Unilever 2005 Annual Report Download - page 25

22 Unilever Annual Report and Accounts 2005
Financial review
(continued)
The figures quoted in the following discussion are in euros, at
current rates of exchange, ie. the average or year-end rates of
each period, unless otherwise stated. Information about exchange
rates between the euro, pound sterling and the US dollar is given
on page 156.
Results for 2005 compared with 2004
The results reflected in the consolidated income statement and
supporting notes arise from the continuing operations of the
Group. During July 2005, we completed the sale of Unilever
Cosmetics International (UCI) to Coty Inc., United States. The
results of UCI have been presented separately as discontinued
operations for the 2004 year and, in 2005, for the period up to
the date of sale.
Reported turnover grew by 2.9% in the year to €39 672 million.
This increase includes a favourable effect from movements of the
average euro exchange rate against the basket of Unilever
currencies, which amounted to 1.3% of turnover. The net impact
of disposals less acquisitions was a decline in turnover of 1.5%.
This arose principally from the sale of European olive oil and other
foods businesses. Underlying sales growth in the year of 3.1%
was the result of volume increases.
Operating profit increased by 25% in the year to €5 314 million
with operating margin increasing to 13.4% (2004: 11.0%).
Before the impact of net costs of restructuring, business disposals
and impairments, the operating margin for 2005 would have
been 0.8 percentage points lower than the previous year.
Advertising and promotions were 1.1 percentage points of sales
higher than last year. Cost savings and an improved mix more
than offset the effect of an increase of nearly €600 million in
input costs. Operating charges for restructuring, business
disposals and impairments include the impairment of the Slim•Fast
business in both 2005 and 2004 amounting to €363 million and
€791 million respectively. An overview of performance by region is
included in the operating reviews on pages 26 to 28.
Net finance costs were 2% lower in the year at €618 million,
through lower levels of borrowings. This also reflects a reduction
in the finance costs associated with pensions which were €55
million.
A reduced contribution was generated from our shares in joint
ventures and associates, most significantly from our associate
JohnsonDiversey. Profit from discontinued operations includes the
gain of €458 million arising from the sale of UCI.
The Group’s effective tax rate of profit for the year was 26%,
compared with 22% in 2004, which reflected resolution of a
higher level of outstanding prior year tax issues.
Net profit and earnings per share from continuing operations
increased by 21% and 22% respectively in the year. Including the
profits of the discontinued operations, total earnings per share
increased by 37% in the year.
Return on invested capital (ROIC) for the year was 12.5%, up
from 10.7% in 2004. This reflects the lower restructuring costs
and higher profits on business disposals included in net profit.
ROIC retains all goodwill and intangibles in invested capital,
regardless of impairment.
Acquisitions and disposals
There were no material acquisitions during 2004 or 2005.
In March 2005 Unilever completed the restructuring of its
Portuguese foods business. Before the restructuring Unilever
Portugal held an interest in FIMA/VG – Distribuição de Produtos
Alimentares, Lda. (FIMA) foods business, a joint venture with
Jerónimo Martins Group, in addition to its wholly owned
Bestfoods business acquired in 2000. As a result of the
transaction the two foods businesses – FIMA and Unilever
Bestfoods Portugal – were unified and the joint venture stakes
were re-balanced so that Unilever now holds 49% of the
combined foods business and Jerónimo Martins Group 51%.
On 11 July 2005, we announced the completion of the sale of
our Prestige fragrance business, UCI, to Coty Inc. of the United
States. Unilever received US $800 million in cash, with the
opportunity for further deferred payments contingent upon
future sales.
On 20 December 2005, Unilever announced its intention to sell its
Mora business to Ad van Geloven in the Netherlands, for an
undisclosed sum. The agreement is subject to approval by
competition authorities and advice from work councils. The
proposed transaction relates to the Mora brand and to factories in
Maastricht and Mol (Belgium).
Other business disposals in 2005 included Stanton Oil in the UK
and Ireland, Dextro in various countries in Europe, Opal in Peru,
Karo and Knax in Mexico, spreads and cooking products in
Australia and New Zealand, Crispa, Mentadent, Marmite, Bovril
and Maizena in South Africa, frozen pizza in Austria, Biopon in
Hungary and tea plantations in India. The combined annual
turnover of these businesses was approximately €200 million.
In 2004 we disposed of more than 20 businesses with total
turnover in excess of €700 million. Significant disposals included
the sale of certain household care brands in North America, our
edible oils business under the Capullo, Inca and Mazola brands in
Mexico, the Dalda brand in Pakistan and the sale of our European
frozen pizza and baguette business. Our chemicals business in
India (Hindustan Lever Chemicals) was merged with Tata
Chemicals.