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26 Unilever Annual Report and Accounts 2011
Report of the Directors About Unilever
FINANCIAL REVIEW 2011 continued
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 ouroperating 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 similarlytitled 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
2011
vs 2010
2010
vs 2009
Underlying sales growth (%) 6.5 4.1
Effect of acquisitions (%) 2.7 0.3
Effect of disposals (%) (1.5) (0.8)
Effect of exchange rates (%) (2.5) 7.3
Turnover growth (%) 5.0 11.1
Asia, Africa CEE
2011
vs 2010
2010
vs 2009
Underlying sales growth (%) 10.5 7.7
Effect of acquisitions (%) 0.7 0.2
Effect of disposals (%) 0.0 (0.1)
Effect of exchange rates (%) (3.7) 10.1
Turnover growth (%) 7.1 18.7
The Americas
2011
vs 2010
2010
vs 2009
Underlying sales growth (%) 6.3 4.0
Effect of acquisitions (%) 3.6 0.3
Effect of disposals (%) (1.5) (0.4)
Effect of exchange rates (%) (3.4) 9.0
Turnover growth (%) 4.7 13.3
Western Europe
2011
vs 2010
2010
vs 2009
Underlying sales growth (%) 0.7 (0.4)
Effect of acquisitions (%) 4.8 0.5
Effect of disposals (%) (3.6) (2.0)
Effect of exchange rates (%) 0.4 1.4
Turnover growth (%) 2.1 (0.5)
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:
2011
vs 2010
2010
vs 2009
Underlying volume growth (%) 1.6 5.8
Effect of price changes (%) 4.8 (1.6)
Underlying sales growth (%) 6.5 4.1
The UVG and price effect for each region and category are shown
within the tables on pages 22 to 23.
Underlying operating margin
In our commentary on results of operations for the Group and
each region, we discuss trends in underlying operating margins.
This means 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 to operating profit
is as follows:
€ million
2011
€ million
2010
Operating profit 6,433 6,339
Restructuring costs 612 589
Business disposals (221) (468)
Acquisition and integration costs and other
one-off items 77 160
Underlying operating profit 6,901 6,620
Turnover 46,467 44,262
Operating margin 13.8% 14.3%
Underlying operating margin 14.9% 15.0%
Further details of RDIs can be found in note 3 on page 72.