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FOR LIFE. TODAY
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PZ Cussons plc / Annual Report and Accounts 2023
PZ Cussons plc / Annual Report and Accounts 2023
Overview
FOR EVERYONE,
FOR LIFE, FOR GOOD.
Performance Highlights
We have made further progress against key financial and non-financial measures
against a backdrop of challenging trading conditions.
Revenue
(£million)
Statutory operating profit margin
(%)
Adjusted basic earnings per share
from continuing operations (p)2
£656.3m
9.1%
11.23p
2023
2022
2021
£656.3m
£592.8m
£603.3m
2023
2022
2021
9.1%
11.1%
12.1%
2023
2022*
2021*
11.23p
12.57p
12.98p
LFL revenue growth1
(%)
Adjusted net cash/(debt)1
(£million)
Statutory basic earnings per share
for continuing operations (p)
6.1%
£5.7m
8.70p
2023
2022
2021
2.9%
6.1%
7.1%
2023
2022
2021
£5.7m
£(9.8)m
£(30.7)m
2023
2022*
2021*
8.70p
11.88p
9.94p
Adjusted operating profit margin2
(%)
Dividend per share
(p)
11.2%
2023
2022*
2021*
6.40p
11.2%
11.3%
11.6%
2023
2022
2021
6.40p
6.40p
6.09p
See Key Performance Indicators / Page 49
1 Definitions of key terms are set out in the Glossary on page 222.
2 Further details on adjusting items are set out in note 3 on page 171.
* Certain figures for each of the years ended 31 May 2021 and 31 May 2022 have been restated. Refer to note 1 (c) of the consolidated financial statements for details.
01
Contents
Overview
Strategic Report
Governance
Financial Statements
02
04
A Word from our Chair
PZ Cussons at a Glance
05 Our Investment Story
10
14
16
Business Model
Our Markets
Chief Executive’s Review
74 Our Board
06
The Year in Review
18 Our Strategy
24
26
42
43
49
52
58
69
People and Culture
Sustainability and TCFD
Non-Financial and
Sustainability Information
Statement
Section 172(1) Statement
Key Performance
Indicators
Financial and
Operating Review
Risk Management
and Principal Risks
Viability and
Going Concern
76
78
Our Executive
Leadership Team
Chair’s Introduction
to Governance
80 Board Activity at a Glance
82
90
96
102
104
Corporate Governance
Statement 2023
Nomination Committee
Report
Audit and Risk
Committee Report
Environmental and Social
Impact Committee Report
Remuneration Committee
Report
110 Remuneration Policy
119
Report on the Directors’
Remuneration
140
151
152
Independent Auditor’s
Report
Consolidated Income
Statement
Consolidated Statement
of Comprehensive Income
153
Consolidated Balance Sheet
155
156
157
Consolidated Statement
of Changes in Equity
Consolidated Cash
Flow Statement
Notes to the Consolidated
Financial Statements
211 Company Balance Sheet
212
213
Company Statement
of Changes in Equity
Notes to the Company
Financial Statements
222 Glossary
Read our report online
www.pzcussons.com/investors
Our strategy in action
132
Report of the Directors
223
Further Statutory and
Other Information
Build
Brands
19
Serve
Consumers
20
Reduce
Complexity
21
Develop
People
22
Grow
Sustainably
23
How we report
We currently report the activities of our business
across four operational segments, described right:
Europe & the Americas 31%
Revenue split
Asia Pacific
Africa
Central
29%
39%
1%
Strategic ReportGovernanceFinancial Statements
There has been a good deal of focus on the performance of Childs
Farm under our ownership following its acquisition in March 2022
– the first by PZ Cussons in eight years. We are pleased with the
progress that has been made in growing its revenues as we have
launched innovative products and begun to expand internationally.
The learnings from the purchase will be carefully considered before
we commit ourselves to any future acquisitions.
At the same time, we have continued to make good progress against
our sustainability targets with sustainability issues increasingly
incorporated into day-to-day commercial considerations. I would
particularly emphasise our continuing reduction in plastic usage
with innovations such as the Carex refill pouch in the UK and
the Morning Fresh Bottle for Life in Australia. Our overall plastic
consumption reduced further in FY23 and is now down 7.8%
compared to the 2021 baseline. Furthermore, for the first time,
nearly all of the paper used in our packaging in the year was either
recycled or certified – a major step forward by management.
In the years ahead, I look forward to supporting the Executive
Leadership team in maximising the potential of PZ Cussons and
in delivering value for all stakeholders. We will focus on building
brands and serving consumers better, while building capabilities
and reducing complexity in the business. I am confident that this
approach will position us well for the future especially as it is in the
hands of our talented and passionate executive team.
I would like to draw your attention to the Remuneration
Committee’s Report in which we propose a new Remuneration
Policy. We recognise the importance of aligning executive
remuneration with the long-term interests of our shareholders. So,
after consulting with a number of key investors, we have simplified
our approach significantly, with long-term remuneration incentives
based on restricted shares. We believe this will better align our
Executive Directors and senior management team with the creation
of shareholder value. I would like to thank shareholders who took
part in the consultation for their consideration and feedback.
In closing, on behalf of the Board, I would like to express our sincere
thanks to all of our colleagues wherever located in the world for
their skill and hard work during the course of the last year. Equally,
I want to thank our customers, suppliers, shareholders and other
stakeholders for their partnership and trust in PZ Cussons.
David Tyler
Chair
02
PZ Cussons plc / Annual Report and Accounts 2023
A Word from our Chair
DEAR SHAREHOLDER,
I am very pleased to present the Annual Report for the year ending
31 May 2023 for PZ Cussons especially as it is my first as Chair. On
behalf of the Board of Directors, I want to pay tribute to Caroline
Silver, my predecessor, for her very significant contribution to the
Company during her nine years on the Board. I would like to
thank her for everything she did on behalf of all the stakeholders
in our business, and to wish her every success in her future
business activities.
I would also like to thank Dariusz Kucz who decided to stand down
from the Board in September 2023 after five successful years as a
Non-Executive Director.
In the ten months since I joined the Board, I have learned a
great deal about the history and culture of the Company and the
opportunities and challenges that lie ahead of us. I would like to
express my appreciation to everyone in the business who has been
so welcoming to me on my arrival and so helpful in furthering my
understanding of the Company.
Given the external economic and political backdrop which has
presented us with challenges and uncertainties, we are pleased to
have been able to record a growth in our adjusted profit before tax
(up 12.6% to £74.1 million) and that we limited the decline in our
earnings per share to 10.7% given the impact of a higher effective
tax rate and higher minority interest costs.
It is important to record a note of caution at this point. These results
are calculated using the average exchange rates applicable during
our financial year ending 31 May 2023. However, the value of the
Nigerian currency, the Naira, fell very substantially indeed in June
2023 after the new Nigerian Government announced that it would
allow the currency to find its natural rate in the markets rather than
being based on the previous exchange rate which was set by the
Central Bank in Nigeria.
Our Nigerian business is a very significant part of PZ Cussons, and so
this will have a material impact on future results given that the fall in
the value of the currency has been about 40% compared to the rate
used in the Financial Statements in this Annual Report and Accounts.
To illustrate this, if our profits in the year to 31 May 2023 had
been translated to Sterling at the average Naira exchange rate
over the two-month period from 1 July to 31 August 2023, the
Group’s adjusted operating profit would have been £58.6 million –
a reduction of £14.7 million on the reported figure. In our trading
statement dated 27 June 2023, we noted that this will adversely
affect our FY24 profits and that it has significantly reduced the value
of the cash held within Nigeria. As a result of the devaluation, the
Board has also deemed it prudent not to increase the level of the
Final dividend to be paid in November.
While this suite of economic reforms is having a negative impact
on near-term reported financial performance, we believe the
medium to long-term prospects for our Nigerian business are much
improved on the assumption that the Government there maintains
its new approach.
Turning to the Group as a whole, we have invested in the last year in
building our brands for the long-term, both in our existing markets
and by entering into a number of new markets and categories.
For example, we have launched an auto dishwashing product in
Australia under our Morning Fresh brand and we are now marketing
our Original Source brand in Spain. The latter represents the first
major launch by our newly-established Business Development team
which is tasked with growing our brands geographically.
Overview 03
Q: When did you first come across
PZ Cussons and what attracted you
to the role?
A: Like many people, I first came across the products
which PZ Cussons sells as a child when using Imperial Leather
soap in the home of my grandparents. Then, in 1975, when
a graduate trainee at Unilever and reviewing the competitive
environment, I became interested from a professional
capacity in the Company for the first time when the merger
took place between the two businesses of Paterson Zochonis
and Cussons. I have kept an eye on PZ Cussons ever since
and have long felt that the business had not fully captured
the opportunity to build valuable brands with underlying
consumer recognition in the way that a number of its
peers had.
Since then, I have worked for a number of other listed and
non-listed businesses, mainly across the broader consumer
sector, allowing me to gain some understanding of the
opportunities and issues across a range of sectors. However,
I am delighted now to be returning to my ‘first love’ of
fast-moving consumer goods, which was where it all started
for me.
Prior to joining, I had met several members of the Board
and Executive Leadership Team and I was very impressed
with what I saw. Here was a group of ambitious individuals
who understand how the industry works, having been
schooled at formidable blue-chip companies. So, I am
very pleased to have joined PZ Cussons at such an exciting
moment in its history.
Q: What have been your first impressions
of the business?
A: Since joining the Board in November 2022, I have met
with many colleagues and shareholders to understand the
business better and gain first-hand feedback.
There is a great deal of excitement within the business
regarding its potential and the changes that are taking place.
It is very refreshing to witness this buzz. Very often, half the
challenge with the kind of strategic change that is under way
at PZ Cussons is gaining the backing of colleagues. This is not
an issue here. I believe their enthusiasm and drive will be key
in successfully ensuring transformation across the business,
allowing us to harness the full potential of PZ Cussons.
Q: Do you envisage any changes to the
PZ Cussons strategy?
A: Any Board in our industry must continually assess the
growth characteristics of its markets and its own competitive
position. ‘Change’ is the only constant, as they say. So, our
areas of strategic focus will naturally evolve as circumstances
change and as we assess whether we are following the best
routes to achieve our objectives.
The business’ priority since Jonathan became CEO has
rightly been around addressing legacy issues and building
the foundations of what is to follow. Of course, more can be
done, but I think the business is well-placed to transform
itself over the coming years. We will focus on our investment
in building brands, prioritising where and how shareholder
money is spent – by geography and by category.
Q: What do you want to achieve over
the coming years at PZ Cussons?
A: I am focused on creating value – not just for our
shareholders but for our many other stakeholders. I see
significant opportunities for the business over the coming
years and want to help the management team maximise
their chances of success in capturing these.
Q: What are you most looking forward to
in your role?
A: I am looking forward to meeting and working with
colleagues from around the company. I have already spent
a good deal of time with our UK business and I have visited
Nigeria to be introduced to our activities there. Over the
coming weeks, I also have market visits planned to Indonesia
and to Australia.
More broadly, I am very much looking forward to those big
moments where we see demonstrable progress against the
strategy, whether that is an innovative new product launch,
expansion into new markets, an uptick in our profitability,
or hitting our sustainability targets. I anticipate that will be
more of these big moments over the next few years, and I am
very enthusiastic about working with the management team
to achieve this acceleration. All of these successes will be a
result of the skills and hard work of colleagues. My job is to
support them.
Strategic ReportGovernanceFinancial Statements 04
PZ Cussons plc / Annual Report and Accounts 2023
PZ Cussons at a Glance
WE ARE A BRANDED
CONSUMER GOODS BUSINESS.
With nearly 140 years of heritage,
we employ over 2,600 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.
£656.3m
revenue in FY23
6.1%
LFL revenue growth in FY23
2,600+
employees
nearly 140 yrs
of heritage
3
core categories
4
priority markets
MUST WIN BRANDS (48% OF FY23 REVENUE)1
• Competitive brand investment levels
PORTFOLIO BRANDS (52% OF FY23 REVENUE)1
• Brilliant execution
• Strong innovation pipeline
• Focus for commercial capabilities
• Validated, repeatable growth wheel
• Robust and regular management review.
• Clear role for each brand
• Resources tailored to specific role
• Incubator support for brands with further potential.
FY23 REVENUE SPLIT
17%
13%
By Category
51%
19%
1 Excluding Group central revenue.
Hygiene
Baby
Beauty
Other
1%
31%
39%
By Region
29%
Europe & the Americas
APAC
Africa
Central
Overview 05
Our Investment Story
PZ CUSSONS ALLOWS INVESTORS TO CAPITALISE ON
ATTRACTIVE MARKET TRENDS IN THE CONSUMER GOODS
SECTOR, PARTICULARLY IN THE EMERGING MARKETS
OF ASIA AND AFRICA.
With leading brands and renewed clarity on ‘where to play’ and ‘how to win’ choices, we are transforming our
business through focused investment and simplification. Our actions will build a higher growth, higher margin,
simpler and more sustainable business.
1. Portfolio of leading brands
Our brands typically lead in our chosen markets
and categories, frequently outperforming the
brand of our global competitors and private label.
#1 in Hand
Hygiene
#1 in Manual
Dishwash
#1 in Family
Soaps
#1 in Prestige
Tanning
Nigeria
400m
people by 2050 =
3rd most populous
country globally
(217m today)
Indonesia
12%
annual growth in Baby
personal care market1
12m
babies born, in
total, in Nigeria
and Indonesia
annually
2. Exposure to rapidly growing
categories and markets
We operate in attractive categories of Hygiene, Baby
and Beauty. We have a unique presence in rapidly
growing emerging markets and, with our multi-local
presence, believe we are better placed to understand
customer, consumer and market dynamics than our peers.
3. Clear strategy to transform
the business
In support of our brand-building, we are investing in
foundational capabilities fuelled by simplifying the
portfolio and operations; this creates both near-term and
long-term opportunities for profitability improvements.
4. A strengthened
management team
We have a largely new Executive Leadership Team,
composed of individuals who, together, have decades
of blue-chip FMCG experience. Our teams are
constantly raising the bar on improved performance
and culture.
5. Strong balance sheet
and financial discipline
Our strong balance sheet allows us to take advantage
of inorganic opportunities.
Sources:
Market positions for Carex, Morning Fresh and Premier are based on Nielsen. St. Tropez is based on Circana Population and birth rates data are from Statista and worldpopulationview.com
1 Euromonitor, 2021-26.
Strategic ReportGovernanceFinancial Statements 06
PZ Cussons plc / Annual Report and Accounts 2023
The Year in Review
JUN 2022
JUN 2022
New award-winning campaigns
for iconic brands
Imperial Leather’s Overindulge Yourself
campaign, the first in seven years, reconnected
with the brand’s heritage and appealed to
consumers seeking everyday indulgence. Our
Born for the Hustle TV ad in the UK was voted
Ad of the Week by The Grocer. Sanctuary
Spa was relaunched with new packaging
and product ranges, such as shower oils and
scrubs, demonstrating the value offered to
consumers seeking a spa experience at home.
Responding to cost-of-living
pressures
We have been working to respond to
cost-of-living pressures across all markets
by introducing new products and pack
sizes (for example, our 55ml Cussons Baby
offer), launching Cussons Creations in the
UK and Sanctuary Spa refills with reduced
plastic, as well as considering consumer
price points.
Read more on page 19
Read more on page 20
APR–JUL 2023
APR 2023
Executive Leadership Team
New product development
We have continued strengthening our
Executive Leadership Team with internal
promotions for Managing Directors of
our Africa and Indonesia businesses and
the appointment of a new Chief People
Officer and Chief Information Officer.
Morning Fresh, Australia’s number
one washing-up liquid brand,
advanced into the fast-growing
auto dishwash category. St. Tropez
launched Luxe Serum, which adds
premium skincare benefits to the
self-tan core proposition. This was
an opportunity to reunite with our
brand ambassador Ashley Graham
and use a ‘digital-first’ activation
approach in the US.
Read more on page 22
Read more on page 53
JUN 2023
Entering new markets
Childs Farm launched into the US market following a successful
first year in our Group. The team also went live with their first
TV advertisement across all ITV regions in the UK. We launched
Original Source, a category leader in the bath and shower sector,
into the Spanish market for the first time. The sector in Spain is
worth over €300 million and is Europe’s third-largest bath and
shower gel market. The move follows the brand’s successful
expansion into markets including Germany and South Africa.
Read more on page 19
Overview
07
Linking to our strategic objectives
Build Brands
Serve Consumers
Reduce Complexity
Develop People
Grow Sustainably
OCT 2022
Future ready
In October, we hosted our first Future Ready leadership
conference, bringing together external speakers and senior
leaders from across the Group to explore macro trends and
business priorities.
NOV 2022
PZ Cussons Board
David Tyler was announced
as Non-Executive Director
and was appointed Chair
of the Board of Directors
following the expiry of the
term of office of Caroline
Silver in March 2023.
Read more on page 25
Q&A with David on page 03
FEB 2023
Childs Farm SlumberTime
Childs Farm launched
SlumberTime, the first new
product development since the
brand joined the PZ Cussons
Group in March 2022. To
strengthen the launch, we
established a partnership with
Vogue Williams, TV presenter
and mum of three.
NOV 2022
Better for all
credit facility
Demonstrating our commitment
to embed our new sustainability
framework, Better For All, into all parts
of our business, we agreed a new
and innovative £325 million credit
facility incorporating environmental
and social impact (ES) linked Key
Performance Indicators (KPIs).
Read more on page 19
Read more on page 187
FY23
People transformation
By rolling out Workday, our new
people management system,
we are standardising and
streamlining global processes,
including offering our people
access to online learning
providers, global talks and
career profiles.
Read more on page 24
Strategic ReportGovernanceFinancial Statements 08
PZ Cussons plc / Annual Report and Accounts 2023
Overview
STRATEGIC
REPORT
Strategic Report
Governance
Financial Statements
09
10 Chief Executive’s Review
14 Business Model
16
Our Markets
18 Our Strategy
24 People and Culture
26
42
Sustainability and TCFD
Non-Financial and Sustainability
Information Statement
43
49
52
58
69
Section 172(1) Statement
Key Performance Indicators
Financial and Operating Review
Risk Management and Principal Risks
Viability and Going Concern
OUR VALUES.
We are clear that our culture is a critical enabler of our PZ Cussons purpose
and strategy and employee engagement is a priority.
Our people helped us to distil our culture into four BEST values and we
have embedded these into our processes and communications, ensuring
that everyone is familiar with them and understands our ways of working.
AS INDIVIDUALS WE ARE
BOLD
IN OUR TEAMS WE ARE
ENERGETIC
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
AS A BUSINESS WE ARE
OUR SHARED CULTURE BRINGS US
STRIVING
TOGETHER
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
Watch our values video at
https://www.pzcussons.com/careers-home/
10
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Chief Executive’s Review
RETURNING
THE GROUP TO
SUSTAINABLE
GROWTH.
We are now approaching three years into our strategy
and we have continued to make good progress. We
have sought to regain our focus on the consumer while
re-investing in our brands and building capabilities.”
Jonathan Myers
Chief Executive Officer
Childs Farm revenue growth
+12%
Increase in stores in Nigeria
+47%
96%
of recycled or certified
paper in packaging
Overview 11
We are now approaching three years into our strategy and we
have continued to make good progress. We have sought to regain
our focus on the consumer while re-investing in our brands and
building capabilities. We are also being selective about where
we should play and how we can win. In doing so, we have sought
to build a higher growth, higher margin, simpler and more
sustainable business.
It is therefore encouraging that we have delivered a third
consecutive year of LFL revenue growth. Our improved gross
profit margin compared to FY22 has also allowed us to invest in
marketing and capabilities while broadly maintaining the Group’s
adjusted operating profit margin. This progress has been achieved
whilst responding to the well-documented macroeconomic
challenges – absorbing for example approximately £80 million
of inflationary costs over the last three years whilst continuing
to meet the needs of the cost-conscious consumer. While much
remains to be done, we have made good progress to date.
On behalf of the Board, I would like to thank the PZ Cussons
teams worldwide for their continued energy and tenacity in these
challenging conditions and our suppliers and customers for their
valued partnership.
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 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 successful
execution. 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 strategy is built upon attractive market and category
fundamentals. Our revenue is split approximately evenly by
developing and developed markets, allowing us to balance
the revenue growth typically seen in faster-growing markets
with the more attractive margin profiles in more established
markets. Our brands are ‘locally-loved’ in their respective
categories – benefitting from local consumer insight and proximity
to customers but supported by our global capabilities and
efficiencies. We see significant potential for long-term market
growth with, for example, a £3.5bn market opportunity1 in
Baby personal care across our largest markets with Nigeria and
Indonesia amongst the largest five markets globally for birth rates.
Across our businesses, we are increasingly adopting a position
and mindset of a ‘challenger’ – bringing scale to compete against
smaller, local players and bringing agility and strong consumer
and customer understanding to compete against larger players.
OUR STRATEGIC PROGRESS IN FY23
Throughout the year, we made good progress across the key areas
of our strategy:
1. Build Brands: investing in our brands to drive awareness
and loyalty
Following the acquisition of Childs Farm in March 2022, we have
sought to further strengthen the brand in FY23 and, in March,
launched ‘SlumberTime’ – an innovative three-part range which
has been created using sleep-enhancing technology to aid the
sleep of babies as well as their parents. We have also started to
accelerate international expansion, with a launch in the US on
Amazon, whilst strengthening our existing footprint in markets
such as the Middle East. Childs Farm revenue grew 12% in FY23
and we believe we can triple the brand’s revenue over the next
five years.
In February, we launched Morning Fresh, our market-leading hand
dishwash brand in Australia, into the auto dishwash category as
we seek to take our existing brands into new category adjacencies.
The auto dishwash segment is around twice the size of the
hand-dishwash segment and is growing significantly faster. Early
signs are promising, with strong feedback from key customers
in Australia.
Original Source was launched into the Spanish market for the first
time in July 2023 with a launch campaign focused on Out of Home
and social media activations. The sector in Spain is worth around
£300m2 and is Europe’s third largest bath and shower gel market,
signalling the strength and ambition of the brand to continue
to grow.
In Nigeria, we launched ‘Joy Black’, a consumer-insight-led
innovation for the Beauty soap. Establishing a differentiated
position in the soap segment and with a campaign which speaks
to local cultural themes, results have been strong, with revenue
growth in the year of over 20%, a doubling of gross margin and
an 11 percentage point increase in consumer awareness.
There remains more to be done to fully maximise the opportunity
for a number of brands however and to understand the brands’
responsiveness to promotional and marketing activity. We
continue, for example, to seek to strengthen St. Tropez’s presence
in the UK, where it has underperformed compared to the US,
reflecting the brand’s positioning and relative historic levels of
investment. Similarly, we have seen more challenging trading in
Sanctuary Spa where, against a difficult category backdrop, the
brand’s re-staging, whilst allowing for improvements in price/mix,
has fallen short of our first-year expectations.
Longer term, we continue to build towards
a higher growth, higher margin, simpler
and more sustainable business.”
Jonathan Myers
Chief Executive Officer
1 Estimates based upon Euromonitor data.
2 Euromonitor.
Strategic ReportGovernanceFinancial Statements 12
PZ Cussons plc / Annual Report and Accounts 2023
Chief Executive’s Review continued
More broadly, we continue to strengthen brand-building
capabilities across the organisation, rolling out 3-year brand plans
for each of our markets with a focus on our Must Win Brands and
assessing opportunities for geographic and category expansion.
A number of these, such as the Morning Fresh auto dishwash
launch, have already been enacted. Brand Investment increased
in FY23 and we continue to prioritise spending on the highest-
returning brands.
2. Serve consumers: winning where the consumer shops
In Nigeria, we sought to improve overall distribution and
customer service levels, in turn growing consumer penetration
by transforming our route-to-market capabilities, differentiating
by region and channel. We have increased the number of stores
we serve directly by nearly 50% compared to FY22, with priority
stores, benefiting from greater focus and a wider range of
products, increasing from 500 to 3,000.
Elsewhere, given Amazon’s increasing importance and previously
unexploited opportunity, we have established a cross-category,
multi-functional, dedicated Amazon ‘centre of excellence’. The
team is focused on driving optimal online performance, returns
on marketing investment and the longer-term strategy across
commercial, supply chain and marketing. We are using Amazon’s
vast amount of data to glean consumer insights to better
understand our consumers and how they engage with our
brands online. Online represents 9% of revenue across the
Group and we see an opportunity for this to increase over time.
3. Reduce complexity: simplifying our operations and
portfolio to improve returns and reduce risk
As part of our initiatives to simplify our operations, we have been
executing a number of transformational supply chain projects.
During FY23, these included outsourcing fragrance supply to
third parties, the near-shoring of our procurement function
from Singapore to Manchester, and the closure of our Thai soap
factory with corresponding outsourcing. These projects are now
well-progressed and are anticipated to achieve annualised cost
savings in the region of £2-3 million. Moreover, it is anticipated
that overall efficiency and capability within the supply chain will
be improved due to these initiatives.
In September 2023, we announced our intention to buy out and
de-list the minority shareholding of PZ Cussons Nigeria plc. Should
the transaction gain the necessary approvals, we anticipate that it
will significantly simplify and strengthen our business in Africa.
4. Develop people: investing in our teams to strengthen
capabilities
During the year, we made a number of new appointments to
strengthen organisational capabilities. As with earlier investments,
we are focused on bringing together the best external and internal
talent. In keeping with this, we hired a new Chief People Officer
and Chief Information Officer – both with strong experience
from senior positions at consumer goods companies – and were
delighted to promote internal talent to the roles of Managing
Director in Indonesia and Nigeria. For the first time in recent
history, Indonesian and Nigerian nationals are leading their
respective businesses.
Our annual engagement survey, in which 96% of employees
participated, shows evidence of the progress we are making
to strengthen our organisation and culture due to the changes
and investment in recent years. Overall engagement is at 73% –
slightly ahead of the previous year and benchmark. Particularly
pleasing was the ‘motivation to go above and beyond’ at 76% –
an improvement on last year’s survey and six percentage points
above benchmark. Nevertheless, improvements are still being
made in providing clarity and transparency on reward and benefits
and clearer career pathways and opportunities.
5. Grow sustainably: acting in the right way for long
term growth
We are making good progress towards becoming a more
sustainable business and environmental considerations
are increasingly considered hand-in-hand with commercial
considerations, evidenced by our continued strength in refills
and the recent launch of bio-degradable wipes in Indonesia.
Specifically, highlights of progress against the sustainability goals
which were established last year include:
• A reduction in virgin plastics in our packaging by 7.8% (vs 2021
baseline) – an improvement from 5.1% reduction in FY22.
• A 49% reduction in waste sent to landfill (vs. 2021 baseline)
– an improvement from 20% reduction in FY22.
• An increase in certified or recycled paper to 96% (from 49%
in FY22).
• Achievement of carbon neutrality in all operations outside
of Africa.
However, further work remains to be done in this area, both
with respect to achieving the established targets and fully
communicating with stakeholders the progress we are making3.
3 Further detail, including TCFD required disclosures is provided on page 35.
Overview 13
On behalf of the Board, I would like to thank the PZ Cussons teams
worldwide for their continued energy and tenacity in these
challenging conditions and our suppliers and customers for
their valued partnership.”
Jonathan Myers
Chief Executive Officer
SERVING THE COST-CONSCIOUS CONSUMER
With consumer inflation rates increasing in many of our markets
throughout FY23, a key focus for our teams has been on better
serving the cost-conscious consumer. This has first and foremost
been achieved through targeting efficiencies across our supply
chain, as detailed later, reducing the need to pass through
inflation. We have, however, used innovation and our portfolio
to support the consumer at various price points.
In the UK, for example, recognising the growing importance of the
discounter channel in recent years, we developed and launched
a new Portfolio Brand, Cussons Creations, in June 2022. Set at a
value price point, this launch has allowed us to replace a number
of the Imperial Leather SKUs, which played at a similar price.
The launch has been positive, allowing us to grow the combined
revenue of Cussons Creations and Imperial Leather for the first
time in recent history, growing combined market share and
distribution points whilst positioning Imperial Leather as a
more premium brand.
In Kenya, we have taken the opportunity to relaunch Flamingo
– a Portfolio brand with a strong heritage targeting the value
consumer, which has lacked attention in recent years. As part of
the relaunch, like Imperial Leather, we have been successful in
growing the brand for the first time in several years, achieving
over 50% revenue growth as we have increased both volumes and
pricing whilst maintaining competitive pricing relative to peers.
In Indonesia, the launch of a smaller 55ml pack size of Cussons
Baby Hair and Body Wash has allowed us to reduce the absolute
price point, enabling Indonesian parents to continue to access
high-quality bathing products for their babies despite a significant
reduction in disposable income.
NEAR-TERM PRIORITIES
As we look into FY24, we have established four priorities for the
business for the next 12 months, seeking to balance addressing
immediate challenges whilst setting the business up well for
long-term success. The priorities are:
1. Continue to simplify and strengthen our business in Nigeria
2. Return the UK market to sustainable, profitable growth
3. Accelerate brand growth in and beyond the core portfolio
4. Continue to transform organisational capabilities.
In the long term, we are building a higher growth, higher margin,
simpler and more sustainable business. We maintain our LFL
revenue growth ambition of mid-single-digits growth and our
ambition for adjusted operating profit margins in the mid-teens.
SUMMARY
In summary, we have continued to make good strategic progress,
with a third year of consecutive LFL revenue growth, delivering
on expectations despite the significant external challenges of cost
inflation and pressures on consumer spending. There is more
to do as we seek to maximise the company’s full potential, and
there are well-documented challenges to be navigated in Nigeria.
However, we continue to believe that we can build a higher
growth, higher margin, simpler and more sustainable business.
Jonathan Myers
Chief Executive Officer
26 September 2023
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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
Trial and loyalty
Delight consumers through
the use of our products
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 financial approach
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
ALL UNDERPINNED BY OUR PURPOSE, CULTURE,
VALUES, GOVERNANCE AND ETHICS
Overview 15
THE VALUE WE CREATE
Our business model creates shared, sustainable value for all our
stakeholders.
FOR CONSUMERS
FOR CUSTOMERS
Innovative, high-quality and
trusted brands
Our retail partners and
customers benefit from
selling our leading brands
Insight and
innovation
Obtain insights into current
consumer needs and longer-
term trends. Through continuous
innovation, use these insights to
continuously develop brands and
products that consumers want
and desire
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
FOR INVESTORS
Engaged teams and
relationships, training and
development opportunities
and a supportive culture
and values
A clear plan to build a
higher growth, higher
margin, simpler and more
sustainable business
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
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Our Markets
WE ARE WELL-POSITIONED
TO DRIVE GROWTH
THROUGH OUR MULTI-LOCAL
APPROACH, WITH OUR
LOCALLY-LOVED BRANDS.
LOCALLY-LOVED BRANDS
OUR PRIORITY MARKETS ARE:
We see our brands as being ‘locally-loved’ solidifying their market presence by
utilising local knowledge and customer relationships to compete against global rivals.
Simultaneously, we capitalise on our global capabilities, efficiencies, and best practices
to out-perform domestic operators.
It’s this approach that positions our business not as multi-national, but as multi-local.
Across these markets, our Must Win brands, and the majority of our Portfolio Brands,
are centred around the three core categories of Hygiene, Baby and Beauty.
UK
Nigeria
Indonesia
Australia/
New Zealand
Most of our brands operate in these
four markets, while the US is home
to St. Tropez, our leading premium
tanning brand.
CATEGORIES
Hygiene
Baby
Beauty
KEY SUB-CATEGORIES
MUST WIN BRANDS
• Mass Personal Care
• Home Care
• Baby Personal Care
• Baby Food
• Masstige Personal
Care
• Premium Self-tanning
• Bath Additives
Overview 17
FOCUS ON BABY PERSONAL CARE
Across our markets of UK, ANZ, US, Nigeria and Indonesia, we have leading positions in the Baby category. In particular, we
see the Baby personal care market, where our Cussons Baby and Childs Farm brands are positioned, valued at around £3.5bn
and driven by the 17 million annual births in these markets. Drivers of the growth vary, with developing markets influenced by
volume growth and developed markets by premiumisation.
DYNAMIC MARKET SIZE
£3.5bn
size of baby personal care market
17m
annual births
DEVELOPING MARKETS DRIVEN BY VOLUME GROWTH
DEVELOPED MARKETS DRIVEN BY PREMIUMISATION
• Rising disposable incomes
• Growth in birth rates.
• Increasing importance of babies and children
• Branded products.
GLOBAL CONSUMER TRENDS
‘PLAY AND EXPLORATION’
‘PROTECT AND NURTURE’
‘SUSTAINABLE’
Market size is based on Euromonitor data and management estimates for Baby Personal Care across the markets of UK, ANZ, USA, Nigeria and Indonesia. Includes wipes and excludes
nappies. Population data is based on World Population Prospects 2022 of the United Nations Department of Economic and Social Affairs.
MACRO TRENDS AFFECTING OUR BUSINESS
Market dynamics
Our response
Macro-economic
environment
We’ve seen a cost-of-living crisis in several of our markets.
Inflation in the UK for example has been reaching highs
of over 10%1 in January 2023 and around 20% in Nigeria2.
This has caused consumers to be ever more cautious with
their spending.
We have doubled our efforts to provide
good everyday value, launching for example
Cussons Creations to serve the needs of the
cash-conscious consumer.
Sustainability
Consumers now have higher expectations for the
brands they buy and the companies behind them. They
are actively seeking reassurance regarding ethically
sourced ingredients, absence of harsh chemicals and
environmental hazards, as well as a guarantee that
products are cruelty-free. Additionally, consumers are
becoming more conscious of packaging choices, favouring
recycled or recyclable materials over virgin plastic.
We are working hard to address the
demands as evidenced by our sustainability
targets.
Childs Farm successfully obtained B Corp
certification in July 2022.
Developing
markets
We believe in the long-term potential of emerging
markets, such as Nigeria. With its projected population
doubling by 2050, it is set to become the world’s third
most populous country, trailing only China and India.
Channel
disruption
Technology
Across a number of our markets, we are seeing changes
to the way in which consumers shop as they continue
to purchase more online. In developing markets, we are
seeing a shift as consumers move towards supermarkets
and modern retail and away from the legacy of markets
and traditional trade.
Technological change is ever present and over the
last year we have seen a significant rise in generative
Artificial Intelligence (AI). While it remains early days, the
technology could have profound implications for many
aspects of our business, creating efficiencies and requiring
new ways of working.
1 Source: CPIH (Consumer Prices Index including owner occupiers’ housing costs) 12 month rate of 11.8% in January 2023.
2 Source: Nigeria National Bureau of Statistics. Inflation was 22.41% in May 2023.
With about half of our revenue originating
from developing markets, alongside the
strong presence of our brands in these
regions, we are strategically positioned to
seize the advantages presented by these
opportunities.
We have established an Amazon Turbo Team
across our developed markets, seeking
to maximise the potential for our brands
online. In Nigeria, we have continued to
strengthen our route to market with a
further 47% increase in the total number of
stores covered.
We are beginning to experiment with
platforms such as ChatGPT, seeking to
leverage the efficiency it can provide in
areas such as marketing.
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Our Strategy
WE BUILD BRANDS TO
SERVE CONSUMERS BETTER,
WITH HYGIENE, BABY AND
BEAUTY AT OUR CORE.
STRATEGY OVERVIEW
In March 2021, we set out our new strategy. ‘Build brands for life.
Today and for future generations.’ We have made clear choices
around ‘Where to Play’ and ‘How to Win’.
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
HYGIENE, BABY
AND BEAUTY
4 PRIORITY MARKETS
SUSTAINABILITY
CULTURE
LEADERSHIP
CAPABILITIES
Focus on Must Win Brands
OUR STRATEGY CAN THEREFORE BE SUMMARISED ACROSS FIVE FOCUS AREAS:
BUILD
BRANDS
SERVE
CONSUMERS
REDUCE
COMPLEXITY
DEVELOP
PEOPLE
GROW
SUSTAINABLY
Investing in our
brands to drive
awareness and
consumer loyalty.
Winning where
the shopper shops.
Simplifying our
operations and
portfolio to
improve returns
and reduce risk.
Investing in our
teams to strengthen
capabilities.
Acting in the right
way for long-term
growth.
Overview 19
BUILD
BRANDS
INVESTING IN OUR BRANDS TO DRIVE
AWARENESS AND CONSUMER LOYALTY
NEW PRODUCT DEVELOPMENT FOR CHILDS FARM
The launch of SlumberTime was a significant milestone as the
brand’s first major innovation under PZ Cussons ownership. Our
innovative range is designed to enhance babies’ sleep experience
and address an issue facing new parents – sleep deprivation.
Childs Farm commissioned a comprehensive study revealing that
the substantial sleep loss experienced by parents during their
baby’s first six months amounted to 550 hours. This research
served as a foundation for the development of SlumberTime.
We partnered with sleep experts at Givaudan to conduct
groundbreaking research on fragrance-related wellbeing benefits.
Utilising the findings, a master perfumer crafted a unique scent
using DreamScentz™ technology.
The SlumberTime range encompasses a three-step routine,
including a soothing bath soak, calming massage lotion and a
sleep mist.
To support the product launch, Childs Farm collaborated with
Vogue Williams, a prominent TV presenter and mother of three.
This strategic partnership brings credibility and broad visibility to
the product range.
Additionally, a ‘save our sleep’ social media campaign is underway,
educating new parents on the skincare benefits of Childs Farm
products and guiding them towards the perfect sleep routine for
their families.
With future developments in the pipeline, we are well positioned
to expand our market share and strengthen our reputation as a
leader in the baby care industry.
ORIGINAL SOURCE ENTRY INTO THE SPANISH MARKET
We recently launched our renowned bath and shower brand,
Original Source, in the Spanish market. This move marks a
significant achievement for the brand as it enters Europe’s third-
largest bath and shower gel market, valued at €345 million. With
successful expansions into other countries and a strong reputation
for invigorating products, Original Source aims to give Spanish
consumers a fresh ‘wake-up call’.
Original Source products are now available in over 1,730 stores
across Spain, thanks to strategic partnerships with Carrefour
and Druni Perfumerias. This expansion aligns with our overall
transformation strategy and demonstrates our strength and
ambition to grow.
To cater to Spanish consumer preferences, Original Source
introduced a new 500ml shower gel bottle, which is packed
with more natural ingredients. The packaging maintains the
recognisable and vibrant colours that have become synonymous
with the brand in the UK.
We launched a series of Original Source promotions to support
expansion into Spain. The brand adapted its iconic UK advertising
slogan, ‘Tingle your Ringle’, in collaboration with distributor Albert
Roger Ltd, ensuring relevance for the Spanish market.
Additionally, we have developed and deployed an influencer
marketing strategy to generate engaging content across social
channels, further amplifying brand awareness and reach among
Spanish consumers.
As we continue to implement our transformation strategy, the
expansion of Original Source into Spain is a testament to our
ongoing success and future prospects.
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Our Strategy continued
SERVE
CONSUMERS
WINNING WHERE THE SHOPPER SHOPS
OUR PROGRESS
Throughout FY23, we saw a cost-of-living crisis in a number of
our markets, with soaring general levels of inflation squeezing
household finances and making it imperative that we successfully
address the needs of cash-conscious consumers. To this end
we acted quickly to introduce Cussons Creations, as we seek to
provide everyday great value shower products for the UK market.
Serving almost exclusively the discounter channel, Cussons
Creations is typically priced below £1.
At the same time, this move also allowed us to begin to
premiumise Imperial Leather – a brand with significant equity
and heritage but which had seen revenue declines for a number
of years as it had lost its way, with growing presence in discount
channels. The launch of Cussons Creations – bearing some of the
same fun look and feel as the previous Imperial Leather range –
was therefore not only an opportunity to provide everyday great
value, but a chance to re-establish Imperial Leather as a touch
of everyday luxury with improved fragrance, better lather and
preferred packaging.
The response to this innovation and re-positioning of our
portfolio has been positive. The combined revenue from
Imperial Leather and Cussons Creations (compared to just
the Imperial Leather offering in FY22) has grown in FY23,
with distribution across the two brands up 17%.
Trending this year and popular with Home Bargain shoppers
• Right Royal Wash which was launched just in advance
of the King’s Coronation
• Dachshund Through the Snow which was launched
for Christmas 2022.
Winning in traditional
trade in Nigeria and online
In Nigeria, we have continued to strengthen our route to
market, increasing our total points of distribution by a further
47% in FY23, meaning we can serve more consumers faster
and more effectively. This has also allowed us to simplify
and improve the configuration of our supply chain, including
reducing the number of distribution centres as we build a
stronger network of distributors and wholesalers.
Elsewhere, given the growing importance of Amazon as a
customer, we have established a dedicated team to accelerate
growth and better serve consumers to the platform. The team
is focused on better understanding returns on marketing
investment and how consumers interact with our brands
online, as well as developing dedicated content to improve
click-through-rates and purchases.
Overview 21
REDUCE
COMPLEXITY
SIMPLIFYING OUR OPERATIONS
AND PORTFOLIO TO IMPROVE
RETURNS AND REDUCE RISK
PZ Cussons is embarking on a supply chain transformation enabling
us to achieve our commercial ambitions and strengthen the
business. We’ve analysed and evaluated each part of our supply
chain and identified areas for improvement, including leveraging
third-party expertise. This suite of projects aims to optimise, simplify,
and future-proof PZ Cussons’ supply chain, representing the most
significant functional transformation for PZ Cussons in many years.
Progress in FY23 has been across three specific projects:
1. Closure of Fragrance Supply and Outsourcing
Fragrance supply operations were closed and outsourced to global
manufacturers. This strategic move will reduce costs, improve
quality, and increase flexibility through these third-party suppliers.
2. Nearshoring of Procurement function from Singapore
to Manchester
Procurement operations were relocated from Singapore to
Manchester to enhance efficiency and strengthen capabilities.
Co-locating global procurement teams in the UK means improved
collaboration with other business areas such as finance and
commercial teams, with cost reduction and streamlined processes.
The transition is complete and we’ve noticed a significant
decrease in inventory levels.
3. Closure of Thai Soap Factory and Outsourcing
We have announced plans to close the Thai soap factory
outsourcing production to more efficient third-party providers.
This decision enables us to achieve significant cost savings,
shorten manufacturing lead times and reduce freight usage
aligning with our sustainability goals, reducing our carbon
footprint and landfill waste. The factory will stop production
in January 2024.
These transformation projects go far beyond fixing the basics and
see us transforming our supply chain to align with the Group’s
future growth ambitions.
Supply chain enhancement results in
significant cost savings for PZ Cussons
Sustainability improvements from
the closure of our Thai factory
£2–3million
estimated annual savings
1,008
tonne reduction
in CO2 footprint
17
tonne reduction in
waste to landfill
Nigeria simplification
We have continued to simplify our operations in Nigeria.
Key changes include:
• Reduction in SKU count in Family Care from c.250 two
years ago to c.120 today
• In doing so we have improved the mix of Premier soap to
be higher margin, driven by a mix of distributor incentives
and clear SKU guidelines according to store or outlet type
• Reduction in ‘tail’ or non-performing brands from 18
to 12.
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Our Strategy continued
DEVELOP
PEOPLE
INVESTING IN OUR TEAMS TO
STRENGTHEN CAPABILITIES
During the year we took the opportunity to make two important promotions to Managing Director
roles. Ningcy and Oghale are the first Indonesian and Nigerian nationals to lead their respective
businesses.
NINGCY YULIANA, MANAGING
DIRECTOR – INDONESIA
Ningcy is Managing Director of PZ
Cussons Indonesia, a role she was
appointed to in June 2023. She is
responsible for driving business
growth in the Indonesian market.
OGHALE ELUENI, MANAGING
DIRECTOR – AFRICA CONSUMER
BUSINESS
Oghale is the Managing Director of
the Africa Consumer Business and is
responsible for leading P&L delivery,
market share and business growth. He
With over 15 years of experience in Brand and Marketing
Management, Ningcy joined PZ Cussons as the Head of Marketing
for the Asia region in January 2011. During this period, she has
built a strong understanding of PZ Cussons’ Indonesia business,
having progressed through five senior leadership positions,
including Sales Director. Prior to PZ Cussons, Ningcy held senior
roles at Nestlé and Sara Lee, among other businesses.
is also accountable for end-to-end operations management and
organisational health across the Africa market.
Before joining PZ Cussons, Oghale served as General Manager,
Sub-Saharan Africa, and Managing Director West Africa for SC
Johnson. More widely, he spent several years at Procter & Gamble
in Africa and the US, holding several leadership roles across market
strategy and planning; and commercial management roles for
Walmart’s International Customer Team, supporting emerging
markets in Asia and Latin America, and health & beauty categories.
How would you sum up your role?
NINGCY: Having worked across several leadership positions
at PZ Cussons over a decade long career, I have a strong
understanding of the business. In my current position, I am
responsible for overseeing operations in the region and
driving business growth in the Indonesian market.
OGHALE: My mission is to lead the Africa business to
deliver sustainable, profitable growth. To enable that, I need
to work with my leadership team to build a truly world class,
brand building organisation, that places a premium on a
high-performance work culture.
What excites you most about your new role?
NINGCY: I’m grateful and excited to challenge myself
in taking the business to another new level. My goal is
to increase the penetration of our brands and products
into Indonesian homes and at the same time to continue
to challenge ourselves in expanding our presence and
availability. While also ensuring that PZ Cussons is an
attractive, rewarding and enjoyable place for people to work.
OGHALE: First and foremost, it’s the organisation I serve.
The Africa team is built of passionate, resilient people who
are always up for the challenge, and it is a delight to come
to work and lead these people. Secondly, Africa is a growing
population, and so I’m excited to be taking the PZ Cussons
brand to even more people across the continent.
What is your primary focus for your first
100 days in the role?
NINGCY: I’m keen to establish a set of targets and
timelines whereby we can achieve our end goal of delivering
continuous improvement and sustainable growth. It’s also
important for me to engage with as many people as possible
from within the organisation, to build trust and drive
momentum around our key targets over the next year. I’m
also keen to introduce the outside world to PZ Cussons, so
that stakeholders can understand who we are as a brand,
and our purpose of being ’For everyone, for life, for good’.
OGHALE: It’s important to acknowledge that PZ Cussons
and Africa has a strong heritage, strong capabilities and a
brilliant workforce. As I look forward, my focus will be to lean
into these strengths to help the business to grow. I want to
explore new categories for our brands to grow into; identify
opportunities for our core brands to travel across Africa; and
I want to scope out opportunities to accelerate learning and
skills programmes within the business, to build a legacy that
we can be proud of.
Overview 23
GROW
SUSTAINABLY
ACTING IN THE RIGHT WAY
FOR LONG-TERM GROWTH
Our Group Sustainability Goals.
33%
virgin plastic
reduction by 2030
100%
recyclable, reusable or
compostable packaging
by 2030
100%
certified or recycled
paper by 2025
Morning Fresh roadmap to meet and beat its 2030 sustainability targets.
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.
A good example of where sustainability considerations have been
explicitly incorporated into our commercial planning is in Australia
with our market-leading Morning Fresh brand.
The team have carefully monitored the sustainability impact
of their packaging plans with new bottle designs, refill formats,
material choice and pack mix. As a result, they have a clear,
quantified roadmap to achieving and potentially outperforming
their targeted 33% reduction in virgin plastic by 2030.
MORNING FRESH PLASTIC GRAMS PER KG
1
Existing initiatives have achieved a
18% reduction as at the end of FY23
2
Future opportunities
FY21
New Bottle
Refills Launch
Pack Mix to
Large Bottles
Auto Launch
New Cap
PCR (50%)
Ambition
New Formats
(Concentrates,
Cardboard
refills)
NEW BOTTLE
3% reduction via a
new bottle design
REFILLS LAUNCH
PACK MIX
Format uses
75% less plastic
Larger formats to
improve packaging ratio
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People and Culture
PRIORITISING PEOPLE
AT PZ CUSSONS.
WE HAVE SOMETHING SPECIAL AT PZ CUSSONS. AS A
FTSE 250 WITH OVER 2,600 PEOPLE WORKING FOR US,
WE CONTINUE TO PLACE OUR PEOPLE AGENDA AT THE
CENTRE OF OUR STRATEGY.
This year has been about establishing foundations following
our business turnaround, creating new processes and evolving
our culture and ways of working.
We have a powerful PZ Cussons purpose, ‘For everyone, for
life, for good’, championing the wellbeing of our consumers:
people, families and communities everywhere. Our purpose is
a key part of our story. We have also defined our BEST values
(Bold, Energetic, Striving and Together) in collaboration with
our people, and these are embedded across the organisation.
Our values inform how we make decisions and support the
key behaviours that we expect our people to role model.
We have a powerful PZ Cussons purpose,
‘For everyone, for life, for good’, championing
the wellbeing of our consumers: people,
families and communities everywhere.”
FULFILLING CAREERS
The transformation of PZ Cussons requires our people to strive
for excellence and to challenge themselves professionally when
delivering against our strategy. We combine our efforts and work
together to achieve the best outcomes for everyone. We want
people to have fulfilling careers with us at every stage of their
career journey.
Early careers: This year, we launched our first early careers
programmes and have offered a number of summer internships
as well as a graduate programme, which includes the opportunity
for an assignment in one of our international business units.
Leaders at all levels: Over 600 leaders at all levels concluded
our leadership development programme this year, spearheaded
by our ELT. The programme emphasised purposeful leadership
aligned with our values and focused on high-performing teams.
This work complemented targeted learning and development
on strategic themes.
Career conversations: We encourage regular career development
conversations to create a learning culture and continue supporting
all people at PZ Cussons to develop and accelerate their careers.
To support our managers and people, we have leveraged
our Workday people management system. We intend for all
employees to develop a career profile to highlight their key career
experiences and skills. This will support our talent planning and
succession processes. We have also transitioned our goal-setting
and performance management process online, focusing more on
continuous performance conversations.
Global learning platform: We launched our first global learning
management system on Workday, offering all of our people access
to a range of best-in-class online learning courses from external
providers. These are updated regularly and can be accessed at
any time.
Overview 25
GLOBAL CONVERSATIONS
We offer regular opportunities to hear from the ELT and other
expert speakers and encourage everyone at PZ Cussons to join the
conversation and ask questions.
Events: In October 2023, we launched our Future Ready
leadership event, bringing together leaders from across our
business to discuss strategic priorities. Our global Town Halls with
the ELT run bi-monthly, and we launched a new global speaker
programme, with a range of external and internal speakers
offering fresh perspectives on topics ranging from e-commerce
or new artificial intelligence tools to building personal resilience.
Several hundred employees attend each short talk.
Engagement: Emphasising our value of working together, we
have also built on our existing employee engagement programme
by creating new Celebrating our Culture events and employee
networks in each of our business units.
Listening and responding: Our HR Leadership Team and employee
groups have been responding to challenges experienced by
employees in our local markets, offering a range of targeted
wellbeing solutions, including support for those impacted by the
rising cost of living. Our annual engagement survey, increased
emphasis on two-way feedback and regular ‘question and answer’
sessions ensure we are continually listening to and learning from
our people. We build all feedback into our strategic planning for
the year ahead.
DIVERSITY, EQUITY AND INCLUSION
It is essential that our colleagues represent the communities
which we serve; we are proud of our PZ Cussons heritage and
this year two of our ELT positions have been taken up by local
nationals, who were promoted from within. We are committed
to creating a culture where we value and celebrate difference so
every person feels like they belong and can be their true self. We
will soon undertake a Diversity, Equity & Inclusion (DEI) Maturity
Assessment to enable us to benchmark where we are currently.
We have also established a DEI Executive Committee who will lead
and sponsor the development of a new DEI strategy, which will be
presented to the Board in FY24.
Global Engagement Survey 2023
We were delighted to attain a 96% participation rate
(compared to 93% in 2022) and to have maintained our
overall employee engagement score at 73% (2022: 72%
and 2023 benchmark: 72%) while our people navigated the
challenges of our external environment and our business
transformation.
Overall motivation to go above and beyond was at 76%
(+6 percentage points compared to our benchmark and
+2 percentage points compared to 2022).
Our people are engaged by the PZ Cussons purpose and
are clear about our strategic priorities: 93% of respondents
confirmed they know how their work contributes to PZ
Cussons’ goals and 93% of respondents understand what
is expected of them.
Thanks to a sustained effort from all of our teams, we also
made big gains in questions relating to holding ourselves
and our team members accountable for business results
(87% agreed with this statement, which was +7 percentage
points versus the benchmark) and inter-departmental
collaboration (74% agreed, +9 percentage points versus the
benchmark). Our UK business in particular had a 15% uplift
in their overall engagement score to 67% during a period of
significant transformation.
92% of survey respondents stated that they are aware
of our BEST values and 87% stated that they believe in
our BEST values. This reflects the efforts made to not just
launch our values but also to embed them firmly in our
ways of working.
Areas to focus on in FY24 for our people, include providing
more clarity and transparency on total reward and benefits,
clearer career pathways and opportunities, and further
developing our employee recognition schemes.
Survey run by Culture Amp. Benchmark Consumer Goods
and Services, January 2023.
I am proud
to work for
PZ Cussons
88%
(2022: 87%)
I would recommend
PZ Cussons as a great
place to work
85%
(2022: 83%)
Strategic ReportGovernanceFinancial Statements 26
PZ Cussons plc / Annual Report and Accounts 2023
Sustainability
IT’S IN THE DNA OF PZ CUSSONS TO
BE A FORCE FOR POSITIVE CHANGE.
INTRODUCTION TO ENVIRONMENTAL AND SOCIAL IMPACT AT PZ CUSSONS
We recognise the impacts that we have on the planet and on society, and we take responsibility for addressing these impacts and work in
partnership with our suppliers, customers and communities to make a difference. We are guided by our company purpose: For Everyone,
For Life, For Good, which helps us consider the customers, consumers and communities we serve, our employees and the planet when
we make decisions as a business.
Our Environmental and Social Impact framework which we call ‘Better for All’, aligns to our purpose and our sustainability strategy helps
everyone in the business, whatever their role, understand how they can help us to achieve our targets. The framework is also supported
by the long-term KPIs that we previously set. The areas within the framework that we focus on were validated and determined by a
Group-wide materiality assessment that we conducted in FY22. We plan to review and refresh this analysis in FY24 to ensure that we
continue to focus on those areas where we have the biggest impact as a business.
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. This report shows where
our actions are guided by these goals.
GOVERNANCE
Our sustainability strategy is overseen by the Board via a sub-committee. The ELT is responsible for developing the strategy and
presenting to the Board for approval, and monitoring progress towards our sustainability KPIs. The Sustainability Steering Group
comprises representatives from our different markets and business functions, and its role is to review the plans that are in place and
our progress towards our corporate and market KPIs. In FY23 we have established working functional and regional teams that meet
monthly to put in place the building blocks to achieve our social and climate-related objectives, both by business unit and functional
levels. Those working groups report to the Sustainability Steering Group.
Decision & monitoring
Decision, collaboration
& monitoring
Board (Environmental and Social Impact Committee – approval of strategy
and monitoring of delivery, including corporate KPIs)
ELT ES Forum (sub-set of the ELT – makes operational and investments decisions)
Sustainability Steering Group (SSG) (report to ELT – monitoring of ESG goals;
oversight of internal and external communications)
Sustainability team
Delivery
Functional workstreams (development and management
of plans to achieve strategic aims, KPIs from
a workstream perspective)
Market delivery projects (full P&L accountability, has to
align with business context; responsible for delivery of
ESG projects on a business unit level)
FOR EVERYONE
FOR LIFE
FOR GOOD
Our impacts on people: Through our
employees and the communities we serve.
This addresses our impact on people, our
employees’ safety and wellbeing, and the
communities that we serve.
For more details see page 28
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 details see page 30
Our behaviours as a business: How we buy, sell
and operate through our value chain for future
resilience and growth. 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 details see page 40
This section of our Annual Report provides a summary of our sustainability activity. For more detail on our sustainability
strategy or for examples of how we are implementing change, see our website for our stand-alone
Environmental and Social Impact Report for FY23 www.pzcussons.com/sustainability/policies-and-disclosures/
Overview
27
OUR BETTER FOR ALL FRAMEWORK.
FOR EVERYONE
FOR LIFE
We continue to use our Environmental and Social
Impact framework Better For All to steer our progress.
Our governance system forms an important part of
this; connecting our different teams and countries in PZ
Cussons to work collectively towards our ESG targets.”
Joanna Gluzman
Chief Sustainability Officer
FOR GOOD
More information about our approach
to sustainability, highlights from the
year, our progress against our targets,
and our plans for the future is available
in our FY23 Environmental and Social
Impact Report which can be found on the
Company website: www.pzcussons.com/
sustainability/policies-and-disclosures.
Strategic ReportGovernanceFinancial Statements 28
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
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.
Our main manufacturing sites are accredited to ISO9001 for
quality. We use ISO10377, the standard for consumer safety,
to assess and improve our performance.
Our product ambition is to inspire responsible consumption
of our products and disposal of our packaging by adapting our
pack communication so consumers can make informed choices.
For more information and case studies about how we deliver
our ambition and how we communicate with consumers on our
product packaging, see our Environmental and Social Impact
Report on our website.
We have over 2,600 employees globally, who collectively define
who we are as a business. Our employees, ELT and the Board
have worked together to define our purpose – ‘For everyone, for
life, for good’ and to capture our BEST values – Bold, Energetic,
Striving and Together. We seek to bring them to life through
our people processes, focusing on creating a high-engagement
culture, encouraging high performance and growing compelling
career paths to attract, retain and develop the most talented and
capable people.
HEALTH AND SAFETY
In FY23, we made positive progress in health and safety across all our KPIs. Following the behaviour safety improvement initiative
completed in all our manufacturing locations in FY22, we noted a 75% reduction in Lost Time Incidents (LTI), with no LTI reported in our
factory operations. We also noted a decrease in the number of reportable incidents. There was also an improvement in the reporting
of minor incidents, and improved due diligence in the identification of minor injuries, meaning our All-Accidents figure increased.
Fatalities
LTI1/Yr
LTIFR2
AAIFR3
2017–18
2018–19
2019–20
2020–21
2021–22
2022–23
0
13
0.26
2.17
0
8
0.13
2.13
0
3
0.05
1.45
0
2
0.04
1.14
0
4
0.08
1.09
0
1
0.02
1.15
Change
year-on-year
0
-3
-0.06
+0.06
1 LTI defined as Lost Time Incidents.
2 LTIFR defined as Lost Time Incident Frequency Rate.
3 AAIFR defined as All Accident Incident Frequency Rate.
Strategic Report
Governance
Financial Statements
29
Aligning to the SDGs
EMPLOYEE DEVELOPMENT
The transformation of PZ Cussons requires our people to strive for
excellence and to challenge themselves professionally in delivering
our strategy. In FY23 we launched our first ‘early careers’
application process globally and have offered a number of summer
internships, as well as a new graduate programme including the
opportunity for an overseas assignment. We also expanded the
learning modules available on our Workday platform to include
training modules on sustainability, and on diversity, equity and
inclusion, providing employees with introductory knowledge on
both these important areas. We launched a new Sustainability Hub
on our intranet, which holds a variety of content, including reading
materials, videos and information about our sustainability strategy.
EMPLOYEE WELLBEING
Our markets have developed a range of health and wellbeing
activities that are particularly relevant to colleagues in those
countries. This allows each programme to be tailored to local
needs. For example, in the UK and Beauty businesses we have
implemented a new breastfeeding policy which will also be
applied in Australia and New Zealand, while in Nigeria a Best
Health and Wellness week was held in addition to reopening the
gym in the head office. For more details see our Environmental
and Social Impact Report which can be found on our website.
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 see strong results.
DIVERSITY, EQUITY AND INCLUSION
To continue building an inclusive workplace environment, we
established a group of ELT members focused on developing and
reporting back on our diversity, equity and inclusion strategy.
This year, we have introduced two new questions to our annual
employee engagement survey, which ask employees about their
ethnicity and educational background. Collecting this data will give
us greater insight into the socioeconomic characteristics of our
employees and will help inform our long-term strategy.
COMMUNITIES
We want to create positive social change in the communities
where we operate. Our Code of Ethical Conduct requires that any
charitable donations we make are free from political affiliations
or conflicts of interest. In FY23 we established our new Charity
Partnership Framework. The framework optimises employee
engagement with the charities we support and assesses the
degree of impact we have on local communities, encouraging
partnerships that align with our corporate purpose and brands.
More information on our charity partnerships and community
impact can be found in our Environmental and Social Impact
Report on our website.
For more details see our Environmental
and Social Impact Report on our website:
www.pzcussons.com/sustainability/policies-and-disclosures/
30
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
FOR LIFE.
We address all our environmental impacts through the lens of our purpose.
We are committed to minimising our impact on the earth and
oceans. We do this through reducing our carbon emissions,
considering the sourcing decisions we make, and through
managing our packaging, waste and water use.
We measure, manage and report our performance in the areas
that we believe are most important to the business, and where
we have the biggest impact. This includes carbon emissions, water
usage and landfill waste, plastic consumption and disposal 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, most of our main operating
sites are certified to ISO14001, with our site in Kenya currently
working towards achieving this certification. We operate a
continuous improvement (CI) programme in our factories which
reduces our carbon emissions, water use and landfill waste.
PLASTICS AND PACKAGING
The packaging agenda is high on our list of priorities. The need to
reduce our packaging footprint is as important as it is challenging.
In FY22 we reviewed our global plastic and packaging targets. In
FY23 we worked with our markets to identify market-based targets
that will help us achieve our global ambitions and have started
implementing measures to move towards meeting those targets.
Our Paper Promise is our global paper target to support our
business strategy. We have been implementing measures to
ensure the proportion of certified or recycled paper that we use
grows each year. Certified paper means that all materials used
come from responsibly managed, certified forests such as FSC,
PEFC or equivalent certification. Using recycled material makes
the most of precious forest resources and reduces the pressure to
harvest more trees. Using certified or recycled paper mitigates the
risk of the material originating from unacceptable sources.
Target
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
FY23 Current
reporting year
FY22 Previous
reporting year
-7.8% compared
to baseline
-5.1% compared
to baseline
88.4%
83.3%
96%*
49%
*
The data covers over 90% (by tonnage) of our manufactured and third-party sourced
consumer goods and we are constantly looking to improve our coverage. Certification
and recycled content is based on supplier documentation and has not been
independently verified or physically reviewed.
Strategic Report
Governance
Financial Statements
31
Aligning to the SDGs
REDUCING CARBON EMISSIONS
Reducing carbon emissions is a priority for our business.
Decreasing our direct carbon emissions is also linked to our
renewed credit facility, further details of which are provided on
page 187. The annual reductions we committed to are in line with
science-based methodology. Our emissions data has been assured
by Verco1 for scopes 1 & 2, and by EcoAct2 for scope 3, both of
which are independent third-party experts.
In FY23 the Group’s carbon footprint for scopes 1 and 2 decreased
by 0.3% (market based) compared to our baseline, reversing the
increase in FY22. We also reduced our energy consumption by 4%
compared to FY22.
While we consciously and voluntarily use carbon credits to
offset those emissions we have not yet been able to reduce, we
remain committed to reducing our overall emissions in absolute
terms. In FY23, we achieved carbon neutrality in the UK, Beauty,
ANZ and Asian operations3. Carbon neutrality means that we
have offset our remaining scope 1 and 2 emissions through the
purchase of Gold Standard VER carbon credits. We have done this
through a combination of increasing energy efficiency, moving to
renewable electricity and through purchasing of carbon offsets.
We purchased of 13,000 tonnes of CO2e offsets, supporting
transformation across two projects, one in Nigeria and one in
Indonesia. Both projects meet the requirements of the Gold
Standard, an internationally recognised offsetting provider.
1
2
Verco provide limited assurance, following the ISO 14064-3:2019 Greenhouse gases
– Part 3 standard. Scope: PZ Cussons and all subsidiaries worldwide on an operational
control basis. The target verification coverage was 20% of Scopes 1 & 2, both of which
were exceeded (94% of both was verified). Based on the verification work undertaken,
Verco consider that all material GHG emission sources have been appropriately
identified, measured, and reported. All findings that were identified during the
limited assurance verification fell below the threshold of ±5% so were not considered
material, and all were rectified prior to the issue of the report and the publishing of
the final inventory of GHG emissions.
Following the limited assurance review, it is Verco’s conclusion that there is no
evidence to suggest that the GHG emissions statement for FY23 are not materially
correct, are not a fair representation of PZ’s operations, and are not prepared in
accordance with the WRI/ WBCSD GHG Protocol.
A limited level of verification was conducted, aligned with the ISO 14064-3:2019
standard specification and guidance for the verification and validation of greenhouse
gas statements. The organisational boundary of PZ Cussons was established using the
operational control approach, which included those sites which were operational in
FY21. Based on the data and information provided by PZ Cussons and the processes and
procedures followed, nothing has come to EcoAct’s attention to indicate that the Scope 3
emissions total for FY21 (8,682,331 tCO2e) are not fairly stated and are free from
material error.
3
At a cost of less than £150k. Given this cost is immaterial, we do not consider a specific
carbon offsetting accounting policy is required.
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.
Target
FY23 Current
reporting year
FY22 Previous
reporting year
Achieve carbon neutrality
in our operations by 2025
22% of our
emissions
Achieve a 42% reduction in
scopes 1 and 2 carbon emissions
(aligned with science-based
targets) by 2030
Achieve net zero emissions
across scopes 1, 2 and 3 by 2045
-0.3% compared
to baseline
NA
Scope 3
calculated
and verified
2% of our
emissions
+8.5%
compared
to baseline
EMISSIONS TABLES
This year, following expert advice from our emissions consultant,
we moved the emissions associated with PZ Wilmar from scopes
1 & 2 to scope 3 (investments), as it is a joint venture in which we
have no operational control. We are showing both scenarios due
to this change being in transition this year. The first table shows
emissions related to PZ Wilmar in scopes 1 & 2, as we have in the
past. The second table shows emissions associated with PZ Wilmar
in scope 3. Going forward, we will report PZ Wilmar in scope 3
(investments).
32
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
For Life continued
OLD REPORTING METHODOLOGY – GREENHOUSE GAS EMISSIONS AND ENERGY CONSUMPTION*:
Energy consumption used to calculate emissions
(MWh)
Scope 14
Emissions from activities for which the Company
owns or controls including combustion fuel &
operation of facilities (Scope 1) (tCO2e)
Scope 24
Emissions from purchase of electricity, heat,
steam and cooling purchased for own use
(Scope 2 location-based) (tCO2e)
Emissions from purchase of electricity, heat,
steam and cooling purchased for own use
(Scope 2 market-based) (tCO2e)
Total Scopes 1 & 24
Total gross Scope 1 + Scope 2 location-based
emissions (tCO2e)
Total gross Scope 1 + Scope 2 market-based
emissions (tCO2e)
Intensity ratio tCO2e (Scope 1 + 2 market-based)
/£100,000 revenue
FY234 (current reporting year)
FY221,2,3,4
FY21 (baseline year)1,2,3
UK
Global
Total
UK
Global
Total
UK
Global
Total
6,518 205,784 212,302
6,203 213,244 219,447
6,209 200,630 206,839
642
39,945
40,587
1,141
42,169
43,310
785
39,998
40,783
676
5,574
6,250
735
6,294
7,029
833
7,837
8,670
0
5,574
5,574
0
6,294
6,294
0
7,837
7,837
1,318
45,519
46,837
1,876
48,463
50,339
1,618
47,835
49,453
642
45,519
46,161
1,141
48,463
49,604
785
47,835
48,620
0.31
5.50
4.52
1.12
6.75
5.69
0.37
12.18
6.04
Total Out of Scope Emissions (tCO2e)5
0
2,390
2,390
0
2,343
2,343
0
2,159
2,159
Scope 36
Cat 1 Purchased goods & services
Cat 2 Capital goods
Cat 3 Fuel and energy related activities
Cat 4 Upstream transport & distribution
Cat 5 Waste generated in operations
Cat 6 Business travel
Cat 7 Employee commuting
Cat 8 Leased assets
Cat 9 Downstream transport & distribution
Cat 10 Processing of sold products
Cat 11 Use of sold products
Cat 12 End-of-life treatment of sold products
Cat 13 Downstream leased assets
Cat 14 Franchises
497,905
389
5,199
106,057
205
24,996
2,408
3,751
684
NA
7,406,152
138,062
NA
NA
*
All emissions have been calculated following to the Greenhouse Gas Protocol (GHG Protocol). Scopes 1 and 2 have been calculated using actual data whereas our scope 3 emissions
have been calculated using spend as a proxy and industry average emission factors.
** In FY23 we completed baselining our scope 3 emissions for 2021. We intend to measure and report on our scope 3 emissions annually in future years.
1
2
3
4
5
6
Manufacturing divestments in Australia and Nigeria have necessitated a re-statement of our previous year’s data (FY22) to ensure like-for-like comparisons with the current reporting
year. We have recalculated our emissions from our base year of FY21 and last year (FY22) to reflect this change in our carbon footprint boundary.
Previous year data updated in line with the recommendations made from our external GHG inventory verification.
Emissions from activities for which the Company owns or controls including combustion of fuel & operation of facilities (Scope 1) (tCO2e).
Information assured and verified by Verco Advisory Services Limited.
Out of scope emissions relate to our use of biomass for the generation of steam in our Kenyan operations.
These relate to our value chain emissions. Under scope 3 emissions we report for categories 1-9 (purchased goods and services, capital goods, fuel and energy-related activities,
operational waste, business travel, employee commuting, upstream leased assets and downstream transport and distribution) categories 11 and 12 (use of sold products and end-of-
life treatment of sold products).
Strategic Report
Governance
Financial Statements
33
NEW REPORTING METHODOLOGY – GREENHOUSE GAS EMISSIONS AND ENERGY CONSUMPTION*:
Energy consumption used to calculate emissions
(MWh)
Scope 1
Emissions from activities for which the Company
owns or controls including combustion fuel &
operation of facilities (Scope 1) (tCO2e)
Scope 2
Emissions from purchase of electricity, heat,
steam and cooling purchased for own use
(Scope 2 location-based) (tCO2e)
Emissions from purchase of electricity, heat,
steam and cooling purchased for own use
(Scope 2 market-based) (tCO2e)
Total Scopes 1 & 2
Total gross Scope 1 + 2 location-based emissions
(tCO2e)
Total gross Scope1 + Scope 2 market-based
emissions (tCO2e)
Intensity ratio tCO2e (Scope 1 + 2 market-based)
/£100,000 revenue
FY23 (current reporting year)
FY22
FY21 (baseline year)
UK
Global
Total
UK
Global
Total
UK
Global
Total
6,518 169,868 176,386
6,203 177,623 183,826
6,209 158,214 164,423
642
32,912
33,554
1,141
35,145
36,286
785
30,637
31,422
676
5,569
6,245
735
6,290
7,025
833
7,815
8,648
0
5,569
5,569
0
6,290
6,290
0
7,815
7,815
1,318
38,481
39,799
1,876
41,435
43,311
1,618
38,451
40,069
642
38,481
39,123
1,141
41,435
42,576
785
38,451
39,236
0.31
8.61
5.96
0.68
9.80
7.22
0.18
21.55
6.50
Total Out of Scope Emissions (tCO2e)
0
2,390
2,390
0
2,343
2,343
0
2,159
2,159
Scope 3
Cat 1 Purchased goods & services
Cat 2 Capital goods
Cat 3 Fuel and energy related activities
Cat 4 Upstream transport & distribution
Cat 5 Waste generated in operations
Cat 6 Business travel
Cat 7 Employee commuting
Cat 8 Leased assets
Cat 9 Downstream transport & distribution
Cat 10 Processing of sold products
Cat 11 Use of sold products
Cat 12 End-of-life treatment of sold products
Cat 13 Downstream leased assets
Cat 14 Franchises
Cat 15 Investments1
* Scope 1 and 2 emissions excluding PZ Wilmar.
1 Category 15 Investments include emissions associated with the joint venture PZ Wilmar.
497,905
389
5,199
106,057
205
24,996
2,408
3,751
684
NA
7,406,152
138,062
NA
NA
496,702
34
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
For Life continued
WASTE
In FY23 we reduced our absolute amount of waste to landfill by 49% compared to FY21. Our factories in the UK have achieved zero
waste to landfill. Overall, we are making progress towards our target of zero waste to landfill by 2030 in the markets where appropriate
infrastructure exists. 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 continuous improvement programme.
Target
FY23 current reporting year
FY22 previous reporting year
FY21 baseline year
By 2030, we aim to send zero waste
to landfill in those countries where
appropriate infrastructure exists
-49% reduction from
a FY21 baseline
-20% reduction from
a FY21 baseline
141 tonnes
WATER
Reducing the amount of water we use is important. We have a continuous improvement programme in place to ensure we are using it
effectively. In FY23 we reduced our water consumption per tonne of finished product by 12% compared to a FY21 baseline. Our absolute
water consumption decreased by 13.5% against FY22 and overall by 23% compared to a 2021 baseline. For the first time, we have made a
water submission to the Carbon Disclosure Project (CDP) for FY23, with a view to a full and graded submission annually from FY24 onwards.
Target
FY23 current reporting year
FY22 previous reporting year
FY21 baseline year
Reduce water intensity by 30%
from 2021 baseline by 2030*
-12% reduction from
a FY21 baseline
-9% reduction from
a FY21 baseline
5.64m3/t of production
* Water intensity is defined as the water use per tonne of production net of formulation water.
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. We have been disclosing data on our deforestation impacts since FY22 to CDP.
Targets
Continue to use 100% responsible palm oil in our products (no deforestation, peat or exploitation)
100% of our paper will be certified or recycled by 2025
We continue working towards 100% NDPE (no deforestation, peat or exploitation) palm oil supply, and in FY22 we made a commitment
to use 100% certified or recycled paper by 2025.
Our progress in biodiversity and remove the final column as that is a target
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
99.68% of the CPO/PKO we
use is fully traceable to mill
93% of the derivatives we use
are fully traceable to mill
Strategic Report
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Financial Statements
35
TASKFORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD).
As a global consumer goods manufacturer and distributor we will be exposed to physical and
transition climate-related risks and opportunities both within our operations and supply chain.
We believe that climate change will require us to protect and prepare ourselves as a business, as
well as reduce our own contributions to global greenhouse gas emissions and future environmental
change. To achieve this, we recognise that it is critical that our stakeholders understand the potential
risks and opportunities that climate change presents to our operations, strategy and business
viability, and we demonstrate that we are effectively managing these risks and opportunities.
We support the recommendations of the Task Force on Climate-
Related Financial Disclosures (TCFD). As a premium listed business
with over 500 employees and £500m revenue we are required
under FCA Listing Rule LR 9.8.6(8) to provide TCFD aligned
disclosures, and by the Companies Act to provide climate-related
financial disclosures (CFD). As such, and in line with the BEIS CFD
guidance, we have continued to published disclosures aligned
to the TCFD recommendations and recommended disclosures,
that in doing so, also meet the mandatory CFD requirements.
Our TCFD statement complies with all requirements except the
following disclosures: metrics & targets (b) and strategy (b & c)
as we do not disclose scope 3 for the reporting year and should
better link climate risks to critical accounting judgements and
provisions, which will also enhance our resilience planning. We
do not yet have a transition plan as we only finished establishing
our methodology to calculate our scope 3. We intend to disclose
our scope 3 emissions for FY22, FY23 and FY24 in our next report
and we will start work on a transition plan that we hope to have
in place within the next two years. We are currently developing
processes and policies in order to integrate all of the above into
our planning, and we anticipate becoming fully compliant in the
coming years.
GOVERNANCE
Board oversight
PZ Cussons’ climate risk is ultimately governed and overseen by
the Board via our Environmental and Social Impact Committee.
The Board approves and oversees our sustainability strategy,
committing the Group to environmental, social and governance
performance and delivery against our goals.
The Environmental and Social Impact Committee meets at
least twice a year to discuss progress against climate-related
KPIs including greenhouse gas emissions, energy consumption,
water consumption, waste production and plastic packaging.
Climate issues are discussed at least two times per year. The
Board has received training on climate change and sustainability
matters by our CSO, which we intend to repeat periodically as
scientific information and understanding of potential climate
change impacts on our business improve. The Board considers
climate-related issues when reviewing and guiding mergers
and acquisitions. PZ Cussons acquired Childs Farm in 2022 and
undertook climate-related risk due diligence before acquisition.
All principal risks are reviewed by the Audit & Risk Committee on
behalf of the Board prior to annual reporting. During FY22 we
conducted a materiality assessment and identified climate change
as a principal risk and component in our sustainability strategy.
Each principal risk is owned by a member of the ELT.
The Environmental and Social Impact Committee has the
following responsibilities:
1)
2)
Reviewing, approving and discussing PZ Cussons’
sustainability strategy and goals including climate goals
and implementation plans
Through the Remuneration Committee, to establish a
link between ESG outcomes to LTIP (Senior Management
Long-Term Incentive Plan). The ESG component of the LTIP
is 20% and is aligned to our ESG goals, including climate
commitments, demonstrating how the Board considers the
importance of climate-related issues among its performance
objectives. Climate commitments, specifically emissions
reduction targets, make up one-third of the ESG component
of the LTIP
3)
Through the Audit & Risk Committee, reviewing and approving
reporting plans.
Management’s roles and responsibilities
Our Chief Executive Officer and Chief Sustainability Officer (CSO)
have overall executive responsibility for our ESG policies and
climate commitments, with other management-level individuals
holding responsibility for identifying or enacting change related to
climate issues within the business such as the Chief Supply Chain
Officer (CSCO), the Chief Financial Officer and the Head of Risk.
The CSO has responsibility for presenting climate-related issues
to the Environmental and Social Impact Committee at least twice
per year, and to the Risk Committee before annual reporting. We
also set a robust chain of governance working top-down through
the Environmental and Social Impact Committee, as described
previously, followed by the ELT made up of the CSO, General
Counsel, Chief Marketing Transformation Officer, and others;
followed by the Sustainability Steering Group, which meets
monthly and includes a management representative from each
market and each function.
36
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
For Life continued
Taskforce on Climate-related Financial Disclosures (TCFD) continued
PZ Cussons has also established a dedicated TCFD working group
which is made up of the CSO and additional management level
representatives from Finance. This group was directly consulted
as part of the development of our TCFD and provided feedback
and recommendations to enhance the quality and consistency
of our disclosures.
Strategy
We have identified climate change as a sustainability and
environmental principal risk; in order to better understand the
potential impacts, we have conducted quantitative scenario
analysis of physical and transition risks over the short, medium
and long term, to stress test the resilience of our business, under
a range of future climate scenarios. As an international consumer
goods business with main markets in the UK, Nigeria, Indonesia
and Australia, our business is exposed to multiple and varying
geographical physical and transition risks. The nature of our
business means that we have offices and manufacturing facilities
spread globally which further increases our relative exposure to
physical risks like extreme weather and transition risks including
changing regulatory environments.
Time horizons: We have assessed potential impacts across three
separate time horizons (short/medium/long term) according to
our current targets, commitments and useful asset lives. We have
selected these horizons in accordance with TCFD and relevance to
our business as explained below.
• Short – Mid-2020s, which is linked to our short-term financial
planning horizons
• Medium – Mid-2030s, which is linked to our medium-term
commitments and targets
• Long – Mid-2040s, which is linked to the operational lifetime of
our existing assets and our net zero commitment.
Scenarios: We have assessed potential impacts across two future
scenarios covering physical and transition risks and opportunities
that may impact our business in the future.
1)
2)
Net zero scenario: The low carbon revolution is an ambitious
scenario that limits global warming to <2°C by 2100 through
stringent and immediately introduced climate policies and
innovation, reaching net zero CO2 emissions around 2050.
It is linked to RCP2.6, involves more transition risks early
on, but manages to limit physical risks to a minimum
(NGFS Scenario: Net Zero 2050).
Current policies: Assumes that only currently implemented
policies are preserved. World does not cut emissions and
climate change accelerates causing 2.5°C of warming by 2050
and >4°C by 2100 bringing irreversible changes. It is linked
to RCP8.5, involves little to no transition risks early on, but
results in irreversible and globally disrupting physical risks
(NGFS Scenario: Current Policies).
Transition risks were assessed considering possible risks and
opportunities for PZ Cussons over the short, medium and long-
term resulting from economic, market and regulatory changes.
Financial modelling has been conducted for these transition risks
using available PZ Cussons data; and assumptions and external
data from sources including: the International Energy Agency
(IEA), the Network for the Greening the Financial System (NGFS),
International Institute for Applied Systems Analysis preparing the
Shared Socio-economic Pathways (SSP) and the Intergovernmental
Panel on Climate Change (IPCC).
Physical risks were assessed by modelling the exposure of PZ
Cussons’ facilities across manufacturing, storage and distribution
operations with the assistance of a third-party provider, leveraging
tools and models developed for the insurance industry integrating
climate projections. 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 two physical risk scenarios, specifically RCP2.6 and
RCP8.5. We will continue to analyse the detail of these physical
risks, the resilience of the organisation and putting in place
mitigation plans which will be disclosed in ARA24.
Considering risks on our business, strategy and
financial planning
Climate risks have been considered through our financial
modelling of transition and physical risks for FY23, to establish
the relative low/medium/high impact on the business over
three different time horizons and two scenarios. We have
considered the impact of the identified climate-related risks
and opportunities on the business and strategy, and embedded
mitigating actions among our transition risks and opportunities
in Table 1 to manage potential risks and capitalise on potential
opportunities. PZ Cussons is undertaking further analysis to fully
embed climate risks into the business and strategy, especially
within the financial planning processes, and will aim to disclose
how these risks are considered in our financial planning processes
in future disclosures.
We are continually reviewing, updating, and enhancing our
understanding of climate-related risks and opportunities and
the resultant impacts on our business in light of external trends,
new information, and changes to our business. We will continue
to assess changes to our overall resilience as our understanding
of climate-related risks and opportunities matures, and if our
business strategies change. We are in the process of developing
our transition plan in line with Transition Plan Taskforce (TPT), see
page 35, which describes our progress to date against our climate-
related targets and our initiatives for reducing carbon emissions.
Based on the results of our risk assessment and scenario analysis.
We believe that the mitigation plans that are in place and further
mitigation actions will provide business and organisational
resilience to our short-medium-term risks, including under a <2°C
scenario (our Net zero scenario) and we consider our strategies to
be appropriate to manage our identified risks. We will continue to
assess our climate-related risks and opportunities under different
scenarios and determine our overall resilience, as we acknowledge
that changes to both internal and external factors over time will
impact the resilience of our business strategies to climate change.
Strategic Report
Governance
Financial Statements
37
RISK MANAGEMENT
Climate risks are integrated into our overall risk management process. Our risk management process is based on a common risk
framework to ensure we identify, assess and mitigate all risks i.e., product safety and quality, health and safety, cybersecurity, legal
compliance, climate change, environmental and regulatory compliance risks that threaten the successful delivery of our strategic
objectives. You can find full details on our risk management process on pages 58 to 71 of this report.
Specifically, our Risk Management Methodology on page 59 describes our processes for identifying, assessing and mitigating all risks,
including climate-related risks. We also identify new and emerging risks through a number of channels that are listed on page 60. Climate
change forms part of our sustainability and the environment principal risk, with further information on how we manage this risk provided
on page 67.
Table 1: Material risks and opportunities
PHYSICAL RISKS
PZC operations physical impacts
L
ST
Short-term
L
MT
Medium-term
L
LT
Long-term
Time horizon:
MT LT
Description of material risk or opportunity: Business interruption of PZC’s operation caused by climate change impacts, such as extreme heat,
extreme rainfall, heat stress, precipitation stress, drought stress, fire, sea level rise.
Scenario
Net zero
Current policies
Potential financial impact
Modelling approach
PZC’s direct operations
might be affected by physical
impacts which may lead to
increased costs for repair/
retrofit of impacted assets
and decreased revenue as a
result of operational outages.
Exposure of each asset
determined based on
location and the severity/
intensity of a climate
hazard occurring at each
location, with the value
exposed being the full asset
value located in an area
of material climate hazard
intensity.
Relative impact
2025 2035 2045
How we’re responding
L
L
H
H
H
H
PZC will continue to 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.
Highest exposure countries:
Nigeria, Indonesia
Supplier operations physical impacts
Time horizon:
LT
Description of material risk or opportunity: Business interruption of PZC’s suppliers operations caused by increased frequency and severity of
flood risk.
Scenario
Net zero
Current policies
Potential financial impact
Modelling approach
PZC’s supply chain might be
disrupted by physical risks
resulting in increased costs
and loss of revenue due to
changes in the availability
of goods and services from
suppliers.
Exposure of each asset
determined based on
location and the severity/
intensity of a climate
hazard occurring at each
location, with the value
exposed being the full asset
value located in an area
of material climate hazard
intensity.
Relative impact
2025 2035 2045
How we’re responding
L
L
H
H
H
H
PZC analyses exposure for a range of
acute climate risks and put mitigation
plans in place. Further mitigation actions
will provide business and organisational
resilience to acute/chronic risks.
Alternative suppliers with lower exposure
to climate risk might be taken into
consideration to mitigate the risk into
the future.
Highest exposure countries:
China, Taiwan
38
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
For Life continued
TRANSITION RISKS
Carbon pricing – Scope 1 & 2
Time horizon (Scope 1 & 2): ST MT
Description of material risk or opportunity: Increased costs associated with carbon pricing and taxation.
Potential financial impact
Modelling approach
Scenario
2025 2035 2045
How we’re responding
Relative impact
Carbon prices from NGFS
applied to our long-term
emissions forecasts.
Net zero
Current policies
L
L
L
L
M
L
Carbon pricing already exists
in some of the jurisdictions
PZC operates in, including the
EU and UK. Under different
scenarios, carbon taxes are
expected to increase, which
could increase PZ’s direct
operating costs resulting in
loss of revenue.
Carbon pricing – Scope 3
In our sustainability strategy we are
setting ambitious targets, see page 36,
to reduce GHG emissions throughout our
value chain, reducing our dependence on
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.
Highest exposure countries: Nigeria
Time horizon (Scope 1 & 2): ST MT
Description of material risk or opportunity: Increased costs associated with carbon pricing.
Relative impact
Potential financial impact
Modelling approach
Scenario
2025 2035 2045
How we’re responding
See scope 1 above.
See scope 1 above.
Net zero
Current policies
See scope 1 above.
L
L
H
L
H
M
Extended producer responsibility
Time horizon: ST MT
Description of material risk or opportunity: Introduction of carbon footprint labelling and Extended Producer Responsibility (EPR).
Potential financial impact
Modelling approach
Scenario
2025 2035 2045
How we’re responding
Relative impact
Estimated EPR costs applied
to our long-term packaging
forecasts.
Net zero
Current policies
L
L
H
L
H
L
Increasing regulatory
pressure and taxes regarding
the sustainability of materials
used in the manufacturing of
products may impact asset
values and revenues through
decreased capacity.
Cost of energy
Description of material risk or opportunity: Abrupt and unexpected shifts in energy costs.
We monitor regulatory developments and
work with the wider industry to prepare.
Last 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.
Highest exposure country: UK
Time horizon: ST MT
Potential financial impact
Modelling approach
Scenario
2025 2035 2045
How we’re responding
Relative impact
Energy prices from NGFS
applied to our long-term
energy forecasts.
Net Zero
Current Policies
L
L
L
L
L
L
PZC anticipates higher levels
of energy price volatility.
This will impact energy
costs associated with PZC’s
operations, which will also
affect our supply chain
resulting in increasing costs
and loss of revenue.
To minimise the risk of increased cost
of energy, we continue to incorporate
energy reduction initiatives across
our sites. Through our continuous
improvement programme in our factories,
we continue to incorporate energy
reduction initiatives across our sites.
Highest exposure country: Nigeria
Strategic Report
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Financial Statements
39
OPPORTUNITY
Energy efficiency
Time horizon: ST MT LT
Description of material risk or opportunity: Reduced energy costs through efficiency gains and cost reductions.
Potential financial impact
Modelling approach
Scenario
2025 2035 2045
How we’re responding
Relative impact
Reduced energy costs may
decrease PZC’s operational
costs.
Energy prices from NGFS
applied to our long-term
energy forecasts.
Net zero
Current policies
L
L
L
L
L We will continue to further improve
L
the energy efficiency of our assets and
our suppliers through our continuous
improvement programmes, which will
also result in lower operational costs. For
example, in FY22 we completed a review of
our shrink tunnels on our packaging lines to
optimise energy efficiency to give an annual
energy saving of 50,000 kWh/year.
Highest exposure country: Nigeria
RELATIVE FINANCIAL IMPACT LEGEND – PER ANNUM IMPACT
We define low/medium/high relative impact based on the net profit financial impact thresholds from our Risk Management Methodology:
L Low risk
Insignificant – Moderate financial impact: <5% net profit
M Medium risk
Major financial impact: >5% and <10% net profit
H High risk
Severe financial impact: >10% net profit
Metrics and targets
We consider greenhouse gas emissions, energy consumption, landfill waste, water consumption, and packaging data metrics as principal
metrics allowing us to monitor progress regarding climate-related risks and opportunities. These climate-related metrics are incorporated
into remuneration policies, and relevant targets were met during the FY23. The whole executive leadership team’s LTIP, including the CSO,
have a climate mitigation goal in the form of an emissions reduction target linked to their remuneration. The climate goals are long term
and success is demonstrated by progress against the trajectory we have committed to.
We will continue to ensure our metrics and targets are appropriate for our risk profile and will expand our metrics in the future taking
into consideration the TCFD all sector and cross-industry metric guidance. We currently use our existing environmental metrics to track
progress against our targets, and are in the process of developing KPIs aligned to our climate-related risks and opportunities to enable us
to better track and manage these over time. Full details on our metrics and targets, including the KPIs we use to track progress against
our targets, can be found on page 49 of this report.
We do not currently have an internal carbon pricing mechanism, however, we will continue to assess the feasibility of introducing one to
mitigate our external exposure to carbon taxation and legislation.
40
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Sustainability continued
FOR GOOD
We behave ethically as a business, through the decisions we make and through our corporate and
environmental and social impact governance processes.
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 our statement
of ethical principles and the behaviours expected across the
business. It provides rules and guidance to ensure we comply
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 also sets out our position on animal testing, anti-
slavery and forced labour, supply chain due diligence, our
responsibilities towards our employees, the prevention of
financial crime (including zero tolerance of all forms of bribery
and corruption and the prohibition of payment of bribes,
kickbacks, and facilitation payments) 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 pages 96 to 101 of this report.
In FY23 we conducted a Code of Ethical Conduct confirmation
survey which was completed by all eligible employees. The
confirmation sought feedback on the level of embeddedness of
our Code and how well it was understood across our business.
The feedback showed a strong understanding of the Code and
the procedures in place to make whistle-blowing reports.
As part of the new joiner process and with the use of Workday
and Trace International LMS portal, we have now implemented
a process that requires all new joiners to confirm that they
have read the Code and complete the ABC training within
their first month. Additional face-to-face training on the Code
was also conducted in high-risk markets by the Head of Ethics
& Compliance and local compliance champions. Face-to-face
training was conducted for employees at a number of our
factory sites, with over 600 employees attending.
Strategic Report
Governance
Financial Statements
41
MODERN SLAVERY ACT AND SUPPLIER CODE OF CONDUCT
Our Slavery and Human Trafficking Statement sets out our
commitment to detecting and preventing the use of all forms of
slavery in our supply chain. It is 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. In FY23 we published our first Human Rights Position
Statement which can be found on our website. All suppliers are
encouraged to submit to third-party rating programmes such
as SEDEX.
Our SCOC incorporates our Modern Slavery Act statement
and mirrors our ethical principles set out in the Code of
Ethical Conduct, requiring our suppliers to adhere to the same
standards to which we hold ourselves, including but not limited
to, compliance with relevant laws and regulatory standards in all
countries in which we operate. 90% of our direct suppliers have
signed it and 95% of our high-value vendors have agreed to the
SCOC or demonstrated they maintain an equivalent code within
their business.
In FY23 we published our Supplier Sustainability Charter, which
is a statement of key principles around supplier sustainability
behaviour. It builds on our Supplier Code of Conduct to
encourage more sustainable behaviour in our supply chain
and can be found on our website.
All new suppliers are subject to pass through a third-party
risk centre platform that conducts due diligence, which is
implemented by Dow Jones. 100% of our new suppliers have
done so and all high-risk suppliers have been issued with a
questionnaire requiring further information before being
considered for approval or rejection by our procurement teams.
In parallel, we plan to reduce the number of suppliers we work
with to improve governance and control. We also monitor
and report twice a year on our performance against our No
Deforestation, No Peat, No Exploitation (NDPE) commitment
in relation to the palm oil we purchase and use.
Important Notice Disclaimer: The companies in which PZ Cussons plc directly and indirectly has an interest are separate and distinct legal entities. In this document, ‘PZ Cussons’
and ‘Group’ are used for convenience only where references are made to PZ Cussons plc and its subsidiaries in general. These collective expressions are used for ease of reference
only and do not imply any other relationship between the companies. Likewise, the words ‘we’, ‘us’ and ‘our’ are also used to refer collectively to members of the Group or to those
who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies.
Animal testing
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
must 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.
In the UK, all our personal care products are accredited by the
Vegan Society, meaning they are free from animal ingredients, and
we are a partner of PETA’s Beauty Without Bunnies Programme,
meaning that all personal care and beauty brands are certified as
free from animal testing. This year we are working to incorporate
our major Australian brands into the programme.
For more detail on our policies and practices, see our website:
www.pzcussons.com/sustainability/policies-and-disclosures
42
PZ Cussons plc / Annual Report and Accounts 2023
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
Our TCFD disclosures can be found on page 35
1(a)
Environment
1(b)
Employees
1(c)
Society
1(d)
Human rights
Our Environmental and Social Impact framework and governance can be found on
page 27
Our Environmental and Social Impact 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 page 40. 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 page 44
We are proud of the contributions we are able to make to the communities in
which we operate, as further detailed on page 30
See page 40, which sets out our policies and due diligence to ensure the integrity
of our supply chain
1(e)
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 40
2(a)
Business model
Details of our business model can be found on page 14
2(d)
Principal risks
Our principal risks are set out on page 61 and our approach to risk management is
set out on page 58
2(e)
Non-financial key performance indicators
Our primary non-financial key performance indicators are set out on page 51
Overview 43
Section 172(1) Statement
CREATING A DIALOGUE
WITH OUR STAKEHOLDERS.
OUR APPROACH TO DOING BUSINESS IS FOUNDED ON THE PRINCIPLE OF CREATING
SUSTAINABLE VALUE FOR ALL OUR STAKEHOLDERS.
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 IMPACT OF STAKEHOLDER ENGAGEMENT ON BOARD DECISION-MAKING
We make use of various engagement channels to receive informative feedback from our key stakeholders which can be factored
into our principal decisions and activities.
Section 172(1) of the Companies Act 2006 (Section 172(1)) 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.
The table below demonstrates where you can read more detail in this Annual Report and Accounts on how the Board has discharged
its Section 172(1) duty this year. The Directors, both individually and collectively, believe they have given due regard to the stakeholders
and matters set out in Section 172(1) (a) to (f) as listed below:
Section 172(1) factor (a) to (f)
Relevant disclosures
Page number or website
(a) Consequence of any
decision in the long-term
(b) the interests of the company’s employees
• Company values
• Our business model
• Our strategy
• Board activity
Page 9
Page 14
Page 18
Page 80
• People and culture
• Diversity and inclusion
• Environmental and Social Impact Committee Report
• Board activity
Page 24
Page 25
Page 102
Page 80
(c) the need to foster the company’s
business relationships with suppliers,
customers and others
(d) the impact of the company’s operations
on the community and the environment
(e) the desirability of the company
maintaining a reputation for high
standards of business conduct
(f) the need to act fairly as between
members of the company
• Sustainability Report
• Modern Slavery Statement
• Board activity
• Sustainability Report
• Modern Slavery Statement
• Board activity
• Palm oil promise
• Modern Slavery Statement
• Anti-Bribery and Corruption Policy
• Shareholder engagement
• AGM
• Remuneration Policy
• Voting rights
Website
Website
Page 80
Website
Website
Page 80
Website
Website
Website
Page 45
Page 79
Page 110
Page 131
For further details on our Sustainability reporting and Palm oil promise, see our website www.pzcussons.com/sustainability/policies-and-disclosures
For our Modern Slavery Statement and Anti-Bribery and Corruption policy, see our website www.pzcussons.com/sustainability/for-good
Strategic ReportGovernanceFinancial Statements 44
PZ Cussons plc / Annual Report and Accounts 2023
Section 172(1) Statement continued
The following table shows how our stakeholders are integral to delivering our strategy. We have grouped our
stakeholders into five key categories and provided an overview of why we value them, the key priorities to our
stakeholders and the ways in which the Group, and the Board in particular, have engaged with them during this
financial year.
WHY WE ENGAGE
Customers and Consumers
Employees
• To ensure loyalty and trust
• To continue delighting consumers
• To help our portfolio to win
• To create enthusiastic consumers and
advocates for our brands.
• To create a supportive environment
• To value ideas equally
• To maintain an open culture
• To foster genuinely open communication
• To develop engaged employees.
KEY PRIORITIES
• Environmental sustainability and transparency
in the supply chain
• Customer service
• Access to our products through digital
channels
• Value and costs.
• Strategy
• Purpose and values
• Safety and wellbeing
• Career development and learning
• Ways of working.
HOW THE GROUP ENGAGES
• Strategic partnership with key customers:
– shopper insights
– proposing promotions and products
– assisting with developing strategies.
• Market research
• Social media
• Direct feedback
• Sales data.
• Local and global ‘Town Hall’ meetings
• Functional webcasts
• Leadership events
• Celebrating our culture event
• Future Ready Summit held in October 2022,
where 80 senior leaders and high potential
employees from around the world.
BOARD ACTIVITY/
HOW THE BOARD ENGAGES
• Visit all markets and meet with customers
and consumers on an ad hoc basis during
site visits
• The Board receives regular market reviews
from business unit leadership teams
• Reviewing customer service, consumer
insights and data as part of monitoring
business performance.
• Kirsty Bashforth, a Non-Executive Director, is
our employee engagement champion, with a
specific mandate to ensure the Board hears
and understands the employee voice
• Our Directors travel to our markets when
possible and hold dedicated employee
engagement sessions on such trips.
STRATEGIC OBJECTIVE
PRIORITIES FOR
THE YEAR AHEAD
• To improve our operational dashboard
to facilitate the Board’s oversight of how
we serve customers and consumers and
continue to increase household penetration.
• Succession planning and ensuring a robust
talent pipeline of diverse talent throughout
the Group
• To continue to work with ELT to define our
Diversity, Equity and Inclusion strategy and
implementation plans.
Overview 45
Linking to our strategic objectives
Build Brands
Serve Consumers
Reduce Complexity
Develop People
Grow Sustainably
Investors
Distributors and Suppliers
Communities
• To understand their investment
objectives and goals
• To pursue our strategic objectives
• To help move the Company forward.
• To ensure our supplier relationships
remain as long-term partnerships
• To create and sustain robust, lasting
and mutually beneficial relationships.
• It is of utmost importance that we
develop good relations with the local
communities where we operate
• To make a positive contribution to
society
• To minimise any negative impacts from
our operations.
• Financial and operating performance
• To ensure stable, long-term and mutually
• To reduce the environmental impact
of the business
beneficial relationships
• Not to increase costs
• To ensure product and service quality
• To be innovative.
• Purpose, values and culture of the
business
• Risks and opportunities
• Long-term sustainable and profitable
growth
• Sustainability issues
• Capital allocation decisions
• Good governance.
of our products (packaging and
formulation)
• To reduce our carbon emissions
• To be aware of cost-of-living and living
standards.
• Q&A sessions and roadshows for our
• The Board engages via a dedicated
• We continue to support the Foodbank
major shareholders
• Ad hoc investor events
• Our annual general meetings are an
opportunity to listen to our shareholders
and respond to any concerns they may have
or perspectives they may wish to share
• Our dedicated Investor Relations
Director whose purpose is to strengthen
our engagement with the investment
community.
• The Chair and our Executive Directors
periodically meet with our major
shareholders
• The CEO and CFO deliver the Group’s
interim and final results, with
presentations
• Our Board members and our Company
Secretary attend the AGM
• The Chair, the Senior Independent
Director and the Company Secretary
are available at all times to hear any
concerns raised by shareholders.
• To debate and set the next phase of
our strategy focusing on strategic
growth options and the journey
from turnaround to transformation.
procurement function
in Australia
• The Board ensures open, dynamic
communication.
• The PZ Cussons Nigeria Foundation
supported the construction of a
computing centre for a school in
Agbor Delta State.
• The CFO reviews payment practices
and policies and monitors trends in the
Company’s performance twice yearly,
reporting to the Audit & Risk Committee
• CEO and CFO engage directly with
distributors and suppliers.
• The Board approved the environmental
and social impact framework ‘Better for
all’ and controls its direction of travel
• Creation of a Board committee
responsible for sustainability
• Two of our ELT positions have been
taken up by local nationals, who were
promoted from within.
• To improve Board materials and data
presentation to facilitate the Board’s
oversight of operational performance
ensuring we are serving our customers
and optimising our supply chain
• To continue to work with ELT to drive our
supply chain transformation programme.
• To encourage Board travel to our priority
markets to engage with our Community
stakeholders
• To continue the Environmental and Social
Impact Committee’s work progressing
along the B-Impact Assessment
• Continue to ensure that the voice of
our communities are reflected in Board
deliberations and decision-making.
Strategic ReportGovernanceFinancial Statements 46
PZ Cussons plc / Annual Report and Accounts 2023
Section 172(1) Statement continued
PRINCIPAL DECISIONS IN FY23
The Board considers all its duties under the Companies Act 2006 including Section 172(1) factors (a) to (f) and many other factors in
all of the decisions it makes. Principal decisions are explicitly framed in the context of the interests of and implications for all affected
stakeholders. In FY23, 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.
Principal decision 1: Supply Chain Transformation
This year we have made significant strategic progress in our drive to reduce complexity. We have completed a number of projects within
our Supply Chain Transformation programme which have simplified operations in accordance with the agreed strategy. This has seen
significant changes including the movement of our procurement ‘hub’ from Singapore to the UK and also the closure of our in-house
fragrance supply house and planned closure of our Thai soap factory.
In making the decision, we considered:
The long-term effect
At the forefront of the Board’s decision-making is the long-term interests of our stakeholders. While decisions concerning disposals or closures
are taken with the utmost thought and care given the potential impact to employees, there must also be consideration of the long-term
consequences of these projects in accordance with the Group’s strategy. The continuation and completion of our Supply Chain Transformation
programme shows a demonstrated commitment and support of the agreed strategy in reducing complexity and enabling sustainable,
profitable growth.
Affected stakeholder groups
Customers and consumers
Our simplification work across the Group supports us to look for opportunities to scale and also strip out unnecessary costs that our
customers and consumers do not value, while working to ensure we do not compromise on quality. We also look for significant improvement in
sustainability credentials relevant to the local market. Increased agility allows us to respond at pace to changing customer and consumer needs.
Employees
The Board carefully scrutinised plans for how to manage impacted employees and challenged management to consider whether employees
could be relocated. A programme of communications activity was put in place to ensure that leaders were visible and in regular dialogue with
impacted colleagues. Where applicable, retention bonuses were offered to maintain operational efficiency, for example, during the gradual
closure of the Thai factory, and relevant career support suited to the role. Where relevant we also notify other colleagues in the Group about
changes being made, so that they understand why they are happening and can ask questions.
Investors
Our investors want improved financial performance and a plan for long-term, sustainable growth. The annualised benefits arising from
activities in the Supply Chain Transformation programme were an important part of the decision-making process. Reallocation of Capex
(capital expenditure) will also go into strengthening supply chains and brand investment.
Distributors and suppliers
In connection with all aspects of our Supply Chain Transformation programme, a comprehensive plan to migrate production volumes to
third-party sources closer to end markets was mapped out and planned. The outsourcing of our soap finishing operations is a further step
in the simplification of supply chains, driving efficiencies across markets and significant improvement in sustainability credentials and lower
end-to-end supply chain costs.
Community
An assessment is always made of any impact to a community most local to our sites as part of the programme. In the decision to announce
the closure of our Thai operations, the announcement was timed to avoid local holidays and to minimise community impacts.
The environmental impact
Delivery of our sustainability ambitions are central to all Supply Chain activities and decisions. By way of example, the planned closure of our
Thai soap factory will see shortened manufacturing lead times and reduce freight usage.
The impact on our reputation and the need to act fairly
The continuation and implementation of the pillars within our Supply Chain Transformation programme demonstrate the strength of our
commitment to our strategy and our values.
Overview 47
Principal decision 2: Appointment of the new Chair
As a result of Caroline Silver stepping down as Chair following completion of her 9 years of service to the Board, a selection process was
commenced to appoint a successor. We welcomed David Tyler as Non-Executive Director in November 2022, and subsequently as Chair in
March 2023. For full details of the appointment process see the Nomination Committee Report on page 90.
In making the decision, we considered:
The long-term effect
In setting the criteria for selection of the new Chair, the Board considered the skills and attributes that would be necessary to deliver our
long-term strategy and to preserve our culture and values.
Affected stakeholder groups
Employees
The Chair is the head of governance for the Group. David’s wide experience ensures he is an exceptional role model for the Board and the
workforce as a whole, his appointment as Chair of the Parker Review on ethnic diversity being testament to that fact. The Parker Review is a
Government-backed independent body which sets targets to improve ethnic diversity of UK Boards and senior management teams in order to
enhance the effectiveness of business and to reflect better the ethnic diversity of the UK population as a whole.
Investors
The Chair represents the Board as a whole and is often the face of communication for investors. The Chair manages Board meetings to ensure
the effective implementation of the Group’s strategy for the long-term benefit of its stakeholders. David has strong experience acting as Chair
including for J Sainsbury plc, Logica plc, Hammerson plc, Domestic & General Group, 3i Quoted Private Equity Plc, and the White Company.
He has also been a Non-Executive Director at Experian plc, Burberry Group plc and Reckitt Benckiser Group plc.
Customers and consumers/distributors and suppliers
The Chair leads the Board, sets its agenda and ensures there is effective leadership at the head of the Group to implement its strategy for the
benefit of all its stakeholders of which customers and consumers are key. David has nearly 50 years of commercial experience which included
large operational responsibilities in his executive career.
Community
The Chair is responsible for the governance of the organisation and with that role will set the tone on all environmental and social issues.
The environmental impact
The Board is vital in ensuring both the long-term sustainable success of the business and ensuring that we continue to focus on improving our
environmental and social impacts to deliver better results for all our stakeholders. As head of the Board, we have chosen a Chair whose passion
for sustainability aligns with our own.
The impact on our reputation and the need to act fairly
The Chair is often seen as the spokesperson for the Group and it was imperative in this position that we found a Chair with a strong history
of executive and non-executive appointments and who understood the listed company environment and was respected in the industry and
therefore able to continue to protect the reputation of the Group and to ensure that the Board acted fairly in all instances.
Strategic ReportGovernanceFinancial Statements 48
PZ Cussons plc / Annual Report and Accounts 2023
Section 172(1) Statement continued
Principal decision 3: Launch of Morning Fresh auto dishwashing tablets
FY23 marked a significant move into an adjacent kitchen segment in ANZ and was a key area of debate and planning for the Board. We
were delighted to be able to take Morning Fresh (Australia’s number 1 dishwashing liquid brand) beyond the sink as part of a broader
strategy to continue the brand’s strong growth and longevity.
In deciding whether to enter the auto dishwashing tablet market, we considered:
The long-term effect
Extending and establishing ourselves in adjacent kitchen segments that are in strong growth is part of our broader strategy for sustainable
profitable revenue growth.
Affected stakeholder groups
Customers and consumers
Morning Fresh is a loved and trusted brand known for outstanding cleaning performance. Extensive consumer research confirmed that
consumers wanted and desired an auto dishwashing tablet product from Morning Fresh. The Board specifically challenged management
on whether we could deliver a product that performs up to the Morning Fresh standard, as a brand that stands for high performance in its
core offering.
Employees
One of the Board’s considerations in approving the launch was the strength of the team in our ANZ operations and a desire to provide
additional investment to demonstrate continued commitment to the team and the ANZ market.
Investors
Our investors want long-term, sustainable growth. The auto dishwashing category is a high-value category that continues to grow strongly.
Leveraging Morning Fresh’s brand strength and equity in liquid dish care to capture our share of this segment is key to continued growth.
Partners and suppliers
We partner with large retailers to grow our business and theirs. The competitive landscape in Australia for auto dishwashing tablet products
is concentrated, with over 90% of the market dominated by two key competitors. Providing our retail customers with additional choice and
insights will help drive category growth and sales to our mutual benefit.
Community
The ANZ business has a longstanding relationship with Foodbank (Australia’s largest hunger relief charity and critical provider of disaster relief
support). In FY23, we were recognised as an official Foodbank Disaster Relief Partner and Purchasing Partner. The success of Morning Fresh
auto dishwashing tablets enables us to continue our strong support of this important charity.
The environmental impact
Dishwashers are generally more environmentally-friendly and sustainable than hand washing dishes in a sink. In particular, our Morning Fresh
auto dishwashing liquid products contain biodegradable ingredients and are designed so that no pre-rinsing is required. As we continue to
expand and innovate in this space, we will look at furthering sustainability credentials for our Morning Fresh auto dishwashing products.
The Board carefully scrutinised the executive proposal, including challenging the marketing and launch plans, the interests of our key customers
in the retail trade and the sustainability of supply, and ultimately the ability to produce a product that met the needs of our consumers.
Following a thorough debate, the Board was delighted to support the launch.
The impact on our reputation and the need to act fairly
Moving into the auto dishwashing segment demonstrates the strength of our commitments – to our ‘Must Win Brands’ and overarching goal of
sustainable profitable revenue growth.
Overview Strategic Report
Governance
Financial Statements
49
Key Performance Indicators
HOW WE MEASURE
OUR PERFORMANCE.
PERFORMANCE HIGHLIGHTS
We have made further progress against key financial measures against a backdrop of challenging trading conditions.
Revenue
(£million)
£656.3m
2023
2022
2021
Definition
Revenue net of discounts,
rebates and sales taxes
(does not include JV revenue)
Statutory operating profit margin
(%)
£656.3m
£592.8m
£603.3m
9.1%
2023
2022*
2021*
9.1%
11.1%
12.1%
Why we measure
Sustainable revenue growth
is a key strategic ambition
Definition
Operating profit from continuing
operations as a % of revenue
Why we measure
Indicator of the return on sales
prior to financing and taxation costs
Adjusted basic earnings per share
from continuing operations1 (p)
LFL revenue growth2
(%)
11.23p
2023
2022*
2021*
11.23p
12.57p
12.98p
6.1%
2023
2022
2021
2.9%
6.1%
7.1%
Definition
Basic earnings per share from
continuing operations adjusted
for the impact of adjusting items
Why we measure
A key indicator of value
enhancement to shareholders
Definition
Like-for-like (LFL) growth adjusts for
constant currency and excludes the
impact of disposals and acquisitions
Why we measure
To provide an alternative measure
on which to evaluate business
performance, excluding the impact
of foreign currency movements
and M&A
1 Further details on adjusting items are set out in note 3 of the consolidated financial statements.
2 Definitions of key terms are provided in the Glossary on page 222.
* Certain figures for each of the years ended 31 May 2021 and 31 May 2022 have been restated. Refer to note 1(c) of the consolidated financial statements for details.
LFL revenue growth
6.1%
50
PZ Cussons plc / Annual Report and Accounts 2023
Overview
Key Performance Indicators continued
PERFORMANCE HIGHLIGHTS CONTINUED
Adjusted net cash/(debt)1
(£million)
£5.7m
2023
2022
2021
Statutory earnings per share
(p)
£5.7m
£(9.8)m
£(30.7)m
8.70p
2023
2022*
2021*
8.70p
11.88p
9.94p
Definition
Cash, short-term deposits and
current asset investments, less
bank overdrafts and borrowings
Why we measure
Indicator of the overall debt
position of the Company and
a way to evaluate the financial
strength of the Group
Definition
Basic earnings per share
from continuing operations
Why we measure
A key indicator of value
enhancement to shareholders
Adjusted operating profit margin2
(%)
Dividend per share
(p)
11.2%
2023
2022*
2021*
11.3%
11.3%
11.6%
6.40p
2023
2022
2021
6.40p
6.40p
6.09p
Definition
Operating profit from continuing
operations before adjusting
items as a % of revenue
Why we measure
Indicator of the return on
sales prior to adjusting items,
financing and taxation costs
Definition
Dividend per share
Why we measure
Dividend growth is a key
performance indicator in terms
of tangible return to shareholders
1 Further details on adjusting items are set out in note 3 of the consolidated financial statements.
2 Definitions of key terms are provided in the Glossary on page 222.
* Certain figures for each of the years ended 31 May 2021 and 31 May 2022 have been restated. Refer to note 1(c) of the consolidated financial statements for details.
Adjusted operating profit margin
11.2%
Strategic Report
Governance
Financial Statements
51
SUSTAINABILITY HIGHLIGHTS
Employee wellbeing score
81%
Read more on page 24
>90%
Suppliers signed our supplier
code of conduct
Read more on page 41
Virgin plastic reduction of
7.8%
Read more on page 30
Free cash flow
£69.9m
Strategic Report 52
PZ Cussons plc / Annual Report and Accounts 2023
Financial and Operating Review
Final approval of copy needed
GROUP PERFORMANCE
OVERVIEW OF GROUP FINANCIAL PERFORMANCE
We have delivered a solid financial performance in the context
of ongoing external volatility and uncertainty. Input cost inflation
remained high for much of the year, with approximately £80
million of total inflation over the last three years, and consumer
spending remained under pressure in most of our markets.
Against this backdrop, we have managed to broadly maintain our
adjusted operating profit margin in FY23, as higher gross profits
were invested behind strategic capabilities and Brand Investment.
Revenue grew 10.7%. This was driven by LFL revenue growth of
6.1% (£36.9 million), which reflected price/mix growth of 12.1%
and volume declines of 6.0%. Childs Farm, which was acquired in
March 2022, contributed £10.9 million to revenue growth, and
translational FX movements, reflecting a weakening of sterling
against most reporting currencies, contributed £15.7 million.
We saw growth in most of our Must Win Brands, with Carex,
Sanctuary Spa and Cussons Baby declining during the year.
LFL revenue growth in the fourth quarter of the year was 6.7%,
driven by an 11.2% improvement in price/mix and a 4.5% decline
in volume.
Adjusted operating profit margin declined by 10bps as a
combination of successful innovation, RGM activity and
productivity initiatives drove a gross profit margin increase of
80bps, funding investment in capabilities. Adjusted EPS declined
by 10.7% as 12.6% growth in adjusted profit before tax was
more than offset by an increased tax charge and an increased
non-controlling interest, each reflecting the growth in operating
profit in our Nigerian business. On a statutory basis, the operating
margin declined 200bps due to the increased investment in
transformation costs and the impairment of Sanctuary Spa (see
note 3), leading to a decline in EPS from continuing operations
of 26.8%.
Cash flow remained strong, with free cash flow of £69.9 million
(FY22: £58.0 million) primarily driven by improved working
capital. Our adjusted net cash was £5.7 million. This includes
cash of approximately £200 million within Nigerian entities which
has been built up as a result of the challenges in repatriating
cash outside of the country . The Board have recommended a
final dividend of 3.73p, which is unchanged on the prior year,
reflecting the material adverse impact the devaluation of the
Naira is expected to have on the near-term reported financial
performance.
In preparing the Group financial statements for the year ended
31 May 2023, management identified prior year adjustments
relating to accounting for impairment on capitalised software
in 2020 and the acquisition of Childs Farm. These adjustments
result in a £0.6 million increase in total assets and a £0.6 million
reduction in profit for FY22. Further information on the nature
of these items is provided in note 1.
1 Based on the 31 May 2023 balance sheet NGN/GBP rate of NGN577.
Overview Final approval of copy needed
53
PERFORMANCE
BY GEOGRAPHY
EUROPE AND THE AMERICAS (31.4% OF FY23 GROUP REVENUE)
£m, unless otherwise
stated
Revenue
LFL revenue growth
Adjusted operating
profit
Margin
Operating profit
Margin
Reported
growth/
(decline) (%)
6.6%
n/a
(16.3)%
(390)bps
(98.3)%
FY22
193.0
(12.3)%
35.0
18.1%
22.9
11.9%
(1,170)bps
FY23
205.8
(0.5)%
29.3
14.2%
0.4
0.2%
Revenue grew 6.6%, driven by £10.9 million revenue contribution
from the acquisition of Childs Farm and favourable foreign
exchange movements, more than offsetting a 0.5% LFL decline in
revenue, which was driven principally by a decline in Carex. LFL
revenue growth improved materially in the second half of the year,
reflecting price/mix action taken earlier in the year and improved
volume trends in most of the brands.
The UK washing and bathing category – the largest category in
Europe and the Americas – declined in value terms by 3%2 in
the year as consumers sought to reduce spending against high
inflation and squeezed household budgets. Within the category,
the hand hygiene and bath segments were down, while we saw
good growth in shower and bar soap.
Reflecting these underlying trends, Sanctuary Spa saw revenue
decline as the re-staging of the brand fell below our expectations.
Carex hand sanitiser volumes fell significantly, but revenue trends
improved in the second half of the year.
We saw very strong, volume-driven revenue growth in Original
Source as it took share in the shower category. This performance
was driven by its successful ‘360’ marketing throughout the year,
incorporating digital and out-of-home activity, building on the
success of last year’s TV campaign and funded by increased overall
Brand Investment. Following the successful re-staging of Imperial
Leather, together with the launch of our new value brand Cussons
Creations, the two brands combined grew revenue compared
to Imperial Leather alone last year and represents the first year
of growth for the brand in a number of years, with gains in both
market share and distribution points.
Total St. Tropez revenue grew strongly, driven by significant share
gains in the US following a launch of the Luxe Serum innovation in
February, supported by our brand ambassador Ashley Graham and
which created a wider halo effect for the brand in the second half
of the year. The US also continued to benefit from the distribution
gains made during FY22. Trading in the UK was, however, more
challenging.
2 Aggregated IRI and Kantar data for the 52 weeks ended 10 June 2023
3 Nielsen data 12 months to 15.06.23
4 Nielsen data 12 months to 15.06.23
Childs Farm revenue grew 12% in the first full year of our
ownership. This has been driven by a renewed focus on the
brand proposition, innovation such as SlumberTime and
increased distribution in the UK, which has increased by
over 20% since acquisition.
Following a significant decline in the first half of the year, the
adjusted operating profit margin improved in the second half of
the year, resulting in a decline of 390bps for the year as a whole.
This reflected the full-period effect of price/mix actions taken in
the first half of the year, lower levels of cost inflation and more
normalised Brand Investment. The margin was also lower as a
result of the contribution of Childs Farm which, reflecting its
investment phase, was slightly loss-making during the year.
On a statutory basis, the operating profit margin declined by
1,170bps primarily as a result of the Sanctuary Spa impairment.
ASIA PACIFIC (29.1% OF FY23 GROUP REVENUE)
£m, unless otherwise
stated
Revenue
LFL revenue growth
Adjusted operating
profit
Margin
Operating profit
Margin
FY23
190.7
4.4%
27.5
14.4%
29.6
15.5%
Reported
growth/
(decline) (%)
9.7%
n/a
31.6%
240bps
(20.0)%
(580)bps
FY22
173.8
3.0%
20.9
12.0%
37.0
21.3%
Revenue grew 9.7% as a result of LFL growth of 4.4% and
favourable movements in foreign exchange. LFL revenue growth
was driven by double-digit price/mix improvements.
In Hygiene, Morning Fresh extended its leadership position in
hand dishwash in Australia with a value market share remaining
around 50% due to continued investment in brand equity and
innovation3. During the year, we launched Morning Fresh into
the auto dishwash category and successfully secured distribution
in the two largest grocery retailers which together comprise
approximately 80% of the market. Early market share data has
been favourable and we are building plans for further marketing
activity over the coming months. Radiant, a Portfolio Brand, also
increased its market share with very strong growth in both volume
and price/mix, with strong growth from innovation with a new
capsules product.
Rafferty’s Garden revenue grew double-digits with price/mix and
volume increases. The brand increased its value market share
by nearly two percentage points in the year, remaining the clear
market leader in the category4.
Strategic ReportGovernanceFinancial Statements 54
PZ Cussons plc / Annual Report and Accounts 2023
Financial and Operating Review continued
Final approval of copy needed
Cussons Baby Indonesia declined as consumers reduced spending
on certain discretionary items, given the squeeze on household
budgets resulting from the government’s lifting of fuel subsidies
in August 2022. Revenue performance became more challenging
throughout the year as lower consumer demand resulted in
gradual de-stocking. Competition from local players intensified
throughout the year, while we elected to continue our focus on
growing the higher margin baby toiletry sub-categories such as
oils, lotions and creams.
The planned reduction in low-margin, by-product sales to third
parties reduced APAC revenue growth by approximately one
percentage point.
Adjusted operating margin grew by 240bps, reflecting strong
price/mix growth and careful cost containment across the
business. On a statutory basis, margins declined by 580bps
due to the non-recurrence of profit on disposal of five:am and
compensation received from the Australian Competition &
Consumer Commission relating to a historical legal claim.
AFRICA (39.1% OF FY23 GROUP REVENUE)
£m, unless otherwise
stated
Revenue
LFL revenue growth
Adjusted operating
profit
Margin
Operating profit
Margin
FY23
256.3
13.4%
37.2
14.5%
48.3
18.8%
FY22
222.0
22.3%
22.3
10.0%
28.6
12.9%
Reported
growth (%)
15.5%
n/a
66.8%
450bps
68.9%
590bps
Revenue grew 15.5%, primarily due to LFL growth of 13.4%. LFL
revenue was driven by price/mix improvements of over 20%, with
several waves of price increases throughout the year, reflecting
the inflationary environment in Nigeria and Ghana. FX movements
supported overall revenue growth, reflecting the stronger Naira
for most of the year.
Across the Nigerian portfolio, we have continued to benefit
from the transformation of our Route to Market approach in
recent years. We have sought to optimise the SKUs by region and
channel, and over the past year have increased by nearly 50%
the number of stores served directly or through our distributors.
Each of our major brands reported double-digit LFL revenue
growth. Premier and Joy each saw good growth due to innovation,
with their ‘Black’ variants – with natural, African ingredients and
strong links to heritage – performing particularly well. Flamingo,
an important Portfolio Brand in Kenya, also grew strongly following
a re-launch, with revenue up over 50%.
Cussons Baby grew strongly, as we continue to recruit new parents
through our programmes within hospitals, through growth in the
rapidly growing baby store channel and due to several innovations
in the wipes portfolio.
Our electricals business revenue grew over 10% on an LFL basis,
contributing revenue of £105.4 million. Gross margins improved
as we continued to prioritise growth in profitability over growth in
volumes. As a Portfolio Brand, we reduced our Brand Investment
in the electricals business in the year and plan to reduce this
further in FY24 to fund higher-priority brands in core categories.
Adjusted operating profit margin grew by 450bps, representing
a third consecutive year of continued profit improvement. This
was achieved through successful price/mix improvements and
a continued focus on optimising product mix despite strong
cost inflation. On a statutory basis, the operating profit margin
increased by 590bps due to the gains on property disposals.
Other financial items
Adjusted operating profit
Adjusted operating profit for the Group was £73.3 million, which
compares to £67.1 million in the prior period (as restated). The
adjusted operating profit margin decreased by 10bps to 11.2%.
Excluding Childs Farm, the margin would have improved compared
to the prior year.
The gross profit margin increased by 80bps to 39.2%. This
reflects the benefits of productivity initiatives and price/mix
improvements, which more than offset underlying inflation in
input costs, as well as an adverse geographic mix effect, which
is the result of our lower margin business in Africa growing more
strongly than the wider Group. Brand Investment increased
in FY23 but decreased as a percentage of revenue by 20bps,
reflecting a planned normalisation of the investment in Carex.
Overheads increased by 100ps as a percentage of revenue as we
continue to invest in capabilities. PZ Wilmar, our joint venture,
performed strongly and contributed £7.5 million to operating
profit.
Adjusting items
Adjusting items in the year totalled a net expense of £12.3 million
before tax. This included a net £2.9 million expense associated
with our ongoing transformation programmes and a £16.5 million
impairment charge of the Sanctuary Spa brand offset by a £4.2
million reversal of a prior period impairment of the Rafferty’s
Garden brand. See note 3 for further details on adjusting items.
After accounting for these adjusting items, operating profit
decreased 9.3% to £59.7 million.
Net finance costs
Adjusted net finance income was £0.8 million, compared to a cost
of £1.3 million in the prior year, as higher interest income on Naira
cash deposits more than offset an increase in interest payable on
largely-UK borrowings.
Within finance income was £1.3 million for the reduction in the
deferred consideration liability for the Childs Farm acquisition,
which was classified as an adjusting item.
Overview Final approval of copy needed
55
Taxation
Foreign exchange
The tax charge on adjusted profit before tax for the year was
£20.1 million, representing an effective tax rate of 27.1%
(FY22: 19.5%). The increase in the effective tax rate was primarily
due to the mix of profits, with Africa and Australia, each with
higher tax rates, growing faster than the wider Group. The tax
charge on statutory profit before tax was £15.4 million.
Profit after tax
Statutory profit for the year from continuing operations was
£46.4 million, compared to £51.4 million in the prior year.
Adjusted basic earnings per share were 11.23p compared to
12.57p in the prior year. This represents a decline of 10.7%
due primarily to the higher tax charge and the increase in
non-controlling interests, each the result of the improved
profitability in Nigeria. Basic earnings per share for continuing
operations on a statutory basis were 8.70p compared to 11.88p.
Balance sheet and cash flow
Adjusted net cash as of 31 May 2023 was £5.7 million (FY22:
adjusted net debt of £9.8 million), including cash and cash
equivalents of just over £200 million denominated in Nigerian
Naira5. The increase was driven principally by cash generated from
operations of £76.6 million, £14.4 million proceeds received from
the disposal of non-core assets in Nigeria, £11.8 million of interest
received on principally Naira-denominated deposits offset by
£29.4 million of dividends paid and a £19.3 million adverse foreign
exchange movement. Net assets of £422.1 million compared to
£448.9 million in the prior period as a result of the increase in
currency translation reserve and reduction in retained earnings.
The Group is funded by a £325 million credit facility, which was
refinanced during the year with a term of up to 2028. As at 31
May 2023, the Group had drawn £125 million of the term loan
under the facility and £127 million under the revolving credit
facility, for a total of £252 million. At 31 May 2022, drawings were
under the previous credit facility and amounted to £174 million.
Total free cash flow was £69.9 million (FY22: £58.0 million) due
to an improvement in cash generated from operations, driven
by higher operating profit and reduced working capital.
Dividend
In light of the recent devaluation of the Naira, which is expected to
adversely affect the Group’s financial results in FY24, the Board is
recommending a final dividend of 3.73 pence which is unchanged
on the previous year. This represents a total dividend for FY23 of
6.40p. Subject to approval at the AGM, which will be held on 23
November 2023, the final dividend will be paid on 30 November
2023 to shareholders on the register at the close of business on
3 November 2023.
The general weakening of Sterling against our other currencies
resulted in a £15.7 million uplift to FY23 revenue, as set out below.
% of FY23
revenue
27%
35%
14%
11%
7%
6%
100%
GBP
NGN
AUD
IDR
USD
Other
Total6
Average FX rates
FY22
1.00
558
1.84
19,331
1.35
–
–
FY23
1.00
536
1.78
18,174
1.20
–
–
Revenue
impact
(£m)
–
8.0
2.7
4.7
4.2
(3.9)
15.7
Impact of Naira devaluation and FY24 modelling considerations
We made an announcement on 27 June 2023 regarding impact
of the Naira devaluation which took place in June. To provide a
further illustration of this matter, we calculate that if our profits
in the year to 31 May 2023 had been translated to Sterling at the
average rate between July and August 2023 as opposed to the
average rate for FY23, the Group’s adjusted operating profit
would have been £14.7 million lower, as detailed below.
£m, unless
otherwise stated
Group adjusted
operating profit
Group cash and
equivalents
Africa revenue
Africa adjusted
operating profit
At reported
FX rates
As at
July/August
average rates7
Difference
73.3
58.6
(14.7)
256.4
256.3
174.6
153.6
(81.8)
(102.7)
37.2
22.5
(14.7)
In addition, the following effects of the devaluation of the Naira
are also expected:
• Group net interest charge in FY24 is likely to be higher,
reflecting lower levels of interest earned in Nigeria.
• The Group’s ETR and non-controlling interest in FY24 are,
all else being equal, expected to be lower.
The recently announced offer to buy out our Nigerian entity
minorities and de-list the business there, which is subject to
approval by shareholders in the Nigerian listed entity, is expected
to benefit the Group from FY25 onwards. The transaction is
expected to provide strategic and operational benefits, as well
as being earnings accretive as a result of the reduction in the
non-controlling interest.
Further guidance on these items will be provided in due course.
5 Based on the balance sheet NGN/GBP rate of NGN577
6 Table shows the impact of translating FY22 revenue at FY23 foreign exchange rates
7 Tables shows only the translational impact of the devaluation of the Naira
Strategic ReportGovernanceFinancial Statements 56
PZ Cussons plc / Annual Report and Accounts 2023
Financial and Operating Review continued
Final approval of copy needed
ALTERNATIVE PERFORMANCE MEASURES
The Group’s business performance is assessed using a number of Alternative Performance Measures (APMs). These APMs include
adjusted profitability measures where results are presented excluding separately disclosed items (referred to as adjusting items) as we
believe this provides both management and investors with useful additional information about the Group’s performance and supports
a more effective comparison of the Group’s financial performance from one period to the next.
Adjusted profitability measures are reconciled to IFRS results on the face of the consolidated income statement with details of adjusting
items provided in note 3 to the consolidated financial statements. Reconciliations between APMs and IFRS reported results are set
out below:
Adjusted operating profit and adjusted operating margin
2023
£m
2022
(restated*)
£m
Group
Operating profit from continuing operations
exclude: adjusting items
Adjusted operating profit
Revenue
Operating margin
Adjusted operating margin
By segment
Europe & the Americas:
Operating profit from continuing operations
exclude: adjusting items
Adjusted operating profit
Revenue
Operating margin
Adjusted operating margin
Asia Pacific:
Operating profit from continuing operations
exclude: adjusting items
Adjusted operating profit
Revenue
Operating margin
Adjusted operating margin
Africa:
Operating profit from continuing operations
exclude: adjusting items
Adjusted operating profit
Revenue
Operating margin
Adjusted operating margin
Central
Operating loss from continuing operations
exclude: adjusting items
Adjusted operating loss
* Certain figures for the year ended 31 May 2022 have been restated. Refer to note 1(c) of the Group consolidated financial statements for details.
59.7
13.6
73.3
656.3
9.1%
11.2%
0.4
28.9
29.3
205.8
0.2%
14.2%
29.6
(2.1)
27.5
190.7
15.5%
14.4%
48.3
(11.1)
37.2
256.3
18.8%
14.5%
(18.6)
(2.1)
(20.7)
65.8
1.3
67.1
592.8
11.1%
11.3%
22.9
12.1
35.0
193.0
11.9%
18.1%
37.0
(16.1)
20.9
173.8
21.3%
12.0%
28.6
(6.3)
22.3
222.0
12.9%
10.0%
(22.7)
11.6
(11.1)
Overview Final approval of copy needed
57
As at
31 May 2023
£m
As at
31 May 2022
£m
127.4
129.0
–
256.4
0.5
105.8
58.0
(0.1)
163.7
0.5
(251.2)
(174.0)
5.7
(9.8)
2023
£m
76.6
(6.7)
69.9
2022
£m
66.2
(8.2)
58.0
Adjusted profit before taxation
Adjusted net debt
Profit before taxation from
continuing operations
exclude: adjusting items
Adjusted profit before taxation
2023
£m
61.8
12.3
74.1
2022
(restated*)
£m
64.5
1.3
65.8
*
Certain figures for each of the year ended 31 May 2022 have been restated. Refer to
note 1(c) of the Group consolidated financial statements for details.
Cash at bank and in hand
Short-term deposits
Overdrafts
Cash and cash equivalents
Current asset investments
Non-current borrowings
Adjusted Earnings Before Interest Depreciation and
Amortisation (‘Adjusted EBITDA’)
Adjusted net cash/(debt) and
cash equivalents
Profit before taxation from
continuing operations
(deduct)/add back: net finance
(income)/costs
add back: depreciation
add back: amortisation
add back: impairment and
impairment reversal
exclude: adjusting items**
Adjusted EBITDA
Adjusted earnings per share
For continuing and discontinued
operations
Basic earnings per share
exclude: adjusting items
Adjusted basic earnings per share
Diluted earnings per share
exclude: adjusting items
Adjusted diluted earnings per share
From continuing operations
Basic earnings per share
exclude: adjusting items
Adjusted basic earnings per share
Diluted earnings per share
exclude: adjusting items
Adjusted diluted earnings per share
2023
£m
61.8
(2.1)
12.1
7.0
12.3
91.1
1.3
92.4
2022
(restated*)
£m
Free cash flow
Cash generated from operations
deduct: purchase of property,
plant and equipment and software
Free cash flow
64.5
1.3
12.8
7.4
9.0
95.0
(7.7)
87.3
2023
pence
2022
(restated*)
pence
8.70
2.53
11.23
8.67
2.52
11.19
8.70
2.53
11.23
8.67
2.52
11.19
11.45
0.69
12.14
11.38
0.69
12.07
11.88
0.69
12.57
11.81
0.69
12.50
*
Certain figures for the year ended 31 May 2022 have been restated. Refer to note 1(c)
of the Group consolidated financial statements for details.
** Excludes adjusting items relating to depreciation, amortisation, impairments and
impairment reversals.
Strategic ReportGovernanceFinancial Statements 58
PZ Cussons plc / Annual Report and Accounts 2023
Risk Management and Principal Risks
HOW WE
MANAGE RISK.
RISK CULTURE
At PZ Cussons, we are focused on conducting our business responsibly, safely and legally while making risk-informed decisions when
responding to opportunities or threats that present themselves.
As an international business, we face risks and uncertainties as we deliver our strategy across our priority markets. By effectively
managing risks and identifying opportunities, we enhance our ability to achieve our strategic objectives successfully.
Each principal risk is owned by a member of the ELT. The Group
Internal Audit Function provides independent assurance to both
the ELT and the Audit & Risk Committee on the effectiveness of
the risk management framework and internal control systems.
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 joint venture agreements.
However, the Group believes its agreements are sufficiently
robust and its partners are aligned with its approach to risk.
The Group’s risk management processes are designed to manage
rather than eliminate risks. They provide reasonable, but not
absolute, assurance against material misstatement or loss.
GOVERNANCE AND OVERSIGHT
The Board is responsible for setting our risk appetite and
for ensuring an effective risk management framework is in
operation. It discharges this responsibility to the Audit & Risk
Committee. The Board periodically reviews the top risks across
the Group. The Audit & Risk Committee (see pages 96 to 101 for
further information) reviews specific risks in more detail. Other
committees may also review risks that are relevant to their area
of responsibility.
At market level, business unit leadership teams are responsible for
applying the Group risk management framework. They also ensure
that risk information is relevant and accurate. If necessary, they
report risk information to the Audit & Risk Committee for review.
At Group level, the Executive Leadership Team (ELT) periodically
reviews risk registers. They use a top-down and bottom-up
approach to ensure that significant strategic and operational risks
are identified. They also ensure that all principal and emerging
risks are assessed. In addition, they may perform ‘deep dive’
reviews of specific principal risks to ensure that controls are
adequately resourced and that exposure remains within the
defined risk appetite parameters (see ‘Risk Appetite’ section
for further information).
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 INTERNAL AUDIT
& RISK DIRECTOR
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.
Overview 59
OUR RISK MANAGEMENT METHODOLOGY
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 our strategic objectives. Our risk management processes include:
Over the course of FY22, the Board reviewed the effectiveness of the risk management framework and methodology. While acknowledging
an improvement over the previous processes, the Board noted that risk management could be better integrated into the overall business
planning and management functions. In Q3 FY23, the Group has appointed a new Internal Audit & Risk Director and a Head of Group
Risk. A process has begun to review and update the risk management framework and methodology.
The results and status of those
risk actions are monitored by the
Risk Team, regional and business
management and second line
assurance functions.
The status of risk actions is
reported frequently to the
Audit & Risk Committee.
Actions are implemented by
regional and business unit
management.
The 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, and the extent to
which the risk can be mitigated
or controlled.
Mitigating actions are
then planned, agreed and
communicated to the relevant risk
owners throughout the Group.
RISK APPETITE
The Board is committed to managing risk in a way that is aligned with our vision and culture. We are aware of the many risks that
our business faces and we have a process in place to identify, assess and mitigate these risks.
We have a very low risk appetite for risks that could damage our reputation or business opportunities. These include risks related to:
• Product safety and quality
• Health and safety
• Cybersecurity and data protection
• Legal compliance
• Climate change
• Environmental and regulatory compliance.
We also have a relatively low risk appetite for risks related to our supply chain and finance functions. We seek to minimise
counterparty credit risk exposure, ensure the resilience of our supply chain and avoid unhealthy levels of financial leverage
or complex tax planning structures.
However, we have a higher appetite for risks that are associated with growth and potential higher returns. These include:
• Our focus on innovation and new product development
• Our involvement in emerging markets
• M&A activity
• Our ambitious sustainability targets.
We seek to mitigate our risk exposure to within target levels through a variety of means including insurance cover, planning and
control processes, and natural portfolio hedges such as the diversity of our brand and product ranges and global footprint.
Strategic ReportGovernanceFinancial Statements
60
PZ Cussons plc / Annual Report and Accounts 2023
Risk Management and Principal Risks continued
EMERGING RISK
New and emerging risks are identified in a number of ways as illustrated in the diagram below.
We believe that our approach to identifying new and emerging risks is comprehensive and effective. By taking a variety of approaches, we
are able to identify risks that may not be immediately obvious and to take steps to mitigate them before they cause harm to our business.
We track emerging risk themes across politics, economics, technology, environment and talent through the processes described below.
Discussions with
external advisers:
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 Group is also a member of
various trade and industry bodies
across the world and leverages
the experience of its peers and
external industry experts.
Awareness of emerging
macro trends:
Our in-house Risk Management
Function ensures we are aware of
emerging macro trends and risks
associated with our industry and
geographical footprint.
Reporting to the Board:
Potential new and emerging risks
are reported to the Board and
considered during its periodic
reviews of Group risks.
Considering principal risks:
In formulating and evolving the
Group risk register, the ELT and the
Board consider the principal risks
identified by individual markets
and functions to determine
whether there are any new risks
which require Group-wide focus
and mitigation.
Assessing emerging risks:
At its annual strategy session, the
Board assesses any emerging risks
(or opportunities) which should be
considered when formulating and
executing strategy in the future.
LOOKING AHEAD
In FY23 we have invested in our risk management capability with the appointment of our new Group Internal Audit & Risk Director
as well as a Head of Group Risk. Over the course of FY24 they will look to improve our risk management framework, conduct risk
management training and workshops across the Group, enhance periodic and structured reporting of risk at Executive Leadership
Team, Audit & Risk Committee and Board level and work to further instil a risk aware culture to ensure risk is a key part of our
strategic decision-making going forward.
Overview 61
OUR PRINCIPAL RISKS
The most significant risks – those that could affect our strategic
ambitions, future performance, viability, and/or reputation –
form our principal risks. The table sets out our principal risks.
This includes a summary of key information, including the type
of risk, links to our strategic drivers and residual risk movement.
Please note, this list does not include all our risks. Other risks,
not presently known, or those we currently consider to be less
material, may also have adverse effects.
In previous years we have disclosed principal risk movements on
an inherent level; they are now disclosed on a residual basis in
order to reflect the risk profile of the Group more accurately.
We have removed pandemic from our list of principal risks
following the WHO (World Health Organisation) declaration that
Covid-19 is no longer a global health emergency, alongside the
fact we have not seen this risk impact our strategic objectives
outside of the interconnectivity to the inflationary environment
and cost-of-living crises. We will continue to monitor pandemic
risk through our internal risk management framework and
emerging risk processes.
We have added two new principal risks, ‘Consumer and Customer
Trends’ and ‘Market and Economic Disruption including Emerging
Markets.’ These two risks replace the previously disclosed
‘Consumer, Customer and Economic Trends’ principal risk as our
view is that these risks are evaluated and managed in materially
diverse ways and as such should be disclosed separately.
Those risks that we believe are currently most prominent or increasing are:
IT and Information Security:
Business Transformation:
At an inherent level, we continue to see increasing 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.
However, at a residual level, we believe our IT processes and controls
are appropriate to mitigate current IT security risk. However, we are
investing further in this area through addressing improvements to IT
General Controls as part of our multi year Controls Transformation
programme. We are also positioned to respond to changes to cyber
threats, the increased regulatory focus on data security, along with
recent geo-political developments.
As we continue to transform our business, there is a risk that we
do not achieve the aims and goals of our various transformative
programmes we have in place. As we embark on ambitious plans
to enhance our consumer offering, improve our technological
capability and simplify our business, we see this risk increasing
due to the competitive market for talent across key niche areas
such as e-commerce. We manage this risk via our transformation
governance structures, Executive Leadership Team ownership
of key transformation programmes and engagement of
external experts.
Legal and Regulatory Compliance:
Consumer and Customer Trends:
Increased cost pressures throughout our value chain are leading to
an increase in the inherent risk of contractual claims and litigation
from our counterparties, particularly in markets that we see as key
drivers of growth and business development. We manage this risk
via our extensive internal and external experts, Global Procurement
Team and in-house risk management expertise.
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 reducing costs where possible
without impacting the consumer experience and by building strong
brands that can maintain strong margins.
Financial Controls (Foreign Exchange, Treasury and Tax):
Market and Economic Disruption including Emerging Markets:
As an international group we are naturally exposed to foreign
exchange risk. Shortly after the end of our financial year, the value
of the Nigerian currency dropped materially. This has emphasised
the extent of this risk. With significant operations in Africa, we are
also materially exposed to specific treasury and tax risks, such as
the issue of currency availability and changing tax regulations. We
manage these risks through our stringent governance and oversight
processes, defined and clear financial, treasury and tax policies and
our experienced in-house expertise.
The ongoing after-effects of globally transformative events seen
around the world, alongside ongoing geopolitical and economic
volatility across emerging markets, such as Nigeria and Indonesia,
that we serve, continue to represent a risk to our business. We
manage this risk by ensuring our product portfolio and market
strategy are sufficiently diversified, establishing forward contracts
where possible and continuing to simplify our business.
Strategic ReportGovernanceFinancial Statements 62
PZ Cussons plc / Annual Report and Accounts 2023
Risk Management and Principal Risks continued
RISK 1: IT AND INFORMATION SECURITY
Trend:
Link to Strategy:
Description of risk:
How we manage the 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.
Ongoing global instability and uncertainty have
increased the inherent risk of cyberattacks which
could impact the security of personal data we
hold as well as business-critical information and
also the automated systems we use across our
supply chain.
Additionally, the increasing use of generative AI
is a source of new and adaptive cybersecurity
threats and introduces additional risks associated
with data breaches.
• A centrally governed IT function continually monitors known and emerging threats
that may impact us.
• An industry-approved cybersecurity control framework has been deployed and
external reviews of this framework have been conducted, evidencing its effectiveness.
• We have developed and delivered a comprehensive information security awareness
programme to ensure both business and personal information remain protected.
• Critical data is backed up regularly in accordance with our control framework and
recovery testing is undertaken.
• Throughout FY23, we have further improved and invested in our relationships with
best-in-class operational services and partners, including the appointment of a new
cybersecurity partner.
• We have continued our relationship with the National Cyber Resilience Centre
to ensure we are aware of emerging risks around Cyber Incident Response
(and reactions, including ransom approach), industry insights and approaches
and cyber intelligence.
• We have an IT risk governance framework in place, with risk information reviewed
monthly by the IT Leadership Team, managing the risk profile for the delivery of IT
Services across Cybersecurity, IT Operational Risk, Audit and Compliance and Disaster
Recovery; additionally, we are refreshing our Information Risk Governance Committee
in FY24 to further enhance governance and oversight.
• In FY23, we completed our three-year IT Strategy Transformation Project, which has
simplified our architecture, enhanced third-party support, and levelled up resources
in this area.
• A comprehensive suite of IT policies is in place covering acceptable use, network
security, removable media, information security, IT and third-party security, access
control and many others.
• We are investing further in this area through addressing improvements to IT General
Controls as part of our multi year Controls Transformation programme.
LINK TO STRATEGY
Build Brands
Develop People
Serve Consumers
Grow Sustainably
Reduce Complexity
TREND
Increased
No change
Decreased
New
Overview
63
RISK 2: TALENT DEVELOPMENT AND RETENTION
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
We recognise that to deliver sustained, profitable
growth we require the best talent. We are
focused on attracting, developing and retaining a
diverse range of skilled people with the potential
to deliver our ambitious growth agenda.
The competition for top talent remains high,
particularly in Marketing, Digital and E-commerce
which saw accelerated growth through
the pandemic.
Attracting key talent in some regions is
challenging due to market dynamics such as the
trend to emigration of nationals in Nigeria, and
the highly competitive employment markets in
both Indonesia and the UK. But we are not seeing
a significant increase in attrition in these markets.
With continued global uncertainty and the
enduring inflationary impacts of Covid-19, we
also see employee engagement and reward and
wellbeing as continued priorities.
• We continually measure overall engagement and our engagement scores have been
consistent over the last three years, despite a landscape of internal and external
change. 96% of our people completed the survey and we achieved an increased
engagement score of 73%. We have global and local action plans in place to continue
our journey with a focus on the critical drivers that will have the most impact on
overall engagement.
• We continue to have a vibrant and open conversation with our people, through
Group-wide social media, communication platforms and bi-monthly global Town Hall
meetings; these are augmented by weekly team and market ‘Huddles’ and regular
‘PZ Talks’ designed to keep employees informed of key strategic initiatives and goals.
• We have a continued focus on wellbeing, with specific initiatives in our markets aimed
at providing wellness, education and mental health support. We encourage work-life
balance, including on Fridays, when our people are able to finish work at 1pm.
• Our global performance management process helps our people to reach high
performance, grow their skills and experience, and progress their career.
• With the launch of LinkedIn Learning and other externally hosted training platforms,
we have made continuous skills development available to all.
• We manage a regular cycle of talent and succession planning for our senior leaders
at all levels of the business. Using our Workday platform we have visibility of the
experience, potential and aspiration of our people; unlocking our ability to identify
and move talent around PZ Cussons. We have also assessed the risk to and impact of
retention of our future leaders and critical talent. Delivering our succession plans has
led to two internal promotions to Executive Leadership Team level – both being local
nationals, of whom one is female, both acting as role models to talent in our Africa
and Asia businesses.
• FY23 saw the further embedding and operationalising of our people system
(Workday); driving better employee performance management, feedback, talent
management and learning. All employees can see the explicit link between employee
goals, performance, development and reward.
• We continue to offer hybrid and virtual working arrangements across our markets,
which are enabled by the deployment of IT platforms such as Microsoft Teams and
Office 365 as well as ensuring our offices are set up technologically for both home and
office working employees to collaborate. Our Global HQ at Aviator Way in Manchester
recently won the BCO ESG award, having been refurbished in January 2022 to support
hybrid working arrangements.
• Our Board have recently committed to our new DEI strategy, with plans being
developed for FY24 across PZ. We support the 30% Club as well as being committed
to the recommendations of the ‘Parker Review’ – whose chair is David Tyler, our
Non-Executive Chair.
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Risk Management and Principal Risks continued
RISK 3: FINANCIAL CONTROLS (FOREIGN EXCHANGE,
TREASURY AND TAX)
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
Due to its international footprint, PZ Cussons is
exposed to a variety of external financial risks in
relation to Foreign Exchange, Treasury and Tax.
• We maintain an established Group treasury function and our Group treasury policy
defines our non-speculative approach to the management of foreign currency and
other financial market exposures.
• Transactional currency exposures are managed within prescribed limits with
short to medium-term forward exchange contracts taken to reduce our exposure
to fluctuations.
• A Group taxation strategy is in place that defines the way in which we conduct
ourselves with respect to our tax affairs.
• Our in-house Group Tax capability is complemented by the use of specialist tax
consultants to ensure compliance with all local and international tax regulations and
treaties, and to ensure that changes in regulations are taken into consideration as
part of our future business strategy.
• Treasury and tax controls are an important part of our overall financial control
framework, which continues to evolve in order to remain fit for purpose and reflective
of the nature of business risks.
• The Audit & Risk Committee maintains oversight and governance over key treasury
and tax-related risk, including tax and treasury strategy, potential tax obligations and
financial controls.
The relative value of exchange rates can fluctuate
significantly and as a result can have a material
impact on financial performance. In addition,
because PZ Cussons consolidates its financial
statements in GBP, it is subject to exchange
rate risk associated with the translation of
its underlying net assets and earnings of its
foreign subsidiaries.
Given our geographic footprint, we are also
subject to exchange rate controls in some of our
jurisdictions that may impact our ability to access
foreign currency in order to settle intercompany
liabilities that may include the repatriation of
cash to the UK by way of dividend payments.
A material shortfall in our operating cash flow
and/or our ability to access appropriate sources
and levels of funding could undermine our
ongoing business activity and the next stage of
business transformation. In times of financial
crisis, we may not be able to raise funds or
access credit in an appropriate jurisdiction
due to market illiquidity.
We are also exposed to counterparty risks with
banks, suppliers, customers, and other credit
providers which could result in financial losses.
Tax is a complex and ever evolving area where
laws and their interpretation change frequently,
and which may lead to unexpected or new tax
exposures. Equally, as a global group, we are
subject to transfer pricing and other related
policies and regulation, which are also subject to
international and local regulatory changes that
may have an impact on business performance.
LINK TO STRATEGY
Build Brands
Develop People
Serve Consumers
Grow Sustainably
Reduce Complexity
TREND
Increased
No change
Decreased
New
Overview
65
RISK 4: CONSUMER AND CUSTOMER TRENDS
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
Inflationary pressures have continued throughout
this financial year; this has seen increased raw
material costs which has placed significant
pressure on our value proposition at a time when
consumers continue to face a cost-of-living crisis
across our markets.
The risk of competition in the marketplace,
especially in online-only offerings and most
starkly across lower quality, lower priced
products, continues to represent a risk to the
financial performance of the Group as consumers
continually review expenditure on key household
items.
Failure to understand our consumers, manage our
customer relationships and innovate in response
to underlying trends could lead to financial and
reputational loss for the Group.
• We use market research and insights data to monitor our consumers’ needs.
• 2023 has seen the introduction of specialist online-only marketing and sales teams.
• Our continued focus on our Must Win Brands and Must Win Drivers ensures we are
focusing resources in the areas that are most important to our valued consumers.
• We continue to focus on maintaining strong relationships with our existing customers
and developing relationships with new customers via the use of consistent and
regular interaction, targeted customer led campaigns and collaborative planning
and forecasting processes.
• We remain focused on cutting any costs we can from our products that do not impact
the consumer experience or sacrifice performance or quality.
• In FY23, we continued the rollout of our new brand Cussons Creations, targeted at a
more cost focused consumer base and being sold in a variety of discounter retailers.
RISK 5: LEGAL AND REGULATORY COMPLIANCE
Trend:
Link to Strategy:
Description of risk:
How we manage the 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.
As the use of generative AI continues to gather
pace, there is an increased risk of IP infringement
and leakage of confidential information as
employees establish how to use the new tools.
There is also an increased risk that regulations
fail to keep pace with the emerging technologies,
exposing the Group to potential issues.
Alongside this, like all companies, we are exposed
to litigation risk in the markets in which we
operate and must continually remain vigilant
to the risk of financial liability in respect of our
contractual obligations. The use of generative
AI could also see this risk increasing as counter
parties and potential litigants use it to generate
new or additional claims.
• 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.
• We are supported by a network of external experts who can be engaged as required
and help us to horizon scan and identify emerging risks. This is particularly important
in developing countries where changes in the law can be sudden and unpredictable.
• We have a Group-wide Code of Ethical Conduct which employees sign up to and this
is complemented by an annual certification exercise.
• Our Ethics and Compliance Team is now established, led by our Head of Ethics &
Compliance, reporting into the General Counsel, with our ethics & compliance
programme being overseen by the Audit & Risk Committee.
• We have a comprehensive training programme including ethics and compliance and
anti-bribery and corruption.
• A third-party confidential whistle-blowing line is in operation, which gives employees
and contractors the chance to raise issues to be investigated by the Ethics and
Compliance Team.
• In FY23, we strengthened our Risk Management Function with the appointment of a
new Head of Group Risk.
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Risk Management and Principal Risks continued
RISK 6: BUSINESS TRANSFORMATION
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
• Across our transformation programme we have dedicated steering committees, often
chaired by Executive Leadership Team members, including the CEO and CFO and
project delivery teams, who conduct in-depth analysis of progress and make regular
reports to the Board.
• Our dedicated Executive Leadership Team forum tracks the delivery, cost, and
accounting treatment for a number of these transformational projects.
• We have renewed focus on our Must Win Brand targets, progress against which is
tracked continuously via the steering committees and reported to the Board.
• We continue to make progress in our Groupwide Controls Transformation Project,
which will improve the global control framework and ensure the Group is ready for
the BEIS reforms.
The fundamental areas in which we are
transforming the business align with our core
strategic goals:
• Reducing complexity: Simplifying our business
in a way which makes sense
• Building brands: Continuing to identify and
focus on our Must Win Brands
• Serving customers: Evolving how we reach
the consumer
• Growing sustainably: Supporting our
sustainability goals and targets
• Developing people: Enhancing the tools
used to empower and develop our people.
We 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.
RISK 7: MARKET AND ECONOMIC DISRUPTION,
INCLUDING EMERGING MARKETS
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
The ongoing after-effects of globally
transformative events, alongside increasing global
geopolitical and macro-economic instability and
volatility, means that our markets are affected by
cost-of-living crises and market disruption.
Within the markets in which we both operate and
serve consumers, such as Nigeria and Indonesia,
significant political and economic instability has
led to inflationary pressures on our consumers;
alongside this, global trade tensions, increasing
nationalisation of markets and currency market
instability could impact our ability to serve our
global consumers.
Failure to react to changing market conditions
could lead to a material effect on the Group’s
financial performance, market share or
reputational standing.
• We have brands across multiple segments and price points across multiple markets,
which ensures we have sufficient diversification across our product mix to cater for a
wide range of consumers.
• Our Global Procurement Team establishes forward contracts where possible to
mitigate the exposure to instability in raw material commodity prices.
• We have extensive experience operating within emerging markets and use this
experience to manage regionalised instability risks.
• We continue to diversify our production capabilities and have simplified our global
supply chain.
• With both our in-house and external legal expertise, we ensure we are aware of
emerging market-related risks.
• We have a dedicated Group Risk Management Function that reports to the Board
via the Audit & Risk Committee material matters of concern in relation to emerging
market risks.
LINK TO STRATEGY
Build Brands
Develop People
Serve Consumers
Grow Sustainably
Reduce Complexity
TREND
Increased
No change
Decreased
New
Overview
67
RISK 8: HEALTH AND SAFETY
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
The safety of our products is of paramount
importance to the Group; the risk of
contamination, mislabelling or unsafe use of raw
materials could lead to significant reputational
damage and/or financial loss to the Group.
Of equal importance is the health, safety and
wellbeing of our people, including employees,
contractors and visitors. The safety of our
facilities, offices, and the health and safety of our
employees working from home under our hybrid
working model are of the utmost importance.
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 supply chain stages. This applies not only to our own production
facilities but to our third-party manufacturers as well.
• We launched 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 the 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.
• This year we have focused on behavioural health and safety training across our
facilities to support the rollout of the new Health and Safety Policy put in place
in the previous year.
RISK 9: SUSTAINABILITY AND THE ENVIRONMENT
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
The effects of Climate Change represent a
material risk to the business, therefore 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.
One of our key strategic objectives is to grow
sustainably. To that end we have set ourselves
ambitious and science-based sustainability goals;
failure to achieve those targets risks alienating key
stakeholders, including consumers and customers,
who are increasingly focused on environmental
sustainability and transparency in the supply
chain, and damaging the goodwill in our brands,
with consequent limitation of our ability to grow
and create value.
• Our Board appointed Environmental and Social Impact Committee provides
governance and oversight over our sustainability function and activities. Below this,
new working forums have been created, including monthly functional and regional
forums with sustainability champions across different departments and business units.
We have also enhanced our ELT KPI reporting, with a new dashboard created to ensure
key metrics are reported quarterly.
• FY23 saw the continued development and embedding of our Dow Jones and Cedex
supplier risk management tools, as well as the appointment of a new Head of Group
Risk who will continue to enhance and support these activities.
• FY23 saw the creation of our Supplier Sustainability Principles, outlining our key
expectations and requirements, early FY24 will see this rolled out to suppliers.
• In order to drive awareness and relevancy of sustainability to employees’ jobs and
personal lives, we have created a new employee intranet hub outlining our strategic
aims, our programmes alliances and partnerships and general sustainable living
practices and examples for employees in their daily lives.
• We have increased resourcing across the sustainability team to manage the
sustainability programmes and progressing our agenda.
• Our Scope 3 baseline data has been verified by a third-party and is now published
on our website.
• Our publicly available sustainability webpage and human rights principles have been
updated in the year to improve external reporting and enhance transparency.
• More information can be found in our TCFD disclosure on pages 35 to 39.
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Risk Management and Principal Risks continued
RISK 10: SUPPLY CHAIN AND LOGISTICS
Trend:
Link to Strategy:
Description of risk:
How we manage the risk:
Our production and distribution facilities could
be severely impacted by adverse events affecting
the continuity of supply, such as a failure of a
key supplier, a health and safety incident, an
environmental failure, or global events.
• We undertake a rigorous selection process before engaging with new third-party
suppliers and perform ongoing audits and performance monitoring to ensure that
contracted standards are being maintained or exceeded.
• We have continued to embed our third-party risk management solution, which
enables us to foresee emerging third-party-related risks and issues.
Our consumers and customers could be severely
impacted by material increases in input costs of
raw materials, freight and distribution costs and
an inability to supply finished products.
• We use multiple suppliers where possible and have a dedicated Global Procurement
Team who can source alternative suppliers where necessary, complemented by
a quality management team able to appropriately assess potential replacement
products.
Failure to get the product to our consumers or
failing to provide that product at a reasonable
price could have a material effect on business
performance and our reputational standing.
• 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.
• We use our globally recognised logistics partners to ensure we are adequately aware
of specific geopolitical or security risks within the markets in which we operate.
LINK TO STRATEGY
Build Brands
Develop People
Serve Consumers
Grow Sustainably
Reduce Complexity
TREND
Increased
No change
Decreased
New
Overview
69
Viability and Going Concern
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 17 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 consolidated
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 14 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 58 to 68. 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.
In concluding on the financial viability of the Group, having
considered the scenarios referred to above, the Directors have a
reasonable expectation that the Company and the Group will be
able to continue in operation and meet all its liabilities as they fall
due up to May 2027.
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Risk Management and Principal Risks continued
Bottom-up scenarios
Each of the principal risks identified has been assessed for its potential financial impact as part of the viability assessment. Of these, the
most severe but plausible scenarios were identified as follows:
Scenario modelled
Link to Principal Risks
Mitigation
1. CONSUMER, CUSTOMER, ECONOMIC
Consumers impacted by high inflationary environment with
inability to pass through cost inflation, down trading to
value brands and increased competition – 5% year-on-year
reduction in revenue in Beauty, UK and Indonesia markets;
reduction in gross margin percentage compared to base case
by 250bps in the same markets.
4. Consumer and customer
trends
7. Market and economic
disruption, including
emerging markets
Competitive landscape leading to higher promotional and
M&C spend – M&C spend percentage increased by 5ppt
above base case.
Nigeria impact (general economic & political uncertainty)
– Naira devaluation and/or reduced overall profit – apply
recent experienced devaluation across duration of plan.
2. TALENT DEVELOPMENT
Revenue reduction and negative margin impact (i.e. worse
performing team) – 3% reduction in revenue year-on-year
compared to base case considered to reflect the gradual
impact of talent retention in all markets; reduction in gross
margin percentage compared to base case by 5ppts.
Increased recruitment fees and replacement value – increase
in employee costs in line with latest available inflation data.
3. IT/INFORMATION SECURITY AND FINANCIAL CONTROLS
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
recent years.
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
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.
Business continuity (cyber attack scenario) – short term
business closer, etc – loss of one month of revenue in FY24.
1. IT and information
security
Sufficient committed credit facilities
headroom maintained and tight cost control.
Reputation, reduced revenue – no revenue growth for the
duration of the plan from FY24 onwards.
Fines (i.e. regulatory) – one-off charge of approx. £25 million
as result of GDPR regulation breach in FY25, based on penalty
regime currently in place.
3. Financial controls
(Foreign Exchange,
Treasury and Tax)
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.
4. CLIMATE/ENVIRONMENT
Regulatory environment, e.g. taxes/levies – Plastics Tax and
similar regulatory impacts reduce profitability by £6 million
per year.
9. Sustainability and
the environment
Increasing the proportion of PCR plastic in
the Group’s products to avoid tax on virgin
plastics.
Consumer choice, e.g. revenue impacts – year-on-year
revenue growth reduced by 1ppt compared base case across
all commercial markets.
Lost production, e.g. factory loss from flooding – Loss of 3
months of revenue in Indonesia.
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.
5. CASH REPATRIATION
Inability to repatriate cash back to the UK due to local
market illiquidity – no cash repatriated to the UK from Nigeria
through the plan period.
3. Financial controls
(Foreign Exchange,
Treasury and Tax)
Sufficient committed credit facilities
headroom maintained and tight cost control.
Overview 71
For the viability assessment, management considered the
availability of committed credit facilities through the viability
period. During the year, the Group agreed a new £325 million
committed credit facility which incorporates a term loan and a
revolving credit facility, and the Board is confident that during the
period it will be able to exercise the options available to extend
the facility, and to replace the term loan facility which matures
during the viability period at the same level if required.
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.
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 from the current level, and
the Board does not believe this scenario to be plausible. In such
an event, 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.
Strategic ReportGovernanceFinancial Statements 72
PZ Cussons plc / Annual Report and Accounts 2023
Overview
GOVERNANCE
Strategic Report
Governance
Financial Statements
73
Our Executive Leadership Team
Chair’s Introduction to Governance
Board Activity at a Glance
74 Our Board
76
78
80
82 Corporate Governance Statement 2023
90
Nomination Committee Report
Audit and Risk Committee Report
96
102 Environmental and Social Impact Committee Report
104 Remuneration Committee Report
110 Remuneration Policy
119 Report on the Directors’ Remuneration
132 Report of the Directors
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.
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.
74
PZ Cussons plc / Annual Report and Accounts 2023
Our Board
A DIVERSE AND
EXPERIENCED BOARD.
GENDER DIVERSITY
Male
Female
62.5%
37.5%
David Tyler N
Non-Executive Chair
Jonathan Myers E
Chief Executive Officer
Sarah Pollard
Chief Financial Officer
TENURE
0–3 years
4–7 years
62.5%
37.5%
John Nicolson A N
Senior Independent Director
Kirsty Bashforth R D E N
Non-Executive Director
Jeremy Townsend A N
Non-Executive Director
ETHNIC BACKGROUND
White British
or Other White
Asian/Asian British 12.5%
87.5%
All figures are as at the date of this report.
Jitesh Sodha A N R
Non-Executive Director
Valeria Juarez E N R
Non-Executive Director
Committees
Other
Audit & Risk Committee
Remuneration Committee
Nomination Committee
Environmental and Social
Impact Committee
Chair
Director with responsibility
for representing the
employee voice and
employee engagement
Executive
Overview 75
Directors’ core areas of expertise
UK institutional shareholders
Recent financial experience
Remuneration experience
Chair skills
Mentoring and coaching skills
5
Sector experience
Retail experience
Africa experience
M&A, strategic partnerships
M&A integration
South-East Asia and ANZ experience
Business transformation
Entrepreneurial experience
Operational experience
Strategy
E-commerce
Sales and marketing
David Tyler
Non-Executive Chair
Appointed: 2022
Jonathan Myers
Chief Executive Officer
Appointed: 2020*
Sarah Pollard
Chief Financial Officer
Appointed: 2021*
Skills & experience: David Tyler joined the PZ
Cussons Board as a Non-Executive Director in
2022, becoming Chair in March 2023. His business
experience spans the consumer, retail, business
services and financial services sectors. His executive
career (1974 to 2006) was spent in financial and
general management at Unilever, NatWest, Christie’s
and GUS. Since 2007, he has had a non-executive
career, chairing Sainsbury’s, Logica, Hammerson,
3i Quoted Private Equity, the White Company,
Imagr and Hampstead Theatre. He has also been
a Non-Executive Director at Experian, Burberry,
Reckitt Benckiser and Rubix. David currently chairs
Domestic & General, JoJo Maman Bébé and the
Government-backed Parker Review on ethnic
diversity in UK business.
Other appointments:
• Director and Chair of Domestic & General Limited
• Director and Chair of JoJo Maman Bébé Ltd.
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, he was Chief Operating Officer at Avon
Products Inc, with overall responsibility for supply
chain, marketing, digital, research and development
and IT functions and was a core member of the
executive team delivering a successful turnaround
of the business. He spent the first 21 years of his
career at Procter & Gamble, working across a wide
range of categories with extensive experience in
developed and developing markets, progressing to
general manager, oral care and feminine care for
the Greater China Region. He has also held senior
leadership positions at the Kellogg Company, serving
as managing director, UK and Ireland and also vice
president, European markets.
Skills & experience: Sarah joined PZ Cussons
from Nomad Foods, Europe’s leading frozen food
company, where she served as Deputy Chief
Financial Officer. Prior to that, she was Chief
Financial Officer for their Birds Eye business.
Sarah is a chartered management accountant,
having qualified with PricewaterhouseCoopers,
and subsequently worked in investment banking,
specifically in mergers and acquisitions at Deutsche
Bank. Prior to Nomad Foods, Sarah held a number
of senior finance positions at Diageo, Tesco
and Unilever. She has worked in commercial,
operational and corporate finance roles including
investor relations and so brings with her a deep
understanding of creating shareholder value in the
consumer goods sector.
John Nicolson
Senior Independent Director
Appointed: 2016
Kirsty Bashforth
Non-Executive Director
Appointed: 2019
Jeremy Townsend
Non-Executive Director
Appointed: 2020
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.
Skills & experience: Kirsty is an experienced
remuneration committee chair and assumed this
role on the Board from 1 July 2020. In her executive
career of more than 30 years, she has most recently
been Chief Business Officer at Diaverum AB (2020
to 2023), and before that, spent 24 years at BP plc in
senior executive positions, including group head of
organisational effectiveness and leading the strategic
coordination of the company’s global B2B business.
Kirsty advises CEOs on change, organisational
culture and leadership through her own QuayFive
consultancy and also chairs the Corporate
Responsibility committee at Serco Group plc.
Other appointments:
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
& risk committee. Jeremy is also Chief Financial Officer
at Marks and Spencer Group plc.
Other appointments:
• Non-Executive Director of NHS England
(formerly NHS Improvement until 30 June 2022)
• Non-Executive Director of Serco Group plc.
• Chief Financial Officer of Marks and Spencer
Group plc.
Jitesh Sodha
Non-Executive Director
Appointed: 2021
Valeria Juarez
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.
Other appointments:
• Chief Financial Officer of Spire Healthcare
Group plc.
Skills & experience: Valeria is an international
business leader with a focus on digital, brand
building and business transformation. Over the
last 27 years, she has worked for both developed
and emerging markets at Ralph Lauren, Amazon,
Diageo, Boston Consulting Group and Procter &
Gamble. She has extensive experience of general
management, digital, strategy, commercial,
innovation and marketing covering branded
consumer goods, fashion and online retailing. She
has been most recently the SVP of digital commerce
for Ralph Lauren International.
*
All Directors were independent on appointment except
for Jonathan Myers and Sarah Pollard.
GovernanceFinancial StatementsStrategic Report 76
PZ Cussons plc / Annual Report and Accounts 2023
Our Executive Leadership Team
A STRENGTHENED EXECUTIVE
LEADERSHIP TEAM.
Jonathan Myers
Chief Executive Officer
Sarah Pollard
Chief Financial Officer
Cath Bailey
Chief People Officer
Andrew Geoghegan
Chief Marketing
Transformation Officer
Appointed to current role: 2020
Appointed to current role: 2021
Appointed to current role: 2023
Appointed to current role: 2021
Joanna Gluzman
Chief Sustainability Officer
Jawaz Illavia
Chief Information Officer
Dimitris Kostianis
Transformation Leader, and Chief
Executive Officer of PZ Cussons
Nigeria Plc
Ningcy Yuliana
Managing Director of PZ Cussons
Indonesia
Appointed to current role: 2021
Appointed to current role: 2023
Appointed to current role: 2023
Appointed to current role: 2023
Overview
77
Oghale Elueni
Managing Director – Africa
Consumer Business
Tracey Mann
Managing Director – Beauty
Kevin Massie
General Counsel and Company
Secretary
Steve Noble
Chief Supply Chain Officer
Appointed to current role: 2023
Appointed to current role: 2022
Appointed to current role: 2020
Appointed to current role: 2021
Alastair Smith
Alastair Smith, Managing
Director – ANZ
Robert Spence
Managing Director – UK
Paul Yocum
Managing Director – Business
Development
Appointed to current role: 2022
Appointed to current role: 2022
Appointed to current role: 2022
GovernanceFinancial StatementsStrategic Report
78
PZ Cussons plc / Annual Report and Accounts 2023
Chair’s Introduction to Governance
“ Strong and effective governance is key to our success.
As I commence my tenure as Chair, I am very encouraged
to see both the strategic progress made in our business
in recent years and the strengthened governance
environment which underpins all that we do.”
BOARD COMMITTEES
Our Board Committees have focused on key activities under
their remit.
• The Audit & Risk Committee led a tender process which
has led to the recommendation to shareholders that
PricewaterhouseCoopers LLP (PwC) be appointed as our Group
auditors for the FY24 audit year. In addition they monitored
and scrutinised progress against our multi year controls
improvement journey and set our priorities for further
work in this area for FY24.
• The Remuneration Committee has concluded a detailed review
of the Directors’ Remuneration Policy and made proposals for
the new Remuneration Policy following a process of shareholder
engagement and consultation.
• The Environmental and Social Impact Committee has made
good progress steering our sustainability journey and further
setting and clarifying its scope.
• The Nomination Committee led the orderly succession planning
and process for my appointment as Chair.
DEAR SHAREHOLDER
I am pleased to present this Governance Report for the year
on behalf of the Board, my first as Chair. I express my thanks to
Caroline Silver, my predecessor, for leading the governance of the
Group expertly during her period as Chair.
This has been a busy year for the Board with significant progress
being made to build a simpler and more sustainable business
despite the challenges in our markets as discussed in the Strategic
Report. I would like to thank all of my Board colleagues for their
commitment, and support.
I draw attention as follows to key areas of focus for the Board
during the year and priorities for the next 12 months.
BOARD EFFECTIVENESS
Good governance is key to the performance of listed companies
and the Board is highly conscious that its own effectiveness
is central to this. This year, we have concluded an externally
facilitated review of the effectiveness of the Board and its
Committees. This exercise confirmed that the Board and its
Committees are operating effectively and some great opportunities
were identified to improve further. These opportunities are
captured in the FY24 Board priorities on page 94. I can confirm
that each Director’s performance continues to be effective,
demonstrating a high level of commitment to their roles. For more
on this, see the Nomination Committee Report on page 90.
BOARD COMPOSITION AND SUCCESSION PLANNING
The Board is composed of a Non-Executive Chair, Chief Executive
Officer, Chief Financial Officer and five independent Non-Executive
Directors. We intend to focus more this year on succession
planning for the Board and particularly for the Executive Leadership
Team. More details of changes in the last year and plans for
the future are set out in the Nomination Committee Report on
page 90.
Overview 79
2023 FOCUS AREAS.
Chair
succession
Board
evaluation
Strategy
delivery
Audit
tender
Remuneration
policy
Nigeria
simplification
OUTLOOK
The Board is responsible for setting the right tone from the top
and maintaining high standards of corporate governance. During
the next year, we plan to agree the Group’s DEI strategy and
refresh succession planning for key Board and Executive roles.
We will also continue to focus on our sustainability strategy.
THE ANNUAL GENERAL MEETING
Our Annual General Meeting (AGM) this year, will be hosted at
the Company’s offices, Manchester Business Park, 3500 Aviator
Way, Manchester, M22 5TG on 23 November 2023. Together with
my fellow Directors, I look forward to meeting shareholders at
our AGM. We will welcome your feedback on that occasion and,
indeed, at any time in the year.
David Tyler
Non-Executive Chair
26 September 2023
DIVERSITY, EQUITY AND INCLUSION
Diversity, Equity and Inclusion (DEI) is a key priority for the Board
given its impact on the culture of the organisation and the quality
of management’s decision-taking. We plan to carry out a Maturity
Assessment of DEI in the coming year, to enable us to benchmark
our position. Thereafter, a new DEI strategy will be developed
for the review of the Board and this will be set out in our 2024
Annual Report.
For all of us, the issue of diversity is a priority. We believe in
creating a business environment where everyone from every
background can thrive and feel welcome. The Board has an
Inclusion and Diversity Policy for Board and Executive Leadership
Team (ELT) appointments which is available in full on the
Company’s website. Personally, I have been very active in this
area as co-Chair, and now Chair, of the Government-backed
Parker Review on ethnic diversity in UK business. I believe that
enhancing the ethnic diversity of a business will both improve its
competitive position and provide fair opportunities for members
of every community.
STAKEHOLDER ENGAGEMENT
The Board regularly engages with shareholders to help inform
strategic decision-making and to understand their views.
Throughout the year, the Board received updates on shareholders,
including their feedback and key areas of focus and views.
Stakeholder feedback is critical to the Board, influencing its
decision-making. The Chair of the Board and each of the
Committees is available to shareholders for discussion and actively
seek opportunities to engage, whether in person at the AGM or
other shareholder engagement events, or through our Investor
Relations team reaching out to key shareholders proactively
offering meetings on relevant topics. For more on dialogue with
our stakeholders, see page 43.
For more details see our Audit & Risk Committee Report / Pages 96 to 101
For more details see our Remuneration Committee Report / Pages 104 to 109
For more details see our Environmental and Social Impact Committee Report / Pages 102 to 103
For more details see our Nomination Committee Report / Pages 90 to 95
GovernanceFinancial StatementsStrategic Report 80
PZ Cussons plc / Annual Report and Accounts 2023
Board Activity at a Glance
In addition to the standing items considered by the Board, the matters set out below were considered and approved.
STRATEGY
Board matters discussed
2022 Strategy day
• Supply chain transformation
• Organic growth
• M&A ambitions
• Capital allocation
• Digital strategy
• Sustainability
• Organisational design
Stakeholders affected
Link to strategic objectives
• Customers/Consumers
• Investors
• Communities – Environment
• Suppliers
Development of KPI dashboard
• Investors
Talent development as key strategy
• Employees
Ownership of ESG
• Communities – Environment
• Investors
Employee engagement including survey results and action plan
and personalised ‘thank you’ notes
• Employees
OPERATIONS
Board matters discussed
International market reviews
Business development, market transformation and innovation
Function review – Legal, Governance and Compliance
Stakeholders affected
Link to strategic objectives
• Investors
• Customers
• Suppliers
• Investors
• Employees
• Suppliers
• Employees
Launch of UK graduate and intern programme
• Employees
Strategic
objectives
Build Brands
Serve Consumers
Reduce Complexity
Develop People
Grow Sustainably
Overview
81
Stakeholders affected
Link to strategic objectives
• Investors
• Employees
• Investors
• Employees
• Investors
• Investors
• Employees
• Community
• Employees
• Investors
• Investors
• Investors
Stakeholders affected
Link to strategic objectives
FINANCE
Board matters discussed
Market reviews and pricing strategies
Results reporting, including Annual Report and Accounts
Dividend payments
Principal and emerging risks
Budget approval
Group tax strategy
Audit tender
GOVERNANCE
Board matters discussed
Appointment of the new Chair and Board composition
• Employees
• Investors
Shareholder communications including Annual General Meeting
• Investors
Governance disclosures including Modern Slavery Statement
Board and Committees evaluation
Review of Board policies
Board reserved matters
Statement of Board responsibilities
Terms of Reference
• Employees
• Community
• Customers/Consumers
• Investors
• Communities – Environment
• Suppliers
• Investors
For more on our Strategy / Page 18
For more on our Section 172(1) statement / Page 43
GovernanceFinancial StatementsStrategic Report
82
PZ Cussons plc / Annual Report and Accounts 2023
Corporate Governance Statement 2023
This Corporate Governance Statement as required by the UK Financial Conduct Authority’s Disclosure Guidance and Transparency Rules
7.2 (DTR 7.2), together with the rest of the Corporate Governance Report and the Committee Reports, forms part of the Report of the
Directors and has been prepared in accordance with the principles of the Financial Reporting Council’s UK Corporate Governance Code
2018 (the 2018 Code). A copy of the 2018 Code can be found on the Financial Reporting Council’s website: www.frc.org.uk.
Additional requirements under the DTR 7.2 are covered in greater detail throughout the Annual Report for which we provide reference
as follows:
The Group’s Risk management and internal control are found on page 58
Information with regards to share capital is presented in the Report of the Directors from page 132
Information on Board and Committee composition can be found on page 74
Information on Board diversity including the Board Inclusion and Diversity Policy can be found on page 92
The Company’s obligation is to state whether it has complied with the relevant principles and provisions of the 2018 Code, or to explain
why it has not done so up to the date of this Annual Report. The Company has complied with the principles and provisions of the 2018
Code during the financial year ending 31 May 2023.
BOARD LEADERSHIP AND COMPANY PURPOSE
The following pages will outline how the Company complies with the principles and provisions of the 2018 Code. Where supporting
information is found outside of this Governance Report or in addition to this Governance Report, the page reference is given in the
table below.
Code Principle and Description
Annual Report and Accounts
Reference
A Effective Board
• Nomination Committee Report
Purpose, strategy, values and culture
• Strategic Report
See page 90
See page 8
Prudent and effective controls
and Board resources
• Strategic Report – managing risk
See page 58
B
C
D Stakeholder engagement
• Creating a dialogue with our stakeholders
See page 43
E
Workforce policies and practices
• Non-Financial Information and Sustainability Statement
• Audit & Risk Committee Report
See pages 42 and 96
Effective Board
The Board understands that its 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 14 and 18 of the Strategic Report and describes the basis upon which the
Company generates and preserves value over the long-term.
The Company is led by an effective and entrepreneurial Board, whose role is to promote the long-term sustainable success of the
Company, thereby generating value for investors and contributing to wider society.
A Board evaluation was carried out in April and May 2023 by external evaluators Board Clic, working with Alison Purdue Associates and
Board Intelligence. For more on this see the Nomination Committee Report on pages 90 to 95.
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.
Board development and training
The Chair is responsible for leading the development, and monitoring the effective implementation, of training policies and procedures
for the Directors. On appointment, each Director receives a formal and tailored induction. There is also a programme of ongoing training
for Directors. The Directors are committed to their own ongoing professional development and the Chair discusses training with each
Non-Executive Director at least annually. The Board undertakes a cycle of training on relevant corporate governance matters and matters
relevant to operational and strategic objectives. Training is typically provided by the Company’s external advisers.
Overview 83
Stakeholder engagement
We recognise the importance of clear communication and proactive engagement with all of our stakeholders. During the year under
review, the Board used various engagement channels to receive valuable feedback from our key stakeholders.
For more details see our Section 172(1) Statement Creating a dialogue with our stakeholders on page 43
STATEMENT OF ENGAGEMENT WITH EMPLOYEES
The Board recognises that employee engagement is the responsibility of the whole Board and that our employees are our biggest asset. In
the last financial year, the Board approved a plan 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.
In line with the 2018 Code, Dariusz Kucz was our Designated Non-Executive Director for workforce engagement in the year. Kirsty Bashforth
took over this role from him after he stepped down from the Board on 14 September 2023 and she now has responsibility for ensuring
that the Board engages effectively with our workforce.
Core themes for the year have been:
• Strategy, including new purpose, culture and values
• Executive Director remuneration and its alignment with broader workforce remuneration policies
• Employee safety and wellbeing
• Learning and careers
• Diversity and inclusion.
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 market visits by Non-Executive Directors, 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 Company purpose.
Designated Non-Executive Director for workforce engagement
Engagement methods
• Attended a number of sessions on different platforms, ranging from global Town Halls to smaller group sessions
• Attended engagement events in Lagos on BEST values roll-out via video conference
• A number of engagements were held with Beauty team members where we had seen lower engagement scores.
Workforce concerns
• Inflation
• Reward and cost-of-living challenges
• Reducing carbon footprint.
STATEMENT OF ENGAGEMENT WITH OTHER BUSINESS RELATIONSHIPS
The Directors have regard for the need to foster the Company’s business relationships with suppliers, customers and others, and the
effect of that regard, including on the principal decisions taken by the Company during the financial year.
This statement should be read in conjunction with our Section 172(1) Statement and Creating a dialogue with our stakeholders on
page 43, the Non-Financial Information and Sustainability Statement on page 42 and Board principal decisions on page 46.
GovernanceFinancial StatementsStrategic Report 84
PZ Cussons plc / Annual Report and Accounts 2023
Corporate Governance Statement 2023 continued
DIVISION OF RESPONSIBILITIES
Code Principle and Description
Annual Report and Accounts
Reference
F Board roles
• Our Board
See page 74
G
Independence
• Our Board
• Nomination Committee Report
H External commitments
• Our Board
I
Board efficiency: Key Board activities
• Section 172(1) Statement
See pages 74 and 90
See page 74
See page 43
Board roles
The responsibilities of the Chair, Chief Executive Officer, Senior Independent Director and Board and Board Committees are clear, set out
in writing and regularly reviewed by the Board. There is a clear division between the Executive and Non-Executive responsibilities.
Role
Responsibilities
Chair of the Board
David Tyler
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 and
• Promoting high standards of integrity and corporate governance throughout the Group, particularly at
Board level.
Chief Executive Officer
Jonathan Myers
The Chief Executive Officer 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.
Specific responsibilities include:
• 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 (ELT)
• 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 ELT 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
• Championing the Group’s values and behaviours.
Chief Financial Officer
Sarah Pollard
The Chief Financial Officer’s specific responsibilities include:
• Implementing the Group’s financial strategy, including balance sheet management and capital allocation
• Supporting the Chief Executive Officer in the delivery of the Group’s strategy and financial performance
• Overseeing financial reporting and internal controls.
Overview 85
Role
Responsibilities
Senior Independent
Non-Executive Director
John Nicolson
The Senior Independent Non-Executive Director’s specific 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 and
• 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 Officer.
Non-Executive Directors
The Non-Executive Directors’ specific responsibilities include:
• Contributing to the development of the Group’s strategy
• Promoting and supporting the Group’s values and commitment to high standards of corporate governance and
• Reviewing, oversight and constructive challenge of the ELT on the delivery of the Company’s objectives
and strategy.
GOVERNANCE FRAMEWORK
The Board recognises that a good governance structure is not static but allows the Group to grow and develop.
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 budget, 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.
GovernanceFinancial StatementsStrategic Report 86
PZ Cussons plc / Annual Report and Accounts 2023
Corporate Governance Statement 2023 continued
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.
THE BOARD DELEGATES RESPONSIBILITY FOR CERTAIN MATTERS TO ITS PRINCIPAL COMMITTEES*
Audit & Risk Committee
Nomination Committee
Ensuring that the
structure, size and
composition of the
Board and the ELT are
best suited to deliver
the Company’s strategy
and meet current and
future needs.
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.
Remuneration
Committee
Environmental and Social
Impact Committee
Reviewing and
recommending the
framework and policy
for remuneration of the
Executive Directors and
senior executives.
Approving the Group’s
ESG strategy and
performance targets,
monitoring performance
by the Group against its
ESG strategy and how
the Group engages with
key stakeholders.
THE EXECUTIVE LEADERSHIP TEAM (ELT)
The Board has delegated responsibility for the delivery of the Group’s strategy and the day-to-day operational
performance of the business to the Executive Directors who work closely with the wider ELT to deliver this strategy.
BALANCE OF INDEPENDENCE
The Board currently comprises five 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.
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.
*
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.
Overview 87
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 the Directors spend
considerably more than this amount of time on Board and Committee activity.
BOARD MEETING 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. The following table sets out the attendance of Directors at the scheduled Board
meetings held during the year. Attendance is shown as the number of meetings attended by every Director eligible to attend. Attendance
at Committee meetings is shown in the tables at the beginning of each Committee report.
Board members
David Tyler1
Caroline Silver2
Jonathan Myers
Sarah Pollard
John Nicolson
Kirsty Bashforth
Dariusz Kucz3
Jeremy Townsend
Jitesh Sodha
Valeria Juarez
1 Appointed as a Director on 24 November 2022.
2 Stepped down as a Director on 23 March 2023.
3 Stepped down as a Director on 14 September 2023.
Member since
Meetings attended
2022
2014
2020
2021
2016
2019
2018
2020
2021
2021
4/4
6/6
7/7
7/7
7/7
7/7
7/7
7/7
7/7
7/7
BOARD ACTIVITY
During the year, the Board held six scheduled meetings and a Board strategy day. A rolling agenda and forward calendar have 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 Officer and to provide comments.
In line with the annual rolling agenda, the Board considered a number of topics on a regular basis. These included:
• Executive reports, including operational and financial performance, market summaries, health and safety and other matters
• Strategy and strategic projects
• Reports from each Board Committee following Committee meetings
• Reports from the Board’s Designated Non-Executive Director for workforce engagement
• Market reviews by regional leads
• Function reviews
• Governance, compliance and legal matters.
Private meetings of the Non-Executive Directors are also held on a regular basis at the conclusion of Board meetings.
GovernanceFinancial StatementsStrategic Report 88
PZ Cussons plc / Annual Report and Accounts 2023
Corporate Governance Statement 2023 continued
BOARD COMPOSITION, SUCCESSION AND EVALUATION
The following pages will outline how the Company complies with the principles and provisions of the 2018 Code. Where supporting
information is found outside of this Governance Report, the page reference is given in the table below.
Code Principle and Description
Annual Report and Accounts
J Appointments to the Board
• Our Board
K
Board composition
• Board skills and experience
• Succession
• Our Board
• Nomination Committee Report
See page
• See page 74
• See page 74
• See page 90
L External commitments
• Nomination Committee Report
• See page 90
Appointments to the Board
David Tyler succeeded Caroline Silver as Non-Executive Chair of the Board on 23 March 2023. Caroline retired from the Board having
served as Chair for six years and as a Board Director since April 2014. David also chairs the Nomination Committee.
See the Nomination Committee Report on page 93 for a detailed breakdown of this appointment process
Skills, experience and knowledge
Our Board is a diverse and effective team, focused on promoting the long-term success of the Group for the benefit of all stakeholders.
For more details see Our Board on page 74 for:
– Directors’ core areas of expertise
– Gender diversity
– Ethnic background
– Independence
– Tenure
– External appointments
Overview
89
AUDIT, RISK AND INTERNAL CONTROL
The following pages will outline how the Company complies with the principles and provisions of the 2018 Code. Where supporting
information is found outside of this Governance Report, the page reference is given in the table below.
Code Principle and Description
Annual Report and Accounts
See page
M Effectiveness of External Auditor and
• Audit & Risk Committee Report
• See page 96
internal audit and integrity of accounts
N
Fair, balanced and understandable
assessment of Company’s prospects
• Audit & Risk Committee Report
• Report of the Directors
O
Internal financial controls
and risk management
• Audit & Risk Committee Report
• Risk Management
• See page 96
• See page 132
• See page 96
• See page 58
The Board’s objective is to give shareholders a fair, balanced and understandable assessment of the Group’s position and prospects for
the business model and strategy and it has responsibility for preparing the Annual Report and Accounts. The Board is also responsible
for maintaining adequate accounting records and seeks to ensure compliance with statutory and regulatory obligations. You can find
an explanation from the Directors about their responsibility for preparing the financial statements in the Statement of Directors’
responsibilities in the Report of the Directors.
For more details see:
– Financial reporting page 101
– Significant financial judgements page 99
– Internal financial controls pages 96 to 101
– Assurance over external reporting pages 140 to 150
– Internal and external audit pages 96 to 101
– External audit tender page 98
– Risk management pages 58 to 71
– Business continuity and disaster recovery page 62
– Cyber security page 62
– Report on the Directors’ Remuneration page 119
REMUNERATION
The Code provides that remuneration policies and practices must be designed to support strategy and promote long-term sustainable
success. The Board delegates responsibility to the Remuneration Committee, comprised of exclusively independent Non-Executive
Directors, to ensure that there are formal and transparent procedures for developing policy for the remuneration of Executive Directors
and senior management and application of policy.
Code Principle and Description
Annual Report and Accounts
See page
P
Linking remuneration purpose
and strategy
• Remuneration Committee Report
• Remuneration Policy
• See page 104
• See page 110
Q
A formal and transparent procedure
for developing policy
• Remuneration Policy
• See page 114
R
Independent judgement and discretion
• Remuneration Committee Report
• See pages 107, 111 to 114, 115, 117,
122, 129
The Remuneration Committee Report sets out the proposed new Directors’ Remuneration Policy, which is subject to a binding vote at our
2023 Annual General Meeting, how the current Directors’ Remuneration Policy was applied throughout FY23 and how the proposed new
Policy will be applied during FY24.
GovernanceFinancial StatementsStrategic Report
90
PZ Cussons plc / Annual Report and Accounts 2023
Nomination Committee Report
THIS YEAR THE COMMITTEE HAS
LED THE PROCESS FOR CHAIR
SUCCESSION AND REVIEWING THE
EFFECTIVENESS OF THE BOARD.
DEAR SHAREHOLDERS,
As Chair of the Nomination Committee, I am pleased to present
its report for the year ended 31 May 2023. Caroline Silver
was Chair of the Committee during the great majority of the
period under review. I present this report on her behalf and we
thank Caroline for her leadership of this Committee until her
departure and my appointment as Chair in March of this year.
During the year, the Committee focused much of its time on
Board succession planning and particularly on the search for and,
ultimately, appointment of myself as the new Chair of the Board
and of this Committee. That process was led by John Nicolson as
Senior Independent Director and his summary of the process itself
is set out on page 93.
Consideration has been given to tenure of Board members and
potential future Board retirements, and the impact of these on
membership of the Board and its Committees. Ongoing succession
planning will be a key focus for 2024 for the Board, its Committees
and the Executive Leadership Team (ELT).
Committee membership and attendance
Committee members
Member since
Attendance
David Tyler1
Caroline Silver2
John Nicolson
Kirsty Bashforth
Dariusz Kucz3
Jeremy Townsend*
Jitesh Sodha*
Valeria Juarez*
2022
2014
2016
2019
2018
2023
2023
2023
1/1
3/3
3/3
3/3
3/3
–
–
–
1
Appointed as Chair of the Committee with effect from 23 March 2023.
2 Stepped down as a Director on 23 March 2023.
3 Stepped down as a Director on 14 September 2023.
* Appointed to the Committee on 19 June 2023.
ACTIVITIES OF THE COMMITTEE DURING THE YEAR
• Recruitment process and appointment of the new Chair
• Induction of David Tyler as Chair of the Company
• 2023 Board and Committees external evaluation
• Reviewed the Board and Committee membership and
composition (including diversity).
Overview 91
Committee role
Priorities for 2024
• Regularly review the leadership and succession needs
• Review talent and succession plans
of the business
• Regularly review the structure, size and composition
of the Board and its Committees
• 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
• Ensure diverse pipeline for succession.
• Conduct an internal Board evaluation
• Ensure that the appropriate mix of knowledge, skills, experience,
and diversity is maintained on the Board and the ELT
• To approve formal succession plans for the Board, its Committees
and senior management.
Detailed responsibilities are set out in the Committee’s Terms of Reference,
which can be found on the Company’s website www.pzcussons.com
BOARD COMMITTEE MEMBERSHIP
Immediately after the completion of the Board evaluation, I
held one-to-one meetings with every Board member about the
conclusions of it. In particular, these discussions brought the
considerations of the Nomination Committee to a conclusion
on the composition of each Board Committee, with the aim
of ensuring all of them have the relevant members and skills.
The membership of the Committees of the Board changed with
effect from 19 June 2023. The up-to-date memberships of each
Committee can be seen on page 74 in the Board section of
this report.
The Nomination Committee will now include as members, all
Non-Executive Directors and will continue to be chaired by me.
The Audit & Risk Committee and the Remuneration Committee
have three members and they continue to be chaired by Jeremy
Townsend and Kirsty Bashforth respectively.
The Environmental and Social Impact Committee will take
responsibility for environmental and social issues. Responsibility
for governance issues will revert directly to the Board. Its new
Chair will be Valeria Juarez and Kirsty Bashforth will serve on
that Committee.
The designated Non-Executive Director for employee engagement
following the resignation of Dariuscz Kucz will be Kirsty Bashforth.
HOW THE COMMITTEE OPERATES
The Committee meets a minimum of twice a year and more
frequently as necessary. During the year, the Committee met
formally three times.
Only members of the Committee are entitled to attend the
meetings. Other individuals, such as the Chief Executive Officer,
Chief People Officer and external advisers, may be invited to
attend 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 Code) and are available on the
Company’s website at www.pzcussons.com.
BOARD MEMBERSHIP
On 14 June 2023, Dariusz Kucz informed the Company that he
would step down from the Board with effect from 14 September
2023. The Nomination Committee has no immediate intention to
replace him but will consider future structure in the light of the
Board evaluation and other future developments.
The Committee approved a recommendation to the Board that
Jeremy Townsend be reappointed as a Non-Executive Director
with effect from 1 April 2023, his first three-year term expiring
on 31 March 2023.
As part of an exercise to align terms of appointment, for example,
in relation to notice periods, the Committee approved the
amendment and restatement of the Letters of Appointment for
Non-Executive Directors John Nicolson, Kirsty Bashforth, Dariusz
Kucz, Jitesh Sodha and Valeria Juarez.
GovernanceFinancial StatementsStrategic Report 92
PZ Cussons plc / Annual Report and Accounts 2023
Nomination Committee Report continued
Our Board meets the target set by the Parker Review on
ethnic diversity by having one Director from a minority ethnic
background. It also meets the FTSE Women Leaders Review
target for one senior position to be held by a woman. We will
bear in mind, when making future appointments to the Board,
that we have a modest shortfall against the target for female
representation: 37.5% versus 40%, which can largely be attributed
to the relatively small size of our Board which magnifies the
impact of a single change.
When evaluating candidates, the Company seeks to make
decisions based on merit and objective criteria as well as the
needs of the Board and ELT, having due regard to the benefits of
all types of diversity, including 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 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. Prior listed board
experience is not a requirement for every appointment.
SUCCESSION PLANNING
The Committee will ensure that enhancing the Board’s skills,
succession planning and diversity remain on its agenda.
Succession planning has been discussed and written succession
plans will be on the Committee’s agenda during the current year.
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. The balance of Directors
(excluding the Chair) was two Executive Directors and five
independent Non-Executive Directors on the date of this report.
The Board complies with the provisions of the 2018 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 132) 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.
BOARD INCLUSION AND DIVERSITY
The Company is committed that the membership of the Board
and its ELT reflect the diversity of our workforce and consumers
in the countries in which we operate.
The Board and ELT 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.
The Company is a signatory to the 30% Club. We believe that
gender diversity is good for our business. The Company had
achieved the FCA guidelines of 40% women on the Board
during the year, but with the retirement of Caroline Silver in
March 2023, and the resignation of Dariusz Kucz, the Board’s
female representation at the date of this report is 37.5%.
SENIOR MANAGEMENT AND THEIR DIRECT REPORTS
AS AT 31 MAY 2023
Senior management* and their direct reports are disclosed
in accordance with the 2018 Code.
Male 47%
Female 53%
*
The definition of ‘senior management’ for this purpose is the ELT.
The names of our ELT members are set out on page 76.
Overview 93
INDUCTION OF DAVID TYLER AS CHAIR
The Nomination Committee, through the Company Secretary,
oversees the induction of all Directors. The purpose of the
induction 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 People Officer.
The programme is structured to provide the information needed
to engage in Board meetings in the same way as for other
Non-Executive Directors joining the Board and is then further
expanded to develop the oversight required as Chair.
The plan for David Tyler’s induction consisted of the following
elements, one of which is ongoing as his business visits are not
yet complete:
• Meetings with the Executive Directors and senior management
• Meetings with external advisers
• Visits to key markets and sites
• Meetings with key shareholders
• Hard copy induction pack, including core governance documents
• Training on core areas, including the Market Abuse Regulation
and directors’ duties.
RECRUITMENT AND APPOINTMENT OF THE NEW CHAIR
Steps taken to appoint the Chair
Subcommittee was established to lead the
search and selection process.
The Subcommittee was committed to ensuring a diverse
long list in all aspects, in accordance with the Inclusion
and Diversity Policy for Board and ELT appointments and
considering a mix of established and step-up candidates.
Long list of 60 candidates received from external consultants
Egon Zehnder, a leading independent search firm. Egon
Zehnder, who were selected in a competitive process,
does not have any other connection with the Company or
individual Directors.
19 candidates were considered in depth.
6 candidates were selected for interview by members
of the Committee. They narrowed down the preferred
list to 3 candidates.
Preferred list of 3 candidates were identified
to meet the Chief Executive Officer and the then Chair.
All candidates were strong and possessed a range of skills and
experience between them, matching well with our brief. There
was a good level of interest in the role and active engagement in
the process from all shortlisted candidates. The candidates were
suitably diverse, this having been a key element of the selection
criteria briefed to Egon Zehnder.
GovernanceFinancial StatementsStrategic Report 94
PZ Cussons plc / Annual Report and Accounts 2023
Nomination Committee Report continued
2023 BOARD AND COMMITTEE EVALUATION
To evaluate its own effectiveness, in accordance with best practice and the requirements of the 2018 Code, the Board undertakes annual
effectiveness reviews using a combination of externally facilitated and internally run evaluations over a 3 -year cycle. Each process is
facilitated by the Company Secretary, working with the Chair. The cycle of the Board evaluations is summarised as follows:
YEAR 1
YEAR 2
YEAR 3
Externally facilitated Board evaluation
using interviews.
Follow-up on action prepared in response
to the year one evaluation using
internally facilitated questionnaires.
Continued follow-up on actions arising
from the previous two years using
internally facilitated questionnaires.
The Board recognises the importance of continually monitoring and improving its performance. In accordance with the three-year cycle,
this year the Board commissioned an external evaluation.
Process
Conclusions and actions agreed from 2023 review
The 2023 Board evaluation was externally facilitated by a
partnership of BoardClic, Board Intelligence and Alison Purdue
Associates. The partnership was selected following a formal tender
process during which three shortlisted reviewers were interviewed
by the Chair and the General Counsel and Company Secretary,
and the recommendation was then endorsed by the Board. The
partnership was selected due to its ability to bring deep expertise
in the fields of digital board evaluation tools, board material
analysis, and the human dynamic in board effectiveness. All three
partners are considered independent as they do not have existing
relationships with the Board or individual directors.
In order to gather and distil feedback, all Directors completed
a tailored digital survey created by BoardClic and were then
interviewed. Detailed interviews were conducted on an individual
basis during April and May 2023 and considered all aspects of
Board effectiveness together with the quality of information the
Board receives. The Board evaluation also included a review of the
Audit & Risk Committee and the Remuneration Committee.
A review of Board meeting documentation was also undertaken as
part of the process.
The findings and recommendations of the evaluation were
presented to and considered by the Board at its May meeting.
The Audit & Risk and Remuneration Committees considered the
results of their own evaluations.
A number of recommendations were made to the Board and
actions agreed.
The actions will be reviewed by the Board in order to track progress
and maintain a focus on the effectiveness of the Board.
The conclusions of this year’s review have been positive and
confirmed that the Board as a whole, and the two Committees
evaluated, remain effective.
The evaluation found that there are strong relationships between
Directors and a supportive, respectful and collegial dynamic within
the Board. The evaluation recognised the considerable progress
the Board has made in governance effectiveness and management
capability in recent years.
Areas identified to enhance the Board’s effectiveness for the
coming year include:
• An increased focus on the next phase of the development and
execution of the Group’s strategy
• Review of the size and composition of the Board for the future,
aligned with the next phase of the strategy. This may lead to a
greater amount of general experience at Board level of listed
companies and more Directors with deep experience of key
geographical markets
• Directors to contribute greater challenge and debate to ensure
material issues are considered from all angles and that there is
frequent ongoing discussion about the culture and openness of
the process around the Board table
• Engaging stakeholders in determining company risk appetite and
strengthening risk management processes
• Develop written succession plans for key Board and executive
roles for both emergency cover and medium to long-term
succession
• The introduction of an organisation-wide dashboard of Key
Performance Indicators for the Board
• Re-balance Board agendas to increase the focus on strategy,
allocating more time for challenge and debate rather
than reporting.
Overview 95
BOARD AND EXECUTIVE MANAGEMENT DIVERSITY DATA
Board and executive management reporting on gender identity or sex
We report our Board and executive management diversity data as follows as at our chosen reference date of 26 September 2023
(the date of this Annual Report and Accounts) further to the new UK Listing Rules requirements.
As at 31 May 2023, the Board included three women Directors representing 33% of the Board. One of the four senior positions on the
Board was held by a woman and one Director from a minority ethnic background.
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 names of our Board and ELT members are set out on pages 74 to 77.
Men
Women
Other categories
Not specified/prefer not to say
Number of
Board members
Percentage
of the Board
Number of senior
positions on
the Board (CEO,
CFO, SID and Chair)
Number
in executive
management1
Percentage
of executive
management
5
3
0
0
62.5%
37.5%
–
–
3
1
0
0
10
5
0
0
66.7%
33.3%
–
–
1
Executive management means the ELT (the most senior executive board below the Board). The Chief Executive Officer and Chief Financial Officer are included in the data fields for the
Board and the ELT as they are members of both respectively.
Board and executive management reporting on ethnic background
White British or other White
(including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Number of
Board members
Percentage
of the Board
Number of senior
positions on
the Board (CEO,
CFO, SID and Chair)
Number
in executive
management
Percentage
of executive
management
7
0
1
0
0
0
87.5%
–
12.5%
–
–
–
4
0
0
0
0
0
12
0
2
1
0
0
80%
–
13.3%
6.7%
–
–
Data in relation to the gender of employees is collected voluntarily
via our people management information system Workday through
which the individual self-reports their gender identity (or specifies
they do not wish to report such data). The criteria of the standard
form questionnaire are fully aligned to the definitions specified
in the UK Listing Rules, with individuals requested to specify: self-
reported gender identity. Selection from ‘a’ male; ‘b’ female; ‘c’
other category/please specify; ‘d’ not specified (due to local data
privacy laws); or ‘e’ prefer not to say. For Non-Executive Board
members, we collect data voluntarily through a manual process.
Data in relation to ethnicity is currently collected via a manual
process managed by the Company Secretariat. Each individual
Board member and member of the ELT is requested to self-
report ethnic background in accordance with the classifications
prescribed in the UK Listing Rules as designated by the UK Office
of National Statistics. As set out in the table above, these are ‘a’
White British or other White; ‘b’ Mixed or Multiple Ethnic Groups;
‘c’ Asian or Asian British; ‘d’ Black; ‘e’ Other ethnic group/please
specify; or ‘f’ not specified/prefer not to say.
David Tyler
Nomination Committee Chair
26 September 2023
GovernanceFinancial StatementsStrategic Report 96
PZ Cussons plc / Annual Report and Accounts 2023
Audit and Risk Committee Report
THE COMMITTEE HAS CONTINUED
TO FOCUS ON EMBEDDING
PROCESSES AND CONTROLS.
Committee membership and attendance
Committee members
Member since
Attendance
Jeremy Townsend
John Nicolson
Dariusz Kucz1
Jitesh Sodha
2020
2016
2018
2021
4/4
4/4
4/4
3/4
1 Director stepped down from the Committee on 14 September 2023.
DEAR SHAREHOLDERS,
I am pleased to present the Committee’s report for the financial
year ended 31 May 2023 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 designed as part of our
ongoing Controls improvement programme and in connection
with the anticipated arrival of Corporate Reforms which are
commonly referred to as UK Sox. This Control Transformation
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 improving the overall control environment and
preparing the Group for the introduction of the UK government’s
proposed regulatory change and corporate governance code
reform leading to future Director declaration of effectiveness of
material internal controls over reporting.
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.
ACTIVITIES DURING THE YEAR
Over the course of FY23, the Committee:
• Oversaw a competitive tender process resulting in a
recommendation to appoint PwC as External Auditor for the
year ended 31 May 2024 which was approved by the Board
• Oversaw continued progress of the Controls Transformation
Project which will result in an improved internal control
framework and environment, along with a review and
improvement of finance shared services organisation design,
capability, control and efficiency. As noted in last year’s report,
while progress continues to be 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 government’s proposed regulatory
change and corporate governance code reform leading to
increased future requirements of audit assurance and Directors
declarations over the effectiveness of material internal controls
over reporting (UK Sox)
Overview 97
Committee role
Priorities for 2024
• Monitor the integrity of the Financial Statements and
• Oversee and assess management’s continued progress on internal
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 whistleblowing
arrangements and procedures for detecting fraud.
controls
• Review financial accounting and reporting
• Continued focus on cyber-risk profile and mitigation plans
• Improve ESG assurance and reporting
• Continue to support the improvement of the Internal Audit &
Risk function to ensure they provide value and drive the business
forwards
• Oversee transition to the new External Auditor.
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 99 of this report
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.
• Closely monitored improvements in payment practices which
are registered with the UK government’s online portal
• Monitored the impact of the acquisition of Childs Farm in FY22
• Strengthened the Internal Audit & Risk team with additional
resource
• An external review of the Committee’s effectiveness was carried
out in conjunction with the FY23 Board evaluation. The results
were positive and objectives agreed for the Board as a whole.
More information on the external review process is set out on
page 94 of this report
• 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 FY23 the Committee met four
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 Internal Audit & Risk Director 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. Currently I serve
as chief financial officer of Marks and Spencer Group plc. I
have also served as CFO of Rentokil Initial Plc, the FTSE 100
commercial pest control and hygiene services business, until
retiring in August 2020.
The experience of the other Committee members is summarised
on page 74. 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.
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 External Auditor so this is their
sixth year of auditing the Group. John Charlton has been lead
partner through FY23.
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 FY23.
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 2023,
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.
GovernanceFinancial StatementsStrategic Report 98
PZ Cussons plc / Annual Report and Accounts 2023
Audit and Risk Committee Report continued
RELATIONSHIP WITH THE EXTERNAL AUDITOR CONTINUED
• Tender process period
External Auditor tender
The Board has announced its intention to appoint
PricewaterhouseCoopers (PwC) as its External Auditor
for the year ending 31 May 2024.
This follows a competitive tender process announced by the
Company on 21 April 2023 and overseen by the Committee and
resulting in a recommendation which was approved by the Board.
– Issue Request for Proposal
– Providing access to management and data room
– Considering technical challenges.
• Selected firms provided a proposal document for consideration.
• Selected firms presented to management and the Committee.
• Decision-making and recommendations made to the Board
The appointment of PwC will be recommended to the Company’s
shareholders for approval at the 2023 AGM.
– PwC provided the preferred global proposal which was
determined by the Committee and recommended to the Board
In the 2022 Annual Report, the Company announced its intention
to commence a tender process for the appointment of its External
Auditor, Deloitte having been appointed as External Auditor in
2017 and continuing through FY23.
Led by the Committee and the Company Secretarial and Finance
teams, the primary objective was to ensure a fair and transparent
tender process and to appoint the audit firm that will provide the
highest quality in the most effective and efficient manner.
As part of planning the tender process, the Committee has taken
due regard of the current FRC guidance on audit tenders.
In selecting a long list of firms to be considered to invite to tender
the Committee’s selection considerations included:
• Independence criteria
• Audit capability and competence
• Audit Quality Review performance
• FMCG experience and breadth of subject matter experts
• Capacity to provide a robust audit.
The tender process included the following steps:
• Before the formal process begins
– Selecting firms to involve
– Considering the audit team of each firm
– Defining critical success factors.
– It is the Board’s intention to recommend the appointment of
PwC to shareholders at the 2023 Annual General Meeting,
and a resolution has been prepared accordingly with PwC’s
first report to members being on the results to 31 May 2024.
Audit and non-audit fees
The Company paid £3 million in audit fees for the financial year
ended 31 May 2023.
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 £40k to Deloitte in
respect of the review of the interim statement released in February
2023. The non-audit to audit fee ratio is 1.3%.
Effectiveness and independence
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
Observations of, and
interactions with,
the External Auditor
The audit plan, the
audit findings and
the External Auditor
external report
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.
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 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 Internal Audit & Risk
Director and the Group Financial Controller during the audit process.
Overview 99
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 2023 are set out below:
Significant issues
and judgements
Areas of significant
financial judgement
Controls
transformation
Risk management
Decisions and improvements
The Committee considered a number of areas of significant financial judgement throughout the year. The key
areas covered included impairment testing of goodwill, intangible assets and tangible assets and associated
discount rates; the treatment of uncertain tax positions across the Group; consideration of the impact of Naira
devaluation on the Group; the treatment as permanent as equity of certain intercompany balances held with
our Nigerian businesses; the treatment of trade expenditure and the processes and controls in place to manage
associated risks; and the classification and disclosure of adjusting items. Additional focus was given to out of period
adjustments. More information is available in note 1(c). 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 the work underway to
design and then embed controls improvements throughout the Group. The Controls Transformation project is
focused on improving the use of SAP, standardising processes and embedding controls. 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 and efficiency.
The Committee reviewed the development of risk management across the Group and approved the appointment
of the new Group Internal Audit & Risk Director as well as a new Head of Group Risk. The Audit & Risk
Optimisation programme will commence in FY24 to ensure risk management is further embedded into
strategic decision-making.
Ethics and compliance
The Committee monitored investigation reports and was satisfied that management was significantly reducing
the Company’s risk profile for fraud and compliance issues.
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.
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.
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.
GovernanceFinancial StatementsStrategic Report 100
PZ Cussons plc / Annual Report and Accounts 2023
Audit and Risk Committee Report continued
RISK MANAGEMENT AND INTERNAL CONTROLS CONTINUED
During the year the Board reviewed their approach to Risk
Management and as a result a new Group risk management
framework was approved by the Audit & Risk Committee in 2023,
and will be operational during FY24. This compliments the work
that the Audit & Risk Committee has set for the multi year controls
improvement plans to address existing weaknesses identified
including upgrading the systems used to record trade promotions,
improving our joiners, movers and leavers processes through
optimisation of our human resources system and addressing
outstanding segregation of duty conflicts within our enterprise
management systems.
While the Committee notes the controls improvements made over
the course of FY23, including the design and further development
of a Group wide framework of internal controls over financial
reporting and an improvement in the process to track and close
audit actions, 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 FY24 and beyond.
INTERNAL AUDIT FUNCTION
A key source of internal assurance is the delivery of an internal
audit plan, which is designed to help the organisation achieve its
strategic priorities. The Internal Audit function is led by a recently
appointed, permanent Group Internal Audit & Risk Director, who
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 for the Internal
Audit function to operate within. It 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 Group Internal Audit & Risk Director reports progress against
the Internal Audit Plan and highlights significant findings at the
Committee meetings. The Group Internal Audit & Risk Director
also has regular meetings with the Audit & Risk Committee
Chair and the CFO outside of the meetings where appropriate.
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.
RISK MANAGEMENT
While the Board oversees the Group’s risk management it
delegates responsibility for review of the risk management
methodology and effectiveness of the risk management process
and the effectiveness of internal controls to the Audit & Risk
Committee. 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 Group uses a risk management process and common risk
framework to ensure we identify, assess, and mitigate risks that
threaten the successful delivery of our strategic objectives. The
revised framework 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 while also ensuring appropriate reporting procedures.
The risk management process covers initial risk identification,
including emerging risks, assessment of the risk, evaluation of
the target risk, the extent to which risks can be mitigated 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.
The Committee is satisfied that the risk management framework
is effective while undertaking plans to refresh risk management
processes with the arrival of a new Head of Risk (see Risk
Management pages 58 to 71).
WHISTLE-BLOWING POLICY
The Company is required to maintain, subject to the oversight by
the Audit & Risk Committee, a mechanism for the confidential
reporting of suspected fraud and other wrongdoing. The Company
has a standalone Whistle-blowing Policy which links to 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 Company Secretary along with the Group Head of
Ethics and Compliance. The Committee receives 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 35 to 39.
Overview 101
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:
• 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
performance measures) and has confirmed to the Board that the
Financial Reporting 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 Committee reviewed the interim financial statements for
the six months to 3 December 2022 and the full-year financial
statements and Annual Report for the year to 31 May 2023. The
principal steps taken by the Committee during the past 12 months
in relation to its review of the published financial statements were:
• 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
• Review of the 2022 interim financial statements and 2022
interim announcement and consideration of Deloitte’s
comments on the drafts of these documents
• To authorise an External Auditor to provide any non-audit services
• Review of plan for preparing the financial statements and
to the Group, prior to the start of those non-audit services.
Annual Report for the year ending 31 May 2023
Set out on page 98 are details of the tender process undertaken
in the year and resulting in the recommendation to be put to
shareholders to appoint PwC as External Auditor for the year
ending 31 May 2024.
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 FY24, 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.
• 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 2023 and consideration of Deloitte’s
comments on these documents.
The 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 proposed
introduction of UK regulation in respect of internal controls on
reporting and audit assurance policy.
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 four years. In light of the impact of rising living costs
on the global economy and the devaluation of the Naira currency
in Nigeria where the Group operates, 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 2023
and satisfied itself that the going concern basis of presentation of
the financial statements and the related disclosure is appropriate.
The Committee has satisfied itself that the Financial Reporting
processes and controls over the information presented in
the Annual Report are satisfactory, that the information is
presented fairly (including the calculations and use of alternative
Jeremy Townsend
Audit & Risk Committee Chair
26 September 2023
GovernanceFinancial StatementsStrategic Report 102
PZ Cussons plc / Annual Report and Accounts 2023
Environmental and Social Impact Committee Report
THE COMMITTEE MADE
SIGNIFICANT PROGRESS IN
STRENGTHENING THE COMPANY’S
ENVIRONMENTAL AND SOCIAL
IMPACT ACTIVITY.
Committee membership and attendance
Committee members
Member since
Attendance
Valeria Juarez1
David Tyler*2
Caroline Silver3
Jonathan Myers
Sarah Pollard*
John Nicolson*
Kirsty Bashforth
Dariusz Kucz*
Jeremy Townsend*
Jitesh Sodha*
2022
2022
2022
2022
2022
2022
2022
2022
2022
2022
3/3
2/2
3/3
3/3
3/3
3/3
3/3
3/3
3/3
3/3
1 Appointed as Chair of the Committee on 19 June 2023.
2 Appointed as Director on 24 November 2022.
3 Stepped down as Director on 23 March 2023.
* Directors stepped down from the Committee on 19 June 2023.
DEAR SHAREHOLDERS,
On behalf of the Board, and as Chair of the Environmental
and Social Impact Committee (ES Committee), I am pleased to
present the ES Committee Report for the year ended 31 May
2023. Caroline Silver was Chair of the Committee during the
period under review and we thank Caroline for her leadership
and guidance on this Committee until her departure from the
Board in March of this year.
The ES Committee was first established as the ESG Committee in
FY22 to oversee the Company’s sustainability strategy and goals.
As part of the Board evaluation in the year, the scope and purpose
of the Committee was reviewed and revised. The ES Committee
is now responsible for environmental and social impact matters
and has been renamed accordingly. The Committee’s Terms of
Reference will be revised to reflect the change.
The ES Committee oversees the Company’s sustainability strategy
and goals. The Committee monitors performance against the ES
goals and how PZ Cussons considers, engages with, reports to
and maintains its reputation with key stakeholders.
Recognising the importance of ES across the whole Group and
its governance, the Committee consisted of all members of the
Board in FY23, and is supported by the ELT through its ES Forum
which acts as a steering committee for the existing and future
workstreams within the Company on important ES matters. For
FY24, we have adjusted the composition of the ES committee
to reflect the ES Committee’s new remit and ways of working.
Overview 103
Committee role
Priorities for 2024
• Regularly review the Group’s ES strategy and performance targets
• Continuously review the Group’s ES strategy and goals and
• Monitor progress by the Group against its ES strategy and goals
• Oversee how the Group engages with key stakeholders on ES
• Consider the climate-related risk and opportunities facing
the Group.
monitor progress against each
• Ensure required processes and capabilities are in place to deliver
the goals
• Consider, review and oversee the development and
implementation of the Diversity, Equity and Inclusion strategy
and goals
• Further optimise ES reporting.
In accordance with the Terms of Reference, the Committee met
three times in the year. Only members of the Committee are
entitled to attend the meetings. However, other Directors and
other individuals may be invited to attend for all or parts of any
meeting as and when appropriate. The Company Secretary acts
as secretary to the Committee.
The Committee’s existing Terms of Reference are compatible with
the Corporate Governance Code 2018 (the 2018 Code) and are
available on the Company’s website at www.pzcussons.com.
ACTIVITIES OF THE COMMITTEE DURING THE YEAR
Creation of the ELT ES Forum
The creation of this Forum was an important step for the
Committee to secure the most comprehensive and accurate
information and to ensure that discussions on ES matters were
inclusive and relevant.
The creation of an executive governance forum provided a central
‘below Board’ decision-making body within the executive on ES
matters and would provide materials to be reviewed by the Board
ES Committee. This body would act as a steering committee
for the existing and future workstreams within the Company
on important ES matters and would make recommendations
to the ES Committee on matters for the Board’s consideration.
As part of the ongoing KPI dashboard project, an ES scorecard
was developed, and this is monitored by the ELT ES Forum and
presented to the Committee on an ongoing basis.
The ES Committee also received operational updates on strategic
initiatives, such as virgin plastic reduction, which had already
reduced by 7.8% from our baseline year of 2021, on our way
to the targeted reduction of a third by 2030. The Company
will continue to explore solutions which enhance product
sustainability, reduce waste, and increase the use of recyclable
materials.
Carbon-neutrality commitments
The Committee is pleased to see that the Company is on track
to meeting its targets of being carbon neutral in operations
with a 10% absolute reduction by 2025, a 42% reduction against
2021 by 2030, and net zero across Scopes 1, 2 and 3 by 2045.
The Committee will continue to monitor and advise on projects
which will best achieve these targets.
Forest Submission under the Carbon Disclosure Project (CDP)
The Committee oversaw the Company’s first Forest Submission
under CDP. The Company recognises that deforestation presents a
business risk and by submitting a forest disclosure, the Company
is better able to measure and manage forest-related risks and
opportunities, transparently report on our progress in this area
and commit to proactive measures to protect the environment.
The Committee also received updates on progress against the
Palm action plan which aims to achieve 100% of deforestation
and exploitation free palm oil supply.
ES strategy
Throughout the year, the Committee monitored progress
against the goals set out in the Group’s ES strategy. The strategy
provides operational focus and, alongside a set of clearly defined
performance targets, supports the Company in achieving its goals.
More information about the ES strategy can be found on
page 36
Valeria Juarez
ES Committee Chair
26 September 2023
GovernanceFinancial StatementsStrategic Report 104
PZ Cussons plc / Annual Report and Accounts 2023
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).
Committee membership and attendance
Committee members
Member since
Attendance
Kirsty Bashforth
Jeremy Townsend1
Jitesh Sodha
Valeria Juarez
2019
2020
2021
2021
5/5
4/5
4/5
5/5
1 Stepped down from the Committee on 19 June 2023.
DEAR SHAREHOLDERS,
On behalf of the Board, I am pleased to present our 2023
Remuneration Committee Report. This report is divided into
three sections as set out below.
(1) This Remuneration Committee Chair Statement – providing
a summary of key reward activity during the year.
(2) The proposed new Directors’ Remuneration Policy (the Policy)
– setting out proposals for the new Policy following a process
of significant shareholder engagement and consultation.
The Policy will be subject to a binding vote at our 2023
Annual General Meeting (AGM) on 23 November 2023.
(3) The Report on Directors’ Remuneration – setting out
how the current Directors’ Remuneration Policy was
applied throughout the 2023 financial year and how our
new proposed Policy will be applied during FY24, which
will be subject to an advisory vote at our 2023 AGM.
BUSINESS CONTEXT
FY23 was the second full financial year of our new strategy and we
have continued to make good progress delivering solid financial
results, while continuing to invest in our brands, building internal
capabilities and delivering against our strategy.
While there remains more to do to maximise our full potential,
against an ongoing volatile and uncertain external backdrop, with
approximately £80 million of inflationary costs over the last three
years, FY23 has seen a number of achievements:
• Third consecutive year of LFL revenue growth at 6.1%
• Growth in gross profit margin, funding investment in capabilities
and offsetting underlying cost inflation
• Adjusted Profit Before Tax (PBT) growth of 12.6% despite cost
inflation pressures, with 11.23p per share of earnings per share,
down 10.7% reflecting a higher effective tax rate and non-
controlling interest charge
• Strong cash generation with free cash flow of £69.9 million
(FY22: £58.0 million), primarily driven by an improvement in
working capital
Overview 105
Committee role
• To set, develop and oversee the implementation of the Directors’
• To maintain an active dialogue with stakeholders, ensuring that
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
the shareholders and other advisory bodies’ views are taken into
account when setting the remuneration of senior executives and
members of the Board.
Detailed responsibilities are set out in the Committee’s Terms of Reference, which can be found on the Company’s website: www.pzcussons.com
• Continued investment in building our brands:
– Further strengthened Childs Farm with the launch of
SlumberTime and acceleration of international expansion
– Launched Morning Fresh, the market-leading hand dishwash
brand in Australia, into the auto dishwash category
– Original Source entered the Spanish market for the first time
and we re-launched our Imperial Leather offering in Thailand.
• Successful delivery of the first stages of the supply chain
transformation programme, including the outsourcing of
fragrance supply to third parties, the near shoring of the
procurement function from Singapore to Manchester and the
planned closure of our Thai Soap Factory with corresponding
outsourcing. These projects will be complete by the end of FY24
• Ongoing delivery against a number of sustainability targets,
such as virgin plastics usage, which was reduced by 7.8% versus
the baseline. More detail on our approach to sustainability is on
pages 26 to 41.
There has also been continued focus on building and deepening
the talent and skills needed to deliver the strategy within the
ELT, with a number of new appointments during the year. The
Committee has given careful consideration to remuneration
for the ELT to ensure there is alignment between Board level
and below.
REMUNERATION DECISIONS YEAR ENDED 31 MAY 2023
Variable remuneration earned during the year
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. Its decisions, and the
context in which they were made, are summarised below:
Annual bonus payout
The FY23 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.
The 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 and agreed
the following:
• 62.1% of the 80% of maximum opportunity of bonus assessed
against financial performance was achieved. Full details of the
targets and performance against them can be found on page 121.
• The Committee also assessed the performance against the
key business objectives which focused on organisational
effectiveness and strategic execution and determined that 18%
of the available 20% was earned for both Executive Directors.
• As such 80.1% of the maximum bonus was earned by the
Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
resulting in awards of 120.1% of salary for the CEO and 100.1%
of salary for the CFO. The Committee reviewed these payouts
in the context of underlying financial performance of the
Company as well as the experience of our wider stakeholders
and is comfortable that they are fair and appropriate therefore
no discretion was applied. Full details of the performance
assessment against both the financial and key business
objectives can be found on page 120.
Vesting of FY21 Performance Share Plan (PSP)
PSP awards granted in the year ended 31 May 2021 (FY21) were
based on three key performance indicators: 60% Earnings Per
Share (EPS) growth, 20% revenue growth from Must Win Brands
measured relative to growth in revenue from Portfolio Brands and
20% relating to sustainability targets. Both the EPS and revenue
targets were not met. However, 100% of the element relating to
sustainability vested. This results in 20% of the maximum award
vesting, equivalent to 30% of salary for the CEO and 25% of salary
for the CFO. Full details are provided on page 122.
Appointment of new Chair
David Tyler joined the Board as a Non-Executive Director on
24 November 2022 and took over as Chair of the Board following
the expiry of the term of office of Caroline Silver on 23 March
2023. The Committee concluded that his fee on appointment as
Chair would be £262,500. This increases to £286,125 with effect
from 1 September 2023, in line with the increase for the other
Non-Executive Directors as set out on page 120.
GovernanceFinancial StatementsStrategic Report 106
PZ Cussons plc / Annual Report and Accounts 2023
Remuneration Committee Report continued
REVIEW OF REMUNERATION POLICY
Our current Policy was approved at the AGM in November 2020
with high levels of support. At that time, we made a number of
changes to align our Policy with good governance including aligning
Executive Director pension rates to the wider workforce, applying
deferral to the annual bonus, increasing shareholding guidelines,
formalising post-employment shareholding guidelines and
enhancing malus and clawback provisions.
During FY23, the Committee undertook a detailed review of the
Policy based on the principles set out on page 110. The current
Policy focused the Directors on the successful delivery of the initial
phase of the strategy, incentivising interventions to reverse previous
business underperformance. As the foundations for future growth
are increasingly established and we move into the next phase of our
strategy, the Committee has sought to ensure that the new Policy has a
continued clear alignment between the approach to remuneration and
the key areas of strategic focus; building brands, serving customers,
reducing complexity, developing people and growing sustainably.
As part of the Policy review process, we consulted shareholders,
representing over 60% of our share capital, and proxy agencies and
received broad support for our proposed approach. The feedback
provided, along with input from independent external advisers and
also consideration of the size, scale and complexity of PZ Cussons,
has ensured good governance and best practice when building
Policy proposals. I would like to thank all those involved for the
high level of engagement during our consultation exercise.
For the new Policy there are three key changes and updates
from the previous policy that was approved at the 2021 AGM.
More detail is provided on each below.
1. Long-Term Incentive Plan (LTIP) – move from a Performance
Share Plan (PSP) to a Restricted Share Plan (RSP)
The Committee considered alternative long-term structures and
believes the adoption of an RSP will more closely align the interests
of our Executive Directors with shareholders:
• A key measure of our long-term success is sustainable share
price growth and continued dividend payments. Introducing an
RSP alongside the existing share ownership requirement will
ensure that Executive Directors have, and retain, a meaningful
shareholding in the business resulting in full alignment with
wider shareholder interests
• The management team have been clear about how and where
to prioritise investment – across Must Win Brands and priority
markets. Given the complexities of trying to incentivise and
assess these priorities using ‘traditional’ performance measures,
we are of the view that a scheme focused on share price
provides a more rounded assessment of management’s delivery
of our new strategy with a focus on the long-term
• We have operated an RSP for several years for senior leaders
below Executive Director level, which has been very effective in
attracting, incentivising and retaining key talent. We believe that
taking a consistent approach for all our senior leaders will ensure
that they are collectively focused on delivering sustained growth
• PZ Cussons has clearly stated its wider simplification agenda
and the Committee believes that a simplified approach to
long-term pay aligns to this. Using an RSP both removes the
need to set and assess targets every year which can be a
complex and challenging process, especially during a period
of transformation, and makes communication easier, which
supports retention and motivation.
We are aware that the current expectation is a 50% reduction in
the maximum opportunity when moving from a PSP to an RSP. The
Committee feel that it is important to maintain an equal balance
of short and long-term reward (on an expected value basis) given
the importance of long-term sustainability to the Company and to
maintain an overall competitive package at target for the Executive
Directors. As such and following a thorough debate, it is proposed
that RSP awards will be set at a maximum of 90% and 75% of
salary for the CEO and CFO respectively (from 150% and 125% of
salary currently). This represents a 40% reduction from previous
levels of award.
RSP awards, like the current PSP awards, will be made on an
annual basis and will be subject to a three-year vesting period
and two-year holding period in line with the 2018 UK Corporate
Governance Code (the 2018 Code). The vesting of the RSP will
be subject to performance underpins and the Committee will
retain the ability to reduce the vesting (including to nil), subject to
performance against these over the vesting period. Those applying
to the RSP awards for FY24 are set out on page 124.
2. Annual bonus plan – increased deferral
The Committee is comfortable that our annual bonus construct
remains fit for purpose and no changes are proposed to the
maximum opportunities (150% of salary for the CEO and 125%
of salary for the CFO).
To further align our Executive Directors with the experience of
our shareholders, deferral of annual bonus into shares under
the Deferred Bonus Share Plan (DBSP) will be increased to 40%
of the total bonus earned and will be for a period of two years.
This results in a greater proportion of the annual package being
delivered in shares.
While not a change to Policy, for FY24 we are planning to re-weight
the profit and revenue measures and maintain the weighting of
the cash-based measure with further details provided below.
3. Non-Executive Director share ownership
To encourage all our leaders to think like owners, we are introducing
an expectation that the Chair and Non-Executive Directors build up
100% of one year’s net fee within four years of appointment. As per
the changes above, this ensures a consistent focus on sustainable
growth for all our shareholders. All other elements of Policy relating
to Non-Executive Directors remain unchanged.
OUR APPROACH TO REMUNERATION FOR THE YEAR ENDING
31 MAY 2024
The key changes to the implementation of pay for FY24 include:
Base salaries
The base salary for the CEO has been increased by 4.4% to
£640,000 with effect from 1 September 2023. This is below the
average increase for the wider employee population in the UK.
The CFO was appointed on a salary materially lower than that paid
to her predecessor, and we have previously disclosed our intention
to review her base salary periodically considering her performance
and increased experience in the role.
The Committee has reviewed the CFO’s salary taking into account
a number of reference points and is proposing to increase the
CFO’s salary by 8.1% to £400,000 effective from 1 September
2023. This increase, along with other aspects of her package,
helps to position the CFO more competitively.
Overview 107
FY24 annual bonus
As set out above, we are planning to re-weight the profit measure
to 50% from 40%, the revenue measure to 20% from 30% and
maintain the weighting of the cash-based measure at 10%. We
are also moving to Operating Profit from Profit Before Tax and
Free Cash Flow from Net Working Capital. The use of Operating
Profit reduces volatility and the potential for windfall gains while
providing enhanced focus on aligning pay with profitability. Free
Cash Flow is a more comprehensive measure of the Company’s
ability to generate cash, explicitly considering the cost of capital
investment. More detail on the weightings and measures is
provided on page 121.
The approach to key business objectives has also been updated
for FY24 to further align them with our strategy and key priorities
for FY24.
There are no changes to the threshold, target or maximum level
of award.
FY24 RSP awards
Subject to the shareholder vote at the AGM on 23 November
2023, the CEO will be granted an RSP award of 90% of salary and
the CFO an award of 75% of salary. For the FY24 RSP award, the
following underpins will be applied:
• No material weakness in the underlying financial health or
sustainability of the business
• Maintenance of appropriate governance frameworks, including
acceptable controls and compliance performance and no events
that result in significant reputational damage to the Company
(as determined by the Board)
• To ensure ongoing focus on our critical ESG commitments,
satisfactory performance against environmental and societal
commitments.
The Committee retains the discretion to reduce vesting,
potentially to nil, subject to performance against the underpins
across the vesting period.
Non-Executive Director fees
The Non-Executive Directors did not receive a fee increase
in FY23. During the year, fees were assessed against market
practice and will be increased by £5,000 to £60,000 with effect
from 1 September 2023. The additional fee for the Audit & Risk
and Remuneration Committee Chairs will increase by £2,500 to
£12,500 also with effect from 1 September 2023.
Further details on how we intend to implement the new Policy in
FY24 and the changes from the previous Policy are set out in the
‘At a glance summary’ on page 108.
Wider employee experience
When considering the remuneration arrangements for the
Executive Directors and other senior executives, the Committee
continues to take account of remuneration across the Group.
Updates on the wider employee experience are provided regularly
to the Committee by the management team, particularly in light of
the challenging macro-economic backdrop and cost-of-living crisis
across all our markets. In March 2023, Dariusz Kucz, in his role as
representative of the employee voice, and I, met again with the
HR Leadership Team to discuss the Group remuneration strategy
and context.
Once again, this was a wide-ranging discussion that gave
the Committee good insights into our colleagues’ views on
remuneration.
The key remuneration activities for the wider employee
population for FY23 considered by the Committee when making
its decisions are set out below:
• Employee salary levels continue to be reviewed annually
against a range of relevant factors which include market data,
economic forecasts and Group financial budgets. The salary
increase budget for FY24 for UK-based employees was 5.0%,
with individual awards based on performance. Many of our
other markets were above this, for example Nigeria at 12%
for our management population and 15% for others and
Indonesia at 6% for the management population and 7% for
others. This reflects local economic factors and our need to
have competitive reward packages in place to attract the talent
needed to deliver our ambitious strategy
• For FY23 all bonuses for eligible employees included an element
of Group performance for the first time. This gave the potential
for employees to be rewarded for their contribution to the
overall success of the PZ Cussons Group as well as their own
Business Unit. Our leaders also have an element relating to their
personal contribution
• We continue to reward critical talent and support retention
by granting share awards in the form of RSPs to other senior
leaders and managers. We believe that the use of RSPs enables
the Company to compete internationally for the best executive
talent and provides a powerful tool to help retain and motivate
key members of our current and future leadership teams. These
awards are well received by participants
• The Share Incentive Plan (SIP) launched in 2021, created further
alignment between employees and investors. Under HMRC
rules, only UK employees can participate. A range of market-
aligned incentives are applied in other countries to provide
shareholder alignment
• We offer a market aligned benefit package that supports our
BEST values
• In addition to the normal pay review and incentive processes,
a range of interventions were put in place to support our
employees during the cost-of-living crisis. These range from
one-off payments in Africa, to financial advice and some
support with utility bills in Asia and help understanding financial
decisions in the UK. The business continues to keep this
under review.
Concluding remarks
Our approach to the new Policy has sought to ensure that there
is a continued clear alignment between remuneration and the
key areas of strategic focus and our shareholder and wider
stakeholder experience. I would like to thank shareholders for all
their feedback during the year and welcome any further views on
any of the matters set out in this report. I look forward to gaining
your support at the upcoming AGM.
Kirsty Bashforth
Chair of the Remuneration Committee
26 September 2023
GovernanceFinancial StatementsStrategic Report 108
PZ Cussons plc / Annual Report and Accounts 2023
Remuneration Committee Report continued
AT A GLANCE SUMMARY: CHANGES TO DIRECTORS’ REMUNERATION AND HOW THEY WILL BE IMPLEMENTED IN FY24
The Committee is responsible for determining, and agreeing with the Board, the Directors’ Remuneration Policy and has oversight of its
implementation, in line with its clear Terms of Reference. During the year, the Committee undertook a detailed review of the Directors’
Remuneration Policy, working with management and independent advisers to develop proposals and recommendations. No Executive
Director was present when their own remuneration was discussed.
The Committee considered market data from UK-listed companies of a similar size and complexity and received information from the
Chief People 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. 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 following table sets out a summary of the changes to the Directors’ Remuneration Policy and how they will be implemented in FY24,
subject to the shareholder vote at the AGM. Full detail is provided on pages 110 to 118.
Key policy features
Approach for FY23
Proposed approach for FY24 and key changes
Salary
Base salaries are normally
reviewed annually taking into
account a number of factors
including size of role, performance
and experience of the individual
and pay increases across the
wider workforce.
Salaries from 1 September 2022:
Salaries from 1 September 2023:
• CEO: £612,979
• CFO: £370,000
• CEO: £640,000 (4.4% increase).
• CFO: £400,000 (8.1% increase). As previously disclosed,
we have periodically reviewed the CFO’s salary based on
increased experience and performance in the role. This
increase, along with other aspects of her package, helps
to position the CFO more competitively.
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
Incentive scheme which focuses
Directors on delivery of annual
goals and milestones which are
consistent with the Group’s
longer-term strategic aims.
CEO and CFO: 10% of salary in line
with UK employee population.
There are no changes for FY24.
Opportunity:
Opportunity:
Policy maximum of 150% of salary.
Maximum bonus for FY23:
• CEO: 150% of salary
• CFO: 125% of salary.
Performance metrics:
• 40%: Adjusted profit before tax
• 30%: Revenue growth
• 10%: Net working capital
percentage
There are no changes to the Policy maximum of 150% of salary
or to the maximum bonuses for the CEO (150% of salary) or the
CFO (125% of salary)
Performance metrics:
For FY24 we are planning to re-weight the profit and revenue
measures and maintain the weighting of the cash-based
measure. We are also moving to Operating Profit from Profit
Before Tax and Free Cash Flow from Net Working Capital.
• 50%: Operating Profit
• 20%: Revenue growth
• 20%: Key business objectives.
• 10%: Free Cash Flow
25% of any bonus earned deferred
into shares for three years.
• 20%: Key business objectives.
40% of the total bonus will be deferred for a period of two
years. This results in a greater proportion of the annual
package being delivered in shares thereby aligning our
Executives with the experience of our shareholders.
Overview 109
Key policy features
Approach for FY23
Proposed approach for FY24 and key changes
Long-term incentive plan (LTIP)
LTIP which focuses on generating
sustained shareholder value over
the longer-term and aligning the
Directors’ interests with those
of the Company’s shareholders.
Performance Share Plan (PSP) with
vesting based on the achievement
of performance targets.
Opportunity:
• Policy maximum of 150%
of salary
• Maximum LTIP award for FY23:
– CEO: 150% of salary
– CFO: 125% of salary.
Performance metrics:
Performance measures based
on financial, strategic or share
price-based metrics measured
over three years.
• Adjusted basic EPS: 60%
• Revenue growth from
Must Win Brands: 20%
• Sustainability: 20%.
Shareholding guidelines
Alignment of the Executive
and Non-Executive Directors’
interests with those of the
Group’s shareholders.
Requirement for Executive
Directors 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 current PSP
and RSP awards until they satisfy
the shareholding guideline.
PSP replaced with a Restricted Share Plan (RSP) with lower
award levels and subject to underpins.
Opportunity:
• Policy maximum of 90% of salary
• Maximum LTIP award for FY24:
– CEO: 90% of salary
– CFO: 75% of salary.
Underpins
The vesting of the RSP will be subject to the underpins set
out below. The Committee retains the ability to reduce
vesting (including to nil) subject to the underpins measured
over the vesting period. The underpins are:
• No material weakness in the underlying financial health
or sustainability of the business
• Maintenance of appropriate governance frameworks,
including acceptable controls and compliance performance
and no events that result in significant reputational damage
to the Company (as determined by the Board)
• To ensure ongoing focus on our critical ESG commitments,
satisfactory performance against environmental and
societal commitments.
A holding period applies for two years following vesting
(i.e. five years from grant).
Recovery and withholding provisions apply.
No change for Executive Directors.
Introduction of an expectation that the Chair and
Non-Executive Directors build up interests in the Company’s
shares worth 100% of their net base fee within four years
of appointment.
GovernanceFinancial StatementsStrategic Report 110
PZ Cussons plc / Annual Report and Accounts 2023
Remuneration Policy
Directors’ Remuneration Policy
This part of the report sets out the Directors’ Remuneration
Policy and 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 (the 2018 Code) and the
requirements of the UKLA Listing Rules.
The Directors’ Remuneration Policy as set out in this report will be
put to shareholders for approval at the FY23 AGM to be held on
23 November 2023. It is the Committee’s intention that the new
Directors’ Remuneration Policy will be effective following approval
from shareholders through a binding vote at the FY23 AGM.
The Committee considered the principles listed in the 2018 Code
when designing the Directors’ Remuneration Policy and took these
into account in its design and implementation:
Clarity, simplicity and balance: Remuneration arrangements
have defined parameters which are transparently communicated
to shareholders and other stakeholders, including maximum
incentive quantum and incentive plan pay-out schedules. With the
proposed introduction of the RSP, we have sought to simplify our
remuneration arrangements further, while maintaining focus and
balance between short and long-term performance.
Linked to the strategy and performance of the business: Our
remuneration frameworks incentivise both short-term objectives
through the annual bonus plan and our long-term transformation
objectives and shareholder value creation through our RSP.
Directors’ Remuneration Policy table
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
Recruitment and retention of
senior executive talent through
the provision of a competitively
positioned and cost-effective
benefits package.
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.
Provision for
retirement
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.
Participation in a defined contribution pension plan or provision of a cash
allowance in lieu of a pension contribution.
A Company pension contribution in line with the rate provided to
Not applicable.
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
(or cash payment in lieu).
To avoid setting expectations of Executive Directors and other
None, although overall performance of the individual is considered
employees, there is no overall maximum for salary increases under
by the Committee when setting and reviewing salaries.
this policy.
the wider Group.
Salary increases are reviewed in the context of salary increases across
Any increase in excess of those elsewhere in the Group would be
considered very carefully by the Committee. Full disclosure would be
included in the relevant Remuneration Report. 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
Not applicable.
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.
Overview 111
Shareholder value and alignment: Remuneration should support
and align with our shareholders long-term interests by linking
the annual bonus to our key strategic measures and having
the right underpins in place for the RSP. Our increased bonus
deferral, alongside our RSP, delivers a significant proportion of
remuneration in shares, some of which have to be retained in
line with our shareholding guidelines. We are also introducing a
shareholding guideline for our Non-Executive Directors to ensure
a consistent focus on sustainable growth of shareholder value.
Risk, proportionality and governance: Our incentive plans are
designed to have a robust link between pay and performance, by
using Group key performance indicators through the annual bonus
and RSP underpins. The Committee is able to exercise discretion 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.
Provisions are also in place to allow for the application of clawback
and/or malus in specific circumstances.
Alignment to culture, purpose and the wider workforce: Our
purpose – For everyone, for life, for good – supports the approach
of cascading down the Directors’ remuneration arrangements
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.
Predictability: The Committee seeks to maintain a consistent
approach to its annual duties including setting targets and
underpins, reviewing incentive outturns and salary review.
Consistency of process helps to ensure consistency of outcomes.
Directors’ Remuneration Policy table
The components of Executive Directors’ remuneration are described below:
Fixed remuneration
Base salary
To provide an appropriate level of
Base salaries are normally reviewed annually taking into account:
fixed cash income to recruit and
retain talent through the provision
of competitively positioned
base salaries.
• 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.
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
None, although overall performance of the individual is considered
by the Committee when setting and reviewing salaries.
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. Full disclosure would be
included in the relevant Remuneration Report. 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.
Benefits
Recruitment and retention of
Benefits that may be provided include car benefits, life assurance, health insurance
senior executive talent through
for each Executive Director and family, permanent health cover and personal
the provision of a competitively
tax advice.
positioned and cost-effective
benefits package.
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.
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.
Provision for
retirement
Designed to enable an Executive
Participation in a defined contribution pension plan or provision of a cash
Director to generate an income
allowance in lieu of a pension contribution.
A Company pension contribution in line with the rate provided to
the wider workforce in the country the Executive Director is based.
Not applicable.
in retirement and to provide an
overall remuneration package
that is competitive in the market.
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
(or cash payment in lieu).
GovernanceFinancial StatementsStrategic Report 112
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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.
Restricted Share
Plan (RSP)
Designed to simplify long-term
incentives and align reward for
the Executive Directors with the
delivery of shareholder value
creation through sustainable
share price growth and continued
dividend payments by delivery
of the business strategy.
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.
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.
Typically, a minimum of 40% of the bonus earned will be deferred into
shares. The deferral period will usually be two 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.
Annual awards of rights over shares calculated as a percentage of base salary.
Awards normally vest three years from the date of grant subject to review by
the Committee of performance against pre-determined underpin/s. If any of the
underpin criteria are not met, the Committee will consider whether to reduce
vesting (including to nil). After vesting, shares are usually subject to an additional
two -year holding period.
In addition to the underpin/s, the Committee retains general discretion to adjust
the vesting levels to ensure they appropriately reflect the underlying performance
of the Group or individual.
Dividend equivalents accrue on shares subject to RSP awards and are paid on
vesting in respect of those shares that vest.
Award levels and underpins are reviewed before each award cycle to ensure that
they remain appropriate.
Recovery and withholding provisions apply to awards granted under the RSP.
The maximum annual bonus opportunity that may be earned for any
The performance measures and targets are set by the Committee
year is 150% of base salary.
each year.
The maximum opportunity for current Executive Directors are:
The majority of the annual bonus is based on challenging financial
• Chief Executive: 150% of salary
• Other Executive Directors: 125% of salary.
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.
Award opportunities in respect of any financial year are limited to rights
Performance underpins may be based around key financial,
over shares with a market value determined by the Committee at grant
governance and strategic measures. They will be set taking into
of a maximum of 90% of base salary.
The current maximum opportunity for Executive Director roles is:
account the business strategy and may vary from year to year if the
Committee deems it appropriate. Full disclosure of the underpins
will be provided in the relevant Remuneration Report.
• Chief Executive: 90% of salary
• Other Executive Directors: 75% of salary.
Requirement to build up interests in the Company’s shares worth 200% of salary.
Not applicable.
Not applicable.
Executive Directors will be required to retain a minimum of half the after-tax
number of vested shares from current PSP and RSP awards until they satisfy the
shareholding guideline.
Executives will be required 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.
Not applicable.
Not applicable.
Overview 113
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Variable remuneration
Annual bonus
scheme and
deferred annual
bonuses
with the Group’s longer-term
strategic aims.
Designed to motivate Executive
Measures and targets are set annually at the beginning of the relevant
Directors to focus on annual goals
financial year and payout levels are determined by the Committee after the
and milestones that are consistent
year-end based on performance against those targets.
Typically, a minimum of 40% of the bonus earned will be deferred into
shares. The deferral period will usually be two 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 maximum opportunity for current Executive Directors are:
• 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.
Restricted Share
Designed to simplify long-term
Annual awards of rights over shares calculated as a percentage of base salary.
Plan (RSP)
incentives and align reward for
Awards normally vest three years from the date of grant subject to review by
the Executive Directors with the
the Committee of performance against pre-determined underpin/s. If any of the
delivery of shareholder value
creation through sustainable
underpin criteria are not met, the Committee will consider whether to reduce
vesting (including to nil). After vesting, shares are usually subject to an additional
share price growth and continued
two -year holding period.
dividend payments by delivery
of the business strategy.
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 90% of base salary.
The current maximum opportunity for Executive Director roles is:
Performance underpins may be based around key financial,
governance and strategic measures. They will be set taking into
account the business strategy and may vary from year to year if the
Committee deems it appropriate. Full disclosure of the underpins
will be provided in the relevant Remuneration Report.
• Chief Executive: 90% of salary
• Other Executive Directors: 75% of salary.
Alignment of the Executive
Requirement to build up interests in the Company’s shares worth 200% of salary.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
In addition to the underpin/s, the Committee retains general discretion to adjust
the vesting levels to ensure they appropriately reflect the underlying performance
of the Group or individual.
Dividend equivalents accrue on shares subject to RSP awards and are paid on
vesting in respect of those shares that vest.
Award levels and underpins are reviewed before each award cycle to ensure that
they remain appropriate.
Recovery and withholding provisions apply to awards granted under the RSP.
Other aspects
Shareholding
guidelines
Directors’ interests with those
of the Group’s shareholders.
Executive Directors will be required to retain a minimum of half the after-tax
number of vested shares from current PSP and RSP awards until they satisfy the
shareholding guideline.
Post-
employment
Ensures there is an appropriate
Executives will be required to maintain a minimum shareholding of 200% of salary
amount of ‘tail risk’ for Executive
for the first year following ceasing to be a Board Director and 100% of salary for
share ownership
Directors post cessation of
the second year, or in either case if lower, the full shareholding on cessation.
requirements
employment.
GovernanceFinancial StatementsStrategic Report 114
PZ Cussons plc / Annual Report and Accounts 2023
Remuneration Policy continued
Legacy awards
The Committee retains the ability to make any remuneration
payments or payments for loss of office notwithstanding that they
are not in line with the Policy set out above where:
Discretion
The Committee will operate the annual bonus and awards under
the LTIP in accordance with the plan rules, shareholder approved
Policy and Listing Rules where applicable.
• The terms of payment were agreed before the Policy came
into effect, as long as they were in line with the shareholder-
approved Directors’ Remuneration Policy in force at the time
they were agreed
• The terms of the payment were agreed at a time when the
relevant individual was not a Director of the Company and the
payment was not in anticipation of the individual becoming a
Director of the Company, in the Committee’s opinion.
Minor amendments
The Committee retains the ability to make minor amendments to
the Policy for regulatory, exchange control, tax or administrative
purposes or to take account of a change in legislation without
seeking shareholder approval.
As per typical market practice, the Committee retains discretion in
a number of areas including (but not limited to) the participants,
timing, vehicle and size of the award. The Committee may amend
or substitute any performance conditions or underpins if they are
of the view that the original conditions are no longer appropriate
and the new conditions are not materially less difficult to satisfy.
In exceptional circumstances, the Committee has the discretion
to change the vesting level to ensure that the outcomes are fair,
appropriate and reflective of the underlying financial performance
of the Group.
Non-Executive Directors Remuneration Policy table
The components of Non-Executive Directors’ remuneration are described below:
Element
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Fees are based on the level of fees paid to Non-Executive Directors
Not applicable.
serving on boards of other relevant 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.
Not applicable.
Not applicable.
Non-Executive
Director 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.
Fees are normally reviewed every year and may be 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 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.
Other aspects
Shareholding
guidelines
Alignment of the Non-Executive
Directors’ interests with those
of the Group’s shareholders.
Expectation that Non-Executive Directors build up interests in the Company’s
shares worth 100% of their base fee, net of statutory deductions, within four
years of appointment.
Performance scenarios
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.
£2,550,575
£2,262,575
£1,878,575
31%
31%
39%
25%
42%
32%
£726,575
100%
Minimum
Target
Maximum
34%
38%
28%
Maximum
(including share
price growth)
Fixed pay
Annual bonus
Long-Term Incentive Plan
Jonathan Myers
Overview 115
An award may be subject to adjustments in the event of a
variation of the Company’s share capital, demerger, delisting,
special dividend or other corporate event that materially impacts
the value of awards.
Recovery and withholding provisions
The Committee may, in its discretion, subject to applicable laws,
apply malus and/or clawback to annual bonus, PSP and RSP
awards at any time within three years of grant or payment as
applicable, in circumstances of a material 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.
Non-Executive
Director fees
To reflect the time commitment
Fees are normally reviewed every year and may be amended to reflect market
in preparing for and attending
positioning and any change in responsibilities.
meetings, the duties and
responsibilities of the role and
the contribution expected from
the Non-Executive Directors.
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.
fulfilling their roles.
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
Other aspects
Shareholding
guidelines
Alignment of the Non-Executive
Expectation that Non-Executive Directors build up interests in the Company’s
Directors’ interests with those
shares worth 100% of their base fee, net of statutory deductions, within four
of the Group’s shareholders.
years of appointment.
Non-Executive Directors Remuneration Policy table
The components of Non-Executive Directors’ remuneration are described below:
Element
Purpose and link to strategy
Operation
Maximum opportunity
Fees are based on the level of fees paid to Non-Executive Directors
serving on boards of other relevant 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.
Performance measures
Not applicable.
Not applicable.
Not applicable.
£1,407,075
£1,257,075
£1,057,075
28%
28%
43%
24%
40%
36%
£457,075
100%
Minimum
Target
Maximum
32%
36%
32%
Maximum
(including share
price growth)
Fixed pay
Annual bonus
Long-Term Incentive Plan
Sarah Pollard
GovernanceFinancial StatementsStrategic Report 116
PZ Cussons plc / Annual Report and Accounts 2023
Remuneration Policy continued
Fixed elements of remuneration
Base salary as at 1 September 2023 (£640,000 for Jonathan Myers and £400,000 for Sarah Pollard), an estimate of the value of benefits and
pension contributions at 10% of base salary.
Minimum
performance
Annual bonus
Target performance
Maximum performance
Maximum performance including share price growth
0%
60% of maximum opportunity
100% of maximum opportunity
100% of maximum opportunity
Jonathan Myers – 60% of 150% of salary
Jonathan Myers – 150% of salary
Jonathan Myers – 150% of salary
Sarah Pollard – 60% of 125% of salary
Sarah Pollard – 125% of salary
Sarah Pollard – 125% of salary
Long-Term Incentive Plan – RSP
0%
100% of award
100% award
Jonathan Myers – 90% of salary
Jonathan Myers – 90% of salary
Sarah Pollard – 75% of salary
Sarah Pollard – 75% of salary
100% of award with a 50% increase in share
price over the vesting period
Jonathan Myers – 90% of salary
Sarah Pollard – 75% 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. Our approach to
remuneration on recruitment is consistent with our overall
philosophy of offering a package sufficient to attract talent of the
calibre needed while aiming to pay no more than is necessary.
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 pre-determined
compensation on termination exceeding one year’s salary and
contractual benefits. Details of the current Executive Directors’
service contracts are shown below:
New appointments may have their salaries set at a lower
level while they become established in their role with higher
than typical increases made on a phased basis subject to the
individual’s performance and contribution to the Group.
Name
Jonathan Myers
Sarah Pollard
Date of appointment
1 May 2020
4 January 2021
To facilitate the hiring of candidates, 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 LTIP. The Committee will ensure that such awards are linked
to the achievement of appropriate and challenging performance
measures and/or underpins as appropriate.
Appropriate costs and support will be covered if the recruitment
requires relocation of the individual.
If an Executive Director is promoted internally, existing awards
and ongoing prior remuneration obligations will usually continue
to run and they will typically continue to participate in plans
or benefits that were in place prior to their appointment to
the Board.
On recruitment of a Non-Executive Director, the Policy elements
set out in the table above will apply.
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.
Overview 117
Long-Term Incentive Plans
Cessation of directorship/employment before the vesting date:
Death
The award will normally vest as soon as practicable following death and will not typically be subject to a
holding period.
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 award will normally vest on the original vesting date. The Committee will have sole discretion as to the
extent to which the award will vest, taking into account the extent to which the performance conditions
and performance underpins have been met for the PSP and RSP respectively.
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 or underpins have been met up to that date.
Awards will be subject to any applicable holding period unless the Committee determines otherwise.
The Committee will reduce the award to reflect the period that has elapsed at the time of cessation unless
the Committee determines otherwise.
Any other reason
The award will lapse upon cessation of directorship/employment.
Cessation of directorship/employment during the holding period
(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
The award will lapse upon cessation of directorship/employment.
Any other reason
Annual bonus scheme – cash element
The award will generally be released at the end of the holding period
unless the Committee determines otherwise.
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. The bonus will be paid at the usual time unless in exceptional circumstances when the Committee
may determine to accelerate the payment.
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
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.
GovernanceFinancial StatementsStrategic Report 118
PZ Cussons plc / Annual Report and Accounts 2023
Remuneration Policy continued
Change in control
The rules of the Long-Term Incentive Plan 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 or
underpins 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 Committee is provided with
information at each meeting setting out management approach
to pay around the Group. During the last year this has been
predominantly focused on management’s activities to support
employees during the cost-of-living crisis but has also covered
the Group-wide pay review budget which is one of the key factors
considered by the Committee 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,
their representative bodies and other interested parties such as
proxy agencies when formulating and implementing the Policy.
During 2023, the Committee consulted major shareholders
in respect of the new Policy, representing over 60% of our
share capital. The Committee fully considered all feedback and
comments received before finalising the terms of 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 AGM 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
Expiry of term
David Tyler (Chair1)
23 November 2025
Caroline Silver (Chair2)
31 March 2023
Kirsty Bashforth
31 October 2025
Dariusz Kucz3
John Nicolson
Jitesh Sodha
30 April 2024
30 April 2025
30 June 2024
Jeremy Townsend
31 March 2026
Valeria Juarez
22 September 2024
1 Chair from 23 March 2023.
2 Chair until 23 March 2023 when she retired from the Board.
3 Stepped down from the Board 14 September 2023.
The letters of appointment of Non-Executive Directors and service
contracts of Executive Directors are available for inspection at the
Company’s registered office during normal business hours and will
be available at the AGM.
Overview 119
Report on the Directors’ Remuneration
This Report on Directors’ Remuneration, sets out how the current Policy was applied throughout FY23 and how our new proposed
Directors’ Remuneration Policy will be applied during FY24. The Report on Directors’ Remuneration is subject to an advisory vote at
our 2023 AGM.
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 2023:
Executive Directors
Salary/fees1
Benefits2
Pension3
Total fixed
Bonus4
PSP5
Other
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Total variable
2023
Total
2022
2023
2022
Non-Executive Directors
Jonathan Myers
Sarah Pollard
607,797
587,938
22,575
22,520
62,073
57,500
692,445
667,958
736,331
483,276
142,763
879,094
483,276
1,571,539
1,151,234
361,188
332,313
17,075
17,020
36,850
32,499
415,113
381,832
370,382
227,630
27,020
397,402
227,630
812,515
609,462
David Tyler6
Caroline Silver7 Kirsty Bashforth
Dariusz Kucz
John Nicolson
Jeremy
Townsend
Jitesh Sodha8
Valeria Juarez9
Salary/fees1
2023
£25,048
£244,231
£250,000
£65,000
£65,416
£60,000
£60,416
£65,000
£65,000
£65,416
£65,416
£55,000
£50,416
£55,000
£38,076
Benefits2
Other
Total
2022
2023
2022
2023
2022
2023
2022
£25,048
£244,231
£250,000
£65,000
£65,416
£60,000
£60,416
£65,000
£65,000
£65,416
£65,416
£55,000
£50,416
£55,000
£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
Jonathan Myers and Sarah Pollard receive salary supplements of 10% of salary in lieu of pension contributions.
4 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 120 to 121.
5
The 2020 PSP was valued based on a 3-month average share price on 31 May 2023 of £1.904. The share price at date of award was £2.285 and £2.480 for the CEO and CFO respectively.
Of the vested amounts for the Executive Directors, nothing was attributable to share price appreciation over the performance period. The Committee did not exercise any discretion in
relation to the vesting of the awards or share price changes.
6 David Tyler was appointed to the Board on 24 November 2022 and as Chair on 23 March 2023.
7 Caroline Silver retired from the Board on 23 March 2023.
8
Jitesh Sodha was appointed to the Board on 1 July 2021.
9 Valeria Juarez was appointed to the Board on 22 September 2021.
Amounts are rounded to the nearest Pound Sterling.
GovernanceFinancial StatementsStrategic Report
120
PZ Cussons plc / Annual Report and Accounts 2023
Report on the Directors’ Remuneration continued
Base salary (audited)
Base salaries for individual Executive Directors are reviewed by the Committee annually, with increases taking effect from 1 September.
Salaries are set with reference to the scope of the role and the markets in which PZ Cussons operates, the performance and experience
of the individual, pay levels in other organisations of a similar size and complexity and pay increases elsewhere in the Group.
The table below sets out details of the changes to base pay for the Executive Directors.
Salary with effect from 1 September 2023
Salary with effect from 1 September 2022
Jonathan Myers
CEO
£640,000
£612,979
Sarah Pollard
CFO
£400,000
£370,000
Jonathan Myers’ base salary has been increased by 4.4% with effect from 1 September 2023. This is below the average level awarded to
the wider employee population in the UK.
Sarah Pollard, CFO, was appointed on a salary materially lower than that paid to her predecessor, and we have previously disclosed our
intention to review her base salary periodically taking into account her performance and increased experience in the role. The Committee
has reviewed the CFO’s salary during the year, taking into account a number of reference points, and is proposing to increase her salary
by 8.1% to £400,000 effective from 1 September 2023. This increase, along with other aspects of her package, positions the CFO more
competitively.
Non-Executive Director fees (audited)
As reported last year, there were no increases to fees for Non-Executive Directors for FY23.
The following fees will be applicable from 1 September 2023:
Basic fees
Chair1
Non-Executive Director
Additional fees
Senior Independent Director
Chair of Audit & Risk or Remuneration Committee
Chair of any other Committee
Director responsible for employee engagement2
From 1 September 2023
From 1 September 2022
Increase
£286,125
£60,000
£10,000
£12,500
£5,000
£5,000
£262,500
£55,000
£10,000
£10,000
£5,000
£5,000
9%
9%
0%
25%
0%
0%
1 The Chair of the Board does not receive additional fees for chairing other Board Committees.
2
The Chair of the Remuneration Committee will also act as the Director responsible for Employee Engagement from 14 September 2023.
Annual bonus for the year ended 31 May 2023 (audited)
In respect of the year ended 31 May 2023, the CEO, Jonathan Myers, and the CFO, Sarah Pollard, both participated in the annual
bonus scheme.
Under this scheme, the CEO was eligible to earn a cash bonus of up to 150% of base salary and the CFO 125% of base salary, 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 FY23 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 in the following table.
Overview
121
FY23 Financial targets
The financial targets and our performance against them are set out below:
Adjusted profit before tax
Revenue growth
Net working capital percentage
Total
Proportion of
total bonus
Threshold
(10% payout)
Target
(60% payout)
Stretch
(100% payout)
Actual
performance*
% of total
bonus payable
40%
30%
10%
£64.5m
£69.0m
£72.5m
£71.1m
£578.3m
£606.4m
£634.7m
£621.4m
11.0%
10.0%
9.5%
10.4%
33.6%
24.4%
4.1%
62.1%
* 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 2023 strategic objectives related to organisational effectiveness and strategic execution. The table below sets out the key milestones
achieved against each objective.
Metric
Milestones achieved
Organisational
effectiveness
• Successful delivery of key milestones in projects to improve the Company’s controls and compliance and reduce
costs. For example:
– Simplification in Nigeria with route to market improvements, including the consolidation of suppliers and
distribution centres, simplification of the portfolio with the sale of residential properties and the start of
improvement in the efficiency of usage of the SAP system
– In the UK, our marketing agencies have been consolidated from over 70 to fewer than 20
As part of the successful relaunch of Imperial Leather, the number of Stok Keeping Units (SKUs) has been
significantly reduced, improving supply chain efficiency and profitability
– Major supply chain transformation, reducing complexity across the Group.
• Significant progress has been made on the organisational structure including a focus on developing and
promoting internal talent. Four internal leaders were promoted and joined the Executive Leadership Team,
further strengthening the talent and capability needed to deliver the ambitious change agenda
• Delivery of critical elements of the People Agenda including strengthening of the talent pipeline with the launch of
our first Graduate Programme in FY23 and the launch of performance management tools to better support effective
management of our talent, including identifying over/under performers and implementing clear action plans
where needed.
Strategic execution
• Achievement of key milestones in the supply chain transformation including near-shoring the procurement function
from Singapore, outsourcing production of our Thai Soap Factory and outsourcing fragrance supply
• Ongoing simplification of our Nigerian operations, including a halving of SKU count and reduction of tail brands by a
third, and the successful roll-out of an improved ERP infrastructure
• Expansion of our brands into new markets and category adjacencies, including the launch of Morning Fresh into the
Australian auto dishwash segment and the launch of Original Source in Spain.
The Committee reviewed the performance of the Executive
Directors against the objectives set out above, while also taking
into account the experience of the Company’s wider stakeholders,
and determined a bonus payout of 18% out of a maximum of 20%
against the strategic targets.
Overall, 80.1% of the maximum bonus was earned by the CEO
and CFO. 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 FY23.
25% of the FY23 annual bonus, totaling £184,083 for the CEO and
£92,596 for the CFO will be deferred into shares for three years.
Annual bonus for the year ending 31 May 2024
Executive Directors will continue to be eligible to participate in
the annual bonus scheme in respect of the year ending 31 May
2024 under the Policy. The annual bonus opportunity for the CEO
and CFO 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 FY23, the specific annual bonus metrics reflect current
strategic priorities. For FY24 we are planning to re-weight the
profit measure (from 40% to 50% of the financial element of
the bonus) and the revenue measure (from 30% to 20%). We
are also moving to Operating Profit from Profit Before Tax and
Free Cash Flow from Net Working Capital. The use of Operating
Profit reduces volatility and the potential for windfall gains while
providing enhanced focus on aligning pay with profitability.
GovernanceFinancial StatementsStrategic Report
122
PZ Cussons plc / Annual Report and Accounts 2023
Report on the Directors’ Remuneration continued
Free Cash Flow is a more comprehensive measure of the
Company’s ability to generate cash, explicitly considering the cost
of capital investment. The revenue growth metric, which drives
organic growth will be maintained at 10%. The remaining portion of
the bonus (20%) will be based on key business objectives relating
to delivery of the strategy and key business priorities for FY24.
Targets for the FY24 bonus have been set by the Committee
to be appropriately demanding and also reflective of current
commercial circumstances, internal planning and market
expectations. The Directors consider that the Group’s
future targets are commercially sensitive and could provide
our competitors with insights into our business plans and
expectations. As such, they should therefore remain confidential
to the Company at this time (although they will be retrospectively
disclosed in next year’s Directors’ Remuneration Report).
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.
To reflect the new Policy, a minimum of 40% of the FY24
bonus earned will be deferred into shares. The deferral period
will typically be two years (unless the Committee determines
otherwise).
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
The following sets out details of:
• Vesting of PSP awards granted in the year ended 31 May 2021
• PSP awards granted in the year ended 31 May 2023
• RSP awards to be granted in the year ended 31 May 2024.
Executive Directors and certain senior executives were eligible to
participate in the PSP, which provided 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. It’s proposed that
going forward, subject to shareholder approval of the Policy at the
AGM, the Executive Directors, and other senior managers, will be
granted awards under the RSP. More details are provided below.
Deferred bonus awards granted in the year ended 31 May 2023 (audited)
As disclosed in last year’s Report on Directors’ Remuneration, and in line with the Company’s current Remuneration Policy, 25% of the
annual bonus earned for the year ended 31 May 2022 was deferred into shares for both Jonathan Myers and Sarah Pollard as set out
below. Awards ordinarily vest on the third anniversary of grant, conditional only on continued employment.
Deferred Bonus Share Plan (DBSP)
Jonathan Myers
Sarah Pollard
Scheme
DBSP 2021
DBSP 2021
Basis of award
25% of annual bonus
25% of annual bonus
Number of
shares1
60,653
28,569
Face value
Vesting/
Transfer date
£120,821
23-Sept-25
£56,909
23-Sept-25
1
Jonathan Myers and Sarah Pollard were granted the above awards on 23 September 2022 calculated using the average mid-market closing share price on 22 September 2022 of £1.992.
The share price used to determine the number of shares subject to the award was in accordance with the rules of the {LTIP 2020}.
Vesting of PSP awards granted in the year ended 31 May 2021 (audited)
PSP awards were made to the CEO and CFO in the year to 31 May 2021 and are due to vest on 27 November 2023 and 1 February 2024
respectively and are based on performance over the period from 1 June 2021 to 31 May 2023. The award for the CFO was pro-rated for
the period from appointment.
The table below sets out the targets and performance achieved:
EPS growth
Revenue Growth from Must Win Brands
Completion of B Impact Assessment
Total
Weighting
Threshold
(25% payout)
Maximum
(100% payout)
Actual
performance
% payable
60%
20%
20%
1% p.a.
5% p.a.
2%
3%
(1.0)%
(6.1)%
See below
See below
See below
0%
0%
20%
20%
Overview
123
The sustainability targets for the 2021 LTIP awards are set out in the table below:
Sustainability target
Completion of B Impact Assessment and agreement with the Board on an associated long-term sustainability goal.
Completion of B Impact Assessment, agreement on an associated long term sustainability goal, year-by-year milestone targets
with an agreed implementation plan and evidence of early progress against the agreed action plan.
Extent of vesting
25%
100%
2021 was the first year that a sustainability measure was included in the LTIP. Targets were therefore set that focused on our sustainability
strategy and ambitions at that point. As will be clear from relevant Remuneration Reports, targets for future awards have evolved based
on the progress that has been made to ensure they remain suitably stretching, year-on-year.
The management team have made very strong progress against the targets set in 2021, as detailed in the table below. The overall vesting
level for 2021 awards has been discussed in detail at both the ES and Remuneration Committees with both Committees in full agreement
on the vesting level. The following table sets out the detailed performance against the target.
Completion of B Impact
Assessment
An externally validated, robust and objective B Corp baseline score, that included consideration across
a number of areas including governance, workers, community, environment and customers, was set
for the business units.
Agreement on associated
long-term sustainability goals
Based on the baseline scores, long-term goals for all business units and functions were set to assist
and support certification of all business units by 2026.
Year-by-year milestone targets
with an agreed implementation
plan
A series of actions and improvement plans have been defined for each business unit, based on the
long-term goals and baseline assessment. The improvement plans for UK PC, Beauty, Asia and ANZ
have been agreed; work on equivalent plans for Africa is continuing to the agreed timeline.
Evidence of early progress
against the agreed action plan
There have been a number of actions that demonstrate progress against the action plans including
the adoption of green building standards, a review of employee benefits and approaches to carbon
footprint assessments. The actions taken to date have already improved our business impact
assessment scores.
Neither the EPS or Revenue growth measures achieved the threshold level of performance and as such the elements of the award
relating to those measures lapsed. The Committee determined that 20% of the element relating to sustainability had vested. This results
in 20% of the maximum award vesting, equivalent to 30% of salary for the CEO and 25% of salary for the CFO. The Committee has
reviewed this level of vesting in the context of wider business performance and stakeholder experience and is comfortable that vesting is
justified at this level with no need to apply discretion.
PSP Awards granted in the year ended 31 May 2023 (audited)
As disclosed in last year’s Report on Directors’ Remuneration, and in line with the Company’s current Remuneration Policy, during the
year ended 31 May 2023, awards under the PSP were made to Jonathan Myers and Sarah Pollard over shares with a value equal to 150%
of base salary and 125% of base salary respectively as set out below:
Performance Share Plan
Scheme
Basis of award
Number of
shares1
Face value
Percentage vesting
for threshold
performance
Performance
period end
date
Jonathan Myers
Sarah Pollard
LTIP 2020
150% of salary
461,580
£919,467
LTIP 2020
125% of salary
232,178
£462,498
25%
25%
23-Sept-25
23-Sept-25
1
Jonathan Myers and Sarah Pollard were granted the above awards under the LTIP on 23 September 2022 calculated using the average mid-market closing share price on 22 September
2022 of £1.992. The share price used to determine the number of shares subject to the award was in accordance with the rules of the LTIP 2020.
As for FY22, the performance metrics were aligned with the business’ mid- to long-term priorities, with unchanged weightings at 60% for
the EPS growth metric and 20% each for the strategic revenue metric and sustainability metrics. The sustainability measures were revised
and are 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). The following tables provide further details.
GovernanceFinancial StatementsStrategic Report 124
PZ Cussons plc / Annual Report and Accounts 2023
Report on the Directors’ Remuneration continued
EPS and strategic revenue targets
Measure
EPS growth
60% weighting
Weighting
Description
Strategic revenue target
20% weighting
Growth in adjusted EPS over
three-year performance period
Revenue growth from ‘Must Win Brands’ measured relative to growth in
revenue from Portfolio Brands
Threshold target
(25% vesting)
Maximum target
(100% vesting)
3% per annum
7% per annum
3%
9%
Pro-rata vesting between threshold and maximum targets.
Sustainability targets
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.
10% reduction in virgin plastic
by end of performance period
(2021 baseline).
On-target
(62.5% payout)
Maximum target
(100% payout)
Carbon neutral in global operations
+ 10% absolute reduction by end of
performance period (scopes 1+2) +
established verified baseline scope 3
measurement.
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) + 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 72% across the three-year
performance period.
Employee wellbeing scores
average 75% across the three-year
performance period.
Employee wellbeing score average
78% across the three-year
performance period.
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.
RSP awards to be granted in the year ended 31 May 2024
As already set out and subject to shareholder approval of the Policy at the AGM, going forward, the Executive Directors will be granted
awards under the RSP at a lower value and with underpins, rather than PSP awards. The maximum award will be 90% of base pay for
the CEO and 75% of base pay for the CFO. The award vesting date for Executive Directors will be aligned with that of the rest of the
Company’s LTIP awards, expected to be September 2026. Post vesting, awards will be subject to a further two-year holding period.
No share plan rules are being tabled for approval at the AGM as awards can be made under the existing LTIP Plan rules that were
approved most recently in 2021.
The vesting of the RSP will be subject to three underpins detailed below over the three financial years to May 2026. The Committee will
also retain the ability to reduce vesting (including to nil) subject to performance against the underpins measured over the vesting period:
• No material weakness in the underlying financial health or sustainability of the business
• Maintenance of appropriate governance frameworks, including acceptable controls and compliance performance and no events that
result in significant reputational damage to the Company (as determined by the Board)
• To ensure ongoing focus on our critical ESG commitments, satisfactory performance against environmental and societal commitments.
The Committee will retain discretion to ensure that overall vesting levels are aligned to the underlying financial performance on both a
Group and individual basis. Recovery and withholding provisions as set out in the Policy will also apply to these awards.
Overview 125
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
• 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
• As set out in the Remuneration Policy, to defer 40% of any bonus earned into shares for two years
• After ceasing to be a Director, 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.
Interests in shares (audited)
The interests in the Company’s shares of each of the Executive Directors as at 31 May 2023 (together with interests held by any
connected persons) were:
Ordinary shares
held at 31 May 2023
Interests in share incentive schemes
that are not subject
to performance conditions as
at 31 May 2023
Interests in share incentive schemes
that are subject
to performance conditions as
at 31 May 20231
Value of shares held at
31 May 2023 as a
% of base salary
J Myers
S Pollard
101,175
29,485
86,539
27,378
1,301,432
493,349
56.35%
28.28%
1
Includes unvested awards under the Performance Share Plan that remain subject to performance.
While the Executive Directors 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.
Jonathan Myers purchased 61,050 shares on 28 June 2023 that are not included above. There have been no other changes in the
Executive Directors’ interests between 31 May 2022 and the date of this report.
The Non-Executive Directors’ shareholdings are disclosed 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 2022
Granted/
allocated
in year
Exercised/
vested
in year
Lapsed in
year
Number of
options/
awards at
31 May 2023
Date of award
Share price
at date of
award (£)
Share price
at date of
vesting (£)
Gain (£)
Vesting/
transfer
date1
J Myers
S Pollard
J Myers
27-Nov-2020
375,000
1-Feb-2021
70,973
23-Sep-2021
403,806
S Pollard
23-Sep-2021
190,198
J Myers
J Myers
26-Nov-2021
61,046
23-Sep-2022
S Pollard
23-Sep-2022
–
–
461,580
232,178
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
375,000
70,973
403,806
190,198
61,046
461,580
232,178
2.285
2.480
2.265
2.265
1.958
1.992
1.992
–
–
–
–
–
–
–
– 27-Nov-23
–
1-Feb-24
– 23-Sep-24
– 23-Sep-24
– 27-Nov-23
– 23-Sep-25
– 23-Sep-25
1 Subject to performance conditions. Shares vesting under the award are subject to a two-year post-vesting holding period.
GovernanceFinancial StatementsStrategic Report 126
PZ Cussons plc / Annual Report and Accounts 2023
Report on the Directors’ Remuneration continued
Deferred bonus awards (audited)
Under the annual bonus, 25% of any payment is deferred into shares for three years.
Date of award
J Myers
23-Sep-2021
S Pollard
23-Sep-2021
J Myers
23-Sep-2022
S Pollard
23-Sep-2022
Number of
options/
awards at
1 June 2022
98,011
18,719
Granted/
allocated
in year
Exercised/
vested
in year
Lapsed in
year
Number of
options/
awards at
31 May 2023
Share price
at date of
award (£)
Share price
at date of
vesting (£)
Gain (£)
Vesting/
transfer
date1
–
–
–
–
–
–
–
–
98,011
18,719
60,653
28,569
2.265
2.265
1.992
1.992
–
–
–
–
– 23-Sep-24
– 23-Sep-24
– 23-Sep-25
– 23-Sep-25
–
–
60,653
28,569
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 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.
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 2023 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
)
£
(
e
u
a
V
l
300
250
200
150
100
50
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
PZ Cussons plc
FTSE 250 Index
Overview
Chief Executive Officer remuneration for previous ten years
2022–23
2021–22
2020–21
2019–201
2018–19
2017–18
2016–17
2015–16
2014–15
2013–14
127
Total
remuneration
(£000)
Annual bonus %
of maximum
opportunity
LTIP % of
maximum
opportunity
1,572
1,151
1,518
660
802
732
1,586
1,105
1,463
1,053
80.1%
54.4%
100.0%
n/a
0%
0%
100.0%
47.4%
72.8%
78.0%
20%
n/a
n/a
n/a
0%
0%
0%
0%
32.5%
0%
1
For 2019–20 the figure for total remuneration represents the pay of A Kanellis from 1 June 2019 to 31 January 2020, the fees paid to C Silver while acting as Executive Chair from
1 February 2020 through 30 April 2020 and the pay of J Myers since his appointment on 1 May 2020. No bonus was paid to any of these individuals and the 2017 and 2018 PSP awards
lapsed in full.
Relative importance of spend on pay
The table below shows PZ Cussons’ distributions to shareholders and total employee pay expenditure for the financial years ended
31 May 2022 and 31 May 2023, 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 49.
2023
£m
84.7
26.8
74.1
2022
£m
72.8
25.5
65.8
Change
%
16.3%
5.1%
12.6%
GovernanceFinancial StatementsStrategic Report
128
PZ Cussons plc / Annual Report and Accounts 2023
Report on the Directors’ Remuneration continued
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 FY22 to FY23.
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
Employees
Jonathan
Myers
(CEO)
Sarah
Pollard
(CFO)
David Tyler
(Chair)
Caroline
Silver
(Chair)
Kirsty
Bashforth
Dariusz
Kucz
John
Nicolson
Jeremy
Townsend
Jitesh
Sodha
Valeria
Juarez
3.5%
0.0%
3.4%
0.2%
8.7%
0.3%
41.6%
52.4%
62.7%
n/a
0.0%
n/a
2022-2023
Salary/fees
Benefits
Bonus
2021-2022
Salary/fees
Benefits
3.5%
0.0%
3.5%
0.0%
10.5%
0.0%
Bonus
(62.0%)
(56.0%)
38.0%
2020-2021
Salary/fees
Benefits
Bonus
3.0%
0.0%
0.0%
0.0%
0.1%
n/a
n/a
n/a
n/a
(2.3)%
(0.6)%
(0.7)%
(0.6)%
(0.6)%
n/a
n/a
0.0%
(87.0)%
n/a
0.0%
n/a
6.1%
0.0%
n/a
0.0%
n/a
5.1%
0.0%
n/a
0.0%
n/a
4.7%
0.0%
n/a
0.0%
n/a
4.7%
0.0%
n/a
9.1%
0.0%
n/a
44.4%
0.0%
n/a
100.0%
100.0%
0.0%
n/a
0.0%
n/a
(14.3)%
17.5%
0.0%
0.0%
(19.0)%
(87.0)% (100.0)% (100.0)% (100.0)%
n/a
n/a
n/a
n/a
n/a
n/a
–
–
–
–
–
–
–
–
–
–
–
–
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 Jonathan Myers in relation to FY23. As set out, 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 2023. For any employee who joined after 1 June 2022 and was still employed
at 31 May 2023, 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.
2022–23
2021–22
2020–21
2019–20
Method
CEO Single
figure (£000)
Upper quartile
Median
Lower quartile
A
A
A
A
1,572
1,151
1,518
660
18
15
19
9
29
23
29
13
44
30
40
19
Overview 129
It should be noted that the pay ratio is likely to change year-on-year given a significant proportion of the CEO’s remuneration package
comprises of variable pay.
The salary and total pay for the individuals identified at the lower quartile, median and upper quartile positions as at 31 May 2023 are set
out below:
2023
Upper quartile individual
Median individual
Lower quartile individual
Salary
Total pay
£74,955
£45,000
£30,828
£89,263
£54,004
£35,695
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 four scheduled and two additional meetings during the 2023 financial year with our activities summarised in the box
on page 130.
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)
• Jeremy Townsend
• Jitesh Sodha
• Valeria Juarez.
During the year, the Committee received advice from Willis Towers Watson (WTW). WTW is a member of the Remuneration Consultants
Group and has signed the voluntary Code of Practice for remuneration consultants. During the year, it has advised the Committee in
relation to market data, evolving market practice and provided support during the Remuneration Policy review. The fees paid to WTW in
respect of this work were charged on a time and materials basis and totalled £115,000 excluding VAT for the year. WTW does not have
any other connections with PZ Cussons plc or any Director of the Company. The Committee is satisfied that the advice provided by WTW
is objective and independent.
During the year, the Committee consulted Caroline Silver and David Tyler (in their capacity as Non-Executive Chair) on issues where it felt
their experience and knowledge could benefit its deliberations and they attended meetings by invitation. The Committee also consulted
Jonathan Myers as CEO on proposals relating to the remuneration of members of the Group’s senior management team and he too
attended meetings by invitation. The CFO, Chief People Officer and Group Reward Director 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.
GovernanceFinancial StatementsStrategic Report 130
PZ Cussons plc / Annual Report and Accounts 2023
Report on the Directors’ Remuneration continued
Committee activities during the year ended 31 May 2023
July 2022
• Update on external environment from
• Review of vesting of past awards under the PSP and update
independent advisor
on the progress of in-flight awards
• Review of the impact of the Childs Farm
• Review of financial targets for the PSP for FY22
acquisition on incentives
• Review annual bonus awards for FY22
• Review of structure and financial targets
for the annual bonus scheme for FY23
• Approval of executive salary review.
• Review and approval of financial targets
for the annual bonus scheme for FY23.
August 2022
• Review of draft Remuneration Report in respect of FY22
• Review of levels of share ownership
• Update on Group reward strategy.
September 2022
• Update on external environment from
• Approval of approach to the Remuneration Policy review
independent advisor
• Approval of PSP targets for the FY23 awards
• Approval of FY22 Directors’ Remuneration Report.
• Wider workforce remuneration update.
January 2023
• Update on external environment from
• Approval of interim senior leader pay increase
independent advisor
• Update on FY23 annual bonus performance and
confirmation of Group PBT threshold post audit
• Update on the progress of in-flight PSP awards
• Approval and review of interim PSP awards.
• Wider workforce remuneration update
• Remuneration Policy approach update
• Review of target setting principles.
March 2023
• Update on FY23 annual bonus performance
• Remuneration Policy approach update
• Update on the progress of in-flight PSP awards
• Review of target adjustment principles.
• Wider workforce remuneration update.
May 2023
• Feedback on policy proposals
• Update on the progress of in-flight PSP awards
• Update on external environment from
• Wider workforce remuneration update including salary
independent advisor
review proposals
• Update on FY23 annual bonus performance
• Review of approach to interim remuneration changes for ELT
• Consideration of FY24 annual bonus target
• Review of Board Chair’s fee.
setting principles.
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. As part of the Policy review process, we engaged with major shareholders comprising c. 60% of our total shareholder base.
Overview 131
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 FY23 this took the form of consultation on the proposed new Policy, as well
as questions at the AGM.
The Remuneration Committee Chair will be available to answer questions from the shareholders regarding remuneration at the 2023
AGM and looks forward to ongoing dialogue with shareholders during FY24.
The votes cast at the 2022 AGM in respect of the approval of the 2022 Report on Directors’ Remuneration and in respect of the approval
of the Directors’ Remuneration Policy are shown below:
Advisory vote on the 2022 Report on Directors’ Remuneration (2022 AGM)
Votes for
Votes against
Number
316,712,358
%
92.82
Number
24,515,949
%
7.18
Votes cast
Votes withheld
341,228,307
75,522
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
%
14.82
Votes cast
Votes withheld
330,421,149
1,021,913
By order of the Board of Directors
Kirsty Bashforth
Chair of the Remuneration Committee
26 September 2023
GovernanceFinancial StatementsStrategic Report 132
PZ Cussons plc / Annual Report and Accounts 2023
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 2023.
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 52 to 57 of the Strategic Report.
The Directors recommend a final dividend of 3.73p (2022: 3.73p) per ordinary share to be paid on 30 November 2023 to ordinary
shareholders on the register at the close of business on 3 November 2023, which, together with the interim dividend of 2.67p
(2022: 2.67p) paid on 6 April 2023, makes a total of 6.40p for the year (2022: 6.40p).
SCOPE OF THE REPORTING IN THIS ANNUAL REPORT AND FINANCIAL STATEMENTS
The Group’s statement on corporate governance can be found on pages 74 to 137 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.
The information required to be disclosed by the UK Listing Rules, LR 9.8.4 R (for the purposes of LR 9.8.4C R) and section 416(1)(a) of the
Companies Act can be found in the following locations:
Section
Topic
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes and other
employee share schemes
Location
Not applicable
Not applicable
Report on Directors’ Remuneration – pages 119 to 131
Waiver of emoluments by a Director
Report on Directors’ Remuneration
Waiver of future emoluments by a Director
Non-pre-emptive issues of equity for cash
Details in relation to major subsidiary undertakings
Not applicable
Not applicable
Not applicable
Parent participation in a placing by a listed subsidiary
Not applicable
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Not applicable
Not applicable
Employee Share Ownership Trust (ESOT): see note 23 of the
Consolidated Financial Statements
Shareholder waivers of future dividends
ESOT: see note 23 of the Consolidated Financial Statements
Agreements with controlling shareholders
Report of the Directors – page 132
1
2
3
4
5
6
7
8
9
10
11
12
13
All the information referenced above is hereby incorporated by reference into this Report of the Directors.
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:
Service in the year ended 31 May 2023
Service in the year ended 31 May 2023
David Tyler
Appointed on 24 November 2022
John Nicolson
Served throughout the year
Caroline Silver
Served until 31 March 2023
Kirsty Bashforth
Served throughout the year
Jonathan Myers
Served throughout the year
Jeremy Townsend
Served throughout the year
Sarah Pollard
Served throughout the year
Jitesh Sodha
Served throughout the year
Dariusz Kucz1
Served throughout the year
Valeria Juarez
Served throughout the year
1 Dariusz Kucz stepped down from the Board and its Committees on 14 September 2023.
Overview 133
DIRECTORS’ INTERESTS
The Directors’ and connected persons’ interests in the share capital of the Company at 31 May 2023, together with their interests at
1 June 2023, or date of appointment if later, are detailed below:
ORDINARY SHARES
Beneficial
David Tyler
Caroline Silver
Jonathan Myers1,2
Kirsty Bashforth4
Dariusz Kucz
Sarah Pollard3
John Nicolson
Jeremy Townsend
Jitesh Sodha
Valeria Juarez5
Total
2023
Number
12,500
42,500
101,175
10,210
7,500
29,485
–
20,000
22,200
7,500
253,070
2022
Number
–
42,500
101,175
10,210
7,500
29,485
–
20,000
22,200
7,500
240,570
1 Charmian Myers, a person closely associated with Jonathan Myers, purchased 61,050 shares on 28 June 2023.
2
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). As at 14 September 2023,
Jonathan Myers held 2,899 shares under the SIP Trust.
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). As at 14 September 2023 and
Sarah Pollard held 2,768 shares under the SIP Trust.
4 Kirsty Bashforth purchased 12,259 shares on 30 June 2023.
5 Valeria Juarez purchased 8,000 shares on 10 July 2023.
Notes:
The figures in the table do not include 9,996,496 (2022: 10,193,781) ordinary shares purchased and held by the Employee Share Option Trust (ESOT) as at 31 May 2023. 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.
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).
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.
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 14 September 2023:
Zochonis Charitable Trust
Sir J B Zochonis Will Trust
Heronbridge Investment Mgt
FIL Limited
Majedie Asset management
J B Zochonis Settlement
Lindsell Train Investment Management
Mrs C M Green Settlement
As at 14 September 2023
As at 31 May 2023
Number of shares
%
Number of shares
63,019,193
49,320,712
31,157,024
21,073,139
21,160,944
19,927,130
18,682,474
15,322,741
14.70%
11.50%
7.27%
4.92%
4.94%
4.65%
4.36%
3.57%
63,019,193
49,320,712
31,157,024
21,073,139
21,160,944
19,927,130
18,682,474
15,322,741
%
14.70%
11.50%
7.27%
4.92%
4.94%
4.65%
4.36%
3.57%
No shares were issued during the year. Further information about the Company’s share capital is given in note 22 of the Consolidated
Financial Statements.
GovernanceFinancial StatementsStrategic Report 134
PZ Cussons plc / Annual Report and Accounts 2023
Report of the Directors continued
ADDITIONAL STATUTORY INFORMATION
Directors’ indemnification
and insurance
Significant agreements –
Relationship Agreement
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.
The Financial Conduct Authority’s UK 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 UK Listing Rules (together, Independence Provisions).
For the purposes of the UK 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 2023, the Concert Party held in the aggregate, approximately 43.13 % of the
issued share capital of the Company.
As required by the UK 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 2023 (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.
Political and charitable
contributions
Charitable contributions in the UK during the year amounted to £501,000 (2022: £185,000).
No political contributions were made (2022: £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 emissions data for the year are contained within the Sustainability – Environment section
on pages 26 to 41.
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.
Overview 135
Employee information
Inclusion and diversity
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 24 and 44 to 45. Employee views are
provided to the Board through updates from the designated Non-Executive Director for employee engagement.
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 (including its Committees) and an Executive Leadership Team (ELT) that reflects the diversity of our
workforce and consumers in the countries in which we operate.
For the purposes of disclosure under Section 414C(8) of the Companies Act, further details on the composition of
our global employee population as at 31 May 2023 are set out in the table below:
2023
2022
2021
2020
2019
Female employees
Male employees
Female senior managers
Male senior managers
Female Group
Board Directors
Male Group
Board Directors
No.
726
1,918
74
109
3
6
%
27
73
40
60
33
67
No.
756
2,005
61
109
4
5
%
27
73
36
64
44
56
No.
832
2,111
51
110
3
4
%
28
72
32
68
43
57
No.
899
2,461
68
125
4
4
%
27
73
35
65
50
50
No.
1,064
2,717
77
150
3
5
%
28
72
34
66
38
62
External Auditor
PricewaterhouseCoopers LLP (PwC) has signified its willingness to act as External Auditor to the Company for the
year ending 31 May 2024 and, in accordance with section 485 of the Companies Act 2006, a resolution for its
appointment 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 on page 98.
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 Risk Management and Principal Risks section on pages 58 to 71 of
the Strategic Report.
Annual General Meeting
The Company’s 2023 Annual General Meeting (AGM) will be held at Manchester Business Park, 3500 Aviator Way,
Manchester, M22 5TG at 10:30am on 23 November 2023. The resolutions that will be proposed at the AGM are
set out in the separate Notice of AGM, which accompanies this Annual Report and Financial Statements.
Share capital
As of 31 May 2023, 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 Act 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.
GovernanceFinancial StatementsStrategic Report 136
PZ Cussons plc / Annual Report and Accounts 2023
Report of the Directors continued
Purchase of own shares
No shares were purchased from 1 June 2022 to 31 May 2023 (2022: nil) and no acquisitions were made by the
ESOT (see note 23 of the Consolidated Financial Statements).
Restrictions on the
transfer of securities
Going concern
Events after the
balance sheet date
Engagement with
Employees, suppliers
and Customers
Additional disclosures
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 UK 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.
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 17 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 69.
The post balance sheet events are described in note 30 to the consolidated financial statements.
Please see Statement of engagement with employees on page 83; Statement of engagement with other business
relationships on page 83 and the Section 172(1) Statement on page 43.
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 10 to 13
• Details of Group subsidiaries including overseas branches are set out in note 29 of the consolidated
financial statements
• Financial instruments and risk management are set out in note 17 of the consolidated financial statements
• Trade payables under vendor financing arrangements are set out in note 18 of the consolidated
financial statements.
Overview 137
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.
DIRECTORS’ CONFIRMATIONS
The Directors consider that the Annual Report, 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 74 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
26 September 2023
GovernanceFinancial StatementsStrategic Report 138
PZ Cussons plc / Annual Report and Accounts 2023
Overview
FINANCIAL
STATEMENTS
Strategic Report
Governance
Financial Statements
139
140 Independent Auditor’s Report
151 Consolidated Income Statement
152 Consolidated Statement of Comprehensive Income
153 Consolidated Balance Sheet
155 Consolidated Statement of Changes in Equity
156 Consolidated Cash Flow Statement
157 Notes to the Consolidated Financial Statements
211 Company Balance Sheet
212 Company Statement of Changes in Equity
213 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.
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.
140
PZ Cussons plc / Annual Report and Accounts 2023
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 2023 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 30 for the consolidated financial statements, and notes 1 to 10 for the parent company financial statements.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and 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”.
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.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Impact of control deficiencies; and
• Impairment of intangible assets.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the group financial statements was £3.08m which was determined on the basis of
4.2% of adjusted profit before tax.
Scoping
The scope of our audit covered 80% of revenue, 88% of adjusted profit before tax and 83% of gross assets.
Overview 141
Significant changes
in our approach
We have designed our audit in light of the deficiencies identified within the group’s IT control environment and our
findings from previous audits. The nature, extent and timing of our audit procedures continue to be modified in
order to respond to the pervasive risks arising from the control deficiencies. We have therefore deemed it necessary
to include our consideration of these deficiencies as a key audit matter in FY23.
In the prior year, we included the identification of cash generating units, and provisions for uncertain tax positions as
key audit matters.
With regards the identification of cash generating units, there have been no significant changes to the business in
the period which would indicate that the conclusions reached in the prior year were incorrect. As such, we do not
consider this to be a key audit matter for FY23.
With regards to uncertain tax positions, whilst the group continues to operate in a number of overseas territories,
the tax landscape is well understood; a number of balances are now settled or nearing settlement or agreed subject
to conditions, there are few new tax judgements arising in the year and we involve specialists throughout the group
to audit these positions. Whilst there continues to be judgement involved in the positions taken, we do not consider
this to be a key audit matter for FY23.
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 references 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 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;
• Obtained an understanding of the current macroeconomic environment and the impact of these on the directors’ assessment of
going concern; and
• Evaluating the appropriateness of the disclosures in the financial statements related to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
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.
Strategic ReportGovernanceFinancial Statements 142
PZ Cussons plc / Annual Report and Accounts 2023
Independent Auditor’s Report continued
To the Members of PZ Cussons plc
5. Key audit matters continued
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. Impact of internal control deficiencies
Key audit matter description
As discussed in the Audit and Risk Committee’s Report on page 96, the group is undergoing a multi-year programme to improve the controls of
the group, and in the year the group has invested £5.1m in their finance transformation programme (as set out in note 3).
IT and business process level control deficiencies were initially identified during the FY20 external audit, and as a result, management and
the directors implemented a controls improvement programme, as noted above. In the current year, there continued to be general IT control
deficiencies relating to privileged access, segregation of duties and third-party oversight. Furthermore, there continues to be a lack of
sufficient review and challenge of forecasts utilised in impairment assessments. Primarily the historic and current year business process control
weaknesses identified have been a contributing factor to the number of prior year adjustments (‘PYAs) identified in both the current and prior
year leading to restatements (as set out in note 1c), and the higher than expected level of corrected misstatements identified through our audit
procedures. We observed an improvement in group financial reporting process level controls in the year.
We have identified the impact of control deficiencies as a key audit matter given the significant additional time spent by senior members of
the audit team considering the impact of control deficiencies, history of restatement, implementing a non-controls strategy and considering
whether there was any exploitation of the controls gaps identified.
How the scope of our audit responded to the key audit matter
We adopted a fully substantive audit approach, with no reliance on internal controls.
We planned our audit in order to respond to the continued deficiencies within the control environment. Consequently, the nature, timing
and extent of our audit procedures continued to be modified as a result of the pervasive risks arising from the deficiencies in the control
environment. Specifically:
• Consistent with the prior year, we have used a lower performance materiality (being 60% of materiality) than would be ordinarily used if the
control environment had been deemed effective. This increased the volume of substantive testing completed. See section 6 below for our
materiality assessment.
• We continued to test a number of transactional balances at an elevated risk level and have therefore continued to perform an increased
level of sample testing.
• We performed additional procedures to identify and address fraud risks, including the involvement of a fraud specialist. We performed
targeted procedures in relation to specific fraud risks, including the risk of management override of controls and the other areas as set out
in section 11.1 below.
• In relation to the GITC deficiencies identified, additional procedures were performed by our IT specialists to determine if the controls gap
had been exploited; additional design and implementation testing was performed by the group audit team over master data review controls;
and risk assessing and testing items identified as a result of ‘Park and Post’ findings identified.
• Senior members of the audit team have performed audit testing directly in the more complex areas of accounting, including impairment
of intangible assets, accounting for quasi-equity loans, as well as consideration of prior year errors identified.
• We utilised data analytics in our testing, particularly with regards to revenue and cost of goods sold where there are large volumes
of transactional data. We performed sample testing on the underlying transactional data used in this analysis in order to assess its
completeness and accuracy, given the IT control deficiencies noted above. We used spreadsheet analysing tools to evaluate the integrity
of management’s going concern and brand impairment models.
Key observations
The control transformation project is in its early stages. There are a number of improvements that need to be made in order to improve the
controls environment and reduce the number of misstatements identified.
Newly identified
Similar level of risk
Increased level of risk
Decreased level of risk
Overview 143
5.2. Impairment of intangible assets
Key audit matter description
As at 31 May 2023, the group recognised indefinite life intangible assets of £230.8m (2022: £245.8m) as per note 10 of the financial
statements, which includes a reversal of a previously charged impairment on Rafferty’s Garden of £4.2m, and an impairment charge of
£16.5m in relation to Sanctuary Spa.
During the year ended 31 May 2023, the group performed its annual impairment assessment, as required by IAS 36 for Rafferty’s Garden.
Sanctuary Spa, Charles Worthington Original Source, St Tropez, Fudge and Childs Farm. The process involved the preparation of discounted
cash flow analysis to support the value in use of the in order to determine the CGUs recoverable amount. We consider Rafferty’s Garden,
Sanctuary Spa and Charles Worthington to be the most sensitive to changes in assumptions.
Rafferty’s Garden is a baby food and nutrition brand operating largely in the Australian market. As a result of financial performance historically,
an impairment charge was recognised during the year to 31 May 2020 of £18.9m, and a partial reversal was recognised due to the brands
recovery post Covid-19 in 2022 of £8.5m. The value in use calculation indicated that the CGUs recoverable amount exceeded its carrying value
and therefore it was appropriate to reverse £4.2m of the previously recognised impairment charge. The increase in the recoverable amount
reflected a change in the current year estimates reflecting the upturn in the brands performance.
Sanctuary Spa is a self-care brand operating largely in the UK market. Historically the market and financial performance of the brand has been
challenging. The value in use calculation indicated an impairment charge was required of £16.5m, which reduces the value of the brand to
£63m. The reduction in recoverable amount in the current year is largely driven by volume and margin declines as consumers are sensitive
to price increases.
Charles Worthington is a personal hair care brand operating largely in the UK market. As a result of financial performance historically an
impairment charge of £16.9m was recognised during the year to 31 May 2020, a partial reversal during the year to 31 May 2021 of £8.3m and
a further impairment of £11.6m during the year to 31 May 2022. The value in use calculation indicated immaterial headroom driven by slower
forecast growth following a strong sales performance in the current year coupled with a forecast recovery in margins after previous inflationary
increases have been absorbed without passing price onto consumers. A range of outcomes which could either result in a future reversal of
previous impairments or a reasonably possible outcome of further impairment being determined.
The impairment and related reversals of impairments on intangible brands, namely acquired brands, are considered a key audit matter due
to the complexity and judgement applied in determining the recoverable value of each of the CGUs, as disclosed in note 1. There are key
judgements over the discount rates to be applied across all CGU’s and the revenue and margin growth rates applicable to Sanctuary Spa,
Charles Worthington and Childs Farm. This matter is also discussed in the Audit and Risk Committee Report on page 99.
How the scope of our audit responded to the key audit matter
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;
• 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;
• Specifically with respect to Sanctuary Spa and Charles Worthington we challenged the brand recovery plans with reference to historic
performance and external market data and with respect to Childs Farm we challenged the international growth assumptions with reference
to the group’s previous experience of developing new brands and launching brands internationally;
• 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;
• Challenged whether the disclosure in the financial statements, including the sensitivities were in line with IAS 36 and IAS 1; and,
• In response to the deficiencies identified with respect to managements review controls over impairment assessments we increased
the level of substantive testing and the seniority of team members completing the work.
Strategic ReportGovernanceFinancial Statements 144
PZ Cussons plc / Annual Report and Accounts 2023
Independent Auditor’s Report continued
To the Members of PZ Cussons plc
5.2. Impairment of intangible assets continued
Key observations
We concur with the directors’ conclusions that an impairment reversal should be recognised in relation to Rafferty’s Garden, and that the
impairment charge is appropriate in respect of Sanctuary Spa. We concluded that the non-reversal of impairment on Charles Worthington was
not material.
We consider that the use of 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. Similarly, the use of a blended discount rate to blended cash flows to account for overseas earnings 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.
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£3.1m (2022: £2.8m)
£0.6m (2022: £0.95m)
Basis for determining
materiality
4.2% of adjusted pre-tax profit (2022: 4.2% 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 (2022: 1% of net assets).
This has reduced as a result of the impairment
recognised on investments in subsidiaries.
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 the business or
other transactions of a 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.
Group materiality £3.1m
Component materiality range
£0.6m to £1.8m
Audit and Risk Committee
reporting threshold £0.15m
Adjusted PBT
£74.1m
Adjusted PBT
Group materiality
Newly identified
Similar level of risk
Increased level of risk
Decreased level of risk
Overview 145
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Parent company financial statements
Performance materiality
60% (2022: 60%) of group materiality
60% (2022: 60%) of parent company materiality
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
• Our cumulative experience from prior year audits;
• The level of corrected, uncorrected misstatements and prior period errors identified in the current year;
• The quality of the control environment, as included as a key audit matter and 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.
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 £154,000 (2022:
£142,000), 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 established portfolio of trusted brands across a range of markets which
includes personal healthcare products and consumer goods. It operates worldwide especially in Africa and other 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 7 components including Singapore, Ghana, Thailand, one legal entity each within the UK and
Nigeria, one trading entity within the US, and the Wilmar joint venture. 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 80% (2022: 88%) of revenue, 88% (2022: 86%)
of adjusted profit before tax, and 83% (2022: 90%) of total 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 component which were lower than group materiality.
Component materiality ranged from £0.6m to £1.8m (2022: £1.3m to £1.9m).
At a 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.
20%
12%
17%
6%
Revenue
21%
Adjusted PBT
11%
Total assets
74%
67%
72%
Full audit scope
Specified audit procedures
Review at group level
Strategic ReportGovernanceFinancial Statements 146
PZ Cussons plc / Annual Report and Accounts 2023
Independent Auditor’s Report continued
To the Members of PZ Cussons plc
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 control
deficiencies as set out in section 5.1.
7.3. Our consideration of climate-related risks
As highlighted in the directors’ Task Force on Climate-Related Financial Disclosures (TCFD) report on page 35, and the principal risks
on pages 61 to 68, the group is exposed to the impacts of climate change on its business and operations. The group continues to develop
its assessment of the potential impacts of climate change and set targets which management considers to be aligned with
the Paris Agreement.
The group discloses that has been no material impact identified in relation to climate change on their financial reporting judgements
and estimates.
As part of our audit procedures, we have held discussions with management to understand the process of identifying climate-related
risks, the determination of mitigating actions and the impact on the group’s financial statements. We performed our own qualitative risk
assessment of the potential impact of climate change on the group’s account balances and classes of transaction and did not identify any
reasonably possible risks of material misstatement on specific account balances. We considered the extent to which climate change-
related impacts had been reflected in the group’s forecast financial information and considered climate-related risks throughout our risk
assessments on each financial statement account balance. Our procedures were performed with the involvement of our ESG specialist
and included reading disclosures included in the Strategic Report to consider whether they are materially consistent with the financial
statements and our knowledge obtained in the audit.
We have not been engaged to provide assurance over the accuracy of these disclosures.
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 partner, supported by members of the group engagement team visited
the Nigerian component, during the audit. The group engagement partner also visited both the Indonesian and Australian components
during the audit period. To supplement these visit, regular meetings were held virtually 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.
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 take 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 the component level, we included group and component management on a
number of the calls with component teams.
Overview 147
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.
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 weaknesses 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, including those that are specific to the group’s sector;
• 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;
‒ the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
Strategic ReportGovernanceFinancial Statements 148
PZ Cussons plc / Annual Report and Accounts 2023
Independent Auditor’s Report continued
To the Members of PZ Cussons plc
11.1. Identifying and assessing potential risks related to irregularities continued
• the matters discussed among the audit engagement team including significant component audit teams and relevant internal
specialists, including tax, 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: presentation of adjusting items and the completeness and accuracy
of 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 laws and regulations applicable to the group (including its
components) and the sector it operates in UK Companies Act, Listing Rules, pensions legislation, environmental and overseas as well
as UK 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 framework related to the sale of beauty, cosmetic, baby 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 did not identify any key audit matters related to the potential risk of fraud or non-compliance
with laws and regulations.
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 in-house legal counsel concerning actual and potential litigation and
claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
HMRC;
• in addressing the risk of fraud within promotional trade spend accruals, performing retrospective reviews of prior year positions;
performing substantive testing over the accrual balance and agreeing to contracts; and considering whether post year end
settlements support or contradict those judgements reached;
• in addressing the risk of fraud within the presentation of adjusting items, testing a sample of adjusting items recognised in the
year, and agreeing these to board approved plans for transformation projects; testing other income and expenses for evidence of
unrecorded adjusting acquisitions; and reviewing the appropriateness of disclosures made in relation to adjusting items; 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.
Overview 149
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the group’s compliance with the provisions of the UK Corporate Governance Code specified
for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on page 69;
• the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why the period
is appropriate set out on page 69;
• the directors’ statement on fair, balanced and understandable set out on page 101;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 58;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set
out on page 99; and
• the section describing the work of the Audit and Risk Committee set out on page 96.
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.
Strategic ReportGovernanceFinancial Statements 150
PZ Cussons plc / Annual Report and Accounts 2023
Independent Auditor’s Report continued
To the Members of PZ Cussons plc
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 6 years, covering the years ending 2018 to 2023. We have
informed the group that the year ended 31 May 2023 will be the final year of our appointment as auditor, and the group has since
undertaken a process to select a replacement auditor, as described on page 96.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit 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 will 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.
John Charlton, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, UK
26 September 2023
Overview 151
Consolidated Income Statement
For the year ended 31 May 2023
Continuing operations
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administrative expenses
Share of results of joint ventures
Operating profit
Finance income
Finance costs
Net finance income/(costs)
Profit before taxation
Taxation
Profit for the year from continuing operations
Discontinued operations
Loss from discontinued operations
Profit for the year
Attributable to:
Owners of the Parent
Non-controlling interests
Earnings per share for continuing and
discontinued operations
Basic earnings per share
Diluted earnings per share
Earnings per share for continuing operations
Basic earnings per share
Diluted earnings per share
Notes
2
12
2
6
7
4
9
9
9
9
2023
2022 (restated)
Business
performance
excluding
adjusting
items
£m
Adjusting
items
(note 3)
£m
Statutory
results
£m
Business
performance
excluding
adjusting
items
£m
Adjusting
items
(note 3)
£m
Statutory
results
£m
656.3
(399.0)
257.3
(105.3)
(86.2)
7.5
73.3
14.1
(13.3)
0.8
74.1
(20.1)
54.0
–
54.0
47.0
7.0
54.0
–
–
–
–
(13.6)
–
(13.6)
1.3
–
1.3
(12.3)
4.7
(7.6)
–
(7.6)
(10.6)
3.0
(7.6)
656.3
(399.0)
257.3
(105.3)
(99.8)
7.5
59.7
15.4
(13.3)
2.1
61.8
(15.4)
46.4
–
46.4
36.4
10.0
46.4
592.8
(365.3)
227.5
(90.3)
(76.7)
6.6
67.1
2.7
(4.0)
(1.3)
65.8
(12.8)
53.0
(1.8)
51.2
50.8
0.4
51.2
–
–
–
–
(1.3)
–
(1.3)
–
–
–
(1.3)
(0.3)
(1.6)
–
(1.6)
(2.9)
1.3
(1.6)
592.8
(365.3)
227.5
(90.3)
(78.0)
6.6
65.8
2.7
(4.0)
(1.3)
64.5
(13.1)
51.4
(1.8)
49.6
47.9
1.7
49.6
pence
pence
pence
pence
pence
pence
11.23
11.19
11.23
11.19
(2.53)
(2.52)
(2.53)
(2.52)
8.70
8.67
8.70
8.67
12.14
12.07
12.57
12.50
(0.69)
(0.69)
(0.69)
(0.69)
11.45
11.38
11.88
11.81
Refer to note 1(c) for details of the prior year restatements.
Strategic ReportGovernanceFinancial Statements 152
PZ Cussons plc / Annual Report and Accounts 2023
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2023
Profit for the year
Other comprehensive (expense)/income
Items that will not be reclassified subsequently to profit or loss
Remeasurement of retirement and other long-term employee benefit obligations
Deferred tax charge on remeasurement of retirement and other long-term benefit obligations
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Cash flow hedges – fair value movements net of amounts reclassified
Reclassification of exchange differences on repayment of permanent as equity loans (net of taxation)
Reclassification of reserves on disposals
Total items that may be reclassified subsequently to profit or loss
Other comprehensive (expense)/income for the year net of taxation
Total comprehensive (expense)/income for the year
Notes
21
19
17
Attributable to:
Owners of the Parent
Non-controlling interests
Refer to note 1(c) for details of the prior year restatements.
2023
£m
46.4
(32.8)
7.4
(25.4)
(21.7)
0.4
–
–
(21.3)
(46.7)
(0.3)
(6.9)
6.6
(0.3)
2022
(restated)
£m
49.6
37.4
(8.4)
29.0
21.7
0.2
(2.7)
0.1
19.3
48.3
97.9
94.3
3.6
97.9
Overview Consolidated Balance Sheet
As at 31 May 2023
153
Assets
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Net investments in joint ventures
Deferred tax assets
Current tax receivable
Retirement benefit surplus
Current assets
Inventories
Trade and other receivables
Derivative financial assets
Current tax receivable
Current asset investments
Cash and cash equivalents
Assets held for sale
Total assets
Equity
Share capital
Own shares
Capital redemption reserve
Hedging reserve
Currency translation reserve
Retained earnings
Other reserves
Attributable to owners of the Parent
Non-controlling interests
Total equity
Notes
2023
£m
2022
(restated)
£m
2021
(restated)
£m
10
11
25
12
19
21
14
15
17
16
13
22
22
312.7
333.9
293.6
74.3
12.5
52.0
7.5
–
38.5
497.5
112.9
119.1
1.0
1.0
0.5
256.4
490.9
–
490.9
988.4
4.3
(36.9)
0.7
0.2
(89.0)
511.7
4.6
395.6
26.5
422.1
82.9
16.9
45.4
4.5
1.2
69.3
554.1
111.8
105.0
0.7
2.6
0.5
163.8
384.4
3.4
387.8
941.9
4.3
(40.0)
0.7
(0.2)
(69.2)
528.5
2.9
427.0
21.9
448.9
91.5
11.7
34.2
5.9
1.7
33.6
472.2
91.1
110.7
1.0
15.3
0.3
87.0
305.4
7.6
313.0
785.2
4.3
(40.0)
0.7
(0.4)
(87.4)
478.1
0.9
356.2
18.8
375.0
Strategic ReportGovernanceFinancial Statements 154
PZ Cussons plc / Annual Report and Accounts 2023
Consolidated Balance Sheet continued
As at 31 May 2023
Liabilities
Non-current liabilities
Borrowings
Other payables
Lease liabilities
Deferred tax liabilities
Retirement and other long-term employee benefit obligations
Current liabilities
Borrowings
Trade and other payables
Lease liabilities
Derivative financial liabilities
Current taxation payable
Provisions
Liabilities directly associated with assets held for sale
Total liabilities
Total equity and liabilities
Refer to note 1(c) for details of the prior year restatements.
Notes
2023
£m
2022
(restated)
£m
2021
(restated)
£m
16, 17
251.2
174.0
118.0
18
25
19
21
16
18
25
17
20
4.1
11.3
76.9
12.4
355.9
–
182.2
1.7
0.5
25.6
0.4
210.4
–
210.4
566.3
988.4
4.5
14.0
91.7
13.1
0.3
8.7
74.2
12.9
297.3
214.1
0.1
163.9
2.9
1.6
21.6
5.6
195.7
–
195.7
493.0
941.9
–
150.9
3.1
0.8
35.2
5.6
195.6
0.5
196.1
410.2
785.2
The consolidated financial statements from pages 151 to 219 were approved by the Board of Directors and authorised for issue on
26 September 2023.
They were signed on its behalf by:
J Myers S Pollard
26 September 2023
PZ Cussons plc
Registered number 00019457
Overview
Consolidated Statement of Changes in Equity
For the year ended 31 May 2023
155
Attributable to owners of the Parent
Share
capital
£m
Own
shares
£m
Notes
Capital
redemption
reserve
£m
Hedging
reserve
£m
Currency
translation
reserve
£m
Retained
earnings
£m
Other
reserves
£m
Non-
controlling
interests
£m
Total
£m
As at 1 June 2021 –
as previously reported
Effect of prior year adjustments
1(c)
As at 1 June 2021 – as restated
Profit for the year – as restated
Other comprehensive income
Total comprehensive
income for the year
Transactions with owners:
Ordinary dividends
8
Share-based payment expense
Dividends relating to
non-controlling interests
Total transactions with owners
recognised directly in equity
As at 31 May 2022
As at 1 June 2022
Profit for the year
Transfer between reserves
1(c)
Other comprehensive
(expense)/income
Total comprehensive (expense)/
income for the year
Transactions with owners:
Ordinary dividends
Share-based payment expense
Shares issued from ESOT
Dividends relating to
non-controlling interests,
net of forfeitures
Total transactions with owners
recognised directly in equity
8
22
4.3
–
4.3
(40.0)
–
(40.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.7
–
0.7
–
–
–
–
–
–
–
(0.4)
(87.4)
474.6
–
(0.4)
–
0.2
–
3.5
(87.4)
478.1
–
18.2
47.9
28.0
0.2
18.2
75.9
–
–
–
–
–
–
–
–
(25.5)
–
–
(25.5)
4.3
(40.0)
4.3
(40.0)
0.7
0.7
(0.2)
(69.2)
528.5
(0.2)
(69.2)
528.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.1
–
3.1
–
–
–
–
–
–
–
–
–
–
–
0.4
0.4
–
–
–
–
–
–
(1.5)
36.4
1.5
(18.3)
(25.4)
(19.8)
12.5
(26.8)
–
(2.5)
–
–
–
–
–
As at 31 May 2023
4.3
(36.9)
0.7
0.2
(89.0)
511.7
Refer to note 1(c) for details of the prior year restatements.
0.9
–
0.9
–
–
–
–
2.0
18.8
371.5
–
3.5
18.8
375.0
1.7
1.9
49.6
48.3
3.6
97.9
–
–
(25.5)
2.0
–
(0.5)
(0.5)
2.0
2.9
2.9
–
–
–
–
–
1.7
–
(0.5)
(24.0)
21.9
448.9
21.9
10.0
–
448.9
46.4
–
(3.4)
(46.7)
6.6
(0.3)
–
–
–
(26.8)
1.7
0.6
–
–
(2.0)
(2.0)
(29.3)
1.7
4.6
(2.0)
(26.5)
26.5
422.1
Strategic ReportGovernanceFinancial Statements 156
PZ Cussons plc / Annual Report and Accounts 2023
Consolidated Cash Flow Statement
For the year ended 31 May 2023
Cash flows from operating activities
Cash generated from operations
Interest paid
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Interest received
Investment income received
Purchase of property, plant and equipment and software
Proceeds from disposal of plant, property and equipment
Proceeds from disposal of businesses
Acquisition of subsidiary
Loans advanced to joint venture
Loan repayments from joint venture
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Proceeds from loans by joint venture
Repayment of lease liabilities
Repayment of loans and borrowings facility
Proceeds from loan and borrowings facility
Financing fees paid on committed credit facility
Net cash generated from financing activities
Net increase in cash and cash equivalents
Effect of foreign exchange rates
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
24
10, 11
28
8
25
16
16
16
16
16
2023
£m
76.6
(11.8)
(15.6)
49.2
11.8
–
(6.7)
14.4
–
–
(11.2)
11.2
19.5
(26.8)
(2.6)
–
(2.5)
(205.0)
283.0
(2.8)
43.3
112.0
(19.3)
163.7
256.4
2022
£m
66.2
(3.5)
(12.3)
50.4
2.6
0.1
(8.2)
18.6
6.4
(33.6)
(12.6)
21.0
(5.7)
(25.5)
(0.5)
0.6
(4.0)
–
56.0
–
26.6
71.3
5.4
87.0
163.7
Overview 157
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 223. PZ Cussons plc is
the parent company and ultimate parent of the Group.
The principal 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 consolidated financial statements are presented in Pounds Sterling (GBP) and, unless otherwise indicated, 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 2023 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
Bronson Holdings Limited
PZ Cussons Acquisition Co Limited
PZ Cussons (International Finance) Limited
St. Tropez Holdings Limited
Tadley Holdings Limited
Thermocool Engineering Company Limited
Companies House Registration Number
09771991
13977759
08589433
05706646
10438262
09266188
1. ACCOUNTING POLICIES
The consolidated 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 are described on pages 168 to 169.
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 section of the Strategic Report. The financial position of the Group and liquidity position are described within the
Financial Review section of the Strategic Report. In addition, note 17 to these consolidated financial statements includes the Group’s
objectives and policies for managing its capital; its financial risk management objectives; its exposures to market risk, credit risk and
liquidity risk; and details of its financial instruments and hedging activities.
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 these consolidated financial statements
and that, therefore, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements for the year
ended 31 May 2023. The scenarios considered as part of the going concern assessment are consistent with those used in the longer-term
viability statement set out on pages 69 to 71.
The consolidated financial statements have been prepared using consistent accounting policies except as stated below.
(a) New and amended accounting standards adopted by the Group
The following amendments to existing standards have been applied for the first time in the year ended 31 May 2023:
• Amendments to IAS 16 ‘Plant, Property & Equipment’ – Proceeds before Intended Use
• Amendments to IFRS 3 ‘Business Combinations’ – Reference to the Conceptual Framework
• Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ – Onerous Contracts – Costs of Fulfilling a Contract
• Annual Improvements to IFRS Standards 2018-2020.
• Amendments to IAS 1 ‘Presentation of Financial Statements’ – Non-Current Liabilities with Covenants.
The adoption of the new accounting standards and interpretations listed above has not led to any changes to the Group’s accounting
policies or had any other material impact on the financial position or performance of the Group.
Strategic ReportGovernanceFinancial Statements 158
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
(b) New accounting standards and interpretations in issue but not yet effective
Certain amendments to existing standards, as listed below, have been published that are not mandatory for the 31 May 2023 reporting
year and have not been early adopted by the Group.
Effective date 1 January 2023:
• Amendments to IAS 1 ‘Presentation of Financial Statements’ – Classification of Liabilities as Current or Non-Current.
• Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ – Definition of Accounting Estimates.
• Amendments to IAS 1 ‘Presentation of Financial Statements’ and IFRS Practice Statement 2 – Disclosure of Accounting Policies.
• Amendments to IAS 12 ‘Income Taxes’ – Deferred Tax related to Assets and Liabilities arising from a Single Transactions.
Effective date 1 January 2024:
• Amendments to IFRS 16 ‘Leases’ – Lease Liability in a Sale and Leaseback.
Effective date to be confirmed:
• Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investment in Associates’ – Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture.
The adoption of the new accounting standards and interpretations listed above is not expected to lead to any significant changes to the
Group’s accounting policies or have any other material impact on the financial position or performance of the Group.
(c) Corrections of errors
In preparing these consolidated financial statements management identified errors relating to transactions reported in prior periods.
In accordance with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ these errors have been corrected either by
restatement of previously reported figures or within the current year as described below.
Restatements
The following items were considered as material errors requiring restatement of previously reported figures.
Intangible asset impairment – in the year ended 31 May 2020 a number of businesses were disposed of by the Group, resulting in the
recognition of a £6.3 million impairment charge in relation to capitalised software. The accounting treatment of these impairments has
subsequently been reviewed and determined to be not in accordance with IAS 36 ‘Impairment of Assets’. The effects of correcting for
this error are to increase the previously reported carrying value of intangible assets on the consolidated balance sheet by £4.7 million
as at 1 June 2021 with a corresponding increase in the deferred tax liability of £1.2 million, and to recognise a £0.8 million amortisation
charge within previously reported administrative expenses in the consolidated income statement for the year ended 31 May 2022, with
a corresponding £0.2 million decrease in the taxation charge.
Childs Farm business combination – in March 2022, the Group acquired Childs Farm. The non-controlling interest of £3.3 million
recognised on the business combination has subsequently been reviewed and determined to be not in accordance with IFRS 3
‘Business Combinations’. The effect of correcting for this error is to reduce each of the previously reported carrying values of goodwill
and non-controlling interests on the consolidated balance sheet by £3.3 million as at 31 May 2022. There is no impact on the previously
reported consolidated income statement.
The impact on the consolidated balance sheets and consolidated income statement of restating previously reported figures for the items
described is set out in the tables below:
As at 31 May 2021
Consolidated balance sheet
Goodwill and other intangible assets
Total assets
Retained earnings
Deferred taxation liabilities
Total equity and liabilities
As previously
reported
£m
Intangible asset
impairment
£m
As restated
£m
288.9
780.5
(474.6)
(73.0)
(780.5)
4.7
4.7
(3.5)
(1.2)
(4.7)
293.6
785.2
(478.1)
(74.2)
(785.2)
Overview 159
As at, and for the year ended, 31 May 2022
Consolidated income statement
Administrative expenses
Profit before taxation
Taxation
Profit for the year from continuing operations
Profit for the year
Consolidated balance sheet
Goodwill and other intangible assets
Total assets
Retained earnings
Non-controlling interests
Deferred taxation liabilities
Total equity and liabilities
As previously
reported
£m
Intangible asset
impairment
£m
Childs Farm
business
combination
£m
As restated
£m
(77.2)
65.3
(13.3)
52.0
50.2
333.3
941.3
(525.6)
(25.2)
(90.7)
(941.3)
(0.8)
(0.8)
0.2
(0.6)
(0.6)
3.9
3.9
(2.9)
–
(1.0)
(3.9)
–
–
–
–
–
(3.3)
(3.3)
–
3.3
–
3.3
(78.0)
64.5
(13.1)
51.4
49.6
333.9
941.9
(528.5)
(21.9)
(91.7)
(941.9)
Corrections in current year
The following items were not considered as material errors, and therefore have been corrected in the current year.
Reclassification of exchange differences on repayments of permanent as equity loans – in the prior year, £1.5 million of accumulated
foreign exchange losses were reclassified to the consolidated income statement following a decision to repay the intercompany loan
between PZ Cussons Ghana Limited and a fellow subsidiary. This treatment has subsequently been reviewed and having considered the
divergence in practice in the interpretation of IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ the Group’s policy is to reclassify
foreign exchange differences on such items only on the disposal or partial disposal of an equity interest. This has been corrected in the
current year through a transfer from retained earnings to the currency translation reserve. There is no impact on previously reported
total equity.
Transactions of the Company-sponsored Employee Share Option Trust (ESOT) – as stated in the accounting policies of the Company,
transactions of the ESOT are treated as being those of the Company and are therefore reflected in the Group’s consolidated financial
statements. Purchases by the ESOT have been reflected, however certain issuances and sales of shares from the ESOT in previous years
had not been. This has been corrected in the current year through a £2.7 million reduction in the own shares reserve for the cost of
shares issued and sold, the recognition of cash proceeds of £0.6 million with a corresponding decrease in retained earnings.
Impairment of net investment in joint ventures – in the year ended 31 May 2021, Wilmar PZ International Pte. Limited, a 50% joint
venture interest of the Group, ceased operations and a £2.2 million impairment was recognised against the carrying value of the Group’s
net investment. The joint venture was formally dissolved in May 2023 and a subsequent review of the previous impairment charge has
identified that the impairment was made in error, and a correction has been made in the current year.
In addition, certain comparative disclosures have been corrected as disclosed in notes 5, 17(b) and 26.
(d) Accounting policies
Basis of consolidation
The consolidated financial statements incorporate the financial statements of PZ Cussons plc and entities controlled by PZ Cussons plc
(its subsidiaries) made up to 31 May each year. The Group controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The total profits or losses of subsidiaries are included in the consolidated income statement and the interest of non-controlling interests
is stated as the non-controlling interest’s proportion of the fair values of the assets and liabilities recognised. Comprehensive income
attributable to the non-controlling interests is attributed to the non-controlling interests even if this results in the non-controlling
interests recognising a deficit balance.
The interest of non-controlling interests in the acquiree is initially measured at the non-controlling interest’s proportion of the net fair
value of the assets, liabilities and contingent liabilities recognised. Where non-controlling interests are acquired, the excess of cost over
the value of the non-controlling interest acquired is recorded in equity.
Where necessary, the accounts of subsidiaries are adjusted to conform to the Group’s accounting policies. All intra-Group transactions,
balances, income and expenses are eliminated on consolidation.
Strategic ReportGovernanceFinancial Statements 160
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
Business combinations and goodwill
The Group accounts for business combinations by applying 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, and presented 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 any existing investment 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 the existing investment 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 investment is credited/charged to the consolidated income statement,
and presented as an adjusting item.
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, otherwise it is recognised in profit or loss.
Goodwill arising on a business combination 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 equity method investment recognised at the date of
acquisition. Goodwill arising on the acquisition of a subsidiary is separately presented on the Group’s balance sheet, and goodwill arising
on the acquisition of an equity method investment is included within the carrying value of the investment. 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 consolidated 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 annually, or more frequently if there are indicators of impairment. The method used for impairment testing
is to allocate goodwill to appropriate cash-generating units (CGUs) based on the smallest identifiable group of assets that generate
independent cash inflows, and to estimate the recoverable amounts of the CGUs as the higher of the asset’s fair values less costs of
disposal and the value in use. An impairment arises if the recoverable amount of the CGU is less than the carrying amount, in which case
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of
the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.
Impairment losses recognised for goodwill cannot be reversed in a subsequent period.
On disposal of a subsidiary or an equity method investment, the attributable amount of goodwill is included in the determination of the
profit or loss on disposal.
Investments in joint ventures
Under IFRS 11 ‘Joint Arrangements’, 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 joint venture and its carrying value, and then recognises the loss within ‘Share of results of a joint venture’
in the consolidated income statement.
Overview 161
Revenue
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 consist 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.
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.
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
Finance income includes interest receivable on short-term deposits, interest receivable on loans to joint ventures, net finance income
in relation to defined benefit pension schemes and the change in the fair value of deferred consideration on business combinations.
Finance costs
Finance costs include interest expense in relation to financial liabilities (which includes the unwind of the discount rate applied to lease
liabilities), finance expense on defined benefit pension schemes, amortisation of fees incurred in arranging financing and the change in
the fair value of deferred purchase consideration on business combinations.
Strategic ReportGovernanceFinancial Statements 162
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Notes to the Consolidated Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
Adjusting items
The Group adopts a columnar format in presenting the consolidated income statement to highlight significant items within the Group’s
results for the year. Such items are classified and presented 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 adjusting 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 presentation of such items as
adjusting items.
The Directors believe that the separate disclosure of these items is relevant to an understanding of the Group’s financial performance
by providing an alternative and 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.
These alternative performance measures should be viewed as supplemental to, but not as a substitute for, measures presented in
the consolidated financial information relating to the Group, which are prepared in accordance with IFRS. Further, they may not be
comparable with similarly-titled measures reported by other companies due to differences in the way they are calculated.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the consolidated income statement except
to the extent that it relates to items recognised in other comprehensive income, in which case it is recognised within that statement.
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.
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 consolidated 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
Plant and machinery not less than
2% per annum
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 is brought into use. Land and assets in the course of
construction are not depreciated.
Overview
163
An asset is de-recognised from the consolidated 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 consolidated income statement 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, to the extent 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 the consolidated
income statement.
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 less any impairment loss and recorded as a separate item
within property, plant and equipment. Gains or losses on disposal are recognised within administrative expenses in profit or loss.
No depreciation is charged on the basis that it is not considered to be material in any year or cumulatively.
Other intangible assets
Other intangible assets comprise brands and software.
Brands
An acquired brand is only recognised on the consolidated 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 consolidated balance sheet at fair value at the date of acquisition. Trademarks, patents and
purchased brands are recorded at purchase cost.
The Directors believe that 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 the Directors have not taken into consideration planned future
expenditure in excess of that required to maintain the asset at that standard of performance.
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. The method used for impairment testing is similar to that used
for goodwill whereby the brand is allocated to a CGU based on the smallest identifiable group of assets that generate independent cash
inflows. The recoverable amount of the CGU is determined as the higher of the asset’s fair value less costs of disposal and the value
in use. An impairment arises if the recoverable amount of the CGU is less than the carrying amount. Any impairment is recognised
immediately in the consolidated income statement.
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 in the
consolidated income statement.
Software
Expenditure on research activities is recognised in the consolidated 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.
Strategic ReportGovernanceFinancial Statements 164
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Notes to the Consolidated Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
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 £5,000) where
the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease.
While the Group does lease certain equipment and vehicles, its leasing activities mainly relate to properties. Leasing contracts are
typically made for fixed periods of up to 12 years, but certain property leases across the Group have extension and termination options
which 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 at the rate implicit in the lease, or if that cannot be readily determined, at the Group’s incremental borrowing rate specific
to the term, country, currency and start date of the lease. 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 balance sheet, and 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 ‘Provisions, Contingent Liabilities and Contingent Assets’. 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.
As a practical expedient, IFRS 16 ‘Leases’ 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 consolidated
income statement.
Overview 165
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 remeasured in accordance with the
requirements of IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Items’. 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 coordinated 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 consolidated 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 Group uses derivative financial instruments such as forward foreign exchange 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 ‘Financial Instruments’.
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 consolidated income statement.
Financial assets
The Group’s financial assets are initially and subsequently measured at either amortised cost or fair value through profit or 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.
Strategic ReportGovernanceFinancial Statements 166
PZ Cussons plc / Annual Report and Accounts 2023
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 the consolidated income statement 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 consolidated balance sheet as part of the ‘net investment in joint ventures’)
are measured initially at fair value and is subsequently held at amortised cost less an ECL allowance. The loans are assessed for an ECL
allowance 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 to 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. Any associated loss allowance related to loans
to joint ventures is recorded in the consolidated income statement.
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.
(a) Interest bearing loans and borrowings
Interest-bearing bank loans, borrowings and overdrafts are initially recorded at fair value, net of directly related fees, 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.
(b) 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.
(c) 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 using 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 trade
payables with separate disclosures in the notes to the consolidated financial statements. The credit period does not exceed 12 months
and are not discounted. As at the reporting date, trade payables under vendor financing arrangements were £nil (2022: £5.9 million),
see note 18.
(d) Share capital and own shares
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.
Overview 167
Where any member of the Group purchases the Company’s equity share capital, the consideration paid, including any directly
attributable incremental costs (net of tax), 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 tax, are included in equity attributable to the Company’s equity holders.
Reserves
(a) Capital redemption reserve
Amounts in respect of the redemption of certain of the Company’s ordinary shares are recognised in the capital redemption reserve.
(b) Hedging reserve
Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are
recognised in the hedging reserve through other comprehensive income. If the firm commitment or forecast transaction that is the
subject of a cash flow hedge results in the recognition of a non-financial asset or liability, then, at the time the asset or liability is
recognised, the associated gains or losses on the derivative that had previously been recognised in other comprehensive income and
accumulated in the hedging reserve are removed directly from equity and included in the initial measurement of the asset or liability.
If the hedged item is transaction-related the foreign currency basis spread is reclassified to profit or loss when the hedged item affects
profit or loss. Those reclassified amounts are recognised in the consolidated income statement in the same line as the hedged item.
(c) 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.
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.
Warranties are provided within the Africa Electricals Division. Warranties are provided from the date of sale and are typically 12 months
in length. A warranty provision is included in the consolidated balance sheet, which is calculated on the basis of historical returns as well
as past experiences and industry averages for defective products.
Retirement benefit and similar obligations
The Group operates retirement benefit schemes in the UK and for certain overseas operations. In the UK, these comprise defined
benefit schemes, each of which was closed to future accrual on 31 May 2008, and defined contribution schemes. Overseas schemes are
predominantly defined contribution schemes, with the exception of PZ Cussons Indonesia, which operates a defined benefit scheme.
The Group accounts for its defined benefit schemes under IAS 19 ‘Employee Benefits’.
The deficit/surplus of the defined benefit pension schemes is recognised in the consolidated 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. 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.
Pension charges/income recognised in the consolidated income statement consists of administration charges for 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.
Remeasurements comprising actuarial gains and losses, the effect of the asset ceiling and the return on plan assets (excluding interest)
are included directly in other comprehensive income.
Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered service
entitling them to the contributions.
Share-based payments
The Group operates a number of long-term incentive schemes which provide share awards to Executive Directors and certain senior
employees. These schemes are designed to align the interests of the participants with those of the Group’s shareholders. The Group also
operates a Share Incentive Plan (SIP) scheme which is open to UK employees.
The awards under these plans 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, where they apply, and service conditions. At each balance sheet date, the estimate of the
number of awards that are expected to vest is assessed, and the impact of the revision, if any, is recognised in the consolidated income
statement, with a corresponding adjustment to equity.
Strategic ReportGovernanceFinancial Statements 168
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
Dividend distributions
Dividend distributions which are subject to shareholder approval are recognised as a liability in the period in which the approval is given.
Interim dividends, which do not require shareholder approval, are recognised when paid.
Consideration of climate change
In preparing the consolidated financial statements, management have considered the impact of climate change, particularly in the
context of the risks identified in the TCFD disclosures on pages 35 to 39. There has been no material impact identified on the financial
reporting judgements and estimates. In particular, management considered the impact of climate change in respect of the following
areas:
• Assessment of impairment of goodwill, other intangibles and tangible assets
• Assessment of impairment of financial assets
• Going concern and viability disclosures
• Impact on useful economic lives of assets
• Preparation of budgets and cash flow forecasts.
Given the low value of short to medium term risk to these areas assessed in the TCFD report, no climate change related impact was
identified. The viability assessment on pages 69 to 71 includes an assessment of severe but plausible scenarios, including climate change
risks, with the potential to impact future performance but none of these are considered likely to give rise to a trading deterioration of the
magnitude indicated by the stress testing or to threaten the viability of the business over the four year assessment period. Management
are, however, aware of the changing nature of risks associated with climate change and will regularly assess these risks against
judgements and estimates made in preparation of the Group’s financial statements.
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.
Key sources of estimation uncertainty
Pensions
The cost of defined benefit pension schemes and the present value of the pension obligation are determined using actuarial assumptions
in those valuations. These include the determination of the discount rate, future salary increases, mortality rates and future pension
increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation
is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. Significant differences in
actual experience or significant changes in key assumptions could affect the retirement benefit surplus/obligations and the net interest
expense. In determining the discount rate, management considers the interest rates of corporate bonds with at least an ‘AA’ rating
or above and having terms to maturity approximating to the terms of the related pension obligation to be appropriate. The mortality
rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at intervals in
response to demographic changes. Future salary increases and pension increases are based on expected future inflation rates for the
respective countries.
See note 21 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 consolidated financial
statements. Any such management estimates are made in accordance with IFRS requirements, including IAS 12 ‘Income Taxes’ and IFRIC
23 ‘Uncertainty over Income Tax Treatments’ when considering income tax and IAS 37 ‘Provisions, Contingent Liabilities and Contingent
Assets’ 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 2023 of £25.2 million
(2022: £29.5 million), of which £20.1 million (2022: £18.8 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. Due to the known difference in
technical standpoint, this potential tax liability has been provided for in full as the range of possible outcomes could be a liability up to
the full value of the provided amount, however the potential future settlement remains a cash risk.
Overview 169
Of the remaining £5.1 million (2022: £10.7 million), £2.8 million (2022: £5.1 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, as at 31 May 2023 the Group had further contingent tax liabilities of £7.8 million
(2022: £8.9 million) and contingent assets of £2.2 million (2022: £nil). Although having a lower probability of a material financial, such
positions have been disclosed as contingent liabilities in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’.
Assessment of impairment of goodwill and other indefinite life assets
Goodwill and brands have all arisen from business combinations and all have indefinite useful lives and, in accordance with IAS 36
‘Impairment of Assets’, are subject to annual impairment testing (which the Group carries out at the year-end date), or more frequently
if there are indicators of impairment. The method used for impairment testing is to allocate assets (including goodwill and brands)
to appropriate CGUs based on the smallest identifiable group of assets that generate independent cash inflows, and to estimate the
recoverable amounts of the CGUs as the higher of the asset’s fair values less costs of disposal and the value in use. Value in use is
determined using cash flow projections from approved budgets and plans which are then extrapolated based on estimated long-term
growth rates applicable to the markets and geographies in which the CGUs operate. The cash flow projections are discounted based on a
pre-tax weighted average cost of capital for comparable companies operating in similar markets and geographies as the Group adjusted
for risks specific to the particular CGU. The assumptions used in the cash flow projections, and associated sensitivities, are described and
set out in note 10.
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 determining that the acquired brands have indefinite lives, the Directors give consideration to such factors as their expected usage
of the brands, typical product life cycles, the stability of the markets in which the brands are sold, the competitive positioning of the
brands, and the level of marketing and other expenditure required to maintain the brands. The carrying value of brands within intangible
assets as at 31 May 2023 was £230.8 million, and if, for example, the useful lives of brands were estimated to be 50 years based on their
strength and durability, this would give rise to an annual impairment charge of £4.6 million.
Critical areas of judgement
Permanent as equity balances
Common with many groups, subsidiaries within the Group enter into transactions with fellow subsidiaries. These transactions give
rise to intragroup receivable/payable balances which, given the different functional currencies of subsidiaries, can mean certain of
these receivable/payable balances will be denominated in foreign currency for one of the counterparties or, in some instances, both
counterparties. The retranslation of these intragroup foreign currency balances gives rise to foreign currency exchange differences, and
IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ provides guidance on the classification of these differences. More specifically,
in relation to consolidated financial statements, IAS 21 provides guidance when settlement of these balances is neither planned nor likely
to occur in the foreseeable future in which case such balances can be considered permanent as equity. Under these circumstances, which
also extends to amounts lent to equity method investments, exchange differences are classified as other comprehensive income within
the currency translation reserve. Judgement is required when assessing when the permanent as equity criteria are met. The Group’s loan
to its joint venture, PZ Wilmar Limited, is considered a permanent as equity loan (note 12).
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 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
comprises the activities of our in-house Fragrance business and of the costs associated with the Global headquarters and above market
functions, net of recharges to our regions. Intra-Group sales of materials and 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.
Strategic ReportGovernanceFinancial Statements 170
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
2. SEGMENTAL ANALYSIS CONTINUED
(a) Reportable segments
Continuing operations
2023
Gross segment revenue
Inter-segment revenue
Revenue
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
2022 (restated)
Gross segment revenue
Inter-segment revenue
Revenue
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
Europe & the
Americas
£m
Asia Pacific
£m
210.2
(4.4)
205.8
29.3
–
29.3
(28.9)
0.4
197.8
(7.1)
190.7
27.5
–
27.5
2.1
29.6
Europe & the
Americas
£m
Asia Pacific
£m
196.3
(3.3)
193.0
35.0
–
35.0
(12.1)
22.9
179.2
(5.4)
173.8
20.9
–
20.9
16.1
37.0
Africa
£m
256.3
–
256.3
29.7
7.5
37.2
11.1
48.3
Africa
£m
222.0
–
222.0
15.7
6.6
22.3
6.3
28.6
Central
£m
Eliminations
£m
74.0
(70.5)
3.5
(20.7)
–
(20.7)
2.1
(18.6)
(82.0)
82.0
–
–
–
–
–
–
Central
£m
Eliminations
£m
77.3
(73.3)
4.0
(11.1)
–
(11.1)
(11.6)
(22.7)
(82.0)
82.0
–
–
–
–
–
–
Total
£m
656.3
–
656.3
65.8
7.5
73.3
(13.6)
59.7
15.4
(13.3)
61.8
Total
£m
592.8
–
592.8
60.5
6.6
67.1
(1.3)
65.8
2.7
(4.0)
64.5
Refer to note 1(c) for details of the prior year restatements.
Segment assets and liabilities are not disclosed because they are not reported to or reviewed by the CODM.
(b) Geographical and category analysis
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:
2023
Revenue
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Net investment in joint ventures
UK
£m
177.9
274.9
23.7
9.2
–
Nigeria
£m
227.9
2.8
29.8
1.2
52.0
Other
£m
250.5
35.0
20.8
2.1
–
Total
£m
656.3
312.7
74.3
12.5
52.0
Overview 2022 (restated)
Revenue
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Net investment in joint ventures
Refer to note 1(c) for details of the prior year restatements.
The Group analyses its revenue by the following categories:
UK
£m
172.5
296.6
24.1
12.0
–
Nigeria
£m
192.3
3.0
34.8
1.4
47.0
Hygiene
Baby
Beauty
Electricals
Other
3. ADJUSTING ITEMS
Adjusting items income/(expense), all of which related to continuing operations, comprised:
Nigeria Simplification
HR Transformation
Finance Transformation
Supply Chain Transformation
Transaction-related income/(costs)
Intangible asset impairment net of impairment reversal
Impairment reversal of net investment in joint ventures
Reclassification of exchange differences on repayment of permanent as equity loans
Compensation from Australian Competition & Consumer Commission
Profit on disposal of five:am
Derecognition of capitalised costs related to cloud computing arrangements
Adjusting items before taxation
Taxation
Adjusting items after taxation
Adjusting items before taxation are classified within:
Operating profit
Finance income
171
Other
£m
228.0
34.3
24.0
3.5
(1.6)
2023
£m
334.8
123.1
85.3
105.4
7.7
656.3
2023
£m
6.8
(0.6)
(5.1)
(4.0)
(2.9)
0.7
(12.3)
2.2
–
–
–
–
(12.3)
4.7
(7.6)
2023
£m
(13.6)
1.3
(12.3)
Total
£m
592.8
333.9
82.9
16.9
45.4
2022
£m
305.9
103.4
80.9
91.5
11.1
592.8
2022
£m
7.8
(2.9)
(0.7)
(0.7)
3.5
(1.4)
(3.1)
–
(1.5)
1.5
0.7
(1.0)
(1.3)
(0.3)
(1.6)
2022
£m
(1.3)
–
(1.3)
Strategic ReportGovernanceFinancial Statements 172
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
3. ADJUSTING ITEMS CONTINUED
A description of the principal adjusting items is provided below:
Nigeria Simplification – comprises £11.1 million from the profit on disposal of a number of residential properties (2022: £15.9 million
profit), and other costs of £4.3 million (2022: £8.1 million) which, in the current year, relate to consultancy costs and other advisory costs
related to the simplification programme, and in the prior year related to the impairment of factory assets and associated engineering
spares within inventory.
HR Transformation – the programme centres around investment in a new people system designed to enhance ways of working, build
organisational capability and underpin the Group’s new culture, reduce organisational risk and embed better controls and drive process
efficiency. This two-year programme of change is split into two phases across the Group’s financial years 2022-24.
Finance Transformation – this project which started in 2022 is a three-year programme of change covering investment in a future
finance operating model and improving capability, processes and controls. As well as ensuring the Group are ready for compliance
deadlines with future corporate reform in Nigeria and the UK (ICFR or ‘UK Sox’ as part of the proposed BEIS corporate reform), it will also
improve the overall Group control environment, with the right set of processes and systems and a strengthened financial control team.
It will deliver an optimal Finance Shared Service Centre footprint and address the legacy finance process and systems issues associated
with our SAP ERP system. The programme is expected to incur up to a further £5.3 million of costs in 2024.
Supply Chain Transformation – this multi-year programme which started in 2022 is designed to respond to the longer-term business
strategy of the organisation, its objectives being 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. Total programme spend is estimated at approximately £16 million, of which approximately
£3 million relates to capital expenditure, over the 5 year programme lifecycle.
Transaction-related income/costs – in March 2022, the Group acquired Childs Farm, and in the current year recognised a £1.3 million
reduction in the deferred consideration liability for the acquisition (note 18) and incurred £0.6 million of costs related to the integration
of the business. In the prior year, £1.4 million of costs directly attributable to the acquisition of Childs Farm were incurred including legal
and other advisory fees.
Intangible asset impairment net of impairment reversal – comprises a £16.5 million impairment of the Sanctuary Spa brand (note 10)
and a £4.2 million reversal of a prior period impairment of the Rafferty’s Garden brand (note 10). In the prior year, an £11.6 million
impairment of the Charles Worthington brand was recognised along with an £8.5 million reversal of a prior period impairment of the
Rafferty’s Garden brand, the latter resulting from a review of future growth assumptions used in the annual impairment test.
Impairment reversal of net investment in joint ventures – relates to the reversal of a £2.2 million impairment made in a previous period
by the Group in its 50% interest in Wilmar PZ International Pte. Limited, which ceased trading in October 2020 and was dissolved in May
2023 (note 12).
The following items relate solely to the prior year:
Compensation from Australian Competition & Consumer Commission – being a receipt 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.
Profit on disposal of five:am – on 4 June 2021, the Group completed the sale of the assets associated with five:am, which was the
Group’s yoghurt business in Australia, for £7.2 million. The £0.8 million pre-tax profit recognised on disposal was net of £0.4 million of
accumulated foreign exchange losses reclassified from equity. On a post-tax basis the profit was £2.5 million which included the release
of a £1.2 million deferred tax liability in relation to the disposed brand.
Derecognition of capitalised costs related to cloud computing arrangements – following the April 2021 IFRIC agenda decision in
relation to this matter, the Group reviewed its costs capitalised in respect of cloud computing arrangements and determined that they
did not meet the criteria for capitalisation, and accordingly derecognised and expensed these.
Overview 4. PROFIT FOR THE YEAR
Profit for the year has been arrived at after charging/(crediting):
Net foreign exchange losses
Research and development costs
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of intangible assets
Impairment of intangible assets
Impairment reversal of intangible assets
Depreciation of right-of-use assets
Profit on disposal of property, plant and equipment
Raw and packaging materials and goods purchased for resale
Inventory provisions
Net trade receivable provision reversal
Short-term or low-value lease rentals
Employee costs (note 5)
Refer to note 1(c) for details of the prior year restatements.
Auditor’s remuneration
An analysis of Auditor’s remuneration 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:
– 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
173
2023
£m
5.1
0.5
8.2
–
7.0
16.5
(4.2)
3.9
(11.1)
377.5
2.0
(0.8)
(0.2)
84.7
2022
(restated)
£m
7.1
2.0
9.3
5.9
7.4
11.6
(8.5)
3.5
(15.9)
342.4
6.9
–
–
72.8
2023
£m
2022
£m
2.2
0.8
3.0
–
3.0
1.3
0.8
2.1
–
2.1
Fees for permitted non-audit services paid to the Company’s Auditor included £40,000 (2022: £40,000) for the review of the Group’s
interim statement released in February 2023 and in the prior year £700 in respect of services rendered to witness and report on the
destruction of inventory in Thailand.
Strategic ReportGovernanceFinancial Statements 174
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
5. EMPLOYEES
The average monthly number of employees (including Executive Directors) was as follows:
Production
Selling and distribution
Administration
2023
number
1,647
613
412
2,672
2022
number
1,783
668
401
2,852
Costs incurred in respect of the above were as follows (comparative amounts have been corrected from previously reported):
Wages and salaries
Social security costs
Pension costs
Share-based payments expense
The pension costs (note 21) consist of:
Defined benefit schemes
Defined contribution schemes
Nigerian gratuity scheme
Other post-employment benefits
6. NET FINANCE INCOME/(COSTS)
Interest receivable on short-term deposits
Interest receivable on loans to joint ventures
Finance income on defined benefit pension schemes
Change in fair value of deferred consideration
Finance income
Interest payable on borrowings
Finance expense on defined benefit pension schemes
Interest expense on lease liabilities
Amortisation of financing fees
Finance costs
Net finance income/(costs)
2023
£m
74.7
4.2
4.1
1.7
84.7
2023
£m
1.5
2.4
0.6
(0.4)
4.1
2023
£m
11.1
0.7
2.3
1.3
15.4
(11.3)
(0.6)
(0.5)
(0.9)
(13.3)
2.1
2022
£m
63.3
3.5
4.5
1.5
72.8
2022
£m
1.7
2.2
0.5
0.1
4.5
2022
£m
1.7
0.4
0.6
–
2.7
(2.5)
(0.6)
(0.5)
(0.4)
(4.0)
(1.3)
Overview 7. TAXATION
Current tax
UK corporation tax
– current year
– adjustments in respect of prior years
– double tax relief
Overseas corporation tax
– current 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
Total deferred tax charge
Total tax charge
Analysed as:
Tax on profit before adjusting items
Tax on adjusting items
175
2023
£m
(2.2)
(0.3)
(0.5)
(3.0)
26.3
0.8
27.1
24.1
(6.2)
(2.3)
(0.2)
(8.7)
15.4
20.1
(4.7)
15.4
2022
(restated)
£m
2.5
(0.5)
(1.1)
0.9
12.2
(0.5)
11.7
12.6
(2.7)
3.0
0.1
0.4
13.0
12.7
0.3
13.0
Refer to note 1(c) for details of the prior year restatements.
The effective tax rate in relation to continuing operations for the year was 24.9% (2022: 20.2% as restated). Before adjusting items,
the effective tax rate was 27.1% (2022: 19.5%).
Strategic ReportGovernanceFinancial Statements 176
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
7. TAXATION CONTINUED
UK corporation tax is calculated at 20.0% (2022: 19.0%) of the estimated assessable profit for the year. Taxation for other jurisdictions
is calculated at the rates prevailing in the respective jurisdictions. The Group has chosen to use the UK corporation tax rate for the
reconciliation of the tax charge for the year to the profit before taxation as this is the seat for the central management and control
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 20.0% (2022: 19.0%)
Adjusted for:
Effect of non-deductible expenses
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 outside of the UK
Net adjustment to amount carried in respect of uncertain tax positions
Movements in deferred tax assets not recognised
Adjustments in respect of prior years
Differences in foreign tax rates (non-UK residents)
Tax charge for the year
Tax charge attributable to continuing operations
Tax credit attributable to discontinued operations
Tax charge for the year
2023
£m
61.8
–
61.8
12.4
2.2
(4.9)
(0.5)
(2.2)
3.2
(0.8)
(0.6)
(1.5)
8.1
15.4
15.4
–
15.4
2022
(restated)
£m
64.5
(1.7)
62.8
11.9
6.6
(10.0)
–
(2.0)
2.2
0.2
–
(1.2)
5.3
13.0
13.1
(0.1)
13.0
Refer to note 1(c) for details of the prior year restatements.
Primary reconciling differences between tax at UK corporation tax rate and the actual tax charge for the year include the following:
• Effect of non-deductible expenses of £2.2 million (2022: £6.6 million) include items considered non-deductible across the Group’s
various operating entities, including disallowances in respect of related party transactions
• Effect of non-taxable income of £4.9 million (2022: £10.0 million) predominately related to the non-taxable gain in Nigeria on property
disposals. The prior year amount included 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
• Other taxes suffered outside the UK increased the annual tax charge by £3.2 million (2022: £2.2 million) and included unrelievable
withholding taxes incurred on dividends received in the UK
• Differences in foreign tax rates during the year of £8.1 million (2022: £5.3 million) reflect changes in the Group profitability profile.
Taxation on items taken directly to equity and other comprehensive income was a credit of £8.9 million (2022: £9.3 million charge) and
related to deferred tax on the remeasurement of retirement and other long-term benefit obligations, on share-based payments expense
and on exchange differences on intercompany balances determined to be permanent as equity.
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 £25.2 million as at 31 May 2023 (2022: £31.0 million). Further information on uncertain tax positions can
be found in note 1(d) under ‘Key sources of estimation uncertainty’.
Overview 8. DIVIDENDS
Amounts recognised as distributions to ordinary shareholders in the year comprise:
Final dividend for the year ended 31 May 2022 of 3.73p (2022: 3.42p) per ordinary share
Interim dividend for the year ended 31 May 2023 of 2.67p (2022: 2.67p) per ordinary share
177
2023
£m
15.6
11.2
26.8
2022
£m
14.3
11.2
25.5
After the balance sheet date, a final dividend for the year ended 31 May 2023 was proposed by the Directors of 3.73p per ordinary
share. This results in a total final proposed dividend of £15.6 million (2022: £15.6 million). Subject to approval by shareholders at the
Annual General Meeting, the dividend will be paid on 30 November 2023 to the shareholders on the register on 3 November 2023.
The proposed dividend has not been included as a liability in the consolidated financial statements as at 31 May 2023.
9. EARNINGS PER SHARE
Earnings per share (EPS) represents the amount of earnings attributable to each ordinary share in issue. Basic EPS is calculated by dividing
the earnings (profit after tax attributable to owners of the Parent) by the weighted average number of ordinary shares in issue during the
year, excluding own shares owned by employee trusts.
For diluted EPS, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential
ordinary shares. The Group’s dilutive potential ordinary shares relate to awards granted under the Group’s share incentive schemes which
are described in the share-based payments note (note 23).
The average number of shares is reconciled to the basic weighted average and diluted weighted average number of shares as set out below:
Average number of ordinary shares in issue during the year
Less: weighted average number of shares held by employee trusts
Basic weighted average shares in issue during the year
Dilutive effect of share incentive schemes
Diluted weighted average shares in issue during the year
2023
number
000
428,725
(10,180)
418,545
1,530
420,075
2022
number
000
428,725
(10,249)
418,476
2,365
420,841
An adjusted EPS measure is provided which calculates EPS excluding adjusting items from profits attributable to owners of the Parent. As
described in the accounting policies, the Directors believe that the separate disclosure of adjusting items is relevant to an understanding
of the Group’s financial performance, and excluding such items provides a more meaningful basis upon which to analyse underlying
business performance and make year-on-year comparisons.
Strategic ReportGovernanceFinancial Statements 178
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
9. EARNINGS PER SHARE CONTINUED
Earnings per share from continuing and discontinued operations
Profit after tax attributable to owners of the Parent
Exclude: adjusting items (net of taxation effect)
Adjusted profit after tax
Basic earnings per share
Exclude: adjusting items
Adjusted basic earnings per share
Diluted earnings per share
Exclude: adjusting items
Adjusted diluted earnings per share
Refer to note 1(c) for details of the prior year restatements.
Earnings per share from continuing operations
Profit attributable to owners of the Parent from continuing operations
Exclude: adjusting items (net of taxation effect)
Adjusted profit after tax
Basic earnings per share
Exclude: adjusting items
Adjusted basic earnings per share
Diluted earnings per share
Exclude: adjusting items
Adjusted diluted earnings per share
Refer to note 1(c) for details of the prior year restatements.
Earnings per share from discontinued operations
Loss after tax attributable to owners of the Parent from discontinued operations
Basic losses per share
Diluted losses per share
2023
£m
36.4
10.6
47.0
2023
pence
8.70
2.53
11.23
8.67
2.52
11.19
2023
£m
36.4
10.6
47.0
2023
pence
8.70
2.53
11.23
8.67
2.52
11.19
2023
£m
–
2023
pence
–
–
2022
(restated)
£m
47.9
2.9
50.8
2022
(restated)
pence
11.45
0.69
12.14
11.38
0.69
12.07
2022
(restated)
£m
49.7
2.9
52.6
2022
(restated)
pence
11.88
0.69
12.57
11.81
0.69
12.50
2022
£m
(1.8)
2022
pence
(0.43)
(0.43)
Overview 179
Total
£m
353.1
50.4
(2.2)
2.8
Goodwill
£m
Software
£m
Brands
£m
53.9
13.5
–
0.8
68.2
–
–
–
(1.6)
66.6
10.6
–
10.6
–
–
–
–
0.5
11.1
–
–
–
–
(0.9)
10.2
56.4
57.1
66.0
1.4
(2.2)
0.4
65.6
2.0
(0.5)
(0.4)
(0.1)
66.6
32.8
(4.7)
28.1
7.4
–
–
(1.2)
0.3
34.6
7.0
(0.5)
–
–
–
41.1
25.5
31.0
233.2
35.5
–
1.6
270.3
404.1
–
–
–
(3.1)
267.2
20.8
–
20.8
–
11.6
(8.5)
–
0.6
24.5
–
–
16.5
(4.2)
(0.4)
36.4
2.0
(0.5)
(0.4)
(4.8)
400.4
64.2
(4.7)
59.5
7.4
11.6
(8.5)
(1.2)
1.4
70.2
7.0
(0.5)
16.5
(4.2)
(1.3)
87.7
230.8
245.8
312.7
333.9
10. GOODWILL AND OTHER INTANGIBLE ASSETS
Cost
As at 1 June 2021
Additions (restated)
Derecognition of capitalised costs related to cloud computing
Exchange differences
As at 31 May 2022
Additions
Disposals
Transfer to property, plant and equipment
Exchange differences
As at 31 May 2023
Accumulated amortisation and impairment
As at 1 June 2021 – as reported
Effect of prior year adjustment
As at 1 June 2021 – as restated
Amortisation charge (restated)
Impairment charge
Impairment reversal
Derecognition of amortisation related to cloud computing
Exchange differences
As at 31 May 2022
Amortisation charge
Disposals
Impairment charge
Impairment reversal
Exchange differences
As at 31 May 2023
Net book value
As at 31 May 2023
As at 31 May 2022 (restated)
Refer to note 1(c) for details of the prior year restatements.
Capitalised costs and accumulated amortisation relating to cloud computing were derecognised in 2021 following the IFRIC agenda
decision in April 2021 regarding the treatment of such costs.
Amortisation is charged to administrative expenses in the consolidated income statement. Cumulative impairment of goodwill as
at 31 May 2023 was £10.2 million (2022: £11.1 million) and cumulative impairment of brands as at 31 May 2023 was £36.4 million
(2022: £24.5 million).
Software includes the Group’s enterprise resource planning system (SAP), and the carrying value of this asset as at 31 May 2023 is
£20.6 million (2022: £25.3 million as restated), with four years of amortisation remaining.
Strategic ReportGovernanceFinancial Statements 180
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
10. GOODWILL AND OTHER INTANGIBLE ASSETS CONTINUED
Other than software, intangible assets comprise goodwill and brands. Goodwill and brands have all arisen from previous business
combinations and all have indefinite useful lives and, in accordance with IAS 36 ‘Impairment of Assets’, are subject to annual impairment
testing (which the Group carries out at the year-end date), or more frequently if there are indicators of impairment. The method used
for impairment testing is to allocate assets (including goodwill and brands) to appropriate cash-generating units (CGUs) based on the
smallest identifiable group of assets that generate independent cash inflows, and to estimate the recoverable amounts of the CGUs as
the higher of the assets’ fair values less costs of disposal and the value in use. Value in use is determined using cash flow projections
from approved budgets and plans which are then extrapolated based on estimated long-term growth rates applicable to the markets and
geographies in which the CGUs operate. The cash flow projections are discounted based on a pre-tax weighted average cost of capital for
comparable companies operating in similar markets and geographies as the Group adjusted for risks specific to the particular CGU.
Goodwill of £56.4 million (2022: £57.1 million as restated) comprises £40.4 million (2022: £40.4 million) in relation to the acquisitions of
the Group’s Beauty brands (Charles Worthington, Fudge, Sanctuary Spa and St. Tropez), £13.5 million (2022: £13.5 million as restated) on
the March 2022 acquisition of Childs Farm and £2.5 million (2022: £3.2 million) in relation to other acquisitions. Goodwill for the Beauty
brands is assessed at the group of CGUs comprising these brands (see table below) as this represents the lowest level at which goodwill is
monitored by management.
The carrying value of goodwill and each brand is set out in the table below. For the impairment testing of brands, each brand is allocated to
a single CGU. For the impairment testing of goodwill, Childs Farm goodwill is allocated to the same CGU as the brand and, as noted above,
Beauty goodwill is allocated to the group of CGUs comprising the Beauty brands:
Charles Worthington
Fudge
Sanctuary Spa
St. Tropez
Beauty
Original Source
Rafferty’s Garden
Childs Farm
Other
Goodwill
2023
£m
Goodwill
(restated)
2022
£m
Brands
2023
£m
9.6
24.6
58.9
58.4
Brands
2022
£m
9.6
24.6
75.4
58.4
40.4
151.5
40.4
168.0
–
–
13.5
2.5
56.4
9.8
34.0
35.5
–
230.8
–
–
13.5
3.2
57.1
9.8
32.5
35.5
–
245.8
In performing the impairment testing, the Group has used the budget and plan covering the four years ending 31 May 2027 as described
in the Long Term Viability Statement on page 69 and the Board approved CGU specific plans for a fifth year before applying the long term
growth rate. Assumptions in the budgets and plans used for the value in use cash flow projections (for all brands excluding Childs Farm)
include future revenue volume and price growth rates, associated future levels of marketing support, the 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. Childs Farm was acquired in March 2022, and on the business
combination a fair value for the brand of £35.5 million was recognised, with goodwill arising of £13.5 million. Management’s stated plan
is to expand the brand into international markets, and so specific assumptions on revenue growth along with associated higher gross
margins have been applied. Revenue for Childs Farm is expected to triple over the five years ending 31 May 2028 reflecting the growth
potential in international markets. The margin growth in international markets compared to the UK is driven by premium product pricing
perception and lower expected promotional activity in these markets. Management forecasts cash conversion rates (being the ratio of
operating cash flow to operating profit) based on historical experience.
Overview 181
The other key assumptions applied in determining value in use are the long-term growth rate beyond the period of the approved budget
and plan, and the discount rate to apply to the cash flow projections, both of which are determined with reference to the markets and
geographies in which the CGU (or group of CGUs) operates. The long-term growth rates and discount rates applied in the value in use
calculations used in impairment tests were:
Charles Worthington
Fudge
Sanctuary Spa
St. Tropez
Beauty group of CGUs (goodwill assessment)
Original Source
Rafferty’s Garden
Childs Farm (brand and goodwill assessment)
Long-term
growth rate
2023
Long-term
growth rate
2022
Pre-tax
discount rate
2023
Pre-tax
discount rate
2022
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
2.5%
2.0%
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
2.5%
n/a
10.1%
10.7%
10.2%
10.4%
10.4%
10.5%
10.6%
12.2%
10.1%
10.1%
8.0%
8.0%
8.2%
8.0%
10.0%
n/a
The results of the impairment tests as at 31 May 2023 were as follows:
Sanctuary Spa
For the Sanctuary Spa brand, the recoverable amount of the applicable CGU was determined to be £63.0 million based on a value in
use calculation which, when compared to a carrying value of £79.5 million (of which the brand represented £75.4 million), resulted in
an impairment charge of £16.5 million. The recoverable amount reflected the challenging UK consumer and self-care category backdrop
as cost-of-living pressures mean consumers are sensitive to price increases. Management has determined gross margin to be the key
assumption in the forecasts for Sanctuary Spa given the factors noted above regarding consumer price sensitivity. Sensitivity analysis
has been carried out and a reasonably possible change where gross margin was to decline by 2.5% within the five year forecast period
would increase the impairment charge by £8.5 million to £25.0 million. Conversely should gross margins improve by 2.5% the impairment
charge would reverse by £8.5 million to £8.0 million.
Charles Worthington
For the Charles Worthington brand, the recoverable amount of the applicable CGU which was based on a value in use calculation was
determined to be £11.5 million, marginally in excess of the carrying value of £10.6 million (of which the brand represented £9.6 million).
The recoverable amount reflected slower growth on a strong sales performance in the year ended 31 May 2023 coupled with a recovery
in margins after previous inflationary cost increases were absorbed without passing on to consumers given price sensitivity during the
cost of living crisis.
Management have determined gross margin to be the key assumption in the forecasts for Charles Worthington given the factors noted
above regarding consumer price sensitivity. Sensitivity analysis has been carried out and a reasonably possible change where gross
margin was to decline by 3.0% within the five year forecast period would result in an impairment charge of £1.2 million. Conversely
should gross margins improve by 3.0% an impairment reversal of £3.0 million would be recorded. Management determined, therefore,
that due to the marginal headroom in the base case and a potential reasonably possible downside leading to an impairment charge,
that it was not appropriate to reverse any of the £19.9 million cumulative impairment recorded in prior years.
Management do not consider a further decline in volumes to be reasonably possible scenario based on historic experience. However,
an increase of 20% in forecast sales within the five year forecast period would result in a reversal of £5.4 million being recorded.
Rafferty’s Garden
For the Rafferty’s Garden brand, the recoverable amount of the applicable CGU was determined to be £44.6 million based on a value
in use calculation which, when compared to a carrying value of £32.0 million (reflecting brand value of £29.8 million), resulted in the
reversal of a previously recognised impairment charge of £4.2 million. The increase in the recoverable amount reflected a change in
the current year estimates reflecting the upturn in the brand’s performance. The reversal of the impairment loss has not exceeded the
carrying amount that would have been determined had no impairment loss been recognised in prior years.
Other CGUs
For the remaining CGUs, the recoverable amounts of the respective applicable CGUs, which were determined based on value in use
calculations, exceeded the carrying values. Sensitivity analysis on the value in use calculations did not identify potential impairment in
relation to a reasonably possible downside in the assumptions used for the projections.
Strategic ReportGovernanceFinancial Statements 182
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
11. PROPERTY, PLANT AND EQUIPMENT
Cost
As at 1 June 2021
Additions
Disposals
Reclassified as held for sale
Reclassification to investment property
Other reclassifications
Exchange differences
As at 31 May 2022
Additions
Disposals
Reclassifications and transfer from intangible assets
Exchange differences
As at 31 May 2023
Accumulated depreciation and impairment
As at 1 June 2021
Depreciation charge
Disposals
Reclassified as held for sale
Reclassification to investment property
Impairment charge
Exchange differences
As at 31 May 2022
Depreciation charge
Disposals
Reclassifications
Exchange differences
As at 31 May 2023
Net book value
As at 31 May 2023
As at 31 May 2022
Land and
buildings
£m
Investment
property
£m
Plant and
machinery
£m
Fixtures, fittings
and vehicles
£m
Assets in
the course of
construction
£m
83.9
–
(0.6)
(2.0)
(4.7)
0.7
4.0
81.3
–
(3.6)
0.9
(3.1)
75.5
32.6
1.8
(0.4)
(0.4)
(1.6)
3.8
1.1
36.9
0.8
(2.7)
0.4
(1.0)
34.4
41.1
44.4
8.4
0.2
(2.4)
(1.7)
4.7
–
(0.7)
8.5
–
–
–
(1.3)
7.2
0.8
–
(0.7)
(0.6)
1.6
–
–
1.1
0.1
–
(0.4)
–
0.8
6.4
7.4
112.3
–
0.5
–
–
4.5
7.3
124.6
–
(5.3)
4.8
(4.4)
119.7
89.1
5.8
0.4
–
–
2.1
5.6
103.0
5.7
(5.3)
–
(3.6)
99.8
19.9
21.6
49.3
–
(1.5)
–
–
3.1
1.2
52.1
0.1
(1.5)
1.2
(0.9)
51.0
46.9
1.7
(1.5)
–
–
–
1.0
48.1
1.6
(1.5)
–
(0.8)
47.4
3.6
4.0
7.0
6.6
(0.1)
–
–
(8.3)
0.3
5.5
4.6
(0.1)
(6.6)
(0.1)
3.3
–
–
–
–
–
–
–
–
–
–
–
–
–
3.3
5.5
Total
£m
260.9
6.8
(4.1)
(3.7)
–
–
12.1
272.0
4.7
(10.5)
0.3
(9.8)
256.7
169.4
9.3
(2.2)
(1.0)
–
5.9
7.7
189.1
8.2
(9.5)
–
(5.4)
182.4
74.3
82.9
Depreciation is charged to administrative expenses except for plant and machinery which is charged to cost of sales in the consolidated
income statement. As at 31 May 2023, the Group had entered into commitments for the purchase of property, plant and equipment
amounting to £1.1 million (2022: £0.3 million). As at 31 May 2023, the Group’s share in the capital commitments of its joint venture was
£nil (2022: £nil).
Disposals in each year mainly related to the sale of residential properties in Nigeria as part of the ongoing simplification programme and
which realised a £11.7 million (2022: £15.9 million) profit on disposal which was included within adjusting items (note 3).
The impairment charge of £5.9 million for land and buildings and plant and machinery in the prior year related to the impairment of
factory assets in Nigeria as part of the ongoing simplification programme, and this charge was included within adjusting items (note 3).
The fair value of the investment properties as at 31 May 2023 is £42.2 million (2022: £43.7 million).
Overview 183
12. 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.
The Group’s principal joint venture relates to a 50% interest in PZ Wilmar Limited, a manufacturing business based in Nigeria. In the
Group’s consolidated financial statements, the interest in PZ Wilmar Limited is accounted for using the equity method, and the Group
includes loans advanced to the joint venture within its net investment.
The movement in the year in the carrying value of the net investments in joint ventures is set out below:
As at 1 June 2021
Share of profit
Exchange differences
As at 31 May 2022
Share of profit
Impairment reversal
Loan waived on dissolution
Exchange differences
As at 31 May 2023
PZ Wilmar Limited
Long-term
loans
£m
Equity method
accounted
£m
Other joint
venture
£m
35.2
–
4.4
39.6
–
–
–
0.7
40.3
0.7
6.6
0.1
7.4
7.5
–
–
(3.2)
11.7
(1.7)
–
0.1
(1.6)
–
2.2
(0.6)
–
–
Total
£m
34.2
6.6
4.6
45.4
7.5
2.2
(0.6)
(2.5)
52.0
The long-term loans are denominated in US Dollars, interest free and repayable in part or in full on demand, subject to a 12 month notice
period. Exchange differences on the long-term loans are recorded within other comprehensive income as the loans are determined to
be permanent as equity (applies to the exchange differences on the loans receivable and the corresponding loan payable in PZ Wilmar
Limited’s results).
Set out below is the summarised financial information for PZ Wilmar Limited:
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
Proportion of Group’s ownership interest in the joint venture
Equity method accounted carrying amount of the Group’s interest in the joint venture
2023
£m
46.4
25.4
83.8
109.2
155.6
(82.2)
(50.0)
(132.2)
23.4
50%
11.7
2022
£m
51.1
43.4
67.5
110.9
162.0
(80.5)
(66.8)
(147.3)
14.7
50%
7.4
Strategic ReportGovernanceFinancial Statements 184
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
12. NET INVESTMENTS IN JOINT VENTURES CONTINUED
Revenue
Profit before tax
Profit after tax
Proportion of Group’s ownership interest in the joint venture
Share of result of joint venture
2023
£m
380.1
20.2
14.9
50%
7.5
2022
£m
295.6
18.8
12.6
50%
6.6
The long-term loans issued to PZ Wilmar Limited 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 increased significantly since initial recognition. The loss allowance has
been measured using lifetime expected credit loss by assessing the value in use of PZ Wilmar Limited, and on this basis, management has
concluded that no impairment of these loans is required.
The Group’s other joint venture related to a 50% interest in Wilmar PZ International Pte. Limited which ceased trading in October 2020
and was dissolved in May 2023 resulting in the reversal of a £2.2 million impairment recorded in a previous period. On dissolution, the
loan advanced by the joint venture was waived.
13. ASSETS HELD FOR SALE
Assets held for sale as at 31 May 2023 were £nil (2022: £3.4 million). Assets held for sale at 31 May 2022 related to residential properties
in Nigeria which are being disposed of as part of the ongoing simplification programme.
14. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2023
£m
21.1
9.9
81.9
2022
£m
27.9
10.0
73.9
112.9
111.8
During the year, the cost of inventories recognised as an expense, and included in cost of sales, amounted to £377.5 million
(2022: £342.4 million) which included £2.0 million (2022: £6.9 million) for the write-down to net realisable value for slow-moving and
obsolete inventories. Inventories are stated after provision to write-down to net realisable value of £6.0 million (2022: £8.8 million).
15. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: loss allowance
Net trade receivables
Amounts owed by joint ventures
Other receivables
Prepayments
2023
£m
92.6
(4.4)
88.2
2.2
22.1
6.6
2022
£m
90.9
(3.9)
87.0
1.7
11.0
5.3
119.1
105.0
The Directors consider the carrying amount of trade and other receivables approximates to their fair value due to their short-term nature.
Overview Movement in the trade receivables loss allowance was:
As at 1 June
Increase in loss allowance
Allowance utilised during the year
Allowance released during the year
Exchange differences
As at 31 May
See note 17 for an analysis of the ageing and credit risk profile of trade receivables.
Net trade receivables are denominated in the following currencies:
Sterling
US Dollar
Nigerian Naira
Euro
Australian Dollar
Indonesian Rupiah
Ghana Cedi
Other currencies
185
2023
£m
(3.9)
(2.0)
0.1
1.2
0.2
(4.4)
2023
£m
31.9
11.2
10.1
0.7
17.3
13.2
0.8
3.0
88.2
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
The increase in other receivables during the year is primarily attributable to the retail auctions operated by the Central Bank of Nigeria,
whereby the bank required advance Naira deposits prior to the bi-weekly allocation of foreign currency. Following the auction, the bank
returned all cash either in Naira or if successful in the auction, foreign currency. These auctions ceased after year end following the policy
announcement made by the Central Bank of Nigeria to liberalise the foreign exchange regime (note 30).
16. CASH AND CASH EQUIVALENTS AND NET DEBT
Cash and cash equivalents include cash at bank and in hand, short-term deposits and other highly liquid investments with original
maturities of three months or less which are readily convertible into known amounts of cash and insignificant risk of changes in value.
Borrowings comprise bank overdrafts and amounts drawn under the Group’s committed credit facility. Bank overdrafts are repayable on
demand and form an integral part of the Group’s cash management. Further details on the Group’s committed credit facility are provided
in note 17.
The Group defines its adjusted net debt as cash and cash equivalents net of borrowings, and net debt as cash and cash equivalents net of
borrowings and lease liabilities.
Movements in cash and cash equivalents, adjusted net debt and net debt were:
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents reported in the
consolidated balance sheet
Current borrowings – bank overdrafts
Cash and cash equivalents reported in the
consolidated cash flow statement
Non-current borrowings
Current asset investments
Adjusted net cash/(debt)
Lease liabilities
Net debt
1 June 2022
£m
Net cash flow
£m
Foreign
exchange
movements
£m
Other*
£m
31 May 2023
£m
105.8
58.0
163.8
(0.1)
163.7
(174.0)
0.5
(9.8)
(16.9)
(26.7)
31.0
80.9
111.9
0.1
112.0
(77.2)
–
34.8
3.0
37.8
(9.4)
(9.9)
(19.3)
–
(19.3)
–
–
(19.3)
–
(19.3)
–
–
–
–
–
–
–
–
0.9
0.9
127.4
129.0
256.4
–
256.4
(251.2)
0.5
5.7
(13.0)
(7.3)
Strategic ReportGovernanceFinancial Statements 186
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
16. CASH AND CASH EQUIVALENTS AND NET DEBT CONTINUED
Cash at bank and in hand
Short-term deposits
Cash and cash equivalents reported in the
consolidated balance sheet
Current borrowings – bank overdrafts
Cash and cash equivalents reported in the
consolidated cash flow statement
Non-current borrowings
Current asset investments
Adjusted net debt
Lease liabilities
Net debt
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
(118.0)
0.3
(30.7)
(11.8)
(42.5)
24.1
46.9
71.0
(0.1)
70.9
(56.0)
–
14.9
4.0
18.9
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)
* Other includes lease additions and an increase in the lease liability arising from the unwinding of interest element.
As at 31 May 2023, £204.1 million (2022: £113.0 million) of the cash and cash equivalents was held by the Group’s Nigerian subsidiaries.
The increase of this amount during the year was mainly due to the effect of the country’s foreign exchange regime where exchange rate
controls impact the ability of those subsidiaries to access foreign currency in order to settle foreign currency liabilities. Subsequent to the
year end, a policy announcement was made by the Central Bank of Nigeria to liberalise the foreign exchange regime, and following this
announcement, the Naira exchange rate weakened against Sterling and USD (see note 30).
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Financial instruments
The carrying amounts of each class of financial instruments were:
Financial assets
Derivatives designated as hedging instruments
Forward foreign exchange contracts
Derivatives not designated as hedging instruments
Forward foreign exchange contracts
Equity instruments at fair value through profit or loss
Current asset investments
Debt instruments at amortised cost
Cash and cash equivalents
Net trade receivables and other receivables
Amounts owed by joint ventures
Long-term loans owed by joint venture
Classified within:
Current assets
Non-current assets
2023
£m
2022
£m
0.8
0.2
0.5
256.4
110.3
2.2
40.3
410.7
370.4
40.3
410.7
0.4
0.3
0.5
163.8
98.0
1.7
39.6
304.3
264.7
39.6
304.3
Overview Financial liabilities
Current interest-bearing borrowings
Bank overdrafts
Non-current interest-bearing loans and borrowings at amortised cost
Bank loans and borrowings
Derivatives designated as hedging instruments
Forward foreign exchange contracts
Derivatives not designated as hedging instruments
Forward foreign exchange contracts
Other financial liabilities at fair value through profit or loss
Other payables1
Other financial liabilities at amortised cost
Trade and other payables2
Lease liabilities
Classified within:
Current liabilities
Non-current liabilities
187
2023
£m
2022
£m
–
0.1
251.2
174.0
0.1
0.4
5.9
175.5
13.0
446.1
179.5
266.6
446.1
0.5
1.1
7.2
159.1
16.9
358.9
166.4
192.5
358.9
1 Relates to deferred consideration on the acquisition of Childs Farm (note 18).
2 Excludes other taxation and social security.
Bank loans and borrowings are amounts drawn under committed facilities. During the year, the Group agreed a new £325 million
committed credit facility which is available for general corporate purposes. The credit facility incorporates both a term loan, of up to
£125 million, with the balance as a revolving credit facility (RCF) structure with maturity dates of up to November 2028. Drawings under
the term loan are permitted in GBP, and under the RCF in GBP, Euros or US Dollar (USD) at interest rates at a margin above SONIA,
EURIBOR or SOFR, as applicable, of 1.30–2.10% dependent on leverage and the attainment of specified sustainability performance
targets. Bank loans and borrowings as at 31 May 2023, which are presented net of £0.8 million of unamortised financing fees, comprise
£125.0 million of term loans which are denominated in GBP at an interest rate, including margin, of 5.73%, and £127.0 million of
borrowings under the RCF which are denominated in GBP at interest rates, including margin, at between 5.66–5.78%.
This facility described above replaced the previous £325 million revolving credit facility which was due to expire in November 2023, and
the bank loans and borrowings as at 31 May 2022 of £174.0 million at an interest rate of 0.80% above SONIA relate to this previous facility.
In addition, the Group retains other unsecured and uncommitted facilities that are primarily used for trade-related activities. As at
31 May 2023, these amounted to £199.8 million (2022: £252.3 million) of which £93.3 million, or 47% were utilised (2022: £53.8 million
or 21%). As at the reporting date, there were no bank overdrafts (2022: £0.1 million).
Strategic ReportGovernanceFinancial Statements 188
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
Changes in liabilities arising from financing activities were as follows:
Current borrowings – bank overdrafts
Non-current borrowings – bank loans and borrowings
Lease liabilities
Current borrowings – bank overdrafts
Non-current borrowings – bank loans and borrowings
Lease liabilities
1 June 2022
£m
Net cash flow
£m
(0.1)
(174.0)
(16.9)
0.1
(78.0)
3.0
1 June 2021
£m
Net cash flow
£m
–
(118.0)
(11.8)
(0.1)
(56.0)
4.0
Foreign
exchange
movements
£m
–
–
–
Foreign
exchange
movements
£m
–
–
Other
£m
31 May 2023
£m
–
0.8
0.9
–
(251.2)
(13.0)
Other
£m
31 May 2022
£m
–
–
(0.1)
(174.0)
(16.9)
(0.5)
(8.6)
(b) 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 Group 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 Group’s 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 Group’s normal purchasing activities.
A. Market risk
The Group’s principal market risks are in relation to foreign currency exchange rates, the prices of certain commodities and interest
rates. In managing market risks, the Group aims to minimise the impact of short-term fluctuations on the Group’s financial performance.
However over the longer term, permanent changes in market rates will have an impact on consolidated earnings.
(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
currency exchange rates. The Group is exposed to foreign currency exchange translation and transaction risks as follows:
• Foreign currency exchange translation risks arise due to the translation of assets and liabilities denominated in currencies other than the
functional currency of the subsidiary into functional currency, which is recorded in the income statement. Further translation differences
arise on the translation of assets and liabilities of non-GBP functional currency operating entities into GBP being the Group’s presentation
currency, which are recorded in other comprehensive income
• Foreign currency 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 foreign exchange transaction risk exposures for the Group are the purchase of inventories (predominantly raw
materials) and services purchased in USD and Euros. Group policy is to reduce this risk, mainly in relation to its GBP and AUD functional
currency subsidiaries, by using forward foreign exchange derivative contracts as hedging instruments which are typically designated
as cash flow hedges. In these cases, the Group negotiates the terms of the derivative to match the terms of the hedged item exposure
normally including covering the period from initial forecasting of the hedged item purchase commitment to the point of settlement.
Overview 189
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 initially accounted for in the hedging reserve through other
comprehensive income. If the firm commitment or forecast transaction that is the subject of a cash flow hedge results in the recognition
of a non-financial asset or liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative
that had previously been recognised in other comprehensive income and accumulated in the hedge reserve are removed directly from
equity and included in the initial measurement of the asset or liability. If the hedged item is transaction-related the foreign currency
‘basis spread’ is reclassified to profit or loss when the hedged item affects profit or loss. Those reclassified amounts are recognised in the
consolidated income statement in the same line as the hedged item.
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. Where there is ineffectiveness and hedge accounting criteria
are not met, the change in the fair value of the derivative is accounted for through profit or loss. There was no ineffectiveness during the
reporting period in relation to the use of forward foreign exchange contracts.
The notional amounts of forward foreign exchange contracts outstanding as at the reporting date, along with the weighted average
hedge rates of these contracts and average spot rates for the reporting period are as follows:
2023
sell USD
buy EUR
sell AUD
buy USD
buy GBP
buy SGD
2022
sell USD
buy EUR
sell AUD
buy USD
buy GBP
buy SGD
Notional
Fair value
Currency
million
Currency
pair
Weighted
average
hedge rate
GBP
equivalent
£m
Average
spot rate
Asset
£m
Liability
£m
73.5
GBP:USD
5.5
8.2
GBP:EUR
GBP:AUD
19.9
AUD:USD
0.6
0.5
AUD:GBP
USD:SGD
1.24
1.13
1.86
0.68
0.56
1.34
59.0
4.9
4.4
15.2
0.6
0.3
1.20
1.15
1.78
0.68
0.65
1.37
0.1
–
0.1
0.8
–
–
1.0
(0.3)
(0.2)
–
–
–
–
(0.5)
Notional
Fair value
Currency
million
Currency
pair
Weighted
average
hedge rate
GBP
equivalent
£m
Average
spot rate
Asset
£m
Liability
£m
55.7
9.8
4.8
GBP:USD
GBP:EUR
GBP:AUD
29.4
AUD:USD
1.0
3.4
AUD:GBP
USD:SGD
1.29
1.17
1.82
0.73
0.57
1.37
43.1
8.3
2.6
23.1
1.0
2.0
1.34
1.18
1.84
0.73
0.54
1.36
0.3
0.1
–
0.3
–
–
0.7
(1.3)
(0.1)
(0.1)
(0.1)
–
–
(1.6)
As at 31 May 2023, the aggregate net amount of fair value movements of forward foreign exchange contracts currently deferred in the
cash flow hedge reserve was a gain of £0.2 million (2022: £0.2 million loss). It is anticipated that the purchases of the hedged items
that these forward exchange contracts were entered into for, will take place during the next financial year and these will be sold within
12 months of purchase.
The movement in the hedging reserve during the year was as follows:
As at 1 June
Fair value net gains of hedging instruments, net of amounts reclassified
As at 31 May
2023
£m
(0.2)
0.4
0.2
2022
£m
(0.4)
0.2
(0.2)
The aggregate amount under forward foreign exchange contracts taken directly to profit or loss was a gain of £2.2 million
(2022: £0.8 million loss).
Strategic ReportGovernanceFinancial Statements 190
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
The majority of the Group’s assets and liabilities are denominated in the functional currency of the relevant subsidiary. The following
sensitivity analysis illustrates the impact of a 10% strengthening of the Group’s transactional currencies against local functional
currencies, with all other variables held constant. The impact on the Group’s profit before tax is due to changes in the value of monetary
assets and liabilities. The impact on the Group’s pre-tax equity is due to changes in the fair value of forward exchange contracts
designated as cash flow hedges and the long-term loan to a joint venture (note 12). The Group’s exposure to foreign currency changes for
all other currencies is not material. A similar but opposite impact would be felt on both profit and equity if the Group’s main transactional
currencies weakened against local functional currencies by a similar amount.
£m
US Dollar
Nigerian Naira
Chinese Renminbi
2023
2022
Impact
on profit
before tax
Impact
on pre-tax
equity
Impact
on profit
before tax
Impact
on pre-tax
equity
(6.2)
3.1
(2.4)
5.4
–
–
(1.8)
2.4
(0.5)
5.5
–
–
The table above shows the foreign currency risk in relation to non-functional currency financial instruments in subsidiaries’ financial
statements at the balance sheet date. In addition, the Group is also exposed to foreign currency risk on the translation of overseas
subsidiaries’ results into Sterling for the Group consolidated financial statements through the use of the average rate for the income
statement and the closing rate for net assets. The impact on the Group’s profit before tax and total equity if the applicable rate used to
translate the results of the Group’s principal foreign operations into Sterling were adjusted to show a 10% strengthening of Sterling is
shown below. A similar but opposite impact would be felt if Sterling weakened against the other currencies by a similar percentage.
£m
Nigerian Naira
Indonesian Rupiah
Australian Dollar
Other
Impact
on adjusted
operating
profit
Impact
on operating
profit
(3.3)
(1.7)
(0.8)
(0.9)
(4.3)
(1.7)
(1.3)
(0.7)
Impact
on total
equity
(27.0)
(0.9)
(5.3)
(3.0)
In the table above, the most significant balance sheet item impacting total equity for the Nigerian Naira is the cash and cash equivalents
held by the Nigerian subsidiaries (note 16).
(ii) Commodity pricing risk
Commodity risk is the risk that changes in underlying raw material prices have an adverse impact on the Group’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.
(iii) Interest rate risk
Interest rate risk is the risk that a change in interest rates will have an adverse impact on the Group’s financial performance. The
Group is exposed to interest rate risk to the extent it has cash at bank and on short-term deposit, enters into floating rate borrowing
arrangements, and/or related interest rate hedging derivatives.
The Group’s policy permits entering into interest rate caps to minimise interest rate risk, and the Group previously entered into an
interest rate cap on a notional principal amount of £75 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, and no interest rate caps have
been taken out by the Group since.
Overview 191
The following table sets out the sensitivity to a reasonably possible change in the Nigerian Fixed Deposit interest rates on the cash
at bank and short-term deposits held by the Group’s Nigerian operations as at 31 May 2023 (note 16). With all other variables held
constant, the Group’s profit before tax is affected as follows:
Nigeria rates
Increase/
decrease in
basis points
+50
-50
Effect on profit before tax
2023
£m
0.6
(0.6)
2022
£m
–
–
The following table sets out the sensitivity to a reasonably possible change in SONIA interest rates on that portion of loans and
borrowings affected as at 31 May 2023. With all other variables held constant, the Group’s profit before tax is affected as follows:
GBP rates
Increase/
decrease in
basis points
+50
-50
Effect on profit before tax
2023
£m
(1.3)
1.3
2022
£m
(0.9)
0.9
B. Credit risk
The Group is exposed to counterparty credit risk from its financing and investing activities with banks and financial institutions, including
cash deposits, and the use of derivatives and other financial instruments, from its operating activities (primarily trade receivables) and
its loans to its joint venture (note 12). The maximum exposure to credit risk at the end of the reporting period is the carrying amount of
each class of financial assets.
Financing and investing activities
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 & Poor’s (S&P) or
Fitch, with further limits established for levels of exposure at various ratings levels. The level of exposure and the credit worthiness of the
Group’s banking counterparties are 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.
Cash and cash equivalents and net forward foreign exchange contracts by counterparty credit rating at the end of the reporting period is
as follows (ratings per S&P unless unavailable, in which case the Fitch rating is used). The 2022 classification has been corrected to report
£114.3 million cash and cash equivalents as B+ to B- counterparty credit rating (previously reported as BB+ to BB-):
AA-
A+ to A-
BBB+ to BBB-
BB+ to BB-
B+ to B-
not rated
2023
2022
Cash and cash
equivalents
£m
Financial
derivatives
£m
Cash and cash
equivalents
£m
Financial
derivatives
£m
8.8
38.6
2.3
2.3
204.3
0.1
256.4
0.8
(0.3)
–
–
–
–
0.5
11.1
27.6
8.4
1.8
114.3
0.6
163.8
0.2
(1.0)
(0.1)
–
–
–
(0.9)
The amounts classified B+ to B- counterparty credit rating relate to cash and cash equivalents held predominantly in Nigeria where the
sovereign credit rating is B- thereby limiting the rating of banks incorporated within the country.
There are no significant concentrations of credit risk within the Group arising from the use of derivatives or other financial instruments.
Strategic ReportGovernanceFinancial Statements 192
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
Trade receivables
The Group trades only with creditworthy third parties. Under the 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.
An allowance for loss is estimated by management based on the expected credit loss model approach. The creation and release of
provisions for receivables is charged/credited to administrative expenses in the consolidated 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 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, and payment terms are
generally 30 days, with a range from 14 to 90 days (2022: 14 to 90 days) which reflects the differing nature of trading in the Group’s
geographical segments.
No other receivables are deemed to be impaired.
The ageing and credit risk profile of trade receivables based on the Group’s provision matrix at the end of the reporting period was:
As at 31 May 2023
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
Specific provision
Net trade receivables
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
Specific provision
Net trade receivables
Expected credit
loss rate
%
Gross trade
receivables
£m
0.1%
0.2%
3.8%
3.8%
2.9%
52.8%
76.2
10.0
0.3
0.5
2.2
3.4
92.6
Lifetime
expected
credit loss
£m
(0.1)
–
–
–
(0.1)
(1.8)
(2.0)
Net trade
receivables
£m
76.1
10.0
0.3
0.5
2.1
1.6
90.6
(2.4)
88.2
Expected credit
loss rate
%
Gross trade
receivables
£m
Lifetime
expected
credit loss
£m
Net trade
receivables
£m
0.4%
1.1%
12.5%
11.1%
15.4%
38.2%
74.4
8.9
1.6
0.9
1.3
3.8
90.9
(0.3)
(0.1)
(0.2)
(0.1)
(0.2)
(1.3)
(2.2)
74.1
8.8
1.4
0.8
1.1
2.5
88.7
(1.7)
87.0
C. Liquidity risk
The Group is exposed to the risk that it is unable to meet its financial commitments as they fall due.
Under the terms of the £325 million committed credit facility agreed during the year, the Group must meet certain financial covenants
for the facility to remain in place and, therefore, for the Group to continue to borrow under it. The previous revolving credit facility,
which was replaced by the currency facility, contained similar financial covenants. The covenants are described in the Capital risk
management section.
Overview 193
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 customers and payments to suppliers, and the timing of any capital and restructuring projects.
Set out below is the maturity profile of the Group’s financial liabilities which is based on the contractual undiscounted cash flows
prepared using forward interest rates where applicable, showing items at the earliest date on which the liability could be required to be
paid (for borrowings under committed facilities, the maturity is based on the maturity of the facility). 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.
As at 31 May 2023
Trade and other payables
Forward foreign exchange contracts
Borrowings
Lease liabilities
As at 31 May 2022
Trade and other payables
Forward foreign exchange contracts
Borrowings
Lease liabilities
< 3 months
£m
3–12 months
£m
1–2 years
£m
2–5 years
£m
> 5 years
£m
177.3
71.8
1.7
0.6
–
12.8
–
2.0
1.3
–
125.0
2.2
2.8
–
127.0
4.0
–
–
–
6.3
< 3 months
£m
3–12 months
£m
1–2 years
£m
2–5 years
£m
> 5 years
£m
161.8
79.5
0.1
0.7
–
42.2
–
2.6
–
–
174.0
2.9
4.5
–
–
5.3
–
–
–
8.0
Total
£m
181.4
84.6
253.7
15.1
Total
£m
166.3
121.7
174.1
19.5
The forward foreign exchange contracts disclosed in the tables above are the gross undiscounted cash outflows. Those amounts may be
settled gross or net. The following table shows the corresponding reconciliation of those amounts to their carrying values:
As at 31 May 2023
Inflows
Outflows
Net
Carrying amounts:
Asset
Liability
As at 31 May 2022
Inflows
Outflows
Net
Carrying amounts:
Asset
Liability
< 3 months
£m
3–12 months
£m
1–2 years
£m
2–5 years
£m
> 5 years
£m
71.9
(71.8)
0.1
0.5
(0.4)
0.1
13.2
(12.8)
0.4
0.5
(0.1)
0.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
< 3 months
£m
3–12 months
£m
1–2 years
£m
2–5 years
£m
> 5 years
£m
78.8
(79.5)
(0.7)
0.5
(1.2)
(0.7)
42.0
(42.2)
(0.2)
0.2
(0.4)
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
85.1
(84.6)
0.5
1.0
(0.5)
0.5
Total
£m
120.8
(121.7)
(0.9)
0.7
(1.6)
(0.9)
Strategic ReportGovernanceFinancial Statements 194
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT CONTINUED
Capital risk management
The objective of the Group 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 bank loans, bank borrowings and equity, including, when applicable, derivatives used
for the purposes of hedging currency and interest exposure on the loans and borrowings, but excluding the cash flow hedging reserve.
In support of its objectives, the Group may undertake actions to adjust its capital structure. Actions may include, but are not limited
to, raising or prepaying 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 one of the covenants in relation to the Group’s £325 million committed credit facility, being the Leverage ratio of Total Net
Debt to EBITDA as defined in the facility agreement. As at 31 May 2023, the Group’s net debt position was £7.3 million. This amount
was net of £256.4 million cash and cash equivalents and, as described in note 16, the majority of this was held by the Group’s Nigerian
subsidiaries where the effect of the country’s exchange rate controls impact the ability of those subsidiaries to access foreign currency in
order to settle foreign currency liabilities. As described in the foreign currency risk section of this note, this Naira denominated cash and
cash equivalents amount represents a balance sheet exposure for the Group.
The other covenant in relation to the £325 million credit facility is Interest Cover, being the ratio of Adjusted EBITDA to Net Finance Charges.
The committed credit 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.
During the year, and as at the reporting date, the Group was in compliance with all financial and other covenants. After the November
2022 refinancing, the Group and their lending banks made some amendments to clarify and confirm the basis of the covenant
calculations.
Fair values
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 Group uses various methods including market, income and cost
approaches. Based on these approaches, the Group 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.
There were no transfers between Level 1, 2 and 3 during the current or prior year.
At the end of the reporting period, the Group held the following financial assets and liabilities at fair value:
As at 31 May 2023
Assets held at fair value
Current asset investments
Derivative financial assets
Liabilities held at fair value
Derivative financial liabilities
Other payables
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
1.0
0.5
–
0.5
–
–
5.9
Total
£m
0.5
1.0
0.5
5.9
Overview 195
As at 31 May 2022
Assets held at fair value
Current asset investments
Derivative financial assets
Liabilities held at fair value
Derivative financial liabilities
Other payables
Level 1
£m
Level 2
£m
Level 3
£m
–
–
–
–
–
0.7
1.6
–
0.5
–
–
7.2
Total
£m
0.5
0.7
1.6
7.2
The following is a description of the valuation methodologies and assumptions used for estimating the fair values.
Current asset investments – Current asset investments comprise non-listed equity investments. A discounted cash flow methodology is
used to estimate the present value of the expected future economic benefits to be derived from the ownership of these investments.
Derivative financial instruments – Derivative financial instruments comprise forward foreign exchange contracts. 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. Counterparty credit is monitored. No adjustment to the fair value for credit risk is made due to materiality.
Other payables – Other payables held at fair value relate to deferred purchase consideration on the acquisition of Childs Farm (note 18),
which was estimated by applying an appropriate discount rate to the expected future payments. The key assumptions take into
consideration the probability of meeting each performance target and the discount factor. Should the target not be met, no consideration
would be payable, and should the discount rate applied be changed, the fair value of the deferred purchase consideration would change,
but the amount of consideration that would ultimately be paid would not necessarily change.
For the financial assets and liabilities not held at fair value, there was no material difference between their carrying values and their fair
values, except for non-current borrowings which are presented net of unamortised issuance costs of £0.8 million.
18. TRADE AND OTHER PAYABLES
Current
Trade payables
Trade obligations with banks
Amounts owed to joint ventures
Other taxation and social security
Other payables
Accruals
Non-current
Other payables
2023
£m
75.9
8.6
–
4.9
10.8
82.0
182.2
4.1
4.1
2022
£m
78.4
–
0.6
2.1
10.8
72.0
163.9
4.5
4.5
Refer to note 17 for further 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. Current trade payables include £nil (2022: £5.9 million)
under these vendor financing arrangements.
Trade obligations with banks relate to common practice in Nigeria where the bank undertakes to settle certain trade creditors on the
Group’s behalf and receives subsequent settlement from the Group trading entities. The Group does not benefit from payment terms
with the bank that are contractually extended beyond those agreed with the supplier, and neither does the supplier benefit from early
payment terms. Accordingly, such liabilities continue to be recognised within trade payables and cash flows are presented as operating.
Deferred consideration for the acquisition of Childs Farm in 2022 (note 28) is included within other payables of which £3.1 million
(2022: £3.2 million) is classified as current and £2.8 million (2022: £4.0 million) as non-current. The liability was reassessed during
the year and a £1.3 million reduction was recognised in finance income.
Strategic ReportGovernanceFinancial Statements 196
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
19. DEFERRED TAX
Deferred tax is provided under the balance sheet liability method using the applicable jurisdiction tax rate at which the balances are
expected to unwind. Movements in deferred tax assets and liabilities during the year were:
As at 1 June 2021 – as
previously reported
Effect of prior year
adjustment
As at 1 June 2021 –
as restated
Credit/(charge) to income
statement (restated)
Charge to other
comprehensive income
Arising on a business
combination
Property,
plant and
equipment
£m
Retirement
benefit
obligations
£m
Revaluation
of property,
plant and
equipment
£m
Unremitted
earnings
£m
Business
combinations
£m
Accruals and
provisions
£m
Tax losses
£m
Other
timing
differences
£m
Total
£m
(9.4)
(5.7)
(5.9)
(1.9)
(42.0)
(1.2)
–
–
–
–
(10.6)
(5.7)
(5.9)
(1.9)
(42.0)
3.8
–
3.8
1.3
(7.3)
(67.1)
–
–
(1.2)
1.3
(7.3)
(68.3)
0.7
0.5
0.1
0.5
2.5
(0.2)
(1.5)
(3.0)
(0.4)
–
–
(8.4)
–
0.2
Exchange differences
(0.5)
As at 31 May 2022
(10.4)
(13.4)
Credit/(charge) to
income statement
Credit to other
comprehensive income
Exchange differences
As at 31 May 2023
0.1
–
0.4
(9.9)
(0.4)
7.4
(0.2)
(6.6)
–
–
(0.1)
(5.9)
0.7
–
0.4
–
–
–
–
(8.9)
(0.2)
(1.4)
(48.6)
(0.4)
–
–
2.7
–
0.7
(4.8)
(1.8)
(45.2)
–
–
0.2
3.8
0.3
–
(0.3)
3.8
–
–
1.0
0.8
3.3
–
(0.5)
3.6
(0.9)
(9.3)
–
(0.9)
(8.9)
(0.3)
(12.1)
(87.2)
2.4
0.9
0.3
8.7
8.3
0.8
(8.5)
(69.4)
Refer to note 1(c) for details of the prior year restatements.
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 £1.8 million (2022: £1.4 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.
As at 31 May 2023, 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 £15.9 million (2022: £14.3 million).
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 2023 the Group recorded a deferred tax asset of £3.6 million (2022: £1.3 million) on recognised
but unused tax losses. A further £2.7 million (2022: £5.1 million) of unrecognised tax losses are not expected to expire or be disposed of,
together with £13.9 million (2022: £14.0 million) of unrecognised capital losses relating to the disposal of the five:am business. There is
also an additional unrecognised deferred tax asset of £13.8 million relating to timing differences other than unrecognised tax losses. This
amount relates to fixed asset differences, unused temporary differences, and accruals and provisions, and it is not probable that these timing
differences will reverse in the foreseeable future.
Other timing differences include a liability for brands and goodwill of £7.1 million (2022: £6.8 million), an asset for share-based payments of
£0.5 million (2022: £0.6 million), and a liability for unrealised foreign exchange movements of £1.6 million (2022: £2.1 million).
After offsetting deferred tax assets and liabilities where appropriate within jurisdictions (as permitted by IAS 12 ‘Income Taxes’), the net
deferred tax liability comprises:
Deferred tax assets
Deferred tax liabilities
2023
£m
7.5
(76.9)
(69.4)
2022
(restated)
£m
4.5
(91.7)
(87.2)
Overview 20. PROVISIONS
As at 1 June 2021
Provided
Utilised
Exchange differences
As at 31 May 2022
Released
Utilised
Exchange differences
As at 31 May 2023
197
Warranty
provisions
£m
VAT
provision
£m
0.7
0.1
(0.2)
0.1
0.7
(0.4)
–
0.1
0.4
4.9
–
–
–
4.9
–
(4.9)
–
–
Total
£m
5.6
0.1
(0.2)
0.1
5.6
(0.4)
(4.9)
0.1
0.4
Warranty provisions relate to the Group’s electricals business in Africa. The VAT provision related to one of the Group’s subsidiaries
which had initially incorrectly assessed VAT on sales of certain goods and purchases of certain raw materials over the period 2016–2019.
Following a determination on the VAT treatment of these sales and purchases, a liability was provided for which included an estimate of
applicable fines and interest, and this was settled during the year.
21. RETIREMENT BENEFITS AND OTHER LONG-TERM EMPLOYEE OBLIGATIONS
The Group operates retirement benefit schemes in the UK and overseas as described below.
UK retirement benefit schemes
The Group operates four defined benefit pension schemes in the UK, each of which were closed to future accrual on 31 May 2008. The
schemes are as follows:
• PZ Cussons Retirement Benefits Plan (Main plan) – for UK-based employees excluding PZ Cussons plc Executive Directors
• PZ Cussons Directors’ Retirement Benefits Plan (Directors’ plan) – for PZ Cussons plc Executive Directors
• PZ Cussons Pension Fund and Life Assurance Scheme for Staff Employed Outside the UK (Expatriate plan) – for all eligible expatriate
employees based outside the UK
• PZ Cussons Employer Financial Retirement Benefits Scheme (Unfunded plan) – an unfunded, unapproved retirement scheme for
certain former PZ Cussons plc Directors.
Current and deferred members of these schemes are provided with defined benefits based on service and final salary. The Main plan,
Directors’ plan and Expatriate plan are funded schemes and the assets of the schemes are administered by trustees and are held in
trust funds independent of the Group. The most recent triennial actuarial valuations of these schemes was as at 31 May 2021, and were
performed by an independent professional actuary. Each scheme was determined to be in surplus and therefore there are no company
contributions required to be paid before the next valuation.
Strategic ReportGovernanceFinancial Statements 198
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
21. RETIREMENT BENEFITS AND OTHER LONG-TERM EMPLOYEE OBLIGATIONS CONTINUED
The UK’s main schemes expose the Group to actuarial risks such as investment risk, interest rate risk and longevity risk as described below:
Risk
Description
Mitigation
Investment risk
Interest risk
The present value of the defined benefit
pension schemes’ liabilities is calculated
using a discount rate (investment return)
determined by direct reference to high-
quality corporate bond yields (for IAS 19
‘Employee Benefits’ purposes) and gilt
yields (for statutory funding and long-term
funding purposes). If the return on scheme
assets is less than these discount rates, the
funding position of the schemes will fall.
A decrease in the corporate bond yield
and/or gilt yield will increase the present
value of the schemes’ liabilities under the
IAS 19 ‘Employee Benefits’ and statutory/
long-term funding bases respectively.
As part of the financing of the funded schemes, they invest in assets with
higher return expectations than lower risk bonds that are the best match for
the schemes’ liabilities. To control the resulting investment risk, the funded
schemes 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 scheme is regularly monitored to ensure
investment risk is not excessive given the statutory funding assumptions
and the schemes’ long-term funding objectives.
The funded schemes 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 schemes’ liabilities due to falling
gilt and/or corporate bond yields are offset by similar movements in the
value of the schemes’ overall assets.
Reflecting the funded schemes’ focus on controlling interest risk relative
to their statutory and long-term funding bases, the schemes’ 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 schemes’ IAS 19 ‘Employee Benefits’
liabilities.
Inflation risk
Longevity risk
An increase in inflation results in higher
benefit increases for members, which
results in higher scheme liabilities.
The schemes’ liability-matching bond assets are also designed to hedge
the majority of the inflation rate risk inherent in the schemes’ liabilities.
This is achieved by investing in index-linked gilts.
The value of the schemes’ liabilities
is calculated by reference to the best
estimate of the life expectancy of each
scheme’s participants. An increase in life
expectancy of the schemes’ participants
will increase the schemes’ liabilities.
To help control longevity risk all the schemes are closed to future
benefit accrual.
The schemes consider additional approaches to mitigating longevity risk,
for example by buying annuities with an insurance company to cover the
schemes’ liabilities.
Overview A summary of the amounts recognised in the consolidated balance sheet for the UK schemes described above is as follows:
Main plan
Directors’ plan
Expatriate plan
Unfunded plan
Restriction due to asset ceiling
Net asset
Classified as/within:
Retirement benefit surplus
Retirement benefit and other long-term
employee obligations
2023
Obligations
£m
(127.3)
(17.4)
(44.7)
(3.1)
Assets
£m
154.0
29.2
89.2
–
272.4
(192.5)
2022
Obligations
£m
(157.9)
(27.0)
(55.0)
(3.5)
Assets
£m
217.3
36.9
113.8
–
368.0
(243.4)
Total
£m
26.7
11.8
44.5
(3.1)
79.9
(44.5)
35.4
38.5
(3.1)
35.4
199
Total
£m
59.4
9.9
58.8
(3.5)
124.6
(58.8)
65.8
69.3
(3.5)
65.8
The trust deeds for the Main plan and Directors’ plan provide 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
surpluses 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 plan has not been recognised in the consolidated balance sheet (shown as a
restriction due to asset ceiling in the table above).
Movements in the fair value of plan assets were as follows:
As at 1 June
Recognised in consolidated income statement:
– administrative expenses
– finance income
Recognised in consolidated other comprehensive income:
– return on plan assets (excluding finance income)
Not recognised within comprehensive income due to asset ceiling:
– finance income
– return on plan assets (excluding finance income)
Employer contributions to the Unfunded plan
Benefits paid
As at 31 May
2023
£m
368.0
(0.4)
10.5
2022
£m
416.8
(0.9)
7.0
(77.9)
(45.9)
2.1
(16.3)
0.2
(13.8)
272.4
1.0
4.2
0.2
(14.4)
368.0
Employer contributions to the Unfunded plan related to payments during the year to former Directors amounting to £201,089
(2022: £190,888).
Strategic ReportGovernanceFinancial Statements 200
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
21. RETIREMENT BENEFITS AND OTHER LONG-TERM EMPLOYEE OBLIGATIONS CONTINUED
The assets in the schemes are as follows:
Equities
Bonds
Property
Cash and cash equivalents
2023
£m
5.2
259.7
–
7.5
272.4
2022
£m
19.0
329.3
4.2
15.5
368.0
Equities and bonds are quoted in active markets with all other assets being unquoted.
The UK schemes’ investment strategy is set by the respective trustees after taking appropriate advice from their investment consultant.
The trustee’s primary objective is to invest the scheme’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 scheme is exposed.
Movements in the present value of the plan defined benefit obligations were as follows:
As at 1 June
Recognised in the consolidated income statement:
– finance income
Recognised in consolidated other comprehensive income:
– remeasurement gain due to changes in demographic assumptions
– remeasurement gain due to changes in financial assumptions
– remeasurement (loss)/gain due to experience adjustments
Benefits paid
As at 31 May
Amounts recognised in the consolidated income statement comprised:
Administrative expenses
Finance income
Amounts recognised within consolidated other comprehensive income comprised:
Relating to plan assets:
– return on plan assets (excluding finance income)
Relating to plan defined benefit obligations:
– remeasurement gain due to changes in demographic assumptions
– remeasurement gain due to changes in financial assumptions
– remeasurement (loss)/gain due to experience adjustments
2023
£m
2022
£m
(243.4)
(334.1)
(8.3)
(6.4)
5.4
49.3
(9.3)
13.8
2.9
78.9
0.9
14.4
(192.5)
(243.4)
2023
£m
(0.4)
2.2
1.8
2022
£m
(0.9)
0.6
(0.3)
2023
£m
2022
£m
(77.9)
(45.9)
5.4
49.3
(9.3)
(32.5)
2.9
78.9
0.9
36.8
Overview The key financial assumptions used by the actuary to value the scheme obligations were as follows:
Rate of increase in retirement benefits in payment
– pensions in payment
– deferred pensions
Discount rate
Inflation (RPI)
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)
201
2023
2022
2.90%
2.40%
5.40%
3.10%
2023
years
22.9
24.4
2.75%
2.35%
3.50%
3.15%
2022
years
22.9
24.4
The ages shown above are weighted average across the schemes based on the scheme’s defined benefit obligation as at 31 May 2023,
and the prior year ages are presented on the same basis.
The graph below sets out the undiscounted benefit payments that are expected to be paid from the funded schemes based on the data
used for the triennial actuarial valuations as at 31 May 2021:
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
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
The sensitivities on the key actuarial assumptions as at the end of the year in relation to the schemes were:
Discount rate
Inflation (RPI)
Mortality
Change in assumption
Decrease of 0.25%
Increase of 0.25%
Increase in life expectancy of 1 year
Change in obligation
Increase of 3.0%
Increase of 2.6%
Increase of 3.4%
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 2024 the Group expects to make cash contributions of £nil (2022: £nil) to funded defined benefit
schemes, and £215,000 (2022: £197,000) to unfunded schemes.
Strategic ReportGovernanceFinancial Statements
202
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
21. RETIREMENT BENEFITS AND OTHER LONG-TERM EMPLOYEE OBLIGATIONS CONTINUED
Overseas retirement benefit schemes
Outside of the UK, the Group operates a number of defined benefit pension schemes, all of which are unfunded, and the movement in
the liability positions of these schemes during the year was as follows:
As at 1 June
Recognised in consolidated income statement:
– administrative expenses
– finance expense
Recognised in consolidated other comprehensive income:
– remeasurement (losses)/gains
Benefits paid
Exchange differences
As at 31 May
2023
£m
(9.6)
0.2
(0.6)
(0.3)
0.8
0.2
(9.3)
2022
£m
(8.4)
(0.9)
(0.6)
0.6
0.6
(0.9)
(9.6)
The most significant overseas defined benefit scheme is operated by the Group’s Indonesian subsidiary, and its obligations have been
valued using a discount rate of 6.75% (2022: 7.75%) and a salary inflation rate of 8.0% (2022: 8.0%). The scheme’s obligation included in
the above table is £8.7 million (2022: £8.6 million).
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 obligation
Increase of 9.3%
Increase of 8.9%
Defined contribution pension schemes and other long-term employee obligations
The Group operates a defined contribution pension scheme for current employees in the UK and at a number of overseas subsidiaries. The
amount recognised as an expense in the consolidated income statement in relation to these schemes was £2.4 million (2022: £2.2 million).
The most significant other long-term employee obligation relates to the gratuity scheme operated by the Group’s Nigerian subsidiary.
This scheme operates under an agreement established in 2006 between PZ Cussons Nigeria plc and its employees, and is only eligible for
employees who joined the company before 1 January 2007. The scheme is funded directly by the company, and the amount recognised
as an expense in the consolidated income statement in relation to this scheme is £0.6 million (2022: £0.5 million).
22. SHARE CAPITAL AND INVESTMENT IN OWN SHARES
(a) Share capital
Allotted, issued and fully paid:
Ordinary shares of 1p each
Total called up share capital
2023
Number
000
428,725
428,725
2022
Number
000
428,725
428,725
£m
4.3
4.3
£m
4.3
4.3
The Company has one class of ordinary shares which carry no right to fixed income.
(b) Investment in own shares
Investment in own shares held by the Group represent the shares in the Company held by the employee share trusts which comprise
the Employee Share Option Trust (ESOT) and the Share Incentive Plan (SIP) trust. The ESOT was established to purchase shares to satisfy
awards under the Group’s incentive schemes and the SIP trust was established to purchase and hold shares on behalf of employees
participating in the SIP. Further details of these schemes are provided in note 23.
Overview Movements in the investment in own shares were:
As at 1 June 2021
Issued to satisfy options
Transfers
As at 31 May 2022
Issued to satisfy options
Transfers
As at 31 May 2023
203
ESOT
number
SIP trust
number
10,291,149
(63,099)
(34,269)
10,193,781
(132,634)
(64,651)
9,996,496
–
–
34,269
34,269
–
64,651
98,920
The transfer of shares between the trusts relate to matching awards provided by the Group under the SIP (see note 23) which are
sourced from the ESOT.
The cost of shares held in the ESOT and SIP trust as at 31 May 2023 was £36.9 million, and the market value was £18.6 million
(2022: £20.6 million).
23. SHARE-BASED PAYMENTS
The Group operates a number of long-term incentive schemes which provide share awards to Executive Directors and certain senior
employees. These schemes are designed to align the interests of the participants with those of the Group’s shareholders. The Group also
operates a Share Incentive Plan (SIP) scheme which is open to UK employees.
The incentive schemes are described below.
Performance Share Plan (PSP)
The current version of the PSP, the PZ Cussons Long-Term Incentive Plan 2020 (LTIP 2020 plan), was approved by shareholders and
adopted at the 2020 Annual General Meeting.
Under the LTIP 2020 plan, 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 (performance shares) subject to continued employment over a three-year
vesting period and the satisfaction of certain performance criteria established by the Remuneration Committee. The fair value of the
awards is determined to be the market price of the underlying shares on the date of the grant. There are no cash settlement alternatives.
The Group accounts for the performance share awards as equity-settled awards. In the current year, 1,616,361 performance share
awards (2022: 1,348,831 awards) were granted equating to a total fair value of £3.3 million (2022: £3.3 million) which will be recognised
over the vesting period.
The LTIP 2020 plan also permits a portion of the awards for the senior employees, but not Executive Directors, to function like restricted
stock. These share awards (restricted share awards) vest in full subject only to continued employment, with no performance conditions.
There are no cash settlement alternatives. The Group accounts for the restricted share awards as equity-settled awards. In the current year,
948,158 restricted share awards (2022: 612,378 awards) were granted equating to a total fair value of £1.9 million (2022: £1.4 million)
which will be recognised over the vesting period.
The total expense recognised in the consolidated income statement in the year in respect of both the performance share awards and the
restricted share awards was £1.3 million (2022: £1.2 million).
Deferred Bonus Share Plan
This plan is limited to the Executive Directors and requires a minimum of 25% of any annual bonus earned to be deferred into shares
(deferred bonus shares). The deferral period is three years (unless the Remuneration Committee determines otherwise) and the shares
vest in full subject only to continued employment, with no performance conditions. The fair value of the deferred bonus share awards is
determined to be the market price of the underlying shares on the date of the grant. The Group accounts for the deferred bonus share
awards as equity-settled awards. In the current year, 89,222 deferred bonus share awards (2022: 116,730 awards) were granted equating
to a total fair value of £0.2 million (2022: £0.3 million) which will be recognised over the vesting period. The amount recognised in the
consolidated income statement in the year in respect of deferred bonus share awards was £0.1 million income (2022: £0.3 million expense).
Strategic ReportGovernanceFinancial Statements 204
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
23. SHARE-BASED PAYMENTS CONTINUED
SIP
The Group launched the SIP in October 2021. Available to UK employees, this plan aligns employees with the business strategy and
investors by encouraging equity participation through the wider employee population. Under the plan, employees can opt to make
a salary deduction on a monthly basis to subscribe for shares which the Group matches up to a maximum of £100 per employee per
month. These matched share awards vest subject to continued employment over a three-year vesting period and a number of conditions
associated with withdrawal. The fair value of the matched share awards is determined to be the market price of the shares on the date
of matching. There are no cash settlement alternatives. The Group accounts for the matched share awards as equity-settled awards.
In the current year, 71,160 matched share awards (2022: 35,389 awards) were granted equating to a total fair value of £0.1 million
(2022: £0.1 million) which will be recognised over the vesting period. The expense recognised in the consolidated income statement
in the year in respect of matched share awards was £45,000 (2022: £71,000).
Set out below are the movements in the options and awards under each of the schemes:
Options/awards outstanding as at 1 June 2021
Options/awards issued
Options/awards exercised
Options/awards lapsed/forfeited
Options/awards outstanding as at 31 May 2022
Options/awards issued
Options/awards exercised
Options/awards lapsed/forfeited1
Performance
shares
number
3,315,616
1,348,831
Restricted
shares
number
Deferred
bonus shares
number
SIP
number
Total
number
370,947
612,378
–
–
3,686,563
116,730
35,389
2,113,328
–
(28,311)
(1,411,534)
(104,060)
–
–
3,252,913
1,616,361
850,954
948,158
116,730
89,222
–
(50,325)
(1,249,311)
(160,840)
–
–
–
(28,311)
(1,209)
(1,516,803)
34,180
4,254,777
71,160
2,724,901
–
(50,325)
(8,880)
(1,419,031)
Options/awards outstanding as at 31 May 2023
3,619,963
1,587,947
205,952
96,460
5,510,322
1
Of the options/awards which lapsed/forfeited in the year ended 31 May 2023 for the performance shares and restricted shares, 1,290,407 related to the previous scheme approved
in 2014.
The vesting dates of the outstanding options/awards as at 31 May 2023 is:
31 May 2024
31 May 2025
31 May 2026
Performance
shares
number
958,755
1,124,677
1,536,531
Restricted
shares
number
Deferred
bonus shares
number
423,434
513,282
651,231
–
116,730
89,222
SIP
number
Total
number
–
1,382,189
29,102
1,783,791
67,358
2,344,342
Overview 24. 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
Net finance (income)/costs
Operating profit
Depreciation (notes 11 and 25)
Amortisation (note 10)
Impairment of intangible assets and property, plant and equipment (notes 10 and 11)
Impairment reversal of intangible assets (note 10)
Profit on disposal of property, plant and equipment
Impairment reversal of net investments in joint ventures
Derecognition of capitalised costs related to cloud computing arrangements
Reclassification of exchange differences on repayment of permanent as equity loans
Difference between pension charge and cash contributions
Profit on disposal of businesses
Share-based payment expense
Share of results of 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
Refer to note 1(c) for details of the prior year restatements.
205
2023
£m
61.8
–
61.8
(2.1)
59.7
12.1
7.0
16.5
(4.2)
(11.1)
(2.2)
–
–
0.5
–
1.7
(7.5)
72.5
(8.4)
(13.4)
30.3
(4.4)
76.6
2022
(restated)
£m
64.5
(1.7)
62.8
1.3
64.1
12.8
7.4
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
Strategic ReportGovernanceFinancial Statements 206
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
25. LEASES
The Group has lease contracts for various items of property, motor 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.
Movements in the carrying amounts of right-of-use assets during the year were:
As at 1 June 2021
Additions
Depreciation
Exchange differences
As at 31 May 2022
Additions
Depreciation
Derecognition of right-of-use assets
Exchange differences
As at 31 May 2023
Movements in the carrying amounts of lease liabilities during the year were:
Land and
buildings
£m
Motor
vehicles
£m
Other
equipment
£m
10.3
5.9
(2.9)
0.3
13.6
0.7
(2.5)
(1.6)
–
10.2
1.2
1.0
(0.2)
0.3
2.3
0.9
(1.2)
(0.1)
(0.3)
1.6
0.2
1.2
(0.4)
–
1.0
0.1
(0.2)
(0.3)
0.1
0.7
As at 1 June 2021
Additions
Accretion of interest
Payments
Exchange differences
As at 31 May 2022
Additions
Accretion of interest
Payments
Derecognition of lease liability
As at 31 May 2023
Total
£m
11.7
8.1
(3.5)
0.6
16.9
1.7
(3.9)
(2.0)
(0.2)
12.5
£m
11.8
8.1
0.5
(4.0)
0.5
16.9
0.8
0.5
(3.0)
(2.2)
13.0
Overview The classification of lease liabilities is:
Current liabilities
Non-current liabilities
Amounts recognised in profit or loss were:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term or low-value assets
207
2023
£m
1.7
11.3
13.0
2023
£m
3.9
0.5
0.2
4.6
2022
£m
2.9
14.0
16.9
2022
£m
3.5
0.5
–
4.0
The maturity analysis of future lease payments is provided in note 17.
26. RELATED PARTY TRANSACTIONS
Key management personnel
The key management personnel of the Group comprise the members of the PZ Cussons plc Board of Directors. The key management
personnel compensation was as follows (comparative amounts have been corrected from previously reported):
Short-term employee benefits
Post-employment benefits
Share-based payments expense
2023
£m
2.5
0.1
0.5
3.1
2022
£m
2.1
0.1
0.3
2.5
Transactions with joint ventures
Certain Group subsidiary companies enter into related party transactions with PZ Wilmar Limited, a joint venture interest which was
set up under the terms of a joint venture agreement with Wilmar International Limited. Set out below are details of related party
transactions during the year with PZ Wilmar Limited as well as balances as at 31 May 2023:
• At 31 May 2023, outstanding long-term loans receivable from PZ Wilmar Limited amounted to £40.3 million (2022: £39.6 million). These
long-term loans are presented as part of the Group’s net investment in the joint venture, and are denominated in US Dollars, interest
free and repayable in part or in full on demand, subject to a 12-month notice period. The loan is matched by another loan of the same
amount and terms from the Group’s fellow joint venture partner
• Short-term loans are advanced to PZ Wilmar Limited from time to time. These loans are interest bearing, repayable on demand and
not secured. During the year, loans advanced amounted to £11.2 million (2022: £12.6 million) and were repaid in full during the year,
and the amount due as at 31 May 2023 was £nil (2022: £nil). In addition, in the prior year the loan receivable as at 31 May 2021 of
£8.5 million was repaid. Interest received in the year amounted to £0.7 million (2022: £0.4 million)
• At 31 May 2023, the outstanding trade receivable balance due from PZ Wilmar Limited was £2.2 million (2022: £1.7 million). All trading
balances are settled in cash, and there were no provisions for doubtful related party receivables at 31 May 2023 (2022: £nil).
PZ Foundation
The PZ Foundation is not a related party within the definition of IAS 24 ‘Related Party Disclosures’ 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 £0.2 million
(2022: £nil). As at 31 May 2023 there were no outstanding balances with the PZ Foundation (2022: £nil).
Strategic ReportGovernanceFinancial Statements 208
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
27. DISCONTINUED OPERATIONS
In 2022, net costs of £1.8 million were recognised in relation to other operations discontinued in prior periods, and cash used in
operating activities amounted to £0.7 million.
28. BUSINESS COMBINATIONS
There were no acquisitions in the year.
Acquisition in year ended 31 May 2022
On 21 March 2022, PZ Cussons Acquisition Co Limited, a subsidiary of the Group, acquired the entire issued share capital of Tadley
Holdings Limited, the parent company of Childs Farm. Childs Farm is a leading brand in UK baby and child personal care.
Under the terms of the transaction, the founder of Childs Farm made a £3.25 million investment in PZ Cussons Acquisition Co
Limited which gave her a 8.125% equity interest in the company, with a mechanism for the Group to purchase this equity interest
in two equal tranches following each of the years ending 31 May 2024 and 31 May 2025 at a price based on a 6.62x multiple of the
lower of Childs Farm’s actual gross profit and forecast gross profit in those years, subject to a cap of £32.5 million. The terms also
allowed for purchase of this equity interest prior to these dates under certain conditions. As the mechanism to purchase the former
owner’s equity interest in PZ Cussons Acquisition Co Limited is contractual, the Group has accounted for this obligation as deferred
consideration in relation to the acquisition of Tadley Holdings Limited. The deferred consideration liability determined at acquisition
amounted to £7.2 million and as at 31 May 2022 this was classified within other payables, with £3.2 million within current liabilities
and £4.0 million within non-current liabilities. The liability was reassessed during the year and a £1.3 million reduction was recognised
in finance income (note 18).
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below:
Intangible assets – brand
Inventories
Trade and other receivables
Trade and other payables
Deferred tax liabilities
Total identifiable net assets acquired
Goodwill (restated)
Purchase consideration
Refer to note 1(c) for details of the prior year restatements.
Purchase consideration comprised:
Cash consideration paid
Cash received from former owner
Deferred consideration
Total consideration
The net cash outflow on acquisition comprised:
Cash consideration paid
Cash received from former owner
2022
£m
35.5
2.2
2.7
(4.4)
(8.9)
27.1
13.5
40.6
2022
£m
36.7
(3.3)
7.2
40.6
2022
£m
36.7
(3.3)
33.4
The goodwill arising on the acquisition of £13.5 million comprised the expected synergies between the acquired business and the Group.
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 31 May 2022.
In the year ending 31 May 2022, costs related to the acquisition amounted to £1.4 million which were recognised in the consolidated
income statement within administrative expenses. The Group has presented these costs as adjusting items (note 3).
Overview 209
29. SUBSIDIARIES AND JOINT VENTURES
Details of the Company’s subsidiaries as at 31 May 2023 are as follows (PZ Cussons (Holdings) Limited and PZ Cussons (International)
Limited are directly owned by PZ Cussons plc; all other subsidiaries are indirectly held):
Company
Operation
Country of
incorporation
Parent
Company’s
interest
Proportion
of voting
interest
Registered
Office address
PZ Cussons (Holdings) Pty Limited
Holding company
Australia
PZ Cussons Australia Pty Limited
Manufacturing
Australia
Holding company
Australia
PZ Cussons Beauty Australia
(Holdings) Pty Limited
Rafferty’s Garden Pty Limited
United Laboratories Limited
Dormant
Dormant
PZ Cussons (New Zealand) Limited
Distribution
Paterson Services (Shanghai) Limited
Active
Australia
Australia
Australia
China
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Bronson Holdings Limited
Holding company
England
100%
100%
Milk Ventures (UK) Limited
Holding company
England
100%
100%
PZ Cussons (Holdings) Limited
Holding company
England
100%
100%
PZ Cussons (International Finance)
Limited
Provision of services
to Group companies
England
100%
100%
PZ Cussons (International) Limited
Provision of services
to Group companies
England
100%
100%
PZ Cussons (UK) Limited
Manufacturing
England
100%
100%
Level 3, 510 Church Street Cremorne Victoria 3121
Level 3, 510 Church Street Cremorne Victoria 3121
Level 3, 510 Church Street Cremorne Victoria 3121
Level 3, 510 Church Street Cremorne Victoria 3121
Level 3, 510 Church Street Cremorne Victoria 3121
Level 3, 510 Church Street Cremorne Victoria 3121
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
Manchester Business Park, 3500 Aviator Way,
Manchester, M22 5TG
PZ Cussons Beauty LLP
Distribution & holding
partnership
England
100%
100%
19-20 Berners Street, London, United Kingdom,
W1T 3NW
Seven Scent Limited
Manufacturing
England
100%
100%
St. Tropez Acquisition Co. Limited
Holding company
England
100%
100%
St. Tropez Holdings Limited
Holding company
England
100%
100%
Thermocool Engineering Company
Limited
Dormant
England
100%
100%
PZ Cussons Acquisition Co Limited
Holding company
England
91.87%
91.87%
Tadley Holdings Limited
Holding company
England
100%
100%
Childs Farm Limited
Distribution
England
100%
100%
PZ Cussons Ghana PLC
Distribution
Ghana
95.68%
95.68%
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, M22 5TG
Manchester Business Park, 3500 Aviator Way,
Manchester, M22 5TG
Manchester Business Park, 3500 Aviator Way,
Manchester, M22 5TG
Plot 27/3-27/7, Sanyo Road, Tema, PO Box 628
Community 1, Tema
Parnon (Hong Kong) Limited
Provision of services
to Group companies
Hong Kong
100%
100%
1/F., Hing Lung Comm. Bldg., 68-74 Bonham Strand,
Sheung Wan
PZ Cussons (Hong Kong) Limited
Dormant
Hong Kong
PZ Cussons India PVT Limited
Provision of services
to Group companies
India
100%
100%
100%
100%
PT PZ Cussons Indonesia
Manufacturing
Indonesia
100%
100%
Level 54, Hopewell Centre, 183 Queen’s Road East
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
Strategic ReportGovernanceFinancial Statements 210
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Consolidated Financial Statements continued
29. SUBSIDIARIES AND JOINT VENTURES CONTINUED
Company
PZ Cussons (Europe) Limited
Operation
Dormant
Country of
incorporation
Parent
Company’s
interest
Proportion
of voting
interest
Registered
Office address
Ireland
100%
100%
Childs Farm Europe Limited
Dormant
Ireland
100%
100%
PZ Cussons (East Africa) Limited
Manufacturing
Kenya
99.99%
99.99%
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, Ireland
P.O. Box 3085 G.P.O Nairobi, Standard Street,
Building: Lornho House
Food For Life Nigeria Limited
Dormant
Harefield Industrial Limited
Distribution
HPZ Limited1
Nutricima Limited
Manufacturing
Dormant
PZ Cussons Nigeria PLC
Manufacturing
Roberts Pharmaceuticals Limited
Dormant
PZ Cussons Polska SA
Distribution
Nigeria
Nigeria
Nigeria
Nigeria
Nigeria
Nigeria
Poland
PZ Cussons Singapore Private Limited
Provision of services
to Group companies
Singapore
99.99%
99.99%
45/47 Town Planning Way, Ilupeju, Lagos
99.99%
99.99%
45/47 Town Planning Way, Ilupeju, Lagos
74.99%
74.99%
45/47 Town Planning Way, Ilupeju, Lagos
99.99%
99.99%
45/47 Town Planning Way, Ilupeju, Lagos
73.27%
73.27%
45/47 Town Planning Way, Ilupeju, Lagos
100%
100%
100%
100%
100%
100%
45/47 Town Planning Way, Ilupeju, Lagos
Ul. Chocimska 17, 00-791 Warszawa
5 Shenton Way, UIC Building #10-01, Singapore
068808
Guardian Holdings Company Limited
Provision of services
to Group companies
Thailand
49%
49%
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%
35 Moo 4, Tessamphan Road, Ban Chang Sub-District,
Mueang Pathum Thani District, Pathum Thani
Province
PZ Cussons Middle East
and South Asia FZE
St. Tropez Inc.
Childs Farm, Inc.
Dormant
Distribution
Dormant
UAE
USA
USA
1 The equity interest in HPZ Limited is owned by PZ Cussons Nigeria PLC.
100%
100%
PO Box 17233, Jebel Ali, Dubai
100%
100%
100%
100%
140 Broadway, Suite 2240, New York NY 10005
251 Little Falls Drive Wilmington, DE 19808
In addition, Paterson Zochonis Employee Trust (registered in Jersey) is also a subsidiary. The trust was established in 2001 and holds
shares in the Company predominantly for the Group’s Long-Term Incentive Plans (note 23).
Joint venture company
Operation
Country of
incorporation
Parent
company’s interest
Registered Office address
PZ Wilmar Limited
Manufacturing
Nigeria
50%
45/47 Town Planning Way, Ilupeju, Lagos
With the exception of PZ Cussons Acquisition Co Limited which has an accounting reference date of 31 March and Paterson Services
(Shanghai) Ltd with an accounting reference date of 31 December, all subsidiary entities have an accounting reference date of 31 May.
30. EVENTS AFTER THE REPORTING PERIOD
Central Bank of Nigeria announcement
In June 2023, a policy announcement was made by the Central Bank of Nigeria to liberalise the foreign exchange regime which, as part of
a broader suite of fiscal reforms under the new government, is designed to improve the longer-term economic prospects for the country
and remove some of the challenges faced by multi-national companies in repatriating funds from Nigeria. Following this announcement,
the Naira exchange rate weakened against sterling and USD.
The Group’s exposure to foreign currency risk is described in note 17, and sensitivity tables are provided which set out the impact of
movements in the principal foreign currency exchange rates affecting the Group’s results.
Offer to acquire minority-held shares in PZ Cussons Nigeria Plc
On 5 September 2023, the Group announced that it had made an offer to acquire the 26.73% of issued share capital of PZ Cussons
Nigeria Plc held by minority-held shareholders at a value of ₦21 per share, subject to prevailing market conditions, equivalent to a total
cash consideration payable of £22.8 million (based on a Naira to GBP rate of 977). Funding for the transaction is expected to come from
existing Naira cash balances. The offer is subject to the approval of the PZ Cussons Nigeria Plc board, regulatory approvals and vote of the
minority shareholders.
Overview Company Balance Sheet
As at 31 May 2023
Non-current assets
Investments in subsidiaries
Receivables
Current assets
Receivables
Investments
Cash and cash equivalents
Current liabilities
Payables
Net current (liabilities)/assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Net assets
Equity
Share capital
Own shares
Capital redemption reserve
Hedging reserve
Other reserve
Retained earnings
Total equity
211
Notes
4
5
5
6
7
8
8
2023
£m
63.2
–
63.2
7.4
0.5
1.2
9.1
(15.9)
(6.8)
56.4
–
56.4
4.3
(36.9)
0.7
–
3.7
84.6
56.4
2022
(restated)
£m
90.7
99.0
189.7
84.7
0.5
1.0
86.2
(4.3)
81.9
271.6
(174.0)
97.6
4.3
(37.3)
0.7
–
2.0
127.9
97.6
Refer to note 1(b) for details of the prior year restatement.
The financial statements from pages 211 to 219 were approved by the Board of Directors and authorised for issue on 26 September 2023.
They were signed on its behalf by:
J Myers
PZ Cussons plc
Registered number 00019457
S Pollard
Strategic ReportGovernanceFinancial Statements
212
PZ Cussons plc / Annual Report and Accounts 2023
Company Statement of Changes in Equity
For the year ended 31 May 2023
Capital
redemption
reserve
£m
Hedging
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Total
£m
Notes
1(b)
3
3
As at 1 June 2021 –
as reported
Effect of prior year
adjustment
As at 1 June 2021 –
as restated
Loss for the year
Cash flow hedges –
net movement
Share based payment
(restated)
Shares issued from
ESOT (restated)
Ordinary dividends
As at 31 May 2022 –
as restated
Loss for the year
Ordinary dividends
Share based payment
Shares issued from
ESOT
As at 31 May 2023
Share
capital
£m
4.3
–
4.3
–
–
–
–
–
Own
shares
£m
(40.0)
2.4
(37.6)
–
–
–
0.3
–
0.7
–
0.7
–
–
–
–
–
4.3
(37.3)
0.7
–
–
–
–
4.3
–
–
–
0.4
(36.9)
–
–
–
–
0.7
(0.1)
–
(0.1)
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.0
–
–
2.0
–
–
1.7
–
3.7
159.6
124.5
(1.8)
0.6
157.8
(4.1)
–
–
(0.3)
(25.5)
127.9
(16.1)
(26.8)
–
(0.4)
84.6
125.1
(4.1)
0.1
2.0
–
(25.5)
97.6
(16.1)
(26.8)
1.7
–
56.4
Overview
213
Notes to the Company Financial Statements
1. ACCOUNTING POLICIES
(a) 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.
The Company’s functional currency is Pounds Sterling (GBP) and these financial statements are presented in GBP and, unless otherwise
indicated, have been presented in £million to one decimal place.
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 loss for the year of the parent company is shown in the statement of changes in equity. Details of dividends paid
are included in note 3 of the 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 consolidated 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 ‘Presentation of Financial Statements’
(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.
(i) New and amended standards adopted by the Company
The following amendments to existing standards apply for the first time in the year ended 31 May 2023:
• Amendments to IAS 16 ‘Plant, Property & Equipment’ – Proceeds before Intended Use
• Amendments to IFRS 3 ‘Business Combinations’ – Reference to the Conceptual Framework
• Amendments to IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’ – Onerous Contracts – Costs of Fulfilling a Contract
• Annual Improvements to IFRS Standards 2018–2020.
The adoption of the new accounting standards and interpretations listed above has not led to any changes to the Company’s accounting
policies or had any other material impact on the financial position or performance of the Company.
Strategic ReportGovernanceFinancial Statements 214
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Company Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
(ii) New accounting standards and interpretations in issue but not yet effective
Certain amendments to existing standards, as listed below, have been published that are not mandatory for the 31 May 2023 reporting
year and have not been early adopted by the Company.
Effective date 1 January 2023:
• Amendments to IAS 1 ‘Presentation of Financial Statements’ – Classification of Liabilities as Current or Non-Current
• Amendments to IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ – Definition of Accounting Estimates
• Amendments to IAS 1 ‘Presentation of Financial Statements’ and IFRS Practice Statement 2 – Disclosure of Accounting Policies
• Amendments to IAS 12 ‘Income Taxes’ – Deferred Tax related to Assets and Liabilities arising from a Single Transaction.
Effective date 1 January 2024:
• Amendments to IFRS 16 ‘Leases’ – Lease Liability in a Sale and Leaseback
• Amendments to IAS 1 ‘Presentation of Financial Statements’ – Non-Current Liabilities with Covenants.
Effective date to be confirmed:
• Amendments to IAS 28 ‘Investment in Associates’ - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
The adoption of the new accounting standards and interpretations listed above is not expected to lead to any significant changes to the
Company’s accounting policies or have any other material impact on the financial position or performance of the Company.
(b) Corrections of errors
In preparing these financial statements management identified errors relating to transactions reported in prior periods. In accordance
with IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ these errors have been corrected by restatement of
previously reported figures as described below.
Restatements
The following items were considered material errors requiring restatement of previously reported figures.
Share based payments – as noted in the Company accounting policies, the Group operates a number of long-term incentive schemes
which provide awards of the Company’s share capital to Executive Directors and certain senior employees. The accounting for these
awards has been subsequently reviewed and determined to be not in accordance with IFRS 2 ‘Share-based Payment’ since the Company
had not been treating the fair value of the awards as capital contributions as required by IFRS 2. The impact on the balance sheet of
correcting this treatment and restating previously reported figures for the item described is set out in the table below.
Transactions of the Company sponsored Employee Share Option Trust (ESOT) - as stated in the accounting policies, are treated as being
those of the Company and are therefore reflected in the Company’s financial statements. Purchases by the ESOT have been reflected,
however certain issuances and sales of shares from the ESOT in previous years had not been. This has been corrected as at 31 May 2021
through a £2.4 million reduction in the own shares reserve for the cost of shares issued and sold, the recognition of cash proceeds of
£0.6 million with a corresponding decrease in retained earnings. The reduction in the own shares reserve as previously reported as at
31 May 2021 is £2.7 million.
The impact on the balance sheet of restating previously reported figures for the items described is set out in the table below:
As at 31 May 2022
Consolidated balance sheet
Investments
Cash and cash equivalents
Total assets less current liabilities
Net assets
Own shares
Other reserve
Total equity
As previously
reported
£m
Share based
payments
£m
ESOT
£m
As restated
£m
88.7
0.4
269.0
95.0
40.0
–
(95.0)
2.0
–
2.0
2.0
–
(2.0)
(2.0)
–
0.6
0.6
0.6
(2.7)
–
(0.6)
90.7
1.0
271.6
97.6
37.3
(2.0)
(97.6)
Overview 215
(c) Accounting policies
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 profit or loss.
Taxation
The tax expense included in the Company income statement consists of current and deferred tax.
Current tax is the expected tax payable on the taxable income for the financial year, using tax rates enacted or substantively enacted by the
balance sheet date. Tax expense is recognised in the Company income statement except to the extent that it relates to items recognised in
the Company statement of comprehensive income or directly in the Company statement of changes in equity, in which case it is recognised
in the Company statement of comprehensive income or directly in the Company statement of changes in equity, respectively.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is calculated at the tax
rates that are expected to apply in the period when the liability is settled or the asset realised, based on the tax rates that have been
enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the Company income statement,
except when it relates to items charged or credited directly to equity or other comprehensive income/(loss), in which case the deferred
tax is also recognised in equity, or other comprehensive income/(loss), respectively.
Investments in subsidiaries
Investments in subsidiaries are held at cost, less any provision for impairment. The Company tests the investment balances for
impairment when there are indicators of impairment. 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 profit or loss. 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.
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 included within current assets and liabilities are generally short-term in nature and accordingly their fair values
approximate to their carrying values.
Receivables
Receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method,
less a loss allowance based on an expected credit loss model.
Payables
Payables are recognised initially at fair value and subsequently measured at amortised cost.
Borrowings
Interest-bearing borrowings 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.
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.
Share capital and own shares
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 its own shares, the consideration paid, including any directly attributable incremental costs (net of tax)
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 tax, is included in equity attributable to the Company’s equity holders.
Transactions of the Company-sponsored Employee Share Option Trust (ESOT) and the Share Incentive Plan (SIP) trust are treated as being
those of the Company and are therefore reflected in the Company’s financial statements. Transactions include purchases and sales of
shares in the Company.
Strategic ReportGovernanceFinancial Statements 216
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Company Financial Statements continued
1. ACCOUNTING POLICIES CONTINUED
Dividend distribution
Dividend distributions which are subject to shareholder approval are recognised as a liability in the period in which approval is given.
Interim dividends, which do not require shareholder approval, are recognised when paid.
Share-based payments
The Group operates a number of long-term incentive schemes which provide awards of the Company’s share capital to Executive
Directors and certain senior employees. These schemes are designed to align the interests of the participants with those of the
Company’s shareholders. The Group also operates a Share Incentive Plan (SIP) scheme which is open to UK employees and this plan
aligns employees with the business strategy and investors by encouraging participation in the ownership of the Company’s share capital.
The incentive schemes are accounted for as equity-settled share-based payments, and further details are provided in note 23 to the
Group consolidated financial statements. 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 is adjusted
to reflect this capital contribution.
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, the critical judgements and key source of estimation uncertainty 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 and estimation of
recoverable amount 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.
2. DIRECTORS’ EMOLUMENTS
Aggregate amount of Directors’ emoluments
Emoluments of the highest paid Director
2023
£m
3.1
1.6
2022
£m
2.2
1.3
Amounts above include share-based payment expenses. For the year ended 31 May 2023 the highest paid Director received Company
pension contributions of £0.06 million (2022: £0.06 million).
The Schedule 5 requirements of SI 2008/410 for Directors’ remuneration, as well as their interests in the Company, are included in the
Report on Directors’ Remuneration on pages 119 to 131.
3. DIVIDENDS
Amounts recognised as distributions to ordinary shareholders in the year comprise:
Final dividend for the year ended 31 May 2022 of 3.73p (2022: 3.42p) per ordinary share
Interim dividend for the year ended 31 May 2023 of 2.67p (2022: 2.67p) per ordinary share
2023
£m
15.6
11.2
26.8
2022
£m
14.3
11.2
25.5
After the balance sheet date, a final dividend for the year ended 31 May 2023 was proposed by the Directors of 3.73p per ordinary
share. This results in a total final proposed dividend of £15.6 million (2022: £15.6 million). Subject to approval by shareholders at the
Annual General Meeting, the dividend will be paid on 30 November 2023 to the shareholders on the register on 3 November 2023.
The proposed dividend has not been included as a liability in the financial statements as at 31 May 2023.
Overview 4. INVESTMENTS IN SUBSIDIARIES
Cost
As at 1 June 2021
Additions (restated)
As at 31 May 2022 – as restated
Additions
As at 31 May 2023
Accumulated impairment
As at 1 June 2021 and 31 May 2022
Impairment charge
As at 31 May 2023
Carrying value
As at 31 May 2023
As at 31 May 2022
217
£m
88.7
2.0
90.7
1.7
92.4
–
(29.2)
(29.2)
63.2
90.7
Refer to note 1(b) for details of the prior year restatement.
Additions are deemed capital contributions in relation to share based payment expenses incurred by 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. In the current year, the Directors identified an indicator of impairment in the investment
in PZ Cussons (International) Limited and based on an assessment of its recoverable amount recorded an impairment of £29.2 million
against its carrying value of £55.6 million. PZ Cussons (International) Limited provides services to fellow subsidiaries and the loss incurred in
the year has been considered an indicator of impairment. As the subsidiary is non-trading and holds the Group’s external borrowings and
UK defined benefit pension schemes, net assets is considered the best approximation to fair value less costs to sell. An increase/decrease
of 10% in the subsidiary’s net assets of £26 million would decrease/increase the investment impairment by £2.6 million. The subsidiary’s
net assets are primarily sensitive to variation in the Group’s UK retirement benefit schemes’ net assets (see note 21 to the consolidated
financial statements).
Details of the Company’s direct subsidiaries as at 31 May 2023 are shown below. For a full listing of all subsidiaries see note 29 in the
Group consolidated financial statements.
Subsidiary companies
Operation
Country of
incorporation
Parent company’s
interest
Proportion of
voting interest
PZ Cussons (Holdings) Limited
Holding company
England
PZ Cussons (International) Limited
Provision of services to Group companies
England
100%
100%
100%
100%
Strategic ReportGovernanceFinancial Statements 218
PZ Cussons plc / Annual Report and Accounts 2023
Notes to the Company Financial Statements continued
5. RECEIVABLES
Non-current
Amounts owed by Group companies
Current
Amounts owed by Group companies
Other receivables
Prepayments
Current tax receivable
2023
£m
–
–
–
2.3
5.1
7.4
2022
£m
99.0
80.3
4.4
–
–
84.7
As at 31 May 2022, the Company was the sole borrower on the Group’s RCF facility at that time with all amounts borrowed under the RCF
being lent on to other Group companies, with interest charged matching the interest liability. The amounts owed by Group companies
as at 31 May 2022 predominantly related to this on-lending, and the balances were unsecured and repayable on demand. Although
amounts were repayable on demand, for the amounts classified as non-current there was no expectation that entire amounts would be
repaid within 12 months and therefore did not meet the criteria to be classified as current assets.
As described in note 17 to the Group consolidated financial statements, in November 2022, and a year in advance of its expiry date, the
RCF facility referred to above was replaced by a new Group committed credit facility.
6. PAYABLES
Amounts owed to Group companies
Accruals
2023
£m
15.8
0.1
15.9
2022
£m
4.1
0.2
4.3
Amounts owed to Group companies are non-interest-bearing, unsecured and have no fixed date of repayment.
7. BORROWINGS
Borrowings as at 31 May 2022 related to amounts drawn under the facility referred to in note 5. This facility was replaced in November
2022, a year in advance of its expiry date. As at 31 May 2022, £174.0 million was drawn at an interest rate of 0.80% above SONIA.
8. SHARE CAPITAL AND INVESTMENT IN OWN SHARES
(a) Share capital
Allotted, issued and fully paid:
Ordinary shares of 1p each
Total called up share capital
2023
number
000
428,725
428,725
2022
number
000
428,725
428,725
£m
4.3
4.3
£m
4.3
4.3
The Company has one class of ordinary shares which carry no right to fixed income.
Overview 219
(b) Investment in own shares
Investment in own shares represent the shares in the Company held by the employee share trusts which comprise the Employee Share
Option Trust (ESOT) and the Share Incentive Plan (SIP) trust. The ESOT was established to purchase shares to satisfy awards under the
Group’s incentive schemes and the SIP trust was established to purchase and hold shares on behalf of employees participating in the SIP.
Movements in the investment in own shares was:
As at 1 June 2021
Issued to satisfy options
Transfers
As at 31 May 2022
Issued to satisfy options
Transfers
As at 31 May 2023
ESOT
number
SIP trust
number
10,291,149
(63,099)
(34,269)
10,193,781
(132,634)
(64,651)
9,996,496
–
–
34,269
34,269
–
64,651
98,920
The transfer of shares between the trusts relate to matching awards provided by the Group under the SIP which are sourced from the ESOT.
The cost of shares held in the ESOT and SIP trust as at 31 May 2023 was £36.9 million, and the market value was £18.6 million
(2022: £20.6 million).
9. CONTINGENT LIABILITIES AND GUARANTEES
The Company is one of a number of Group companies who are guarantors to the £325 million committed credit facility taken out by
the Group during the year. The new facility comprises a term loan, of up to £125 million, with the balance as a revolving credit facility
(RCF) structure with maturity dates of up to November 2028. Further details are provided in note 17 to the Group consolidated financial
statements. The amount borrowed by the Group under this agreement as at 31 May 2023 was £252.0 million, of which the Company’s
borrowing was £nil.
A similar arrangement applied for the previous facility, and as at 31 May 2022 the amount borrowed under this facility was £174.0 million,
all of which was borrowed by the Company.
10. EVENTS AFTER THE REPORTING PERIOD
There are no material post balance sheet events since the year-end date.
Strategic ReportGovernanceFinancial Statements 220
PZ Cussons plc / Annual Report and Accounts 2023
Overview
ADDITIONAL
INFORMATION
Strategic Report
Governance
Financial Statements
221
222 Glossary
223 Further Statutory and Other Information
222
PZ Cussons plc / Annual Report and Accounts 2023
Glossary
Term
Adjusting Items
B Corp
BEST values
Brand Investment
ELT
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
Our PZ Cussons values (Bold, Energetic, Striving and Together)
An operating cost related to our investment in brands (previously ‘Media & Consumer’)
Executive Leadership Team
Employee wellbeing
% score based upon a set of questions within our annual survey of employees
EPS
Free cash flow
Earnings per share
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
Through the line
Stock keeping unit
Marketing campaign incorporating both mass reach and targeted activity
Overview Strategic Report
Governance
Financial Statements
223
Further Statutory and Other Information
SHAREHOLDER INFORMATION AND CONTACTS
Annual General Meeting
The Annual General Meeting will be held
at 10:30am on 23 November 2023 at:
Manchester Business Park,
3500 Aviator Way, Manchester,
M22 5TG
Financial calendar
The key dates for PZ Cussons’ financial
calendar are available on our website:
www.pzcussons.com
Registered office
PZ Cussons plc
Manchester Business Park
3500 Aviator Way
Manchester
M22 5TG
Tel: 0161 435 1000
www.pzcussons.com
Registered number
Company registration number –
00019457
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Tel: +44 (0370) 707 1221
www.computershare.com
Company Secretary
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. While 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.
224
PZ Cussons plc / Annual Report and Accounts 2023
Notes
PZ Cussons plc / Annual Report and Accounts 2023
Overview
FOR EVERYONE,
FOR LIFE, FOR GOOD.
Performance Highlights
We have made further progress against key financial and non-financial measures
against a backdrop of challenging trading conditions.
Revenue
(£million)
Statutory operating profit margin
(%)
Adjusted basic earnings per share
from continuing operations (p)2
£656.3m
9.1%
11.23p
2023
2022
2021
£656.3m
£592.8m
£603.3m
2023
2022
2021
9.1%
11.1%
12.1%
2023
2022*
2021*
11.23p
12.57p
12.98p
LFL revenue growth1
(%)
Adjusted net cash/(debt)1
(£million)
Statutory basic earnings per share
for continuing operations (p)
6.1%
£5.7m
8.70p
2023
2022
2021
2.9%
6.1%
7.1%
2023
2022
2021
£5.7m
£(9.8)m
£(30.7)m
2023
2022*
2021*
8.70p
11.88p
9.94p
Adjusted operating profit margin2
(%)
Dividend per share
(p)
11.2%
2023
2022*
2021*
6.40p
11.2%
11.3%
11.6%
2023
2022
2021
6.40p
6.40p
6.09p
See Key Performance Indicators / Page 49
1 Definitions of key terms are set out in the Glossary on page 222.
2 Further details on adjusting items are set out in note 3 on page 171.
* Certain figures for each of the years ended 31 May 2021 and 31 May 2022 have been restated. Refer to note 1 (c) of the consolidated financial statements for details.
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PZ Cussons plc
Manchester Business Park
3500 Aviator Way
Manchester M22 5TG