Report & accounts 2002 in full - Unilever

36 Financial review
The decrease is primarily due to the strengthening of
the euro during the year. Included in the charge is
€1 023 million in respect of Bestfoods.
Exceptional items for the year of €874 million included
€1 215 million of restructuring costs, a credit of
€249 million for the net profits and losses on business
disposals and €98 million credit from the release of legal
and environmental provisions following the settlement of
certain legal claims in our favour. Associated costs included
within operating profit BEIA were €191 million for the year
(2001: €373 million).
The exceptional costs incurred during the year primarily
relate to the Path to Growth initiatives announced in
February 2000, and to the integration of Bestfoods. The
total net cost of these programmes over 5 years is estimated
to be €6.2 billion. Of the €5.0 billion incurred to date,
€4.3 billion is exceptional and €0.7 billion is associated costs.
Operating profit and Group operating profit each fell by 3%
to €5 125 million and €5 041 million respectively, with the
underlying margin improvement offset by higher exceptional
charges and the 7% average currency impact.
An overview of operating performance by region and
product category is included in the Regional and Category
texts on pages 18 to 23 and 24 to 34 respectively.
Net interest cost for the year was €473 million lower at
€1 173 million as we benefited from strong cash flow from
operations, the proceeds of business disposals, lower
interest rates and the favourable effect of currency
movements. Net interest cover for the year was 4.5 times,
up from 3.2 times in 2001. The net interest cover on the
basis of EBITDA (BEI) was 7 times (2001: 5 times).
The Group’s effective tax rate on profit for the year
was 38.7% (2001: 42.7%). This rate reflects the nondeductibility
of the Bestfoods goodwill amortisation and
a lower effective tax rate on net exceptional items.
The underlying tax rate on normal operations for the
year was 32.2% (2001: 33.7%).
Minority interests increased to €312 million (2001:
€239 million), mainly as a result of a fiscal policy
change affecting local shareholders in India.
Net profit for the year rose by 16% to €2 129 million;
combined earnings per share were up 18%; combined
earnings per share BEIA increased by 14%.
Return on capital employed increased to 11% from 9%
in 2001.
Unilever Annual Report & Accounts and Form 20-F 2002
Results – 2001 compared with 2000
Turnover rose by 9% to €52 206 million.
Group turnover increased by 8% to €51 514 million.
This increase was driven by underlying sales growth of 4%,
compared with 1.5% in 2000, combined with a net effect
from acquisitions and disposals of an increase of 7%.
The most significant of these were the acquisition of
Bestfoods and the disposal of Elizabeth Arden and some
European soups and sauces brands. This growth was offset
by a 3% strengthening of the average exchange rate for
the euro against the basket of Unilever currencies.
As a result of the Bestfoods acquisition, the Group’s share
of joint venture turnover increased by 43% to €692 million.
Group operating profit BEIA of €7 149 million increased
by 25% for the year. The improvement in group operating
margin BEIA by 1.9% to 13.9% reflected the ongoing
contribution from Path to Growth restructuring and
procurement savings and the successful integration
of Bestfoods.
Amortisation of goodwill and intangibles was €1 387 million
compared with €435 million in 2000. The increase was
primarily the result of a full year’s amortisation charge for
acquisitions made partway through 2000. Included in this
charge was €1 170 million for Bestfoods and €193 million
as a result of other acquisitions in 2000, principally Slim•Fast,
Ben & Jerry’s, Cressida and Amora Maille.
Exceptional items for the year were €588 million, which
included €1 515 million of restructuring investment and
profits on disposals of €927 million. Of the latter,
€811 million related to the profit on the sale of the
brands to secure regulatory approval for our acquisition
of Bestfoods and €114 million related to profit on the sale
of Unipath. Associated costs included within operating profit
BEIA were €373 million in 2001.
Group operating profit increased by 63% to €5 174 million,
primarily being the net impact of acquisitions and disposals
offset by an increase in the amortisation charge.
The share of operating profit of joint ventures increased to
€84 million (2000: €57 million), reflecting a full year of the
Bestfoods’ joint ventures.
Net interest cost rose to €1 646 million compared with
€632 million in 2000. This reflected the increase in the level
of borrowings during 2000 to fund acquisitions, principally
Bestfoods. Cash generation from disposals during the
year, along with proceeds from the sale of the European
bakery business in 2000, reduced the interest charge by
approximately €80 million. Net interest cover for the year
was just over 3 times. The net interest cover on the basis
of EBITDA (BEI) was 5 times for the year.
The Group’s effective tax rate for the year was 42.7%
(2000: 49.3%). This rate reflected the non-deductibility of