2nd Aug 2007 07:02
Unilever PLC02 August 2007 SECOND QUARTER AND HALF YEAR RESULTS 2007 KEY FINANCIALS (unaudited) Second Quarter 2007 • million Half Year 2007---------------------------- ----------------------------Current Current Constant Current Current Constant rates rates rates rates rates rates Continuing operations:-------- ------- -------- -------- ------- -------- 10 526 3 % 5 % Turnover 20 054 1 % 5 %-------- ------- -------- -------- ------- -------- 1 443 1 % 3 % Operating profit 2 745 (4)% 0 %-------- ------- -------- -------- ------- -------- 1 412 4 % 6 % Pre-tax profit 2 744 3 % 6 %-------- ------- -------- -------- ------- -------- 1 153 14 % 17 % Net profit from continuing operations 2 205 10 % 13 %-------- ------- -------- -------- ------- -------- 1 207 16 % 18 % Net profit from total operations 2 281 8 % 11 %-------- ------- -------- -------- ------- ---------------- ------- -------- -------- ------- -------- 0.38 15 % 17 % EPS from continuing operations (Euros) 0.72 10 % 13 %-------- ------- -------- -------- ------- -------- 0.40 16 % 18 % EPS from total operations (Euros) 0.75 9 % 12 %-------- ------- -------- -------- ------- -------- Strong first half growth and underlying improvement in margins. Plans toaccelerate change. HIGHLIGHTS Financial Highlights of the Half Year • Underlying sales growth of 5.8%. • Operating margin of 13.7%, with an underlying improvement of 0.3 percentage points (before higher charges for restructuring and lower disposal profits). • Earnings per share from continuing operations up 10%, including good contributions from joint ventures and associates, reduced finance costs and a lower tax rate. Operational Highlights • Broad-based sales growth across all regions and categories. A step-up in innovation driving strong growth in priority areas of personal care, developing and emerging markets and Vitality. Sales ahead of a systems change in the US contribute 0.4 percentage points to first half growth. • Increased pricing to offset rising commodity costs. Sustained contribution from 'One Unilever' and other savings. Outlook for the year • Underlying sales growth now expected to be at the upper end of the 3-5% range, together with an underlying improvement in operating margin. Accelerating change • Plans to step up innovation, shaping the portfolio and margin improvement. • Planned disposals of over €2 billion of turnover including North American laundry. • Accelerated programme to generate savings of €1.5 billion. GROUP CHIEF EXECUTIVE COMMENT "Our first half performance reflects the success of the strategy initiated in2005 and keeps us on track towards achieving our objectives. We set out thisyear to sustain our growth momentum and deliver an underlying improvement inoperating margin. Despite rising commodity costs, we have started to see thebenefits of growth coming through in the bottom line. Our growth strategy, investment in core capabilities, new operating model and 'One Unilever' programme have all been integral to our improved performance. We are now announcing plans to build on this platform and accelerate ourperformance. Growth remains our number one priority: growth ahead of our markets, with bettermargin development, and greater resilience to internal and external changes.The steps we are taking now support this agenda by enhancing innovation, moreaggressively shaping our portfolio and driving still harder towards a moreefficient cost and asset base. I am pleased with the progress we have made to date, and the plans announcedtoday reassure me of further progress to 2010 and beyond." Patrick Cescau, Group Chief Executive 2 August 2007 ACCELERATING CHANGE Building on the progress made since 2005, the programme announced today includesthe following key features: Shaping the portfolio - Planned disposals of more than €2 billion of turnover, including North American laundry. - Disposals increase Unilever's growth rate by around 0.4 percentage points and are neutral to operating margin after removal of uncovered costs. Accelerating margin improvement - Simplifying the organisation by grouping countries in clusters and streamlining regional structures. - Reducing supply chain costs and assets, while improving on-shelf availability. - Reduction in annual cost base by around €1.5 billion by exit 2010 (compared with the 2006 base). This includes both new plans and the completion of 'One Unilever' and other existing initiatives. - Additional benefits in speed of decision making and innovation roll-out. - Restructuring costs to average around 2.5% of sales over the period 2007-2009. 2007 OUTLOOK - Underlying sales growth at the upper end of the 3-5% range. - Underlying improvement in operating margin. - Higher restructuring costs. Profits on disposals depend on timing and outcome of the disposal programme. Reported operating margin will reflect this. LONGER TERM TARGETS Current progress and existing plans keep Unilever on track to achieve growth andmargin objectives: - Underlying sales growth of 3-5% p.a. - Operating margin in excess of 15% by 2010 after charging 50-100 bps of ongoing restructuring. New plans announced today are expected to: - Strengthen the portfolio growth potential over time. - Enable operating margin target to be exceeded. Ungeared free cash flow (UFCF): - Against the base of €25-30 billion (2005-2010), disposals already made reduce UFCF by €1.2 billion. - Planned disposals would lead to a further reduction of €0.8 billion (proceeds of disposals are not included in UFCF). - Additional planned restructuring reduces UFCF by around €0.5 billion in the period, while enhancing the ongoing cash generating capacity of the business. ENQUIRIES Media: Media Relations Team Investors: Investor Relations TeamUK +44 20 7822 6805 [email protected] UK +44 20 7822 6830 [email protected] +31 10 217 4844 US +1 201 894 2615 [email protected]@unilever.comThere will be a web cast of the results presentation available at:www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/default.asp UNILEVER SECOND QUARTER AND HALF YEAR RESULTS 2007 In the following commentary we report underlying sales growth (USG) at constantexchange rates, excluding the effects of acquisitions and disposals. Turnoverincludes the impact of exchange rates and acquisitions and disposals. Unileveruses 'constant rate' and 'underlying' measures primarily for internalperformance analysis and targeting purposes. We also use the movements inUngeared Free Cash Flow and Return On Invested Capital to measure progressagainst our longer-term value creation goals. Unilever believes that suchmeasures provide additional information for shareholders on underlying businessperformance trends. Such measures are not defined under IFRS or US GAAP and arenot intended to be a substitute for GAAP measures of turnover, profit and cashflow. Further information about these measures is available on our website atwww.unilever.com/ourcompany/investorcentre. 1. SUMMARY OF BUSINESS PERFORMANCE FOR THE FIRST HALF YEAR Underlying sales grew by 5.8% in both the second quarter and the first halfyear, with volumes up by 4.6% in the six months and an increasing contributionfrom price. In the first half year, Europe grew by 2.6% with the UK, France and Germanystill subdued but improving, and good growth across much of the rest of theregion. The Americas were up by 4.9%, including growth of 4.7% in the US whichwas boosted by additional sales ahead of the implementation of a unified ITsystem at the end of the second quarter. This added about 0.4 percentage pointsto the overall Unilever growth rate in the first half. Asia Africa grew by 11%with continued broad-based growth across countries and categories. All our categories grew well in the first half year. The strongest performanceshave been in personal care, tea and household cleaning. Savoury, ice cream andlaundry also contributed strongly. Investment in advertising and promotions has been increased at the same rate assales growth and continues to be focused behind our priority categories andregions. Price increases and savings programmes combined with the benefit of highervolumes to more than compensate the impact of sharply higher commodity costs,thus driving an underlying improvement in margin. 2. FINANCIAL COMMENTARY 2.1 Turnover The underlying sales growth of 5.8% in both the second quarter and the firsthalf year was partly offset by the effects of disposals and exchange rates toleave turnover ahead by 2.6% in the second quarter and by 1.3% in the first halfyear. 2.2 Operating profit Operating profit increased by 0.6% in the second quarter. The operating marginat 13.7% was 0.3 percentage points lower than a year ago because of a higherlevel of restructuring charges and less profits on disposals. Before theseitems, the operating margin was 0.2 percentage points higher in the secondquarter. For the first half year, operating profit was 3.5% lower than last year. Theoperating margin at 13.7% again included higher restructuring and less profitson disposals. Before these the operating margin was 0.3 percentage pointshigher in the first half year. 2.3 Finance costs and tax Costs of financing net borrowings were 19% lower in both the second quarter andhalf year mainly thanks to a reduced level of net debt compared with theequivalent periods in 2006. The credit on pensions financing improved to €33 million for the second quarterand €67 million for the first half year reflecting an improved funding positionof our schemes and higher expected equity returns. The tax rates of 19% in the second quarter and 20% in the first half year werelower than last year reflecting the favourable settlement of tax audits and abetter country mix. We continue to expect a rate of around 24% for the fullyear 2007 and a longer-term rate of around 26%. 2.4 Joint Ventures, associates and other income from non-current investments Our share in net profit from joint ventures has nearly doubled to €30 millionfor the second quarter and €57 million for the first half year, mainly driven bythe continuing strong growth in the partnerships between Lipton and Pepsi forready-to-drink tea. In the second quarter, the combined share of net profit in associates and otherincome from non-current investments returned to a more normal level of €9million. The first half net profit of €82 million for associates andnon-current investments mainly reflected a gain in the first quarter in one ofour venture capital funds. 2.5 Net profit and earnings per share Net profit from continuing operations grew by 14% in the second quarter and by10% in the first half year. EPS on the same basis grew by 15% and by 10%. Discontinued operations for last year include frozen foods (sold in the fourthquarter of 2006) and in 2007 include the one-off recognition in the secondquarter of profit from future performance-based contributions from the sale ofUCI in 2005. 2.6 Share buy-backs By the end of June, we had bought back shares to a value of €0.7 billion as partof this year's planned €1.5 billion programme. 2.7 Cash flow Net cash flow from operating activities was €0.4 billion lower, mainly due to ahigher seasonal outflow of working capital and the timing of tax payments. Thehigher working capital outflow reflected a low opening position and a number offactors including the effect of sales ahead of the systems change in the US andincreased stocks of raw and packaging materials as physical covers againstcommodity cost increases. Financing activities showed an outflow of €0.5 billion. Dividends paid were up€0.2 billion. The share buy-back programme resulted in an increase in treasurystock of €0.4 billion, net of shares released for share incentive schemes.Other financing activities include compensation paid to former holders ofpreference shares of €0.2 billion. 2.8 Balance sheet The total trading working capital was at a similar level to the same time lastyear. Compared with the position at the start of the year, inventories are up€0.4 billion and trade receivables by €1.2 billion, mainly reflecting theirnormal seasonal increase. Trade payables and other current liabilities includeobligations to purchase shares in the current buy-back programme. Provisions are down by €0.3 billion due to expenditure on restructuring schemesand compensation paid to former holders of preference shares. Deferred tax assets decreased by €0.5 billion due to the improvement in thefunding position of the group's pension schemes. 2.9 Pensions The funding position of the group's main pension schemes has improved since thestart of the year with higher valuations of assets and reduced liabilities dueto higher discount rates, net of slightly increased inflation assumptions.Since the start of 2007 the changes have been incorporated in the balance sheeteach quarter. This left the net liability at the half year at €1.2 billion. The net surpluson funded schemes has risen from €0.3 billion to €1.9 billion, including schemesin deficit of €0.5 billion. Unfunded pensions liabilities have reduced by €0.3billion to €3.1 billion. 3. OPERATIONAL REVIEW FOR THE FIRST HALF YEAR 3.1 Europe Second Quarter 2007 Half Year 2007 ------------------------------------------- ------------------------------------------ % % % Underlying % Underlying 2007 2006 Change sales growth 2007 2006 Change sales growth ------------------------------------------- ------------------------------------------ 4 041 4 009 0.8 1.7 Turnover (• million) 7 585 7 480 1.4 2.6 ------ ------ ------ ------ -------------------- ------ ------ ------ ------ 13.8 13.4 Operating Margin (%) 14.1 15.0 Includes: (1.7) (1.6) - RDIs* (1.5) (0.4) ------ ------ ------ ------ -------------------- ------ ------ ------ ------ * Restructuring, business disposals and impairments Growth Underlying sales growth increased to 2.6% for the first half, entirely driven byvolume. Consumer demand is now healthier across the region and our business isbetter placed to take advantage of this through the 'One Unilever' programme andimproved innovation. We saw strong contributions from the Netherlands, Italy, Russia and Poland, aswell as good performances in a number of smaller countries. The UK, Germany andFrance produced mixed but overall improved performances. In the UK there was good growth in deodorants, household care, tea anddressings, but some share loss in fabric conditioners and hair care and lowersales in ice cream. This led to sales in line with last year overall. In Germany, we have gained share in most categories and sales were up in thefirst half year, particularly in ice cream and personal care. As expected, astrong first quarter, which included buy-in ahead of list price increases, wasfollowed by somewhat weaker sales in the second quarter. France grew modestly with strong sales in ice cream, savoury, deodorants andskin care but shares were soft overall. Innovation Most of our innovations are aimed at meeting consumers' needs for Vitality withproducts that help people feel good, look good and get more out of life. Astrong ice cream programme includes Frusi, a frozen yoghurt with wholegraincereals and real fruit pieces, 'Milk-time' tubs, high in calcium - following asimilar concept succesful in Asia, and Solero 'smoothies', a refreshing andlight fruit ice cream snack. Blue Band/Rama Idea!, a spread containingimportant nutrients for the brain, is in most countries across the region.Hellmann's light with citrus fibre technology offers the same taste but in aneven lighter form. Clear anti-dandruff shampoo has been launched in Russia at the same time aslaunches in Asia and Latin America. Meanwhile Dove continues to broaden itsappeal. The Dove pro-age range of skin, deodorants and shampoos isspecifically designed for the over 50's and the Dove range of 'glow' lotionswith subtle self tanners has been extended and is now in most countries. Axewas enhanced with new innovative packaging and a new global fragrance. 'Small and Mighty' concentrated liquid laundry detergents, which led the move tothe more efficient and environmentally friendly form in the US market have beenlaunched in six European countries. Profitability The operating margin, at 14.1% for the first half year, was 0.9 percentagepoints lower than a year ago, entirely due to a higher level of restructuring,disposal and impairment costs. Before these items, the operating margin was 0.2percentage points higher than last year. Savings programmes fully offset theimpact of higher commodity costs. 3.2 The Americas Second Quarter 2007 Half Year 2007 ------------------------------------------ ------------------------------------------ % % % Underlying % Underlying 2007 2006 Change sales growth 2007 2006 Change sales growth ------------------------------------------ ------------------------------------------ 3 520 3 478 1.2 6.5 Turnover (• million) 6 751 6 896 (2.1) 4.9 ------ ------ ------ ------ ------ ------ ------ ------ 14.9 16.0 Operating Margin (%) 14.6 15.3 Includes: ------ ------ ------ ------ (0.7) 0.4 - RDIs* (0.7) 0.0 ------ ------ ------ ------ * Restructuring, business disposals and impairments Growth Underlying sales grew by 4.9% in the first half year, with a strong contributionfrom the US at 4.7%, modest growth in Brazil and Mexico, and excellentperformances elsewhere in the region. Most of the increase is coming fromvolume, while pricing was up by 1.0%. Market growth in the US slowed a little during the half year. Our innovationprogramme has driven an increase in market share in personal care while ourshares are broadly stable across the other categories. Sales were boosted atthe end of the period by stocking up by customers ahead of the implementation ofunified IT system as part of the 'One Unilever' programme. This added about 1percentage point to growth in the Americas in the first half year and willreverse in the third quarter. In addition to personal care, new products inspreads, tea and frozen meals drove good growth in those categories. In icecream our sales were down, but we expect the actions that we have taken to leadto an improved performance in the second half year. Sales in Brazil grew only modestly. There has been increased competition intomato products and spreads. During the second quarter we announced thecreation of a joint venture with Perdigao to develop our heart healthmargarine, Becel, and the disposal of our local Brazilian margarine brands. Inlaundry, volumes are growing well and market shares are strong, followingreductions in pricing as we repositioned our brands against local competitors. In Mexico, the return to growth has been sustained in the first half year. Asexpected, second quarter growth was strong and compensated for a decline in thefirst quarter. This phasing was a reflection of the comparators in the previousyear. There were strong performances in much of the rest of the region, with Canada,Argentina, Andina and Central America doing particularly well. Innovation Food innovations clearly demonstrate the focus on Vitality.Cholesterol-lowering mini-drinks, already very successful in Europe, have nowbeen introduced to the US as Promise Activ SuperShots. In Latin America, Knorrhas been building its health credentials with new varieties of bouillons andimproved soups. Hellmann's 'real' campaign highlights its simple ingredients,naturally rich in Omega 3, and a cholesterol-free mayonnaise has just beenlaunched in the US. In ice cream, we have extended Breyers 'double churn' inthe US to fat-free, light and no sugar added versions, while innovations inLatin America address both Vitality and low income consumer opportunities. Innovation in personal care reflects the new more global approach. The newglobal mix of Clear anti-dandruff shampoo was launched in Brazil, while the Dovepro-age range of skin, deodorants and shampoos has been launched in theUS at the same time as in Europe. Axe has been given the same new look in theUS as elsewhere in the world and the new variant 'Vice' is now available acrossthe region. We have introduced concentrated liquid detergents in Argentina and Chilefollowing earlier moves in North America and Europe. Profitability The operating margin of 14.6% was 0.7 percentage points lower than a year agoreflecting a higher level of restructuring costs and lower profits on businessdisposals. Before these items the operating margin would have been in line withlast year. Price increases, cost savings and the benefit of volume leveragehave compensated for sharp increases in commodity costs. 3.3 Asia Africa Second Quarter 2007 Half Year 2007 ----------------------------------------- ----------------------------------------- % % % Underlying % Underlying 2007 2006 Change sales growth 2007 2006 Change sales growth ----------------------------------------- ----------------------------------------- 2 965 2 771 7.0 10.8 Turnover (• million) 5 718 5 417 5.6 11.3 ------ ------ ------ ------ ------ ------ ------ ------ 12.2 12.3 Operating Margin (%) 12.1 12.3 Includes: ------ ------ ------ ------ (0.5) (0.5) - RDIs* (0.6) 0.5 ------ ------ ------ ------ * Restructuring, business disposals and impairments Growth The strong start to the year has been sustained, with underlying sales growth of11.3% for the first half year. The region now represents close to 30% of oursales, delivering just over half of Unilever's total growth. Markets remainbuoyant in most countries. Our growth is broad-based by both geography andcategory and reflects a step-up in innovation, particularly in personal care. India grew well in all categories with a significant contribution from pricingas we take action to recover commodity cost increases. Highlights includedmarket share gain in laundry and good performances in tea and ice cream. China is a particular priority for growth and sales were up by 20% in the firsthalf year. Tea, savoury, ice cream and personal care categories were all wellahead. Indonesia and the Phillipines grew strongly, while Thailand has returned togrowth after a disappointing year in 2006. Japan and Australia both grewmodestly, with both countries benefiting from the innovation plan in personalcare and with tea and ice cream also growing well in Australia. A big increase in sales of ice cream in Turkey, broad-based growth in SouthAfrica, and personal care innovation in Arabia also made notable contributionsto the performance of the region. Innovation The innovation programme in the region reflects many of the global initiatives. Clear anti-dandruff shampoo has been launched for the first time in China,Arabia, Egypt, Pakistan and the Phillipines and we have added new products tothe range in Turkey. In Japan, we have launched Axe and brought out new products in the Doveself-foaming facial wash and Lux hair styling ranges. In China, Zonghuatoothpaste now includes a new 'Complete Care' variant. Pond's anti-ageing face care products have been introduced in several countries,while in Indonesia we have launched two new hair care products: Doveanti-dandruff and Clear scalp oil control. In Turkey, we have launched a cholesterol-lowering margarine with plant sterolsunder the Becel brand as well as Amaze snacks, which contain a range ofnutrients in a formulation designed to support the mental development ofschool-aged children, and follow a similar approach to the European Blue Band/Rama Idea! initative. Meanwhile, in Asia we have extended the 'Moo' range ofice creams containing super absorbent calcium for children's development. The rejuvenation of Knorr seasonings with premium ingredients, alreadysuccessful in Europe, has been launched in Arabia and will be taken elsewhere inthe region. Profitability The operating margin of 12.1% for the half year is 0.2 percentage points lowerthan last year after higher restructuring costs and lower profits in disposals.Before these items the margin was 0.9 percentage points higher than last year.This showed the benefit of higher volumes and savings programmes, together withstrong pricing action which helped to offset higher commodity costs.Investment in advertising and promotions has been raised in line with salesgrowth. SAFE HARBOUR STATEMENT: This announcement may contain forward-lookingstatements, including 'forward-looking statements' within the meaning of theUnited States Private Securities Litigation Reform Act of 1995. Words such as 'expects', 'anticipates', 'intends' or the negative of these terms and othersimilar expressions of future performance or results, including financialobjectives to 2010, and their negatives are intended to identify suchforward-looking statements. These forward-looking statements are based uponcurrent expectations and assumptions regarding anticipated developments andother factors affecting the Group. They are not historical facts, nor are theyguarantees of future performance. Because these forward-looking statementsinvolve risks and uncertainties, there are important factors that could causeactual results to differ materially from those expressed or implied by theseforward-looking statements, including, among others, competitive pricing andactivities, consumption levels, costs, the ability to maintain and manage keycustomer relationships and supply chain sources, currency values, interestrates, the ability to integrate acquisitions and complete planned divestitures,physical risks, environmental risks, the ability to manage regulatory, tax andlegal matters and resolve pending matters within current estimates, legislative,fiscal and regulatory developments, political, economic and social conditions inthe geographic markets where the Group operates and new or changed priorities ofthe Boards. Further details of potential risks and uncertainties affecting theGroup are described in the Group's filings with the London Stock Exchange,Euronext Amsterdam and the US Securities and Exchange Commission, including theAnnual Report on Form 20-F. These forward-looking statements speak only as ofthe date of this document. Except as required by any applicable law orregulation, the Group expressly disclaims any obligation or undertaking torelease publicly any updates or revisions to any forward-looking statementscontained herein to reflect any change in the Group's expectations with regardthereto or any change in events, conditions or circumstances on which any suchstatement is based. CONDENSED FINANCIAL STATEMENTS INCOME STATEMENT(unaudited) Second Quarter • million Half Year-------------------------------------- ----------------------------------------- 2007 2006 Increase/ 2007 2006 Increase/ (Decrease) (Decrease) Current Constant Current Constant rates rates rates rates Continuing operations: 10 526 10 258 3 % 5 % Turnover 20 054 19 793 1 % 5 % 1 443 1 435 1 % 3 % Operating profit 2 745 2 845 (4)% 0 % ----------------------------------------------------------------------------------------------------------------------- After (charging)/crediting: (120) (100) Restructuring (241) (161) 10 36 Business disposals and impairments 45 155----------------------------------------------------------------------------------------------------------------------- (70) (114) Net finance costs (140) (235) ----------------------------------------------------------------------------------------------------------------------- 44 (19) Finance income 71 68 (147) (108) Finance costs (278) (324) 33 13 Pensions and similar obligations 67 21----------------------------------------------------------------------------------------------------------------------- 30 16 Share in net profit/(loss) of joint 57 34 ventures 3 6 Share in net profit/(loss) of 51 6 associates 6 8 Other income from non-current 31 11 investments------ ------ ------ ------ 1 412 1 351 4 % 6 % Profit before taxation 2 744 2 661 3 % 6 % (259) (344) Taxation (539) (653)------ ------ ------ ------ 1 153 1 007 14 % 17 % Net profit from continuing operations 2 205 2 008 10 % 13 % 54 37 Net profit/(loss) from discontinued 76 95 operations------ ------ ------ ------ 1 207 1 044 16 % 18 % Net profit for the period 2 281 2 103 8 % 11 % ----------------------------------------------------------------------------------------------------------------------- Attributable to: 63 58 Minority interests 124 127 1 144 986 16 % 18 % Shareholders' equity 2 157 1 976 9 % 12 %----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- Combined earnings per share 0.38 0.33 15 % 17 % Continuing operations (Euros) 0.72 0.65 10 % 13 % 0.37 0.32 13 % 15 % Continuing operations - diluted 0.70 0.63 10 % 13 % (Euros) 0.02 0.01 Discontinued operations (Euros) 0.03 0.04 0.01 0.02 Discontinued operations - diluted 0.02 0.04 (Euros) 0.40 0.34 16 % 18 % Total operations (Euros) 0.75 0.69 9 % 12 % 0.38 0.34 14 % 16 % Total operations - diluted (Euros) 0.72 0.67 9 % 11 %---------------------------------------------------------------------------------------------------------------------- STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)• million Half Year ------------------------- 2007 2006 Fair value gains/(losses) on financial instruments net of tax 14 5Actuarial gains/(losses) on pension schemes net of tax 1 221 7Currency retranslation gains/(losses) net of tax 194 (368) ------ ------Net income/(expense) recognised directly in equity 1 429 (356) Net profit for the period 2 281 2 103 ------ ------ Total recognised income and expense for the period 3 710 1 747 ---------------------------------------------------------------------------------------------------------Attributable to: Minority interests 131 103 Shareholders' equity 3 579 1 644--------------------------------------------------------------------------------------------------------- MOVEMENTS IN EQUITY(unaudited)• million Half Year 2007 2006 -------------------------Equity at 1 January 11 672 8 765Total recognised income and expense for the period 3 710 1 747Dividends (1 363) (1 266)Movement in treasury stock (1 283) (14)Share-based payment credit 64 63Dividends paid to minority shareholders (97) (97)Currency retranslation gains/(losses) net of tax (1) (11)Other movements in equity 92 6 ------ ------Equity at the end of the period 12 794 9 193 BALANCE SHEET(unaudited)• million As at As at As at 30 June 31 December 1 July 2007 2006 2006 -----------------------------------Non-current assetsGoodwill and intangible assets 17 180 17 206 17 428Property, plant and equipment 6 249 6 276 6 139Pension asset for funded schemes in surplus 2 451 1 697 1 099Deferred tax assets 782 1 266 1 469Other non-current assets 1 215 1 126 1 068 ------ ------ ------Total non-current assets 27 877 27 571 27 203 Current assetsInventories 4 166 3 796 3 893Trade and other current receivables 5 437 4 254 4 994Current tax assets 254 125 98Other financial assets 292 273 345Cash and cash equivalents 1 518 1 039 1 590Non-current assets held for sale 38 14 488 ------ ------ ------Total current assets 11 705 9 501 11 408 Current liabilitiesFinancial liabilities (5 367) (4 458) (6 060)Trade payables and other current liabilities (8 833) (7 838) (7 486)Current tax liabilities (614) (579) (479)Provisions (658) (1 009) (497)Liabilities associated with non-current assets held for sale - - (232) ------ ------ ------Total current liabilities (15 472) (13 884) (14 754) ------ ------ ------Net current assets/(liabilities) (3 767) (4 383) (3 346) ------ ------ ------Total assets less current liabilities 24 110 23 188 23 857 Non-current liabilitiesFinancial liabilities due after one year 5 233 4 377 6 242Pensions and post-retirement healthcare benefits liabilities: Funded schemes in deficit 517 1 379 2 305 Unfunded schemes 3 097 3 398 3 931Provisions 899 826 783Deferred tax liabilities 1 088 1 003 951Other non-current liabilities 482 533 452 ------ ------ ------Total non-current liabilities 11 316 11 516 14 664 EquityShareholders' equity 12 245 11 230 8 788Minority interests 549 442 405 ------ ------ ------Total equity 12 794 11 672 9 193 ------ ------ ------Total capital employed 24 110 23 188 23 857 CASH FLOW STATEMENT(unaudited)• million Half Year --------------------- 2007 2006 Operating activities Cash flow from operating activities 1 661 1 894Income tax paid (600) (435) ------ ------Net cash flow from operating activities 1 061 1 459 Investing activitiesInterest received 62 49Net capital expenditure (444) (440)Acquisitions and disposals 72 186Other investing activities 161 45 ------ ------Net cash flow from/(used in) investing activities (149) (160) Financing activitiesDividends paid on ordinary share capital (1 412) (1 194)Interest and preference dividends paid (225) (278)Change in financial liabilities 1 905 49Movement on treasury stock (444) (14)Other financing activities (309) (72) ------ ------Net cash flow from/(used in) financing activities (485) (1 509) ------ ------Net increase/(decrease) in cash and cash equivalents 427 (210)Cash and cash equivalents at the beginning of the year 710 1 265Effect of foreign exchange rate changes 23 269 ------ ------Cash and cash equivalents at the end of period 1 160 1 324 Reconciliation of net profit to cash flow from operating activities(unaudited)• million Half Year 2007 2006 ------------------- Net profit 2 281 2 103Taxation 546 692Share of net profit of joint ventures/associates and other income from non-current (139) (51)investmentsNet finance costs 140 240 ------ ------ Operating profit (continuing and discontinued operations) 2 828 2 984Depreciation, amortisation and impairment 464 454Changes in working capital (1 313) (1 162)Pensions and similar provisions less payments (104) (172)Restructuring and other provisions less payments (93) (91)Elimination of (profits)/losses on disposals (182) (202)Non-cash charge for share-based compensation 69 67Other adjustments (8) 16 ------ ------Cash flow from operating activities 1 661 1 894 ANALYSIS OF NET DEBT(unaudited)• million As at As at 30 June 31 December 2007 2006 --------------------- Total financial liabilities (10 600) (8 835) ----------------------Financial liabilities due within one year (5 367) (4 458)Financial liabilities due after one year (5 233) (4 377) ----------------------Cash and cash equivalents as per balance sheet 1 518 1 039 ----------------------Cash and cash equivalents as per cash flow statement 1 160 710Add bank overdrafts deducted therein 358 329 ----------------------Financial assets 292 273 ----------------------Net debt (8 790) (7 523) GEOGRAPHICAL ANALYSIS(unaudited) Continuing operations - Second Quarter• million Europe Americas Asia Africa Total -----------------------------------------------Turnover 2006 4 009 3 478 2 771 10 258 2007 4 041 3 520 2 965 10 526Change 0.8 % 1.2 % 7.0 % 2.6 %Impact of: Exchange rates 0.3 % (4.7)% (3.0)% (2.3)% Acquisitions 0.0 % 0.1 % 0.0 % 0.0 % Disposals (1.2)% (0.4)% (0.4)% (0.7)%Underlying sales growth 1.7 % 6.5 % 10.8 % 5.8 %------------------------------------------------------------------------------------------------ Price (0.3)% 1.3 % 3.3 % 1.3 % Volume 2.0 % 5.2 % 7.2 % 4.5 %------------------------------------------------------------------------------------------------ Operating profit 2006 539 556 340 1 435 2007 557 523 363 1 443Change current rates 3.3 % (6.0)% 6.9 % 0.6 %Change constant rates 3.3 % (0.9)% 10.7 % 3.4 % Operating margin 2006 13.4 % 16.0 % 12.3 % 14.0 % 2007 13.8 % 14.9 % 12.2 % 13.7 %Includes restructuring, business disposals andimpairments 2006 (1.6)% 0.4 % (0.5)% (0.6)% 2007 (1.7)% (0.7)% (0.5)% (1.1)% Continuing operations - Half Year• million Europe Americas Asia Africa Total ----------------------------------------------Turnover 2006 7 480 6 896 5 417 19 793 2007 7 585 6 751 5 718 20 054Change 1.4 % (2.1)% 5.6 % 1.3 %Impact of: Exchange rates 0.4 % (6.3)% (4.7)% (3.4)% Acquisitions 0.1 % 0.1 % 0.1 % 0.1 % Disposals (1.6)% (0.5)% (0.5)% (0.9)%Underlying sales growth 2.6 % 4.9 % 11.3 % 5.8 %------------------------------------------------------------------------------------------------ Price (0.5)% 1.0 % 3.1 % 1.1 % Volume 3.1 % 3.8 % 7.9 % 4.6 %------------------------------------------------------------------------------------------------Operating profit 2006 1 121 1 056 668 2 845 2007 1 067 988 690 2 745Change current rates (4.9)% (6.4)% 3.3 % (3.5)%Change constant rates (5.0)% 0.1 % 9.1 % 0.2 % Operating margin 2006 15.0 % 15.3 % 12.3 % 14.4 % 2007 14.1 % 14.6 % 12.1 % 13.7 %Includes restructuring, business disposals andimpairments 2006 (0.4)% 0.0 % 0.5 % 0.0 % 2007 (1.5)% (0.7)% (0.6)% (1.0)% Operating profit of discontinued operations (excluding profit/loss on disposals)- Second Quarter• million Europe Americas Asia Africa Total ----------------------------------------------- 2006 51 - - 51 2007 - - - - Operating profit of discontinued operations (excluding profit/loss on disposals)- Half Year• million Europe Americas Asia Africa Total ------------------------------------------------- 2006 119 - - 119 2007 - - - - PRODUCT AREA ANALYSIS(unaudited) Continuing operations - Second Quarter• million Savoury, Ice cream Home care Home and dressings and Personal and Personal and spreads beverages Foods care other Care Total ---------------------------------------------------------------------------------Turnover 2006 3 338 2 362 5 700 2 764 1 794 4 558 10 258 2007 3 377 2 441 5 818 2 861 1 847 4 708 10 526Change 1.2 % 3.4 % 2.1 % 3.5 % 2.9 % 3.3 % 2.6 % Impact of: Exchange rates (2.1)% (2.2)% (2.2)% (2.9)% (2.3)% (2.6)% (2.3)% Acquisitions 0.1 % 0.0 % 0.1 % 0.0 % 0.0 % 0.0 % 0.0 % Disposals (0.5)% (0.8)% (0.6)% (0.9)% (0.7)% (0.8)% (0.7)% Underlying sales growth 3.8 % 6.6 % 4.9 % 7.5 % 6.1 % 6.9 % 5.8 % Operating profit 2006 463 383 846 451 138 589 1 435 2007 526 403 929 383 131 514 1 443Change current rates 13.4 % 5.1 % 9.6 % (15.0)% (4.1)% (12.5)% 0.6 %Change constant rates 16.5 % 7.6 % 12.4 % (12.4)% 0.0 % (9.5)% 3.4 % Operating margin 2006 13.9 % 16.3 % 14.9 % 16.2 % 7.6 % 12.8 % 14.0 % 2007 15.5 % 16.5 % 16.0 % 13.4 % 7.1 % 10.9 % 13.7 % Continuing operations - Half Year• million Savoury, Ice cream Home care Home and dressings and Personal and Personal and spreads beverages Foods care other Care Total ----------------------------------------------------------------------------------Turnover 2006 6 737 3 992 10 729 5 466 3 598 9 064 19 793 2007 6 752 4 055 10 807 5 610 3 637 9 247 20 054Change 0.2 % 1.6 % 0.7 % 2.6 % 1.1 % 2.0 % 1.3 % Impact of: Exchange rates (2.9)% (3.2)% (3.0)% (4.0)% (3.5)% (3.8)% (3.4)% Acquisitions 0.1 % 0.1 % 0.1 % 0.1 % 0.0 % 0.1 % 0.1 % Disposals (0.6)% (1.1)% (0.8)% (1.0)% (1.1)% (1.1)% (0.9)% Underlying sales growth 3.8 % 5.9 % 4.6 % 7.9 % 5.9 % 7.1 % 5.8 % Operating profit 2006 1 037 544 1 581 950 314 1 264 2 845 2007 983 517 1 500 925 320 1 245 2 745Change current rates (5.2)% (5.1)% (5.2)% (2.6)% 2.2 % (1.4)% (3.5)%Change constant rates (2.2)% (1.7)% (2.0)% 1.5 % 7.4 % 2.9 % 0.2 % Operating margin 2006 15.4 % 13.6 % 14.7 % 17.4 % 8.7 % 13.9 % 14.4 % 2007 14.6 % 12.7 % 13.9 % 16.5 % 8.8 % 13.5 % 13.7 % NOTES(unaudited) Basis of preparation The condensed interim financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as adopted by the EU. Thebasis of preparation is consistent with the year ended 31 December 2006 exceptthat: • Finance lease creditors and funding-related derivatives have been reclassified in the balance sheet in order to facilitate the presentation of net debt. Comparatives for 31 December 2006 and 1 July 2006 have been restated accordingly; and • Line items relating to borrowings in the balance sheet have been renamed to financial liabilities to align with the requirements of IFRS 7 'Financial Instruments - Disclosures' which Unilever has adopted as at 1 January 2007. The condensed interim financial statements, which comply with IAS 34, are shownat current exchange rates, while percentage year-on-year changes are shown atboth current and constant exchange rates to facilitate comparison. Discontinued operations The net cash flows attributable to the discontinued operations in respect ofoperating, investing and financingactivities for the first half year were •(3) million, €85million and €0 millionrespectively (2006: €63 million, •(2) million and •(2) million). Taxation The tax rate for the half year was 20% compared with 25% for the first half of2006. The tax rate is calculated by dividing the tax charge by pre-tax profitexcluding the contribution of joint ventures and associates. The tax charge forthe half year includes €85 million (2006: €76 million) relating to UnitedKingdom taxation. Issuances and repayments of debt and purchase of own shares On 29 May 2007, Unilever N.V. issued Floating Rate Notes with a value of €750million and a maturity date of 29 May 2009. On 19 June 2007, Unilever CapitalCorporation issued Floating Rate Extendible Notes with a value of US $500 million, having an initial maturity date of 11 July 2008 and a final maturity date of 11 June 2012. During the quarter we continued to purchase shares under the share buy-backprogramme announced in March 2007. As at the end of June, shares to the valueof €663 million had been purchased under these arrangements. Exchange rate conventions The income statement on page 9, the statement of recognised income and expenseand the movements in equity on page 10 and the cash flow statement on page 12are translated at rates current in each period. The balance sheet on page 11 and the analysis of net debt on page 12 aretranslated at period-end rates of exchange. Supplementary information in US dollars and sterling is available on our websiteat: www.unilever.com/ourcompany/investorcentre. The financial statements attached do not constitute the full financialstatements within the meaning of Section 240 of the UK Companies Act 1985. Fullaccounts for Unilever for the year ended 31 December 2006 have been delivered tothe Registrar of Companies. The auditors' report on these accounts wasunqualified and did not contain a statement under Section 237(2) or Section 237(3) of the UK Companies Act 1985. EARNINGS PER SHARE(unaudited) Combined earnings per share The earnings per share information given below, including the comparativeamounts for 2006, is expressed in terms of the nominal share values which haveapplied since 22 May 2006 following the split of NV shares and the consolidationof PLC shares which were approved at the 2006 AGMs. The combined earnings per share calculations are based on the average number ofshare units representing the combined ordinary shares of NV and PLC in issueduring the period, less the average number of shares held as treasury stock. In calculating diluted earnings per share, a number of adjustments are made tothe number of shares, principally the following: (i) conversion into PLCordinary shares in the year 2038 of shares in a group company under thearrangements for the variation of the Leverhulme Trust and (ii) the exercise ofshare options by employees. At 30 June 2007 the number of shares in issue was 2,876.6 million, down by 13.3million since the start of the year as a consequence of the share buy-backprogramme, net of the exercise of options. Earnings per share for total operations for the first half year 2007 2006 ----------------------Combined EPS Thousands of units ----------------------Average number of combined share units 2 887 050 2 881 632 • million ----------------------Net profit attributable to shareholders' equity 2 157 1 976 ----------------------Combined EPS (Euros) 0.75 0.69 ---------------------- Combined EPS - Diluted Thousands of unitsAdjusted average number of combined share units 2 984 504 2 966 729 ----------------------Combined EPS - diluted (Euros) 0.72 0.67 ---------------------- ----------------------Earnings per share in US Dollars and SterlingCombined EPS (Dollars) 0.99 0.84Combined EPS - diluted (Dollars) 0.96 0.82 ---------------------- ----------------------Combined EPS (Pounds) 0.50 0.47Combined EPS - diluted (Pounds) 0.49 0.46 ---------------------- THIRD QUARTER RESULTS The results for the third quarter 2007 and the announcement of interim dividendswill be published on 1 November 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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