2019 FIRST HALF YEAR RESULTS

Performance highlights (unaudited)

 

Underlying performance										GAAP measures
						vs 2018										vs 2018
First Half
Underlying sales growth (USG)(a)							3.3	%		Turnover		€	26.1bn				(0.9	)%
Underlying operating margin(b)			19.3	%			50bps			Operating margin(b)			17.6	%			40bps
Underlying earnings per share(b)		€	1.27				5.0	%		Earnings per share(b)		€	1.14				3.4	%
Quarterly dividend payable in September 2019													€ 0.4104 per share

 

(a)	USG does not include price growth in Venezuela and Argentina. See page 6 for further details.

(b)	2018 numbers have been restated following adoption of IFRS 16. See note 1 and note 9 for more details.

First half highlights

 

•

Underlying sales grew 3.3% with volume 1.2% and price 2.1%

 

•

Emerging markets underlying sales growth 6.2% with volume 2.5% and price 3.6%

 

•

Turnover decreased 0.9% driven by the sale of our spreads business, partially offset by a 1.1% currency benefit

 

•

Underlying operating margin increased 50bps with 30bps from gross margin

 

•

Operating margin increased by 40bps

 

•

Underlying earnings per share increased 5.0%, with constant EPS up 3.0%

Alan Jope: Chief Executive Officer statement

“We have delivered consistent growth within our guided range for 2019, led by our emerging markets. Accelerating growth remains our top priority and we continue to evolve our portfolio and seek out fast growth channel and geographical opportunities, as well as address those performance hotspots where growth is falling short of our aspirations.

For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3-5% range, an improvement in underlying operating margin that keeps us on track for the 2020 target and another year of strong free cash flow. Our sustainable business model and portfolio of purpose-led brands are key to delivering superior long-term financial performance.”

Underlying sales growth (USG), underlying volume growth (UVG), underlying price growth (UPG), underlying operating profit (UOP), underlying operating margin (UOM), underlying earnings per share (underlying EPS), constant underlying EPS, underlying effective tax rate, free cash flow (FCF) and net debt are non-GAAP measures (see pages 6 to 9)

25 July 2019

 

FIRST HALF OPERATIONAL REVIEW: DIVISIONS

 

		First Half 2019
(unaudited)		Turnover				USG(a)				UVG				UPG(a)				Change in underlying operating margin(b)
		€bn				%				%				%				bps
Unilever			26.1				3.3				1.2				2.1				50
Beauty & Personal Care			10.7				3.3				1.7				1.6				100
Home Care			5.4				7.4				2.8				4.5				120
Foods & Refreshment			10.0				1.3				(0.1	)			1.4				(40	)

 

(a)	Wherever referenced in this announcement, USG and UPG do not include any price growth in Venezuela and Argentina. See pages 6 to 7 on non-GAAP measures for further details.

(b)	2018 numbers have been restated following adoption of IFRS 16. See note 1 and note 9 for more details.

Our markets: Growth in our markets was mixed. Market growth in Europe and North America was held back by the impact of weather on ice cream sales. In the emerging markets we continued to see good momentum particularly in China and South East Asia. India saw strong market growth, though it moderated, as expected. Argentina remains hyperinflationary and high levels of pricing continue to weigh on consumer demand.

Unilever overall performance: Underlying sales grew 3.3% with 1.2% from volume and 2.1% from price. Emerging markets grew 6.2%, led by Asia/AMET/RUB, which saw broad-based geographic growth, whilst developed markets were weaker.

In the first half, we estimate the 2018 truckers’ strike in Brazil increased USG by 50bps. Growth was suppressed by weak ice cream performance; a result of poorer weather, particularly in Europe following two years of very strong summers. 80bps of Argentina price growth in the quarter was excluded from USG due to hyperinflationary status. Turnover in the first half decreased 0.9% driven by the sale of the spreads business, partially offset by a currency benefit of 1.1%.

Underlying operating margin improved by 50bps. Gross margin was up 30bps, helped by efficiencies from our 5-S programme. Overheads had an adverse impact on underlying operating margin of 10bps. Our change programmes have helped to address stranded costs following the disposal of spreads and we continue to invest in the ongoing digital transformation of our business. Brand and marketing investment decreased compared to the prior year, as we continued to deliver zero based budgeting savings ahead of target, with an increased focus on digital spend. More than two thirds of savings have been reinvested, largely behind innovations and new brand launches.

Beauty & Personal Care

Underlying sales grew 3.3%, with 1.7% from volume and 1.6% from price.

Deodorants performed well, supported by our Rexona Clinical and Dove Zero aluminium ranges, alongside the extension of Love, Beauty & Planet. New formats continued to drive sales in skin cleansing, including the incremental launch of Dove bath bombs as well as Dove foaming handwash. Good performance in skin care was supported by on-trend innovations including Pond’s Instabright glow cream. Hair care saw only modest growth for the first half, with a challenging second quarter particularly in the US. Oral care grew over the half, helped by innovations such as Closeup natural whitening toothpaste and Signal White Now. Our prestige brands, including Dermalogica, Hourglass, and REN, saw double digit growth overall, and we announced the acquisitions of Garancia and Tatcha, which are not yet included in USG. Turnover increased by 6.3% including a 2.2% exchange rate impact and 0.6% impact of acquisitions.

Underlying operating margin in Beauty & Personal Care increased by 100bps, driven by efficiency programmes in brand and marketing investment.

USG, UVG, UPG, UOP, UOM, underlying EPS, constant underlying EPS, underlying effective tax rate, FCF and net debt are non-GAAP measures (see pages 6 to 9)

 

2

Home Care

Underlying sales grew 7.4%, with 2.8% from volume and 4.5% from price.

Fabric solutions performed strongly, benefiting from premiumisation and the execution of our strategy to move consumers into products with additional consumer benefits, including Omo Perfect Wash in Brazil. China saw good performance from the relaunch of Omo while in India Surf Excel continued to grow double digit. Seventh Generation continues to be rolled out in Europe and North Asia, building on the naturals trend. Home and hygiene grew well, supported by double digit growth from Sunlight, and we launched innovations such as the Cif Cleaner Choices range with natural cleaning ingredients. In Indonesia we used our Home Care brands to run the mosque cleaning programme during Ramadan, an example of purpose-led growth. Good growth in fabric sensations was supported by the launch of a redesigned Comfort core range, focusing on clothes care, as well as a natural variants range. The life essentials category was flat. Turnover increased by 7.2% including a (0.4)% exchange rate impact and a 0.2% impact of acquisitions.

Underlying operating margin in Home Care increased by 120bps, with improvements in gross margin, as well as efficiencies in brand and marketing investment and overheads.

Foods & Refreshment

Underlying sales grew 1.3%, with (0.1)% from volume and 1.4% from price.

In tea, sales declined with volumes impacted by weak consumer demand in developed markets. This was partially offset by black tea in emerging markets and our fruit, herbal and green tea ranges, including Pukka’s premium herbal offering. Sales in dressings were flat with volumes slightly down as competitive intensity remained high. Despite poorer weather compared to the previous two years, ice cream grew slightly over the half. We saw good ice cream performance in Asia/AMET/RUB and from innovations such as Magnum white chocolate and cookies. Savoury performance was helped by the launch of new snack pot variants meeting the trend towards convenience. The introduction of Hellmann’s burger and spicy dipping sauces continue to broaden the brand beyond core mayonnaise, and Sir Kensington’s performed well. Turnover decreased by (10.9)% including 0.6% exchange rate impact and (12.5)% impact of acquisitions and disposals.

Underlying operating margin in Foods & Refreshment decreased by 40bps, as a result of an adverse impact on overheads related to the disposal of our spreads business.

 

3

FIRST HALF OPERATIONAL REVIEW: GEOGRAPHICAL AREA

 

		First Half 2019
(unaudited)		Turnover				USG(a)				UVG				UPG(a)				Change in underlying operating margin(b)
		€bn				%				%				%				bps
Unilever			26.1				3.3				1.2				2.1				50
Asia/AMET/RUB			12.2				6.2				2.9				3.2				70
The Americas			8.1				2.1				(0.1	)			2.2				80
Europe			5.8				(0.6	)			(0.2	)			(0.4	)			(40	)

 

		First Half 2019
(unaudited)		Turnover				USG(a)				UVG				UPG(a)
		€bn				%				%				%
Developed markets			10.4				(0.7	)			(0.6	)			(0.1	)
Emerging markets			15.7				6.2				2.5				3.6
North America			4.6				0.1				(0.5	)			0.7
Latin America			3.5				4.9				0.5				4.4

 

(a)	Wherever referenced in this announcement, USG and UPG do not include any price growth in Venezuela and Argentina. See pages 6 to 7 on non-GAAP measures for further details.

(b)	2018 numbers have been restated following adoption of IFRS 16. See note 1 and note 9 for more details.

Asia/AMET/RUB

Underlying sales grew 6.2% with 2.9% from volume and 3.2% from price. South East Asia grew well with accelerating growth in Indonesia, the Philippines and Vietnam helped by locally relevant innovations delivered through our C4G organisation. Turkey continued to see good volume growth despite double digit price growth in response to the devaluation of the Lira. Sales in China were up high-single digit led by premium innovation and strong growth in e-commerce. Growth in South Asia was good, where we continue to outperform in moderating markets. Africa saw low single digit growth despite disruption surrounding the elections in Nigeria and the introduction of a new currency in Zimbabwe. Turnover increased by 3.9% including 0.2% exchange rate impact and (2.3)% impact of acquisitions and disposals.

Underlying operating margin was up 70bps driven by brand and marketing investment efficiencies and improvement in gross margin.

The Americas

Latin America grew 4.9% against a weak comparator due to the Brazil truckers’ strike in 2018. In Brazil the consumer environment continued to normalise and our business was helped by innovations including Rexona Clinical Protection. In Argentina, which continues to be hyperinflationary, volumes declined 9.1% in markets that declined close to 20%. All Argentina price growth continues to be excluded from USG and UPG.

Underlying sales growth in North America was flat with price growth of 0.7% but volume down 0.5%. In Beauty & Personal Care, good momentum in deodorants was offset by weak performance in hair. Foods continued to be impacted by high levels of promotional activity, whilst ice cream declined slightly. Home Care delivered strong growth as Seventh Generation performed well and Love, Home & Planet, which builds on the success on Love Beauty & Planet, had a promising start.

Turnover declined by 0.7% including 3.1% exchange rate impact and (4.4)% impact from acquisitions and disposals.

Underlying operating margin was up 80bps led by brand and marketing investment efficiencies and a small improvement in gross margin.

Europe

Underlying sales declined 0.6% with volumes down 0.2% and price down 0.4%. Our European business faced challenges from continued price deflation and adverse weather. Our e-commerce and discounters channels grew strongly, helped by our channel-focused divisional strategies. The broader retail environment remains difficult, particularly in Germany where we saw significant decline. Southern Europe performed strongly, helped by growth in Home Care and Foods & Refreshment. Central and Eastern Europe continued to grow well, with good performance in all categories, particularly fabric sensations. Turnover declined by (11.4)% including (10.7) impact of acquisitions and disposals.

Underlying operating margin was down 40bps, impacted by the sale of spreads and a decline in gross margin due to negative pricing.

 

4

ADDITIONAL COMMENTARY ON THE FINANCIAL STATEMENTS – FIRST HALF 2019

Restatement of 2018 balances

2018 numbers have been restated following adoption of IFRS 16. More detail is provided in note 1 and note 9 on page 15 and pages 21 to 24 of the financial statements.

Finance costs and tax

Net finance costs increased by €63 million to €351 million in the first half of 2019. The increase was due to exchange rate losses on cash balances in Zimbabwe of €40 million following the significant devaluation of the new Zimbabwe dollar as well as higher cost of debt.

The effective tax rate was 26.8% versus 25.9% in the same period last year, primarily due to a non-taxable credit in acquisition and disposal related costs in 2018. The effective tax rate on underlying operating profit was 26.2% compared to 26.5% in the prior year.

Joint ventures, associates and other income from non-current investments

Net profit from joint ventures and associates was €85 million, compared to €83 million in the prior year. Income from non-current investments was €2 million, down from €5 million in 2018.

Earnings per share

Underlying earnings per share increased by 5.0% to €1.27. The adverse impact of the spreads disposal was offset by the 2018 share buy back programme. Improvement in underlying operating margin and a positive currency impact were partially offset by the adverse finance costs. Underlying earnings per share at constant rates increased by 3.0%. These underlying measures exclude the post-tax impact of business disposals, acquisition and disposal-related costs, restructuring costs, impairments, one-off items within operating profit and any other significant unusual items within net profit but not operating profit.

Diluted earnings per share increased 3.4% at current rates and 2.3% at constant rates. Improvement in underlying EPS was partially offset by a credit to acquisitions and disposal related costs recognised in the prior year as a result of early settlement of the contingent consideration for Blueair.

Free cash flow

Free cash flow in the first half of 2019 was €1.5 billion, down from €2.0 billion in the first half of 2018. This included lost underlying operating profit following the disposal of spreads as well as an adverse impact from tax paid relating to profit on the disposal, totalling €0.5 billion.

Net debt

Closing net debt increased to €24.2 billion compared with €22.6 billion at 31 December 2018. The increase was driven by dividends paid, acquisitions and a negative currency impact, partly reduced by free cash flow delivery.

Pensions

Pension liabilities net of assets reduced to €0.5 billion at the end of June 2019 versus €0.9 billion as at 31 December 2018. The decrease was driven by good investment returns which were partially offset by higher liabilities as discount rates continued to decrease.

Finance and liquidity

On 4 June 2019 we announced the issuance of €650 million 1.5% fixed rate notes due June 2039 and £500 million 1.5% fixed rated notes due July 2026.

In February 2019 $750 million 4.8% bonds matured and were repaid. In March 2019, $750 million 2.2% fixed rate notes matured and were repaid.

 

5

COMPETITION INVESTIGATIONS

As previously disclosed, along with other consumer products companies and retail customers, 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 measures, 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 period average exchange rates into euro, except for countries where the impact of consumer price inflation rates has escalated to extreme levels. In these countries, the local currency amounts before the application of IAS 29 are translated into euros using the period closing exchange rate. The table below shows exchange rate movements in our key markets.

 

		First half average rate in				First half average rate in
		2019				2018
Brazilian Real (€1 = BRL)			4.282				4.125
Chinese Yuan (€1 = CNY)			7.659				7.715
Indian Rupee (€1 = INR)			79.149				79.478
Indonesia Rupiah (€1 = IDR)			16046				16663
Philippine Peso (€1 = PHP)			59.010				62.911
UK Pound Sterling (€1 = GBP)			0.873				0.880
US Dollar (€1 = US $)			1.130				1.212

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 and changes in currency. 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. Also excluded is the impact of price growth from countries where the impact of consumer price inflation (CPI) rates has escalated to extreme levels.

There are two countries where we have determined extreme levels of CPI exist. The first is Venezuela where in Q4 2017 inflation rates exceeded 1,000% and management considered that the situation would persist for some time. Consequently, price growth in Venezuela has been excluded from USG since Q4 2017. The second is Argentina, which from Q3 2018 has been accounted for in accordance with IAS 29, and thus from Q3 2018 Argentina price growth is excluded from USG. The adjustment made at Group level as a result of these two exclusions was a reduction in price growth of 1.2% for the first half. This treatment for both countries will be kept under regular review.

The reconciliation of changes in the GAAP measure turnover to USG is provided in notes 3 and 4.

 

6

NON-GAAP MEASURES (continued)

 

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.

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 Argentina and Venezuela as explained in USG above. The measures and the related turnover GAAP measure are 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. 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 net profit to FCF is as follows:

 

€ million		First Half
(unaudited)		2019				2018 Restated(a)
Net profit			3,209				3,229
Taxation			1,145				1,100
Share of net profit of joint ventures/associates and other income from non-current investments			(87	)			(88	)
Net monetary gain arising from hyperinflationary economies			(29	)			–
Net finance costs			351				288
Operating profit			4,589				4,529
Depreciation, amortisation and impairment			965				1,228
Changes in working capital			(1,888	)			(1,697	)
Pensions and similar obligations less payments			(94	)			(76	)
Provisions less payments			47				(61	)
Elimination of (profits)/losses on disposals			(36	)			16
Non-cash charge for share-based compensation			95				115
Other adjustments			23				(283	)
Cash flow from operating activities			3,701				3,771
Income tax paid			(1,309	)			(1,081	)
Net capital expenditure			(558	)			(495	)
Net interest paid			(291	)			(194	)
Free cash flow			1,543				2,001
Total net cash flow (used in)/from investing activities			(716	)			(1,441	)
Total net cash flow (used in)/from financing activities			(856	)			(679	)

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

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 other significant one-off items within operating profit

 

•

Non-underlying items not in operating profit but within net profit are: significant and unusual items in net finance cost, monetary gain/(loss) arising from hyperinflationary economies, 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

 

7

NON-GAAP MEASURES (continued)

 

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:

 

€ million		First Half
(unaudited)		2019				2018 Restated(a)
Operating profit			4,589				4,529
Non-underlying items within operating profit (see note 2)			465				438
Underlying operating profit			5,054				4,967
Turnover			26,126				26,352
Operating margin (%)			17.6				17.2
Underlying operating margin (%)			19.3				18.8

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

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 on page 19 for reconciliation of net profit attributable to shareholders’ equity to underlying profit attributable to shareholders equity.

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:

 

€ million		First Half
(unaudited)		2019				2018 Restated(a)
Taxation			1,145				1,100
Tax impact:
Non-underlying items within operating profit(b)			89				170
Non-underlying items not in operating profit but within net profit(b)			–				(29	)
Taxation before tax impact of non-underlying items			1,234				1,241
Profit before taxation			4,354				4,329
Non-underlying items within operating profit before tax			465				438
Non-underlying items not in operating profit but within net profit before tax(c)			(29	)			–
Share of net profit /loss of joint ventures and associates			(85	)			(83	)
Profit before tax excluding non-underlying items before tax and share of net profit/(loss) of joint ventures and associates			4,705				4,684
Underlying effective tax rate			26.2	%			26.5	%

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

(b)	Refer to note 2 for further details on these items.

(c)

2019 amount excludes €3 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 €3 million, total non-underlying items not in operating profit but within net profit before tax is €32 million. See note 2.

 

8

NON-GAAP MEASURES (continued)

 

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 2019 price growth in Venezuela and Argentina divided by the diluted combined average number of share units. This measure reflects the underlying earnings for each share unit of the Group in constant exchange rates.

The reconciliation of underlying earnings attributable to shareholders’ equity to constant underlying earnings attributable to shareholders’ equity and the calculation of constant underlying EPS is as follows:

 

€ million		First Half
(unaudited)		2019				2018 Restated(a)
Underlying profit attributable to shareholders’ equity (see note 6)			3,342				3,318
Impact of translation from current to constant exchange rates and translational hedges			(23	)			(18	)
Impact of Venezuela and Argentina price growth(b)			(58	)			–
Constant underlying earnings attributable to shareholders’ equity			3,261				3,300
Diluted combined average number of share units (millions of units)			2,625.6				2,737.3
Constant underlying EPS (€)			1.24				1.21

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

(b)	See pages 6 to 7 for further details.

Net debt

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. 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 total financial liabilities to net debt is as follows:

 

€ million (unaudited)		As at 30 June 2019				As at 31 December 2018 Restated(a)				As at 30 June 2018 Restated(a)
Total financial liabilities			(28,985	)			(26,738	)			(31,599	)
Current financial liabilities			(5,616	)			(3,613	)			(11,080	)
Non-current financial liabilities			(23,369	)			(23,125	)			(20,519	)
Cash and cash equivalents as per balance sheet			3,911				3,230				3,991
Cash and cash equivalents as per cash flow statement			3,789				3,090				3,811
Add bank overdrafts deducted therein			122				140				189
Less cash and cash equivalents classified as held for sale			–				–				(9	)
Other current financial assets			913				874				866
Net debt			(24,161	)			(22,634	)			(26,742	)

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

 

9

PRINCIPAL RISK FACTORS

On pages 28 to 33 of our 2018 Report and Accounts on Form 20-F we set out our assessment of the principal risk issues that would face the business through 2019 under the headings: brand preference; portfolio management; sustainability; climate change; plastic packaging; customer relationships; talent; supply chain; safe and high quality products; systems and information; business transformation; economic and political instability; treasury and pensions; ethical; and 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 2019.

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 including to plastic packaging; the effect of climate change on Unilever’s business; 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. 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. 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 2018 and the Unilever Annual Report and Accounts 2018.

ENQUIRIES

 

Media: Media Relations Team						Investors: Investor Relations Team
UK or NL or		+44 78 2527 3767 +44 77 7999 9683 +31 10 217 4844 +32 494 60 4906		lucila.zambrano@unilever.com JSibun@tulchangroup.com els-de.bruin@unilever.com freek.bracke@unilever.com		+44 20 7822 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

 

10

CONSOLIDATED INCOME STATEMENT

(unaudited)

 

€ million		First Half
		2019				2018 Restated(a)				Increase/ (Decrease)
										Current rates				Constant rates
Turnover			26,126				26,352				(0.9	)%			(0.7	)%
Operating profit			4,589				4,529				1.3	%			0.9	%
After (charging)/crediting non-underlying items			(465	)			(438	)
Net finance costs			(351	)			(288	)
Finance income			86				64
Finance costs			(420	)			(337	)
Pensions and similar obligations			(17	)			(15	)
Net monetary gain/(loss) arising from hyperinflationary economies			29				–
Share of net profit/(loss) of joint ventures and associates			85				83
After crediting non-underlying items			3				–
Other income/(loss) from non-current investments and associates			2				5
Profit before taxation			4,354				4,329				0.6	%			(0.1	)%
Taxation			(1,145	)			(1,100	)
After (charging)/crediting tax impact of non-underlying items			89				141
Net profit			3,209				3,229				(0.6	)%			(1.5	)%
Attributable to:
Non-controlling interests			203				198
Shareholders’ equity			3,006				3,031				(0.8	)%			(1.9	)%
Combined earnings per share
Basic earnings per share (euros)			1.15				1.11				3.4	%			2.3	%
Diluted earnings per share (euros)			1.14				1.11				3.4	%			2.3	%

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(unaudited)

 

€ million		First Half
		2019				2018 Restated(a)
Net profit			3,209				3,229
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			16				(4	)
Remeasurements of defined benefit pension plans			267				142
Items that may be reclassified subsequently to profit or loss, net of tax:
Gains/(losses) on cash flow hedges			83				36
Currency retranslation gains/(losses)			64				(755	)
Total comprehensive income			3,639				2,648
Attributable to:
Non-controlling interests			216				185
Shareholders’ equity			3,423				2,463

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

 

11

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(unaudited)

 

€ million		Called up share capital				Share premium account				Other reserves				Retained profit				Total				Non- controlling interest				Total equity
First half - 2019
1 January 2019 as previously reported			464				129				(15,286	)			26,265				11,572				720				12,292
IFRS 16 Restatement(a)			–				–				68				(243	)			(175	)			–				(175	)
Impact of adopting IFRIC 23(a)			–				–				–				(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 at fair value through other comprehensive income			–				–				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(b)			(30	)			–				6,599				(6,569	)			–				–				–
Other movements in treasury shares(c)			–				–				31				(180	)			(149	)			–				(149	)
Share-based payment credit(d)			–				–				–				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
First half - 2018
1 January 2018 as previously reported			484				130				(13,633	)			26,648				13,629				758				14,387
IFRS 16 Restatement(a)			–				–				46				(235	)			(189	)			–				(189	)
1 January 2018 after restatement			484				130				(13,587	)			26,413				13,440				758				14,198
Profit or loss for the period			–				–				–				3,031				3,031				198				3,229
Other comprehensive income, net of tax:
Gains/(losses) on:
Equity instruments at fair value through other comprehensive income			–				–				(4	)			–				(4	)			–				(4	)
Cash flow hedges			–				–				35				–				35				1				36
Remeasurements of defined benefit pension plans			–				–				–				142				142				–				142
Currency retranslation gains/(losses)			–				–				(733	)			(8	)			(741	)			(14	)			(755	)
Total comprehensive income			–				–				(702	)			3,165				2,463				185				2,648
Dividends on ordinary capital			–				–				–				(2,037	)			(2,037	)			–				(2,037	)
Repurchase of shares(e)			–				–				(2,516	)			–				(2,516	)			–				(2,516	)
Other movements in treasury shares(c)			–				–				(51	)			(135	)			(186	)			–				(186	)
Share-based payment credit(d)			–				–				–				115				115				–				115
Dividends paid to non-controlling interests			–				–				–				–				–				(201	)			(201	)
Currency retranslation gains/(losses) net of tax			–				–				–				–				–				–				–
Hedging gain/(loss) transferred to non-financial assets			–				–				96				–				96				–				96
Other movements in equity			–				–				50				(21	)			29				(24	)			5
30 June 2018			484				130				(16,710	)			27,500				11,404				718				12,122

 

(a)	1 January 2019 restated following adoption of IFRS 16 and IFRIC 23. 1 January 2018 restated following adoption of IFRS 16. Refer note 1 and note 9.

(b)	During 2019 170,000,000 NV ordinary shares and 18,660,634 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

(c)	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.

(d)	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.

(e)	Repurchase of shares reflects the cost of acquiring ordinary shares as part of the share buyback programmes announced on 19 April 2018.

 

12

CONSOLIDATED BALANCE SHEET

(unaudited)

 

€ million		As at 30 June 2019				As at 31 December 2018 Restated(a)				As at 30 June 2018 Restated(a)
Non-current assets
Goodwill			17,697				17,341				16,687
Intangible assets			12,547				12,152				12,011
Property, plant and equipment			12,067				12,088				11,911
Pension asset for funded schemes in surplus			2,053				1,728				2,340
Deferred tax assets			1,376				1,152				1,034
Financial assets			705				642				642
Other non-current assets			495				530				502
			46,940				45,633				45,127
Current assets
Inventories			4,387				4,301				4,246
Trade and other current receivables			8,079				6,482				6,818
Current tax assets			265				472				505
Cash and cash equivalents			3,911				3,230				3,991
Other financial assets			913				874				866
Assets held for sale			34				119				3,404
			17,589				15,478				19,830
Total assets			64,529				61,111				64,957
Current liabilities
Financial liabilities			5,616				3,613				11,080
Trade payables and other current liabilities			14,391				14,457				13,779
Current tax liabilities			1,072				1,445				924
Provisions			665				624				472
Liabilities held for sale			1				11				143
			21,745				20,150				26,398
Non-current liabilities
Financial liabilities			23,369				23,125				20,519
Non-current tax liabilities			187				174				324
Pensions and post-retirement healthcare liabilities:
Funded schemes in deficit			1,176				1,209				1,157
Unfunded schemes			1,417				1,393				1,460
Provisions			637				697				719
Deferred tax liabilities			2,272				1,900				1,942
Other non-current liabilities			330				346				316
			29,388				28,844				26,437
Total liabilities			51,133				48,994				52,835
Equity
Shareholders’ equity			12,710				11,397				11,404
Non-controlling interests			686				720				718
Total equity			13,396				12,117				12,122
Total liabilities and equity			64,529				61,111				64,957

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

 

13

CONSOLIDATED CASH FLOW STATEMENT

(unaudited)

 

€ million		First Half
		2019				2018 Restated(a)
Net profit			3,209				3,229
Taxation			1,145				1,100
Share of net profit of joint ventures/associates and other income from non-current investments and associates			(87	)			(88	)
Net monetary gain arising from hyperinflationary economies			(29	)			–
Net finance costs			351				288
Operating profit			4,589				4,529
Depreciation, amortisation and impairment			965				1,228
Changes in working capital			(1,888	)			(1,697	)
Pensions and similar obligations less payments			(94	)			(76	)
Provisions less payments			47				(61	)
Elimination of (profits)/losses on disposals			(36	)			16
Non-cash charge for share-based compensation			95				115
Other adjustments(b)			23				(283	)
Cash flow from operating activities			3,701				3,771
Income tax paid			(1,309	)			(1,081	)
Net cash flow from operating activities			2,392				2,690
Interest received			78				45
Net capital expenditure			(558	)			(495	)
Other acquisitions and disposals			(470	)			(1,035	)
Other investing activities			234				44
Net cash flow (used in)/from investing activities			(716	)			(1,441	)
Dividends paid on ordinary share capital			(2,080	)			(2,033	)
Interest paid			(369	)			(239	)
Change in financial liabilities			1,937				4,250
Repurchase of shares			–				(2,248	)
Other movements on treasury stock			(205	)			(264	)
Other financing activities			(139	)			(145	)
Net cash flow (used in)/from financing activities			(856	)			(679	)
Net increase/(decrease) in cash and cash equivalents			820				570
Cash and cash equivalents at the beginning of the period			3,090				3,169
Effect of foreign exchange rate changes			(121	)			72
Cash and cash equivalents at the end of the period			3,789				3,811

 

(a)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

(b)	2018 includes a non-cash credit of €277 million from early settlement of contingent consideration relating to Blueair.

 

14

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 2018. 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.

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 consolidated income statement on page 11, the consolidated statement of comprehensive income on page 11, the consolidated statement of changes in equity on page 12 and the consolidated cash flow statement on page 14 are translated at exchange rates current in each period. The consolidated balance sheet on page 13 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 2018 are not Unilever PLC’s statutory accounts for that financial year. Those accounts of Unilever for the year ended 31 December 2018 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.

Recent accounting developments

IFRS 16 ‘Leases’

The Group has adopted IFRS 16 which replaced existing lease guidance including IAS 17 ‘Leases’, IFRIC 4 ‘Determining whether an arrangement contains a lease’, SIC-15 ‘Operating Leases-Incentives’ and SIC-27 ‘Evaluating the substance of transactions involving the legal form of a lease’. The standard changes the recognition, measurement, presentation and disclosure of leases. At the commencement of a lease, lease payments (lease liability) and an asset representing the right to use the asset during the lease term (right-of-use asset) are recorded on the balance sheet. The right-of-use asset is then depreciated on a straight-line basis and interest expense recognised on the lease liability in the income statement over the lease term.

The standard has no impact on the actual cash flows of the group. However, as the standard requires the capitalisation, and subsequent depreciation of costs that are expensed as paid, the disclosures of cash flows within the cash flow statement are impacted. The amounts previously expensed as operating cash outflows are instead capitalised and presented as financing cash outflows. The Group has restated 2018 numbers for the impact of IFRS 16. Refer to note 9 for the restatement impact of IFRS 16 on the financial statements and segment information.

IFRIC 23 ‘Uncertainty Over Income Tax Treatments’

On 1 January 2019 the Group adopted IFRIC 23. The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes.

The Group applies judgement in identifying uncertainties over income tax treatments and has considered whether it should adjust its uncertain tax provisions in line with this new criteria. The Group has elected to recognise the cumulative impact within opening retained earnings.

 

15

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

2 SIGNIFICANT ITEMS WITHIN THE INCOME STATEMENT

Non-underlying items

Non-underlying items are costs and revenues relating to gains and losses on business disposals, acquisition and disposal-related credit/costs, restructuring costs, impairments and other one-off items within operating profit, and other significant and unusual items within net profit but outside of operating profit, which we collectively term non-underlying items, due to their nature and/or frequency of occurrence. These items are significant in terms of nature and/or amount and are relevant to an understanding of our financial performance.

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.

 

€ million		First Half
		2019				2018
Acquisition and disposal-related credit/(costs)(a)			(77	)			148
Gain/(loss) on disposal of group companies(b)			66				–
Restructuring costs			(454	)			(367	)
Impairment and other one-off items(c)			–				(219	)
Non-underlying items within operating profit before tax			(465	)			(438	)
Tax on non-underlying items within operating profit			89				170
Non-underlying items within operating profit after tax			(376	)			(268	)
Share of gain on disposal of Spreads business in Portugal JV			3				–
Net monetary gain arising from hyperinflationary economies			29				–
Non-underlying items not in operating profit but within net profit before tax			32				–
Tax impact of non-underlying items not in operating profit but within net profit:
Impact of US tax reform			–				(29	)
Non-underlying items not in operating profit but within net profit after tax			32				(29	)
Non-underlying items after tax(d)			(344	)			(297	)
Attributable to:
Non-controlling interests			(8	)			(10	)
Shareholders’ equity			(336	)			(287	)

 

(a)	2018 includes a credit of €277 million from early settlement of contingent consideration relating to Blueair.

(b)	2019 includes a gain of €60 million relating to disposal of Alsa baking and dessert business.

(c)	2018 includes a charge of €208 million relating to impairment of Blueair intangible asset.

(d)	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.

 

16

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(unaudited)

 

3 SEGMENT INFORMATION - DIVISIONS

 

First Half		Beauty & Personal Care				Home Care				Foods & Refreshment				Total
Turnover (€ million)
2018			10,084				5,048				11,220				26,352
2019			10,721				5,410				9,995				26,126
Change (%)			6.3				7.2				(10.9	)			(0.9	)
Impact of:
Exchange rates(a) (%)			2.2				(0.4	)			0.6				1.1
Acquisitions (%)			0.6				0.2				0.5				0.5
Disposals (%)			—				—				(13.0	)			(5.5	)
Underlying sales growth (%)			3.3				7.4				1.3				3.3
Price(a) (%)			1.6				4.5				1.4				2.1
Volume (%)			1.7				2.8				(0.1	)			1.2
Operating profit (€ million)
2018(b)			2,056				651				1,822				4,529
2019			2,322				652				1,615				4,589
Underlying operating profit (€ million)
2018(b)			2,220				646				2,101				4,967
2019			2,469				756				1,829				5,054
Operating margin (%)
2018(b)			20.4				12.9				16.2				17.2
2019			21.7				12.1				16.2				17.6
Underlying operating margin (%)
2018(b)			22.0				12.8				18.7				18.8
2019			23.0				14.0				18.3				19.3

 

(a)	Underlying price growth in Venezuela and Argentina has been excluded when calculating the price growth in the tables above, and an equal and opposite adjustment made in the calculation of exchange rate impact. See page 6 for further details.

(b)	Restated following adoption of IFRS 16. Refer note 1 and note 9.

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 as underlying operating profit divided by turnover.

 

17