Unilever Annual Report & Accounts and Form 20-F 2000

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Unilever Annual Report & Accounts and Form 20-F 2000
Financial review
Return on capital employed fell to 8% from 22% in 1999.
The decline is due to the decrease in profit after tax,
combined with the increase in long term borrowings.
Results - 1999 over 1998
Total turnover was 1.5% higher at €41 262 million.
Group turnover increased 1.3% to €40 977 million.
Underlying volume growth of 1% was partly offset by
the slight strengthening of the euro against the basket
of Unilever currencies.
The Group’s share of joint venture turnover increased to
€285 million from €202 million in 1998.
Group operating profit before exceptional items and
amortisation increased by 7%, reflecting a further
strengthening in underlying margin of 0.5 percentage
points of turnover to 11.1%.
Amortisation of goodwill and intangibles rose to €23 million
from €8 million in 1998.
Exceptional charges of €269 million in 1999 compare with
net gains in 1998 of €125 million which included the profit
on the disposal of Plant Breeding International in the United
Kingdom. The 1999 charge included €232 million for
restructuring.
Operating profit fell by 2% as a result of the above
exceptional charges and amortisation of goodwill and
intangibles.
Share of operating profit of joint ventures increased to
€42 million (1998: €30 million) reflecting improved
performance in our joint ventures in the United States
and Portugal.
Net interest costs were €14 million, compared with an
interest income in 1998 of €156 million. The change was
due to a €5.1 billion reduction in net funds during the year,
following payment of €6.1 billion for the cash element of
the special dividend in June 1999. Net interest cover for the
year was more than 300 times, and over 30 times for the
second half year. The net interest cover on the basis of
EBITDA (bei) was 412 times in 1999.
The Group’s effective tax rate reduced to 32% compared
with 33% in 1998, mainly reflecting prior year tax credits.
Minority interests increased to €201 million (1998:
€144 million) as a result of continued strong performance
in India, and a return to profitability in Nigeria.
Net profit fell by 6% as a result of the negative swing in
exceptional items, and the impact on net interest of the
special dividend. Combined earnings per share was
unchanged at 39.48 euro cents per 1.4p of PLC ordinary
capital and €2.63 per Fl. 1.12 of NV ordinary capital, as the
Report of the Directors
reduction in net income was offset by the reduction in
the number of shares following the share consolidation.
Combined earnings per share before exceptional items
and amortisation rose by 9%.
Return on capital employed increased to 22% from 16% in
1998. This improvement is due to the more efficient capital
structure resulting from the payment of the special dividend.
The payment of the special dividend was responsible for a
reduction of the Weighted Average Cost of Capital (WACC)
of some 0.5%. WACC is calculated as the real cost of equity
multiplied by the market capitalisation, plus the real after
taxation interest cost of debt multiplied by the market value
of the net debt, divided by the sum of the market values of
debt and equity.
2000
Dividends and market capitalisation
Ordinary dividends paid and proposed on PLC ordinary
capital amount to 13.07p per 1.4p share (1999: 12.50p),
an increase of 5% per share. Ordinary dividends paid and
proposed on the NV ordinary capital amount to €1.43 per
Fl. 1.12 share (1999: €1.27), an increase of 13% per share.
The ratio of dividends to profit attributable to ordinary
shareholders increased to 133.3% (1999: 45.2%).
Unilever’s combined market capitalisation at 31 December
2000 was €65.3 billion (1999: €52.7 billion).
Balance sheet
The euro weakened slightly against the basket of Unilever
currencies between the two balance sheet dates. The
resulting exchange gain on the translation of opening
balances was offset by the exchange loss on the movement
resulting from the equity injection into the US. Profit
retained, after accounting for dividends and currency
retranslation of opening balances and of movements,
increased by €603 million to €7 146 million; the goodwill
adjustment on disposal of Elizabeth Arden, included in the
result for the year, was a writeback from reserves. Thus
there was no net impact on profit retained.
Total capital and reserves increased to €8 169 million (1999:
€7 761 million) reflecting the above movements in retained
profits less the value of shares purchased in respect of
employee share option plans.
Cash flow
Cash flow from operations increased by €1 084 million to
€6 738 million driven by the impact of acquistions and by
an improvement in results before exceptional items and
amortisation together with further reductions in working
capital, primarily in stocks. This was partially offset by cash
flows in relation to exceptional charges and a €550 million
payment to settle share options and similar obligations in
Bestfoods consequent to the change of control.