Unilever 2013 Annual Report Download - page 35

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;
• core earnings per share (core EPS);
• free cash flow; and
• net debt.
UNDERLYIN SALES ROWTH (US)
Underlying Sales Growth or “USG” refers to the increase in
turnover for theperiod, excluding any change in turnover resulting
from acquisitions, disposals and changes in currency. Acquisitions
anddisposals are excluded from USG for a period of 12 calendar
months from the applicable closing date. Turnover from acquired
brands that are launched in countries where they were not
previously sold is included in USG as such turnover is more
attributable to our existing sales and distribution network than
theacquisition itself.
The reconciliation of USG to changes in the GAAP measure
turnover is as follows:
TOTAL ROUP
2013
vs 2012
2012
vs 2011
Underlying sales growth (%) 43 6.9
Effect of acquisitions (%) –1.8
Effect of disposals (%) (11) (0.7)
Effect of exchange rates (%) (59) 2.2
Turnover growth (%)(a) (30) 10.5
PERSONAL ARE
2013
vs 2012
2012
vs 2011
Underlying sales growth (%) 73 10.0
Effect of acquisitions (%) –4.4
Effect of disposals (%) (02) (0.5)
Effect of exchange rates (%) (68) 2.3
Turnover growth (%)(a) (02) 17.0
FOODS
2013
vs 2012
2012
vs 2011
Underlying sales growth (%) 03 1.8
Effect of acquisitions (%) ––
Effect of disposals (%) (37) (1.5)
Effect of exchange rates (%) (38) 3.0
Turnover growth (%)(a) (70) 3.3
REFRESHMENT
2013
vs 2012
2012
vs 2011
Underlying sales growth (%) 11 6.3
Effect of acquisitions (%) 01 0.8
Effect of disposals (%) –0.7
Effect of exchange rates (%) (47) 2.4
Turnover growth (%)(a) (37) 10.5
HOME ARE
2013
vs 2012
2012
vs 2011
Underlying sales growth (%) 80 10.3
Effect of acquisitions (%) 01 0.6
Effect of disposals (%) –(1.1)
Effect of exchange rates (%) (86) 0.6
Turnover growth (%)(a) (12) 10.4
(a) Turnover growth is made up of distinct individual growth components
namely underlying sales, currency impact, acquisitions and disposals.
Turnover growth is arrived at by multiplying these individual components
on a compounded basis as there is a currency impact on each of the other
components. Accordingly, turnover growth is more than just the sum of the
individual components.
UNDERLYIN VOLUME ROWTH (UV)
Underlying Volume Growth or “UVG” is part of USG and means,
for the applicable period, the increase in turnover in such period
calculated as the sum of (1) the increase in turnover attributable
to the volume of products sold; and (2) the increase in turnover
attributable to the composition of products sold during such
period. UVG therefore excludes any impact to USG due to changes
in prices.
The relationship betweenthe two measures is set out below:
2013
vs 2012
2012
vs 2011
Underlying volume growth (%) 25 3.4
Effect of price changes (%) 18 3.3
Underlying sales growth (%) 43 6.9
The UVG and price effect for category and geographical area are
shown in the tables on pages 27 and 28.
FREE ASH FLOW (FF)
Within the Unilever Group, free cash flow (FCF) is defined as cash
flow from operating activities, less income taxes paid, net capital
expenditures and net interest payments and preference dividends
paid. It does not represent residual cash flows entirely available
for discretionary purposes; for example, the repayment of
principal amounts borrowed is not deducted from FCF. Free cash
flow reflects an additional way of viewing our liquidity that we
believe is useful to investors because it represents cash flows
that could be used for distribution of dividends, repayment of debt
or to fund our strategic initiatives, including acquisitions, if any.
32 Unlever Annual Report and Accounts 2013Strategc report
FINANCIAL REVIEW 2013
CONTINUED