Unilever 2012 Annual Report Download - page 37

34 Unilever Annual Report and Accounts 2012Report of the Directors About Unilever
FINANIAL REVIEW 2012 continued
Non-AAP measures
Non-AAP 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;
• core operating profit and core operating margin (including
acquisition and disposal related costs, gain/(loss) on disposal
of group companies, impairments and other one-off items
(non-core items));
• core earnings per share (core EPS);
• free cash flow; and
• net debt.
Underlyng sales growth (US)
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 roup
2012
vs 2011
2011
vs 2010
Underlying sales growth (%) 69 6.5
Effect of acquisitions (%) 18 2.7
Effect of disposals (%) (07) (1.5)
Effect of exchange rates (%) 22 (2.5)
Turnover growth (%) 105 5.0
Personal are
2012
vs 2011
2011
vs 2010
Underlying sales growth (%) 100 8.2
Effect of acquisitions (%) 44 7.3
Effect of disposals (%) (05) (0.2)
Effect of exchange rates (%) 23 (2.9)
Turnover growth (%) 170 12.4
Foods
2012
vs 2011
2011
vs 2010
Underlying sales growth (%) 18 4.9
Effect of acquisitions (%) –0.2
Effect of disposals (%) (15) (4.3)
Effect of exchange rates (%) 30 (1.9)
Turnover growth (%) 33 (1.3)
Refreshment
2012
vs 2011
2011
vs 2010
Underlying sales growth (%) 63 4.9
Effect of acquisitions (%) 08 0.3
Effect of disposals (%) 07 (0.3)
Effect of exchange rates (%) 24 (2.5)
Turnover growth (%) 105 2.3
Home are
2012
vs 2011
2011
vs 2010
Underlying sales growth (%) 103 8.1
Effect of acquisitions (%) 06 1.3
Effect of disposals (%) (11) 0.1
Effect of exchange rates (%) 06 (3.1)
Turnover growth (%) 104 6.2
Underlyng volume growth (UV)
Underlying volume growth is underlying sales growth after
eliminating the impact of price changes. The relationship
betweenthe two measures is set out below:
2012
vs 2011
2011
vs 2010
Underlying volume growth (%) 34 1.6
Effect of price changes (%) 33 4.8
Underlying sales growth (%) 69 6.5
The UVG and price effect for category and geographical area are
shown in the tables on pages 30 to 31.
Free cash flow (FF)
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.