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Neptune's Mark Martin slips on PZ Cussons slide

Neptune's Mark Martin slips on PZ Cussons slide
 

Shares in PZ Cussons (PZC) have slumped to the bottom of the FTSE 250 as the soap and shampoo maker warned on profits amid weaker sales in the UK and Nigeria.

The shares were down 15.4% to 234.2p on the news, but off from a nine-year low of 199.7p hit at the start of trading.

PZ Cussons said that 2018 profits would 'fall short of expectations' and come in between £80 million and £85 million, below expectations of up to £100 million.

The company said that UK sales continued to be hampered by 'consumer caution across all retail channels caused by economic uncertainty and inflation out-stripping wage growth'.

The group has also been hit by the devaluation of the Naira currency in Nigeria, its largest market.

'Following the significant cost inflation of recent years, the Nigerian consumer's discretionary income remains under pressure with subdued buying levels,' it said.

Today's profit warning follows January's disappointing half-year results, with the shares down 29% since then.

Today's news represents a blow to Neptune UK Mid Cap manager Mark Martin, who holds 4.8% of his £548 million fund in the stock. 

Dominic St George and Jon Asante, managers of the £36.3 million Stewart Investors Worldwide Equity fund, are also high-conviction backers, with a 2.3% position.

'A company like PZ Cussons lives or dies by the strength of its brands,' said Russ Mould, investment director at AJ Bell.

'To get the market back on side management will need to demonstrate the recent troubles are temporary rather than a reflection of the fading appeal of its products.'

Mike van Dulken, head of research at Accendo Markets, highlighted the company's efforts to reduce expenditure.

'A cost cutting review has been announced, focusing on less packaging and fewer, simpler but bigger projects? But will this be enough?' he asked.

PZ Cussons' woes also weighed on other consumer staples companies, with shares in Reckitt Benckiser (RB) down 1.2% at £55.82.

Hikma Pharmaceuticals (HIK) was another big mover, up 14% at £10.59 and jumping to the top of the mid-cap index after a string of broker upgrades.

Jefferies analyst Jane Vane-Tempest upgraded the pharmaceuticals group to 'hold' from 'underperform' and hiked her target price from 895p to 997p.

'We believe that our stress case to further downside is now unlikely and also that sentiment is now skewed to the upside,' she said.

'Despite challenging industry fundamentals persisting into 2018, we believe guidance gives a floor to expectations.'

Citigroup meanwhile raised its rating to 'buy', while analysts at Morgan Stanley, HSBC and JPMorgan all raised their target prices.

The FTSE 100 meanwhile rose nine points to 7,141, although Hammerson (HMSO) was a big faller, down 5.7% at 430.6p after analysts at Credit Suisse cut their rating on the retail landlord to 'neutral' from 'outperform' and slashed their target price to 460p from 605p.

Among 'small-cap' stocks, Sportech (ROD) rose 12.5% to 42.2p as the pools betting company recovered some ground from yesterday's heavy sell-off.

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Mark Martin
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