Unilever 2007 Annual Report Download - page 34

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Financial Review continued
Underlying sales growth (USG)
USG reflects the change in revenue from continuing operations at
constant rates of exchange, excluding the effects of acquisitions
and disposals. It is a measure that provides valuable additional
information on the underlying performance of the business.
In particular, it presents the organic growth of our business year
on year and is used internally as a core measure of sales
performance.
The reconciliation of USG to changes in the GAAP measure
turnover is as follows:
2007 2006
vs 2006 vs 2005
Underlying sales growth (%) 5.5 3.8
Effect of acquisitions (%) 0.1 0.1
Effect of disposals (%) (0.9) (0.8)
Effect of exchange rates (%) (3.1) 0.3
Turnover growth (%) 1.4 3.2
Net debt
Net debt is defined as the excess of total financial liabilities,
excluding trade and other payables, over cash, cash equivalents
and financial assets, excluding amounts held for sale. It is a
measure that provides valuable additional information on the
summary presentation of the Group’s net financial liabilities and is
a measure in common use elsewhere. The net debt definition in
our 2007 reporting has not changed in substance from previous
years, however, the terminology has been updated to correspond
with that appearing on the balance sheet.
The reconciliation of net debt to the GAAP measure total financial
liabilities is as follows:
€ million € million
2007 2006
Total financial liabilities (9 649) (8 835)
Financial liabilities due within one year (4 166) (4 458)
Financial liabilities due after one year (5 483) (4 377)
Cash and cash equivalents as per balance sheet 1 098 1 039
Cash and cash equivalents as per
cash flow statement 901 710
Add bank overdrafts deducted therein 197 329
Financial assets 216 273
Net debt (8 335) (7 523)
Total Shareholder Return (TSR)
TSR measures the returns received by a shareholder, capturing
both the increase in share price and the value of dividend income
(assuming dividends are re-invested). Unilever’s TSR performance
is compared with a peer group of competitors over a three-year
rolling performance period. This period is sensitive enough to
reflect changes but long enough to smooth out short-term
volatility. The return is expressed in US dollars, based on the
equivalent US dollar share price for NV and PLC. US dollars were
chosen to facilitate comparison with companies in Unilever’s
chosen reference group. The choice of currency affects the
absolute TSR but not the relative ranking.
Unilever’s TSR target is to be in the top third of a reference group
including 20 other international consumer goods companies on a
three-year rolling basis. At the end of 2006 we were positioned
13th, and at the end of 2007 the ranking was 8th. In 2007,
the following companies formed the peer group of comparative
companies:
Avon Kraft
Beiersdorf Lion
Cadbury Schweppes L’Oréal
Clorox Nestlé
Coca-Cola Orkla
Colgate PepsiCo
Danone Procter & Gamble
Heinz Reckitt Benckiser
Kao Sara Lee
Kimberly-Clark Shiseido
200720062003 2004 2005
7
14
21
Unilever’s position relative to the TSR reference group
The reference group, including Unilever, consists of 21 companies. Unilever’s position is
based on TSR over a three-year rolling period.
32 Unilever Annual Report and Accounts 2007
Report of the Directors continued