REG - Unilever PLCUnilever NV. - 2014 First Half Year Results <Origin Href="QuoteRef">ULVR.L</Origin> <Origin Href="QuoteRef">UNc.AS</Origin> - Part 1
06/09/2014 20:29
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Unilever PLC
24 July 2014
2014 FIRST HALF YEAR RESULTS
SOLID GROWTH IN CHALLENGING MARKETS
First half highlights
· Underlying sales growth 3.7% with emerging markets up 6.6%
· Underlying volume growth 1.9% and price up 1.7%
· Turnover decreased by 5.5% to E24.1 billion with currency down (8.5)%
· Core operating margin stable at 14.0% at current exchange rates, up 30bps
at constant exchange rates
· Operating profit up 13% reflecting profits on disposal
· Core earnings per share up 2% to E0.78
Second quarter highlights
· Underlying sales growth 3.8% with underlying volume growth 1.9% and price
up 1.9%
Paul Polman: Chief Executive Officer statement
"The first half again shows consistent top and bottom line progress despite
significant headwinds. Our markets have been challenging and we have
experienced a further slow-down in the emerging countries whilst developed
markets are not yet picking up.
We continued to grow ahead of our markets driven by strong innovations such as
Ben & Jerry's Cores, compressed deodorants in Europe, REGENERATE Enamel
Science in oral and Skip Dual Action capsules. At the same time we continue to
invest for the long term with our programme to take our brands into new
countries with the launches of Lifebuoy in China, Omo in Arabia and Clear in
Japan.
We made further progress in strengthening our portfolio with the acquisition
of a majority stake in Qinyuan, the Chinese water purification business, and
the disposals of the Ragu and Bertolli pasta sauces brands in the United
States and, more recently, the Slim.Fast business.
In a tougher cost environment, project Half is on track and is enabling us to
drive cost savings and simultaneously increase organisational agility.
We remain focused on achieving another year of profitable volume growth ahead
of our markets, steady and sustainable core operating margin improvement and
strong cash flow."
Key Financials (unaudited)Current Rates First Half 2014
Underlying Sales Growth (*) 3.7%
Turnover E24.1bn -5.5%
Operating Profit E4.4bn +13%
Net Profit E3.0bn +12%
Core earnings per share (*) E0.78 +2%
Diluted earnings per share E0.97 +17%
Quarterly dividend payable in September 2014 E0.285 per share
(*) Underlying sales growth and core earnings per share are non-GAAP measures
(see pages 6 and 7). 24 July 2014
OPERATIONAL REVIEW: CATEGORIES
Second Quarter 2014 First Half 2014
(unaudited) Turnover USG UVG UPG Turnover USG UVG UPG Change in core operating margin
Ebn % % % Ebn % % % bps
Unilever Total 12.7 3.8 1.9 1.9 24.1 3.7 1.9 1.7 0
Personal Care 4.4 4.5 2.2 2.2 8.6 4.5 2.4 2.0 110
Foods 3.1 0.7 0.1 0.5 6.1 (0.5) (0.9) 0.4 50
Refreshment 2.9 4.5 3.1 1.4 4.9 5.1 3.3 1.7 (100)
Home Care 2.3 6.2 2.5 3.5 4.5 6.8 3.7 3.0 (150)
Our markets: Market growth continued to slow in emerging countries,
particularly in Asia, as macro-economic pressures weighed on consumer spending
in our categories. Developed markets remained weak with little sign of any
recovery in North America or Europe.
Unilever performance: We delivered another quarter of growth ahead of our
markets. Emerging markets grew 6.6% with price up 4.4% and volume growth of
2.1%. Developed markets grew by 0.3% in the second quarter, with positive
volume growth partially offset by declining price. All categories grew with
good performances from Home Care, Personal Care and Refreshment.
Gross margin for the half year increased by 10bps to 41.5% at constant
exchange rates primarily due to our focus on higher margin products and
continued discipline around savings programmes which more than offset higher
commodity costs in local currencies in emerging markets. Brand and marketing
investment was up by 10bps. Overheads improved by 30bps and core operating
margin was up 30bps in constant exchange rates. In current exchange rates,
core operating margin was flat at 14.0% impacted by currency headwinds. Core
operating profit was down by E209 million at E3.4 billion after a negative
currency impact of E413 million. Core earnings per share was up 2% at E0.78.
Personal Care
Personal Care continued to grow ahead of slowing markets underpinned by a
strong innovation programme. Deodorants saw the continued success of the
compressed aerosol range in Europe, good growth for Rexona with the successful
Do:More campaign, the positive impact of new communication behind Dove
Invisible Dry and the introduction of new packaging for Axe. In oral care we
introduced a new brand, REGENERATE Enamel Science, in the United Kingdom. This
is a premium proposition and is the first toothpaste and serum system that
regenerates enamel with exactly the same mineral which makes up tooth enamel.
In hair Clear has been successfully introduced in Japan and re-launched in key
markets such as Brazil and China. TRESemmé benefited from the success of the 7
Day Keratin Smooth range, and Dove Oxygen Moisture made good progress in the
United States. Skin cleansing saw continued strong growth for Lifebuoy
reflecting the success of the proposition to protect against 10 infection
causing germs and the introduction of the brand in China. Dove continued to
deliver broad-based growth and Lux benefited from the re-launch in China and
South East Asia. In skin care Fair & Lovely delivered strong growth and the
Dove Purely Pampering range was extended into nourishing body oil.
Core operating margin in the first half was up 110bps, with higher gross
margin driven by margin accretive innovation and efficiencies in brand and
marketing investments. Core operating profit was broadly unchanged at E1,532
million.
Foods
Foods growth in the second quarter reflected the impact of the late Easter and
improved market shares but the markets in North America and Europe remained
challenging whilst emerging markets continued to grow in mid single digits.
Savoury grew on the back of the 'What's for dinner tonight?' market
development campaign and good progress in emerging markets. Dressings growth
stepped up and we saw good performances from Hellmann's with Olive Oil in the
United States and the extension of the new squeezy packaging in Brazil. Whilst
we gained share in margarine, spreads performance reflected the decline of the
market. We continued to improve the taste of our products, to roll out the
successful 'It takes a village' campaign for Pro.Activ and to introduce blends
of vegetable oil and butter, such as Gold by Flora and Bertolli with Butter in
the United Kingdom, to meet a broader range of consumer taste preferences.
Core operating margin was up 50bps in the first half with higher gross margin
partially offset by higher brand and marketing investment. Core operating
profit was down at E1,097 million, primarily due to currency.
Refreshment
Ice cream performed strongly in the quarter. Magnum benefited from a strong
programme of activities including its 25th anniversary, the launch of Magnum
Infinity in the United States and Indonesia, and the launch of Magnum Mini in
Brazil. Ben & Jerry's grew well supported by innovations such as Cores and the
introduction of a mini cup format in Japan whilst Cornetto responded well to
re-launches in North Asia and Europe.
The performance of leaf tea was mixed. We saw good growth in India and Turkey,
and also in the United States driven by the success of Lipton K-Cups and new
liquid concentrate. Sales in Russia and Saudi Arabia were soft. Ades soy drink
continued to recover from the impact of last year's product recall in Brazil.
Core operating margin was down 100bps with lower gross margin as a result of
pricing and savings programmes lagging higher commodity costs. This together
with adverse currency resulted in core operating profit of E509 million.
Home Care
Laundry growth remained competitive and well-balanced between volume and
price. Following a good response to the launch in France under the Skip brand,
Persil Dual Action capsules were launched in the United Kingdom. Omo was
re-introduced in Saudi Arabia and Skip Small & Mighty liquids were launched in
South Africa. In household care we grew ahead of slowing markets. Cif
multi-purpose sprays and Domestos Zero Stain toilet cleaner were launched in
Vietnam and Indonesia and Domestos Ultra Power was launched in Russia.
Core operating margin was down 150bps driven by lower gross margin reflecting
brand extensions into new markets, the tough competitive environment and
higher commodity costs. This together with adverse currency resulted in core
operating profit of E229 million.
OPERATIONAL REVIEW: GEOGRAPHICAL AREA
Second Quarter 2014 First Half 2014
(unaudited) Turnover USG UVG UPG Turnover USG UVG UPG Change in core operating margin
Ebn % % % Ebn % % % Bps
Unilever Total 12.7 3.8 1.9 1.9 24.1 3.7 1.9 1.7 0
Asia/AMET/RUB 5.1 6.3 3.8 2.3 9.8 6.1 3.8 2.2 0
The Americas 4.0 4.8 0.3 4.5 7.6 4.3 0.4 3.9 (40)
Europe 3.6 (0.8) 1.1 (1.9) 6.7 (0.4) 1.1 (1.5) 40
Asia/AMET/RUB
Sales growth in the quarter was equally driven by volume and price growth. We
saw strong performances in Indonesia, Turkey, the Philippines, Japan and South
Africa. Whilst slower growth in China reflected weaker markets, the acquired
Qinyuan water purification business has started well.
Core operating margin in the first half was stable with higher gross margin
offset by higher brand and marketing investment.
The Americas
North America grew by 0.4% in the quarter with positive volume growth
partially offset by negative price growth. Personal Care, Refreshments and
dressings experienced healthy growth. Following the respective strategic
reviews, the disposal of the Ragu and Bertolli pasta sauces brands in the
United States was completed during the quarter and the disposal of Slim.Fast
was announced early in July. Latin America delivered another quarter of strong
growth but economic conditions remain difficult and the growth was driven by
pricing. All categories grew and within Refreshment we saw a strong ice cream
performance.
Core operating margin was down 40bps due to a lower gross margin in Latin
America where price increases have lagged higher commodity costs.
Europe
Europe declined by (0.8%) in the quarter with negative price growth partially
offset by volume growth which was stable at 1.1%. We saw growth in the United
Kingdom, France and the Nordic countries and continued signs of recovery in
Spain and Greece. Central Europe was however weak, mainly due to challenging
market conditions in Poland.
Core operating margin was up 40bps driven by higher gross margin and lower
brand and marketing investment.
ADDITIONAL COMMENTARY ON THE FINANCIAL STATEMENTS - FIRST HALF 2014
Finance costs and tax
The cost of financing net borrowings in the first half 2014 was E212 million
versus E215 million in 2013. The average level of net debt increased whilst
interest rate movements were marginally favourable: the average interest rate
on borrowings was 3.6% excluding one-off charges and the average return on
cash deposits was 4.0%. Pensions financing was a charge of E47 million versus
a charge of E71 million in the prior year.
The effective tax rate was 29.4%, higher than 27.1% in 2013 due to the impact
of business disposals. The effective tax rate on core earnings was 23.9%. Our
longer term expectation for the tax rate remains around 26%.
Joint ventures, associates and other income from non-current investments
Net profit from joint ventures and associates, together with other income from
non-current investments contributed E98 million compared with E53 million in
2013. The improvement was due to increased profits from the Lipton
ready-to-drink tea joint ventures and one-off items in non-current
investments.
Earnings per share
Core earnings per share in the first half was up 2% to E0.78. This improvement
was driven by the growth in constant currency core operating profit and a
lower tax charge partially offset by negative foreign exchange movements. In
constant exchange rates, core earnings per share increased by 14%. This
measure excludes the impact of business disposals, acquisition and disposal
related costs, impairments and other one-off items.
On 19 May 2014 Unilever purchased for £715 million the rights left in trusts
by the first Viscount Leverhulme which were convertible in 2038 into
70,875,000 Unilever PLC ordinary shares. This increased diluted earnings per
share metrics as the dilutive effect of these shares does not impact the
calculation of weighted average shares from the date of the transaction.
Diluted earnings per share for the first half was up 17% at E0.97. This
included the profit on disposal of the Ragu and Bertolli pasta sauces brands
in the United States.
Pensions
The pension liability net of assets was E2.5 billion at the end of June 2014
versus E2.0 billion as at 31 December 2013. The increase in the net pension
deficit reflects the impact of higher liabilities due to lower discount rates
partially offset by strong investment performance and cash contributions.
Disposals
Business disposals contributed E1.4 billion to non-core profits versus E371
million in the first half 2013. This primarily related to the disposal of the
Ragu and Bertolli pasta sauces brands in the United States. The decision to
dispose of the Slim.Fast business has been taken in the first half and an
impairment charge of E318 million, accompanied by a tax credit of E117
million, has been recognised on the reclassification of the assets to held for
sale. The disposal was completed in July.
Free cash flow
Free cash flow was E0.8 billion versus E1.3 billion in 2013. The reduction is
primarily due to an adverse currency impact and phasing of capital
expenditure.
Net debt
Closing net debt was E9.3 billion versus E8.5 billion as at 31 December 2013
primarily due to the seasonal outflow of working capital.
Finance and liquidity
On 19 March 2014 Unilever announced the issuance of our first ever green
sustainability bond. The £250 million 2% fixed rate notes are due 19 December
2018. The proceeds will be deployed on projects which support achievement of
the goals of the Unilever Sustainable Living Plan.
COMPETITION INVESTIGATIONS
As previously disclosed, along with other consumer products companies and
retail customers, Unilever is involved in a number of ongoing investigations
by national competition authorities. 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.
PRINCIPAL RISK FACTORS
On pages 34 to 39 of our 2013 Report and Accounts we set out our assessment of
the principal risk issues that would face the business through 2014 under the
headings: brand preference; portfolio management; sustainability; customer
relationships; talent; supply chain; safe and high quality products; systems
and information; business transformation; external economic and political
risks, and natural disasters; treasury and pensions; ethical; legal and
regulatory. In our view, the nature and potential impact of such risks remain
essentially unchanged as regards our performance over the second half of
2014.
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 9 to 19; (ii) pages 2 to 8
comprise the interim management report; and (iii) the Directors'
responsibility statement can be found on page 20. No material related parties
transactions have taken place in the first six months of the year.
NON-GAAP MEASURES
In our financial reporting we use certain measures that are not recognised
under IFRS or other generally accepted accounting principles (GAAP). We do
this because we believe that these measures are useful to investors and other
users of our financial statements in helping them to understand underlying
business performance. Wherever we use such measures, we make clear that these
are not intended as a substitute for recognised GAAP measures. Wherever
appropriate and practical, we provide reconciliations to relevant GAAP
measures. Unilever uses 'constant rate' 'underlying' and 'core' measures
primarily for internal performance analysis and targeting purposes. The
non-GAAP measures which we apply in our reporting are set out below.
Underlying sales growth (USG)
"Underlying Sales Growth" or "USG" refers to the increase in turnover for the
period, excluding any change in turnover resulting from acquisitions,
disposals and changes in currency. Acquisitions and disposals are excluded
from USG for a period of 12 calendar months from the applicable closing date.
Turnover from acquired brands that are launched in countries where they were
not previously sold is included in USG as such turnover is more attributable
to our existing sales and distribution network than the acquisition itself.
The reconciliation of USG to changes in the GAAP measure turnover is provided
in notes 3 and 4.
Underlying volume growth (UVG)
"Underlying Volume Growth" or "UVG" is part of USG and means, for the
applicable period, the increase in turnover in such period calculated as the
sum of (1) the increase in turnover attributable to the volume of products
sold; and (2) the increase in turnover attributable to the composition of
products sold during such period. UVG therefore excludes any impact to USG due
to changes in prices. The relationship between the two measures is set out in
notes 3 and 4.
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 expenditures and net
interest payments and preference dividends paid. It does not represent
residual cash flows entirely available for discretionary purposes; for
example, the repayment of principal amounts borrowed is not deducted from FCF.
Free cash flow reflects an additional way of viewing our liquidity that we
believe is useful to investors because it represents cash flows that could be
used for distribution of dividends, repayment of debt or to fund our strategic
initiatives, including acquisitions, if any.
The reconciliation of FCF to net profit is as follows:
E million First Half
(unaudited) 2014 2013
Net profit 2,995 2,682
Taxation 1,223 977
Share of net profit of joint ventures/associates and other income
from non-current investments (98) (53)
Net finance costs 259 286
Operating Profit 4,379 3,892
Depreciation, amortisation and impairment 842 583
Changes in working capital (1,089) (1,004)
Pensions and similar obligations less payments (195) (246)
Provisions less payments 84 43
Elimination of (profits)/losses on disposals (1,421) (372)
Non-cash charge for share-based payments 118 121
Other adjustments 20 (18)
Cash flow from operating activities 2,738 2,999
Income tax paid (994) (894)
Net capital expenditure (789) (632)
Net interest and preference dividends paid (197) (173)
Free cash flow 758 1,300
Net cash flow (used in)/from investing activities 895 (798)
Net cash flow (used in)/from financing activities (1,494) (354)
Core operating profit (COP), core operating margin (COM) and non-core items
COP and COM means operating profit and operating margin, respectively, before
the impact of business disposals, acquisition and disposal related costs,
impairments and other one-off items, which we collectively term non-core
items, due to their nature and frequency of occurrence. The reconciliation of
core operating profit to operating profit is as follows:
E million First Half
(unaudited) 2014 2013
Operating profit 4,379 3,892
Non-core items (see note 2) (1,012) (316)
Core operating profit 3,367 3,576
Turnover 24,098 25,500
Operating margin (%) 18.2 15.3
Core operating margin (%) 14.0 14.0
Core EPS
The Group also refers to core earnings per share (core EPS). In calculating
core earnings, net profit attributable to shareholders' equity is adjusted to
eliminate the post tax impact of non-core items. Refer to note 2 on page 13
for reconciliation of core earnings to net profit attributable to
shareholders' equity.
Net debt
Net debt is defined as the excess of total financial liabilities, excluding
trade and other payables, over cash, cash equivalents and current financial
assets, excluding trade and other receivables. It is a measure that provides
valuable additional information on the summary presentation of the Group's net
financial liabilities and is a measure in common use elsewhere.
The reconciliation of net debt to the GAAP measure total financial liabilities
is as follows:
E million As at 30 June2014 As at 31 December2013 As at 30 June2013
(unaudited)
Total financial liabilities (13,436) (11,501) (15,907)
Current financial liabilities:
Liabilities related to acquisition of non-controlling interests(a) - - (4,034)
Other current financial liabilities (5,705) (4,010) (5,065)
Non-current financial liabilities (7,731) (7,491) (6,808)
Cash and cash equivalents as per balance sheet 3,419 2,285 3,467
Cash and cash equivalents as per cash flow statement 3,090 2,044 3,204
Add bank overdrafts deducted therein 329 241 263
Other financial assets 744 760 804
Net debt (9,273) (8,456) (11,636)
(a) Included in liabilities related to acquisition of non-controlling
interests as at 30 June 2013 is E3,754 million relating to acquisition of
shares in Hindustan Unilever and other non-controlling interests totalling
E280 million.
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; inability to find sustainable solutions to support long-term
growth; customer relationships; the recruitment and retention of talented
employees; disruptions in our supply chain; the cost of raw materials and
commodities; the production of safe and high quality products; secure and
reliable IT infrastructure; successful execution of acquisitions, divestitures
and business transformation projects; economic and political risks and natural
disasters; financial risks; failure to meet high ethical standards; and
managing regulatory, tax and legal matters. Further details of potential risks
and uncertainties affecting the Group are described in the Group's filings
with the London Stock Exchange, NYSE Euronext in Amsterdam and the US
Securities and Exchange Commission, including the Group's Annual Report on
Form 20-F for the year ended 31 December 2013 and Annual Report and Accounts
2013. These forward-looking statements speak only as of the date of this
announcement. 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.
ENQUIRIES
Media: Media Relations TeamUK +44 20 7823 5354 lucila.zambrano@unilever.comNL +31 6 1137 5464 marc.potma@unilever.com Investors: Investor Relations Team+44 20 7822 6830 investor.relations@unilever.com
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INCOME STATEMENT
(unaudited)
E million First Half
2014 2013 Increase/
(Decrease)
Currentrates Constantrates
Turnover 24,098 25,500 (5.5)% 3.3%
Operating profit 4,379 3,892 13% 24%
After (charging)/crediting non-core items 1,012 316
Net finance costs (259) (286)
Finance income 61 55
Finance costs (273) (270)
Pensions and similar obligations (47) (71)
Share of net profit/(loss) of joint ventures and associates 61 52
Other income/(loss) from non-current investments 37 1
Profit before taxation 4,218 3,659 15% 27%
Taxation (1,223) (977)
Net profit 2,995 2,682 12% 24%
Attributable to:
Non-controlling interests 177 253
Shareholders' equity 2,818 2,429 16% 28%
Combined earnings per share
Basic earnings per share (euros) 0.99 0.86 16% 28%
Diluted earnings per share (euros) 0.97 0.83 17% 29%
STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
E million First Half
2014 2013
Net profit 2,995 2,682
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurements of defined benefit pension plans net of tax (489) 526
Items that may be reclassified subsequently to profit or loss:
Currency retranslation gains/(losses) net of taxFair value gains/(losses) on financial instruments net of tax 11(62) (162)93
Total comprehensive income 2,455 3,139
Attributable to:
Non-controlling interests 191 217
Shareholders' equity 2,264 2,922
STATEMENT OF CHANGES IN EQUITY
(unaudited)
E million Called up share capital Share premium account Other reserves Retained profit Total Non- controlling interest Total equity
First half - 2014
1 January 2014 484 138 (6,746) 20,468 14,344 471 14,815
Profit or loss for the period - - - 2,818 2,818 177 2,995
Other comprehensive income net of tax
Fair value gains/(losses) on financial instruments - - (62) - (62) - (62)
Remeasurements of defined benefit pension plans net of tax - - - (491) (491) 2 (489)
Currency retranslation gains/(losses) - - (110) 109 (1) 12 11
Total comprehensive income - - (172) 2,436 2,264 191 2,455
Dividends on ordinary capital - - - (1,580) (1,580) - (1,580)
Movements in treasury stock(a) - - (105) (148) (253) - (253)
Share-based payment credit(b) - - - 117 117 - 117
Dividends paid to non-controlling interests - - - - - (168) (168)
Currency retranslation gains/(losses) net of tax - 4 - - 4 (4) -
Other movements in equity(c) - - (159) (845) (1,004) 87 (917)
30 June 2014 484 142 (7,182) 20,448 13,892 577 14,469
First half - 2013
1 January 2013 484 140 (6,196) 20,964 15,392 557 15,949
Profit or loss for the period - - - 2,429 2,429 253 2,682
Other comprehensive income net of tax
Fair value gains/(losses) on financial instruments - - 93 - 93 - 93
Remeasurements of defined benefit pension plans net of tax - - - 526 526 - 526
Currency retranslation gains/(losses) - - (45) (81) (126) (36) (162)
Total comprehensive income - - 48 2,874 2,922 217 3,139
Dividends on ordinary capital - - - (1,449) (1,449) - (1,449)
Movements in treasury stock(a) - - 98 (70) 28 - 28
Share-based payment credit(b) - - - 135 135 - 135
Dividends paid to non-controlling interests - - - - - (105) (105)
Currency retranslation gains/(losses) net of tax - (5) - - (5) (4) (9)
Other movements in equity(c) - - - (4,141) (4,141) (230) (4,371)
30 June 2013 484 135 (6,050) 18,313 12,882 435 13,317
(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) 2014 includes the impact of the purchase of Estate shares (see note 11).
2013 includes the impact of the acquisition of non-controlling interests.
BALANCE SHEET
(unaudited)
E million As at 30 June2014 As at 31 December2013 As at 30 June2013
Non-current assets
Goodwill 14,050 13,917 14,483
Intangible assets 7,041 6,987 7,047
Property, plant and equipment 9,639 9,344 9,221
Pension asset for funded schemes in surplus 810 991 757
Deferred tax assets 1,181 1,084 986
Financial assets 478 505 527
Other non-current assets 620 563 581
33,819 33,391 33,602
Current assets
Inventories 4,328 3,937 4,490
Trade and other current receivables 6,176 4,831 6,414
Current tax assets 259 217 268
Cash and cash equivalents 3,419 2,285 3,467
Other financial assets 744 760 804
Non-current assets held for sale 76 92 49
15,002 12,122 15,492
Total assets 48,821 45,513 49,094
Current liabilities
Financial liabilities 5,705 4,010 9,099
Trade payables and other current liabilities 12,654 11,735 12,211
Current tax liabilities 1,654 1,254 1,371
Provisions 430 379 327
Liabilities associated with assets held for sale 1 4 1
20,444 17,382 23,009
Non-current liabilities
Financial liabilities 7,731 7,491 6,808
Non-current tax liabilities 81 145 1
Pensions and post-retirement healthcare liabilities:
Funded schemes in deficit 1,752 1,405 1,496
Unfunded schemes 1,585 1,563 1,666
Provisions 1,004 892 931
Deferred tax liabilities 1,447 1,524 1,510
Other non-current liabilities 308 296 356
13,908 13,316 12,768
Total liabilities 34,352 30,698 35,777
Equity
Shareholders' equity 13,892 14,344 12,882
Non-controlling interests 577 471 435
Total equity 14,469 14,815 13,317
Total liabilities and equity 48,821 45,513 49,094
CASH FLOW STATEMENT
(unaudited)
E million First Half
2014 2013
Net profit 2,995 2,682
Taxation 1,223 977
Share of net profit of joint ventures/associates and other income
from non-current investments (98) (53)
Net finance costs 259 286
Operating profit 4,379 3,892
Depreciation, amortisation and impairment 842 583
Changes in working capital (1,089) (1,004)
Pensions and similar obligations less payments (195) (246)
Provisions less payments 84 43
Elimination of (profits)/losses on disposals (1,421) (372)
Non-cash charge for share-based compensation 118 121
Other adjustments 20 (18)
Cash flow from operating activities 2,738 2,999
Income tax paid (994) (894)
Net cash flow from operating activities 1,744 2,105
Interest received 61 48
Net capital expenditure (789) (632)
Financial assets related to acquisition of non-controlling interest - (423)
Other acquisitions and disposals 1,577 520
Other investing activities 46 (311)
Net cash flow (used in)/from investing activities 895 (798)
Dividends paid on ordinary share capital (1,577) (1,449)
Interest and preference dividends paid (258) (221)
Acquisition of non-controlling interest - (335)
Purchase of Estate shares (see note 11) (880) -
Change in financial liabilities 1,557 1,728
Other movements on treasury stock (256) 28
Other financing activities (80) (105)
Net cash flow (used in)/from financing activities (1,494) (354)
Net increase/(decrease) in cash and cash equivalents 1,145 953
Cash and cash equivalents at the beginning of the period 2,044 2,217
Effect of foreign exchange rate changes (99) 34
Cash and cash equivalents at the end of the period 3,090 3,204
NOTES TO THE FINANCIAL STATEMENTS
(unaudited)
1 ACCOUNTING INFORMATION AND POLICIES
The accounting policies and methods of computation are in compliance with IAS
34 'Interim Financial Reporting' and except as set out below are consistent
with the year ended 31 December 2013. The condensed interim financial
statements are based on International Financial Reporting Standards (IFRS) as
adopted by the EU and IFRS as issued by the International Accounting Standards
Board. With effect from 1 January 2014 we have implemented amendments to IAS
32 'Financial instruments: Presentation' and IAS 39 'Financial instruments:
Recognition and Measurement'. The impact on the Group is not material.
After making appropriate enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. 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 income statement on page
9, the statement of comprehensive income on page 9, the statement of changes
in equity on page 10 and the cash flow statement on page 12 are translated at
exchange rates current in each period. The balance sheet on page 11 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 2013
are not the company's statutory accounts for that financial year. Those
accounts have been reported on by the company's previous auditor and delivered
to the registrar of companies. The report of the previous auditor 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
Companies Act 2006.
2 SIGNIFICANT ITEMS WITHIN THE INCOME STATEMENT
In our income statement reporting we disclose the total value of non-core
items that arise within operating profit. These are costs and revenues
relating to business disposals, acquisition and disposal related costs,
impairments and other one-off items, which we collectively term non-core
items, due to their nature and frequency of occurrence.
E million First Half
2014 2013
Acquisition and disposal related costs (60) (55)
Gain/(loss) on disposal of group companies(a) 1,390 371
Impairments and other one-off items(b) (318) -
Non-core items before tax 1,012 316
Tax impact of non-core items (470) (123)
Non-core items after tax 542 193
Attributable to:
Non-controlling interests - -
Shareholders' equity 542 193
(a) 2014 includes gain of E1,316 million from the disposal of the Ragu &
Bertolli brands and related assets (see note 7).
(b) Impairment charge of E318 million recognised on assets related to the
Slim.Fast business (see note 8).
The following table shows the impact of non-core items on profit attributable
to shareholders.
E million First Half
2014 2013
Net profit attributable to shareholders' equity 2,818 2,429
Post tax impact of non-core items (542) (193)
Core profit attributable to shareholders' equity 2,276 2,236
3 SEGMENT INFORMATION - CATEGORIES
Second Quarter Personal Care Foods Refreshment HomeCare Total
Turnover (E million)
2013 4,637 3,379 2,986 2,334 13,336
2014 4,400 3,105 2,872 2,318 12,695
Change (%) (5.1) (8.1) (3.8) (0.7) (4.8)
Impact of:
Exchange rates (%) (9.1) (6.7) (7.2) (8.9) (8.1)
Acquisitions (%) - - 0.2 2.7 0.6
Disposals (%) (0.1) (2.2) (1.0) - (0.8)
Underlying sales growth (%) 4.5 0.7 4.5 6.2 3.8
Price (%) 2.2 0.5 1.4 3.5 1.9
Volume (%) 2.2 0.1 3.1 2.5 1.9
First Half Personal Care Foods Refreshment Home Care Total
Turnover (E million)
2013 9,053 6,753 5,085 4,609 25,500
2014 8,554 6,124 4,939 4,481 24,098
Change (%) (5.5) (9.3) (2.9) (2.8) (5.5)
Impact of:
Exchange rates (%) (9.5) (6.5) (7.4) (10.3) (8.5)
Acquisitions (%) - - 0.4 1.5 0.4
Disposals (%) (0.1) (2.6) (0.6) - (0.8)
Underlying sales growth (%) 4.5 (0.5) 5.1 6.8 3.7
Price (%) 2.0 0.4 1.7 3.0 1.7
Volume (%) 2.4 (0.9) 3.3 3.7 1.9
Operating profit (E million)
2013 1,496 1,520 575 301 3,892
2014 1,509 2,431 212 227 4,379
Core operating profit (E million)
2013 1,523 1,175 576 302 3,576
2014 1,532 1,097 509 229 3,367
Operating margin (%)
2013 16.5 22.5 11.3 6.5 15.3
2014 17.6 39.7 4.3 5.1 18.2
Core operating margin (%)
2013 16.8 17.4 11.3 6.6 14.0
2014 17.9 17.9 10.3 5.1 14.0
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.
Core 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. Core operating
margin is calculated as core operating profit divided by turnover.
4 SEGMENT INFORMATION - GEOGRAPHICAL AREA
Second Quarter Asia /AMET /RUB TheAmericas Europe Total
Turnover (E million)
2013 5,377
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