Unilever 2008 Annual Report Download - page 46

Unilever Annual Report and Accounts 2008 43
Report of the Directors
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:
2008 2007
vs 2007 vs 2006
Underlying sales growth (%) 7.4 5.5
Effect of acquisitions (%) 0.4 0.1
Effect of disposals (%) (1.8) (0.9)
Effect of exchange rates (%) (4.8) (3.1)
Turnover growth (%) 0.8 1.4
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 reconciliation of net debt to the GAAP measure total financial
liabilities is as follows:
€ million € million
2008 2007
Total financial liabilities (11 205) (9 649)
Financial liabilities due within one year (4 842) (4 166)
Financial liabilities due after one year (6 363) (5 483)
Cash and cash equivalents as per balance sheet 2 561 1 098
Cash and cash equivalents as per
cash flow statement 2 360 901
Add bank overdrafts deducted therein 201 197
Financial assets 632 216
Net debt (8 012) (8 335)
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 2007 we were positioned
8th, and at the end of 2008 the ranking was 9th. In 2008,
the following companies formed the peer group of comparator
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
Restructuring costs, business disposals and other one-off
items
In our commentary on results of operations in each of our regions
and at group level, we make reference to the impact of
restructuring costs, business disposals and other one-off items,
which we refer to collectively as RDIs, on our operating profit and
operating margins. We highlight these because we believe that
giving this information allows readers of our financial statements
to have a better understanding of underlying trends. There is no
recognised GAAP measure that corresponds to the items that we
report under this heading. For further information about these
items please refer to note 3 on page 93.
200820072004 2005 2006
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.