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Table of contents

  • Page 1
    ... you. This Annual Report and Accounts does not constitute an invitation to invest in Unilever shares. Any decisions you make in reliance on this information are solely your responsibility. The information is given as of the dates specified, is not updated, and any forward-looking statements are made...

  • Page 2
    MAKING SUSTAINABLE LIVING COMMONPLACE ANNUAL REPORT AND ACCOUNTS 2015 STRATEGIC REPORT

  • Page 3
    ... PROGRAMME WE AIM TO IMPROVE HEALTH AND HYGIENE FOR 1 BILLION PEOPLE AROUND THE WORLD, THROUGH BRANDS SUCH AS LIFEBUOY. OUR HANDWASHING PROGRAMME IS THE WORLD'S LARGEST, THANKS IN PART TO FUNDING FROM OUR EXTERNAL PARTNERS. 21 The campaign was rolled out in 21 countries. 337 million Almost 337...

  • Page 4
    ...risks and consistent, competitive and profitable long-term growth. OUR ANNUAL REPORT AND ACCOUNTS 2015 IS IN TWO PARTS: OUR STRATEGIC REPORT The Strategic Report contains information about us, how we create value and how we run our business. It includes our strategy, business model, markets and Key...

  • Page 5
    ...and Knorr, that deliver strong social or environmental benefits. We actively manage our portfolio and in 2015 added a Prestige skin care range in Personal Care through acquisition, and focused some of our Foods brands in a new Baking, Cooking and Spreads business. 1 2 3 4 13 â,¬1 BILLION BRANDS...

  • Page 6
    ... of returns over the long term. Our scale means we can take advantage of global manufacturing and distribution, providing efficiencies of scale and driving down costs. 9 10 11 12 13 190 WE OPERATE IN MORE THAN 190 COUNTRIES Unilever Annual Report and Accounts 2015 Strategic Report 3

  • Page 7
    ... environment in which to do business. Over the years I have looked to engage frequently and openly with Unilever's shareholder base and that was repeated in 2015. I met once again with principal shareholders in Europe and the US and discussed with them issues related to strategy and governance...

  • Page 8
    ... Report. For more information on Board evaluation and shareholder engagement, see pages 46 and 49 of the Governance and Financial Report. Committee reports can be found on pages 60 to 83 of the Governance and Financial Report. 9 10 11 12 13 14 Unilever Annual Report and Accounts 2015 Strategic...

  • Page 9
    CHIEF EXECUTIVE OFFICER'S REVIEW UNILEVER COMPLETED YET ANOTHER YEAR OF GROWTH AHEAD OF ITS MARKETS IN 2015 AND CONTINUED TO DRIVE LONG-TERM RETURNS FOR SHAREHOLDERS. Our leadership in making sustainable living the foundation of our business received resounding vindication from a number of political...

  • Page 10
    ... percentage points. Tight control of working capital contributed to a healthy year of cash flow delivery of â,¬4.8 billion, which - combined with the improvement in operating margin - contributed to core earnings per share growth of 14%. Unilever Annual Report and Accounts 2015 Strategic Report 7

  • Page 11
    ... agile business models and proximity to consumers, these businesses are gaining share in many markets. In this environment, the opportunity exists to show that we can continue to develop a portfolio of brands with the right blend of global and local presence, supported by an organisational structure...

  • Page 12
    .... Marc Engel joined ULE on 1 January 2016. Graeme Pitkethly will be proposed for election as an Executive Director at the 2016 AGMs. For ULE biographies, please see page 59 of the Governance and Financial Report. 9 10 Ω 11 12 13 Unilever Annual Report and Accounts 2015 Strategic Report 9

  • Page 13
    ...-level growth in North America and Europe. Many emerging markets were hit by local currency devaluations versus the US dollar, driving up the cost of consumer goods faster than wage growth. A number of these economies export commodities and have also been hit by slowing global demand. DIGITAL AND...

  • Page 14
    ...innovations and consumer offers to rival those of global players. Among customers, the relative decline of supermarkets continues in favour of local and convenience stores, discount chains - often with own label offers - and e-commerce. Unilever Annual Report and Accounts 2015 Strategic Report 11

  • Page 15
    ..., profitable and responsible. VISION OUR LONG-TERM FOCUS ALLOWS US TO MAKE STRATEGIC PORTFOLIO CHOICES POSITIVE SOCIAL IMPACT CATEGORY CHOICES DOUBLE THE BUSINESS ACTIVE PORTFOLIO MANAGEMENT We actively manage our brand portfolio to focus it on more attractive segments where we can apply global...

  • Page 16
    ...sales growth, core operating margin and free cash flow by continuously investing in our supply chain, our brands and marketing, our people and IT to provide a long-term sustainable business. BUILDING A PRESTIGE BUSINESS Through acquisition we have invested in the growth opportunity of Prestige skin...

  • Page 17
    ...process and through all channels. We partner with many digital start-ups through our Unilever Foundry programme to bring the most cutting edge marketing to Unilever brands. WE PARTNER WITH CUSTOMERS TO PIONEER NEW PRODUCTS AND CONCEPTS 14 Strategic Report Unilever Annual Report and Accounts 2015

  • Page 18
    ... brands through benefit-led innovation unlocked by science and technology. We spend about â,¬1 billion a year on research and development, employ more than 6,000 R&D experts and have six key R&D sites. Categoryspecific R&D is complemented by a Strategic Science Group working on long-term science...

  • Page 19
    ... BENEFITS THAT OUR VISION AND STRATEGY DELIVER TRANSLATE INTO PERFORMANCE FOR SHAREHOLDERS AND SOCIETY AT LARGE. FINANCIAL PERFORMANCE GROWING THE BUSINESS: GROUP UNDERLYING SALES GROWTH* UNDERLYING VOLUME GROWTH* CORE OPERATING MARGIN* FREE CASH FLOW* 2015 4.1% 2014: 2.9% Underlying sales growth...

  • Page 20
    ... We trained 70,000 women microentrepreneurs to sell our products in rural India by end 2015.Ð- The percentage of persons of each sex who were Unilever managers was 55% male and 45% female (2014: 57% male and 43% female).** PERFORMANCE 54% of procurement spend through suppliers meeting mandatory...

  • Page 21
    ... at the annual Rainforest Alliance Gala in New York in May 2015, when it won the Sustainable Standard-Setter Award, which recognises businesses and individuals that work diligently to meet rigorous sustainability standards, protect the environment and support local communities worldwide. BREYERS...

  • Page 22
    ... the long term. The financial performance that results is based on growth that is consistent, competitive, responsible and profitable. How we manage our portfolio of assets and our finances is an important contributor to shareholder returns and reflects how the business is adapting to meet changing...

  • Page 23
    ...CONSUMER EXPERIENCE TRANSFORMED BY THE SPRAY FORMAT. INTRODUCING DRY SPRAY DEODORANTS IN NORTH AMERICA CONTINUED INNOVATIONS HELP DRIVE GROWTH IN CORE BRANDS Market shares of Unilever deodorants are growing in both the US and Canada. 20 Strategic Report Unilever Annual Report and Accounts 2015

  • Page 24
    ... and cash flow. In 2015, focus has been on three priorities: to accelerate growth in emerging markets; to reignite growth in Europe and North America; and to adapt the portfolio to address emerging consumer trends. The strategy successfully delivered a return to positive underlying sales growth of...

  • Page 25
    ... BRANDS, AS WELL AS SUNLIGHT, DOMESTOS, COMFORT AND OUR WATER PURIFICATION BRAND PUREIT. Home Care had a turnover of â,¬10.2 billion in 2015, accounting for 19% of Unilever's turnover and 10% of operating profit. The category generates more than 80% of its sales in emerging markets and its strategic...

  • Page 26
    ... and helped by successful innovations behind premium brands in Europe and North America. Performance was also helped by good summer weather in Europe. Innovations included Magnum Pink & Black and the Ben & Jerry's Cookie Core range. In September 2015 we acquired Grom, a gelato business with 60...

  • Page 27
    .... Unilever worked with the World Business Council for Sustainable Development (WBCSD), World Economic Forum (WEF), UN Global Compact and We Mean Business Coalition to encourage companies to step up their efforts to address climate change in their own operations. Speaking in Paris at an event hosted...

  • Page 28
    ... communities across Africa, South Asia, Latin America and the Caribbean. It is a three-year US$10 million investment plan to spur economic growth by backing private enterprises which link smallholders to Unilever's global supply chain and distribution networks. In 2015, Unilever and the Global...

  • Page 29
    ... campaign to help consumers save water in Brazil during the country's worst water shortage, helping the brand grow at nearly double the market rate. THE CAMPAIGN DOUBLED VISITORS TO THE OMO WEBSITE WITH A 290% INCREASE IN DWELL TIME. 26 Unilever Annual Report and Accounts 2015 Strategic Report

  • Page 30
    ...730,000 on tea smallholdings in Kenya and India. We also enabled around 600,000 smallholder farmers and 1.8 million small-scale retailers to access initiatives which aimed to improve their agricultural practices or increase their sales. Unilever Annual Report and Accounts 2015 Strategic Report 27

  • Page 31
    ... and 32 in 2014. This result reflects our digital engagement with students via social media and numerous campus activities. Our flagship initiative is the Future Leaders League - an international competition among universities which send teams to our global event, and which provides the opportunity...

  • Page 32
    ... Unilever, our supply chain is where the bulk of Unilever's people work and so is a big focus for our training activity. This number of people requires us to focus on self-directed learning via the use of effective systems and core skills curricula. This year we have updated the Learning Management...

  • Page 33
    ... rights issues - those at risk of the most severe negative impacts through a company's activities or business relationships. The report highlights challenges and key areas of progress, including Unilever's work to empower women, the fight against sexual harassment and how we are addressing health...

  • Page 34
    ... high. Among the top 101 executive managers, 23 (23%) were women compared with 18% in 2014. If you include employees who are statutory directors of the corporate entities whose financial information is included in the Group's 2015 consolidated accounts in this Annual Report and Accounts, the number...

  • Page 35
    ... are taken for local customers and consumers, which helps deliver our global strategy. 58% Turnover from emerging markets 12% 11% 9% 6% 7% 2011 2012 2013 2014 2015 Our average emerging markets growth over the period was 9%. 32 Strategic Report Unilever Annual Report and Accounts 2015

  • Page 36
    ... our consumer insight and research and development resources. The acquisition of the Prestige skin care brands is a good example of how Unilever uses merger and acquisition activity to help reshape our portfolios towards more attractive segments where we can most effectively apply our global scale...

  • Page 37
    ...Working capital as a percentage of sales is negative which means that growth in the business is intrinsically cash generative. The ratio of fixed assets to sales reduced compared with the previous year as the business grew. FINANCIAL RETURNS EARNINGS PER SHARE As a result of our operations our core...

  • Page 38
    ...of total turnover (2014: 57%) with underlying sales growth of 7.1% (2014: 5.7%) of which 2.7% was volume growth. Currency devaluation continued to push up the cost of living for consumers in many of the emerging markets. Our performance in developed markets was flat with good volume growth in Europe...

  • Page 39
    ...of exchange rate was a favourable â,¬151 million. In addition, higher supply chain costs led to decline in margins and this reduced profit by â,¬55 million. Brand and marketing investment was up 5%. HOME CARE 2015 2014 % Change REFRESHMENT 2015 2014 % Change Turnover (â,¬ million) Operating...

  • Page 40
    ... of strong cash flow generated from operating activities which included â,¬0.7 billion from efficient working capital 2013 2014 2015 management. The prior year was also negatively impacted by â,¬0.8 billion tax arising on business disposals. Net capital expenditure remains flat in absolute terms at...

  • Page 41
    ... 2015 vs 2014 (0.6) - (3.6) (3.9) (7.9) 2014 vs 2013 HOME CARE Underlying sales growth (%) Effect of acquisitions (%) Effect of disposals (%) Effect of exchange rates (%) Turnover growth (%)(a) 5.9 0.2 (0.1) 4.5 10.9 5.8 1.8 - (4.8) 2.4 38 Strategic Report Unilever Annual Report and Accounts...

  • Page 42
    ... sales growth (%) Effect of acquisitions (%) Effect of disposals (%) Effect of exchange rates (%) Turnover growth (%)(a) (a) 2015 vs 2014 2014 vs 2013 FREE CASH FLOW (FCF) Within the Unilever Group, free cash flow (FCF) is defined as cash flow from operating activities, less income taxes...

  • Page 43
    ...and mitigating factors can be found on pages 53 to 57. pages 53 to 57 of the Governance and Financial Report PRINCIPAL RISK BRAND PREFERENCE As a branded goods business, Unilever's success depends on the value and relevance of our brands and products to consumers around the world and on our ability...

  • Page 44
    ...price controls can impact on the growth and profitability of our local operations. Social and political upheavals and natural disasters can disrupt sales and operations. In 2015, more than half of Unilever's turnover came from emerging markets including Brazil, India, Indonesia, Turkey, South Africa...

  • Page 45
    ..., underlying sales growth and core operating margin improvement are key measures in our annual bonus plan and long-term executive incentive plans. Cash flow generation remains central to the success of the business in terms of both returns to shareholders and investment for future growth and...

  • Page 46
    ... PLC in sterling for 2014 and 2015 respectively. Includes basic Non-Executive Director fee and Committee chairmanship and/or membership. (b) The only benefit received relates to travel by spouses or partners where they are invited by Unilever. (c) Chairman. Chair, Corporate Responsibility Committee...

  • Page 47
    ...of the Unilever share price, our quarterly and annual results, performance charts, financial news and investor relations speeches and presentations. It also includes conference and investor/analyst presentations. You can also view this year's Annual Report and Accounts, and those for prior years, at...

  • Page 48
    ... results to differ materially are: Unilever's global brands not meeting consumer preferences; Unilever's ability to innovate and remain competitive; Unilever's investment choices in its portfolio management; inability to find sustainable solutions to support long-term growth; customer relationships...

  • Page 49
    ...Number: 24051830 UNILEVER PLC Head Office 100 Victoria Embankment London EC4Y 0DY United Kingdom T +44 (0)20 7822 5252 Registered Office Unilever PLC Port Sunlight Wirral Merseyside CH62 4ZD United Kingdom Registered in England and Wales Company Number: 41424 FOR FURTHER INFORMATION ABOUT UNILEVER...

  • Page 50
    MAKING SUSTAINABLE LIVING COMMONPLACE ANNUAL REPORT AND ACCOUNTS 2015 GOVERNANCE AND FINANCIAL REPORT

  • Page 51
    ...Committee Report of the Nominating and Corporate Governance Committee Directors' Remuneration Report 45 53 58 60 62 64 66 Notes to the consolidated financial statements (continued) 13 Trade and other current receivables 14 Trade payables and other liabilities 15 Capital and funding 15A Share capital...

  • Page 52
    ...on 1 October 2015 and will be proposed to be appointed as an Executive Director at the 2016 AGMs. A list of our current Directors, their roles on the Boards, their dates of appointment and their other major appointments is set out on page 58. Unilever Annual Report and Accounts 2015 Governance 45

  • Page 53
    ...and between) Board and Board Committee meetings on, among other things, Unilever's business, environmental, social, corporate governance, regulatory developments and investor relations matters. Details of the training provided to the Directors in 2015 can be found in the Chairman's Statement on page...

  • Page 54
    ... RIGHTS NV shareholders can cast one vote for each â,¬0.16 nominal capital they hold and can vote in person or by proxy. The voting rights attached to NV's outstanding shares are split as follows: Total number of votes % of issued capital NV SPECIAL ORDINARY SHARES To ensure unity of management...

  • Page 55
    ... General Meeting, issue shares within the limits prescribed within the resolutions. At the PLC 2015 AGM held on 30 April 2015 the PLC Directors were authorised to issue new shares, up to a maximum of £13,300,000 nominal value (which at the time represented approximately 33% of PLC's issued ordinary...

  • Page 56
    ...on average £100 each in nominal value of PLC share capital can require PLC to propose a resolution at a General Meeting. PLC shareholders holding in aggregate 5% of the issued PLC ordinary shares are able to convene a General Meeting of PLC. Unilever Annual Report and Accounts 2015 Governance 49

  • Page 57
    ... shareholder value creation and relative total shareholder return. Unilever therefore believes that the interests of the business and shareholders are best served by linking our long-term share plans to such measures as described above, which are further set out in the Directors' Remuneration Report...

  • Page 58
    ... the UK and listed on the London Stock Exchange, is required to state how it has applied the main principles and how far it has complied with the provisions set out in the 2014 UK Corporate Governance Code (UK Code), which is available on the Financial Reporting Council's (FRC) website. In 2015 PLC...

  • Page 59
    ...or related Code Policies in 2015. Our Code of Business Principles can be found on our website. www.unilever.com/corporategovernance Risk Management and Control: Following a review by the Disclosure Committee, Audit Committee and Boards, the CEO and the CFO concluded that the design and operation of...

  • Page 60
    ... controls and procedures in operation within Unilever. They have also considered the effectiveness of any remedial actions taken for the year covered by this report and up to the date of its approval by the Boards. Details of the activities of the Audit Committee in relation to this can be found...

  • Page 61
    ... strategies into projects and category plans, develop products and relevant brand communication and successfully roll out new products to our consumers. PORTFOLIO MANAGEMENT Unilever's strategic investment choices will affect the long-term growth and profits of our business. Unilever's growth...

  • Page 62
    ..., develop, organise and retain the right number of appropriately qualified people is critical if we are to compete and grow effectively. This is especially true in our key emerging markets where there can be a high level of competition for a limited talent pool. The loss of management or other key...

  • Page 63
    ... to emerging markets have given us experience of operating and developing our business successfully during periods of economic, political or social change. TREASURY AND PENSIONS Unilever is exposed to a variety of external financial risks in relation to Treasury and Pensions. The relative values of...

  • Page 64
    .... In times of financial market volatility, we are also potentially exposed to counter-party risks with banks, suppliers and customers. Certain businesses have defined benefit pension plans, most now closed to new employees, which are exposed to movements in interest rates, fluctuating values of...

  • Page 65
    ... Appointed Director October 2008 Key areas of experience: Finance, consumer, sales & marketing Current external appointments: The Dow Chemical Company (NED); World Business Council for Sustainable Development (Chairman, Executive Committee); UN Global Compact (Board member); UK Business Ambassador...

  • Page 66
    ... include: Unilever East Africa and Emerging Markets (EVP); Chief Procurement Officer; Supply Chain, Spreads, Dressings and Olive Oil Europe (VP); Ice Cream Brazil (Managing Director); Ice Cream Brazil (VP); Corporate Strategy Group; Birds Eye Wall's, Unilever UK (Operations Manager) Current external...

  • Page 67
    ... it provided the necessary information for shareholders to assess the Group's position and performance, business model and strategy. The Committee was Unilever Annual Report and Accounts 2015 PRIORITIES FOR 2016 Exchange rate management Non-Financial KPIs IT security and data privacy Tax strategy...

  • Page 68
    ... Large Companies Market Investigation (Mandatory use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014. The last tender for the audit of the annual accounts was performed in 2013. INTERNAL AUDIT FUNCTION The Committee reviewed Corporate Audit's audit plan for the year...

  • Page 69
    ... the Responsible Business Partner Policy in a number of countries during 2015. HIGHLIGHTS OF 2015 • Review of Unilever's Code of Business Principles and Responsible Sourcing Policy • Milestones on the Unilever Sustainable Living Plan • Launch of first human rights report PRIORITIES FOR 2016...

  • Page 70
    ... the Group's reputation and standing in society. Louise Fresco Chair of the Corporate Responsibility Committee Laura Cha Feike Sijbesma Further details on the USLP can be found in Unilever's online Sustainable Living Report 2015, to be published in April 2016. FIRST HUMAN RIGHTS REPORT In 2014, the...

  • Page 71
    ...footprint and strategy of the Group. In addition, the Non-Executive Directors in aggregate should have sufficient understanding of the markets where Unilever is active in order to understand the key trends and developments relevant for Unilever. In 2015, the Committee engaged the services of Russell...

  • Page 72
    ... main accountabilities of Unilever's Chairman were that the Chairman should chair the shareholder meetings, oversee the overall strategy, act as a sounding board for the Executive Directors and the Non-Executive Directors, plan for succession of all Board members, keep all communication open between...

  • Page 73
    ... and strategy. This review will continue in 2016 in preparation for renewal of the Remuneration Policy in 2017. • Benchmarking exercises for Unilever's 'Top 100' executive management population below Executive Director level show that Unilever continues to be aligned against market pay rates...

  • Page 74
    ..., underlying sales growth and core operating margin improvement are key measures in our annual bonus plan and long-term executive incentive plans. Cash flow generation remains central to the success of the business in terms of both returns to shareholders and investment for future growth and...

  • Page 75
    ... our annual and long-term plans have been selected to support our business strategy and the ongoing enhancement of shareholder value through a focus on increasing sales, improving margin, cash generation and returns for shareholders. DELIVERING SUSTAINABLE PERFORMANCE Acknowledging that success is...

  • Page 76
    ... OTHER BENEFIT ENTITLEMENTS In line with Unilever's Remuneration Policy, Executive Directors will be provided with death, disability and medical insurance cover and actual tax return preparation costs in 2016. www.unilever.com/ara2015/downloads In line with the commitments made to the current CEO...

  • Page 77
    ... growth ambition and our long-term business strategy. Unilever's primary business objective is to generate a sustainable improvement in business performance through increasing underlying sales while steadily improving core operating margins and cash flow. The measures chosen for the annual and long...

  • Page 78
    ... TSR measure, Unilever's TSR is measured against a comparator group of other consumer goods companies. TSR measures the return received by a shareholder, capturing both the increase in share price and the value of dividend income (assuming dividends are reinvested). The TSR results are measured on...

  • Page 79
    ... the beginning of the year, the Committee set stretching financial performance targets which management delivered against during the course of the year. In 2015 underlying sales growth improved to 4.1%, ahead of our markets. Improvement in core operating margin compared with 2014 was 0.3 percentage...

  • Page 80
    .... In 2015, Paul again received recognition for his work in leading Unilever and helping to promote a sustainable and responsible long-term business model around the world. Unilever not only delivered consistent growth in underlying sales and core operating margin together with strong cash flow in...

  • Page 81
    ... percentage points per year, demonstrating management's drive for consistent top and bottom line growth. Unilever also generated strong operating cash flow in the period, with cumulative operating cash flow of â,¬16.6 billion. Total shareholder return (TSR) over this three-year period was below the...

  • Page 82
    ... sales growth; • core operating margin improvement; • cumulative operating cash flow; and • relative total shareholder return. Further details are set out on pages 70 to 71. MCIP Conditional matching share award made on 13 February 2015 Based on the level of 2014 bonus paid in 2015 invested...

  • Page 83
    ... NV and PLC ordinary shares of Executive Directors and their connected persons as at 31 December 2015. When calculating an Executive Director's personal shareholding the following methodology is used: • Base salary at the date of measurement. • Shares in either Unilever PLC or Unilever N.V. (or...

  • Page 84
    ... accrued in prior years in respect of these grants, lapsed upon the departure of Jean-Marc Huët on 1 October 2015. On 11 February 2016, Paul Polman received an award of 35,115 NV and 35,115 PLC performance-related shares under the GSIP. Unilever Annual Report and Accounts 2015 Governance 77

  • Page 85
    ... of Jean-Marc Huët's 2016 tax return preparation and advisory services. Jean-Marc will not be receiving any payments relating to his departure from Unilever. There were no payments for loss of office. PAYMENTS FOR LOSS OF OFFICE (AUDITED) 78 Governance Unilever Annual Report and Accounts 2015

  • Page 86
    ... and PLC in sterling for 2014 and 2015 respectively. Includes basic Non-Executive Director fee and Committee chairmanship and/or membership. (b) The only benefit received relates to travel by spouses or partners where they are invited by Unilever. (c) Chairman. (d) Chair, Corporate Responsibility...

  • Page 87
    DIRECTORS' REMUNERATION REPORT CONTINUED NON-EXECUTIVE DIRECTORS' INTERESTS IN SHARES (AUDITED) Non-Executive Directors are encouraged to build up a personal shareholding of at least one times their annual fees over the five years from 1 January 2012 (or appointment if later). The table shows the ...

  • Page 88
    .... These fees relate to the period starting from 1 January 2015 until 1 October 2015, the date on which Jean-Marc Huët ceased to be an Executive Director of Unilever. SEVEN-YEAR HISTORICAL TOTAL SHAREHOLDER RETURN (TSR) PERFORMANCE The table below includes: • growth in the value of a hypothetical...

  • Page 89
    ...'s review of the executive remuneration framework in 2016, including any consultations with shareholders, in a timely manner so as to further enhance the Boards' decision-making around proposals to extend or modify the Remuneration Policy. 82 Governance Unilever Annual Report and Accounts 2015

  • Page 90
    ...% of share capital). The Directors' Remuneration Report is not subject to a shareholder vote in the Netherlands. The Directors' Remuneration Report has been approved by the Boards and signed on their behalf by Tonia Lovell, Group Secretary. Unilever Annual Report and Accounts 2015 Governance 83

  • Page 91
    .... INTERNAL AND DISCLOSURE CONTROLS AND PROCEDURES Please refer to pages 53 to 57 for a discussion of Unilever's principal risk factors and to pages 54 to 57 for commentary on the Group's approach to risk management and control. 84 Financial statements Unilever Annual Report and Accounts 2015

  • Page 92
    ... Company Accounts give a true and fair view of the state of the Group's and of Unilever PLC's affairs as at 31 December 2015 and of the Group's profit for the year then ended; • the Consolidated Financial Statements have been properly prepared in accordance with International Financial Reporting...

  • Page 93
    ... tax positions. For each risk noted above refer to related disclosure within the Report of the Audit Committee (page 60), accounting policies and financial disclosures within the notes to the Consolidated Financial Statements. 86 Financial statements Unilever Annual Report and Accounts 2015

  • Page 94
    ... at corporate level are as follows: GROUP REVENUE GROUP PROFIT BEFORE TAXATION 25% (2014: 30%) 36% (2014: 13%) Audits of Account Balances TOTAL ASSETS 9% (2014: 3%) 5% (2014: 22%) 86% (2014: 75%) 30% (2014: 37%) 19% (2014: 12%) 51% (2014: 51%) 39% (2014: 57%) Audits for Group Reporting...

  • Page 95
    ... Statement on pages 50 to 52 relating to Unilever PLC's compliance with the eleven provisions of the 2014 UK Corporate Governance Code specified for our review. We have nothing to report in respect of the above responsibilities. 88 Financial statements Unilever Annual Report and Accounts 2015

  • Page 96
    ...the Directors are responsible for the preparation of the Consolidated Financial Statements and the PLC Company Accounts and for being satisfied that they give a true and fair view. Scope of an audit of financial statements A description of the scope of an audit of financial statements is provided on...

  • Page 97
    ... financial statements. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December â,¬ million 2015 â,¬ million 2014 â,¬ million 2013 Notes Net profit Other comprehensive income Items that will not be reclassified to profit or loss: Remeasurement of defined benefit pension plans...

  • Page 98
    ...: Fair value gains/(losses) on financial instruments Remeasurement of defined benefit pension plans net of tax Currency retranslation gains/(losses) Total comprehensive income Dividends on ordinary capital Movements in treasury stock(a) Share-based payment credit(b) Dividends paid to non-controlling...

  • Page 99
    ... UNILEVER GROUP CONTINUED CONSOLIDATED BALANCE SHEET as at 31 December Notes â,¬ million 2015 â,¬ million 2014 Assets Non-current assets Goodwill Intangible assets Property, plant and equipment Pension asset for funded schemes in surplus Deferred tax assets Financial assets Other non-current assets...

  • Page 100
    CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December Notes â,¬ million 2015 â,¬ million 2014 â,¬ million 2013 Net profit Taxation Share of net profit of joint ventures/associates and other income/(loss) from non-current investments and associates Net finance costs Operating profit ...

  • Page 101
    ... company either through sale or as a result of a repayment of capital, the cumulative exchange difference is recognised in the income statement as part of the profit or loss on disposal of group companies. UNILEVER The two parent companies, NV and PLC, together with their group companies, operate...

  • Page 102
    ...providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity. The Group does not currently believe adoption of the following new standards would have a material impact on the consolidated results or financial...

  • Page 103
    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP CONTINUED 2. SEGMENT INFORMATION SEGMENTAL REPORTING Personal Care Foods Home Care Refreshment - including sales of skin care and hair care products, deodorants and oral care products. - including sales of soups, bouillons, sauces, snacks...

  • Page 104
    ... financial assets, deferred tax assets and pension assets for funded schemes in surplus. No other country had turnover or non-current assets (as shown above) greater than 10% of the Group total. ADDITIONAL INFORMATION BY GEOGRAPHIES Although the Group's operations are managed by product area...

  • Page 105
    ... to the acquisition or disposal of group companies. â,¬ million 2015 â,¬ million 2014 â,¬ million 2013 Turnover Cost of sales of which: Distribution costs Gross profit Selling and administrative expenses of which: Brand and Marketing Investment Research and Development Operating profit 53,272...

  • Page 106
    ... number of employees during the year Asia/AMET/RUB The Americas Europe '000 2015 '000 2014 '000 2013 97 42 32 171 99 42 32 173 97 43 34 174 Key management compensation(a) Salaries and short-term employee benefits Non-Executive Directors' fees Post-employment benefits Share-based benefits...

  • Page 107
    ...the long-term investment and funding strategy. The Group also has an internal body, the Pensions and Equity Committee, that is responsible for setting the company's policies and decision making on plan matters, including but not limited to design, funding, investments, risk management and governance...

  • Page 108
    ... charge to the income statement comprises: â,¬ million 2015 â,¬ million 2014 â,¬ million 2013 Notes Charged to operating profit: Defined benefit pension and other benefit plans: Current service cost Employee contributions Special termination benefits Past service cost including (losses)/gains on...

  • Page 109
    ...the balance sheet date were: â,¬ million 2015 Other postemployment benefit plans Pension plans â,¬ million 2014 Other postemployment benefit plans Pension plans Fair value of assets Present value of liabilities Net liabilities Pension liability net of assets Of which in respect of: Funded plans in...

  • Page 110
    ...â,¬ million 31 December 2015 Other postemployment benefit plans â,¬ million 31 December 2014 Other postemployment benefit plans Pension plans Pension plans Total Assets Equities Total - Europe - North America - Other Fixed Income Total - Government bonds - Investment grade corporate bonds - Other...

  • Page 111
    ... sales growth, operating cash flow and core operating margin improvement. There is an additional target based on relative total shareholder return (TSR) for senior executives. A summary of the status of the Performance Share Plans as at 31 December 2015, 2014 and 2013 and changes during the years...

  • Page 112
    ... 31 December 2014, the exercise price of 167,479 PLC options (NV: nil) were above the market price of the shares. Shares held to satisfy options and related trusts are accounted for in accordance with IAS 32 'Financial Instruments: Presentation' and SIC 12 'Consolidation of Special Purpose Entities...

  • Page 113
    ...tax paid in the consolidated cash flow statement primarily because of deferred tax arising on temporary differences and payment dates for income tax occurring after the balance sheet date. Tax charge in income statement Current tax Current year Over/(under) provided in prior years â,¬ million 2015...

  • Page 114
    ... â,¬ million Liabilities 2014 â,¬ million Total 2015 â,¬ million Total 2014 Deferred tax assets and liabilities Pensions and similar obligations Provisions Goodwill and intangible assets Accelerated tax depreciation Tax losses Fair value gains Fair value losses Share-based payments Other Of which...

  • Page 115
    ...per share and core earnings per share, a number of adjustments are made to the number of shares, principally: (i) conversion into PLC ordinary shares in the year 2038 of shares in a group company (refer below) and (ii) the exercise of share options by employees. On 19 May 2014 Unilever PLC purchased...

  • Page 116
    ... 19 January 2016, to be payable in March 2016. See note 26 'Events after the balance sheet date' on page 135. Total dividends declared in relation to 2015 were â,¬1.21 (2014: â,¬1.14) per NV ordinary share and £0.88 (2014: £0.90) per PLC ordinary share. 9. GOODWILL AND INTANGIBLE ASSETS GOODWILL...

  • Page 117
    ... The Americas Foods Asia/AMET/RUB 6.0 3.7 1.6 1.6 1.6 0.5 5.9 3.7 1.6 1.6 1.5 0.4 Value in use has been calculated as the present value of projected future cash flows. A pre-tax discount rate of 7.4% (2014: 7.4%) was used. 110 Financial statements Unilever Annual Report and Accounts 2015

  • Page 118
    ... AND INTANGIBLE ASSETS CONTINUED For the significant CGUs, the following key assumptions were used in the discounted cash flow projections: Foods Europe Foods The Americas Foods Asia/ AMET/RUB Long-term sustainable growth rates Average near-term nominal growth rates Average operating margins...

  • Page 119
    ... of associates Long-term trade and other receivables Fair value of biological assets Other non-financial assets(a) (a) 48 59 413 48 203 771 52 42 265 42 256 657 Other non-financial assets mainly relate to tax deposits paid. 112 Financial statements Unilever Annual Report and Accounts 2015

  • Page 120
    ...low across territories and so trade receivables are considered to be a single class of financial assets. Balances are considered for impairment on an individual basis rather than by reference to the extent that they become overdue. Unilever Annual Report and Accounts 2015 Financial statements 113

  • Page 121
    ... 378 12,984 Due after more than one year Accruals Others Total trade payables and other liabilities 120 273 393 14,181 Included in others are third party royalties, certain derivatives and dividends to non-controlling interests. 114 Financial statements Unilever Annual Report and Accounts 2015

  • Page 122
    ... rate swaps and FX contracts. The Treasury department maintains a list of approved financial instruments. The use of any new instrument must be approved by the Chief Financial Officer. The use of leveraged instruments is not permitted. Unilever Annual Report and Accounts 2015 Financial statements...

  • Page 123
    ... TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP CONTINUED 15. CAPITAL AND FUNDING CONTINUED Unilever considers the following components of its balance sheet to be managed capital: • total equity - retained profit, other reserves, share capital, share premium, non-controlling interests...

  • Page 124
    ... financial information in relation to HUL is shown below. â,¬ million 2015 â,¬ million 2014 HUL Balance sheet as at 31 December Non-current assets Current assets Current liabilities Non-current liabilities HUL Comprehensive income for the year ended 31 December Turnover Profit after tax Total...

  • Page 125
    ... Fair value gains/(losses) on financial instruments - movement during the year 1 January Cash flow hedges Available for sale financial assets 31 December â,¬ million 2015 â,¬ million 2014 (198) 60 40 (98) (113) (72) (13) (198) Refer to the consolidated statement of comprehensive income on...

  • Page 126
    ...value adjustment following the fair value hedge accounting of a fix-to-float interest rate swap. Information in relation to the derivatives used to hedge bonds and other loans within a fair value hedge relationship is shown in note 16. Unilever Annual Report and Accounts 2015 Financial statements...

  • Page 127
    .... Cash flow from operating activities provides the funds to service the financing of financial liabilities on a day-to-day basis. The Group seeks to manage its liquidity requirements by maintaining access to global debt markets through short-term and long-term debt programmes. In addition, Unilever...

  • Page 128
    ... in balance sheet Undiscounted cash flows 2015 Non-derivative financial liabilities: Preference shares Bank loans and overdrafts Bonds and other loans Finance lease creditors Other financial liabilities Trade payables excluding social security and sundry taxes Issued financial guarantees Notes...

  • Page 129
    ... derivatives are generally designated as hedging instruments in cash flow hedge accounting relations. All commodity forward contracts are done in line with approvals from the Global Commodity Executive which is chaired by the Unilever Chief Supply Chain Officer (CSCO). The Group manages currency...

  • Page 130
    ... full-year basis would have led to an additional â,¬1 million debit in equity from derivatives in cash flow hedge relationships (2014: â,¬42 million debit). See the split in fixed and floating-rate interest in the following table. Unilever Annual Report and Accounts 2015 Financial statements 123

  • Page 131
    ...) (2) (100) - (15) (1) (97) (97) (a) Swaps that hedge the currency risk on intra-group loans and offset â,¬155 million within 'Hedges of net investments in foreign operations' are included within 'Hedge Accounting not applied'. 124 Financial statements Unilever Annual Report and Accounts 2015

  • Page 132
    ... on the trade date. At that point, they are classified as: • held-to-maturity investments; • loans and receivables; • available-for-sale financial assets; or • financial assets at fair value through profit or loss. Unilever Annual Report and Accounts 2015 Financial statements 125

  • Page 133
    ... consist of investments in a number of companies and financial institutions in Europe, India and the US, including â,¬86 million (2014: â,¬86 million) of assets in a trust to fund benefit obligations in the US (see also note 4B). 126 Financial statements Unilever Annual Report and Accounts 2015

  • Page 134
    ... Credit risk is the risk of financial loss to the Group if a customer or counter-party fails to meet its contractual obligations. Additional information in relation to credit risk on trade receivables is given in note 13. These risks are generally managed by local controllers. Credit risk related to...

  • Page 135
    ...in the year ended 31 December 2014. • The fair values of quoted investments falling into Level 1 are based on current bid prices. • The fair values of unquoted available-for-sale financial assets are based on recent trades in liquid markets, observable market rates, discounted cash flow analysis...

  • Page 136
    ...credit risk and remaining maturities. • Fair values for finance lease creditors have been assessed by reference to current market rates for comparable leasing arrangements. Assets valued using Level 3 valuation techniques are primarily made up of long-term cash receivables and unlisted investments...

  • Page 137
    ...sublease payments of â,¬41 million (2014: â,¬38 million) are expected to be received. â,¬ million 2015 â,¬ million 2014 Long-term operating lease commitments Land and buildings Plant and machinery 2,024 430 2,454 1,903 424 2,327 130 Financial statements Unilever Annual Report and Accounts 2015

  • Page 138
    ... a change of control are accounted for as equity transactions and therefore do not have any impact on goodwill. The difference between consideration and the non-controlling share of net assets acquired is recognised within equity. Unilever Annual Report and Accounts 2015 Financial statements 131

  • Page 139
    .... Grom, a premium Italian gelato business. 1 May 2015 6 May 2015 1 August 2015 1 September 2015 30 September 2015 CONSOLIDATED INCOME STATEMENT Since the acquisition dates the acquisitions above have contributed â,¬216 million to the Group revenue and â,¬32 million to Group operating profit. If...

  • Page 140
    ... disposed businesses are included in the consolidated financial statements up to their date of disposal: â,¬ million 2015 â,¬ million 2014 â,¬ million 2013 Disposals Goodwill and intangible assets Other non-current assets Current assets Trade creditors and other payables Net assets sold (Gain)/loss...

  • Page 141
    ... above-average longer-term growth prospects. Langholm Capital II was launched in 2009. Unilever has invested â,¬55 million in Langholm II, with an outstanding commitment at the end of 2015 of â,¬20 million (2014: â,¬40 million). 134 Financial statements Unilever Annual Report and Accounts 2015

  • Page 142
    ... financial statements. Otherwise, events after the balance sheet date of a material size or nature are disclosed below. On 19 January 2016 Unilever announced a quarterly dividend with the 2015 fourth quarter results of â,¬0.3020 per NV ordinary share and £0.2300 per PLC ordinary share. Unilever...

  • Page 143
    ...THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP CONTINUED 27. GROUP COMPANIES AS AT 31 DECEMBER 2015 In accordance with section 409 of the Companies Act 2006 a list of subsidiaries, partnerships, associates, and joint ventures as at 31 December 2015 is set out below. All subsidiary undertakings...

  • Page 144
    ...Unilever Mashreq - Home Care (SAE) Unilever Mashreq Trading LLC Unilever Mashreq - Personal Care (SAE) Unilever Mashreq - Tea (SAE) Unilever El Salvador SCC S.A. de C.V. Unilever de Centro America S.A. Accantia Group Holdings (unlimited company) Alberto-Culver (Europe) Limited Alberto-Culver Company...

  • Page 145
    ...UK Services Limited° Unilever House, 100 Victoria Embankment, London, EC4Y 0DY Unilever Company for Industrial Development Limited Unilever Company for Regional Marketing and Research Limited Unilever Corporate Ventures Limited° Unilever Employee Benefit Trustees Limited Unilever General Partner...

  • Page 146
    ...55 PLC 35.45 NV 0 PLC 100 NV 0 PLC 100 NV 0 PLC 100 Unilever House, 100 Victoria Embankment, London, EC4Y 0DY Unilever UK Limited Unilever UK Pension Fund Trustees Limited Unilever US Investments Limited° Unilever Ventures General Partner Limited Unilever Ventures III Limited Partnership Unilever...

  • Page 147
    ... Ave, Tehran 20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24 20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24 20 Riverwalk, National Digital Park, Citywest Business Campus Dublin 24 140 Financial statements Unilever Annual Report and Accounts 2015

  • Page 148
    ...00 Ordinary RM1.00 Ordinary Partnership Interest Partnership Interest Partnership Interest Partnership Interest Partnership Interest Partnership Interest Partnership Interest MAD100.00 Ordinary USD0.01 Ordinary MMK8,200.00 Ordinary Unilever Annual Report and Accounts 2015 Financial statements 141

  • Page 149
    ...B.V.* Unilever Employee Benefits Management B.V.* Unilever Employment Services B.V.* Unilever Europe Business Center B.V.* Unilever Finance International B.V.°* Unilever Foodsolutions B.V.* Unilever Global Services B.V.* Unilever Holdings B.V.* Unilever Home & Personal Care Nederland B.V.* Unilever...

  • Page 150
    ...T2 NZ Limited Unilever New Zealand Limited Unilever New Zealand Superannuation Trustee Limited Unilever New Zealand Trading Limited Ben & Jerry's Franchising New Zealand Limited Unilever de Centroamerica S.A. Unilever Niger S.A. Unilever Nigeria Plc West Africa Popular Foods Nigeria Limited Unilever...

  • Page 151
    ...TO THE CONSOLIDATED FINANCIAL STATEMENTS UNILEVER GROUP CONTINUED 27. GROUP COMPANIES CONTINUED % Country of Name of Incorporation Undertaking Singapore Singapore Slovakia Slovakia 74.25 South Africa South Africa 74.25 74.25 0.02 0.009 South Africa South Africa Unilever Asia Private Limited Unilever...

  • Page 152
    ... United States United States United States United States United States United States United States United States United States Unilever United States Foundation, Inc 700 Sylvan Avenue, Englewood Cliffs, New Jersey 07632-3201 Unilever Annual Report and Accounts 2015 Financial statements 145

  • Page 153
    ... S.A. United Africa Trust Limited Hindustan Unilever Foundation Unilever Jamaica Limited Union East African Trust Limited* Societe Commerciale du Rif Societe Tangeroise de Parfumerie et d'Hygiene S.A.R.L. Unilever Tea Rwanda Limited Unilever Home & Personal Care Products Manufacturing LLCx Birds...

  • Page 154
    ... profits made by Binzagr Unilever Limited. The Unilever Group is entitled to 80% of the profits made by Unilever Trading LLC, Unilever Home and Personal Care Products Manufacturing LLC and Unilever General Trading LLC. â-Š Accounted for as non-current investments within non-current financial assets...

  • Page 155
    COMPANY ACCOUNTS UNILEVER N.V. BALANCE SHEET AS AT 31 DECEMBER â,¬ million Notes 2015 â,¬ million Restated 2014 Assets Non-current assets Intangible assets Investments in subsidiaries Other non-current assets Current assets Trade and other current receivables Cash and cash equivalents Total assets ...

  • Page 156
    ... statement as it arises. Shares in group companies are stated at amortised cost less any amounts written off to reflect a permanent impairment. Any impairment is charged to the profit and loss account as it arises. RETIREMENT BENEFITS INTANGIBLE ASSETS INVESTMENTS IN SUBSIDIARIES Unilever Annual...

  • Page 157
    ...TO THE COMPANY ACCOUNTS UNILEVER N.V. CONTINUED DIVIDENDS 2. INVESTMENTS IN SUBSIDIARIES â,¬ million 2015 Under IAS 10 'Events after the Balance Sheet Date', proposed dividends do not meet the definition of a liability until such time as they have been approved by shareholders at the Annual General...

  • Page 158
    ... Restated 2014 1 January Profit for the year Dividends Realised profit on shares/certificates held to meet employee share options. Other charges 31 December 11,525 2,659 (1,862) 25 10 12,357 11,010 2,230 (1,757) 44 (2) 11,525 Company accounts Unilever N.V. Unilever Group: shareholders' equity...

  • Page 159
    ... of IFRS 1 'First time adoption of International Financial Reporting Standards'. Reconciliation of equity at 31 December 2014 UK GAAP Notes â,¬ million Effect of transition â,¬ million FRS 101 â,¬ million Company accounts Unilever N.V. Unilever Group excluding non-controlling interest 2,659 4,909...

  • Page 160
    ... cost under FRS 101. (b) Deferred tax position is updated based on the capitalisation of the computer software. (C) The impact on equity is the net of the impact of points (a) and (b) above. THE BOARD OF DIRECTORS 17 February 2016 Unilever Annual Report and Accounts 2015 Financial statements 153

  • Page 161
    ... 38) POST-BALANCE SHEET EVENT On 19 January 2016 the Directors announced a dividend of â,¬0.302 per Unilever N.V. ordinary share. The dividend is payable from 9 March 2016 to shareholders registered at the close of business on 5 February 2016. The profit for the year is applied firstly to the...

  • Page 162
    ... ACCOUNTS UNILEVER PLC BALANCE SHEET AS AT 31 DECEMBER £ million Notes 2015 £ million Restated 2014 Assets Non-current assets Intangible assets Investments in subsidiaries 1 2 171 8,365 8,536 183 8,372 8,555 598 598 9,153 Current assets Trade and other current receivables 3 445 445 Total...

  • Page 163
    ..., presentation of a cash flow statement, standards not yet effective, impairment of assets and related party transactions. Where required equivalent disclosures are given in the group accounts of Unilever, which are publicly available. heading 'Capital and funding' in note 15 to the consolidated...

  • Page 164
    ... Limited - a subsidiary of Unilever PLC. Fixed asset investments comprise equity shares of group companies and include the associated company Hindustan Unilever Limited, with a cost of £2,197 million (2014: £2,197 million). These are listed on the Bombay Stock Exchange and have a market value...

  • Page 165
    ... £0.2300 per Unilever PLC ordinary share. The dividend is payable from 9 March 2016 to shareholders registered at the close of business on 5 February 2016. 14. EXPLANATION OF TRANSITION TO FRS 101 FROM UK GAAP This is the first year that the Company has presented its financial statements under FRS...

  • Page 166
    ... up share capital Share premium Capital redemption reserve Other reserves Retained profit Shareholders' equity/total equity Total liabilities and equity 6,487 41 94 11 (367) 2,286 2,065 8,552 41 94 11 (367) 2,286 2,065 8,552 Unilever Annual Report and Accounts 2015 Financial statements 159

  • Page 167
    ... profit 98 Group structure 94 Home Care 16,22, 36, 96 Impairment 96, 98, 110-111 Income statement 35, 90 Innovation 4, 14-15, 27 Intangible assets 109-110, 149, 156 International Financial Reporting Standards 94 Inventories 113 Joint ventures 90, 93, 96-97, 112-113, 134, 136 Key management 99 Key...

  • Page 168
    ... results to differ materially are: Unilever's global brands not meeting consumer preferences; Unilever's ability to innovate and remain competitive; Unilever's investment choices in its portfolio management; inability to find sustainable solutions to support long-term growth; customer relationships...

  • Page 169
    ...Number: 24051830 UNILEVER PLC Head Office 100 Victoria Embankment London EC4Y 0DY United Kingdom T +44 (0)20 7822 5252 Registered Office Unilever PLC Port Sunlight Wirral Merseyside CH62 4ZD United Kingdom Registered in England and Wales Company Number: 41424 FOR FURTHER INFORMATION ABOUT UNILEVER...