL revenue growth of 22.3% was driven by improvements
in both price/mix and volume, with strong distribution
gains. Each of our major brands, including the portfolio
brands Stella, Canoe and Robb, reported double-digit LFL
revenue growth. Statutory revenue growth was slightly
lower, at 15.3%, as a result of the devaluation of the Naira.
Cussons Baby continued to grow strongly through
expansion of the product portfolio and driving trial usage
and awareness through the hospital activation programme
for mothers-to-be, positioning the brand as the most
trusted in baby care. In Ghana and Kenya, we similarly
continue to build penetration.
In our Hygiene business, Premier saw very strong growth,
gaining share in both the anti-bacterial and family soap
segments. This was driven in part by strong promotional
activity, with one campaign for Premier Cool reaching
around 35 million consumers via targeted digital marketing
over a two-month period.
Morning Fresh maintained its market-leading position in
the dishwashing category in Nigeria despite significant
price increases and a number of regional and local players
entering the category. Imperial Leather in Kenya grew
strongly, driven by innovation execution. The initial
performance of Carex following its re-launch during
the year has also been strong and we see significant
opportunity for the brand to build over time.
Our electricals revenue grew over 20% on a LFL basis,
driven by a series of price increases across main product
lines, and contributed revenue of £91.5 million. Gross
margins improved as we continue to prioritise growing the
profitability of the business.
Adjusted operating margin grew by 440bps. Against a
backdrop of very strong cost inflation, this was achieved
through successive price increases throughout the
year, as well as a focus on optimising product mix. This
included a 10% shift in the product mix of Premier, away
from the family soap segment, towards higher-margin
medicated products. On a statutory basis, operating profit
margin increased 820bps reflecting the profit on disposal
of property in Nigeria as part of the Group’s Nigeria
simplification project.
Africa
(37.4% of FY22 Group revenue)
Revenue (£m)
LFL revenue growth (%)
FY22
£222.0m
22.3%
Adjusted operating profit (£m)
£22.3m
Margin (%)
Operating profit (£m)
10.0%
£28.6m
Reported
growth/
(decline) (%)
15.3%
n/a
108.4%
440bps
217.8%
82
PZ Cussons plc / Annual Report and Financial Statements 2022
FINANCIAL REVIEW
OTHER FINANCIAL ITEMS
Operating profit
Adjusted operating profit for the Group was £67.9 million,
which compares to £71.0 million in the prior year. This was
due to a 1.7% decline in revenue, with LFL revenue growth of
2.9% being more than offset by the net effect of M&A and FX
movements. The gross profit margin declined by 90bps. While
productivity initiatives largely offset the significant levels of
input cost inflation, we experienced an adverse mix effect
as a result of the very strong revenue growth in our African
business which is lower margin. Carex also contributed to the
margin reduction, as a result of the decline in revenue and
some stock provisions. Brand Investment decreased 70bps
primarily reflecting more normal levels of Carex investment,
while overheads increased 20bps as we invest in capabilities.
PZ Wilmar, our joint venture, performed strongly and
contributed £6.6 million to operating profit. Operating profit
declined 9.9% to £66.6 million as a result of the decline in
revenue and the impairment charge.
Adjusting items
Adjusting items in the year totalled a loss of £1.3 million
before tax. This included a net £7.8 million income from
our Nigeria simplification project where a £15.9 million
profit related to the disposal of property was offset by
£8.1 million of costs mainly driven by the impairment of
factory assets and associated engineering spares held in
inventory, £11.6 million of impairment charges related to
the Charles Worthington brand, an £8.5 million reversal
of previous impairment charges relating to the Rafferty’s
Garden brand and £4.3 million of costs associated with
various transformation programmes which were initiated
during FY22 and FY21. See note 3 for further details on
adjusting items.
After accounting for these adjusting items, operating profit
for the Group was £66.6 million which was £7.3 million
lower than the prior year.
Net finance costs
Net finance costs in the year were £1.3 million, compared
to £2.4 million in the prior period, as slightly higher interest
costs were more than offset by increased interest income
on cash deposits.
Profit before tax was £65.3 million, £6.2 million lower
than the prior period. Adjusted profit before tax was
£66.6 million (FY21: £68.6 million).
Taxation
The tax charge in the year for continuing operations was
£13.3 million compared to £29.3 million in the prior year.
One off items, including anticipated changes in UK
corporation tax rates, adversely impacted the 2021 effective
tax rate (ETR), with a return to a more normalised ETR in
2022 reflecting the global footprint of the Group. On an
adjusted basis, the ETR for FY22 was 19.5% (FY21: 21.0%).
Profit after tax
Profit for the year from continuing operations was
£52.0 million, which compared to £42.2 million in the prior
year. Basic earnings per share were 12.02p, compared to
10.09p in the prior year. Adjusted basic earnings per share
were 12.71p, which compares to 13.12p in the prior year.
This 3.1% reduction is predominantly due to the reduction
in revenue and the decline in gross profit margin.
The loss from discontinued operations in the year was
£1.8 million, which was driven by the settlement of legal
claims relating to Minerva, a Greek subsidiary which was
disposed of in September 2019. In the prior year, the
loss of £51.6 million from discontinued operations was
predominantly driven by the loss on disposal of Nutricima.
Profit for the year was £50.2 million compared to a loss of
£9.4 million in the prior year.
Balance sheet and cash flow
Adjusted net debt as at 31 May 2022 was £9.8 million
(FY21: £30.7 million). The reduction was due to the cash flow
from operations, and £25.8 million of proceeds received
from the disposal of non-core assets, including five:am,
the Group’s Australian yoghurt brand, and residential
properties in Nigeria. These were offset by the investment
of £37.0 million to acquire Childs Farm. Net assets of
£449.3 million (FY21: £371.5 million) further reflect the
Group’s strengthening balance sheet and the movements
in pension schemes.
The Group is funded by a £325 million revolving credit
facility of which £174 million was drawn as at 31 May 2022.
The facility is committed until 28 November 2023 and we
are confident of refinancing this in due course.
Total free cash flow was £58.0 million (FY21: £64.5 million)
which included a net working capital outflow as we
have sought to increase stock levels given supply chain
uncertainty and cost volatility.
Dividend
The Board is recommending a 9% increase in the final
dividend, at 3.73 pence (FY21: 3.42p) per share, making
a total of 6.40 pence (FY21: 6.09p) per share for the year.
This overall 5.1% increase reflects the Board’s confidence
in the Group’s financial resilience and future growth
prospects. Subject to approval at the AGM, which will be
held on 24 November 2022, the final dividend will be paid
on 30 November 2022 to shareholders on the register at
the close of business on 21 October 2022.
Strategic Report / Financial review
83
Year ended
31 May 2022
Year ended*
31 May 2021
£65.3m
£71.5m
£1.3m
£(2.9)m
£66.6m
£68.6m
£1.3m
£2.4m
£19.4m
£20.7m
£87.3m
£91.7m
£66.2m
£73.4m
£(8.2)m
£(8.9)m
£58.0m
£64.5m
66.4%
70.3%
£66.6m
£73.9m
£1.3m
£(2.9)m
£67.9m
£71.0m
£592.8m
£603.3m
11.5%
11.8%
12.02p
10.09p
0.69p
3.03p
12.71p
13.12p
£163.8m
£87.0m
£(0.1)m
–
£0.5m
£0.3m
£(174.0)m
£(118.0)m
£(9.8)m
£(30.7)m
£87.3m
£91.7m
£(9.8)m
£(30.7)m
0.1x
0.3x
Reconciliation of Alternative Performance Measures to Reported Results
Statutory 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
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
Adjusted net debt
Adjusted EBITDA
Adjusted net debt
Net debt / adjusted EBITDA
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c on page 173.
1. Free cash flow conversion is free cash flow divided by adjusted EBITDA.
84
PZ Cussons plc / Annual Report and Financial Statements 2022
RISK MANAGEMENT
ENABLING OUR
STRATEGIC PROGRESS
Our approach to risk management
The Group uses a risk management process and common risk framework to ensure we identify,
assess and mitigate risks that threaten the successful delivery of strategic objectives.
Our risk management processes include initial identification
of risks, including emerging risks, at the operational level.
These risks are then assessed, including an assessment of
the potential impact of the risk on our business, whether
the risk is increasing or decreasing and at what pace, and
the extent to which the risk can be mitigated or controlled.
The process also seeks to establish our appetite for each
risk, and to balance the level of risk and opportunity in our
overall portfolio.
Risk management is the responsibility of the Board, which
it has primarily delegated to the Audit & Risk Committee.
The Board periodically reviews the top risks in the register
with deeper interrogations into specific risks taking place
in either the Audit & Risk Committee (see pages 110 to 115
for further information) or in other committees which have
coverage of the specific matter to which a risk relates. The
Audit & Risk Committee also assesses the effectiveness of
the risk management framework.
The Executive Leadership Team (ELT) periodically reviews
risk registers, operating both top-down and bottom-up
approaches to ensure significant strategic and operational
risks are identified and that all principal and emerging risks,
are assessed. In addition, ‘deep dive’ reviews of specific
principal risks may be 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 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 interim 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 counterparty
credit risk exposure, ensure the resilience of our supply
chain particularly amid 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, our recent acquisition of Childs Farm
or our ambitious sustainability targets including our
B Corp ambitions. We seek to mitigate our risk exposure
to within target levels through insurance cover, planning,
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 seeks to apply 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.
In FY21, the Group adopted these risk management
processes. Over the course of FY21 and FY22, the Board
reviewed their effectiveness. Whilst acknowledging an
improvement over the previous processes, the Board noted
that risk management could be better integrated into the
overall business planning and management processes.
A new Head of Internal Audit is expected to join the Group
in FY23 who will lead a review of the risk management
processes and resourcing with a view to further embedding
risk management within our business.
OUR RISK MANAGEMENT PROCESS
Identifying and assessing risk and implementing effective
risk mitigation activities are essential elements of ensuring
that we are able to deliver on our strategy.
N I T O R &
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Our approach to emerging risk
New and emerging risks are identified in a number of ways:
• Potential new and emerging risks are reported to the
Board and considered during its periodic 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 advisers including its
lawyers across all relevant territories, accountants and
tax advisers, internal audit partners, insurance brokers,
health and safety advisers, and sustainability and PR
advisers. 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.
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.
Strategic Report / Risk management
85
OUR RISK MANAGEMENT FRAMEWORK
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.
Those risks that we believe are currently most prominent
or increasing are:
• IT and Information Security: we continue to see high
levels of cyber attacks which if not prevented or
otherwise mitigated, could result in a loss of key business,
systems and/or result in material losses. We manage this
by employing cyber security systems and by deploying
comprehensive awareness and training programmes.
• Consumer, customer and macro-economic trends:
we continue to see cost of living challenges in most of
our markets while commodity cost inflation continues
to increase our cost of goods. We manage this risk by
focusing on reducing costs where possible without
impacting the consumer experience and by building
strong brands that can maintain strong margins.
• People and talent: as workers adapt to the new ways
of working post Covid, and as recent inflation trends
begin to impact wages, we are seeing significant
competition to recruit and retain top talent. We mitigate
this challenge by focusing on creating an excellent
working culture, investing in learning and development,
ensuring our employees are engaged and have good
career opportunities and by remaining competitive
on remuneration.
• 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. We have set out an ambitious
plan to mitigate this risk, including our new sustainability
targets set out on page 44.
86
PZ Cussons plc / Annual Report and Financial Statements 2022
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
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10
3
2
7
1
4
9
5
8
LIKELIHOOD (GROSS)
LINK TO STRATEGY
1 Where To Play
We have a clear focus on the leading brands in our
core categories within our priority markets.
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
RISKS
1 Consumer, customer and economic trends
2 Talent development and retention
3 IT and information security
4 Sustainability and environment
5 Business transformation
6 Health & safety
7 Supply chain and logistics
8 Legal and regulatory compliance
9 Financial Controls (Treasury and tax)
We have reshaped our purpose and our values, ensuring
each person in the organisation is clear on their role and
engaged in executing our new strategy.
10 Pandemic
5 Developing leaders at all levels
We have re-established the rhythms and disciplines
of talent management 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.
Strategic Report / Principal risks and uncertainties
87
RISK 1: CONSUMER, CUSTOMER AND ECONOMIC TRENDS
Trend:
Link to Strategy: 1, 2, 7
Description of risk:
Measures to manage risk:
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. We remain focused on cutting any costs we can from our
products that do not impact the consumer experience or sacrifice performance or quality.
We may also increase prices where necessary in the face of increasing costs.
We continue to focus on maintaining strong relationships with our existing customers and
developing relationships with new customers. In our developed markets we have joint
business plans 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.
In the aftermath of the Covid-19 pandemic,
the world is now facing significant inflation,
in many areas for the first time in a generation.
Significant increases to essential commodities
including raw materials needed to
manufacture our products is placing significant
pressure on our cost of goods. At the same
time, these inflationary pressures are creating
a cost of living crisis amongst our consumers
who are having to make difficult decisions on
how to allocate their resources. As our input
costs rise, our ability to increase our prices
may not completely cover such cost increases
resulting in decreasing margins. Where we
are able to successfully execute cost increases
some of our valued consumers may choose to
trade-down to lower-priced, lower-performing
products which could impact sales volumes.
We anticipate that there will be pressure from
customers for us to absorb cost inflation and
indeed we have recently seen high profile
examples of major consumer goods companies
pulling goods from shelves of retailers where
they could not agree new terms.
RISK 2: TALENT DEVELOPMENT AND RETENTION
Trend:
Link to Strategy: 1, 2, 3, 4, 5, 7
Description of risk:
Measures to manage risk:
We recognise that 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. Following the Covid-19
pandemic, companies saw a large increase in
attrition, sometimes referred to as ‘the great
resignation’. Since then, the competition
for top talent has increased significantly,
particularly in areas such as IT and e-commerce
which saw accelerated growth through
the pandemic. With the increasing global
uncertainty and the enduring impacts of
COVID-19, we also see employee wellbeing
as an increasing risk along with increasing
demands from employees around flexible
and hybrid working solutions.
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 holding quarterly global
Town Hall meetings. We have increased our focus on wellbeing, launching specific initiatives
in our market aimed at providing wellness support and education and mental health
support through our employee assistance hotline.
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 to 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.
A major development in the year has been the launch of the Workday IT system, providing
greater efficiency, visibility and consistency in these areas. We have also implemented
hybrid and virtual working arrangements across our markets, which are enabled by the
deployment of IT platforms such as Microsoft Teams and Office 365.
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
TREND
Increased
Same
Decreased
88
PZ Cussons plc / Annual Report and Financial Statements 2022
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
RISK 3: IT AND INFORMATION SECURITY
Trend:
Link to Strategy: 3, 6
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 support this via 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 along with recent geo-political developments that are seeing increasing
cyber-attack activity.
RISK 4: SUSTAINABILITY AND ENVIRONMENT
Trend:
Link to Strategy: 1, 3, 6
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 require 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.
We recently announced the appointment of our first Chief Sustainability Officer to lead
the efforts in this area under the guidance of the Board’s newly appointed ESG Committee.
Our ESG activities, in particular, our environment, sourcing and community programmes,
ensure that we understand and take account of the sustainability 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, including
our recently announced sustainability goals set out on pages 44 and 45. We have
also improved our processes aimed at ensuring that our supply chain aligns with our
sustainability goals, including the launch of our new third party risk management platform
provided by Dow Jones which helps us ensure that our supply chain is free from all forms
of corruption and modern slavery.
RISK 5: BUSINESS TRANSFORMATION
Trend:
Link to Strategy: 4, 6, 7
Description of risk:
Measures to manage risk:
We will continue to strive 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.
Following the launch of our new strategy last year, we have been focusing on embedding
this across all areas of the business. Various dedicated steering committees, 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.
Our new adjusting items policy and a dedicated ELT forum track the delivery, cost and
accounting treatment for a number of these transformational projects. FY22 saw the launch
of the controls transformation project and the successful delivery of Phase 1 of our HR
transformation with the launch of our Workday platform.
Strategic Report / Principal risks and uncertainties
89
RISK 6: HEALTH & SAFETY
Trend:
Link to Strategy: 1
Description of risk:
Measures to manage risk:
The health and safety of everyone who is
impacted by our business and the wellbeing
of our consumers, employees and visitors
are of paramount importance to us. 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 a 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 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 and safety framework.
Having delivered the new health and safety policy, our focus is on cultural initiatives to
ensure that the policy is embedded in the business. This includes investment in health and
safety awareness and training.
RISK 7: SUPPLY CHAIN AND LOGISTICS
Trend:
Link to Strategy: 3, 6
Description of risk:
Measures to manage risk:
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.
Our production and distribution facilities
could be severely impacted by adverse
events, such as a failure of a key supplier, a
health and safety incident, an environmental
failure or global events. We have felt this
risk increase recently as a result of Covid-19
lockdowns, including recent lockdowns in
China, the war in Ukraine, well-publicised
shipping and logistics challenges including
port delays and the Suez Canal blockage
and shortages of key commodities and
input materials.
RISK 8: LEGAL AND REGULATORY COMPLIANCE
Trend:
Link to Strategy: 3, 6
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 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 and regulatory 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. Last year
we launched our first Code of Ethical Conduct, replacing the anti-bribery and corruption
policy, which had been launched the year before. This year, the focus has been on training
related to the Code, as well as the first annual code certification exercise. This year also
saw the appointment of a new Group Head of Ethics and Compliance reporting to our
General Counsel, along with a dedicated Ethics and Compliance manager for Nigeria.
We also provided training to our board and ELT on the recent rise in litigation related to
sustainability claims.
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
TREND
Increased
Same
Decreased
90
PZ Cussons plc / Annual Report and Financial Statements 2022
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
RISK 9: FINANCIAL CONTROLS (TREASURY AND TAX)
Trend:
Link to Strategy: 3
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 a 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.
These specific treasury and tax risks are part
of our overall financial control framework.
Equally, as an international integrated Group,
we must comply with transfer pricing and
other related policies and laws in each of our
markets which can change from time to time
with little notice.
RISK 10: PANDEMIC
Description of risk:
While the immediate effects of the Covid-19
pandemic and associated lock-downs and
other restrictions were more prevalent in
FY21, these have not completely subsided
and the world continues to be subject to
uncertainty around travel restrictions,
office attendance and the possibility of new
variants or other strain on public health
infrastructure resulting in further lockdowns.
Like all businesses, we continue to maintain a
high-risk awareness in this area, although we
consider that 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.
There is also the continued risk to the
business through both the wider economic
uncertainty which the pandemic has
generated and may yet continue to generate,
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.
We maintain an established Group Treasury function and our Group Treasury policy defines
our non-speculative approach to the management of foreign currency exposures, all
overseen by our recently appointed Group Director of Treasury and Tax.
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 advisers to ensure compliance with all local and international tax
regulations and treaties.
This all forms part of our overall financial control framework, which is being reviewed
and improved where necessary as part of our recently launched Controls Transformation
Project, which will be implemented with the support of the recently appointed Director
of Internal Control.
Trend:
Link to Strategy: 1, 2, 3, 6
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 establishment of 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 employee surveys
and virtual meetings, to ensure that we support each other.
We have also been able to effectively manage the additional operational risk, increase
supply and launch new products as required, 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 again lowered the risk profile of this separate pandemic risk due to
the lifting of restrictions, the vaccine roll out and the existence of contingency plans in
the business, we recognise that pandemic risk will continue to present itself in many
different areas as we move to our new way of working and see the pandemic continue
to impact parts of the world at different times, for example the recent lockdowns in
China. We maintain our diligence in this area and have considered these elements in
relation to separate risks.
The Strategic Report was approved by the Board and signed on its behalf by Kevin Massie, Company Secretary, on 28 September 2022.
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
TREND
Increased
Same
Decreased
Strategic Report / Principal risks and uncertainties
91
Going concern statement
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 18 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 below.
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.
• 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
four-year period. The strategic planning process is led by
the CEO and is fully reviewed by the Board.
• The investment planning cycle, which covers four years.
The ELT considers, and the Board reviews, likely customer
demand and manufacturing capacity for each of its
key markets. The four-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 four
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 four-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.
• The likelihood and impact of severe but plausible
scenarios in relation to principal risks as described on
pages 86 to 90. 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 four-year assessment
period.
92
PZ Cussons plc / Annual Report and Financial Statements 2022
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Bottom-up scenarios
Each of the principal risks identified on pages 86 to 90 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
1. CONSUMER, CUSTOMER, ECONOMIC
a. Pandemic / War (related economic downturn,
downward revenue impacts & inflationary
impacts to cost base) – 4% y-o-y reduction in
revenue in UK, Beauty, Australia, and Indonesia.
Reduction in TGM% vs base case by 6ppt in the same
markets. Testing basis derived through analysis of
actual pandemic impacts during Covid-19 and using
plausible rates based on this benchmarking.
b. Competitive landscape leading to higher M&C
spend – M&C % increased by 2ppt above base case,
derived by reference to similar situations in FY20
and FY21.
c. Nigeria impact (general economic & political
uncertainty) – Naira devaluation and/or reduced
overall profit – £11 million decline in Operating
Profit in Nigeria in FY23 - based on repeat of FY19
to FY20 profit reduction. 50% of impact carries into
FY24, then resumes in line with the base case.
10. Pandemic / health crisis
1.
Consumer, customer and
economic trends
The Group has and is continuing to
strengthen its capabilities in revenue
growth management, marketing and supply
chain. These capabilities are important to
counteract such pressures and the Group
has already demonstrated its ability to
mitigate significant input cost inflation over
the last financial year.
Procurement constantly works with vendors
to obtain the best prices. Known cost
increases are already factored into the
budget and forecasts.
2. TALENT DEVELOPMENT AND RETENTION
a. Revenue reduction & negative margin impact
2.
Talent development and
retention
(i.e., worse performing team) – 5% y-o-y reduction
in revenue in UK, Beauty, Australia, Indonesia and
Nigeria Family Care. Reduction in TGM% vs base case
by 5ppt in the same markets. Testing basis derived
through analysis of actual pandemic impacts during
Covid-19 and using plausible rates based on this
benchmarking.
b. Increased recruitment fees – y-o-y increase in
Employee Costs in line with latest available inflation
data for UK, ANZ, Nigeria and Indonesia.
3. IT / INFORMATION SECURITY AND
FINANCIAL CONTROLS
3.
IT / information security
9. Financial controls
a. Fines (i.e., regulatory) – one off charge of
£25.5 million as result of GDPR regulation breach
in FY23, based on GDPR penalty regime currently in
place.
b. Reputation – reduced revenue – Flat revenue Group
wide for the duration of the plan from
FY23 onwards.
c. Business continuity (cyber-attack scenario)
– short term business closure, etc - Loss of 1 month
of Group revenue in FY23 (a recent study in the UK
suggests that the median cost of a cyber-attack in
the UK is £28k).
4. SUSTAINABILITY AND ENVIRONMENT
a. Regulatory environment, e.g., taxes/levies
– Plastics Tax reduces profitability by £6m per year
(extrapolating from assessment of unmitigated
impact of recently introduced UK plastic tax).
b. Consumer choice, e.g., Revenue impacts – Y-o-Y
revenue growth reduced by 1ppt vs base case in all
major markets (UK, Beauty, Australia, Indo, Nigeria).
c. Lost production (factory loss from flooding etc)
– Loss of 3 months of revenue in FY23 in Indonesia.
4.
Sustainability and
environment
The Group has and is continuing to
strengthen its culture, values and training
in order to make PZ Cussons an attractive
place to work in order to attract talented
employees.
Sufficient financial facilities headroom
maintained and tightly controlled
overheads.
Sufficient financial facilities headroom
maintained and tightly controlled
overheads.
The temporary loss of system access
is highly unlikely to affect the Group’s
performance as there are detailed
contingency plans in place to cover such
eventualities as well as sufficient inventory
on hand to cover any temporary loss of
production.
Increasing the proportion of PCR plastic in
the Group’s products to avoid tax on virgin
plastics.
Improving the Group’s capabilities in
revenue growth management, marketing
and supply chain.
The temporary loss of production is highly
unlikely to affect the Group’s performance
as there is sufficient inventory on hand to
cover such eventualities.
Strategic Report / Principal risks and uncertainties
93
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. 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. The ratio of net debt
to EBITDA at the end of FY22 of 0.1x remains substantially
below the maximum covenant level under the Group’s
lending facilities, providing significant headroom. Current
committed debt facilities mature in November 2023,
however, management has held preliminary discussions
with both current and prospective members of the banking
syndicate and the Board is confident that renewal of the
revolving credit facility will not be problematic.
Reverse stress testing
Management has 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
significantly, by more than 96% from it’s current FY22 level,
and the Board does not believe this scenario to be plausible.
Management would take mitigating actions to avoid such
a decline in performance long before it would occur,
such as reducing the dividend payment, stopping capital
expenditure or taking other actions to preserve cash.
94
PZ Cussons plc / Annual Report and Financial Statements 2022
INTRODUCING OUR VALUES
PZ Cussons people
aspire to be our BEST
BOLD
ENERGETIC
STRIVING
TOGETHER
See Our Values / Page 18
IN OUR TEAMS WE ARE
ENERGETIC
DYNAMIC AND PROACTIVE,
CAPABLE AND FLEXIBLE,
EMBRACING CHANGE
AND MOVING FAST INTO
THE FUTURE
Governance / Introducing our BEST values
95
96 Our Board
98 Chair’s introduction to governance
100 Board leadership and
Company purpose
104 Governance framework
106 Nomination Committee report
110 Audit & Risk Committee report
116 ESG Committee report
118 Remuneration Committee report
124 Remuneration Policy
132 Report on Directors’ remuneration
144 Report of the Directors
E
C
N
A
N
R
E
V
O
G
Our ENERGETIC value in action:
WE ARE UP FOR
EVERY CHALLENGE
• adapting with agility to
stay ahead
• responding at speed,
building momentum
• evolving to overcome
every obstacle in our way
96
PZ Cussons plc / Annual Report and Financial Statements 2022
OUR BOARD
A DIVERSE AND
EXPERIENCED BOARD.
1
4
7
2
5
8
3
6
9
Gender diversity*
Tenure
5
44%
4
44%
5
4
Ethnicity
2
29%
7
Female
Male
0–3 years > 5 directors
4–7 years > 4 directors
Other
British
* As at 31 May 2022 and as at the date of the report.
Directors’ core areas of expertise
• UK institutional shareholders
• Recent financial experience
• Remuneration experience
• Chair skills
• Mentoring and coaching skills
• Sector experience
• 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
Governance / Board of Directors
97
1
Caroline Silver N E
Non-Executive Chair
Appointed: 2014
4
Kirsty Bashforth N R E
Non-Executive Director
Appointed: 2019
7
Dariusz Kucz A N E D
Non-Executive Director
Appointed: 2018
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 is a chartered accountant and over
a 30+ year career in investment banking.
She has previously held senior corporate
finance and mergers and acquisitions
positions at Morgan Stanley, Merrill Lynch
and most recently at Moelis and Company.
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 The
Intercontinental Exchange, Inc.
2
Jonathan Myers E
Chief Executive Officer
Appointed: 2020
Skills & experience: Jonathan is an experienced
FMCG executive, having worked for a number
of well-known global branded consumer
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 & 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
3
Sarah Pollard E
Chief Financial Officer
Appointed: 2021
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
worked in investment banking, specifically
in mergers & 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: 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 the Asia
Pacific, and Wrigley, where he was regional VP,
Central and Eastern Europe.
Independent: Yes
8
Jitesh Sodha A R E
Non-Executive Director
Appointed: 2021
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 Green Energy International,
Mobile Streams, where he led their IPO, and
T-Mobile International UK.
Independent: Yes
Other appointments:
• CFO of Spire Healthcare Group plc
9
Valeria Juarez R E
Non-Executive Director
Appointed: 2021
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
Skills & experience: Kirsty is Chief Business
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 co-
ordination 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
5
Jeremy Townsend A R E
Non-Executive Director
Appointed: 2020
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
6
John Nicolson A N E
Senior Independent Director
Appointed: 2016
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, regional president
Americas and executive committee member
at Heineken NV and more recently Chair of
AG Barr plc. 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
Committees
A
R
D
Audit & Risk Committee
Remuneration Committee
N
E
Nomination Committee
ESG Committee
Director with responsibility for representing the employee
voice and employee engagement
Chair
98
PZ Cussons plc / Annual Report and Financial Statements 2022
CHAIR’S INTRODUCTION TO GOVERNANCE
This past year has seen further strategic progress and
continuing governance improvements as we strive to
create a simpler business with the right focus on
governance and controls.
Board composition and succession
planning
It has been a relatively stable year
for our Board with our most recent
Directors, Jitesh Sodha and Valeria
Juarez joining in July and September
2021 respectively. After a few years
of significant change to our Board
and Executive Leadership Team,
FY22 saw a focus on establishing our
ways of working and ensuring good
communications and performance.
The Board has seen significant
improvements over the year in terms
of Board processes and the quality
of management reporting, which
in turn has made for better Board
meetings with a greater focus on
strategy and growth. Our most
recent internally facilitated Board
evaluation showed that we believe
our Board to have a strong mix of
skills to lead the Company through
its transformational journey and to
meet the challenges that lie ahead.
The appointment of Jitesh Sodha
demonstrates our commitment to the
board composition requirements of
The Parker Review on ethnic diversity.
Caroline Silver
Non-Executive Chair
Succession planning will be a priority
for the Board in FY23. I will be
reaching my ninth anniversary on the
Board in April 2023, and in line with
the Corporate Governance Code I do
not intend to stand for re-election
at the 2023 AGM. A process has
begun to identify my successor, led
by John Nicolson, as SID. Further
details are set out in the Nomination
Committee report. Also having
recently strengthened our Executive
Leadership Team, the Board will
need to ensure that we refresh our
executive succession plans to reflect
our new team structure, with the
appropriate focus on inclusion
and diversity.
ESG
As we announced in last year’s annual
report and accounts, the Board has
increased its focus on ESG, creating
a standing ESG Committee of the
Board. Over the course of the year,
the Committee established its terms
of reference and set out an ambitious
agenda which included the approval
of our revised sustainability targets
which were recently published on our
website at www.pzcussons.com and
which are explained on page 116, and
44 of this Report.
Internal controls
We have continued to make
improvements to our internal
controls environment, both to
continue to address some of the areas
for improvement identified in the
controls review we commissioned
in FY20, and also to prepare for
anticipated changes to legislation
and regulation relating to corporate
governance and internal controls.
This controls transformation project
has been overseen by the Audit & Risk
Committee, and more details are set
out in the Audit & Risk Committee
report on page 110.
Following FY21’s launch of our new
Group Code of Ethical Conduct,
FY22 saw the launch of e-learning
modules, training seminars in our
factories and an online certification
programme aimed at ensuring that the
Code is fully-embedded throughout
our business. I am pleased to say we
saw a high degree of engagement
both in terms of participation in
the training modules and in overall
awareness of the Code and its
requirements.
FY22 also saw the launch of a
refreshed Supplier Code of Conduct,
aimed at ensuring that our standards
of ethics and integrity apply
throughout our supply chain. Initial
responses to the new Supplier Code
of Conduct have been positive.
Lastly, we partnered with Dow
Jones to launch a third party risk
management tool to enable us to
more effectively conduct screening
and due diligence throughout our
supply chain.
Governance / Chair’s introduction to governance
99
Values, Purpose and Culture
After launching our new strategy
just over a year ago, the Board also
supported the launch of a new set of
values for the Group. Our BEST values
were launched earlier in FY22 to a
very positive reception and the Board
believe that these values strongly
reflect and support the Company’s
culture and purpose. Our new values
were developed internally through
extensive consultation with our teams
and so the Board sees a strong sense
of ownership of our BEST values
within our employee base. Following
the launch of our BEST values,
the Board engaged directly with
employees in a number of different
ways, from internal social media, to
Town Hall and small group sessions
held by a number of our Directors as
they travelled to our priority markets.
Further details on the launch of our
BEST values are set out on page 18.
Outlook
Looking ahead, in FY23 we will be
continuing our focus on ESG and the
implementation of our sustainability
strategy. Succession planning,
both in terms of the current Chair
succession activities but also
refreshing longer term succession
plans for key Board and Executive
roles, will also be a priority through
the work of the Nominations
Committee. In addition, we will
continue to focus on strengthening
our governance processes and internal
controls and continue to execute our
transformational plans to simplify our
business in line with our strategy.
I firmly believe that we have the
correct strategy in place, supported
by the right individuals at Board level
and throughout the business, and
that we will continue the progress we
have made in driving performance
and operational improvement
throughout FY22.
Caroline Silver
Non-Executive Chair
28 September 2022
100
PZ Cussons plc / Annual Report and Financial Statements 2022
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 2022. 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 103
Composition, succession and
evaluation (including the
Nomination Committee report)
Pages 106 to 109
Audit, risk and internal control
(including the Audit & Risk
Committee report)
Pages 110 to 115
Remuneration (the Directors’
Remuneration report)
Pages 132 to 143
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 24 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 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 2022.
The Board held six 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 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.
Governance / Board leadership and company purpose
101
Board Activity
Board activity during the year
July 2021
September 2021
November 2021
January 2022
March 2022
May 2022
• CEO report
• CEO report
• CEO report
• CEO report
• CEO report
• CEO report
and strategy
discussions
and strategy
discussions
and strategy
discussions
and strategy
discussions
and strategy
discussions
and strategy
discussions
• CFO report and
operational
discussions
• CFO report and
operational
discussions
• CFO report and
operational
discussions
• CFO report and
operational
discussions
• CFO report and
operational
discussions
• CFO report and
operational
discussions
• Report from
Committee
Chairs and
Employee
Engagement
Champion
• Report from
Committee
Chairs and
Employee
Engagement
Champion
• Report from
Committee
Chairs and
Employee
Engagement
Champion
• Report from
Committee
Chairs and
Employee
Engagement
Champion
• Report from
Committee
Chairs and
Employee
Engagement
Champion
• Report from
Committee
Chairs and
Employee
Engagement
Champion
• Board evaluation
• Approval of
• Approval of ESG
• Review of interim
results
• Market review
– Nigeria
report
• Review proposed
set up of ESG
Committee
full-year results
announcement
Committee terms
of reference
• Dividend
recommendation
• Review of
committee
memberships
• Governance
• Approval of
review including
updating
the schedule
of matters
reserved for
Board decision,
statement
of Board
responsibilities
• Market review
– ANZ
Annual Report
and financial
statements
• Approval of AGM
materials
• Approval of
Company values
• Market review
– Indonesia
• Budget planning
and approach
• Market review –
UK personal care
• Budget approval
• Market review
– Beauty
• Functional review
• Functional review
– Supply Chain
– Finance
• Review of
• TCFD and
ESG reporting
requirements
committee terms
of reference
• Approval of
Sustainability
Charter
102
PZ Cussons plc / Annual Report and Financial Statements 2022
BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED
Stakeholder engagement
Workforce engagement
The Board recognises that employee
engagement is the responsibility of
the whole Board. For FY22 a plan was
approved by the Board setting out
agreed principles on engagement,
core themes to address based on
feedback from the global employee
survey and a calendar of events to
ensure engagement takes place
across the year, and across all markets.
A designated Non-Executive Director,
Dariusz Kucz, has responsibility for
ensuring that the Board successfully
engages with our workforce and
reports on progress at most
Board meetings.
Core themes for the year have been:
• Strategy, including new purpose,
culture and values
• Employee safety and wellbeing
• Learning and careers
• Adjusted working practices through
and beyond the Covid-19 pandemic.
As well as the global employee survey,
other forms of engagement include
regular Town Halls – both globally
and locally, workforce engagement
on executive remuneration,
designated NED market visits, and
regular meetings with Culture
Ambassadors who play an important
role in driving cultural change.
The Board continues to monitor the
Company’s culture throughout our
business transformation, having
received a training presentation on
measuring company culture during
the year and receiving periodic
reports from management and its
own engagements whether through
employee surveys, town hall meetings,
individual engagements during Board
travel and through the launch of
the BEST Values and our refreshed
Company purpose.
For FY23 the plan for employee
engagement will continue to be
developed, and will incorporate
findings from the annual global
employee survey, together with
feedback from the engagement
sessions that have taken place in
the past year.
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 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.
At the 2021 AGM, resolutions
re-electing two Non-Executive
Directors were passed with the
necessary majority but with a number
of votes against by the independent
shareholders. Following this, the
Board has engaged with shareholders
and will continue to do so to balance
the views of all shareholders.
Annual General Meeting (AGM)
At each AGM there is an update on
the progress of the business over the
last year and also on current trading
conditions. All shareholders, including
private investors, have an opportunity
to present questions to the Board
at the AGM, and the Directors
make themselves available to meet
informally with shareholders before
and after the 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.
Governance / Board leadership and company purpose
103
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 an appropriate balance is maintained between Executive and Non-Executive Directors with the skills,
experience and expertise to provide guidance, challenge and oversight to the Board and executive management
• 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
• Executive management matters affecting the Group and leading the Executive Leadership Team
• 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
• Ensuring, with the support of the Company Secretary, that the Executive Leadership Team comply with their delegated
authority and the matters reserved for the Board
• Leading and overseeing the development and implementation of good governance policies relating to whistle-
blowing, insider dealing, disclosure, anti-corruption, safety and sustainability
• Promoting an entrepreneurial and ethical culture which welcomes and supports a diverse workforce
Chief Financial
Officer
Sarah Pollard
• Championing the Group’s values and behaviours.
The CFO’s responsibilities include:
•
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 and ensuring that an independent
evaluation of the performance of the Chair is completed by an external evaluator at least once every three years
• 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.
104
PZ Cussons plc / Annual Report and Financial Statements 2022
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 pages 96 to 97
THE BOARD DELEGATES CERTAIN MATTERS TO ITS
PRINCIPAL COMMITTEES*, WHICH ARE RESPONSIBLE FOR:
Audit & Risk
Committee
Nomination
Committee
Remuneration
Committee
ESG
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 110 to 115
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 106 to 109
Reviewing and
recommending the
framework and policy
for remuneration of the
Executive Directors and
senior executives.
See pages 118 to 143
Approving the Group’s
ESG strategy and
performance targets,
monitor performance
by the Group against its
ESG strategy and how
the Group engages with
key stakeholders.
See pages 116 to 117
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.
Terms of reference for each Committee listed above are available on the Company’s website.
Governance / Governance framework
105
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.
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.
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.
Board attendance
Audit & Risk
Committee
attendance
Remuneration
Committee
attendance
Nomination
Committee
Attendance
ESG Committee
attendance
Caroline Silver
Jonathan Myers
Sarah Pollard
John Nicolson
Kirsty Bashforth
Dariusz Kucz
Jeremy Townsend
Jitesh Sodha*
Valeria Juarez**
6/6
6/6
6/6
5/6
6/6
6/6
6/6
4/6
4/4
* Jitesh Sodha was on an extended leave of absence during 2022.
** Valeria Juarez joined the Board on 22 September 2021.
4/5
5/5
5/5
3/5
3/4
2/2
3/4
1/2
2/2
4/4
4/4
4/4
4/4
1/1
1/1
2/2
2/2
2/2
2/2
2/2
2/2
2/2
1/2
2/2
106
PZ Cussons plc / Annual Report and Financial Statements 2022
NOMINATION COMMITTEE REPORT
This year the Committee has focused on Board succession
planning and continued to oversee the work being done on
Talent development, Inclusion and Diversity across
the Group.
Caroline Silver
Chair of the Nomination Committee
The Board remains committed to
the Company’s focus on inclusion
and diversity and ensuring the Board
and ELT reflects the diversity of our
workforce and consumers in the
countries in which we operate.
The Board Diversity 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. While we are
pleased that we are in compliance with
the guidelines for gender and ethnic
diversity on Boards, we will continue
to work to add more diversity through
subsequent Board recruiting.
NOMINATION COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year are set out below:
Committee members
Member since
Caroline Silver
John Nicolson
Kirsty Bashforth
Dariusz Kucz
Jeremy Townsend*
Jitesh Sodha*
Valeria Juarez*
2014
2016
2019
2018
2020
2021
2021
* Directors who stepped down from committee on 23 November 2021.
For attendance at the Nomination Committee, the Board meetings and other Board
Committees, please see the full attendance table / Page 105
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 2022.
This year the Committee has focused on Board succession planning
and continued to oversee the work being done on Talent development,
Inclusion and Diversity across the Group.
Following the appointments to the board of Jitesh Sodha in July 2021
and Valeria Juarez in September 2021, we believe the Board has the
relevant skills and balance to oversee the implementation of the
Group’s strategy.
Succession planning will continue to be a priority for the next year,
as I will be reaching my ninth anniversary on the Board in April 2023 and,
in line with the provisions of the Corporate Governance Code, intend to
transition to a new Chair to be appointed in due course. John Nicolson,
as SID, is leading the process of finding my successor, which is set out
further down this report.
Governance / Nomination Committee report
107
COMMITTEE ROLE
PRIORITIES FOR 2023
• Regularly review the structure, size and composition of the Board and its Committees.
• Continue to review talent and succession
• Review the leadership and succession needs of the organisation.
•
Identify and nominate for approval candidates to fill Board vacancies.
• Evaluate the Board’s diversity and balance of skills.
• Evaluate the performance of the Board.
• Review the time needed to fulfil the roles of Chair,
Senior Independent Director and Non-Executive Directors.
plans against the management objective of
driving material improvement in succession
planning.
• Successfully identify a successor Board
Chair.
• Conduct an external Board effectiveness
review.
• Review continuing efforts to improve
Board and senior management diversity.
Detailed responsibilities are set out in the Committee’s terms of reference,
which can be found on the Company’s website / www.pzcussons.com/
How the Committee operates
The Committee meets a minimum
of twice a year and more frequently
as necessary. During the year the
Committee met four 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
Succession planning
During the year, the Nomination
Committee established a
subcommittee to lead the search
and selection process of a new Chair.
The appointment will be made to
ensure a smooth transition. The
subcommittee is committed to
ensuring a diverse list in all aspects,
in accordance with the Board and
ELT inclusion and diversity statement
and will consider diversity as part of
the role description. Egon Zehnder
was selected to assist with the Chair
succession search as a result of a
competitive process. Egon has no
other interests in the Company and
has been briefed as to the Board’s
policies and commitment to diversity.
ELT succession and appointments
During the year, the Committee
oversaw the appointment of four
new ELT members. These included
the Managing Directors of our UK and
Australia business units and two newly
created roles in Sustainability and
Business Development.
Talent and succession planning
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.
The diversity of our succession
pipeline has been improved, with half
of identified successors being female,
and strong representation of our
markets in our MD succession pipeline.
Succession planning for CEO and CFO
will be a focus for FY23 with both of
those role having recently been filled
with external hires.
The continued focus on ELT and their
successors’ development has led to
two new initiatives:
1.
2.
Board mentoring – supporting
successors and high-potential
senior leaders.
Individual ELT assessment and
development building on ELT
team development, working
with EYLane4, an executive
development consultancy.
108
PZ Cussons plc / Annual Report and Financial Statements 2022
NOMINATION COMMITTEE REPORT CONTINUED
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.
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 six 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 146)
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
the new FCA guidelines of 40%
women on the Board, at least one
member from a minority ethnic
background and at least one senior
position held by a woman.
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 2022, the Board
comprised four female and five male
Directors, equivalent to 44% female
representation. Directly below Board
level there were 14 ELT members,
of whom 29% were female and 71%
male. Direct reports of the ELT were
44% female and 56% 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
A Board skills matrix was reviewed
as part of the FY22 Board evaluation.
This matrix serves as a 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.
Governance / Nomination Committee report
109
Board and Committee performance evaluation and Board effectiveness reviews
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. The
next external evaluation will take
place in 2023.
Follow-up on action prepared in
response to the year one evaluation
using internally facilitated
questionnaires.
Continued follow-up on actions
arising from the previous two
years using internally facilitated
questionnaires.
2022 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 2022.
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,
particularly in relation to the increased
focus on ESG.
Recommended objectives for FY23
which were adopted by the Board
include, in addition to those listed in
each Committee section:
• Review risk management processes
and develop a fuller view of the
Company’s risk profile, principal and
emerging risks and risk appetite
• Improve the use of technology and
data to facilitate board discussion
and decision-making purposes
• Introduce more targeted Board
training and development sessions
including a travel programme to
priority markets.
Caroline Silver
Nomination Committee Chair
28 September 2022
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PZ Cussons plc / Annual Report and Financial Statements 2022
AUDIT & RISK COMMITTEE REPORT
The Committee has continued to focus on embedding the
processes and controls that have been put in place following
the KPMG report in 2020. This control transformation
update has been closely monitored by the Committee, with
the main benefits primarily related to risk reduction.
Jeremy Townsend
Chair of the Audit & Risk Committee
AUDIT & RISK COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year are set out below:
Committee members
Jeremy Townsend
John Nicolson
Dariusz Kucz
Jitesh Sodha
Member since
2020
2016
2018
2021
For attendance at the Audit & Risk Committee, the Board meetings and other Board
Committees, please see the full attendance table / Page 105
DEAR SHAREHOLDERS,
I am pleased to present the Committee’s report for the financial year
ended 31 May 2022 which sets out a summary of the work of the
Committee and how it has carried out its responsibilities during
the year.
The Committee has continued to focus on embedding the processes and
controls that have been put in place following the KPMG report in 2020.
This control transformation update has been closely monitored by the
Committee, with the main benefits primarily related to risk reduction.
This regular focus from the Committee, recognising the progress made
while supporting management to adapt plans where necessary, helps
ensure continued focus on addressing the KPMG report findings, with the
support of Internal Audit.
The Committee recognises that Internal Audit plays a key role in controls
improvement and ensuring cultural changes are embedded is critical but
can be difficult to measure and quantify.
Over the course of FY22, the
Committee reviewed and approved
a number of improved accounting
processes and controls improvements.
In FY21 the Company moved away
from the use of ‘exceptional items’
in favour of ‘adjusting items’. In FY22
the Committee adopted a formal
policy on the classification of adjusting
items and these are now routinely
reviewed by the Committee against
that framework for the purposes of
reporting financial results externally.
The Committee also reviewed and
approved a controls transformation
project which as well as being an
evolution of a number of the individual
items that had been proposed in
response to the 2020 KPMG controls
review, will introduce an improved
internal control framework and
environment in anticipation of
future legislation and corporate
governance reform, along with a
review and improvement of finance
shared services organisation design,
capability, control and efficiency.
These improvements and fresh
approaches have given the Committee
confidence that we are on the right
path to building a more robust
controls culture within the business.
While progress has been made,
the Committee is aware that this
ambitious transformation will involve
considerable work. The importance
of this controls improvement process
is only heightened by the current
discussions and consultations around
audit reform and regulatory change.
During the year, the Committee also
reviewed the Committee’s terms
of reference to ensure continued
alignment with the 2018 UK Corporate
Governance Code and best practice.
Governance / Audit & Risk Committee report
111
COMMITTEE ROLE
• 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 independence, 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.
PRIORITIES
FOR 2023
• Oversee and assess
management’s
continued progress
on internal controls.
• Review financial
accounting and
reporting.
Detailed responsibilities are set out in the Committee’s terms of reference,
which can be found on the Company’s website / www.pzcussons.com/
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 112
of this report.
An internal review of the Committee’s
effectiveness was carried out through
the completion of a questionnaire by
each of its members together with
the Board Chair, the CEO, the CFO,
the Company Secretary and the Group
Financial Controller. The results were
positive with objectives for FY22
achieved, and good management of
relationships with key stakeholders.
On the back of this review, objectives
for FY23 include reviewing and
developing effective risk management
systems and auditor succession.
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.
How the Committee operates
The Committee meets a minimum
of three times a year and more
frequently as necessary. During
FY22 the Committee met five times.
This enabled 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.
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 attended to
review specific risks and mitigating
action plans. The Company Secretary
acts as secretary to the Committee.
As Chair of the Committee, I have held
a number of senior finance director
roles throughout my career. I served
as Chief Financial Officer of Rentokil
Initial Plc, the FTSE 100 commercial
pest control and hygiene services
business, until retiring in August 2020.
I am a former Accounting Council
Member of the Financial Reporting
Council and have held non-executive
director and audit committee chair
roles in a number of businesses
including Galliford Try plc and
WM Morrison Supermarkets plc.
The experience of the other
Committee members is summarised
on page 97. The Board considers each
Committee member is independent
and has a 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
Auditor
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 fifth year of auditing
the Group.
Jane Boardman has been lead partner
since Deloitte became the Company’s
auditors for FY18 and she will rotate
off the audit following the FY22 audit.
Deloitte will continue as auditor
through FY23 under a new lead
partner, John Charlton, while the
Committee undertakes a tender
exercise. The Committee intends
to launch such a tender imminently
and has had a number of positive
discussions with potential successors.
During the year, the members of
the Committee regularly met 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
material issues raised in this regard
throughout FY22.
112
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AUDIT & RISK COMMITTEE REPORT CONTINUED
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 2022, 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
Effectiveness and independence
The Company paid £2.1 million in audit
fees for the financial year ended
31 May 2022.
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. In
the year the Group paid £40,000 to
Deloitte in respect of the review of
the interim statement released in
February 2022 and £700 in respect
of services rendered to witness and
report on the destruction of stock in
Thailand. The non-audit to audit fee
ratio is 1.9%.
The Chair of the Committee speaks
to the audit partner to find 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.
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 lead 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 this is
consistent with what they communicated to the Committee at the audit planning stage.
The Committee has also regularly discussed the content of 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 is of the
opinion 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.
Key judgements and estimates
The Committee reviewed the external reporting of the Group including the interim review and the Annual Report
and Financial Statements. 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 2022 are set out on the following page:
Governance / Audit & Risk Committee report
113
Significant issues and judgements Decisions and improvements
Areas of significant
financial judgement
Controls transformation
Risk management
Ethics and compliance
The Committee considered a number of areas of significant financial judgement
throughout the year. The key areas covered involved the accounting treatment related
to various claims, disputes and settlements; the treatment of trade expenditure and the
processes and controls in place to manage associated risks; the process of 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, including a reassessment of the definition of cash generating units
within the Beauty business for impairment purposes. Additional focus was given
to tax and definition of cash generating units due to the prior year restatements.
More information is available in note 1c. The Committee accepted the judgements
recommended by management having challenged them and considered alternative
options.
The Committee monitored improvements to internal controls and increased its focus on
embedding controls improvements throughout the Group. The Controls Transformation
project is focused on improving the use of SAP, process controls and cultural issues.
It aims to establish an effective internal controls framework in anticipation of future
corporate governance reform changes as well as improving finance shared services,
organisation design, capability, controls and efficiency.
The Committee reviewed the development of risk registers throughout the Group and
how they are integrating with year-end risk reporting processes. There will be a mapping
exercise of risks against the long-term strategy, and input will be sought from external
stakeholders.
Following the prior year launch of the Code of Ethical Conduct, the Committee reviewed
the ongoing training and confirmation surveys conducted by management to gauge the
effectiveness of the programme. The Committee also monitored investigation reports
and was satisfied that management was significantly reducing the Company’s risk profile
for fraud and compliance issues.
TCFD
The Committee engaged the services of Willis Towers Watson to conduct a physical and
transition risk assessment to facilitate the Company reporting against four key themes –
governance and responsibility, risks and opportunities, metrics and targets and
mitigation plans.
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
Financial control improvements
have 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 was
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
Nigerian business.
The Code of Ethical Conduct provides
a framework document for the PZ
Cussons ethics and compliance system.
The Code is supported by a range of
policies including:
• Conflicts of interest policy – setting
expectations for avoidance of
conflicts
• Whistle-blowing 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
• 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 FY22, the committee
also reviewed and approved plans
for a transformative change in our
finance function to materially improve
controls and future proof the function
against business and regulatory
change. This project will require
significant work in FY23 and beyond.
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AUDIT & RISK COMMITTEE REPORT CONTINUED
Internal Audit function
Risk management
Whistle-blowing policy
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 currently led by the interim Head
of Internal Audit whilst we await the
arrival of the new permanent Head of
Risk and Internal Audit. The interim
Head of Internal Audit 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.
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
reconfirms that the Internal Audit
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 helps
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 FY22 Internal Audit Plan was
approved by the Audit & Risk
Committee in May 2021. 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.
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.
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. The Risk Management
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 (see
Risk Management pages 84 to 85).
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 has a standalone Whistle-
blowing Policy as part of the Code of
Ethical Conduct.
Navex Global, a leading whistle-
blowing system provider, is engaged
to provide a telephone and web-based
reporting system for use with the
Whistle-blowing Policy.
The whistle-blowing system is
maintained by the Group General
Counsel and the Group Head of Ethics
and Compliance and is independently
monitored by the Internal Audit
function. The Committee receives
regular whistle-blowing reports
and reports on the effectiveness
of the Whistle-blowing Policy and
reports regularly to the Board on
these matters.
Climate Related Risks
The Company supports the
recommendations of the Financial
Stability Board’s Task Force on
Climate-Related Financial Disclosures
(‘TCFD’). The Committee received
reports from the Chief Sustainability
Officer on the steps to achieve
compliance with TCFD, risk
identification and related mitigation
plans. The Committee received and
discussed the assurance process for
the final TCFD statement, which can
be found on pages 64 to 67.
Statement of compliance
The Company confirms that it
has complied with the 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:
Governance / Audit & Risk Committee report
115
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 Auditor. These technical
updates have kept the Committee
informed on the UK Corporate
Reform and the expected timescales,
the Audit Market Reform and the
possible 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 and rising living costs 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, 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 2022 and
satisfied itself that the going concern
basis of presentation of the financial
statements and the related disclosure
is appropriate.
Jeremy Townsend
Audit & Risk Committee Chair
28 September 2022
• 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 start 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 2022 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 continued
focus on controls improvement to be
delivered in FY23, the overall controls
environment of the Company has
improved year-on-year.
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 2021 and
the full-year financial statements and
Annual Report for the year to 31 May
2022. 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 2021 interim financial
statements and 2021 Interim
Announcement and consideration of
Deloitte’s comments on the drafts
of these documents
• Review of plan for preparing the
financial statements and Annual
Report for the year ending 31 May
2022
• Review of the significant
judgements and estimates that
impact the financial statements
• Review of the financial statements
and Annual Report for the
year ending 31 May 2022 and
consideration of Deloitte’s
comments on these documents.
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PZ Cussons plc / Annual Report and Financial Statements 2022
ESG COMMITTEE REPORT
In January 2022, the Board established the ESG Committee
to oversee the Company’s ESG strategy and performance
targets. The Committee monitors performance against
the ESG goals and how PZ Cussons considers, engages
with, reports to, and maintains its reputation with key
stakeholders.
Caroline Silver
Chair of the ESG Committee
ESG COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year are set out below:
Committee members
Member since
Caroline Silver
Jonathan Myers
Sarah Pollard
John Nicolson
Kirsty Bashforth
Dariusz Kucz
Jeremy Townsend
Jitesh Sodha
Valeria Juarez
2022
2022
2022
2022
2022
2022
2022
2022
2022
For attendance at the ESG Committee, the Board meetings and other Board
Committees, please see the full attendance table / Page 105
DEAR SHAREHOLDERS,
On behalf of the Board, and as Chair of the ESG Committee, I am pleased
to present the ESG Committee report for the year ended 31 May 2022.
In January 2022, the Board established the ESG Committee to oversee
the Company’s ESG strategy and performance targets. The Committee
monitors performance against the ESG goals and how PZ Cussons
considers, engages with, reports to and maintains its reputation
with key stakeholders.
Recognising the importance of ESG across the whole Group and its
governance, the Committee consists of all members of the Board, and is
supported by the ELT through its Sustainability Steering Committee.
The Committee’s focus initially has
been on reviewing the sustainability
strategy and monitoring developments
on our B Corp certification journey and
approving key sustainability KPIs.
How the Committee operates
The Committee meets a minimum of
twice a year and more frequently as
necessary. The Committee first met
in January 2022 and met again in
May 2022.
Only members of the Committee
are entitled to attend the meetings.
Other individuals such as the Chief
Sustainability 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 Company Secretary acts as
secretary for the committee.
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.
Governance / ESG Committee report
117
PRIORITIES FOR 2023
• Progress with B Corp
certification.
• Set long-term goals to align
with the sustainability strategy.
• Agree plans for stakeholder
engagement.
• Review plans for ensuring
inclusion and diversity across
our businesses.
COMMITTEE ROLE
• Approve the Group’s ESG strategy and performance targets.
• Monitor performance by the Group against its ESG strategy.
• Oversee how the Group engages with key stakeholders on ESG.
Detailed responsibilities are set out in the Committee’s terms of reference,
which can be found on the Company’s website / www.pzcussons.com/
Activities of the Committee during
the year
Sustainability strategy
The Committee debated and approved
a new sustainability strategy and
framework designed to align with the
Company’s purpose: for everyone, for
life, for good. The strategy provides
operational focus and, alongside a
set of clearly defined performance
targets, will support the Company in
achieving its goals. More information
about the sustainability strategy can
be found on page 44.
B Corp certification
Our ambition is to certify our businesses
as B Corps by 2026. The Committee
has reviewed the process and
timeline to achieve this goal and
will continue to monitor this area
at each Committee meeting.
Caroline Silver
ESG Committee Chair
28 September 2022
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PZ Cussons plc / Annual Report and Financial Statements 2022
REMUNERATION COMMITTEE REPORT
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 the Executive Leadership Team (ELT).
Kirsty Bashforth
Chair of the Remuneration
Committee (from 1 July 2020)
REMUNERATION COMMITTEE MEMBERSHIP
The Directors who served on the Committee during the year are set out below:
Committee members
Kirsty Bashforth: Chair
Dariusz Kucz*
Jeremy Townsend
Jitesh Sodha
Valeria Juarez
Member since
2019
2018
2020
2021
2021
* Director who stepped down from committee on 23 November 2021.
Dariusz Kucz retired at the 2021 AGM. For attendance at the Remuneration
Committee, the Board meetings and other Board Committees, please see the full
attendance table / Page 105
DEAR SHAREHOLDERS,
On behalf of the Board, I am pleased to present our 2022 Remuneration
Committee report. This report is divided into three sections:
1)
2)
3)
This Remuneration Committee Chair Statement – providing a summary
of key reward implementation decisions made in the year.
The Remuneration Policy – the 2021–2023 Policy which was approved
by our shareholders in a binding vote at the 2020 AGM.
The Report on Directors’ Remuneration – a report on remuneration
which details how the policy was applied throughout the 2022 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 2022 AGM.
Background to remuneration decisions
Business performance
FY22 was the first full financial year
of our new strategy: Build Brands for
Life. Today and for future generations.
The Group has made good progress,
reporting a more consistent financial
performance while strengthening
a number of key capabilities.
Like most companies in our sector,
our performance during FY22
has been heavily influenced by a
challenging external environment,
with significant cost inflation and
pressures on consumer spending.
Within this context and despite
these headwinds, which included
c.£40 million additional costs
compared to FY21, we made good
progress in FY22, including:
• A second year of like-for-like
revenue growth, reporting 2.9%
growth in FY22;
• Market share growth in seven of
our eight existing Must Win Brands
(‘MWB’), due to better execution
and improved returns on Brand
Investment;
• Adjusted profit before tax from
continuing operations declined
2.9% to £66.6 million given the
challenging market environment,
but was ahead of market
expectations;
Governance / Remuneration Committee report
119
COMMITTEE ROLE
• 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 employee population.
• 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 the shareholders and
other advisory bodies’ views are taken into account when setting the remuneration of
senior executives and members of the Board.
PRIORITIES FOR 2023
• Review the remuneration
policy in advance of the 2023
Annual General Meeting
(AGM).
• Engage with shareholders on
the remuneration policy and
pay implementation.
• Work with management to
support efforts to address
the global cost-of-living
challenges.
Detailed responsibilities are set out in the Committee’s terms of reference,
which can be found on the Company’s website / www.pzcussons.com/
• Total of £25.8 million proceeds from
• To reward critical talent, and
the disposal of non-core assets,
including the five:am yoghurt
business and Nigerian residential
properties;
• Acquisition of Childs Farm, which
completed in March 2022 and is
now a MWB.
The Board has also been focusing on
building and deepening the expertise
of our ELT to deliver the Group
strategy and grow a robust bench of
talent for the future. The Committee
has given careful consideration to
remuneration for the ELT to ensure
there is alignment between Board
level and below throughout the year.
Wider employee experience
The key remuneration developments
concerning the wider employee
population for FY22 are set out below:
• Employee salary levels are reviewed
annually against a range of relevant
inputs which includes market data,
economic forecasts, pay at the
Board level, and Group financial
budgets. The average salary
increase awarded for the broader
UK employee population for FY22
was 3% of salary. The average salary
increase for FY23 is anticipated to
be 3.5% of salary for the broader
UK workforce.
incentivise retention, share awards
in the form of Restricted Stock Units
(RSUs) have been granted below
the ELT.
• FY22 bonuses for the wider
employee population varied
depending on the achievement of
performance metrics in business
units. The typical bonus paid to
employees in Group roles (below
the ELT) was 82.4% of target.
• The launch of our Share Incentive
Plan (‘SIP’) in October 2021
further aligns employees with the
business strategy and investors by
encouraging equity participation
through the wider employee
population.
• As in FY21, 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 for FY22.
In addition to the above developments
in employee pay and benefits, there
has been a strong focus on wellbeing:
• In the UK, our Aviator Way office
refurbishment includes a fully
equipped gym and studio with a
full-time instructor. Access to
the gym and classes, (including
spinning, HiT and yoga), are free
to all employees. The Aviator Way
offices are located very close to
Manchester Airport so our carpark
has been made available to those
travelling abroad for the duration
of their holiday.
• In Nigeria, a one-time Covid-19
payment was made to support
working from home and
transportation costs in the context
of the increasing cost of living.
• In Australia and New Zealand,
we re-launched our BEST values
recognition award programme and
introduced a quarterly half-day
wellbeing leave initiative.
• In May, I met with the HR Leadership
Team and Dariusz Kucz, in his role
as representative of the employee
voice, to discuss the Group
remuneration strategy and context.
• In a move to create more equitable
rewards, we are no longer pro-rating
bonuses for any period of family
leave for employees in the
US and UK.
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PZ Cussons plc / Annual Report and Financial Statements 2022
REMUNERATION COMMITTEE REPORT CONTINUED
Shareholder considerations
• Our share price saw some decline
through FY22. The Committee did
nonetheless consider whether a
reduction to the LTIP grant level
for FY23 would be prudent, but it
concluded from its discussions that
the Committee was comfortable
that management’s performance
had been effective at minimising
the risks arising from the impact
of the broader volatile economic
conditions.
REMUNERATION DECISIONS
The Committee carefully considered
the progress made by management
during the year, the impact of the
trading environment on Group
performance and the experience
of both the shareholders and wider
workforce through the financial
year when reviewing incentive plan
outturns and setting performance
conditions and targets for the
forthcoming year. Its decisions are
summarised below:
Remuneration earned during the
year ended 31 May 2022
The key aspects of remuneration
earned during the year are as follows:
Salary
• As reported in last year’s report,
Jonathan Myers, Chief Executive
Officer, received a salary increase
of 3% (from £575,000 to £592,250)
with effect from 1 September 2021
in line with the average applied to
the UK employee population.
• Sarah Pollard, Chief Financial Officer
also received a salary increase of 3%
(from £325,000 to £334,750) with
effect from 1 September 2021.
Annual bonus payout
• The FY22 annual bonus was based
on three key financial indicators:
40% adjusted profit before tax,
30% revenue growth and 10% net
working capital percentage, with
the balance of the bonus being
subject to delivery against key
business objectives
– 34% of the 80% (maximum
opportunity) 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 available 20% was
earned.
– As such 54% of the maximum
bonus was earned by the Chief
Executive Officer and Chief
Financial Officer.
– Full details of the performance
assessment against both the
financial and key business
objectives can be found on
page 133.
• The overall performance outturn
resulted in awards representing
82% of salary for the CEO and 68%
of salary for the CFO.
• The Remuneration Committee
reviewed the formulaic bonus
outcome in the context of overall
Group performance and taking
into consideration the experience
of the key stakeholders including
employees and shareholders during
the year. The Committee agreed
that the outcome was fair and
therefore no discretion was applied
to the bonus outturn for FY22.
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 2022.
• PSP awards granted to other
participants in FY19 lapsed due to
the EPS targets not being met. This
award was made under the previous
remuneration policy and therefore
prior to our overhaul of the LTIP’s
metrics and targets.
• Jonathan Myers was granted a PSP
award during 2022 over shares to
the value of 150% of salary and
Sarah Pollard was granted a PSP
award over shares to the value of
125% of salary. These awards will
vest to the extent EPS, Must Win
Brands and Sustainability targets are
met over the period to 31 May 2024.
Our approach to remuneration for
the year ending 31 May 2023
The approach to remuneration
implementation for FY23 is in line
with the approved remuneration
policy and is largely unchanged from
FY22. However, some key changes to
the implementation of pay for
FY23 include:
• Base salaries
– The base salary for the Chief
Executive Officer has been
increased to £612,979 by 3.5%
with effect from 1 September
2022 in line with the average
level awarded to the wider
employee population in the UK.
– Sarah was appointed as Chief
Financial Officer in January 2021.
She has since performed very
strongly and has additionally
played an instrumental role
in building deeper capability
within the Group’s finance
team. Sarah was appointed on
a salary of £325,000, materially
lower than the salary paid to her
predecessor (£371,000) and this
remained the case following
her salary increase of 3% to
£334,750 last year.
Governance / Remuneration Committee report
121
Concluding remarks
Our approach to executive
remuneration is focused on providing
clear alignment between pay and
performance and the experience
of all the key stakeholders. We use
a holistic, connected approach to
reviewing executive reward and seek
to avoid making pay decisions in
isolation of the rest of the Group and
our Group pay philosophy. I hope that
the decisions summarised in this letter
and pay decisions clearly demonstrate
this commitment. I would like to thank
the shareholders for their continued
support for our pay policy and its
implementation and hope to receive
your support at the upcoming AGM.
We would welcome your views on any
of the matters set out in this report.
Kirsty Bashforth
Chair of the Remuneration Committee
– The annual bonus Key Business
Objectives have been updated
for FY23.
– The LTIP sustainability targets
for FY23 have been updated to
reflect our long-term priorities:
carbon neutrality, packaging
sustainability and employee
wellbeing. All of which are key
to our journey towards B Corp
certification. Further details are
set out on page 136.
– The LTIP targets for the financial
measures have also been
reviewed and updated slightly to
reflect our long-term budget and
strategy.
• Non-Executive Director fees. Further
to a review of Non-Executive Director
fees against market practice, no
changes are proposed.
Further details on how we intend to
implement the policy in FY23 are set
out in the ‘At a glance summary’ on
page 122.
Board Changes
I would like to welcome to the
Committee Jitesh Sodha and Valeria
Juarez who joined the Board in
2021. Jitesh is an experienced FTSE
director and CFO, Valeria brings sector
expertise in branded consumer goods
and e-commerce. Dariusz Kucz retired
from the Committee following the
2021 AGM but continues to serve on
the Board and holds responsibility for
representing the employee voice. As
such we continue to partner on wider
workforce remuneration matters.
I would like to thank him for his
contributions over the course of his
membership.
In the FY21 Remuneration
Committee report, when
discussing the Chief Financial
Officer’s starting salary, the
Committee set out its intentions
to ensure that base salary levels
remain market competitive based
on performance and increased
experience in post over time. The
Committee determined, having
reflected on a number of inputs
including, the Chief Financial
Officer’s strong performance in
role, total compensation market
data for Chief Financial Officers
at companies of a similar financial
size in both the FTSE and other
consumer goods companies and
pay increases and positioning for
our employees below the Board,
to increase the Chief Financial
Officer’s salary from £334,750
to £370,000 (with effect from
1 September 2022) which
represents an increase of 10.5%.
The Committee is cognisant that
this increase is larger than we
have historically made, however,
we are comfortable that the
circumstances warrant such
an increase to ensure that pay
reflects performance is market
competitive and retentive.
• Incentive plan measures, weightings
and targets
– Performance measures currently
in place continue to reflect our
strategy and are key milestones
that pave the way for our goal
to have all businesses become
B Corp by 2026, therefore no
changes are proposed to the
overall performance, measures
and weightings attached to
the annual bonus and LTIP
grant for FY23. However, some
changes have been made to the
underlying goals and targets
to reflect the evolving ongoing
priorities of the Group:
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PZ Cussons plc / Annual Report and Financial Statements 2022
REMUNERATION COMMITTEE REPORT CONTINUED
At a glance summary: how we will implement the policy in FY23
The table below summarises how the Committee intends to implement the Remuneration Policy for the forthcoming
financial year ending 31 May 2023.
Key policy features
FY23 implementation
Link to KPIs
Salary
Base salaries are normally reviewed
annually taking into account:
• The Chief Executive Officer’s salary has been increased by 3.5% in line
with the average increase awarded to the wider employee population.
• 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.
• The Chief Financial Officer’s salary has been subject to a more extensive
review in line with our stated intentions upon her recruitment in 2021
whereby her salary was set below the prior incumbent and market
competitive levels. Further to a review of market practice, individual
performance and Group pay decisions, it was determined necessary to
make a more substantive increase to the Chief Financial Officer’s salary
of 10.5%.
Salary
Increase
Chief Executive
Officer
Chief Financial
Officer
612,979
3.5%
370,000
10.5%
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
• The Chief Executive Officer, Jonathan Myers, and Chief Financial Officer,
Sarah Pollard, remain on pension rate of 10% of salary in line with UK
employee population.
• Pension contributions for any new appointment are expected to be in
line with that for the employees in the location where they are based.
Policy maximum of 150% of salary.
Chief Executive Officer Chief Financial Officer
• Adjusted profit
Incentive scheme which focuses Directors
on delivery of annual goals and milestones
which are consistent with the Group’s
longer-term strategic aims.
The 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.
Maximum bonus
150% of salary
125% of salary
Performance metrics:
• Adjusted profit before tax: 40%
• Revenue growth: 30%
• Net working capital percentage: 10%
• Key business objectives: 20%
before tax
• Revenue growth
• Net working
capital
percentage
• Strategic
priorities
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.
Governance / Remuneration Committee report
123
Key policy features
FY23 implementation
Link to KPIs
Long-term incentive plan
Policy maximum of 150% of salary.
Chief Executive Officer Chief Financial Officer
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.
The 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.
• Adjusted
basic EPS
• Revenue growth
• Sustainability
LTIP award
150% of salary
125% of salary
Performance metrics:
Weighting
Threshold
target
Threshold
vesting
Maximum
target
Adjusted basic EPS
60%
Revenue growth
from Must Win
Brands
20%
3%
per annum
3%
per annum
25%
25%
7%
per annum
9%
per annum
Sustainability
20%
See page 137
The range of targets are set having had regard to internal planning,
external market commitments, and the expectations for the Company’s
future performance.
The targets for our financial metrics are more stretching that those set for
awards granted last year.
Fees will be paid in line with the policy as shown:
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
FY 22
FY 21
Increase
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%
5%
100%
0%
0%
0%
* The Company Chair does not receive additional fees for chairing other Board Committees.
124
PZ Cussons plc / Annual Report and Financial Statements 2022
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
advisers 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 are
transparently communicated to the
shareholders and other stakeholders,
including maximum incentive
quantum and incentive plan pay-
out schedules. We seek to provide
as much contextual information as
possible on how we set incentive plan
performance targets and disclose
targets in advance where they are not
commercially sensitive. Incentive plan
metrics are used in communicating
and measuring Group performance on
a day-to-day basis and in our external
financial reporting, ensuring that
participants and the shareholders have
a clear view of pay for performance.
Simplicity: The remuneration
framework for Executive Directors
is market typical thereby avoiding
unnecessary complexity and uses
generally accepted and reported
performance metrics which are simple
to understand and explain.
Risk: Our incentive plans are designed
to have a robust link between pay
and performance, by using Group key
performance indicators and having a
layer of Committee review whereby
discretion can be exercised to adjust
incentive outturns at the end of the
performance period to mitigate any
risk of payment for failure, or any risk
that executives have been unduly
penalised by the structure of the
incentive. Mitigation of behavioural
risks is provided via exposure to long-
term share price movements through
deferral of incentive payments in
shares, recovery provisions and share
ownership requirements.
Predictability: The Committee seeks
to maintain a consistent approach
to its annual duties including target
setting, reviewing incentive outturns
and salary review. Consistency of
process helps to ensure consistency
of outcomes.
Proportionality: The annual bonus
and PSP have performance metrics
which are aligned with the Company’s
KPIs and Budget as set by the
Board. The Committee may reduce
payouts under the bonus and PSP if
they are not in line with underlying
performance.
Alignment to culture: The Directors’
remuneration arrangements
are cascaded down through the
organisation as appropriate ensuring
that there are common goals and
outcomes. The Committee reviews
remuneration arrangements
throughout the Company and takes
these into account when setting
Directors’ remuneration.
Governance / Remuneration policy
125
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 each 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 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.
126
PZ Cussons plc / Annual Report and Financial Statements 2022
REMUNERATION POLICY CONTINUED
Element
Purpose and
link to strategy
Operation
Maximum
opportunity
Performance
measures
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 three
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 maximum annual bonus
opportunity that may be earned
for any year is 150% of base
salary.
The performance
measures and targets are
set by the Committee
each year.
The current maximum
opportunity for Executive
Director roles is:
• Chief Executive: 150% of salary
• Other Executive Directors:
125% of salary
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.
Governance / Remuneration policy
127
Element
Purpose and
link to strategy
Operation
Maximum
opportunity
Performance
measures
Variable remuneration continued
Performance
Share Plan
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.
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 full shareholding on cessation.
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.
128
PZ Cussons plc / Annual Report and Financial Statements 2022
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 Group 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
£2,997,948
£2,538,214
36%
46%
£1,480,825
16%
37%
£699,277
36%
31%
£423,000
£1,579,250
£1,348,000
32%
44%
£816,125
14%
34%
34%
29%
100%
47%
28%
23%
100%
52%
34%
27%
Below
threshold
Target
Maximum
Maximum
(including share
price growth)
Below
threshold
Target
Maximum
Maximum
(including share
price growth)
Jonathan Myers
Sarah Pollard
Fixed pay
Annual Bonus
Long-term incentive plans
Governance / Remuneration policy
129
Minimum performance
Target performance
Maximum performance
Maximum performance
including share price growth
Fixed elements
of remuneration
Base salary as at 1 September 2022 (612,979 for Jonathan Myers and £370,000 for Sarah Pollard), an estimate of the value
of benefits and pension contributions at 10% of base salary
Annual bonus
0%
Long-term
incentive plans
0%
60% of maximum
opportunity
100% of maximum
opportunity
Jonathan Myers –
60% of 150% of salary
Jonathan Myers –
150% of salary
Sarah Pollard –
60% of 125% of salary
Sarah Pollard –
125% of salary
25% of award
100% of award
Jonathan Myers –
25% of 150% of salary
Jonathan Myers –
150% of salary
Sarah Pollard –
25% of 125% of salary
Sarah Pollard –
125% of salary
100% of maximum
opportunity
Jonathan Myers –
150% of salary
Sarah Pollard –
125% of salary
100% of award with a
50% increase in share price
over the vesting period
Jonathan Myers –
150% of salary
Sarah 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
Jonathan Myers
Sarah Pollard
Date of appointment
1 May 2020
4 January 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.
130
PZ Cussons plc / Annual Report and Financial Statements 2022
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.
Governance / Remuneration policy
131
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 dates of the letters of
appointment are set out below.
Name
Caroline Silver (Chair)
Kirsty Bashforth
Dariusz Kucz
John Nicolson
Jitesh Sodha
Jeremy Townsend
Valeria Juarez
Expiry of term
31 March 2023
31 October 2022
30 April 2024
30 April 2025
30 June 2024
31 March 2023
22 September 2024
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.
132
PZ Cussons plc / Annual Report and Financial Statements 2022
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 2022:
Executive Directors
Salary/ fees 1
Benefits 2
Pension 4
Total fixed
Bonus 3
PSP
Other
Total variable
Total
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Non-Executive Directors
Jonathan Myers
Sarah Pollard5
587,938
575,000
22,520
22,508
57,500
57,500
667,958
655,008
483,276
862,500
483,276
862,500
1,151,234
1,517,508
332,313
135,417
17,020
7,092
32,499
13,542
381,832
156,051
227,630
164,734
131,015
227,630
295,749
609,462
451,800
Caroline
Silver
Kirsty
Bashforth
Dariusz
Kucz
John
Nicolson
Jeremy
Townsend
Jitesh
Sodha 6
Valeria
Juarez 7
Salary/ fees 1
Benefits 2
Other
Total
2022
2021
2022
2021
2022
2021
2022
2021
£250,000
£250,000
£65,416
£61,667
£60,416
£57,500
£65,416
£62,500
£65,416
£26,679
–
£537
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£50,416
£38,076
–
–
–
–
–
–
–
–
–
–
£250,000
£250,537
£65,416
£61,667
£60,416
£57,500
£65,416
£62,500
£65,416
£26,679
£50,416
£38,076
1 The amount of salary/fees payable in the period.
2 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.
3 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 133 to 135. As disclosed last year, £131,015 of Sarah Pollard’s FY21 bonus payment was to compensate her for outstanding shares
forfeited on departure from her former employer.
4 Jonathan Myers and Sarah Pollard receive salary supplements of 10% of salary in lieu of pension contributions.
5 Sarah Pollard was appointed Chief Financial Officer on 4 January 2021.
6 Jitesh Sodha was appointed to the Board on 1 July 2021.
7 Valeria Juarez was appointed to the Board on 22 September 2021.
Amounts are rounded to the nearest Pound Sterling.
Notes to the single figure table 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.
Governance / Report on Directors’ remuneration
133
As reported last year, Jonathan Myers, Chief Executive Officer, received a salary increase of 3% (from £575,000 to
£592,250) with effect from 1 September 2021 which was in line with the average applied to the UK workforce.
Sarah Pollard, Chief Financial Officer, also received a salary increase of 3% (from £325,000 to £334,750) with effect from
1 September 2021.
Non-Executive Director fees
As reported last year, the basic fee for Non-Executive Directors was increased from £52,500 to £55,000 and the fee for
the Senior Independent Director was increased from £5,000 to £10,000 for FY22. This follows five years of no increase
to either fee and further to a review of both market practice and pay increases within the Group.
Annual bonus for the year ended 31 May 2022
In respect of the year ended 31 May 2022, 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.
The FY22 annual bonus was based on three key financial indicators: 40% adjusted profit before tax, 30% revenue growth
and 10% net working capital percentage, with 20% of the bonus being subject to delivery against key business objectives.
A summary of the performance targets and outturns are set out below.
Financial targets
The financial targets and our performance against them are set out below:
Proportion
of total
bonus
payable
15%
9%
10%
34%
Proportion
of total
bonus
payable
Adjusted profit before tax
Revenue growth
Net working capital percentage
Proportion
of total
bonus
Threshold
(10%
payout)
Target
(60%
payout)
Stretch
(100%
payout)
Actual
performance*
40%
30%
10%
£63.5m
£70.6m
£74.1m
£67.6m
£591.3m
£602.9m
£615.5m
£595.7m
11.1%
10.0%
9.5%
8.2%
* the actual performance in the table is based on budgeted FX rates used for management reporting to determine the value of bonus payable
Strategic targets
The 2022 strategic objectives related to organisational effectiveness and strategic execution.
Metric
Proportion
of total
bonus
Organisational
effectiveness
10%
Milestones achieved
• New succession plans have been documented, reviewed and validated by the Board.
10%
• The organisational structure has been refined and strengthened, including hiring talent into
key strategic roles (e.g., Chief Sustainability Officer, Chief Marketing Officer, and Business
Development Director). Commercial Talent has been successfully integrated from
Acquisitions.
• Retention targets have been met – turnover of talent remained within plan for key segments
of the business.
Strategic
execution
10%
• Successful implementation of significant cost management initiatives leading to significant
10%
growth and margin improvement in Nigeria.
• Significant progress has been made with our People Agenda, with the launch of Workday
phase one and introduction of our new Purpose and Values.
• Supply chain manufacturing network optimisation plan has gone live in Singapore.
• Revenue growth management capabilities strengthened through the implementation of
the Turbo booster, Group role recruited, new toolkits created, and promotional
management tools approved for implementation in FY23.
Overall 54% of the maximum bonus was earned by the Chief Executive Officer and Chief Financial Officer. The Committee
reviewed the formulaic outcome in the context of overall Group performance and taking into consideration the experience
of key stakeholders including employees and the shareholders during the year. The Committee agreed the outcome was fair
and therefore no discretion was applied to the bonus outturn for FY22.
134
PZ Cussons plc / Annual Report and Financial Statements 2022
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
Annual bonus for the year ended 31 May 2023
Executive Directors will continue to be eligible to participate in the annual bonus scheme in respect of the year ending
31 May 2023 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 FY22, 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 FY23 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.
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 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 FY19 which were due to vest in FY22 did not meet their performance
criteria and lapsed.
Awards granted in the year ended 31 May 2022 (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 2022 an award was made to J Myers under the PSP over shares with a value equal to 150% of
base salary and 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:
Performance Share Plan
Scheme
Basis of award
Number of
shares1,2
Face value
Percentage
vesting for
threshold
performance
Performance period
end date
Jonathan Myers
LTIP 2020
150% of salary
403,806
£888,373
25% 23 September 2024
Sarah Pollard
LTIP 2020
125% of salary
190,198
£418,435
25% 23 September 2024
1
2
Jonathan Myers was granted an award over 403,806 shares and Sarah Pollard was granted an award over 190,198 under the LTIP on 23 September 2021 calculated
using the average mid-market closing share price on 22 September 2021 of £2.20. The share price used to determine the number of shares subject to the award was in
accordance with the rules of the LTIP 2020.
Shareholders at the 2021 AGM approved an adjustment to Jonathan Myers’ 27 November 2020 award increasing it from 375,000 shares to 436,046. The amendment
increased the aggregate value, as at the date the award was granted, of the shares over which the award subsists from 150% of the Chief Executive Officer’s base
salary to circa 175% of salary.
Governance / Report on Directors’ remuneration
135
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
The targets were based on progress towards the Group’s ambitions to
achieve B Corp certification and addressed 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).
Threshold target
(25% vesting)
2% per annum
2%
Maximum
target (100%
vesting)
6% per annum
6%
Ethical Sourcing:
• 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.
• 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.
Carbon Disclosure Project (CDP) performance:
• Improve from current ‘B-’ score to a ‘B’ score by the end of the
performance period.
Employee Engagement:
• Improve the employee engagement scores to 73% (+1%) by the end
of the performance period.
Ethical Sourcing:
• 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.
CDP Performance:
• Achieve an ‘A/A-’ score by the end of the performance period.
Employee Engagement:
• Improve the employee engagement score across the Group to 75%
(+3%) by improving 1% each year of the performance period.
136
PZ Cussons plc / Annual Report and Financial Statements 2022
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
LTIP Awards to be granted in the year ended 31 May 2023
For awards to be granted in FY23, the EPS and strategic measures and weightings are the same as the awards granted in
respect of FY22. The sustainability target weighting is unchanged. The measures have been revised and based on progress
towards the Group’s ambitions to achieve B Corp certification and address our priorities with respect to (i) carbon neutrality,
(ii) package sustainability and (iii) our employees, wellbeing (each of which will determine the vesting of one-third of the
20% portion of the award based on sustainability).
Weighting
Carbon Neutrality
Package Sustainability
Employee Wellbeing
Threshold target
(25% payout)
Carbon neutral in global operations (scopes 1+2) by end of the
performance period.
On-target
(62.5% payout)
Carbon neutral in global operations + 10% absolute reduction by end
of performance period (scopes 1+2) + established verified baseline
scope 3 measurement.
Maximum
target
(100% payout)
Carbon neutral in global operations + 10% absolute reductions
(scopes 1+2) by end of performance period + established verified
baseline scope 3 measurement and SBT aligned reduction plan
to 2045.
10% reduction in virgin
plastic by end of
performance period
(2021 baseline).
Employee wellbeing
scores average 72%
across the three-year
performance period.
10% reduction in virgin
plastic by end of
performance period
(2021 baseline) + 80%
certified paper in
packaging.
10% reduction in virgin
plastic by end of
performance period
(2021 baseline) +
100% certified paper
in packaging.
Employee wellbeing
scores average 75%
across the three-year
performance period.
Employee wellbeing
score average 78%
across the three-year
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 2022 (together with interests held by
any connected persons) were:
Ordinary shares held at
31 May 2022
Interests in share
incentive schemes
that are not subject to
performance conditions
as at 31 May 2022
Interests in share
incentive schemes
that are subject to
performance conditions
as at 31 May 20221
J Myers
S Pollard
101,175
29,485
48,760
9,312
839,852
261,171
1
Includes unvested awards under the Performance Share Plan that remain subject to performance.
Value of shares held
at 31 May 2022 as a
% of base salary
17.08%
8.81%
Governance / Report on Directors’ remuneration
137
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 2022 and the date of this report.
The Non-Executive Directors’ shareholdings are disclosed on page 145 within the Report of the Directors.
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
2021
Date of award
Granted/
allocated
in year
Exercised/
vested
in year
Lapsed
in year
J Myers
27-Nov-2020
375,000
S Pollard
1-Feb-2021
70,973
–
–
J Myers
23-Sep-2021
S Pollard
23-Sep-2021
J Myers
26-Nov-2021
–
–
–
403,806
190,198
61,046
–
–
–
–
–
–
–
–
–
–
Number of
options/
awards
at 31 May
2022
375,000
70,973
–
–
–
Share
price at
date of
award (£)
Share
price at
date of
vesting (£)
Gain
(£)
Vesting/
transfer
date1
2.285
2.480
2.265
2.265
1.958
–
–
–
–
–
– 27-Nov-23
–
1-Feb-24
– 23-Sep-24
– 23-Sep-24
– 27-Nov-23
1 Subject to performance conditions as set out on page 135. 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.
Number of
options/
awards
at 1 June
2021
Date of award
Granted/
allocated
in year
Exercised/
vested
in year
Lapsed
in year
Number of
options/
awards
at 31 May
2022
Share
price at
date of
award (£)
Share
price at
date of
vesting (£)
Gain
(£)
Vesting/
transfer
date1
J Myers
23-Sep-2021
S Pollard
23-Sep-2021
–
–
98,011
18,719
–
–
–
–
98,011
18,719
2.265
2.265
–
–
– 23-Sep-24
– 23-Sep-24
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 Jonathan Myers and Sarah Pollard is set at 10% of salary, in line
with the rate applicable to the wider UK employee population.
Loss of office payments and payments to former Directors (audited)
There were no loss of office or payments to former Directors during the year.
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 2022 under the Company’s share incentive plans, no new ordinary shares
were issued.
138
PZ Cussons plc / Annual Report and Financial Statements 2022
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
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 2022 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
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
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Chief Executive Officer remuneration for previous ten years
2021–22
2020–21
2019–201
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
2012–13
Total
remuneration
(£)
Annual bonus
% of maximum
opportunity
LTIP % of
maximum
opportunity
1,151,234
1,517,508
659,665
802,335
732,077
1,586,330
1,104,601
1,463,325
1,052,912
1,104,089
54.4%
100%
n/a
0%
0%
100.0%
47.4%
72.8%
78.0%
69.5%
n/a
n/a
n/a
0%
0%
0%
0%
32.5%
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.
Governance / Report on Directors’ remuneration
139
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 2021 and 31 May 2022, and the percentage change:
Total employee costs
Dividends paid
Profit before tax and adjusting items1
1 This metric is in line with the Group’s profitability KPI, which is set out on page 75.
2022 £m
2021 £m
change %
68.5
24.3
66.6
76.9
24.3
68.6
-11%
4.9%
-3%
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 FY21 to FY22.
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
(employees 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
Jonathan Myers (CEO)
Sarah Pollard (CFO)
Caroline Silver (Chair)
Kirsty Bashforth
Dariusz Kucz
John Nicolson
Jeremy Townsend
Jitesh Sodha
Valeria Juarez
Percentage change (FY22/FY21)
Salary/fees
Benefits
3.5%
3.5%
10.5%
0%
6.1%
5.1%
4.7%
4.7%
100%
100%
0%
0%
0%
-87%
0%
0%
0%
0%
0%
0%
Bonus
-62%
-56%
38%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
140
PZ Cussons plc / Annual Report and Financial Statements 2022
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
CEO to all-employee pay ratio
Option A was used for the analysis because it is the ‘purest’ approach. Under Option A, companies are required to determine
total full-time equivalent total remuneration for all UK employees for the relevant financial year. The CEO single figure is
the pay received by J Myers in relation to FY22. 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 advisers which provide context from other listed companies. Executive pay policy for the CEO, other Directors
and senior management is then set 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.
Employee data includes those employed as at 31 May 2022. For any employee who joined after 1 June 2021 and was still
employed at 31 May 2022, 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
FY21
A
FY22
A
£1,517,508
£1,151,233
19
29
40
15
23
30
The salary and total pay for the individuals identified at the lower quartile, median and upper quartile positions as at 31 May
2022 are set out below:
2022
Upper quartile individual
Median individual
Lower quartile individual
Salary
Total pay
£70,000
£79,195
£45,000
£50,368
£25,596
£38,553
Wider employee remuneration context
• It is the Committee’s view that it is necessary to enable the Company to compete internationally for the best executive
talent with restricted stock being a common form of incentive. Use of stock as part of an overall remuneration approach
is a powerful tool to enable the alignment of interests of senior managers with the shareholders and the Committee
believes 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. These awards are very well
received by recipients.
• The Committee reviewed the remuneration principles and strategy that were developed during the year for employees
below the Executive Leadership Team.
• The Share Incentive Plan (SIP) launch in October 2021 created further alignment between employees and investors.
Under HMRC rules only UK employees can participate. A diverse set of incentives (e.g. discretionary LTIP awards) are
applied in other countries to ensure package value equity and provide shareholder alignment.
Governance / Report on Directors’ remuneration
141
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 102 for further details).
• During the year, the Committee Chair and Dariusz Kucz (designated employee engagement Non-Executive Director)
met with the HR Leadership Team to discuss the Group Remuneration Strategy and broader context.
The Committee reaffirmed that the changes made to remuneration in FY22 were appropriate and took account of
employees’ views.
Consideration by the Directors of matters relating to Directors’ remuneration
Throughout the year the Committee has comprised exclusively independent Non-Executive Directors in accordance with the
2018 Code. The Committee held 5 scheduled meetings during the 2022 financial year with our activities summarised in the
box on page 142.
The following Directors were members of the Remuneration Committee when matters relating to the Directors’
remuneration for the year were being considered:
• Kirsty Bashforth (Chair from 1 July 2020)
• Dariusz Kucz (retired at AGM)
• Jeremy Townsend
• Jitesh Sodha
• Valeria Juarez
During the year, the Committee appointed Willis Towers Watson (WTW) as remuneration consultants following a
competitive tender process. WTW are members 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. The fees paid to WTW in respect of this work were charged on a time and materials basis
and totalled £27,000 excluding VAT for the year. WTW does not have any other connections with PZ Cussons plc or any
Director of the Company.
During the year, the Committee consulted Caroline 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 Jonathan Myers as Chief Executive Officer 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 employee population.
142
PZ Cussons plc / Annual Report and Financial Statements 2022
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
Committee activities during the year ended 31 May 2022
July 2021
September 2021
November 2021
January 2022
May 2022
• Update on post AGM
trends and regulation
from the remuneration
adviser
• Review of cascade of
non-financial targets
outside of the Executive
Directors
• Update on post AGM
trends and regulation
from the new
remuneration adviser
• Presentation from
the remuneration
adviser on governance,
remuneration trends
and the implications
for the business
• Review of draft annual
bonus awards for FY21
• Approval of financial
targets for the annual
bonus scheme for FY22
• Approval of PSP targets
• Consideration of salary
adjustments within the
ELT (not Executive
Directors)
• Approval of financial
for the FY22 awards
• Consideration of
• Approval of
Remuneration Report in
respect of FY21
• Approval of actual
annual bonus awards for
FY21 performance
implementation of
Employee Stock
Purchase Plan (SIP)
• Approval of the grant of
the FY21 PSP awards
• Consideration of AGM
voting and investor
feedback
targets for the annual
bonus scheme for FY22
• Approval of executive
salary review
• Review of timing of
awards under the
annual bonus and PSP
• Review of vesting of
past awards under the
PSP and update on the
progress of in-flight
awards
• Review of draft
Remuneration Report in
respect of FY21
• Half-year review of FY22
annual bonus targets
• Consideration of
company-wide
remuneration
• Consideration of share
plan participation for all
employees
• Approval and review of
interim Performance
Share Plan awards
• Presentation from
the remuneration
adviser on governance
remuneration trends
and the implications for
the business
• Consideration of forecast
performance in respect
of FY19 PSP
• Consideration of forecast
performance in respect
of FY22 annual bonus
• Consideration of
provisional FY23 PSP
structure and targets
• Consideration of
provisional FY23 annual
bonus targets
• Consideration of overall
Group remuneration
structure and strategy
• Consideration of Group
salary proposals
• Consideration of
workforce engagement
on executive
remuneration
• Consideration of
Committee terms
of reference
• Consideration of CFO
Remuneration package
• Review of Board Chair’s
fee
KB, DK, JT
KB, DK, JT
KB, JT, DK
KB, JT, JS, VJ
KB, JT, VJ
Governance / Report on Directors’ remuneration
143
Shareholder engagement
The Committee recognises the importance of understanding the perspective of the 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.
Statement of shareholder voting
The Committee is directly accountable to the shareholders and, in this context, is committed to an open and transparent
dialogue with the shareholders on the issue of executive remuneration. For FY22 this took the form of consultation on
sustainability target-setting within the current policy and the CEO LTIP adjustment, as well as questions at the AGM.
The Remuneration Committee Chair will be available to answer questions from the shareholders regarding remuneration at
the 2022 AGM and looks forward to consultation during FY23 as the regular 3-year cycle of the Remuneration Policy update
takes shape.
The votes cast at the 2021 AGM in respect of the approval of the 2021 Report on Directors’ Remuneration and in respect of
the approval of the Directors’ Remuneration Policy are shown below:
Advisory vote on the 2021 Report on Directors’ Remuneration (2021 AGM):
Votes for
Votes against
Number
294,059,802
%
88.73
Number
37,359,552
%
Votes cast
Votes withheld
11.27
331,419,354
23,708
Binding vote on amendments to the Directors’ Remuneration Policy (2021 AGM):
Votes for
Votes against
Number
281,444,488
%
85.18
Number
48,976,661
%
Votes cast
Votes withheld
14.82
330,421,149
1,021,913
By order of the Board of Directors
Kirsty Bashforth
Chair of the Remuneration Committee
28 September 2022
144
PZ Cussons plc / Annual Report and Financial Statements 2022
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 2022.
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 1 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 82 and 83 of the Strategic Report.
The Directors recommend a final dividend of 3.73p (2021: 3.42p) per ordinary share to be paid on 30 November to ordinary
shareholders on the register at the close of business on 19 October, which, together with the interim dividend of 2.67p
(2021: 2.67p) paid on 7 April 2022, makes a total of 6.40p for the year (2021: 6.09p).
Scope of the reporting in this Annual Report and Financial Statements
The Group’s statement on corporate governance can be found on pages 96 to143 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
Location
Not applicable
1
2
3
4
5
6
7
8
9
10
11
12
13
Publication of unaudited financial information
Not applicable
Details of long-term incentive schemes
and other employee share schemes
Report on Directors’ Remuneration – pages 132 to 137
Waiver of emoluments by a Director
Report on Directors’ Remuneration
Waiver of future emoluments by a Director
Not applicable
Non-pre-emptive issues of equity for cash
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 – page 146
All the information referenced above is hereby incorporated by reference into this Report of the Directors.
Governance / Report of the Directors
145
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:
Caroline Silver
Jonathan Myers
Kirsty Bashforth
Dariusz Kucz
John Nicolson
Sarah Pollard
Jeremy Townsend
Jitesh Sodha
Valeria Juarez
Service in the year 31 May 2022
Served throughout the year
Served throughout the year
Served throughout the year
Served throughout the year
Served throughout the year
Served throughout the year
Served throughout the year
Appointed on 1 July 2021
Appointed on 22 September 2021
Directors’ interests
The Directors’ and connected persons’ interests in the share capital of the Company at 31 May 2022, together with their
interests at 1 June 2021, or date of appointment if later, are detailed below:
Ordinary shares
Beneficial
Caroline Silver
Jonathan Myers
Kirsty Bashforth
Dariusz Kucz
Sarah Pollard
John Nicolson
Jeremy Townsend
Jitesh Sodha
Valeria Juarez
Total
2022
Number
42,500
101,175
10,210
7,500
29,485
–
20,000
22,200
7,500
2021
Number
42,500
50,000
5,000
7,500
29,485
–
10,000
22,200
–
240,570
144,485
1
The figures in the table do not include 10,193,781 (2021: 10,291,149) ordinary shares purchased and held by the Employee Share Option Trust (ESOT) as at 31 May
2022. 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 table do not include conditional share awards granted under the PZ Cussons plc Long Term Incentive Plan (LTIP) or the Deferred Share Bonus Plan
(DSBP).
3 The figures in the table do not include the shares purchased and granted to Executive Directors under the PZ Cussons plc Share Incentive Plan (SIP).
4 As at 21 September 2022, J Myers held 1,388 shares under the SIP Trust.
5 As at 21 September 2022, S Pollard held 1,261 shares under the SIP Trust.
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.
146
PZ Cussons plc / Annual Report and Financial Statements 2022
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 of the 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 direct or indirect interests amounting to 3% or more of its issued share
capital as at the end of the financial year and at 21 September 2022:
Zochonis Charitable Trust
Sir J B Zochonis Will Trust
Heronbridge Investment Mgt
FIL Limited
Majedie Asset management
J B Zochonis Settlement
As at 21 September 2022
As at 31 May 2022
Number of
shares
Number of
shares
%
%
63,019,193
14.70% 63,019,193
14.70%
49,320,712
11.50% 49,320,712
11.50%
31,157,024
7.27% 31,157,024
21,938,516
5.12% 16,943,415
21,160,944
4.94% 21,160,944
19,927,130
4.65% 19,927,130
7.27%
3.95%
4.94%
4.65%
4.36%
3.57%
Lindsell Train Investment Management
18,682,474
4.36% 18,682,474
Mrs C M Green Settlement
15,322,741
3.57% 15,322,741
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 FY21, the Takeover Panel approved the reconstitution of the Concert Party as comprising
the core members of the founding Zochonis family, related family groups and certain related trusts holding. As of
31 May 2022, the Concert Party held in the aggregate, approximately 43.58% of the issued share capital of the Company.
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 2022
(being the end of the financial year under review):
• 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.
Governance / Report of the Directors
147
Political and charitable contributions
Charitable contributions in the UK during the year amounted to £184,561 (2021: £70,000). No political contributions were
made (2021: £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
Global greenhouse gas (GHG) emissions data for the year are contained within the Sustainability – Environment section on
pages 60 to 61.
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 on pages 38 and 50 to 52. 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. The Company has adopted a diversity
and inclusion statement that sets out 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. The board composition
requirements of The Parker Review on ethnic diversity were also met with the board changes during the year, see page 96.
Further details on the composition of our global employee population are set out in the table below*:
2022
2021
2020
2019
2018
No.
756
2,005
61
109
4
5
1,020
428
%
27
73
36
64
44
56
37
16
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
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 years old
* Figures taken as of 31 May 2022
148
PZ Cussons plc / Annual Report and Financial Statements 2022
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(1) statement on
page 40.
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 Audit & Risk
Committee Report 2006 on page 110.
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 86 to 93 of the Strategic Report.
Annual General Meeting
The Company’s 2022 Annual
General Meeting will be held at the
Manchester Business Park, 3500
Aviator Way, Manchester, M22 5TG
at 10:30am on 24 November 2022.
The resolutions that will be proposed
at the 2022 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 of 31 May 2022, 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
2006 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
No shares were purchased from
1 June 2021 to 31 May 2022 (2021: 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); and
• 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 18 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 92.
Events after the balance sheet date
There are no material post balance
sheet events since the year end date.
Governance / Report of the Directors
149
Directors’ confirmations
The Directors consider that the
Annual Report and Accounts and
accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s and
Company’s position and performance,
business model and strategy.
Each of the Directors, whose names
and functions are listed under Our
Board on page 97 confirm that, to the
best of their knowledge:
• the Group financial statements,
which have been prepared in
accordance with UK-adopted
international accounting standards,
give a true and fair view of the
assets, liabilities, financial position
and profit of the Group;
• the Company financial statements,
which have been prepared in
accordance with United Kingdom
Accounting Standards, comprising
FRS 101, give a true and fair view of
the assets, liabilities and financial
position of the Company; and
• the Strategic Report 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 that 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 Massie
Group General Counsel and Company
Secretary
28 September 2022
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
12 to 15.
• Details of Group subsidiaries
including overseas branches are set
out in note 30 on pages 233 to 235.
• Financial instruments and risk
management are set out in note 18
on page 208.
• Trade payables under vendor
financing arrangements are set out
in note 1 on page 182.
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; and
• 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
in respect of the financial statements
The Directors are responsible for
preparing the Annual Report and
Accounts and the 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 prepared
the Group financial statements
in accordance with UK-adopted
international accounting standards
and the Company financial statements
in accordance with United Kingdom
Generally Accepted Accounting
Practice (and including FRS 101
(Reduced Disclosure Framework).
Under company law, 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 Company and
of the profit or loss of the Group
for that period. In preparing the
financial statements, the Directors
are required to:
• select suitable accounting policies
and then apply them consistently;
• state whether applicable UK-
adopted international accounting
standards have been followed for
the Group financial statements
and United Kingdom Accounting
Standards, comprising FRS 101 have
been followed for the Company
financial statements, subject to
any material departures disclosed
and explained in the financial
statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and Company will continue in
business.
The Directors are responsible for
safeguarding the assets of the Group
and Company and hence for taking
reasonable steps for the prevention
and detection of fraud and other
irregularities.
The Directors are also responsible
for keeping adequate accounting
records that are sufficient to show and
explain the Group’s 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 Directors’ Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the
maintenance and integrity of the
Company’s website. Legislation in
the United Kingdom governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
150
PZ Cussons plc / Annual Report and Financial Statements 2022
INTRODUCING OUR VALUES
PZ Cussons people
aspire to be our BEST
BOLD
ENERGETIC
STRIVING
TOGETHER
See our Values / Page 18
AS A BUSINESS WE ARE
STRIVING
RAISING THE BAR,
PUSHING PERFORMANCE,
AIMING HIGH AND
ACHIEVING MORE
Financial Statements / Introducing our BEST values
151
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
I
F
152 Independent Auditor’s
Report
166 Consolidated income
statement
167 Consolidated statement
of comprehensive income
168 Consolidated balance sheet
170 Consolidated statement
of changes in equity
171 Consolidated cash flow
statement
172 Notes to the consolidated
financial statements
236 Company balance sheet
237 Company statement
of changes in equity
238 Notes to the Company
financial statements
Our STRIVING value in action:
WE WORK WITH RESILIENCE
AND DETERMINATION
• taking ownership of goals
and commercial growth
• leading with ambition and
entrepreneurial in attitude
• always learning to improve
152
PZ Cussons plc / Annual Report and Financial Statements 2022
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 2022 and of the Group’s profit
for the year then ended;
• the Group financial statements have been properly prepared in accordance with United Kingdom adopted
international accounting standards;
• 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 31 for the consolidated financial statements, and related notes 1 to 9 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 United Kingdom adopted international accounting standards. 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. The non-audit services provided to the Group for the year are disclosed in note
4 to the financial statements. We confirm that we have not provided any non-audit services prohibited by the FRC’s
Ethical Standard 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.
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3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
•
•
Identification of Cash Generating Units (CGUs);
Impairment and related reversals of impairment of intangible assets; and
• Provisions for uncertain tax positions.
Within this report, key audit matters are identified as follows:
Materiality
Scoping
Significant changes in our
approach
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
The materiality that we used for the Group financial statements was £2.8m which was
determined on the basis of 5% of adjusted profit before tax.
The scope of our audit covered 88% of revenue, 86% of adjusted profit before tax and 90%
of net assets.
In the prior year, we identified the classification and presentation of adjusting items as a key
audit matter. The Group established a new accounting policy in the prior year which set out
clearly the considerations for determination of adjusting items and implemented control
activities so that such items were fully considered and adequately assessed in advance of
categorisation; this process is now fully embedded. We therefore consider this area not to be
a key audit matter for FY22.
In the current year, we have included the identification of CGUs as a key audit matter.
Following a change in the Group’s strategy, a review of the previous judgement, (which
concluded that the Beauty division was one CGU), was undertaken with reference to the
definitions and guidance within IAS 36, in particular reviewing the ability of CGUs to generate
largely independent cash inflows. Having completed this review, the Directors concluded
that there were, and should always have been, four separately identifiable CGUs, split by
brand, rather than one Beauty CGU. This has led to reconsideration of previous impairment
review conclusions, resulting in prior year adjustments in relation to Charles Worthington
CGU.
The key audit matter identified in the prior year in relation to the carrying value of Rafferty’s
Garden continues to be a key audit matter and is considered further in section 5.2 below
along with other intangible assets.
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 the Directors’ 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 the Directors;
• Obtaining the Directors’ 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 actual and forecast covenant positions at the period end date and throughout the going concern period;
and
• Evaluating the appropriateness of the disclosures in the financial statements related to going concern.
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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.
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. Identification of Cash Generating Units (CGUs)
Key audit matter description
IAS 36 Impairment of Assets defines a CGU as the “smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows from other assets
or groups of assets”. CGUs are assessed annually for impairment indicators to determine
whether the related amounts in the financial statements (including goodwill and intangible
assets) are valued appropriately. As at the 31 May 2022, 7 CGUs were identified (FY21 (pre
restatement): 3 CGUs), comprising £60.4m of goodwill (FY21: £43.3m) and £245.8m of brand
value (FY21: £212.4m).
In previous years, the Group disclosed that a critical area of judgement in the preparation of
the financial statements related to the identification of CGUs. This disclosure noted that the
Directors considered that the Beauty business, comprising four indefinite life brands, was a
single CGU. As at 31 May 2021, the impairment review of the Beauty CGU indicated significant
headroom of £328.3m.
In the current year, the Directors have reviewed the assessment of CGUs in line with the
requirements of IAS 36. As part of the Group’s analysis, a review of all key customers within
the Beauty business was performed. The review concluded that the cash inflows associated
with each brand (Charles Worthington, Sanctuary Spa, St Tropez and Fudge) are largely
independent, and have been since the date the brands were acquired. Thus, the Directors
concluded that each brand should have been, from the date of acquisition, a separate CGU
and impairment assessments should therefore be performed at that level. The review also
concluded that the goodwill arising on the initial acquisition of each brand should have been
attributed to the respective brand’s single CGU, on the basis that no other CGU was expected
to benefit materially from the acquisition.
As a result of this reassessment, the Group has recognised an impairment in relation to the
Charles Worthington brand (£16.9m impairment in FY20 and £8.3m reversal of impairment in
FY21). This has been discussed further in section 5.2.
The identification of CGUs has been included as a key audit matter due to the complexity
and level of judgement involved in whether interdependencies exist within the cash inflows.
Identification of CGUs also continues to be considered a critical accounting judgement in the
current year, as described in note 1 of the financial statements. Further details of the change
in judgement and the related prior year errors are disclosed in notes 1c and 10 respectively,
of the consolidated financial statements, and also discussed in the Audit and Risk Committee
Report on page 113.
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How the scope of our audit
responded to the key audit matter
Key observations
We have performed the following audit procedures in response to this key audit matter:
• Considered key customer relationships, the mechanics of how these contracts are entered
into and how those various commercial negotiations have evolved over time to determine
the extent of evidence supporting the independence of cash inflows;
• Assessed how management monitor and operate the Group to assess contradictory
evidence to the conclusion that there are four distinct CGUs rather than one;
• Evaluated management’s analysis of the factors determining the appropriateness of
goodwill allocation to CGUs at the point of acquisition;
• Assessed management’s considerations of IAS 8 Accounting policies, changes in accounting
estimates and errors to evaluate management’s conclusions in respect of whether the
revised CGU determination gives rise to prior year adjustments; and
• Evaluated the financial statement disclosures included in relation to the change in CGU
identification.
We concur that there are four distinct and separable CGUs in relation to Charles
Worthington, Sanctuary Spa, St Tropez and Fudge, on the basis of their cash inflows have
been largely independent since the date of acquisition. We also concur that each CGU is
the only beneficiary of synergies arising from the acquisition and thus goodwill arising on
each brand’s acquisition should be allocated wholly to the CGU associated with the brand
acquired.
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5.2. Impairment and related reversals of impairments on intangible assets
Key audit matter description
As at 31 May 2022, the Group recognised intangible assets of £245.8m (2021: £212.4m) as per
note 10 of the financial statements, which includes £32.6m related to Rafferty’s Garden and
£9.6m related to Charles Worthington.
Rafferty’s Garden is a baby food and nutrition brand operating largely in the Australian
market. The brand is assumed to have an indefinite life and accordingly is not amortised.
The brand is not considered to be one of the Group’s ‘Must Win Brands’. As a result of
financial performance historically, an impairment charge was recognised during the year
to 31 May 2020 of £18.9m. During the year ended 31 May 2022, the Group performed its
annual impairment assessment, as required by IAS 36. The 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. The value in use calculation indicated that
the CGU’s recoverable amount exceeded its carrying value and therefore it was appropriate to
reverse £8.5m of the previously recognised impairment charge.
Charles Worthington is a personal hair care brand operating largely in the UK market. The
brand is not considered to be one of the Group’s ‘Must Win Brands’, and historically the
financial performance of the brand has been challenging. The brand is assumed to have
an indefinite life and accordingly is not amortised. Charles Worthington is considered to
represent a single CGU (see section 5.1), for the purposes of impairment testing due to the
largely independent cash inflows arising from the brand.
During the year ended 31 May 2022, the Directors performed their annual impairment
assessment, as required by IAS 36. The Directors also assessed the recoverable amount of this
CGU at each of 31 May 2020 and 2021 in order to assess whether the retrospective change in
CGU determination gave rise to prior year adjustments. This process involved the preparation
of discounted cash flow analysis to support the value in use of the Charles Worthington CGU,
in order to determine the CGU’s recoverable amount. The value in use calculations indicated
an impairment charge of £16.9m as at 31 May 2020 relating fully to the brand value, with
a reversal identified of £8.3m in FY21 and a current year charge of £11.6m, resulting in a
closing carrying value of the brand value at 31 May 2022 of £9.6m. The 31 May 2020 and
FY21 impairment positions have been reflected in a prior year adjustment in these accounts,
with the FY22 impact being shown as an adjusting item in the income statement for the year
ended 31 May 2022.
The Group’s other indefinite life intangible assets (those residing in the Sanctuary Spa, St
Tropez, Fudge and Original Source CGUs) were also assessed individually for impairment in the
current year. Each of these brands had significant headroom, and as such, no impairment was
recognised.
The impairment and related reversals of impairments on intangible assets, namely acquired
brands, are considered a key audit matter due to the complexity and judgement applied in
determining the carrying value of each of the CGUs, as disclosed in note 1. There are key
judgements over the discount rates to be applied and growth rates applicable within each
CGU. This matter is also discussed in the Audit and Risk Committee Report on page 113.
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How the scope of our audit
responded to the key audit matter
Key observations
We understood the Group’s process for identifying indicators of impairment and for
performing the impairment assessment, including the extent to which support was
provided by management’s external experts. 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 CGUs (see section 5.1);
• Considered the compliance of the value in use model with the requirements of IAS 36 and
tested the arithmetical accuracy of the models, through our analytic tools;
• Worked with our valuation specialists to assess the discount rate used within the value in
use models;
• Challenged the revenue and margin growth rates used within the model, with reference to
historical forecasting accuracy, the Group’s current performance, external market growth
rates and consistency with the Group’s strategy;
• Evaluated and challenged the sensitivity analysis to determine whether it takes into
account reasonably possible changes in assumptions, in particular in respect of the current
economic climate and the impact of high current and forecast inflation;
• Evaluated management’s calculations for determining the value of prior year adjustments
identified; we considered the assumptions used such as discount rates and terminal
growth rates as well as judgements such as revenue and margin growth rates adopted
therein; and
• Challenged whether the disclosure in the financial statements, including the sensitivities,
were in line with IAS 36 and IAS 1.
We concur with the Directors’ conclusions that an impairment reversal should be recognised
in relation to Rafferty’s Garden, and that the impairment charges and reversals as now
disclosed are appropriate in respect of Charles Worthington.
We consider that the use of a post-tax discount rate applied to post-tax cash flows is not
compliant with IAS 36, however, the impact on value in use is immaterial.
We also concluded that the disclosures made in respect of possible downside scenarios in
note 10 are appropriate.
Further, we concur that the prior year adjustment has been appropriately disclosed in
accordance with IAS 8.
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5.3. Provisions for uncertain tax positions
Key audit matter description
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
2022, there were a number of open tax claims against the Group in relation to its subsidiaries
relating to 2013 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 flows.
In addition to the open claims with tax authorities, the Group, following the appointment of
a new head of tax and treasury, undertook a detailed review of all tax risks and exposures
across the Group. As a result, the Group identified underpaid VAT, a liability which should
have, in accordance with IAS 37 Provisions, contingent liabilities and contingent assets, been
recorded in the financial statements in earlier periods in one of the Group’s subsidiaries, but
which, in error, had not been considered at that time. This resulted in a prior year adjustment
with a net impact of £3.9m on the brought forward balance sheet. More details have been
provided in note 1c to the consolidated financial statements.
Given the uncertain environments in which the Group operates there is a range of possible
outcomes for provisions and contingencies and the Directors are 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 have 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 and the related judgements made by the Directors
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 178. 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.
This matter is also discussed in the Audit and Risk Committee Report on page 113.
How the scope of our audit
responded to the key audit matter
With the support of our UK taxation specialists across corporation tax and transfer pricing,
and with input from tax specialists within our overseas component teams, we have 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 the Group’s policies for recognition and measurement of uncertain tax positions
for compliance with the guidance per IFRIC 23 and IAS 37 where such tax positions do not
fall under IAS 12 Income tax or IFRIC 23 Uncertainty over income tax treatments;
• 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;
• Considered the additional matters identified by management that relate to prior year
issues and which have been corrected via a prior year adjustment; we considered both the
fact pattern relating to those issues and whether there are any other potential exposures
which have not been previously considered or which have arisen in the current year; and
• Assessed the disclosure in notes 1 and 7 in relation to provisions for uncertain tax
positions and contingent liabilities.
We concur that the Group has applied an appropriate and consistent approach to estimating
provisions for uncertain tax positions. Further, we concur with the Directors’ assessment
of the treatment of underpaid VAT in prior years including the recognition of the related
provision as a prior year adjustment. We are satisfied that the Group’s estimates are
appropriately recorded and tax matters are appropriately disclosed.
Key observations
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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
£2.8m (2021: £3.2m)
£1.4m (2021: £1.1m)
Basis for
determining
materiality
5% of adjusted pre-tax profit (2021: 5% 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 50% of
group materiality (2021: 1% of net assets capped at
35% 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 users of the financial statements, 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 influence the extent to
which dividends can be paid.
Adjusted PBT
£66.6m
Adjusted PBT
Group materiality
Group materiality £2.8m
Component materiality
range £1.3m to £1.9m
Audit Committee reporting
threshold £0.14m
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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.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group financial statements
Parent company financial statements
60% (2021: 60%) of group materiality
60% (2021: 60%) of parent company materiality
In determining performance materiality, we
considered the following factors:
In determining performance materiality, we
considered the following factors:
• Our cumulative experience from prior year audits;
• Our risk assessment, including our understanding of
• The level of corrected, uncorrected misstatements
and prior period errors identified in the current
year;
• The quality of the control environment and, 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.
the entity and its environment; and
• The low value of profit impacting misstatements,
both corrected and uncorrected, identified when
compared to the Group accounts.
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 £142,000 (2021: £160,000), 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
PZ Cussons is an international consumer goods group with an establish portfolio of trusted brands across a range of
markets which includes personal healthcare products and consumer goods. It operates worldwide especially in Africa
and commonwealth nations.
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 7 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 five components including Singapore, Ghana, one
legal entity each within the UK and Nigeria and 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 88% (2021: 94%) of
revenue, 86% (2021: 91%) of adjusted profit before tax and 90% (2021: 88%) 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 £1.3m to
£1.9m (2021: £1.1m to £2.1m).
At the Group 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.
Financial Statements / Independent Auditor’s report
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12%
14%
15%
11%
Revenue
Adjusted Profit
before tax
10%
12%
Net assets
73%
75%
78%
Full audit scope
Specified audit procedures
Review at group level
7.2. Our consideration of the control environment
We identified 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 again 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 110, and as evidenced by our work in relation to
the design and implementation of key controls over financial reporting and significant risk areas, the Group’s control
environment is undergoing a programme of improvement. As a result several deficiencies have been identified by
the Group’s internal audit function, and by ourselves in the performance of our audit, which the Group 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 2022.
7.3. Our consideration of climate-related risks
We have gained an understanding of the Group’s processes to address climate-related risks, including implementation
of the Environmental and Social Governance (ESG) Committee and the ESG Framework. We have performed a risk
assessment of the financial impact of climate risks on the financial statements and concluded the risks of material
misstatements due to climate risks factors are remote. In doing so we considered the estimates and judgements
applied to the financial statements and how climate risks impact their valuation. We challenged the Group’s
disclosures relating to climate risks in the Sustainability section of the Annual Report and considered whether
information included in the climate related disclosures of the Annual Report were consistent with our understanding
the business and the financial statements.
7.4. 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 financial significance and associated risk attached to the Nigerian component, the group engagement
team visited the Nigerian component twice during the audit. Due to the continued disruption to international travel in
certain locations, no other visits took place. We had initially planned to visit Indonesia, which would have also included
a meeting with the Australian component team; however, due to the continued impact of Covid-19 and restrictions
that were periodically in place in Indonesia, we were unable to do this. 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 video-conference and reviewed documentation of the findings of their work remotely.
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Due to the level of risk attached to the Nigerian component, the group audit team increased the level of interaction
with the Nigerian 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.
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.
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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;
• considered the geographies that the group operates in, especially where those geographies have inherent
weakness in their anti-money laundering systems;
• 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
management identified over the course of the year that required further investigation by internal audit and the
Group’s compliance and legal functions but which 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, IT, and forensic specialists regarding how and where
fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these 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: impairment and/or reversal of
impairments in intangible assets, 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, Listing Rules, pensions legislation, 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, the regulatory framework related to the sale
of beauty, cosmetic and healthcare products, employment laws, the Nigerian foreign exchange regulatory laws, and
the UK Bribery Act.
11.2. Audit response to risks identified
As a result of performing the above, we identified provisions for uncertain tax positions as a key audit matter related
to potential non-compliance with laws and regulations, and impairment and related reversal of impairments on
intangible assets as a key audit matter related to the potential risk of fraud. The key audit matters section of our
report explains the matter in more detail and also describes the specific procedures we performed in response to that
key audit matter.
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;
164
PZ Cussons plc / Annual Report and Financial Statements 2022
INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF PZ CUSSONS PLC
• 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 the Group’s control environment in response to the
potential non-compliance with laws and regulations identified;
• in addressing the risk of fraud in promotional trade spend, reviewing subsequent settlements to assess the accuracy
of estimates made by management, analysing the key trends in the year, and testing 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 as set out on page 91;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why
the period is appropriate as set out on page 91;
• the Directors’ statement on fair, balanced and understandable as set out on page 115;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out
on page 84;
• the section of the annual report that describes the review of effectiveness of risk management and internal control
systems as set out on page 98; and
• the section describing the work of the Audit and Risk Committee as set out on page 110.
Financial Statements / Independent Auditor’s report
165
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
five years, covering the years ending 2018 to 2022.
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.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these
financial statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed
on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF
RTS’). This auditor’s report provides no assurance over whether the annual financial report has been prepared using
the single electronic format specified in the ESEF RTS.
Jane Boardman, BSc FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Manchester, UK
28 September 2022
166
PZ Cussons plc / Annual Report and Financial Statements 2022
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 MAY 2022
Year ended 31 May 2022
(Restated)*
Year ended 31 May 2021
Business
performance
excluding
adjusting
items
£m
Net
adjusting
items
(note 3)
£m
Statutory
results for
the year
£m
Business
performance
excluding
adjusting
items
£m
Notes
Net
adjusting
items
(note 3)
£m
Statutory
results for
the year
£m
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
13
2
6
7
4
Discontinued operations
Loss from discontinued
operations
28
Profit/(loss) for the year
Attributable to:
Owners of the Parent
Non-controlling interests
From continuing operations
Basic EPS (p)
Diluted EPS (p)
From continuing and
discontinued operations
Basic EPS (p)
Diluted EPS (p)
9
9
9
9
2
592.8
(365.3)
227.5
(90.3)
(75.9)
6.6
67.9
2.7
(4.0)
(1.3)
66.6
(13.0)
–
–
–
–
(1.3)
–
(1.3)
–
–
–
(1.3)
(0.3)
592.8
603.3
(365.3)
(366.4)
227.5
(90.3)
(77.2)
6.6
66.6
2.7
(4.0)
(1.3)
65.3
(13.3)
236.9
(100.3)
(71.2)
5.6
71.0
1.5
(3.9)
(2.4)
68.6
(14.4)
–
–
–
–
2.9
–
2.9
–
–
–
2.9
(14.9)
603.3
(366.4)
236.9
(100.3)
(68.3)
5.6
73.9
1.5
(3.9)
(2.4)
71.5
(29.3)
53.6
(1.6)
52.0
54.2
(12.0)
42.2
(1.8)
51.8
51.4
0.4
12.71
12.64
–
(1.8)
(5.3)
(46.3)
(51.6)
(1.6)
50.2
48.9
(58.3)
(9.4)
(2.9)
1.3
(0.69)
(0.69)
48.5
1.7
12.02
11.95
49.6
(0.7)
(59.0)
0.7
(9.4)
–
13.12
13.10
(3.03)
(3.03)
10.09
10.07
12.28
12.21
(0.69)
(0.69)
11.59
11.52
11.85
11.84
(14.10)
(14.08)
(2.25)
(2.24)
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Financial Statements / Main statements
167
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MAY 2022
Profit/(loss) for the year
Other comprehensive income / (expense)
Items that will not be reclassified subsequently to profit and loss
Re-measurement of post-employment benefit obligations
Deferred tax (loss)/gain 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 repayment of quasi-equity loans
Deferred tax on repayment of quasi-equity loans
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 for the year net of taxation
Total comprehensive income/(expense) for the year
Attributable to:
Owners of the Parent
Non-controlling interests
Notes
2022
£m
50.2
(Restated)*
2021
£m
(9.4)
22
20
18
18
37.4
(8.4)
29.0
(9.5)
2.4
(7.1)
21.7
(31.9)
–
0.2
–
(1.4)
(1.3)
(0.2)
0.3
19.3
48.3
98.5
94.9
3.6
1.4
(0.6)
0.2
–
–
39.9
–
9.0
1.9
(7.5)
(2.5)
(5.0)
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
168
PZ Cussons plc / Annual Report and Financial Statements 2022
CONSOLIDATED BALANCE SHEET
AT 31 MAY 2022
31 May
2022
£m
(Restated)*
31 May
2021
£m
(Restated)*
1 June
2020
£m
Notes
10
11
26
13
20
22
14
15
18
16
17
12
23
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
Currency translation reserve
Capital redemption reserve
Other reserve
Hedging reserve
Retained earnings
Attributable to owners of the parent
Non-controlling interests
Total equity
333.3
288.9
82.9
16.9
45.4
4.5
1.2
69.3
553.5
111.8
105.0
0.7
2.6
0.5
163.8
384.4
3.4
387.8
941.3
4.3
(69.2)
0.7
(37.1)
(0.2)
525.6
424.1
25.2
449.3
91.5
11.7
34.2
5.9
1.7
33.6
467.5
91.1
110.7
1.0
15.3
0.3
87.0
305.4
7.6
313.0
780.5
287.5
112.3
13.7
40.9
15.4
6.9
42.9
519.6
104.6
104.1
0.7
10.7
0.3
78.7
299.1
20.5
319.6
839.2
4.3
4.3
(87.4)
(100.5)
0.7
(39.1)
(0.4)
474.6
352.7
18.8
371.5
0.7
(39.0)
–
514.0
379.5
24.2
403.7
Financial Statements / Main statements
169
Liabilities
Non-current liabilities
Borrowings
Other payables
Long-term lease liability
Deferred taxation liabilities
Retirement and 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
31 May
2022
£m
(Restated)*
31 May
2021
£m
(Restated)*
1 June
2020
£m
Notes
17,18
174.0
118.0
127.0
26
20
22
17
19
26
18
21
12
4.5
14.0
90.7
13.1
0.3
8.7
73.0
12.9
0.4
10.4
62.4
12.2
296.3
212.9
212.4
0.1
163.9
2.9
1.6
21.6
5.6
195.7
–
195.7
492.0
941.3
–
150.9
3.1
0.8
35.2
5.6
195.6
0.5
196.1
409.0
780.5
1.2
161.8
3.4
0.9
47.7
8.1
223.1
–
223.1
435.5
839.2
* The results for the years ended 31 May 2020 and 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
The Financial Statements from pages 166 to 243 were approved by the Board of Directors and authorised for issue.
They were signed on its behalf by:
J Myers
28 September 2022
S Pollard
PZ Cussons plc
Registered number 00019457
170
PZ Cussons plc / Annual Report and Financial Statements 2022
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MAY 2022
Attributable to owners of the Parent
Share
capital
£m
Currency
translation
reserve
£m
Capital
redemption
reserve
£m
Notes
Other
reserves
£m
Hedging
reserve
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
£m
At 1 June 2020
(as previously reported)
Effect of prior year adjustments
1c
At 1 June 2020 (restated)*
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
22
18
18
20
8
Non-controlling interests dividend paid
Acquisition of non-controlling interests
Total transactions with owners
recognised directly in equity
At 31 May 2021 (restated)*
At 1 June 2021 (restated)*
Profit for the year
Other comprehensive income/(expense):
Re-measurement of post-
employment obligations
Exchange differences on translation
of foreign operations
Cash flow hedges movement – fair
value gain in year net of taxation
Disposals – recycle of equity reserves
Deferred tax on re-measurement of
post-employment obligations
Repayment of quasi-equity loans
22
18
20
Total comprehensive income for the year
Transactions with owners:
Ordinary dividends
8
Share-based payment charges
Non-controlling interests dividend paid
Sale of non-controlling interests
Total transactions with owners
recognised directly in equity
–
–
–
–
–
–
(0.6)
0.2
–
–
–
530.3
(16.3)
514.0
(9.4)
(9.5)
–
–
–
–
2.4
1.4
25.4
421.2
(1.2)
(17.5)
24.2
403.7
–
–
(9.4)
(9.5)
(5.0)
(31.9)
–
–
–
–
–
(0.6)
0.2
39.9
2.4
1.4
–
–
(0.1)
–
–
–
–
–
(0.1)
(0.4)
(15.1)
(5.0)
(7.5)
4.3
–
4.3
(100.5)
–
(100.5)
0.7
–
0.7
(39.0)
–
(39.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(26.8)
–
–
39.9
–
–
13.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.3
4.3
(87.4)
(87.4)
0.7
0.7
(39.1)
(39.1)
(0.4)
(0.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19.8
–
(0.2)
–
(1.4)
18.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.0
–
–
2.0
–
–
–
0.2
–
–
–
0.2
–
–
–
–
–
(24.3)
–
(24.3)
–
–
(0.2)
(0.2)
(0.2)
(0.2)
(24.3)
474.6
474.6
48.5
(0.4)
(24.7)
18.8
371.5
18.8
371.5
1.7
50.2
37.4
–
37.4
–
–
0.3
(8.4)
(1.3)
76.5
(25.5)
–
–
–
1.9
21.7
–
–
–
–
0.2
0.1
(8.4)
(2.7)
3.6
98.5
–
–
(25.5)
2.0
(0.5)
(0.5)
3.3
3.3
(25.5)
525.6
2.8
(20.7)
25.2
449.3
At 31 May 2022
4.3
(69.2)
0.7
(37.1)
(0.2)
Financial Statements / Main statements
171
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 MAY 2022
Notes
25
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
Purchase of property, plant and equipment and software
10,11
Proceeds from disposal of PPE and investment property
Cash flow from disposal of companies and businesses
Resolution of purchase price from disposal of company
Acquisition of subsidiary
Cash receipts from repayment of loans by joint venture
Cash advances and loans provided to joint venture
Net cash (used) / 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
Proceeds from loans by joint ventures
Repayment of lease liabilities
Proceeds from / (repayment of) loan facility
Net cash generated / (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
29
8
26
17
17
17
17
2022
£m
2021
£m
66.2
(12.3)
(3.5)
50.4
2.6
0.1
(8.2)
18.6
7.2
(0.8)
(33.6)
8.4
–
(5.7)
(0.5)
(25.5)
–
0.6
(4.0)
56.0
26.6
71.3
87.0
5.4
163.7
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
172
PZ Cussons plc / Annual Report and Financial Statements 2022
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 247. PZ Cussons plc is the parent company and ultimate Parent of the Group.
The principle activities of the Group are the manufacturing and distribution of soaps, detergents, toiletries, beauty
products, pharmaceuticals, electrical goods, edible oils, fats and spreads and nutritional products.
These Financial Statements are presented in Pound Sterling and have been presented in £ million to one decimal
place. Foreign operations are included in accordance with the policies set out in note 1.
For the year ended 31 May 2022 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.
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 184.
The Group’s business activities, together with the factors likely to affect its future development, performance
and position are set out in the Business Review. The financial position of the Group and liquidity position are also
described within that review. Additionally, note 18 to the financial statements includes the Group’s objectives and
policies for managing its capital; its financial risk management objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and liquidity risk.
The Directors consider that adequate resources exist for the Group to continue in operational existence for a period
of at least 12 months from the date of approval of these financial statements and that, therefore, it is appropriate to
adopt the going concern basis in preparing the consolidated financial statements for the period ended 31 May 2022.
The Financial Statements have been prepared using consistent accounting policies except as stated below.
(a) New and amended standards adopted by the Group
The Group has reviewed the April 2021 IFRIC agenda decision regarding the treatment of costs related to cloud
computing. The Group has implemented an amended accounting policy based on the guidance published within
the IFRIC agenda decision. The Group has conducted analysis to identify those projects that, in light of the agenda
decision, would have been recognised directly as expenses, rather than capitalised as intangible assets, related to
cloud computing. The Group does not consider the impact to historic periods to be material and does not intend to
make any adjustment to those periods related to this accounting policy adoption. The Group has instead derecognised
the brought forward capitalised costs that were previously held within intangible assets, which total £1.0 million, and
recorded these as expenses in the income statement in the year ended 31 May 2022. Given its nature and magnitude,
the amount is disclosed as an adjusting item.
(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 2022
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 but does not expect it to be material.
• IFRS 17 ‘Insurance Contracts’;
• Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28;
• Amendments to IFRS 3 ‘Business Combinations’;
• Amendments to IFRS 16 ‘Leases’;
from FY23
date TBC
from FY23
from FY23
Financial Statements / Notes to the consolidated financial statements
173
• Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’;
• Amendments to IAS 1 ‘Presentation of Financial Statements’;
• Amendments to IAS 8 ‘Accounting policies, changes in accounting estimates and errors’; and
• Amendments to IAS 12 ‘Income Taxes’.
(c) Restatement due to prior year adjustments
from FY23
from FY24
from FY24
from FY24
In preparing these financial statements, management identified errors relating to prior periods. Accordingly, prior year
adjustments have been made. The issues were identified as the management team conducted reviews across the
Group’s tax positions, as well as considering the judgement related to the determination of Cash-Generating Units
(CGUs) for the purposes of testing the Group’s indefinite life intangible assets for impairment.
Indirect tax liability
Management identified an issue related to indirect tax whereby a subsidiary company incorrectly assessed the applicability
of VAT to sales of particular goods and purchases of particular raw materials over a period between 2016 and 2019.
Management consider that this issue results in a liability that has not previously been recognised in the financial
statements of the subsidiary or the Group.
As at the FY22 reporting date, and in line with IAS 37, management have considered it appropriate to recognise a
provision of £4.9 million in relation to this liability, which includes applicable fines and interest. Management consider
it would have been correct to have recorded the provision in the years in which the incorrect assessment of VAT took
place, being between 2016 and 2019. In line with IAS 8, and considering that this time period is before FY21, which is
the earliest prior period presented in the financial statements, management have restated the opening balance sheet
of this comparative period. A provision of £4.9 million has been recorded within current liabilities and a corporation
tax receivable has been recognised for £1.1 million, as a portion of the liability is tax deductible. A resulting reduction
in retained earnings and non-controlling interest has been made for the net value of £3.8 million.
Charles Worthington Impairment
In the year, management reviewed the evidence supporting the Group’s judgements around CGU identification
in relation to the impairment testing of the Group’s indefinite life intangible assets and goodwill. This review was
focused on the four brands that make up the Group’s Beauty division, and was triggered by the Group’s new strategy,
whereby two of the Beauty brands, St Tropez and Sanctuary, have been determined as Must Win Brands, with the
other two beauty brands, Fudge and Charles Worthington, being classified as Portfolio brands.
These four brands and their directly attributable assets were, on initial acquisition, treated as separate CGUs; however,
the CGUs were combined in FY12, based on circumstances which management at the time believed supported the
interdependence of cash inflows associated with the four brands. In recent years, the judgement around this single
CGU determination has been highlighted as a significant judgement within the financial statements.
The conclusion of this year’s review of this judgement is that the brands should always have been treated as separate
CGUs; whilst there are some interdependencies in cash inflows arising from the brands, in particular when pricing is
agreed with a customer across a range of brands and then incorporated into a single contract drawn up covering all
brands, when considered overall the cash inflows of each brand are largely independent of each other.
The directors have therefore concluded that each brand, together with its associated assets and liabilities, should
have been treated as a separate CGU from the date of acquisition of the brand and not combined into one CGU in
FY12. Management have undertaken work to assess the carrying value of each of the four CGUs as at 31 May 2020
and 31 May 2021 and concluded that had the four CGUs been tested individually for impairment at those dates:
• The Charles Worthington CGU would have been impaired by £16.9 million at 31 May 2020, and a reversal of this
impairment of £8.3 million would have occurred in the year ended 31 May 2021. A further impairment charge of
£11.6 million has also been recorded in respect of Charles Worthington for the year ended 31 May 2022. These
movements reflect the impact of Covid-19 on the brand’s operating performance, the subsequent post Covid
recovery and the Group’s renewed strategy which has classified Charles Worthington as a portfolio brand; and
• The Sanctuary Spa, Fudge and St Tropez CGUs would not have been impaired at either 31 May 2020 or 31 May 2021.
Therefore, in accordance with IAS 8, management have recognised prior year adjustments, which, in aggregate:
• reduce the carrying value of intangible assets by £16.9 million and associated deferred tax liabilities by £3.2 million
at 31 May 2020 and retained earnings by £13.7 million.
• reduce the carrying value of intangible assets by £8.6 million and associated deferred tax liabilities by £2.2 million at
31 May 2021 with an increase in operating profit of £8.3 million and profit after tax of £7.2 million and a reduction
in retained earnings of £6.5 million. The £8.3 million reversal has been disclosed as an adjusting item within note 3.
174
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
31 May 2020 £m
Balance sheet
Goodwill and other intangible assets
Current tax receivable
Retained earnings
Non-controlling interests
Deferred taxation liabilities
Provisions
31 May 2021 £m
Consolidated income statement
Administrative expenses
Profit before tax
Corporation tax
Loss after tax
Balance sheet
Goodwill and other intangible assets
Current tax receivable
Retained earnings
Non-controlling interests
Deferred taxation liabilities
Provisions
(d) Accounting policies
Basis of consolidation
Charles
Worthington
impairments
As previously
reported
Indirect tax
liability
FY20
FY21
As restated
304.4
9.6
530.3
25.4
(65.6)
(3.2)
287.5
10.7
514.0
24.2
(62.4)
(8.1)
–
(16.9)
1.1
–
(2.6)
(13.7)
(1.2)
–
(4.9)
–
3.2
–
–
–
–
–
–
–
Charles
Worthington
impairments
As previously
reported
Indirect tax
liability
FY20
FY21
As restated
(76.6)
63.2
(28.2)
(16.6)
297.5
14.2
483.7
20.0
(75.2)
(0.7)
–
–
–
–
–
–
–
–
–
8.3
8.3
(1.1)
7.2
(16.9)
8.3
1.1
–
(2.6)
(13.7)
(1.2)
–
–
7.2
–
–
3.2
(1.1)
(4.9)
–
–
(68.3)
71.5
(29.3)
(9.4)
288.9
15.3
474.6
18.8
(73.0)
(5.6)
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.
Financial Statements / Notes to the consolidated financial statements
175
Business combinations
The acquisition of subsidiaries is accounted for using the acquisition 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 re-assesses 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.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that
date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either
treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement
period or recognised in profit or loss.
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 re-assessment, 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.
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.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment
loss on its investment in its joint ventures. At each reporting date, the Group determines whether there is objective
evidence that the investment in joint ventures is impaired. If there is such evidence, the Group calculates the amount
of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying
value, and then recognises the loss within ‘Share of results of a joint venture’ in the statement of profit or loss.
176
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
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 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 Pounds 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 denominated in currencies other than the functional currency of the local entity are
translated at the appropriate rates prevailing on 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.
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.
Finance income and costs
Finance income is earned on deposits and finance costs are incurred on interest bearing loans and borrowings.
Both are recognised in the Income Statement in the period in which they are incurred.
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.
Financial Statements / Notes to the consolidated financial statements
177
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, which operates 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.
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 classified as adjusting items. These items are those that are material in value or related
to significant one-off changes in the structure or value of the business. Certain items may be recognised across
multiple years if they are deemed to be part of a significant transformation project which would not be expected to
recur. Such projects are required to be agreed up front with a clear scope, timeline and budget. The Directors apply
judgement in assessing the particular 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.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the Consolidated
Statement of Profit and Loss except to the extent that it relates to items recognised in Other Comprehensive Income,
in which case it is recognised within the Statement of Other Comprehensive Income.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the financial year end date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities recognised
for financial reporting purposes and the amounts used for taxation purposes, on an undiscounted basis. The amount
of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of
assets and liabilities, using tax rates enacted or substantively enacted at the financial year end date.
178
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
Deferred taxation is not provided on the initial recognition of an asset or liability in a transaction, other than in a
business combination, if at the time of the transaction there is no effect on either accounting or taxable profit or loss.
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.
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.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised.
The Group maintains adequate provisions for potential liabilities that may arise from periods that remain 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 uncertain tax treatments,
management is required to make judgements in determination of the facts and circumstances 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.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment
losses. Land and buildings held from before 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.
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.
Financial Statements / Notes to the consolidated financial statements
179
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 or 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.
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 £5 thousand). 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 one 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.
180
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
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; or
• 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); or
• 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.
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.
Financial Statements / Notes to the consolidated financial statements
181
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. 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 cash equivalents include cash at bank and in hand, call and short-term deposits and other highly liquid
investments with original maturities of three months or less which are readily convertible onto known amounts of
cash and insignificant risk of changes in value.
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.
Derivative financial instruments
The Group’s activities expose it to the financial risk resulting from changes in underlying market rates including
foreign exchange and interest rates. The Company uses derivative financial instruments such as forward currency
contracts and interest rate caps to hedge its risks associated with foreign currency and interest rate fluctuations.
For those derivatives designated as hedges and for which hedge accounting is appropriate, the Group documents
at the inception of the transaction, the hedging relationship between hedging instruments and hedged items.
The documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being
hedged as well as its risk management objectives and how effectiveness will be measured throughout its duration.
Such hedges are expected at inception to be highly effective.
The Group also performs periodic assessment of whether the derivatives that are used in hedging transactions
remain highly effective. The Group designates gross positions and hedge documentation is prepared in accordance
with IFRS 9.
All derivative financial instruments are initially recognised and subsequently remeasured at each reporting date at fair
value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
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. Any gains or losses arising from changes in the fair value
of derivatives that do not qualify for hedge accounting, or in relation to any ineffective portion of derivatives that are
otherwise in a hedging relationship are recognised immediately in the Income Statement.
Financial assets
The Group’s financial assets are initially and 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 de-recognises 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.
182
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
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’)
are 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 life time 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.
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.
Interest bearing loans and 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 using the effective interest rate method.
Gains and losses arising on the repurchase, settlement or other cancellation of interest-bearing loans and borrowings
are recognised in finance income and finance costs, respectively.
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 payables generally equals the
originally invoiced amounts.
Trade payables under vendor financing arrangements
The Group may from time to time enter into arrangements with a bank or banking partners under which the bank
offers vendors the option to receive early settlement of its trade receivables. Vendors utilising the financing arrangement
pay a fee to the bank. The Group does not pay any 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 are not discounted. As at the reporting date, account
payables under vendor financing arrangements were £5.9 million (2021: £2.7 million), see note 19.
Financial Statements / Notes to the consolidated financial statements
183
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 fair value of both the hedged item and the
hedging instrument, where the hedged item and hedging instrument are designated to be in a continuing and
effective hedging relationship. The Hedging 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 impacts profit or loss or when the hedged
transaction is no longer expected to occur, or included directly in the initial recognition value of where the hedged
transaction results in recognition of a non-financial asset.
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
The Currency translation reserve recognises the cumulative effect of foreign exchange differences arising on
translation of the Group’s overseas operations from their local functional currency to the Group’s presentational
currency.
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 at the balance
sheet date of the likely future economic outflows required to settle the obligation.
(i) VAT provision
A provision is held for indirect tax liabilities of a subsidiary entity. Further information is included in note 1c.
(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.
184
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
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.
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 Statement
of Comprehensive Income 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
Current tax liabilities/assets relate to the expected amount of tax to be paid/received as a result of the operating
performance of the Group’s entities. In calculating the appropriate tax charge, assumptions and judgements are made
regarding application and interpretation of local laws.
In situations where tax impacts are subject to uncertain treatment, interpretation of local rule or regulation, or
otherwise remain to be agreed with relevant tax authorities, an estimate of any resulting financial impact may
be recorded in the financial statements. Any such management estimates are made in accordance with IFRS
requirements, including IAS12 and IFRIC23 when considering income tax and IAS37 in relation to non-income taxes.
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 from the original amounts recorded. 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.
Included within the current tax liability of the Group are current tax estimates with carrying values as at 31 May 2022
of £29.5 million (2021: £25.3 million), of which £18.8 million (2021: £17.1 million) relates to a single estimate arising
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 £18.8 million. It has been provided for in full because the directors
believe the economic outflow to be probable, not because the legislation is subjective.
Financial Statements / Notes to the consolidated financial statements
185
Of the remaining £10.7 million (2021: £3.7 million), £5.1 million (2021: £2.8 million) relates to the perceived risk that
due to the subjective nature of transfer pricing in certain jurisdictions, tax authorities may challenge the arm’s length
nature of certain intercompany transactions.
In addition to the provision items listed above, at 31 May 2022 the Group held further contingent tax liabilities of
£8.9 million (2021: £25.9 million). 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. The material
reduction in the current year relates to a reclassification of outstanding items due to changes in judgement of the
probability of settlement.
Critical areas of judgement
Determination of CGUs
The Directors are also required to apply judgement when assessing whether the brands meet the definition of a cash
generating unit (‘CGU’) under IAS36. As disclosed in note 1c, during the year, the directors performed a review of the
appropriateness of the judgement that the four brands making up the Group’s Beauty business represented a single
CGU. This is a key judgement since it underpins the way in which indefinite life brands are tested for impairment.
The directors concluded that the four brands each represents its own CGU which should be tested separately for
impairment accordingly. The change in this critical area of judgement has resulted in the recognition of prior year
adjustments in these accounts.
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.
186
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2. Segmental analysis
The segmental information presented in this 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 business 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.
Reporting segments
Continuing operations
2022
Europe & the
Americas
£m
Asia
Pacific
£m
Gross segment revenue
196.3
179.2
Inter-segment revenue
(3.3)
(5.4)
Africa
£m
222.0
–
Revenue
193.0
173.8
222.0
Segmental operating profit / (loss)
before adjusting items and share of
results of joint ventures
Share of results of joint ventures
Segmental operating profit / (loss)
before adjusting items
Adjusting items
Segmental operating profit / (loss)
Finance income
Finance costs
Profit before taxation
35.0
–
35.0
(12.1)
22.9
20.9
–
20.9
16.1
37.0
15.7
6.6
22.3
6.3
28.6
Central
£m
Eliminations
£m
77.3
(73.3)
4.0
(10.3)
–
(10.3)
(11.6)
(21.9)
(82.0)
82.0
–
–
–
–
–
–
Total
£m
592.8
–
592.8
61.3
6.6
67.9
(1.3)
66.6
2.7
(4.0)
65.3
Financial Statements / Notes to the consolidated financial statements
187
2021 (restated)*
Europe & the
Americas
£m
Asia
Pacific
£m
Gross segment revenue
220.9
194.5
Inter-segment revenue
(4.0)
(7.3)
Africa
£m
192.6
–
Revenue
216.9
187.2
192.6
Segmental operating profit / (loss)
before adjusting items and share of
results of joint ventures
Share of results of joint ventures
Segmental operating profit / (loss)
before adjusting items
Adjusting items
Segmental operating profit / (loss)
Finance income
Finance costs
Profit before taxation
52.1
–
52.1
7.2
59.3
20.7
–
20.7
0.1
20.8
5.1
5.6
10.7
(1.7)
9.0
Central
£m
Eliminations
£m
50.9
(44.3)
6.6
(12.5)
–
(12.5)
(2.7)
(15.2)
(55.6)
55.6
–
–
–
–
–
–
Total
£m
603.3
–
603.3
65.4
5.6
71.0
2.9
73.9
1.5
(3.9)
71.5
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
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 the rest of the world (‘Other’) is:
2022
Revenue
Goodwill and other intangible assets
Property, plant and equipment
Long-term right-of-use assets
Net investment in joint ventures
2021 (restated)*
Revenue
Goodwill and other intangible assets
Property, plant and equipment
Long-term right-of-use assets
Net investment in joint ventures
The Group analyses its revenue by the following categories:
Hygiene
Baby
Beauty
Electricals
Other
UK
£m
Nigeria
£m
172.5
296.0
24.1
12.0
45.4
192.3
3.0
34.8
1.4
–
UK
£m
Nigeria
£m
197.3
260.3
24.1
7.3
34.2
163.6
3.0
42.8
1.2
–
Other
£m
228.0
34.3
23.9
3.5
–
Other
£m
242.4
25.6
24.6
3.2
–
2022
£m
305.9
103.4
80.9
91.5
11.1
Total
£m
592.8
333.3
82.9
16.9
45.4
Total
£m
603.3
288.9
91.5
11.7
34.2
2021
£m
322.4
100.0
74.1
79.4
27.4
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
592.8
603.3
188
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Adjusting items
Year to 31 May 2022
Adjusting items included within continuing operations:
Nigeria Simplification
HR Transformation
Control Transformation
Supply Chain Transformation
Profit on disposal of five:am
Childs Farm acquisition-related costs
Compensation from Australian Competition & Consumer Commission
Recycling of foreign exchange on quasi-equity loans
De-recognition of capitalised costs related to cloud computing
arrangements
Impairment of Charles Worthington brand intangible assets (note 10)
Reversal of impairment of Rafferty’s Garden brand intangible assets
(note 10)
Total adjusting items
Year to 31 May 2021 (restated)*
Adjusting items included within continuing operations:
Group and regional restructuring
Impact of classification of five:am assets as held for sale
Nigeria Simplification
Reversal of impairment of Charles Worthington brand
intangible assets
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
Adjusting items
before taxation
£m
Taxation
£m
Adjusting items
after taxation
£m
7.8
(2.9)
(0.7)
(0.7)
0.7
(1.4)
1.5
(1.5)
(1.0)
(11.6)
8.5
(1.3)
(1.5)
0.6
0.1
0.1
–
–
(0.5)
(0.1)
0.2
2.9
(2.1)
(0.3)
6.3
(2.3)
(0.6)
(0.6)
0.7
(1.4)
1.0
(1.6)
(0.8)
(8.7)
6.4
(1.6)
Adjusting items
before taxation
£m
Taxation
£m
Adjusting items
after taxation
£m
(2.8)
1.2
(3.8)
8.3
–
2.9
(40.7)
(0.4)
(41.1)
(38.2)
0.5
(0.3)
0.2
(2.1)
(13.2)
(14.9)
(5.2)
–
(5.2)
(20.1)
(2.3)
0.9
(3.6)
6.2
(13.2)
(12.0)
(45.9)
(0.4)
(46.3)
(58.3)
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Explanation of adjusting items
Year to 31 May 2022
Adjusting items – continuing operations
Nigeria Simplification
£7.8 million of net income before tax was recognised relating to the Nigeria Simplification project. The amount
comprises £15.9 million of profit on disposal of a number of residential properties in Nigeria as well as £7.6 million of
costs related to the impairment of factory assets and associated engineering spares held in inventory. These assets
relate to product categories that are being reduced as part of the Group’s simplification strategy. The Group expect
to complete further disposals in the following financial year with an expected net income of £17 million. Please see
note 11 for further information.
Financial Statements / Notes to the consolidated financial statements
189
HR Transformation
The HR Transformation programme centres around investment in a new people system. The investment will enhance
ways of working, build organisational capability and underpin our new culture, reduce organisational risk and embed
better controls and drive process efficiency. This two-year programme of change is split into two phases. Phase 1 will
deliver the foundational improvements to our people processes (delivered in this financial year, costing £2.9 million)
and Phase 2 will enable PZ Cussons to transform and realise all the benefits, expected to be delivered the first half of
the next financial year at a cost of £1 million.
Controls Transformation
This project is a three-year programme of change which, as well as ensuring we are ready for compliance deadlines
with future corporate reform in Nigeria and the UK, will also embed an overall strong FTSE plc control environment
across the Group, resolving structural root causes in a comprehensive and properly funded manner and significantly
reducing the ongoing control issues and risks- with the right set of processes and systems and a properly resourced
financial control team. It will deliver an optimal Finance Shared Service Centre footprint, and address legacy finance
process and systems issues. The Group has incurred £0.7 million of costs in the period and expects to incur around
£7 million in the next financial year.
Supply Chain Transformation
The Supply Chain Transformation programme is a multi-year programme which responds to the longer-term business
strategy of the organisation. The programme aims to align and improve supply chain capabilities and drive activities
that will dramatically reduce business complexity. It focuses on leading brands for priority markets and outsourcing
manufacturing that is no longer economically viable. It enhances capabilities where there is scale and strategic
advantage in terms of formulation or manufacturing or where there are geographical benefits. The Group has
incurred £0.7 million in the period and expects to incur around £4 million in the next financial year.
Disposal of five:am
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 £7.2 million. The pre-tax profit recognised on disposal was £0.7 million is stated after
accounting for the recycling to the profit and loss account of historical accumulated foreign exchange losses of
£0.4 million that were initially recorded directly in equity. The results of five:am have not been reported within
discontinued operations in the FY22 or 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 5.32.
Acquisition of Childs Farm
On 21 March 2022, the Group acquired all of the issued share capital in Childs Farm, the UK market-leading baby
and child personal care brand. Joanna Jensen, founder of Childs Farm, made an investment into the PZ Cussons
subsidiary that completed the acquisition such that PZ Cussons now owns a 92% interest in Childs Farm. The costs of
the acquisition and subsequent integration with the Group are expected to be around £1.9 million, with £1.4 million
incurred in the period with the further £0.5 million expected to be incurred in the first half of the next period. Please
see note 29 on page 232 for further information.
Australia Competition & Consumer Commission compensation
In the period the Group received a payment of £1.5 million from the Australian Competition & Consumer Commission
as compensation towards legal costs incurred by the Group in a successful defence of a legal case related to
competition in the laundry market in Australia dating from 2008-2009.
Recycling of foreign exchange losses
£1.5 million of costs were recognised related to the recycling of accumulated historical foreign exchange losses
following a decision taken in the period to repay the intercompany quasi-equity loan between PZ Cussons Ghana Ltd
and PZ Cussons Holdings Ltd. The loan was originally intended to be long term, which is why it was treated as a
quasi-equity loan, but a decision was made in the period to repay it due to the fact there was a surplus of cash
available in PZ Cussons Ghana Ltd.
190
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3. Adjusting items continued
De-recognition of capitalised costs related to cloud computing arrangements
The Group has reviewed the April 2021 IFRIC agenda decision regarding the treatment of costs related to cloud
computing. The net book value of those costs, as at 30 November 2021, was £1.0 million. The Group has de-recognised
these brought-forward capitalised costs, that were previously held within intangible assets, and recorded these as
expenses in the Income Statement for the period ended 31 May 2022. The impact of this de-recognition has been
disclosed as an adjusting item due its nature and magnitude, in line with the Group’s adjusting items policy. Please see
note 10 on page 197 for further information.
Impairment of Charles Worthington brand intangible assets
The Group performed a review of future growth assumptions in relation to Charles Worthington and concluded that
the value-in-use of this cash-generating units was lower than the carrying value and therefore booked an impairment
charge to intangible assets of £11.6 million per IAS 36. Please see note 10 on page 197 for further information.
Reversal of impairment of Rafferty’s Garden brand intangible assets
The Group performed a review of future growth assumptions in relation to Rafferty’s Garden brand and concluded
value-in-use of this cash-generating units was higher than the carrying value and therefore reversed a previously
recorded impairment charge to intangible assets of £8.5 million per IAS 36. Please see note 10 on page 197 for
further information.
Year to 31 May 2021
Adjusting items – continuing operations
Group and regional restructuring
The Group incurred costs of £2.8 million 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. £4.9 million of
costs related to restructuring were included within the Group Structure and Systems adjusting item from FY20.
The Directors have considered these costs adjusting in nature on the basis that they relate to one-off restructuring
costs, particularly redundancy.
Impact of classification of five:am assets as held for sale
The Group recognised an impairment reversal credit of £1.5 million 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 £0.3 million 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 £3.8 million of costs related to redundancy and restructuring associated with the Nigeria
Simplification project, including redundancy costs across the Nigerian businesses (£0.7 million), separation costs and
the write-down of assets due to the closure of our Coolworld retail electrical stores in Nigeria (£0.7 million), change
in ownership of the joint ventures due to impact of merging PZ Wilmar Ltd and PZ Wilmar Food Ltd (£0.2 million)
and an impairment charge following the cessation of trading of Wilmar PZ International Pte Limited (£2.2 million).
Further activity is expected against this project in the following financial year ending May 2022 which is expected to
include further 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 £13.2 million. 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 £8.9 million 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.
Reversal of impairment of Charles Worthington brand intangible assets
The Group performed a review of future growth assumptions in relation to Charles Worthington brand and concluded
value-in-use of this cash-generating units was higher than the carrying value for Charles Worthington and therefore
reversed a previously recorded impairment charge to intangible assets of £8.3 million per IAS 36. Please see note 10
for further information.
Financial Statements / Notes to the consolidated financial statements
191
Adjusting items – discontinued operations
Loss on disposal of Nutricima assets
The Group recognised costs of £45.9 million relating to the sale of the Nutricima business. This represents the loss
on disposal net of project-related costs of £40.7 million, which includes the recycling of foreign exchange losses from
the currency reserve of £39.9 million related to intercompany loans and assets sold, and an attributable tax charge
of £5.2 million. Further detail is provided in note 28. A further £5.9 million 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 £0.4 million in relation to the wind-up of the 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.
4. Profit for the year
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 of intangible assets (note 10)
Impairment of intangible assets (note 10)
Amortisation of intangible assets (note 10)
Depreciation of right-of-use assets (note 26)
(Profit)/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 (note 15)
IFRS 16 short-term or low-value lease rentals (note 26)
Employee costs (note 5)
Auditor’s remuneration (see below)
2022
£m
7.1
2.0
5.9
9.3
(8.5)
11.6
6.6
3.5
(15.9)
342.4
6.9
–
–
68.9
2.1
(Restated)*
2021
£m
16.0
2.1
0.5
11.0
(9.8)
–
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 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
192
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
4. Profit for the year – analysis by nature continued
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
2022
£m
2021
£m
1.3
0.8
2.1
–
2.1
1.0
1.0
2.0
–
2.0
Fees for permitted non-audit services paid to the Company’s Auditor included £40,000 (2021: £40,000) which were
in respect of the review of the Group’s interim statement released in February 2022 and £700 in respect of services
rendered to witness and report on the destruction of stock in Thailand.
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
2022
Number
2021
Number
1,783
2,009
668
401
744
399
2,852
3,152
2022
£m
59.6
3.3
4.5
1.5
2021
£m
67.6
3.9
4.5
0.8
68.9
76.8
2022
£m
2021
£m
1.7
2.2
0.5
0.1
4.5
1.6
2.4
0.4
0.1
4.5
Financial Statements / Notes to the consolidated financial statements
193
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 132 to 143.
6. Net finance costs
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 incurred on Revolving Credit Facility renewal
Finance costs
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 2021 adjusting item of £13.2m)
Total deferred tax charge
Total tax charge
2022
£m
1.5
0.1
1.6
2021
£m
2.4
0.1
2.5
2022
£m
2021
£m
2.1
0.6
2.7
(2.5)
–
(0.6)
(0.5)
(0.4)
(4.0)
(1.3)
0.9
0.6
1.5
(1.2)
(0.5)
(0.6)
(1.0)
(0.6)
(3.9)
(2.4)
2022
£m
(Restated)*
2021
£m
2.5
(0.5)
(1.1)
0.9
12.2
(0.5)
11.7
12.6
(2.5)
3.0
0.1
0.6
13.2
8.5
1.6
(1.0)
9.1
0.9
(0.2)
0.7
9.8
7.2
3.6
13.4
24.2
34.0
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
194
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
7. Taxation continued
Within the tax charge for the year, £0.3 million is classified within adjusting items, of which £(0.8) million is deferred
tax and £1.1 million is current tax. Further detail included in note 3.
UK corporation tax is calculated at 19.0% (2021: 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 is measured at
25% following the Finance Act 2021. Per the announcement made by the UK Government on the 23rd September
2022, the planned increase of Corporation tax from 19% to 25% will be abolished. In line with the Finance Act 2021,
UK deferred taxes are currently shown in the Financial Statements at 25% and will be revalued to 19% in future
reporting periods once this change has been enacted.
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
and tax residency of the Group.
Profit before tax from continuing operations
Loss before tax from discontinued operations
Profit before tax
Tax at the UK corporation tax rate of 19.0% (2021: 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 (credit) / charge attributable to discontinued operations
Tax charge for the year
2022
£m
65.3
(1.7)
63.6
12.1
6.6
(10.0)
–
(2.0)
2.2
0.2
–
(1.2)
5.3
13.2
13.3
(0.1)
13.2
(Restated)*
2021
£m
71.5
(46.9)
24.6
4.7
15.8
(2.4)
13.4
(1.7)
2.4
(6.8)
8.1
5.0
(4.5)
34.0
29.3
4.7
34.0
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
The Company is resident in the United Kingdom for tax purposes. The effective tax rate for the year ended May 31, 2022
including adjusting items and discontinued operations is 20.8% (2021: 138.1%). The high effective tax rate in FY21 was
driven by a one-off adjusting item following the disposal of Nutricima and the enacted future UK Corporate tax rate
change impacting the deferred tax charge.
The Group operates in a number of overseas tax jurisdictions that have tax rates in excess of the current UK rate.
Financial Statements / Notes to the consolidated financial statements
195
Primary reconciling differences between tax at UK corporation tax rate and the actual tax charge for the year include
the following:
• Expenses not deductible/taxable amount to £6.6 million (2021: £15.8 million) relate to several items including the
disposal of five:am assets (£1.1 million) and intangible amortisation in Nigeria (£0.8 million). The 2021 value of
£15.8 million was materially higher due to the impact of the Nigerian Nutricima disposal.
• Items treated as non-taxable reduced the tax charge for the year by £10.0 million (2021: £2.4 million),
predominately in relation to the following one off items; a large non-taxable gain in Nigeria of £3.2 million relating
to land disposal and non-taxable proceeds of £4.0 million on disposal of the five:am brand and related items.
• Tax liabilities outside the UK increase the annual tax charge by £2.2 million, including unrelievable withholding taxes
incurred on dividends received in the UK.
• Differences in foreign tax rates during the year of £5.3 million (2021: (£4.5 million) reflect changes in the Group
profitability profile.
Taxation on items taken directly to equity and other comprehensive income was a charge of £9.3 million
(2021: £3.8 million). Items relate to deferred tax on pensions, share based payments and foreign exchange
differences on intercompany loans. Further detail is included in note 20.
The Group operates in a multinational tax environment where the nature of 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.
The Group believes that it has made adequate provision for all open tax positions including those in current discussion
with local tax authorities, and which totalled £31.0 million as at 31 May 2022 (2021: £28.3 million). Further information
on 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 2021 of 3.33p (2020: 3.13p) per ordinary share
Interim dividend for the year ended 31 May 2022 of 2.67p (2021: 2.67p) per ordinary share
Proposed final dividend for the year ended 31 May 2022 of 3.73p (2021: 3.42p)
per ordinary share
2022
£m
2021
£m
14.3
11.2
25.5
13.1
11.2
24.3
15.6
14.3
The proposed final dividends for the years ended 31 May 2021 and 31 May 2022 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 2021 and 31 May 2022 respectively.
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 net debt 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
2022
Number
000
2021
Number
000
418,476
418,402
420,841
419,016
196
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
9. Earnings per share continued
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:
Average number of ordinary shares in issue during the year
2022 Number
000
2021 Number
000
428,725
428,725
Less: weighted average number of shares held by Employee Share Option Trust
(10,249)
(10,323)
Basic weighted average shares in issue during the year
Dilutive effect of share incentive plans
Diluted weighted average shares in issue during the year
Earnings per share from continued and discontinued operations
Profit/(loss) after tax attributable to owners of the Parent
Adjusting items (net of taxation effect)
Adjusted profit after tax
Basic earnings / (losses) per share
Adjusting items
Adjusted basic earnings per share
Diluted earnings / (losses) per share
Adjusting items
Adjusted diluted earnings per share
418,476
418,402
2,365
614
420,841
419,016
(Restated)*
2022
£m
48.5
2.9
51.4
2022
pence
11.59
0.69
12.28
11.52
0.69
12.21
2021
£m
(9.4)
59.0
49.6
2021
pence
(2.25)
14.10
11.85
(2.24)
14.08
11.84
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
From continuing operations
Profit attributable to owners of the Parent from continuing operations
Adjusting items (net of taxation effect)
Adjusted profit after tax
2022
£m
50.3
2.9
53.2
(Restated)*
2021
£m
42.2
12.7
54.9
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Financial Statements / Notes to the consolidated financial statements
197
Basic earnings per share
Adjusting items
Adjusted basic earnings per share
Diluted earnings per share
Adjusting items
Adjusted diluted earnings per share
2022
pence
12.02
0.69
12.71
11.95
0.69
12.64
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
From discontinued operations
Loss after tax attributable to owners of the Parent from discontinued operations
(Restated)*
2021
pence
10.09
3.03
13.12
10.07
3.03
13.10
2021
£m
(51.6)
46.3
(5.3)
2022
£m
(1.8)
–
(1.8)
Adjusting items (net of taxation effect)
Adjusted loss after tax
Basic losses per share
Adjusting items
Adjusted basic losses per share
Diluted losses per share
Adjusting items
Adjusted diluted losses per share
10. Goodwill and other intangible assets
Cost
At 1 June 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 and between categories
2022
pence
2021
pence
(0.43)
(12.33)
–
(0.43)
11.06
(1.27)
(0.43)
(12.31)
–
(0.43)
11.05
(1.26)
Goodwill
£m
Software
£m
Brands
£m
Total
£m
69.1
(0.1)
–
0.9
(2.9)
–
(21.5)
8.4
63.2
(0.8)
2.4
–
(0.8)
1.3
–
0.7
268.3
400.6
0.3
–
–
–
–
(0.6)
2.4
0.9
(3.7)
1.3
(32.8)
(54.3)
(2.6)
6.5
198
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
10. Goodwill and other intangible assets continued
At 31 May 2021
Currency retranslation
Additions
Derecognition of capitalised costs related to cloud computing
At 31 May 2022
Accumulated amortisation and impairment
At 1 June 2020 (restated)*
Currency retranslation
Amortisation charge for the year
Disposals
Impairment reversal – restated*
Reclassified as held for sale (note 12)
Revised analysis between cost and amortisation of intangible
assets and between categories
At 31 May 2021 (restated)*
Currency retranslation
Amortisation charge for the year
Impairment charge
Impairment reversal
Derecognition of amortisation related to cloud computing
At 31 May 2022
Net book values
At 31 May 2022
At 31 May 2021- restated*
Goodwill
£m
Software
£m
Brands
£m
66.0
233.2
Total
£m
353.1
2.8
53.7
(2.2)
1.6
35.5
-
270.3
407.4
59.3
113.1
–
–
–
(9.8)
(26.8)
(1.9)
20.8
0.6
–
11.6
(8.5)
–
24.5
–
6.3
(3.6)
(9.8)
(48.3)
6.5
64.2
1.4
6.6
11.6
(8.5)
(1.2)
74.1
245.8
212.4
333.3
288.9
0.4
1.4
(2.2)
65.6
27.5
(0.3)
6.3
(0.7)
–
–
–
32.8
0.3
6.6
–
–
(1.2)
38.5
27.1
33.2
53.9
0.8
16.8
-
71.5
26.3
0.3
–
(2.9)
–
(21.5)
8.4
10.6
0.5
–
–
–
–
11.1
60.4
43.3
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Transfers from property, plant and equipment mainly represent the capitalised element of software costs relating to
IT network and security improvements.
The Group has reviewed the April 2021 IFRIC agenda decision regarding the treatment of costs related to cloud computing.
The net book value of those costs, as at 31 May 2021, was £1.0 million. The Group has derecognised these brought-
forward capitalised costs, that were previously held within intangible assets, and recorded these as expenses in the
Income Statement for the year ended 31 May 2021. The impact of this derecognition has been disclosed as an adjusting
item due its nature and magnitude, in line with the Group’s adjusting items policy. Please see note 3 for further information.
Revised analysis between cost and amortisation in 2021 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, £0.7 million of software costs were
identified which had previously been disclosed as ‘Other Brands’.
Amortisation is charged to administrative expenses in the Income Statement.
Software includes the ERP system (SAP). The carrying value of this asset as at 31 May 2022 is £21.4 million
(2021: £28.0 million), with five years of amortisation remaining.
The carrying amounts of software are reviewed at each reporting date to determine whether there is any indication
of impairment.
Financial Statements / Notes to the consolidated financial statements
199
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. Brands are tested for impairment at the individual CGU level and goodwill is tested for impairment at the
segment level.
• 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 years which are then extrapolated beyond the
five-year period based on estimated long-term growth rates.
• Childs Farm has been reviewed for impairment on the basis of fair value less cost to sell (FVLCS) given the proximity
of the acquisition to the year end.
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. In the year, management reviewed the evidence supporting the Group’s judgements around CGU
identification of the Group’s indefinite life intangible assets and goodwill, and in particular the determination in place
since FY12 that the four Beauty brands, St Tropez, Sanctuary Spa, Fudge and Charles Worthington be combined into
one Beauty CGU. The conclusion of this review is that the brands should always have been treated as separate CGUs
and in accordance with IAS8, management have recognised prior year adjustments to reflect this fact. Further details
can be found in note 1c.
In the year, the Group acquired Childs Farm, and has recognised £35.5 million in relation to the value of the brand
and an additional £16.8 million in relation to goodwill, which represents the expected synergies and the deferred
consideration arrangement in place for the Group to purchase the outstanding minority shareholding. Further
information is available in note 29.
The table below summarises the allocation of goodwill and brands to each CGU.
Original Source
Charles Worthington
Sanctuary Spa
St Tropez
Fudge
Rafferty’s Garden
Childs Farm
Nutricima
five:am
Other1
Total
Reclassified as held for sale:
Nutricima
five:am
Total
Goodwill
2022
£m
(Restated)*
Goodwill
2021
£m
Brands
2022
£m
(Restated)*
Brands
2021
£m
–
8.3
21.0
11.1
–
–
16.8
–
–
3.2
60.4
–
–
–
8.3
21.0
11.1
–
–
–
–
–
2.9
43.3
–
–
9.8
9.6
75.4
58.4
24.6
32.5
35.5
–
–
–
9.8
21.2
75.4
58.4
24.6
23.0
–
–
6.0
–
245.8
218.4
–
–
–
(6.0)
60.4
43.3
245.8
212.4
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
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.
200
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
10. Goodwill and other intangible assets continued
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.
The long-term growth rates and discount rates applied in the value-in-use calculations have been set out below:
Original Source
The Sanctuary
St Tropez
Charles Worthington
Fudge
Rafferty’s Garden
Pre-tax
Discount rate
FY21
Pre-tax
Discount rate
FY21
(restated)*
Long-term
growth rate
FY22
Long-term
growth rate
FY21
8.0%
8.0%
8.0%
10.1%
10.1%
10.0%
7.1%
7.7%
7.7%
8.0%
8.0%
6.9%
1.5%
1.5%
1.5%
1.5%
1.5%
2.5%
1.7%
1.7%
1.7%
1.7%
1.7%
3.0%
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
The discount rates disclosed above are the pre-tax discount rates applied in the FY22 value-in-use calculations. For FY22,
all discount rates include a size premium. For FY21, a size premium was only applied in respect of the four CGUs that make
up the Beauty division (St. Tropez, Fudge, Sanctuary Spa and Charles Worthington). For the Original Source and Rafferty’s
Garden CGUs this therefore represents a change in the estimation approach as defined within IAS8. If this change
had not been applied, the reversal of the previously recognised impairment charge in respect of Rafferty’s Garden
would have increased by £8.0 million. 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 FY21 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, certain impairments have been recognised in FY22, as set out below.
For the Charles Worthington brand, the impairment tests showed a fair value of the brand of £9.6 million compared
to the carrying value of £21.2 million, resulting in an impairment loss of £11.6 million. The tests were based on
management’s best estimate of future performance using the board approved five year plan with an overlay for the
impact of inflation based on a 10% increase to costs over the period of that forecast. Sensitivity analysis on the brand
indicated a reasonably possible additional downside of £2 million based on a sales decline of 4%.
For Rafferty’s Garden, the impairment tests showed a fair value of £32.5 million compared to the carrying value of £24.2
million, resulting in a reversal of previously recorded impairment losses to the value of £8.5 million. The tests were based on
management’s best estimate of future performance using the board approved five year plan with an overlay for the impact
of inflation based on a 10% increase to costs. Sensitivity analysis performed indicated that the extent of reversal would be as
low as £3 million on a reasonably possible downside based on a sales decline of 2.5% or a margin decline of 1%pt.
For the remaining brands with intangible assets, namely St Tropez, Fudge, Sanctuary Spa and 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. 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.
Financial Statements / Notes to the consolidated financial statements
201
11. Property, plant and equipment
Cost
At 1 June 2020
Currency retranslation
Additions
Disposals
Reclassified as held for sale
Reclassification
Reclassification to software within
intangible assets
At 31 May 2021
Currency retranslation
Additions
Disposals
Reclassified as held for sale
Reclassification to other fixed assets
Reclassification to investment property
At 31 May 2022
Accumulated depreciation and
impairment
At 1 June 2020
Currency retranslation
Charge for the year
Disposals
Reclassified as held for sale
Impairment loss
At 31 May 2021
Currency retranslation
Charge for the year
Disposals
Reclassified as held for sale
Reclassification to investment property
Impairment loss
At 31 May 2022
Net book values
At 31 May 2022
At 31 May 2021
Land and
buildings
£m
Investment
property
£m
Plant and
machinery
£m
Fixtures,
fittings and
vehicles
£m
Assets in the
course of
construction
£m
133.1
(15.3)
0.5
(3.3)
(7.7)
5.0
–
112.3
7.3
–
0.5
–
4.5
–
53.0
(2.6)
–
(1.3)
–
0.2
–
49.3
1.2
–
(1.5)
–
3.1
–
124.6
52.1
104.2
(11.4)
6.9
(3.2)
(7.4)
–
89.1
5.6
5.8
0.4
–
–
2.1
47.7
(2.3)
2.6
(1.3)
–
0.2
46.9
1.0
1.7
(1.5)
–
–
–
103.0
48.1
94.6
(9.6)
–
(0.2)
(1.0)
0.1
–
83.9
4.0
–
(0.6)
(2.0)
0.7
(4.7)
81.3
34.1
(2.8)
1.4
(0.1)
(0.3)
0.3
32.6
1.1
1.8
(0.4)
(0.4)
(1.6)
3.8
36.9
44.4
51.3
9.9
(1.5)
–
–
–
–
–
8.4
(0.7)
0.2
(2.4)
(1.7)
–
4.7
8.5
0.8
(0.1)
0.1
–
–
–
0.8
–
–
(0.7)
(0.6)
1.6
–
1.1
7.4
7.6
21.6
23.2
4.0
2.4
5.5
7.0
(1.3)
(1.3)
8.5
(0.9)
6.0
–
–
(5.3)
7.0
0.3
6.6
(0.1)
–
(8.3)
–
5.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
299.1
(29.9)
6.5
(4.8)
(8.7)
–
260.9
12.1
6.8
(4.1)
(3.7)
–
–
272.0
186.8
(16.6)
11.0
(4.6)
(7.7)
0.5
169.4
7.7
9.3
(2.2)
(1.0)
–
5.9
189.1
82.9
91.5
202
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
11. Property, plant and equipment continued
Depreciation is charged to administrative expenses or cost of sales (for plant & machinery) in the Income Statement.
At 31 May 2022, the Group had entered into commitments for the acquisition of property, plant and equipment
amounting to £0.3 million (2021: £0.7 million). At 31 May 2022, the Group’s share in the capital commitments of the
joint ventures was £nil (2021: £nil).
Disposals are mainly related to the sale of a number of residential properties in Nigeria linked to the ongoing
simplification project. A £15.9 million profit on disposal was recognised in adjusting items.
Impairment losses of £5.9 million in land & buildings and plant & machinery in the year related to the impairment of
factory assets in Nigeria. This amount has been recognised in adjusting items in the Consolidated Income Statement
within the Nigeria Simplification line item.
Impairment losses in land & buildings in the prior year were related to re-assessment 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 £1.6 million NBV relating to land in the UK.
This, together with £1.1 million NBV brought forward in Investment properties relating to properties in Nigeria
have been reclassified to ‘Assets Held for Sale’ at 31 May 2022. Further details of the assets held for sale classification
are available in note 12.
The fair value of the investment properties as at 31 May 2022 is £43.7 million (2021: £25.1 million).
12. Assets held for sale
Disposal group held for sale
Intangible assets (note 10)
Property, plant and equipment (note 11)
Inventory
Employee-related accruals
Subtotal
Property, plant and equipment held for sale (note 11)
Total
Current assets:
Assets held for sale
Current liabilities:
Liabilities directly associated with assets held for sale
Total
2022
£m
2021
£m
–
–
–
–
–
3.4
3.4
6.0
0.3
0.6
(0.5)
6.4
0.7
7.1
3.4
7.6
–
3.4
(0.5)
7.1
The property, plant and equipment held for sale relates to a carried forward balance of £0.7 million regarding disused
land in the UK, in addition, new items have been reclassified as held for sale during the financial year, relating to
investment properties in Nigeria £1.1 million and Land Held in the UK £1.6 million.
Financial Statements / Notes to the consolidated financial statements
203
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
£m
Group’s
share of net
(liabilities)/
assets of joint
ventures
£m
Net
investments in
joint ventures
£m
Carrying value
At 1 June 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
44.4
0.1
(3.4)
–
–
–
(3.5)
–
–
(2.2)
(0.2)
0.2
Exchange differences on translation of foreign currency loans classified
as ‘permanent as equity’ recognised in equity
(5.9)
(1.2)
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
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 2022
–
–
35.2
–
4.4
–
39.6
0.3
5.6
(1.0)
0.5
(0.3)
6.6
5.8
40.9
0.1
(3.4)
(2.2)
(0.2)
0.2
(7.1)
0.3
5.6
34.2
0.5
4.1
6.6
45.4
At the start and the end of the prior period, the Group held investments in two joint ventures as follows:
Joint venture
companies
Operation
Country of
incorporation
Parent Company’s
interest
Registered
Office address
PZ Wilmar Limited
Manufacturing
Nigeria
Wilmar PZ
International
Pte Limited
Provision of services to
joint venture companies
Singapore
50%
50%
45/47 Town Planning
Way, Ilupeju, Lagos
56 Neil Road, Singapore
204
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Net investments in joint ventures continued
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.
PZ Wilmar Ltd
Assets
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Total assets
Liabilities
Non-current liabilities
Current liabilities
Total liabilities
Net assets
PZ Wilmar Ltd
Revenues
Profit before tax for the year
Profit after tax
Total comprehensive income
2022
£m
2021
£m
51.1
46.5
43.4
67.5
110.9
162.0
(80.5)
(66.8)
35.1
50.5
85.6
132.1
(71.7)
(59.1)
(147.3)
(130.8)
14.7
1.3
2022
£m
295.6
18.8
12.6
12.6
2021
£m
214.4
10.8
8.9
8.9
Group’s share of profit after tax for the year was £6.6 million (2021: £5.6 million). 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 is as follows:
PZ Wilmar Ltd
Net assets 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 regarding 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
2022
£m
14.7
50%
7.4
2021
£m
1.3
50%
0.7
2022
£m
2021
£m
–
–
–
–
(1.6)
(1.7)
Financial Statements / Notes to the consolidated financial statements
205
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 2 as the credit risk has not increased
significantly since initial recognition. The loss allowance has been measured using lifetime expected credit loss (ECL)
by assessing the value in use of PZ Wilmar Ltd, and on this basis, management has 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
2022
£m
27.9
10.0
73.9
111.8
2021
£m
22.6
5.1
63.4
91.1
During the year the cost of inventories recognised as an expense, and included in cost of sales, amounted to £342.4
million (2021: £343.3 million). This included £6.9 million (2021: £6.6 million) which was charged to the Income Statement
to write down slow-moving and obsolete inventories. Inventories are stated after provisions for impairment of £8.8
million (2021: £5.5 million).
15. Trade and other receivables
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 materially affect its customers’ historical default rates and, consequently,
the expectation and estimation of the ECLs has not changed.
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
2022
£m
90.9
(3.9)
87.0
1.7
11.0
5.3
2021
£m
90.1
(4.1)
86.0
9.5
10.6
4.6
105.0
110.7
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 (2021: 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.
206
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
15. Trade and other receivables continued
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
2022
£m
72.8
11.0
1.1
2.1
87.0
2021
£m
71.3
13.9
0.5
0.3
86.0
The following table details the risk profile of trade receivables based on the Group’s provision matrix as at 31 May 2022:
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
Expected
credit
loss rate
£m
0.4%
1.1%
12.5%
11.1%
15.4%
38.2%
100.0%
Gross trade
receivables
£m
Lifetime
ECL
£m
Specific
provisions
£m
Total
provision for
impairment
of trade
receivables
£m
74.4
8.9
1.6
0.9
1.3
3.4
0.4
90.9
0.3
0.1
0.2
0.1
0.2
1.3
0.4
2.6
1.3
–
–
–
–
–
–
1.3
1.6
0.1
0.2
0.1
0.2
1.3
0.4
3.9
The following table details the risk profile of trade receivables based on the Group’s provision matrix as at 31 May 2021:
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
Expected
credit
loss rate
£m
0.41%
0.00%
16.7%
10.0%
16.7%
47.1%
100.0%
Gross trade
receivables
£m
Lifetime
ECL
£m
Specific
provisions
£m
Total
provision for
impairment
of trade
receivables
£m
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
1.5
-
-
-
-
0.6
-
2.1
1.8
-
0.2
0.1
0.1
1.4
0.5
4.1
Financial Statements / Notes to the consolidated financial statements
207
2022
£m
(4.1)
(0.9)
0.3
0.9
(0.1)
(3.9)
2022
£m
36.3
12.5
11.0
0.8
9.5
12.1
1.4
3.4
87.0
2022
£m
0.5
0.5
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
Movements in the Group provision for impairment of trade receivables are as follows:
At 1 June
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
Other currencies
16. Current asset investments
Unlisted
17. Cash and cash equivalents
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents
Overdrafts
Net Cash and cash equivalents
1 June 2021
£m
Net cash
flow
£m
Foreign
exchange
movements
£m
Other*
£m
31 May 2022
£m
79.4
7.6
87.0
–
87.0
24.1
46.9
71.0
(0.1)
70.9
2.3
3.5
5.8
–
5.8
–
–
5.8
(0.5)
5.3
–
–
–
–
–
–
0.2
0.2
(8.6)
(8.4)
105.8
58.0
163.8
(0.1)
163.7
(174.0)
0.5
(9.8)
(16.9)
(26.7)
Loans due in greater than one year
(118.0)
(56.0)
Current asset investments
Adjusted net debt
Lease liabilities
Net debt
0.3
(30.7)
(11.8)
(42.5)
–
14.9
4.0
18.9
* Other includes lease additions in FY22 and an increase in the lease liability arising from the unwinding of interest element.
208
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
17. Cash and cash equivalents continued
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents
Overdrafts
Net Cash and cash equivalents
Loans due in greater than one year
Current asset investments
Adjusted net debt
Lease liabilities
Net debt
1 June 2020
£m
Net cash
flow
£m
Foreign
exchange
movements
£m
Other
£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)
* Other includes lease additions in FY22 and an increase in the lease liability arising from the unwinding of interest element.
18. Financial instruments and risk management
The Group’s activities expose it to a variety of financial risks, including market risk (arising from movements in foreign
currency rates, commodity prices and interest rate risk), credit risk and liquidity risk.
Overall risk management is led by senior management and executed according to Company policy with the intention
to minimise adverse impacts on the Group’s financial performance through the execution of agreed risk management
strategies. Management of these risks, along with the day to day management of treasury activities is performed by
the Group Treasury function as defined within the Board approved policy framework.
Where appropriate, the Group uses derivative financial instruments to hedge certain risk exposures. The use of
financial derivatives and the management of all financial risks is governed by the Group Treasury policy as approved
by the Board of Directors. The Group does not enter into any financial derivative contract for trading or speculative
purposes. All hedging activity is carried out by a central treasury department that hedges financial risks according to
forecasts provided by the companies operating units.
The Group also enters into contracts with suppliers for its principal raw material requirements and associated input
costs. Commodity and associated input and manufacturing costs such as energy are part of the Groups normal
purchasing activities.
A. Market risk
In managing market risks, the Company aims to minimise the impact of short-term fluctuations on the Group’s
financial performance. Over the longer term, permanent changes in market rates (including both foreign exchange,
commodity prices and interest rates) will have an impact on consolidated earnings.
(a)(i) Foreign currency risk
Foreign currency risk is the risk that the fair value of Group assets, liabilities or future cash flows will fluctuate due
to changes in foreign exchange rates. The Group is exposed to foreign exchange translation and transaction risks as
follows:
• Foreign exchange translation risks arise due to the translation of assets and liabilities denominated in currencies
other than GBP.
• Foreign exchange transaction risk occurs due to changes in the value of cash flows in a currency other than the
functional currency of the operating entity.
The most significant exposures for the Company are the purchase of raw materials, stock and services purchased in
U.S. Dollars and Euros. The Company’s policy is to reduce this risk by using foreign exchange forward contracts which
are typically designated as cashflow hedges.
Financial Statements / Notes to the consolidated financial statements
209
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 derivatives designated as cashflow hedges, the derivative covers the
period of exposure from initial forecasting of the hedged item to the point of settlement.
Hedge accounting is typically applied in order to remove any timing mismatch between the hedging instrument and
hedged item, with the effective portion of the change in fair value of the hedging instrument accounted for in the
cash flow hedge reserve through other comprehensive income. It will be recognised in the profit and loss at the same
time as the hedged item. Where hedge accounting criteria is not met, the fair value of the derivative is accounted for
through the profit and loss.
The majority of the Group’s assets and liabilities are denominated in the functional currency of the relevant subsidiary.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting
date are as follows. The amounts listed under income statement show the Group’s exposure to foreign currency
based on operations from entities denominated in foreign currency.
£m
Nigerian Naira
US Dollar
Euro
Indonesian Rupiah
Australian Dollar
2022
2021
Assets
Liabilities
Income
Statement
Assets
Liabilities
–
16.3
1.5
–
0.1
–
3.5
2.4
–
–
5.5
1.8
–
8.7
11.6
–
18.8
0.9
–
–
–
1.5
2.6
–
–
Income
Statement
(61.4)
1.5
–
8.5
6.6
The following table demonstrates the sensitivity to a reasonably possible change in the Nigerian Naira, US Dollar, Euro,
Indonesian Rupiah and Australian Dollar exchange rates, with all other variables held constant, on the current years
Group profit before tax (due to changes in the fair value of monetary assets and liabilities) and the Groups equity (due
to the change in fair value of designated hedging contracts).
£m
Change
2022
Effect
on profit
before tax
Effect on
assets
Effect on
liabilities
Effect
on profit
before tax
Effect on
assets
Effect on
liabilities
2021
Nigerian Naira
US Dollar
Euro
Indonesian Rupiah
Australian Dollar
+5%
–5%
+5%
–5%
+5%
–5%
+5%
–5%
+5%
–5%
(0.3)
0.3
0.1
(0.1)
–
–
0.4
(0.4)
0.6
(0.6)
–
–
0.8
(0.8)
0.1
(0.1)
–
–
–
–
–
–
0.2
(0.2)
0.1
(0.1)
–
–
–
–
(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)
–
–
–
–
–
–
The Company’s policy is to reduce its risk of foreign exchange movements in material operating cash flows in
currencies other than the operating entity’s functional currency using forward contracts designated as cash flow
hedges. Forecast cash flows represent the hedged item and are subject to management assessment.
In order to qualify as a cash flow hedge, the hedging instrument must meet the requirements of IFRS9, including
alignment of the critical terms between the hedging instrument and hedged item. The Group designates the forward
component of forward contracts as the hedging instrument.
Hedge ineffectiveness may arise from items including changes in forecast transactions, misalignment in critical terms,
or if credit dominates the relationship between hedged item and hedging instrument. There was no ineffectiveness
during the reporting period in relation to the use of foreign exchange forward contracts.
210
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18. Financial instruments and risk management continued
The notional amounts of forward contracts outstanding as the reporting date, along with the weighted average hedge
rates and average spot rates for the reporting period are shown below:
£m
GBP/USD
GBP/EUR
GBP/AUD
AUD/USD
AUD/GBP
USD/SGD
Total
2022
Notional Average rate
Weighted
average
hedge rate
Notional Average rate
43.1
(8.3)
2.6
(23.1)
(1.0)
(2.0)
11.3
1.34
1.18
1.84
0.73
0.54
0.74
1.29
1.17
1.82
0.73
0.57
1.37
19.9
(7.2)
8.8
(14.2)
–
(0.7)
6.5
1.33
1.12
1.81
0.74
0.55
0.74
2021
Weighted
average
hedge rate
1.36
1.12
1.84
0.75
–
1.34
The following table shows the notional value and fair value of the foreign currency forward contracts outstanding at
the end of the reporting period. Items are presented on a gross aggregate basis across counterparties.
£m
As at 31 May 2022
Assets
Liabilities
As at 31 May 2021
Assets
Liabilities
Gross
notional
amount
Fair value
Change in
fair value
66.0
(54.6)
38.4
(31.9)
0.7
(1.6)
1.0
(0.7)
(0.3)
(0.9)
0.3
0.2
As at 31 May 2022, the aggregate fair value of foreign exchange forward contracts currently deferred in the cash flow
hedge reserve was (£0.1 million) (2021: loss of £0.3 million). It is anticipated that the purchases will take place during
the next financial year when the carrying value of hedging instruments will be recycled into the profit and loss. It is
anticipated that the raw materials will be converted into inventory and sold within 12 months of purchase.
The aggregate amount under foreign exchange forward contracts taken directly to profit and loss was a loss of £0.8
million (2021: gain of £0.5 million).
Set out below is the reconciliation of each component of equity and the analysis of other comprehensive income:
£m
As at 1 June 2020
Changes in fair value of hedging instruments net of taxation
As at 31 May 2021
Changes in fair value of hedging instruments net of taxation
As at 31 May 2022
Cash flow
reserve
0.2
(0.6)
(0.4)
0.2
(0.2)
Cost of
hedging
reserve
(0.2)
0.2
–
–
–
Financial Statements / Notes to the consolidated financial statements
211
Managing interest rate benchmark reform and associated risks
As a result of the cessation of Sterling LIBOR on 31 December 2021, the Group transitioned borrowings under its
existing revolving credit facility from LIBOR to SONIA, with the amendment and restatement of underlying loan
documentation entered into on 12 Nov 2021.
(b)(i) Commodity pricing risk
Commodity risk is the risk that changes in underlying raw material prices have an adverse impact on the Company’s
financial performance.
The Group’s policy is to minimise the pricing volatility accompanied by unfavourable changes in commodity prices by
entering into fixed price supplier contracts in line with its commercial strategy.
The Group does not enter into any commodity derivatives.
(c)(i) Interest rate risk
Interest rate risk is the risk that a change in interest rates will have an adverse impact on the Groups financial performance.
The Group is exposed to interest rate risk to the extent it enters into floating rate borrowing arrangements, and/or
related interest rate hedging derivatives.
As part of the interest rate risk policy the Group previously entered into interest rate cap (financial option) on a notional
principal amount of GBP75 million, in which it agreed to exchange at specified intervals, the difference between fixed
and floating rate interest amounts, with a floating strike price of 1.25%. This was accounted for as a cash flow hedge
with the option time value accounted for a cost of hedging. The interest rate cap expired in December 2021.
As a result of decisions taken by national regulators, GBP LIBOR and certain USD LIBOR time periods were phased
out at the end of Dec 2021 and replaced by alternative reference indexes (SONIA and SOFR). Such changes have been
reflected in the Group’s £325 million Revolving Credit Facility.
The below sensitivity analysis has been prepared on the basis of gross debt (excluding lease liabilities) as at 31 May 2022
and demonstrates the sensitivity to a reasonably possible change in interest rates.
£m
2022
Sterling
Increase/
decrease in
basis points
Effect
on profit
before tax
+50
+40
+30
+20
+10
-10
-20
-30
-40
-50
(0.9)
(0.7)
(0.5)
(0.3)
(0.2)
0.2
0.3
0.5
0.7
0.9
212
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18. Financial instruments and risk management continued
£m
2021
Sterling
Increase/
decrease in
basis points
Effect
on profit
before tax
+50
+40
+30
+20
+10
-10
-20
-30
-40
-50
(0.6)
(0.5)
(0.4)
(0.2)
(0.1)
0.0
0.1
0.2
0.4
0.5
The Group’s sensitivity to interest rates has increased during the current year primarily due to an increase in drawn
borrowing amounts under the Group Revolving Credit Facility which in turn have been used to support the acquisition
of Childs Farm together with general working capital purposes.
B. Credit risk
The Group is exposed to counterparty credit risk from its operating activities (primarily trade receivables) and from its
financing activities with banks and financial institutions, including cash deposits, and the use of derivatives and other
financial instruments. The maximum exposure to credit risk at the end of the reporting period is the carrying amount
of each class of financial assets.
The Group maintains a policy on financial counterparty credit risk exposures that limits the maximum exposure on the
investment of surplus cash and use of derivative instruments with reference to a minimum credit rating as maintained
by Standard & Poors or Fitch, with further limits established for levels of exposure at various ratings levels.
The below table provides an overview of the net assets (liabilities) attributed to each counterparty.
£m
AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
CCC+
Not rated
Total
31 May 2022
Cash
and cash
equivalents
and financial
derivatives
31 May 2021
Cash
and cash
equivalents
and financial
derivatives
11.3
26.6
8.3
116.1
–
-
0.6
162.9
26.1
87.8
1.4
2.9
31.0
-
8.2
157.4
* Ratings per S&P unless unavailable, in which case Fitch rating has been used.
The level of exposure and the credit worthiness of the Group’s Banking counterparties is regularly reviewed to ensure
compliance with this policy. Higher cash held with lower rated banks reflects the impact of perceived sovereign
ceilings operating within those countries.
There are no significant concentrations of credit risk within the Group arising from the use of derivatives or other
financial instruments.
Financial Statements / Notes to the consolidated financial statements
213
The Group trades only with creditworthy third parties. Per Group policy, customers are subject to credit verification
procedures in order to establish appropriate credit terms and trade receivable balances are monitored on an ongoing
basis. The Group does not have material bad debts. Further detail of trade receivable balances is provided in note 15.
C. Liquidity risk
The Group is exposed to the risk that it is unable to meet its financial commitments as they fall due.
The Company has financial conditions, including financial covenants as part of its Group revolving Credit Facility
which it must comply with in order to maintain its current level of borrowings. There have been no breaches of the
covenants throughout the year or in the post balance sheet period.
The Group manages liquidity risk through the Group Treasury function, with cash flow forecasts prepared and
reviewed on a monthly basis. In addition, longer term cash flow forecasts of up to 12 months are prepared as part of
the Group’s monthly forecasting and periodic budget cycles, with performance against free cash flow and net working
capital targets monitored each month and providing longer term cash flow and net debt visibility.
The Group’s net debt level can vary from month to month depending on seasonal trading patterns including the
holding of inventory, timing of receipts from customer and payments to suppliers, and the timing of any capital and
restructuring projects. Net debt levels as at the period end may therefore be subject to change during the reporting
period.
The following table shows a maturity analysis of the contractual undiscounted cash flows prepared using forward
interest rates where applicable, showing items at the earliest date on which the Company could be required to pay
the liability. 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 rates at the reporting date. Derivatives are presented on a
notional basis in Sterling.
£m
< 3 months
3–12 months
1–2 years
2–5 years
31 May 2022
Trade and other payables
Forward contracts sell
Forward contracts buy
Gross borrowings
Lease liabilities
161.8
25.5
–
29.1
(53.2)
(12.8)
–
–
–
–
0.7
–
2.2
174.0
1.6
4.5
–
–
–
12.4
31 May 2021
£m
< 3 months
3–12 months
1–2 years
2–5 years
Trade and other payables
Forward contracts sell
Forward contracts buy
Gross borrowings
Lease liabilities
147.6
17.5
(22.4)
–
1.0
–
13.6
(15.2)
–
2.9
–
0.8
(0.8)
118.0
3.7
–
–
–
–
5.4
Total
166.3
54.6
(66.0)
174.0
16.9
Total
147.6
31.9
(38.4)
118.0
13.0
The Company has access to a Revolving credit facility of £325 million, expiring in November 2023 and which is
available for general corporate purposes. As at 31 May 2022, this facility was £174 million (2021: £118 million) drawn.
In addition, the Group retains other unsecured and uncommitted facilities that are primarily used for trade related
activities. As at 31 May 2022, these amounted to £252.3 million (2021: £282.7 million) of which £53.8 million, or 21%
were utilised (2021: £33.1 million or 12%). As at the reporting date, there was an additional overdraft of £0.1 million
as shown in Note 17.
Capital risk management
The objective of the Company when considering total capital is to protect the value of capital investments and to
generate returns on shareholder funds. Total capital is defined as including loans, borrowings and equity, including
derivatives used for the purposes of hedging currency and interest exposure on related loans and borrowings, but
excluding the cash flow hedging reserve.
214
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18. Financial instruments and risk management continued
In support of its objectives, the Company may undertake actions to adjust its capital structure. Actions may include,
but are not limited to, raising or prepayment of Borrowings together with related derivative instruments, issuance
of additional share capital, payment of dividends or share repurchase programmes.
The Group considers Net debt (excluding lease liabilities) to be an important performance measure, on the basis
that this measure forms the basis of the adjusted Net debt to adjusted EBITDA covenant in relation to the Group’s
Revolving Credit Facility (RCF). As at 31 May 2022 the Group had net debt of £9.8 million (2021: £30.7 million).
In 2018, the Group entered into a £325 million Revolving Credit facility with a syndicated bank group, which matures
in Nov 2023. The RCF includes financial covenants customary within such an agreement, covering Interest cover
(defined as ratio of EBITDA to Net Finance Charges in any reporting period) and Leverage (defined as in respect of
any Relevant Period, the ratio of Total Net Debt on the last day of that Relevant Period to EBITDA in respect of that
Relevant Period).
The RCF facility also includes other customary provisions relating to events of default, including non-payment
of principal, interest or fees, misrepresentations, breach of covenants, creditor process, cross default to other
indebtedness of the borrowers and its subsidiaries.
The Multicurrency Facility requires that a certain proportion of the Groups resources are covered via Material
company obligations requiring that the aggregate EBITDA of the Guarantors (calculated on an unconsolidated basis)
should be not less than 30% of the EBITDA of the Group, and the aggregate net assets of the Guarantors (calculated
on an unconsolidated basis and including intercompany balances and investments in Subsidiaries of any member of
the Group) were not less than 60% of the consolidated net assets of the Group.
As at the reporting date the Group was in compliance with all financial and other covenants contained in the RCF.
Categories of financial instruments
The following table shows the carrying amounts of each relevant class of financial instruments as defined in IFRS9.
Financial assets
£m
Total financial assets at fair value
Derivatives designated as hedging instruments – revalued to other comprehensive income
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
2022
2021
0.4
0.5
98.0
1.7
–
39.6
100.6
39.6
140.2
0.1
0.3
96.6
9.5
8.5
35.2
115.0
35.2
150.2
Financial Statements / Notes to the consolidated financial statements
215
Financial liabilities
£m
Current interest-bearing loans and borrowings
Maturity
2022
2021
Unsecured borrowings/overdrafts
2023
0.1
–
Non-current interest-bearing loans and borrowings at amortised cost
Senior Revolving Credit Facility
2023
174.0
118.0
Other financial liabilities fair valued through profit or loss
Derivatives designated as hedging instruments – revalued to other
comprehensive income
Other financial liabilities at amortised cost, other than interest-bearing loans
and borrowings
Trade and other payables
Total current
Total non-current
Total
Fair values
0.5
–
166.3
162.4
178.5
340.9
0.3
–
147.6
147.9
118.0
265.9
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. In determining fair value, the Company uses various methods
including market, income and cost approaches. Based on these approaches, the Company utilises certain assumptions
that market participations would use in pricing the asset or liability, including assumptions about risk and the risks
inherent in the inputs to the valuation technique. These inputs may be readily observable, market corroborated, or
generally unobservable inputs. The fair value hierarchy ranks the quality and reliability of the information used to
determine fair values.
Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following categories:
Level 1: Derived from quoted prices in active markets for identical assets or liabilities;
Level 2: Derived from observable inputs other than level 1, including quoted prices for similar assets or liabilities,
quoted prices in less active markets, or other observable inputs that can be corroborated by observable market
data; and
Level 3: Derived from valuation techniques that include inputs for the asset or liability that are not based on
observable market data (unobservable inputs). This may include pricing models, discounted cash flow or similar
methodologies as well as instruments for which the determination of fair value requires significant management
judgement or estimation.
216
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18. Financial instruments and risk management continued
There were no transfers between Level 1, 2 and 3 during the current or prior year.
The following is a description of the valuation methodologies and assumptions used for estimating the fair value of
financial instruments held by the Company.
• Derivative financial instruments
There is no difference between carrying value and fair value. Fair value is calculated using observable market data
where it is available and include spot rate and observable market forward points as discounted to reflect the time
value of money.
The Group Treasury Team carry out a quarterly analysis that assesses movements in underlying credit rating and credit
spreads of each counterparty, with any significant changes reported to management. Due to the immateriality of any
required adjustment relating to credit risk, no adjustment has been made.
• Trade and other payables/receivables
The notional amount of trade and other payables/receivable are deemed to be carried at fair value, short-term and
settled in cash.
• Cash and cash equivalents
The carrying value of cash and cash equivalents is deemed to equal fair value.
• Non-listed equity investments
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 liabilities
The fair value is deemed to approximate the carrying value.
19. Trade and other payables
Trade payables
of which trade payables under vendor financing arrangements
Amounts owed to joint ventures
Other taxation and social security
Other payables
Accruals
Total current
Other payables
Total non-current
2022
£m
78.4
5.9
0.6
2.1
10.8
72.0
163.9
2022
£m
4.5
4.5
2021
£m
58.2
2.7
–
3.3
6.3
83.1
150.9
2021
£m
0.3
0.3
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.
Other payables include £4.0 million of current and £3.2 million of non-current liabilities for the deferred consideration
in relation to the acquisition of Childs Farm. Further information is available in note 29.
Financial Statements / Notes to the consolidated financial statements
217
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
Total
£m
At 1 June 2020
(restated)*
Credit to income
Charge to equity
Currency
translation
At 31 May 2021
(restated)*
Charge / (Credit)
to income
Charge / (Credit)
to equity
Acquisition
Currency
translation
At 31 May 2022
(7.0)
(3.4)
–
(5.5)
(2.4)
2.4
(6.9)
(0.3)
–
1.0
(0.2)
1.3
–
(1.9)
–
–
(6.4)
(3.0)
1.4
(33.6)
(8.2)
–
5.9
6.5
(47.0)
(0.6)
(4.3)
(24.2)
–
–
3.8
0.7
(0.2)
(1.5)
(0.9)
0.2
(9.4)
(5.7)
(5.9)
(1.9)
(7.3)
(42.0)
3.8
1.3
(67.1)
0.5
0.5
0.1
0.5
(3.0)
2.5
(0.2)
(1.5)
(0.6)
–
–
(0.5)
(9.4)
(8.4)
–
0.2
(13.4)
–
–
(0.1)
(5.9)
–
–
–
(0.9)
–
(0.9)
(1.4)
(12.1)
–
(8.9)
(0.2)
(48.6)
–
–
0.2
3.8
–
–
(9.3)
(8.9)
1.0
(0.3)
0.8
(86.2)
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
As at 31 May 2022, the Deferred tax liability of £12.1 million classified as ‘Other timing differences’ predominantly
comprises:
• a Deferred tax liability on brands and goodwill of £6.8 million (2021: £6.3 million);
• a Deferred tax asset on share-based payments of £0.6 million (2021: nil); and,
• a Deferred tax liability on unrealised foreign exchange movements of £2.1 million (2021: £1.0 million).
Unremitted earnings may be liable to overseas withholding taxes if anticipated to be distributed as dividends. A deferred
tax liability has been recognised in respect of unremitted earnings in Indonesia of £1.4 million (2021: £1.9 million).
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 totals
approximately £14.3 million as at 31 May 2022 (2021: £12.7 million).
The deferred tax liability of £48.6 million categorised as ‘Business Combinations’ relates to intangible assets
recognised on consolidation.
In accordance with IAS12, deferred tax assets and liabilities may be offset where feasible to do.
218
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
20. Deferred tax continued
The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:
Deferred tax assets
Deferred tax liabilities
2022
£m
4.5
(90.7)
(86.2)
(Restated)*
2021
£m
5.9
(73.0)
(67.1)
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Deferred taxes have been measured at the tax rate expected to be applicable at the date such assets and liabilities
are realised. All UK deferred tax items are recognised at 25%. Per the announcement made by the UK Government on
the 23rd September 2022, the planned increase of Corporation tax from 19% to 25% will be abolished. In line with the
Finance Act 2021, UK deferred taxes are currently shown in the Financial Statements at 25% and will be revalued to
19% in future reporting periods once this change has been enacted.
Deferred income tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related
tax benefit through future taxable profits is probable.
At 31 May 2022 the Group recorded a deferred tax asset of £1.3 million on recognised but unused tax losses
(2021: £1.8 million). A further £5.1 million of unrecognised tax losses (2021: £6.1 million) are not expected to
expire or be disposed of, together with £14.0 million of unrecognised capital losses relating to the disposal of
the five:am business.
21. Provisions
At 1 June 2020 (restated)*
Reclassification to retirement benefits and other long-term employee obligations
(note 22)
Released to the Income Statement
Exchange differences
Used during the year
At 31 May 2021 (restated)*
Charged to the Income Statement
Exchange differences
Used during the year
At 31 May 2022
Warranty
provisions
£m
VAT
provision
£m
3.2
4.9
(1.1)
(0.2)
(0.2)
(1.0)
0.7
0.1
0.1
(0.2)
0.7
–
–
–
–
4.9
–
–
–
4.9
Total
£m
8.1
(1.1)
(0.2)
(0.2)
(1.0)
5.6
0.1
0.1
(0.2)
5.6
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
Provisions as at 31 May 2022 relate to warranty costs in the Africa Electricals division (2021: £0.7 million).
The majority of provisions are expected to be utilised in the next 12 months. The VAT provision relates to a liability for
indirect taxes for one of the Group’s subsidiaries. Further information is included in note 1c.
Financial Statements / Notes to the consolidated financial statements
219
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 employees plan – for all historically eligible UK-based employees, excluding PZ Cussons plc Executive Directors
• Directors’ plan – for PZ Cussons plc Executive Directors
• Expatriate plan – for all eligible expatriate employees 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 £190,888 (2021: £188,388).
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 in 2021 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 employees of PZ Cussons Nigeria plc dated 31 December 2006. The scheme is only applicable
to employees 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 employees 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)
2022
2021
Expatriate plan
Directors’ plan
Main employees plan
Unfunded plan
Other overseas units
Restriction due to asset ceiling
Defined benefit asset / (liability)
per Group accounts
Surplus
£m
Deficit
£m
58.8
9.9
59.4
–
–
128.1
(58.8)
–
–
–
(3.5)
(9.6)
(13.1)
–
Total
£m
58.8
9.9
59.4
(3.5)
(9.6)
115.0
(58.8)
Surplus
£m
Deficit
£m
53.6
6.7
26.9
–
–
87.2
(53.6)
–
–
–
(4.5)
(8.4)
(12.9)
Total
£m
53.6
6.7
26.9
(4.5)
(8.4)
74.3
–
(53.6)
69.3
(13.1)
56.2
33.6
(12.9)
20.7
220
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
22. Retirement benefits and other long-term employee obligations continued
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.
Interest risk
A decrease in the corporate bond yield and/or
gilt yield will increase the present value of the
Plans’ liabilities under the IAS 19 and statutory/
long-term funding bases respectively.
Inflation risk
Longevity risk
An increase in inflation results in higher benefit
increases for members, which results in higher
Plan liabilities.
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.
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.
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.
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.
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.
Financial Statements / Notes to the consolidated financial statements
221
The movements in the year are as follows:
At 1 June 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
Currency retranslation
Interest expense and administrative expenses
Contributions paid
Utilised in the year
Re-measurement gains
At 31 May 2022
Overseas
retirement
benefits
and similar
obligations
£m
UK
retirement
benefits
£m
(7.7)
(1.1)
1.0
(1.7)
–
1.2
–
(0.1)
(8.4)
(0.9)
(1.5)
–
0.6
0.6
(9.6)
38.4
–
–
0.1
0.2
–
(0.2)
(9.4)
29.1
–
(0.3)
0.2
–
36.8
65.8
Total
£m
30.7
(1.1)
1.0
(1.6)
0.2
1.2
(0.2)
(9.5)
20.7
(0.9)
(1.8)
0.2
0.6
37.4
56.2
Funding and contributions by the Group
The Directors’ and Expatriate plans are fully funded. During the year the employer paid £nil (2021: £nil) as a
contribution towards the Main plan.
222
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
22. Retirement benefits and other long-term employee obligations continued
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 2022:
Undiscounted 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
Notes
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
Data provided to us by the Trustees of each plan (PZ Cussons Retirement Benefits Plan, PZ Cussons Directors’ Retirement Benefits Plan and the PZ Cussons
Pension Fund and Life Assurance Scheme for Staff Employed Outside the UK).
Cashflows are in respect of the above plans only (they exclude any projected benefit payments for the EBFRS plan).
Above cashflows are based on the preliminary 31 May 2021 actuarial valuations and Trustees technical provisions assumptions.
Cashflows above are undiscounted.
Information prepared as part of Company year-end IAS 19 reporting (full details of those results are in my report dated 15 June 2022).
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 7.75% (2021: 7.25%) and salary inflation rate of 8.0% (2021: 8.0%) have
been used. The scheme is unfunded and provision for future obligations included in the above table is £8.6 million
(2021: £7.5 million).
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 2021 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 2022. There have been no changes in
the valuation methodology adopted for this year’s disclosures compared to the previous year’s disclosures.
Financial Statements / Notes to the consolidated financial statements
223
The key financial assumptions used by the actuary were as follows:
Rate of increase in retirement benefits in payment
Discount rate
Inflation assumption
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 on 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
2022
2.75%
3.50%
3.15%
2021
3.05%
1.95%
3.20%
2022
Years
2021
Years
23.9
25.5
23.9
25.5
Assets
2022
£m
416.8
8.0
Assets
2021
£m
439.6
7.1
(41.7)
(12.8)
0.2
(0.9)
(14.4)
368.0
2022
£m
19.0
329.3
4.2
15.5
0.2
(0.6)
(16.7)
416.8
2021
£m
26.7
356.6
6.8
26.7
368.0
416.8
(243.4)
(334.1)
124.6
(58.8)
65.8
(13.4)
52.4
82.7
(53.6)
29.1
(5.7)
23.4
Equities and bond assets are quoted in active markets with all other assets being unquoted.
The UK scheme’s 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.
224
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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
2022
£m
53.6
1.0
4.2
58.8
2021
£m
61.4
1.0
(8.8)
53.6
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 on 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 gain / (loss) due to changes in demographic assumptions
Re-measurement loss due to changes in financial assumptions
Re-measurement due to experience adjustments
Benefits paid
31 May
Plans that are wholly or partly funded
Plans that are wholly unfunded
Obligations
2022
£m
Obligations
2021
£m
(334.1)
(339.8)
(6.4)
–
2.9
78.9
0.9
14.4
(5.5)
(0.2)
(1.1)
(4.3)
–
16.8
(243.4)
(334.1)
(239.9)
(329.6)
(3.5)
(4.5)
(243.4)
(334.1)
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
The above amounts are recognised in the Group’s Income Statement in arriving at operating profit.
2022
£m
0.6
–
(0.9)
(0.3)
2021
£m
0.6
(0.2)
(0.5)
(0.1)
Financial Statements / Notes to the consolidated financial statements
225
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 gain / (loss) due to changes in demographic assumptions
Re-measurement gain / (loss) due to changes in financial assumptions
Re-measurement due to experience adjustments
Changes in asset ceiling / onerous liability (excluding interest income)
Loss on scheme assets (excluding interest income)
Net surplus at end of year
Analysed between:
Retirement benefit surplus
Retirement benefit obligation
2022
£m
29.1
0.6
(0.9)
–
0.2
2.9
78.9
0.9
(4.2)
(41.7)
65.8
69.3
(3.5)
65.8
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
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 3.6%
Increase of 2.9%
Decrease in life expectancy of 1 year
Increase of 4.4%
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
Change in assumption
Decrease of 1.0%
Increase of 1.0%
Change in defined benefit
obligation
Increase of 9.3%
Increase of 8.9%
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 2023 the Group expects to make cash contributions of £nil (2022: £nil) to funded
defined benefit plans.
The amount recognised as an expense in the Consolidated Income Statement in relation to defined contribution
schemes is £2.2 million (2021: £2.4 million). The amount recognised as an expense in the Consolidated Income
Statement in relation to the Nigerian Gratuity Scheme is £0.5 million (2021: £0.4 million).
226
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
23. Share capital
Allotted, issued and fully paid:
Ordinary shares of 1p each
Total called up share capital
2022
2021
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.
24. Share-based payments
As at 31 May 2022, the Group has three 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 employees. The 2020 LTIP was agreed at the Annual General Meeting on 26 November 2020.
Additionally the Group operates a deferred bonus share scheme (the ‘DBSP’) for Executive Directors. The Group also
operates a SIP scheme which is open to UK employees.
No further awards from the 2014 PSP will be made, and the final options granted from this scheme have a vesting
date 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 grant date.
The Employee Share Option Trust (ESOT) purchases shares to fund the PSP and LTIP Schemes. As at 30 November
2021, the ESOT held 10,193,781 shares in PZ Cussons Plc at a book value of £40.0 million (May 2021: £40.0 million).
The market value of these shares as at 31 May 2022 was £20.6 million (May 2021: £26.2 million).
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 Share Plan including PSP and LTIP 2020 PSP elements
Executive Directors and certain senior employees 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.
In the current year, 1,348,831 performance share awards have been granted under the LTIP 2020 scheme.
Participants’ awards will vest if certain targets are met, as detailed in the Remuneration Committee Report.
Restricted Share Plan
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, 612,378 restricted stock shares awards were granted under the LTIP 2020 scheme.
Deferred Bonus Share Plan
This share plan is limited to the Executive Directors and transfers the annual bonus award into a share award.
These share awards will vest in full subject to continued employment and no performance conditions.
In the current year, 116,730 deferred bonus share awards were granted under the scheme.
Financial Statements / Notes to the consolidated financial statements
227
SIP Scheme
Employees can opt to make a salary deduction on a monthly basis to subscribe to shares. The company provides one
matched share for each partnership share subscribed to, up to a maximum of £100 per employee per month. The
matched shares are considered to be share based payments under IFRS 2. These share awards will vest in full subject
to continued employment and a number of conditions associated with withdrawal.
In the year to 31 May 2022, 35,389 matched share awards were granted under the scheme.
The following tables show the options outstanding as at 31 May 2022 for each of the schemes, and the vesting date
of those same options subject to the conditions related to each scheme being met.
PSP
Number
RSU
Number
DBSP
Number
SIP
Number
Total
Number
Options outstanding at 1 June 2021
3,315,616
370,947
–
–
3,686,563
Options issued during the year
1,348,831
612,378
116,730
35,389
2,113,328
Options exercised during the year
–
(28,311)
Options lapsed during the year
(198,100)
(104,060)
Options lapsed – 2014 scheme
(1,213,434)
–
–
–
–
–
(28,311)
(1,209)
(303,369)
–
(1,213,434)
Options outstanding at 31 May 2022
3,252,913
850,954
116,730
34,180
4,254,777
31 May 2023
31 May 2024
31 May 2025
Fair value
PSP
Number
RSU
Number
DBSP
Number
SIP
Number
Total
Number
1,027,539
32,962
1,012,725
311,732
–
–
–
–
1,060,501
1,324,457
1,212,649
506,260
116,730
34,180
1,869,819
The fair value of the awards granted in the period was £5.0 million (2021: £3.4 million) 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 an income statement charge of £1.5 million
(2021: £0.8 million), including a true up to the cumulative cost to take into account the latest expected outcome
of the performance conditions for the 2020 LTIP PSP scheme.
There were 28,311 shares exercised during the year from the Restricted Share Plan.
In the year, 1,213,434 shares belonging to the 2014 PSP scheme lapsed as the performance conditions had not
been met.
228
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
25. Reconciliation of profit before tax to cash generated from operations
Profit before tax from continuing operations
Loss before tax from discontinued operations
Profit before tax
Adjustment for net finance costs
Operating profit
Depreciation (note 11 & 26)
Amortisation (note 10)
Impairment of intangible and tangible fixed assets (notes 10 & 11)
Impairment reversal on intangible fixed assets (note 10)
Impairment of equity investment in joint venture (note 13)
(Gain)/loss on sale of assets
Derecognition of capitalised costs related to cloud computing arrangements
Other recycling of foreign exchange losses
Difference between pension charge and cash contributions
(Profit) / loss on disposal of companies & businesses
Share-based payment charges
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
2022
£m
65.3
(1.7)
63.6
1.3
64.9
12.8
6.6
17.5
(8.5)
–
(14.0)
1.0
1.4
1.1
(1.7)
1.9
(6.6)
76.4
(14.5)
4.0
0.4
(0.1)
66.2
(Restated)*
2021
£m
71.5
(46.9)
24.6
2.4
27.0
14.3
6.3
0.5
(9.8)
2.2
0.4
–
0.6
0.5
40.7
–
(5.6)
77.1
2.2
(5.9)
1.3
(1.3)
73.4
* The results for the year ended 31 May 2021 have been restated to reflect prior year adjustments. Further details are set out in note 1c.
26. 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 three and 12 years, while motor vehicles and other
equipment generally have lease terms between one and four 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.
Financial Statements / Notes to the consolidated financial statements
229
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
As at 1 June 2020
Additions
Depreciation
Reclassified as held for sale
Currency translation
As at 31 May 2021
Additions
Depreciation
Currency translation
As at 31 May 2022
Land and
buildings
£m
11.5
1.8
(2.4)
(0.2)
(0.4)
10.3
5.9
(2.9)
0.3
13.6
Cars
£m
2.0
0.5
(0.9)
–
(0.4)
1.2
1.0
(0.2)
0.3
2.3
Other
equipment
£m
0.2
–
–
–
–
0.2
1.2
(0.4)
–
1.0
Set out below are the carrying amounts of lease liabilities and the movements during the period:
Lease liability
As at 1 June 2020
Additions
Accretion of interest
Payments
Reclassified as held for sale
Currency translation
As at 31 May 2021
Additions
Accretion of interest
Payments
Currency translation
As at 31 May 2022
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
2022
£m
3.5
0.5
–
4.0
Total
£m
13.7
2.3
(3.3)
(0.2)
(0.8)
11.7
8.1
(3.5)
0.6
16.9
Total
£m
13.7
1.8
1.0
(4.0)
(0.2)
(0.5)
11.8
8.1
0.5
(4.0)
0.5
16.9
2.9
14.0
16.9
2021
£m
3.3
1.0
0.2
4.5
230
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
26. Lease liabilities continued
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
2022
£m
2.9
6.3
7.7
2021
£m
3.1
7.1
1.6
16.9
11.8
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.
• At 31 May 2022 the outstanding long-term loan balance receivable from PZ Wilmar Limited was £39.6 million
(2021: £35.2 million). 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 not secured.
• At 31 May 2022 the outstanding current loan balance receivable from PZ Wilmar Limited was £nil (2021: £8.5
million). These loans are interest bearing, repayable on demand and not secured. The interest received on this loan
in the year was £0.2 million (2021: £0.2 million).
• The value of goods purchased by the Group from PZ Wilmar Limited was £4.7 million (2021: £7.1 million).
• The value of certain services the Group sourced and then sold to PZ Wilmar Limited was £0.3 million (2021: £0.3 million).
At 31 May 2022 the outstanding trade receivable balance from PZ Wilmar Limited was £1.7 million (2021: £1.0 million
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 2022
(2021: £nil) and no charge to the Income Statement in respect of doubtful related party receivables (2021: £nil).
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 business to the PZ Foundation were £nil (2021: £nil). As at 31 May 2022 there were no outstanding
balances with the PZ Foundation (2021: £nil).
Financial Statements / Notes to the consolidated financial statements
231
28. Discontinued operations
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.
As part of the sale agreement, the Group agreed to reimburse an amount of consideration, £0.8 million, if certain
subsidies were not received by Minerva. This reimbursement was not provided in the previous years. The date for
receipt of the grants has passed and as such, the Group has made the relevant settlements. This amount is shown in
discontinued operations within the year to 31 May 2022.
Additionally a warranty claim was made against the Group within the year related to the disposal of Minerva S.A.
The Group has incurred costs of £1.1 million related to this claim. This amount includes an agreed settlement,
which has been paid, a further amount which has been agreed to be paid if certain events occur, which are
expected to be highly likely to occur, and legal costs.
£0.2 million sundry income in the year relates to Nutricima, the assets and activities of which were disposed of in
FY21. The results of the discontinued operations, which have been included in the Consolidated Income Statement,
were as follows:
31 May 2022
£m
31 May 2021
£m
Revenue
Sundry income
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
Attributable tax expenses
Net loss attributable to discontinued operations (attributable to owners of the Company)
The cash flows that are attributable to the activities of the discontinued operations are as follows:
–
0.2
(2.0)
(1.8)
–
(1.8)
–
–
–
(1.8)
(1.8)
2.4
–
(8.2)
(5.8)
0.5
(5.3)
(0.4)
(40.7)
(5.2)
(46.3)
(51.6)
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
31 May 2022
£m
Minerva
£m
Nutricima
£m
31 May 2021
£m
(0.7)
0.1
–
(0.6)
(0.8)
0.1
–
(0.7)
0.1
–
–
0.1
(7.5)
16.0
–
8.5
232
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
29. Acquisition
On 21 March 2022 the Group acquired the entire issued share capital of Tadley Holdings Limited, the parent company
of Childs Farm, through its subsidiary PZ Cussons Acquisition Co Limited. Childs Farm is a leading brand in UK baby and
child personal care. Subsequently, Joanna Jensen, the founder of Childs Farm, made an investment into PZ Cussons
Acquisition Co Limited, such that the Group now holds a 92% interest in Childs Farm. The Group’s consideration in
respect of the acquisition was £36.8 million which was paid in cash.
A mechanism is in place for the Group to purchase Joanna Jensen’s shareholding in two equal tranches following the
end of the 31 May 2024 and 31 May 2025 financial years at a price based on a 6.62x multiple of the lower of actual
Gross Profit of Childs Farm and its forecast Gross Profit, subject to a cap of £32.5 million.
In substance, the Group has reflected the acquisition as a 100% interest purchase on the basis that the mechanism
in place for the Group to purchase the outstanding 8% shareholding is contractual and is in substance a deferred
consideration. A liability has been recorded as part of the acquisition representing the fair value of the liability,
based on the multiple above, for £7.2 million. This deferred consideration is split between current liabilities:
‘other payables’ of £3.2 million, and non-current liabilities: ‘other payables’ of £4 million on the basis of the
contractual terms. The latest possible date for full settlement of the deferred consideration is 31 May 2025.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the
table below:
Trade and other debtors
Inventory
Property, plant and equipment
Brand intangible asset recognised
Trade and other creditors
Deferred tax assets / (liabilities)
Total identifiable assets acquired and liabilities assumed
Goodwill
Cash consideration
Deferred consideration
Total consideration
Net cash outflow arising on acquisition:
Cash consideration
Less: Cash and cash equivalent balances acquired
£m
2.7
2.2
–
35.5
(4.4)
(8.9)
27.1
16.8
36.8
7.2
44.0
36.8
(3.4)
33.4
The fair value of the receivables is £2.3 million which is the same as the gross contractual value as the provision held
against amounts expected not to be collected is immaterial.
The goodwill arising from the acquisition of £16.8 million comprises primarily of expected synergies between the
acquired business and the Group and recognition of the fair value of the deferred consideration.
Childs Farm contributed £2.9 million of revenue and £0.4 million loss to the Group’s operating profit for the period
between the date of acquisition and the reporting date.
Acquisition related costs of £1.4 million have been recognised in the income statement in the year, disclosed within
adjusting items.
Financial Statements / Notes to the consolidated financial statements
233
30. Subsidiaries, joint ventures and non-current asset investments
Details of the Company’s subsidiaries at 31 May 2022 are as follows:
Company
Operation
Country of
incorporation
Parent
Company’s
interest
Proportion
of voting
interest
Registered
Office address
Holding company
Australia
†100%
†100%
Building A, Level 1,15 Compark Circuit,
Mulgrave, Victoria, 3170
PZ Cussons
(Holdings) Pty
Limited
PZ Cussons Australia
Pty Limited
PZ Cussons Beauty
Australia (Holdings)
Pty Limited
Rafferty’s Garden
Pty Limited
United Laboratories
Limited
PZ Cussons (New
Zealand) Limited
Paterson Services
(Shanghai) Limited
Bronson Holdings
Limited
Milk Ventures (UK)
Limited
PZ Cussons
(Holdings) Limited
PZ Cussons
(International
Finance) Limited
PZ Cussons
(International)
Limited
PZ Cussons (UK)
Limited
Manufacturing
Australia
†100%
†100%
Holding company
Australia
†100%
†100%
Dormant
Australia
†100%
†100%
Dormant
Australia
†100%
†100%
Distribution
Australia
†100%
†100%
Dormant
China
†100%
†100%
Holding company
England
†100%
†100%
Holding company
England
†100%
†100%
Holding company
England
*100%
*100%
England
†100%
†100%
Provision of services
to Group companies
Provision of services
to Group companies
Manufacturing
England
†100%
†100%
PZ Cussons Beauty
LLP
Distribution &
holding partnership
England
†100%
†100%
Seven Scent Limited Manufacturing
England
†100%
†100%
St. Tropez
Acquisition Co.
Limited
St. Tropez Holdings
Limited
Thermocool
Engineering
Company Limited
PZ Cussons
Acquisition Co
Limited
Holding company
England
†100%
†100%
Holding company
England
†100%
†100%
Dormant
England
†100%
†100%
Holding company
England
†100%
†100%
Building A, Level 1,15 Compark Circuit,
Mulgrave, Victoria, 3170
Building A, Level 1,15 Compark Circuit,
Mulgrave, Victoria, 3170
Building A, Level 1,15 Compark Circuit,
Mulgrave, Victoria, 3170
Building A, Level 1,15 Compark Circuit,
Mulgrave, Victoria, 3170
Building A, Level 1,15 Compark Circuit,
Mulgrave, Victoria, 3170
Suite 635, 6th Floor, No.2000 Pudong Ave.
China (Shanghai) Pilot Free Trade Zone
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
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
19-20 Berners Street, London, United
Kingdom, W1T 3NW
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
Manchester Business Park, 3500 Aviator
Way, Manchester, United Kingdom, M22
5TG
England
*100%
*100%
Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG
234
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
30. Subsidiaries, joint ventures and non-current asset investments continued
Company
Operation
Country of
incorporation
Parent
Company’s
interest
Proportion
of voting
interest
Registered
Office address
Tadley Holdings
Limited
Holding company
England
†100%
†100%
Childs Farm Ltd
Distribution
England
†100%
†100%
PZ Cussons Ghana
Limited
Distribution
Ghana
†95.68%
†95.68%
Parnon (Hong Kong)
Limited
Provision of services
to Group companies
Hong Kong
†100%
†100%
PZ Cussons (Hong
Kong) Limited
Dormant
Hong Kong
†100%
†100%
PZ Cussons India PVT
Limited
Provision of services
to Group companies
India
†100%
†100%
Manufacturing
Indonesia
†100%
†100%
Dormant
Ireland
†100%
†100%
Dormant
Ireland
†100%
†100%
Manufacturing
Kenya
†99.99%
†99.99%
PT PZ Cussons
Indonesia
PZ Cussons (Europe)
Limited
Childs Farm Europe
Ltd
PZ Cussons (East
Africa) Limited
Food For Life Nigeria
Limited
Harefield Industrial
Limited
The Barn, Kestrel Court, Vyne Road,
Sherborne St. John, Basingstoke,
Hampshire, England, RG24 9HJ
The Barn, Kestrel Court, Vyne Road,
Sherborne St. John, Basingstoke,
Hampshire, England, RG24 9HJ
Plot 27/3-27/7, Sanyo Road, Tema, PO
Box 628
1/F., Hing Lung Comm. Bldg., 68-74
Bonham Strand, Sheung Wan
5/F, Manulife Place, 348 Kwun Tong Road,
Kowloon, Hong Kong
604, ‘C’ Wing Raylon Arcade Ram Mandir
Road – Kondvita Road, Bhim Nagar,
Andheri East, Mumbai 400093
Jalan Halim Perdana Kusuma No. 144,
Kebon Besar, Batuceper, Tangerang,
Banten, Indonesia
The Greenway, Ardilaun Court, 112-114
St Stephen’s Green, Dublin, D02 TD28,
Ireland
4th Floor, 103/104 O’Connell Street,
Limerick V94 AT85, Co. Limerick, Limerick,
Ireland
P.O. Box 3085 G.P.O Nairobi, Standard
Street, Building: Lornho House
Dormant
Nigeria
†99.99%
†99.99%
45/47 Town Planning Way, Ilupeju, Lagos
Distribution
Nigeria
†99.80%
†99.80%
45/47 Town Planning Way, Ilupeju, Lagos
HPZ Limited¹
Manufacturing
Nutricima Limited
Dormant
PZ Cussons Nigeria
PLC
Manufacturing
Nigeria
Nigeria
Nigeria
†74.99%
†74.99%
45/47 Town Planning Way, Ilupeju, Lagos
†100%
†100%
45/47 Town Planning Way, Ilupeju, Lagos
†73%
†73%
45/47 Town Planning Way, Ilupeju, Lagos
Roberts
Pharmaceuticals
Limited
Dormant
Nigeria
†99.99%
†99.99%
45/47 Town Planning Way, Ilupeju, Lagos
PZ Cussons Polska SA Distribution
Poland
†100%
†100%
Ul. Chocimska 17, 00-791 Warszawa
PZ Cussons
Singapore Private
Limited
Provision of services
to Group companies
Guardian Holdings
Company Limited
Provision of services
to Group companies
Thailand
†49%
†49%
Singapore
†100%
†100%
5 Shenton Way, UIC Building #10-01,
Singapore 068808
35 Moo 4, Tessamphan Road, Ban Chang
Sub-District, Mueang Pathum Thani
District, Pathum Thani Province
35 Moo 4, Tessamphan Road, Ban Chang
Sub-District, Mueang Pathum Thani
District, Pathum Thani Province
PZ Cussons
(Thailand) Limited
Manufacturing
Thailand
†99.99%
†99.99%
† Shares held by a subsidiary.
Financial Statements / Notes to the consolidated financial statements
235
Company
PZ Cussons Middle
East and South Asia
FZE
Operation
Dormant
Country of
incorporation
Parent
Company’s
interest
Proportion
of voting
interest
Registered
Office address
UAE
†100%
†100%
PO Box 17233, Jebel Ali, Dubai
St. Tropez Inc.
Distribution
USA
†100%
†100%
Childs Farm, Inc.
Dormant
USA
†100%
†100%
140 Broadway, Suite 2240, New York NY
10005
251 Little Falls Drive Wilmington, DE
19808
¹ HPZ Limited is 74.99% owned by PZ Cussons Nigeria PLC and is therefore consolidated.
* Shares held by the Parent Company.
† Shares held by a subsidiary.
Joint venture companies
Operation
Country of
incorporation
Parent
Company’s
interest
PZ Wilmar Limited
Manufacturing
Nigeria
†50%
Wilmar PZ International Pte
Limited
Provision of services to joint
venture companies
Singapore
†50%
† Shares held by a subsidiary.
All subsidiary entities have a year end of 31 May.
31. Events after the reporting period
There are no material post balance sheet events since the year end date.
Registered Office address
45/47 Town Planning Way,
Ilupeju, Lagos
28 Biopolis Road, Singapore
138568
236
PZ Cussons plc / Annual Report and Financial Statements 2022
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
Notes
31 May 2022
£m
31 May 2021
£m
4
5
5
6
7
88.7
99.0
187.7
84.7
0.5
0.4
85.6
(4.3)
81.3
88.7
89.9
178.6
69.1
0.3
0.5
69.9
(6.0)
63.9
269.0
242.5
(174.0)
(118.0)
95.0
124.5
4.3
0.7
–
(40.0)
130.0
95.0
4.3
0.7
(0.1)
(40.0)
159.6
124.5
PZ Cussons plc reported a loss for the financial year ended 31 May 2022 of £4.1 million (2021: £4.7 million loss).
The Financial Statements from pages 166 to 243 were approved by the Board of Directors and authorised for issue.
They were signed on its behalf by:
J Myers
28 September 2022
S Pollard
28 September 2022
PZ Cussons plc
Registered number 00019457
COMPANY STATEMENT OF CHANGES IN EQUITY
Financial Statements / Company statement of changes in equity
237
Notes
Called up
share
capital
£m
Capital
redemption
reserve
£m
4.3
0.7
–
–
–
–
–
–
4.3
0.7
–
–
–
–
–
–
4.3
0.7
3
3
Cash flow
Hedge &
Hedging
reserve
£m
(0.3)
–
0.2
–
(0.1)
–
0.1
–
–
Other
reserve
£m
Profit
and loss
account
£m
(40.0)
188.6
Total
£m
153.3
–
–
–
(40.0)
–
–
–
(40.0)
(4.7)
(4.7)
–
(24.3)
159.6
(4.1)
–
(25.5)
130.0
0.2
(24.3)
124.5
(4.1)
0.1
(25.5)
95.0
At 1 June 2020
Loss for the year
Cash flow hedge
reserve movement
Ordinary dividends
At 31 May 2021
Loss for the year
Cash flow hedge
reserve movement
Ordinary dividends
At 31 May 2022
238
PZ Cussons plc / Annual Report and Financial Statements 2022
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 judgement in the process of applying the Company’s
accounting policies. The areas involving a higher degree of judgement 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’; and
(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 Company
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.
Financial Statements / Notes to the Company financial statements
239
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 judgements are
made in applying these laws to the taxable profits in any given period 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 2022 and 31 May 2021, together with
information regarding the methods and assumptions used to calculate fair values, can be summarised as follows:
Current asset investments
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.
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.
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.
240
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
1. Accounting policies continued
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 a significant increase in credit risk since initial
recognition 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 the 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.
p) Share based payments
The Company operates a Performance Share Plan for senior executives, which involves equity-settled share-based
payments.
Financial Statements / Notes to the Company financial statements
241
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 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.
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 judgement 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
2022
£m
2.2
1.0
2021
£m
1.5
0.7
For the year ended 31 May 2022 the highest paid Director received Company pension contributions of £0.06 million
(2021: £0.1 million).
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 132 to 143.
The Directors are employed by the Company. The Directors of the company only are different to the Directors of the
group.
3. Dividends
Amounts recognised as distributions to ordinary shareholders in the year comprise:
Final dividend for the year ended 31 May 2021 of 3.33p (2020: 3.13p) per ordinary share
Interim dividend for the year ended 31 May 2022 of 2.60p (2021: 2.67p) per ordinary share
Proposed final dividend for the year ended 31 May 2022 of 3.73p (2021: 3.42p) per
ordinary share
2022
£m
2021
£m
14.3
11.2
25.5
13.1
11.2
24.3
15.6
14.3
The proposed final dividends for the years ended 31 May 2021 and 31 May 2022 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 2021 and 31 May 2022 respectively.
242
PZ Cussons plc / Annual Report and Financial Statements 2022
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
4. Investments in subsidiaries
Cost at 1 June 2020
Cost and net book value at 31 May 2021
Cost and net book value at 31 May 2022
Shares
£m
Loans
£m
88.7
88.7
88.7
–
–
–
Total
£m
88.7
88.7
88.7
Details of the Company’s direct subsidiaries at 31 May 2022 are shown below. For a full listing of all subsidiaries see
note 30 in the Group’s Consolidated Financial Statements.
Subsidiary companies
Operation
PZ Cussons (Holdings) Limited
Holding company
Country of
incorporation
England
PZ Cussons (International) Limited Provision of services to Group companies
England
Parent
Company’s
interest
Proportion
of voting
interest
100%
100%
100%
100%
5. Debtors
Non-current – debtors
Amounts owed by Group companies
Current – debtors
Amounts owed by Group companies
Other receivables
2022
£m
2021
£m
99.0
89.9
80.3
4.4
183.7
65.2
3.9
159.0
£179.3 million (2021: £155.1 million) of amounts owed by Group companies. The Company is currently the sole
borrower on the Group RCF facility with all external amounts borrowed being lent on to other Group companies,
with interest charged matching the external interest liability. £nil (2021: £nil) of amounts owed by Group companies
are non-interest bearing. All of the balances are unsecured and are repayable on demand. Although amounts are
repayable on demand, for the amounts classified as non current there is no expectation that entire amounts would
be repaid within 12 months and therefore do not meet the criteria to be classified as current assets.
6. Creditors
Due within one year
Amounts owed to Group companies
Accruals
Due in greater than one year
Bank loans
2022
£m
2021
£m
4.1
0.2
4.3
5.8
0.2
6.0
174.0
174.0
118.0
118.0
£nil (2021: £nil) of amounts owed to Group companies are interest bearing. 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.
Financial Statements / Notes to the Company financial statements
243
7. Called up share capital
Allotted, called up and fully paid:
Ordinary shares:
Ordinary shares of 1p each
Total called up share capital
2022
2021
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. 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 2022 was
£174.0 million (2021: £118.0 million).
9. Events after the reporting period
There are no material post balance sheet events since the year end date.
244
PZ Cussons plc / Annual Report and Financial Statements 2022
INTRODUCING OUR VALUES
PZ Cussons people
aspire to be our BEST
BOLD
ENERGETIC
STRIVING
TOGETHER
See our Values / Page 18
OUR SHARED CULTURE BRINGS US
TOGETHER
ONE FAMILY, MANY VOICES;
SUPPORTED, INCLUDED,
RESPECTFUL, EMPOWERED,
AND WITH JOY IN WHAT WE DO
Additional Information / Introducing our BEST values
245
N
O
I
T
A
M
R
O
F
N
I
L
A
N
O
I
T
I
D
D
A
246 Glossary
247 Further statutory and
other information
Our TOGETHER value in action:
WE ARE TOGETHER AND
IT GIVES US STRENGTH
• powering our pioneering spirit
• helping each other unleash
potential
• innovating and exciting, sharing
and celebrating
246
PZ Cussons plc / Annual Report and Financial Statements 2022
GLOSSARY
Term
Adjusting Items
B Corp
Definition
Cash, short-term deposits and current asset investments, less bank overdrafts and
borrowings. Excludes IFRS 16 lease liabilities
A B Corp is a company that has been certified by the non-profit organisation
B Lab as meeting rigorous standards of environmental, social and governance
performance, accountability and transparency.
Brand Investment
An operating cost related to our investment in brands (previously 'Media & Consumer')
Employee wellbeing
% score based upon a set of questions within our annual survey of employees
Free cash flow
Cash generated from operations less capital expenditure
Free cash flow conversion
Free cash flow as a % of adjusted EBITDA from continuing operations
Like-for-like ('LFL')
Must Win Brands
Growth on the prior year, adjusting for constant currency and excluding the impact
of disposals and acquisitions
The brands in which we place greater investment and focus. They comprise:
Carex, Childs Farm (acquired in March 2022), Cussons Baby, Joy, Morning Fresh,
Original Source, Premier, Sanctuary Spa and St Tropez
Portfolio Brands
The brands we operate which are not Must Win Brands
PZ Cussons Growth Wheel
Our 'repeatable model' for driving commercial execution, comprising
'Consumability', 'Attractiveness', 'Shoppability' and 'Memorability'’
Revenue Growth Management
Maximising revenue through ensuring optimised price points across customers and
channels and across different product sizes
SKUs
Stock keeping unit
Through the line
Marketing campaign incorporating both mass reach and targeted activity
Additional Information / Further statutory and other information
247
FURTHER STATUTORY AND OTHER INFORMATION
Shareholder information and contacts
Annual General Meeting
Registered office
Registrars
The Annual General Meeting will be
held at 10:30am on 24 November
2022 at: Manchester Business Park,
3500 Aviator Way, Manchester,
M22 5TG
PZ Cussons plc
Manchester Business Park
3500 Aviator Way
Manchester
M22 5TG
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Financial calendar
The key dates for PZ Cussons’
financial calendar are available on
our website: www.pzcussons.com
Tel: 0161 435 1000
www.pzcussons.com
Tel: +44 (0370) 707 1221
www.computershare.com
Registered number
Company Secretary
Company registration number –
00019457
Kevin Massie
Cautionary note regarding forward-looking statements
This report contains certain forward-looking statements relating to expected or anticipated results, performance
or events. Such statements are subject to normal risks associated with the uncertainties in our business, supply
chain and consumer demand along with risks associated with macro-economic, political and social factors in the
markets in which we operate. Whilst we believe that the expectations reflected herein are reasonable based on
the information we have as at the date of this announcement, actual outcomes may vary significantly owing to
factors outside the control of the PZ Cussons Group, such as cost of materials or demand for our products, or
within our control such as our investment decisions, allocation of resources or changes to our plans or strategy.
The PZ Cussons Group expressly disclaims any obligation to revise forward-looking statements made in this or
other announcements to reflect changes in our expectations or circumstances. No reliance may be placed on
the forward-looking statements contained within this announcement.
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PZ Cussons plc
Manchester Business Park
3500 Aviator Way
Manchester M22 5TG