Unilever 2006 Annual Report Download - page 14

Unilever Annual Report and Accounts 2006 11
Report of the Directors (continued)
Group Chief Executive
We are grateful to those shareholders and other stakeholders
who responded to our invitation on the Unilever website to post
questions for Patrick Cescau. A number of their questions are
reflected in the Q&A below.
How do you look back on 2006?
We are on a journey to restore Unilever’s competitiveness and
growth potential. That journey is ongoing but I think we can look
back on 2006 with some pride and satisfaction.
The improving top-line performance recorded during the year
suggests that the wide-ranging changes we made to the business
in 2004 and 2005 – both to our organisation and to our strategy
–were the right ones for Unilever. They are putting us firmly on
the road to sustained growth.
Ialso believe that we will look back on 2006 as the year when
the business regained its confidence and self-belief after the
setbacks of recent years. There is a new energy and optimism
flowing through the Group.
What pleased you most about the Group’s performance
last year?
The quality and the broad-based natureof our growth. All parts
of the business – all regions and all categories – contributed to
healthy underlying sales growth of 3.8%. Our cash flow position
in 2006 was also strong, and it was a sign of the growing
financial health of the business that we were able to return
an additional €750 million to shareholders in the form of a
one-offdividend.
Our performance was particularly strong in those areas we had
identified as growth priorities and where we had invested
accordingly – for example, in developing and emerging markets
(D&E) and in our personal carebusiness, which grew by an
impressive 6.3%. This is particularly pleasing and encouraging
because it suggests the strategy we are following – investing
heavily in order to obtain leadership positions in high growth
areas – is the right one to take us forward.
Iwould also highlight our performance in Europe, which has been
atough market for us in recent years. Last year we re-doubled
our efforts and this was rewarded in steadily improving results
and a returnto modest growth levels.
Were there any areas where you had hoped to make
greater progress during 2006?
Restoring Unilever’s competitiveness has involved making a lot of
changes to the business. In order to deliver sustained growth and
create value for shareholders, we have reformed our governance,
overhauled our organisation and put in place a whole new
strategy to take the business forward.
Inevitably, changes on this scale are going to proceed at differing
speeds. Overall I am satisfied with where we are at this stage in
the transformation of the Group. Equally, I know that we have
some challenges ahead, in particular delivering more profitable
growth. While our operating margin in 2006 was satisfactory, we
must strive for a better performance in the year ahead. We
weren’t helped in 2006 by higher than expected costs resulting
from sharp increases in commodity prices, but that has merely
served to highlight the importance of the measures we are taking
to simplify our business and to squeeze out unnecessary costs.
Since becoming Group Chief Executive you have embarked
on a significant programme of organisational change and
restructuring. Do you feel that you now have the right
organisation in place to drive Unilever’s growth?
It is the nature of things today that you have to keep the
workings of any organisation under constant review. As a
business, that is the only way to ensure you are best serving the
interests of shareholders and other stakeholders. But yes, I do
believe we are well advanced with the organisational changes
needed to support the next stage of our development.
Indeed, we are already deriving significant benefits from the
changes we have made, not least from our morestreamlined
governance and management structures. Furthermore, our ‘One
Unilever’ programme continues to deliver both greater clarity and
significant savings as it is steadily rolled out across the whole
business. These are all helping to deliver the speed and the scale
we need to compete more effectively and could be seen reflected
last year in moreglobal brand platforms, the faster roll-out of
products and the launch of bigger and better innovations.
But we arenot complacent. Weknow that we will have to
quicken the pace of change even further in the year ahead if we
areto meet our goal of moving from competing to winning in
the marketplace.
You have put the concept of ‘Vitality’ at the heart of the
Group’s mission. What evidence is there that it has had a
direct impact on performance in 2006?
Vitality is about directing our business towards the increasing
desire and emphasis on the part of consumers the world over to
feel good, look good and to get more out of life. As a business
whose brands deliver health, hygiene and nutritional benefits, we
are perhaps uniquely well placed to respond to these evolving
consumer trends.
To that end, Vitality is already directly impacting our performance.
It is a key element in guiding us to those high growth spaces we
now regard as critical to Unilever’s long-term success. It is also
perhaps the single biggest factor driving our innovation
programme. The successful launch in the UK last year of AdeZ
– a soya-based fruit drink – is a good example, one that can be
traced directly to our Vitality mission and our determination to
continue developing products with proven nutritional benefits.