The FTSE 250 could are usually extra unstable than its bigger cousin, the FTSE 100, however it will possibly present buyers with larger alternatives for outsized returns.
There aren’t many firms that may boast a bunch of market-leading manufacturers of their portfolio. PZ Cussons (LSE: PZC) can, although. These embody Imperial Leather, Original Source, Carex, and Sanctuary Spa.
Despite being residence to a set of high manufacturers, it is a firm that has struggled to make itself related towards a lot bigger rivals, 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, one in every of its greatest markets. Hyperinflation and a foreign money devaluation has left the Nigerian client struggling.
The devaluation of the native foreign money, the naira, was a serious contributor to a 20% droop in revenues in FY24. The firm discovered itself with far an excessive amount of local-denominated foreign money that it couldn’t repatriate, attributable to problem acquiring US {dollars}.
Often, an existential disaster forces a enterprise to re-evaluate its technique and try and 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 having the ability to hint its roots to Nigeria, that sale of its African enterprise could be a optimistic transfer, in my view. No enterprise can anticipate to thrive when its revenue and loss (P&L) account reveals wild volatility swings. That isn’t any solution 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 vital value financial savings.
But for me, value financial savings isn’t sufficient. Out of the merger I need to see larger 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 vital enabler of success.
