It’s always a little unsettling when one of a company’s top executives resigns. That’s just happened with fast-moving consumer goods outfit PZ Cussons (LSE: PZC), which is a stalwart of the FTSE 250 index.
Today’s announcement reveals Brandon Leigh – the firm’s chief financial officer (CFO) – “has resigned and has stepped down from the Board with immediate effect.”
A decent trading update
It’s a big deal because the chief financial officer is often number-two in charge of a company – if PZ Cussons were the government, this is like the chancellor of the exchequer putting in his resignation letter.
Leigh has been with the firm for more than 22 years and became a director in 2006. Chair Caroline Silver said in the announcement he “played a leading role in the Company’s development since that time.” For context, the share price is up just over 40% since the beginning of 2006 and shareholders have also enjoyed decent dividend income along the way.
Pending the appointment of a new CFO, Leigh’s responsibilities will be taken on by Alan Bergin, the commercial finance director, with help from the chief executive. In the short term, I don’t think this news changes anything about the case for investing in PZ Cussons because the reasons for Leigh’s sudden departure don’t appear to be in the public domain. Of more relevance is the trading update the firm released today alongside the resignation announcement.
The update relates to the trading year ended 31 May, which is a general note that the company is trading in line with previous expectations. City analysts following the firm expect earnings to lift by high single-digit percentages during the current year to May 2020, and again the year after that.
The company is seeing “resilient” performance in Europe and Asia “driven by product innovation and renovation as well as distribution expansion.” The beauty division is also performing “particularly well.” Meanwhile, it’s no secret that Cussons has been having trouble with trading in Africa, which reflects in the way the shares have dropped from a peak above 420p in the autumn of 2013 to just 199p today, as I write.
The stock looks up with events
Recent results from Africa continue to be “disappointing,” which the firm puts down to “the macroeconomic situation in Nigeria and the challenging conditions at the port.” Last year, around 30% of overall revenue originated in Africa, but only about 2% of the overall operating profit. It seems to me there could be plenty of potential for future recovery in the Africa operation. Alternatively, it’s possible that Cussons could withdraw from the region, given that earnings there are so low.
However, I think the stock is well up with events in Africa and the current valuation isn’t outrageous given the firm’s overall steady cash-generating qualities. The forward-looking price-to-earnings ratio for the trading year to May 2020 runs just below 16 and the anticipated dividend yield is around 4.3%.
The company has a good record of raising its dividend a little every year, even with the ongoing situation in Africa. I see this one as troubled, but attractive.
