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Unilever Annual Report and Accounts 2010 31
Report of the Directors About Unilever
Non-GAAP measures
Certain discussions and analyses set out in this Annual Report
and Accounts include measures which are not defined by generally
accepted accounting principles (GAAP) such as IFRS. We believe
this information, along with comparable GAAP measurements,
isuseful to investors because it provides a basis for measuring
ouroperating performance, ability to retire debt and invest in
newbusiness opportunities. Our management uses these financial
measures, along with the most directly comparable GAAP financial
measures, in evaluating our operating performance and value
creation. Non-GAAP financial measures should not be considered
in isolation from, or as a substitute for, financial information
presented in compliance with GAAP. Non-GAAP financial
measures as reported by us may not be comparable with
similarlytitled amounts reported by other companies.
In the following sections we set out our definitions of the
following non-GAAP measures and provide reconciliations
torelevant GAAP measures:
• underlying sales growth;
• underlying volume growth;
• underlying operating margin (including explanation
ofrestructuring, business disposals and other one-off
items(RDIs));
• free cash flow; and
• net debt.
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:
Total Group
2010 2009
vs 2009 vs 2008
Underlying sales growth (%) 4.1 3.5
Effect of acquisitions (%) 0.3 0.6
Effect of disposals (%) (0.8) (3.0)
Effect of exchange rates (%) 7.3 (2.7)
Turnover growth (%)
11.1 (1.7)
Asia, Africa and Central & Eastern Europe
2010 2009
Underlying sales growth (%)
Effect of acquisitions (%)
Effect of disposals (%)
Effect of exchange rates (%)
Turnover growth (%)
vs 2009
7.7
0.2
(0.1)
10.1
18.7
vs 2008
7.7
0.5
(0.9)
(4.0)
2.9
The Americas
2010 2009
Underlying sales growth (%)
vs 2009
4.0
vs 2008
4.2
Effect of acquisitions (%) 0.3 0.7
Effect of disposals (%) (0.4) (6.0)
Effect of exchange rates (%) 9.0 (1.2)
Turnover growth (%)
13.3 (2.6)
Western Europe
2010 2009
Underlying sales growth (%)
vs 2009
(0.4)
vs 2008
(1.9)
Effect of acquisitions (%) 0.5 0.5
Effect of disposals (%) (2.0) (2.2)
Effect of exchange rates (%) 1.4 (2.5)
Turnover growth (%)
(0.5) (6.0)
Underlying volume growth (UVG)
Underlying volume growth is underlying sales growth after
eliminating the impact of price changes. The relationship
between the two measures is set out below:
2010 2009
vs
2009 vs 2008
Underlying volume growth (%)
Effect of price changes (%)
Underlying sales growth (%)
5.8
(1.6)
4.1
2.3
1.2
3.5
The UVG and price effect for each region and each category are
included within the tables on pages 24 to 27.
Underlying operating margin
In our commentary on results of operations in each of our regions
and at Group level, we discuss trends in underlying operating
margins, by which we mean operating margin before the impact
of restructuring costs, business disposals, impairments and other
one-off items, which we refer to collectively as RDIs. 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 this
measure.
The reconciliation of underlying operating profit and underlying
operating margin to the reported measures is as follows:
€ million € million
2010 2009
Operating profit 6,339 5,020
Restructuring costs 589 897
Business disposals (468) (4)
Impairments and other one-off items 160 (25)
Underlying operating profit 6,620 5,888
Turnover 44,262 39,823
Operating margin 14.3% 12.6%
Underlying operating margin 15.0% 14.8%
Further details of RDIs can be found in note 3 on page 83.