The financial performance of a company is usually the extent to which the financial objectives of a company have been achieved. It is a process that involves determining the results of a company’s activities in monetary terms and the firm’s policy. It gives the overall financial health of business over some time. The report can be used in comparisons with other firms in the same industry in terms of aggregation. Analysing of the financial performance would include the interpretation of the financial statement in a way that it puts into account the full diagnostics of the profitability and financial soundness of the company (Post and Byron 2015). This report will include an analysis of the financial performance of PZ Cussons plc. The report will consist of the study of the firm and the sector it operates in. There will be an in-depth analysis of the accounting matters that are facing the firm and comparisons with other firms from the same industry.
Analysis of company and industry it operates in
The analysis of a company is a process that is done by the investors and even the creditors to evaluate their securities by the collection of information relating to the company’s profile, their commodities and their profitability. PHz Cussons is one of the leading companies in its sector based in Manchester, United Kingdom. It is a global leader in the manufacturing and distribution industries’ Cussons is an active consumer commodities group and innovator of some of the best- and well-established brands in the world. PZ Cussons has global operations in emerging markets that are well selected and developed and which have a potential for great strategic growth (Bloomberg n.d). The company have a world-class distribution and supply chain which allow them the global customer demands and deliver brands that are quality and which improve everyday life. The company’s brand includes Cussons baby, imperial leather, St. Tropez, original source and morning fresh. The company’s segments include Asia, Africa and Europe (CUSSONS n.d). The Asian and African segments are majorly involved in the sale of home care, personal care, electrical products and food and nutrition products. In the four cour categories or segments the company is engaged in, it has been able to offer over 5000 employment positions across Asia, Africa, North America and Europe. The company has been able to reach greater heights over the past because of the focused strategy and particular approach incorporated by the company.
As per the annual report, the company delivered positive profit growth in the Asian segment and credible outcome in Europe. The macroeconomic conditions, particularly in Nigeria, have been responsible for the sharp decline in profits from the African division for the year and ultimately contributing to poor results for the whole Group. In terms of revenue, the Group had a lower of 5.8% on a reported basis and 2.3% on a relentless currency basis. The significant reduction in the attuned operating profit was attributed to the problematic conditions in Nigeria. This represented a lower of 18.2% on a reported basis and a relentless basis of 15.9 % (Cussons 2018). The higher interest charges for the period attributed to 80.1 m profit after tax. The Nigeria markets had a sharp contraction due to insufficient liquidity at the consumer and trade level. The shares for no. 1 and 2 brands remained well placed and healthy when progress returns to the market. Macro environment conditions are still the biggest challenge in many markets that the firm operates.
accounting issues facing the Company
change in accounting strategies and policies
The firm changed its accounting policies for the recognition of surpluses in its defined benefit pension schemes. There are new introductions in three areas. The new changes state that assets would be categorised because of the goals of the firm in holding the assets, evaluation of whether the contractual cash flows are only payments of principle interest. The firm will evaluate its quasi-equity loans in regards to the enterprise model assessment the outcomes of which are still ongoing (Cussons 2018). The firms’ investments in equities would be tested at fair value under IFRS 9, rather than at cost as they are present. There is an expectation that all other assets within the range of IFRS 9 will be measured at an amortised cost as they are held in the collection of contractual cash flows and pass the SPPI evaluation.
Change in accounting estimates
Judgement is required in choosing the rate in changing the US Dollar denominated balances held in the firm’s Nigerian enterprises into Naira, and the outcomes of the Nigerian entities ino sterling pound for consolidation resolutions. The rate used by the management in the previous year was from Central Bank of Nigeria. There has been close observation and valuation of the exchange rates that have been used for settling transactions throughout the year majority of which have been carried out through NIFEX and is set to continue (PLC 2018). This change the estimates used for accounting under the accounting policies, the changes in the errors and estimates have led to the exceptional cost of 6.3m
Impairment of non-operational European fixed assets
An impairment loss of 3.7 million Euros was realised after non-operational fixed assets in Europe were impaired.
Australian brand sold
The financial year marked the sale of the non-core brand in Australia that led to an exceptional 2.3 million in tax credit. The before-tax profit due to disposal was zero euros.
The firms essential syndicated borrowing facility that is given by three lenders including euros 285 million credit facility that is committed to 2020 are among the loans due in one year. The firm has additional uncommitted working capital totalling to 197.7 million euros (PLC 2018). The overdrafts have not been included as part of the firms borrowing facilities.
The information in the prior announcement has been computed with IFRS requirements, but there is still insufficient information that enables full compliance with the International Financial Reporting Standards. There has been a review of the accounting policy for the realisation of surpluses in its prescribed pension schemes (PLC 2018). This change has resulted in the firm derecognising the surplus in pension that is concerning the expat defined pension system. The changed policy has been used retrospectively and the previous year restated.
d)comparison with competitors?
Bloomberg, n.d. Company Overview of PZ Cussons Plc. [Online]
Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=875621[Accessed 20 March 2019].
Cussons, P., 2018. Governance and Financial Statements of 2018. [Online]
Available at: file:///C:/Users/omole/Downloads/PZ%20Cussons%20plc%20Gov_FS%2018%20FINAL%20WEB%20(1).pdf
[Accessed 20 March 2019].
CUSSONS, P., n.d. About Us. [Online]
Available at: https://www.pzcussons.com/en_int/about-us
[Accessed 20 March 2019].
PLC, P. C., 2018. FINAL RESULTS. [Online]
Available at: file:///C:/Users/omole/Downloads/PZ%20Cussons%20PLC%20Year%20End%20Announcement%20FY18%20FINAL%20(1).pdf
[Accessed 20 March 2019].
PLC, P. C., 2018. Notice of the 2018 Annual General Meeting. [Online]
Available at: Downloads/PZ%20Cussons%20Notice%20of%20Meeting_2018_.pdf[Accessed 20 March 2019].
Post, C. and Byron, K., 2015. Women on boards and firm financial performance: A meta-analysis. Academy of Management Journal, 58(5), pp.1546-1571.