Interim Results
Unilever PLC
04 August 2005
SECOND QUARTER AND HALF YEAR RESULTS 2005
Encouraging progress towards restoring top line growth and increased
competitiveness.
FINANCIAL HIGHLIGHTS
(unaudited)
Second Quarter 2005 € million Half Year 2005
Current Current Constant Current Current Constant
rates rates rates rates rates rates
Continuing
operations:
10 222 1% 2% Turnover 19 367 2% 3%
1 265 (18)% (18)% Operating profit 2 657 (7)% (6)%
1 124 (20)% (20)% Pre-tax profit 2 382 (8)% (7)%
787 (26)% (26)% Net profit from 1 751 (6)% (6)%
continuing
operations
Total operations:
0.75 (29)% (29)% EPS - NV (Euros) 1.71 (6)% (6)%
11.19 (29)% (29)% EPS - PLC (Euro 25.63 (6)% (6)%
cents)
KEY FEATURES OF THE QUARTER
•Underlying sales grew by 3.3%, entirely from volume.
•Overall market shares have been stabilised since the start of the year.
•Underlying profitability was robust, with savings programmes and a better
mix largely offsetting higher input costs and increased marketing
investment.
•Operating profit of €1.3 billion includes €353 million write-down on
Slim•Fast.
CHIEF EXECUTIVE'S COMMENT AND OUTLOOK
The second quarter marks another encouraging step as we execute our plans to
improve top line performance. We have strengthened our innovation programme and
halted the decline in overall market share.
We are making good progress against our business priorities. Developing and
emerging markets are once again a key driver of growth for Unilever, with strong
sales in buoyant markets, and in personal care the improvement made in the first
quarter has been sustained. Conditions in Western Europe generally remain
difficult and we have more to do to improve our competitiveness there.
We have made major changes in the way the business is organised and I am pleased
that these are gaining traction. The focus on competitiveness is translating
into more and better innovation, into keener pricing of our products and sharper
execution in the way in which we bring our brands to the market.
We continue to drive cost efficiency through our savings programmes and these
are being reinforced as we integrate our foods and home and personal care
operations around the world. This has meant that so far this year we have
largely contained the impact on operating margin of higher input costs and the
increased level of investment behind our brands.
The meal replacement category declined further in the first half year. While
this is less than 1% of our business, the reduced market size requires an
additional write-down on Slim•Fast which affects operating profit and earnings
per share in the quarter.
Looking forward, we do not expect significant change in the market environment
in the rest of the year. Input costs and investment behind our brands will
increase the pressure on margins. Against this background we remain focused on
the job of improving our competitiveness and restoring top line growth.
Patrick Cescau
Group Chief Executive
4 August 2005
Unilever has adopted international accounting standards (IFRS). These apply to
both the prior year comparators and the current year results. In addition, the
condensed interim financial statements are now shown only at current exchange
rates, while percentage year-on-year changes are shown at both current and
constant exchange rates to facilitate comparison. Further information on the
impact of IFRS can be found on page 10 and on the Unilever web site at
www.unilever.com/ourcompany/investorcentre/.
In the following commentary sales growth is stated on an underlying basis at
constant exchange rates and excluding the effects of acquisitions and disposals.
Turnover includes the impact of exchange rates and acquisitions and disposals.
Unilever uses 'constant rate' and 'underlying' measures primarily for internal
performance analysis and targeting purposes. Unilever believes that such
measures provide additional information for shareholders on underlying business
performance trends. Such measures are not defined under IFRS or US GAAP and are
not intended to be a substitute for GAAP measures of turnover and profit.
Following the announcement of the disposal of our Prestige fragrances
operations, Unilever Cosmetics International (UCI), results for this business
have been presented in our financial results as discontinued operations, as
required by IFRS 5. For further information please refer to page 11. The profit
arising on the sale of this business will be included in our results for the
third quarter of 2005, and is expected to be around €450 million before tax.
SECOND QUARTER AND HALF YEAR FINANCIAL RESULTS
Underlying sales grew by 3.3% in the quarter, entirely coming from volume. In
the first half year, underlying sales grew by 4.6%, including about 2 percentage
points from additional days in the first quarter.
Turnover was 1.4% ahead in the quarter, with the growth in underlying sales
partly offset by a negative 1.8% from disposals and a small negative impact of
currency movements.
Operating margin was 12.4% in the quarter. This includes a reduction of 3.4
percentage points from a €353 million write-down of the carrying value of
Slim•Fast, following the periodic review of goodwill and intangible assets at
the end of June. The additional impairment charge results from a further decline
in the market size of the meal replacement category and consequently a lower
sales outlook for Slim•Fast.
Operating margin in the half year was 13.7%. This was 1.4 percentage points
lower than last year, including the impact of the Slim•Fast write-down.
Restructuring costs in the half year were lower by €124 million, while profits
on disposals and asset sales were higher by €47 million. Savings programmes and
a better mix largely compensated for higher input costs and increased marketing
investment behind our brands.
Operating profit decreased by 18% in the quarter and by 7% in the first half
year. (Before the effect of the Slim•Fast write-down, operating profit increased
by 5% in both the quarter and the half year).
Net financing costs excluding pensions were reduced by 6% in the quarter, and by
4% in the first half year, through a lower level of net debt.
The tax rate was 30% in the quarter. For the first half year the tax rate was
26.5% compared with 28% last year. This reflects the benefit of non-recurring
items and is below the longer term expectation of 30%.
Net profit on continuing operations decreased by 26% in the quarter and by 6% in
the first half year, including the impact of the Slim•Fast write-down. Within
this, there was a small adverse impact from currency movements.
Including the results of discontinued operations, EPS decreased by 29% in the
quarter and by 6% in the first half year. (Before the impact of the Slim•Fast
write-down, EPS decreased by 7% in the quarter and increased by 6% in the first
half year).
CASH FLOW
Net cash flow from operating activities, which is net of tax payments, was €1.4
billion for the first half year, a decrease of €0.6 billion on 2004. Of this
decrease, €0.4 billion comes from a higher seasonal outflow of working capital
in the first half year following a particularly low level achieved at the end of
2004. Tax was €0.2 billion higher, including tax paid on capital gains.
Net cash flow from investing activities was €0.6 billion higher, mainly due to
acquisition and disposal activity and net movements in investments with maturity
greater than three months. Net cash flow used in financing activities rose by
€0.2 billion, reflecting the higher dividend paid.
BALANCE SHEET
Goodwill and intangibles have increased by €0.9 billion since 1 January.
Currency movements added €1.4 billion, offset by Slim•Fast impairment and
disposals totalling €0.5 billion. Inventories and trade receivables were €1.8
billion higher, reflecting currency movements and seasonal build-ups. Assets and
liabilities held for sale include those related to the Prestige fragrance
business sold in July 2005.
Closing net debt was €11.5 billion, an increase of €0.3 billion from the start
of the year. A reduction of €1.4 billion on conversion of the €0.05 preference
shares was largely offset by adverse currency movements, mainly from a stronger
US dollar, and purchases of treasury stock.
Total equity has increased by €2.1 billion since 1 January 2005. Net profit
added €1.7 billion and currency retranslation added €0.5 billion. Treasury stock
was used for the conversion of the €0.05 preference shares. This had the effect
of reducing borrowings by €1.4 billion and increasing equity by the same amount.
Subsequent purchases of treasury stock and the 2004 dividend reduced equity by
€0.3 billion and €1.2 billion respectively.
SECOND QUARTER PERFORMANCE BY REGION
EUROPE
The difficult market conditions in much of the region have continued.
Competition is intense between retailers as well as between manufacturers and
pricing is under pressure. Our markets in home and personal care are flat, while
foods categories have grown by about 1%.
Underlying sales declined by 0.6% in the quarter, with volumes slightly ahead,
but lower pricing as we have moved to improve competitiveness. The volume growth
represents an improvement compared with the first quarter, including a better
performance in both sales and market shares in ice cream.
Market shares, in aggregate across our categories, have been stable since the
start of the year, although they are still lower than a year ago.
Central and Eastern Europe grew strongly, particularly in Russia across all home
and personal care categories and in Knorr and Calve in savoury and dressings.
Sales in Western Europe were disappointing in a challenging environment,
particularly in the UK, France and the Netherlands, and by category in home and
personal care and in frozen foods. We expect to see a gradual improvement
resulting from a step-up in activity and innovation.
The 'Vitality' theme increasingly drives our innovation programme across both
foods and home and personal care.
In Foods, the Flora/Becel brand continues to extend its footprint with the
roll-out of the pro•activ range, now including yoghurt drinks. Knorr Vie shots
have been extended to the UK and Spain after a successful start in Belgium and
the Netherlands.
Across the region, Magnum 5 Senses ice creams are off to a good start.
In laundry, the globally successful 'Dirt is Good' campaign is now being applied
to re-energise the Persil brand in the UK and Ireland and Skip in a number of
other countries. In personal care, the Sunsilk styling range is being rolled out
following launches in the first quarter.
The operating margin, at 17.6%, was 2.2 percentage points higher than last year,
boosted by profits on disposals and with a lower level of restructuring costs.
The benefits of savings programmes and an improved mix more than offset higher
input costs and more competitive pricing.
THE AMERICAS
There has been a sustained pick-up in market growth in home and personal care
categories in the US and most Latin American countries remain buoyant, however
markets in foods categories in the US were flat.
Underlying sales grew by 5%, entirely from volume, with solid growth in the US
and strong performances in Brazil, Mexico and Argentina.
In home and personal care in the US, aggregate market shares have recovered in
the first half and are now back close to the level of a year ago. Sales
performance improved, driven by very good volume growth in skin care and
deodorants.
US foods had a relatively weaker quarter, as expected, against a strong
comparator in the previous year which had benefited from rapid growth of the
Carb Options range. Sales of the new Country Crock side dishes and Bertolli
frozen meals are doing well. Aggregate shares have improved since the start of
the year, although they are still slightly lower than a year ago. The ice cream
business continues to perform well.
The meal replacement category has seen a further sharp decline. Within this,
Slim•Fast has increased share, but sales are well down. We are driving
innovation with a range of high protein products and new 'meal-on-the-go' bars,
and are further integrating the business into our other operations.
Market shares remain healthy across Latin America and our established businesses
are benefiting from increasing consumer demand. Sales in Argentina are rising
strongly and we are growing well again in Chile. In Brazil volumes are well
ahead, particularly in home and personal care, despite an upsurge in local
competition in lower priced segments of the market. Growth in Mexico was broad
based across categories.
The innovation programme includes a series of activities directed at the
'Vitality' opportunity. In the US, we have launched: Hellmann's with Canola oil,
for a healthy heart; Ragu organic sauces; Lipton tea with the AOX seal -
promoting tea's naturally antioxidant properties, and the 'Smart' ranges of
Breyers ice cream.
AdeS soy based drinks in Latin America have been enhanced with new flavours and
'light' varieties. Hellmann's cholesterol free mayonnaise has been extended to
Brazil and Central America.
In the US a Dove hair styling range and Dove cool moisturising bar and body wash
have been launched. The Axe range has been extended with shower gel and
deodorant sticks and Degree for men has been introduced. In laundry, all now
includes a detergent with softening.
In Latin America we have introduced Sunsilk Hidraloe and Guarana and summer
variants of Dove across several categories.
The operating margin, at 5.1%, was 11.8 percentage points lower than last year,
of which 10.7 percentage points related to the write-down of Slim•Fast. The
remaining reduction of 1.1 percentage points reflected increased investment in
advertising and promotions and lower profits on disposals. Savings programmes
and an improved mix largely offset higher input costs.
ASIA/AFRICA
Most markets across the region are growing well, with strong consumer demand,
although Japan remains a difficult business environment.
Underlying sales grew by 8%, mainly from volume but also with a contribution
from pricing to recover increased input costs, especially in home and personal
care. There was double digit growth across our key developing and emerging
markets, almost without exception. This contrasts with weaker performances in
Japan and Australia.
Overall market share has been held since the start of the year, but has not yet
recovered to the level of a year ago.
Good growth in India in the quarter was broad based across categories.
Highlights of a good performance in China were Omo laundry detergent,
outstanding growth of Lux Super Rich following its launch late last year, and
innovation led growth in Pond's.
Sales in Japan improved after several difficult quarters. Lipton tea is growing
well, but the competitive background in hair and skin care remains tough.
All our major businesses in South East Asia recorded strong growth in the
quarter, in very competitive markets. Laundry, household care and hair care
performed particularly well.
In Turkey sales and market shares made good progress. There has been
particularly encouraging progress in laundry, with Omo consolidating its
position as brand leader. Ice cream, tea and household care also grew well.
Arabia has grown strongly in a buoyant economy.
Recent innovation includes Dove shampoos in India, Dove combing cream in Turkey
and Sunsilk anti-dandruff shampoo in Arabia. New global bar products for Lux
have been launched in India, and Pond's Beauty White in China. In laundry, Omo
sensitive skin formulation has been introduced in Turkey and Indonesia.
Lipton ready-to-drink teas have been extended with milk tea in China and
Leaf'n'Lemon in Japan. Knorr Soupy Snax is being rolled out in a number of
countries in Asia.
The operating margin, at 13.0%, was slightly lower than last year. Input costs
in home and personal care have increased sharply, but this has been offset by
selective price increases, cost efficiencies and an improved mix.
SAFE HARBOUR STATEMENT: This announcement may contain forward-looking
statements, including 'forward-looking statements' within the meaning of the
United States Private Securities Litigation Reform Act of 1995. Words such as
'expects', 'anticipates', 'intends' or the negative of these terms and other
similar expressions of future performance or results and their negatives are
intended to identify such forward-looking statements. These forward-looking
statements are based upon current expectations and assumptions regarding
anticipated developments and other factors affecting the Group. They are not
historical facts, nor are they guarantees of future performance. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including, among
others, competitive pricing and activities, consumption levels, costs, the
ability to maintain and manage key customer relationships and supply chain
sources, currency values, interest rates, the ability to integrate acquisitions
and complete planned divestitures, physical risks, environmental risks, the
ability to manage regulatory, tax and legal matters and resolve pending matters
within current estimates, legislative, fiscal and regulatory developments,
political, economic and social conditions in the geographic markets where the
Group operates and new or changed priorities of the Boards. Further details of
potential risks and uncertainties affecting the Group are described in the
Group's filings with the London Stock Exchange, Euronext Amsterdam and the US
Securities and Exchange Commission, including the Annual Report and Accounts on
Form 20-F. These forward-looking statements speak only as of the date of this
document. Except as required by any applicable law or regulation, the Group
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the Group's expectations with regard thereto or any change
in events, conditions or circumstances on which any such statement is based.
CONDENSED INTERIM FINANCIAL STATEMENTS
INCOME STATEMENT (unaudited)
Second Quarter € million Half Year
2005 2004 Increase/ 2005 2004 Increase/
(Decrease) (Decrease)
Current rates Constant rates Current rates Constant rates
Continuing
operations:
10 222 10 077 1% 2% Turnover 19 367 19 027 2% 3%
1 265 1 548 (18)% (18)% Operating 2 657 2 865 (7)% (6)%
profit
After
charging:
(353) - Impairment of (353) -
Slim•Fast
(153) (172) Net finance (306) (330)
costs
4 (8) Finance 101 78
income
(145) (142) Finance (379) (367)
costs
(12) (22) Pensions and (28) (41)
similar
obligations
8 9 Share in net 18 18
profit of
joint
ventures
(8) 1 Share in net (8) 2
profit/(loss)
of
associates
12 19 Other income 21 32
from
non-current
investments
1 124 1 405 (20)% (20)% Profit before 2 382 2 587 (8)% (7)%
taxation
(337) (342) Taxation (631) (719)
787 1 063 (26)% (26)% Net profit 1 751 1 868 (6)% (6)%
from
continuing
operations
(3) 7 Net profit/ 14 4
(loss) from
discontinued
operations
784 1 070 (27)% (27)% Net profit 1 765 1 872 (6)% (5)%
for the
period
Attributable
to:
53 53 Minority 100 102
interests
731 1 017 (28)% (29)% Shareholders' 1 665 1 770 (6)% (5)%
equity
Combined
earnings per
share
From total
operations
0.75 1.05 (29)% (29)% Per € 0.51 1.71 1.82 (6)% (6)%
ordinary NV
share (Euros)
11.19 15.72 (29)% (29)% Per 1.4p 25.63 27.30 (6)% (6)%
ordinary PLC
share (Euro
cents)
0.73 1.01 (28)% (28)% Per € 0.51 1.66 1.75 (5)% (5)%
ordinary NV
share -
diluted
(Euros)
10.91 15.07 (28)% (28)% Per 1.4p 24.85 26.20 (5)% (5)%
ordinary PLC
share -
diluted (Euro
cents)
From
continuing
operations
0.75 1.05 (28)% (28)% Per € 0.51 1.69 1.82 (7)% (6)%
ordinary NV
share (Euros)
11.24 15.61 (28)% (28)% Per 1.4p 25.42 27.23 (7)% (6)%
ordinary PLC
share (Euro
cents)
0.73 1.00 (27)% (27)% Per € 0.51 1.64 1.74 (6)% (5)%
ordinary NV
share -
diluted
(Euros)
10.95 14.98 (27)% (27)% Per 1.4p 24.64 26.14 (6)% (5)%
ordinary PLC
share -
diluted (Euro
cents)
STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)
€ million Half Year
2005 2004
Fair value gains/(losses) on financial instruments and
cash flow hedges net of tax 12 n/a
Actuarial gains/(losses) on pension schemes net of tax 12 (53)
Currency retranslation gains/(losses) net of tax 556 (90)
Net income/(expense) recognised directly in equity 580 (143)
Net profit for the period 1 765 1 872
Total recognised income and expense for the period 2 345 1 729
Attributable to:
Minority interests 146 104
Shareholders' equity 2 199 1 625
BALANCE SHEET (unaudited)
€ million As at As at As at
2 July 31 December 26 June
2005 2004 2004
Non-current assets
Goodwill and intangible assets 17 876 17 007 18 952
Property, plant and equipment 6 451 6 181 6 581
Pension asset for funded schemes in 720 625 788
surplus
Deferred tax assets 1 633 1 491 1 329
Other non-current assets 1 243 1 064 1 096
Total non-current assets 27 923 26 368 28 746
Assets held for sale 373 n/a n/a
Current assets
Inventories 4 282 3 756 4 319
Trade and other receivables due
within one year 5 370 4 131 5 227
Financial assets 372 1 013 1 188
Cash and cash equivalents 1 594 1 590 2 297
Total current assets 11 618 10 490 13 031
Current liabilities
Borrowings due within one year (7 506) (5 155) (7 317)
Trade payables and other current (8 613) (8 232) (9 129)
liabilities
Total current liabilities (16 119) (13 387) (16 446)
Net current assets/(liabilities) (4 501) (2 897) (3 415)
Total assets less current 23 795 23 471 25 331
liabilities
Non-current liabilities
Borrowings due after one year 6 085 6 893 9 042
Pension liability for funded schemes
in deficit 2 377 2 291 2 460
Pension liability for unfunded 4 053 3 788 3 693
schemes
Deferred tax liabilities 835 773 1 177
Restructuring and other provisions 1 349 1 364 794
Other non-current liabilities 761 717 803
Total non-current liabilities 15 460 15 826 17 969
Liabilities held for sale 119 n/a n/a
Equity
Shareholders' equity 7 802 7 280 6 973
Minority interests 414 365 389
Total equity 8 216 7 645 7 362
Total capital employed 23 795 23 471 25 331
MOVEMENTS IN EQUITY (unaudited)
€ million Half Year
2005 2004
Equity at 31 December 2004 7 645 n/a
IFRS transition adjustment for financial instruments
(including preference shares) (1 564) n/a
Equity at 1 January 6 081 7 194
Total recognised income and expense for the period 2 345 1 729
Dividends (1 229) (1 134)
Conversion of preference shares 1 380 -
(Purchase)/sale of treasury stock (285) (366)
Share option credit 85 121
Dividends paid to minority shareholders (106) (122)
Currency retranslation gains/(losses) net of tax (55) (25)
Other movements in equity - (35)
Equity at the end of the period 8 216 7 362
CASH FLOW STATEMENT (unaudited)
€ million Half Year
2005 2004
Operating activities
Cash flow from operating activities 2 127 2 557
Income tax paid (777) (576)
Net cash flow from operating activities 1 350 1 981
Investing activities
Interest received 79 36
Net capital expenditure (335) (373)
Acquisitions and disposals 117 (6)
Other investing activities 299 (133)
Net cash flow from/(used in) investing activities 160 (476)
Financing activities
Dividends paid on ordinary share capital (1 093) (962)
Interest and preference dividends paid (364) (338)
Change in borrowings and finance leases 327 414
Purchase of own shares (285) (343)
Other financing activities (101) (63)
Net cash flow from/(used in) financing activities (1 516) (1 292)
Net increase/(decrease) in cash and cash equivalents (6) 213
Cash and cash equivalents at the beginning of the 1 406 1 428
year
Effect of foreign exchange rate changes (36) 381
Cash and cash equivalents at the end of period 1 364 2 022
ANALYSIS OF NET DEBT (unaudited)
€ million As at As at
2 July 1 January
2005 2005
Cash and cash equivalents as per cash flow 1 364 1 406
statement
Add: bank overdrafts deducted therein 229 184
Less: cash and cash equivalents in assets/
liabilities 1 (8)
held for disposal
Cash and cash equivalents as per balance sheet 1 594 1 582
Financial assets 372 533
Borrowings due within one year (7 506) (6 448)
Borrowings due after one year (6 085) (7 221)
Derivatives and finance leases included in other
receivables and other liabilities 127 369
Net debt at the end of the period (11 498) (11 185)
GEOGRAPHICAL ANALYSIS (unaudited)
Continuing operations - Second Quarter
€ million Europe Americas Asia/Africa Total
Turnover
2004 4 431 3 164 2 482 10 077
2005 4 307 3 300 2 615 10 222
Change (2.8)% 4.3% 5.3% 1.4%
Impact of:
Exchange rates 0.1% 0.1% (1.1)% (0.2)%
Acquisitions 0.2% 0.0% 0.0% 0.1%
Disposals (2.5)% (0.8)% (1.6)% (1.8)%
Underlying sales growth (0.6)% 5.1% 8.2% 3.3%
Price (0.8)% 0.0% 1.1% (0.1)%
Volume 0.2% 5.0% 7.0% 3.4%
Operating profit
2004 684 536 328 1 548
2005 757 167 341 1 265
Change current rates 10.7% (68.8)% 3.7% (18.3)%
Change constant rates 10.8% (71.7)% 6.4% (18.5)%
Operating margin
2004 15.4% 16.9% 13.2% 15.4%
2005 17.6% 5.1% 13.0% 12.4%
Continuing operations - Half Year
€ million Europe Americas Asia/Africa Total
Turnover
2004 8 251 6 045 4 731 19 027
2005 8 175 6 248 4 944 19 367
Change (0.9)% 3.4% 4.5% 1.8%
Impact of:
Exchange rates 0.2% (1.1)% (2.2)% (0.8)%
Acquisitions 0.2% 0.0% 0.0% 0.1%
Disposals (2.5)% (1.1)% (2.0)% (1.9)%
Underlying sales growth 1.2% 5.7% 9.1% 4.6%
Price (0.9)% 0.4% 0.9% 0.0%
Volume 2.1% 5.3% 8.1% 4.6%
Operating profit
2004 1 284 969 612 2 865
2005 1 398 606 653 2 657
Change current rates 8.9% (37.5)% 6.6% (7.3)%
Change constant rates 8.9% (37.6)% 10.2% (6.5)%
Operating margin
2004 15.6% 16.0% 12.9% 15.1%
2005 17.1% 9.7% 13.2% 13.7%
Operating profit/(loss) of discontinued operations - Second Quarter
€ million Europe Americas Asia/Africa Total
2004 (5) 19 - 14
2005 (5) 3 - (2)
Operating profit/(loss) of discontinued operations - Half Year
€ million Europe Americas Asia/Africa Total
2004 (13) 24 2 13
2005 2 20 - 22
CATEGORY ANALYSIS (unaudited)
Continuing operations - Second Quarter
€ million Spreads Ice cream Home Home
Savoury and and care and
and cooking frozen Personal and Personal
dressings products Beverages foods Foods care other Care Total
Turnover
2004 2 065 1 104 774 1 938 5 881 2 490 1 706 4 196 10 077
2005 2 048 1 037 776 1 996 5 857 2 595 1 770 4 365 10 222
Change (0.9)% (6.0)% 0.2% 3.0% (0.4)% 4.2% 3.8% 4.0% 1.4%
Impact of:
Exchange rates 0.1% 0.5% (0.6)% (0.4)% (0.1)% (0.8)% 0.5% (0.3)% (0.2)%
Acquisitions 0.0% 0.0% 0.2% 0.3% 0.1% 0.0% 0.0% 0.0% 0.1%
Disposals (2.6)% (5.5)% (1.4)% (0.9)% (2.4)% (0.5)% (1.3)% (0.8)% (1.8)%
Underlying
sales growth 1.6% (1.1)% 2.1% 4.1% 2.0% 5.6% 4.6% 5.2% 3.3%
Operating
profit/(loss)
2004 369 179 108 309 965 407 176 583 1 548
2005 346 178 (246) 383 661 420 184 604 1 265
Change current
rates (6.2)% (0.8)% (328.2)% 23.9% (31.5)% 3.2% 4.0% 3.5% (18.3)%
Change
constant rates (5.8)% 0.0% (344.8)% 24.5% (32.5)% 4.7% 5.1% 4.8% (18.5)%
Operating
margin
2004 17.8% 16.3% 13.9% 15.9% 16.4% 16.4% 10.3% 13.9% 15.4%
2005 16.9% 17.2% (31.6)% 19.2% 11.3% 16.2% 10.3% 13.8% 12.4%
Continuing operations - Half Year
€ million Spreads Ice cream Home Home
Savoury and and care and
and cooking frozen Personal and Personal
dressings products Beverages foods Foods care other Care Total
Turnover
2004 3 954 2 144 1 507 3 254 10 859 4 754 3 414 8 168 19 027
2005 4 013 2 094 1 490 3 353 10 950 4 973 3 444 8 417 19 367
Change 1.5% (2.3)% (1.1)% 3.1% 0.8% 4.6% 0.9% 3.0% 1.8%
Impact of:
Exchange rates (0.4)% 0.1% (1.5)% (0.8)% (0.6)% (1.7)% (0.5)% (1.2)% (0.8)%
Acquisitions 0.0% 0.0% 0.1% 0.4% 0.2% 0.0% 0.0% 0.0% 0.1%
Disposals (2.1)% (6.1)% (1.2)% (1.5)% (2.6)% (0.6)% (1.7)% (1.1)% (1.9)%
Underlying
sales growth 4.0% 3.9% 1.5% 5.0% 4.0% 7.1% 3.1% 5.4% 4.6%
Operating
profit/(loss)
2004 682 349 200 407 1 638 793 434 1 227 2 865
2005 712 390 (155) 472 1 419 857 381 1 238 2 657
Change current
rates 4.4% 11.7% (177.5)% 16.1% (13.3)% 8.0% (12.4)% 0.8% (7.3)%
Change
constant rates 5.1% 12.6% (183.4)% 17.0% (13.3)% 10.7% (11.9)% 2.6% (6.5)%
Operating
margin
2004 17.2% 16.3% 13.3% 12.5% 15.1% 16.7% 12.7% 15.0% 15.1%
2005 17.7% 18.6% (10.4)% 14.1% 13.0% 17.2% 11.0% 14.7% 13.7%
Discontinued operations
Operating loss of discontinued operations for the second quarter of 2005 was €
(2) million (2004: profit of €14 million), and operating profit for the half
year was €22 million (2004: €13 million). These amounts relate wholly to the
personal care category.
NOTES (unaudited)
Adoption of IFRS
Unilever adopted International Financial Reporting Standards (IFRS) with effect
from 1 January 2005. This includes the early adoption of IAS 19 (revised 2004)
on employee benefits. Our transition date is 1 January 2004 as this is the start
date of the earliest period for which we will present full comparative
information under IFRS in our 2005 Annual Report and Accounts.
These condensed interim financial statements have been prepared in accordance
with IAS 34. The financial information is prepared under the historical cost
convention as modified by the revaluation of biological assets, financial assets
classified as 'available-for-sale' and 'at fair value through profit or loss',
and derivatives.
IFRS 1 mandates that most IFRS are applied fully retrospectively, meaning that
the opening balance sheet at 1 January 2004 is restated as if those accounting
policies had always been applied. There are certain limited exemptions to this
requirement. A reconciliation from old GAAP to IFRS of the balance sheet as per
26 June 2004 and the income statements for the quarter and the six month periods
then ended is given on pages 12 to 14. A more detailed review of the changes to
our accounting policies and a reconciliation of financial statements from
old GAAP to IFRS is available on our website at www.unilever.com/ourcompany/
investorcentre/.
From 1 January 2005 Unilever implemented the following additional changes in
accounting policies. These changes are applied prospectively from
1 January 2005.
Financial instruments (including preference shares)
Since 1 January 2005 Unilever has applied IAS 32 and IAS 39. These standards
have many detailed consequences, however the key areas of impact for Unilever
are described below.
Under IAS 32, Unilever must present the NV preference share capital as a
liability rather than as part of equity. All of the dividends paid on these
preference shares are recognised in the income statement as interest expense.
The carrying value of the preferential share capital of NV as at 1 January 2005
was €1 502 million.
IAS 39 requires certain non-derivative financial assets to be held at fair value
with unrealised movements in fair value recognised directly in equity.
Non-derivative financial liabilities continue to be measured at amortised cost,
unless they form part of a fair value hedge accounting relationship when they
are measured at amortised cost plus the fair value of the hedged risk.
IAS 39 requires recognition of all derivative financial instruments on the
balance sheet and that they are measured at fair value. The standard also places
significant restrictions on the use of hedge accounting and changes the hedge
accounting methodology. As a result Unilever recognises all derivative financial
instruments on balance sheet at fair value and applies the new hedge accounting
methodology to all significant qualifying hedging relationships.
Non-current assets and asset groups held for sale
Application of IFRS 5 has resulted in reclassifications of non-current assets
and asset groups held for sale in the balance sheet as at 1 January 2005. It
does not significantly affect the asset values themselves. Following the
announcement of the sale of UCI, results have been analysed between continuing
and discontinued operations, as required by IFRS 5.
Turnover definition
From 1 January 2005 Unilever changed its treatment of promotional couponing and
trade communications. From 1 January 2005 these costs are deducted from turnover
together with other trade promotion costs which are already deducted from
turnover. Comparatives have been restated to reflect this change, which has no
impact on operating profit or net profit.
Issuances and repayments of debt
Movements during the quarter included the repayment of US $ 200 million Notes at
maturity on 20 June 2005.
Preference shares
On 15 February 2005 after close of trading, NV converted part of the notional
value of the NLG 0.10 (€ 0.05*) cumulative preference shares into NV ordinary
shares. Upon conversion the holders of the preference shares received one NV
ordinary share for every 11.2 preference shares held. This resulted in a total
of 18 881 587 NV ordinary shares being transferred to the preference
shareholders. These NV ordinary shares had previously been held as treasury
shares by NV. As a consequence of the conversion, the notional value of the
shares was reduced to €0.05*. On 10 May 2005 the Annual General Meeting of the
shareholders of NV resolved to cancel the preference shares upon repayment of
the notional value in accordance with NV's articles of Association. The shares
were cancelled at midnight on 13 July 2005 and were delisted by Euronext with
effect from 14 July 2005.
*This amount is a representation in Euros on the basis of Article 67c Book 2 of
the Dutch Civil Code, rounded to two decimal places, of underlying Dutch
guilders, as these have not been converted into Euros in Unilever N.V.'s
Articles of Association.
Acquisitions and Disposals
On 11 July 2005, we announced the completion of the sale of our Prestige
fragrance business, Unilever Cosmetics International (UCI), to Coty Inc. of the
United States. Unilever received US $800 million in cash, with the opportunity
for further deferred payments contingent upon future sales. The business
includes the perfume licences for Calvin Klein, Cerruti, Vera Wang, Chloe and
Lagerfeld, as well as a manufacturing and distribution centre in Mt. Olive, New
Jersey, United States and a distribution centre in Lille, France. Sales for the
global prestige business in 2004 were in excess of US $600 million (€490
million). The profit arising on the sale of this business will be included in
our results for the third quarter of 2005, and is expected to be around €450
million before tax.
Impairment
Since the beginning of the year we have continued to review the carrying value
of goodwill and intangibles relating to the global Slim•Fast business in light
of the continuing decline in size of the weight management category and a lower
sales outlook for this part of our business. Our review at the end of Q2
resulted in a pre-tax charge of €353 million being taken to reflect a reduced
view of the future size of the Slim•Fast brand. The impairment charge is
included within operating profit of the Americas region. The impairment review
comprised a comparison of the carrying value of the brand with its value in use,
calculated using a discounted cash flow methodology. The relevant cash flow
projections covered a period of 10 years as management considers that this
period fairly reflects long-term value in this highly dynamic category. The
discount rate used for the valuation was based on a pre-tax weighted average
cost of capital and was 11%.
Dividends
The following final dividends in respect of 2004 were declared at the Annual
General Meetings on 10 May and 11 May 2005:
Unilever N.V.:€1.26 per ordinary €0.51 share
Unilever PLC:12.82p per ordinary 1.4p share
These dividends were paid to shareholders on 13 June 2005.
Discontinued operations
Following the announcement of the disposal of UCI, results for this business
have been presented in our income statement as discontinued operations, in line
with the requirements of IFRS 5. The amount reported for the year to date
represents the profits and losses arising on these operations during the first
half of 2005. The assets and liabilities of the business have been classified as
assets and liabilities held for disposal in our reported balance sheet as at 2
July 2005.
Basic earnings per €0.51 NV ordinary share in respect of the discontinued
operations were €0.00 for the quarter and €0.02 for the year to date (2004:
€0.00 in both cases). Diluted earnings per €0.51 NV ordinary share in respect of
the discontinued operations were €0.00 for the quarter and €0.02 for the year to
date (2004: €0.01 in both cases).
Basic earnings per 1.4p PLC ordinary share in respect of the discontinued
operations were (0.05) Euro cents for the quarter and 0.21 Euro cents for the
year to date (2004: 0.11 Euro cents and 0.07 Euro cents respectively). Diluted
earnings per 1.4p PLC ordinary share in respect of the discontinued operations
were (0.04) Euro cents for the quarter and 0.21 Euro cents for the half year
(2004: 0.09 Euro cents and 0.06 Euro cents respectively).
The cash outflows attributable to the discontinued operations in respect of
operating, investing and financing activites for the first half year were
€(60) million, €0 million and €0 million respectively (2004 : €(2) million, €(1)
million and €0 million).
Exchange rate conventions
The income statement on page 5, the statement of recognised income and expense
on page 6, the movements in equity on page 7 and the cash flow statement on page
7 are translated at rates current in each period.
The balance sheet on page 6 is translated at period-end rates of exchange.
Supplementary information in US dollars and sterling is available on our website
at www.unilever.com/ourcompany/investorcentre/.
The financial statements attached do not constitute the full financial
statements within the meaning of Section 240 of the UK Companies Act 1985. Full
accounts for Unilever for the year ended 31 December 2004 have been delivered to
the Registrar of Companies. The auditors' report on these accounts was
unqualified and did not contain a statement under Section 237(2) or Section 237
(3) of the UK Companies Act 1985.
Reconciliation of profit for the half year ended 26 June 2004
(unaudited)
Previously Godwill and
reported indefinite
under old lived Pensions Deferred
GAAP intangible Biological and similar tax restate-
assets Software assets obligations ment effects
€ million € million € million € million € million € million
Turnover 19 873 - - - - -
Turnover of
joint ventures (96) - - - - -
Operating costs (17 451) 523 27 2 - -
Share of operating
profit of joint
ventures 20 - - - - -
Operating profit/(loss) 2 346 523 27 2 - -
Share of operating
profit of associates 20 4 - - - -
Finance costs (312) - - - - -
Other finance
income/(cost) -
pensions and similar
obligations (43) - - - 1 -
Share of net profit
of joint ventures - - - - - -
Share of net profit
of associates - - - - - -
Income from other
non-current investments 21 - - - 11 -
Profit/(loss) before
taxation 2 032 527 27 2 12 -
Taxation (668) (25) (7) (1) (4) (23)
Profit/(loss)
for the period 1 364 502 20 1 8 (23)
Attributable to:
Minority interests 100 1 1 - - -
Shareholders' equity 1 264 501 19 1 8 (23)
Reconciliation of profit for the half year ended 26 June 2004
(unaudited) Cont/...
Tax Joint Total Change
reclassifying ventures effect of relating to Restated
effect and transition turnover under
associates Dividends Others to IFRS definition IFRS
€ million € million € million € million € million € million € million
Turnover - (96) - - (96) (532) 19 245
Turnover of
joint ventures - 96 - - 96 - -
Operating costs - - - - 552 532 (16 367)
Share of operating
profit of joint ventures - (20) - - (20) - -
Operating profit/(loss) - (20) - - 532 - 2 878
Share of operating
profit of associates - (24) - - (20) - -
Finance costs - 23 - - 23 - (289)
Other finance
income/(cost) -
pensions and
similar obligations - - - - 1 - (42)
Share of net profit
of joint ventures - 18 - - 18 - 18
Share of net profit
of associates - 2 - - 2 - 2
Income from other
non-current investments - - - - 11 - 32
Profit/(loss)
before taxation - (1) - - 567 - 2 599
Taxation - 1 - - (59) - (727)
Profit/(loss)
for the period - - - - 508 - 1 872
Attributable to:
Minority interests - - - - 2 - 102
Shareholders' equity - - - - 506 - 1 770
Reconciliation of profit for the second quarter ended 26 June 2004
(unaudited)
Previously Godwill and
reported indefinite
under old lived Pensions Deferred
GAAP intangible Biological and similar tax restate-
assets Software assets obligations ment effects
€ million € million € million € million € million € million
Turnover 10 516 - - - - -
Turnover of
joint ventures (53) - - - - -
Operating costs (9 184) 264 15 4 - -
Share of operating
profit of joint ventures 10 - - - - -
Operating profit/(loss) 1 289 264 15 4 - -
Share of operating
profit of associates 11 2 - - - -
Finance costs (161) - - - - -
Other finance
income/(cost) -
pensions and similar
obligations (23) - - - - -
Share of net profit
of joint ventures - - - - - -
Share of net
profit of associates - - - - - -
Income from other
non-current investments 19 - - - - -
Profit/(loss)
before taxation 1 135 266 15 4 - -
Taxation (335) (11) (4) (1) - 1
Profit/(loss)
for the period 800 255 11 3 - 1
Attributable to:
Minority interests 51 - 1 1 - -
Shareholders' equity 749 255 10 2 - 1
Reconciliation of profit for the second quarter ended 26 June 2004
(unaudited) Cont/...
Tax Joint Total Change
reclassifying ventures effect of relating to Restated
effect and transition turnover under
associates Dividends Others to IFRS definition IFRS
€ million € million € million € million € million € million € million
Turnover - (53) - - (53) (279) 10 184
Turnover of joint ventures - 53 - - 53 - -
Operating costs - - - - 283 279 (8 622)
Share of operating
profit of joint ventures - (10) - - (10) - -
Operating profit/(loss) - (10) - - 273 - 1 562
Share of operating
profit of associates - (13) - - (11) - -
Finance costs - 11 - - 11 - (150)
Other finance
income/(cost) -
pensions and
similar obligations - - - - - - (23)
Share of net profit
of joint ventures - 9 - - 9 - 9
Share of net
profit of associates - 1 - - 1 - 1
Income from other
non-current investments - - - - - - 19
Profit/(loss)
before taxation - (2) - - 283 - 1 418
Taxation - 2 - - (13) - (348)
Profit/(loss)
for the period - - - - 270 - 1 070
Attributable to:
Minority interests - - - - 2 - 53
Shareholders' equity - - - - 268 - 1 017
Reconciliation of equity at 26 June 2004
(unaudited)
Previously Godwill and
reported indefinite
under old lived Pensions Deferred
GAAP intangible Biological and similar tax restate-
assets Software assets obligations ment effects
€ million € million € million € million € million € million
Non-current assets
Goodwill 13 313 414 - - - -
Intangible assets 4 216 879 130 - - -
Property, plant and 6 680 - - (40) - -
equipment
Biological assets - - - 31 - -
Joint ventures and 69 - - - - -
associates
Other non-current 170 - - - 191 -
investments
Pension asset for 574 - - - (52) -
funded schemes in
surplus
Trade and other 978 - - - - -
receivables
due after more than one
year
Deferred tax assets - - - - - -
Total non-current 26 000 1 293 130 (9) 139 -
assets
Current assets
Inventories 4 322 - - - - -
Trade and other 5 604 - - - - -
receivables
due within one year
Financial assets 1 072 - - - - -
Cash and cash 2 413 - - - - -
equivalents
Total current assets 13 411 - - - - -
Current liabilities
Creditors due within (16 446) - - - - -
one year
Borrowings (7 317) - - - - -
Trade and other (9 129) - - - - -
payables
Current tax liabilities - - - - - -
Net current (3 035) - - - - -
assets/(liabilities)
Total assets less 22 965 1 293 130 (9) 139 -
current liabilities
Non-current liabilities
Creditors due after 9 845 - - - - -
more than one year
Borrowings 9 042 - - - - -
Trade and other 803 - - - - -
payables
Provisions for 798 (4) - - - -
liabilities and charges
(excluding pensions and
similar obligations)
Restructuring and other 770 - - - - -
provisions
Interest in associates 28 (4) - - - -
Liabilities for 4 451 - - - 173 -
pensions and similar
obligations
Pension liability for 1 746 - - - 13 -
funded schemes in
deficit
Pension liability for 2 705 - - - 160 -
unfunded schemes
Deferred tax 704 6 41 (1) (10) 1 153
liabilities
Total non-current 15 798 2 41 (1) 163 1 153
liabilities
Shareholders' equity
Called up share capital 642 - - - - -
Share premium account 1 538 - - - - -
Other reserves (2 846) - - - - -
Retained profit 7 445 1 289 89 (7) (24) (1 153)
Total shareholders' 6 779 1 289 89 (7) (24) (1 153)
equity
Minority interests 388 2 - (1) - -
Total equity 7 167 1 291 89 (8) (24) (1 153)
Total capital employed 22 965 1 293 130 (9) 139 -
Reconciliation of equity at 26 June 2004
(unaudited) Cont/...
Tax Joint Total
reclassifying ventures effect of Restated
effect and transition under
associates Dividends Others to IFRS IFRS
€ million € million € million € million € million € million
Non-current assets
Goodwill - - - - 414 13 727
Intangible assets - - - - 1 009 5 225
Property, plant and - - - (59) (99) 6 581
equipment
Biological assets - - - - 31 31
Joint ventures and - - - - - 69
associates
Other non-current - - - 380 571 741
investments
Pension asset for funded 266 - - - 214 788
schemes in surplus
Trade and other
receivables due after
more than one year (782) - - 59 (723) 255
Deferred tax assets 1 329 - - - 1 329 1 329
Total non-current assets 813 - - 380 2 746 28 746
Current assets
Inventories - - - (3) (3) 4 319
Trade and other
receivables - - - (377) (377) 5 227
due within one year
Financial assets - - - 116 116 1 188
Cash and cash equivalents - - - (116) (116) 2 297
Total current assets - - - (380) (380) 13 031
Current liabilities
Creditors due within
one year 960 - - - 960 (15 486)
Borrowings - - - - - (7 317)
Trade and other payables 960 - - - 960 (8 169)
Current tax liabilities (960) - - - (960) (960)
Net current - - - (380) (380) (3 415)
assets/(liabilities)
Total assets less current 813 - - - 2 366 25 331
liabilities
Non-current liabilities
Creditors due after more - - - - - 9 845
than one year
Borrowings - - - - - 9 042
Trade and other payables - - - - - 803
Provisions for liabilities - - - - (4) 794
and charges
(excluding pensions and
similar obligations)
Restructuring and other - - - - - 770
provisions
Interest in associates - - - - (4) 24
Liabilities for pensions 1 529 - - - 1 702 6 153
and similar obligations
Pension liability for 701 - - - 714 2 460
funded schemes in deficit
Pension liability for 828 - - - 988 3 693
unfunded schemes
Deferred tax liabilities (716) - - - 473 1 177
Total non-current 813 - - - 2 171 17 969
liabilities
Shareholders' equity
Called up share capital - - - - - 642
Share premium account - - - - - 1 538
Other reserves - - - - - (2 846)
Retained profit - - - - 194 7 639
Total shareholders' equity - - - - 194 6 973
Minority interests - - - - 1 389
Total equity - - - - 195 7 362
Total capital employed 813 - - - 2 366 25 331
EARNINGS PER SHARE (unaudited)
Combined earnings per share
The combined earnings per share calculations are based on the average number of
share units representing the combined ordinary shares of NV and PLC in issue
during the period, less the average number of shares held to meet options
granted under various employee share plans.
The number of combined share units is calculated from the underlying NV and PLC
shares using the exchange rate of £1 = €5.445, in accordance with the
Equalisation Agreement. This number (expressed in terms of NV shares) increased
from 962 million at the start of the year to 979 million at the end of the
second quarter (6 412 million to 6 525 million in terms of PLC shares) following
the conversion of the €0.05 preference shares in February. The number is
expected to reduce as we replenish treasury stock.
The calculations of diluted earnings per share are based on (i) conversion into
PLC ordinary shares in the year 2038 of shares in a group company under the
arrangements for the variation of the Leverhulme Trust; (ii) conversion of the
€0.05* NV preference shares; (iii) the exercise of share options by employees.
Earnings per share for total operations for the half year
2005 2004
Combined EPS Thousands of units
Average number of combined share units of € 0.51 974 006 965 018
Average number of combined share units of 1.4p 6 493 372 6 433 454
€ million
Net profit attributable to shareholders' equity 1 665 1 770
Less: preference dividends n/a (14)
Net profit attributable to shareholders' equity
for basic earnings per share calculation 1 665 1 756
Combined EPS per € 0.51 (Euros) 1.71 1.82
Combined EPS per 1.4p (Euro cents) 25.63 27.30
Combined EPS - Diluted Thousands of units
Adjusted average number of combined share units
of € 0.51 1 006 610 1 011 432
Adjusted average number of combined share units
of 1.4p 6 710 734 6 742 878
€ million
Adjusted net profit attributable to
shareholders' 1 668 1 767
equity
Combined diluted EPS per € 0.51 (Euros) 1.66 1.75
Combined diluted EPS per 1.4p (Euro cents) 24.85 26.20
Combined EPS - American shares
Combined EPS per € 0.51 NV - New York Share $2.19 $2.23
Combined EPS per 5.6p PLC - American Depositary
Receipt $1.31 $1.34
Combined diluted EPS per € 0.51 NV - New York $2.12 $2.14
Share
Combined diluted EPS per 5.6p PLC - American
Depositary Receipt $1.27 $1.29
DATES
The results for the third quarter and the announcement of interim dividends will
be published on 3 November 2005.
Salient figures for the above results will be published in the Daily Telegraph
on 5 August.
4 August 2005
This information is provided by RNS
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