TIDMULVR TIDM0NXM
RNS Number : 0928V
Unilever PLC
19 July 2018
2018 FIRST HALF YEAR RESULTS
A solid, all-round performance with some challenging markets
Performance highlights (unaudited)
Underlying performance GAAP measures
vs 2017 vs 2017
First Half
Underlying sales growth
(USG)(a) 2.5% Turnover EUR26.4bn (5.0)%
Turnover excluding
USG excluding spreads(a)(b) 2.7% spreads(b) EUR24.9bn (4.8)%
Underlying operating
margin 18.6% 80bps Operating margin 17.0% (50)bps
Underlying earnings
per share EUR1.22 7.8% Earnings per share EUR1.11 1.6%
Second Quarter
Turnover excluding
USG excluding spreads(a)(b) 1.9% spreads(b) EUR13.0bn (4.5)%
======== ========= =================== ========== =========
Quarterly dividend payable in September EUR0.3872 per share
2018
================================================== ==========================================
(a) These amounts do not include any price growth in Venezuela.
See pages 6-7 on non-GAAP measures for further details.
(b) Unilever announced its agreement to sell the spreads
business on 15 December 2017, and has completed the sale on 2 July
2018.
First half highlights
-- Underlying sales growth excluding spreads 2.7% with volume 2.5% and price 0.2%
-- Truckers' strike in Brazil adversely affected USG by around 60bps
-- Emerging markets underlying sales growth 4.1% with volume 3.3% and price 0.8%
-- Turnover decreased 5.0% including an adverse translational currency impact of (8.9)%
-- Underlying operating margin up 80bps driven by increased
gross margin and further reduced overheads
-- Underlying earnings per share up 7.8% after a currency impact
of (10.8)%, constant underlying EPS up 18.6%
Paul Polman: Chief Executive Officer statement
"Our first half results show solid volume-driven growth across
all three divisions, which was achieved despite the effects of an
extended truckers' strike in Brazil, one of our biggest markets.
Growth was driven by strong innovation and continued expansion in
future growth markets. The margin improvement was of high quality
and in line with our strategy, driven by further gross margin
progression, increased investment behind our brands and strong
savings delivery.
The Connected 4 Growth change programme, which makes our
organisation more agile and resilient, is driving the step-up in
our innovation and savings programmes. As part of the continued
portfolio evolution, we have completed the exit from spreads on 2
July 2018. In anticipation of the disposal proceeds, we have
already returned EUR3 billion as part of our EUR6 billion share
buyback programme that will complete before the end of the year. We
have also signed an agreement to acquire a 75% stake in the Italian
personal care business Equilibra.
Our expectation for the full year is unchanged. We expect
underlying sales growth in the 3% - 5% range, an improvement in
underlying operating margin and strong cash flow. We remain on
track for our 2020 goals."
19 July 2018
FIRST HALF OPERATIONAL REVIEW: DIVISIONS
Underlying performance GAAP measures
vs 2017 vs 2017
First Half
Underlying sales growth
(USG)(a) 2.5% Turnover EUR26.4bn (5.0)%
Turnover excluding
USG excluding spreads(a)(b) 2.7% spreads(b) EUR24.9bn (4.8)%
Underlying operating
margin 18.6% 80bps Operating margin 17.0% (50)bps
Underlying earnings
per share EUR1.22 7.8% Earnings per share EUR1.11 1.6%
Second Quarter
Turnover excluding
USG excluding spreads(a)(b) 1.9% spreads(b) EUR13.0bn (4.5)%
======== ========= =================== ========== =========
Quarterly dividend payable in September EUR0.3872 per share
2018
================================================== ==========================================
* Wherever referenced in this announcement, USG and UPG for both
the half year and the second quarter do not include any price
growth in Venezuela. See pages 6-7 on non-GAAP measures for further
details.
We have previously announced agreements to sell our spreads
business. The disposals were completed on 2 July 2018. The table
below provides information on our second quarter and half year 2018
performance excluding sales related to spreads.
Second Quarter 2018 First Half 2018
(unaudited) Turnover USG UVG UPG Turnover USG UVG UPG
=============================== ========= ==== ==== ====
EURbn % % % EURbn % % %
=============================== ========= ==== ==== ==== ========= ==== ==== ====
Unilever excluding spreads 13.0 1.9 1.5 0.3 24.9 2.7 2.5 0.2
=============================== ========= ==== ==== ==== ========= ==== ==== ====
Foods & Refreshment excluding
spreads 5.4 2.0 1.2 0.9 9.7 2.4 1.8 0.6
========= ==== ==== ==== ========= ==== ==== ====
Our markets: Overall market conditions remained challenging in
the first half. We saw an encouraging improvement in volumes and a
lower contribution from price growth, particularly in emerging
markets. The truckers' strike in Brazil presented a significant
headwind in the second quarter which we expect to partially reverse
in the second half of the year.
Unilever overall performance: Underlying sales growth excluding
spreads was 2.7% which was almost entirely driven by volume growth
across all divisions. USG including spreads was 2.5%. Growth was
adversely affected by the situation in Brazil which reduced USG in
the first half by around 60bps and 120bps in the second quarter.
Emerging markets grew by 4.1% with an improved contribution from
volume of 3.3%, while price growth was modest in a lower inflation
environment. Sales in developed markets were slightly up as volume
growth was mostly offset by continued competitive price deflation
in Europe and North America. Turnover decreased 5.0% to EUR26.4
billion, which included an adverse currency impact of (8.9)% and
1.9% from acquisitions net of disposals.
Gross margin improved by 60bps to 43.7%, primarily driven by
positive mix and our '5-S' savings programme. Brand and marketing
investment was up 20bps. Compared to the prior year, we stepped up
the absolute level of brand and marketing investment, focused on
media investment while continuing to drive efficiencies in
advertising production. Due to a further reduction in the
underlying cost base, overheads reduced by 40bps. As a result,
underlying operating margin improved by 80bps to 18.6%. Operating
margin was down 50bps to 17.0%, mainly due to a gain on disposal of
the AdeS soy beverage business in the prior year.
Beauty & Personal Care
Beauty & Personal Care continued to grow the core with
innovations behind global and local brands, while expanding the
portfolio in attractive segments and channels. This led to an
improvement in volumes in the first half. Growth in the second
quarter however was negatively affected by the truckers' strike in
Brazil as well as challenging competitive conditions in Europe and
South East Asia. Against this backdrop, skin care performed well,
driven by Vaseline's successful market development campaign, Pond's
and Lakme in India. The prestige business demonstrated broad-based
first half growth of more than 6%. The 2017 acquisitions Carver,
Sundial Brands and Schmidt's all grew strongly and will contribute
to underlying sales growth from twelve months after completion.
Skin cleansing delivered good growth helped by new premium formats.
These included aerosol mousse which delivers an improved sensorial
experience and was launched across five brands in Europe, and the
launch of Dove body polish in North America which exfoliates and
nourishes at the same time. In hair care, volume-led growth was
driven by Sunsilk and Dove, helped by their successful expansion
into natural propositions with on-trend ingredients. Deodorants
returned to good volume growth, helped by innovations such as
Rexona antibacterial and invisible, which offers both odour and
stain protection, while price growth was negative as we stepped up
promotional activity. Sales in oral care were slightly down
primarily due to competitive challenges in some developed
markets.
Underlying operating margin was up 70bps driven by higher gross
margin and lower overheads.
Home Care
Home Care increased its strong emerging market footprint with
its proven market development model and benefit-led innovations.
Growth was broad-based with the exception of Latin America. Fabric
solutions continued to successfully expand its core brands in
fast-growing segments, such as natural products with the premium
Omo Naturals range in China. We are also uptrading consumers into
the liquids segment in emerging markets, for example with Surf
Excel Matics in India, and into premium formats in developed
markets, such as the launch of Persil triple chamber liquid
capsules in the United Kingdom. Comfort delivered double-digit
growth, helped by the roll-out of the ultra-concentrated Comfort
Perfume Deluxe from South East Asia to the United Kingdom and the
extension of the sensitive Comfort Pure range into India. Home and
hygiene remained a strong growth contributor to Home Care. This was
helped by continued double-digit growth of Domestos toilet blocks
and bleaches, the launch of Sunlight dishwash in Indonesia with
improved formulation that allows 5x faster degreasing, and the
launch of Cif premium sprays, with specialist care and cleaning, in
23 European markets. Our water purification business performed
well, while in air purification Blueair declined sharply in China,
the brand's biggest market.
Underlying operating margin improved by 60bps mainly reflecting
strong savings delivery and an improvement in overheads.
Foods & Refreshment
The division continued to build its presence in emerging markets
and sustained a strong performance in food service channels. At the
same time, we continued to modernise the portfolio by responding to
consumer needs in fast-growing segments such as organic, natural,
vegan, health and wellness. Ice cream delivered strong growth
driven by innovations behind our premium brands. These included the
launch of Magnum Core & Praliné variant, which provides our
most indulgent ice cream experience yet, and the roll-out of the
successful Ben & Jerry's non-dairy platform from the United
States into Europe. The new Kinder(R) ice cream, launched after
partnering with an Italian confectioner, had a very promising start
in Germany and France. In leaf tea, volume-led growth continued to
be driven by strong innovations in India, where we extended our
market leadership. We continued to transform our portfolio in
Europe and North America, but growth was held back by a decline of
our black tea business. The recent acquisitions Pukka Herbs organic
herbal tea and TAZO had a good first half in Europe and North
America. In foods, Knorr grew ahead of the Group average, primarily
driven by cooking products in emerging markets, as well as
innovations in on-trend segments in developed markets. These
included the launch of Knorr mini meals in Europe, snack products
with natural and nutritious ingredients, and Knorr Selects side
dishes in the United States. Hellmann's continued to communicate
strong natural claims and in the United States launched Hellmann's
Real Ketchup, made with six ingredients and sweetened only with
honey. However, sales in dressings were slightly down in an intense
promotional environment.
Underlying operating margin was up 100bps as a result of
strongly improved gross margin and lower overheads.
FIRST HALF OPERATIONAL REVIEW: GEOGRAPHICAL AREA
Second Quarter 2018 First Half 2018
Turnover USG UVG UPG Turnover USG UVG UPG Change
in underlying
operating
(unaudited) margin
========================== ========= ===== ===== ======= ===============
EURbn % % % EURbn % % % bps
========================== ========= ====== ====== ====== ========= ===== ===== ======= ===============
Unilever 13.7 1.6 1.2 0.3 26.4 2.5 2.2 0.2 80
========================== ========= ====== ====== ====== ========= ===== ===== ======= ===============
Asia/AMET/RUB 6.0 6.3 5.6 0.7 11.7 6.1 5.1 0.9 140
The Americas 4.1 (3.8) (4.1) 0.3 8.1 (0.8) (0.5) (0.3) (40)
Europe 3.6 0.4 0.7 (0.3) 6.6 0.2 0.7 (0.5) 140
========================== ========= ====== ====== ====== ========= ===== ===== ======= ===============
Second Quarter 2018 First Half 2018
(unaudited) Turnover USG UVG UPG Turnover USG UVG UPG
======================== ======== ===== ====== =======
EURbn % % % EURbn % % %
======================== ======== ====== ====== ====== ======== ===== ====== =======
Developed markets 6.0 (0.6) (0.3) (0.3) 11.1 0.2 0.8 (0.6)
Emerging markets 7.7 3.1 2.3 0.8 15.3 4.1 3.3 0.8
======================== ======== ====== ====== ====== ======== ===== ====== =======
North America 2.4 (1.2) (1.3) 0.1 4.6 0.7 1.0 (0.3)
Latin America 1.7 (6.9) (7.5) 0.6 3.5 (2.6) (2.1) (0.4)
======================== ======== ====== ====== ====== ======== ===== ====== =======
The table below provides information on our second quarter 2018
and first half 2018 performance excluding sales related to
spreads.
Second Quarter 2018 First Half 2018
(unaudited) Turnover USG UVG UPG Turnover USG UVG UPG
============================= ========= ==== ==== ======
EURbn % % % EURbn % % %
========= ====== ====== ====== ========= ==== ==== ======
Developed markets excluding
spreads 5.5 (0.3) - (0.3) 10.2 0.5 1.1 (0.6)
============================= ========= ====== ====== ====== ========= ==== ==== ======
Europe excluding spreads 3.2 1.1 1.4 (0.3) 5.8 0.6 1.1 (0.5)
============================= ========= ====== ====== ====== ========= ==== ==== ======
North America excluding
spreads 2.3 (1.0) (1.1) 0.1 4.3 0.9 1.1 (0.2)
========= ====== ====== ====== ========= ==== ==== ======
Asia/AMET/RUB
Strong underlying sales growth was driven by volume gains with
price growth progressively decreasing over the last four quarters.
India continued to demonstrate strong volume growth and muted
pricing as the benefits of the Goods and Services Tax were passed
on to consumers from July 2017. In China, growth was driven by
strong e-commerce sales but partially offset by a sharp decline in
air purification. Turkey delivered double-digit growth across all
divisions, while sales growth in Indonesia, South Africa and Russia
remained weak reflecting challenging market and competitive
conditions.
Underlying operating margin was up 140bps, driven by increased
gross margin and lower overheads.
The Americas
In North America, market growth was weak, particularly in
traditional channels. This resulted in modest underlying sales
growth. Home Care, skin cleansing and skin care performed well
driven by innovations that included the new brand launch Love,
Beauty & Planet. Ice cream had a softer start to the season and
the competitive intensity remained particularly high in
dressings.
After improved volume growth in the first quarter, underlying
sales in Latin America were severely impacted by the strike in
Brazil and the weakening of economic conditions in Argentina. To
offset the significant recent currency devaluation, we have taken
price increases in Argentina and we expect to recover around half
of the lost sales in Brazil over the second half. Mexico
demonstrated broad-based growth and quickly extended the recently
acquired Quala hair care brands into other personal care
categories.
Underlying operating margin declined by 40bps, including the
impact of strike-related volume deleverage in Latin America.
Europe
Markets in Europe remained tough with a challenging retail
environment and price deflation in several countries. Against this
backdrop, Europe delivered modest underlying sales growth. Ice
cream performed strongly despite lapping a good season in the prior
year, skin cleansing and fabric sensations continued with good
volume-led growth. High promotional intensity weighed on the sales
growth in deodorants. Central and Eastern Europe, Germany and the
United Kingdom delivered a step-up in growth while sales in France
continued to decline.
Underlying operating margin improved by 140bps primarily due to
increased gross margin and lower overheads.
ADDITIONAL COMMENTARY ON THE FINANCIAL STATEMENTS - FIRST HALF
2018
Finance costs and tax
Net finance costs decreased by EUR67 million to EUR223 million
in the first half of 2018. Despite an increase in net debt, the
cost of financing net borrowings at EUR208 million was EUR33
million lower than in the prior year. Included within this was a
EUR48 million reduction in other interest costs, largely reflecting
one-off provision releases related to indirect taxes. The impact of
the higher levels of borrowing was offset by benefits from lower
rates, resulting in the average interest rate on net debt falling
to 1.9% from 3.1% in 2017. Pensions financing was a charge of EUR15
million compared to EUR49 million in the prior year.
The effective tax rate was 25.9% versus 28.9% in the same period
last year. The change was mainly driven by the tax impact of
acquisition and disposal related costs in 2018 and the AdeS
disposal in 2017. The effective tax rate on underlying profit was
26.5% compared to 27.9% in the prior year.
Joint ventures, associates and other income from non-current
investments
Net profit from joint ventures and associates contributed EUR83
million compared with EUR75 million in the first half of 2017
mainly due to growth in profits from our joint venture in
Portugal.
Earnings per share
Underlying earnings per share in the first half increased by
7.8% to EUR1.22 after an adverse currency impact of 10.8%. Constant
underlying earnings per share increased by 18.6% primarily driven
by underlying sales growth, improved underlying operating margin,
and a lower share count as a result of the share buyback programme.
These underlying measures exclude the post-tax impact of business
disposals, acquisition and disposal-related costs, restructuring
costs, impairments, one-off items within operating profit and any
other significant unusual items within net profit but not operating
profit.
Diluted earnings per share for the first half was up 1.6% at
EUR1.11. In the prior year, we recorded a gain on disposal of
EUR0.3 billion for the AdeS soy beverage business in Latin America.
In 2018, a credit to acquisition and disposal related costs of
EUR277 million was taken as a result of the early settlement of the
contingent consideration for Blueair. This credit more than offset
an impairment charge of EUR208 million related to a Blueair
intangible asset following the sharp decline in China.
Free cash flow
Free cash flow in the first half of 2018, which included the
usual seasonal increase in inventory and receivables, improved by
EUR0.4 billion to EUR1.8 billion. The step-up was primarily driven
by lower cash contributions to our pension funds.
Net debt
Closing net debt increased to EUR24.8 billion compared with
EUR20.3 billion as at 31 December 2017, mainly reflecting the share
buybacks of EUR2.5 billion we have undertaken until 30 June 2018,
EUR1.1 billion from acquisitions and disposals as well as an
adverse currency impact of EUR0.4 billion. Total financial
liabilities amounted to EUR29.6 billion compared to EUR24.4 billion
at the year-end. Cash and other current financial assets increased
by EUR0.8 billion to EUR4.9 billion compared to 31 December
2017.
Pensions
The pension liability net of assets reduced to EUR0.3 billion at
the end of June 2018 versus EUR0.6 billion as at 31 December 2017.
The decrease primarily reflects the impact of lower liabilities due
to higher discount rates.
Finance and liquidity
In first half year 2018, we announced the issuance of the
following bonds:
-- 5 February 2018: Triple-tranche EUR2.0 billion bond,
comprising of fixed rate notes of EUR500 million at 0.5% due August
2023, EUR700 million at 1.125% due February 2027, and EUR800
million at 1.625% due February 2033
-- 19 March 2018: Quadruple-tranche $2.1 billion bond,
comprising of fixed rate notes of $400 million at 2.75% due March
2021, $550 million at 3.125% due March 2023, $350 million at 3.375%
due March 2025, $800 million at 3.5% due March 2028
In June 2018, EUR750 million floating rate notes matured and
were repaid.
Share buyback programme
On 19 April 2018, Unilever announced the intention to start a
share buyback programme of up to EUR6 billion. As at 30 June 2018,
the Group has repurchased 53,040,783 ordinary shares as part of the
first tranche of the programme. Total consideration for the
repurchase of shares was EUR2.5 billion which is recorded within
other reserves. The first tranche of EUR3 billion will complete on
19 July 2018.
We intend to start the remaining share buyback, for an aggregate
market value equivalent to EUR3 billion, on 20 July 2018.
Spreads business
On 2 July 2018, Unilever announced it has completed the sale of
its Spreads business to KKR and has completed the sale of its
Spreads business in Southern Africa to Remgro and the related
acquisition of Remgro's interest in Unilever South Africa.
Simplification of Unilever's dual-headed legal structure
Further to the announcement of the proposal by the Board on 15
March 2018, Unilever plans to hold general meetings for Unilever NV
and for Unilever PLC shareholders on 25 and 26 October 2018
respectively. Documentation will be made available to shareholders
at least six weeks ahead of the shareholder meetings.
COMPETITION INVESTIGATIONS
As previously disclosed, along with other consumer products
companies and retail customers, Unilever is involved in a number of
ongoing investigations by national competition authorities,
including those within Italy and South Africa. These proceedings
and investigations are at various stages and concern a variety of
product markets. Where appropriate, provisions are made and
contingent liabilities disclosed in relation to such matters.
Ongoing compliance with competition laws is of key importance to
Unilever. It is Unilever's policy to co-operate fully with
competition authorities whenever questions or issues arise. In
addition, the Group continues to reinforce and enhance its internal
competition law training and compliance programme on an ongoing
basis.
NON-GAAP MEASURES
Certain discussions and analyses set out in this announcement
include measures which are not defined by generally accepted
accounting principles (GAAP) such as IFRS. We believe this
information, along with comparable GAAP measures, is useful to
investors because it provides a basis for measuring our operating
performance, ability to retire debt and invest in new business
opportunities. Our management uses these financial measures, along
with the most directly comparable GAAP financial measures, in
evaluating our operating performance and value creation. Non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, financial information presented in compliance
with GAAP. Wherever appropriate and practical, we provide
reconciliations to relevant GAAP measures.
Unilever uses 'constant rate', and 'underlying' measures
primarily for internal performance analysis and targeting purposes.
We present certain items, percentages and movements, using constant
exchange rates, which exclude the impact of fluctuations in foreign
currency exchange rates. We calculate constant currency values by
translating both the current and the prior period local currency
amounts using the prior period average exchange rates into
euro.
The table below shows exchange rate movements in our key
markets.
First half First half
average rate average rate
in 2018 in 2017
================================
Brazilian Real (EUR1 = BRL) 4.125 3.429
Chinese Yuan (EUR1 = CNY) 7.715 7.433
Indian Rupee (EUR1 = INR) 79.478 71.111
Indonesia Rupiah (EUR1 = IDR) 16663 14409
UK Pound Sterling (EUR1 = GBP) 0.880 0.860
US Dollar (EUR1 = US $) 1.212 1.081
============= =============
Underlying sales growth (USG)
Underlying Sales Growth or "USG" refers to the increase in
turnover for the period, excluding any change in turnover resulting
from acquisitions, disposals and changes in currency. The impact of
acquisitions and disposals is excluded from USG for a period of 12
calendar months from the applicable closing date. Turnover from
acquired brands that are launched in countries where they were not
previously sold is included in USG as such turnover is more
attributable to our existing sales and distribution network than
the acquisition itself. We believe this measure provides valuable
additional information on the underlying sales performance of the
business and is a key measure used internally. Also excluded is the
impact of price growth from countries where consumer price
inflation (CPI) rates have escalated to extreme levels of 1,000% or
more, and where management forecast that such a situation will
continue for an extended period of time; at least one year. This
happens very rarely but in the fourth quarter of 2017 the actual
and forecast inflation rates for Venezuela triggered such an
exclusion. This treatment will be kept under regular review, but
will not be revised until the fourth quarter of 2018 at the
earliest. The reconciliation of changes in the GAAP measure
turnover to USG is provided in notes 3 and 4.
Underlying price growth (UPG)
Underlying price growth or "UPG" is part of USG, and means, for
the applicable period, the increase in turnover attributable to
changes in prices during the period. UPG therefore excludes the
impact to USG due to (1) the volume of products sold; and (2) the
composition of products sold during the period. In determining
changes in price we exclude the impact of price growth in Venezuela
as explained under USG above. The measures and the related turnover
GAAP measure are set out in notes 3 and 4.
Underlying volume growth (UVG)
Underlying Volume Growth or "UVG" is part of USG and means, for
the applicable period, the increase in turnover in such period
calculated as the sum of (1) the increase in turnover attributable
to the volume of products sold; and (2) the increase in turnover
attributable to the composition of products sold during such
period. UVG therefore excludes any impact to USG due to changes in
prices. The measures and the related turnover GAAP measure are set
out in notes 3 and 4.
Free cash flow (FCF)
Within the Unilever Group, free cash flow (FCF) is defined as
cash flow from operating activities, less income taxes paid, net
capital expenditures and net interest payments and preference
dividends paid. It does not represent residual cash flows entirely
available for discretionary purposes; for example, the repayment of
principal amounts borrowed is not deducted from FCF. Free cash flow
reflects an additional way of viewing our liquidity that we believe
is useful to investors because it represents cash flows that could
be used for distribution of dividends, repayment of debt or to fund
our strategic initiatives, including acquisitions, if any.
The reconciliation of net profit to FCF is as follows:
EUR million First Half
(unaudited) 2018 2017
================================================== =======
Net profit 3,237 3,317
Taxation 1,102 1,315
Share of net profit of joint ventures/associates
and other income
from non-current investments (88) (75)
Net finance costs 223 290
======= =======
Operating profit 4,474 4,847
======= =======
Depreciation, amortisation and impairment 983 763
Changes in working capital (1,697) (1,436)
Pensions and similar obligations less payments (76) (794)
Provisions less payments (61) 68
Elimination of (profits)/losses on disposals 32 (299)
Non-cash charge for share-based compensation 115 158
Other adjustments (283) -
======= =======
Cash flow from operating activities 3,487 3,307
======= =======
Income tax paid (1,081) (1,122)
Net capital expenditure (495) (672)
Net interest and preference dividends paid (146) (148)
======= =======
Free cash flow 1,765 1,365
======= =======
Total net cash flow (used in)/from investing
activities (1,441) (460)
Total net cash flow (used in)/from financing
activities (395) 138
======= =======
Non-underlying items
Several non-GAAP measures are adjusted to exclude items defined
as non-underlying due to their nature and/or frequency of
occurrence.
-- Non-underlying items within operating profit are: gains or
losses on business disposals, acquisition and disposal related
costs, restructuring costs, impairments and other significant
one-off items within operating profit
-- Non-underlying items not in operating profit but within net
profit are: significant and unusual items in net finance cost,
share of profit/(loss) of joint ventures and associates and
taxation
-- Non-underlying items are both non-underlying items within
operating profit and those non-underlying items not in operating
profit but within net profit
Underlying operating profit (UOP) and underlying operating
margin (UOM)
Underlying operating profit and underlying operating margin mean
operating profit and operating margin before the impact of
non-underlying items within operating profit. Underlying operating
profit represents our measure of segment profit or loss as it is
the primary measure used for making decisions about allocating
resources and assessing performance of the segments. The
reconciliation of operating profit to underlying operating profit
is as follows:
EUR million First Half
(unaudited) 2018 2017
============================================== ======
Operating profit 4,474 4,847
Non-underlying items within operating profit
(see note 2) 438 79
====== ======
Underlying operating profit 4,912 4,926
====== ======
Turnover 26,352 27,725
Operating margin (%) 17.0% 17.5%
Underlying operating margin (%) 18.6% 17.8%
====== ======
Underlying earnings per share (EPS)
Underlying earnings per share (underlying EPS) is calculated as
underlying profit attributable to shareholders' equity divided by
the diluted combined average number of share units. In calculating
underlying profit attributable to shareholders' equity, net profit
attributable to shareholders' equity is adjusted to eliminate the
post-tax impact of non-underlying items. This measure reflects the
underlying earnings for each share unit of the Group. Refer to note
6 on page19 for reconciliation of net profit attributable to
shareholders' equity to underlying profit attributable to
shareholders equity.
Underlying effective tax rate
The underlying effective tax rate is calculated by dividing
taxation excluding the tax impact of non-underlying items by profit
before tax excluding the impact of non-underlying items and share
of net profit/(loss) of joint ventures and associates. This measure
reflects the underlying tax rate in relation to profit before tax
excluding non-underlying items before tax and share of net
profit/(loss) of joint ventures and associates. Tax impact on
non-underlying items within operating profit is the sum of the tax
on each non-underlying item, based on the applicable country tax
rates and tax treatment.
The reconciliation of taxation to taxation before non-underlying
items is as follows:
EUR million First Half
(unaudited) 2018 2017
================================================== =======
Taxation 1,102 1,315
Tax impact of non-underlying items:
Non-underlying items within operating profit(a) 170 (21)
Non-underlying items not in operating profit (29) -
but within net profit(a)
======= ========
Taxation before tax impact of non-underlying
items 1,243 1,294
======= ========
Profit before taxation 4,339 4,632
Non-underlying items within operating profit
before tax(a) 438 79
Share of net profit /loss of joint ventures and
associates (83) (75)
======= ========
Profit before tax excluding non-underlying items
before tax and share of net profit/(loss) of
joint ventures and associates 4,694 4,636
======= ========
Underlying effective tax rate 26.5% 27.9%
======= ========
(a) Refer to note 2 for further details on these items.
Constant underlying EPS
Constant underlying earnings per share (constant underlying EPS)
is calculated as underlying profit attributable to shareholders'
equity at constant exchange rates and excluding the impact of both
translational hedges and 2018 price inflation in Venezuela divided
by the diluted combined average number of share units. This measure
reflects the underlying earnings for each share unit of the Group
in constant exchange rates.
The reconciliation of underlying earnings attributable to
shareholders' equity to constant underlying earnings attributable
to shareholders' equity and the calculation of constant underlying
EPS is as follows:
EUR million First Half
(unaudited) 2018 2017
=========================================================== =======
Underlying profit attributable to shareholders'
equity (see note 6) 3,326 3,206
Impact of translation from current to constant exchange
rates and translational hedges 228 (68)
Impact of Venezuela price inflation(a) 28 -
======= ==========
Constant underlying earnings attributable to shareholders'
equity 3,582 3,138
=========================================================== ======= ==========
Diluted combined average number of share units (millions
of units) 2,737.3 2,845.7
=========================================================== ======= ==========
Constant underlying EPS (EUR) 1.31 1.10(b)(c)
======= ==========
(a) See pages 6 to 7 for further details.
(b) Represents the first half 2017 underlying EPS as adjusted
for translational hedges and the impact of translation of earnings
using annual average 2017 exchange rates.
(c) From 2018, in our reporting of growth in constant underlying
EPS, we translate the prior period using an annual average exchange
rate rather than monthly averages. This change has been made to
align with the prior period constant exchange rate used for
calculating USG. The impact of this is a reduction of EUR0.04 per
share in the first half 2017 constant underlying EPS.
Net debt
Net debt is defined as the excess of total financial
liabilities, excluding trade payables and other current
liabilities, over cash, cash equivalents and other current
financial assets, excluding trade and other current receivables. It
is a measure that provides valuable additional information on the
summary presentation of the Group's net financial liabilities and
is a measure in common use elsewhere.
The reconciliation of total financial liabilities to net debt is
as follows:
EUR million As at As at As at
30 June 31 December 30 June
2018 2017 2017
(unaudited)
=============================================
Total financial liabilities (29,621) (24,430) (19,633)
Current financial liabilities (10,670) (7,968) (5,081)
Non-current financial liabilities (18,951) (16,462) (14,552)
Cash and cash equivalents as per balance
sheet 3,991 3,317 5,016
Cash and cash equivalents as per cash flow
statement 3,811 3,169 4,860
Add bank overdrafts deducted therein 189 167 156
Less cash and cash equivalents classified
as held for sale (9) (19) -
Other current financial assets 866 770 825
======== ============= ========
Net debt (24,764) (20,343) (13,792)
======== ============= ========
PRINCIPAL RISK FACTORS
On pages 27 to 31 of our 2017 Report and Accounts we set out our
assessment of the principal risk issues that would face the
business through 2018 under the headings: brand preference;
portfolio management; sustainability; climate change; customer
relationships; talent; supply chain; safe and high quality
products; systems and information; business transformation;
economic and political instability; treasury and pensions; ethical;
and legal and regulatory. In our view, the nature and potential
impact of such risks remain essentially unchanged as regards our
performance over the second half of 2018.
OTHER INFORMATION
This document represents Unilever's half-yearly report for the
purposes of the Disclosure and Transparency Rules (DTR) issued by
the UK Financial Conduct Authority (DTR 4.2) and the Dutch Act on
Financial Supervision, section 5:25d (8)/(9) (Half-yearly financial
reports). In this context: (i) the condensed set of financial
statements can be found on pages 11 to 22; (ii) pages 2 to 10
comprise the interim management report; and (iii) the Directors'
responsibility statement can be found on page 23. No material
related parties transactions have taken place in the first six
months of the year.
CAUTIONARY STATEMENT
This announcement may contain forward-looking statements,
including 'forward-looking statements' within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
Words such as 'will', 'aim', 'expects', 'anticipates', 'intends',
'looks', 'believes', 'vision', or the negative of these terms and
other similar expressions of future performance or results, and
their negatives, are intended to identify such forward-looking
statements. These forward-looking statements are based upon current
expectations and assumptions regarding anticipated developments and
other factors affecting the Unilever Group (the 'Group'). They are
not historical facts, nor are they guarantees of future
performance.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by
these forward-looking statements. Among other risks and
uncertainties, the material or principal factors which could cause
actual results to differ materially are: Unilever's global brands
not meeting consumer preferences; Unilever's ability to innovate
and remain competitive; Unilever's investment choices in its
portfolio management; inability to find sustainable solutions to
support long-term growth; the effect of climate change on
Unilever's business; customer relationships; the recruitment and
retention of talented employees; disruptions in our supply chain;
the cost of raw materials and commodities; the production of safe
and high quality products; secure and reliable IT infrastructure;
successful execution of acquisitions, divestitures and business
transformation projects; economic and political risks and natural
disasters; financial risks; failure to meet high and ethical
standards; and managing regulatory, tax and legal matters. These
forward-looking statements speak only as of the date of this
announcement. Except as required by any applicable law or
regulation, the Group expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in the Group's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based. Further details of potential risks and uncertainties
affecting the Group are described in the Group's filings with the
London Stock Exchange, Euronext Amsterdam and the US Securities and
Exchange Commission, including in the Annual Report on Form 20-F
2017 and the Unilever Annual Report and Accounts 2017.
ENQUIRIES
Media: Media Relations Team Investors: Investor Relations Team
+44 78 2527
3767
+44 78 2504
9151
UK +31 10 217 lucila.zambrano@unilever.com
or 4844 louise.phillips@unilever.com
NL +32 494 60 els-de.bruin@unilever.com +44 20 7822
or 4906 freek.bracke@unilever.com 6830 investor.relations@unilever.com
There will be a web cast of the results presentation available
at:
www.unilever.com/investor-relations/results-and-presentations/latest-results/
INCOME STATEMENT
(unaudited)
EUR million First Half
2018 2017 Increase/
(Decrease)
=========
Current Constant
rates rates
============================================ ========= ======== =========
Turnover 26,352 27,725 (5.0)% 5.7%
Operating profit 4,474 4,847 (7.7)% 2.8%
After (charging)/crediting non-underlying
items (438) (79)
Net finance costs (223) (290)
Finance income 64 90
Finance costs (272) (331)
Pensions and similar obligations (15) (49)
Share of net profit/(loss) of
joint ventures and associates 83 75
Other income/(loss) from non-current
investments and associates 5 -
Profit before taxation 4,339 4,632 (6.3)% 4.0%
Taxation (1,102) (1,315)
After (charging)/crediting tax
impact of non-underlying items 141 (21)
Net profit 3,237 3,317 (2.4)% 8.1%
Attributable to:
========= ========= ======== =========
Non-controlling interests 198 207
Shareholders' equity 3,039 3,110 (2.3)% 8.1%
========= ========= ======== =========
Combined earnings per share
Basic earnings per share (euros) 1.11 1.10 1.6% 12.4%
Diluted earnings per share (euros) 1.11 1.09 1.6% 12.4%
==== ==== ===== ======
STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
EUR million First Half
2018 2017
========================================================== ======
Net profit 3,237 3,317
Other comprehensive income
Items that will not be reclassified to profit or
loss, net of tax:
Gains/(losses) on equity instruments measured at
fair value through other
comprehensive income(a) (4) -
Remeasurements of defined benefit pension plans 142 641
Items that may be reclassified subsequently to profit
or loss, net of tax:
Gains/(losses) on cash flow hedges 36 63
Currency retranslation gains/(losses) (767) (694)
Fair value gains/(losses) on financial instruments(a) - (12)
Total comprehensive income 2,644 3,315
Attributable to:
Non-controlling interests 185 170
Shareholders' equity 2,459 3,145
====== =====
(a) Classification has changed following adoption of IFRS 9. See
note 1 for further details.
STATEMENT OF CHANGES IN EQUITY
(unaudited)
EUR million Called Share Other Retained Total Non- Total
up share premium reserves profit controlling equity
capital account interest
======================================
First half - 2018
========== ========= ========== ========= ======= ============= ========
1 January 2018 484 130 (13,633) 26,648 13,629 758 14,387
========== ========= ========== ========= ======= ============= ========
Profit or loss for the period - - - 3,039 3,039 198 3,237
Other comprehensive income,
net of tax:
Gains/(losses) on(a)
Equity instruments at fair
value through other
comprehensive
income - - (4) - (4) - (4)
Cash flow hedges - - 35 - 35 1 36
Remeasurements of defined
benefit pension plans net
of tax - - - 142 142 - 142
Currency retranslation
gains/(losses) - - (745) (8) (753) (14) (767)
========== ========= ========== ========= ======= ============= ========
Total comprehensive income - - (714) 3,173 2,459 185 2,644
Dividends on ordinary capital - - - (2,037) (2,037) - (2,037)
Repurchase of shares(b) - - (2,516) - (2,516) - (2,516)
Movements in treasury stock(c) - - (51) (135) (186) - (186)
Share-based payment credit(d) - - - 115 115 - 115
Dividends paid to non-controlling
interests - - - - - (201) (201)
Currency retranslation gains/(losses) - - - - - - -
net of tax
Hedging gain/(loss) transferred
to non-financial assets - - 96 - 96 - 96
Other movements in equity - - 50 (27) 23 (24) (1)
========== ========= ========== ========= ======= ============= ========
30 June 2018 484 130 (16,768) 27,737 11,583 718 12,301
========== ========= ========== ========= ======= ============= ========
First half - 2017
========== ========= ========== ========= ======= =============
1 January 2017 484 134 (7,443) 23,179 16,354 626 16,980
========== ========= ========== ========= ======= ============= ========
Profit or loss for the period - - - 3,110 3,110 207 3,317
Other comprehensive income
net of tax:
Fair value gains/(losses)
on financial instruments(a) - - (11) - (11) (1) (12)
Gains/(losses) on cash flow
hedges(a) - - 63 - 63 - 63
Remeasurements of defined
benefit pension plans net
of tax - - - 641 641 - 641
Currency retranslation
gains/(losses) - - (633) (25) (658) (36) (694)
========== ========= ========== ========= ======= ============= ========
Total comprehensive income - - (581) 3,726 3,145 170 3,315
Dividends on ordinary capital - - - (1,925) (1,925) - (1,925)
Repurchase of shares(b) - - (1,368) - (1,368) - (1,368)
Movements in treasury stock(c) - - (54) (146) (200) - (200)
Share-based payment credit(d) - - - 158 158 - 158
Dividends paid to non-controlling
interests - - - - - (184) (184)
Currency retranslation gains/(losses)
net of tax - (3) - - (3) - (3)
Other movements in equity - - 31 11 42 3 45
========== ========= ========== ========= ======= ============= ========
30 June 2017 484 131 (9,415) 25,003 16,203 615 16,818
========== ========= ========== ========= ======= ============= ========
(a) Classification in 2018 has changed following adoption of
IFRS 9. See note 1 for further details.
(b) Repurchase of shares reflects the cost of acquiring ordinary
shares as part of the share buyback programmes announced on 6 April
2017 and 19 April 2018. At 30 June 2018 these shares have not been
cancelled and are recognised as treasury shares (see note 10).
(c) Includes purchases and sales of treasury stock, and transfer
from treasury stock to retained profit of share-settled schemes
arising from prior years and differences between exercise and grant
price of share options.
(d) The share-based payment credit relates to the non-cash
charge recorded against operating profit in respect of the fair
value of share options and awards granted to employees.
BALANCE SHEET
(unaudited)
EUR million As at As at As at
30 June 31 December 30 June
2018 2017 2017
Non-current assets
Goodwill 16,687 16,881 16,974
Intangible assets 12,011 11,520 9,481
Property, plant and equipment 10,050 10,411 11,063
Pension asset for funded schemes in surplus 2,340 2,173 1,334
Deferred tax assets 1,000 1,085 1,255
Financial assets 642 675 685
Other non-current assets 619 557 615
43,349 43,302 41,407
Current assets
Inventories 4,246 3,962 4,162
Trade and other current receivables 6,821 5,222 6,215
Current tax assets 505 488 328
Cash and cash equivalents 3,991 3,317 5,016
Other financial assets 866 770 825
Assets held for sale 3,404 3,224 52
========= ============= =========
19,833 16,983 16,598
========= ============= =========
Total assets 63,182 60,285 58,005
========= ============= =========
Current liabilities
Financial liabilities 10,670 7,968 5,081
Trade payables and other current liabilities 13,779 13,426 13,322
Current tax liabilities 924 1,088 992
Provisions 472 525 424
Liabilities held for sale 143 170 1
========= ============= =========
25,988 23,177 19,820
========= ============= =========
Non-current liabilities
Financial liabilities 18,951 16,462 14,552
Non-current tax liabilities 324 118 116
Pensions and post-retirement healthcare
liabilities:
Funded schemes in deficit 1,157 1,225 1,277
Unfunded schemes 1,460 1,509 1,619
Provisions 719 794 1,001
Deferred tax liabilities 1,966 1,913 2,053
Other non-current liabilities 316 700 749
24,893 22,721 21,367
Total liabilities 50,881 45,898 41,187
========= ============= =========
Equity
Shareholders' equity 11,583 13,629 16,203
Non-controlling interests 718 758 615
========= ============= =========
Total equity 12,301 14,387 16,818
========= ============= =========
Total liabilities and equity 63,182 60,285 58,005
========= ============= =========
CASH FLOW STATEMENT
(unaudited)
EUR million First Half
2018 2017
====================================================== ========
Net profit 3,237 3,317
Taxation 1,102 1,315
Share of net profit of joint ventures/associates
and other income
from non-current investments and associates (88) (75)
Net finance costs 223 290
======== ========
Operating profit 4,474 4,847
======== ========
Depreciation, amortisation and impairment 983 763
Changes in working capital (1,697) (1,436)
Pensions and similar obligations less payments (76) (794)
Provisions less payments (61) 68
Elimination of (profits)/losses on disposals 32 (299)
Non-cash charge for share-based compensation 115 158
Other adjustments(a) (283) -
======== ========
Cash flow from operating activities 3,487 3,307
======== ========
Income tax paid (1,081) (1,122)
Net cash flow from operating activities 2,406 2,185
======== ========
Interest received 45 104
Net capital expenditure (495) (672)
Other acquisitions and disposals (1,035) 154
Other investing activities 44 (46)
Net cash flow (used in)/from investing activities (1,441) (460)
======== ========
Dividends paid on ordinary share capital (2,033) (1,911)
Interest and preference dividends paid (191) (252)
Change in financial liabilities 4,486 3,613
Repurchase of shares (2,248) (1,071)
Other movements on treasury stock (264) (199)
Other financing activities (145) (42)
Net cash flow (used in)/from financing activities (395) 138
Net increase/(decrease) in cash and cash equivalents 570 1,863
======== ========
Cash and cash equivalents at the beginning of the
period 3,169 3,198
Effect of foreign exchange rate changes 72 (201)
Cash and cash equivalents at the end of the period 3,811 4,860
======== ========
(a) Includes a non-cash credit of EUR277 million from early
settlement of contingent consideration relating to Blueair.
NOTES TO THE FINANCIAL STATEMENTS
(unaudited)
1 ACCOUNTING INFORMATION AND POLICIES
The accounting policies and methods of computation are in
compliance with IAS 34 'Interim Financial Reporting' as issued by
the International Accounting Standard Board (IASB) and as adopted
by the EU; and except as set out below are consistent with the year
ended 31 December 2017. The condensed interim financial statements
are based on International Financial Reporting Standards (IFRS) as
adopted by the EU and IFRS as issued by the IASB.
After making appropriate enquiries, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the half year financial statements.
The condensed interim financial statements are shown at current
exchange rates, while percentage year-on-year changes are shown at
both current and constant exchange rates to facilitate comparison.
The income statement on page 11, the statement of comprehensive
income on page 11, the statement of changes in equity on page 12
and the cash flow statement on page 14 are translated at exchange
rates current in each period. The balance sheet on page 13 is
translated at period-end rates of exchange.
The condensed interim financial statements attached do not
constitute the full financial statements within the meaning of
section 434 of the UK Companies Act 2006. The comparative figures
for the financial year ended 31 December 2017 are not Unilever
PLC's statutory accounts for that financial year. Those accounts of
Unilever for the year ended 31 December 2017 have been reported on
by the Group's auditor and delivered to the Registrar of Companies.
The report of the auditor on these accounts was (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report, and (iii) did not contain a statement under section 498 (2)
or (3) of the UK Companies Act 2006.
New accounting standards
On 1 January 2018 the Group adopted IFRS 9 'Financial
Instruments', which replaced IAS 39 'Financial Instruments -
Recognition and Measurement'. The Group has not restated
comparative information for prior periods.
-- Classification and Measurement: On 1 January 2018, we
reclassified our financial assets to the new categories based on
the Group's reason for holding the assets and the nature of the
cash flows from the assets. See note 9 for further information.
There were no changes to the carrying values of the Group's
financial assets from adopting the new classification model. There
have been no changes to the classification or measurement of the
Group's financial liabilities.
-- Impairment: From 1 January 2018 the Group implemented an
expected credit loss impairment model for financial assets. For
trade receivables, our calculation methodology has been updated to
consider expected losses based on ageing profile. The adoption of
the expected loss approach has not resulted in any material change
in impairment provision for any financial asset.
-- Hedge accounting: The Group applied the hedge accounting
requirements of IFRS 9 prospectively. At the date of initial
application all of the Group's existing hedging relationships were
eligible to be treated as continuing hedge relationships.
On 1 January 2018 the Group adopted IFRS 15 'Revenue from
Contracts with Customers' with no impact as our accounting policies
were already in line with IFRS 15.
In addition, IFRS 16 'Leases' has been issued by the IASB and
endorsed by the EU but is not yet adopted by the Group. It is
effective from 1 January 2019. Our work on implementing the new
lease model prescribed is progressing as planned, and we continue
to consider the implications of the standard on the Group's
consolidated results and financial position. Whilst we have
conducted contract reviews in a sample of countries and central
locations, our work is ongoing on an initial impact assessment
exercise and a review of the systems and processes that will need
to be updated. We have not yet estimated the amount of right of use
assets and lease liabilities that will be recognised on the balance
sheet or decided which exemptions will be adopted.
Change in operating segments
The Group has revised its operating segments to align with the
new structure under which the business is managed. Beginning 2018,
operating segment information is provided based on three product
areas: Beauty & Personal Care, Home Care and Foods &
Refreshment.
2 SIGNIFICANT ITEMS WITHIN THE INCOME STATEMENT
Non-underlying items
Non-underlying items are costs and revenues relating to gains
and losses on business disposals, acquisition and disposal-related
credit/costs, restructuring costs, impairments and other one-off
items within operating profit, and other significant and unusual
items within net profit but outside of operating profit, which we
collectively term non-underlying items, due to their nature and/or
frequency of occurrence. These items are significant in terms of
nature and/or amount and are relevant to an understanding of our
financial performance.
Restructuring costs are charges associated with activities
planned by management that significantly change either the scope of
the business or the manner in which it is conducted.
EUR million First Half
2018 2017
======================================================== =====
Acquisition and disposal-related credit/(costs)(a) 148 (69)
Gain/(loss) on disposal of group companies(b) - 308
Restructuring costs (367) (318)
Impairment and other one-off items(c) (219) -
===== =====
Non-underlying items within operating profit before
tax (438) (79)
Tax on non-underlying items within operating profit 170 (21)
===== =====
Non-underlying items within operating profit after
tax (268) (100)
======================================================== ===== =====
Non-underlying items not in operating profit but within
net profit:
Impact of US tax reform (29) -
===== =====
Non-underlying items not in operating profit but within
net profit after tax (29) -
======================================================== ===== =====
Non-underlying items after tax(d) (297) (100)
======================================================== ===== =====
Attributable to:
======================================================== ===== =====
Non-controlling interests (10) (4)
Shareholders' equity (287) (96)
===== =====
(a) 2018 includes a credit of EUR277 million from early
settlement of contingent consideration relating to Blueair.
(b) 2017 includes a gain of EUR308 million from the sale of AdeS
soy beverage business in Latin America.
(c) Includes a charge of EUR208 million relating to impairment
of Blueair intangible asset.
(d) Non-underlying items after tax is calculated as
non-underlying items within operating profit after tax plus
non-underlying items not in operating profit but within net profit
after tax.
3 SEGMENT INFORMATION - DIVISIONS
Second Quarter Beauty & Home Foods & Total
Personal Care Refreshment
Care
Turnover (EUR million)
2017 5,340 2,688 6,378 14,406
2018 5,175 2,488 6,067 13,730
Change (%) (3.1) (7.4) (4.9) (4.7)
Impact of:
Exchange rates (%)* (9.1) (9.7) (6.8) (8.2)
Acquisitions (%) 5.0 0.7 0.8 2.3
Disposals (%) - (0.4) (0.1) (0.1)
Underlying sales growth (%) 1.6 2.2 1.3 1.6
============================= ====== ============= =======
Price (%)* (0.3) 0.6 0.8 0.3
Volume (%) 1.9 1.6 0.5 1.2
============================= ========== ====== ============= =======
First Half Beauty & Home Foods & Total
Personal Care Refreshment
Care
Turnover (EUR million)
2017 10,481 5,398 11,846 27,725
2018 10,084 5,048 11,220 26,352
Change (%) (3.8) (6.5) (5.3) (5.0)
Impact of:
Exchange rates (%)* (10.2) (10.0) (7.3) (8.9)
Acquisitions (%) 4.3 0.6 0.9 2.1
Disposals (%) - (0.2) (0.4) (0.2)
Underlying sales growth (%) 2.7 3.5 1.8 2.5
================================== ======= ============= =======
Price (%)* (0.2) 0.3 0.6 0.2
Volume (%) 2.9 3.2 1.2 2.2
=============
Operating profit (EUR million)
2017 2,068 573 2,206 4,847
2018 2,037 638 1,799 4,474
Underlying operating profit (EUR
million)
2017 2,207 643 2,076 4,926
2018 2,201 633 2,078 4,912
Operating margin (%)
2017 19.7 10.6 18.6 17.5
2018 20.2 12.6 16.0 17.0
Underlying operating margin (%)
2017 21.1 11.9 17.5 17.8
2018 21.8 12.5 18.5 18.6
================================== ========== ======= ============= =======
* 2018 underlying price growth in Venezuela has been excluded
from the Price rows in the tables above, and an equal and opposite
adjustment made in the Exchange rate rows.
The adjustment made at Total Group level in these tables in
respect of 2018 price growth in Venezuela was 2.0% for the second
quarter and 1.3% for the first half. Prior to this adjustment being
made, second quarter price growth at Total Group level would have
been 2.3% and second quarter exchange rate impact would have been
(10.0)%. The corresponding adjustments for Foods & Refreshment
were 4.5% for the second quarter and 3.1% for the first half. There
is no adjustment in the other divisions.
Turnover growth is made up of distinct individual growth
components namely underlying sales, currency impact, acquisitions
and disposals. Turnover growth is arrived at by multiplying these
individual components on a compounded basis as there is a currency
impact on each of the other components. Accordingly, turnover
growth is more than just the sum of the individual components.
Underlying operating profit represents our measure of segment
profit or loss as it is the primary measure used for the purpose of
making decisions about allocating resources and assessing
performance of segments. Underlying operating margin is calculated
as underlying operating profit divided by turnover.
4 SEGMENT INFORMATION - GEOGRAPHICAL AREA
Second Quarter Asia / The Europe Total
AMET / Americas
RUB
Turnover (EUR million)
2017 6,163 4,707 3,536 14,406
2018 6,017 4,152 3,561 13,730
Change (%) (2.4) (11.8) 0.7 (4.7)
Impact of:
Exchange rates (%)* (9.6) (11.7) (0.8) (8.2)
Acquisitions (%) 1.6 3.8 1.6 2.3
Disposals (%) 0.0 0.0 (0.4) (0.1)
Underlying sales growth (%) 6.3 (3.8) 0.4 1.6
============================= ========== ======= =======
Price (%)* 0.7 0.3 (0.3) 0.3
Volume (%) 5.6 (4.1) 0.7 1.2
============================= ======== ========== ======= =======
First Half Asia / The Europe Total
AMET / Americas
RUB
Turnover (EUR million)
2017 12,085 9,077 6,563 27,725
2018 11,735 8,083 6,534 26,352
Change (%) (2.9) (11.0) (0.5) (5.0)
Impact of:
Exchange rates (%)* (10.3) (12.8) (0.8) (8.9)
Acquisitions (%) 2.0 3.5 0.4 2.1
Disposals (%) - (0.5) (0.3) (0.2)
Underlying sales growth (%) 6.1 (0.8) 0.2 2.5
================================== ========== ======= =======
Price (%)* 0.9 (0.3) (0.5) 0.2
Volume (%) 5.1 (0.5) 0.7 2.2
=======
Operating profit (EUR million)
2017 2,070 1,704 1,073 4,847
2018 2,248 1,156 1,070 4,474
Underlying operating profit (EUR
million)
2017 2,211 1,538 1,177 4,926
2018 2,317 1,333 1,262 4,912
Operating margin (%)
2017 17.1 18.8 16.3 17.5
2018 19.2 14.3 16.4 17.0
Underlying operating margin (%)
2017 18.3 16.9 17.9 17.8
2018 19.7 16.5 19.3 18.6
================================== ======== ========== ======= =======
* 2018 underlying price growth in Venezuela has been excluded
from the Price rows in the tables above, and an equal and opposite
adjustment made in the Exchange rate rows.
The adjustment made at Total Group level in these tables in
respect of 2018 price growth in Venezuela was 2.0% for the second
quarter and 1.3% for the first half. Prior to this adjustment being
made, second quarter price growth at Total Group level would have
been 2.3% and second quarter exchange rate impact would have been
(10.0)%. The corresponding adjustments for the Americas were 6.5%
for the second quarter and 4.2% for the first half. There is no
adjustment in the other geographical areas.
5 TAXATION
The effective tax rate for the first half was 25.9% compared to
28.9% in 2017. The tax rate is calculated by dividing the tax
charge by pre-tax profit excluding the contribution of joint
ventures and associates.
Tax effects of components of other comprehensive income were as
follows:
EUR million First Half 2018 First Half 2017
Before Tax After Before Tax After
tax (charge)/ tax tax (charge)/ tax
credit credit
======================================= ======= ======= =========== ======
Gains/(losses) on(a):
Equity instruments at fair
value through other comprehensive
income (4) - (4) - - -
Cash flow hedges 32 4 36 74 (11) 63
Other financial instruments - - - (11) (1) (12)
Remeasurements of defined
benefit pension plans 206 (64) 142 751 (110) 641
Currency retranslation gains/(losses) (768) 1 (767) (723) 29 (694)
======= =========== ====== ======= =========== ======
Other comprehensive income (534) (59) (593) 91 (93) (2)
======= =========== ====== ======= =========== ======
(a) Classification has changed following adoption of IFRS 9. See
note 1 for further details.
6 COMBINED EARNINGS PER SHARE
The combined earnings per share calculations are based on the
average number of share units representing the combined ordinary
shares of NV and PLC in issue during the period, less the average
number of shares held as treasury shares.
In calculating diluted earnings per share and underlying
earnings per share, a number of adjustments are made to the number
of shares, principally the exercise of share options by
employees.
Earnings per share for total operations for the six months were
calculated as follows:
2018 2017
===========================================================
Combined EPS - Basic
=========================================================== ======== ========
Net profit attributable to shareholders' equity (EUR
million) 3,039 3,110
Average number of combined share units (millions
of units) 2,727.3 2,834.4
Combined EPS - basic (EUR) 1.11 1.10
======== ========
Combined EPS - Diluted
=========================================================== ======== ========
Net profit attributable to shareholders' equity (EUR
million) 3,039 3,110
Adjusted average number of combined share units (millions
of units) 2,737.3 2,845.7
Combined EPS - diluted (EUR) 1.11 1.09
======== ========
Underlying EPS
=========================================================== ======== ========
Net profit attributable to shareholder's equity (EUR
million) 3,039 3,110
Post tax impact of non-underlying items attributable
to shareholders' equity (see note 2) 287 96
======== ========
Underlying profit attributable to shareholders' equity
(EUR million) 3,326 3,206
Adjusted average number of combined share units (millions
of units) 2,737.3 2,845.7
Underlying EPS - diluted (EUR) 1.22 1.13
======== ========
In calculating underlying earnings per share, net profit
attributable to shareholders' equity is adjusted to eliminate the
post-tax impact of non-underlying items in operating profit and any
other significant unusual items within net profit but not operating
profit.
During the period the following movements in shares have taken
place:
Millions
=======================================================
Number of shares at 31 December 2017 (net of treasury
shares) 2,738.9
-------------------------------------------------------- --------
Shares repurchased under the share buyback programme (53.0)
-------------------------------------------------------- --------
Net movement in shares under incentive schemes (0.3)
======================================================== ========
Number of shares at 30 June 2018 2,685.6
======================================================== ========
7 ACQUISITIONS AND DISPOSALS
Total consideration for acquisitions completed in the first half
of 2018 is EUR1,078 million (acquisitions completed in the first
half of 2017: EUR304 million). The main acquisition in the first
half of 2018 was the home and personal care business of Quala in
Latin America, which completed on 28 February 2018.
8 ASSETS AND LIABILITIES HELD FOR SALE
The following assets and liabilities have been disclosed as held
for sale:
EUR million 30 June 30 June 31 December
2018 2018 2017
Spreads(a) Total Total
================================================
Property, plant and equipment held for
sale - 1 30
============ ======== ===========
Disposal groups held for sale
Non-current assets
Goodwill and intangible assets 2,512 2,512 2,311
Property, plant and equipment 559 564 552
Deferred tax assets 140 140 145
Other non-current assets 3 3 1
============ ======== ===========
3,214 3,214 3,009
============ ======== ===========
Current assets
Inventories 137 137 130
Trade and other receivables 23 24 18
Current tax assets 10 10 13
Cash and cash equivalents 9 9 19
Other - 4 5
============ ======== ===========
179 184 185
================================================ ============ ======== ===========
Assets held for sale 3,393 3,404 3,224
================================================ ============ ======== ===========
Current liabilities
Trade payables and other current liabilities 82 83 106
Current tax liabilities 11 11 11
Provisions 1 1 1
============ ======== ===========
94 95 118
============ ======== ===========
Non-current liabilities
Pensions and post-retirement healthcare
liabilities 6 6 9
Provisions - - 1
Deferred tax liabilities 42 42 42
============ ======== ===========
48 48 52
================================================ ============ ======== ===========
Liabilities held for sale 142 143 170
================================================ ============ ======== ===========
(a) In the second half of 2017 the Group announced agreements to
sell the South African spreads business to Remgro and the global
spreads business (excluding South Africa) to KKR. Both disposals
were completed on 2 July 2018. Consideration of EUR7.3 billion was
received for the sale of the global spreads business (excluding
South Africa), including estimated working capital adjustments on
completion.
9 FINANCIAL INSTRUMENTS
The Group is exposed to the risks of changes in fair value of
its financial assets and liabilities. The following tables
summarise the fair values and carrying amounts of financial
instruments and the fair value calculations by category. On
transition to IFRS 9, there were no changes to the carrying values
of the Group's financial assets.
EUR million Fair value Carrying amount
========================================
As at As at As at As at As at As at
30 June 31 December 30 June 30 June 31 December 30 June
2018 2017 2017 2018 2017 2017
======================================== ========= ============= ========= ========= ============= =========
Financial assets
Cash and cash equivalents 3,991 3,317 5,016 3,991 3,317 5,016
Held-to-maturity investments(a) - 163 152 - 163 152
Loans and receivables(a) - 463 304 - 463 304
Available-for-sale financial
assets(a) - 564 655 - 564 655
Amortised cost(a) 632 - - 632 - -
Fair value through other comprehensive
income(a) 288 - - 288 - -
Financial assets at fair value
through profit and loss:
Derivatives 209 116 293 209 116 293
Other 379 139 106 379 139 106
========= ============= ========= ========= ============= =========
5,499 4,762 6,526 5,499 4,762 6,526
Financial liabilities
Preference shares - - (125) - - (68)
Bank loans and overdrafts (1,131) (995) (829) (1,128) (992) (825)
Bonds and other loans (27,842) (23,368) (19,031) (27,426) (22,709) (18,353)
Finance lease creditors (151) (147) (153) (135) (131) (134)
Derivatives (542) (421) (253) (542) (421) (253)
Other financial liabilities (390) (177) - (390) (177) -
========= ============= ========= ========= ============= =========
(30,056) (25,108) (20,391) (29,621) (24,430) (19,633)
========= ============= ========= ========= ============= =========
(a) Classification has changed following adoption of IFRS 9. See
below and note 1 for further details.
Level Level Level Level Level Level Level Level Level
EUR million 1 2 3 1 2 3 1 2 3
As at 30 June As at 31 December As at 30 June
2018 2017 2017
========================= ========================= =========================
Assets at fair value
Available-for-sale financial
assets(a) - - - 215 7 342 277 8 370
Financial assets at
fair value through other
comprehensive income(a) 143 4 141 - - - - - -
Financial assets at
fair value
through profit or loss:
Derivatives(a) - 366 - - 173 - - 376 -
Other 185 - 194 137 - 2 - 104 2
Liabilities at fair
value
Derivatives(b) - (588) - - (534) - - (392) -
Contingent Consideration - - (199) - - (445) - - (413)
======= ======= ======= ======= ======= ======= ======= ======= =======
(a) Includes EUR157 million (December 2017: EUR57 million)
derivatives, reported within trade receivables, that hedge trading
activities.
(b) Includes EUR(46) million (December 2017: EUR(113) million)
derivatives, reported within trade payables, that hedge trading
activities.
Other than changes arising on adoption of IFRS 9, there were no
significant changes in classification of fair value of financial
assets and financial liabilities since 31 December 2017. There were
also no significant movements between the fair value hierarchy
classifications since 31 December 2017.
9 FINANCIAL INSTRUMENTS (continued)
The fair value of trade receivables and payables is considered
to be equal to the carrying amount of these items due to their
short-term nature.
Calculation of fair values
The fair values of the financial assets and liabilities are
defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Methods and
assumptions used to estimate the fair values are consistent with
those used in the year ended 31 December 2017.
Adoption of IFRS 9 - Impact on measurement of financial
assets
On the date of initial application of IFRS 9, 1 January 2018,
financial assets of EUR207 million previously measured at fair
value through equity were reclassified as fair value through profit
or loss. Fair value gains or losses on these financial assets were
immaterial in 2017 and 2018. Financial assets of EUR6 million
previously measured at fair value through profit or loss were
reclassified to amortised cost under IFRS 9.
Cash and cash equivalents and trade receivables, which were
classified as loans and other receivables under IAS 39, will be
classified as amortised cost under IFRS 9.
10 SHARE BUYBACK PROGRAMME
On 19 April 2018 Unilever announced a share buyback programme of
up to EUR6 billion to return the expected after-tax proceeds from
the spreads disposal. At 30 June 2018 the Group has repurchased
53,040,783 ordinary shares as part of the programme for EUR2,514
million. Cash paid for the repurchase of shares was EUR2,246
million and EUR268 million is shown within current financial
liabilities. These shares have not been cancelled and are
recognised as treasury shares with the cost reported within other
reserves.
11 DIVIDS
The Boards have determined to pay a quarterly interim dividend
for Q2 2018 at the following rates which are equivalent in value
between the two companies at the rate of exchange applied under the
terms of the Equalisation Agreement:
Per Unilever N.V. ordinary share EUR 0.3872
Per Unilever PLC ordinary share GBP 0.3435
Per Unilever N.V. New York share US$ 0.4531
Per Unilever PLC American Depositary US$ 0.4531
Receipt
The quarterly interim dividends have been determined in euros
and converted into equivalent sterling and US dollar amounts using
exchange rates issued by WM/Reuters on 17 July 2018.
US dollar cheques for the quarterly interim dividend will be
mailed on 5 September 2018 to holders of record at the close of
business on 3 August 2018. In the case of the NV New York shares,
Netherlands withholding tax will be deducted.
The quarterly dividend calendar for the remainder of 2018 will
be as follows:
Announcement Ex-Dividend Record Date Payment Date
Date Date
=========================
Quarterly dividend - for 19 July 2018 2 August 3 August 2018 5 September
Q2 2018 2018 2018
Quarterly dividend - for 18 October 1 November 2 November 2018 5 December 2018
Q3 2018 2018 2018
============= ============ ================ ================
12 EVENTS AFTER THE BALANCE SHEET DATE
There were no material post balance sheet events other than
those mentioned elsewhere in this report.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors declare that, to the best of their knowledge:
-- this condensed set of interim financial statements, which
have been prepared in accordance with IAS 34 'Interim Financial
Reporting', as issued by the International Accounting Standard
Board and endorsed and adopted by the EU gives a true and fair view
of the assets, liabilities, financial position and profit or loss
of Unilever; and
-- the interim management report gives a fair review of the
information required pursuant to regulations 4.2.7 and 4.2.8 of the
Disclosure and Transparency Rules (DTR) issued by the UK Financial
Conduct Authority and section 5:25d (8)/(9) of the Dutch Act on
Financial Supervision (Wet op het financieel toezicht).
Unilever's Directors are listed in the Annual Report and
Accounts for 2017, with the exception of certain changes following
the Unilever N.V. and Unilever PLC 2018 AGMs:
-- Ann Fudge retired as a Non-Executive Director
-- Andrea Jung was appointed a Non-Executive Director
Details of all current Directors are available on our website at
www.unilever.com
By order of the Board
Paul Polman Graeme Pitkethly
Chief Executive Officer Chief Financial Officer
19 July 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UWAKRWKABAAR
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July 19, 2018 02:00 ET (06:00 GMT)
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