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46 Unilever Annual Review 1998 Financial Review
Financial Review
The figures quoted in this Financial Review and in the Summary
Financial Statement are in sterling, at current rates of exchange,
unless otherwise stated. The profit and loss and cash flow
information is translated at average rates of exchange and the
balance sheet at year-end rates of exchange.
Results
Turnover for the Group fell by 9% to £27 094 million,
with sales in the continuing operations (ie excluding the
chemicals businesses) falling by 5%; this included an increase
in underlying volume in the continuing business of almost 2%,
offset by the 9% strengthening of sterling against the basket
of Unilever currencies. Operating profit increased by 24% to
£2 955 million, or by 33% in the continuing operations. This
reflected an improvement in margins, before exceptional items,
of 0.7% of turnover, together with exceptional gains of
£84 million (1997 exceptional charges of £565 million) which
included a £261 million profit on the disposal of Plant Breeding
International (PBI). There were no non-operating exceptional
items in 1998.
Analysis of operating performance by geography and by
category is given in the Business Overview and Category
reviews on pages 10 and 34 respectively.
Income from fixed investments in 1998 of £25 million
was in line with last year (1997: £27 million).
Average net funds for the year at constant rates were
£3.5 billion, resulting in a net interest income of £105 million
compared to an interest cost in 1997 of £73 million. Net
interest cover (1997: 66 times) has therefore not been
measured for 1998.
.
The Group’s effective tax rate reduced to 33% compared to
35% in 1997 when the impact of the disposal of the chemicals
businesses is excluded. The reduction is mainly due to one-off
items and the benefit of higher prior year tax credits.
Minority interests of £97 million were in line with 1997 with
higher profits in India offset by increased losses in China, and
the impact in 1997 of the minority interests’ share in the profit
on disposal of the speciality chemicals businesses.
Net profit after exceptional items decreased by 41% to
£1 973 million. Excluding the profit on the sale of the speciality
chemicals businesses and the loss on disposal of fixed assets in
1997, net profit increased by 36%. The £649 million positive
swing in operating exceptional items referred to previously
made a significant contribution to this improvement; excluding
exceptional items net income was 9% ahead of 1997.
Return on capital employed, before the impact of the special
dividend (see below), decreased to 16% from 28% in 1997,
entirely due to the impact of the profit on the sale of chemicals
businesses in 1997. Average capital employed excludes
goodwill on acquisitions made before 1998, which are
eliminated in reserves. As the special dividend is accounted for
on 31 December 1998, its impact on average capital employed
and the related return on capital employed is not material in
1998. In a full year the impact of the special dividend would
increase return on capital employed to approximately 24%.
Earnings and dividends per share
pence per 1.25p of ordinary capital
20.9
6.7
94
19.7
7.4
95
■ Combined earnings per share
■ Dividends per share
* Excluding 1998 special dividend
21.5
8.0
96
44.7
8.4
97
26.5
*10.7
98