Unilever 2005 Annual Report Download - page 21
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18 Unilever Annual Report and Accounts 2005
Financial Review
Non-GAAP measures (continued)
Return on invested capital
Return on invested capital (ROIC) expresses the returns generated on capital invested in the company. The progression of ROIC is used
by Unilever to measure progress against our longer-term value creation goals outlined to investors.
ROIC is profit after tax but excluding net interest on net debt and impairment(a) of goodwill and indefinite-lived intangible assets both
net of tax, divided by average invested capital for the year. Invested capital is the sum of property, plant and equipment and other non-
current investments, software and finite-lived intangible assets, working capital, goodwill and indefinite-lived intangible assets at gross
book value and cumulative goodwill written off directly to reserves under an earlier accounting policy.
The reconciliation of ROIC to the GAAP measure net profit is as follows:
€ million € million
2005 2004
Net profit 3 975 2 941
Add back net interest expense net of tax 424 431
Add back impairment charges net of tax(a) 245 536
Profit after tax, before interest and impairment of goodwill and indefinite-lived intangible assets 4 644 3 908
Year-end positions for invested capital:
Property, plant and equipment and other non-current investments 7 333 6 966
Software and finite-lived intangible assets 642 623
Inventories 4 107 3 756
Trade and other receivables 5 061 4 410
Trade payables and other creditors due within one year (8 658) (8 232)
Elements of invested capital included in assets and liabilities held for sale 200 –
Goodwill and indefinite-lived intangible assets at gross book value 21 621 19 854
Total 30 306 27 377
Add back cumulative goodwill written off directly to reserves 6 870 7 246
Year-end invested capital 37 176 34 623
Average invested capital for the year 37 012 36 444
Return on average invested capital 12.5% 10.7%
(a) Excluding write-downs of goodwill and indefinite-lived intangible assets taken in connection with business disposals.