8th Feb 2007 07:02
Unilever PLC08 February 2007 FOURTH QUARTER AND ANNUAL RESULTS 2006 KEY FINANCIALS (unaudited) Fourth Quarter 2006 • million Full Year 2006Current Current Constant Current Current Constantrates rates rates rates rates rates Continuing operations:9 727 0% 3% Turnover 39 642 3% 3%1 062 5% 10% Operating profit 5 408 7% 6%1 042 20% 25% Pre-tax profit 4 831 7% 7% 898 30% 35% Net profit from continuing operations 3 685 10% 10%2 100 185% 195% Net profit from total operations 5 015 26% 26% 0.29 31% 35% EPS from continuing operations (Euros) 1.19 11% 10% 0.71 196% 206% EPS from total operations (Euros) 1.65 27% 27% HIGHLIGHTS Focus on business priorities results in growth across all regions Change programme delivering improved operational effectiveness Full Year Financials • Underlying sales growth of 3.8%. • Operating margin of 13.6%, up from 13.2% in 2005. • Savings delivered ahead of plan, but commodity costs higher than expected. Further increase in advertising and promotions. • Net profit from continuing operations up 10%. Net profit from total operations up by 26% including a profit of €1.2 billion from the sale of European frozen foods businesses in the fourth quarter. • Strong ungeared free cash flow of €4.2 billion. • Proposed final dividend of €0.47 per NV ordinary share and 32.04p per PLC ordinary share, raising the total regular dividend per share by 6% for both NV and PLC. Additional 'one-off' dividend of €750 million paid in the fourth quarter as previously announced. Fourth Quarter Financials • Underlying sales growth of 3.4% against a strong comparator. • Operating margin of 10.9%, after charging €469 million of restructuring costs, partly offset by one-time gains of €266 million from changes in pension plans and healthcare plans. High investment in market research and development in support of another strong innovation programme for 2007. Operational Highlights of the Year • Focus on personal care, developing and emerging markets, and Vitality delivering strong growth and share gains in priority areas. • Growth in Europe of 1%. • Market competitiveness restored - market shares stable in aggregate. • Change programme delivering tangible results - better execution in customer management and marketing; good progress in the move to 'One Unilever' around the world; faster roll-out of high impact innovations; research and development capabilities being enhanced. GROUP CHIEF EXECUTIVE COMMENT The improved performance in 2006 shows that the wide-ranging changes made to thebusiness over the last two years are working. I am particularly pleased thatthis improvement is broad-based, with every region and category contributing.The new organisation and the implementation of 'One Unilever' are improvingUnilever's operational effectiveness; bringing faster decision making, betterlocal execution and enabling us to allocate resources more effectively acrossour portfolio. The work we have done in setting clear priorities and implementing change hasmade Unilever a stronger business, able to build on its local strengths andbetter exploit the power of being global. However, there is much more to bedone and there are many exciting opportunities ahead of us. In 2007 we will continue to focus on our growth priorities in order to buildsustainable advantage for our portfolio and a structural improvement in ourgrowth rate in the long term; and we intend to go further, faster and deeper inour drive to improve margins. I am confident that we are well on track to achieve our long-term targets. 2007 Outlook We expect the business and competitive environment in 2007 to be broadlyunchanged, with consumer demand remaining modest in Europe but robust elsewhere.Prospects for home and personal care input costs are more favourable than in2006 but there has been no let-up in the rise of foods commodity prices. Against this background, and with a strong innovation programme, we expect todeliver underlying sales growth in 2007 within our 3-5% longer term targetrange. Savings programmes are expected to drive an improvement in operatingmargin to over 13.6%, after charging restructuring costs of 0.5 to 1 percent ofsales. Strategy and long term financial targets At the heart of Unilever's strategy is a concentration of resources on areaswhere we have leading positions and on high growth spaces, especially inpersonal care, in developing and emerging markets and in Vitality. While thefocus is on developing the business organically, acquisitions and disposals alsohave a role to play in accelerating the portfolio development. To execute this strategy the business has been reorganised to simplify themanagement structure and to improve capabilities in marketing, customermanagement and research and development. The result is better allocation ofresources, better execution, faster decision-making and greater focus onefficiency. The new organisation, augmented by the successful 'One Unilever'project, allows us to leverage our scale both globally and locally. Unilever's long term ambition is to achieve top-third total shareholder returnand our targets reflect this. Over the period 2005 - 2010 we target ungearedfree cash flow of €25-30 billion. Disposals made in the past two years, with nosignificant acquisitions to date, have reduced the cash generation over theperiod by just over €1 billion. Return on invested capital is targeted toincrease over the 2004 base of 11%. We expect underlying sales growth of 3-5%and an operating margin in excess of 15% by 2010 after a normal level ofrestructuring of 0.5 to 1 percent of sales. We are lowering our longer termguidance for the tax rate from around 28% to around 26%. Patrick Cescau, Group Chief Executive 8 February 2007 ENQUIRIES Media: Contacts 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.com There will be a web cast of the results presentation available at:www.unilever.com/ourcompany/investorcentre/results/quarterlyresults/default.asp UNILEVER FOURTH QUARTER AND ANNUAL RESULTS 2006: PRELIMINARY STATEMENT 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 YEAR Underlying sales grew by 3.8% in the year and by 3.4% in the fourth quarteragainst a strong comparator. Each quarter of the year has seen growth in the3-5% range, in line with our markets and with market shares broadly maintainedin each region. Most of the growth continues to come from volume increases, butthe year saw a return to positive pricing (+0.9%). Our business in Europe returned to growth of 1% in 2006. We are now morecompetitive and have also benefited from a modest pick-up in consumer demand.There were encouraging improvements in the UK and Germany. The Netherlands grewwell, but France remains a difficult market for us. The Americas grew by 3.7%. Sales in the US were ahead by 2.4% with goodprogress in hair care and deodorants, but lower sales in laundry and ice cream.Our businesses in South America grew strongly, but Mexico was disappointing. Asia Africa continues to be a major driver of Unilever's growth across bothfoods and home and personal care with sales up 7.7% in the year. Almost allcountries contributed, with very strong performances from China, India andIndonesia. Savings programmes delivered slightly ahead of plan, but significantly highercosts held back profitability. Commodity costs rose more sharply than expectedand were up by over €600 million in the year. Productivity savings and a returnto positive pricing ensured gross margins were maintained at last year's levels,although this was below our expectations. Overhead costs were broadly in line with our plans for the year. The move to asingle operating company in each market, under the 'One Unilever' programme, isbringing simpler, lower-cost, structures. However, savings from the programmein the year were offset by cost inflation, especially in Asia Africa and plannedinvestments in infrastructure. Substantial further savings opportunities havebeen identified and as we go forward we expect to see overheads fall as apercentage of turnover. Investment in advertising and promotions was increased by nearly €300 million,mainly in advertising, and was carefully focused behind our priorities forgrowth. There were significant one-time gains reflecting changes in pension plans andhealthcare plans in the fourth quarter. These were offset by additionalrestructuring, largely in order to move quickly to eliminate overheads in Europefollowing the frozen foods disposal. The sale of European frozen foods businesses was completed in the quarter with anet profit of €1.2 billion. 2. FINANCIAL COMMENTARY 2.1 Turnover Turnover increased by 3.2% in the year. This included 3.8% of underlying salesgrowth and 0.3% from favourable currency movements, with disposals accountingfor the difference. In the fourth quarter, turnover was lower by 0.3%. Underlying sales grew by3.4%, while currency effects, particularly the weakening of the US dollar,reduced turnover by 3.0%, again with disposals accounting for the difference. 2.2 Operating profit Full Year Operating profit increased by 7% in the year. The operating margin for the year was 13.6%, up by 0.4 percentage points on2005. This was after charging restructuring, disposals and impairment costsequivalent to 1.3 percentage points of sales (compared with 1.5 percentagepoints last year). It also included €266 million of one-off gains from changesto US healthcare and UK pensions plans in the fourth quarter, equivalent to 0.7percentage points of sales. Before these items, and the profit on the US officesale in the second quarter of 2005, the operating margin would have been 0.3percentage points lower than last year. Gross margins have been held steady through the year, with supply chain savingsprogrammes, pricing action and a positive mix fully offsetting around €600million of higher input costs. Investment in advertising and promotions increased by nearly €300 million, from12.8% to 13.1% of sales. Fourth Quarter Operating profit increased by 5% in the fourth quarter. The operating margin was 10.9%, with a high charge for restructuring, disposalsand impairments, equivalent to 4.4 percent of sales, offset by the gains onhealthcare and pension plans equivalent to 2.7 percent of sales. Before theseitems the operating margin would have been 0.1 percentage point higher than lastyear. Advertising and promotion was 0.5 percentage points lower in the fourth quarterthan last year, reflecting the planned different phasing this year. Marketresearch and development costs were again high in the fourth quarter, in supportof another strong innovation programme for 2007. 2.3 Finance costs and tax Costs of financing net borrowings were 17% lower for the year than in 2005,benefiting from a lower overall level of net debt. Pensions financing, which was a net expense of €53 million in 2005, showed a netincome of €41 million in 2006, reflecting an improved asset base. As already announced, in the third quarter we took a provision of €300 millionrelating to preference shares, and this is included in financing costs. The tax rate for the year was 24%, compared with 26% last year, and includingthe benefits of a better country mix. The fourth quarter rate was unusually lowat 14% and included a substantial benefit from higher tax deductibility on theprovision taken in the third quarter in relation to preference shares. Weexpect a rate of around 24% again in 2007 and are lowering our longer termguidance from around 28% to around 26%. 2.4 Joint Ventures and Associates Share of net profit from joint ventures was ahead of last year due to continuedgrowth in the partnerships between Lipton and Pepsi for ready-to-drink tea. Share of net profit from associates included a profit from a placement of equityby one of our venture capital fund investments in the fourth quarter. 2.5 Net profit and Earnings per share For the full year, net profit from continuing operations grew by 10% and EPS onthe same basis was up by 11%. In the fourth quarter, net profit and EPS from continuing operations increasedby 30% and 31% respectively helped by the low tax rate in the quarter. Net profit including discontinued operations increased by 26% in the year, witha net profit of €1 170 million on the sale of frozen foods businesses in thefourth quarter. EPS on this basis increased by 27% for the year. 2.6 Dividends and share buy-backs The 2006 interim dividend was paid on 4 December 2006 at €0.23 per share for NVand 15.62p for PLC. In addition a one-off dividend of €750 million was paid atthe same time. The Boards will recommend to the Annual General Meetings finaldividends of €0.47 per ordinary share of Unilever N.V. and 32.04p per ordinaryshare of Unilever PLC. This will bring the total regular dividend, excludingthe additional one-off payment, to €0.70 per share for NV and 47.66p for PLC, anincrease of 6% in each case. We are planning to buy back €1.5 billion of shares in 2007. 2.7 Cash flow Cash from operating activities was €0.3 billion lower than in 2005 due tosignificantly higher contributions to pension schemes. There was a further improvement in the level of working capital, with a reduction of €0.1 billion, in addition to a €0.2 billion reduction last year. Income tax paid was substantially lower through a combination of tax relief onthe higher pension contributions, structural improvements in the tax rate andtiming differences. As a result, net cash flow from operating activities was€0.2 billion higher than last year. Net capital expenditure was €0.1 billion higher than a year ago as investmentwas stepped up behind growth priorities. Ungeared Free Cash Flow increased by €0.2 billion to €4.2 billion. Net debt reduced from €10.5 billion at the start of the year, to €7.5 billion atthe end of the year. This was driven by the combination of cash generated bythe business, proceeds of disposals (particularly of frozen foods businesses inthe fourth quarter), and the effect of the weaker US dollar. 2.8 Return on Invested Capital Return on invested capital increased from 12.5% in 2005 to 14.6% in 2006. Bothyears included significant profits on disposals of discontinued operations.Excluding these, the return on invested capital increased from 11.3% to 11.5%. 2.9 Balance sheet The two most significant changes to the shape of the balance sheet are thereduction in net funding deficit on pensions and post retirement healthcareschemes, and the reduction in net debt. Improvements in asset yields and increased contributions have caused pensionassets for funded schemes in surplus to rise by €0.7 billion. Net pensions andpost retirement liabilities have declined by €1.8 billion mainly due to thecombination of increases in discount rates and changes to scheme benefits,offset by higher life expectancies. There have been consequent movements indeferred tax balances. Cash generated by the business and from the sale of the frozen foods businesshas funded an additional one-off dividend of €0.75 billion in December and areduction in net borrowings. For most other items, changes in translation rates had a greater impact thanunderlying movements. Most notably, goodwill and intangible assets were reducedby €0.8 billion largely due to exchange rates. 2.10 Pensions and healthcare plans The overall funding shortfall before tax has significantly reduced from €5.6billion at the end of 2005 to €3.1 billion at the end of 2006. Within this, there is now an aggregate surplus of €0.3 billion on our funded plans, reflecting a combination of strong equity returns, increased contributions and higher real interest rates, partly offset by increased life expectancy assumptions. The value of our unfunded obligations has reduced from €4.2 billion to €3.4 billion due to the rise in interest rates, favourable exchange rate movements and changes to various retiree medical benefits. We made a number of changes in 2006. In particular, in the US retireehealthcare plan we introduced an annual cap on the benefits which eachparticipant can claim. In the UK we updated assumptions on pension commutationsand now reduce some deferred pensions if they are taken early, to align withmarket practice. 3. OPERATIONAL REVIEW 3.1 Full Year Performance - Europe Fourth Quarter 2006 Full Year 2006 2006 2005 % % 2006 2005 % % change Underlying change Underlying sales growth sales growth 3 615 3 618 (0.1) 0.1 Turnover (• million) 15 000 14 940 0.4 1.0 5.3 4.4 Operating Margin (%) 12.7 13.8 Includes: (7.3) (3.7) - RDIs* (2.2) (0.9) 3.3 - Gain on UK Pensions 0.8 * Restructuring, business disposals and impairments. Growth Much work has been done to make our business in Europe more competitive. Therehas been a single-minded drive to improve the value we offer to consumers andstronger innovation, more targeted at the core of our portfolio. At the sametime, the implementation of 'One Unilever', the building of capabilities andchanges in leadership are resulting in better execution. These changes, together with improved consumer demand, returned the region tomodest growth. Underlying sales grew by 1% in the year, entirely from volume,and by 0.1% in the fourth quarter, against a relatively strong comparator.Market shares were broadly stable, with gains in ice cream, soups, deodorantsand body-care but losses in laundry, hair care and tea. The UK, our largest European business, returned to growth in the year, with goodresults across most foods and personal care categories. Laundry sales declinedbut there were promising signs of progress in recent market shares with Persilregaining its position as the country's leading laundry brand. The Netherlands had a strong year as it benefited from going to market as asingle company being a pioneer of the 'One Unilever' programme. Highlights wererapid growth for Lipton, Dove, Rexona and Axe. France remained a difficultmarket for us and sales were lower in spreads, laundry and hair care. Newmanagement is in place and there was an improvement in the second half year.Sales in Germany held up better in 2006, and there was good growth in personalcare, but some turnover in Lipton ice tea was lost following changes in rulesfor bottle returns. Central and Eastern Europe continued to do well, driven by double-digit growthin Russia. Innovation Our 2006 innovation programme in foods has seen our brands embrace Vitalityacross all categories, with new products designed to deliver the health benefitsthat our consumers are seeking. Rama/BlueBand Idea!, a spread with addednutrients that are beneficial to children's mental development, was launched innine countries. The AdeS brand of healthy soya-based drinks has been broughtfrom Latin America to the UK as AdeZ. A range of Knorr bouillon cubes withselected natural ingredients and a better, richer taste has been rolled outacross the region and Vie 'one shot' fruit and vegetable drinks are nowavailable in ten countries. Meanwhile, the global 'Choices' programme is beingrolled out. The front-of-pack logo helps people identify products which meetinternational benchmarks for trans fat, saturated fat, salt and sugar content. Product launches in home and personal care with clear functional or emotionalbenefits are being rolled out rapidly across the region. A range of new Dovelaunches in several categories in 2006 included 'Summer Glow', a lightmoisturising body lotion with a unique combination of special Dove moisturisersand a hint of self tan. In household care, Domestos 5X with C-TAC kills germson first contact and continues to do so even after flushes, while the power ofCif has been applied to a series of power sprays. Profitability The operating margin, at 12.7%, was 1.1 percentage point lower than a year ago,with higher net costs for restructuring, disposals and impairments, and aone-time gain of €120 million in the fourth quarter of 2006 from changes to theUK pensions plan. Before these items, the operating margin would have been 0.6percentage points lower than in 2005. Margins in foods were lower than in 2005as we absorbed significant increases in commodity costs which were only partlycompensated by savings programmes. 3.2 Full Year Performance - The Americas Fourth Quarter 2006 Full Year 2006 2006 2005 % % 2006 2005 % % change Underlying change Underlying sales growth sales growth 3 448 3 521 (2.1) 4.3 Turnover (• million) 13 779 13 179 4.6 3.7 16.7 16.7 Operating Margin (%) 15.8 13.0 Includes: (3.4) (1.6) - RDIs* (1.0) (3.4) 4.2 - US Healthcare gain 1.0 * Restructuring, business disposals and impairments. Growth Underlying sales growth accelerated progressively through the quarters, with3.7% for the year, and a healthy balance of volume and price. Overall, we have maintained share in the US in markets which are growing ataround 3%. Underlying sales growth in the US was 2.4%, additionally reflectingtrade de-stocking in personal care in the first half of the year and in icecream in the second half. Degree, Dove and Axe, our three main deodorantsbrands, all gained share, while the launch of Sunsilk drove growth in hair care.In laundry we initiated the move to concentrated liquids, but have lostfurther share in conventional detergents. Bertolli frozen meals and Slim Fast gained share in the US as did Liptonready-to-drink tea, in our joint venture with Pepsi. Our share for the year asa whole was also up in ice cream, but sales were down. The category has beenheavily promoted in recent years but in 2006 the level of promotional intensityreduced. As a result, the trade bought less as they used up stocks. Brazil picked up well after a slow start with very good innovation-drivenperformances in hair, deodorants and laundry, with Omo shares at their highestlevel for many years. Sales in Mexico were lower for the year, affected by acombination of a decline in the traditional retail trade and local low pricedcompetition. In addition there were several operational issues which have beenaddressed and the business returned to growth in the fourth quarter. Elsewherethere was good growth in Argentina, Central America and Venezuela. Takentogether, sales in Latin America were ahead by 5.8% with home and personal carecontinuing to do well but more modest growth in foods in the face of tough localcompetition. Innovation Products introduced in the year in the US included Wishbone salad 'spritzers',with one calorie per spray, further development of the Bertolli premium frozenmeal range, and Lipton pyramid tea bags. Across the region, new Knorr soups andbouillons cater for local flavour and tastes and the highly successful AdeSnutritional drink has been extended with a 'light' variant, new fruit flavoursand the launch of Soymilk in Brazil and Mexico. We have strengthened our hair portfolio in the US with the launch of Sunsilk.This followed improvements to both the Suave and Dove hair care lines and thesale of the Aquanet and Finesse brands. After a good response to all Small &Mighty concentrated liquid detergents, we have applied the same technology tofabric conditioners to create Snuggle Exhilarations, a three-times moreconcentrated premium sub-range delivering superior fragrance. In Brazil, theOmo laundry brand has been further strengthened with a new top performanceproduct and 'baby' and 'foam control' variants. Profitability The operating margin, at 15.8%, was 2.8 percentage points higher than a yearago, with lower costs for restructuring, disposals and impairments, and aone-time benefit in the fourth quarter of 2006 of €146 million from changes toUS healthcare plans. In 2005 there was a gain on the sale of an office in thesecond quarter. Before these items the operating margin would have been 0.3percentage points lower than last year. Innovation-driven mix, pricing andproductivity offset higher commodity costs. Advertising and promotions wasincreased behind key launches. 3.3 Full Year Performance - Asia Africa Fourth Quarter 2006 Full Year 2006 2006 2005 % % 2006 2005 % % change Underlying change Underlying sales growth sales growth 2 664 2 618 1.8 7.0 Turnover (• million) 10 863 10 282 5.7 7.7 11.1 10.2 Operating Margin (%) 12.2 12.6 Includes: (1.6) (0.3) - RDIs* (0.3) - * Restructuring, business disposals and impairments. Growth Markets remained buoyant in most of the key countries, though there was aslow-down in consumer spending in Thailand during the year. Underlying sales growth of 7.7% was broadly based and our aggregate marketshares remained stable. India grew well across all major categories. A mix of global, regional andlocal brands are driving growth, notably Wheel and Surf Excel in laundry andClinic in hair care. A second year of excellent growth in China stemmed from acombination of market growth, better distribution and innovations behind globalbrands such as Omo, Lux, Ponds, and the local toothpaste brand, Zhonghua. Indonesia sustained good momentum, not only in the large home and personal carecategories, but also in foods, through strong performances in ice cream andsavoury. Thailand had a disappointing year through weak demand and intensecompetition, and a major programme of activities is under way to correct this. There was a much improved performance in Australia with share gains in a numberof categories. In Japan, the hair care market has seen another major brandlaunched by competition. Against this, Lux Super Rich, the leading brand,performed well, but Dove and mod's, our other two brands, lost share. Savoury, ice cream, laundry and household care were the main drivers of stronggrowth in Turkey, while sales in Arabia were well ahead in every category. In South Africa, aggressive price promotions by a local competitor have reducedour sales in laundry, but there was strong growth and share gains in foodscategories. Innovation Innovation is increasingly being driven globally and regionally, rather thanlocally. The new Sunsilk range has been introduced in most major markets and inlaundry the 'Dirt is Good' positioning is now in place across the region.Pond's age miracle cream, incorporating unique technology and designedspecifically for the needs of Asian skin has been launched in the Philippines,Indonesia, Thailand and China. Meanwhile the latest global Axe/Lynx fragrance,'Click' has been introduced in Australia and New Zealand. As in the rest of the world, the foods innovation programme picked up theVitality theme. Moo, a delicious vanilla and chocolate ice cream, with its highcalcium content and fun packaging and shape, is both a wholesome and appealingoption for kids. Healthy green tea innovations are being rolled outextensively, while in South Africa, Rama magarine now communicates the healthyoils in the product. At the same time, addressing the needs of lower incomeconsumers, low-unit priced Knorr bouillon cubes, already successful in LatinAmerica, were introduced to the region. Profitability The operating margin at 12.2% was 0.4 percentage points lower than a year ago.Before the impact of restructuring, disposals and impairments, the operatingmargin would have been in line with last year. The benefits to margin of strongvolume growth and savings programmes were fully offset by higher commodity costsand other cost inflation which could not be fully recovered in pricing. 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 and Accounts on Form 20-F. These forward-looking statements speakonly as of the date of this document. Except as required by any applicable lawor regulation, 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) Fourth Quarter • million Full Year2006 2005 Increase/ 2006 2005 Increase/ (Decrease) (Decrease) Current Constant Current Constant rates rates rates rates Continuing operations: 9 727 9 757 0% 3% Turnover 39 642 38 401 3% 3% 1 062 1 012 5% 10% Operating profit 5 408 5 074 7% 6% After (charging)/crediting: (469) (198) Restructuring (704) (328) 45 (4) Business disposals and impairments 196 (249) Gains on US healthcare and UK 266 - pensions 266 - (83) (152) Net finance costs (721) (613) 27 7 Finance income 128 129 (117) (146) Finance costs (590) (689) - - Preference shares provision (300) - 7 (13) Pensions and similar obligations 41 (53) Share in net profit/(loss) of joint 27 15 ventures 78 47 Share in net profit/(loss) of 32 (19) associates 36 (25) 4 9 Other income from non-current 30 33 investments 1 042 865 20% 25% Profit before taxation 4 831 4 516 7% 7% (144) (176) Taxation (1 146) (1 181) 898 689 30% 35% Net profit from continuing operations 3 685 3 335 10% 10% 1 202 47 Net profit/(loss) from discontinued 1 330 640 operations 2 100 736 185% 195% Net profit for the period 5 015 3 975 26% 26% Attributable to: 68 52 Minority interests 270 2092 032 684 197% 206% Shareholders' equity 4 745 3 766 26% 26% Combined earnings per share 0.29 0.22 31% 35% Continuing operations (Euros) 1.19 1.07 11% 10% 0.28 0.21 30% 34% Continuing operations - diluted 1.15 1.04 11% 10% (Euros) 0.42 0.01 Discontinued operations (Euros) 0.46 0.22 0.41 0.02 Discontinued operations - diluted 0.45 0.21 (Euros) 0.71 0.23 196% 206% Total operations (Euros) 1.65 1.29 27% 27% 0.69 0.23 196% 205% Total operations - diluted (Euros) 1.60 1.25 27% 27% STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)• million Full Year 2006 2005 Fair value gains/(losses) on financial instruments net of tax (758) 346Actuarial gains/(losses) on pension schemes net of tax 853 (49)Currency retranslation gains/(losses) net of tax 444 181 Net income/(expense) recognised directly in equity 539 478 Net profit for the period 5 015 3 975 Total recognised income and expense for the period 5 554 4 453 Attributable to: Minority interests 242 249 Shareholders' equity 5 312 4 204 MOVEMENTS IN EQUITY(unaudited)• million Full Year 2006 2005 Equity at 1 January 8 765 6 515Total recognised income and expense for the period 5 554 4 453Dividends (2 684) (1 867)Conversion of preference shares - 930Movements in treasury stock 118 (1 262)Share-based payment credit 111 186Dividends paid to minority shareholders (184) (217)Currency retranslation gains/(losses) net of tax (6) 13Other movements in equity (2) 14Equity at the end of the period 11 672 8 765 BALANCE SHEET(unaudited)• million As at As at 31 December 31 December 2006 2005 Non-current assetsGoodwill and intangible assets 17 206 18 055Property, plant and equipment 6 276 6 492Pension asset for funded schemes in surplus 1 697 1 036Deferred tax assets 1 266 1 703Other non-current assets 1 126 1 072Total non-current assets 27 571 28 358 Current assetsInventories 3 796 4 107Trade and other current receivables 4 290 4 830Current tax assets 125 124Other financial assets 237 335Cash and cash equivalents 1 039 1 529Non-current assets held for sale 14 217Total current assets 9 501 11 142 Current liabilitiesBorrowings due within one year (4 362) (5 942)Trade payables and other current liabilities (7 934) (8 228)Current tax liabilities (579) (554)Provisions (1 009) (644)Liabilities associated with non-current assets held for sale - (26)Total current liabilities (13 884) (15 394)Net current assets/(liabilities) (4 383) (4 252)Total assets less current liabilities 23 188 24 106 Non-current liabilitiesBorrowings due after one year 4 239 6 457Pensions and post-retirement healthcare benefits liabilities: Funded schemes in deficit 1 379 2 415 Unfunded schemes 3 398 4 202Provisions 826 732Deferred tax liabilities 1 003 933Other non-current liabilities 671 602Total non-current liabilities 11 516 15 341 EquityShareholders' equity 11 230 8 361Minority interests 442 404Total equity 11 672 8 765Total capital employed 23 188 24 106 CASH FLOW STATEMENT(unaudited)• million Full Year 2006 2005Operating activitiesCash flow from operating activities 5 574 5 924Income tax paid (1 063) (1 571)Net cash flow from operating activities 4 511 4 353 Investing activitiesInterest received 125 130Net capital expenditure (934) (813)Acquisitions and disposals 1 777 784Other investing activities 187 414Net cash flow from/(used in) investing activities 1 155 515 Financing activitiesDividends paid on ordinary share capital (2 602) (1 804)Interest and preference dividends paid (605) (643)Change in borrowings and finance leases (3 281) (880)Movement on treasury stock 98 (1 276)Other financing activities (182) (218)Net cash flow from/(used in) financing activities (6 572) (4 821) Net increase/(decrease) in cash and cash equivalents (906) 47 Cash and cash equivalents at the beginning of the year 1 265 1 406 Effect of foreign exchange rate changes 351 (188) Cash and cash equivalents at the end of period 710 1 265 RECONCILIATION OF NET PROFIT TO CASH FLOW FROM OPERATING ACTIVITIES(unaudited)• million Full Year 2006 2005Net profit 5 015 3 975Taxation 1 332 1 301Share of net profit of joint ventures/associates and other income from non-current (145) (55)investmentsNet finance costs 725 618Depreciation, amortisation and impairment 982 1 274Changes in working capital 87 193Pensions and similar provisions less payments (1 038) (532)Restructuring and other provisions less payments 107 (230)Elimination of (profits)/losses on disposals (1 620) (789)Non-cash charge for share-based compensation 120 192Other adjustments 9 (23)Cash flow from operating activities 5 574 5 924 ANALYSIS OF NET DEBT(unaudited)• million As at As at 31 December 31 December 2006 2005 Total borrowings (8 601) (12 399)Borrowings due within one year (4 362) (5 942)Borrowings due after one year (4 239) (6 457)Cash and cash equivalents as per balance sheet 1 039 1 529Cash and cash equivalents as per cash flow statement 710 1 265Add bank overdrafts deducted therein 329 265Less cash and cash equivalents in assets/liabilities held for sale - (1)Other financial assets 237 335Derivatives and finance leases included in other receivables and other liabilities (198) 33Net debt (7 523) (10 502) GEOGRAPHICAL ANALYSIS(unaudited) Continuing operations - Fourth Quarter• million Europe Americas Asia Africa Total Turnover 2005 3 618 3 521 2 618 9 757 2006 3 615 3 448 2 664 9 727Change (0.1)% (2.1)% 1.8% (0.3)%Impact of: Exchange rates 0.5% (5.4)% (4.5)% (3.0)% Acquisitions 0.3% 0.1% 0.0% 0.1% Disposals (0.9)% (0.8)% (0.4)% (0.7)%Underlying sales growth 0.1% 4.3% 7.0% 3.4% Price 0.1% 1.3% 2.4% 1.2% Volume 0.0% 2.9% 4.5% 2.2% Operating profit 2005 158 587 267 1 012 2006 191 575 296 1 062Change current rates 20.6% (1.9)% 11.0% 5.0%Change constant rates 19.6% 3.0% 17.7% 9.6% Operating margin 2005 4.4% 16.7% 10.2% 10.4% 2006 5.3% 16.7% 11.1% 10.9%Includes restructuring, business disposals andimpairments, and Q4 2006 gains on UK pensions andUS healthcare plans 2005 (3.7)% (1.6)% (0.3)% (2.0)% 2006 (4.0)% 0.8% (1.6)% (1.6)% Continuing operations - Full Year• million Europe Americas Asia Africa Total Turnover 2005 14 940 13 179 10 282 38 401 2006 15 000 13 779 10 863 39 642Change 0.4% 4.6% 5.7% 3.2%Impact of: Exchange rates 0.2% 1.4% (1.1)% 0.3% Acquisitions 0.1% 0.1% 0.0% 0.1% Disposals (0.9)% (0.7)% (0.8)% (0.8)%Underlying sales growth 1.0% 3.7% 7.7% 3.8% Price (0.1)% 1.4% 1.8% 0.9% Volume 1.1% 2.3% 5.8% 2.8% Operating profit 2005 2 064 1 719 1 291 5 074 2006 1 903 2 178 1 327 5 408Change current rates (7.7)% 26.7% 2.8% 6.6%Change constant rates (7.9)% 25.0% 4.0% 6.3% Operating margin 2005 13.8% 13.0% 12.6% 13.2% 2006 12.7% 15.8% 12.2% 13.6%Includes restructuring, business disposals andimpairments, and Q4 2006 gains on UK pensions andUS healthcare plans 2005 (0.9)% (3.4)% 0.0% (1.5)% 2006 (1.4)% 0.0% (0.3)% (0.6)% Operating profit of discontinued operations - Full Year• million Europe Americas Asia Africa Total 2005 228 20 - 248 2006 170 - - 170 PRODUCT AREA ANALYSIS(unaudited) Continuing operations - Fourth Quarter • million Savoury, Ice cream Foods Personal Home care Home and Total dressings and care and Personal and spreads beverages other Care Turnover 2005 3 732 1 461 5 193 2 752 1 812 4 564 9 757 2006 3 709 1 416 5 125 2 786 1 816 4 602 9 727Change (0.7)% (3.0)% (1.3)% 1.2% 0.2% 0.8% (0.3)%Impact of: Exchange rates (2.2)% (4.2)% (2.8)% (3.6)% (2.9)% (3.3)% (3.0)% Acquisitions 0.1% 0.2% 0.1% 0.2% 0.0% 0.2% 0.1% Disposals (0.7)% (0.8)% (0.7)% (1.0)% (0.5)% (0.8)% (0.7)%Underlying sales growth 2.2% 1.9% 2.1% 5.8% 3.7% 4.9% 3.4% Operating profit 2005 438 20 458 447 107 554 1 012 2006 499 (37) 462 471 129 600 1 062Change current rates 14.0% (283.5)% 1.2% 5.2% 20.5% 8.2% 5.0%Change constant rates 17.6% (278.6)% 5.3% 9.4% 28.6% 13.1% 9.6% Operating margin 2005 11.7% 1.4% 8.8% 16.2% 6.0% 12.2% 10.4% 2006 13.5% (2.6)% 9.0% 16.9% 7.0% 13.0% 10.9% Continuing operations - Full Year • million Savoury, Ice cream Foods Personal Home care Home and Total dressings and care and Personal and spreads beverages other Care Turnover 2005 13 557 7 332 20 889 10 485 7 027 17 512 38 401 2006 13 767 7 578 21 345 11 122 7 175 18 297 39 642Change 1.5% 3.4% 2.2% 6.1% 2.1% 4.5% 3.2%Impact of: Exchange rates 0.2% 0.0% 0.1% 0.5% 0.3% 0.4% 0.3% Acquisitions 0.0% 0.1% 0.0% 0.1% 0.0% 0.1% 0.1% Disposals (1.2)% (0.4)% (0.9)% (0.9)% (0.5)% (0.7)% (0.8)%Underlying sales growth 2.6% 3.7% 2.9% 6.3% 2.3% 4.7% 3.8% Operating profit 2005 2 026 609 2 635 1 793 646 2 439 5 074 2006 1 993 900 2 893 1 913 602 2 515 5 408Change current rates (1.6)% 48.0% 9.8% 6.7% (6.8)% 3.1% 6.6%Change constant rates (1.5)% 48.5% 10.1% 5.6% (7.4)% 2.2% 6.3% Operating margin 2005 14.9% 8.3% 12.6% 17.1% 9.2% 13.9% 13.2% 2006 14.5% 11.9% 13.6% 17.2% 8.4% 13.7% 13.6% 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. Theseare the same accounting policies as those used for preparation of the AnnualReport and Accounts for the year ended 31 December 2005 except that thepresentation of secondary segments has been changed following the disposal ofthe majority of the European frozen foods business and we now presentrestructuring, business disposals and impairments on the face of the incomestatement. 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 Following the announcement of the disposal of the majority of our Europeanfrozen foods businesses, the results for these businesses have been presented inour income statement as discontinued operations, in line with the requirementsof IFRS 5. The amount reported for the year represents the profits and lossesarising on these operations during the period to the date of disposal, togetherwith the profit arising on disposal. On 3 November 2006, Unilever completed thesale of these businesses to Permira. Net assets disposed of amounted to €314million; after deducting tax and other adjustments from the gross proceeds of €1725 million, this resulted in a profit after tax of €1 170 million. Discontinued operations for 2005 also include the results of our prestigefragrances business, Unilever Cosmetics International (UCI), up until itsdisposal in July of that year, together with the profit arising on disposal. The net cash flows attributable to the discontinued operations in respect ofoperating, investing and financing activities for the year were €79 million, €1618 million and •(1) million respectively (2005: €62 million, €621 million and •(4) million). Taxation The charge for the year to date includes €177 million (2005: €123 million)relating to United Kingdom taxation. Issuances and repayments of debt and purchase of own shares There was a repayment of 5.125% notes during the quarter of US $500 million. Preference shares provision On 8 November 2006 Unilever N.V. (NV) announced that it had agreed a settlementwith the main parties in the legal dispute over the €0.05 (NLG 0.10) cumulativepreference shares. The terms of the agreement are that NV will pay an amount of€1.38 plus interest of €0.16 compensation per preference share held at thebeginning of 24 March 2004, the day on which NV announced its intention toconvert the preference shares into NV ordinary shares. The settlement includesall former preference shareholders that had initiated the inquiry procedure. On20 January 2007 NV announced that the settlement offer will be extended to allthose other former preference shareholders who held preference shares at thebeginning of 24 March 2004. As announced at Q3, we have provided €300 millionto cover the agreement. Exchange rate conventions The income statement on page 10, the statement of recognised income and expenseand the movements in equity on page 11 and the cash flow statement on page 13are translated at average rates for each period. The balance sheet on page 12 and the analysis of net debt on page 13 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 2005 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. DIVIDENDS The dividend information given below, including the comparative amounts for2005, is expressed in terms of the nominal share values which have applied since22 May 2006 following the split of NV shares and the consolidation of PLC shareswhich were approved at the 2006 AGMs. The Boards have resolved to recommend to the Annual General Meetings for NV andPLC, to be held on 15 May 2007 and 16 May 2007 respectively, the declaration offinal dividends in respect of 2006 on the Ordinary capitals at the followingrates which are equivalent in value at the rate of exchange applied in terms ofthe Equalisation Agreement between the two companies: Unilever N.V. €0.47 per ordinary share* (2005: €0.44). Together with the interim dividendalready paid, this brings the total of NV's regular interim and final dividendsfor 2006 to €0.70 per ordinary share (2005: €0.66). In addition, a one-offdividend of €0.26 per ordinary share was paid in December 2006. *Unilever N.V. ordinary shares and Unilever N.V. depositary receipts forordinary shares. Unilever PLC 32.04p per ordinary share (2005: 30.09p). Together with the interim dividendalready paid, this brings the total of PLC's regular interim and final dividendsfor 2006 to 47.66p per ordinary share (2005: 45.13p). In addition, a one-offdividend of 17.66p was paid in December 2006. The NV final dividend will be paid on 21 June 2007, to shareholders registeredat close of business on 21 May 2007, and will go ex-dividend on 17 May 2007. The PLC final dividend will be paid on 21 June 2007, to shareholders registeredat close of business on 25 May 2007, and will go ex-dividend on 23 May 2007. Dividend on New York shares of NV US dollar checks for the final dividend on the New York Shares of €0.16 nominalamount after deduction of Netherlands withholding tax at the appropriate rate,converted at the euro/dollar European Central Bank rate of exchange on 15 May2007 will be mailed on 20 June 2007 to holders of record at the close ofbusiness on 21 May 2007. If converted at the euro/dollar rate of exchange on 7February 2007, the NV final dividend would be US $0.6103 per New York share(2005 final dividend: US $0.5613 actual payment) before deduction of Netherlandswithholding tax. With the interim dividend in respect of 2006 of US $0.2934 atthe actual euro/dollar conversion rate, already paid, this would result in atotal for regular interim and final dividends in respect of 2006 of US $0.9037per New York Share (2005: US $0.8251 actual payment). In addition, a one-offdividend of US $0.3316 was paid in December 2006. Dividend on American Depositary Receipts of PLC US Dollar checks for the final dividend on the American Depositary Receipts inPLC converted at the sterling/dollar rate of exchange current in London on 16May 2007 will be mailed on 20 June 2007 to holders of record at the close ofbusiness on 25 May 2007. If converted at the sterling/dollar rate of exchangeon 7 February 2007, the PLC final dividend would be US $0.6317 per AmericanDepositary Receipt in PLC (2005 final dividend: US $0.5583 actual payment).With the interim dividend in respect of 2006 of US $0.2983 at the actualsterling/dollar conversion rate, already paid, this would result in a total forregular interim and final dividends in respect of 2006 of US $0.9300 perAmerican Depositary Receipt in PLC (2005: US $0.8238 actual payment). Inaddition, a one-off dividend of US $0.3372 was paid in December 2006. EARNINGS PER SHARE(unaudited) Combined earnings per share The earnings per share information given below, including the comparativeamounts for 2005, 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; (ii) conversion of the€0.05 NV preference shares (up to the point of conversion); and (iii) theexercise of share options by employees. Earnings per share for total operations for the full year 2006 2005 Combined EPS Thousands of unitsAverage number of combined share units 2 883 258 2 912 970 • millionNet profit attributable to shareholders' equity 4 745 3 766 Combined EPS (Euros) 1.65 1.29 Combined EPS - Diluted Thousands of unitsAdjusted average number of combined share units 2 972 468 3 006 909 • millionAdjusted net profit attributable to shareholders' equity 4 745 3 769 Combined EPS - diluted (Euros) 1.60 1.25 Earnings per share in US Dollars and SterlingCombined EPS (Dollars) 2.06 1.61Combined EPS - diluted (Dollars) 2.00 1.56 Combined EPS (Pounds) 1.12 0.88Combined EPS - diluted (Pounds) 1.09 0.86 DATES The results for the first quarter 2007 will be published on 3 May 2007. ENQUIRIES: UNILEVER PRESS OFFICE+44 (0) 20 7822 6805/6010Internet: www.unilever.comE-mail: [email protected] 8 February 2007 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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