Unilever 2011 Annual Report Download - page 30

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27
Free cash flow (FCF)
Free cash flow represents the cash generated from the operation
and financing of the business. The movement in FCF measures
our progress against the commitment to deliver strong cash flows.
FCF is not used as a liquidity measure within Unilever. FCFincludes
the cash flow from Group operating activities, lessincome tax paid,
net capital expenditure, net interest andpreference dividends paid.
The reconciliation of FCF to net profit is as follows:
€ million
2011
€ million
2010
Net profit 4,623 4,598
Taxation 1,622 1,534
Share of net profit of joint ventures/associates
and other income from non-current investments (189) (187)
Net finance costs 377 394
Depreciation, amortisation and impairment 1,029 993
Changes in working capital (177) 169
Pensions and similar provisions less payments (553) (472)
Provisions less payments 972
Elimination of (profits)/losses on disposals (215) (476)
Non-cash charge for share-based compensation 105 144
Other adjustments 849
Cash flow from operating activities 6,639 6,818
Income tax paid (1,187) (1,328)
Net capital expenditure (1,974) (1,701)
Net interest and preference dividends paid (403) (424)
Free cash flow 3,075 3,365
Net debt
Net debt is defined as the excess of total financial liabilities,
excluding trade and other payables, over cash, cash equivalents
and current financial assets, excluding trade and other
receivables. 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
2011
€ million
2010
Total financial liabilities (13,718) (9,534)
Current financial liabilities (5,840) (2,276)
Non-current financial liabilities (7,878) (7,258)
Cash and cash equivalents as per balance sheet 3,484 2,316
Cash and cash equivalents as per
cash flow statement 2,978 1,966
Add bank overdrafts deducted therein 506 350
Current financial assets 1,453 550
Net debt (8,781) (6,668)
Core operating margin
From 2012 the Group will refer to core operating margin as a
non-GAAP measure. This means operating margin before the
impact of business disposals, impairments, aquisition and
integration costs and other one-off items. There is no recognised
GAAP measure that corresponds to this measure.
Unilever Annual Report and Accounts 2011
Report of the Directors About Unilever