Unilever 2009 Annual Report Download - page 40

Unilever Annual Report and Accounts 2009 37
Basis of reporting
The accounting policies that are most significant in connection
with our financial reporting are set out on pages 42 and 43.
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 56).
Certain discussions within this Financial Review 2009 and in the
Financial Review 2008 starting on page 47 include measures that
are not defined by generally accepted accounting principles
(GAAP) such as IFRS. These include underlying sales growth (USG),
underlying volume growth (UVG), operating margin before RDIs,
ungeared free cash flow (UFCF), return on invested capital (ROIC),
and net debt. Further information about these measures is given
below or on pages 44 to 46.
Underlying sales growth 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 that
this 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 turnover for each of our
reporting regions is given on pages 38 to 39, and for the Group in
total on page 46.
Operating margin before RDIs is a measure that allows us to
comment on trends in operating profit after excluding the impact
of restructuring costs, profits and losses on business disposals,
impairments and certain other one-off items (which we collectively
term RDIs). We give further information about these on the face
of our income statement and in note 3 on page 89.
The reconciliation of operating margin before RDIs to reported
operating margin for each of our reporting regions is given on
pages 38 to 39, and for the Group in total on page 46.
USG, UVG and operating margin before RDIs are not measures
which are defined under IFRS. They should not be considered in
isolation from, or as a substitute for, financial information
presented in compliance with IFRS. These measures as reported by
us may not be comparable with similarly titled measures reported
by other companies.
Group results and earnings per share
The following discussion summarises the results of the Group
during the years 2009 and 2008. The figures quoted are in euros,
at current rates of exchange, being the average rates applying in
each period as applicable, unless otherwise stated. Information
about exchange rates between the euro, pound sterling and US
dollar is given on page 130.
In 2009 and 2008, no disposals qualified to be disclosed as
discontinued operations for purposes of reporting.
€ million € million
2009 2008
Continuing operations:
Turnover 39,823 40,523
Operating profit 5,020 7,167
Operating profit before RDIs 5,888 5,898
Net profit 3,659 5,285
€€
2009 2008
EPS – continuing operations 1.21 1.79
EPS – continuing operations before RDIs 1.33 1.43
Turnover in 2009 at €39,823 million was 1.7% lower than in
2008. Underlying sales growth, excluding the impact of
acquisitions, disposals and currency impacts, was 3.5%, including
underlying volume growth of 2.3%.
Reported operating profit was €5,020 million, compared with
€7,167 million in 2008, which benefited significantly from one-off
profits arising on the disposal of group companies. Underlying
operating margin before the net impact of these and other RDI
items was 14.8% compared with 14.6% in 2008. Reported
operating margin for the year was 12.6% (2008: 17.7%).
The cost of financing net borrowings was €429 million, €29
million higher than last year. The interest rate on net borrowings
was 4.9%, compared with 4.5% last year.
There was a net charge of €164 million for pensions financing
compared with a credit of €143 million in the previous year.
Expected returns on assets were much reduced in 2009 due to the
fall in asset values caused by the credit crunch.
The tax rate before RDIs was 26.6%, in line with last year. The
reported tax rate for the year was 26.2% compared with 26.4%
for 2008.
Net profit from joint ventures and associates, together with other
income from non-current investments, contributed €489 million,
which included a gain of €327 million from the disposal of the
majority of our equity interest in JohnsonDiversey. This compares
with €219 million last year, which included a gain of €61 million
on the disposal of our interests in plantations in Côte D’lvoire.
Reported earnings per share of €1.21 were 33% lower than last
year which was boosted by one-off profits on disposals of
businesses. Earnings per share before RDIs at €1.33 for the year
were 7% lower, principally due to the net charge for pensions
financing, compared with a credit last year.
Financial Review 2009