Unilever 2000 Annual Report Download - page 27

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Unilever Annual Report & Accounts and Form 20-F 2000 Report of the Directors
Financial review
The figures quoted in this review are in euros, at current
rates of exchange, unless otherwise stated. The profit and
loss and cash flow information is translated at average rates
of exchange for the relevant year and the balance sheet
information at year-end rates of exchange.
For definitions of key ratios referred to in this Review please
refer to page 93.
Results – 2000 over 1999
Total turnover, which includes Group turnover plus the
Group’s share of joint venture turnover, rose by 16% to
48 066 million.
Group turnover also increased 16% to 47 582 million.
2 945 million, representing 7% of this growth, came from
the impact of acquisitions in 2000, primarily Bestfoods. On the
basis of 1999’s results, the impact of disposals, principally
the European bakery business, was a reduction in turnover of
approximately 500 million. Underlying volume grow th w as
2% , compared with 1% in 1999. The remaining increase
was driven by the 9% weakening of the average exchange
rate for the euro against the basket of Unilever currencies.
The Group's share of joint venture turnover increased by 70%
to 484 million, as a result of the acquisition of Bestfoods'
joint ventures in Africa & M iddle East and Asia & Pacific.
Group operating profit before exceptional items and
amortisation increased by 25% for the year to 5 729 million,
with underlying margin up 0.8 percentage points to 12.0%
as the benefits of restructuring and buying savings are
realised. Acquisitions made in the year contributed
415 million, of which 280 million relates to Bestfoods.
416 million of the overall increase w as the result of the
weakening of the average euro rate between the two years.
Amortisation of goodwill and intangibles was 435 million,
compared with 23 million in 1999, reflecting the impact
of acquisitions, notably Slim•Fast, Ben & Jerry’s, Cressida,
Amora Maille and Bestfoods. The amortisation of Bestfoods’
goodwill in the period w as 301 million.
Exceptional items increased to 1 992 million from
269 million in 1999. The majority of the exceptional
charges relate to our Path to Growth programme
announced on 22 February 2000. This initiative consists
of focusing resources on our leading brands, rationalising
manufacturing sites to improve supply chain efficiency
and reduce costs, and reorganising or divesting under-
performing businesses. The total programme is estimated
to cost 5 billion, the majority of w hich is expected to
be exceptional. 1.9 billion of the 2000 exceptional items
relates to this programme. Of this amount, 1.1 billion
relates to restructuring and 0.8 billion for other items,
principally business disposals. The key disposals w ere the
European bakery business w hich gave rise to a profit of
143 million and the sale of Elizabeth Arden, completed in
January 2001, w hich gave rise to the recognition of a loss in
2000 of 859 million after w riting back goodw ill which had
been charged direct to shareholders funds on the acquisition
of the business in 1989. Exceptional items also include
approximately 100 million in respect of restructuring
arising from the integration of Bestfoods.
As a result of the amortisation and exceptional items
charged above, Group operating profit was dow n 23%
to 3 302 million.
Share of operating profit of joint ventures increased to
57 million (1999: 42 million) w ith the Bestfoods’ joint
ventures contributing 12 million.
An overview of operating performance by region and
product category is included in the Regional and Category
texts on pages 9 and 15 respectively.
Net interest cost was 632 million compared with
14 million in 1999. This significant increase reflects a
27 billion increase in debt during the year follow ing the
Bestfoods acquisition in October 2000 and other acquisitions
during the year, together w ith a reduction in cash following
the payment of the special dividend in 1999. Included in
the interest cost is a 37 million exceptional charge w hich
primarily reflects the fees charged on the unused portion
of the financing facility put in place prior to the Bestfoods
acquisition. Net interest cover for the year was just over five
times; for the fourth quarter interest cover was negative as a
result of the amortisation of goodwill and the very high level
of exceptional items together with the high level of debt
since the Bestfoods acquisition. The net interest cover on
the basis of EBITDA (bei), (see page 93 for definition), w as
eleven times for the year and four times for the final quarter.
The Group's effective tax rate rose to 51.5% from 31.5%
in 1999. The increase was a result of Bestfoods goodw ill
amortisation, which is not tax deductible, and net tax relief
of only 14% on exceptional items. This low rate arises
because tax relief w as already obtained in prior years on
the goodwill writeback on the businesses disposed. The
underlying tax rate for normal trading operations was 34%
before the inclusion of Bestfoods goodwill amortisation, the
same level as in 1999.
Minority interests increased 7% to 215 million due almost
entirely to the weakening of the euro.
Net profit fell by 60% as a result of the high level of
exceptional items and amortisation of goodw ill, increased
interest costs due to higher borrowings and the impact
of the non-tax deductibility of some of these charges.
Combined earnings per share w as similarly down 59% .
Combined earnings per share before exceptional items
and amortisation increased by 14% .