The FTSE 250 might are typically extra risky than its bigger cousin, the FTSE 100, however it will possibly present traders with better alternatives for outsized returns.
There are usually not many corporations that may boast a number of market-leading manufacturers of their portfolio. PZ Cussons (LSE: PZC) can, although. These embrace Imperial Leather, Original Source, Carex, and Sanctuary Spa.
Despite being dwelling to a collection of prime manufacturers, it is a firm that has struggled to make itself related in opposition to a lot bigger opponents, together with Procter & Gamble and Unilever.
Since peaking at 400p in 2014, its share worth has fallen ever since. Today, I can choose them up for 80p; a whopping 80% decline.
But it isn’t the previous that issues however the future.
Compounding the corporate’s woes has been financial turmoil in Nigeria, considered one of its greatest markets. Hyperinflation and a foreign money devaluation has left the Nigerian shopper struggling.
The devaluation of the native foreign money, the naira, was a significant contributor to a 20% hunch in revenues in FY24. The firm discovered itself with far an excessive amount of local-denominated foreign money that it couldn’t repatriate, because of issue acquiring US {dollars}.
Often, an existential disaster forces a enterprise to re-evaluate its technique and try to reinvent itself. PZ Cussons is doing simply that. It has put in movement steps that would result in the partial or full sale of its African enterprise.
Despite with the ability to hint its roots to Nigeria, that sale of its African enterprise can be a constructive transfer, for my part. No enterprise can anticipate to thrive when its revenue and loss (P&L) account displays wild volatility swings. That is not any technique to create long-term shareholder worth, both.
One of the criticisms I’ve lengthy had with PZ Cussons is the sheer complexity of its UK portfolio. A bloated organisational construction with far too many layers of administration has resulted in duplication throughout its provide chain.
Earlier this 12 months, administration took the choice to merge its Personal Care and Beauty divisions. Although too early to inform, the combining of those two companies ought to present important value financial savings.
But for me, value financial savings just isn’t sufficient. Out of the merger I wish to see better ranges of economic acumen in addition to product innovation.
One benefit that it has over its rivals is its measurement. Being smaller ought to present it with agility in a fiercely aggressive market. As a cost-of-living disaster continues, model positioning shall be a important enabler of success.
