Unilever 2006 Annual Report Download - page 33

30 Unilever Annual Report and Accounts 2006
Report of the Directors (continued)
Financial review (continued)
Balance sheet
€million €million
2006 2005
Goodwill and intangible assets 17 206 18 055
Other non-current assets 10 365 10 303
Current assets 9501 11 142
Current liabilities (13 884) (15 394)
23 188 24 106
Non-current liabilities 11 516 15 341
Shareholders’ equity 11 230 8361
Minority interest 442 404
23 188 24 106
Goodwill and intangibles as at 31 December 2006 were
€0.8 billion lower than in 2005. This was almost solely a
consequence of currency movements. Currency movements also
explain the reduction of inventories and trade receivables when
compared with prior year. The other significant movements in
non-current assets relate to pension assets for funded schemes
in surplus and deferred tax assets. The increase in pension fund
assets was due to improvements in asset yields and increased
contributions. The decrease of non-current deferred tax assets
from €1.7 billion as at 31 December 2005 to €1.3 billion as at
31 December 2006 was a result of the decrease in pension
liabilities.
The overall funding shortfall beforetax of pensions and health
careplans reduced significantly from €5.6 billion at the end of
2005 to €3.1 billion at the end of 2006. Within this, there was at
31 December 2006 an aggregated surplus of €0.3 billion on our
funded plans, reflecting a combination of strong equity returns,
increased contributions and higher real interest rates, partly offset
by increased life expectancy assumptions. The value of our
unfunded obligations reduced from €4.2 billion to €3.4 billion
due to rises in interest rates, favourable exchange movements
and changes to various retiree medical benefits.
We made a number of changes to our pensions and post-
retirement healthcare plans during 2006. In particular, in the
US retiree healthcare plan we introduced an annual cap on the
benefits which each participant can claim. In the UK we updated
assumptions on pension commutations and now reduce some
deferred pensions if they are taken early, to align with market
practice. See page 32 for details on Unilever’s pension
investment strategy.
Total equity has increased by €2.9 billion in the year. Net profit
added €5.0 billion and currency and fair value/actuarial gains
added €0.5 billion. Dividends paid in the year totalled
€2.7 billion.
As at 31 December 2006, cash and cash equivalents and other
financial assets amounted to €1.3 billion, a decrease of €0.6
billion. Borrowings, (including finance leases amounting to
€0.2 billion and the negative fair value of derivatives relating to
borrowings) amounted to €8.8 billion a reduction of €3.8 billion.
The net debt position, see page 27, as at 31 December 2006 was
€7.5 billion, a reduction of €3.0 billion since 1 January 2006.
This was driven by the cash generated by the business during the
year, the proceeds of disposals (particularly from the sale of the
majority of the European frozen foods businesses) and currency
effects, specifically the weakening of the US dollar.
Unilever manages interest rate and currency exposures based on
the net debt position. Taking into account the various cross
currency swaps and other derivatives, 81% of Unilever’s net debt
was in US dollars (2005: 60%) and 25% in euros (2005:17%)
and ((33)% - financial assets) in sterling, with the remainder
spread over a large number of other currencies. The currency
distribution of total borrowings was as follows: 70% in US dollars
(2005: 51%), and 24% in euros (2005: 20%) with the remainder
spread over a large number of other currencies. Further details of
the currency analyses are given in note 15 on page 95 and note
16 on page 98.
Unilever has committed credit facilities in place to support its
commercial paper programmes and for general corporate
purposes. The undrawn committed credit facilities in place at
the end of 2006 were: bilateral committed credit facilities
totalling US $4.6 billion, bilateral notes commitments totalling
US $0.2 billion and bilateral money market commitments totalling
US $1.4 billion. Further details regarding these facilities are given
in note 16 on page 98.
During 2006, a US $300 million bond with a fixed interest rate
of 6.15% was repaid, as was a €1 billion bond with a fixed
interest rate of 5.125% and a US $500 million bond with a fixed
interest rate of 5.125%. Three floating rate bonds denominated
in Japanese yen for a total of ¥37 billion (approximately
€250 million) were repaid and Unilever issued a new floating rate
bond for a similar amount with a maturity date of June 2008.
Unilever is satisfied that its financing arrangements are adequate
to meet its working capital needs for the foreseeable future.
Unilever’s contractual obligations at the end of 2006 included
capital expenditure commitments, borrowings, lease commitments
and other commitments. A summary of certain contractual
obligations at 31 December 2006 is provided in the table below.
Other long-term commitments have increased compared with
prior year due to the outsourcing contracts which Unilever has
entered into during 2006. Further details are set out in the
following notes to the accounts; note 10 on page 90, note 16 on
page 96, note 17 on pages 99 to 101 and note 25 on page 112.