Unilever 2008 Annual Report Download - page 32

Unilever Annual Report and Accounts 2008 29
Performance Review
Basis of reporting
Certain discussions within this Performance Review and in the
Financial Review starting on page 35 include measures that are
not defined by generally accepted accounting principles (GAAP)
such as IFRS. These include Ungeared Free Cash Flow (UFCF),
Return on Invested Capital (ROIC), Underlying Sales Growth
(USG), and Net Debt. For further information please refer to
page 40.
The accounting policies that are most significant in connection
with our financial reporting are set out on pages 38 and 39.
Foreign currency amounts for results and cash flows are translated
from underlying local currencies into euros using annual average
exchange rates. Balance sheet amounts are translated at year-end
rates, except for the ordinary capital of the two parent
companies. These are translated at the rate referred to in the
Equalisation Agreement of 31⁄9p = €0.16 (see Corporate
governance on page 51).
During 2008 we have implemented changes in the regional
organisation of our business reflecting our strategic focus on the
developing world. Our revised structure for management and
reporting of financial performance is across the following three
regions:
• Western Europe
• The Americas
• Asia, Africa and Central & Eastern Europe (AACEE)
Our segmental reporting information for prior years has therefore
been restated so that the results for countries in Central & Eastern
Europe are now reported under AACEE.
In this Performance Review we comment on changes in revenue
on the basis of underlying sales growth (USG). This measure
reflects the change in revenue at constant rates of exchange,
(average exchange rates for the preceding year) excluding the
effects of acquisitions and disposals. We believe 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.
USG is not a measure which is defined under IFRS. It should not
be considered in isolation from, or as a substitute for, financial
information presented in compliance with IFRS. This measure as
reported by us may not be comparable with similarly titled
measures reported by other companies.
The reconciliation of USG to changes in turnover for each of our
reporting regions is given in the following sections, and for the
Group in total on page 43.
We also make reference in our commentary to restructuring costs,
profits and losses on business disposals, impairments and certain
other one-off items, which we collectively term RDIs, and the
impact of these on our operating margin. We give further
information about these on the face of our income statement and
in note 3 on page 93.
The reporting in this section is based on results for continuing
operations. Information about discontinued operations is given in
note 27 on page 130.
Group results and earnings per share
The following discussion summarises the results of the Group
during the years 2008, 2007 and 2006. The figures quoted are in
euros, at current rates of exchange, being the average or year-end
rates of each period as applicable, unless otherwise stated.
Information about exchange rates between the euro, pound
sterling and US dollar is given on page 139.
In 2008 and 2007, no disposals qualified to be disclosed as
discontinued operations for purposes of reporting. During 2006,
we successfully completed the sale of the majority of our
European frozen foods businesses. The results of the businesses
disposed of have been presented as discontinued operations for
2006 for the period up to the date of sale. There was also some
impact on 2007 as a result of the outcome of agreements made
in connection with the sale.
€ million € million € million
2008 2007 2006
Continuing operations:
Turnover 40 523 40 187 39 642
Operating profit 7 167 5 245 5 408
Net profit 5 285 4 056 3 685
Net profit from discontinued operations –80 1 330
Net profit – total 5 285 4 136 5 015
€€€
2008 2007 2006
EPS – continuing operations 1.79 1.32 1.19
EPS – total 1.79 1.35 1.65
Group results for 2008 compared with 2007
Underlying sales growth of 7.4% was broad-based across
categories and in line with our markets overall. Growth was
primarily driven by increased prices, with volumes essentially flat.
Underlying sales growth was offset by movements of (4.8)% in
exchange rates and a net impact of (1.4)% from disposals and
acquisitions. Including these effects, turnover was €40 523 million
for the full year, increasing by 0.8%.
During the year we continued to progress our One Unilever
transformation agenda, contributing to an underlying
improvement in operating margin. We integrated multiple
countries into single multi-country operations in many of our key
markets. We further shaped our portfolio through a number of
disposals, including our North American laundry business, Boursin,
Lawry’s and the Bertolli olive oil business, as well as through the
acquisition of Inmarko, the market leader in ice cream in Russia.
We also made further progress in the simplification of our supply
chain network in Europe with the establishment of a regional
European supply chain company in Switzerland, and we initiated a
move to a similar regional structure for Asia based in Singapore.
Operating profit increased by €1 922 million to €7 167 million,
including a higher level of profits on business disposals. These
generated a pre-tax profit of €2 190 million in 2008, compared
with €297 million in 2007. Before the impact of RDIs
(restructuring, disposals, impairments and other one-off items),
operating profit grew by 1% at current exchange rates, or 6% at
constant exchange rates, and there was an underlying
improvement in operating margin of 0.1 percentage points.
Report of the Directors