I’ve been scanning the FTSE 250 for top stocks that look set to thrill the market in 2025 and one immediately jumped out at me.
This is ironic because it’s one that’s flown completely under my radar for years, and with good reason. This company has got itself in a right lather.
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When I see the name PZ Cussons (LSE: PZC.L), I immediately picture a bar of Imperial Leather soap. It used to be ubiquitous in people’s bathrooms, although I don’t recall seeing it as often lately.
Can theshare price shine again?
The consumer goods group has other brands, notably Original Source, Carex hand gels and the St Tropez self-tanning product range. It’s a decent collection but let’s put it this way: it isn’t Unilever. On the other hand, this could work in its favour. There’s more scope to grow a £375m company, which is PZ Cussons’ current market cap, than one worth £113bn.
So what went wrong? PZ Cussons operates in a competitive market, where it has been crowded out by big guns Unilever and Proctor & Gamble, while own-brand rivals and discounters squeeze margins and market share.
It also ended up with outsized exposure to the Nigerian market, which makes up around 40% of total sales. The 10.6% drop in full-year revenues to £527.9m was mostly driven by a plunge in the Nigerian naira.
The PZ Cussons share price has suddenly got some lustre after rising 14.1% in a month, driven by a positive market update on 21 November. It’s still down 39.68% over the last year though. Over two years it’s plunged 58.62%.
The board now predicts first-half like-for-like revenue growth of 5%, despite a sales dip in Asia-Pacific and some “category softness” in Australia and New Zealand. It’s plotting the partial or even full sale of its African business. That’s a big step. It’s operated on the continent for 140 years.
Long-running restructuring process
PZ Cussons is also making progress with the St Tropez sale, deemed a non-core brand. Popular in the US, it could raise anything up to £100m. The cash will come in handy. The company ended 2023 with a £250m debt pile. It’s worked that down to £160m. Selling the brand could be a game-changer.
The five analysts tracking the stock have set a median one-year share price target of 105.4p. That’s up 17.83% from today, if it happens. Three name it a Strong Buy, while two label it a Hold. None suggest selling, and why should they, with PZ Cussons shares finally showing signs of life.
My concern is that the restructuring process has been rumbling along for years, with the board offloading everything from its Nigerian dairy brand to Australian yoghurt and Polish soaps. When will it end?
There’s still a buying opportunity here, with PZ Cussons trading at 11.15 times earnings, while yielding 4.03%. Original Source bathing product sales are frothing up in the UK while the Childs Farm acquisition is making hay.
I’m tempted, but not quite tempted enough to buy it. The board still has a lot of work to do here. I may kick myself this time next year as PZ Cussons might just clean up in 2025.
