Unilever 2008 Annual Report Download - page 45

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Financial Review continued
42 Unilever Annual Report and Accounts 2008
Report of the Directors
Return on invested capital (ROIC)
ROIC expresses the returns generated on capital invested in the Group. The progression of ROIC is used by Unilever to measure
progress against our longer-term value creation goals outlined to investors.
ROIC is profit after tax but excluding net interest on net debt and impairment of goodwill and indefinite-lived intangible assets both net
of tax, divided by average invested capital for the year. Invested capital is the sum of property, plant and equipment and other non-
current investments, software and finite-lived intangible assets, working capital, goodwill and indefinite-lived intangible assets at gross
book value and cumulative goodwill written off directly to reserves under an earlier accounting policy.
In 2008, ROIC was 15.7% (2007: 12.7%; 2006: 14.6%). The reconciliation of ROIC to the GAAP measure net profit is shown below.
ROIC is based on total business profit, including profit on business disposals. The impact of such disposals in 2008, 2007 and
2006 was €1.6 billion, €0.3 billion and €1.2 billion respectively. ROIC excluding this impact in 2008 was 11.2% (2007: 11.3%;
2006: 11.5%).
€ million € million € million
Return on invested capital 2008 2007 2006
Net profit 5 285 4 136 5 015
Add back net interest expense net of tax 294 314 365
Add back impairment charges net of tax(a) 38 115
Profit after tax, before interest and impairment of goodwill and indefinite-lived intangible assets 5 617 4 451 5 395
Year-end positions for invested capital:
Property, plant and equipment and other non-current investments 7 024 7 276 7 142
Software and finite-lived intangible assets 540 590 608
Inventories 3 889 3 894 3 796
Trade and other receivables 5 002 4 965 4 667
Trade payables and other creditors due within one year (8 449) (8 545) (8 513)
Elements of invested capital included in assets and liabilities held for sale 45 150 15
Goodwill and indefinite-lived intangible assets at gross book value 20 892 20 029 20 705
Total 28 943 28 359 28 420
Add back cumulative goodwill written off directly to reserves 6 343 6 427 6 427
Year-end invested capital 35 286 34 786 34 847
Average invested capital for the year 35 832 35 122 36 850
Return on average invested capital 15.7% 12.7% 14.6%
(a) Excluding write-downs of goodwill and indefinite-lived intangible assets taken in connection with business disposals.