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21Unilever Annual Report and Accounts 2011
Report of the Directors About Unilever
Financial overview 2011
Consolidated income statement
(highlights) for the year ended 31 December
2011 2010 % change
Turnover (€ million) 46,467 44,262 5%
Operating profit (€ million) 6,433 6,339 1%
Profit before tax (€ million) 6,245 6,132 2%
Net profit (€ million) 4,623 4,598 1%
Diluted earnings per share (€) 1.46 1.46 0%
Turnover at €46.5 billion increased 5.0%, despite a negative
impact of 2.5% due to currency. Underlying sales growth
increased to 6.5%, driven by emerging markets. Underlying
volume growth was 1.6% and the price effect was 4.8%.
Operating profit was €6.4 billion, compared with €6.3 billion in
2010, with higher credits for one-off items, lower profits arising
from the disposal of group companies and higher acquisition and
integration costs. Underlying operating profit increased by 4.2% to
€6.9 billion, with underlying operating margin decreasing by 0.1%
to 14.9%.
The cost of financing net borrowings was €448 million,
€34 million higher than last year. The average level of net debt
increased, in part due to the acquisition of Alberto Culver. The
average interest rate was 3.7% on borrowings and 2.3% on cash
deposits. The net pensions financing credit was €71 million
compared with €20 million in 2010.
The effective tax rate was 26.5% compared with 25.5% in 2010,
reflecting the geographic mix of pre-tax profits and the impact of
the Italian frozen foods disposal in the 2010 rate.
Net profit from joint ventures and associates, together with other
income from non-current investments, contributed €189 million
compared to €187 million in the prior year.
Fully diluted earnings per share were flat at €1.46. Higher
underlying operating profit and lower pension costs were partially
offset by lower profits from business disposals. In addition,
restructuring charges (including acquisitions) were higher, the
impact of foreign exchange was negative and finance costs and
the tax charge increased.
Key performance indicators*
2011 2010 2009
Underlying sales growth (%) 6.5 4.1 3.5
Underlying volume growth (%) 1.6 5.8 2.3
Underlying operating margin (%) 14.9 15.0 14.8
Free cash flow (€ million) 3,075 3,365 4,072
We report our performance against four key financial indicators:
• underlying sales growth;
• underlying volume growth;
• underlying operating margin; and
• free cash flow.
The performance of the KPIs is described on page 20, on this page
and within the segmental commentaries on pages 22 to 23. The
KPIs are described on pages 26 to 27. The non-financial KPIs are
described on pages 6 and 19.
Acquisitions and disposals
During 2011 Unilever continued to shape its portfolio through
M&A activities. The most significant was the acquisition of Alberto
Culver, Inc., completed on 10 May 2011, and the full year impact of
the acquired Sara Lee’s personal care business, which completed
on 6 December 2010.
Alberto Culver, Inc. was acquired for €2.7 billion in cash and the
provisional estimate of goodwill arising on acquisition, recognised
in our 2011 balance sheet, is €1.3 billion. The acquisition
accounting will be finalised during 2012.
During the year, the Group has updated the provisional acquisition
accounting recorded at 31 December 2010 for the Sara Lee
acquisition. Certain adjustments to the 31 December 2010 balance
sheet have been recorded, including the update of the valuation of
assets held for sale in relation to the Sanex business which was
disposed during 2011.
Further details of these and other acquisitions and disposals
during 2009, 2010 and 2011 can be found in note 21 on pages
104 to 106.
We have presented some parts of the financial review
within other sections of this Annual Report and
Accounts, including the financial statements section.
We believe this integrated approach provides a better
flow of information and avoids duplication.
* Certain measures used in our reporting are not
defined under IFRS. For further information about
these measures, please refer to the commentary
on non-GAAP measures on pages 26 to 27.