TIDMULVR TIDM0NXN
RNS Number : 8196T
Unilever PLC
23 July 2020
2020 FIRST HALF YEAR RESULTS
Performance highlights (unaudited)
Underlying performance GAAP measures
vs 2019 vs 2019
First Half
Underlying sales growth
(USG) (0.1)% Turnover EUR25.7bn (1.6)%
Underlying operating
margin 19.8% 50bps Operating margin 18.2% 60bps
Underlying earnings Diluted earnings per
per share EUR1.35 6.4% share EUR1.25 9.2%
Second Quarter
USG (0.3)% Turnover EUR13.3bn (3.1)%
======== ========= ===================== ========== =========
Quarterly dividend payable in September EUR0.4104 per share
2020
============================================== ============================================
First half highlights
-- Underlying sales declined 0.1% with volume declining 0.3% and price growth of 0.2%
-- Turnover decreased 1.6% including a positive impact of 1.1%
from acquisitions net of disposals and negative impact of 2.5% from
currency
-- Underlying operating profit excluding currency increased
3.8%, before a negative impact of 3.2% from currency
-- Underlying earnings per share up 6.4%, including a negative impact of 3.7% from currency
-- Free cash flow up EUR1.3 billion to EUR2.9 billion,
reflecting our objective to protect cash during the crisis
-- Quarterly shareholder dividend maintained at EUR0.4104 per share
-- Completed acquisitions of Horlicks brand from GSK, enhancing presence in healthy nutrition
-- Announced plans to unify the Group legal structure under a single parent company
Alan Jope: Chief Executive Officer statement
"Performance during the first half has shown the true strength
of Unilever. We have demonstrated the resilience of the business -
in our portfolio, in a continued step-up in operational excellence,
and in our financial position - and we have unlocked new levels of
agility in responding to unprecedented fluctuations in demand.
We have also taken action to strengthen the strategic future of
the company by announcing proposals to unify our dual-headed legal
structure, progressing the strategic review of our global tea
business and making new commitments to help protect the climate and
regenerate nature.
From the start of the Covid-19 crisis, we have been guided by
clear priorities in line with our multi-stakeholder business model
to protect our people, safeguard supply, respond to new patterns of
consumer demand, preserve cash, and support our communities.
Our focus for the rest of 2020 will continue to be volume led
competitive growth, absolute profit and cash delivery as this is
the best way to maximise shareholder value.
I would like to thank every member of the Unilever team for the
outstanding commitment they have shown in the most difficult of
circumstances."
23 July 2020
FIRST HALF OPERATIONAL REVIEW: DIVISIONS
Second Quarter 2020 First Half 2020
=================================
Turnover USG UVG UPG Turnover USG UVG UPG Change
in underlying
operating
(unaudited) margin
======================== ========= ====== ====== ====== ========= ===== ===== ======= ===============
EURbn % % % EURbn % % % bps
========= ====== ====== ====== ========= ===== ===== ======= ===============
Unilever 13.3 (0.3) (0.8) 0.5 25.7 (0.1) (0.3) 0.2 50
========= ====== ====== ====== ========= ===== ===== ======= ===============
Beauty & Personal Care 5.3 (0.9) (0.5) (0.4) 10.6 (0.3) 0.1 (0.4) 50
Home Care 2.6 4.0 3.2 0.8 5.3 3.2 2.9 0.3 130
Foods & Refreshment 5.4 (1.8) (3.2) 1.4 9.8 (1.7) (2.5) 0.8 (20)
========= ====== ====== ====== ========= ===== ===== ======= ===============
Our markets: The spread of Covid-19, combined with the
lock-downs and restrictions that have been implemented in many
countries, has led to significant changes in the operating
environment in our markets. Consumer demand patterns have been
impacted by channel closures, more time spent in the home and the
critical importance of hygiene.
China was the first of our markets to be impacted by Covid-19,
entering lock-down in January. China slowed significantly during
the lock-down period, with some recovery after April as the economy
opened back up. In most other major markets, sales patterns in
January and February were normal and Covid-19 impacted from March
onwards. In North America and parts of Europe there was a positive
impact from household stocking in March. Consumption patterns then
normalised in the second quarter with heightened levels of demand
for hygiene and in home food products. Market growth in India had
already been slowing prior to the spread of Covid-19 and the market
was further impacted by the introduction of the strict national
lock-down at the end of March. This national lock-down continued
until early June, when it was followed by further regional
lock-downs. Latin America was impacted by Covid-19 later than other
major markets, with the effects primarily in the second quarter,
exacerbating already challenging conditions in the region.
Unilever overall performance: Underlying sales declined 0.1%
with volumes declining 0.3% and price growth of 0.2%. Developed
markets grew 2.4% whilst emerging markets declined 1.9% .
The impact of Covid-19 on our business in the first half varied
widely across our channels and categories. Channel closures as a
result of lock-downs in our markets negatively impacted our food
service, out of home ice cream and Prestige businesses. Food
service declined by nearly 40% and out of home ice cream declined
by nearly 30%. Shoppers moved from offline to online channels,
driving e-commerce growth of 49% .
As people spent more time in their homes, we saw growth in home
consumption of foods, ice cream and tea. It also meant that
consumers had fewer personal care occasions from going to work or
socialising, and we saw a decline in our personal care business,
except for hygiene products. The effectiveness of good hygiene
practices against the spread of Covid-19 increased demand for our
hand and home hygiene products, which each grew double digits.
Consumers eating and cleaning more at home, and focusing more on
hand hygiene, led to underlying sales growth in North America of
9.5% in the second quarter, despite a negative impact of 3.7% from
food solutions and Prestige channel closures.
The lock-downs introduced in our markets during the first half
varied in severity, with some having a more significant impact on
the supply and availability of goods, particularly those in India
and China. China entered lock-down in January and declined
mid-teens during the first quarter. The market re-opened from
April, and China returned to mid-single digit growth in the second
quarter. Growth in India was impacted by the lock-down implemented
from March.
Turnover decreased 1.6%. There was a positive impact of 1.1%
from acquisitions net of disposals and a negative impact of 2.5%
from currency.
Underlying operating profit was EUR5.1 billion, an increase of
3.8% excluding a negative impact from currency of 3.2%. Underlying
operating margin improved by 50bps. As consumer habits and the
status of lock-downs have been changing during this period, we have
been quick to adapt and reallocate our brand and marketing
investment week by week. In response to lock-downs in our markets,
we reduced spend in some channels and geographies while maintaining
investment in growth opportunities. This, combined with a
deflationary environment in media rates, led to a reduction in
brand and marketing investment by 100bps during the period. In the
second half of the year, we expect to see higher brand and
marketing investment, as lock-downs ease and we support brand
campaigns and product innovations tailored to the new environment.
Gross margin reduced by 30bps driven by costs to adapt and run our
supply chain in response to Covid-19, ensuring the safety and
continuity of our operations, as well as an adverse mix effect.
Overheads increased by 20bps, including an adverse currency
mix.
We delivered free cash flow of EUR2.9 billion, an increase of
EUR1.3 billion. The increase was driven by favourable working
capital movements, reduced capital expenditure and lower cash tax
paid, primarily a result of higher tax on disposals in the prior
year relating to the disposal of the spreads business.
Covid-19 response and support measures: Unilever has put in
place a wide-ranging set of measures to support global and national
efforts to tackle the Covid-19 pandemic.
In our own operations, strict protocols for hygiene and physical
distancing are in place for Unilever's sourcing units and
distribution centres. Unilever's office-based employees have been
working from home since March, with some limited reopening of
office workplaces in selected countries, where stringent
requirements have been met.
We are supporting global efforts to tackle Covid-19,
contributing EUR100 million through donations of soap, sanitiser,
bleach and food. We are also working in partnership with others,
including a programme to reach up to a billion people globally with
the UK Department for International Development to urgently tackle
the spread of the disease through raising hygiene awareness and
changing behaviour. We have also made available up to EUR500
million of cash flow relief for our most vulnerable small and
medium sized suppliers, though so far the levels of uptake have
been low.
Unilever's financial strength remains robust and we have not
sought Covid-19 related financial support from any governments.
Strategic review of tea: In January Unilever announced a
strategic review of its global tea business, which includes leading
brands such as Lipton, Brooke Bond and PG Tips.
This review has assessed a full range of options. We will retain
the tea businesses in India and Indonesia and the partnership
interests in the ready-to-drink tea joint ventures.
The balance of Unilever's tea brands and geographies and all tea
estates have an exciting future, and this potential can best be
achieved as a separate entity. A process will now begin to
implement the separation, which is expected to conclude by the end
of 2021.
The tea business that will be separated generated revenues of
EUR2 billion in 2019.
Recent acquisitions: During the second quarter, we completed the
acquisitions of the health food drinks portfolio of GlaxoSmithKline
in India, Bangladesh and 20 other predominantly Asian markets.
Acquiring the iconic brands Horlicks and Boost is in line with
Unilever's strategy to enhance its presence in healthy
nutrition.
Beauty & Personal Care
Beauty & Personal Care underlying sales declined 0.3%, with
volume growth of 0.1% and negative pricing of 0.4%.
Skin cleansing saw mid-teens volume-led growth, as we quickly
responded to the critical need for hand hygiene to prevent the
spread of Covid-19. We rolled out our Lifebuoy hygiene brand to
over 50 markets and increased our hand sanitiser capacity by around
600 times across several brands. This helped contribute to double
digit growth for Suave. Lock-downs in our markets and reduced
personal care occasions amidst restricted living, led to lower
demand for skin care, deodorants and hair care, which each saw
volume and price decline. The division's largest brand Dove
remained resilient, with mid-single digit growth. Our Prestige
portfolio was impacted by health and beauty channel closures in
many markets. Consumer oral care demand remained robust. However,
the category saw negative volumes related to disruption caused by
lock-downs in key markets.
Underlying operating margin in Beauty & Personal Care
increased by 50bps. Gross margin was lower, with negative pricing
and an impact from mix, and overheads increased. This was offset by
a reduction in brand and marketing investment through lock-down
periods.
Home Care
Home Care underlying sales grew 3.2%, with 2.9% from volume and
positive pricing of 0.3%.
We saw increased consumer demand for household cleaning
products, such as Cif surface cleaners, and our home and hygiene
brands delivered high-teens underlying sales growth. Working with
environmental health experts, Domestos educated consumers about
targeted cleaning of high-touch surfaces in the home to help
prevent the spread of Covid-19 and saw strong double digit growth.
Strict lock-downs in Asia impacted fabric solutions, which declined
overall. However future formats such as capsules and liquids
continued to grow. Clean and green brand Seventh Generation saw
strong double digit, volume-led growth. Fabric sensations declined
low-single digit, driven by Brazil and China.
Underlying operating margin in Home Care increased by 130bps,
driven by gross margin improvements from savings delivery and lower
commodity costs.
Foods & Refreshment
Foods & Refreshment underlying sales declined 1.7%, with
volumes down 2.5% and positive pricing of 0.8%.
Lock-downs in most markets led to the closure of out of home
channels. This, together with reduced tourism, led to a reduction
in out of home ice cream sales of nearly 30%. Similarly, food
service sales were down around 40% as hotels, restaurants, cafes
and bars closed. At the same time, we saw double digit growth in
our retail foods business with Knorr and Hellmann's performing
strongly. Sales of ice cream for consumption in home increased by
15% in the first half and by 26% in the second quarter,
significantly offsetting the declines in out of home channels.
Magnum and Ben and Jerry's continued to grow strongly.
Underlying operating margin in Foods & Refreshment declined
by 20bps. Gross margin fell, driven by mix, volume deleverage from
out of home channel closures and costs related to Covid-19. This
was partially offset by a reduction in brand and marketing
investment.
FIRST HALF OPERATIONAL REVIEW: GEOGRAPHICAL AREA
Second Quarter 2020 First Half 2020
=================================================
Turnover USG UVG UPG Turnover USG UVG UPG Change
in underlying
(unaudited) operating
margin
========================== ========= ====== ====== ==== ========= ===== ===== ======= ===============
EURbn % % % EURbn % % % bps
========================== ========= ====== ====== ==== ========= ===== ===== ======= ===============
Unilever 13.3 (0.3) (0.8) 0.5 25.7 (0.1) (0.3) 0.2 50
========================== ========= ====== ====== ==== ========= ===== ===== ======= ===============
Asia/AMET/RUB 6.1 (1.8) (2.4) 0.6 11.8 (2.7) (2.9) 0.2 (40)
The Americas 4.2 5.2 4.2 0.9 8.2 5.0 4.1 0.9 220
Europe 3.0 (4.5) (4.4) 0.0 5.7 (1.8) (1.0) (0.8) (30)
========================== ========= ====== ====== ==== ========= ===== ===== ======= ===============
Second Quarter 2020 First Half 2020
==============================
(unaudited) Turnover USG UVG UPG Turnover USG UVG UPG
======================== ======== ====== ====== ====== ======== ===== ===== ======
EURbn % % % EURbn % % %
======================== ======== ====== ====== ====== ======== ===== ===== ======
Developed markets 5.8 2.1 2.2 (0.1) 10.9 2.4 3.0 (0.6)
Emerging markets 7.5 (1.9) (2.9) 1.0 14.8 (1.9) (2.6) 0.7
======================== ======== ====== ====== ====== ======== ===== ===== ======
North America 2.8 9.5 9.5 (0.1) 5.1 7.3 7.7 (0.4)
Latin America 1.4 (0.8) (3.2) 2.5 3.1 1.9 (0.8) 2.8
======================== ======== ====== ====== ====== ======== ===== ===== ======
Asia/AMET/RUB
Underlying sales declined 2.7% with volume decline of 2.9% and
positive pricing of 0.2%. Volumes were impacted by lock-downs of
varying severity imposed across the region. China, the first market
to enter lock-down, starting from January and easing in April,
declined in the first quarter. Following the relaxation of
restrictions, China returned to mid-single digit growth in the
second quarter, although food service remained challenging. India
and the Philippines declined, as strict lock-downs were imposed
from March, disrupting the flow of goods and negatively impacting
consumption of discretionary personal care categories as consumers
stayed at home more. Thailand was negatively impacted by reduced
tourism. Regional lock-downs were imposed in Indonesia as Covid-19
spread, and while growth was positive over the half year, sales
declined in the second quarter.
Underlying operating margin was down 40bps with a reduction in
gross margin and higher overheads, driven by investment in our
connected stores programme in South Asia, which digitises the
retail value chain, and partially offset by lower brand and
marketing investment .
The Americas
Underlying sales growth in North America was 7.3% with 7.7% from
volume and a decline of 0.4% from price. This growth includes
negative impact of around 3% from our food service and prestige
businesses which were impacted by channel closures. The decline in
these businesses was offset by increased consumption of in home
foods and ice cream as well as hygiene products; consumption which
was sustained throughout the second quarter. Our supply chain
responded quickly to increase capacity for products experiencing a
surge in demand.
Latin America grew 1.9% with volumes down 0.8% and positive
pricing of 2.8%. The impact of Covid-19 on the region was
concentrated in the second half of the period. Mexico saw negative
volumes and a sequential decline in the second quarter, more than
offsetting growth in the first quarter. Brazil grew low-single
digit overall, as a second quarter decline only partially offset
growth in the first quarter. Volumes grew in Argentina throughout
the first half, driven by in-home foods consumption, against a
backdrop of prolonged strict lock-down measures.
Underlying operating margin was up 220bps, with lower brand and
marketing investment as well as an improvement in overheads, which
was driven by savings programmes in Latin America and volume
leverage in North America.
Europe
Underlying sales declined 1.8% with negative volumes of 1.0% and
price down 0.8%. Negative volumes in Europe were a result of
significant declines in out of home ice cream and food service, as
well as reduced demand for personal care products. The most
severely impacted countries were Italy and Spain, where increased
demand for in home eating and hygiene products only partially
offset these negative impacts. The UK grew mid-single digit and
Germany low-single digit however, as increased demand for in home
eating and hygiene products more than offset declines in the
negatively impacted categories.
Underlying operating margin was down 30bps, with a reduction in
gross margin due to adverse mix and supply chain costs related to
Covid-19 as well as higher overheads, driven by volume deleverage
and other one-off items, which were partially offset by lower brand
and marketing investment.
ADDITIONAL COMMENTARY ON THE FINANCIAL STATEMENTS FIRST HALF 2020
Finance costs and tax
Net finance costs decreased by EUR102 million to EUR249 million
in the first half of 2020. The decrease was driven by interest on
tax credits in Brazil and India and exchange rate losses on cash
balances in Zimbabwe in the prior year. Cost of borrowings
decreased due to lower hedging costs, partly offset by lower income
on cash as interest rates declined. The interest rate on average
net debt decreased to 2.0% from 2.8% in the prior year.
The underlying effective tax rate for H1 2020 was 22.6% compared
with 26.2% in H1 2019. The decrease was primarily driven by
favourable tax settlements which were agreed during the period, a
reduction in the India tax rate and replacement of Indian
distribution tax with a dividend withholding tax. The effective tax
rate for H1 2020 was 22.3% compared with 26.8% in H1 2019.
Joint ventures, associates and other income from non-current
investments
Net profit from joint ventures and associates was EUR89 million,
compared to EUR85 million in the prior year. Income from other
non-current investments was zero versus EUR2 million in 2019.
Earnings per share
Constant underlying earnings per share increased by 10.1%.
Underlying earnings per share on a current currency basis increased
by 6.4% to EUR1.35, following a negative currency impact of 3.7%.
The improvement was driven by reduced tax and net finance costs, as
well as higher operating profit. These movements were slightly
reduced by an increase in profit attributable to minority interests
following the completion of the merger between Unilever's listed
subsidiary in India and GlaxoSmithKline's Consumer Healthcare
Limited.
Diluted earnings per share increased by 9.2% to EUR1.25 led by
the improvement in underlying EPS.
Free cash flow
Free cash flow in the first half of 2020 was EUR2.9 billion, up
from EUR1.5 billion in the first half of 2019. The improvement was
primarily led by favourable working capital movement as we enhanced
our focus on receivables management, as well as reduced capital
expenditure following a review of all spend in light of the
Covid-19 crisis. In addition, cash tax paid was lower as the prior
year included payments relating to the disposal of the spreads
business and tax settlements.
Net debt
Closing net debt decreased to EUR22.8 billion compared with
EUR23.1 billion at 31 December 2019. Increases to net debt due to
dividends paid and acquisitions were offset by the free cash flow
delivery.
Pensions
Pension liabilities net of assets increased to EUR0.4 billion at
the end of June 2020 versus EUR0.2 billion as at 31 December 2019.
Higher liabilities resulting from falling discount rates were
partially offset by positive investment returns on pension
assets.
Finance and liquidity
On 25 March 2020 Unilever announced the issuance of EUR1,000
million 1.25% fixed rate notes due March 2025 and EUR1,000 million
1.75% fixed rate notes due March 2030.
In April 2020, EUR300 million 0.0% fixed rate notes matured and
were repaid. In May 2020, $800 million 1.8% fixed rate notes and
$150 million 5.15% fixed rate notes matured and were repaid .
On 31 December 2019 Unilever had undrawn revolving 364-day
bilateral credit facilities in aggregate of $7,865 million with a
364-day term out. As part of the regular annual process, the
facilities were renewed in the first half of 2020 (undrawn balance
at 30 June 2020 was $7,965 million). The intention is that these
facilities will again be renewed in 2021.
COMPETITION INVESTIGATIONS
As previously disclosed, Unilever is involved in a number of
ongoing investigations and cases by national competition
authorities, including those within Italy, Greece and South Africa.
These proceedings and investigations are at various stages and
concern a variety of product markets. Where appropriate, provisions
are made and contingent liabilities disclosed in relation to such
matters.
Ongoing compliance with competition laws is of key importance to
Unilever. It is Unilever's policy to co-operate fully with
competition authorities whenever questions or issues arise. In
addition the Group continues to reinforce and enhance its internal
competition law training and compliance programme on an ongoing
basis .
NON-GAAP MEASURES
Certain discussions and analyses set out in this announcement
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. Wherever appropriate and practical, we provide
reconciliations to relevant GAAP measures .
Unilever uses 'constant rate', and 'underlying' measures
primarily for internal performance analysis and targeting purposes.
We present certain items, percentages and movements, using constant
exchange rates, which exclude the impact of fluctuations in foreign
currency exchange rates. We calculate constant currency values by
translating both the current and the prior period local currency
amounts using the prior year average exchange rates into euro,
except for the local currency of entities that operate in
hyperinflationary economies. These currencies are translated into
euros using the prior year closing exchange rate before the
application of IAS 29. The table below shows exchange rate
movements in our key markets.
First half First half
average rate average rate
in 2020 in 2019
================================ =============
Brazilian Real (EUR1 = BRL) 5.323 4.282
Chinese Yuan (EUR1 = CNY) 7.743 7.659
Indian Rupee (EUR1 = INR) 81.535 79.149
Indonesia Rupiah (EUR1 = IDR) 16055 16046
Philippine Peso (EUR1 = PHP) 55.823 59.010
UK Pound Sterling (EUR1 = GBP) 0.873 0.873
US Dollar (EUR1 = US $) 1.102 1.130
============= =============
Underlying sales growth (USG)
Underlying sales growth (USG) refers to the increase in turnover
for the period, excluding any change in turnover resulting from
acquisitions, disposals, changes in currency and price growth in
excess of 26% in hyperinflationary economies. Inflation of 26% per
year compounded over three years is one of the key indicators
within IAS 29 to assess whether an economy is deemed to be
hyperinflationary. We believe this measure provides valuable
additional information on the underlying sales performance of the
business and is a key measure used internally. The impact of
acquisitions and disposals is 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 changes in the GAAP
measure turnover to USG is provided in notes 3 and 4.
Underlying price growth (UPG)
Underlying price growth (UPG) is part of USG and means, for the
applicable period, the increase in turnover attributable to changes
in prices during the period. UPG therefore excludes the impact to
USG due to (i) the volume of products sold; and (ii) the
composition of products sold during the period. In determining
changes in price we exclude the impact of price growth in excess of
26% per year in hyperinflationary economies as explained in USG
above. The measures and the related turnover GAAP measure are set
out in notes 3 and 4.
Underlying volume growth (UVG)
Underlying volume growth (UVG) is part of USG and means, for the
applicable period, the increase in turnover in such period
calculated as the sum of (i) the increase in turnover attributable
to the volume of products sold; and (ii) the increase in turnover
attributable to the composition of products sold during such
period. UVG therefore excludes any impact on USG due to changes in
prices. The measures and the related turnover GAAP measure are set
out in notes 3 and 4.
Non-underlying items
Several non-GAAP measures are adjusted to exclude items defined
as non-underlying due to their nature and/or frequency of
occurrence.
(--) Non-underlying items within operating profit are: gains or
losses on business disposals, acquisition and disposal related
costs, restructuring costs, impairments and one-off items within
operating profit.
(--) Non-underlying items not in operating profit but within net
profit are: net monetary gain/(loss) arising from hyperinflationary
economies and significant and unusual items in net finance cost,
share of profit/(loss) of joint ventures and associates and
taxation.
(--) Non-underlying items are: both non-underlying items within
operating profit and those non-underlying items not in operating
profit but within net profit.
Underlying operating profit (UOP) and underlying operating
margin (UOM)
Underlying operating profit and underlying operating margin mean
operating profit and operating margin before the impact of
non-underlying items within operating profit. Underlying operating
profit represents our measure of segment profit or loss as it is
the primary measure used for making decisions about allocating
resources and assessing performance of the segments. The
reconciliation of operating profit to underlying operating profit
is as follows:
EUR million First Half
==============
(unaudited) 2020 2019
=================================================== ====== ======
Operating profit 4,672 4,589
Non-underlying items within operating profit (see
note 2) 412 465
====== ======
Underlying operating profit 5,084 5,054
====== ======
Turnover 25,714 26,126
Operating margin (%) 18.2 17.6
Underlying operating margin (%) 19.8 19.3
====== ======
Underlying effective tax rate
The underlying effective tax rate is calculated by dividing
taxation excluding the tax impact of non-underlying items by profit
before tax excluding the impact of non-underlying items and share
of net profit/(loss) of joint ventures and associates. This measure
reflects the underlying tax rate in relation to profit before tax
excluding non-underlying items before tax and share of net
profit/(loss) of joint ventures and associates. Tax impact on
non-underlying items within operating profit is the sum of the tax
on each non-underlying item, based on the applicable country tax
rates and tax treatment. This is shown in the following table:
EUR million First Half
================
(unaudited) 2020 2019
========================================================== ======= =======
Taxation 991 1,145
Tax impact:
Non-underlying items within operating profit(a) 109 89
Non-underlying items not in operating profit but within
net profit(a) (7) -
======= =======
Taxation before tax impact of non-underlying items 1,093 1,234
======= =======
Profit before taxation 4,533 4,354
Non-underlying items within operating profit before
tax(a) 412 465
Non-underlying items not in operating profit but within
net profit before tax(b) (21) (29)
Share of net profit /(loss) of joint ventures and
associates (89) (85)
======= =======
Profit before tax excluding non-underlying items before
tax and share of net profit/(loss) of joint ventures
and associates 4,835 4,705
======= =======
Underlying effective tax rate 22.6% 26.2%
======= =======
(a) Refer to note 2 for further details on these items.
(b) 2019 amount excludes EUR3 million gain on disposal of
spreads business by the joint venture in Portugal which is included
in the share of net profit/(loss) of joint ventures and associates
line. Including the EUR3 million, total non-underlying items not in
operating profit but within net profit before tax is EUR32 million.
Refer to note 2 for further details.
Underlying earnings per share (EPS)
Underlying earnings per share (underlying EPS) is calculated as
underlying profit attributable to shareholders' equity divided by
the diluted combined average number of share units. In calculating
underlying profit attributable to shareholders' equity, net profit
attributable to shareholders' equity is adjusted to eliminate the
post-tax impact of non-underlying items. This measure reflects the
underlying earnings for each share unit of the Group. Refer to note
6 for reconciliation of net profit attributable to shareholders'
equity to underlying profit attributable to shareholders equity
.
Constant underlying EPS
Constant underlying earnings per share (constant underlying EPS)
is calculated as underlying profit attributable to shareholders'
equity at constant exchange rates and excluding the impact of both
translational hedges and price growth in excess of 26% per year in
hyperinflationary economies divided by the diluted average number
of ordinary share units. This measure reflects the underlying
earnings for each share unit of the Group in constant exchange
rates.
The reconciliation of underlying profit attributable to
shareholders' equity to constant underlying earnings attributable
to shareholders' equity and the calculation of constant underlying
EPS is as follows:
EUR million First Half
================
(unaudited) 2020 2019
=========================================================== ======= =======
Underlying profit attributable to shareholders' equity
(see note 6) 3,559 3,342
Impact of translation from current to constant exchange
rates and translational hedges 127 (1)
Impact of price growth in excess of 26% per year in
hyperinflationary economies (6) -
======= =======
Constant underlying earnings attributable to shareholders'
equity 3,680 3,341
======= =======
Diluted combined average number of share units (millions
of units) 2,627.2 2,625.6
======= =======
Constant underlying EPS (EUR) 1.40 1.27
======= =======
Net debt
Net debt 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. Net
debt is defined as the excess of total financial liabilities,
excluding trade payables and other current liabilities, over cash,
cash equivalents and other current financial assets, excluding
trade and other current receivables, and non-current financial
asset derivatives that relate to financial liabilities.
The reconciliation of total financial liabilities to net debt is
as follows:
EUR million As at As at As at
30 June 31 December 30 June
2020 2019 2019
======== =============
(unaudited)
============================================= ======== =============
Total financial liabilities (28,805) (28,257) (28,985)
Current financial liabilities (4,792) (4,691) (5,616)
Non-current financial liabilities (24,013) (23,566) (23,369)
Cash and cash equivalents as per balance
sheet 4,855 4,185 3,911
Cash and cash equivalents as per cash flow
statement 4,722 4,116 3,789
Add bank overdrafts deducted therein 133 69 122
Other current financial assets 1,100 907 913
Non-current financial assets derivatives
that relate to financial liabilities 96 114 -
======== ============= ========
Net debt (22,754) (23,051) (24,161)
======== ============= ========
Free cash flow (FCF)
Within the Unilever Group, free cash flow (FCF) is defined as
cash flow from operating activities, less income taxes paid, net
capital expenditure and net interest payments. 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. FCF 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.
The reconciliation of net profit to FCF is as follows:
EUR million First Half
================
(unaudited) 2020 2019
============================================================ ======= =======
Net profit 3,542 3,209
Taxation 991 1,145
Share of net profit of joint ventures/associates and
other income
from non-current investments (89) (87)
Net monetary gain arising from hyperinflationary economies (21) (29)
Net finance costs 249 351
======= =======
Operating profit 4,672 4,589
======= =======
Depreciation, amortisation and impairment 987 965
Changes in working capital (1,215) (1,888)
Pensions and similar obligations less payments (79) (94)
Provisions less payments (66) 47
Elimination of (profits)/losses on disposals 45 (36)
Non-cash charge for share-based compensation 74 95
Other adjustments 9 23
======= =======
Cash flow from operating activities 4,427 3,701
======= =======
Income tax paid (899) (1,309)
Net capital expenditure (422) (558)
Net interest paid (256) (291)
======= =======
Free cash flow 2,850 1,543
======= =======
Total net cash flow (used in)/from investing activities (581) (716)
Total net cash flow (used in)/from financing activities (2,088) (856)
======= =======
OTHER INFORMATION
This document represents Unilever's half-yearly report for the
purposes of the Disclosure and Transparency Rules (DTR) issued by
the UK Financial Conduct Authority (DTR 4.2) and the Dutch Act on
Financial Supervision, section 5:25d (8)/(9) (Half-yearly financial
reports). In this context: (i) the condensed set of financial
statements can be found on pages 12 to 24; (ii) pages 2 to 11
comprise the interim management report; and (iii) the Directors'
responsibility statement can be found on page 25. No material
related parties transactions have taken place in the first six
months of the year.
PRINCIPAL RISK FACTORS
On pages 35 to 39 of our 2019 Annual Report and Accounts we set
out our assessment of the principal risk issues that would face the
business under the headings: brand preference; portfolio
management; climate change; plastic packaging; customer; talent;
supply chain; safe and high quality products; systems and
information; business transformation; economic and political
instability; treasury and tax; ethical; and legal and regulatory.
The Covid-19 pandemic has increased the potential impact of certain
of these risks and the longer term impacts will depend on a range
of factors including the duration and scope of the pandemic, the
geographies impacted, the impact of the pandemic on economic
activity and the nature and severity of measures adopted by
governments, including restrictions in business operations, travel,
mandates to avoid large gathering and orders to self-quarantine or
shelter in place. The Covid-19 pandemic may have significant
negative impacts in the medium and long term on the business.
Changes in consumer behaviour as a result of government imposed
lock downs and the need for people to self-quarantine, shelter in
place or observe social distancing for an indeterminate period of
time has reduced demand for certain products, particularly those
which rely on out of home consumption. Demand for certain personal
care products has also been affected as a result of reduced usage
by consumers in stay at home settings. The severity of
government-imposed lock downs and the period for which they
continue in different countries will have an impact on consumer
demand in those countries. In the longer term a deterioration in
the financial position of consumers as a result of Covid-19
pandemic may also impact demand for products. In addition,
disruptions as a result of Covid-19 in manufacturing, supply and
distribution arrangements, including those of third parties may
adversely impact operations.
CAUTIONARY STATEMENT
This announcement may contain forward-looking statements,
including 'forward-looking statements' within the meaning of the
United States Private Securities Litigation Reform Act of 1995.
Words such as 'will', 'aim', 'expects', 'anticipates', 'intends',
'looks', 'believes', 'vision', or the negative of these terms and
other similar expressions of future performance or results, and
their negatives, are intended to identify such forward-looking
statements. These forward-looking statements are based upon current
expectations and assumptions regarding anticipated developments and
other factors affecting the Unilever Group (the 'Group'). They are
not historical facts, nor are they guarantees of future
performance.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by
these forward-looking statements. Among other risks and
uncertainties, the material or principal factors which could cause
actual 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; the effect of climate change on Unilever's
business; Unilever's ability to find sustainable solutions to its
plastic packaging; significant changes or deterioration in customer
relationships; the recruitment and retention of talented employees;
disruptions in our supply chain and distribution; increases or
volatility in the cost of raw materials and commodities; the
production of safe and high quality products; secure and reliable
IT infrastructure; execution of acquisitions, divestitures and
business transformation projects; economic, social and political
risks and natural disasters; financial risks; failure to meet high
and ethical standards; and managing regulatory, tax and legal
matters. A number of these risks have increased as a result of the
current Covid-19 pandemic. These forward-looking statements speak
only as of the date of this document. Except as required by any
applicable law or regulation, the Group expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to
reflect any change in the Group's expectations with regard thereto
or any change in events, conditions or circumstances on which any
such statement is based. Further details of potential risks and
uncertainties affecting the Group are described in the Group's
filings with the London Stock Exchange, Euronext Amsterdam and the
US Securities and Exchange Commission, including in the Annual
Report on Form 20-F 2019 and the Unilever Annual Report and
Accounts 2019 .
ENQUIRIES
Media: Media Relations Team Investors: Investor Relations
Team
+44 78 2527
3767
+44 77 7999
9683
UK +31 10 217 lucila.zambrano@unilever.com
or 4844 JSibun@tulchangroup.com
NL +31 62 375 els-de.bruin@unilever.com +44 20 7822
or 8385 marlous-den.bieman@unilever.com 6830 investor.relations@unilever.com
There will be a web cast of the results presentation available
at:
www.unilever.com/investor-relations/results-and-presentations/latest-results
CONSOLIDATED INCOME STATEMENT
(unaudited)
EUR million First Half
=======================================
2020 2019 Increase/
(Decrease)
======== ======== ===================
Current Constant
rates rates
======================================================== ======== ======== ======== =========
Turnover 25,714 26,126 (1.6)% 1.2%
Operating profit 4,672 4,589 1.8% 5.1%
Which includes non-underlying items
credits/(charges) of (412) (465)
Net finance costs (249) (351)
Finance income 139 86
Finance costs (378) (420)
Pensions and similar obligations (10) (17)
Non-underlying item net monetary gain/(loss)
arising from hyperinflationary economies 21 29
Share of net profit/(loss) of joint
ventures and associates 89 85
Which includes non-underlying item credits/(charges)
of - 3
Other income/(loss) from non-current
investments and associates - 2
Profit before taxation 4,533 4,354 4.1% 8.0%
Taxation (991) (1,145)
Which includes tax impact of non-underlying
items of 102 89
Net profit 3,542 3,209 10.4% 14.7%
Attributable to:
======== ======== ======== =========
Non-controlling interests 258 203
Shareholders' equity 3,284 3,006 9.3% 13.8%
======== ======== ======== =========
Combined earnings per share
Basic earnings per share (euros) 1.25 1.15 9.2% 13.7%
Diluted earnings per share (euros) 1.25 1.14 9.2% 13.7%
==== ==== ===== ======
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
EUR million First Half
==============
2020 2019
======================================================== ======= =====
Net profit 3,542 3,209
Other comprehensive income
Items that will not be reclassified to profit or
loss, net of tax:
Gains/(losses) on equity instruments measured at
fair value through other
comprehensive income 20 16
Remeasurements of defined benefit pension plans (201) 267
Items that may be reclassified subsequently to profit
or loss, net of tax:
Gains/(losses) on cash flow hedges 43 83
Currency retranslation gains/(losses)(a) (1,481) 64
Total comprehensive income 1,923 3,639
Attributable to:
Non-controlling interests 177 216
Shareholders' equity 1,746 3,423
======= =====
(a) 2020 currency retranslation losses resulted from the
weakening of currencies against the euro in our foreign operations,
primarily in Brazil, Mexico, India, Korea and Russia .
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
EUR million Called Share Non-
up share premium Other Retained controlling Total
capital account reserves profit Total interest equity
====================================== ========== ========= ========== ========= ======= =============
First half - 2020
========== ========= ========== ========= ======= ============= ========
1 January 2020 420 134 (5,574) 18,212 13,192 694 13,886
========== ========= ========== ========= ======= ============= ========
Profit or loss for the period - - - 3,284 3,284 258 3,542
Other comprehensive income,
net of tax:
Gains/(losses) on:
Equity instruments - - 16 - 16 4 20
Cash flow hedges - - 46 - 46 (3) 43
Remeasurements of defined
benefit pension plans - - - (200) (200) (1) (201)
Currency retranslation
gains/(losses) - - (1,387) (13) (1,400) (81) (1,481)
========== ========= ========== ========= ======= ============= ========
Total comprehensive income - - (1,325) 3,071 1,746 177 1,923
Dividends on ordinary capital - - - (2,149) (2,149) - (2,149)
Other movements in treasury
shares(a) - - 190 (126) 64 - 64
Share-based payment credit(b) - - - 74 74 - 74
Dividends paid to non-controlling
interests - - - - - ( 210 ) (210)
Currency retranslation gains/(losses)
net of tax - (7) - - (7) - (7)
Hedging gain/(loss) transferred
to non-financial assets - - - - - 1 1
Net gain arising from Horlicks
acquisition(c) - - - 2,930 2,930 1,918 4,848
Other movements in equity(d) - - - (211) (211) 5 (206)
========== ========= ========== ========= ======= ============= ========
30 June 2020 420 127 (6,709) 21,801 15,639 2,585 18,224
========== ========= ========== ========= ======= ============= ========
First half - 2019
==== === ======== ======= ======= =====
1 January 2019 as previously
reported 464 129 (15,286) 26,265 11,572 720 12,292
IFRS 16 Restatement - - 68 (243) (175) - (175)
Impact of adopting IFRIC
23 - - - (38) (38) - (38)
==== === ======== ======= ======= ===== =======
1 January 2019 after restatement 464 129 (15,218) 25,984 11,359 720 12,079
==== === ======== ======= ======= ===== =======
Profit or loss for the period - - - 3,006 3,006 203 3,209
Other comprehensive income,
net of tax:
Gains/(losses) on:
Equity instruments - - 14 - 14 2 16
Cash flow hedges - - 83 - 83 - 83
Remeasurements of defined
benefit pension plans - - - 266 266 1 267
Currency retranslation gains/(losses) - - 50 4 54 10 64
==== === ======== ======= ======= ===== =======
Total comprehensive income - - 147 3,276 3,423 216 3,639
Dividends on ordinary capital - - - (2,079) (2,079) - (2,079)
Cancellation of treasury
shares(e) (30) - 6,599 (6,569) - - -
Other movements in treasury
shares(a) - - 31 (180) (149) - (149)
Share-based payment credit(b) - - - 95 95 - 95
Dividends paid to non-controlling
interests - - - - - (237) (237)
Currency retranslation gains/(losses) - - - - - - -
net of tax
Hedging gain/(loss) transferred
to non-financial assets - - 35 - 35 - 35
Other movements in equity - - - 26 26 (13) 13
==== === ======== ======= ======= ===== =======
30 June 2019 434 129 (8,406) 20,553 12,710 686 13,396
==== === ======== ======= ======= ===== =======
(a) Includes purchases and sales of treasury stock, and transfer
from treasury stock to retained profit of share-settled schemes
arising from prior years and differences between exercise and grant
price of share options.
(b) The share-based payment credit relates to the non-cash
charge recorded against operating profit in respect of the fair
value of share options and awards granted to employees.
(c) Consideration for the Main Horlicks Acquisition included the
issuance of shares in a group subsidiary, Hindustan Unilever
Limited, which resulted in a net gain being recognised within
equity. See note 7 for further details.
(d) Includes EUR163 million paid for purchase of the
non-controlling interest in Unilever Malaysia.
(e) During the first half of 2019 170,000,000 Unilever N.V.
ordinary shares and 18,660,634 Unilever PLC ordinary shares were
cancelled. The amount paid to repurchase these shares was initially
recognised in other reserves and is transferred to retained profit
on cancellation.
CONSOLIDATED BALANCE SHEET
(unaudited)
EUR million As at As at As at
30 June 31 December 30 June
2020 2019 2019
========= =============
Non-current assets
Goodwill 19,675 18,067 17,697
Intangible assets 16,049 12,962 12,547
Property, plant and equipment 11,374 12,062 12,067
Pension asset for funded schemes in surplus 2,296 2,422 2,053
Deferred tax assets 1,325 1,336 1,376
Financial assets 815 874 705
Other non-current assets 896 653 495
52,430 48,376 46,940
Current assets
Inventories 4,646 4,164 4,387
Trade and other current receivables 6,955 6,695 8,079
Current tax assets 336 397 265
Cash and cash equivalents 4,855 4,185 3,911
Other financial assets 1,100 907 913
Assets held for sale 56 82 34
========= ============= =========
17,948 16,430 17,589
========= ============= =========
Total assets 70,378 64,806 64,529
========= ============= =========
Current liabilities
Financial liabilities 4,792 4,691 5,616
Trade payables and other current liabilities 14,602 14,768 14,391
Current tax liabilities 1,051 898 1,072
Provisions 530 620 665
Liabilities held for sale 1 1 1
========= ============= =========
20,976 20,978 21,745
========= ============= =========
Non-current liabilities
Financial liabilities 24,013 23,566 23,369
Non-current tax liabilities 289 182 187
Pensions and post-retirement healthcare
liabilities:
Funded schemes in deficit 1,275 1,157 1,176
Unfunded schemes 1,426 1,461 1,417
Provisions 642 664 637
Deferred tax liabilities 3,276 2,573 2,272
Other non-current liabilities 257 339 330
31,178 29,942 29,388
Total liabilities 52,154 50,920 51,133
========= ============= =========
Equity
Shareholders' equity 15,639 13,192 12,710
Non-controlling interests 2,585 694 686
========= ============= =========
Total equity 18,224 13,886 13,396
========= ============= =========
Total liabilities and equity 70,378 64,806 64,529
========= ============= =========
CONSOLIDATED CASH FLOW STATEMENT
(unaudited)
EUR million First Half
================
2020 2019
========================================================= ======= =======
Net profit 3,542 3,209
Taxation 991 1,145
Share of net (profit)/loss of joint ventures/associates
and other (income)/loss
from non-current investments and associates (89) (87)
Net monetary (gain)/loss arising from hyperinflationary
economies (21) (29)
Net finance costs 249 351
======= =======
Operating profit 4,672 4,589
======= =======
Depreciation, amortisation and impairment 987 965
Changes in working capital (1,215) (1,888)
Pensions and similar obligations less payments (79) (94)
Provisions less payments (66) 47
Elimination of (profits)/losses on disposals 45 (36)
Non-cash charge for share-based compensation 74 95
Other adjustments 9 23
======= =======
Cash flow from operating activities 4,427 3,701
======= =======
Income tax paid (899) (1,309)
Net cash flow from operating activities 3,528 2,392
======= =======
Interest received 80 78
Net capital expenditure (422) (558)
Other acquisitions and disposals (623) (470)
Other investing activities 384 234
Net cash flow (used in)/from investing activities (581) (716)
======= =======
Dividends paid on ordinary share capital (2,120) (2,080)
Interest paid (336) (369)
Change in financial liabilities 602 1,937
Other movements on treasury shares - (205)
Other financing activities (234) (139)
Net cash flow (used in)/from financing activities (2,088) (856)
Net increase/(decrease) in cash and cash equivalents 859 820
======= =======
Cash and cash equivalents at the beginning of the
period 4,116 3,090
Effect of foreign exchange rate changes (253) (121)
Cash and cash equivalents at the end of the period 4,722 3,789
======= =======
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(unaudited)
1 ACCOUNTING INFORMATION AND POLICIES
The accounting policies and methods of computation are in
compliance with IAS 34 'Interim Financial Reporting' as issued by
the International Accounting Standard Board (IASB) and as adopted
by the EU; and except as set out below are consistent with the year
ended 31 December 2019. The condensed interim financial statements
are based on International Financial Reporting Standards (IFRS) as
adopted by the EU and IFRS as issued by the IASB.
Management have produced forecasts which have been modelled for
different plausible downside scenarios as a result of the Covid-19
pandemic. These scenarios confirm the Group is able to generate
profits and cash in the year ended 31 December 2020 and beyond. As
a result, the Directors have a reasonable expectation that the
Group has adequate resources to meet its obligations as they fall
due for a period of at least 12 months from the date of signing
these financial statements. Accordingly, they continue to adopt the
going concern basis in preparing the half year financial
statements.
The condensed interim financial statements are shown at current
exchange rates, while percentage year-on-year changes are shown at
both current and constant exchange rates to facilitate comparison.
The consolidated income statement on page 12, the consolidated
statement of comprehensive income on page 12, the consolidated
statement of changes in equity on page 13 and the consolidated cash
flow statement on page 15 are translated at exchange rates current
in each period. The consolidated balance sheet on page 14 is
translated at period-end rates of exchange.
The condensed interim financial statements attached do not
constitute the full financial statements within the meaning of
section 434 of the UK Companies Act 2006. The comparative figures
for the financial year ended 31 December 2019 are not Unilever
PLC's statutory accounts for that financial year. Those accounts of
Unilever for the year ended 31 December 2019 have been reported on
by the Group's auditor and delivered to the Registrar of Companies.
The report of the auditor on these accounts was (i) unqualified,
(ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report, and (iii) did not contain a statement under section 498 (2)
or (3) of the UK Companies Act 2006.
Adoption of new accounting standards
Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39
and IFRS 7
The Group has adopted the amendments that modify specific hedge
accounting requirements to allow entities to continue to forecast
future cash flows assuming that the interest rate benchmark will
continue despite ongoing reviews of interest rate benchmark reform.
As a result, there is no requirement for an entity to discontinue
hedge relationships or to reassess the economic relationships
between hedged items and hedging instruments as a result of the
uncertainties of the interest rate benchmark reform. The Group does
not have material derivatives that refer to an interest rate
benchmark so these amendments do not have a material impact on
Unilever.
2 SIGNIFICANT ITEMS WITHIN THE INCOME STATEMENT
Non-underlying items
These include non-underlying items within operating profit and
non-underlying items not in operating profit but with net
profit:
-- Non-underlying items within operating profit are gains or
losses on business disposals, acquisition and disposal related
costs, restructuring costs, impairment and one-off items within
operating profit.
-- Non-underlying items not in operating profit but with net
profit are net monetary gain/(loss) arising from hyperinflationary
economies and significant and unusual items in net finance cost,
share of profit/(loss) of joint ventures and associates and
taxation.
Restructuring costs are charges associated with activities
planned by management that significantly change either the scope of
the business or the manner in which it is conducted.
EUR million First Half
==============
2020 2019
============================================================== ======= =====
Acquisition and disposal-related credit/(costs) (27) (77)
Gain/(loss) on disposal of group companies(a) 6 66
Restructuring costs (391) (454)
Impairment - -
One-off items - -
======= =====
Non-underlying items within operating profit before
tax (412) (465)
Tax on non-underlying items within operating profit 109 89
======= =====
Non-underlying items within operating profit after
tax ( 303 ) (376)
============================================================== ======= =====
Share of gain on disposal of Spreads business in Portugal
JV - 3
Net monetary gain arising from hyperinflationary economies 21 29
======= =====
Non-underlying items not in operating profit but within
net profit before tax 21 32
Tax impact of non-underlying items not in operating
profit but within net profit:
Hyperinflation adjustment for Argentina deferred tax (7) -
======= =====
Non-underlying items not in operating profit but within
net profit after tax 14 32
============================================================== ======= =====
Non-underlying items after tax(b) (289) (344)
============================================================== ======= =====
Attributable to:
============================================================== ======= =====
Non-controlling interests ( 14 ) (8)
Shareholders' equity (275) (336)
======= =====
(a) 2019 includes a gain of EUR60 million relating to disposal
of Alsa baking and dessert business.
(b) Non-underlying items after tax is calculated as
non-underlying items within operating profit after tax plus
non-underlying items not in operating profit but within net profit
after tax.
3 SEGMENT INFORMATION - DIVISIONS
Second Quarter Beauty & Home Foods & Total
Personal Care Refreshment
Care
========== ====== =============
Turnover (EUR million)
2019 5,518 2,718 5,474 13,710
2020 5,320 2,617 5,355 13,292
Change (%) (3.6) (3.7) (2.2) (3.1)
Impact of:
Acquisitions (%) 1.1 0.3 2.9 1.6
Disposals (%) - (0.1) (0.3) (0.1)
Currency-related items (%), of
which: (3.7) (7.6) (3.0) (4.2)
Exchange rates changes (%) (3.9) (7.8) (3.3) (4.5)
Extreme price growth in hyperinflationary
markets* (%) 0.2 0.3 0.3 0.3
Underlying sales growth (%) (0.9) 4.0 (1.8) (0.3)
============================================== ====== ============= ======
Price* (%) (0.4) 0.8 1.4 0.5
Volume (%) (0.5) 3.2 (3.2) (0.8)
============================================== ========== ====== ============= ======
First Half Beauty & Home Foods & Total
Personal Care Refreshment
Care
========== ====== =============
Turnover (EUR million)
2019 10,721 5,410 9,995 26,126
2020 10,610 5,328 9,776 25,714
Change (%) (1.0) (1.5) (2.2) (1.6)
Impact of:
Acquisitions (%) 1.3 0.3 1.7 1.2
Disposals (%) - - (0.4) (0.2)
Currency-related items (%), of
which: (2.0) (4.8) (1.7) (2.5)
Exchange rates changes (%) (2.2) (5.1) (2.0) (2.7)
Extreme price growth in hyperinflationary
markets* (%) 0.3 0.3 0.3 0.3
Underlying sales growth (%) (0.3) 3.2 (1.7) (0.1)
============================================== ====== ============= ======
Price* (%) (0.4) 0.3 0.8 0.2
Volume (%) 0.1 2.9 (2.5) (0.3)
=============
Operating profit (EUR million)
2019 2,322 652 1,615 4,589
2020 2,403 744 1,525 4,672
Underlying operating profit (EUR
million)
2019 2,469 756 1,829 5,054
2020 2,495 817 1,772 5,084
Operating margin (%)
2019 21.7 12.1 16.2 17.6
2020 22.6 14.0 15.6 18.2
Underlying operating margin (%)
2019 23.0 14.0 18.3 19.3
2020 23.5 15.3 18.1 19.8
============================================== ========== ====== ============= ======
* Underlying price growth in excess of 26% per year in
hyperinflationary economies has been excluded when calculating the
price growth in the tables above, and an equal and opposite amount
is shown as extreme price growth in hyperinflationary markets.
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.
Underlying operating profit represents our measure of segment
profit or loss as it is the primary measure used for the purpose of
making decisions about allocating resources and assessing
performance of segments. Underlying operating margin is
calculated
4 SEGMENT INFORMATION - GEOGRAPHICAL AREA
Second Quarter Asia / The Europe Total
AMET / Americas
RUB
======== ========== =======
Turnover (EUR million)
2019 6,265 4,269 3,176 13,710
2020 6,063 4,210 3,019 13,292
Change (%) (3.2) (1.4) (4.9) (3.1)
Impact of:
Acquisitions (%) 2.6 1.2 0.2 1.6
Disposals (%) (0.1) (0.1) (0.1) (0.1)
Currency-related items (%), of
which: (3.8) (7.3) (0.6) (4.2)
Exchange rates changes (%) (3.9) (7.8) (0.6) (4.5)
Extreme price growth in hyperinflationary
markets* (%) 0.1 0.6 - 0.3
Underlying sales growth (%) (1.8) 5.2 (4.5) (0.3)
============================================== ========== ======= ======
Price* (%) 0.6 0.9 - 0.5
Volume (%) (2.4) 4.2 (4.4) (0.8)
============================================== ======== ========== ======= ======
First Half Asia / The Europe Total
AMET / Americas
RUB
======== ========== =======
Turnover (EUR million)
2019 12,195 8,141 5,790 26,126
2020 11,807 8,227 5,680 25,714
Change (%) (3.2) 1.1 (1.9) (1.6)
Impact of:
Acquisitions (%) 1.4 1.5 0.5 1.2
Disposals (%) (0.2) (0.1) (0.3) (0.2)
Currency-related items (%), of
which: (1.7) (5.1) (0.3) (2.5)
Exchange rates changes (%) (1.8) (5.8) (0.3) (2.7)
Extreme price growth in hyperinflationary
markets* (%) 0.1 0.7 - 0.3
Underlying sales growth (%) (2.7) 5.0 (1.8) (0.1)
============================================== ========== ======= ======
Price* (%) 0.2 0.9 (0.8) 0.2
Volume (%) (2.9) 4.1 (1.0) (0.3)
=======
Operating profit (EUR million)
2019 2,339 1,270 980 4,589
2020 2,265 1,532 875 4,672
Underlying operating profit (EUR
million)
2019 2,526 1,425 1,103 5,054
2020 2,394 1,622 1,068 5,084
Operating margin (%)
2019 19.2 15.6 16.9 17.6
2020 19.2 18.6 15.4 18.2
Underlying operating margin (%)
2019 20.7 17.5 19.1 19.3
2020 20.3 19.7 18.8 19.8
============================================== ======== ========== ======= ======
* Underlying price growth in excess of 26% per year in
hyperinflationary economies has been excluded when calculating the
price growth in the tables above, and an equal and opposite amount
is shown as extreme price growth in hyperinflationary markets.
5 TAXATION
The effective tax rate for the first half was 22.3% compared to
26.8% in 2019, a decrease primarily driven by favourable tax
settlements agreed during the period, a reduction in the India tax
rate and replacement of Indian distribution tax with a dividend
withholding tax. The tax rate is calculated by dividing the tax
charge by pre-tax profit excluding the contribution of joint
ventures and associates.
Tax effects of components of other comprehensive income were as
follows:
EUR million First Half 2020 First Half 2019
============================= ============================
Before Tax After Before Tax After
tax (charge)/ tax tax (charge)/ tax
credit credit
======================================= ======= =========== ======= ======= =========== ======
Gains/(losses) on
Equity instruments at fair
value through other comprehensive
income 19 1 20 16 - 16
Cash flow hedges 71 (28) 43 89 (6) 83
Remeasurements of defined
benefit pension plans (242) 41 (201) 274 (7) 267
Currency retranslation gains/(losses) (1,516) 35 (1,481) 68 (4) 64
======= =========== ======= ======= =========== ======
Other comprehensive income (1,668) 49 (1,619) 447 (17) 430
======= =========== ======= ======= =========== ======
6 COMBINED EARNINGS PER SHARE
2020 2019
=========================================================== ========
Combined EPS - Basic
=========================================================== ======== ========
Net profit attributable to shareholders' equity (EUR
million) 3,284 3,006
Average number of combined share units (millions
of units) 2,619.0 2,616.5
Combined EPS - basic (EUR) 1.25 1.15
======== ========
Combined EPS - Diluted
=========================================================== ======== ========
Net profit attributable to shareholders' equity (EUR
million) 3,284 3,006
Adjusted average number of combined share units (millions
of units) 2,627.2 2,625.6
Combined EPS - diluted (EUR) 1.25 1.14
======== ========
Underlying EPS
=========================================================== ======== ========
Net profit attributable to shareholder's equity (EUR
million) 3,284 3,006
Post tax impact of non-underlying items attributable
to shareholders' equity (see note 2) 275 336
======== ========
Underlying profit attributable to shareholders' equity
(EUR million) 3,559 3,342
Adjusted average number of combined share units (millions
of units) 2,627.2 2,625.6
Underlying EPS - diluted (EUR) 1.35 1.27
======== ========
In calculating underlying earnings per share, net profit
attributable to shareholders' equity is adjusted to eliminate the
post-tax impact of non-underlying items.
During the period the following movements in shares have taken
place:
Millions
=======================================================
Number of shares at 31 December 2019 (net of treasury
shares) 2,616.8
-------------------------------------------------------- --------
Net movement in shares under incentive schemes 4.5
======================================================== ========
Number of shares at 30 June 2020 2,621.3
======================================================== ========
7 ACQUISITIONS AND DISPOSALS
Total consideration for acquisitions completed in the first half
of 2020 is EUR5,526 million (acquisitions completed in the first
half of 2019: EUR654 million). A material acquisition in the first
half of 2020 was the purchase of the health food drinks portfolio
of GlaxoSmithKline plc in India and 20 other predominantly Asian
markets ("the Main Horlicks Acquisition"). There were no other
significant acquisitions completed in the first half of 2020.
Horlicks Acquisitions
The Main Horlicks Acquisition was composed of the following
related transactions on 1 April 2020:
-- Hindustan Unilever Limited (HUL), a subsidiary of the Group,
obtained control of the business of GlaxoSmithKline Consumer
Healthcare Limited (GSKCH) via an all equity merger under which
4.39 shares of HUL were allotted for every share of GSKCH;
-- HUL purchased the Horlicks intellectual property rights,
being mainly legal rights to the Horlicks brand (the 'HFD IP') for
India and Unilever N.V. and Unilever PLC purchased the HFD IP
outside of India and Bangladesh; and
-- Unilever Foods (Malaysia) Sdn Bhd and Unilever Asia Pacific
Limited (Singapore) purchased the Horlicks commercial operations of
GSK in 20 other predominantly Asian markets ("Local Distribution
Assets").
The Bangladesh Horlicks Acquisition is separate to the Main
Horlicks Acquisition and completed on 30 June 2020. Unilever
Overseas Holding B.V. purchased 82% of GSK Bangladesh Limited and
Unilever PLC purchased the HFD IP in Bangladesh. The following
disclosures relate only to the Main Horlicks Acquisition.
Main Horlicks Acquisition
The purpose of the acquisition was to add the Horlicks and Boost
brands in certain geographical markets to Unilever's portfolio to
increase presence in healthy nutrition and in high-growth emerging
markets.
Effect on consolidated income statement
The acquisition contributed EUR142 million to Group turnover and
EUR39 million to Group operating profit since the acquisition date.
If the acquisition had taken place at the beginning of the year,
Group turnover would have been EUR25,856 million and Group
operating profit would have been EUR4,711 million.
Effect on consolidated balance sheet
The EUR5,294 million consideration comprised of EUR449 million
in cash and EUR4,845 million in shares of Hindustan Unilever
Limited valued based on the share price of HUL on the completion
date and the exchange rate on the same date (83.05 INR/EUR).
The fair value of the net assets acquired are set out in the
table below. The amounts are provisional and subject to change.
EUR million
============================================================
Intangible assets 3,345
Other non-current assets 249
Deferred tax (net) (746)
Other financial assets 463
Trade and other receivables 74
Other current assets 94
Non-current liabilities (159)
Current liabilities (122)
===========
Net assets acquired 3,198
Goodwill 2,096
===========
Total consideration 5,294
===========
Net cash outflow arising on acquisition:
Cash consideration (449)
Less cash and cash equivalents acquired 36
===========
Total outflow in the consolidated statement of cash flows (413)
===========
Goodwill represents the future value which the Group believes it
will obtain through operational synergies, such as the overlapping
distribution network, tax benefits on goodwill and working capital
improvements and leveraging from the competencies and capabilities
of the Horlicks brand presence and recognition to generate stronger
market power. We expect around EUR1.3 billion of the goodwill to be
deductible for tax purposes. While we believe there is legal basis
to claim the Horlicks goodwill as tax deductible, we expect
challenges to this from the Indian tax authorities. Since the
acquisition date, foreign exchange has decreased this goodwill in
euros by EUR44 million.
The gross contractual value of trade and other receivables as at
the dates of acquisition amounted to EUR74 million which is
expected to be fully recoverable.
Within the acquired net assets, contingent liabilities amounting
to EUR123 million in respect of ongoing litigation against
GlaxoSmithKline Consumer Healthcare Limited have been recognised
based on management's estimate of the values of exposures and their
assessment of the probability of the related claims being settled
by the Group. The contingent liabilities mainly relate to direct
and indirect tax disputes with the Indian tax authorities. There
are several matters being disputed and in each case we believe that
the likelihood that the Indian tax authorities will ultimately
prevail is no higher than moderate, however we expect that most of
these disputes will not be resolved for several years. Contingent
assets of EUR73 million are also recognised, measured on the same
basis, for the Group's right to future indemnification by
GlaxoSmithKline Pte Limited and Horlicks Limited in relation to
certain claims.
Acquisition-related costs of EUR29 million have been recorded
within non-underlying items in the consolidated income statement
for the half year period to 30 June 2020 (full year 2019: EUR12
million). Total costs relating to the issuance of shares amounting
to EUR5 million have been recognised against equity by Hindustan
Unilever Limited.
Impact of dilution of Group interest in Hindustan Unilever
Limited
The acquisition of GSKCH by HUL was settled through the issue of
(184.6 million) new shares of Hindustan Unilever Limited and so
resulted in dilution of Unilever's interest in Hindustan Unilever
Limited from 67.2% to 61.9%. The table below shows the impact of
the decrease in shareholding on the equity attributable to
shareholders of the Group .
EUR million
================================================================
67.2% share of HUL's net assets acquired before acquisition
of GSKCH 718
61.9% share of HUL's net assets acquired after acquisition
of GSKCH 661
===========
Loss recognised in equity due to dilution (57)
Gain arising from proportionate share of GSKCH's net assets
acquired 3,001
===========
Net gain arising from the Main Horlicks acquisition recognized
in equity 2,944
===========
8 FINANCIAL INSTRUMENTS
The Group's Treasury function aims to protect the Group's
financial investments, while maximising returns. The fair value of
financial assets is the same as the carrying amount for 2020 and
2019. The Group's cash resources and other financial assets are
shown below.
EUR million 30 June 2020 31 December 2019 30 June 2019
============================== ============================ ============================
Current Non-current Total Current Non-current Total Current Non-current Total
========================== ======== ============ ====== ======= ============ ===== ======= ============ =====
Cash and cash equivalents
Cash at bank and in
hand 2,672 - 2,672 2,457 - 2,457 2,157 - 2,157
Short-term deposits
with maturity
of three months or
less 2,176 - 2,176 1,693 - 1,693 1,568 - 1,568
Other cash equivalents 7 - 7 35 - 35 186 - 186
======== ============ ====== ======= ============ ===== ======= ============ =====
4,855 - 4,855 4,185 - 4,185 3,911 - 3,911
======== ============ ====== ======= ============ ===== ======= ============ =====
Other financial assets
Financial assets at
amortised cost(a) 774 129 903 578 220 798 239 260 499
Financial assets at
fair value through
other comprehensive
income(b) - 304 304 - 266 266 110 217 327
Financial assets at
fair value
through profit or loss:
Derivatives that
relate
to
financial liabilities 69 96 165 20 114 134 411 - 411
Other(c) 257 286 543 309 274 583 153 228 381
======== ============ ====== ======= ============ ===== ======= ============ =====
1,100 815 1,915 907 874 1,781 913 705 1,618
======== ============ ====== ======= ============ ===== ======= ============ =====
Total financial assets(d) 5,955 815 6,770 5,092 874 5,966 4,824 705 5,529
======== ============ ====== ======= ============ ===== ======= ============ =====
(a) Current financial assets at amortised cost include short
term deposits with banks with maturities longer than three months
and loans to joint venture entities. Non-current financial assets
at amortised cost include judicial deposit of EUR94 million
(December 2019: EUR136 million) and investment in bonds of EURnil
million (December 2019: EUR56 million).
(b) Included within non-current financial assets at fair value
through other comprehensive income are equity investments of EUR284
million (December 2019: EUR244 million).
(c) Included within current financial assets at fair value
through profit or loss are highly liquid debt mutual funds.
Included within non-current financial assets at fair value through
profit or loss are assets in a trust to fund benefit obligations in
the US and investments in a number of companies and financial
institutions in North America, North Asia, South Asia and
Europe.
(d) Financial assets exclude trade and other current
receivables.
The Group is exposed to the risks of changes in fair value of
its financial assets and liabilities. The following tables
summarise the fair values and carrying amounts of financial
instruments and the fair value calculations by category.
EUR million Fair value Carrying amount
================================ =================================== ======================================
As at As at As at As at As at As at
30 June 31 December 30 June 30 June 31 December 30 June
2020 2019 2019 2020 2019 2019
================================ ========= ============= ========= ========== ============= ===========
Financial assets
Cash and cash equivalents 4,855 4,185 3,911 4,855 4,185 3,911
Financial assets at amortised
cost 903 798 499 903 798 499
Financial assets at fair value
through other
comprehensive income 304 266 327 304 266 327
Financial assets at fair value
through profit and loss:
Derivatives 165 134 411 165 134 411
Other 543 583 381 543 583 381
========= ============= ========= ========== ============= ===========
6,770 5,966 5,529 6,770 5,966 5,529
Financial liabilities
Bank loans and overdrafts (851) (853) (1,044) (851) (853) (1,041)
Bonds and other loans (28,206) (26,525) (26,787) (25,837) (25,032) (25,390)
Lease liabilities (1,849) (1,919) (1,967) (1,849) (1,919) (1,967)
Derivatives (76) (270) (464) (76) (270) (464)
Other financial liabilities (192) (183) (123) (192) (183) (123)
========= ============= ========= ========== ============= ===========
(31,174) (29,750) (30,385) (28,805) (28,257) (28,985)
========= ============= ========= ========== ============= ===========
EUR million Level Level Level Level Level Level Level Level Level
1 2 3 1 2 3 1 2 3
======= ======= ====== ======= ======= ====== ======= ======= ======
As at 30 June As at 31 December As at 30 June
2020 2019 2019
======================== ======================== ========================
Assets at fair value
Financial assets at
fair value through other
comprehensive income 5 4 295 7 4 255 116 4 207
Financial assets at
fair value
through profit or loss:
Derivatives(a) - 268 - - 208 - - 448 -
Other 260 - 283 311 - 272 155 - 226
Liabilities at fair
value
Derivatives(b) - (187) - - (326) - - (530) -
( 154
Contingent Consideration - - (155) - - ) - - (156)
======= ======= ====== ======= ======= ====== ======= ======= ======
(a) Includes EUR103 million (December 2019: EUR74 million, June
2019: EUR37 million) derivatives, reported within trade
receivables, that hedge trading activities.
(b) Includes EUR(111) million (December 2019: EUR (56) million,
June 2019: EUR(66) million) derivatives, reported within trade
payables, that hedge trading activities.
There were no significant changes in classification of fair
value of financial assets and financial liabilities since 31
December 2019. There were also no significant movements between the
fair value hierarchy classifications since 31 December 2019.
The fair value of trade receivables and payables is considered
to be equal to the carrying amount of these items due to their
short-term nature.
Calculation of fair values
The fair values of the financial assets and liabilities are
defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Methods and
assumptions used to estimate the fair values are consistent with
those used in the year ended 31 December 2019.
9 DIVIDS
The Boards have determined to pay a quarterly interim dividend
for Q2 2020 at the following rates which are equivalent in value
between the two companies at the rate of exchange applied under the
terms of the Equalisation Agreement:
Per Unilever N.V. ordinary share EUR 0.4104
Per Unilever PLC ordinary share GBP 0.3698
Per Unilever N.V. New York share US$ 0.4694
Per Unilever PLC American Depositary US$ 0.4694
Receipt
The quarterly interim dividends have been determined in euros
and converted into equivalent sterling and US dollar amounts using
exchange rates issued by WM/Reuters on 21 July 2020.
US dollar cheques for the quarterly interim dividend will be
mailed on 9 September 2020 to holders of record at the close of
business on 7 August 2020. In the case of the NV New York shares,
Netherlands withholding tax will be deducted.
The quarterly dividend calendar for the remainder of 2020 will
be as follows:
Announcement Ex-Dividend Record Date Payment Date
Date Date
================= ============= ============ ==============
Q2 2020 Dividend 23 July 2020 6 August 7 August 2020 9 September
2020 2020
Q3 2020 Dividend 22 October 5 November 6 November 2 December
2020 2020 2020 2020
============= ============ ============== =============
10 EVENTS AFTER THE BALANCE SHEET DATE
There were no material post balance sheet events other than
those mentioned elsewhere in this report.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors declare that, to the best of their knowledge:
-- this condensed set of interim financial statements, which
have been prepared in accordance with IAS 34 'Interim Financial
Reporting', as issued by the International Accounting Standard
Board and endorsed and adopted by the EU gives a true and fair view
of the assets, liabilities, financial position and profit or loss
of Unilever; and
-- the interim management report gives a fair review of the
information required pursuant to regulations 4.2.7 and 4.2.8 of the
Disclosure and Transparency Rules (DTR) issued by the UK Financial
Conduct Authority and section 5:25d (8)/(9) of the Dutch Act on
Financial Supervision (Wet op het financieel toezicht).
Unilever's Directors are listed in the Annual Report and
Accounts for 2019, with the exception of Marijn Dekkers who retired
as a Non-Executive Director following the Unilever N.V. and
Unilever PLC 2020 AGMs.
Details of all current Directors are available on our website at
www.unilever.com
By order of the Board
Alan Jope Graeme Pitkethly
Chief Executive Officer Chief Financial Officer
23 July 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PPUBWMUPUPUP
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